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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-3
FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES
UNDER THE TRUST INDENTURE ACT OF 1939
METALLURG, INC.
(Name of applicant)
27 EAST 39TH STREET
NEW YORK, NEW YORK 10016
(Address of principal executive office)
SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
Title of Class Amount
SENIOR SECURED NOTES DUE 2007 $60,000,000(1)
Approximate date of proposed public offering:
ON, OR AS SOON AS PRACTICABLE AFTER, THE EFFECTIVE DATE (AS DEFINED IN THE
APPLICANT'S FOURTH AMENDED AND RESTATED JOINT PLAN OF REORGANIZATION,
DATED DECEMBER 18, 1996).
Name and Address of agent for services:
ERIC L. SCHONDORF, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
METALLURG, INC.
27 EAST 39TH STREET
NEW YORK, NEW YORK 10016
(212) 686-4010
Copies to:
RONALD F. DAITZ, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153
(212) 310-8000
THE APPLICANT HEREBY AMENDS THIS APPLICATION FOR QUALIFICATION ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVENESS UNTIL: (I) THE 20TH DAY
AFTER THE FILING OF A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT IT SHALL
SUPERCEDE THIS AMENDMENT, OR (II) SUCH DATE AS THE COMMISSION, ACTING PURSUANT
TO SECTION 307(C) OF THE ACT, MAY DETERMINE UPON THE WRITTEN REQUEST OF THE
APPLICANT.
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(1) The principal amount of the Senior Secured Notes due 2007 is subject to
adjustment as provided for in the Applicant's Fourth Amended and Restated
Joint Plan of Reorganization, dated December 18, 1996.
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GENERAL
1. GENERAL INFORMATION. Furnish the following information as to the applicant:
(a) Form of organization:
A corporation.
(b) State or other sovereign power under the laws of which organized:
New York.
2. SECURITIES ACT EXEMPTION APPLICABLE. State briefly the facts relied upon by
the applicant as a basis for the claim that registration of the indenture
securities under the Securities Act of 1933, as amended (the "Securities Act"),
is not required.
Capitalized terms not otherwise defined in this Form T-3 have the
respective meanings assigned to them in that certain Disclosure Statement (the
"Disclosure Statement"), a copy of which is included as Exhibit T3E.1 to this
Form T-3.
Metallurg, Inc., a New York corporation (the "Applicant"), and a debtor in
possession under chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code"), intends to issue Senior Secured Notes due 2007 (the
"Indenture Securities") on or about the Effective Date (defined below), in
accordance with the Applicant's Fourth Amended and Restated Joint Plan of
Reorganization (the "Plan"), which the Applicant, together with Shieldalloy
Metallurgical Corporation, a New York corporation and wholly-owned subsidiary of
the Applicant ("SMC"), filed with the United States Bankruptcy Court for the
Southern District of New York (the "Bankruptcy Court") on December 18, 1996. The
interest rate on the Indenture Securities will be 12% per annum. The Indenture
Securities will mature upon the tenth anniversary of the Effective Date. On or
about February 26, 1997, the Plan was confirmed by the Bankruptcy Court.
The Applicant presently expects that the Effective Date and the
consummation of transactions contemplated by the Plan will occur on or about
March 31, 1997 (the "Effective Date"). On the Effective Date, among other
things, certain of the Applicant's existing creditors will receive, in
satisfaction of existing claims, a pro rata share of the value of the "Plan
Consideration." The Plan Consideration consists of (i) $30,000,000 in cash, (ii)
$60,000,000(1) aggregate principal amount of the Indenture Securities and (iii)
approximately 4,750,000 shares of the Applicant's common stock to be issued
under the Plan.
The Applicant believes that the offer and exchange on the Effective Date
of the Indenture Securities as described above are exempt from the registration
requirements of the Securities Act and of equivalent state securities and "blue
sky" laws, by section 1145(a)(1) of the Bankruptcy Code. Generally, section
1145(a)(1) of the Bankruptcy Code exempts the offer and sale of securities under
a bankruptcy plan of reorganization from registration under the Securities Act
and under equivalent state securities and "blue sky" laws if the following
requirements are satisfied: (i) the securities are issued by the debtor (or its
successor) under a plan of reorganization; (ii) the recipients of the securities
hold a claim against the debtor, an interest in the debtor or a claim for an
administrative expense against the debtor; and (iii) the securities are issued
entirely in exchange for the recipient's claim against or interest in the debtor
or are issued "principally" in such exchange and "partly" for cash or property.
The Applicant believes that the offer and exchange of the Indenture Securities
under the Plan will satisfy such requirements of section 1145(a)(1) of the
Bankruptcy Code and, therefore, such offer and exchange is exempt from the
registration requirements referred to above.
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(1) THE PRINCIPAL AMOUNT OF THE INDENTURE SECURITIES IS SUBJECT TO ADJUSTMENT
AS PROVIDED FOR IN THE APPLICANT'S PLAN.
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AFFILIATIONS
3. AFFILIATES. Furnish a list or diagram of all affiliates of the Applicant and
indicate the respective percentages of voting securities or other bases of
control.
AS OF MARCH 17, 1997
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Percentage of
Voting Securities
Owned Directly or
Applicant's Controlled Affiliates Indirectly by Applicant
--------------------------------- -----------------------
Companhia Industrial 100%
Fluminense(1)
Metallurg (Canada) Limited(1) 100%
Metallurg (Far East) Limited(1) 100%
Ferrolegeringar Aktiengesellschaft(1) 100%
Metallurg Mexico S.A. de C.V.(1) 100%
Aktiebolaget Ferrolegeringar(1) 100%
Metallurg South Africa (Pty.) Limited(1) 100%
Metallurg International Resources 100%
GmbH(1)
Brandau y Cia S.A.(1) 100%
London & Scandinavian 100%
Metallurgical Co, Limited(1)
Shieldalloy Metallurgical 100%
Corporation(1)
Metallurg do Brasil Ltda.(1) 100%
Turk Maadin Sirketi(1) 100%
Aluminum Powder Company Limited(2) 100%
Metallurg Services, Inc.(1) 100%
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Mineracao Serido S.A.(3) 100%
Metallurg S.P. Ind. Com. 100%
de Metais Ltda.(4)
W.T. Mines Limited(6) 100%
Stand 359 Wadeville 100%
Extension 4 (Pty.) Limited(6)
Atlantic Alloys and Chemicals 100%
Limited(1)
Caribbean Metals & Alloys Limited(1) 100%
M & A Powders Limited(2) 100%
Alpoco Developments Limited(9) 100%
Metalloys Limited(9) 100%
Tantalum Corporation(1) 100%
Montan Aktiengesellschaft(1) 100%
S.A. Vickers Limited(2) 100%
H.M.I. Limited(2) 100%
Metal Alloys (South Wales) 100%
Limited(2)
Ferrolegeringar Metallurg Yugoslavia(5) 100%
Montanistica S.A.(1) 100%
MIR (China), Inc.(1) 100%
GfE Metalle und Materialien GmbH(7) 100%
GfE Giesserei und Stahlwerksbedarf(7) 100%
Shawdon Enterprises Limited (8) 100%
FAG Poland Sp. z. o. o.(5) 100%
Metallurg Rijeka(1) 100%
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Metallurg Holdings Corporation(1) 100%
Metallurg, Inc.(1) 100%
Shieldalloy Metallurgical Corporation(1) 100%
Elektrowerk Weisweiler GmbH(1) 98%
Gesellschaft fur Elektrometallurgie mbH(1) 99%
GfE Umwelttechnik GmbH(7) 99%
Keramed Medizintechnik GmbH(7) 99%
Metalchimica S.r.l.(5) 95%
Aleaciones Metalurgicas Venezolanas C.A.(1) 80%
Societe Miniere du Kivu(7) 70%
Metallurg International Resources Russia Limited(8) 60%
Ampal, Inc.(1) 50%
RZM-Recyclingzentrum Mittelfranken GmbH(7) 49.95%
AMSA(6) 49%
Compagnie des Mines et Metaux(1) 21%
Solikamsk Magnesium Works(10) 5%
As of the Effective Date, voting securities of non-U.S. subsidiaries or
the Applicant (other than Metallurg (Canada) Limited and Elektrowerk Weisweiler
GmbH) will be transferred to Metallurg Holdings Corporation.
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(1) Voting securities owned directly by the Applicant. As of the Effective
Date, voting securities of non-U.S. subsidiaries of the Applicant (other
than Metallurg (Canada) Limited and Elektrowerk Weisweiler GmbH) will be
transferred to Metallurg Holdings Corporation.
(2) Voting securities owned directly by London and Scandinavian Metallurgical
Co, Limited.
(3) Voting securities owned directly by Metallurg do Brasil Ltda.
(4) Voting securities owned directly by Companhia Industrial Fluminense.
(5) Voting securities owned directly by Ferrolegeringar Aktiengesellschaft.
(6) Voting securities owned directly by Metallurg South Africa (Pty.) Limited.
(7) Voting securities owned directly by Gesellschaft fur Elektrometallurgie
mbH.
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(8) Voting securities owned directly by Metallurg International Resources
GmbH.
(9) Voting securities owned directly by Aluminum Powder Company Limited.
(10) Voting securities owned directly by Shawdon Enterprises Limited.
Applicant's Controlling Affiliates Bases of Control
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Not Applicable Not Applicable
AS OF THE EFFECTIVE DATE OF THE PLAN OF REORGANIZATION
The corporate structure of the Applicant will not change from the
structure described above.
MANAGEMENT AND CONTROL
4. DIRECTORS AND EXECUTIVE OFFICERS. List the names and complete mailing
addresses of all directors and executive officers of the Applicant and all
persons chosen to become directors or executive officers. Indicate all offices
with the Applicant held or to be held by each person named.
AS OF MARCH 17, 1997
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Name Mailing Address Office
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Michael A. Standen c/o Metallurg, Inc. Chairman of the Board,
27 East 39th Street President and Chief
New York, New York 10016 Executive Officer
Steven N. Rappaport c/o Metallurg, Inc. Director
27 East 39th Street
New York, New York 10016
Alan D. Ewart c/o Metallurg, Inc. Director
27 East 39th Street
New York, New York 10016
Dr. Hans Spilker c/o Metallurg, Inc. Director
27 East 39th Street
New York, New York 10016
J. Richard Budd, III c/o Metallurg, Inc. Senior Vice President
27 East 39th Street
New York, New York 10016
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Michael A. Banks c/o Metallurg, Inc. Vice President
27 East 39th Street Administration
New York, New York 10016
Barry C. Nuss c/o Metallurg, Inc. Vice President
27 East 39th Street Finance
New York, New York 10016
Eric L. Schondorf c/o Metallurg, Inc. Vice President and
27 East 39th Street General Counsel
New York, New York 10016
AS OF THE EFFECTIVE DATE OF THE PLAN OF REORGANIZATION
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It is anticipated that the executive officers of the Applicant will
continue to serve in their respective capacities immediately after consummation
of the plan. As of the Effective Date, the Applicant's new Board of Directors
will be as follows:
Name Mailing Address Office
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Michael A. Standen c/o Metallurg, Inc. Chairman of the Board
27 East 39th Street and President
New York, New York 10016
Alan D. Ewart c/o Metallurg, Inc. Director
27 East 39th Street
New York, New York 10016
John Bauer c/o Contrarian Capital Director
Management, L.L.C.
411 West Putnam Avenue - Suite 225
Greenwich, Connecticut 06830
Herb Seif c/o SBC Capital Markets, Inc. Director
45 Broadway Atrium
New York, New York 10006
Peter Langerman c/o Mutual Series Fund, Inc. Director
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
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5. PRINCIPAL OWNERS OF VOTING SECURITIES. Furnish the following information as
to each person owning 10% or more of the voting securities of the Applicant.
AS OF MARCH 17, 1997
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Name and Title of Amount % of
Mailing Address Class Owned Owned Class
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Voting Trust(1) Common Stock 2,005(2) 100%
c/o Metallurg, Inc.
27 East 39th Street
New York, New York 10016
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(1) The Voting Trust was established by a voting trust agreement, dated July
5, 1989, by and among the beneficial owners of the shares of stock of the
Applicant, the trustees named therein and Hartmann & Craven, Esq., as
depositories.
(2) Mr. Standen is the beneficial owner of 400 shares held of record by the
Voting Trust.
AS OF THE EFFECTIVE DATE OF THE PLAN OF REORGANIZATION(1)
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Upon consummation of the Plan, all of the currently outstanding securities
of the Applicant will be cancelled. As of the Effective Date of the Plan, the
following persons are expected to own 10% or more of the authorized and
outstanding voting securities of the reorganized Applicant, as provided in the
Plan.
Name and Title of Amount % of
Mailing Address Class Owned Owned Class
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Mutual Series Fund, Inc. Common Stock 1,353,000 27.0%
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Contrarian Capital Common Stock 839,000 16.8%
Management, L.L.C.
411 West Putnam Avenue - Suite 225
Greenwich, Connecticut 06830
Morgans, Waterfall, Vintiadis Common Stock 743,000 14.9%
& Company, Inc.
10 East 50th Street - 26th Floor
New York, New York 10022
Cerberus Partners, L.P. Common Stock 709,000 14.2%
950 Third Avenue
New York, New York 10022
SBC Capital Markets, Inc. Common Stock 549,000 11.0%
45 Broadway Atrium
New York, New York 10006
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(1) The amounts set forth in this table are estimates based upon the claims
held by creditors of the Applicant and SMC as of January 23, 1997 as well
as the assumptions set forth in the Applicant's and SMC's Joint Disclosure
Statement for the Plan, dated December 18, 1996. Such claims, in turn, are
based upon the records of the Applicant's claims reconciliation agent as
of January 23, 1997 and other transactions reported to the Applicant but
not reflected on such record.
UNDERWRITERS
6. UNDERWRITERS. Give the name and complete mailing address of (a) each person
who, within three years prior to the date of filing the application, acted as an
underwriter of any securities of the Applicant which were outstanding on the
date of filing the application, and (b) each proposed principal underwriter of
the securities proposed to be offered. As to each person specified in (a), give
the title of each class of securities underwritten.
(a) No person has acted as an underwriter of any securities of the
Applicant, within the three years prior to the date hereof, which
securities are outstanding on the date hereof.
(b) No person will act as underwriter or private placement agent of the
Indenture Securities.
CAPITAL SECURITIES
7. CAPITALIZATION. (a) Furnish the following information as to each authorized
class of securities of the Applicant.
AS OF MARCH 17, 1997
Title of Class Amount Authorized Amount Outstanding
- - -------------- ----------------- ------------------
Common Stock 10,000 2,005
ON THE EFFECTIVE DATE OF THE PLAN OF REORGANIZATION
Upon consummation of the Plan, all of the currently outstanding securities
of the Applicant will be cancelled and the authorized and outstanding securities
of the reorganized Applicant, as provided in the Plan, will be as follows:
Title of Class Amount Authorized Amount Outstanding
- - -------------- ----------------- ------------------
Common Stock 15,000,000 approximately 5,000,000
Indenture Securities(1) $60,000,000 aggregate $60,000,000 aggregate
principal amount principal amount
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(1) The principal amount of the Indenture Securities is subject to adjustment
as provided for in the Applicant's Plan.
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(b) Give a brief outline of the voting rights of each class of voting
securities referred to in paragraph (a) above.
Each share of Common Stock of the Applicant will be entitled to one vote,
and the Applicant's Certificate of Incorporation will not provide for cumulative
voting. The Indenture Securities are not entitled to any voting rights.
INDENTURE SECURITIES
8. ANALYSIS OF INDENTURE PROVISIONS. Insert at this point the analysis of
indenture provisions required under Section 305(a)(2) of the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act").
All references to the Indenture herein refer to the Indenture (the
"Indenture") to be dated as of the Effective Date between the Applicant, SMC and
IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"). Capitalized terms
used in this Section 8 which are not otherwise defined below or elsewhere in
this Application on Form T-3 have the respective meanings assigned to them in
the Indenture. The following summary of certain provisions of the Indenture does
not purport to be complete and is subject to, and is qualified in its entirety,
by reference to all of the provisions of the Indenture. A copy of the Indenture,
including the form of Indenture Securities, is included as Exhibit T3C hereto.
(A) EVENTS OF DEFAULT AND WITHHOLDING OF NOTICE. The following are Events
of Default under the Indenture: (i) failure by the Company to pay interest on
any Security when the same becomes due and payable, which failure continues for
a period of 30 days; (ii) failure by the Company to pay the principal of any
Security when the same becomes due and payable at maturity, upon redemption or
otherwise or default in the purchase of any Security on the Excess Proceeds
Payment Date or the Change of Control Payment Date pursuant to an Excess
Proceeds Offer or Change of Control Offer which has been made to Holders; (iii)
failure by the Company in the performance of any covenant contained in the
Securities or the Indenture, which failure continues for 30 days after written
notice by the Trustee or Holders of at least 25% of the aggregate principal
amount of the Securities outstanding; (iv) failure by the Company or any
Significant Subsidiary which is a Restricted Subsidiary to pay principal of or,
for a period of five days, interest on any Indebtedness for borrowed money
(other than the Securities) when the same becomes due and payable and the
principal amount of such Indebtedness exceeds $5,000,000 in the aggregate; (v)
failure by the Company or any Significant Subsidiary which is a Restricted
Subsidiary with respect to any Indebtedness for borrowed money exceeding
$5,000,000 in the aggregate, which results in the same becoming due and payable
or being declared due and payable; (vi) failure by the Company or any
Significant Subsidiary which is a Restricted Subsidiary to pay any final
judgment or order for more than $5,000,000, which failure continues for 60 days;
(vii) the occurrence of certain bankruptcy related events; or (viii) the failure
of any Security Document to be in full force and effect in all material
respects.
If an Event of Default occurs and is continuing other than pursuant to the
occurrence of certain bankruptcy related events, then either the Trustee or the
registered owners of at least 25% in aggregate principal amount of the
Securities, by notice in writing to the Company (and to the Trustee if given by
Holders), may declare the unpaid principal of and accrued but unpaid interest on
all the Securities to be due and payable, and upon any such declaration the same
shall become immediately due and payable.
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If an Event of Default occurs pursuant to certain bankruptcy related
events, the unpaid principal of and accrued interest but unpaid interest on all
of the Securities shall ipso facto become and be immediately due and payable
with any declaration or other act on the part of the Trustee or any Holder.
The Holders of a majority in principal amount of the then outstanding
Securities by written notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except non-payment of principal or
interest that has become due solely because of the acceleration) have been cured
or waived.
The Indenture provides that the Trustee shall give the holders notice of
any event which is an Event of Default within 90 days after it occurs. Except in
the case of a Default or Event of Default in the payment on any Security, the
Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the interest
of the Holders.
(B) AUTHENTICATION AND DELIVERY OF SECURITIES; APPLICATION OF PROCEEDS.
Each Security will be signed by one Officer of the Company. A Security will not
be valid until authenticated by the manual signature of the Trustee, such
signature to be conclusive evidence that the Security has been authenticated
under the Indenture.
No provisions are contained in the Indenture with respect to use by the
Company of proceeds of issuance of the Securities. There will be no proceeds
from the issuance of the Securities because such securities will be issued
pursuant to a plan of reorganization approved by the United States Bankruptcy
Court in exchange for the discharge of certain claims arising from ownership of
certain securities of and claims against the debtors involved in the bankruptcy
proceeding.
(C) RELEASE OF COLLATERAL. The Indenture provides that requests for
releases of collateral from the Trustee must comply with the Trust Indenture
Act, to the extent applicable, and that dispositions of collateral in the
Ordinary Course of Business shall not be deemed to impair the security interest
of the Holders under the Security Documents.
(D) SATISFACTION AND DISCHARGE. The Indenture provides that the Indenture
will cease to be of further effect, if (i) either (a) the Company has delivered
the Securities (other than (1) Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in the Indenture and (2)
Securities for whose payment has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust as provided in the Indenture) have been delivered
to the Trustee cancelled or for cancellation or (b) the Securities not
theretofore delivered to the Trustee cancelled or for cancellation (1) have
become due and payable or (2) will become due and payable at their stated
maturity within one year or (3) are to be called for redemption within one year,
and in the case of (1), (2) and (3), the Company has irrevocably deposited with
the Trustee trust funds in trust in an amount sufficient to pay principal and
interest on the Securities to maturity or redemption, as the case may be; (ii)
the Company has paid or caused to be paid all other sums payable under the
Indenture by the Company; and (iii) the Company has delivered to the Trustee an
Officer's Certificate stating that all conditions precedent provided in the
Indenture relating to satisfaction and discharge of the Indenture have been
complied with. In the event the Securities are defeased as aforesaid, the
Company will be relieved of its obligations under the Indenture, with certain
specified exceptions.
(E) EVIDENCE OF COMPLIANCE WITH CONDITIONS AND COVENANTS. The Company is
required to furnish the Trustee (within 120 days after the end of each fiscal
year) with an Officers' Certificate
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of the Company relating to the knowledge of such officers with respect to
performance of each covenant in the Indenture by the Company and to the
existence of any Default that occurred during the fiscal year, and if they do
know of a Default, describing it and its status.
The Indenture provides that upon any application or request by the Company
to the Trustee to take any action under a provision of the Indenture, the
Company must furnish to the Trustee such certificates and opinions as are
required by the Trust Indenture Act or the Indenture. Each such certificate or
opinion must be in the form of an Officers' Certificate or an Opinion of
Counsel. Any certificate or opinion must comply with the requirements of the
Trust Indenture Act and the Indenture.
9. OTHER OBLIGORS. Give the name and complete mailing address of any person,
other than the Applicant, who is an obligor upon the Indenture Securities.
Shieldalloy Metallurgical Corporation
12 West Boulevard
Newfield, NJ 08344
CONTENTS OF APPLICATION FOR QUALIFICATION. This application for qualification
comprises:
(a) Pages numbered __ to __, consecutively. (1)
(b) The statement of eligibility and qualification of the Trustee under
the Indenture to be qualified on Form T-l.
(c) The following exhibits in addition to those filed as part of the
statement of eligibility and qualification of the trustee:
Exhibit T3A.1 Certificate of Incorporation of the Applicant.
Exhibit T3A.2 Certificate of Amendment to the Certificate of
Incorporation of the Applicant.
Exhibit T3A.3 Certificate of Incorporation of the
reorganized Applicant.
Exhibit T3B.1 Amended and Restated By-Laws of the Applicant.
Exhibit T3B.2 By-Laws of the reorganized Applicant.
Exhibit T3C Form of Indenture to be qualified (including
forms of Security, Security Agreement and Pledge
Agreement attached as Exhibits A, B and C,
respectively, thereto).
Exhibit T3E.1 Joint Disclosure Statement for Fourth
Amended and Restated Joint Plan of Reorganization,
dated December 18, 1996 (including the appendices
and exhibits attached thereto).
Exhibit T3E.2 Form of Ballots.
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Exhibit T3E.3 Supplement to Joint Disclosure Statement for
Fourth Amended and Restated Joint Plan of
Reorganization dated December 18, 1996 (including
the exhibit attached thereto).
Exhibit T3E.4 Notice of Entry of Order Confirming Debtors'
Fourth Amended and Restated Joint Plan of
Reorganization.
Exhibit T3E.5 Amended Notice of Entry of Order Confirming
Debtors' Fourth Amended and Restated Joint Plan
of Reorganization.
Exhibit T3E.6 Post Confirmation Order and Notice.
Exhibit T3F See the cross-reference sheet contained in the
Indenture filed herewith as Exhibit T3C.
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(1) Pursuant to Rule 309(a) of Regulation S-T, requirements as to sequential
numbering shall not apply to this electronic format document.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Applicant, Metallurg, Inc., a corporation organized and existing under the laws
of New York, has duly caused this application to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York, State of
New York, on the 21st day of March, 1997.
METALLURG, INC.
By /s/ Eric L. Schondorf
------------------------
Attest: /s/ Amy I. Pandit Name: Eric L. Schondorf
Title: Vice President, General Counsel
and Secretary
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305 (B)(2)
IBJ SCHRODER BANK & TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
New York 13-5375195
(State of Incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
Barbara McCluskey, Vice President
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
(212) 858-2000
(Name, Address and Telephone Number of Agent for Service)
METALLURG, INC.
(Exact name of obligor as specified in its charter)
Delaware 98-0160214
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27 EAST 39TH STREET
NEW, YORK, NEW YORK
10016
(Address of principal executive office) (Zip code)
$60,000,000 12% SENIOR SECURED NOTES DUE 2007
(Title of Indenture Securities)
<PAGE>
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department
Two Rector Street
New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
Item 3. Voting securities of the trustee.
Furnish the following information as to each class of voting
securities of the trustee:
As of March 21, 1997
Col. A Col. B
Title of class Amount Outstanding
Not Applicable
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Item 4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in
any other securities, of the obligor are outstanding, furnish the
following information:
(a) Title of the securities outstanding under each such other
indenture
Not Applicable
(b) A brief statement of the facts relied upon as a basis for the
claim that no conflicting interest within the meaning of
Section 310 (b) (1) of the Act arises as a result of the
trusteeship under any such other indenture, including a
statement as to how the indenture securities will rank as
compared with the securities issued under such other
indenture.
Not Applicable
Item 5. Interlocking directorates and similar relationships with the obligor
or underwriters.
If the trustee or any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or of any underwriter for the obligor,
identify each such person having any such connection and state the
nature of each such connection.
Not Applicable
Item 6. Voting securities of the trustee owned by the obligor or its
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director,
partner, and executive officer of the obligor:
As of March 21, 1997
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially securities represented by
amount given in Col. C
______________ ______________ _______________ ________________________
Not Applicable
3
<PAGE>
Item 7. Voting securities of the trustee owned by underwriters or their
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and
each director, partner and executive officer of each such
underwriter:
As of March 21, 1997
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially securities represented by
amount given in Col. C
______________ ______________ _______________ ________________________
Not Applicable
Item 8. Securities of the obligor owned or held by the trustee
Furnish the following information as to securities of the obligor
owned beneficially or held as collateral security for obligations in
default by the trustee:
As of March 21, 1997
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially or held as securities represented by
collateral security for amount given in Col. C
obligations in default
______________ _____________ _______________________ ______________________
Not Applicable
4
<PAGE>
Item 9. Securities of underwriters owned or held by the trustee.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the
obligor, furnish the following information as to each class of
securities of such underwriter any of which are so owned or held by
the trustee:
As of March 21, 1997
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially or held as securities represented by
collateral security for amount given in Col. C
obligations in default
______________ _____________ _______________________ ______________________
Not Applicable
Item 10. Ownership or holdings by the trustee of voting securities of
certain affiliates or securityholders of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the
knowledge of the trustee (1) owns 10 percent or more of the voting
securities of the obligor or (2) is an affiliate, other than a
subsidiary, of the obligor, furnish the following information as to
the voting securities of such person:
As of March 21, 1997
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially or held as securities represented by
collateral security for amount given in Col. C
obligations in default
______________ _____________ _______________________ ______________________
Not Applicable
5
<PAGE>
Item 11. Ownership or holdings by the trustee of any securities of a
person owning 50 percent or more of the voting securities of the
obligor.
If the trustee owns beneficially or holds as collateral security
security for obligations in default any securities of a person who,
to the knowledge of the trustee, owns 50 percent or more of the
voting securities of the obligor, furnish the following information
as to each class of securities of such any of which are so owned or
held by the trustee:
As of March 21, 1997
Col. A Col. B Col. C
Nature of Indebtedness Amount Outstanding Date Due
______________________ _________________ _________
Not Applicable
Item 12. Indebtedness of the Obligor to the Trustee.
Except as noted in the instructions, if the obligor is indebted to
the trustee, furnish the following information:
As of March 21, 1997
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially or held as securities represented by
collateral security for amount given in Col. C
obligations in default
______________ _____________ _______________________ ______________________
Not Applicable
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with respect to
the securities under this indenture. Explain the nature of any
such default.
Not Applicable
(b) If the trustee is a trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities,
6
<PAGE>
of the obligor are outstanding, or is trustee for more than
one outstanding series of securities under the indenture,
state whether there has been a default under any such
indenture or series, identify the indenture or series
affected, and explain the nature of any such default.
Not Applicable
Item 14. Affiliations with the Underwriters
If any underwriter is an affiliate of the trustee, describe each
such affiliation.
Not Applicable
Item 15. Foreign Trustees.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to
be qualified under the Act.
Not Applicable
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company
as amended to date. (See Exhibit 1A to Form T-1, Securities
and Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the Trustee to
Commence Business (Included in Exhibit I above).
*3. A copy of the Authorization of the Trustee, as amended to
date (See Exhibit 4 to Form T-1, Securities and Exchange
Commission File No. 22-19146).
*4. A copy of the existing By-Laws of the Trustee, as amended to
date (See Exhibit 4 to Form T-1, Securities and Exchange
Commission File No. 22-19146).
7
<PAGE>
5. A copy of each Indenture referred to in Item 4, if the
Obligor is in default. Not Applicable.
6. The consent of the United States institutional trustee
required by Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and
Exchange Commission, to which there have been no amendments or changes.
NOTE
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor and its directors
or officers, the trustee has relied upon information furnished to it by
the obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the
answer to said Item are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2
and 16 of this form since to the best knowledge of the trustee as
indicated in Item 13, the obligor is not in default under any indenture
under which the applicant is trustee.
8
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility & qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New York,
on the 21st day of March, 1997.
IBJ SCHRODER BANK & TRUST COMPANY
By: /S/ BARBARA MCCLUSKEY
Barbara McCluskey
Vice President
<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the issue by, Metallurg, Inc. of its 12%
Senior Secured Notes due 2007 we hereby consent that reports of examinations by
Federal, State, Territorial, or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /S/ BARBARA MCCLUSKEY
Barbara McCluskey
Vice President
Dated: March 21, 1997
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
------------
ASSETS
------
<S> <C> <C>
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin .....................$ 34,228
Interest-bearing balances.................................................$ 229,175
Securities: Held-to-maturity securities....................................$ 174,707
Available-for-sale securities............................$ 36,168
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries and in IBFs:
Federal Funds sold........................................................$ 15,062
Securities purchased under agreements to resell...........................$ -0-
Loans and lease financing receivables:
Loans and leases, net of unearned income......................$ 1,780,278
LESS: Allowance for loan and lease losses.....................$ 56,976
LESS: Allocated transfer risk reserve.........................$ -0-
Loans and leases, net of unearned income, allowance, and reserve..........$1,723,302
Trading assets held in trading accounts.......................................$ 622
Premises and fixed assets (including capitalized leases)......................$ 4,264
Other real estate owned.......................................................$ 397
Investments in unconsolidated subsidiaries and associated companies...........$ -0-
Customers' liability to this bank on acceptances outstanding..................$ 105
Intangible assets.............................................................$ -0-
Other assets..................................................................$ 153,290
TOTAL ASSETS..................................................................$2,371,320
<PAGE>
<CAPTION>
LIABILITIES
<S> <C> <C>
Deposits:
In domestic offices.......................................................$ 671,747
Noninterest-bearing ......................................$ 224,231
Interest-bearing .........................................$ 447,516
In foreign offices, Edge and Agreement subsidiaries, and IBFs.............$ 856,540
Noninterest-bearing ......................................$ 17,313
Interest-bearing .........................................$ 839,227
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal Funds purchased...................................................$ 430,500
Securities sold under agreements to repurchase............................$ -0-
Demand notes issued to the U.S. Treasury......................................$ 50,000
Trading Liabilities...........................................................$ 539
Other borrowed money:
a) With a remaining maturity of one year or less..........................$ 61,090
b) With a remaining maturity of more than one year........................$ 7,647
Mortgage indebtedness and obligations under capitalized leases................$ -0-
Bank's liability on acceptances executed and outstanding......................$ 105
Subordinated notes and debentures.............................................$ -0-
Other liabilities.............................................................$ 77,289
TOTAL LIABILITIES.............................................................$2,155,457
Limited-life preferred stock and related surplus..............................$ -0-
<CAPTION>
EQUITY CAPITAL
<S> <C>
Perpetual preferred stock and related surplus.................................$ -0-
Common stock..................................................................$ 29,649
Surplus (exclude all surplus related to preferred stock)......................$ 217,008
Undivided profits and capital reserves........................................$ (30,795)
Net unrealized gains (losses) on available-for-sale securities................$ 1
Cumulative foreign currency translation adjustments...........................$ -0-
TOTAL EQUITY CAPITAL..........................................................$ 215,863
TOTAL LIABILITIES AND EQUITY CAPITAL..........................................$2,371,320
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit Name and Number Page No.
- - ----------------------- --------
Exhibit T3A.1 Certificate of Incorporation of the Applicant.
Exhibit T3A.2 Certificate of Amendment to the Certificate of
Incorporation of the Applicant.
Exhibit T3A.3 Certificate of Incorporation of the
reorganized Applicant.
Exhibit T3B.1 Amended and Restated By-Laws of the Applicant.
Exhibit T3B.2 By-Laws of the reorganized Applicant.
Exhibit T3C Form of Indenture to be qualified (including
forms of Security, Security Agreement and Pledge
Agreement attached as Exhibits A, B and C,
respectively, thereto).
Exhibit T3E.1 Joint Disclosure Statement for Fourth
Amended and Restated Joint Plan of Reorganization,
dated December 18, 1996 (including the appendices
and exhibits attached thereto).
Exhibit T3E.2 Form of Ballots.
Exhibit T3E.3 Supplement to Joint Disclosure Statement for
Fourth Amended and Restated Joint Plan of
Reorganization dated December 18, 1996 (including
the exhibit attached thereto).
Exhibit T3E.4 Notice of Entry of Order Confirming Debtors'
Fourth Amended and Restated Joint Plan of
Reorganization.
Exhibit T3E.5 Amended Notice of Entry of Order Confirming
Debtors' Fourth Amended and Restated Joint Plan
of Reorganization.
Exhibit T3E.6 Post Confirmation Order and Notice.
Exhibit T3F See the cross-reference sheet contained in the
Indenture filed herewith as Exhibit T3C.
13
CERTIFICATE OF INCORPORATION
OF
METALLURG, INC.
Under Section 807 of the Business Corporation Law
* * * * *
The undersigned, being the President and Secretary of Metallurg, Inc.,
pursuant to Section 402 of the Business Corporation Law hereby restate, certify
and set forth:
<PAGE>
FIRST: The name of the corporation is Metallurg, Inc.
SECOND: The corporation is formed for the following
purpose or purposes:
To engage in any lawful act or activity for which a corporation may be
organized under the Business Corporation Law, provided that the corporation is
not formed to engage in any act or activity requiring the consent or approval of
any state official, department, board, agency or other body without such consent
or approval first being obtained.
To have, in furtherance of the corporate purposes, all of the powers
conferred upon corporations organized under the Business Corporation Law subject
to any limitations thereof contained in this certificate of incorporation or in
the laws of the State of New York.
THIRD: The aggregate number of shares which this corporation shall have
authority to issue is three hundred ten thousand (310,000) shares, which are
divided into classes as follows:
1
<PAGE>
Three hundred thousand (300,000) shares of preferred stock having a par
value of One Hundred ($100) Dollars per share.
Ten thousand (10,000) shares of common stock without par value.
The designations, rights, preferences, privileges and voting powers of the
shares and the restrictions and the qualifications thereof are as follows:
PREFERRED STOCK
(1) Except as otherwise required by law, the holders of the preferred
stock have no voting power for the election of directors of the corporation nor
shall they otherwise have any voting power whatsoever.
(2) Before any dividends shall be paid upon or set apart for the common
stock, the holders of record of preferred stock shall be entitled to receive,
when and as declared by the Board of Directors of the corporation out of the
assets of the corporation available for dividends pursuant to the Business
Corporation Law, a noncumulative
2
<PAGE>
dividend at the rate of six (6%) percent per annum of the par value, each fiscal
year, and no more, payable at such time or times and in such amount or amounts
as the Board of Directors may declare. No dividends shall be paid in any fiscal
year on the common stock until after preferred dividends on the preferred stock
for such fiscal year have been paid or declared and a sum sufficient for the
payment thereof set apart.
(3) The corporation may, through its Board of Directors and in conformity
with the provisions of the Business Corporation Law, at any time or from time to
time, redeem all or any part of the issued and outstanding preferred shares by
paying the holders of record thereof, out of funds legally available therefor,
the sum of One Hundred ($100) Dollars for each such share to be redeemed;
provided, however, if at the time of such redemption the adjusted shareholders'
equity of the corporation (as defined below), as of the last day of the fiscal
year immediately preceding the date the redemption is authorized by the
corporation, is less than One Hundred Million ($100,000,000) Dollars, then, and
in that event, the sum to be paid for each such share to be redeemed shall be an
amount determined by multiplying the par value of each preferred share by a
3
<PAGE>
fraction, the numerator of which shall be the adjusted shareholders' equity of
the corporation, as of the last day of the fiscal year immediately preceding the
date the redemption was authorized, and the denominator of which shall be One
Hundred Million ($100,000,000) Dollars. As used herein the term "adjusted
shareholders' equity of the corporation" shall mean the shareholders' equity of
the corporation, which shall be determined from the consolidated financial
statements of the corporation and consolidated subsidiaries, as audited by the
corporation's independent certified public accountants in accordance with
generally accepted auditing standards, except that, for purposes hereof, the
shareholders' equity of the corporation shall be adjusted in order to eliminate
the effect of any cumulative foreign currency translation adjustment account as
set forth on such consolidated financial statements. Such independent certified
public accounting firm's determination of the adjusted shareholders' equity of
the corporation shall be conclusive and binding on the preferred shareholders.
In the event of such redemption, a notice fixing the time and place of
redemption shall be mailed not less than thirty days prior to the date so fixed
to each holder of record of the preferred shares to be redeemed at his address
as it appears on the record of shareholders. On and after the
4
<PAGE>
date fixed for such redemption, the holders of the shares so called for
redemption shall not be entitled to any dividends and shall not have any rights
or interests as holders of said shares except to receive the payment or payments
herein designated, without interest thereon, upon presentation and surrender of
their certificates therefor.
(4) In the event of any liquidation, dissolution, or winding up of the
affairs of the corporation, whether voluntary or involuntary, each issued and
outstanding preferred share shall entitle the holder of record thereof to
payment at the rate of One Hundred ($100) Dollars, before any payment or
distribution of the net assets of the corporation (whether stated capital or
surplus) shall be made to or set apart for the holders of record of the issued
and outstanding common shares; and after the payment to the holders of record of
the preferred shares of the par value of their shares, the remaining net assets
(whether stated capital or surplus), if any, shall be distributed exclusively to
the holders of record of the issued and outstanding common shares, each issued
and outstanding common share entitling the holder of record thereof to receive
an equal proportion of said remaining net assets. If the net assets of the
corporation shall be insufficient
5
<PAGE>
to pay in full the preferential amounts among the holders of the preferred
shares as aforesaid, then each issued and outstanding preferred share shall
entitle the holder of record thereof to an equal proportion of said net assets,
and the holders of the common shares shall in no event be entitled to
participate in the distribution of said net assets in respect of their common
shares. Without excluding any other proceeding which does not in fact effect a
liquidation, dissolution or winding up to the corporation, a merger or
consolidation of the corporation into or with any other corporation, a merger of
any other corporation into the corporation, or a sale, lease, mortgage, pledge,
exchange, transfer, or other disposition by the corporation of all or
substantially all of its assets shall not be deemed, for the purposes of this
paragraph, to be a liquidation, dissolution, or winding up of the corporation.
(5) No holder of any of the preferred stock of the corporation shall be
entitled as of right to subscribe for, purchase, or otherwise acquire any shares
of any class of the corporation which the corporation proposes to issue or any
rights or options which the corporation proposes to grant for the purchase of
shares of any class of the corporation or for the purchase of any shares, bonds,
6
<PAGE>
securities, or obligations of the corporation which are convertible into or
exchangeable for, or which carry any rights to subscribe for, purchase, or
otherwise acquire shares of any class of the corporation; and any and all such
shares, bonds, securities or obligations of the corporation, whether now or
hereafter authorized or created, may be issued, or may be reissued or
transferred if the same have been reacquired and have treasury status, and any
and all of such rights and options may be granted by the Board of Directors to
such persons, firms, corporations and associations, and for such lawful
consideration, and on such terms, as the Board of Directors in its discretion
may determine, without first offering the same, or any thereof, to any said
holder. Without limiting the generality of the foregoing stated denial of any
and all preemptive rights, no holder of shares of any class of the corporation
shall have any preemptive rights in respect of the matters, proceedings, or
transactions specified in subparagraphs (1) to (6), inclusive, of paragraph (e)
of Section 622 of the Business Corporation Law.
7
<PAGE>
COMMON STOCK
(6) Except as otherwise required by law, the holders of the no par value
voting common stock shall have the sole and exclusive voting power for the
election of directors and shall otherwise have the entire voting power. The
holder of each share of the said no par value voting common stock shall have one
(1) vote.
(7) In any fiscal year, after all noncumulative preferred stock dividends
have been paid or declared and a sum sufficient for the payment thereof set
apart, as provided in paragraph (2) of this Article "THIRD", the Board of
Directors of the corporation in its discretion both as to time and amount, may
declare and pay out of the assets of the corporation available for dividends
pursuant to the Business Corporation Law, dividends on the common stock.
(8) No holder of any of the common stock of the corporation shall be
entitled as of right to subscribe for, purchase, or otherwise acquire any shares
of any class of the corporation which the corporation proposes to issue or any
rights or options which the corporation proposes to grant for the purchase of
shares of any class of the corporation or for the purchase of any shares, bonds,
8
<PAGE>
securities, or obligations of the corporation which are convertible into or
exchangeable for, or which carry any rights to subscribe for, purchase, or
otherwise acquire shares of any class of the corporation; and any and all of
such shares, bonds, securities or obligations of the corporation, whether now or
hereafter authorized or created, may be issued, or may be reissued or
transferred if the same have been reacquired and have treasury status, and any
and all of such rights and options may be grated by the Board of Directors to
such persons, firms, corporations and associations, and for such lawful
consideration, and on such terms, as the Board of Directors in its discretion
may determine, without first offering the same, or any thereof, to any said
holder. Without limiting the generality of the foregoing stated denial of any
and all preemptive rights, no holder of shares of any class of the corporation
shall have any preemptive rights in respect of the matters, proceedings, or
transactions specified in subparagraphs (1) to (6), inclusive, of paragraph (e)
of Section 62 of the Business Corporation Law.
FOURTH: The office of the corporation is to be located in the County of
New York, in the State of New York.
9
<PAGE>
FIFTH: The Secretary of State is designated as the agent of the
corporation upon whom process against the corporation may be served. The post
office address within the State of New York to which the Secretary of State
shall mail a copy of any process against the corporation served upon him is
Metallurg, Inc., 25 East 39th Street, New York, New York 10016.
SIXTH: The duration of the corporation is to be perpetual.
SEVENTH: The number of directors of the corporation shall be provided in
the By-Laws of the corporation. The personal liability of the directors of the
corporation is hereby eliminated to the fullest extent permitted by the
provisions of the Business Corporation Law of the State of New York, as the same
may be amended and supplemented, including without limitation, the provisions of
paragraph (b) of Section 402 of the said law as now or hereinafter in effect.
EIGHTH: The directors and officers shall be indemnified to the fullest
extent permitted by the Business Corporation Law as the same may be hereafter
amended or
10
<PAGE>
supplemented. Without limiting the foregoing, the corporation may indemnify its
directors and officers pursuant to an agreement between the corporation and such
directors and/or officers provided that no indemnification may be made to or on
behalf of any director or officer if a judgment or other final adjudication
adverse to such director or officer establishes that his acts were committed in
bad faith or were the result of active and deliberate dishonesty and were
material to the cause of action so adjudicated, or that he personally gained in
fact a financial profit or other advantage to which he was not legally entitled.
NINTH: Any one or more members of the Board of Directors of the
corporation or of any committee thereof may participate in a meeting of said
Board or of any such committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time.
(5) This restatement of the certificate of incorporation of Metallurg, Inc.
was authorized by the affirmative vote of the Board of Directors, followed by
the affirmative vote of the holders of a majority of all
11
<PAGE>
outstanding shares of each class of stock entitled to vote thereon, at a meeting
of the shareholders of said corporation duly called and held on the seventh day
of June, 1989.
IN WITNESS WHEREOF, we have signed this certificate on the seventh day of
June, 1989, and we affirm the statements contained herein as true under
penalties of perjury.
/s/Michael A. Standen
Michael A. Standen, President
/s/Michael A. Finn
Michael A. Finn, Secretary
12
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
METALLURG, INC.
Under Sections 805 and 808 of the Business Corporation Law
of the State of New York
THE UNDERSIGNED, being Metallurg, Inc. hereby certifies that:
FIRST: The name of the Corporation is Metallurg, Inc.
SECOND: The original Certificate of Incorporation was filed with the
Secretary of State of the State of New York on April 26, 1946 and the
Corporation was originally organized under the name Bedos Shoe Manufacturing
Corp.
THIRD: Article THIRD of the Certificate of Incorporation relating to
authorized capital of the Corporation, which currently provides for an
authorized capital of Ten Thousand (10,000) common shares, no par value per
share ("Common Shares"), and Three Hundred Thousand (300,000) preferred shares,
par value $100 per share ("Preferred Shares"), is deleted in its entirety and
the following text is substituted for it:
"THIRD: (1) The number of shares that the Corporation is authorized
to issue and have outstanding are Ten Thousand (10,000) common
shares, par value $.01 per share.
(2) Pursuant to the requirements of Section 1123(a)(6) of
the United States Code, the Corporation shall not issue nonvoting
capital shares, subject, however, to further amendment of the
1
<PAGE>
Certificate of Incorporation as and to the extent permitted by
applicable law."
FOURTH: The amendment provides for a change of shares as follows:
Upon the effectiveness of this Amendment, (a) all authorized, but unissued
Preferred Shares, being Three Hundred Thousand (300,000) Preferred Shares, will
be hereby cancelled, (b) all authorized, but unissued Common Shares, being Seven
Thousand Nine Hundred Ninety Five (7,995) Common Shares, will be hereby changed
to Seven Thousand Nine Hundred Ninety Five (7,995) common shares, par value $.01
per share ("New Common Shares"), and (c) all the issued and outstanding Common
Shares, being Two Thousand Five (2,005) Common Shares, will be hereby changed to
Two Thousand Five (2,005) New Common Shares.
FIFTH: The foregoing amendment was authorized in connection with the
Joint Plan of Reorganization of Metallurg, Inc. and Shieldalloy Metallurgical
Corporation, dated December 18, 1996 (as amended or modified, the "Plan"),
confirmed by the United States Bankruptcy Court for the Southern District of New
York on or about February 26, 1997, under Title 11 of the United States Code and
under the authority of Section 808 of the New York Business Corporation Law.
2
<PAGE>
IN WITNESS WHEREOF, I have subscribed this certificate and do hereby
affirm the foregoing as true under the penalties of perjury, this 14th day of
March, 1997.
/s/ Michael A. Standen /s/ Barry C. Nuss
- - -------------------------- ------------------------------
Michael A. Standen Barry C. Nuss
President Assistant Secretary
3
CERTIFICATE OF INCORPORATION
OF
METALLURG, INC.
THE UNDERSIGNED, being a natural person for the purpose of
organizing a corporation under the General Corporation Law of the State of
Delaware, hereby certifies that:
FIRST: The name of the Corporation is Metallurg, Inc.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle, State of Delaware 19801. The name of the registered agent of the
Corporation in the State of Delaware at such address is The Corporation Trust
Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware, as from time to time amended.
FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is 15,000,000, all of which shares
shall be Common Stock having a par value of $0.01. Pursuant to the requirements
of Section 1123(a)(6) of Title 11 of the United States Code, the Corporation
shall not issue any shares of non-voting capital stock, subject, however, to
further amendment of this certificate as and to the event permitted by
applicable law.
FIFTH: The name and mailing address of the incor- porator are Eric
L. Schondorf, c/o Metallurg, Inc., 27 East 39th Street, New York, New York
10016.
SIXTH: In furtherance and not in limitation of the powers conferred
by law, subject to any limitations contained elsewhere in these articles of
incorporation, by-laws of the Corporation may be adopted, amended or repealed by
a majority of the board of directors of the Corporation, but any by-laws adopted
by the board of directors may be amended or repealed by the stockholders
entitled to vote thereon. Election of directors need not be by written ballot.
<PAGE>
SEVENTH: (a) A director of the Corporation shall not be personally
liable either to the Corporation or to any stockholder for monetary damages for
breach of fiduciary duty as a director, except (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, or (ii) for
acts or omissions which are not in good faith or which involve intentional
misconduct or knowing violation of the law, or (iii) for any matter in respect
of which such director shall be liable under Section 174 of Title 8 of the
General Corporation Law of the State of Delaware or any amendment thereto or
successor provision thereto, or (iv) for any transaction from which the director
shall have derived an improper personal benefit. Neither amendment nor repeal of
this paragraph (a) nor the adoption of any provision of the Certificate of
Incorporation inconsistent with this paragraph (a) shall eliminate or reduce the
effect of this paragraph (a) in respect of any matter occurring, or any cause of
action, suit or claim that, but for this paragraph (a) of this Article, would
accrue or arise, prior to such amendment, repeal or adoption of an inconsistent
provision.
(b) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to, or testifies in, any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative in nature, by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding to the full extent permitted
by law, and the Corporation may adopt By-laws or enter into agreements with any
such person for the purpose of providing for such indemnification.
(c) To the extent that a director or officer of the Corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in paragraph (b) of this Article, or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
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(d) Expenses incurred by an officer, director, employee or agent in
defending or testifying in a civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such director or officer is not entitled
to be indemnified by the Corporation against such expenses as authorized by this
Article, and the Corporation may adopt By-laws or enter into agreements with
such persons for the purpose of providing for such advances.
(e) The indemnification permitted by this Article shall not be
deemed exclusive of any other rights to which any person may be entitled under
any agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in such person's official capacity and as to action in another
capacity while holding an office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person.
(f) The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, employee benefit plan trust or other enterprise against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such liability
under the provisions of this Article or otherwise.
IN WITNESS WHEREOF, the undersigned has duly executed this
Certificate of Incorporation on this 11th day of February, 1997.
/s/ Eric L. Schondorf
----------------------
Eric L. Schondorf
Sole Incorporator
3
AMENDED AND RESTATED
BY-LAWS
OF
METALLURG, INC.
(A New York Corporation)
ARTICLE I
SHAREHOLDERS
1. CERTIFICATES REPRESENTING SHARES. Certificates representing
shares shall set forth thereon the statements prescribed by Section 508, and,
where applicable, by Section 505, 616, 620, 709, and 1002, of the Business
Corporation Law and by any other applicable provision of law and shall be signed
by the Chairman or a Vice-Chairman of the Board of Directors, if any, or by the
President or a Vice-President and by the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer and may be sealed with the corporate
seal or a facsimile thereof. The signatures of the officers upon a certificate
may be facsimiles if the certificate is countersigned by a transfer agent or
registered by a registrar other than the corporation itself or its employee. In
case any officer who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer at the date of its issue.
A certificate representing shares shall not be issued until the full
amount of consideration therefor has been paid except as Section 504 of the
Business Corporation Law may otherwise permit.
The corporation may issue a new certificate for shares in place of
any certificate theretofore issued by it, alleged to have been lost or
destroyed, and the Board of Directors may require the owner of any lost or
destroyed certificate, or his legal representative, to give the
<PAGE>
corporation a bond sufficient to indemnify the corporation against any claim
that may be made against it on account of the alleged loss or destruction of any
such certificate or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS. The corporation may issue
certificates for fractions of a share where necessary to effect transactions
authorized by the Business Corporation Law which shall entitle the holder, in
proportion to his fractional holdings, to exercise voting rights, receive
dividends and participate in liquidating distributions; or it may pay in cash
the fair value of fractions of a share as of the time when those entitled to
receive such fractions are determined; or it may issue scrip in registered or
bearer form over the manual or facsimile signature of an officer of the
corporation or of its agent, exchangeable as therein provided for full shares,
but such scrip shall not entitle the holder to any rights of a shareholder
except as therein provided.
3. SHARE TRANSFERS. Upon compliance with provisions restricting the
transferability of shares, if any, transfers of shares of the corporation shall
be made only on the share record of the corporation by the registered holder
thereof, or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes due
thereon.
4. RECORD DATE FOR SHAREHOLDERS. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the directors may fix, in advance, a date as the
record date for any such determination of shareholders. Such date shall not be
more than fifty days nor less than ten days before the date of such meeting, nor
more than fifty days prior to any other action. If no record date is fixed, the
record date for the determination of shareholders entitled to notice of or to
vote at a meeting of shareholders shall be at the close of the business on the
day next preceding the day on which notice is given, or, if no notice is given,
the day on which the
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meeting is held; the record date for determining shareholders for any purpose
other than that specified in the preceding clause shall be at the close of
business on the day on which the resolution of the directors relating thereto is
adopted. When a determination of shareholders of record entitled to notice of or
to vote at any meeting of shareholders has been made as provided in this
paragraph, such determination shall apply to any adjournment thereof, unless
directors fix a new record date under this paragraph for the adjourned meeting.
5. MEANING OF CERTAIN TERMS. As used herein in respect of the right
to noticed of a meeting of shareholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "shareholder" or "shareholders"
refers to an outstanding share or shares and to a holder or holders of record of
outstanding shares when the corporation is authorized to issue only one class of
shares, and said reference is also intended to include any outstanding share or
shares and any holder or holders of record of outstanding shares of any class
upon which or upon whom the Certificate of Incorporation confers such rights
where there are two or more classes or series of shares or upon which or upon
whom the Business Corporation Law confers such rights notwithstanding that the
Certificate of Incorporation may provide for more than one class or series of
shares, one or more of which are limited or denied such rights thereunder.
6. SHAREHOLDER MEETINGS.
- TIME. The annual meeting shall be held on the date fixed, from
time to time, by the directors, provided, that each successive annual meeting
shall be held on a date within thirteen months after the date of the preceding
annual meeting. A special meeting shall be held on the date fixed by the
directors except when the Business Corporation Law confers the right to fix the
date upon shareholders.
- PLACE. The annual and special meetings shall be held at such
place, within or without the State of New York, as the directors may, from time
to time, fix. Whenever the directors shall fail to fix such place, or, whenever
shareholders entitled to call a special meeting shall call the same, the meeting
shall be held at the office of the corporation in the State of New York.
3
<PAGE>
- CALL. Annual meetings may be called by the directors or by any
officer instructed by the directors to call the meeting. Special meetings may be
called in like manner except when the directors are required by the Business
Corporation Law to call a meeting, or except when the shareholders are entitled
by said Law to demand the call of a meeting.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE. Written notice
of all meetings shall be given, stating the place, date, and hour of the
meeting, and, unless it is an annual meeting, indicating that it is being issued
by or at the direction of the person or persons calling the meeting. The notice
of an annual meeting shall state that the meeting is called for the election of
directors and for the transaction of other business which may properly come
before the meeting, and shall, (if any other action which could be taken at a
special meeting is to be taken at such annual meeting) state the purpose or
purposes. The notice of a special meeting shall in all instances state the
purpose or purposes for which the meeting is called; and, at any such meeting,
only such businesses may be transacted which is related to the purpose or
purposes set forth in the notice. If the directors shall adopt, amend, or repeal
a by-law regulating an impending election of directors, the notice of the
meeting for election of directors shall contain the statements prescribed by
Section 601(b) of the Business Corporation Law. If any action is proposed to be
taken which would, if taken, entitle shareholders to receive payment for their
shares, the notice shall include a statement of that purpose and to that effect.
A copy of that notice of any meeting shall be given, personally or by first
class mail, not less than ten days nor more than fifty days before the date of
the meeting, unless the lapse of the prescribed period of time shall have been
waived, to each shareholder at his record address or at such other address which
he may have furnished by request in writing to the Secretary of the corporation.
Notice by mail shall be deemed to be given when deposited, with postage thereon
prepaid, in a post office or official depository under the exclusive care and
custody of the United States post office department. If a meeting is adjourned
to another time or place, and, if an announcement of the adjourned time or place
is made at the meeting, it shall not be necessary to give notice of the
adjourned meeting unless the directors, after adjournment, fix a new date for
the adjourned meeting. Notice of a meeting need not be given to any shareholder
who submits a
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<PAGE>
signed waiver of notice before or after the meeting. The attendance of a
shareholder at a meeting without protesting prior to the conclusion of the
meeting the lack of notice of such meeting shall constitute a waiver of notice
by him.
- SHAREHOLDER LIST AND CHALLENGE. A list of shareholders as of the
record date, certified by the Secretary or other officer responsible for its
preparation or by the transfer agent, if any, shall be produced at any meeting
of shareholders upon the request thereat or prior thereto of any shareholder. If
the right to vote at any meeting is challenged, the inspectors of election, if
any, or the person presiding thereat, shall require such list of shareholders to
be produced as evidence of the right of the person challenged to vote at such
meeting, and all persons who appear from such list to be shareholders entitled
to vote thereat may vote at such meeting.
- CONDUCT OF MEETING. Meetings of the shareholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, a Vice-President, or, if none of the foregoing is in
office and present and acting, by a Chairman to be chosen by the shareholders.
The Secretary of the corporation, or in his absence, an Assistant Secretary,
shall act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present the Chairman of the meeting shall appoint a
secretary of the meeting.
- PROXY REPRESENTATION. A shareholder may authorize another person
or persons to act for him by proxy in all matters in which a shareholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the shareholder or his attorney-in-fact. No proxy
shall be valid after the expiration of eleven months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided by the
Business Corporation Law.
- INSPECTORS - APPOINTMENT. The directors, in advance of any
meeting, may, but need not, appoint one or more inspectors to act at the meeting
or any adjournment thereof. If an inspector or inspectors are not appointed,
5
<PAGE>
the person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding threat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. On request of the person presiding at
the meeting or any shareholder, the inspector or inspectors, if any, shall make
a report in writing of any challenge, question or matter determined by him or
them and execute a certificate of any fact found by him or them.
- QUORUM. Except for a special election of directors pursuant to
Section 603 (b) of the Business Corporation Law, and except as herein otherwise
provided, the holders of a majority of the outstanding shares entitled to vote
thereat shall constitute a quorum at a meeting of shareholders for the
transaction of any business, provided that when a specified item of business is
required to be voted on by a class or series, voting as a class, the holders of
a majority of the share of such class or series shall constitute a quorum for
the transaction of such specified item of business. When a quorum is once
present to organize a meeting, it is not broken by the subsequent withdrawal of
any shareholders. The shareholders present may adjourn the meeting despite the
absence of a quorum.
- VOTING. Except as otherwise provided in the Certificate of
Incorporation, each share shall entitle the holder thereof to one vote. In the
election of directors, a plurality of the votes cast shall elect. Any other
action shall be authorized by a majority of the votes cast except where the
Business Corporation Law prescribes a different proportion of votes.
6
<PAGE>
7. SHAREHOLDER ACTION WITHOUT MEETING. Whenever shareholders are
required or permitted to take any action by vote, such action may be taken
without a meeting on written consent, setting forth the action so taken, signed
by the holders of all shares.
ARTICLE II
GOVERNING BOARD
1. FUNCTIONS AND DEFINITIONS. The business of the corporation shall
be managed under the direction of a governing board, which is herein referred to
as the "Board of Directors" or "directors" notwithstanding that the members
thereof may otherwise bear the titles of trustees, managers, or governors or any
other designated title, and notwithstanding that only one director legally
constitutes the Board. The word "director" or "directors" likewise herein refers
to a member of to members of the governing board notwithstanding the designation
of a different official title or titles. The use of the phrase "entire board"
herein refers to the total number of directors which the corporation would have
if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. Each director shall be at least
eighteen years of age. A director need not be a shareholder, a citizen of the
United States, or a resident of the State of New York. The Board of Directors
shall consist of no fewer than three, except that, where all the shares are
owned beneficially and of record by less than three shareholders, the number of
directors may be less than three but not less than the number of such
shareholders. Subject to the foregoing limitation and except for the first Board
of Directors, such number may be fixed from time to time by action of the
shareholders or of the directors. The number of directors may be increased or
decreased by action of shareholders or of the directors, provided that any
action of the directors to effect such increase or decrease shall require the
vote of a majority of the entire Board. No decrease shall shorten the term of
any incumbent director.
3. ELECTION AND TERM. The Board of Directors shall be elected
annually at the annual meeting of shareholders and in the interim by the
shareholders or by the remaining directors to fill vacancies and newly created
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<PAGE>
directorships, and all directors elected by shareholders shall hold office until
the next annual meeting of shareholders and until their successors have been
duly elected and qualified; and directors who are elected in the interim by the
remaining directors to fill vacancies and newly created directorships shall hold
office until the next meeting of shareholders at which the election of directors
is in the regular order of business and until their successors have been duly
elected and qualified. In the interim between annual meetings of shareholders or
special meetings of shareholders called for the election of directors, newly
created directorships and any vacancies in the Board of Directors, including
vacancies resulting from the removal of directors for cause or without cause,
may be filled by the vote of the remaining directors then in office, although
less than a quorum exists.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the
State of New York as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the
time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, of the President, or of a
majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. The notice of any meeting need not specify the purpose of the
meeting. Any requirement of furnishing a notice shall be waived by any director
who signs a waiver of notice before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to him.
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<PAGE>
- QUORUM AND ACTION. One-third of the entire Board shall constitute
a quorum for the transaction of business. A majority of the directors present,
whether or not a quorum is present, may adjourn a meeting to another time and
place. Except as herein otherwise provided, the act of the Board shall be the
act, at a meeting duly assembled, by vote of a majority of the directors present
at the time of the vote, a quorum being present at such time.
Any one or more members of the Board of Directors or of any
committee thereof may participate in a meeting of said Board or of any such
committee by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time, and participation by such means shall constitute presence in person at the
meeting.
- CHAIRMAN OF THE MEETING. The President, if present and acting, or
any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Any or all of the directors may be removed
for cause or without cause by the shareholders. One or more of the directors may
be removed for cause by the Board of Directors.
6. COMMITTEES. Whenever the Board of Directors shall consist of more
than three members, the Board of Directors, by resolution adopted by a majority
of the entire Board of Directors, may designate from their number three or more
directors to constitute a Committee of the Board and other committees, each of
which, to the extent provided in the resolution designating it, shall have the
authority of the Board of Directors with the exception of any authority the
delegation of which is prohibited by Section 712 of the Business Corporation
Law.
7. WRITTEN LAW. Any action required or permitted to be taken by the
Board of Directors or by any committee thereof may be taken without a meeting if
all of the members of the Board of Directors or of any committee thereof consent
in writing to the adoption of a resolution authorizing the action. The
resolution and the written consents thereto by the members of the Board of
Directors or any such committee shall be filed with the minutes of the
proceeding of the Board of Directors or of any such committee.
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<PAGE>
ARTICLE III
OFFICERS
The directors may elect or appoint a Chairman of the Board of
Directors, a President, one or more Vice-Presidents, a Secretary, one or more
Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and such
other officers as they may determine. The President may but need not be a
director. Any two or more offices may be held by the same person except the
offices of President and Secretary; or, when all of the issued and outstanding
shares of the corporation are owned by one person, such person may hold all or
any combination of offices.
Unless otherwise provided in the resolution of election or
appointment, each officer shall hold office until the meeting of the Board of
Directors following the next annual meeting of shareholders and until his
successor has been elected and qualified.
Officers shall have the powers and duties defined in the resolutions
appointing them.
The Board of Directors may remove any officer for cause or without
cause.
ARTICLE IV
STATUTORY NOTICES TO SHAREHOLDERS
The directors may appoint the Treasurer or other fiscal officer
and/or the Secretary or any other officer to cause to be prepared and furnished
to shareholders entitled thereto any special financial notice and/or any
financial statement, as the case may be, which may be required by any provision
of law, and which, more specifically, may be required by Sections 510, 511, 515,
516, 517, 519, and 520 of the Business Corporation Law.
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<PAGE>
ARTICLE V
BOOKS AND RECORDS
The corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of the shareholders, of the
Board of Directors, and/or any committee which the directors may appoint, and
shall keep at the office of the corporation in the State of New York or at the
office of the transfer agent or registrar, if any, in said state, a record
containing the names and addresses of all shareholders, the number and class of
shares held by each, and the date when they respectively became the owners of
record thereof. Any of the foregoing books, minutes, or records may be in
written form or in any other form capable of being converted into written form
within a reasonable time.
ARTICLE VI
CORPORATE SEAL
The corporate seal, if any, shall be in such form as the Board of
Directors shall prescribe.
ARTICLE VII
FISCAL YEAR
The first fiscal year of the corporation shall be fixed, and shall
be subject to change form time to time, by the Board of Directors.
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ARTICLE VIII
AMENDMENTS
1. BY DIRECTORS. The Board of Directors shall have the power to
make, amend and/or repeal the By-laws of this Corporation by the affirmative
vote of a majority of the members of the Board of Directors in office.
2. BY SHAREHOLDERS. The shareholders may make, alter, amend and/or
repeal the By-laws of this Corporation, and all By-laws made by the Directors
may be altered, amended or repealed by the shareholders by a vote of the holders
of a majority of the capital shares of the Corporation issued, outstanding and
having voting power, at any annual meeting or at any special meeting called for
such purpose, provided notice of such proposed alteration, amendment or repeal
be included in the notice of the meeting.
Adopted: July 10, 1990
12
BY-LAWS
OF
METALLURG, INC.
(a Delaware corporation)
I
Stockholders
1. Annual Meetings. The annual meeting of
stockholders for the election of directors and for the transaction of such other
business as may properly come before the meeting shall be held each year at such
date and time, within or without the State of Delaware, as the Board of
Directors shall determine.
2. Special Meetings. Special meetings of stockholders for the
transaction of such business as may properly come before the meeting may be
called by order of the Board of Directors or by stockholders holding together at
least a majority of all the shares of the Corporation entitled to vote at the
meeting, and shall be held at such date and time, within or without the State of
Delaware, as may be specified by such order. Whenever the directors shall fail
to fix such place, the meeting shall be held at the principal executive office
of the Corporation.
3. Notice of Meetings. Written notice of all meetings of the
stockholders shall be mailed or delivered to each stockholder not less than 10
nor more than 60 days prior to the meeting. Notice of any special meeting shall
state in general terms the purpose or purposes for which the meeting is to be
held.
4. Stockholder Lists. The officer who has charge of the stock ledger
of the Corporation shall prepare and make, at least 10 days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, either at a place within the city where the meeting is
to be held, which place shall be
<PAGE>
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
5. Quorum. Except as otherwise provided by law or the Corporation's
Certificate of Incorporation, a quorum for the transaction of business at any
meeting of stockholders shall consist of the holders of record of a majority of
the issued and outstanding shares of the capital stock of the Corporation
entitled to vote at the meeting, present in person or by proxy. At all meetings
of the stockholders at which a quorum is present, all matters, except as
otherwise provided by law or the Certificate of Incorporation, shall be decided
by the vote of the holders of a majority of the shares entitled to vote thereat
present in person or by proxy. If there be no such quorum, the holders of a
majority of such shares so present or represented may adjourn the meeting from
time to time, without further notice, until a quorum shall have been obtained.
When a quorum is once present it is not broken by the subsequent withdrawal of
any stockholder.
6. Organization. Meetings of stockholders shall be presided over by
the Chairman, if any, or if none or in the Chairman's absence the Vice-Chairman,
if any, or if none or in the Vice-Chairman's absence the President, if any, or
if none or in the President's absence a Vice-President, or, if none of the
foregoing is present, by a chairman to be chosen by the stockholders entitled to
vote who are present in person or by proxy at the meeting. The Secretary of the
Corporation, or in the Secretary's absence an Assistant Secretary, shall act as
secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present, the presiding officer of the meeting shall appoint any
person present to act as secretary of the meeting.
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7. Voting; Proxies; Required Vote. (a) At each meeting of
stockholders, every stockholder shall be entitled to vote in person or by proxy
appointed by instrument in writing, subscribed by such stockholder or by such
stockholder's duly authorized attorney-in-fact and, unless the Certificate of
Incorporation provides otherwise, shall have one vote for each share of stock
entitled to vote registered in the name of such stockholder on the books of the
Corporation on the applicable record date fixed pursuant to these By-laws. At
all elections of directors the voting may but need not be by ballot and a
plurality of the votes cast there shall elect. Except as otherwise required by
law or the Certificate of Incorporation, any other action shall be authorized by
a majority of the votes cast.
(b) Any action required or permitted to be taken at any meeting of
stockholders may, except as otherwise required by law or the Certificate of
Incorporation, 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 record of the issued and outstanding capital stock of
the Corporation having a majority of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted, and the writing or writings are filed with the permanent
records of the Corporation. Prompt notice of the taking of corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
(c) Where a separate vote by a class or classes, present in person
or represented by proxy, shall constitute a quorum entitled to vote on that
matter, the affirmative vote of the majority of shares of such class or classes
present in person or represented by proxy at the meeting shall be the act of
such class, unless otherwise provided in the Corporation's Certificate of
Incorporation.
8. Nomination of Directors. Nominations for the election of
directors may be made by any stockholder entitled to vote in the election of
directors generally. However, any stockholder entitled to vote in the election
of directors generally may nominate one or more persons for election as
directors at a meeting only if timely notice of such stockholder's intent to
make such nomination or nominations has been given in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice must be
3
<PAGE>
delivered to or mailed and received at the principal executive offices of the
Corporation not fewer than 90 days prior to the meeting. Each such notice shall
set forth (a) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated, (b) a representation
that the stockholder is a holder of record of shares of the Corporation entitled
to vote for election of directors on the date of such notice and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice, (c) a description of all arrangements or understandings
between the stockholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations are to
be made by the stockholder, (d) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission, had the nominee been nominated, or intended to be nominated by the
Board of Directors and (e) the consent of each nominee to serve as a director of
the Corporation if so elected.
If the chairman of the meeting for the election of directors determines
that a nomination of any candidate for election as a director at such meeting
was not made in accordance with the applicable provisions of this Section 8,
such nomination shall be void.
9. Inspectors. The Board of Directors, in advance of any meeting,
may, but need not, appoint one or more inspectors of election to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not so
appointed, the person presiding at the meeting may, but need not, appoint one or
more inspectors. In case any person who may be appointed as an inspector fails
to appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors, if any, shall determine the number of shares of stock
outstanding and the voting power of each, the shares of stock represented at the
meeting, the existence of a quorum, and the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count
4
<PAGE>
and tabulate all votes, ballots or consents, determine the result, and do such
acts as are proper to conduct the election or vote with fairness to all
stockholders. On request of the person presiding at the meeting, the inspector
or inspectors, if any, shall make a report in writing of any challenge, question
or matter determined by such inspector or inspectors and execute a certificate
of any fact found by such inspector or inspectors.
II
Board of Directors
1. General Powers. The business, property and affairs of the
Corporation shall be managed by, or under the direction of, the Board of
Directors.
2. Qualification; Number; Term; Remuneration. (a) Each director
shall be at least 18 years of age. A director need not be a stockholder, a
citizen of the United States, or a resident of the State of Delaware. The number
of directors initially constituting the entire Board shall be at least five (5)
(but no more than seven (7)), or such larger or lesser number (but not less than
one) as may be fixed from time to time by action of the stockholders or Board of
Directors, one of whom may be selected by the Board of Directors to be its
Chairman. The use of the phrase "entire Board" herein refers to the total number
of directors which the Corporation would have if there were no vacancies.
(b) Directors who are elected at an annual meeting of stockholders,
and directors who are elected in the interim to fill vacancies and newly created
directorships, shall hold office until the next annual meeting of stockholders
and until their successors are elected and qualified or until their earlier
resignation or removal.
(c) Directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
5
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3. Quorum and Manner of Voting. Except as otherwise provided by law,
a majority of the entire Board shall constitute a quorum. A majority of the
directors present, whether or not a quorum is present, may adjourn a meeting
from time to time to another time and place without notice. The vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
4. Places of Meetings. Meetings of the Board of Directors may be
held at any place within or without the State of Delaware, as may from time to
time be fixed by resolution of the Board of Directors, or as may be specified in
the notice of meeting.
5. Annual Meeting. Following the annual meeting of stockholders, the
newly elected Board of Directors shall meet for the purpose of the election of
officers and the transaction of such other business as may properly come before
the meeting. Such meeting may be held without notice immediately after the
annual meeting of stockholders at the same place at which such stockholders'
meeting is held.
6. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as the Board of Directors shall from time
to time by resolution determine. Notice need not be given of regular meetings of
the Board of Directors held at times and places fixed by resolution of the Board
of Directors.
7. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board, President,
Secretary, or by a majority of the directors then in office.
8. Notice of Meetings. A notice of the place, date and time and the
purpose or purposes of each meeting of the Board of Directors shall be given to
each director by mailing the same at least two days before the special meeting,
or by telegraphing or telephoning the same or by delivering the same personally
not later than the day before the day of the meeting.
9. Organization. At all meetings of the Board of Directors, the
Chairman, if any, or if none or in the Chairman's absence or inability to act
the President, or in the President's absence or inability to act any Vice-
6
<PAGE>
President who is a member of the Board of Directors, or in such Vice-President's
absence or inability to act a chairman chosen by the directors, shall preside.
10. Resignation. Any director may resign at any time upon written
notice to the Corporation and such resignation shall take effect upon receipt
thereof by the President or Secretary, unless otherwise specified in the
resignation. Any or all of the directors may be removed, with or without cause,
by the holders of a majority of the shares of stock outstanding and entitled to
vote for the election of directors.
11. Vacancies. Unless otherwise provided in these By-laws, vacancies
on the Board of Directors, whether caused by resignation, death,
disqualification, removal, an increase in the authorized number of directors or
otherwise, may be filled by the affirmative vote of a majority of the remaining
directors, although less than a quorum, or by a sole remaining director, or at a
special meeting of the stockholders, by the holders of shares entitled to vote
for the election of directors.
12. Action by Written Consent. Any action required or permitted to
be taken at any meeting of the Board of Directors may be taken without a meeting
if all the directors consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors.
III
Committees
1. Appointment. From time to time the Board of Directors by a
resolution adopted by a majority of the entire Board may appoint any committee
or committees for any purpose or purposes, to the extent lawful, which shall
have powers as shall be determined and specified by the Board of Directors in
the resolution of appointment.
2. Procedures, Quorum and Manner of Acting. Each committee shall fix
its own rules of procedure, and shall meet where and as provided by such rules
or by resolution of the Board of Directors. Except as otherwise provided by law,
the presence of a majority of the then appointed members of a
7
<PAGE>
committee shall constitute a quorum for the transaction of business by that
committee, and in every case where a quorum is present the affirmative vote of a
majority of the members of the committee present shall be the act of the
committee. Each committee shall keep minutes of its proceedings, and actions
taken by a committee shall be reported to the Board of Directors.
3. Action by Written Consent. Any action required or permitted to be
taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if all the members of the committee consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the committee.
4. Term; Termination. In the event any person shall cease to be a
director of the Corporation, such person shall simultaneously therewith cease to
be a member of any committee appointed by the Board of Directors.
IV
Officers
1. Election and Qualifications. The Board of Directors shall elect
the officers of the Corporation, which shall include a President and a
Secretary, and may include, by election or appointment, one or more
Vice-Presidents (any one or more of whom may be given an additional designation
of rank or function), a Treasurer and such Assistant Secretaries, such Assistant
Treasurers and such other officers as the Board may from time to time deem
proper. Each officer shall have such powers and duties as may be prescribed by
these By-laws and as may be assigned by the Board of Directors or the President.
Any two or more offices may be held by the same person except the offices of
President and Secretary.
2. Term of Office and Remuneration. The term of office of all
officers shall be one year and until their respective successors have been
elected and qualified, but any officer may be removed from office, either with
or without cause, at any time by the Board of Directors. Any vacancy in any
office arising from any cause may be filled for the unexpired portion of the
term by the Board of Directors. The remuneration of all officers of the
8
<PAGE>
Corporation may be fixed by the Board of Directors or in such manner as the
Board of Directors shall provide.
3. Resignation; Removal. Any officer may resign at any time upon
written notice to the Corporation and such resignation shall take effect upon
receipt thereof by the President or Secretary, unless otherwise specified in the
resignation. Any officer shall be subject to removal, with or without cause, at
any time by vote of a majority of the entire Board.
4. Chairman of the Board. The Chairman of the Board of Directors, if
there be one, shall preside at all meetings of the Board of Directors and shall
have such other powers and duties as may from time to time be assigned by the
Board of Directors.
5. President and Chief Executive Officer. The President shall be the
chief executive officer of the Corporation, and shall have such duties as
customarily pertain to that office. The President shall have general management
and supervision of the property, business and affairs of the Corporation and
over its other officers; may appoint and remove other officers and other agents
and employees; and may execute and deliver in the name of the Corporation powers
of attorney, contracts, bonds and other obligations and instruments.
6. Vice-President. A Vice-President may execute and deliver in the
name of the Corporation contracts and other obligations and instruments
pertaining to the regular course of the duties of said office, and shall have
such other authority as from time to time may be assigned by the Board of
Directors or the President.
7. Treasurer. The Treasurer shall in general have all duties
incident to the position of Treasurer and such other duties as may be assigned
by the Board of Directors or the President.
8. Secretary. The Secretary shall in general have all the duties
incident to the office of Secretary and such other duties as may be assigned by
the Board of Directors or the President.
9. Assistant Officers. Any assistant officer shall have such powers
and duties of the officer such
9
<PAGE>
assistant officer assists as such officer or the Board of Directors shall from
time to time prescribe.
V
Books and Records
1. Location. The books and records of the Corporation may be kept at
such place or places within or outside the State of Delaware as the Board of
Directors or the respective officers in charge thereof may from time to time
determine. The record books containing the names and addresses of all
stockholders, the number and class of shares of stock held by each and the dates
when they respectively became the owners of record thereof shall be kept by the
Secretary as prescribed in the By-laws and by such officer or agent as shall be
designated by the Board of Directors.
2. Addresses of Stockholders. Notices of meetings and all other
corporate notices may be delivered personally or mailed to each stockholder at
the stockholder's address as it appears on the records of the Corporation.
(a) Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors and which record date shall not be more than 60 nor less than 10 days
before the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a
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<PAGE>
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors and which
date shall not be more than 10 days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. If no record date
has been fixed by the Board of Directors, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required, shall be
the first date on which a signed written consent setting forth the action taken
or proposed to be taken is delivered to the Corporation by delivery to its
registered office in this State, its principal place of business, or an officer
or agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. If no record date has been fixed by the Board of Directors
and prior action by the Board of Directors is required by this chapter, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted and which record date shall be not more than 60 days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
VI
Certificates Representing Stock
1. Certificates; Signatures. The shares of the Corporation shall be
represented by certificates, provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all
11
<PAGE>
classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate, signed by or in the name of the Corporation by
the Chairman or Vice-Chairman of the Board of Directors, or the President or
Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, representing the number of shares
registered in certificate form. Any and all signatures on any such certificate
may be facsimiles. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
The name of the holder of record of the shares represented thereby, with the
number of such shares and the date of issue, shall be entered on the books of
the Corporation.
2. Transfers of Stock. Upon compliance with provisions restricting
the transfer or registration of transfer of shares of stock, if any, shares of
capital stock shall be transferable on the books of the Corporation only by the
holder of record thereof in person, or by duly authorized attorney, upon
surrender and cancellation of certificates for a like number of shares, properly
endorsed, and the payment of all taxes due thereon.
3. Fractional Shares. The Corporation may, but shall not be required
to, issue certificates for fractions of a share where necessary to effect
authorized transactions, or the Corporation may pay in cash the fair value of
fractions of a share as of the time when those entitled to receive such
fractions are determined, or it may issue scrip in registered or bearer form
over the manual or facsimile signature of an officer of the Corporation or of
its agent, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a stockholder except as therein
provided.
The Board of Directors shall have power and authority to make all
such rules and regulations as it may
12
<PAGE>
deem expedient concerning the issue, transfer and registration of certificates
representing shares of the Corporation.
4. Lost, Stolen or Destroyed Certificates. The Corporation may issue
a new certificate of stock in place of any certificate, theretofore issued by
it, alleged to have been lost, stolen or destroyed, and the Board of Directors
may require the owner of any lost, stolen or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
any such new certificate.
ARTICLE VII
Dividends
Subject always to the provisions of law and the Certificate of
Incorporation, the Board of Directors shall have full power to determine whether
any, and, if any, what part of any, funds legally available for the payment of
dividends shall be declared as dividends and paid to stockholders; the division
of the whole or any part of such funds of the Corporation shall rest wholly
within the lawful discretion of the Board of Directors, and it shall not be
required at any time, against such discretion, to divide or pay any part of such
funds among or to the stockholders as dividends or otherwise; and before payment
of any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, thinks proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the Board of Directors
shall think conducive to the interest of the Corporation, and the Board of
Directors may modify or abolish any such reserve in the manner in which it was
created.
ARTICLE VIII
Ratification
Any transaction, questioned in any law suit on the ground of lack of
authority, defective or irregular execu-
13
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tion, adverse interest of director, officer or stockholder, non-disclosure,
miscomputation, or the application of improper principles or practices of
accounting, may be ratified before or after judgment, by the Board of Directors
or by the stockholders, and if so ratified shall have the same force and effect
as if the questioned transaction had been originally duly authorized. Such
ratification shall be binding upon the Corporation and its stockholders and
shall constitute a bar to any claim or execution of any judgment in respect of
such questioned transaction.
ARTICLE IX
Corporate Seal
The corporate seal shall have inscribed thereon the name of the
Corporation and the year of its incorporation, and shall be in such form and
contain such other words and/or figures as the Board of Directors shall
determine. The corporate seal may be used by printing, engraving, lithographing,
stamping or otherwise making, placing or affixing, or causing to be printed,
engraved, lithographed, stamped or otherwise made, placed or affixed, upon any
paper or document, by any process whatsoever, an impression, facsimile or other
reproduction of said corporate seal.
ARTICLE X
Fiscal Year
The fiscal year of the Corporation shall be fixed, and shall be
subject to change, by the Board of Directors. Unless otherwise fixed by the
Board of Directors, the fiscal year of the Corporation shall be the calendar
year.
ARTICLE XI
Waiver of Notice
Whenever notice is required to be given by these By-laws or by the
Certificate of Incorporation or by law, a written waiver thereof, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice.
14
<PAGE>
ARTICLE XII
Bank Accounts, Drafts, Contracts, Etc.
Bank Accounts and Drafts. In addition to such bank accounts as may
be authorized by the Board of Directors, the primary financial officer or any
person designated by said primary financial officer, whether or not an employee
of the Corporation, may authorize such bank accounts to be opened or maintained
in the name and on behalf of the Corporation as he may deem necessary or
appropriate, payments from such bank accounts to be made upon and according to
the check of the Corporation in accordance with the written instructions of said
primary financial officer, or other person so designated by the Treasurer.
Contracts. The Board of Directors may authorize any person or
persons, in the name and on behalf of the Corporation, to enter into or execute
and deliver any and all deeds, bonds, mortgages, contracts and other obligations
or instruments, and such authority may be general or confined to specific
instances.
Proxies; Powers of Attorney; Other Instruments. The Chairman, the
President or any other person designated by either of them shall have the power
and authority to execute and deliver proxies, powers of attorney and other
instruments on behalf of the Corporation in connection with the rights and
powers incident to the ownership of stock by the Corporation. The Chairman, the
President or any other person authorized by proxy or power of attorney executed
and delivered by either of them on behalf of the Corporation may attend and vote
at any meeting of stockholders of any company in which the Corporation may hold
stock, and may exercise on behalf of the Corporation any and all of the rights
and powers incident to the ownership of such stock at any such meeting, or
otherwise as specified in the proxy or power of attorney so authorizing any such
person. The Board of Directors, from time to time, may confer like powers upon
any other person.
Financial Reports. The Board of Directors may appoint the primary
financial officer or other fiscal officer and/or the Secretary or any other
officer to cause to be prepared and furnished to stockholders entitled thereto
any special financial notice and/or financial statement, as the case may be,
which may be required by any provision of law.
15
<PAGE>
ARTICLE XIII
Amendments
The Board of Directors or the holders of record of a majority of the
issued and outstanding shares of capital stock of the Corporation shall have the
power to adopt, amend or repeal the By-laws. By-laws adopted by the Board of
Directors may be repealed or changed, and new By-laws made, by the stockholders,
and the stockholders may prescribe that any By-law made by them shall not be
altered, amended or repealed by the Board of Directors.
16
METALLURG, INC.,
as the Company
[$60,000,000]
Senior Secured Notes due 2007
INDENTURE
Dated as of [April 2,] 1997
IBJ SCHRODER BANK & TRUST COMPANY,
Trustee
<PAGE>
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.
(b) .................................................. 8.08; 8.10; 12.02
(c) .................................................. N.A.
311(a) ................................................... 8.11
(b) .................................................. 8.11
(c) .................................................. N.A.
312(a) ................................................... 2.05
(b) .................................................. 12.03
(c) .................................................. 12.03
313(a) ................................................... 8.06
(b)(1)................................................ N.A.
(b)(2)................................................ 8.06
(c) .................................................. 8.06; 12.02
(d) .................................................. 8.06
314(a) ................................................... 5.03; 12.02
(b) .................................................. N.A.
(c)(1)................................................ 12.04
(c)(2)................................................ 12.04
(c)(3)................................................ N.A.
(d) .................................................. N.A.
(e) .................................................. 12.05
(f) .................................................. N.A.
315(a) ................................................... 8.01
(b) .................................................. 8.05; 12.02
(c) .................................................. 8.01
(d) .................................................. 8.01
(e) .................................................. 7.11
316(a)(last sentence)..................................... 2.09
(a)(1)(A)............................................. 7.05
(a)(1)(B)............................................. 7.04
(a)(2)................................................ N.A.
(b) .................................................. 7.07
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
(c) .................................................. 10.04
317(a)(1)................................................. 7.08
(a)(2)................................................ 7.09
(b) .................................................. 2.04
318(a) ................................................... 12.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
NYFS05...:\40\63140\0003\2185\IND1036R.54P
<PAGE>
TABLE OF CONTENTS
ARTICLE 1.
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions........................................... 1
Section 1.02. Other Definitions..................................... 15
Section 1.03. Incorporation by Reference of Trust
Indenture Act..................................... 16
Section 1.04. Rules of Construction................................. 17
ARTICLE 2.
THE SECURITIES
Section 2.01. Form and Dating....................................... 17
Section 2.02. Execution and Authentication.......................... 18
Section 2.03. Registrar and Paying Agent............................ 18
Section 2.04. Paying Agent to Hold Money in Trust................... 19
Section 2.05. Holder Lists.......................................... 19
Section 2.06. Transfer and Exchange................................. 20
Section 2.07. Replacement Securities................................ 20
Section 2.08. Outstanding Securities................................ 21
Section 2.09. Treasury Securities................................... 21
Section 2.10. Temporary Securities.................................. 22
Section 2.11. Cancellation.......................................... 22
Section 2.12. Defaulted Interest.................................... 22
ARTICLE 3.
GUARANTY
Section 3.01. Guaranty.............................................. 23
Section 3.02. Obligation of Guarantor Unconditional................. 23
Section 3.03. Execution and Delivery of Guaranty.................... 24
Section 3.04. Waiver Relating to Guaranties......................... 25
Section 3.05. Release of Guarantor.................................. 26
Section 3.06. Reinstatement of Guaranty............................. 26
ARTICLE 4.
REDEMPTION
Section 4.01. Notices to Trustee.................................... 26
Section 4.02. Selection of Securities to Be Redeemed................ 27
Section 4.03. Notice of Redemption.................................. 27
i
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Page
Section 4.04. Effect of Notice of Redemption........................ 28
Section 4.05. Deposit of Redemption Price........................... 28
Section 4.06. Securities Redeemed in Part........................... 29
Section 4.07. Optional Redemption................................... 29
Section 4.08. Mandatory Redemption.................................. 29
ARTICLE 5.
COVENANTS
Section 5.01. Payment of Securities................................. 30
Section 5.02. Maintenance of Office or Agency....................... 30
Section 5.03. SEC Reports; Financial Statements..................... 31
Section 5.04. Compliance Certificate................................ 31
Section 5.05. Stay, Extension and Usury Laws........................ 32
Section 5.06. Limitation on Restricted Payments..................... 32
Section 5.07. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted
Subsidiaries...................................... 35
Section 5.08. Limitation on Additional Indebtedness................. 35
Section 5.09. Limitations on Transactions with Affiliates........... 35
Section 5.10. Corporate Existence................................... 36
Section 5.11. Limitation on Liens................................... 36
Section 5.12. Change of Control..................................... 36
Section 5.13. Limitations on Asset Sales............................ 38
ARTICLE 6.
SUCCESSORS
Section 6.01. Limitation on Mergers, Consolidations
or Sale of Assets................................. 41
Section 6.02. Successor Company Substituted......................... 42
ARTICLE 7.
DEFAULTS AND REMEDIES
Section 7.01. Events of Default...................................... 42
Section 7.02. Acceleration.......................................... 44
Section 7.03. Other Remedies........................................ 45
Section 7.04. Waiver of Past Defaults............................... 45
Section 7.05. Control by Majority................................... 45
Section 7.06. Limitation on Suits................................... 46
Section 7.07. Rights of Holders to Receive Payment.................. 46
Section 7.08. Collection Suit by Trustee............................ 46
Section 7.09. Trustee May File Proofs of Claim...................... 47
Section 7.10. Priorities............................................ 47
Section 7.11. Undertaking for Costs................................. 48
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ARTICLE 8.
TRUSTEE
Section 8.01. Duties of Trustee..................................... 48
Section 8.02. Rights of Trustee..................................... 50
Section 8.03. Individual Rights of Trustee.......................... 50
Section 8.04. Trustee's Disclaimer.................................. 51
Section 8.05. Notice of Defaults.................................... 51
Section 8.06. Reports by Trustee to Holders......................... 51
Section 8.07. Compensation and Indemnity............................ 51
Section 8.08. Replacement of Trustee................................ 52
Section 8.09. Successor Trustee by Merger, Etc...................... 54
Section 8.10. Eligibility; Disqualification......................... 54
Section 8.11. Preferential Collection of Claims
Against Company................................... 54
ARTICLE 9.
DISCHARGE OF INDENTURE
Section 9.01. Satisfaction and Discharge of Indenture............... 55
Section 9.02. Application of Trust Money............................ 56
Section 9.03. Repayment to Company.................................. 56
Section 9.04. Indemnity for U.S. Government Obligations............. 56
Section 9.05. Reinstatement......................................... 57
ARTICLE 10.
AMENDMENTS
Section 10.01. Without Consent of Holders........................... 57
Section 10.02. With Consent of Holders.............................. 58
Section 10.03. Compliance with Trust Indenture Act.................. 60
Section 10.04. Revocation and Effect of Consents.................... 60
Section 10.05. Notation on or Exchange of Securities................ 60
Section 10.06. Trustee to Sign Amendments, Etc...................... 60
ARTICLE 11.
SECURITY
Section 11.01. Security Documents................................... 61
Section 11.02. Recording, Opinion of Counsel, Etc................... 62
Section 11.03. Trust Indenture Act Requirements..................... 63
Section 11.04. Disposition of Certain Collateral
without Requesting Release....................... 64
Section 11.05. Other Release of Lien................................ 66
Section 11.06. Impairment of Security Interest...................... 67
Section 11.07. Authorization of Receipt of Funds
by the Trustee Under
the Security Documents........................... 67
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Section 11.08. Reliance on Company Request.......................... 67
Section 11.09. Payment of Expenses.................................. 67
Section 11.10. Trustee's Duties..................................... 68
ARTICLE 12.
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls......................... 68
Section 12.02. Notices.............................................. 68
Section 12.03. Communication by Holders with Other Holders.......... 70
Section 12.04. Certificate and Opinion as
to Conditions Precedent.......................... 70
Section 12.05. Statements Required in Certificate
or Opinion....................................... 70
Section 12.06. Rules by Trustee and Agents.......................... 71
Section 12.07. Legal Holidays....................................... 71
Section 12.08. No Recourse Against Others........................... 71
Section 12.09. Governing Law........................................ 71
Section 12.10. No Adverse Interpretation of
Other Agreements................................. 71
Section 12.11. Successors........................................... 72
Section 12.12. Severability......................................... 72
Section 12.13. Counterpart Originals................................ 72
Section 12.14. Table of Contents, Headings, Etc..................... 72
ARTICLE 13.
MEETINGS OF HOLDERS
Section 13.01. Purposes of Meetings................................. 72
Section 13.02. Call of Meetings by Trustee.......................... 73
Section 13.03. Call of Meetings by Company or Holders............... 73
Section 13.04. Persons Entitled to Vote at Meeting.................. 73
Section 13.05. Regulations for Meeting.............................. 73
SIGNATURES
SIGNATURES................................................................. 73
EXHIBIT A FORM OF SECURITY
EXHIBIT B FORM OF SECURITY AGREEMENT
EXHIBIT C FORM OF PLEDGE AGREEMENT
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INDENTURE dated as of [April 2,] 1997 between METALLURG, INC., a
New York corporation (the "Company"), Shieldalloy Metallurgical Corporation, a
New York corporation, as the Guarantor ("SMC" or the "Guarantor"), and IBJ
Schroder Bank & Trust Company, a banking corporation duly organized and existing
under the laws of the State of New York, as trustee (the "Trustee").
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of the 12% Senior Secured Notes due 2007
(the "Securities").
Each party agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders of the Securities:
ARTICLE 1.
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Acquisition" means (i) an Investment or capital contribution
(by means of transfers of cash or other property to others or payments for
property or services for the account or use of others, or otherwise) by the
Company or any Restricted Subsidiary in any other Person, or any acquisition or
purchase of Capital Stock of another Person by the Company or any Restricted
Subsidiary, in either case pursuant to which such Person shall become a
Restricted Subsidiary or shall be merged with or into or consolidated with the
Company or any Restricted Subsidiary or (ii) an acquisition by the Company or
any Restricted Subsidiary of the property and assets of any Person other than
the Company or
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any Restricted Subsidiary which constitute substantially all of a division,
operating unit or line of business of such Person or which is otherwise outside
the ordinary course of business.
"Asset Sale" means any direct or indirect sale, transfer, conveyance
or lease (which has the effect of a disposition and is not for security
purposes) or other disposition (including by way of merger, consolidation or
sale-leaseback transaction, but not including Restricted Payments permitted
under this Indenture) in one transaction or a series of related transactions by
the Company or any Restricted Subsidiary to any Person (other than the Company
or any Restricted Subsidiary) of (i) all or any of the Capital Stock of any
Restricted Subsidiary, (ii) all or substantially all of the property and assets
of an operating unit or business of the Company or any Restricted Subsidiary or
(iii) any other property and assets of the Company or any Restricted Subsidiary
outside the ordinary course of business of the Company or such Restricted
Subsidiary and, in each case, that is not governed by the provisions of this
Indenture applicable to mergers, consolidations and sales of assets of the
Company; provided, however, that the term "Asset Sale" shall in no case include
any sale, transfer, conveyance, lease or other disposition (including by way of
merger, consolidation or sale-leaseback transaction, but not including
Restricted Payments permitted under this Indenture) in one transaction or a
series of related transactions by the Company or any Restricted Subsidiary to
any Person (i) pursuant to a Company Reincorporation Merger, (ii) pursuant to
a SMC Reincorporation Merger, (iii) of property or equipment that has become
worn out, obsolete or damaged or otherwise unsuitable for use in connection with
the business of the Company or any Restricted Subsidiary, as the case may be,
(iv) involving assets with a Fair Market Value not in excess of $500,000, (v) of
inventory in the ordinary course of business or (vi) for security purposes only.
"Bankruptcy Law" means title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board" means the Board of Directors of the Company.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board and to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day" means any day other than a Legal Holiday.
"Capitalized Lease" means any lease that would be required to be
capitalized on the balance sheet in accordance with generally accepted
accounting principles.
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"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations and rights or other equivalents in the equity
of such Person (however designated and whether voting or non-voting), whether
outstanding at the Issue Date or issued after the Issue Date, including, without
limitation, all Common Stock and Preferred Stock, and any and all rights,
warrants or options exchangeable for or convertible into any thereof.
"Cash Equivalents" means (i) U.S. Government Obligations with
maturities of one year or less from the date of acquisition, (ii) certificates
of deposit, eurodollar time deposits, overnight bank deposits and bankers'
acceptances having maturities of one year or less from the date of acquisition
issued by any commercial bank organized under the laws of the United States or
any state thereof having capital and surplus in excess of $500,000,000, and
(iii) commercial paper of an issuer rated at least "A-1" by Standard & Poor's
Corporation or "P-1" by Moody's Investors Service, Inc., or carrying an
equivalent rating by a nationally recognized rating agency if both of the two
named rating agencies cease publishing ratings of investments.
"Change of Control" means the occurrence of any of the following
events: (a) any "person" or "group" (as such terms are used in Section 13(d) and
Section 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total Voting Stock of the Company; or (b) the Company
consolidates with, or merges with or into, another Person or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where (i) the
outstanding Voting Stock of the Company is converted into or exchanged for (1)
Voting Stock (other than Disqualified Stock) of the surviving or transferee
corporation or (2) cash, securities and other property in an amount which could
be paid by the Company as a Restricted Payment under this Indenture and (ii)
immediately after such transaction no "person" or "group" (as such terms are
used in Section 13(d) and Section 14(d) of the Exchange Act) is the "beneficial
owner" (as defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except
that a person shall be deemed to have "beneficial ownership" of all securities
that such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total Voting Stock of the surviving or transferee corporation;
or (c) during any
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consecutive two-year period, individuals who at the beginning of such period
constituted the Board (together with any new directors whose election by the
Board or whose nomination for election by the stockholders of the Company was
approved by a vote of a majority of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board then in office, including, without limitation, by reason
of the provisions of the Company's Certificate of Incorporation relating to the
rights of certain classes of stockholders to designate and remove directors of
the Company.
"Collateral" means, collectively, all of the property and assets
that are from time to time subject to the Security Documents.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations and rights or other equivalents in the common
stock or ordinary shares of such Person (however designated and whether voting
or non-voting), whether or not outstanding at the Issue Date, including, without
limitation, all series and classes of such common stock or ordinary shares.
"Company Reincorporation Merger" means a merger of the Company
with and into Metallurg, Inc., a Delaware corporation and wholly-owned
Subsidiary of the Company.
"Company Request" means a written request signed on behalf of the
Company by an Officer of the Company and delivered to the Trustee.
"Consolidated Income Tax Expense" means, for any period, the
provision for corporation, local, foreign and all other income taxes of the
Company and the Restricted Subsidiaries for such period as determined in
accordance with generally accepted accounting principles; provided, that, there
shall be excluded therefrom any income taxes related to the items described in
clauses (i) through (vii) of the definition of Consolidated Net Income for such
period.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness for borrowed money of the Company
and the Restricted Subsidiaries for such period (including, without limitation,
amortization of original issue discount on any Indebtedness for borrowed money
and the interest portion of any deferred payment obligation (other than pension
obligations), calculated in accordance with the effective interest method of
accounting); all commissions, discounts and other fees and charges accrued with
respect to letters of credit and bankers' acceptance financing payable by the
Company and the Restricted Subsidiaries in respect of such period; the net costs
4
<PAGE>
associated with interest rate protection obligations of the Company and the
Restricted Subsidiaries in respect of such period; and interest in respect of
such period on Indebtedness for borrowed money that is guarantied or secured by
the Company or any Restricted Subsidiary; all but the principal component of
rent or other amounts in respect of Capitalized Lease Obligations paid, accrued
or scheduled to be paid or to be accrued by the Company and the Restricted
Subsidiaries during such period; and all dividends on any Preferred Stock or
Disqualified Stock of the Company to the extent paid accrued or scheduled to be
paid or to be accrued during such period; excluding, however, any premiums, fees
and expenses (and any amortization thereof) payable in connection with the
issuance of the Securities. Consolidated Interest Expense shall be determined on
a consolidated basis in conformity with generally accepted accounting
principles.
"Consolidated Net Income" means, for any period, the consolidated
net income (or loss) of the Company and the Restricted Subsidiaries for such
period, as determined on a consolidated basis in conformity with generally
accepted accounting principles, and adjusted, to the extent included in
calculating such consolidated net income, by excluding, without duplication, (i)
all extraordinary gains or losses of such Person (net of fees and expenses
relating to the transaction giving rise thereto) for such period, (ii) income of
the Company and the Restricted Subsidiaries derived from or in respect of all
Investments in Persons other than Restricted Subsidiaries, (iii) the portion of
net income (or loss) allocable to minority interests in unconsolidated Persons
for such period except to the extent actually received by the Company or any
Restricted Subsidiary, (iv) net income (or loss) of any other Person combined
with the Company or a Restricted Subsidiary on a "pooling of interests" basis
attributable to any period prior to the date of combination, (v) any gain or
loss, net of taxes, realized by the Company or a Restricted Subsidiary upon the
termination of any employee pension benefit plan during such period, (vi) gains
or losses in respect of any Asset Sales (net of fees and expenses relating to
the transaction giving rise thereto) during such period and (vii) except in the
case of any restriction or encumbrance permitted under Section 5.07 hereof, the
net income of any Restricted Subsidiary for such period to the extent that the
declaration of dividends or similar distributions by that Restricted Subsidiary
of that income is not at the time permitted, directly or indirectly, by
operation of the terms of its constitutional documents or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Operating Cash Flow" means, with respect to any
period, the Consolidated Net Income of the Company and the Restricted
Subsidiaries for such period (a) increased by the sum of (i) the Consolidated
Income Tax Expense of the Company and the Restricted Subsidiaries accrued
according to generally accepted accounting principles for such period (other
than taxes attributable to extraordinary, unusual or non-recurring gains or
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losses); (ii) Consolidated Interest Expense for such period; (iii) depreciation
of the Company and the Restricted Subsidiaries for such period; (iv)
amortization of the Company and the Restricted Subsidiaries for such period,
including, without limitation, amortization of capitalized debt issuance costs
for such period, all determined on a consolidated basis in accordance with
generally accepted accounting principles; and (v) all other non-cash charges
deducted in determining Consolidated Net Income including, without limitation,
non-cash write-offs, write-downs or adjustments and (b) decreased by non-cash
items increasing revenues in determining such Consolidated Net Income. For
purposes of this definition, (i) any Subsidiary of the Company that is a
Restricted Subsidiary on a Transaction Date shall be deemed to have been a
Restricted Subsidiary at all times during the four fiscal quarters immediately
preceding such Transaction Date (the "Reference Period") and (ii) any Subsidiary
of the Company that is not a Restricted Subsidiary on a Transaction Date shall
be deemed not to have been a Restricted Subsidiary at any time during the
Reference Period. In addition to and without limitation of the foregoing, for
purposes of this definition, "Consolidated Operating Cash Flow" shall be
calculated after giving effect on a pro forma basis for the Reference Period to,
without duplication, any Asset Sales or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company or one of the Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness) occurring during the period commencing on the first day of the
Reference Period to and including the Transaction Date, as if such Asset Sale or
Asset Acquisition occurred on the first day of the Reference Period.
"Corporate Trust Office" shall be at the address of the Trustee
specified in Section 12.02 or such other address of which the Trustee may give
notice to the Company.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Default" means any event which is, or after notice or passage of
time would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock of such Person which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is exchangeable for Indebtedness or is redeemable at
the option of the holder thereof, in whole or in part, on or prior to the final
maturity date of the Securities.
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"Effective Date" means the Issue Date.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect at the time.
"Fair Market Value" means the amount which a willing buyer would pay
a willing seller in an arm's-length transaction, with neither being under any
compulsion to buy or sell.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of
(i) Consolidated Operating Cash Flow to (ii) Consolidated Interest Expense, in
each case for such period.
"Guaranty" means a guaranty (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Holder" means a Person in whose name a Security is registered.
"Indebtedness" with respect to any Person, means any indebtedness,
whether or not contingent, whether recourse to all or a portion of the assets of
such Person, 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 representing the balance deferred and unpaid
of the purchase price of any property (including pursuant to capital leases),
except any such purchase price balance that constitutes an accrued expense or a
trade payable, if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such Person prepared on a
consolidated basis in accordance with generally accepted accounting principles,
and shall also include, to the extent not otherwise included, any Guaranty of
indebtedness which would be included within this definition.
"Investment" means any direct or indirect advance, loan or other
extension of credit (other than advances to customers in the ordinary course of
business, which are recorded as accounts receivable on the balance sheet of any
Person and other than advances or loans to officers, directors and employees
permitted by this Indenture) or capital contribution to (by means of any
transfer of cash or other property to others or any payment
7
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for property or services for the account or use of others), or any purchase or
acquisition of Capital Stock, bonds, notes, debentures or other securities
issued by, any other Person.
"Issue Date" means the date of the issuance of the Securities.
"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 and any filing of or
agreement to give any financing statement under the Uniform Commercial Code (or
equivalent statute) of any jurisdiction).
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or Cash Equivalents, including
payments in respect of deferred payment obligations when received in the form of
cash or Cash Equivalents and proceeds from the conversion of other property
received when converted to cash or Cash Equivalents, net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) provision for all taxes
(to the extent such taxes are paid or payable) as a result of such Asset Sale or
the subsequent payment of such proceeds to the Company for the payment of such
taxes, (iii) payments made to repay Indebtedness or any other obligation
outstanding at the time of such Asset Sale that either (A) is secured by a Lien
on the property or assets sold or (B) is required to be paid as a result of such
sale, (iv) reserves for any amounts which are prohibited to be paid to the
Company by reason of law, contract or otherwise and (v) appropriate amounts to
be provided by the Company or any Restricted Subsidiary of the Company as a
reserve against any liabilities associated with such Asset Sale or the
subsequent payment of the proceeds of such Asset Sale to the Company for such
reserves, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Vice Chairman, the President, the Chief Financial Officer, any
Executive Vice President, any Vice President, the Treasurer or the Secretary of
such Person.
"Officers' Certificate" means a certificate signed by two Officers,
delivered to the Trustee, and which shall include the statements set forth in
Section 12.05.
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"Opinion of Counsel" means a written opinion from legal counsel who
may be an employee of, or counsel to, the Company or who may be other counsel
who is reasonably acceptable to the Trustee, and which shall include the
statements set forth in Section 12.05.
"Ordinary Course of Business" means, with respect to sales of
Inventory or services performed, all sales of Inventory or services performed by
the Company in the ordinary course of business, but in any event excluding (i)
"bulk transfers" as defined in Section 6-102 of the Uniform Commercial Code,
(ii) such sales and services after the time there shall have occurred an Event
of Default under Sections 7.01(7) or (8) hereof and (iii) such sales and
services after the time the Trustee has taken possession of such Inventory after
the occurrence of an Event of Default and the Company has rights in such
Inventory pursuant to Section 9-506 of the Uniform Commercial Code.
"Permitted Indebtedness" means: (i) Indebtedness under the Working
Capital Credit Facility in an aggregate principal amount outstanding at the time
not to exceed the sum of 90% of the book value of accounts receivable of the
Company and the Restricted Subsidiaries and 75% of the book value of the
inventory of the Company and the Restricted Subsidiaries; (ii) Indebtedness of a
Restricted Subsidiary (to the extent not included in clause (i) above) under a
working capital, overdraft or similar line of credit in an aggregate amount not
to exceed the sum of 90% of the book value of accounts receivable and 75% of the
book value of the inventory of such Restricted Subsidiary; (iii) Indebtedness
secured by purchase money security interests upon or in any property acquired or
held by the Company or any Restricted Subsidiary in the ordinary course of
business to secure the purchase price of such property incurred solely for the
purpose of financing the acquisition of such property, and Indebtedness in
respect of Capitalized Leases; (iv) other Indebtedness of the Company and the
Restricted Subsidiaries in an aggregate principal amount not to exceed
$10,000,000 at any one time outstanding; (v) Indebtedness represented by the
Securities and this Indenture; (vi) Indebtedness of the Company and the
Restricted Subsidiaries existing as of the Effective Date including, without
limitation, any term loan or revolving credit facility, the net proceeds of
which are used to reduce the principal amount of the Securities (the "Existing
Indebtedness") (other than Indebtedness described in clauses (i) and (ii));
(vii) Indebtedness issued in exchange for, or the proceeds of which are used to
extend, refinance, renew, replace, defease or refund Indebtedness referred to in
clauses (iii) and (vi) above ("Refinancing Indebtedness"); provided, however,
that (a) the principal amount of such Refinancing Indebtedness shall not exceed
the principal amount of Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded and (b) the Refinancing Indebtedness shall have a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness so extended, refinanced, renewed, replaced,
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defeased or refunded and the Securities; and (viii) Indebtedness between or
among the Company and one or more of the Restricted Subsidiaries.
"Permitted Investments" means: (i) Investments by the Company or any
Restricted Subsidiary in property or assets owned or used in Related Businesses;
(ii) Investments by the Company or any Restricted Subsidiary in any Person
engaged in a Related Business as a result of such Investment (x) such Person
becomes a Wholly Owned Restricted Subsidiary or (y) such Person is merged or
consolidated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Wholly Owned Restricted
Subsidiary; (iii) Investments by the Company or any Restricted Subsidiary in
Cash Equivalents; (iv) Investments by the Company or any Restricted Subsidiary
in mutual or similar funds having assets in excess of $500,000,000; and (v)
Investments by the Company or any Restricted Subsidiary in the Company or any
Restricted Subsidiary.
"Permitted Liens" mean: (i) Liens in favor of the Company or the
Guarantor; (ii) liens on assets of the Company and its Subsidiaries in favor of
the Working Capital Agent, for the benefit of the Working Capital Lenders, to
secure obligations under the Working Capital Credit Facility; (iii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary thereof in a transaction not
prohibited by the terms of this Indenture; provided, however, that such Liens
were in existence prior to and were not granted in contemplation of such merger
or consolidation; (iv) Liens on property existing at the time of acquisition
thereof by the Company or any Subsidiary thereof in a transaction not prohibited
by the terms of this Indenture; provided, however, that such Liens were in
existence prior to the contemplation of such acquisition; (v) statutory Liens of
landlords and warehousemen's, carriers', mechanics', suppliers', materialmen's
or repairmen's or other like Liens, and Liens relating to surety and appeal
bonds, performance bonds, workmen's compensation, unemployment insurance and
other types of social security and other obligations of a like nature incurred
in the ordinary course of business; (vi) Liens existing on the Effective Date;
(vii) Liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded; (viii) Liens securing
purchase money Indebtedness and Capitalized Leases; (ix) easements,
rights-of-way, zoning, 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 or any of its Subsidiaries; (x) Liens
upon specific items of inventory or other goods and proceeds securing
obligations in respect of bankers' acceptances issued or created to facilitate
the purchase, shipment or storage of such inventory or other goods in the
ordinary course of business; (xi) Liens securing reimbursement obligations with
respect to letters of credit which encumber documents and other property
relating to such
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letters of credit and the products and proceeds thereof; (xii) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
nondelinquent customs duties in connection with the importation of goods; (xiii)
judgment and attachment Liens not giving rise to a Default or Event of Default;
(xiv) Liens arising out of consignment or similar arrangements for the sale of
goods entered into by the Company or any of its Subsidiaries in the ordinary
course of business in accordance with industry practice; (xv) any interest or
title of a lessor in the property subject to any lease, whether characterized as
capitalized or operating, entered into by the Company or any of its Subsidiaries
in the ordinary course of business; (xvi) Liens arising from filing Uniform
Commercial Code financing statements for precautionary purposes in connection
with true leases of personal property that are otherwise permitted under this
Indenture and under which the Company or any of its Subsidiaries is the lessee;
(xvii) all other Liens incurred in the ordinary course of business; provided
that the aggregate amount of Indebtedness secured by such other Liens shall not
exceed $10,000,000 at any one time outstanding; (xviii) extensions, renewals and
regranting of any liens referred to in clauses (i) through (xvii) above in
connection with any Refinancing Indebtedness permitted under this Indenture; and
(xix) liens in favor of the Trustee provided for in this Indenture.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Plan" means the Company's Fourth Amended and Restated Joint Plan of
Reorganization pursuant to Chapter 11 of the Bankruptcy Code, as amended from
time to time.
"Pledge Agreement" means the agreement substantially in the form of
Exhibit C hereto, executed by the Company in favor of the Trustee, as the same
may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations and rights or other equivalents in the
preferred stock of such Person (however designated and whether voting or
nonvoting), whether or not outstanding at the Issue Date, which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
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"Related Business" means the same or a similar line of business as
the Company and its Subsidiaries were engaged in on the Effective Date.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of the Company which is
not a Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities described above issued under this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time.
"Security Agreement" means the agreement substantially in the form
of Exhibit B hereto, executed by the Company in favor of the Trustee, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
"Security Documents" means the Security Agreement and the Pledge
Agreement.
"Significant Subsidiary" means, at any date of determination, any
Subsidiary of the Company that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company and the Restricted Subsidiaries for such fiscal year.
"SMC Reincorporation Merger" means a merger of SMC with and into
Shieldalloy Metallurgical Corporation, a Delaware corporation and wholly-owned
Subsidiary of the Company.
"Specified Indebtedness" means all indebtedness, obligations and
other liabilities (contingent or otherwise) arising under or with respect to the
Working Capital Credit Facility and all notes, security documents or other
documents, instruments or
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agreements executed in connection therewith. The term "Specified Indebtedness"
shall expressly include any and all interest accruing and costs and expenses
incurred after the filing by or against the Company of any petition or like
application under the Bankruptcy Law to the extent allowed or allowable in any
such case or proceeding so commenced.
"Subsidiary" of any Person means a corporation, partnership or other
entity more than 50% of the Voting Stock of which is owned by such Person or one
or more Subsidiaries of such Person.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, and as in effect on the date on which this Indenture
is qualified under the TIA, except as provided in Section 10.03 hereof.
"Transaction Date" means, with respect to the incurrence of any
Indebtedness by the Company or any Restricted Subsidiary, the date such
Indebtedness is to be incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"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.
"Trust Officer" means the chairman or vice chairman of the board of
directors, the chairman or vice-chairman of the executive committee of the board
of directors, the president, any vice-president, assistant vice-president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any trust officer, any assistant trust officer,
the controller, any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any Person to whom a particular corporate trust matter is referred
because of his/her knowledge of and familiarity with the particular subject, or,
in the case of a successor trustee, an officer assigned to the department,
division or group performing the corporate trust work of such successor.
"Unrestricted Subsidiary" means any Person of which a majority of
the Capital Stock or other equity securities having ordinary voting power for
the election of directors or other governing body of such Person is owned by the
Company, directly or indirectly, and that has been designated by the Company (by
written notice to the Trustee) as an "Unrestricted Subsidiary," and each
Subsidiary of an Unrestricted Subsidiary; provided, however, that a Person that
is a Subsidiary may not subsequently be designated as an
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"Unrestricted Subsidiary" if such designation would result in a Default or Event
of Default. For purposes of the foregoing, the net Investment in any Subsidiary
at the time of such designation shall be deemed made at the time of such
designation. The Board may, by a Board Resolution delivered to the Trustee,
designate any Restricted Subsidiary of the Company (other than a Significant
Subsidiary) (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Restricted Subsidiary owns
any Capital Stock of, or owns or holds any Lien on any property of, the Company
or any Restricted Subsidiary, and provided that (i) no Default or Event of
Default shall have occurred and be continuing at the time of or after giving
effect to such designation and (ii) either (A) the Subsidiary to be so
designated has total assets of $10,000 or less or (B) if such Subsidiary has
assets greater than $10,000, such designation would be permitted under Section
5.06. The Board of Directors of the Company may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary of the Company, provided that (i) no
Default or Event of Default shall have occurred and be continuing at the time of
or after giving effect to such designation; (ii) immediately after giving effect
to such designation the Company could incur $1.00 of additional Indebtedness
under the proviso in paragraph (a) of Section 5.08; and (iii) all Liens and
Indebtedness of such Unrestricted Subsidiary outstanding immediately following
such designation would, if incurred at such time, have been permitted to be
incurred for all purposes of this Indenture. Any designation by the Board shall
be evidenced to the Trustee by promptly filing with the Trustee a copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
Notwithstanding the foregoing, (i) Gesellschaft fur Elektrometallugie GmbH and
its Subsidiaries, (ii) Elektrowerk Weisweller GmbH and its Subsidiaries, (iii)
Metallurg do Brazil Ltda and its Subsidiaries and (iv) Companhia Industrial
Fluminense and its Subsidiaries, shall be deemed to be Unrestricted
Subsidiaries.
"U.S. Government Obligations" mean securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the timely payment of which is uncondi- tionally guarantied as a full
faith and credit obligation by the United States of America, that, in either
case under clause (i) or (ii), are not callable or redeemable at the option of
the issuer thereof, and shall also include a depository receipt issued by a bank
or trust company as custodian with respect to any such government obligation or
a specific payment of interest on or principal of such government obligation
held by such custodian for the account of the holder of a depository receipt;
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government
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Obligation or the specific payment of interest on or principal on the U.S.
Government Obligation evidenced by such depository receipt.
"Voting Stock" means with respect to any Person, Capital Stock of
any class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the then
outstanding aggregate principal amount of such Indebtedness into (ii) the total
of the product obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned" means, with respect to any Subsidiary of any Person,
such Subsidiary if all of the outstanding Capital Stock in such Subsidiary
(other than any director's qualifying shares or Investments by foreign nationals
mandated by applicable law) is owned by such Person or one or more Wholly Owned
Subsidiaries of such Person.
"Working Capital Agent" means The First National Bank of Boston, as
agent for the lenders under the Working Capital Credit Facility or any successor
thereto appointed pursuant to the terms of the Working Capital Credit Facility.
"Working Capital Lenders" means each lender under the Working
Capital Credit Facility.
"Working Capital Credit Facility" means a credit facility provided
to the Company, SMC and one or more of their Subsidiaries, all extensions,
renewals, refinancings, replacements and refundings thereof, each as amended,
supplemented or otherwise modified from time to time.
Section 1.02. Other Definitions.
Defined in
Term Section
"Affiliate Transaction" ........................... 5.09
"Change of Control Date" .......................... 5.12
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"Change of Control Offer" ......................... 5.12
"Change of Control Payment Date"................... 5.12
"Event of Default" ................................ 7.01
"Excess Proceeds".................................. 5.13
"Exceeds Proceeds Offer"........................... 5.13
"Exceeds Proceeds Payment Date".................... 5.13
"Guarantied Obligations"........................... 3.01
"Legal Holiday" ................................... 12.07
"Paying Agent" .................................... 2.03
"Registrar"........................................ 2.03
"Replacement Assets"............................... 5.13
"Restricted Payments".............................. 5.06
"Securities" ......................................Preamble
"Subject Property"................................. 11.04
"Successor Company" ............................... 6.01
"Successor Guarantor" ............................. 6.01
Section 1.03. 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.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Securities means the Company and any other obligor
on the Securities (including the Guarantor).
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
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Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
in the United States;
(3) references to "generally accepted accounting principles" means
generally accepted accounting principles in effect in the United States as
of the time when and for the period as to which such accounting principles
are to be applied, except that for purposes of financial calculations
hereunder, shall mean all principles as in effect on the date hereof;
(4) "including" means including without limitation;
(5) "or" is not exclusive;
(6) words in the singular include the plural, and in the plural
include the singular; and
(7) provisions apply to successive events and transactions.
ARTICLE 2.
THE SECURITIES
Section 2.01. Form and Dating.
The Securities, the notation thereon relating to the Guaranty
pursuant to Article 3 hereof and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A, the terms of which are
incorporated in and made a part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock exchange rules,
agreements to which the Company is subject or usage. Each Security shall be
dated the date of its authentication. The Securities shall be in denominations
of $1,000 and integral multiples thereof.
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Section 2.02. Execution and Authentication.
An Officer of the Company shall sign the Securities for the Company
by manual or facsimile signature. The Company's seal shall be placed or
reproduced on the Securities and may be in facsimile form.
An Officer of Guarantor shall sign the Guaranty pursuant to Article
3 hereof for Guarantor by manual or facsimile signature.
If an Officer of the Company or the Guarantor whose signature is on
a Security no longer holds that office at the time the Security is authenticated
by the Trustee, the Security shall nevertheless be valid.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature of the Trustee shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate Securities for original issue up to
the aggregate principal amount stated in paragraph 4 of the Securities, upon a
written order of the Company signed by two Officers of the Company, which order
shall set forth the amount and the date of the Securities to be authenticated.
The aggregate principal amount of Securities outstanding at any time may not
exceed the amount set forth in paragraph 4 of the Securities, except as provided
in Sections 2.07 and 2.08 hereof.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Securities. Unless limited by the term
of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent for service of notice or
demands.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Securities may be presented for payment ("Paying Agent").
The Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional paying
agent. The Company may change any Paying Agent,
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Registrar or co-registrar without notice to any Holder. The Company shall notify
the Trustee of the name and address of any Agent not a party to this Indenture.
The Company or any of its Subsidiaries may act as Paying Agent, Registrar or
co-registrar.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. If the Company fails to appoint or maintain another entity
as Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such, and shall be entitled to appropriate compensation in
accordance with Section 8.07 hereof.
The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the
Securities.
Section 2.04. Paying Agent to Hold Money in Trust.
Not later than 11:00 a.m., New York City time, on each date on which
principal of and interest on the Securities is due and payable, the Company
shall deposit with the Paying Agent, in immediately available funds, a sum
sufficient to pay such principal and interest. 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 of or interest on the Securities,
and will notify the Trustee of any default by the Company in making any such
payment. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed by the Paying
Agent. Upon complying with this Section, the Paying Agent (if other than the
Company) shall have no further liability for the money delivered to the Trustee.
If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold
in a separate trust fund for the benefit of the Holders all money held by it as
Paying Agent.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Trustee is not the Registrar, the Company shall cause to be
furnished to the Trustee at least seven Business Days before each interest
payment date and before the final maturity 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 and taxpayer
identification numbers of the Holders and the Company shall otherwise comply
with TIA ss. 312(a).
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Section 2.06. Transfer and Exchange.
When Securities are presented to the Registrar or a co-registrar
with a request to register, transfer or exchange them for an equal principal
amount of Securities of other authorized denominations, the Registrar shall
register the transfer or make the exchange if its requirements for such
transactions are met; provided, however, that any Security presented or
surrendered for registration of transfer or exchange shall be duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Registrar and the Trustee duly executed by the Holder thereof or his attorney
duly authorized in writing. To permit registrations of transfers and exchanges,
the Company shall issue and the Trustee shall authenticate Securities at the
Registrar's request, subject to such rules as the Trustee may reasonably
require.
The Company shall not be required (i) to issue, register the
transfer of or exchange Securities during a period beginning at the opening of
business on a Business Day 15 days before the day of any selection of Securities
for redemption under Section 4.02 and ending at the close of business on the day
of selection or (ii) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
No service charge shall be made to the Holder for any registration
of transfer or exchange (except as otherwise expressly permitted herein), but
the Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than such
transfer tax or similar governmental charge payable upon exchanges (without a
transfer to another Person) pursuant to Section 2.10, 4.06 or 10.05 hereof in
which event the Company will be responsible for the payment of any such taxes).
Prior to due presentment for registration of transfer of any
Security, the Trustee, any Agent and the Company may deem and treat the Person
in whose name any Security is registered as the absolute owner of such Security
for the purpose of receiving payment of principal of and interest on such
Security and for all other purposes whatsoever, whether or not such Security is
overdue, and none of the Trustee, any Agent or the Company shall be affected by
notice to the contrary.
Section 2.07. Replacement Securities.
If any mutilated Security is surrendered to the Trustee or the
Registrar, or the Company and the Trustee receive evidence to their satisfaction
that any Security is lost,
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destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Security if the requirements of Section 8-405 of the
Uniform Commercial Code are met and the Holder satisfies any other reasonable
requirements of the Trustee. Notwithstanding the foregoing, if any mutilated,
lost, destroyed or wrongfully taken Security has become due or is to become due
within 15 days of the receipt by the Company of a request for replacement, the
Company may pay such Security when due in lieu of issuing a replacement
Security. 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 Security is replaced. The
Company and the Trustee may charge the Holder for any tax that may be imposed
and for their expenses in replacing a Security.
Every replacement Security is an additional obligation of the
Company.
The provisions of this Section 2.07 are exclusive and shall preclude
all other rights and remedies with respect to the replacement or payment of
mutilated, destroyed, lost or wrongfully taken Securities.
Section 2.08. Outstanding Securities.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation and those described in this Section 2.08 as not
outstanding.
If a Security is replaced pursuant to Section 2.07 hereof, it ceases
to be outstanding unless the Company and the Trustee receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid under
Section 5.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
Subject to Section 2.09 hereof, a Security does not cease to be
outstanding because the Company or one of its Affiliates holds the Security.
Section 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount
of Securities have concurred in any direction, waiver or consent or called for a
meeting of
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Holders or are present at a meeting of Holders, Securities owned by the Company
or an Affiliate shall be considered as though not outstanding, except that for
the purposes of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent, only Securities that a Trust Officer
knows are so owned shall be so disregarded.
Section 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee, upon
receipt of the written order of the Company signed by two Officers, shall
authenticate definitive Securities in exchange for temporary Securities. Until
such exchange, temporary Securities shall be entitled to the same rights,
benefits and privileges as definitive Securities.
Section 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer, exchange,
replacement or payment. The Trustee shall cancel all Securities surrendered for
registration of transfer, exchange, replacement, payment or cancellation and
shall destroy cancelled Securities (subject to the record-retention requirement
of the Exchange Act) and forward certification of their destruction to the
Company unless the Company shall direct that cancelled Securities be returned to
it. The Company may not issue new Securities to replace Securities that it has
redeemed or paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, which date shall be at least five
Business Days prior to the payment date, in each case at the rate provided in
Section 5.01 hereof. The Company shall, with the consent of the Trustee, fix or
cause to be fixed each such special record date and payment date. At least 15
days before a special record date, the Company (or the Trustee, upon the
Company's written request delivered at least 20 days prior to the special record
date, in the name of and at the expense
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of the Company) shall mail to the Holders a notice that states the special
record date, the related payment date and the amount of such defaulted interest
to be paid.
ARTICLE 3.
GUARANTY
Section 3.01. Guaranty.
For value received, Guarantor hereby unconditionally guaranties to
the Holders and to the Trustee (i) the due and punctual payment of the principal
of and interest on, the Securities, to the extent lawful, and all other amounts
due and payable to the Trustee under this Indenture by the Company
(collectively, the "Guarantied Obligations"), when and as the same shall become
due and payable, whether at the stated maturity or by declaration of
acceleration, call for redemption or otherwise, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee, according to the terms of the Securities and this Indenture and (ii)
the due and punctual performance in the case of any extension or renewal of time
of payment of any Securities or any such other obligation, whether at stated
maturity or by declaration of acceleration, call for redemption or otherwise,
according to the terms of such extension or renewal. The Guaranty pursuant to
this Article 3 constitutes a guaranty of payment in full when due and not merely
a guaranty of collectibility.
Notwithstanding the foregoing, Guarantor's liability under this
Section 3.01 shall be limited to the maximum amount that would not result in
Guarantor's Guaranty under this Section 3.01 constituting a fraudulent
conveyance or fraudulent transfer under applicable law.
Section 3.02. Obligation of Guarantor Unconditional.
Except as provided in Section 3.05, the obligations of Guarantor
hereunder shall be as aforesaid absolute and unconditional, and shall not be
impaired, modified, released or limited by any occurrence or condition
whatsoever, including, without limitation, (i) any compromise, settlement,
release, waiver, renewal, extension, indulgence or modification of, or any
change in, any of the obligations and liabilities of the Company contained in
the Securities or this Indenture, (ii) any impairment, modification, release or
limitation of the liability of the Company or its estate in bankruptcy, or any
remedy for the enforcement thereof, resulting from the operation of any present
or future provision of any applicable Bankruptcy Law or other statute, as each
may be then in effect or from any
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decision of any court, (iii) the assertion or exercise by the Company or the
Trustee of any rights or remedies under the Securities or this Indenture or
their delay in or failure to assert or exercise any such rights or remedies,
(iv) the assignment or the purported assignment of any property as additional
security for the Securities, including, without limitation, all or any part of
the rights of the Company under this Indenture, (v) the extension of the time
for payment by the Company of any payment or other sum or any part thereof owing
or payable under any of the terms and provisions of the Securities or this
Indenture or of the time for performance by the Company of any other obligations
under or arising out of any such terms and provisions or the extension or the
renewal of any thereof, (vi) the modification or amendment (whether material or
otherwise) of any duty, agreement or obligation of the Company set forth in this
Indenture, (vii) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all of the assets, marshalling of
assets and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of, or other similar proceeding affecting, the Company or the disaffirmance of
this Guaranty pursuant to this Article 3 or the Securities or this Indenture in
any such proceeding, (viii) the release or discharge of the Company from the
performance or observance of any agreement, covenant, term or condition
contained in the Securities or this Indenture by operation of law, (ix) the
unenforceability of the Securities or this Indenture, (x) any exchange, release
or application of Collateral, or (xi) any other circumstance which might
otherwise constitute a legal or equitable discharge of a surety or guarantor.
Section 3.03. Execution and Delivery of Guaranty.
To evidence its Guaranty set forth in this Article 3, Guarantor
hereby agrees that a notation of such Guaranty shall be placed on each Security
authenticated and delivered by the Trustee and that this Guaranty shall be
executed on behalf of such Guarantor by the manual or facsimile signature of one
Officer of Guarantor.
Guarantor further agrees that its Guaranty pursuant to this Article
3 shall remain in full force and effect notwithstanding any failure to endorse
on each Security a notation of such Guaranty.
If an Officer of Guarantor whose signature is on a Guaranty no
longer holds that office at the time the Trustee authenticates the Security on
which a Guaranty is endorsed, such Guaranty shall be valid nevertheless.
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The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Guaranty
set forth in this Indenture on behalf of Guarantor.
Section 3.04. Waiver Relating to Guaranties.
Guarantor hereby (i) waives diligence, presentment, demand of
payment, filing of claims with a court in the event of the merger, insolvency or
bankruptcy of the Company, any right to require proceeding first against the
Company or to realize on any collateral, protest or notice with respect to the
Guarantied Obligations and all demands whatsoever, (ii) acknowledges that any
agreement, instrument or document evidencing the Guarantied Obligations may be
transferred and that the benefit of its obligations hereunder shall extend to
each holder of any agreement, instrument or document evidencing the Guarantied
Obligations without notice to them and (iii) covenants that its Guaranty
pursuant to this Article 3 will not be discharged except pursuant to Section
3.05 or by complete performance of the Guarantied Obligations and of its
Guaranty pursuant to this Article 3. Guarantor further agrees that, as between
Guarantor, on the one hand, and the Holders and the Trustee, on the other hand,
(i) the maturity of the obligations guarantied hereby may be accelerated as
provided in Article 7 for the purposes of this Guaranty, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guarantied hereby, and (ii) in the event of any declaration of
acceleration of such obligations as provided in Article 7, such obligations
(whether or not due and payable) shall forthwith become due and payable by
Guarantor for the purpose of this Guaranty. In addition, without limiting the
foregoing provisions, upon the effectiveness of any acceleration under Article
7, the Trustee shall promptly make a demand for payment of the Securities under
the Guaranty herein.
Guarantor further agrees that if at any time all or any part of any
payment theretofore applied by any Person to any Guarantied Obligation is, or
must be, rescinded or returned for any reason whatsoever, including, without
limitation, the insolvency, bankruptcy or reorganization of the Company, such
Guarantied Obligation shall for the purposes of its Guaranty pursuant to this
Article 3 to the extent that such payment is or must be rescinded or returned,
be deemed to have continued in existence notwithstanding such application, and
its Guaranty pursuant to this Article 3 shall continue to be effective or be
reinstated, as the case may be, as to such Guarantied Obligations as though such
application had not been made.
Guarantor shall be subrogated to all rights of the Holders against
the Company in respect of any amounts paid to such Holder by the Guarantor
pursuant to the provisions of the Guaranty; provided, however, that the
Guarantor shall not be entitled to enforce, or to
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receive any payments arising out of or based upon, such right of subrogation
until the principal of and interest on all Securities issued under this
Indenture shall have been paid in full.
Section 3.05. Release of Guarantor.
Without any action required on the part of Holders, the Trustee, the
Company or the Guarantor, the Guarantor shall be released and discharged from
its obligations under its Guaranty pursuant to this Article 3 upon the sale
(whether effected by sale of all or substantially all of the assets or stock of
the Guarantor), disposition (by consolidation, merger or otherwise) or
dissolution of the Guarantor to the extent permitted hereby if as a result of
such sale, disposition or dissolution, the Guarantor ceases to be a Subsidiary
of the Company; provided, however, that, in the case of a SMC Reincorporation
Merger, the Successor Guarantor assumes by supplemental Indenture in accordance
with Article 6 hereof all of the obligations of the Guarantor under its Guaranty
pursuant to this Article 3.
Section 3.06. Reinstatement of Guaranty.
The Guaranty pursuant to this Article 3 shall, to the fullest extent
permitted by law, continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of the Securities, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any Holder, whether as a "voidable preference," "fraudulent
conveyance," "fraudulent transfer," or otherwise, all as though such payment or
performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Securities shall, to
the fullest extent permitted by law, be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
ARTICLE 4.
REDEMPTION
Section 4.01. Notices to Trustee.
If the Company elects to redeem Securities pursuant to the optional
redemption provisions of Section 4.07 hereof, it shall furnish to the Trustee,
at least 40 days but not more than 80 days (unless a shorter period shall be
agreed to by the Trustee) before a redemption date, an Officers' Certificate
setting forth the Section of this Indenture pursuant
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to which the redemption shall occur, the redemption date, the principal amount
of Securities to be redeemed and the redemption price.
Section 4.02. Selection of Securities to Be Redeemed.
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed pro rata or by a method that complies
with applicable legal and securities exchange requirements, if any, and that the
Trustee considers fair and appropriate and in accordance with methods generally
used at the time of selection by fiduciaries in similar circumstances and taking
into account the provisions of the next paragraph. The particular Securities to
be redeemed shall be selected unless otherwise provided herein, not less than 30
or more than 60 days prior to the redemption date by the Trustee from the
outstanding Securities not previously called for redemption.
If the Company shall so direct, Securities registered in the name of
the Company or any Subsidiary thereof shall not be included in the Securities
selected for redemption.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Security selected for
partial redemption, the principal amount thereof to be redeemed. Securities and
portions of them selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Securities of a Holder are to be redeemed, the
entire outstanding amount of Securities held by such Holder, even if not a
multiple of $1,000, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
Section 4.03. Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail, or cause to be mailed, a notice of redemption by
first-class mail to each Holder whose Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
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(3) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion will be
issued with an identification number;
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making such redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the redemption date;
(7) the paragraph of the Securities and/or Section of this Indenture
pursuant to which the Securities called for redemption are being redeemed;
and
(8) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall deliver to the Trustee, at least 45 days prior to the redemption
date (unless a shorter period shall be agreed to by the Trustee), an Officers'
Certificate requesting that the Trustee give such notice and setting forth the
information to be stated in such notice as provided in the preceding paragraph
of this Section 4.03.
Section 4.04. Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for
redemption become due and payable on the redemption date at the redemption price
set forth in the Security. Upon surrender to the Paying Agent, such Securities
shall be paid at the redemption price stated in the notice, plus accrued
interest to the redemption date. Failure to give notice or any defect in the
notice to any Holder shall not affect the validity of the notice to any other
Holder.
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Section 4.05. Deposit of Redemption Price.
No later than 11:00 a.m., New York City time, on the redemption
date, the Company shall deposit with the Paying Agent (or if the Company or a
Subsidiary is the Paying Agent, shall segregate and hold in trust) money, in
immediately available funds, sufficient to pay the redemption price of and
accrued interest on all Securities to be redeemed on that date other than
Securities or portions of Securities called for redemption which have been
delivered by the Company to the Trustee for cancellation. The Paying Agent shall
return to the Company any money deposited with the Paying Agent by the Company
in excess of the amount necessary to pay the redemption price of, and accrued
interest on, all Securities to be redeemed. Funds provided for redemption may
also be returned to the Company as provided in Section 9.03.
If the Company complies with the preceding paragraph, interest on
the Securities to be redeemed will cease to accrue on the applicable redemption
date, whether or not such Securities are presented for payment. If any Security
called for redemption shall not be so paid upon surrender for redemption because
of the failure of the Company to comply with the preceding paragraph, interest
will be paid on the unpaid principal from the redemption date until such
principal is paid and, to the extent lawful, on any interest not paid on such
unpaid principal, in each case at the rate provided in Section 5.01 hereof.
Section 4.06. Securities Redeemed in Part.
Upon surrender of a Security 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 Security equal in principal amount to the unredeemed portion
of the Security surrendered.
Section 4.07. Optional Redemption.
The Company may redeem all or any portion of the Securities upon the
terms and at the redemption prices set forth in paragraph 5 of the Securities.
Any redemption pursuant to this Section 4.07 shall be made pursuant
to the provisions of Sections 4.01 through 4.06 hereof.
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Section 4.08. Mandatory Redemption.
The Company must redeem Securities upon the terms and at the
redemption prices set forth in paragraph 6 of the Securities.
Any redemption pursuant to this Section 4.08 shall be made pursuant
to the provisions of Sections 4.02 through 4.06 hereof.
ARTICLE 5.
COVENANTS
Section 5.01. Payment of Securities.
The Company shall pay the principal of and interest on the
Securities on the dates and in the manner provided in the Securities and in this
Indenture. Principal and interest shall be considered paid on the date due if,
on such date, the Paying Agent holds in accordance with this Indenture money, in
immediately available funds, sufficient to pay all principal and interest then
due and the Paying Agent is not prohibited from paying such money to the Holders
on that date pursuant to the terms of this Indenture.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 2% per annum in excess of the then applicable interest rate on the Securities
to the extent lawful and it 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 period) at the same rate to the extent
lawful.
Section 5.02. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of
New York, an office or agency (which may be an office of the Trustee or
Registrar or any co-registrar) where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
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The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind any such designation;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
Section 5.03. SEC Reports; Financial Statements.
The Company shall furnish to the Trustee and the Holders, within 15
days after it files them with the SEC, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) that the
Company is required to file with the SEC pursuant to Section 13 or Section 15(d)
of the Exchange Act. Notwithstanding that the Company may not be subject to, or
may not be required to remain subject, to the reporting requirements of Section
13 or Section 15(d) of the Exchange Act, the Company shall furnish to the
Trustee and the Holders, within 15 days after it would have been required to
file such statements with the SEC, all quarterly consolidated financial
statements or annual consolidated financial statements, including any notes
thereto (and with respect to annual consolidated financial statements, an
auditors' report therein by Deloitte & Touche LLP or another firm of established
national reputation), comparable to the consolidated financial statements that
the Company would have been required to include in such reports if the Company
were subject to the requirements of Section 13 or Section 15(d) of the Exchange
Act. The Company also shall comply with the provisions of TIA ss. 314(a).
Section 5.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company, an officers' certificate signed by
the Company's principal executive officer, principal financial officer or
principal accounting officer stating that a review of the activities of the
Company and its Subsidiaries during the preceding fiscal year has been made
under the supervision of the signing officer with a view to determining whether
the Company and each of those Subsidiaries has kept, observed, performed and
fulfilled its obligations under this Indenture, and further stating, as to such
officer signing
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such certificate, that to the best of such officer's knowledge the Company and
each of those Subsidiaries has kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he may have knowledge and what action the
Company is taking or proposes to take with respect thereto). For the purpose of
this Section 5.04(a), compliance shall be determined without regard to any
period of grace or requirement of notice provided by the terms of this
Indenture.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the annual reports
delivered to the Trustee and the Holders pursuant to Section 5.03 above shall be
accompanied by a written statement of the Company's independent public
accountants (who shall be Deloitte & Touche LLP or another firm of established
national reputation) that in making the examination necessary for certification
of such annual reports nothing has come to their attention which would lead them
to believe that the Company has violated Section 5.03 of this Indenture or, if
any such violation has occurred, specifying the nature and period of existence
thereof, it being understood that such accountants shall not be liable directly
or indirectly to any Person for any failure to obtain knowledge of any such
violation.
(c) So long as any of the Securities are outstanding, the Company
will deliver to the Trustee, forthwith upon any Officer becoming aware of any
Default or Event of Default, an Officers' Certificate specifying such Default or
Event of Default and the action the Company is taking or proposes to take with
respect thereto.
Section 5.05. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, plead or in any manner whatsoever
claim or take the benefit or advantage of any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, which 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 (to the extent that it may lawfully do so) that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
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Section 5.06. Limitation on Restricted Payments.
The Company will not, nor will it permit any Restricted Subsidiary
to: (i) declare or pay any dividend or make any distribution on account of the
Company's Capital Stock (other than dividends or distributions payable in
Capital Stock of the Company (other than Disqualified Stock)); (ii) purchase,
redeem or otherwise acquire or retire for value any of the Company's Capital
Stock; (iii) make any principal payment on, purchase, redeem, retire, defease,
prepay, decrease or otherwise acquire or retire for value prior to a scheduled
final maturity, scheduled repayment or scheduled mandatory payment date
(including pursuant to mandatory repurchase covenants) or maturity date any
Indebtedness subordinated to the Securities of the Company or (iv) make any
Restricted Investments in any Person (all such payments and other actions set
forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments") if, after giving effect to such Restricted Payment:
(1) a Default or Event of Default has occurred and is
continuing;
(2) the Company could not incur at least $1.00 of
additional Indebtedness in compliance with Section 5.08; or
(3) the aggregate amount expended for all Restricted
Payments subsequent to the Effective Date (the amount of any
expenditures, if other than cash, as determined in good faith
by the Board) exceeds the sum of (i) 50% of the aggregate
Consolidated Net Income of the Company calculated on a
cumulative basis for the period from the Effective Date to the
last day of the Company's fiscal quarter immediately preceding
the Company's fiscal quarter in which the Restricted Payment
is proposed to be made plus (ii) the aggregate net proceeds,
including cash and the fair market value of property other
than cash (as determined in good faith by the Board) received
by the Company (x) from the issuance after the Effective Date
of Capital Stock of the Company (other than Disqualified
Stock) and (y) upon the exercise after the Effective Date of
any options, warrants or other rights to acquire the Capital
Stock of the Company.
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The foregoing limitations on Restricted Payments shall not prohibit:
(a) the payment of any dividend within 60 days after the
date of declaration thereof, if at said date of
declaration such payment would comply with the
provisions hereof; or
(b) the retirement of any shares of the Company's Capital
Stock in exchange for, or out of the net proceeds of the
substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of, other shares
of the Company's Capital Stock (other than Disqualified
Stock); or
(c) the redemption, repurchase, defeasance or other
acquisition or retirement for value of Indebtedness that
is subordinated in right of payment to the Securities
including accrued and unpaid interest, with the proceeds
of, or in exchange or conversion for, (A) shares of
Capital Stock (other than Disqualified Stock) of the
Company or (B) Refinancing Indebtedness which is
subordinated in right of payment to the Securities to
the same extent as the Indebtedness so refinanced; or
(d) Restricted Payments contemplated by the Plan; or
(e) Investments by the Company or a Restricted Subsidiary
that operates in a Related Business in an aggregate
amount not to exceed $15,000,000; or
(f) payments or distributions pursuant to mergers permitted
by this Indenture; or
(g) extension by the Company or any Restricted Subsidiary of
trade credit on ordinary terms to Unrestricted
Subsidiaries recorded as accounts receivable; or
(h) advances or capital contributions by the Company or
Restricted Subsidiaries in Unrestricted Subsidiaries in
an aggregate amount not to exceed $10,000,000 (net of
any amounts paid after the Issue Date as dividends or
other capital distributions or repayment of advances to
the Company or any Restricted
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Subsidiary by Unrestricted Subsidiaries), other than
capital contributions arising as a result of a
conversion of permitted advances to Unrestricted
Subsidiaries to equity in such Unrestricted Subsidiary;
or
(i) Investments in Unrestricted Subsidiaries from capital
contributions to the Company or the sale of Capital
Stock of the Company; or
(j) repurchases of Capital Stock of the Company owned by
employees of the Company or any of its Subsidiaries.
Section 5.07. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction of any kind on the ability of
any Restricted Subsidiary to: (i) pay dividends or make any other distributions
to the Company or any Restricted Subsidiary on its Capital Stock or with respect
to any other interest or participation in, or measured by, its profits; (ii) pay
any Indebtedness or other obligations owed to the Company or any Restricted
Subsidiary; (iii) make loans or advances to the Company or any Restricted
Subsidiary; (iv) transfer any of its property or assets to the Company or any
Restricted Subsidiary; (v) grant Liens on its assets in favor of the Holders; or
(vi) guaranty the Securities or any renewals or refinancings thereof, except for
such encumbrances or restrictions existing under or by reason of: (A) applicable
law, (B) restrictions contained in agreements in effect on the Issue Date and
(C) Permitted Indebtedness.
Section 5.08. Limitation on Additional Indebtedness.
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create, incur, issue, assume, guaranty or otherwise
become directly or indirectly liable, contingently or otherwise, or otherwise
become responsible for (collectively, "incur"), any Indebtedness for borrowed
money, other than Permitted Indebtedness; provided, however, that the Company or
its Restricted Subsidiary may incur Indebtedness for borrowed money if, after
giving effect thereto, the Fixed Charge Coverage Ratio of the Company for the
applicable four fiscal quarter period ending immediately prior
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to the Transaction Date would have been at least 1.5 to 1.0 after giving pro
forma effect to such incurrence or issuance.
An Unrestricted Subsidiary may incur Indebtedness for borrowed money
in connection with the acquisition by such Unrestricted Subsidiary of the
business, property or assets of, or the Capital Stock or other evidence of
ownership of, any other Person, entity or business only if the recourse of the
holder or holders of such Indebtedness is entirely to the business, property or
assets of such Unrestricted Subsidiary or acquired Person, entity or business
and neither the Company nor any Restricted Subsidiary has any liability with
respect thereto except as described below under Section 5.09.
Section 5.09. Limitations on Transactions with Affiliates.
The Company will not, and will not permit any Restricted Subsidiary
to, sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into any
transaction, contract, agreement, understanding, loan, advance or guaranty with,
or for the benefit of, any Affiliate (other than the Company or any Restricted
Subsidiary) (each of the foregoing, an "Affiliate Transaction"), unless such
Affiliate Transaction is a Company Reincorporation Merger or a SMC
Reincorporation Merger or is on terms that are no less favorable to the Company
or Restricted Subsidiary than those that would have been obtained on an
arms-length basis in a comparable transaction by the Company or Restricted
Subsidiary with an unrelated Person, as determined by a majority of the
independent members of the Board in their good faith judgment as evidenced by a
resolution of the Board filed with the Trustee. Except with respect to a
Company Reincorporation Merger and a SMC Reincorporation Merger, any Affiliate
Transaction in excess of $10,000,000 shall be subject to the further requirement
that the Company obtain an opinion of an independent financial advisor stating
that the Affiliate Transaction is fair from a financial point of view to the
Company or such Restricted Subsidiary.
Section 5.10. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence and the corporate, partnership or other existence of each
Significant Subsidiary in accordance with the respective organizational
documents as they may be from time to time amended of the Company and each such
Significant Subsidiary and the rights (charter and statutory), governmental
licenses and governmental franchises of the Company and each such Significant
Subsidiary; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any such
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Significant Subsidiary, if the preservation thereof is no longer necessary in
the conduct of the business of the Company and the Significant Subsidiaries
taken as a whole and the loss thereof is not adverse in any material respect to
the Holders (which determination, if made in good faith by the Board, shall be
conclusive).
Section 5.11. Limitation on Liens.
The Company will not, directly or indirectly, create, incur, assume
or suffer to exist any Lien upon any of its assets or property now owned or
hereafter acquired by it, except for Permitted Liens.
Section 5.12. Change of Control.
Upon the occurrence of a Change of Control, each Holder shall have
the right to require the repurchase of its Securities by the Company in cash
pursuant to the offer described below (the "Change of Control Offer") at a
purchase price equal to 100% of the principal amount at maturity thereof, plus
accrued and unpaid interest thereon, if any, to the date of payment (the "Change
of Control Payment"). The Company is not required to make a Change of Control
Offer following a Change of Control if a third party makes a Change of Control
Offer that would be in compliance with the provisions described in this Section
5.12 if it were made by the Company and purchases the Securities validly
tendered and not withdrawn. Prior to the mailing of the notice to Holders
provided for in the succeeding paragraph, but in any event within 30 days
following any Change of Control, the Company covenants to (i) repay in full all
Indebtedness of the Company that would prohibit the repurchase of the Securities
as provided for in the succeeding paragraph or (ii) obtain any requisite
consents under instruments governing any such Indebtedness of the Company to
permit the repurchase of the Securities as provided for in the succeeding
paragraph. The Company shall first comply with the covenant in the preceding
sentence before it shall be required to repurchase Securities pursuant to this
Section 5.12.
Within 30 days following the Change of Control, the Company shall
mail a notice to the Trustee and each Holder stating: (i) that a Change of
Control has occurred, that the Change of Control Offer is being made pursuant to
this Section 5.12 and that all Securities validly tendered will be accepted for
payment; (ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date such
notice is mailed) (the "Change of Control Payment Date"); (iii) that any
Security not tendered will continue to accrue interest pursuant to its terms;
(iv) that unless the Company defaults in the payment of the Change of Control
Payment, any Security accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest
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on and after the Change of Control Payment Date; (v) that Holders electing to
have any Security or portion thereof purchased pursuant to the Change of Control
Offer will be required to surrender such Security, together with a form entitled
"Option of the Holder to Elect Purchase" on the reverse side of such Security
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day immediately preceding the Change of
Control Payment Date; (vi) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of business on
the third Business Day immediately preceding the Change of Control Payment Date,
a telegram, telex, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Securities delivered for purchase and a
statement that such Holder is withdrawing his election to have such Securities
purchased; and (vii) that Holders whose Securities are being purchased only in
part will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; provided that each Security purchased and
each new Security issued shall be in a principal amount of $1,000 or integral
multiples thereof.
On the Change of Control Payment Date, the Company shall: (i) accept
for payment Securities or portions thereof tendered pursuant to the Change of
Control Offer; (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Securities or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Trustee, all Securities or portions
thereof so accepted together with an Officers' Certificate specifying the
Securities or portions thereof accepted for payment by the Company. The Paying
Agent shall promptly mail, to the Holders of Securities so accepted, payment in
an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Security equal in principal amount
to any unpurchased portion of the Securities surrendered; provided that each
Security purchased and each new Security issued shall be in a principal amount
of $1,000 or integral multiples thereof. The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date. For purposes of this Section 5.12, the Trustee
shall act as Paying Agent.
The Company will comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in the event that a Change of Control occurs and the
Company is required to repurchase the Securities under this Section 5.12.
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Section 5.13. Limitations on Asset Sales.
The Company will not, and will not permit any Restricted Subsidiary
to, make any Asset Sale unless (a) the Company or such Restricted Subsidiary, as
the case may be, receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the shares or assets sold or otherwise
disposed of and (b) at least 80% of such consideration consists of cash or Cash
Equivalents. To the extent the Net Cash Proceeds of any Asset Sale are not
required to be applied to repay or secure, and permanently reduce the
commitments under, any Indebtedness of the Company or any Restricted Subsidiary,
or are not so applied or used to secure, the Company or any Restricted
Subsidiary, may apply such Net Cash Proceeds within 270 days thereof to an
investment in properties and assets that will be used in a Related Business (or
in Capital Stock of any Person that will become a Restricted Subsidiary as a
result of such investment if such Person's primary business consists of a
Related Business) of the Company or any Restricted Subsidiary ("Replacement
Assets"). Notwithstanding the foregoing, the Company or its Restricted
Subsidiaries may retain up to 25% of Net Cash Proceeds from Asset Sales for any
purpose. Any Net Cash Proceeds from any Asset Sale that are neither used to
repay or secure, and permanently reduce the commitments under, any Indebtedness
of any Restricted Subsidiary nor invested in Replacement Assets within such
270-day period (exclusive of up to such 25% referred to in the preceding
sentence) shall constitute "Excess Proceeds" subject to disposition as provided
below.
Within 20 days after the aggregate amount of Excess Proceeds equals
or exceeds $5,000,000, the Company shall make an offer to purchase (an "Excess
Proceeds Offer"), from all Holders of the Securities, that aggregate principal
amount at maturity of Securities as can be purchased by application of such
Excess Proceeds at a price in cash equal to 100% of the outstanding principal
amount at maturity thereof plus accrued and unpaid interest, if any. Each Excess
Proceeds Offer shall remain open for a period of 20 Business Days or such longer
period as may be required by law. To the extent that the principal and accrued
interest of Securities validly tendered and not withdrawn pursuant to an Excess
Proceeds Offer is less than the Excess Proceeds, the Company may use such
deficiency for general corporate purposes. If the principal and accrued interest
of Securities validly tendered and not withdrawn by Holders thereof exceeds the
amount of Securities which can be purchased with the Excess Proceeds, Securities
to be purchased will be selected on a pro rata basis. Upon completion of such
Excess Proceeds Offer, the amount of Excess Proceeds shall be reset to zero.
Notwithstanding the two immediately preceding paragraphs, the
Company and the Restricted Subsidiaries will be permitted to consummate an Asset
Sale without
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compliance with such paragraphs to the extent such Asset Sale is contemplated by
the Plan or approved by the Bankruptcy Court (as defined in the Plan) prior to
the Issue Date; provided that any consideration not constituting Replacement
Assets received by the Company or any of the Restricted Subsidiaries in
connection with any Asset Sale permitted to be consummated under this paragraph
shall constitute Net Cash Proceeds subject to the provisions of the two
preceding paragraphs.
The Company shall commence an Excess Proceeds Offer by mailing a
notice to the Trustee and each Holder stating: (i) that the Excess Proceeds
Offer is being made pursuant to this Section 5.13 and that all Securities
validly tendered will be accepted for payment on a pro rata basis; (ii) the
purchase price and the date of purchase (which shall be a Business Day five
Business Days after the expiration date of the Excess Proceeds Offer, the
"Excess Proceeds Payment Date"); (iii) that any Security not tendered will
continue to accrue interest, as the case may be, pursuant to its terms; (iv)
that, unless the Company defaults in the payment of the Excess Proceeds Payment,
any Security accepted for payment pursuant to the Excess Proceeds Offer shall
cease to accrue interest, as the case may be, on and after the Excess Proceeds
Payment Date; (v) that Holders electing to have a Security purchased pursuant to
the Excess Proceeds Offer will be required to surrender the Security, together
with the form entitled "Option of the Holder to Elect Purchase" on the reverse
side of the Security completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the Business Day immediately
preceding the Excess Proceeds Payment Date; (vi) that Holders will be entitled
to withdraw their election if the Paying Agent receives, not later than the
close of business on the date of the expiration of the Excess Proceeds Offer, a
telegram, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Securities delivered for purchase and a
statement that such Holder is withdrawing his election to have such Securities
purchased; and (vii) that Holders whose Securities are being purchased only in
part will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; provided that each Security purchased and
each new Security issued shall be in a principal amount of $1,000 or integral
multiples thereof.
On the date of the expiration of the Excess Proceeds Offer, the
Company shall accept for payment on a pro rata basis Securities or portions
thereof tendered pursuant to the Excess Proceeds Offer; and on or prior to the
Excess Proceeds Payment Date, (i) deposit with the Paying Agent money sufficient
to pay the purchase price of all Securities or portions thereof so accepted; and
(ii) deliver, or cause to be delivered, to the Trustee all Securities or
portions thereof so accepted together with an Officers' Certificate specifying
the Securities or portions thereof accepted for payment by the Company. The
Paying Agent shall promptly mail to the Holders of Securities so accepted
payment in an amount equal to the purchase
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price, and the Trustee shall promptly authenticate and mail to such Holders a
new Security equal in principal amount to any unpurchased portion of the
Security surrendered; provided that each Security purchased and each new
Security issued shall be in a principal amount of $1,000 or integral multiples
thereof. The Company will publicly announce the results of the Excess Proceeds
Offer as soon as practicable after the Excess Proceeds Payment Date. For
purposes of this Section 5.13, the Trustee shall act as the Paying Agent.
The Company will comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in the event that an Excess Proceeds Offer is
required to be commenced and the Company is required to repurchase the
Securities under this Section 5.13.
ARTICLE 6.
SUCCESSORS
Section 6.01. Limitation on Mergers, Consolidations or Sale of Assets.
(a) The Company shall not consolidate with or merge with or into, or
sell, convey, transfer, lease or otherwise dispose of all or substantially all
of its assets as an entirety to, any Person unless:
(1) the Person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale or conveyance
shall have been made (the "Successor Company"), is a corporation organized
and existing under the laws of the United States, any state thereof or the
District of Columbia;
(2) the Successor Company assumes, by supplemental Indenture in a
form reasonably satisfactory to the Trustee, all the obligations of the
Company under the Securities and this Indenture;
(3) immediately after the transaction no Default or Event of Default
exists;
(4) except in the case of a Company Reincorporation Merger,
immediately after the transaction, the Company or the Successor Company
would be permitted to incur at least $1.00 of additional Indebtedness for
borrowed money as described in Section 5.08; and
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(5) prior to the consummation of the proposed transaction, the
Company delivers to the Trustee an Officers' Certificate to the foregoing
effect and an Opinion of Counsel stating that the proposed transaction and
supplemental Indenture comply with this Indenture.
(b) The Company shall not permit Guarantor to consolidate with or
merge with or into, or sell, convey, transfer, lease or otherwise dispose of all
or substantially all of its assets as an entirety to, any Person unless:
(1) the Person formed by or surviving any such consolidation or
merger (if other than Guarantor), or to which such sale or conveyance
shall have been made (the "Successor Guarantor"), is a corporation
organized and existing under the laws of the United States of America, any
state thereof or the District of Columbia;
(2) the Successor Guarantor assumes by supplemental Indenture in a
form reasonably satisfactory to the Trustee, all the obligations of
Guarantor under the Securities and this Indenture;
(3) immediately after the transaction no Default or Event of Default
exists; and
(4) prior to the consummation of the proposed transaction, the
Company delivers to the Trustee an Officers' Certificate to the foregoing
effect and an Opinion of Counsel stating that the proposed transaction and
supplemental Indenture comply with this Indenture.
Section 6.02. Successor Company Substituted.
Upon any consolidation or merger, or any sale, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company or the Guarantor in accordance with Section 6.01, the Successor Company
or the Successor Guarantor formed by such consolidation into or with which the
Company or Guarantor is merged or to which such sale, conveyance, transfer,
lease or other disposition is made shall succeed to, and be substituted for, and
may exercise every right and power of, the Company or the Guarantor under this
Indenture with the same effect as if such Successor Company or such Successor
Guarantor had been named as the Company or the Guarantor herein and thereafter,
except in the case of a lease, the predecessor corporation shall be relieved of
all obligations and covenants under this Indenture and the Securities.
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ARTICLE 7.
DEFAULTS AND REMEDIES
Section 7.01. Events of Default.
An "Event of Default" shall include:
(1) default by the Company for 30 days in payment of any interest
due on the Securities when the same becomes due and payable;
(2) default in the payment of the principal of any Securities when
due upon redemption or otherwise or default in the purchase of Securities
on the Excess Proceeds Payment Date or the Change of Control Payment Date
pursuant to an Excess Proceeds Offer or Change of Control Offer which has
been made to Holders;
(3) default by the Company for 30 days in the performance of any
other covenant contained in the Securities or this Indenture after written
notice by the Trustee or Holders of at least 25% of the aggregate
principal amount of the Securities outstanding;
(4) default by the Company or any Significant Subsidiary which is a
Restricted Subsidiary in the payment of any principal of or, for a period
of five days, interest on any Indebtedness for borrowed money (other than
the Securities) when due (after giving effect to any applicable grace
periods) and the principal amount of such Indebtedness exceeds $5,000,000
in the aggregate;
(5) default by the Company or any Significant Subsidiary which is a
Restricted Subsidiary with respect to any Indebtedness for borrowed money
exceeding $5,000,000 in the aggregate, which results in such Indebtedness
becoming due or being declared due and payable;
(6) any final judgment or order is rendered against the Company or
any Significant Subsidiary which is a Restricted Subsidiary for more than
$5,000,000 and such judgment or order remains unpaid, undischarged and
unstayed for 60 days;
(7) the Company or any Restricted Subsidiary which is a Significant
Subsidiary shall, within the meaning of or pursuant to any Bankruptcy Law:
(A) commence a voluntary case or proceeding,
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(B) consent to the entry of an order for relief against it in
an involuntary case or proceeding,
(C) consent to the appointment of a Custodian of it or for all
or substantially all of its property,
(D) make a general assignment for the benefit of its creditors
or
(E) generally not pay its debts when such debts become due or
shall admit in writing its inability to pay its debts generally;
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law with respect to the Company or any Restricted
Subsidiary which is a Significant Subsidiary that:
(A) is for relief against such Person in an involuntary case
or proceeding,
(B) appoints a Custodian of such Person for all or
substantially all of its properties, or
(C) orders the liquidation of such Person,
and in each case the order or decree remains unstayed and in effect for 60
days; provided, however, that if the entry of such order or decree is
appealed and dismissed on appeal then the Event of Default hereunder by
reason of the entry of such order or decree shall be deemed to have been
cured; or
(9) the failure of any Security Document to be in full force and
effect in all material respects.
Section 7.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
clause (7) or (8) of Section 7.01) occurs and is continuing, the Trustee may, by
written notice to the Company, or the Holders of at least 25% in principal
amount of the then outstanding Securities may, by written notice to the Company
and the Trustee, declare the unpaid principal of and any accrued but unpaid
interest on all the Securities to be due and payable,
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together with the interest accrued thereon, immediately, all without
presentment, demand, notice, protest or other requirements of any kind, all of
which are hereby expressly waived.
If an Event of Default specified in clause (7) or (8) of Section
7.01 occurs, the unpaid principal of and any accrued but unpaid interest on all
the Securities shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
The Holders of a majority in principal amount of the then
outstanding Securities by written notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal or interest that has become due solely because of the acceleration)
have been cured or waived. No such rescission shall affect any subsequent
Default or Event of Default or impair any right consequent thereto.
Section 7.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal of or interest
on the Securities or to enforce the performance of any provision of the
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any 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. Except as set
forth in Section 2.07 hereof, all remedies are cumulative to the extent
permitted by law.
Section 7.04. Waiver of Past Defaults.
Subject to Section 10.02 hereof, the Holders of a majority in
principal amount of the then outstanding Securities by notice to the Trustee may
waive an existing Default or Event of Default and its consequences except a
continuing Default or Event of Default in the payment of the principal of and
interest on any Security. Upon any such waiver, such Default or Event of Default
shall cease to exist and together with 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.
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Section 7.05. Control by Majority.
The Holders of a majority in principal amount of the then
outstanding Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture, that would involve the Trustee in
personal liability or that may be unduly prejudicial to the rights of other
Holders; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. The Trustee
shall be entitled to indemnification reasonably satisfactory to it against
losses, liabilities or expenses caused by the taking or not taking of such
action.
Section 7.06. Limitation on Suits.
Subject to Section 7.07 hereof, a Holder may pursue a remedy with
respect to this Indenture or the Securities only if:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in principal amount of the then
outstanding Securities make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer and, if requested, provide, to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) 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
(5) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Securities do not give the Trustee a
direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
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Section 7.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on the Securities, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of the Holder.
Section 7.08. Collection Suit by Trustee.
If an Event of Default specified in Section 7.01(1) or 7.01(2)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of and interest remaining unpaid on the Securities and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
Section 7.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Securities), 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 8.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 8.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties which 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
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consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
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.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 8.07 hereof;
Second: subject to Article 10 hereof, to the Holders for amounts due
and unpaid on the Securities for principal and interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Securities for principal and interest, respectively; and
Third: subject to Article 10 hereof, to the Company.
The Trustee may fix a record date and payment date for any payment
to Holders. At least 15 days before such record date, the Company shall mail to
each Holder and the Trustee a notice that states the record date, the payment
date and the amount to be paid.
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 7.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 7.07 hereof or a suit by Holders of more than 10% in
principal amount of the then outstanding Securities.
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ARTICLE 8.
TRUSTEE
Section 8.01. Duties of Trustee.
(1) 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 their exercise, as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
(2) Except during the continuance of an Event of Default known to
the Trustee:
(a) The duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenant or obligation shall be read into this
Indenture against the Trustee.
(b) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(3) 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:
(a) This paragraph does not limit the effect of paragraph (2)
of this Section.
(b) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(c) 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 7.05 hereof.
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(4) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(1), (2), (3) and (5) of this Section 8.01.
(5) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(6) Notwithstanding anything to the contrary outstanding, no
provision of this Indenture or any Security Document shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or thereunder or in the exercise of
any of its rights or powers, if the Trustee shall have reasonable grounds to
believe that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(7) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(8) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 8.01 and to provisions of the TIA.
Section 8.02. Rights of Trustee.
(1) The Trustee may conclusively rely and shall be protected from
acting or refraining from acting based 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.
(2) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate (which shall conform to the provisions of Section 12.05
hereof) or an Opinion of Counsel or both. The Trustee shall not be liable for
any action it takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel. The Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection from liability in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.
(3) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
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(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture.
(5) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
Section 8.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or an
Affiliate of the Company with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 8.10 and 8.11 hereof.
Section 8.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture, the Security Documents or the
Securities; it shall not be accountable for the Company's use of any money paid
to the Company or upon the Company's direction under any provision hereof, it
shall not be responsible for the use or application of any money received by any
Paying Agent other than the Trustee, and it shall not be responsible for any
statement or recital herein or any statement in the Securities or any other
document in connection with the issuance of the Securities or pursuant to this
Indenture other than its certificate of authentication.
Section 8.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to the Holders a notice of the
Default or Event of Default within 90 days after the occurrence thereof. Except
in the case of a Default or Event of Default in payment on any Security, the
Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the
interests of the Holders.
Section 8.06. Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall mail to the Holders, as their
names and addresses
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appear in the register of the Securities, a brief report dated as of such May 15
in accordance with, and to the extent required under, TIA ss. 313(a). The
Trustee also shall comply with TIA ss. 313(b). The Trustee also shall transmit
by mail all reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each securities exchange, if any, on which the Securities
are listed. The Company shall promptly notify the Trustee when the Securities
are listed on any securities exchange.
Section 8.07. Compensation and Indemnity.
The Company shall pay to the Trustee such compensation for its
services hereunder and under the Security Documents as may be agreed upon by the
Company and the Trustee from time to time. The Trustee's compensation shall not
be limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any loss, liability
or expense incurred by it arising out of or in connection with the acceptance or
administration of its duties, or the exercise of its rights or powers, under
this Indenture or any Security Document, except as set forth in the next
paragraph. 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 the
claim 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 obligation of the
Company under this Section 8.07 shall survive the satisfaction and discharge of
this Indenture and the resignation and removal of the Trustee.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through its own willful misconduct,
negligence or bad faith.
To secure the Company's payment obligations in this Section 8.07,
the Trustee shall have a Lien prior to the Securities, but subject to the
provisions of Section 3 of the
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Security Agreement and Section 6 of the Pledge Agreement, on all money or
property held or collected by the Trustee, except that held in trust to pay
principal of and interest on particular Securities. Such Lien shall survive the
satisfaction and discharge of the Indenture and the resignation or removal of
the Trustee.
Section 8.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 8.08.
The Trustee may resign at any time and be discharged from the trust
hereby created by so notifying the Company in writing at least 30 days prior to
the date of the proposed resignation. The Holders of a majority in principal
amount of the then outstanding Securities may remove the Trustee by so notifying
the Trustee and the Company. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 8.10 hereof;
(2) the Trustee is adjudged bankrupt or insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(3) a Custodian or public officer takes charge of the Trustee or its
property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Securities may appoint
a successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Securities
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee after written request by any Holder who has been a
bona fide Holder for at least six months fails to comply with Section 8.10
hereof, such Holder may
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petition, on behalf of himself and all others similarly situated, any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to the Holders. 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 8.07 hereof. Notwithstanding replacement of the Trustee pursuant to this
Section 8.08 hereof, the Company's obligations under Section 8.07 hereof shall
continue for the benefit of the retiring Trustee.
Section 8.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee, provided such successor is eligible and qualified under
Section 8.10 hereof.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture and any of the Securities shall have been authenticated but
not delivered, any such successor Trustee may adopt the certificate of
authentication of any predecessor Trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor Trustee may authenticate such Securities
either in the name of any predecessor hereunder or, in the name of the successor
Trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Securities or in this Indenture provided that the
certificate of the Trustee shall have.
Section 8.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof authorized under such laws to exercise corporate
trustee power, shall be subject to supervision or examination by Federal or
state authority and shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition.
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This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1). The Trustee is subject to TIA ss. 310(b).
Section 8.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 9.
DISCHARGE OF INDENTURE
Section 9.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of transfer or exchange of the Securities herein expressly
provided for), and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture, when
(1) either:
(a) all the Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 2.07 hereof and
(ii) Securities for whose payment has theretofore been deposited in trust
or segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust, as provided in Section 9.03
hereof) have been delivered to the Trustee cancelled or for cancellation;
or
(b) all such Securities not theretofore delivered to the
Trustee cancelled or for cancellation, (i) have become due and payable, or
(ii) will become due and payable at their stated maturity within one year,
or (iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has irrevocably
deposited or caused to be deposited with the Trustee, pursuant to an
irrevocable trust and security agreement in form and substance reasonably
satisfactory to the Trustee, as trust funds in trust for the purpose an
amount sufficient to pay and discharge the
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entire indebtedness on such Securities not theretofore delivered to the
Trustee cancelled or for cancellation, for principal and interest to the
date of such deposit which have become due and payable, or to the stated
maturity date or redemption date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate stating that all conditions precedent provided for herein relating
to the satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 8.07 hereof shall
survive.
Section 9.02. Application of Trust Money.
The Trustee or a trustee satisfactory to the Trustee and the Company
shall hold in trust money or U.S. Government Obligations deposited with it
pursuant to Section 9.01 hereof. It shall apply the deposited money and the
money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of principal of and interest on
the Securities.
Section 9.03. Repayment to Company.
The Trustee and the Paying Agent shall promptly pay to the Company
upon written request any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon
written request any money held by them for the payment of principal or interest
that remains unclaimed for two years after the date upon which such payment
shall have become due; provided, however, that the Company shall have either
caused notice of such payment to be mailed to each Holder entitled thereto not
less than 30 days prior to such repayment or within such period shall have
published such notice in a financial newspaper of widespread circulation
published in The City of New York. After payment to the Company, the Holders
entitled to the money must look to the Company for payment as general creditors
unless an applicable abandoned property law designates another Person, and all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
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Section 9.04. Indemnity for U.S. Government Obligations.
The Company shall pay and shall indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against any deposited U.S.
Government Obligations or the principal and interest received on such U.S.
Government Obligations.
Section 9.05. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Article 9 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to this Article 9
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with this Article 9;
provided, however, that if the Company has made any payment of interest on or
principal of any Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE 10.
AMENDMENTS
Section 10.01. Without Consent of Holders.
The Company, the Guarantor and the Trustee may amend this Indenture,
the Securities or any Security Document without the consent of any Holder:
(1) to cure any ambiguity, defect, omission or inconsistency;
(2) to make any change in Article 11 that would limit or terminate
the benefits available to any Working Capital Lender under Article 11 or
the Security Documents;
(3) to reflect any change in generally accepted accounting
principles which becomes effective subsequent to the date of this
Indenture that otherwise would result in any change in any calculation
required to determine compliance with any provision contained in this
Indenture so that the determination of compliance with such
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provision will yield the same result as would have obtained prior to such
change in generally accepted accounting principles;
(4) to make any change that does not adversely affect the legal
rights hereunder of any Holder;
(5) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company; or
(6) to make any change to the extent necessary to reflect the
consummation of a Company Reincorporation Merger and a SMC
Reincorporation Merger.
Upon the request of the Company, accompanied by a resolution of the
Board of the Company, authorizing the execution of any such supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
10.06 hereof, the Trustee shall join with the Company and the Guarantor or their
respective successors, in the case of an amendment reflecting a Company
Reincorporation Merger and a SMC Reincorporation Merger, (unless the Guarantor
shall have been released pursuant to Section 3.05 hereof) in the execution of
any supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations which
may be therein contained, but the Trustee shall not be obligated to enter into
any such supplemental Indenture which affects its 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 supplemental
Indenture.
After an amendment under this Section 10.01 becomes effective, the
Company shall mail to Holders a notice briefly describing such amendment. The
failure to give such notice to all Holders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section 10.01.
Section 10.02. With Consent of Holders.
The Company and the Trustee may amend this Indenture, the Securities
or any Security Document with the written consent of the Holders of at least a
majority in principal amount of the then outstanding Securities.
Upon the request of the Company, accompanied by a resolution of the
Board authorizing the execution of any such supplemental Indenture, and upon the
filing with the Trustee of evidence satisfactory to the Trustee of the consent
of the Holders as aforesaid, and upon receipt by the Trustee of the documents
described in Section 10.06 hereof, the Trustee shall join with the Company in
the execution of such supplemental Indenture unless such
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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 supplemental
Indenture.
It shall not be necessary for the consent of the Holders under this
Section 10.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment or waiver under this Section 10.02 becomes
effective, the Company shall mail to the Holders of each Security affected
thereby a notice briefly describing the amendment 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 supplemental Indenture or waiver.
The Holders of a majority in principal amount of the Securities then outstanding
may waive compliance in a particular instance by the Company with any provision
of this Indenture or the Securities. However, without the consent of each Holder
affected, an amendment or waiver under this Section may not:
(1) change the stated maturity of the principal of, or any
installment of interest on, any Securities;
(2) reduce the principal amount of or interest on, any Security;
(3) change the place or currency of payment of principal of or
interest on, any Security,
(4) impair the right to institute suit for the enforcement of any
payment on or after the redemption date or, in the case of an Excess
Proceeds Offer or a Change of Control Offer which has been made, on or
after the applicable Payment Date of any Security;
(5) reduce the above-stated percentage of outstanding Securities the
consent of whose Holders is necessary to modify or amend this Indenture;
(6) waive a default in the payment of principal of or interest on
the Securities;
(7) reduce the percentage or aggregate principal amount of
outstanding Securities the consent of whose Holders is necessary for
waiver of compliance with certain provisions of this Indenture or for
waiver of certain defaults;
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(8) adversely affect the ranking or security of the Securities; or
(9) following the mailing of an Excess Proceeds Offer or a Change of
Control Offer, modify the provisions of this Indenture with respect to
such offer in a manner adverse to the Holders of the Securities.
The Company shall give the Holders of the Securities notice of the effectiveness
of any amendment under this Section 10.02.
Section 10.03. Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities at a time when
this Indenture shall be qualified under the TIA shall be set forth in a
supplemental Indenture that complies with the TIA as then in effect.
Section 10.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder is a continuing consent that binds the Holder and
every subsequent Holder of a Security or portion of a Security that evidences
the same Indebtedness as the consenting Holder's Security, even if notation of
the consent is not made on any Security. However, any such Holder or subsequent
Holder may revoke the consent as to his Security or portion of a Security if the
Trustee receives written notice of revocation before the date the amendment,
supplement or waiver becomes effective. An amendment, supplement or waiver
becomes effective in accordance with its terms and thereafter binds every
Holder. The Company may fix a record date for determining which Holders must
consent to such amendment, supplement or waiver, which record date shall be (i)
the later of 30 days prior to the first solicitation of such consent or the date
of the most recent list of Holders furnished to the Trustee pursuant to Section
2.05 hereof prior to such solicitation or (ii) such other date as the Company
shall designate. If a record date is fixed, those Persons who were Holders of
securities at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to consent to such amendment, supplement or
waiver or to revoke any consent previously given, whether or not those Persons
continue to be Holders after such record date.
Section 10.05. Notation on or Exchange of Securities.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Security thereafter authenticated. The Company in
exchange
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for all Securities may issue and the Trustee shall authenticate new Securities
that reflect the amendment, supplement or waiver. Failure to make the
appropriate notation or issue a new Security shall not affect the validity and
effect of such amendment, supplement or waiver or of the Security.
Section 10.06. Trustee to Sign Amendments, Etc.
The Trustee shall sign any amendment or supplemental Indenture
authorized pursuant to this Article 10 if the amendment does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. If it does,
the Trustee may, but need not, sign it. In signing or refusing to sign such
amendment or supplemental Indenture, the Trustee shall be entitled to receive,
if requested, an indemnity reasonably satisfactory to it and to receive and,
subject to Section 8.01 hereof, shall be fully protected in relying upon (and
may require), an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that such amendment or supplemental Indenture is authorized or
permitted by this Indenture, that it is not inconsistent herewith, and that it
will be valid and binding upon the Company and the Guarantor in accordance with
its terms. The Company may not sign an amendment or supplemental Indenture until
the Board approves it.
ARTICLE 11.
SECURITY
Section 11.01. Security Documents.
(a) To secure the due and punctual payment of the Securities, the
Company and the Trustee have entered into or will enter into the Security
Documents to create the security interests thereunder and for related matters
including, without limitation, appointment of the Working Capital Agent (or any
other agent or representative) as agent for perfection of the security interests
created pursuant to the Pledge Agreement. The Company covenants and agrees that
it has full right, power and lawful authority to grant, bargain, sell, release,
convey, hypothecate, assign, pledge, transfer, confirm and grant a security
interest in the property constituting the Collateral, in the manner and form
done in the Security Documents or intended to be done, and that the Company (i)
will forever warrant and defend the title to the same against the claims of all
Persons whatsoever in each case free and clear of all Liens whatsoever, except
Liens permitted by Section 5.11 hereof and (ii) will execute, acknowledge and
deliver to the Trustee such further assignments, transfers, assurances or other
instruments and will do or cause to be done all such acts and things as may be
necessary or proper to assure and confirm to the Trustee its interest in the
Collateral, or any
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part thereof, as from time to time constituted, and its rights under the
Security Documents so as to render the same available for the security and
benefit of this Indenture and the Securities.
(b) Each Holder, by accepting the Securities, consents and agrees to
all of the terms and provisions of the Security Documents, including the
relative priority of the interests of the Working Capital Lenders and Holders
with respect to the Collateral, as the same may be amended from time to time
pursuant to the provisions of the Security Documents and this Indenture, and
authorizes and directs the Trustee to enter into each Security Document and to
perform its obligations and exercise its rights thereunder in accordance
therewith; provided, however, that if any Security Document limits, qualifies,
or conflicts with the duties imposed by the provisions of the TIA, the TIA
controls except to the extent that (i) the TIA permits such provisions to be
modified by contract or (ii) the SEC has granted any exemption with respect
thereto.
(c) As long as the Specified Indebtedness is secured by a Lien on
any Collateral of the Company, then as between the Working Capital Lenders and
the Holders, (i) the proceeds of any enforcement, collection, execution, levy or
foreclosure proceeding or otherwise, shall be applied first to the payment of
the Specified Indebtedness or held as security for the Specified Indebtedness
and (ii) the Holders shall refrain from taking any action to foreclose upon,
take possession of, liquidate or proceed against, or otherwise exercise any
rights or remedies under this Indenture or the Security Documents with respect
to, any Collateral or hinder or delay the Working Capital Lenders in the
exercise of any of their rights and remedies in respect of the Working Capital
Credit Facility. Upon final payment in full in cash of the Specified
Indebtedness, the Collateral as now or hereafter constituted shall be held for
the equal and ratable benefit of the Holders 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 Securities.
Section 11.02. Recording, Opinion of Counsel, Etc.
The Company will cause, at its own expense, this Indenture, the Security
Documents, and all amendments or supplements thereto, to be registered, recorded
and filed and/or rerecorded and/or re-filed and/or renewed in such manner and in
such place or places, if any, as may be required by law in order fully to
preserve and protect the Liens of the Security Documents (except as expressly
otherwise therein provided) and all parts of the Collateral that may be
preserved or protected by such registering, recording or filing and to
effectuate and preserve the security of the Holders and all rights of the
Trustee.
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The Company shall furnish to the Trustee:
(a) promptly after the execution and delivery of this Indenture and
each Security Document or other instrument of further assurance, an
Opinion of Counsel stating that, in the opinion of such counsel, the
Security Documents and other instruments of further assurance, and any
required financing statements with respect thereto, have been properly
recorded, endorsed, registered and filed or other action has been taken,
so as to perfect and make effective the Liens intended to be created
thereby, and reciting the details of such action or stating that, in the
opinion of such counsel, no such action is necessary to make such Liens
effective; and
(b) within 15 days after March 31 in each year beginning with the
year 1998, an Opinion of Counsel, dated as of such date, either stating
that, in the opinion of such counsel, such action has been taken with
respect to the recording, registering, filing, re-recording,
re-registering and re-filing of this Indenture and the Security Documents,
financing statements, supplemental indentures, continuation statements or
other instruments of further assurance as is necessary to maintain the
Liens of the Security Documents and the perfection thereof and reciting
the details of such action, or stating that, in the opinion of counsel, no
such action prior to April 30 of the subsequent year is necessary to
maintain such Lien and the perfection thereof.
The Trustee shall hold in its possession the Security Documents,
except as it from time to time may be required for actions, suits or proceedings
relating to the Security Documents or for the purpose of enforcing or realizing
upon any right or value thereby represented. The Trustee may, from time to time,
in its sole discretion, for the purpose of convenient location of the Security
Documents, appoint one or more agents to hold physical custody, for the account
of the Trustee, of the Security Documents.
Section 11.03. Trust Indenture Act Requirements.
(a) The release of any Collateral from the terms of any Security
Document or the release, in whole or in part, of the Liens created by any
Security Document, will not be deemed to impair the security interests
thereunder in contravention of the provisions of this Indenture if and to the
extent the Collateral or Liens are released pursuant to, and in accordance with,
the applicable provisions hereof and of the Security Documents.
(b) To the extent applicable, the Company shall cause ss. 314(d) of
the TIA relating to the release of Collateral from the Liens of the Security
Documents to be complied with.
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(c) In the case of transactions permitted by Section 11.04(b)
hereof, the Company shall deliver to the Trustee, within 15 days after the end
of each of the six-month periods ended on June 30 and December 31 in each year,
an Officers' Certificate to the effect that all transactions effected pursuant
to Section 11.04(b) hereof during the preceding six-month period were made in
the Ordinary Course of Business and that all proceeds therefrom were used by the
Company as permitted herein. The Company shall provide the Trustee with a copy
of any exemption granted by the SEC and promptly inform the Trustee of any
rescission or termination of, or amendment to such exemption.
(d) The fair value of Collateral released from the Liens of the
Security Documents pursuant to Section 11.04(b) hereof shall not be considered
in determining whether the aggregate fair value of Collateral released from the
Liens of the Security Documents in any calendar year exceeds the 10% threshold
specified in Section 314(d)(1) of the TIA; provided that the Company's right to
rely on this sentence at any time is conditioned upon the Company having
furnished to the Trustee all certificates described in Section 11.03(c) hereof
that were required to be furnished to the Trustee at or prior to such time.
Section 11.04. Disposition of Certain Collateral without Requesting Release.
(a) In connection with a sale, lease, exchange, transfer or other
disposition of any of the Collateral in which the Liens of the Working Capital
Lenders are released and the Company delivers the certificate or opinion
required by Section 314(d)(1) of the TIA, the Liens thereon of the Trustee shall
be automatically, unconditionally and simultaneously released and the Trustee
shall execute and deliver to the Working Capital Agent or the Company such
termination statements, releases and other documents as the Working Capital
Agent or the Company may request to effectively confirm such release.
(b) As long as the Company is in compliance with the provisions of
Section 11.03(c) hereof, the Company may, pursuant to and in accordance with
this Indenture and the Security Documents, without requesting the release or
consent of the Trustee,
(i) sell or dispose of in the Ordinary Course of Business free
from the Liens of the Security Documents, any machinery, equipment,
furniture, apparatus, tools or implements, materials or supplies or
other similar property ("Subject Property") which, in its reasonable
opinion, may have become obsolete or unfair for use in the conduct
of its businesses or the operation of the Collateral upon replacing
the same with, or substituting for the same, new Subject Property
constituting Collateral not necessarily of the same character
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but being of at least equal value and utility as the Subject
Property so disposed of as long as such new Subject Property becomes
subject to the Liens of the Security Documents, which new Subject
Property shall without further action become Collateral subject to
the Liens of the Security Documents;
(ii) abandon, sell, assign, transfer, license or otherwise
dispose of in the Ordinary Course of Business any personal property
the use of which is no longer necessary or desirable in the proper
conduct of the business of the Company and the maintenance of its
earnings and is not material to the conduct of the business of the
Company and its Subsidiaries taken as a whole;
(iii) grant in the Ordinary Course of Business, rights-of-way
and easements over or in respect of any of the Company's real
property, provided that such grant will not, in the reasonable
opinion of the Company's Board of Directors, impair the usefulness
of such property in the conduct of the Company's business, and will
not be prejudicial to the interests of the Holders;
(iv) sell, transfer or otherwise dispose of Inventory in the
Ordinary Course of Business;
(v) sell, collect, liquidate, factor or otherwise dispose of
Accounts (as defined in the Security Agreement) and accounts
receivable in the Ordinary Course of Business; and
(vi) make cash payments (including for the scheduled repayment
of Indebtedness) from cash that is at any time part of the
Collateral in the Ordinary Course of Business that are not otherwise
prohibited by this Indenture and the Security Documents.
(c) To the extent the Company has not complied with Section 11.03(c)
hereof, the Company shall not dispose of or transfer (by lease, assignment, sale
or otherwise), in any transaction or any series of related transactions,
Collateral pursuant to the provisions of Section 11.04(b) hereof (i) with a fair
value to the Company equal to 10% or more of the aggregate fair value of all
Collateral then existing (as determined in the good faith judgment of the
Company and, if required by the TIA, an independent appraiser) or (ii) if there
is a default in the payment of principal of any of the Securities.
(d) Upon receipt of a Company Request complying with Section 11.08
hereof and subject to the Company's compliance with Section 314(c) of the TIA,
to the extent
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applicable, the Trustee shall execute and deliver, within five business days
from the receipt of the Company Request, any instrument deemed by the Company to
be necessary or appropriate to dispose of portions of the Collateral pursuant to
this Section 11.04 if the provisions of this Section 11.04 have been complied
with.
Section 11.05. Other Release of Lien.
(a) As long as no Event of Default has occurred and is continuing,
whenever any property of the Company which shall be subject to the Liens of the
Security Documents is disposed of and Section 11.04 hereof is not applicable,
the Trustee shall release the same from the Liens thereof upon receipt by the
Trustee of the following:
(i) A copy of a resolution of the Board of Directors of the
Company, requesting such release;
(ii) An Officer's Certificate stating in substance as
follows:
(A) That the Company has complied with all conditions
precedent hereunder and under the Security Documents;
(B) That the Company has sold or exchanged, or contracted to
sell or exchange, the property so to be released for a
consideration representing, in the opinion of the
signers, its full value to the Company, which
consideration may be cash and/or other property, to be
described in reasonable detail in such certificate;
(C) That the retention of such property is no longer
desirable in the conduct of the business of the Company;
and
(D) That any money stated in said certificate to have been
received in consideration for any such sale or exchange
is being applied in accordance with Section 5.13 hereof.
(iii) An Opinion of Counsel to the effect that the Security
Documents or other designated deeds or instruments of conveyance,
assignment or transfer covering any property included in the
consideration for such release or acquired with the proceeds of such
sale, are sufficient to subject the same to the security interest
granted by this Indenture or any Security Document and that such
release complies with any applicable requirements of the TIA.
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(b) Upon receipt of the Officers' Certificate and Opinion of Counsel
required by Section 11.05(a) hereof, the Trustee must execute, deliver or
acknowledge any necessary or proper instruments of termination, satisfaction or
release to evidence the release of any Lien on Collateral permitted to be
released pursuant to this Indenture or any Security Document.
Section 11.06. Impairment of Security Interest.
The Company will not, and will not permit any Subsidiary to, take or
omit to take any action which reasonably might or would have the result of
affecting or impairing the security interests with respect to the Collateral in
contravention of this Indenture, and the Company shall not (and shall cause the
Subsidiaries not to) grant to, or suffer to exist in favor of, any Person any
interests whatsoever in the Collateral except as permitted by the Security
Documents or this Indenture. The Company will not, and will not permit any
Subsidiary to, enter into any agreement or instrument that by its terms
expressly requires that the proceeds received from the sale of any Collateral be
applied to repay, redeem or otherwise retire any Indebtedness of any Person
other than as set forth in this Article 11 and the Security Documents.
Section 11.07. Authorization of Receipt of Funds by the Trustee Under the
Security Documents.
Subject to the provisions of the Security Documents, the Trustee is
authorized to receive any funds for the benefit of Holders of Securities under
the Security Documents, and to make further distributions of such funds to the
Holders according to the provisions of this Indenture.
Section 11.08. Reliance on Company Request.
The Trustee shall, before taking any action under this Article 11,
be entitled to receive a Company Request, stating that such action will not be
in contravention of the provisions hereof, and such Company Request shall be
full protection to the Trustee for any action taken or omitted to be taken in
reliance thereon; provided that, in the event and as long as this Indenture is
qualified under the TIA, the Trustee's action under this Article 11 shall at all
times be and remain subject to its duties under Section 315 of the TIA.
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Section 11.09. Payment of Expenses.
On demand of the Trustee, the Company forthwith shall pay or
satisfactorily provide for all reasonable expenditures incurred by the Trustee
under this Article 11, and the Trustee's entitlement to all such sums shall be
secured by a Lien upon the Collateral.
Section 11.10. Trustee's Duties.
The powers conferred upon the Trustee by this Article 11 are solely
to protect the Liens of this Indenture and the Security Documents and shall not
impose any duty upon the Trustee to exercise any such powers except as expressly
provided in this Indenture. The Trustee shall be under no duty whatsoever to
make or give any presentment, demand for performance, notice of nonperformance,
protest, notice of protest, notice of dishonor, or other notice or demand in
connection with any Collateral, or to take any steps necessary to preserve any
rights against prior parties except as expressly provided in this Indenture and
the Security Documents. The Trustee shall not be liable for failure to collect
or realize upon any or all of the Collateral, or for any delay in so doing, nor
shall the Trustee be under any duty to take any action whatsoever with regard
thereto. The Trustee shall have no duty to comply with any recording, filing or
other legal requirements necessary to establish or maintain the validity,
priority or enforceability of the Liens of this Indenture and the Security
Documents in, or the Trustee's rights in or to, any of the Collateral.
ARTICLE 12.
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by any of Sections 310 to 317, inclusive, of the TIA, through
operation of Section 318(c) of the TIA, such imposed duties shall control except
to the extent that (i) the TIA permits such provisions to be modified by
contract or (ii) the SEC has granted any exemption with respect thereto.
Section 12.02. Notices.
Any notice or communication by the Company or the Trustee to the other is duly
given if in writing and delivered in person or mailed by first-class mail
(registered or certified, return
68
<PAGE>
receipt requested), telecopier or overnight air courier guaranteeing next day
delivery, to the other's address:
If to the Company or Guarantor:
Metallurg, Inc.
27 East 39th Street
New York, New York 10016
Attention: Eric L. Schondorf, Esq.
Telecopier No.: (212) 481-7124
With a Copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Ronald F. Daitz, Esq.
Telecopier No.: (212) 310-8007
If to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust Department
Telecopier No.: (212) 858-2000
With a Copy to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 11036
Attention: Sheldon I. Hirshon, Esq.
Telecopier No.: (212) 969-2900
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
69
<PAGE>
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee at the same time.
Section 12.03. Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Securities. The
Company, the Trustee, the Registrar, the Paying Agent and anyone else shall have
the protection of TIA ss. 312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent (including any covenants compliance with which
constitutes a condition precedent), if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent (including any such covenants) have been
complied with.
Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than annual
certificates provided pursuant to Section 5.04 hereof) shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) 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;
70
<PAGE>
(3) a statement that, in the opinion of such Person, such person has
made such examination or investigation as is necessary to enable such
Person to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.07. Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions or trust companies in The City of New York or at a place of payment
are authorized or obligated by law, regulation or executive order to remain
closed. If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period.
Section 12.08. No Recourse Against Others.
An incorporator, director, officer, employee, controlling Person or
stockholder of the Company, as such, or any successor Person thereof shall not
have any liability for any obligations of the Company or Trustee under the
Securities or this Indenture or for any obligations of the Guarantor under the
Guaranty or this Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation. Each Holder by accepting a Security
waives and releases all such liability.
Section 12.09. Governing Law.
THIS INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAW OF THE STATE OF NEW YORK.
71
<PAGE>
Section 12.10. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or a Subsidiary. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
Section 12.11. Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
Section 12.12. Severability.
In case any provision in this Indenture or in the Securities shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 12.13. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 12.14. Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
ARTICLE 13.
MEETINGS OF HOLDERS
Section 13.01. Purposes of Meetings.
A meeting of Holders may be called at any time and from time to time
pursuant to the provisions of this Article 13 for any of the following purposes:
72
<PAGE>
(a) to give any notice to the Company or to the Trustee, or to give
any direction to the Trustee, or to waive any non-performance hereunder and its
consequences, or to take any other action authorized to be taken by Holders
pursuant to any of the provisions of this Indenture;
(b) to remove the Trustee and appoint a successor trustee pursuant
to the provisions of Section 8.08 hereof;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Article 10 hereof;
(d) to take any other action authorized to be taken by or on behalf
of the Holders of any specified aggregate principal amount of the Securities
under any other provision of this Indenture or under applicable law.
Section 13.02. Call of Meetings by Trustee.
The Trustee may at any time call a meeting of Holders to take any
action specified in Section 13.01 hereof, to be held at such time and at such
place in the State of New York, as the Trustee shall determine. Notice of each
meeting of the Holders, setting forth the time and the place of such meeting
and, in general terms, the action proposed to be taken at such meeting, shall be
mailed by the Trustee to the Holders, not less than 20 but no more than 60 days
prior to the date fixed for the meeting, at their last addresses as they shall
appear on the register of the Securities.
Section 13.03. Call of Meetings by Company or Holders.
If at any time the Company, pursuant to a resolution of its Board of
Directors, or the Holders of at least 20% in aggregate principal amount of the
Securities then outstanding, shall have requested the Trustee to call a meeting
of Holders of Securities to take any action authorized in Section 13.01 hereof,
by written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have mailed notice of such
meeting within 20 days after receipt of such request, then the Company or the
Holders of Securities in the amount above specified, as the case may be, may
determine the time and the place in the State of New York for such meeting, and
may call such meeting by mailing notice thereof as provided in Section 13.02
hereof.
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Section 13.04. Persons Entitled to Vote at Meeting.
To be entitled to vote at any meeting of Holders of Securities, a
Person shall (a) be a Holder of Securities or (b) be a Person appointed by an
instrument in writing as proxy by a Holder of Securities. The only Persons who
shall be entitled to be present or speak at any meeting of the Holders of the
Securities shall be the Persons entitled to vote at such meeting and their
counsel and any representatives of the Company and its counsel.
Section 13.05. Regulations for Meeting.
Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Holders in regard to the appointment of proxies, the proof of the holding of
Securities, the appointment and duties of inspectors of votes, the submission
and examination of proxies and other evidence of the right to vote, and such
other matters concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting unless the meeting shall have been called by the Company
or by Holders as provided in Section 13.03 hereof, in which case the Company or
the Holders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman, and a permanent chairman and a permanent secretary
of the meeting shall be elected by vote of the Holders of a majority in
principal amount of the Securities represented at the meeting and entitled to
vote.
At any meeting of Holders, the presence of Persons holding or
representing Securities in an aggregate principal amount sufficient to take
action upon the business for the transaction of which such meeting was called
shall be necessary to constitute a quorum; but, if less than a quorum be
present, the Persons holding or representing a majority in aggregate principal
amount of the Securities represented at the meeting may adjourn such meeting
with the same effect, for all intents and purposes, as though a quorum had been
present.
74
<PAGE>
SIGNATURES
METALLURG, INC.
By:______________________________
Attest: ______________________ Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:______________________________
Attest: ______________________ Name:
Title:
Accepted and agreed to, solely with respect to the Guaranty of the
Securities and all express obligations of the Guarantor set forth herein.
SHIELDALLOY METALLURGICAL CORPORATION
By:______________________________
Attest: ______________________ Name:
Title:
75
<PAGE>
EXHIBIT A
(Face of Security)
No. ______
METALLURG, INC.
12% Senior Secured Notes due 2007
CUSIP [ ]
METALLURG, INC., a Delaware
corporation organized and existing under the laws
of the State of Delaware, promises to pay to __________________________ or
registered
assigns, the principal sum of Dollars
as set forth herein.
Maturity Date: [________ __, 2007]
Interest Payment Dates: January 1 and July 1
Record Dates: December 15 and June 15
Reference is hereby made to the further provisions of this Security set forth on
the reverse side hereof, which further provisions shall for all purposes have
the same effect as if set forth at this place.
ATTEST: METALLURG, INC.
By:
------------------------------ ----------------------------
Eric L. Schondorf Michael A. Standen
Secretary President
A-1
<PAGE>
[SEAL]
Dated:
Certificate of Authentication: This is one of
the Securities referred to in the within-
mentioned Indenture.
IBJ SCHRODER BANK & TRUST COMPANY, as Trustee
- - ----------------------------,
By:
Authorized Officer
A-2
<PAGE>
(Back of Security)
METALLURG, INC.
12% Senior Secured Notes due 2007
1. Interest. METALLURG, INC., a New York corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
an interest rate of 12% per annum. The Company shall pay interest semi-annually
in arrears on January 1 and July 1 to the holders of record of this Security
("Holders") at the close of business on December 15 and June 15 next preceding
the interest payment date. Interest shall initially accrue from January 1, 1997
and the first interest payment date will be July 1, 1997. Interest shall be
computed on the basis of a 365- or 366-day year.
2. Method of Payment. The Company shall pay interest on the
Securities (except defaulted interest) to the Persons who are registered Holders
of Securities at the close of business on the record date for the next interest
payment date. Holders must surrender Securities to a Paying Agent to collect
principal payments. The Company shall pay principal and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts. However, the Company may pay principal and interest by check
payable in such money. It may mail an interest check to a Holder's registered
address.
3. Paying Agent and Registrar. Initially, IBJ Schroder Bank & Trust
Company, a New York corporation, as trustee (the "Trustee"), shall act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or
co-registrar without prior notice. The Company or any of its subsidiaries may
act in any such capacity.
4. Indenture. The Company issued the Securities under an Indenture
dated as of [April 2,] 1997 (the "Indenture") among the Company, the Guarantor
and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date
of the Indenture. The Securities are subject to, and qualified by, all such
terms, certain of which are summarized herein, and Holders are referred to the
Indenture and such Act for a statement of such terms. The Securities are secured
obligations of the Company limited to [$60,000,000] in aggregate principal
amount.
A-3
<PAGE>
The Indenture contains certain covenants that, among other things,
limit (i) the issuance of additional indebtedness by the Company, (ii) certain
transactions with affiliates, (iii) sales of assets, including capital stock of
subsidiaries, and (iv) certain consolidations, mergers and transfers of assets.
5. Optional Redemption. The Company may redeem the Securities, in
whole or in part, at any time or from time to time, prior to maturity, upon not
less than 30 nor more than 60 days prior notice, at 103% of principal amount of
the Securities plus accrued and unpaid interest, if any, to the redemption date,
if redeemed prior to July 1, 1999, and thereafter at 100% of the principal
amount of the Securities plus accrued and unpaid interest, if any, to the
redemption date.
6. Mandatory Redemption. The Company will be required to make a
mandatory redemption in respect of the Securities as follows:
Principal Amount
Date To Be Redeemed
---- --------------
[April 2,] 2004 $2,500,000
[April 2,] 2005 $2,500,000
[April 2,] 2006 $2,500,000
7. Notice of Redemption. Notice of redemption shall be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at such Holder's registered address.
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed pro rata or by a method that complies
with applicable legal and securities exchange requirements, if any, and that the
Trustee considers fair and appropriate and in accordance with methods generally
used at the time of selection by fiduciaries in similar circumstances and taking
into account the provisions of the next paragraph. The particular Securities to
be redeemed shall be selected unless otherwise provided herein, not less than 30
or more than 60 days prior to the redemption date by the Trustee from the
outstanding Securities not previously called for redemption.
If the Company shall so direct, Securities registered in the name of
the Company or any Subsidiary thereof shall not be included in the Securities
selected for redemption.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Security selected for
partial redemption, the principal amount thereof to be redeemed. Securities and
portions of them selected shall be in
A-4
<PAGE>
amounts of $1,000 or whole multiples of $1,000; except that if all of the
Securities of a Holder are to be redeemed, the entire outstanding amount of
Securities held by such Holder, even if not a multiple of $1,000, shall be
redeemed. Except as provided in the preceding sentence, provisions of the
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption.
If this Security is redeemed subsequent to a record date with
respect to any interest payment date specified above and prior to such interest
payment date, then any accrued interest shall be paid to the Person who
surrenders this Security for redemption.
8. Repurchase at Option of Holder. Sections 5.12 and 5.13 of the
Indenture provide that upon the occurrence of a Change of Control or, under
certain circumstances, after an Asset Sale, and subject to further limitations
contained therein, the Company shall make an offer to purchase certain amounts
of the Securities in accordance with the procedures set forth in the Indenture.
Holders of Securities that are subject to an offer to purchase will receive an
offer to purchase from the Company prior to any related purchase date, and may
elect to have such Securities purchased by completing the form entitled "Option
of Holder to Elect Purchase" appearing below.
9. Security Documents. In order to secure the due and punctual
payment of the principal of and interest on the Securities and all other amounts
payable by the Company under the Indenture and the Securities when and as the
same shall be due and payable, whether at maturity, by acceleration or
otherwise, according to the terms of the Securities and the Indenture, the
Company has granted Liens on the Collateral to the Trustee for the benefit of
the Holders of the Securities pursuant to the Indenture and the Security
Documents. The Securities will be secured by Liens on the Collateral that are
subordinate to the Liens of the holders of Specified Indebtedness and certain
other permitted encumbrances.
Each Holder, by accepting this Security, acknowledges and agrees
that, as provided in the Security Documents, the Liens on the Collateral granted
to the Holders shall be subordinated and junior to the prior Liens on and
security interests in the Collateral and all proceeds thereof granted to the
holders of Specified Indebtedness.
Each Holder, by accepting this Security, 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.
A-5
<PAGE>
10. Denominations, Transfer, Exchange. The Securities are in
registered form in denominations of $1,000 and integral multiples of $1,000. The
transfer of Securities may be registered and Securities may be exchanged as
provided in the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not exchange or register the transfer of any Security or portion of a
Security selected for redemption. Also, it need not exchange or register the
transfer of any Securities for a period of 15 days before a selection of
Securities to be redeemed.
11. Persons Deemed Owners. The registered Holder of a Security shall
be treated as its owner for all purposes.
12. Amendments and Waivers. Subject to certain exceptions, the
Indenture or the Securities may be amended with the consent of the Holders of at
least a majority in principal amount of the then outstanding Securities, and any
existing Default may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Securities. Without the consent of any
Holder, the Indenture or the Securities may be amended to cure any ambiguity,
defect, omission or inconsistency, to make any change that does not adversely
affect the rights of any Holder, to make any change to the extent necessary to
reflect the consummation of a Company Reincorporation Merger and a SMC
Reincorporation Merger or to reflect certain changes in generally accepted
accounting principles.
13. Defaults and Remedies. Events of Default are set forth in the
Indenture. If an Event of Default occurs and is continuing (other than an Event
of Default specified in Sections 7.01(7) and (8) (with respect to the Company)),
the Trustee may, by written notice to the Company, or the Holders of at least
25% in principal amount of the then outstanding Securities may, by written
notice to the Company and the Trustee, declare the unpaid principal of and any
accrued but unpaid interest on all the then outstanding Securities to be due and
payable, together with the interest accrued thereon, immediately, all without
presentment, demand, notice, protest or other requirements of any kind. Holders
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Securities. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Securities may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders notice of any continuing default (except a default in
payment of principal or interest) if it determines that withholding notice is in
their interests. The Company must furnish an annual compliance certificate to
the Trustee.
14. Trustee Dealings with the Company. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not Trustee.
A-6
<PAGE>
15. No Recourse Against Others. An incorporator, a director,
officer, employee or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or the
Indenture or for any obligations of a Guarantor under the Guaranties or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
16. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. 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.)
18. Indenture. Each Holder, by accepting a Security, agrees to be
bound by all of the terms and provisions of the Indenture, as the same may be
amended from time to time.
19. 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 Securities and has directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed hereon or thereon.
20. THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
The Trustee will, at the expense of the Company, furnish to any
Holder upon written request and without charge a copy of the Indenture. Request
may be made to:
Attention:
A-7
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign
and transfer this Security 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
Security on the books of the Company. The agent may substitute another to act
for him.
Date:_______________ Your signature:_____________________________
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee:_________________________
(All signatures must be guaranteed by a member of a national securities exchange
or of the National Association of Securities Dealers, Inc. or by a commercial
bank or trust company located in the United States.)
A-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company pursuant to
Section 5.12 or 5.13 of the Indenture, check the box:
[ ]
If you want to elect to have any part of this Security purchased by the Company
pursuant to Section 4.07 of the Indenture, state the amount: $_______________
Date: Your Signature:
(Sign exactly as your
name appears on the
other side of this
Security)
Signature Guarantee:
(All signatures must be guaranteed by a member of a national securities exchange
or of the National Association of Securities Dealers, Inc. or by a commercial
bank or trust company located in the United States.)
A-9
<PAGE>
FORM OF NOTATION ON SECURITY
RELATING TO GUARANTY
This Security is guarantied as provided in Article 3 of the Indenture and shall
be subject to the provisions relating to release and discharge of the
Guarantor's obligations under this Guaranty provided therein.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed
in facsimile by its duly authorized officer.
SHIELDALLOY METALLURGICAL CORPORATION
By:______________________
Name:
Title:
<PAGE>
EXHIBIT B
FORM OF
SECURITY AGREEMENT
SECURITY AGREEMENT, dated [April 2,] 1997, made by Metallurg,
Inc., a New York corporation (the "Grantor"), in favor of IBJ Schroder
Bank & Trust Company, a banking corporation duly organized and
existing under the laws of the State of New York, as trustee (the
"Trustee"), acting on behalf of the holders (the "Holders" and
together with the Trustee, the "Secured Parties") of certain senior
secured notes due 2007 of the Grantor (the "Securities").
W I T N E S S E T H :
-------------------
WHEREAS, pursuant to the Indenture, dated as of [April 2,]
1997, between the Grantor, Shieldalloy Metallurgical Corporation, a
New York corporation and direct, wholly owned subsidiary of the
Grantor and the Trustee (said Indenture, as it may be amended,
supplemented or otherwise modified from time to time, being the
"Indenture"), the Securities were issued to the Holders;
WHEREAS, pursuant to the terms of Section 11.01 of the
Indenture, the Grantor has agreed to grant the security interests
contemplated herein;
WHEREAS, to secure the Specified Indebtedness, the Grantor
has granted a security interest (the "Senior Lien") in the Collateral
(as hereinafter defined) pursuant to the security agreement, dated
[April 2,] 1997, in favor of the Working Capital Agent, as agent for
the Working Capital Lenders (the "WCCF Security Agreement");
WHEREAS, the Senior Lien is to be senior and prior to the
Lien created hereby in favor the Trustee; and
NOW, THEREFORE, the Grantor hereby agrees with the Trustee
on behalf and for the ratable benefit of the Holders as follows:
1. Defined Terms. Capitalized terms used herein and not
-------------
otherwise defined herein have the meanings ascribed to them in the
Indenture. As used in this Agreement, the following terms have the
meanings specified below (such meanings being equally applicable to
both the singular and plural forms of the terms defined):
<PAGE>
"Account" means any "account," as such term is defined
-------
in Section 9-106 of the UCC, now owned or hereafter acquired
by the Grantor and, in any event, includes, without
limitation, (i) all accounts receivable, book debts and
other forms of obligations (other than forms of obligations
evidenced by Chattel Paper, Documents or Instruments) now
owned or hereafter received or acquired by or belonging or
owing to the Grantor (including, without limitation, under
any trade name, style or division thereof) whether arising
out of goods sold or services rendered by the Grantor or
from any other transaction, whether or not the same involves
the sale of goods or services by the Grantor (including,
without limitation, any such obligation which might be
characterized as an account or contract right under the
UCC), (ii) all of Grantor's rights in, to and under all pur-
chase orders or receipts now owned or hereafter acquired by
it for goods or services, and all of Grantor's rights to any
goods represented by any of the foregoing (including,
without limitation, unpaid seller's rights of rescission,
replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods), (iii) all moneys
due or to become due to the Grantor under all contracts for
the sale of goods or the performance of services or both by
the Grantor (whether or not yet earned by performance on the
part of the Grantor or in connection with any other
transaction), now in existence or hereafter occurring, in-
cluding, without limitation, the right to receive the pro-
ceeds of said purchase orders and contracts, and (iv) all
collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.
"Account Debtor" means any "account debtor," as such
--------------
term is defined in Section 9-105(1)(a) of the UCC.
"Chattel Paper" means any "chattel paper," as such term
-------------
is defined in Section 9-105(1)(b) of the UCC, now owned or
hereafter acquired by the Grantor.
"Collateral" has the meaning assigned to such term in
----------
Section 2 of this Agreement.
"Contracts" means all contracts, undertakings or other
---------
agreements (other than Chattel Paper, Documents or
Instruments) in or under which the Grantor may now or
hereafter have any right, title or interest, including,
without limitation, with respect to an Account, any
agreement relating to the terms of payment or the terms of
performance thereof.
B-2
<PAGE>
"Documents" means any "document," as such term is
---------
defined in Section 9-105(1)(f) of the UCC, now owned or
hereafter acquired by the Grantor.
"Equipment" means any "equipment," as such term is
---------
defined in Section 9-109(2) of the UCC, now owned or
hereafter acquired by the Grantor and, in any event,
includes, without limitation, all machinery, equipment,
furnishings, fixtures, vehicles, computers and other
electronic data-processing and office equipment now owned or
hereafter acquired by the Grantor and any and all additions,
substitutions and replacements of any of the foregoing,
wherever located, together with all attachments, components,
parts, equipment and accessories installed thereon or
affixed thereto.
"General Intangibles" means any "general intangibles,"
-------------------
as such term is defined in Section 9-106 of the UCC, now
owned or hereafter acquired by the Grantor and, in any
event, includes, without limitation, all customer lists,
trademarks, patents, rights in intellectual property,
licenses, permits, copyrights, trade secrets, proprietary or
confidential information, inventions (whether patented or
patentable or not) and technical information, procedures,
designs, knowledge, know-how, software, data bases, data,
skill, expertise, experience, processes, models, drawings,
materials and records, goodwill, rights of indemnification
and all right, title and interest which the Grantor may now
or hereafter have in or under any Contract, now owned or
hereafter acquired by the Grantor.
"Grantor" has the meaning specified in the preamble
-------
hereto.
"Holders" have the meaning specified in the preamble
-------
hereto.
"Indenture" has the meaning specified in the recitals
---------
hereto.
"Insolvency or Liquidation Proceeding" shall mean (i)
------------------------------------
any voluntary or involuntary case or proceeding under
Bankruptcy Law with respect to the Grantor, (ii) any other
voluntary or involuntary insolvency, reorganization or
bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or
proceeding with respect to the Grantor or to any of its
respective assets, or (iii) any liquidation, dissolution,
reorganization or winding up of the Grantor whether
voluntary or involuntary and whether or
B-3
<PAGE>
not involving insolvency or bankruptcy, or (iv) any
assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Grantor.
"Instrument" means any "instrument," as such term is
----------
defined in Section 9-105(1)(i) of the UCC, now owned or
hereafter acquired by the Grantor, other than instruments
that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"Inventory" means any "inventory," as such term is
---------
defined in Section 9-109(4) of the UCC, now owned or here-
after acquired by the Grantor wherever located, and, in any
event, includes, without limitation, all inventory,
merchandise, goods and other personal property now owned or
hereafter acquired by the Grantor which are held for sale or
lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work
in process or materials used or consumed or to be used or
consumed in the Grantor's business, or the processing,
packaging, delivery or shipping of the same, and all
finished goods.
"Proceeds" means "proceeds," as such term is defined in
--------
Section 9-306(1) of the UCC, and, in any event, shall
include, without limitation, (i) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to the
Grantor from time to time with respect to any of the
Collateral, (ii) any and all payments (in any form whatso-
ever) made or due and payable to the Grantor from time to
time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of
the Collateral by any governmental authority (or any Person
acting under color of governmental authority), and (iii) any
and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Secured Parties" has the meaning specified in the
---------------
preamble hereto.
"Securities" has the meaning specified in the preamble
----------
hereto.
"Senior Lien" has the meaning specified in the recitals
-----------
hereto.
"Transaction Documents" means this Agreement, the
---------------------
Indenture, the Pledge Agreement and the Securities.
"Trustee" has the meaning specified in the preamble
-------
hereto.
B-4
<PAGE>
"UCC" means the Uniform Commercial Code as the same
---
may, from time to time, be in effect in the State of New
York; provided, however, in the event that, by reason of
-------- -------
mandatory provisions of law, any or all of the attachment,
perfection or priority of the Trustee's and the Holders' se-
curity interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than
the State of New York, the term "UCC" shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attach-
ment, perfection or priority and for purposes of definitions
related to such provisions.
"WCCF Security Agreement" has the meaning specified in
-----------------------
the recitals hereto.
2. Grant of Security Interest. A. As collateral security
--------------------------
for the full and prompt payment when due (whether at stated maturity,
by acceleration or otherwise) of the Securities and to induce the
Holders to accept the Securities, the Grantor hereby assigns, conveys,
pledges, hypothecates and transfers to the Trustee, on behalf and for
the ratable benefit of the Holders, and hereby grants to the Trustee,
on behalf and for the ratable benefit of the Holders, a security
interest in, all of the Grantor's right, title and interest in, to and
under the following (all of which being hereinafter collectively
referred to as the "Collateral"), which security interest shall be
junior and subordinated to the Senior Lien as provided in Section 3
hereof:
(i) all Accounts;
(ii) all Contracts;
(iii) all Documents;
(iv) all Instruments;
(v) all Inventory;
(vi) all Chattel Paper;
(vii) all Equipment;
(viii) all General Intangibles;
B-5
<PAGE>
(ix) to the extent not otherwise included, all Proceeds of
each of the foregoing and all accessions to, substitutions and
replacements for, and rents, profits and products of, each of the
foregoing; and
provided, however, that any Contract shall not be
-------- -------
Collateral if the granting hereunder of a security interest
in such Contract would violate the terms thereof or would
result in the non-breaching party under such Contract
obtaining the right to terminate such Contact.
3. Subordination to the Senior Lien. (a) The Secured
--------------------------------
Parties hereby expressly agree as follows:
(i) that notwithstanding the date, manner (including,
without limitation, the Liens on the Collateral) granted to
the Secured Parties or of any Liens granted to the Working
Capital Agent, for the benefit of the Working Capital
Lenders, and notwithstanding any provision of the UCC, or
any applicable law or decision or any other Transaction
Document or the Working Capital Credit Facility or any other
circumstances whatsoever, each Secured Party hereby agrees
that
(A) the Working Capital Agent, for the benefit of
the Working Capital Lenders, shall have a senior and
prior Lien on and security interest in the Collateral
and all proceeds thereof to secure the claims of such
holders;
(B) any Lien in the Collateral now or hereafter
held by the Secured Parties regardless of how acquired,
whether by grant, statute, operation of law,
subrogation or otherwise, shall be junior and
subordinate in all respects to all Liens in the
Collateral securing Specified Indebtedness; and
(C) all Liens securing Specified Indebtedness
shall be and remain senior to all Liens securing the
Securities for all purposes, whether or not such Liens
securing Specified Indebtedness are subordinated to any
Lien securing any other obligations of the Grantor;
(ii) neither the Trustee nor any Holder shall contest
or support any other Person in contesting, in any action or
proceeding or otherwise (including, without limitation, any
Insolvency or Liquidation Proceeding), the
B-6
<PAGE>
validity or enforceability of the Specified Indebtedness or
the perfection or priority of any Lien securing Specified
Indebtedness held by the Working Capital Agent or the
Working Capital Lenders;
(iii) neither the Trustee nor any Holder shall take or
receive from or on behalf of the Grantor directly or
indirectly, in cash or other property or by setoff,
counterclaim or in any manner (whether pursuant to any
enforcement, collection, execution, levy or foreclosure
proceeding or otherwise) any Collateral or any proceeds of
Collateral, unless and until all Specified Indebtedness
shall have been paid in full in cash; provided, however,
-------- -------
that nothing herein shall preclude the Grantor from making
the payments in respect of the Securities required by the
terms thereof;
(iv) unless and until the Specified Indebtedness has
been paid in full in cash, neither the Trustee nor any
Holder shall assert any remedy in respect of the Collateral
or any Lien therein held by the Trustee on behalf and for
the ratable benefit of the Holders (including, without
limitation, under or in respect of the Transaction
Documents); and
(v) unless and until all Specified Indebtedness has
been paid in full in cash, neither the Trustee nor any
Holder will commence, or join with any Person (other than
the Working Capital Lenders and the Working Capital Agent)
in commencing any enforcement, collection, execution, levy
or foreclosure proceeding or otherwise in respect of the
Collateral or any Lien therein granted under any Transaction
Document or otherwise.
(b) Any proceeds of Collateral received by the Trustee or
any Holder in contravention of this Section 3, and, if
applicable, any sums received by the Trustee under Section 507(b)
of the federal Bankruptcy Law, shall be segregated and held in
trust and forthwith paid over to the Working Capital Agent for
the benefit of the Working Capital Lenders in the same form
received, with any necessary endorsements or as a court of
competent jurisdiction may otherwise direct.
(c) The Grantor may sell, lease, exchange, transfer or
otherwise dispose of Collateral pursuant to the provisions of
Section 11.04(b) and Section 11.03(c) of the Indenture without
requesting the release or consent of the Trustee, as provided
more fully in the Indenture. In connection with any sale, lease,
exchange, transfer or other disposition of any Collateral
pursuant to Section 11.04(a) of the Indenture, in which the Liens
of the Working Capital Lenders are released and the Company
delivers the
B-7
<PAGE>
certificate or opinion required by Section 314(d)(1) of the TIA,
the Liens thereon of the Secured Parties shall be automatically,
unconditionally and simultaneously released and the Trustee shall
execute and deliver to the Working Capital Agent or the Grantor
such termination statements, releases and other documents as the
Working Capital Agent or the Grantor may request to effectively
confirm such release.
(d) Each Secured Party hereby waives any and all rights it
may have to object to the manner in which the Working Capital
Agent or the Working Capital Lenders seek to enforce or collect
the Specified Indebtedness or the Liens granted in any of the
Collateral, including waiving any right based on any duty to
conduct any such sale, lease, exchange, transfer or other
disposition in a commercially reasonable manner.
(e) In furtherance of the foregoing, the Trustee, on behalf
and for the ratable benefit of the Holders from time to time,
will execute and deliver to the Working Capital Agent undated UCC
termination statements in respect of all of the Collateral in
such number and such jurisdictions as determined by the Working
Capital Agent. Each Secured Party hereby appoints the Working
Capital Agent as its attorney-in-fact and authorizes the Working
Capital Agent to complete the UCC termination statements and file
them in order to carry out the purposes of this Section 3(e).
This appointment and authorization is coupled with an interest
and is irrevocable.
(f) If at any time any payment made or value received with
respect to any Specified Indebtedness is rescinded or must
otherwise be returned by the Working Capital Agent or any Working
Capital Lender upon the insolvency, bankruptcy, or reorganization
of the Grantor, or otherwise, then (i) to the extent necessary to
repay in full in cash the Specified Indebtedness, the Trustee
will, upon written demand by the Working Capital Agent, deliver
to the Working Capital Agent any funds or property previously
received by the Trustee with respect to the Collateral and then
held by the Trustee, and (ii) to the extent previously
terminated, the Senior Lien and the other rights and priorities
in favor of the Working Capital Agent and the Working Capital
Lenders under this Section 3 shall be reinstated as though such
payment had not been made or value received.
(g) The provisions of this Section 3 are and are intended
solely for the purpose of defining the relative rights of the
Holders of the Securities on the one hand and the Working Capital
Lenders on the other hand. Nothing contained in this Section 3
or any other Transaction Document is intended to or shall (i)
impair, as
B-8
<PAGE>
among the Grantor, its creditors (other than the Working Capital
Lenders) and the Secured Parties, the obligation of the Grantor,
which is absolute and unconditional, to pay to the Secured
Parties the principal of and interest on, and any other amount
payable by the Grantor under the Transaction Documents as and
when the same shall become due and payable in accordance with its
terms; or (ii) affect the relative rights against the Grantor of
the Secured Parties and its creditors (other than the Working
Capital Lenders); or (iii) prevent the Secured Parties from
accelerating the Securities and the Trustee commencing any action
to enforce or collect any payments theretofore due under the
Indenture or the Securities, provided that the Trustee may not
take action to foreclose or otherwise realize on the Collateral
if any Specified Indebtedness is then outstanding in
contravention of this Section 3. If any provision of this
Agreement (including, without limitation, this Section 3)
conflicts with the duties imposed by the provisions of the TIA,
to the extent applicable, the TIA controls except to the extent
that (i) the TIA permits such provisions to be modified by
contract or (ii) the SEC has granted any exemption with respect
thereto.
4. Rights of the Secured Parties.
-----------------------------
It is expressly agreed by the Grantor that, anything herein
to the contrary notwithstanding, the Grantor shall remain liable
under each of the Contracts to observe and perform all the
conditions and obligations to be observed and performed by it
thereunder and the Grantor shall perform all of its duties and
obligations thereunder, all in accordance with and pursuant to
the terms and provisions of each such Contract. Neither the
Trustee nor any Holder shall have any obligation or liability
under any Contract by reason of or arising out of this Agreement
or the granting of a security interest in any Contract to the
Trustee on behalf and for the ratable benefit of the Holders of a
security interest therein or the receipt by the Trustee or any
Holder of any payment relating to any Contract pursuant hereto,
nor shall the Trustee or any Holder be required or obligated in
any manner to perform or fulfill any of the obligations of the
Grantor under or pursuant to any Contract, or to make any
payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of
any performance by any party under any Contract, or to present or
file any claim, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or
times.
B-9
<PAGE>
5. Representations and Warranties. The Grantor hereby
------------------------------
represents and warrants to the Secured Parties as follows:
(a) The Grantor is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
New York.
(b) The execution, delivery and performance by the Grantor
of this Agreement are within the Grantor's corporate powers, have
been duly authorized by all necessary corporate action, do not
contravene the Grantor's certificate of incorporation or by-laws,
any requirement of law or any order or decree of any court, or
any contractual obligation of the Grantor, and do not result in
or require the creation of any Lien (other than pursuant to the
Indenture) upon or with respect to any of its properties.
(c) No consent, authorization, approval or other action by,
and no notice to or filing with, any governmental authority is
required for the due execution, delivery and performance by the
Grantor of this Agreement except for filing of the UCC financing
statements listed on Schedule I hereto.
(d) This Agreement has been duly executed and delivered by
the Grantor and is the legal, valid and binding obligation of the
Grantor, enforceable against the Grantor in accordance with its
terms.
(e) There are no pending or, to the Grantor's knowledge,
threatened actions, investigations or proceedings affecting the
Grantor or any of its Subsidiaries before any court, governmental
authority or arbitrator other than those that in the aggregate
have no reasonable likelihood of having a material adverse effect
on the rights or remedies of the Holders or the ability of the
Grantor to perform its obligations hereunder.
(f) The Grantor is the sole owner of each item of the
Collateral in which it purports to grant a security interest
hereunder, having good title thereto, free and clear of any and
all Liens, except for the security interest granted pursuant to
this Agreement and other Permitted Liens. No material amounts
payable under or in connection with any of its Accounts or
Contracts are evidenced by Instruments which have not been
delivered to the Trustee or the Working Capital Agent pursuant to
the terms of the WCCF Security Agreement.
B-10
<PAGE>
(g) No effective security agreement, financing statement,
equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of
record in any public office, except such as may have been filed
by the Grantor in favor of the Trustee pursuant to this Agreement
or such as relate to other Permitted Liens.
(h) This Agreement is effective to create a valid and
continuing Lien on the Collateral; appropriate financing
statements have been filed in the jurisdictions listed on
Schedule I hereto, such Lien is perfected as to all Collateral in
which a Lien may be perfected by the filing of a financing
statement under the UCC except as provided in Section 6(m)
hereof, and is prior to all other Liens, except as to the Senior
Lien, certain other Permitted Liens and to the extent that
financing statements are not required pursuant to Section 6(m)
hereof.
(i) The Grantor's principal place of business and the place
where its records concerning the Collateral are kept and the
location of its Inventory and Equipment are set forth on Schedule
II hereto.
(j) The amount represented by the Grantor to the Trustee
from time to time as owing by each Account Debtor or by all
Account Debtors in respect of the Accounts of the Grantor will at
such time be the correct amount actually and unconditionally
owing by such Account Debtors thereunder.
6. Covenants. The Grantor covenants and agrees with the
---------
Trustee that from and after the date of this Agreement and until the
obligations under the Securities are fully satisfied:
(a) Maintenance of Records. The Grantor will keep and
----------------------
maintain at its own cost and expense satisfactory and complete
records of the Collateral, including, without limitation, a
record of all payments received and all credits granted with
respect to the Collateral and all other dealings with the
Collateral. The Grantor will mark its books and records
pertaining to the Collateral to evidence this Agreement and the
Lien and security interests granted hereby. For the Trustee's
and the Holders' further security, the Grantor agrees that the
Trustee and the Holders shall have a special property interest in
all of the Grantor's books and records pertaining to the
Collateral and, subject to the provisions of Section 3 hereof,
upon the occurrence and during the continuance of any Event of
Default, the Grantor shall deliver and turn over any such books
and records to the Trustee or to its representatives at any time
on demand of the Trustee. Prior to the occurrence of an Event of
Default and upon
B-11
<PAGE>
reasonable notice from the Trustee, the Grantor shall permit any
representative of the Trustee to inspect such books and records
and will provide photocopies thereof to the Trustee.
(b) Indemnification. In any suit, proceeding or action
---------------
brought by the Trustee or any Holder relating to any Account,
Chattel Paper, Contract, General Intangible or Instrument for any
sum owing thereunder, or to enforce any provision of any Account,
Chattel Paper, Contract, General Intangible or Instrument, the
Grantor will save, indemnify and keep each of the Trustee and the
Holders harmless from and against all expense, loss or damage
suffered by reason of any defense, set-off, counterclaim,
recoupment or reduction of liability whatsoever of the obligor
thereunder, arising out of a breach by the Grantor of any
obligation thereunder or arising out of any other agreement,
Indebtedness or liability at any time owing to, or in favor of,
such obligor or its successors from the Grantor, and all such
obligations of the Grantor shall be and remain enforceable
against and only against the Grantor and shall not be enforceable
against the Trustee or the Holders.
(c) Compliance with Laws, Etc. The Grantor will comply, in
-------------------------
all material respects, with all acts, rules, regulations, orders,
decrees and directions of any governmental authority, applicable
to the Collateral or any part thereof or to the operation of the
Grantor's business; provided, however, that the Grantor may
-------- -------
contest any act, regulation, order, decree or direction in any
reasonable manner which shall not, in the sole opinion of the
Trustee, adversely affect the Trustee's rights hereunder or
adversely affect its Lien on and security interest in the
Collateral.
(d) Payment. The Grantor will pay promptly when due all
-------
taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of its income or profits
therefrom and all claims of any kind (including, without
limitation, claims for labor, materials and supplies), except
that no such charge need be paid if (i) such non-payment does not
involve any danger of the sale, forfeiture or loss of any of the
Collateral or any interest therein, and (ii) such charge is
adequately reserved against in accordance with and to the extent
required by generally accepted accounting principles.
(e) Compliance with Terms of Accounts, Etc. In all material
--------------------------------------
respects, the Grantor will comply with and perform with all
obligations, covenants, conditions and agreements with respect to
any Account, Chattel Paper or Contract and all other agreements
to which it is a party or by which it is bound.
B-12
<PAGE>
(f) Limitation on Liens on Collateral. The Grantor will not
---------------------------------
create, permit or suffer to exist, and will defend the Collateral
against and take such other action as is necessary to remove, any
Lien on the Collateral except Permitted Liens, and will defend
the right, title and interest of the Trustee and the Holders in
and to any of the Grantor's rights under the Contracts, Chattel
Paper, General Intangibles, Equipment, Documents, Instruments,
and Inventory and in and to the Proceeds thereof against the
claims and demands of all Persons whomsoever.
(g) Maintenance of Insurance. The Grantor will maintain,
------------------------
with financially sound and reputable companies, insurance
policies (i) insuring its Inventory and Equipment against loss by
fire, explosion, theft and such other casualties as are usually
insured against by companies engaged in the same or similar
businesses and (ii) insuring the Grantor and the Trustee and the
Holders against liability for personal injury and property damage
relating to such Inventory and Equipment, such policies to be in
such amounts and against at least such risks as are usually
insured against in the same general area by companies engaged in
the same or a similar business, naming the Trustee, subject to
the Senior Lien, as an additional insured with a lender loss
payable clause in favor of the Trustee on behalf and for the
ratable benefit of the Holders. The Grantor shall, if so
requested by the Trustee, deliver to the Trustee as often as the
Trustee may reasonably request, a report of a reputable insurance
broker satisfactory to the Trustee with respect to the insurance
on its Inventory and Equipment. All insurance with respect to
the Inventory and Equipment shall (i) contain a clause which
provides that the Secured Parties' interest under the policy will
not be invalidated by any act or omission of, or any breach of
warranty by, the insured, or by any change in the title,
ownership or possession of the insured property, or by the use of
the property for purposes more hazardous than is permitted in the
policy, and (ii) provide that no cancellation, reduction in
amount or change in coverage thereof shall be effective until at
least ten days after receipt by the Trustee of written notice
thereof.
(h) Limitations on Disposition. The Grantor will not sell,
--------------------------
lease, transfer or otherwise dispose of any of the Collateral, or
attempt or contract to do so, except as permitted by the
Indenture.
(i) Further Identification of Collateral. The Grantor will,
------------------------------------
if so requested by the Trustee, furnish to the Trustee, as often
as the Trustee reasonably requests, statements and schedules
further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Trustee may
reasonably request, all in reasonable detail.
B-13
<PAGE>
(j) Right of Inspection. Upon reasonable notice to the
-------------------
Grantor (unless an Event of Default has occurred and is
continuing, in which case no notice is necessary), the Trustee
shall at all times have full and free access during normal
business hours to all the books and records and correspondence of
the Grantor, and the Trustee or its representatives may examine
the same, take extracts therefrom and make photocopies thereof,
and the Grantor agrees to render to the Trustee, at the Grantor's
cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto. Upon reasonable notice
to the Grantor (unless an Event of Default has occurred and is
continuing, in which case no notice is necessary) but subject to
the provisions of Section 3 hereof, the Trustee and its
representatives shall also have the right to enter into and upon
any premises where any of the Inventory and Equipment is located
for the purpose of inspecting the same, observing its use or
otherwise protecting its interests therein.
(k) Maintenance of Equipment. The Grantor will keep and
------------------------
maintain the Equipment in good operating condition sufficient for
the continuation of the business conducted by the Grantor on a
basis consistent with past practices, and the Grantor will
provide all maintenance and service and all repairs necessary for
such purpose.
(l) Continuous Perfection. The Grantor will not change its
---------------------
name, identity or corporate structure in any manner which might
make any financing or continuation statement filed in connection
herewith seriously misleading within the meaning of Section
9-402(7) of the UCC (or any other then applicable provision of
the UCC) unless the Grantor shall have given the Trustee at least
30 days' prior written notice thereof and shall have taken all
action (or made arrangements to take such action substantially
simultaneously with such change if it is impossible to take such
action in advance) necessary or reasonably requested by the
Trustee to amend such financing statement or continuation state-
ment so that it is not seriously misleading. The Grantor will
not change its principal place of business or remove its records
or change the location of its Inventory and Equipment, each as
set forth on Schedule II hereto, unless it gives the Trustee at
least 30 days' prior written notice thereof and has taken such
action as is necessary to cause the security interest of the
Trustee in the Collateral to continue to be perfected.
(m) Collateral Perfection. The Grantor shall not be
---------------------
required to file UCC financing statements or their equivalents in
any jurisdiction (i) outside of the United States, (ii) where the
value of Collateral located in such jurisdiction is less than
$100,000 or (iii) if the Grantor would incur any recording fees
or taxes in connection with any such filing other than nominal
fees or taxes. The Grantor shall be only
B-14
<PAGE>
required to use commercially reasonable efforts in obtaining
waivers from third-party bailees.
7. The Trustee's Appointment as Attorney-in-Fact. (a)
---------------------------------------------
Subject to the provisions of Section 3 hereof,
(i) the Grantor hereby irrevocably constitutes and
appoints the Trustee and any officer or agent thereof, 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 the Grantor and in the name of the
Grantor or in its own name, from time to time in the
Trustee's discretion, for the purpose of carrying out the
terms of this Agreement, to take any and all appropriate
action and to execute and deliver any and all documents and
instruments which the Trustee may deem necessary or
desirable to accomplish the purposes of this Agreement and,
without limiting the generality of the foregoing, hereby
gives the Trustee the power and right, on behalf of the
Grantor, without notice to or assent by the Grantor to do
the following:
(ii) to ask, demand, collect, receive and give
acquittances and receipts for any and all moneys due and to
become due under any Collateral and, in the name of the
Grantor or in its own name or otherwise, to take possession
of and endorse and collect any checks, drafts, notes,
acceptances or other Instruments for the payment of moneys
due under any Collateral and to file any claim or to take
any other action or proceeding in any court of law or equity
or otherwise deemed appropriate by the Trustee for the
purpose of collecting any and all such moneys due under any
Collateral whenever payable and to file any claim or to take
any other action or proceeding in any court of law or equity
or otherwise deemed appropriate by the Trustee for the
purpose of collecting any and all such moneys due under any
Collateral whenever payable;
(iii) to pay or discharge taxes, Liens, security
interests or other encumbrances levied or placed on or
threatened against the Collateral, to effect any repairs or
any insurance called for by the terms of this Agreement and
to pay all or any part of the premiums therefor and the
costs thereof; and
(iv) (A) to direct any party liable for any payment
under any of the Collateral to make payment of any and all
moneys due, and to become due thereunder, directly to the
Trustee or as the Trustee shall direct; (B) to
B-15
<PAGE>
receive payment of and receipt for any and all moneys,
claims and other amounts due, and to become due at any time,
in respect of or arising out of any Collateral; (C) to sign
and indorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in
connection with Accounts and other Documents constituting or
relating to the Collateral; (D) to commence and prosecute
any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or
any part thereof and to enforce any other right in respect
of any Collateral; (E) to defend any suit, action or
proceeding brought against the Grantor with respect to any
Collateral; (F) to settle, compromise or adjust any suit,
action or proceeding described above and, in connection
therewith, to give such discharges or releases as the
Trustee may deem appropriate; (G) to license or, to the
extent permitted by an applicable license, sublicense,
whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any patent or trademark,
throughout the world for such term or terms, on such
conditions, and in such manner, as the Trustee shall in its
sole discretion determine; and (H) generally to sell,
transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and
completely as though the Trustee were the absolute owner
thereof for all purposes, and to do, at the Trustee's option
and the Grantor's expense, at any time, or from time to
time, all acts and things which the Trustee reasonably deems
necessary to protect, preserve or realize upon the
Collateral and the Trustee's and the Holders' Lien therein,
in order to effect the intent of this Agreement, all as
fully and effectively as the Grantor might do.
(b) The Trustee agrees that, except upon the occurrence and
during the continuance of any Event of Default but subject to the
provisions of Section 3 hereof, it will forbear from exercising
the power of attorney or any rights granted to the Trustee
pursuant to this Section 7. The Grantor hereby ratifies, to the
extent permitted by law, all that any said attorney shall
lawfully do or cause to be done by virtue hereof. The power of
attorney granted pursuant to this Section 7, being coupled with
an interest, shall be irrevocable until the Securities are
indefeasibly paid in full.
(c) The powers conferred on the Trustee hereunder are solely
to protect the Trustee's and the Holders' interests in the
Collateral and shall not impose any duty upon it to exercise any
such powers. The Trustee shall be accountable only for amounts
that it actually receives as a result of the exercise of such
powers and neither
B-16
<PAGE>
it nor any of its officers, directors, employees or agents shall
be responsible to the Grantor for any act or failure to act,
except for its own gross negligence or willful misconduct.
(d) Subject to the provisions of Section 3 hereof, the
Grantor also authorizes the Trustee, at any time and from time to
time upon the occurrence and during the continuance of an Event
of Default, (i) to communicate in its own name with any party to
any Contract with regard to the assignment of the right, title
and interest of the Grantor in and under the Contracts hereunder
and other matters relating thereto and (ii) to execute, in
connection with the sale provided for in Section 9 hereof, any
endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.
8. Performance by the Trustee of the Grantor's
-------------------------------------------
Obligations. If the Grantor fails to perform or comply with any of
-----------
its agreements contained herein and the Trustee, as provided for by
the terms of this Agreement, shall itself perform or comply, or
otherwise cause performance or compliance, with such agreement, the
reasonable expenses of the Trustee incurred in connection with such
performance or compliance, shall be payable by the Grantor to the
Trustee on demand and shall constitute obligations secured hereby.
9. Remedies, Rights Upon an Event of Default.
-----------------------------------------
(a) If any Event of Default shall occur and be continuing,
the Trustee shall, subject to the provisions of Section 3 hereof
and the Indenture, at the request of the Holders of at least 25%
of the aggregate principal amount of the outstanding Securities,
or may with the consent of the Holders of a majority in principal
amount of the outstanding Securities, exercise in addition to all
other rights and remedies granted to it in this Agreement, the
Indenture or any other instrument or agreement securing,
evidencing or relating to the Securities, all rights and remedies
of a secured party under the UCC. Without limiting the
generality of the foregoing, the Grantor expressly agrees that in
any such event the Trustee, without demand of performance or
other demand, advertisement or notice of any kind (except the
notice specified below of time and place of public or private
sale) to or upon the Grantor or any other Person (all and each of
which demands, advertisements and/or notices are hereby expressly
waived to the maximum extent permitted by the UCC and other
applicable law) but subject to the provisions of Section 3
hereof, may forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith
sell, lease, assign, give an option or options to purchase, or
sell or otherwise dispose of and deliver said Collateral (or
contract to do so), or any part thereof, in one or
B-17
<PAGE>
more parcels at public or private sale or sales, at any exchange
or broker's board or any of the Trustee's offices or elsewhere at
such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. The
Trustee or any Holder shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of said
Collateral so sold, free of any right or equity of redemption,
which equity of redemption the Grantor hereby releases. The
Grantor further agrees, at the Trustee's request to assemble the
Collateral and make it available to the Trustee at places which
the Trustee shall reasonably select, whether at the Grantor's
premises or elsewhere. Subject to the provisions of Section 3
hereof, the Trustee shall apply the net proceeds of any such
collection, recovery receipt, appropriation, realization or sale,
as provided in Section 9(d) hereof, with the Grantor remaining
liable for any deficiency remaining unpaid after such
application, and only after so paying over such net proceeds and
after the payment by the Trustee of any other amount required by
any provision of law, including Section 9-504(1)(c) of the UCC,
need the Trustee to account for the surplus, if any, to the
Grantor. To the maximum extent permitted by applicable law, the
Grantor waives all claims, damages, and demands against the
Secured Parties arising out of the repossession, retention or
sale of the Collateral. The Grantor agrees that the Trustee need
not give more that ten days' notice of the time and place of any
public sale or of the time after which a private sale may take
place and that such notice is reasonable notification of such
matters. The Grantor shall remain liable for any deficiency if
the proceeds of any sale or disposition of the Collateral are
insufficient to pay all amounts to which the Secured Parties are
entitled, the Grantor also being liable for the reasonable fees
and expenses of any attorneys employed by the Trustee and the
Holders to collect such deficiency.
(b) The Grantor also agrees to pay all reasonable costs of
the Trustee and the Holders, including, without limitation,
reasonable attorneys' fees, incurred in connection with the
enforcement of any of its rights and remedies hereunder.
(c) The Grantor hereby waives presentment, demand, protest
or any notice (to the maximum extent permitted by applicable law)
of any kind in connection with this Agreement or any Collateral.
(d) After the termination and release of the Senior Lien and
subject to the provisions of Section 3 hereof, the Proceeds of
any sale, disposition or other realization upon all or any part
of the Collateral shall be distributed by the Trustee in the
following order of priorities:
B-18
<PAGE>
First, to the payment of the reasonable costs and expenses
of such sale, including, without limitation, reasonable expenses
of the Trustee and its agents including the reasonable fees and
expenses of its counsel, all reasonable expenses, liabilities and
advances made or incurred by the Trustee and the Holders in
connection therewith or pursuant to Section 8 hereof and all
other amounts to which the Trustee may be entitled under Section
8.07 of the Indenture;
Second, to the Holders pro rata for the payment in full of
the Securities; and
Finally, after payment in full of all the Securities, to the
payment of the Grantor, or its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same as a
court of competent jurisdiction may direct.
10. Limitation on the Secured Parties' Duty in Respect of
-----------------------------------------------------
Collateral. No Secured Party shall have any duty as to any Collateral
----------
in its possession or control or in the possession or control of any
agent or nominee of it or any income thereon or as to the preservation
of rights against prior parties or any other rights pertaining
thereto, except that each Secured Party shall use reasonable care with
respect to the Collateral in its possession or under its control.
Upon request of the Grantor, the Trustee shall account for any moneys
received by it in respect of any foreclosure on or disposition of the
Collateral.
11. Security Interest Absolute. All rights of the Trustee
--------------------------
and security interests hereunder, and all obligations of the Grantor
hereunder, shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of any
provision of the Indenture, the Securities or any other
Transaction Document or any other agreement or instrument
relating thereto;
(ii) any change in the time, manner or place of payment
of, or in any other term of, or any increase in the amount
of, all or any of the Securities, or any other amendment or
waiver of any term of, or any consent to any departure from
any requirement of, the Indenture, the Securities or any
other Transaction Document;
(iii) any exchange, release or non-perfection of any Lien
on any other collateral, or any release or amendment or
waiver of any term of any guaranty of, or consent to
departure from any requirement of any guaranty of, all or
any of the Securities; or
B-19
<PAGE>
(iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, a
borrower or a pledgor.
12. Continuing Security Interest. This Agreement shall
----------------------------
create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until payment in full of the
Securities, (ii) be binding upon the Grantor, its successors and
assigns, and (iii) inure, together with the rights and remedies of the
Trustee and the Holders hereunder, to the benefit of and be
enforceable by the Secured Parties and their respective successors,
transferees and assigns. At such time as no Securities are
outstanding, the Grantor shall be entitled to the return, upon its
request and at its expense, of such of the Collateral as shall not
have been sold or otherwise applied pursuant to the terms hereof.
13. Notices. All notices and other communications
-------
provided for hereunder shall be in writing (including telegraphic,
telex, telecopy, or cable communication) and certified mailed,
telegraphed, telexed, telecopied, cabled or delivered by hand, if to
the Grantor or the Trustee, addressed to it as provided in the
Indenture, or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party
complying as to delivery with the terms of this Section 11. All such
notices and other communications shall, when certified mailed,
telegraphed, telexed, telecopied, cabled or delivered, be effective
three Business Days after being deposited in the mails, or when
delivered to the telegraph company, confirmed by telex answerback,
telecopied with automatic confirmation of receipt, delivered to the
cable company, or delivered by hand to the addressee or its agent,
respectively.
14. Amendments, Etc. No amendment or waiver of any
---------------
provision of this Agreement nor consent to any departure by the
Grantor therefrom shall in any event be effective unless the same
shall be in writing, approved by the Holders of a majority in
principal amount of the outstanding Securities (except as otherwise
provided under Section 10.02 of the Indenture) and signed by the
Trustee, and then any such waiver or consent shall only be effective
in the specific instance and for the specific purpose for which given.
15. No Waiver; Remedies. (a) No failure on the part of any
-------------------
Secured Party to exercise, and no delay in exercising any right here-
under shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative, may be exercised singly or
concurrently, and are not exclusive of any remedies provided by law or
any other Transaction Document.
B-20
<PAGE>
(b) Failure by any of the Secured Parties at any time or
times hereafter to require strict performance by the Grantor or any
other Person of any of the provisions, warranties, terms or conditions
contained in any Transaction Document now or at any time or times
hereafter executed by the Grantor or any such other Person and
delivered to any of the Secured Parties shall not waive, affect or
diminish any right of any of the Secured Parties at any time or times
hereafter to demand strict performance thereof, and such right shall
not be deemed to have been modified or waived by any course of conduct
or knowledge of any of the Secured Parties, or any agent, officer or
employee of any Secured Party.
16. Successors and Assigns. This Agreement and all
----------------------
obligations of the Grantor hereunder shall be binding upon the
successors and assigns of the Grantor, and shall, together with the
rights and remedies of the Trustee hereunder, inure to the benefit of
the Trustee, the Holders, and their respective successors and assigns.
17. Governing Law. This Agreement shall be governed
-------------
by, and be construed and interpreted in accordance with, the law of
the State of New York. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or
invalidity and without invalidating the remaining provisions of this
Agreement.
18. Waiver of Jury Trial. The Grantor waives any right
--------------------
it may have to trial by jury in any action or proceeding to enforce or
defend any rights or remedies hereunder, under the Indenture or under
any of the other Transaction Documents or any other document relating
to any of the foregoing.
19. Further Indemnification. The Grantor agrees to pay,
-----------------------
and to hold the Trustee and each Holder harmless from, any and all
liabilities with respect to, or resulting from any delay in paying,
any and all excise, sales or other similar taxes which may be payable
or determined to be payable with respect to any of the Collateral or
in connection with any of the transactions contemplated by this
Agreement.
20. Section Titles. The Section titles contained in this
--------------
Agreement are and shall be without substantive meaning or content of
any kind whatsoever and are not a part of this Agreement.
B-21
<PAGE>
IN WITNESS WHEREOF, The Grantor has caused this Agreement to
be executed and delivered by its duly authorized officer on the date
first above written.
METALLURG, INC.
By:
------------------------------------
Name:
Title:
Accepted and acknowledged by:
IBJ Schroder Bank & Trust Company, as Trustee
By:
---------------------------------
Name:
Title:
B-22
<PAGE>
SCHEDULE I TO SECURITY AGREEMENT
FILINGS
-------
JURISDICTION FILING OFFICE
------------ -------------
<PAGE>
SCHEDULE II
SCHEDULE II TO SECURITY AGREEMENT
LOCATION OF RECORDS AND CERTAIN COLLATERAL
------------------------------------------
Principal Place of
Business and
Location of Records
-------------------
Location of
Inventory
and Equipment
-------------
<PAGE>
EXHIBIT C
FORM OF
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated [April 2,] 1997, made by Metallurg, Inc., a
New York corporation (the "Pledgor"), and IBJ Schroder Bank & Trust Company, a
banking corporation duly organized and existing under the laws of the State of
New York, as trustee (the "Trustee"), acting on behalf of the holders (the
"Holders" and together with the Trustee, the "Secured Parties") of the senior
secured notes due 2007 of the Pledgor (the "Securities").
W I T N E S S E T H:
WHEREAS, pursuant to the Indenture, dated as of [April 2,] 1997,
between the Pledgor, Shieldalloy Metallurgical Corporation, a New York
corporation and direct, wholly owned subsidiary of the Pledgor ("SMC"), and the
Trustee (said Indenture, as it may be amended, supplemented or otherwise
modified from time to time, being the "Indenture"), the Securities were issued
to the Holders;
WHEREAS, pursuant to the terms of Section 11.01 of the Indenture,
the Pledgor has agreed to grant the security interests contemplated herein;
WHEREAS, the Pledgor is the legal and beneficial owner of the shares
of capital stock described in Schedule I hereto and issued by the issuers named
therein (the "Pledged Shares");
WHEREAS, to secure the Specified Indebtedness, the Pledgor has
granted a security interest (the "Senior Pledge") in the Collateral (as
hereinafter defined) pursuant to the pledge agreement, dated [April 2,] 1997,
in favor of the Working Capital Agent, as agent for the Working Capital Lenders
(the "WCCF Pledge Agreement");
WHEREAS, the Senior Pledge is to be senior and prior to the Lien
created hereby in favor of the Trustee; and
NOW, THEREFORE, in consideration of the premises, the parties hereto
hereby mutually agree:
<PAGE>
SECTION 1. Defined Terms. Capitalized terms used herein and not
otherwise defined herein have the meanings ascribed to them in the Indenture.
SECTION 2. Pledge. (a) The Pledgor hereby pledges to the Trustee on
behalf and for the ratable benefit of the Holders and grants to the Trustee on
behalf and for the ratable benefit of the Holders a security interest in the
following (all of which being hereinafter collectively referred to as the
"Pledged Collateral"), which security interest shall be junior and subordinated
to the Senior Pledge as provided in Section 6 hereof:
(i) all of the Pledged Shares;
(ii) all additional shares of stock or other securities of SMC
from time to time acquired by the Pledgor in any manner and
all shares of stock or other securities of any Person who,
after the date of this Agreement, becomes, as a result of any
occurrence, a Significant Subsidiary of the Borrower;
provided, however, that there are no other Liens (other than a
Lien in favor of the Working Capital Lenders) on the shares of
such Significant Subsidiary (any such shares being "Additional
Pledged Shares");
(iii) the certificates representing the shares referred to in
clauses (i) and (ii) above; and
(iv) all dividends, cash, instruments and other property or
proceeds, from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the
foregoing.
provided, however, that nothing herein shall require the Pledgor to pledge any
shares or any Additional Pledged Shares to the extent such pledge is not
permitted by law.
SECTION 3. Security Interest. This Agreement secures and the Pledged
Collateral is security for the full and prompt payment when due (whether at
stated maturity, by acceleration or otherwise) of the Securities.
SECTION 4. Delivery of Pledged Collateral. As long as the Senior
Pledge shall not have been terminated or released with respect thereto, all
certificates or instruments representing or evidencing the Pledged Collateral
shall be delivered to, and held on behalf of the Trustee, by the Working Capital
Agent pursuant to Section 7 hereof and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank. Upon the termination and the release of the Senior
2
<PAGE>
Pledge but subject to the provisions of Section 6 hereof, the Working Capital
Agent shall deliver to the Trustee such Pledged Collateral (including all
instruments of transfer and assignment) in its possession or otherwise held
pursuant to this Agreement, except to the extent that the Working Capital Agent
on behalf of the Working Capital Lenders has retained, otherwise acquired, sold
or otherwise disposed of the Pledged Collateral in full or partial satisfaction
of the Senior Pledge.
SECTION 5. Representations and Warranties. The Pledgor represents
and warrants to the Trustee for the benefit of the Holders:
(a) The Pledged Shares (i) have been duly authorized and validly
issued; (ii) are fully paid and non-assessable; (iii) the Pledged Shares issued
by the Issuers listed in Part A of Schedule I constitute 100% of the issued and
outstanding shares of stock of such Issuer and (iv) the Pledged Shares issued by
the Issuers listed in Part B of Schedule I constitute at least 65% of the issued
and outstanding shares of stock of such Issuer.
(b) The Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any Lien, except for the Lien created by this
Agreement and the Senior Pledge.
(c) The pledge of the Pledged Shares and Additional Pledged Shares
pursuant to this Agreement creates a valid and perfected security interest in
the Pledged Collateral, in favor of the Trustee on behalf and for the ratable
benefit of the Holders securing the payment of all of the Securities.
(d) No consent, authorization, approval, or other action by, and no
notice to or filing with, any governmental authority is required either (i) for
the pledge by the Pledgor of the Pledged Collateral pursuant to this Agreement
or for the due execution, delivery or performance of this Agreement by the
Pledgor, or (ii) for the exercise by the Trustee of the voting or other rights
provided for in this Agreement or of the remedies in respect of the Pledged
Collateral pursuant to this Agreement, except as may be required in connection
with the disposition of the Pledged Collateral by laws affecting the offering
and sale of securities generally.
(e) The execution, delivery and performance by the Pledgor of this
Agreement are within the Pledgor's corporate powers, have been duly authorized
by all necessary corporate action, do not contravene the Pledgor's certificate
of incorporation or by-laws, any requirement of law, any order or decree of any
court applicable to the Pledgor or any contractual obligation of the Pledgor.
3
<PAGE>
(f) There are no pending or, to the Pledgor's knowledge, threatened
actions, investigations or proceedings affecting the Pledgor or any of its
Subsidiaries before any court, governmental authority or arbitrator other than
those that in the aggregate have no reasonable likelihood of having a material
adverse effect on the rights or remedies of the Holders or the ability of the
Pledgor to perform its obligations hereunder.
SECTION 6. Subordination to the Senior Pledge. (a) The Secured
Parties hereby expressly agree as follows:
(i) that notwithstanding the date, manner (including, without
limitation, the Liens on the Pledged Collateral) granted to the
Secured Parties or of any Liens granted to the Working Capital
Agent, for the benefit of the Working Capital Lenders, and
notwithstanding any provision of the Uniform Commercial Code (the
"UCC") in effect in the State of New York at that time, or any
applicable law or decision or any other Transaction Document or the
Working Capital Credit Facility or any other circumstances
whatsoever, each Secured Party hereby agrees that
(A) the Working Capital Agent, for the benefit of the
Working Capital Lenders, shall have a senior and prior Lien on
and security interest in the Pledged Collateral and all
proceeds thereof to secure the claims of such holders; and
(B) any Lien in the Pledged Collateral now or hereafter
held by the Secured Parties regardless of how acquired,
whether by grant, statute, operation of law, subrogation or
otherwise, shall be junior and subordinate in all respects to
all Liens in the Pledged Collateral securing Specified
Indebtedness; and
(C) all Liens securing Specified Indebtedness shall be
and remain senior to all Liens securing the Securities for all
purposes, whether or not such Liens securing Specified
Indebtedness are subordinated to any Lien securing any other
obligations of the Pledgor;
(ii) neither the Trustee nor any Holder shall contest or
support any other Person in contesting, in any action or proceeding
or otherwise (including, without limitation, any Insolvency or
Liquidation Proceeding (as defined in the Security Agreement)), the
validity or enforceability of the Specified Indebtedness or the
perfection or priority of any Lien securing
4
<PAGE>
Specified Indebtedness held by the Working Capital Agent or the
Working Capital Lenders;
(iii) neither the Trustee nor any Holder shall take or receive
from or on behalf of the Pledgor directly or indirectly, in cash or
other property or by setoff, counterclaim or in any manner (whether
pursuant to any enforcement, collection, execution, levy or
foreclosure proceeding or otherwise) any Pledged Collateral or any
proceeds of Pledged Collateral, unless and until all Specified
Indebtedness shall have been paid in full in cash, provided,
however, that nothing herein shall preclude the Pledgor from making
the payments in respect of the Securities required by the terms
thereof;
(iv) unless and until the Specified Indebtedness has been paid
in full in cash, neither the Trustee nor any Holder shall assert any
remedy in respect of the Pledged Collateral or any Lien therein held
by the Trustee on behalf and for the ratable benefit of the Holders
(including, without limitation, under or in respect of the
Transaction Documents); and
(v) unless and until all Specified Indebtedness has been paid
in full in cash, neither the Trustee nor any Holder will commence,
or join with any Person (other than the Working Capital Lenders and
the Working Capital Agent) in commencing any enforcement,
collection, execution, levy or foreclosure proceeding or otherwise
in respect of the Pledged Collateral or any Lien therein granted
under any Transaction Document or otherwise.
(b) Any proceeds of the Pledged Collateral received by the Trustee
or any Holder in contravention of this Section 6 and, if applicable, any sums
received by the Trustee under Section 507(b) of the federal Bankruptcy Law shall
be segregated and held in trust and forthwith paid over to the Working Capital
Agent for the benefit of the Working Capital Lenders in the same form received,
with any necessary endorsements or as a court of competent jurisdiction may
otherwise direct.
(c) The Pledgor may sell, lease, exchange, transfer or otherwise
dispose of Pledged Collateral pursuant to the provisions of Section 11.04(b) and
Section 11.03(c) of the Indenture without requesting the release or consent of
the Trustee, as provided more fully in the Indenture. In connection with any
sale, lease, exchange, transfer or other disposition of any Pledged Collateral
pursuant to Section 11.04(a) of the Indenture, in which the Liens of the Working
Capital Lenders are released and the Company delivers the certificate or opinion
required by Section 314(d)(1) of the TIA, the Liens thereon of the Secured
Parties shall be automatically, unconditionally and simultaneously released and
the Trustee shall execute and
5
<PAGE>
deliver to the Working Capital Agent or the Pledgor such termination statements,
releases and other documents as the Working Capital Agent or the Pledgor may
request to effectively confirm such release. Notwithstanding the foregoing, a
SMC Reincorporation Merger shall not be deemed to be a sale, lease, exchange,
transfer or other disposition of Pledged Collateral for purposes of this
Agreement and the Indenture; provided, however, that the provisions of Article 6
of the Indenture are satisfied with respect thereto.
(d) Each Secured Party hereby waives any and all rights it may have
to object to the manner in which the Working Capital Agent or the Working
Capital Lenders seek to enforce or collect the Specified Indebtedness or the
Liens granted in any of the Pledged Collateral, including waiving any right
based on any duty to conduct any such sale, lease, exchange, transfer or other
disposition in a commercially reasonable manner.
(e) If at any time any payment made or value received with respect
to any Specified Indebtedness is rescinded or must otherwise be returned by the
Working Capital Agent or any Working Capital Lender upon the insolvency,
bankruptcy, or reorganization of the Pledgor, or otherwise, then (i) to the
extent necessary to repay in full in cash the Specified Indebtedness, the
Trustee will, upon written demand by the Working Capital Agent, deliver to the
Working Capital Agent any property or funds previously received by the Trustee
with respect to the Collateral and then held by the Trustee and (ii) to the
extent previously terminated, the Senior Pledge and the other rights and
priorities in favor of the Working Capital Agent and the Working Capital Lenders
under this Section 6 shall be reinstated as though such payment had not been
made or value received.
(f) The provisions of this Section 6 are and are intended solely for
the purpose of defining the relative rights of the Holders of the Securities on
the one hand and the Working Capital Lenders on the other hand. Nothing
contained in this Section 6 or any other Transaction Document is intended to or
shall (i) impair, as among the Pledgor, its creditors (other than the Working
Capital Lenders) and the Secured Parties, the obligation of the Pledgor, which
is absolute and unconditional, to pay to the Secured Parties the principal of
and interest on, and any other amount payable by the Pledgor under the
Transaction Documents as and when the same shall become due and payable in
accordance with its terms; or (ii) affect the relative rights of the Secured
Parties against the Pledgor and its creditors (other than the Working Capital
Lenders); or (iii) prevent the Secured Parties from accelerating the Securities
and the Trustee commencing any action to enforce or collect any payments
theretofore due under the Indenture or the Securities, provided that the Trustee
may not take action to foreclose or otherwise realize on the Pledged Collateral
if any Specified Indebtedness is then outstanding in contravention of this
Section 6. If any provision of this Agreement (including, without limitation,
this Section 6) conflicts with the duties imposed by the provisions of the TIA,
to the extent applicable, the TIA controls except to the extent that the TIA
permits such provisions to be modified by contract and except to the extent of
any exemption with respect thereto granted by the SEC.
6
<PAGE>
SECTION 7. Agent for Perfection. (a) The Secured Parties hereby
appoint the Working Capital Agent as their agent to hold the Pledged Collateral,
including the certificates evidencing the Pledged Shares and the Additional
Pledged Shares, if any, for the limited purpose of perfecting the security
interest created by this Agreement, and the Working Capital Agent by its counter
signature hereof, hereby accepts such appointment and acknowledges that it holds
the Pledged Collateral, including the certificates evidencing the Pledged Shares
and the Additional Pledged Shares, if any, that are in its possession pursuant
to the Senior Pledge and as agent for the Secured Parties hereunder. The Secured
Parties agree that the Working Capital Agent shall not have any obligation to
the Secured Parties in holding the Pledged Collateral, including the
certificates representing the Pledged Shares and the Additional Pledged Shares,
if any, as their agent hereunder except to exercise the same care in respect of
such Pledged Collateral as it exercises in holding such Pledged Collateral for
the benefit of the Working Capital Lenders pursuant to the WCCF Pledge
Agreement, and that the Working Capital Agent shall not be liable to the Trustee
or the Secured Parties for any loss, costs, or damages which may result from any
act or omission on its part in holding such certificates or instruments, unless
caused by the Working Capital Agent's gross negligence or willful misconduct.
The Working Capital Agent acknowledges and agrees that notwithstanding its
appointment as agent for the Secured Parties to hold the Pledged Collateral on
behalf of the Secured Parties, the Working Capital Agent shall have no right or
authorization to take any action on behalf, or in the name, of any Secured Party
with respect to the Pledged Collateral, without the prior written consent of the
Trustee and Holders of at least a majority in principal amount of the
outstanding Securities.
(b) The Working Capital Agent hereby agrees that, upon termination
and release of the Senior Pledge (prior to the indefeasible payment in full of
the Securities) but subject to the provisions of Section 6 hereof, the Working
Capital Agent shall deliver to the Trustee all Pledged Collateral in its
possession, except to the extent that the Working Capital Agent and the Working
Capital Lenders have retained, or otherwise acquired, sold or otherwise disposed
of the Pledged Collateral in full or partial satisfaction of the Senior Pledge.
SECTION 8. Further Assurances, Etc. (a) The Pledgor agrees that at
any time and from time to time, at the cost and expense of the Pledgor, the
Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that the
Trustee may request, in order to perfect and protect the Lien granted or
purported to be granted hereby or to enable the Trustee to exercise and enforce
its rights and remedies hereunder with respect to any Pledged Collateral.
7
<PAGE>
(b) The Pledgor agrees to defend the title to the Pledged Collateral
and the Lien thereon of the Trustee against the claim of any other Person and to
maintain and preserve such Lien until indefeasible payment in full of all of the
Securities.
SECTION 9. Voting Rights; Dividends; Etc.
(a) As long as no Event of Default shall have occurred and be
continuing (or, in the case of subsection (a)(i) of this Section 9, as long as
no notice thereof shall have been given by the Trustee to the Pledgor) but
subject to the terms of the Senior Pledge:
(i) The Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Pledged
Collateral or any part thereof.
(ii) The Pledgor shall be entitled to receive and retain any
and all dividends paid in respect of the Pledged Collateral, other
than any and all
(A) dividends paid or payable other than in cash in
respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in
cash in respect of any Pledged Shares or Additional Pledged
Shares in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital,
capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Collateral,
all of which, as long as the Senior Pledge shall not have been
terminated and released, the Pledgor shall forthwith deliver to the
Working Capital Agent to be applied to the Working Capital Credit
Facility or to be held as part of the Senior Pledge as provided
therein. Upon the termination and the release of the Senior Pledge,
such property or funds shall thereafter be delivered to the Trustee
to hold as Pledged Collateral and shall, if received by the Pledgor,
be received in trust for the benefit of the Trustee, be segregated
from the other property or funds of the Pledgor, and be forthwith
delivered to the Trustee as Pledged Collateral in the same form as
so received (with any necessary indorsement).
8
<PAGE>
(iii) The Trustee shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and other rights which
it is entitled to exercise pursuant to paragraph (i) above and to
receive the dividends which it is authorized to receive and retain
pursuant to paragraph (ii) above.
(b) Subject to the provisions of Section 6 hereof, upon the
occurrence and during the continuance of an Event of Default:
(i) Upon notice by the Trustee to the Pledgor, all rights of
the Pledgor to exercise the voting and other consensual rights which
it would otherwise be entitled to exercise pursuant to Section
9(a)(i) above shall cease, and all such rights shall thereupon
become vested in the Trustee who shall thereupon have the sole right
to exercise such voting and other consensual rights.
(ii) All rights of the Pledgor to receive the dividends which
it would otherwise be authorized to receive and retain pursuant to
Section 9(a)(ii) above shall cease, and all such rights shall
thereupon become vested in the Trustee who shall thereupon have the
sole right to receive and hold as Pledged Collateral such dividends.
(iii) All dividends which are received by the Pledgor contrary
to the provisions of paragraph (ii) of this Section 9(b) shall be
received in trust for the benefit of the Trustee, shall be
segregated from other funds of the Pledgor and shall be forthwith
paid over to the Trustee as Pledged Collateral in the same form as
so received (with any necessary indorsement).
(iv) The Pledgor shall, if necessary to permit the Trustee to
exercise the voting and other rights which it may be entitled to
exercise pursuant to Section 9(b)(i) above and to receive all
dividends and distributions which it may be entitled to receive
under Section 9(b)(ii) above, execute and deliver to the Trustee,
from time to time and upon written notice of the Trustee,
appropriate proxies, dividend payment orders and other instruments
as the Trustee may reasonably request. The foregoing shall not in
any way limit the Trustee's power and authority granted pursuant to
Section 11 hereof.
9
<PAGE>
SECTION 10. Transfers and Other Liens; Additional Pledged Shares.
(a) The Pledgor agrees that it will not (i) sell or otherwise
dispose of, or grant any option or warrant with respect to, any of the Pledged
Collateral (it being understood that a SMC Reincorporation Merger shall not be
deemed a sale, lease, exchange or other disposition of Pledged Collateral for
purposes of this Agreement and the Indenture; provided, however, that the
provisions of Article 6 of the Indenture are satisfied with respect thereto) or
(ii) create or permit to exist any Lien upon or with respect to any of the
Pledged Collateral, except for the Lien created pursuant to this Agreement, the
Indenture and the Senior Pledge.
(b) The Pledgor agrees that it will (i) cause each issuer of the
Pledged Shares not to issue any shares of stock or other securities in addition
to or in substitution for the Pledged Shares, except to the Pledgor, (ii) pledge
hereunder, immediately upon its acquisition (directly or indirectly) thereof,
but subject to Sections 6 and 7 hereof, any and all Additional Pledged Shares
and (iii) promptly (and in any event within three Business Days) deliver to the
Trustee a Pledge Amendment, duly executed by the Pledgor, in substantially the
form of Schedule III hereto (a "Pledge Amendment"), in respect of the Additional
Pledged Shares, together, subject to the provisions of Sections 6 and 7 hereof,
with all certificates or other instruments representing or evidencing the same
(in form suitable for transfer by delivery or accompanied by duly executed
instruments of transfer or assignment in blank). The Pledgor hereby (i)
authorizes the Trustee to attach each Pledge Amendment to this Pledge Agreement,
(ii) agrees that all Additional Pledged Shares listed on any Pledge Amendment
delivered to the Trustee shall for all purposes hereunder constitute Pledged
Shares and be subject to the provisions of Section 6 hereof, and (iii) is deemed
to have made, upon such delivery, the representations and warranties contained
in Section 5 hereof with respect to such Pledged Collateral.
SECTION 11. Trustee Appointed Attorney-in-Fact and Proxy. Subject to
the provisions of Sections 6 and 7 hereof, the Pledgor hereby irrevocably
constitutes and appoints the Trustee and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact and proxy with
full irrevocable power and authority in the place and stead of the Pledgor and
in the name of the Pledgor or in its own name, from time to time in the
Trustee's discretion, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute and deliver any
and all documents and instruments which the Trustee may deem necessary or
advisable to accomplish the purposes of this Agreement, including, without
limitation, to receive, indorse and collect all instruments made payable to the
Pledgor representing any dividend or other distribution or payment in respect of
the Pledged Collateral or any part thereof, to give full discharge for the same,
and to vote or grant any consent in respect of the Pledged Shares authorized by
Section 9(b) hereof. The Pledgor hereby ratifies, to the extent permitted by
law, all that any said attorney shall lawfully do or cause to be done by virtue
hereof. This power, being coupled with an interest, is irrevocable until the
Securities are paid in full.
10
<PAGE>
SECTION 12. Trustee May Perform. If the Pledgor fails to perform any
agreement contained herein, the Trustee, subject to the provisions of Section 6
hereof, may itself perform, or cause performance of, such agreement, and the
expenses of the Trustee incurred in connection therewith shall be payable by the
Pledgor under Section 15 hereof and constitute obligations secured hereby.
SECTION 13. Reasonable Care. In addition to and not in limitation of
Section 7 hereof, the Trustee shall be deemed to have exercised reasonable care
in the custody and preservation of the Pledged Collateral in its possession if
the Pledged Collateral is accorded treatment substantially equal to that which
the Trustee accords its own property, it being understood that neither the
Trustee nor any other Secured Party shall have responsibility for (i)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Pledged Collateral, whether
or not the Trustee or any other Secured Party has or is deemed to have knowledge
of any such matter, or (ii) taking any necessary steps to preserve rights
against any Person with respect to any Pledged Collateral.
SECTION 14. Remedies upon Default. Subject to the provisions of
Section 6 hereof, if any Event of Default shall have occurred and be continuing:
(a) The Trustee may exercise in respect of the Pledged Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party after default
under the UCC, and the Trustee may also and without notice except as specified
below, 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 office of the
Trustee or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Trustee may deem commercially reasonable. The Pledgor agrees
that, to the extent notice of sale shall be required by law, at least ten days'
notice to the Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
The Trustee shall not be obligated to make any sale of Pledged Collateral
regardless of notice of sale having been given. The Trustee 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. The Pledgor hereby waives any claims
against the Trustee 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 the Trustee
accepts the first offer received and does not offer such Pledged Collateral to
more than one offeree.
11
<PAGE>
(b) If the Trustee shall determine to exercise its right to sell all
or any of the Pledged Collateral pursuant to this Section 14, the Pledgor agrees
that, upon request of the Trustee, the Pledgor will, at its own cost and
expense:
(i) execute and deliver, and use its best efforts to cause
each issuer of the Pledged Shares or the Additional Pledged Shares
and its directors and officers to execute and deliver, all such
instruments and documents, and do or cause to be done all such other
acts and things, as may be necessary or, in the opinion of the
Trustee, necessary or advisable to register such Pledged Shares or
the Additional Pledged Shares under the provisions of the Securities
Act of 1933, as from time to time amended (the "Securities Act"),
and to cause the registration statement relating thereto to become
effective and to remain effective for such period as prospectuses
are required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectus which, in the
opinion of the Trustee, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules
and regulations of the Securities and Exchange Commission ("SEC")
applicable thereto;
(ii) use its best efforts to qualify the Pledged Collateral
under the state securities or "Blue Sky" laws and to obtain all
necessary governmental approvals for the sale of the Pledged
Collateral, as requested by the Trustee;
(iii) make available to its security holders, as soon as
practicable, an earning statement which will satisfy the provisions
of Section 11(a) of the Securities Act; and
(iv) do or cause to be done all such other acts and things as
may be necessary to make such sale of the Pledged Collateral or any
part thereof valid and binding and in compliance with applicable
law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages which would be suffered by the Secured Parties by reason of the failure
by the Pledgor to perform any of the covenants contained in this Section 14 and,
consequently, agrees that, if the Pledgor shall fail to perform any of such
covenants, it shall pay, as liquidated damages and not as a penalty, an amount
equal to the value of the Pledged Collateral on the date the Trustee shall
demand compliance with this Section 14.
(c) The Pledgor recognizes that, by reason of the aforementioned
requirements and certain prohibitions contained in the Securities Act and
applicable state
12
<PAGE>
securities laws, the Trustee may, at its option, elect not to require the
Pledgor to register all or any part of the Pledged Collateral and may therefore
be compelled, with respect to any sale of all or any part of the Pledged
Collateral, to limit purchasers to those who will agree, among other things, to
acquire such securities for their own account, for investment, and not with a
view to the distribution or resale thereof. The Pledgor acknowledges and agrees
that any such sale may result in prices and other terms less favorable to the
seller than if such sale were a public sale without such restrictions and,
notwithstanding such circumstances, agrees that any such sale shall be deemed to
have been made in a commercially reasonable manner. The Trustee shall be under
no obligation to delay the sale of any of the Pledged Collateral for the period
of time necessary to permit the Pledgor to register such securities for public
sale under the Securities Act or under applicable state securities laws, even if
the Pledgor would agree to do so.
(d) If the Trustee determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, the Pledgor shall, from
time to time, furnish to the Trustee all such information as the Trustee may
request in order to determine the number of shares and other instruments
included in the Pledged Collateral which may be sold by the Trustee as exempt
transactions under the Securities Act and rules of the SEC thereunder, as the
same are from time to time in effect.
(e) Subject to the provisions of Section 6 hereof, any cash held by
the Trustee as Pledged Collateral and all cash proceeds received by the Trustee
in respect of any sale of, collection from, or other realization upon all or any
part of the Pledged Collateral shall be applied by the Trustee:
First, to the payment of the reasonable costs and expenses of such
sale, including, without limitation, reasonable expenses of the Trustee and its
agents including the reasonable fees and expenses of its counsel, all reasonable
expenses, liabilities and advances made or incurred by the Trustee in connection
therewith or pursuant to Sections 11 or 15 hereof and all other amounts to which
the Trustee may be entitled under Section 8.07 of the Indenture;
Second, to the Holders, pro rata, for the payment in full of the
Securities; and
Finally, after payment in full of all of the Securities, to the
payment to the Pledgor, or its successors or assigns, or to whomsoever may be
lawfully entitled to receive the same as a court of competent jurisdiction may
direct.
SECTION 15. Expenses. The Pledgor will upon demand pay to the
Trustee the amount of any and all reasonable expenses, including, without
limitation, the reasonable
13
<PAGE>
fees and expenses of the Trustee's counsel and of any experts and agents, which
the Trustee may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, sale of, collection from, or
other realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights and remedies hereunder of the Trustee, the
Working Capital Agent and the Holders, or (iv) the failure by the Pledgor to
perform or observe any of the provisions hereof.
SECTION 16. Security Interest Absolute. All rights of the Trustee
and security interests hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of any provision of
the Indenture, the Securities or any other Transaction Document or
any other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or
in any other term of, or any increase in the amount of, all or any
of the Securities, or any other amendment or waiver of any term of,
or any consent to any departure from any requirement of, the
Indenture, the Securities or any other Transaction Document;
(iii) any exchange, release or non-perfection of any Lien on
any other collateral, or any release or amendment or waiver of any
term of any guaranty of, or consent to departure from any
requirement of any guaranty of, all or any of the Securities; or
(iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, a borrower or a pledgor.
SECTION 17. Amendments, Etc. No amendment or waiver of any provision
of this Agreement nor consent to any departure by the Pledgor herefrom shall in
any event be effective unless the same shall be in writing, approved by the
Holders of a majority in principal amount of the outstanding Securities (except
as otherwise provided under Section 10.02 of the Indenture) and signed by the
Trustee, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 18. Addresses for Notices. All notices, communications and
deliveries required or permitted by this Agreement shall be made in writing
signed by the party making the same, shall specify the Section of this Agreement
pursuant to which it is given or being made, and shall be deemed given or made
(i) on the date delivered if
14
<PAGE>
delivered by telecopy or in person, (ii) on the third business day after it is
mailed if mailed by registered or certified mail (return receipt requested)
(with postage and other fees prepaid), or (iii) on the day after it is
delivered, prepaid, to an overnight express delivery service that confirms to
the sender delivery on such day, as follows:
To the Pledgor:
Metallurg, Inc.
27 East 39th Street
New York, New York 10016
Attn: Eric L. Schondorf, Esq.
Telecopy No.: (212) 481-7124
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: Ronald F. Daitz, Esq.
Telecopy No.: (212) 310-8007
To the Working Capital Agent:
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attn: James J. Ward, Vice President
Telecopy No.: (617) 434-2309
With a copy to:
Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110
Attn: Edwin E. Smith, Esq.
Telecopy No.: (617) 951-8736
15
<PAGE>
To the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attn: Corporate Trust Department
Telecopy No.: (212) 858-2952
or to such other representative or at such other address of a party as such
party hereto may furnish to the other Parties in writing. If notice is given
pursuant to this Section 18 of any assignment to a permitted successor or assign
of a party hereto, the notice shall be given as set forth above to such
successor or assign of such party.
SECTION 19. Continuing Security Interest. This Agreement shall
create a continuing security interest in the Pledged Collateral and shall (i)
remain in full force and effect until payment in full of the Securities, (ii) be
binding upon the Pledgor, its successors and assigns, and (iii) inure, together
with the rights and remedies of the Trustee and the Holders hereunder, to the
benefit of and be enforceable by the Secured Parties and their respective
successors, transferees and assigns. At such time as no Securities are
outstanding, the Pledgor shall be entitled to the return, upon its request and
at its expense, of such of the Pledged Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof.
SECTION 20. Governing Law; Severability. This Agreement shall be
governed by, and be construed and interpreted in accordance with, the law of the
State of New York. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity and without invalidating the remaining provisions of
this Agreement. Unless otherwise defined herein or in the Indenture, terms
defined in Article 9 of the UCC as in effect in the State of New York are used
herein as therein defined.
SECTION 21. Waiver of Jury Trial. The Pledgor waives any right it
may have to a trial by jury in respect of any litigation based on, or arising
out of, under or in connection with, this Agreement or any other Transaction
Document, or any course of conduct, course of dealing, verbal or written
statement or other action of any Secured Party.
16
<PAGE>
SECTION 22. Section Titles. The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not part of this Agreement.
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly
executed and delivered by its duly authorized officer on the date first above
written.
METALLURG, INC.
By:_________________________________
Name:
Title:
Accepted and Acknowledged:
IBJ SCHRODER BANK & TRUST COMPANY, as Trustee
By:____________________________
Name:
Title:
Accepted and Acknowledged as to Sections 4 and 7 hereof:
THE FIRST NATIONAL BANK OF BOSTON, as Working Capital Agent
By:____________________________
Name:
Title:
17
<PAGE>
SCHEDULE I TO PLEDGE AGREEMENT
Attached to and forming a part of that certain Pledge Agreement, dated
[April 2,] 1997, between Metallurg, Inc., a New York corporation, and IBJ
Schroder Bank & Trust Company, as Trustee.
<TABLE>
<CAPTION>
Stock Certificate Outstanding Pledged
Stock Issuer Class of Stock No(s). Shares Par Value Shares
- - ------------ -------------- ------ ------ --------- ------
<S> <C> <C> <C> <C> <C>
</TABLE>
18
<PAGE>
SCHEDULE III TO PLEDGE AGREEMENT
PLEDGE AMENDMENT
This Pledge Amendment, dated ________, 19__, is delivered pursuant
to Section 10(b) of the Pledge Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to the Pledge
Agreement, dated [April 2,] 1997, between the undersigned and IBJ Schroder Bank
& Trust Company, as Trustee on behalf of and for the ratable benefit of the
Holders referred to therein, and that the Additional Pledged Shares listed on
this Pledge Amendment shall be and become part of the Pledged Collateral
referred to in the Pledge Agreement and shall secure all Securities of the
undersigned. The terms defined in the Pledge Agreement or Indenture are being
used herein as therein defined.
METALLURG, INC.
By:_________________________________
Name:
Title:
Stock
Certificate Number
Issuer Class of Stock No(s). Par Value of Shares
19
NYFS05...:\40\63140\0003\1711\EXHN076P.24L
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - --------------------------------x
In re :
Chapter 11 Case Nos.
METALLURG, INC. and : 93 B 44468 (JLG)
SHIELDALLOY METALLURGICAL 93 B 44469 (JLG)
CORPORATION, : (Jointly Administered)
Debtors. :
- - --------------------------------x
DEBTORS' SECOND AMENDED JOINT DISCLOSURE STATEMENT
PURSUANT TO SECTION 1125 OF THE BANKRUPTCY CODE
WEIL, GOTSHAL & MANGES LLP
Attorneys for the Debtors and Debtors
in Possession
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
Dated: New York, New York
December 18, 1996
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
I. INTRODUCTION.............................................................................................................. 1
II. OVERVIEW OF THE PLAN..................................................................................................... 4
III. GENERAL INFORMATION..................................................................................................... 13
A. Description and History of Business............................................................................ 13
1. Business................................................................................................ 13
2. History................................................................................................. 13
3. Operations.............................................................................................. 13
B. Events Leading to the Commencement of the Chapter 11 Cases..................................................... 14
IV. EVENTS DURING THE CHAPTER 11 CASES....................................................................................... 15
A. Appointment of the Creditors' Committee........................................................................ 15
B. Stabilization of Business...................................................................................... 16
1. Employee Related Matters................................................................................ 17
2. DIP Credit Facility..................................................................................... 17
3. Commodity Forward Contracts............................................................................. 17
C. Development and Implementation of Business Plan................................................................ 18
D. Retention of Warrior International Ltd. to Market the Debtors' Assets.......................................... 18
E. Disposition of Real Estate Assets.............................................................................. 19
F. Draw Down on Letters of Credit................................................................................. 19
G. Purchase of Elektrowerk Weisweiler, GmbH....................................................................... 19
H. Purchase of Interest in Solikamsk Magnesium Works.............................................................. 20
I. Sale of Interest in Frankel Metal Company...................................................................... 20
J. Settlement of Miscellaneous Claims and Motions................................................................. 20
1. Claim of Secured Parties................................................................................ 20
2. Claims of Unsecured Parties............................................................................. 21
3. Subordination of Management Fees........................................................................ 21
4. Settlement of SERP Claims............................................................................... 21
5. Settlement of Union Contracts........................................................................... 22
6. Settlement of Multiemployer Pension Claims.............................................................. 22
7. Objections to Claims.................................................................................... 23
8. Objection to Former Preferred Stockholder Claims........................................................ 24
9. The Madden Class Action Claim........................................................................... 24
V. COMPROMISES AND SETTLEMENTS OF CERTAIN CLAIMS UNDER THE PLAN.............................................................. 25
A. Former Preferred Stockholders.................................................................................. 26
B. Settlement With Holders of Environmental Claims................................................................ 27
1. Background on Environmental Claims...................................................................... 27
2. The Newfield, New Jersey Site........................................................................... 28
a. The NRC.......................................................................................... 28
b. The NJDEP........................................................................................ 28
3. The Cambridge, Ohio Site................................................................................ 29
a. The NRC.......................................................................................... 29
b. The State of Ohio................................................................................ 30
4. Nature of the Environmental Claims...................................................................... 30
5. The Environmental Settlement Agreements................................................................. 31
6. United States and NJDEP Environmental Settlement Agreement.............................................. 32
a. Allowance Of United States Claims................................................................ 32
b. Allowance Of New Jersey Claims................................................................... 32
c. Treatment Of Allowed Claims...................................................................... 33
d. Required Financial Assurance .................................................................... 33
e. Covenant Not To Sue And Reservation Of Rights; Bankruptcy Discharge.............................. 34
f. Senior Management Approval; Lodging And Opportunity For Public Comment........................... 35
7. Ohio Environmental Settlement Agreement................................................................. 35
a. Allowance Of Claims.............................................................................. 36
b. Treatment Of Allowed Claims...................................................................... 36
c. Required Financial Assurance..................................................................... 36
i
<PAGE>
<CAPTION>
Page
<S> <C>
d. Covenant Not To Sue And Reservation Of Rights; Bankruptcy Discharge.............................. 37
e. Senior Management Approval; Lodging And Opportunity For Public Comment........................... 37
VI. THE PLAN OF REORGANIZATION............................................................................................... 38
A. Essential Elements of the Plan................................................................................. 39
1. Classification and Treatment of Claims and Equity Interests............................................. 39
2. Distributions Under the Plan............................................................................ 39
a. Distributions on the Effective Date.............................................................. 39
b. Distributions Dependent Upon the Resolution of Disputed Priority Claims.......................... 39
c. Distributions Dependent Upon the Resolution of Disputed Unsecured Claims......................... 39
d. Distributions Subsequent to the Effective Date................................................... 40
e. Limitation on Distributions...................................................................... 40
3. Method of Distributions Under the Plan.................................................................. 40
a. Distributions of Cash............................................................................ 41
b. De Minimis Distributions......................................................................... 41
c. Distributions of New Common Stock................................................................ 41
d. Distributions of New Secured Notes............................................................... 41
e. Unclaimed Distributions.......................................................................... 42
4. Compromise and Settlement of Claims and
Resolution of Intercompany Claims....................................................................... 42
B. Classification and Treatment of Claims and Equity Interests.................................................... 43
1. Administrative Expense Claims........................................................................... 43
2. Priority Tax Claims..................................................................................... 44
3. Class 1A -- Other Priority Claims Of MI................................................................. 44
4. Class 1B -- Other Priority Claims of SMC................................................................ 44
5. Class 2A -- MI Intercompany Claims...................................................................... 45
6. Class 2B -- SMC Intercompany Claims..................................................................... 45
7. Class 2C -- Midlantic Secured Claim..................................................................... 45
8. Class 2D -- Midlantic Guaranty Claim.................................................................... 45
9. Class 2E -- MI Other Secured Claims..................................................................... 45
10. Class 2F -- SMC Other Secured Claims.................................................................... 46
11. Class 3A -- MI Convenience Claims....................................................................... 46
12. Class 3B -- SMC Convenience Claims...................................................................... 46
13. Class 4A -- MI Unsecured Claims......................................................................... 47
14. Class 4B -- Canadian Guarantee Claims................................................................... 49
15. Class 4C -- SMC Unsecured Claims........................................................................ 50
16. Class 4D -- Settling Former Preferred Stockholder Claims................................................ 52
17. Class 4E -- Multiemployer Pension Claim................................................................. 53
18. Class 4F -- Environmental Settlement Agreement Claims................................................... 54
19. Class 5 -- Insured Claims Against MI.................................................................... 54
20. Class 6 -- Insured Claims Against SMC................................................................... 54
21. Class 7 -- MI Equity Interests.......................................................................... 55
22. Class 8 -- SMC Equity Interests......................................................................... 55
C. Summary of Other Provisions of the Plan........................................................................ 55
1. New Common Stock........................................................................................ 55
2. Conditions Precedent to Confirmation of the Plan........................................................ 56
3. Conditions Precedent to Consummation of the Plan........................................................ 56
4. Executory Contracts and Unexpired Leases................................................................ 58
5. Indemnification......................................................................................... 59
6. Compensation and Benefit Programs....................................................................... 59
7. Provisions for Treatment of Disputed Claims............................................................. 59
8. Amendment and Restatement of the Debtors' Articles of Incorporation and Bylaws.......................... 60
9. Discharge, Release from Claims and Interests and Injunctions............................................ 61
10. Amendment of the Plan................................................................................... 61
11. Revocation of the Plan.................................................................................. 61
12. Extinguishment of Causes of Action Under the Avoiding Power Provisions.................................. 61
13. Rights of Action Under Avoiding Provisions.............................................................. 61
14. Exculpation............................................................................................. 62
15. Termination of Creditors' Committee..................................................................... 62
16. Supplemental Documents.................................................................................. 62
ii
<PAGE>
<CAPTION>
Page
<S> <C>
VII. CONFIRMATION AND CONSUMMATION PROCEDURE................................................................................. 62
A. Solicitation of Votes.......................................................................................... 62
B. The Confirmation Hearing....................................................................................... 63
C. Confirmation................................................................................................... 63
1. Acceptance or Cramdown.................................................................................. 64
2. Unfair Discrimination and Fair and Equitable Tests...................................................... 64
3. Feasibility............................................................................................. 64
4. Best Interests Test..................................................................................... 65
D. Consummation................................................................................................... 66
E. Exit Financing................................................................................................. 67
VIII. MANAGEMENT OF THE REORGANIZED DEBTORS.................................................................................. 67
A. Board of Directors and Management.............................................................................. 67
1. Composition of the Board of Directors................................................................... 67
2. Identity of Metallurg Officers.......................................................................... 67
3. Identity of Shieldalloy Officers........................................................................ 69
B. Compensation of Executive Officers............................................................................. 69
C. 1997 Stock Award and Stock Option Plan......................................................................... 70
1. General................................................................................................. 70
2. Awards under the SASOP.................................................................................. 71
3. Termination of Employment............................................................................... 72
4. Federal Income Tax Consequences of the SASOP............................................................ 72
D. Executive Employment Agreements................................................................................ 74
1. General................................................................................................. 74
2. Compensation............................................................................................ 74
3. Termination of Employment............................................................................... 74
E. Management Incentive Compensation Plans........................................................................ 75
1. General................................................................................................. 75
2. Awards.................................................................................................. 75
3. Termination of Employment............................................................................... 76
F. Executive Retention Plans...................................................................................... 76
G. Post-Effective Date Security Ownership of Certain Beneficial Owners............................................ 76
IX. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS TO THE NEW COMMON STOCK TO BE
DISTRIBUTED UNDER THE PLAN............................................................................................ 77
X. REORGANIZATION VALUES..................................................................................................... 78
XI. CERTAIN RISK FACTORS TO BE CONSIDERED.................................................................................... 79
A. Overall Risks to Recovery by Holders of Claims................................................................. 79
1. Failure to Obtain Approval of the Environmental Settlement Agreements................................... 80
2. Ability to Refinance Certain Indebtedness............................................................... 80
3. Significant Holders..................................................................................... 80
4. Lack of Established Market for New Common Stock......................................................... 80
5. Dividend Policies....................................................................................... 81
6. Provisions of Stock Award and Option Plan............................................................... 81
7. Projected Financial Information......................................................................... 81
8. Business Factors and Competitive Conditions............................................................. 81
a. Dependence on Cyclical Markets................................................................... 81
b. Metals Industry Highly Competitive............................................................... 81
c. Dependence on Others for Raw Materials........................................................... 82
d. Environmental Regulation......................................................................... 82
B. Hart-Scott-Rodino Act Requirements............................................................................. 82
XII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN..................................................................... 82
A. Consequences to the Debtors.................................................................................... 83
1. Cancellation of Debt.................................................................................... 83
2. Limitations on NOL Carryforwards and Other Tax Attributes............................................... 84
3. Alternative Minimum Tax................................................................................. 84
4. Treatment of New Secured Notes.......................................................................... 85
iii
<PAGE>
<CAPTION>
Page
<S> <C>
B. Consequences to Holders of Claims in Classes 4A, 4B, 4C and 4D................................................. 85
1. Holders of MI Unsecured Claims and Canadian Guarantee Claims............................................ 85
a. Holders of Claims Not Constituting "Securities".................................................. 86
b. Holders of Claims Constituting "Securities"...................................................... 86
2. Holders of SMC Unsecured Claims......................................................................... 86
3. Holders of Settling Former Preferred Stockholder Claims................................................. 87
4. Additional Tax Considerations For All Holders........................................................... 87
a. Distribution in Discharge of Accrued Interest.................................................... 87
b. Installment Method............................................................................... 88
c. Original Issue Discount on New Secured Notes..................................................... 88
d. Disputed Claims Reserves......................................................................... 88
e. Subsequent Sale of New Common Stock.............................................................. 89
f. Withholding...................................................................................... 89
XIII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN.............................................................. 89
A. Liquidation Under Chapter 7.................................................................................... 90
B. Alternative Plan of Reorganization............................................................................. 90
XIV. CONCLUSION AND RECOMMENDATION......................................................................................... 91
</TABLE>
iv
<PAGE>
EXHIBITS TO DISCLOSURE STATEMENT
Exhibit A The Plan
Exhibit B Order of the Bankruptcy Court, dated December 18, 1996,
among other things, approving this Disclosure Statement
and establishing certain procedures with respect to the
solicitation and tabulation of votes to accept or reject
the Plan.
Exhibit C Audited Financial Statements of Metallurg, Inc. and
Consolidated Subsidiaries For Years Ended December 31,
1995 and 1994.
Exhibit D Metallurg, Inc. and Shieldalloy Metallurgical Corporation
Projected Financial Information.
Exhibit E Metallurg, Inc. and Shieldalloy Metallurgical Corporation
Liquidation Analysis.
Exhibit F Metallurg, Inc. 1997 Stock Award and Stock Option Plan.
v
<PAGE>
I. INTRODUCTION
Metallurg, Inc. ("Metallurg"), a New York corporation, and
Shieldalloy Metallurgical Corporation ("Shieldalloy"), a New York corporation
(collectively, the "Debtors"), submit this Disclosure Statement pursuant to
section 1125 of title 11, United States Code (the "Bankruptcy Code") to holders
of Claims in the Debtors' chapter 11 cases in connection with (i) the
solicitation of acceptances or rejections of the Debtors' Fourth Amended and
Restated Joint Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy
Code, dated December 18, 1996 (the "Plan"), filed by the Debtors with the United
States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court") and (ii) the hearing to consider confirmation of the Plan scheduled for
February 20, 1997 at 2:00 p.m. (the "Confirmation Hearing") . Unless otherwise
defined herein, all capitalized terms contained herein have the meanings
ascribed to them in the Plan.
Attached as Exhibits to this Disclosure Statement are copies
of the following:
o The Plan (Exhibit A);
o Order of the Bankruptcy Court, dated December 18, 1996, among
other things, approving this Disclosure Statement and
establishing certain procedures with respect to the
solicitation and tabulation of votes to accept or reject the
Plan (Exhibit B);
o Audited Financial Statements of Metallurg, Inc. and
Consolidated Subsidiaries For Years Ended December 31, 1995
and 1994 (Exhibit C);
o Metallurg, Inc. and Shieldalloy Metallurgical Corporation
Projected Financial Information (Exhibit D);
o Metallurg, Inc. and Shieldalloy Metallurgical Corporation
Liquidation Analysis (Exhibit E); and
o Metallurg, Inc. 1997 Stock Award and Stock Option Plan
(Exhibit F).
ALL EXHIBITS OR SCHEDULES TO THIS DISCLOSURE STATEMENT WHICH
ARE NOT ANNEXED HERETO WILL BE FILED WITH THE CLERK OF THE BANKRUPTCY COURT NOT
LESS THAN TEN (10) DAYS PRIOR TO THE LAST DAY UPON WHICH CREDITORS MAY VOTE TO
ACCEPT OR REJECT THE PLAN. THE PLAN SUPPLEMENT AND SCHEDULES TO THE PLAN WILL BE
FILED WITH THE CLERK OF THE BANKRUPTCY COURT NOT LESS THAN TEN (10) DAYS PRIOR
TO THE CONFIRMATION HEARING. SUCH EXHIBITS OR SCHEDULES MAY BE INSPECTED AT THE
OFFICE OF THE CLERK OF THE BANKRUPTCY COURT DURING NORMAL COURT HOURS. CREDITORS
AND EQUITY INTEREST HOLDERS MAY OBTAIN COPIES OF THE EXHIBITS AND SCHEDULES,
ONCE FILED, UPON WRITTEN REQUEST TO THE FOLLOWING ADDRESS:
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
Attn: Gary T. Holtzer, Esq.
PLAN SUMMARIES AND STATEMENTS MADE IN THIS DISCLOSURE
STATEMENT ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE PLAN, THE OTHER
EXHIBITS AND SCHEDULES HERETO AND THERETO AND ANY OTHER DOCUMENTS REFERENCED
HEREIN OR THEREIN.
In addition, a Ballot for the acceptance or rejection of the
Plan is enclosed with the Disclosure Statement submitted to the holders of
Claims that the Debtors believe may be entitled to vote to accept or reject the
Plan.
<PAGE>
On December 18, 1996, after notice and a hearing, the
Bankruptcy Court approved this Disclosure Statement as containing adequate
information of a kind and in sufficient detail to enable hypothetical,
reasonable investors typical of the Debtors' creditors to make an informed
judgment whether to accept or reject the Plan. APPROVAL OF THIS DISCLOSURE
STATEMENT DOES NOT, HOWEVER, CONSTITUTE A DETERMINATION BY THE BANKRUPTCY COURT
AS TO THE FAIRNESS OR MERITS OF THE PLAN.
Each creditor of the Debtors entitled to vote to accept or
reject the Plan should read this Disclosure Statement and the Plan in their
entirety before voting on the Plan.
Pursuant to the provisions of the Bankruptcy Code, only
holders of allowed claims or equity interests in classes of claims or equity
interests that are impaired under the terms and provisions of a chapter 11 Plan
are entitled to vote to accept or reject the Plan. Classes of claims or equity
interests in which the holders of claims or interests will not receive or retain
any property under a chapter 11 Plan are deemed to have rejected the Plan and
are not entitled to vote to accept or reject the Plan. Classes of claims or
equity interests in which the holders of claims or interests are unimpaired
under a chapter 11 Plan are deemed to have accepted the Plan and are not
entitled to vote to accept or reject the Plan.
Classes 2A, 2B, 2C, 2D, 4A, 4B, 4C, 4D, 4E, 4F, 5, and 6 of
the Plan are impaired and, to the extent such Claims are Allowed Claims, the
holders of such Claims will receive distributions under the Plan. Holders of
Claims in those Classes are entitled to vote to accept or reject the Plan.
Classes 1A, 1B, 2E, 2F, 3A, 3B, and 8 of the Plan are unimpaired under the Plan
and the holders of Claims in those Classes are conclusively presumed to have
accepted the Plan. Class 7 is impaired and will not receive any distributions
under the Plan and the holders of such Equity Interests are conclusively
presumed to have rejected the Plan. Therefore, the Debtors are soliciting
acceptances only from holders of Allowed Claims in Classes 2A, 2B, 2C, 2D, 4A,
4B, 4C, 4D, 4E, 4F, 5, and 6.
IF YOU ARE A FORMER PREFERRED STOCKHOLDER ("FPS"), YOUR CLAIM
WILL BE THE SUBJECT OF AN OBJECTION BY THE STATUTORY COMMITTEE OF UNSECURED
CREDITORS (THE "CREDITORS' COMMITTEE") TO DISALLOW AND EXPUNGE ALL FORMER
PREFERRED STOCKHOLDER CLAIMS. IF YOU ARE A FORMER PREFERRED STOCKHOLDER AND WANT
TO ACCEPT THE FPS SETTLEMENT AMOUNT, ON THE ELECTION FORM ACCOMPANYING THIS
DISCLOSURE STATEMENT, YOU MUST ELECT INTO THE FPS SETTLEMENT AND RELEASE,
COMPROMISE AND SETTLE ALL CLAIMS ON ACCOUNT OF PREFERRED STOCK ISSUED BY
METALLURG OR ENTER INTO A STIPULATION WITH THE DEBTORS AND THE CREDITORS'
COMMITTEE TO ACCEPT THE FPS SETTLEMENT. EACH SETTLING FORMER PREFERRED
STOCKHOLDER WHO MAKES SUCH ELECTION TO SETTLE ITS CLAIM BY SO INDICATING ON THE
ELECTION FORM OR ENTERING INTO A STIPULATION TO ACCEPT THE FPS SETTLEMENT WILL
BE DEEMED TO HAVE ACCEPTED THE PLAN AS A HOLDER OF AN ALLOWED CLAIM IN CLASS 4D
AND RECEIVE ITS PRO RATA DISTRIBUTION ON ACCOUNT THEREOF.
The Bankruptcy Code defines "acceptance" of a plan by a class
of claims as acceptance by creditors in that class that hold at least two-thirds
in dollar amount and more than one-half in number of the claims that cast
ballots for acceptance or rejection of the plan. For a complete description of
the requirements for confirmation of the Plan, see Section VII. below entitled
"Confirmation and Consummation Procedure."
If a Class of Claims or Equity Interests rejects the Plan or
is deemed to reject the Plan, the Debtors have the right to request confirmation
of the Plan pursuant to section 1129(b) of the Bankruptcy Code. Section 1129(b)
permits the confirmation of a plan notwithstanding the nonacceptance of such
plan by one or more impaired classes of claims or equity interests. Under that
section, a plan may be confirmed by a bankruptcy court if it does not
"discriminate unfairly" and is "fair and equitable" with respect to each
nonaccepting class. For a more detailed description of the requirements for
confirmation of a nonconsensual plan, see Section VII.C.2. below entitled
"Confirmation and Consummation Procedure --Unfair Discrimination and Fair and
Equitable Tests."
2
<PAGE>
With respect to those Classes of Claims and Equity Interests
which are deemed to have rejected the Plan, the Debtors intend to request
confirmation of the Plan pursuant to section 1129(b) of the Bankruptcy Code. If
one or more of the Classes entitled to vote on the Plan votes to reject the
Plan, the Debtors reserve the right to request confirmation of the Plan over the
rejection of the Plan by such Class or Classes. The determination as to whether
to seek confirmation of the Plan under such circumstances will be announced
before or at the Confirmation Hearing.
After carefully reviewing this Disclosure Statement, including
the Exhibits, each holder of an Allowed Claim in Classes 2A, 2B, 2C, 2D, 4A, 4B,
4C, 4D, 4E, 4F, 5, and 6 should vote on the Plan.
THE DEBTORS BELIEVE THAT ACCEPTANCE OF THE PLAN IS IN THE BEST
INTERESTS OF THE DEBTORS AND THEIR CREDITORS AND URGE THAT CREDITORS VOTE TO
ACCEPT THE PLAN.
THE CREDITORS' COMMITTEE ALSO SUPPORTS THE PLAN.
As the appointed representative of all of the Debtors' general
unsecured creditors, the Creditors' Committee has participated in lengthy,
complicated negotiations culminating in this Plan on which you are being asked
to vote. THE CREDITORS' COMMITTEE RECOMMENDS THAT YOU VOTE FOR THE PLAN BY
SIGNING AND RETURNING THE ENCLOSED BALLOT.
As more fully described in this Disclosure Statement, general
unsecured creditors will receive virtually all of the reorganized value of the
Debtors in the form of Cash, New Secured Notes and New Common Stock. The
arrangements made with the Environmental Authorities having jurisdiction over
the Debtors, in the view of the Creditors' Committee, represent a reasonable
resolution of the various environmental issues facing the Debtors.
The Creditors' Committee, together with its legal advisors,
Stroock & Stroock & Lavan, and its financial advisors, Policano & Manzo, has
participated in extensive due diligence and negotiations with the Debtors and
other major constituencies including the Environmental Authorities. Plan
represents the negotiated resolutions of these discussions. THE CREDITORS'
COMMITTEE BELIEVES THE PLAN ACHIEVES THE GOAL OF MAXIMIZING THE RECOVERY FOR ALL
UNSECURED CREDITORS OF THE DEBTORS AND, THEREFORE, URGES YOU TO RETURN YOUR
BALLOT WITH A VOTE ACCEPTING THE PLAN.
ALL PROJECTED RECOVERIES OF HOLDERS OF ALLOWED CLAIMS AND
ALLOWED EQUITY INTERESTS SET FORTH HEREIN ARE BASED ON THE FINANCIAL INFORMATION
SET FORTH IN THE FINANCIAL APPENDIX ANNEXED HERETO AS EXHIBIT D AND THE
ASSUMPTIONS SUMMARIZED THEREIN AND THROUGHOUT THE ENTIRETY OF THIS DISCLOSURE
STATEMENT. ALL SUCH RECOVERIES ARE MERELY PROJECTED RECOVERIES, BASED ON
ASSUMPTIONS WHICH ARE SET FORTH IN THE FINANCIAL APPENDIX. TO THE EXTENT THAT
ACTUAL RESULTS VARY FROM THE ASSUMPTIONS, RECOVERIES MAY VARY FROM THE
PROJECTIONS.
If you are entitled to vote to accept or reject the Plan, a
Ballot is enclosed for the purpose of voting on the Plan. If you hold a Claim in
more than one Class and you are entitled to vote Claims in more than one Class,
you will receive separate Ballots which must be used for each separate Class of
Claims. Please vote and return your Ballot(s) to:
METALLURG, INC.
c/o
Balloting Agent
Georgeson & Company Inc.
Wall Street Plaza
88 Pine Street, 30th Floor
New York, New York 10005
3
<PAGE>
or, if delivered by hand or courier
METALLURG, INC.
c/o
Balloting Agent
Georgeson & Company Inc.
Wall Street Plaza
88 Pine Street, 30th Floor
New York, New York 10005
DO NOT RETURN YOUR NOTES OR SECURITIES WITH YOUR BALLOT.
IF YOU ARE A FORMER PREFERRED STOCKHOLDER AND WANT TO ACCEPT
THE FPS SETTLEMENT, ON THE ELECTION FORM ACCOMPANYING THIS DISCLOSURE STATEMENT,
YOU MUST ELECT INTO THE FPS SETTLEMENT AND RELEASE, COMPROMISE AND SETTLE ALL
CLAIMS ON ACCOUNT OF PREFERRED STOCK ISSUED BY METALLURG OR ENTER INTO A
STIPULATION WITH THE DEBTORS AND THE CREDITORS' COMMITTEE TO ACCEPT THE FPS
SETTLEMENT. IF AN ELECTION IS MADE TO PARTICIPATE IN THE FPS SETTLEMENT, YOU
MUST ALSO INDICATE ON THE ENCLOSED ELECTION FORM OR IN WRITING WHETHER YOU
CHOOSE THE FPS SETTLEMENT STOCK OPTION OR THE FPS SETTLEMENT CASH OPTION. IF YOU
ARE A FORMER PREFERRED STOCKHOLDER WHO DOES NOT EITHER MAKE THIS ELECTION ON
ELECTION FORM ACCOMPANYING THIS DISCLOSURE STATEMENT OR ENTER INTO A STIPULATION
TO ACCEPT THE FPS SETTLEMENT, AND/OR YOU DO NOT VOTE TO ACCEPT THE PLAN, THEN
YOU WILL NOT HAVE AN ALLOWED CLASS 4D CLAIM AND YOU WILL NOT RECEIVE YOUR PRO
RATA DISTRIBUTION ON ACCOUNT THEREOF AND YOUR CLAIM WILL BE SUBJECT TO OBJECTION
BY THE CREDITORS' COMMITTEE AND TREATED AS A DISPUTED CLAIM IN CLASS 4A (MI
UNSECURED CLAIMS).
TO BE COUNTED, YOUR BALLOT INDICATING ACCEPTANCE OR REJECTION
OF THE PLAN MUST BE RECEIVED NO LATER THAN 5:00 P.M., EASTERN STANDARD TIME, ON
FEBRUARY 10, 1997.
If you are a creditor entitled to vote on the Plan and did not
receive a Ballot, received a damaged Ballot or lost your Ballot, or if you have
any questions concerning the Disclosure Statement, the Plan or the procedures
for voting on the Plan, please call Georgeson & Company Inc. at (800) 223-2064.
Pursuant to section 1128 of the Bankruptcy Code, the
Confirmation Hearing will be held on February 20, 1997 at 2:00 p.m. before the
Honorable James L. Garrity, Jr., United States Bankruptcy Judge, at the United
States Bankruptcy Court, Alexander Hamilton Custom House, One Bowling Green,
Room 610-2, New York, New York 10004. The Bankruptcy Court has directed that
objections, if any, to confirmation of the Plan be served and filed so that they
are received on or before February 10, 1997 at 5:00 p.m., Eastern Standard Time,
in the manner described in Section VII.B. "Confirmation and Consummation
Procedure -- The Confirmation Hearing." The Confirmation Hearing may be
adjourned from time to time by the Bankruptcy Court without further notice
except for the announcement of the adjournment date made at the Confirmation
Hearing or at any subsequent adjourned Confirmation Hearing.
II. OVERVIEW OF THE PLAN
The following is a brief overview of the provisions of the
Plan. This overview is qualified in its entirety by reference to the provisions
of the Plan, a copy of which is annexed hereto as Exhibit A, and the more
detailed financial and other information contained elsewhere in this document
and in the Exhibits hereto. In addition, for a more detailed description of the
terms and provisions of the Plan, see Section VI. below entitled "The Plan of
Reorganization."
4
<PAGE>
The Plan will substantially reduce the level of the Debtors'
prepetition unsecured indebtedness. The Debtors' unsecured long-term
indebtedness and short-term borrowings (including obligations in respect of
letters of credit), excluding any accrued interest and any capitalized lease
obligations, will be reduced from approximately $121 million as of the
Commencement Date to approximately $60 million. In addition, all prepetition
Equity Interests in Metallurg will be cancelled. The Plan provides for the
distribution to holders of Allowed Claims in Classes 4A, 4B, 4C, 4D, 4E, and 4F
of approximately $30 million in Cash (based upon the Debtors' current estimates
of Allowed Administrative Expense Claims, Other Secured Claims, Allowed Priority
Tax Claims, Allowed Other Priority Claims), New Secured Notes in a principal
amount of $60 million and 4,750,000 shares of New Common Stock of Reorganized
Metallurg. These amounts of New Secured Notes and New Common Stock actually
distributed on the Effective Date shall be adjusted in accordance with the terms
of the Plan.
At the Reorganized Debtors' election, the Reorganized Debtors
or their Subsidiaries may borrow funds under one or more term loan or revolving
credit facilities for the purpose of reducing the principal amount of the New
Secured Notes issued under the Plan, which reduction will be on a dollar for
dollar basis. See Section VII.E. below entitled "Confirmation and Consummation
Procedure -- Exit Financing."
The Plan designates 18 Classes of Claims and two Classes of
Equity Interests. These Classes take into account the differing nature and
priority under the Bankruptcy Code of the various Claims and Equity Interests.
Material elements of the Plan include (i) the compromises and
settlements of the approximately $1 billion of Environmental Claims asserted
against Shieldalloy and Metallurg and resolution of issues concerning financial
assurances to be posted by Shieldalloy to cover future remediation costs and
expenses, all as more fully set forth in the Environmental Settlement
Agreements, copies of which are included in the Plan Supplement, and (ii) the
compromise and settlement of the Claims of the Former Preferred Stockholders of
Metallurg. For a more detailed description of the foregoing, see Section V.
below entitled "Compromises and Settlements of Certain Claims Under the Plan."
The determination of the Bankruptcy Court with respect to
approval of the compromises and settlements with the Environmental Authorities
and the Former Preferred Stockholders will be made at the Confirmation Hearing.
The Debtors intend to seek Bankruptcy Court approval of the compromise and
settlement of these settlements at the Confirmation Hearing.
The following table briefly summarizes the classification and
treatment of Claims and Equity Interests under the Plan. The recoveries set
forth below are merely estimated recoveries based upon various assumptions. The
estimated recoveries assume that with respect to the issuance of New Common
Stock, the approximate aggregate equity value of the New Common Stock is $50
million. For a discussion of the valuation of the New Common Stock, see Section
X. below entitled "Reorganization Values." If the amount of Allowed Claims and
Disputed Claims in Classes 4A, 4B, 4C, and 4D is substantially in excess of the
Debtors' current estimates of such Allowed Claims, the percentage recovery on
Allowed Claims in Classes 4A, 4B, 4C, 4D, 4E, and 4F may be reduced. There is no
assurance that the New Common Stock issued under the Plan will actually trade at
the projected Reorganization Value or that there will exist any trading market
in the New Common Stock. Estimated recoveries with respect to the New Secured
Notes to be issued under the Plan to holders of Allowed Claims in Classes 4A,
4B, 4C, and 4E assume that the terms of the New Secured Notes are market-rate
terms. For a complete description of the risks associated with the recoveries
provided under the Plan, see Section XI. below entitled "Certain Risk Factors To
Be Considered."
5
<PAGE>
SUMMARY OF CLASSIFICATION AND TREATMENT
OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN(1)
<TABLE>
<CAPTION>
Estimated Estimated
Aggregate Percentage
Type of Claim Amount of Recovery of
or Equity Allowed Allowed
Class Interest Treatment Claims Claims(2)
- - ----- -------- --------- ------ -------
<S> <C> <C> <C> <C>
- - -- Administrative Unimpaired; payment (a) in full, in Cash, on $5.2 million(3) 100%
Expense Claims the later of the Effective Date and the date
such Claim is Allowed or (b) in accordance
with the terms and conditions of
transactions or agreements relating to
obligations incurred in the ordinary course
of business during the pendency of the
Chapter 11 Cases or assumed by the Debtors
in Possession.
- - -- Priority Tax Unimpaired; payment in full, in Cash, on the $256,000 100%
Claims later of the Effective Date and the date such
Claim is Allowed.
1A Other MI Unimpaired; payment in full, in Cash, on the $0 100%
Priority Claims later of the Effective Date and the date such
Claim is Allowed.
1B Other SMC Unimpaired; payment in full, in Cash, on $56,000 100%
Priority Claims the later of the Effective Date and the date
such Claim is Allowed.
2A MI Impaired; offset and no other distribution. $15,471,000 0%
Intercompany
Claims
2B SMC Impaired; offset and no other distribution. $18,385,000 0%
Intercompany
Claims
<FN>
- - --------
(1.) This table is only a summary of the classification and treatment of
Claims and Equity Interests under the Plan. Reference should be made to the
entire Disclosure Statement and the Plan for a complete description of the
classification and treatment of Claims and Equity Interests.
(2.) The estimated recoveries exclude all Disputed Claims and contingent Claims
except to the extent the Debtors have accrued liabilities and/or set aside
reserves for same. In addition, the estimated recoveries are based on the
assumption that (i) all of the Settling Former Preferred Stockholders choose the
FPS Settlement Stock Option and (ii) all holders of Allowed Claims in Classes
4A, 4B, and 4C will receive distributions in accordance with "Option A" as
opposed to "Option B" of each such Class. For a discussion of the treatment
afforded holders of Claims in Classes 4A, 4B, and 4C under "Option A" and
"Option B" in each such Class, see Section VI.B. below entitled "The Plan of
Reorganization -- Classification and Treatment of Claims and Equity Interests.
(3.) This amount excludes all administrative expenses to be paid by the Debtors
in the ordinary course.
</FN>
6
<PAGE>
<CAPTION>
Estimated Estimated
Aggregate Percentage
Type of Claim Amount of Recovery of
or Equity Allowed Allowed
Class Interest Treatment Claims Claims(2)
- - ----- -------- --------- ------ -------
<S> <C> <C> <C> <C>
2C Midlantic Impaired; distribution of Cash in the full $766,000(4) 100%
Secured Claim amount of its Allowed Claim.
of SMC
2D Midlantic Impaired; fully satisfied upon distribution of N.A. N.A.
Guaranty the Cash to be distributed to the holder of
the Class 2C Midlantic Claim.
2E MI Other Unimpaired. On the Effective Date, at $42,900 100%
Secured Claims Metallurg's option, an Allowed Other
Secured Claim is (a) unimpaired and the
holder's legal, equitable and contractual
rights are unaltered by Plan, (b)
reinstated, defaults are cured and its
holder is compensated for damages resulting
from its reliance on right to accelerate
maturity and payment of indebtedness, (c)
paid in full in cash, (d) satisfied by
delivery of the property securing such
Claim, (e) satisfied by assumption and
assignment of underlying agreement and cure
of defaults thereunder, or (f) paid in such
manner as the parties agree.
2F SMC Other Unimpaired. On the Effective Date, at $89,500 100%
Secured Claims Shieldalloy's option, an Allowed Other
Secured Claim is (a) unimpaired and the
holder's legal, equitable and contractual
rights are unaltered by Plan, (b)
reinstated, defaults are cured and its
holder is compensated for damages resulting
from its reliance on right to accelerate
maturity and payment of indebtedness, (c)
paid in full in cash, (d) satisfied by
delivery of the property securing such
Claim, (e) satisfied by assumption and
assignment of underlying agreement and cure
of defaults thereunder, or (f) paid in such
manner as the parties agree.
3A MI Convenience Payment in full, in Cash on the Effective $12,000 100%
Claims Date.
<FN>
- - --------
(4.) The Debtors anticipate that this amount will be increased to
include accrued interest, attorneys' fees, and other reasonable fees and
expenses to the extent that such items are part of Midlantic's Allowed Claim.
</FN>
7
<PAGE>
<CAPTION>
Estimated Estimated
Aggregate Percentage
Type of Claim Amount of Recovery of
or Equity Allowed Allowed
Class Interest Treatment Claims Claims(2)
- - ----- -------- --------- ------ -------
<S> <C> <C> <C> <C>
3B SMC Payment in full, in Cash on the Effective $108,000 100%
Convenience Date.
Claims
4A MI Unsecured Impaired; distribution to each holder of an $139,450,000 66.0%
Claims Allowed Claim which is $1 million or less of
either (A) its Pro Rata Share of (i) the MI
Unsecured Portion of Cash in the Cash
Distribution Pool less the amount of Cash
distributed pursuant to Sections
5.13(b)(A)(i), 5.15(b)(ii), and 5.16(b)(ii)
of the Plan, (ii) the MI Unsecured Por-tion
of 70% of the New Secured Notes, and (iii)
the MI Unsecured Portion of (x) 70% of the
New Common Stock excluding the Management
Stock Awards less (y) New Common Stock
issued to Former Preferred Stockholders who
elect the FPS Settlement Stock Option
(collectively, the "Class 4A-Option A") or
(B) the same distribution made to the holder
of an Allowed Class 4A claim electing Class
4A-Option A, except that in lieu of its Pro
Rata Share of the MI Unsecured Portion of
70% of the New Secured Notes, it will
receive Cash equal to 66 2/3% of the
principal amount of New Secured Notes that
would have been distributed to it as the
holder of an Allowed Claim in Class 4A
pursuant to the Class 4A-Option A (the
"Class 4A-Option B").(5) The New Secured Notes
have the terms set forth in Exhibit A to the
Plan.
<FN>
- - --------
(5.) In the event a holder's Allowed Claims in Class 4A aggregate $1 million or
more, such holder will be deemed to have elected Class 4A-Option A.
</FN>
8
<PAGE>
<CAPTION>
Estimated Estimated
Aggregate Percentage
Type of Claim Amount of Recovery of
or Equity Allowed Allowed
Class Interest Treatment Claims Claims(2)
- - ----- -------- --------- ------ -------
<S> <C> <C> <C> <C>
4B Canadian Impaired; distribution of its Pro Rata Share $71,063,000 3.9%
Guarantee of (i) the Canadian Guarantee Portion of
Claims Cash in the Cash Distribution Pool less the
amount of Cash distributed pursuant to
Sections 5.13(b)(i), 5.15(b)(A)(ii), and
5.16(b)(ii) of the Plan, (ii) the Canadian
Guarantee Portion of 70% of the New Secured
Notes on the terms set forth in Exhibit A to
the Plan, and (iii) the Canadian Guarantee
Portion of (x) 70% of the New Common Stock
excluding the Management Stock Awards less
(y) New Common Stock issued to Former
Preferred Stockholders who elect the FPS
Settlement Stock Option.
4C SMC Unsecured Impaired; distribution to each holder of an $123,982,000 30.9
Claims Allowed Claim which is $1 million or less of
either (A) its Pro Rata Share of (i) the SMC
Unsecured Portion of the total amount of
Cash equal to the Cash Distribution Pool
plus the Cash distributions to Former
Preferred Stockholders who elect the FPS
Settlement Cash Option, (ii) the SMC
Unsecured Portion of the New Secured Notes
on the terms set forth in Exhibit A to the
Plan, and (iii) the SMC Unsecured Portion of
the New Common Stock excluding the
Management Stock Awards (collectively, the
"Class 4C-Option A") or (B) the same
distribution made to the holder of an
Allowed Class 4C Claim electing Class
4C-Option A, except that in lieu of its Pro
Rata Share of the SMC Unsecured Portion of
the New Secured Notes, it will receive Cash
equal to 66 2/3% of the principal amount of
New Secured Notes that would have been
distributed to it as the holder of an
Allowed Claim in Class 4C pursuant to the
Class 4C-Option A (collectively, the "Class
4C-Option B").(6) For purposes of making
distributions hereunder, the Pro Rata Share
shall be
- - --------
(6.) In the event a holder's Allowed Claims on Class 4C aggregate $1 million or
more, such holder will be deemed to have elected Class 4C-Option A.
9
<PAGE>
<CAPTION>
Estimated Estimated
Aggregate Percentage
Type of Claim Amount of Recovery of
or Equity Allowed Allowed
Class Interest Treatment Claims Claims(2)
- - ----- -------- --------- ------ -------
<S> <C> <C> <C> <C>
calculated as if Class 4C included holders
of Allowed Claims as "Class 4C" under this
Plan and all Allowed Claims as Classes 4E
and 4F under this Plan.
4D Settling Former Impaired; in consideration for releasing, $25,707,000 2.9% to
Preferred compromising and settling all claims on 5.8%(7)
Stockholder account of preferred stock issued by
Claims Metallurg, distribution of either (i) the
FPS Settlement Stock Option, or (ii) the FPS
Settlement Cash Option.
4E Multiemployer Impaired; distribution of (i) New Common $5,000,000 30.9%(8)
Pension Claim Stock that would have been distributed to the
holder of such Claim on a Pro Rata basis had
it been the holder of an Allowed Claim
classified in Class 4C, which, as of the
Effective Date, would have included in the
aggregate of all Allowed Claims classified
as "Class 4C" under this Plan and Allowed
Claims classified as Classes 4E and 4F under
this Plan and (ii) the Pro Rata amount of
Cash that would have been distributed to the
holder of such Claim had it been the holder
of an Allowed Claim classified as Class 4C
which, as of the Effective Date, would have
included in the aggregate all Allowed Claims
classified as "Class 4C" under this Plan,
and all Allowed Claims classified as Class
4E and Class 4F under this Plan. In
addition, the holder of an Allowed Class 4E
Claim shall receive New Secured Notes in an
amount equal to the Pro Rata amount of New
Secured Notes that would have been
distributed to the holder of such Claim had
it been the holder
<FN>
- - --------
(7.) Any Settling Former Preferred Stockholder electing the FPS Settlement Cash
Option will receive an estimated recovery of 2.9%. The 5.8% estimated recovery
assumes that such Settling Former Preferred Stockholder elects the FPS
Settlement Stock Option rather than the FPS Settlement Cash Option.
(8.) By letter, dated December 1, 1996, the holder of the Allowed Claim in Class
4E elected to receive New Common Stock in lieu of the Cash as provided for in
Section 5.15(b)(i) of the Plan. The Debtors, on the Effective Date or as soon as
practicable, shall distribute, in lieu of the Cash described in Section
5.15(b)(i) of the Plan, the number of shares of New Common Stock that would have
been distributed to holders of such Claim on a Pro Rata basis had it been the
holder of an Allowed Claim classified as Class 4C which as of the Effective Date
would have included in the aggregate all Allowed Claims classified in "Classes
4C" under this Plan and all Allowed Claims classified as Class 4E and Class 4F
under this Plan.
</FN>
10
<PAGE>
<CAPTION>
Estimated Estimated
Aggregate Percentage
Type of Claim Amount of Recovery of
or Equity Allowed Allowed
Class Interest Treatment Claims Claims(2)
- - ----- -------- --------- ------ -------
<S> <C> <C> <C> <C>
of an Allowed Claim classified in Class 4C
which, as of the Effective Date, would have
included in the aggregate all Allowed Claims
classified as "Class 4C" under this Plan and
all Allowed Claims classified as Class 4E
and Class 4F under this Plan.
4F Environmental Impaired; distribution of Cash equal to (i) $4,070,000 21.1%
Settlement 50% of the total value of New Common
Agreement Stock that would have been distributed to the
Claims holder of such Claims on a Pro Rata basis
had they been the holders of Allowed Claims
classified in Class 4C which, as of the
Effective Date, would have included in the
aggregate all Claims classified as "Class
4C", Class 4E, and Class 4F of this Plan;
(ii) the Pro Rata amount of Cash that would
have been distributed to the holders of such
Claims had they been classified the holders
of an Allowed Claim classified as "Class 4C"
which, as of the Effective Date, would have
included the aggregate of all Allowed Claims
classified as "Class 4C" under this Plan and
all Allowed Claims classified as Classes 4E
and 4F under this Plan, and (iii) 66 2/3% of
the value of New Secured Notes (excluding
accrued interest) that would have been
distributed to the holder of such Claims on
a Pro Rata basis had they been the holders
of Allowed Claims classified as Class 4C
which, as of the Effective Date, would have
included the aggregate of all Allowed Claims
classified as "Class 4C" under this Plan and
all Allowed Claims classified as Class 4E
and Class 4F under this Plan.
11
<PAGE>
<CAPTION>
Estimated Estimated
Aggregate Percentage
Type of Claim Amount of Recovery of
or Equity Allowed Allowed
Class Interest Treatment Claims Claims(2)
- - ----- -------- --------- ------ -------
<S> <C> <C> <C> <C>
5 Insured Claims Impaired; on the Effective Date each holder N.A. N.A.
Against MI of an Insured Claim against MI shall only be
entitled to maintain actions against and
obtain payment solely from an insurance
company under an insurance policy or
policies issued by such company to, or for
the benefit of, MI. To the extent the
proceeds from the Debtors' insurance
policies are insufficient to satisfy a final
judgment obtained by the holder of an
Insured Claim Against MI, such holder shall
be entitled, on account of such deficiency
amount, to a cash distribution by the
Reorganized Debtor in an amount equal to the
recovery payable to holders of Claims
classified in Class 4A.
6 Insured Claims Impaired; on the Effective Date each holder N.A. N.A.
Against SMC of an Insured Claim against SMC shall only
be entitled to maintain actions against and
obtain payment solely from an insurance
company under an insurance policy or
policies issued by such company to, or for
the benefit of, SMC. To the extent the
proceeds from the Debtors' insurance
policies are insufficient to satisfy a final
judgment obtained by the holder of an
Insured Claim Against SMC, such holder shall
be entitled, on account of such deficiency
amount, to a cash distribution by the
Reorganized Debtor in an amount equal to the
recovery payable to holders of Claims
classified in Class 4C.
7 MI Equity Impaired; no distributions. N.A. N.A.
Interests
8 SMC Equity Unimpaired; Reorganized Metallurg shall N.A. N.A.
Interests Claims retain 100% ownership in Reorganized
Shieldalloy.
</TABLE>
The initial payments of Cash, New Secured Notes, and/or New
Common Stock under the Plan will be made to holders of Allowed Administrative
Expense Claims, Allowed Priority Tax Claims, and Allowed Claims in Classes 1A,
1B, 2C, 2E, 2F, 3A, 3B, 4A, 4B, 4C, 4D, 4E, and 4F on the later of (i) the
Effective Date and (ii) the date such Claim becomes an Allowed Claim, or as soon
thereafter as is practicable. The "Effective Date" means the first Business Day
that is ten (10) days (as calculated in accordance with Bankruptcy Rule 9006(a))
after the Confirmation Date, or as soon thereafter as is practicable and after
all conditions to the effectiveness of the Plan have been satisfied or waived.
For a more detailed description of the conditions precedent to the Plan, see
Section VI.C.2. and 3. below entitled "The Plan of Reorganization -- Conditions
Precedent to Confirmation of the Plan," and "Conditions Precedent to
Consummation of the Plan." Payments of Cash will, at the election of the
Reorganized Debtors, be made by Reorganized Metallurg by check payable to the
order of the person entitled to receive
12
<PAGE>
the Cash payment or by wire transfer of immediately available funds. For a more
detailed explanation of the time and manner of distributions under the Plan, see
Section VI.A.2. and 3. below entitled "The Plan of Reorganization --
Distributions Under the Plan" and "Method of Distributions Under the Plan."
III. GENERAL INFORMATION
A. DESCRIPTION AND HISTORY OF BUSINESS
1. BUSINESS
Metallurg, through its subsidiaries, is a leading
international producer and seller of high quality metals and metal alloys used
by manufacturers of steel, aluminum, super alloys, hard metals, hard facing,
electronics and fiber optics and other metal consuming industries (Metallurg and
its Subsidiaries are collectively referred to as the "Metallurg Group"). Other
than its direct or indirect equity ownership in its operating subsidiaries,
Metallurg also operates a trading division, Metallurg International Resources
("MIR"), which trades in such metals and metal alloys.
The Metallurg Group employs approximately 1,700 people
worldwide. The Metallurg Group operates smelting and refining facilities located
in the United States, the United Kingdom, Germany and Brazil, as well as mining
chrome, tin and tantalum ores in Turkey and Brazil for use in its production
facilities. In addition, the Metallurg Group operates sales offices in several
countries, which cover all of the major worldwide metals consuming markets.
Metallurg, the parent holding company, employs approximately 30 people in its
New York office.
Shieldalloy is a wholly-owned subsidiary of Metallurg and
operates manufacturing facilities in Newfield, New Jersey and Cambridge, Ohio
that produce ferroalloys, aluminum master alloys, and other specialty metals. In
addition to its manufacturing activities, Shieldalloy acts as the agent or
distributor for products produced by other members of the Metallurg Group and
for outside suppliers of products not produced by the Group. Shieldalloy's
customers include the major steel, foundry, aluminum, and superalloy producers
in the United States. In addition to its plant facilities located in New Jersey
and Ohio, Shieldalloy has sales offices in Illinois, California, Pennsylvania
and Alabama. Shieldalloy employs approximately 290 people.
2. HISTORY
The Metallurg Group was founded in 1911 through the
construction of a vanadium alloy and chemical producing plant in Nurnberg,
Germany followed in 1917 with the construction of a ferrochrome producing plant
in Weisweiler, Germany. In subsequent years, the company's customer base grew
throughout Europe and, in 1938, facilities in England and a sales and
distribution subsidiary in Switzerland were added to the group. Metallurg was
established in New York City in 1947. The expansion of the Metallurg Group both
globally and in the United States surged as a result of the postwar growth of
the steel industry. In addition, the Metallurg Group has become a world leader
in aluminum hardeners and grain refiners for the aluminum industry through its
plants in the United Kingdom, United States and Brazil.
3. OPERATIONS
The Metallurg Group manufactures three major classes of
alloys: specialty ferroalloys, aluminum master alloys, and specialty metals and
alloys. Metallurg's two principal ferroalloy products are ferrovanadium and low
carbon ferrochrome, which are both specialty ferroalloys.
Ferroalloys are used in steel primarily to increase
temperature resistance and strength-to-weight ratios in the finished product.
Aluminum master alloys are critical elements in the refining of aluminum because
pure aluminum alone lacks the strength to be used as a base metal in any
application. Specialty metals and metal alloys are used by producers of steel,
13
<PAGE>
aluminum, and super alloys to enhance the performance of finished metal products
in high performance forgings and castings for aircraft engines, frames and other
aerospace applications.
In addition to the production operations of the Metallurg
Group, Metallurg also sources complementary products from other manufacturers
and, through its trading activities, supplies many metal products to both
foreign and domestic merchanting markets.
B. EVENTS LEADING TO THE COMMENCEMENT OF THE CHAPTER 11 CASES
World demand for metal and alloy additives varies with demand
for steel, aluminum and aerospace products. The economic recession that began in
1989 in end use markets such as the automotive, durable goods, construction and
defense sectors, placed significant downward pressure on alloy prices and
volumes. In addition, increased competition as a result of sales by exporters,
from the Commonwealth of Independent States (the "CIS"), of excess stocks of
these metals and alloys precipitated by the economic collapse of the former
Soviet Union and the end of the Cold War drove prices of ferroalloys in Europe
to historically low levels. Moreover, in the wake of reductions in United States
defense spending, there was a reduction in demand in the market for super alloys
utilized in the aerospace industry. Despite losses incurred since 1990, as a
result of the recession in world markets and dumping by the CIS, Metallurg
reduced its fixed cost base and was positioned to generate earnings growth in an
improving economy.
During the 1980's, Metallurg obtained financing from several
sources. Pursuant to that certain credit agreement, dated as of July 31, 1986,
as amended (the "Credit Agreement") by and among Metallurg and certain of its
subsidiaries, on the one hand, and several financial institutions led by Morgan
Guaranty Trust Company (collectively, the "Banks"), on the other hand, Metallurg
and certain of its subsidiaries were able to borrow from the Banks on a
revolving basis. As of the Commencement Date, approximately $64 million was
outstanding under the Credit Agreement.
In addition, Metallurg entered into a $5 million note
agreement, dated as of September 13, 1989, with Deutsche Bank AG (which matured
on September 10, 1993) and a $6 million note agreement, dated as of February 11,
1991, with National Westminster Bank PLC (which matured on February 10, 1995)
(collectively, the "Bank Note Purchase Agreements").
Also, Metallurg obtained financing from various insurance
companies initially in the amount of approximately $25 million, in the
aggregate, arising from various note purchase agreements (collectively, the
"Insurance Company Note Purchase Agreements"). Specifically, Metallurg has had
outstanding obligations in the principal amount of $15 million to a group of
insurance companies, including CIGNA Investments, Inc. (maturing September 1,
1999), $6 million to a group of insurance companies, including Connecticut
General Life Insurance Company (maturing February 1, 1996), and $6 million to
the Canada Life Assurance Company (maturing October 1, 1999) (collectively, the
"Insurance Companies").
Several of the Banks issued irrevocable letters of credit at
the request of Metallurg and/or Shieldalloy aggregating approximately $17.8
million (the "Letters of Credit"). The New Jersey Department of Environmental
Protection (the "NJDEP") is the beneficiary of $16.2 million of the Letters of
Credit, and the United States Nuclear Regulatory Commission ("NRC") is the
beneficiary of $1.5 million of the Letters of Credit. The Freeholders of the
County of Cumberland, New Jersey are the beneficiaries of $115,000 of Letters of
Credit. For more information concerning the letters of credit, see Section IV.F.
below entitled "Events During the Chapter 11 Cases -- Draw Down on Letters of
Credit."
In mid 1992, Metallurg commenced negotiations with the Banks
for an extension of the terms of the Credit Agreement, which was due to expire
in July of 1993. As a result of the numerous economic factors which negatively
impacted the Metallurg Group's businesses, Metallurg was in default in certain
of the covenants in the Credit Agreement, the Bank Note Purchase Agreements and
the Insurance Company Note Purchase Agreements by late 1992. Metallurg entered
into negotiations with all of its lenders to obtain amendments to the various
agreements to cure such defaults and realistically restructure its debt
14
<PAGE>
in light of the projections for the upcoming fiscal periods for the Metallurg
Group's businesses. These negotiations continued until the end of July, 1993.
During the course of negotiations regarding the restructuring
of its debt, Metallurg did not make a $3 million principal payment due under the
Insurance Company Note Purchase Agreements on February 3, 1993. Metallurg
entered into a forbearance agreement with the Insurance Companies with respect
to this $3 million principal payment, pursuant to which the Insurance Companies
agreed to forbear from exercising any of their rights or remedies for a
specified period of time. The forbearance agreement was extended several times
and expired on May 28, 1993.
As a result of Metallurg's continuing cash shortage, Metallurg
ceased to pay interest on all of its outstanding debt obligations to the Banks
and the Insurance Companies on June 12, 1993. At the end of July of 1993,
Metallurg made one final restructuring proposal to the Banks and the Insurance
Companies, which the Banks and the Insurance Companies rejected.
During the first two weeks of August, 1993, Metallurg received
notices of default from the Banks and the Insurance Companies informing it of
the defaults under its various credit agreements and accelerating the respective
obligations thereunder.
Confronted with these obligations, the decrease in revenue
from its operating subsidiaries and the resultant cash shortages, the management
and Board of Directors of Metallurg determined that it, as well as its
subsidiary Shieldalloy, had no alternative but to seek the protections of
chapter 11 of the Bankruptcy Code
IV. EVENTS DURING THE CHAPTER 11 CASES
On September 2, 1993, the Debtors commenced the Chapter 11
Cases in the Bankruptcy Court. The Debtors continue to operate their businesses
and manage their properties as debtors in possession pursuant to sections 1107
and 1108 of the Bankruptcy Code.
The following is a brief description of some of the major
events during the Chapter 11 Cases.
A. APPOINTMENT OF THE CREDITORS' COMMITTEE
On September 13, 1993, the United States Trustee appointed the
Creditors' Committee to represent unsecured creditors of the Debtors. Since its
formation, the Creditors' Committee has consulted with the Debtors concerning
the administration of the Chapter 11 Cases. The Debtors have kept the Creditors'
Committee informed about their operations and have sought the concurrence of the
Creditors' Committee for actions and transactions taken outside of the ordinary
course of the Debtors' business. The Creditors' Committee has participated
actively, together with the Debtors' management and professionals, in, among
other things, reviewing the Debtors' business plan. In addition, the Creditors'
Committee appointed a "subcommittee" to negotiate with the Debtors regarding
various sensitive trade issues.
Pursuant to an order of the Bankruptcy Court, dated February
14, 1995, the Bankruptcy Court approved a procedure for the dissemination of
information to prospective buyers and sellers of claims asserted against the
Debtors in these chapter 11 cases. Consequently, there was significant trading
of claims against the Debtors, which resulted in a complete change in the
composition of the creditor constituency. Approximately ninety percent (90%) of
the dollar amount of claims (exclusive of environmental, intercompany and other
claims) asserted against the Debtors were acquired by five investors (the "New
Creditor Group"). Substantially all of the claims asserted by the members of the
Creditors' Committee were sold, thereby resulting in the resignation of such
members from the Creditors' Committee, with the exception of Midlantic National
Bank, and the subsequent appointment by the U.S. Trustee of the New Creditor
Group and a trade creditor to the Creditors' Committee.
The Creditors' Committee currently consists of seven (7)
members and includes representatives of each of the principal constituencies of
unsecured creditors of the Debtors -- the Banks, the Debtors' trade vendors and
suppliers, and
15
<PAGE>
unsecured claimholders. The current members(9) of, and the attorneys and
advisors retained by, the Creditors' Committee are set forth below:
CREDITORS' COMMITTEE
SBC Capital Markets, Inc. Mutual Series Fund, Inc.
45 Broadway Atrium 51 John F. Kennedy Parkway
New York, New York 10006 Short Hills, New Jersey 07078
Contrarian Capital Management, L.L.C. Cerberus Partners, L.P.
411 West Putnam Avenue 950 Third Avenue
Suite 225 New York, New York 10022
Greenwich, Connecticut 06830
Midlantic National Bank Morgans, Waterfall, Vintiadis
499 Thornall Street & Company, Inc.
Edison, New Jersey 08818 10 East 50th Street
26th Floor
New York, New York 10022
Amalgamated Metal Trading Ltd.
Adelaide House
Ground Floor
London Bridge, London
EC 4R9DT, England
ATTORNEYS
STROOCK & STROOCK & LAVAN
7 Hanover Square
New York, New York 10004
FINANCIAL ADVISOR
Policano & Manzo
Park 80 West, Plaza II
Suite 200
Saddle Brook, NJ 07662
B. STABILIZATION OF BUSINESS
The Debtors' business operations were in a state of
uncertainty as of the Commencement Date. Accordingly, during the initial stages
of the Chapter 11 cases, the Debtors focused significant energies on the
stabilization of their U.S. and foreign business operations.
- - --------
(9) Cambior Inc., National Westminster Bank PLC, Northwestern National Life
Insurance Company, Mitsui Co. (U.S.A.), Inc., Morgan Guaranty Trust Co. of NY,
Chemical Bank, Fesil KS, Deutsche Bank A.G., Kerr McGee Chemical Corp. and CIGNA
Investments, Inc. were formerly members of the Creditors' Committee.
16
<PAGE>
1. EMPLOYEE RELATED MATTERS
To maintain the continued support, cooperation and morale of
the Debtors' employees, the Debtors obtained authority to pay employees for
prepetition wages, salaries and other compensation and to continue to perform
under the Debtors' health and severance plans and policies. To ensure the
retention of key executives, the Debtors also obtained Bankruptcy Court approval
of an Executive Retention Plan which provides eligible executives of the Debtors
specific severance benefits in the event of their actual or constructive
dismissal. For a more complete discussion of the Executive Retention Plan, see
Section VIII.F. below entitled "Management of the Reorganized Debtors --
Executive Retention Plans."
2. DIP CREDIT FACILITY
In order for the Debtors to meet their working capital needs,
the Debtors entered into that certain Debtor In Possession Loan Agreement, dated
September 2, 1993, among the Debtors, as borrowers, Frankel Metal Company
("FMC") and Metallurg Services, Inc., as guarantors (the "Guarantors"), and
First National Bank of Boston ("FNBB"), as lender, pursuant to which FNBB agreed
to extend postpetition credit, including the issuance of letters of credit and
entry into foreign exchange contracts, in the aggregate amount up to $30 million
(as amended from time to time, the "DIP Facility"). The DIP Facility allowed
Metallurg and Shieldalloy to operate its business after the Commencement Date.
In the ordinary course of its business, Shieldalloy incurs obligations to
various domestic and foreign companies who supply raw materials essential to the
continued operation of its business. The DIP Facility provided the assurance
needed by the Debtors necessary for those suppliers to honor outstanding
purchase orders.
The Debtors entered into the Seventh Amendment to the DIP
Facility, dated as of August 11, 1995, with the Guarantors and FNBB which
provided for the extension of the term of the DIP Facility through the earlier
of (i) December 31, 1996 or (ii) the commencement of the substantial
consummation (as defined in section 1101 of the Bankruptcy Code) of a plan or
plans of reorganization and FNBB has agreed to provide the Debtors with a
continuing postpetition credit facility in the amount of up to $20 million. By
Motion, dated December 12, 1996, the Debtors are seeking Bankruptcy Court
approval further extending the term of the DIP Facility through substantial
consummation of the Plan.
3. COMMODITY FORWARD CONTRACTS
During the prepetition period, Metallurg, through its MIR
division, was an active participant in trading of aluminum, tin and nickel on
the London Metals Exchange ("LME"), as well as in private non-LME transactions.
In the ordinary course of its business, MIR entered into forward contracts with
various parties pursuant to which it agreed to sell, and purchase, aluminum, tin
and nickel for future delivery. The commencement of Metallurg's chapter 11 case
adversely impacted the continuation of this trading business. Specifically, the
LME brokers liquidated outstanding aluminum and tin positions pursuant to
alleged contractual rights of termination and certain trading counterparties
unilaterally repudiated outstanding aluminum contracts, thereby leaving MIR's
trading portfolio in a precariously unbalanced position and exposing Metallurg
to adverse fluctuations in market prices. Consequently, Metallurg's estate was
exposed to losses of as much as $200,000 per day depending on the actual price
fluctuations.
Accordingly, the Debtors obtained relief from the Bankruptcy
Court on September 21, 1993, which permitted Metallurg to hedge its exposure to
its open positions and terminate performance obligations under certain commodity
contracts, thereby limiting the estate's exposure to negative market
fluctuations and limiting any potential claims due to MIR's inability to meet
its performance obligations under certain contracts.
In addition, due to fluctuations of prices in the metals
commodities market, certain of the commodities contracts became unprofitable.
Therefore, the Debtors obtained authorization from the Bankruptcy Court on
February 14, 1994, to reject the unprofitable commodities contracts and fix the
damages arising thereunder.
17
<PAGE>
C. DEVELOPMENT AND IMPLEMENTATION OF BUSINESS PLAN
The Debtors have undertaken several initiatives which are
reflected in their business plan. Certain of these initiatives were commenced
prior to the Petition Date, the implementation of which has continued throughout
the course of these chapter 11 cases. These initiatives are summarized below.
The Metallurg Group has sought to refine its product mix
through the elimination of unprofitable or non-core products, expansion of
sources for its materials and development of new products. To that end, the
Metallurg Group has eliminated its trading of low margin products such as
aluminum and tin. In addition, the Metallurg Group has expanded its sourcing of
material from the CIS in products such as silicon metal, manganese metal and
silicochrome, as well as developed several new products such as titanium carbide
products, hydride alloys, and vanadium tetrachloride.
Metallurg has also pursued anti-dumping actions against
members of the CIS with respect to the export of low carbon ferrochrome by
members of the CIS and ferrovanadium by Russia. These anti-dumping actions have
resulted in the imposition of punitive duties in both cases.
Both prior to and in the course of developing the Business
Plan, Metallurg undertook an analysis of each of its business units. As a result
of such analysis, the Debtors determined to terminate several unprofitable
business operations, including tin operations in Brazil and ferrovanadium
operations in Germany. In addition, the Metallurg Group has sold certain of its
non-core assets, such as Metallurg's real estate holdings in New York City,
certain real estate in Turkey and the sale of its share in the Brazilian tin
consortium, EBESA. In reviewing its working capital requirements throughout the
world, the Metallurg Group has been able to attain significant inventory
reduction.
In the year ended December 31, 1995, the Metallurg Group
(excluding its German operations) reduced selling, general and administrative
expenses approximately 6% from its 1993 level. Metallurg has strengthened its
management with the addition and/or replacement of key people at Metallurg and
certain of its major operating and selling subsidiaries.
With respect to its sales and marketing efforts, the Metallurg
Group has opened sales offices in China and in Poland. In addition, it has
entered into new agency agreements with various producers, including Fesil,
Soconomar and Cambior. In an effort to secure continuing supplies of material
from the CIS and to expand its merchanted products, Metallurg purchased
approximately 5% of Solikamsk Magnesium Works. See Section IV.H. below entitled
"Events During the Chapter 11 Cases -- Purchase of Interest in Solikamsk
Magnesium Works." Through its English subsidiary, London & Scandinavian
Metallurgical Co., Ltd., the Metallurg Group has acquired the boron alloy
business of Elkem and exchanged its tantalum carbide business for the polishing
powder business of an Austrian metals producer. In addition, Metallurg purchased
Elektrowerk Weisweiler, GmbH from Gesellschaft fur Elektrometallurgie, GmbH. See
Section IV.G. below entitled "Events During the Chapter 11 Cases -- Purchase of
Elektrowerk Weisweiler, GmbH."
D. RETENTION OF WARRIOR INTERNATIONAL LTD. TO MARKET THE DEBTORS' ASSETS
In addition, with the cooperation of the Committee, the
Debtors determined that it was necessary to identify alternative sources of
capital to assist in funding a chapter 11 plan or plans of reorganization. To
that end, Metallurg retained Warrior International Ltd. ("Warrior") to assist
Metallurg in the process of identifying potential strategic investors who would
have an interest in purchasing some or all of Metallurg's assets. The Debtors
and Warrior completed an Information Memorandum following extensive discussions
with the Creditors' Committee to solicit its comments and suggestions for
circulation to potential strategic investors. The Information Memorandum
contained relevant material information concerning the Debtors' business
operations and the Metallurg Group. Warrior undertook the process of soliciting
strategic investors to acquire some or all of the assets of Metallurg, or in the
alternative, provide the Debtors with a much needed equity infusion. Warrior
provided potential investors the Information Memorandum. Notwithstanding
Warrior's efforts, potential investors were reluctant to make firm bids for some
or all of Metallurg's assets due to the outstanding environmental claims.
Warrior's retention expired in July of 1995.
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E. DISPOSITION OF REAL ESTATE ASSETS
As part of the Debtors' cost reduction plan, and in connection
with the administration of the Chapter 11 Cases, the Debtors closely examined
all of their real property interests. As a result of such analysis, the Debtors
determined that it was in the best interests of their estates and creditors to
sell certain premises which were no longer necessary in their business
operations and the sale of which could generate a significant amount of Cash to
be used to fund partially a plan of reorganization. Accordingly, on July 7,
1994, June 27, 1995, and December 21, 1995, respectively, the Debtors obtained
authorization to sell two buildings located at 25 East 39th Street, New York,
New York and 23 East 39th Street, New York, New York, and certain real property
located at 3690 North West Boulevard, Vineland, New Jersey. Approximately
$4,043,000 less $295,000 in brokerage commissions in net proceeds from the sales
of these properties were placed in escrow and will be used to fund the Plan. In
addition, by order, dated December 4, 1996, the Bankruptcy Court approved
Metallurg's sale of its headquarters building located at 27-29 East 39th Street,
New York, New York, for $3,600,000 in cash. The proceeds from the sale of such
building will be placed in escrow and will be used to fund the Plan.
F. DRAW DOWN ON LETTERS OF CREDIT
Shieldalloy is party to an Administrative Consent Order, dated
October 5, 1988, as amended and modified from time to time (the "ACO"), with the
NJDEP. The ACO requires evaluations, and where appropriate, remediation of
hazardous waste at the Newfield, New Jersey facility. Shieldalloy's obligations
under the ACO are secured by (i) a trust fund of approximately $8 million
representing the proceeds of the NatWest Bank letter of credit for soil,
surface, sediment and groundwater remediation; and (ii) letters of credit in the
amount of $8 million from Deutsche Bank and $200,000 from Midlantic National
Bank for compliance with the New Jersey Solid Waste Management Act.
With the NJDEP's approval and pursuant to its obligations
under the ACO and the New Jersey Solid Waste Management Act, during the second
half of 1995, Shieldalloy commenced the process of closing certain of its
impoundment lagoons. On May 18, 1995, one day before expiration, the NJDEP drew
down on the $8 million letter of credit from NatWest Bank. The proceeds from the
NatWest Bank letter of credit have been set aside in a trust and such proceeds
are excluded from the definition of the Cash Distribution Pool.
In connection with the implementation of the Plan and in
accordance with the United States and NJDEP Environmental Settlement Agreements
the cash proceeds derived from the $8 million letter of credit, dated as of
December 29, 1989, issued by Deutsche Bank AG for the benefit of the NJDEP; the
$8 million letter of credit, dated as of February 23, 1989 issued by National
Westminster Bank PLC; and the $200,000 irrevocable standby letter of credit,
dated as of June 3, 1986, issued by Midlantic Bank will be held by Mellon Bank
in a trust account (the "LOC Trust Account"). Finally, in connection with the
United States and NJDEP Environmental Settlement Agreement, the cash proceeds
derived from the $1.5 million letter of credit, dated as of July 18, 1990,
issued by Deutsche Bank AG in favor of the NRC will be held in a trust account
for the benefit of the NRC. SMC intends to replace the cash proceeds held in
trust for the benefit of the NRC with a letter of credit also issued for the
benefit of the NRC on substantially the same terms as the $1.5 million letter of
credit referred to above.
G. PURCHASE OF ELEKTROWERK WEISWEILER, GMBH
Pursuant to Bankruptcy Court approval, on July 4, 1996,
Metallurg purchased the 98% interest of Elektrowerk Weisweiler, GmbH ("EWW"), a
German subsidiary of Gesellschaft fur Elektrometallurgie, GmbH ("GfE"). EWW is
one of the world's major suppliers of low carbon ferrochrome and was previously
owned by GfE. GfE is the Metallurg Group's principal German manufacturing and
merchanting subsidiary. Metallurg believes that its direct ownership of EWW is
vital to the future profitability of the Metallurg Group. Metallurg purchased
all of the outstanding shares owned by GfE for approximately $6.5 million.
During the postpetition period, both EWW and GfE were involved
in substantial restructuring efforts. As a result of GfE's restructuring,
whereby it directed its resources to more profitable areas such as specialized
chemicals, metals and
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alloys, which products are significant to the overall profitability of the
Metallurg Group, GfE incurred substantial losses which depleted its equity base.
GfE received tremendous pressure from its local German bank creditors to
continue paying down its debt. Under the circumstances, GfE determined to sell
its interest in EWW.
H. PURCHASE OF INTEREST IN SOLIKAMSK MAGNESIUM WORKS
Pursuant to Bankruptcy Court approval, on August 21, 1996,
Metallurg, through an indirectly, wholly-owned Cyprus Subsidiary, purchased 5%
of the outstanding stock of Solikamsk Magnesium Works ("SMW") for $1,000,000.
SMW is a Russian based company that is the fourteenth largest producer of
magnesium metal in the world. SMW also produces other metallic products via the
processing of rare earth ores, specifically, tantalum oxide, niobium oxide,
titanium dioxide and rare earth chlorides and carbonates. In addition, SMW
manufactures chemicals and fertilizers as byproducts from its metals operations.
Metallurg and its Subsidiaries have been purchasing products from SMW since
1992.
The acquisition by Metallurg of a 5% interest in SMW will be
strategically beneficial to Metallurg because it will permit the Metallurg Group
to a secure continuing supply of materials from Russia. By acquiring the shares,
Metallurg hopes to strengthen its existing business ties with SMW.
I. SALE OF INTEREST IN FRANKEL METAL COMPANY
By order, dated December 4, 1996, the Bankruptcy Court
approved Shieldalloy's sale of its wholly-owned, non-Debtor Subsidiary, Frankel
Metal Company ("FMC"), to FMC's management for a purchase price in excess of
$3.7 million. FMC is a processor of titanium scrap which purchases products from
and sells products to the Metallurg Group. Shieldalloy funds Frankel's
operations through the Debtors' cash management system, and pursuant to security
agreements, dated April 30, 1994, Frankel granted the Debtors first priority
security interests in and liens on all of its assets to continue such financing.
As of November 13, 1996, Frankel was indebted to the Debtors
in the amount of approximately $3.6 million. The proceeds of the sale of FMC
will be applied to repay the outstanding loan made by the Debtors to FMC under
their cash management system, and will satisfy the liens in connection
therewith. Shieldalloy believes that the purchase price represents substantial
value to the estate and that the sale of FMC will provide for the disposition of
an asset which is not necessary and non-core to Shieldalloy's successful
reorganization.
J. SETTLEMENT OF MISCELLANEOUS CLAIMS AND MOTIONS
1. CLAIM OF SECURED PARTIES
During the pendency of the Chapter 11 Cases, Midlantic
National Bank ("Midlantic"), sought adequate assurance payments pursuant to
sections 361 and 363 of the Bankruptcy Code.
The parties were able to reach a final agreement which was
embodied in a stipulation and order which was signed by the Bankruptcy Court on
May 2, 1994. The settlement provided that the Debtors would pay (i) all contract
rate interest accrued on the principal amount outstanding under the New Jersey
Economic Development Authority Notes held by Midlantic from September 2, 1993
until May 2, 1994, (ii) monthly interest at the contract rate, and (iii) monthly
adequate protection payments of $15,000 from September 1, 1994 through December
1, 1994 and, thereafter, monthly adequate protection payments in the amount of
scheduled depreciation of Shieldalloy's machinery and equipment as provided in
the stipulation and order, which payments would reduce the outstanding principal
amount under the New Jersey Economic Development Authority Notes. Under the
stipulation and order, Midlantic (i) agreed to defer all late fees and default
rate interest without waiving same and (ii) was granted a superpriority
administrative expense claim to the extent that payments received or equity in
the property ultimately proved to be insufficient to satisfy its Claim.
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As a result of the monthly adequate protection payments made
to Midlantic under the stipulation and order, the Debtors estimate that the
principal amount of the New Jersey Economic Development Authority Notes held by
Midlantic will be approximately $766,000 as of the Effective Date.
As set forth in the Plan, the Debtors and Midlantic have
agreed that on the Effective Date of the Plan, or as soon thereafter as is
practicable, Midlantic will receive in Cash the full amount of Midlantic's
Allowed Secured Claim.
2. CLAIMS OF UNSECURED PARTIES
Certain unsecured creditors have taken actions to obtain
payment of their claims during the pendency of the Chapter 11 Cases.
The Debtors have also entered into compromises and settlements
of the claims of certain creditors for reclamation of goods pursuant to section
2-702 of the Uniform Commercial Code and section 546(c) of the Bankruptcy Code.
In accordance with the Plan, the Debtors will grant to such creditors Allowed
Administrative Expense Claims in the amount of one hundred percent (100%) of
their reclamation claims.
3. SUBORDINATION OF MANAGEMENT FEES
In the ordinary course of its business and pursuant to
separate management service contracts with its direct and indirect subsidiaries,
including GfE and EWW, Metallurg charges a management fee, which is intended to
allocate expenses incurred by Metallurg for providing certain management
services to Metallurg Group members, including advice and consultation with
respect to personnel, accounting and legal matters, information services, and
financial and operational functions. Through Metallurg Services, Inc. ("MSI"), a
wholly-owned subsidiary of Metallurg, Metallurg charges GfE and EWW, as well as
other members of the Metallurg Group, for management services. These management
fees are remitted quarterly to MSI, which, in turn, remits said fees to
Metallurg net of a processing charge.
GfE and EWW were charged approximately $500,000 per annum by
MSI for management services provided by Metallurg to GfE and EWW.
During the postpetition period, both EWW and GfE were engaged
in restructuring efforts. EWW succeeded in negotiating a consensual
restructuring, wherein it received concessions from its local utility and the
German pension insurance company, and a guaranty of eighty percent (80%) of its
bank debt from the local government. A condition of this agreement was, however,
that Metallurg, through MSI, release EWW from the obligation to pay $557,000 in
accrued management fees. Accordingly, Metallurg obtained authorization from the
Bankruptcy Court, pursuant to section 363 of the Bankruptcy Code, to waive the
management fees, on February 14, 1994.
As a result of GfE's substantial restructuring, whereby it
directed its resources to more profitable areas such as specialized chemicals,
metals and alloys, GfE incurred substantial losses which depleted its equity
base. As a result of its financial position, GfE had been legally unable to
remit payment of any management fees since 1992. Consequently, GfE accrued
liabilities to MSI in the aggregate amount of approximately DM 2.1 million or
$1.4 million and was not likely to remit payment to MSI in the foreseeable
future. Accordingly, Metallurg obtained authorization from the Bankruptcy Court
allowing Metallurg to authorize MSI to agree to subordinate certain liabilities
owed to it by GfE, in respect of accrued and accruing unpaid management fees, to
all other liabilities of GfE.
4. SETTLEMENT OF SERP CLAIMS
Unless otherwise specifically agreed between Metallurg and the
Metallurg executive officer, all of Metallurg's supplemental executive
retirement plans and arrangements ("SERP"), including the Management Benefit
Plan, will be rejected under the Plan as of the Effective Date. Claims arising
from the rejection of these plans, including prepetition and postpetition
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accruals thereunder, will be allowed, without duplication, in accordance with
their respective priorities under the Bankruptcy Code and calculated using a
discount rate of seven and one-half percent (7.5%) and other actuarial
assumptions used with respect to the Pension Plan.
5. SETTLEMENT OF UNION CONTRACTS
On May 23, 1994, Shieldalloy entered into a successor
collective bargaining agreement (the "1994 UAW CBA") with Local 2327 of the
International Union United Automobile, Aerospace and Agricultural Implement
Workers of America ("UAW"), which had succeeded in the interest of District 65
UAW, the union representing certain of the employees at Shieldalloy's Newfield,
New Jersey facility. Among the items agreed to between Shieldalloy and Local
2327 UAW during the negotiations of the 1994 UAW CBA was Shieldalloy's
withdrawal as a participating employer from District 65 Pension Plan, a
multiemployer pension plan. The successor collective bargaining agreement
expired on May 24, 1996. On May 25, 1996, Shieldalloy entered into a successor
collective bargaining agreement with UAW (the "1996 UAW CBA"). Shieldalloy,
Local 2327 UAW and the Board of Trustees of the District 65 Pension Plan agreed
that the effective date of Shieldalloy's withdrawal from District 65 Pension
Plan would be deemed to be January 1, 1994. By settlement agreement, dated
November 5, 1996, the Debtors and District 65 Pension Plan fixed the amount and
priority of the claims of District 65 Pension Plan against Shieldalloy. For a
discussion of the settlement with District 65 Pension Plan, see Section V.6.
below entitled "Settlement of Multiemployer Pension Claims."
In addition, on June 11, 1994, Shieldalloy entered into a
successor collective bargaining agreement with the United Steelworkers of
America, AFL/CIO, Local Union 5050 ("USW"), the union representing certain of
its employees at Shieldalloy's Cambridge, Ohio facility. The June 11, 1994
agreement is scheduled to expire on June 10, 1998. Pursuant to a memorandum of
agreement, dated June 13, 1996 (the "1996 USW Agreement"), Shieldalloy and USW
modified the June 11, 1994 agreement with respect to wages and fringe benefits.
The Debtors intend to seek Bankruptcy Court approval of the 1996 UAW CBA and the
1996 USW Agreement prior to confirmation.
6. SETTLEMENT OF MULTIEMPLOYER PENSION CLAIMS
Prior to entering into the 1994 UAW CBA, Shieldalloy was a
party to a collective bargaining agreement with Local 2327 UAW, the union
representing certain employees at Shieldalloy's facility in Newfield, New
Jersey. That prior collective bargaining agreement required that Shieldalloy
contribute to the District 65 Pension Plan, a multiemployer pension plan that
provides benefits to eligible employees of contributing employers. Shieldalloy
withdrew from the District 65 Pension Plan effective January 1, 1994.
On or about August 12, 1994, District 65 Pension Plan filed a
proof of claim against Shieldalloy, dated August 3, 1994, in the amount of
$2,390,000 ("Claim 291"), asserting a claim for individual employer withdrawal
liability under the Employee Retirement Income Security Act of 1974, 29 U.S.C.
ss.ss. 1101 et seq., as amended by the Multiemployer Pension Plan Amendment Act
of 1980, 29 U.S.C. ss. 1381 et seq. (collectively, "ERISA"). At the time
District 65 Pension Plan filed Claim 291 (and thereafter), it had been
experiencing financial difficulties. Specifically, District 65 Pension Plan did
not satisfy certain minimum funding obligations under ERISA and the Internal
Revenue Code ("IRC") for Pension Plan years ending on January 31, 1993 and
January 31, 1994 (the "Minimum Funding Deficiencies"). Further, District 65
Pension Plan experienced a mass withdrawal from District 65 Pension Plan
effective as of January 31, 1995 (the "Mass Withdrawal").
Subsequent to the Bar Date, on or about June 6, 1996, District
65 Pension Plan filed an amended proof of claim against Shieldalloy ("Claim
367"), asserting, among other things, claims for individual employer withdrawal
liability, and liability for Mass Withdrawal and Minimum Funding Deficiencies
under ERISA and the IRC, in an amount of at least $6.5 million. On or about the
same date, District 65 Pension Plan also filed a proof of claim against
Metallurg (the "Claim 366"), asserting against Metallurg the same claim that it
asserted against Shieldalloy in Claim 367 in the amount of at least $6.5 million
because section 4001(b)(i) of ERISA provides for joint and several liability of
the Claims with respect to all entities under "common control."
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Based on various legal theories, the Debtors filed objections
to the allowance, in whole or in part, of Claim 367 (the "Claim 367 Objection")
and Claim 366 (the "Claim 366 Objection"). District 65 Pension Plan responded
by: (i) filing a motion with the District Court to withdraw the reference to the
Bankruptcy Court with respect to the Claim 367 Objection, (ii) filing a motion
with the Bankruptcy Court for an order staying the proceedings relating to the
Claim 367 Objection, and (iii) filing a memorandum of law with this Court
opposing the Claim 366 Objection (the "Pension Plan Opposition"). The Debtors
responded to the Pension Plan Opposition by filing a reply with this Court on
September 30, 1996.
In addition to asserting Claims 291, 366 and 367 against the
Debtors, the District 65 Pension Plan has also asserted such claims against the
Debtors' non-Debtor subsidiaries (the "Non-Debtor Subsidiaries") pursuant to
section 4001(b)(i) of ERISA which provides for joint and several liability for
such Claims with respect to all entities under "common control."
After extensive arms-length negotiations, and to resolve
potentially costly and protracted litigation over this dispute, the Debtors
entered into, subject to Bankruptcy Court approval, that certain Complete and
Permanent Release and Settlement Agreement, dated November 5, 1996 (the
"District 65 Settlement Agreement"). Pursuant to the District 65 Settlement
Agreement, (i) Claim 367 will be reduced and allowed against Shieldalloy as a
general unsecured Claim in the amount of $5 million (the "Multiemployer Pension
Claim"), (ii) Claim 366 filed against Metallurg will be disallowed and expunged
in its entirety, (iii) the Debtors and the Non-Debtor Subsidiaries (except for
the Non-Debtor Subsidiaries located in the United Kingdom) will receive a
release of all claims of District 65 Pension Plan (except that Shieldalloy will
not be released from the general unsecured claim of $5 million), and (iv)
Metallurg will pay or cause the non-Debtor Subsidiaries to pay $50,000 to
District 65 Pension Plan. Under the Plan, the Multiemployer Pension Claim is
classified under Class 4E. For a discussion of the treatment of Class 4E under
the Plan, see Section VI.B.18 below entitled "The Plan of Reorganization
- - --Classification and Treatment of Claims and Equity Interests -- Class 4F --
Environmental Settlement Agreement Claims."
By order, dated November 26, 1996 (the "Approval Motion"), the
Bankruptcy Court approved the District 65 Settlement Agreement.
7. OBJECTIONS TO CLAIMS
Throughout the Chapter 11 Cases, the Debtors continued their
efforts to analyze and reconcile proofs of claim filed in their cases. In
furtherance thereof, the Debtors filed four omnibus claims objections.
Pursuant to their first omnibus objection, the Debtors sought
to disallow and expunge (i) sixteen duplicate claims filed against the Debtors,
(ii) nine claims superseded by subsequently filed claims, and (iii) seven claims
filed after the Bar Date. By order, dated December 23, 1994, the Bankruptcy
Court granted the relief sought in the Debtors' first omnibus objection.
Pursuant to their second omnibus objection, the Debtors sought
(i) to expunge twenty-two claims improperly filed against one Debtor and deem
such claims to have been properly filed against the other Debtor, (ii) to
disallow and to expunge, or reduce in amount, twenty-six claims asserted in
amounts in excess of the Debtors' books and records, and (iii) to reclassify
seventeen claims improperly asserted as other than a general unsecured claim. As
to all but three claims, by order dated May 17, 1995, the Bankruptcy Court
granted the relief sought in the Debtors' second omnibus objection.
Pursuant to their third omnibus objection, the Debtors
objected to nineteen proofs of claim improperly asserted against Shieldalloy for
contribution in connection with the cleanup of the Metamora Superfund site. By
Stipulation and Order, dated November 5, 1996, all of the claims were disallowed
and expunged in their entirety with prejudice.
Pursuant to their fourth omnibus objection, the Debtors sought
(i) to disallow and expunge five duplicate claims filed against the Debtors,
(ii) to disallow and expunge thirteen amended claims superseded by subsequently
filed claims, (iii) to expunge two claims improperly filed against the wrong
Debtor and treat them as filed against the other Debtor, (iv) to disallow and
expunge, or reduce in amount, seventeen claims asserted in amounts in excess of
the amounts in the Debtors' books and
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records, (v) to reclassify nine claims improperly asserted as other than general
unsecured claims, and (vi) to disallow and expunge twenty-two claims for which
the Debtors have no liability because the claims were either satisfied
subsequent to the Petition Date pursuant to a Court order, asserted postpetition
liabilities of the Debtor which were satisfied in the ordinary course of
business, or because the Debtors' books and records indicate that, as of the
Petition Date, no sums were due and owing the claimants. As to all but four
claims, by order dated December 4, 1996, the Bankruptcy Court granted the relief
sought in the Debtors' fourth omnibus objection. The Debtors have consensually
resolved two of these claims and anticipate the consensual resolution of the
remaining two claims.
In an objection to a proof of claim filed on behalf of a class
of plaintiffs, the Debtors obtained a court order, dated March 1, 1996,
expunging and disallowing a wrongly asserted claim against Shieldalloy for
asserted cleanup costs for hazardous waste. The Debtors also filed numerous
other objections to proofs of claim fixing, liquidating, reclassifying and
expunging various other claims, including, pension claims, medical claims, and
environmental claims.
8. OBJECTION TO FORMER PREFERRED STOCKHOLDER CLAIMS
On or before December 29, 1996, the Creditors' Committee
intends to file an objection to all Claims scheduled by Metallurg on behalf of,
or filed by, Former Preferred Stockholders, seeking to expunge and disallow such
Claims, or in the alternative, to equitably subordinate such Claims to Claims of
all other creditors of Metallurg or to reclassify such Claims as Equity
Interests in Metallurg not entitled to any distributions under Class 4D of the
Plan. Therefore, those Former Preferred Stockholders who do not elect to
participate in the FPS Settlement will have to file a response to the Creditors'
Committee's objection and litigate the merits of their Claims. If no response is
filed to the Creditors' Committee's objection, such Former Preferred
Stockholder's Claim will be expunged in its entirety and entitled to no
distribution under the Plan. If the Creditors' Committee's objection to the
Former Preferred Stockholder's Claim is overruled by the Bankruptcy Court, then
such Claim will be treated as an Allowed Claim in Class 4A (MI Unsecured Claims)
of the Plan and entitled to distribution as provided for under the Plan. For
information concerning the history and background of the Former Preferred
Stockholder Claims, see Section V.A. below entitled "Compromises and Settlements
of Certain Claims Under the Plan -- Former Preferred Stockholders."
9. THE MADDEN CLASS ACTION CLAIM
Prior to the Petition Date, on December 17, 1990, Patricia and
James Madden (the "Maddens") commenced an action in New Jersey State Superior
Court against Shieldalloy and certain additional defendants, styled as Madden v.
Shieldalloy Corp., et al., Docket No. W-015394 (the "New Jersey Action") on
behalf of themselves, and as the representatives of a putative class of
approximately 82 claimants, asserting personal injury tort claims and property
claims for damages allegedly caused by, among other things, Shieldalloy's
release of chemicals into the vicinity surrounding Shieldalloy's Newfield, New
Jersey facility. On July 25, 1995, the New Jersey Superior Court dismissed the
New Jersey Action without prejudice.
Although one of the Debtors' primary insurers has assumed full
responsibility for defending the New Jersey Action, that insurer and others have
(i) reserved their rights with respect to the payment of any judgment against
the Debtors obtained as a result of the New Jersey Action pending resolution of
the Coverage Action (as defined below) and (ii) simultaneously contested that
the Debtors have insurance coverage in a separate lawsuit commenced on July 24,
1990 in the Superior Court of New Jersey, styled as Metallurg, Inc. and
Shieldalloy Metallurgical Corporation v. Allstate Insurance Co., et al. Docket
No. L001855-90 (the "Coverage Action").
On or about August 15, 1994, the Maddens filed a proof of
claim (the "Madden Proof of Claim") in their own behalf and as parents and
natural guardians of their minor children, Lance Madden, Ryan Madden, Danielle
Madden and Michael J. Madden for themselves and all similarly situated parties
as described in the New Jersey Action (the "Madden Claimants"), asserting
unliquidated unsecured claims against the Debtors based on the allegations
contained in the complaint filed in the New Jersey Action. It is also stated in
the Madden Proof of Claim that counsel to the Madden Claimants was authorized to
submit individual claims on behalf of these parties and their children
specifically identified in Exhibit A to the
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Madden Proof of Claim (the "Individual Claimants", and collectively with the
Madden Claimants, the "Claimants"). By objection, dated July 17, 1996,
Shieldalloy objected to the Madden Proof of Claim and requested that alleged
claims therein be disallowed and expunged or, in the alternative, estimated (the
"Estimation Motion"). In response to Shieldalloy's objection, the Claimants (i)
moved for relief from the automatic stay to reinstate the New Jersey Action
(which had been dismissed without prejudice pending resolution of the Madden
Proof of Claim by the Bankruptcy Court) (the "Madden Stay Motion"), and (ii)
responded to Shieldalloy's objection arguing that the relief therein should be
denied or that the Bankruptcy Court should abstain pursuant to 28 U.S.C. ss.
1334(c). On November 1, 1996, the Debtors filed a reply and requested that the
Bankruptcy Court estimate the Madden Proof of Claim at $0 for plan confirmation
purposes pursuant to section 502(c) of the Bankruptcy Code.
The Debtors believe that the Claimants will account for all of
the Allowed Claims in Classes 5 and 6 of the Plan. The Debtors have reached an
agreement (the "Madden Agreement") with the Claimants concerning modification of
the automatic stay and the ability of the Madden Claimants to recover against
the Debtors in the event a final judgment is obtained in the New Jersey Action.
In accordance with the Madden Agreement and pursuant to the treatment allowed
under Classes 5 and 6 of the Plan, the Claimants will be permitted to pursue the
New Jersey Action against Shieldalloy and obtain payment from the insurance
company or insurance companies which issued the insurance policy or policies
(the "Insurance Policy") for the benefit of Shieldalloy. Upon confirmation of
the Plan, the automatic stay will be vacated to allow for the reinstatement and
continuation of the New Jersey Action against the Debtors solely for the purpose
of determining the liability and/or damages of the Debtors relating to the New
Jersey Action. In the event the insurance proceeds available under the Insurance
Policy are insufficient to cover a final judgment obtained against Metallurg
(the "Metallurg Deficiency Claim"), the Claimants will hold the Metallurg
Deficiency Claim against Metallurg. In the event the insurance proceeds
available under the Insurance Policy are insufficient to cover a final judgment
obtained against Shieldalloy (the "Shieldalloy Deficiency Claim"), the Claimants
will hold the Shieldalloy Deficiency Claim against Shieldalloy. The holder of
the Metallurg Deficiency Claim will be entitled to a cash distribution by the
Reorganized Debtors in an amount equal to the recovery payable to holders of
Allowed Claims against Metallurg classified as Class 4A under the Plan. The
holder of the Shieldalloy Deficiency Claim will be entitled to a cash
distribution by the Reorganized Debtors in an amount equal to the recovery
payable to holders of Allowed Claims against Shieldalloy classified as Class 4C
under the Plan. For example, the holder of the Metallurg Deficiency Claim will
receive a distribution of approximately 66% in cash and the holder of the
Shieldalloy Deficiency Claim will receive a distribution of approximately 30.9%
in cash. The holder of both the Metallurg Deficiency Claim and Shieldalloy
Deficiency Claim will receive approximately 96.9% in cash of the aggregate
amount of both Claims. The Claimants will receive no distributions under the
Plan on account of the Metallurg Deficiency Claim or the Shieldalloy Deficiency
Claim. In the event that the Plan is not confirmed, the Madden Stay Motion will
be reinstated and scheduled for a hearing before the Bankruptcy Court within 30
days of February 20, 1997.
The Debtors intend to seek Bankruptcy Court approval of the
Madden Agreement prior to the Confirmation Hearing on notice to all of the
Claimants. In conjunction therewith, the Debtors intend to amend the Reply to
request that the Claims asserted on behalf of the Maddens and the Individual
Claimants in the Madden Proof of Claim be estimated as one Claim at $1 for
voting purposes under each of Classes 5 and 6 of the Plan. In that regard, the
Debtors anticipate filing a motion to approve the Madden Agreement on or before
January 10, 1997. The Debtors further anticipate that a hearing to approve the
Madden Agreement will be held before the Bankruptcy Court on or about February
5, 1997 at 11:00 a.m.
In the event the Madden Agreement is not approved by the
Bankruptcy Court, the Debtors intend to move forward with the Estimation Motion,
pursuant to which the Debtors will seek to have the Madden Proof of Claim
estimated by the Bankruptcy Court at zero for reserve purposes under the Plan
and will seek to cramdown on Classes 5 and 6 pursuant to 11 U.S.C. ss.
1129(b)(2)(B).
25
<PAGE>
V. COMPROMISES AND SETTLEMENTS OF CERTAIN CLAIMS UNDER THE PLAN
Pursuant to section 1123(b)(3)(A) of the Bankruptcy Code, the
Debtors have provided in the Plan for the settlement of their controversies with
the Former Preferred Stockholders and the Environmental Authorities.
In accordance with Bankruptcy Rule 9019, at the Confirmation
Hearing, the Debtors will request that the Bankruptcy Court approve the
settlements embodied in the Plan. The approval of the settlements by the
Bankruptcy Court will entail consideration of certain factors to determine
whether such settlements are in the best interests of the Debtors' estates.
Among the determinative factors to be considered are:
o the probability of success in the litigation;
o the complexity of the litigation and the expenses,
inconveniences and delays necessarily attendant to the
prosecution of the litigation;
o the difficulties, if any, to be encountered in the collection
of any judgment that might be obtained; and
o the interests of the debtor's estate including those of the
creditors and other parties in interest with appropriate
deference to the reasonable views expressed by them in
relation to the proposed settlement.
A. FORMER PREFERRED STOCKHOLDERS
The Former Preferred Stockholders have Claims of approximately
$25 million in the aggregate. These Claims arise from the purported redemption
of preferred stock of Metallurg by former and current employees of Metallurg
and/or its affiliates prior to the Commencement Date. The issuance of preferred
stock was made following a recapitalization program in which the outstanding
securities of Metallurg were exchanged for preferred stock representing an
allocable share of the value of Metallurg built up pursuant to shareholder
repurchase agreements, and new common stock. Upon leaving the company,
retirement or death, the common and preferred stock would be repurchased by
Metallurg, to be paid, at Metallurg's option, either as a lump sum or over a
10-year period.
In addition, in order to prevent certain key employees from
leaving the company and tendering their common and preferred stock at a time
when Metallurg was involved in negotiations with its institutional lenders in an
effort to restructure approximately $100 million of Metallurg's debt, Metallurg
entered into new agreements whereby employees who held preferred stock of
Metallurg were allowed to tender same for its accrued value to be paid out over
a 10-year period, and would be allowed to retain their common stock. In exchange
for the right to redeem the preferred stock, the employees were required to
remain with Metallurg or its affiliates for five years.
Throughout these chapter 11 cases, the Creditors' Committee
has opposed any distribution to the Former Preferred Stockholders on account of
Claims arising from the redemption of preferred stock of Metallurg on the basis
that the Former Preferred Stockholder Claims should be treated as equity which
should not retain an interest under the Plan. On the other hand, certain Former
Preferred Stockholders have asserted that their Claims should not be treated as
equity because (i) they arise from rights to payment under shareholders'
agreements that required the repurchase of preferred stock under certain
circumstances, or (ii) the preferred stock, notwithstanding its designation as
such, was never in the nature of an equity instrument, but rather an agreement
under which employees were to receive deferred incentive compensation. The
Creditors' Committee believes that if the Claims of the Former Preferred
Stockholders are treated as Allowed Claims rather than equity, such Claims
should be equitably subordinated to all other creditors.
Metallurg's management, on behalf of the Former Preferred
Stockholders, engaged in extensive negotiations with the Creditors' Committee
regarding the resolution of these Claims and as a consequence thereof, entered
into the FPS Settlement Agreement which is incorporated into the Plan.
26
<PAGE>
Pursuant to the FPS Settlement Agreement, each Settling Former
Preferred Stockholder will have the right to elect to receive either (i) its Pro
Rata Share of Cash in the amount of $750,000 (the "FPS Settlement Cash Option")
or (ii) its Pro Rata Share of 150,000 shares (approximately three percent (3%))
of the New Common Stock of Reorganized Metallurg (the "FPS Settlement Stock
Option"). All Former Preferred Stockholders who elect to accept the FPS
Settlement Amount on the enclosed election form or enter into a stipulation with
the Debtors and the Committee to accept the FPS Settlement will be deemed to
hold Allowed Claims in Class 4D of the Plan.
The Creditors' Committee believes that the Former Preferred
Stockholder Claims, if litigated, would almost certainly be disallowed.
According to the Creditors' Committee, such treatment is anticipated for two
reasons: (i) the formalities necessary for conversion of the preferred stock
were never completed as to the majority of Former Preferred Stockholders, and
(ii) Metallurg, under New York state law, was prohibited from redeeming the
preferred stock if it was insolvent at the time of redemption or was thereby
rendered insolvent. Moreover, because conversion was not for reasonably
equivalent value, the Former Preferred Stockholder Claims may be avoidable as
fraudulent transfers.
Even if the Claims are found to be valid, the Creditors'
Committee believes the Bankruptcy Court will equitably subordinate the Claims
because of the policy underlying the Bankruptcy Code that redemption debt should
come behind general creditors because of the priority creditors enjoy in
bankruptcy over stockholders.
The Plan incorporates the FPS Settlement Agreement which
resolves various and complex issues concerning the Claims asserted by Former
Preferred Stockholder.
Despite the belief of the Creditors' Committee as to the
treatment of the Former Preferred Stockholder Claims, it remains a litigable
issue, the outcome of which is not certain. In addition, the cost of litigating
the issue will be substantial and time-consuming. Therefore, the Debtors and the
Creditors' Committee believe that the FPS Settlement Agreement comprises a
reasonable settlement of the validity and priority of the Claims and is in the
best interest of the Debtors' estates.
Any Former Preferred Stockholder who wants to accept the FPS
Settlement must elect on the enclosed election form to release, compromise and
settle all Claims on account of Old Preferred Stock issued by Metallurg. Any
Former Preferred Stockholder who does not make this election on the enclosed
election form will not have an Allowed Class 4D Claim and will not receive its
Pro Rata distribution on account thereof. Instead, such Former Preferred
Stockholder's claim on account of the Old Preferred Stock will be the subject of
an objection to be filed by the Creditors' Committee. Pending the resolution of
the Creditors' Committee's objection, the Former Preferred Stockholder will be
deemed to have a Disputed Claim in Class 4A of the Plan and appropriate reserves
will be made in accordance with Section 11.3 of the Plan.
B. SETTLEMENT WITH HOLDERS OF ENVIRONMENTAL CLAIMS
1. BACKGROUND ON ENVIRONMENTAL CLAIMS
Shieldalloy operates manufacturing facilities in Newfield, New
Jersey and Cambridge, Ohio that produce alloys and other products. The
manufacture of various alloy products at the two facilities has resulted in the
production of byproducts, including slags, drosses, baghouse dust and
wastewater. Shieldalloy has cleanup obligations under federal and state
environmental laws and regulations stemming from historic generation of these
byproducts at Newfield and Cambridge.
These cleanup obligations are under the jurisdiction of
various federal and state regulatory authorities, including the NRC, the United
States Environmental Protection Agency (the "USEPA"), the United States
Department of Interior ("DOI"), the NJDEP, the State of Ohio Environmental
Protection Agency (the "Ohio EPA"), and the Ohio Department of Health ("ODH").
During the course of the chapter 11 cases, Shieldalloy has conducted extensive
sampling and investigation
27
<PAGE>
to assess environmental conditions at its Newfield and Cambridge facilities and
to evaluate the feasibility of various remedial alternatives. The results of
this work, titled Remedial Investigations and Feasibility Studies ("RI/FS"),
have been submitted to the applicable Environmental Authorities. Although final
remedy selection is still subject to state approval, Shieldalloy believes it
will be able to fund likely capital costs at Cambridge and Newfield out of cash
flow and the financial assurance provided to the Environmental Authorities
pursuant to the Environmental Settlement Agreements.
2. THE NEWFIELD, NEW JERSEY SITE
Shieldalloy owns and operates the Newfield facility. As a
result of past and present manufacturing operations, Shieldalloy's Newfield
facility has generated slag and other byproducts. Slag is a rock-like byproduct
of the alloy manufacturing process.
a. The NRC
One of the products manufactured by Shieldalloy at Newfield is
ferrocolumbium. Due to the presence of low levels of naturally occurring thorium
and uranium in the raw material used to make ferrocolumbium, portions of the
Newfield facility are subject to regulation by the NRC. Specifically, the
Newfield facility has a slag pile that contains naturally occurring low levels
of radioactivity and is regulated as "source material" under the Atomic Energy
Act. The Newfield NRC license allows the slag pile to remain in place
indefinitely, subject to submission of a conceptual decommissioning plan and
financial assurance for implementation of that plan, as long as Shieldalloy
continues to produce ferrocolumbium.
During the course of its chapter 11 case, Shieldalloy has
extensively explored and located various alternatives for the sale or
disposition of some of the slag located at the Newfield facility and continues
to explore opportunities. Shieldalloy continues to explore opportunities for the
sale of certain of the slag located at the Newfield facility. NRC personnel
responsible for Newfield have taken the position at public meetings that the
slag pile does not pose a threat to human health or the environment.
The amount of financial assurance required and available under
the existing NRC license and decommissioning plan is $750,000. Decommissioning
of the site is secured by a letter of credit in the amount of $1.5 million,
which covers both the Newfield and Cambridge facilities. On or before the
Effective Date, Shieldalloy anticipates that the NRC will draw down on the $1.5
million letter of credit. The proceeds have been set aside in a trust and such
proceeds are excluded from the definition of Cash to be distributed under the
Plan. The Newfield NRC license has been in the renewal process for almost ten
years. Shieldalloy has requested that the NRC have a letter of credit issued for
its benefit in exchange for a repayment of the cash in the trust fund.
b. The NJDEP
In addition to regulatory requirements associated with
NRC-regulated manufacturing activities, Shieldalloy is also party to an
Administrative Consent Order, dated October 5, 1988, as amended and modified in
1991 (the "1988 New Jersey ACO"), with the NJDEP. The 1988 New Jersey ACO
incorporates Shieldalloy's obligation to conduct a remedial investigation and
feasibility study of remedial action alternatives to remedy ground water
contamination at the Newfield facility and hydraulically down gradient thereof
pursuant to a prior ACO dated September 5, 1984 (the "1984 New Jersey ACO"). The
1988 New Jersey ACO requires evaluation, and where appropriate, remediation of
certain environmental conditions at the Newfield facility pursuant to
requirements of the New Jersey Water Pollution Control Act and the New Jersey
Solid Waste Management Act, and the regulations promulgated pursuant thereto.
These activities include the closure of nine wastewater lagoons, soil
remediation, surface water and sediment cleanup, as well as miscellaneous
operation and maintenance activities and onsite controls.
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<PAGE>
Shieldalloy's obligations under the 1984 New Jersey ACO and
1988 New Jersey ACO are secured by the Environmental Letters of Credit. On May
18, 1995, the NJDEP drew down on Environmental Letters of Credit totalling $8
million. On or prior to the Effective Date, Shieldalloy anticipates that the
NJDEP will draw down on the remaining $8.2 million of Environmental Letters of
Credit issued by Deutche Bank ($8 million) and Midlantic Bank ($200,000). The
proceeds from the letters of credit have been set aside in a trust and such
proceeds are excluded from the definition of the Cash to be distributed under
the Plan.
Throughout the bankruptcy, Shieldalloy has been engaged in
negotiations with the USEPA and the NJDEP concerning the completion of
Shieldalloy's obligations under the 1988 New Jersey ACO. Shieldalloy has
conducted extensive sampling and submitted a series of reports to the State of
New Jersey. Most recently, Shieldalloy submitted a final draft RI/FS proposing
remedial alternatives for the remaining elements of the Newfield site cleanup.
The actual remediation of groundwater at Newfield has been ongoing for a number
of years and the identification of remedies for the closure of the lagoons has
been completed as well. Phase I closure of six lagoons is completed and Phase II
work on the remaining three lagoons could begin as early as the summer of 1997.
The RI/FS for Newfield proposes a range of remedial alternatives.
The United States and NJDEP Environmental Settlement Agreement
dedicates over $21 million in proceeds of a combination of Cash and letters of
credit to these remedial activities. Accordingly, Reorganized Shieldalloy will
continue to comply with the obligations under the 1988 New Jersey ACO, with the
foregoing proceeds together with Cash from operations to satisfy applicable
state financial assurance requirements. For a more detailed discussion of the
United States and NJDEP Environmental Settlement Agreement, see Section V.B.7.
below entitled "Compromises and Settlements of Certain Claims Under the Plan --
Settlement with Holders of Environmental Claims."
3. THE CAMBRIDGE, OHIO SITE
In 1987, Shieldalloy purchased the Cambridge manufacturing
facility from Foote Mineral Company ("Foote"). Foote began operations at the
Cambridge facility in 1953. Cyprus Foote Mineral Company ("Cyprus Foote") is the
successor in interest to Foote.
a. The NRC
As a result of historic alloy manufacturing processes
conducted since 1953, piles of slag (the "east" and "west" slag piles) have
accumulated at the Cambridge facility. A portion of the slag at the Cambridge
site is a byproduct of ferrocolumbium production from a former operator of the
Cambridge site. Foote and a predecessor company used columbium-containing ore to
manufacture ferrocolumbium from the late 1950s until 1972. As is the case at
Newfield, ferrocolumbium production at Cambridge was regulated by the NRC due to
naturally occurring thorium and uranium in the columbium ore used as a raw
material. Upon its purchase of the Cambridge facility in 1987, Shieldalloy
applied for and received an NRC license for the possession and decommissioning
of source material remaining in the slag piles. Because ferrocolumbium
processing no longer occurs at Cambridge, Shieldalloy currently is required to
decommission the slag piles.
Shieldalloy is seeking approval from the NRC to decommission
the slag piles by stabilizing and capping them with an engineered cover and
instituting controls on access and site use. Final approval requires the NRC's
preparation of an environmental impact statement ("EIS") in accordance with the
National Environmental Policy Act and implementing NRC regulations. With regard
to the east slag pile, Shieldalloy is also considering the sale of the slag to
domestic or foreign steel manufacturers, as an alternative to the in situ remedy
of stabilization and capping. The EIS is the culmination of a multistage process
of assessing the environmental implications of various decommissioning
alternatives for source material at the site. Since 1987, Shieldalloy has spent
approximately $5.6 million to consolidate the slag and baghouse dust at the
Cambridge site and to cover a large portion of the west slag pile with an
engineered cover in consultation with the NRC.
On November 9, 1995, the NRC issued a preliminary draft EIS,
determining that offsite disposal was not economically viable and concluding
that the onsite disposal remedy proposed by Shieldalloy was feasible and
appropriate for
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<PAGE>
protection of public health and safety. Since that time, two additional draft
EIS documents have been issued by the NRC. Over the past two years the NRC has
conducted public hearings in Cambridge, Ohio and solicited written comments on
its draft EIS.
b. The State of Ohio
In late 1994 and early 1995, Shieldalloy, Cyprus Foote, and
the State of Ohio participated in extended negotiations to identify the scope of
the investigation necessary to evaluate environmental issues at the Cambridge,
Ohio site. These negotiations resulted in agreement on a Consent Order for
Preliminary Injunction ("COPI"). The purpose of the COPI was to facilitate
resolution of all environmental claims regarding the Cambridge site by
conducting a fast-track evaluation of environmental conditions at the site.
Under the COPI, Shieldalloy and Cyprus Foote agreed to conduct
an expedited RI/FS of the site with the goal of completing the investigation of
site conditions and submitting a proposed remedy for the State of Ohio's
approval within nine months. The State of Ohio agreed to review and comment on
data submissions as promptly as possible and, upon completion of the RI/FS,
select a final remedy for the site and issue a "Preferred Plan" setting forth
that remedy. Once the State of Ohio issues its Preferred Plan, the COPI requires
the parties to meet in good faith to negotiate a consent order for a permanent
injunction requiring Shieldalloy and Cyprus Foote to implement the selected
remedy for the site.
By order dated February 8, 1995, the Bankruptcy Court
authorized Shieldalloy to enter into the COPI. On July 11, 1995, the State of
Ohio filed a complaint in the Ohio Court of Common Pleas and immediately lodged
the COPI with that court. Pursuant to the COPI, Shieldalloy and Cyprus Foote
have submitted the RI/FS the State of Ohio issued its Preferred Plan on December
16, 1996. The RI/FS proposes a range of remedial alternatives for the east and
west slag piles, cleanup of wetlands soil, and cleanup of on- and off-site
sediments.
4. NATURE OF THE ENVIRONMENTAL CLAIMS
As of the Bar Date, various federal and state environmental
regulatory agencies had asserted over $1 billion in unsecured claims against
Metallurg and Shieldalloy for civil penalties, investigatory costs,
decommissioning costs, cleanup costs, oversight costs, and natural resource
damages associated with environmental conditions at the Newfield and Cambridge
sites (the "Environmental Claims"). The following is a detailed listing of the
Environmental Claims:
<TABLE>
<CAPTION>
============================================================================================================================
CLAIMANT SITE AMOUNT DESCRIPTION
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NJDEP Newfield, $1,251,135.98 Prepetition claim for cleanup
New Jersey costs and various damages
incurred.
- - ----------------------------------------------------------------------------------------------------------------------------
NJDEP Newfield, $10.01 million Prepetition claim for natural
New Jersey resource damages to
groundwater and wetlands.
- - ----------------------------------------------------------------------------------------------------------------------------
NJDEP Newfield, $38,032.00 Prepetition claim for a civil
New Jersey penalty assessment pursuant to
an NJDEP administrative
order dated 1/13/94.
- - ----------------------------------------------------------------------------------------------------------------------------
USEPA Newfield, $176,843.37 Prepetition claim for response
New Jersey costs incurred.
30
<PAGE>
<CAPTION>
============================================================================================================================
CLAIMANT SITE AMOUNT DESCRIPTION
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------
USEPA Newfield, $224 million Priority claim for future
New Jersey cleanup costs.
- - ----------------------------------------------------------------------------------------------------------------------------
USEPA Newfield, $68,793.37 Priority claim for postpetition
New Jersey response costs incurred.
- - ----------------------------------------------------------------------------------------------------------------------------
USEPA and DOI Newfield, $8,260,000.00 Priority claim for natural
New Jersey resource damages to wetlands.
- - ----------------------------------------------------------------------------------------------------------------------------
Ohio EPA Cambridge, Ohio $30 million to Priority claim for future
$535 million cleanup costs and civil
penalties.
- - ----------------------------------------------------------------------------------------------------------------------------
Ohio EPA Cambridge, Ohio $458,404.00 Prepetition claim for natural
resource damages.
- - ----------------------------------------------------------------------------------------------------------------------------
Ohio EPA Cambridge, Ohio $493,470.90 Prepetition claim for civil
penalties.
- - ----------------------------------------------------------------------------------------------------------------------------
Ohio EPA Cambridge, Ohio $33,125.10 Prepetition claim for response
costs incurred by Ohio EPA.
- - ----------------------------------------------------------------------------------------------------------------------------
Ohio Department of Cambridge, Ohio $20,600.00 Prepetition claim for response
Health costs and other costs incurred
by the ODH.
- - ----------------------------------------------------------------------------------------------------------------------------
USEPA Cambridge, Ohio $41,562.35 Prepetition claim for response
costs incurred by USEPA.
- - ----------------------------------------------------------------------------------------------------------------------------
USEPA Cambridge, Ohio $45,102.93 Priority claim for postpetition
response costs incurred by
USEPA.
- - ----------------------------------------------------------------------------------------------------------------------------
USEPA Cambridge, Ohio $452 million Priority claim for future
cleanup costs.
- - ----------------------------------------------------------------------------------------------------------------------------
DOI Cambridge, Ohio $460,000.00 Priority claim for natural
resource damages.
============================================================================================================================
</TABLE>
5. THE ENVIRONMENTAL SETTLEMENT AGREEMENTS
The Plan incorporates the Environmental Settlement Agreements,
which resolve and settle certain of the Environmental Claims, and the issues
concerning financial assurances to be posted by Reorganized Shieldalloy to
assure payment of future remediation costs. Prior to the Effective Date, the
Debtors will enter into settlement agreements with the United States, New
Jersey, and Ohio as they pertain to the Newfield, New Jersey and Cambridge, Ohio
sites. In that regard, the United States and NJDEP Environmental Settlement
Agreement addresses Claims and issues asserted by the EPA, DOI, and NRC at the
Newfield, New Jersey and Cambridge, Ohio sites. The United States and NJDEP
Environmental Settlement Agreement addresses the Claims and issues asserted by
the NJDEP at the Newfield, New Jersey site. The Ohio Environmental Settlement
Agreement addresses the Claims and issues asserted by the Ohio EPA, ODH at the
Cambridge, Ohio site. The
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<PAGE>
pertinent terms of each of the Environmental Settlement Agreements which are
included in the Plan Supplement are summarized as follows:
6. UNITED STATES AND NJDEP ENVIRONMENTAL SETTLEMENT AGREEMENT
a. Allowance Of United States Claims
The Debtors, the United States, and New Jersey have agreed in
the United States and NJDEP Environmental Settlement Agreement as follows:
i. The United States shall have an Allowed General Unsecured
Claim against Shieldalloy in the amount of $178,192.82 for prepetition oversight
costs incurred by USEPA at the Newfield site;
ii. The United States shall have an Allowed General Unsecured
Claim against Shieldalloy in the amount of $41,562.35 for prepetition oversight
costs incurred by USEPA at the Cambridge site;
iii. The United States shall have an Allowed Administrative
Expense Claim against Shieldalloy in the amount of $191,177.23 for USEPA's
postpetition oversight costs at the Newfield site and an Allowed Administration
Expense Claim against Shieldalloy in the amount of $4,967 for DOI's postpetition
oversight costs at the Newfield site;
iv. The United States shall have an Allowed Administrative
Expense Claim against Shieldalloy in an amount not less than $94,209.88 but not
more than $108,046.73 subject to Shieldalloy's receipt and approval of
documentation for costs incurred after April 30, 1996 for the USEPA's
postpetition oversight costs at the Cambridge site and an Allowed Administrative
Expense Claim against Shieldalloy in the amount of $4,714.67 for DOI's
postpetition oversight costs at the Cambridge site;
v. The NRC shall have an Allowed General Unsecured Claim
against Shieldalloy in the amount of $41,613.63 for prepetition licensing fees
owed by Shieldalloy in connection with the Newfield and Cambridge sites;
vi. The NRC's postpetition licensing fees owed by Shieldalloy
in connection with the Newfield and Cambridge sites shall be paid in the
ordinary course of business; and
vii. Shieldalloy agrees to commence the enhancement,
restoration, and creation of certain wetlands in and around the Newfield site as
full and complete satisfaction of the United States' and DOI's prepetition claim
for natural resource damages at the Newfield site as set forth in the attached
July 24, 1996 workplan (annexed as Exhibit 1 to the United States and NJDEP
Settlement Agreement); and
viii. The United States shall have an Allowed General
Unsecured Claim against Shieldalloy in the amount of $497,000 (the "Civil
Penalty Claim") in full resolution and satisfaction of the civil penalty amounts
claimed by the United States in United States of America v. Shieldalloy
Corporation, Civil Action 86-4016, District of New Jersey.
b. Allowance Of New Jersey Claims
The Debtors have agreed in the United States and NJDEP
Environmental Settlement Agreement that New Jersey shall have Claims against
Shieldalloy, as indicated in the amounts and classification as set forth below:
i. An Allowed General Unsecured claim in the amount of
$638,508.20 for prepetition oversight costs incurred by NJDEP.
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<PAGE>
ii. An Allowed General Unsecured Claim in the amount of
$1,196,982.84 for prepetition New Spill fund Authorization;
iii. An Allowed Administrative Expense Claim in an amount not
less than $262,912.12 but not more than $270,242.69, subject to Shieldalloy's
receipt and approval of NJDEP Office of Natural Resources cost documentation for
the period from September 9, 1993 to April 12, 1996 for NJDEP's postpetition
oversight costs at the Newfield site; and
iv. An Allowed General Unsecured Claim against Shieldalloy in
the amount of $1,311,000.
Shieldalloy agrees to commence within six months after
substantial consummation of the Plan or some other time as the parties may
agree, the enhancement, restoration and creation of certain wetlands in and
around the Newfield site as set forth in Work Plan dated July 24, 1996 (attached
as Exhibit 1 to the United States and NJDEP Environmental Settlement Agreement).
These actions will constitute full satisfaction of New
Jersey's claims for damages to natural resources under CERCLA and New Jersey
statutes.
Additionally, under the United States and NJDEP Environmental
Settlement Agreement, New Jersey on behalf of NJDEP shall have an Allowed
General Unsecured Claim against Shieldalloy in the amount of $100,000 and
$38,032.00, in full resolution and satisfaction of penalty amounts claimed by
New Jersey under the Spill Act and Water Pollution Control Act, respectively.
c. Treatment Of Allowed Claims
All Allowed General Unsecured Claims under or pursuant to the
terms of the United States and NJDEP Environmental Settlement Agreement will be
classified in Class 4F as "Metallurg/Shieldalloy Environmental Claims" under the
Plan and will receive the distribution in accordance with Section 5.16 of the
Plan in the event such Class accepts the Plan and the Plan is confirmed by the
Bankruptcy Court.
d. Required Financial Assurance
Pursuant to the United States and NJDEP Environmental
Settlement Agreement, Shieldalloy, the United States and the NJDEP identified
those environmental projects with respect to the work to be performed at the
Newfield site (the "Environmental Projects") and have agreed, for purposes of
determining financial assurance only, the dollar amounts for each of the
Environmental Projects (the "Predetermined Costs") which are identified as
follows:
The Environmental Dollar Estimate
Projects (in millions)
-------- -------------
Phase II Lagoon closure $5.6
Soil remediation 2.3
Sediment remediation 1.6
Groundwater remediation 9.4
Future oversight costs .7
NRC Slag pile remediation 5.0
NRDA work .514
Building decontamination .3
Stormwater control .2
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<PAGE>
Shieldalloy has agreed to provide, create or make available
the following fund (the "Posted Financial Assurance Fund") with respect to the
work to be performed at the Newfield site as follows:
A. At or prior to the Effective Date, there shall be held on
deposit in that certain Mellon trust account maintained by Shieldalloy for the
benefit of NJDEP pursuant to the ACO (the "LOC Trust Account") the cash proceeds
plus accrued interest derived from: (i) the $8 million letter of credit, dated
as of December 29, 1989, issued by Deutsche Bank AG in favor of the NJDEP, (ii)
the $8 million letter of credit, dated as of February 23, 1989, issued by
National Westminster Bank PLC in favor of the NJDEP and (iii) the $200,000
irrevocable letter of credit, dated as of June 3, 1986, issued by Midlantic Bank
in favor of the NJDEP.
B. At or prior to the Effective Date, at Shieldalloy's
discretion, it shall establish a cash reserve, letter of credit or a combination
thereof, in an amount of $4.25 million dollars for the benefit of the United
States and New Jersey.
C. At or prior to the Effective Date: (i) the United States
shall pay to Metallurg the outstanding tax refund, which currently equals
$600,000 plus accrued interest (the "Tax Refund") and (ii) at its discretion,
Shieldalloy will deposit into the LOC Trust Account cash or establish a letter
of credit in an amount equal to the Tax Refund for the benefit of the United
States and New Jersey.
D. Shieldalloy will continue an existing letter of credit
previously posted for the benefit of the NRC in the amount of $750,000.
Alternatively, the NRC will draw down on such letter of credit and the proceeds
shall be deposited into a separate trust account for the benefit of NRC.
Pursuant to the United States and NJDEP Environmental
Settlement Agreement, as any or each of the above-listed Environmental Projects
is completed (or to the extent practicable, any portion of any or each
Environmental Projects), in the event the Predetermined Costs for all
Environmental Projects which have not yet been completed are less than the total
amount of Posted Financial Assurance at any time (the "Refund Amount"), then
either: (i) such excess amount shall be refunded to Shieldalloy in a timely
manner, or (ii) the letters of credit which constitute part of the Posted
Financial Assurance Fund may be amended or replaced such that the Posted
Financial Assurance Fund does not exceed the Predetermined Costs.
Nothing under the United States and NJDEP Environmental
Settlement Agreement is intended to preclude any decision by the NJDEP or USEPA
to reduce or change the form of financial assurance for the Newfield site under
applicable New Jersey or federal financial assurance regulations or guidelines,
subject to the agreement of NJDEP and USEPA.
e. Covenant Not To Sue And Reservation Of Rights; Bankruptcy
Discharge
Except for those Prepetition and Postpetition Claims
specifically settled pursuant to the United States and NJDEP Environmental
Settlement Agreement, Shieldalloy's environmental liabilities at the Newfield
site, including natural resource claims not otherwise settled pursuant to the
United States and NJDEP Environmental Settlement Agreement arising
preconfirmation, shall be excepted from discharge and shall pass through
Shieldalloy's chapter 11 case unaffected. The Predetermined Costs as identified
in the Agreement in no way constitute a cap or limitation on Shieldalloy's
continuing obligations to comply with New Jersey and United States environmental
laws. Except as otherwise provided for in the United States and NJDEP
Environmental Settlement Agreement, the terms of the United States and NJDEP
Environmental Settlement Agreement do not constitute a release of Shieldalloy or
any prior or subsequent owner or operator of the Newfield site from any other
liability under any state or United States environmental laws, including the
Administrative Consent Order issued by the NJDEP on October 5, 1988, as amended
and modified in 1992, for the assessment, cleanup remediation, correction or
other response to any condition that at the Newfield site now exists, will exist
in the future or was created before Shieldalloy took ownership of the Newfield
site. Moreover, nothing in the United States and NJDEP Environmental Settlement
Agreement releases Shieldalloy or subsequent owner or operator of the Newfield
site from complying with applicable state and federal environmental laws.
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<PAGE>
Under the United States and NJDEP Environmental Settlement
Agreement, Shieldalloy has agreed that all response costs claims incurred or to
be incurred postconfirmation by the United States and New Jersey will be
entitled to administrative priority in a subsequent Chapter 7 or 11 bankruptcy
case of Shieldalloy.
Under the United States and NJDEP Environmental Settlement
Agreement, the United States and New Jersey have agreed that in the event the
United States Environmental Settlement Agreement is approved by the Bankruptcy
Court and the Plan is confirmed and consummated, they shall not object to the
discharge granted to Metallurg pursuant to section 1141(d) of the Bankruptcy
Code.
f. Senior Management Approval; Lodging And Opportunity For
Public Comment
The United States has filed with the Bankruptcy Court a
certification which represents that a settlement agreement between the Debtors
and the United States has been reached that is ready for submission for
applicable U.S. senior management approval. The United States will expeditiously
seek, U.S. senior management approval of the United States and NJDEP
Environmental Settlement Agreement. Assuming U.S. senior management approval of
the United States and NJDEP Environmental Settlement Agreement is obtained, the
United States has agreed that the United States and NJDEP Environmental
Settlement Agreement shall be expeditiously lodged in accordance with applicable
requirements for a period of 45 days for public notice and comment. After the
conclusion of the public comment period, the United States will file with the
Court any comments received, as well as the United States' responses to the
comments, if any. The United States has reserved the right to withdraw or
withhold its consent if the comments regarding the Settlement Agreement disclose
facts or considerations which indicate that the Settlement Agreement is not in
the public interest. It is anticipated that the public comment process will have
been completed prior to the Confirmation Hearing.
The NJDEP has filed with the Bankruptcy Court a Certification
which represents that a settlement agreement between the Debtors and the NJDEP
has been reached that is ready for submission for applicable NJDEP senior
management approval. It is anticipated that by the hearing on the Disclosure
Statement, NJDEP senior management will have decided whether or not to approve
the United States and NJDEP Environmental Settlement Agreement. Assuming NJDEP
senior management approval of the NJDEP Environmental Settlement Agreement is
obtained, the NJDEP has agreed that the United States and NJDEP Environmental
Settlement Agreement shall be expeditiously lodged in accordance with applicable
requirements for a period of 45 days for public notice and comment. After the
conclusion of the public comment period, New Jersey will file with the Court any
comments received, as well as the New Jersey responses to the comments, if any.
New Jersey reserves the right to withdraw or withhold its consent if the
comments regarding the Settlement Agreement disclose facts or considerations
which indicate that the Settlement Agreement is not in the public interest. It
is anticipated that the public comment process will have been completed prior to
the Confirmation Hearing.
The Debtors will request that as part of the confirmation of
the Plan that the United States and NJDEP Environmental Settlement Agreement be
approved by the Bankruptcy Court pursuant to the order confirming the Plan of
Reorganization.
7. OHIO ENVIRONMENTAL SETTLEMENT AGREEMENT
Shieldalloy agreed to enter into a Permanent Injunction
Consent Order ("Consent Order") with the State of Ohio resolving environmental
claims relating to Shieldalloy's Cambridge, Ohio facility. The terms of the
Consent Order are incorporated by reference into the Ohio Environmental
Settlement Agreement. Pursuant to the Consent Order, Shieldalloy and a former
owner of the Cambridge site, Cyprus Foote Mineral Company ("Cyprus Foote"), will
perform remedial design and remedial action ("RD/RA") at the Cambridge site. At
this time, the Ohio EPA estimates that its preferred remedy for the Cambridge
site will cost approximately $8.68 million.
In addition to performance of the RD/RA work, Shieldalloy and
Cyprus Foote will enhance, restore or preserve certain wetlands in the vicinity
of the Cambridge site in satisfaction of claims for natural resource damages
under
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CERCLA and Ohio law. The Consent Order will obligate Shieldalloy and Cyprus
Foote to spend no more than $276,000.00 on this special wetlands project,
excluding the cost of purchasing the affected property.
Shieldalloy's assent to the Consent Order is conditioned on
Ohio EPA selection of a final remedy for the site and publication of a final
Decision Document that is equivalent in all material respects to the Preferred
Plan for the site issued on December 16, 1996. The Consent Order also is subject
to public comment under Ohio law and shall not become effective before March 31,
1997.
a. Allowance Of Claims
The Ohio Environmental Settlement Agreement and the Consent
Order resolve claims filed by the State of Ohio in the bankruptcy case and an
enforcement action commenced by the State of Ohio against Shieldalloy and Cyprus
Foote in the Court of Common Pleas for Guernsey County, Ohio. Under the Ohio
Environmental Settlement Agreement, Shieldalloy has agreed that Ohio shall have
Claims against Shieldalloy as indicated in the amounts and classification as set
forth below:
(i) An Allowed General Unsecured Claim in the amount not to
exceed $26,862.55 for prepetition oversite costs incurred by OEPA and ODH;
(ii) An Allowed Administrative Expense Claim for $55,000.00 in
full satisfaction of civil penalty amounts claimed by Ohio under Ohio statutes
and regulations; and
(iii) An Allowed Administrative Expense Claim not to exceed
$102,620.86 for OEPA's postpetition oversite costs.
b. Treatment Of Allowed Claims
All Allowed General Unsecured Claims under or pursuant to the
terms of the Ohio Environmental Settlement Agreement will be classified under
Class 4F as "Shieldalloy Environmental Claims" and will receive distributions in
accordance with Section 5.16 of the Plan in the event such Class accepts the
Plan, and the Plan is confirmed by the Bankruptcy Court.
c. Required Financial Assurance
The Consent Order requires Shieldalloy and Cyprus Foote to
provide financial assurance in an initial amount not more than $9 million for
RD/RA work at the site. Pursuant to an agreement between Shieldalloy and Cyprus
Foote, Cyprus Foote will satisfy the $9 million RD/RA financial assurance
requirements.
In addition, pursuant to the Consent Order Shieldalloy has
agreed to provide financial assurance for long-term operation and maintenance
("O&M") of two slag piles commonly known as the "East" and "West" slag piles at
the Cambridge. This financial assurance requirement will ensure that funds are
available for O&M of the slag piles for a period of 1,000 years.
The terms of the Shieldalloy's financial assurance obligations are as follows:
(i) Within 30 days of the effective date of the Consent Order,
Shieldalloy will spend approximately $1.75 million to purchase an annuity
providing income for 100 years of O&M for the slag piles after completion of the
RD/RA work;
(ii) Within 30 days of the effective date of the Consent
Order, Shieldalloy will establish a Perpetual Care Trust for the benefit of Ohio
in an initial amount of $113,331.00 to fund extension of the annuity for an
additional 900 years;
(iii) The description of the O&M work to be financially
assured, annual cost basis for the work, and commencement and frequency of
payments include the following:
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<PAGE>
<TABLE>
<CAPTION>
Annual Costs Payment
O&M Work (1997 basis)(10) Commencement Frequency
-------- ------------ ------------ ---------
<S> <C> <C> <C>
Annual topsoil maintenance $29,700 Jan. 1, 2002 Annually
Quarterly inspections 20,570 Jan. 1, 2002 Quarterly
Annual inspections 1,430 Jan. 1, 2028 Annually
5 Year inspections 8,866 Jan. 1, 2028 Every 5th year
</TABLE>
The Ohio Environmental Settlement Agreement and the Consent
Order represent Shieldalloy's sole obligation to provide financial assurance for
the Cambridge site as of the Effective Date. Nothing in the Ohio Environmental
Settlement Agreement is intended to preclude any decision by the OEPA or ODH to
reduce the financial assurance for the Cambridge site under the applicable
statutes, regulations or guidelines, including, but not limited to, a future
determination that the East Slag Pile may be sold as product to third parties
and, therefore, is not subject to remediation.
d. Covenant Not To Sue And Reservation Of Rights; Bankruptcy
Discharge
Notwithstanding Ohio's filing of its proofs of claim in the
Shieldalloy chapter 11 case and except for those prepetition and postpetition
Claims specifically settled pursuant to the Ohio Environmental Settlement
Agreement and the Consent Order, Shieldalloy's environmental liabilities at the
Cambridge site will be excepted from discharge and will pass through
Shieldalloy's chapter 11 case unaffected. The Ohio Environmental Settlement
Agreement for the Cambridge site does not constitute a cap or limitation on
Shieldalloy's continuing obligations to comply with Ohio and United States
environmental laws. The terms of the Ohio Environmental Settlement Agreement do
not constitute a release of Shieldalloy or any prior or subsequent owner or
operator of the Cambridge site from any other liability or obligations under
Ohio or United States environmental laws, including the terms of the Consent
Order for the assessment, cleanup, remediation, correction or other response to
any condition at the Cambridge site that now exists, will exist in the future or
was created before Shieldalloy took ownership of the Cambridge site. Nothing in
the Ohio Environmental Settlement Agreement will release Shieldalloy or
subsequent owner or operator of the Cambridge site from complying with
applicable Ohio and federal environmental laws.
Ohio agrees that in the event this Agreement is approved by
the Bankruptcy Court and the Plan of Reorganization is confirmed and
consummated, it shall not object to the discharge granted to Metallurg pursuant
to section 1141(d) of the Bankruptcy Code.
e. Senior Management Approval; Lodging And Opportunity For
Public Comment
Ohio has filed in the Bankruptcy Court a certification which
represents that the Consent Order and the settlement agreement between the
Debtors and Ohio has been reached that is ready for submission for applicable
Ohio senior management approval. It is anticipated that on or prior to the
hearing on the Disclosure Statement Ohio senior management will have decided
whether or not to approve the Ohio Environmental Settlement Agreement.
- - --------
(10) Such amounts to be increased by an assumed inflation rate of 3.4%
per annum.
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If required under applicable statutes and regulations, Ohio
agrees that the Consent Order shall be expeditiously lodged in accordance with
applicable requirements for a period of 30 days for public notice and comment.
Ohio reserves the right to withdraw or withhold its consent if the comments
regarding the Consent Order disclose facts or considerations which indicate that
the Consent Order is not in the public interest. It is anticipated that the
public comment process will have been completed prior to the Confirmation
Hearing.
The Plan incorporates each of the above-described
Environmental Settlement Agreements. These Settlement Agreements resolve various
and complex issues concerning various Environmental Claims asserted by each of
the respective Environmental Authorities. Moreover, the Environmental Settlement
Agreements address and resolve the complex issue of the appropriate amount of
financial assurances with respect to future remediation costs and expenses that
would have to be posted by Shieldalloy for the benefit of the respective
Environmental Authorities prior to consummating its plan of reorganization.
The Creditors' Committee was actively involved in negotiating
the terms and provisions of the Environmental Settlement Agreements and supports
approval of these agreements. Among those complex issues that would have to be
addressed are:
1. Whether Metallurg was responsible for any of the
Environmental Claims asserted by the Environmental Authorities;
2. The dischargeability of the Environmental Claims asserted
by the Environmental Authorities;
3. The proper amount of financial assurances to be posted for
future remediation costs and expenses; and
4. The feasibility of the Debtors' plan of reorganization in
connection with the proposed financial assurances.
While the Debtors are confident that they would have prevailed
in litigation with the Environmental Authorities concerning the foregoing
issues, the Debtors and the Creditors' Committee believe that the delay and
expenses would have been prohibitive to the Debtors and could have possibly
jeopardized the ability of each Debtor to reorganize under chapter 11 of the
Bankruptcy Code. The Debtors submit that the Environmental Settlement Agreements
represent an optimal resolution of the issues addressed therein and is in the
best interest of Debtors' estates and creditors.
VI. THE PLAN OF REORGANIZATION
The Debtors believe that (i) through the Plan, creditors will
obtain a substantially greater recovery from the estates of the Debtors than the
recovery which would be available if the assets of the Debtors were liquidated
under chapter 7 of the Bankruptcy Code and (ii) the Plan will afford the Debtors
the opportunity and ability to continue in business as a viable going concern
and preserve ongoing employment for the Debtors' employees.
The Plan is annexed hereto as Exhibit A and forms a part of
this Disclosure Statement. The summary of the Plan set forth below is qualified
in its entirety by reference to the more detailed provisions set forth in the
Plan.
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<PAGE>
A. ESSENTIAL ELEMENTS OF THE PLAN
1. CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS
The Plan classifies Claims and Equity Interests separately and
provides different treatment for different Classes of Claims and Equity
Interests in accordance with the Bankruptcy Code. As described more fully in
Section VI.B. below entitled "The Plan of Reorganization -- Classification and
Treatment of Claims and Equity Interests," the Plan provides, separately for
each Class, that holders of certain Claims will receive various amounts and
types of consideration (e.g., Cash, New Secured Notes, and/or New Common Stock),
thereby giving effect to the different rights of the holders of Claims and
Equity Interests of each Class.
2. DISTRIBUTIONS UNDER THE PLAN
Distributions to holders of Claims under the Plan may occur in
one or more distributions.
a. Distributions on the Effective Date
On or about the Effective Date of the Plan, the holders of
Allowed Administrative Expense Claims, MI Other Secured Claims, SMC Other
Secured Claims, Priority Tax Claims, Other Priority Claims Of SMC, Other
Priority Claims Of MI, MI Convenience Claims, and SMC Convenience Claims will be
paid in full. In addition, on or about the Effective Date, the holder of the
Allowed Midlantic Secured Claim in Class 2C will receive Cash in the amount of
approximately $766,000, which will be deemed to be in full satisfaction of the
Allowed Claims in Classes 2C and 2D of the Plan. Holders of Allowed Claims in
Classes 4A, 4B, 4C, 4D, 4E, and 4F will receive distributions of Cash, New
Secured Notes, and/or New Common Stock on or about the Effective Date.
b. Distributions Dependent Upon the Resolution of
Disputed Priority Claims
The distribution of Cash to holders of Claims in Classes 4A,
4B, 4C, 4E, and 4F is dependent upon the total amount of Allowed Other Secured
Claims and Allowed Priority Claims. Under the Plan, the Reorganized Debtors will
not distribute any Cash to the holders of Disputed Priority Claims (which
includes Disputed Administrative Expense Claims, Disputed Priority Tax Claims,
and Disputed Other Priority Tax Claims) and Disputed Other Secured Claims unless
and until such Claims become Allowed Claims. In order to provide for
distributions to the holders of Disputed Priority Claims and Disputed Other
Secured Claims as and when such Claims become Allowed Claims, the Reorganized
Debtors, from and after the Effective Date, will deposit Cash in a segregated,
interest-bearing account in an amount sufficient to pay (i) the aggregate of all
Disputed Administrative Expense Claims, Disputed Other Secured Claims, Disputed
Priority Tax Claims and Disputed Other Priority Claims, (ii) the reasonable
costs and expenses incurred by Reorganized Metallurg, as the Disputed Claims
Agent, to administer the Plan Reserves, and (iii) any taxes payable on account
of the Plan Reserves.
If such Disputed Administrative Expense Claims, Disputed Other
Secured Claims, Disputed Priority Tax Claims, and Disputed Other Priority Claims
become Allowed Claims, forty-five (45) days after the next succeeding
Reallocation Date, the Reorganized Debtors will distribute to the holders of
such Allowed Claims, Cash in the amount of such Allowed Claims and such
claimholders' Pro Rata Share of net interest from the Disputed Other Secured and
Priority Claims Reserve.
c. Distributions Dependent Upon the Resolution of
Disputed Unsecured Claims
The distribution of Cash, New Common Stock, and New Secured
Notes to holders of Claims in Classes 4A, 4B, 4C, 4E, and 4F is also dependent
upon the total amount of Allowed Claims in Classes 4A, 4B, and 4C. Under the
Plan, the Reorganized Debtors will not distribute any Cash or any shares of New
Common Stock or New Secured Notes to holders of Disputed Unsecured Claims
(including Old Preferred Stock Claims of Non-Settling Former Preferred
Stockholders), unless and
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<PAGE>
until such Claims become Allowed Claims. In order to provide for distributions
to the holders of Disputed Unsecured Claims as and when such Claims become
Allowed Claims, the Reorganized Debtors will withhold from the distributions to
such Classes in escrow and an interest-bearing account, the distributions of
Cash, New Common Stock, and New Secured Notes to which holders of Disputed
Unsecured Claims may be entitled based upon the Disputed Unsecured Claim
amounts.
Under the Plan, from and after the Effective Date, Cash or
other dividends issued in kind, if any, on the Reserved Securities will be added
to, and deposited in, the Disputed Unsecured Claims Reserve.
If such Disputed Unsecured Claims become Allowed Claims,
forty-five (45) days after the next succeeding Reallocation Date, the
Reorganized Debtors will distribute to the holders of such Allowed Claims, Cash,
shares of New Common Stock and New Secured Notes (including dividends issued in
kind, if any), in the amount of such Allowed Claims and such claimholders' Pro
Rata Share of net earnings (including Cash dividends, if any, and interest) from
the Disputed Unsecured Claims Reserve.
d. Distributions Subsequent to the Effective Date
The distributions to the holders of Claims in Classes 4A, 4B,
4C, 4E, and 4F are also dependent upon the total amount of Allowed Claims in
Classes 4A, 4B, and 4C and the total amount of Allowed Other Secured Claims and
Allowed Priority Claims. In the event that the amounts reserved in the Disputed
Other Secured and Priority Claims Reserve and the Disputed Unsecured Claims
Reserve are greater than zero after all Disputed Claims are either allowed,
disallowed, or expunged, in whole or in part, the holders of Allowed Claims in
Classes 4A, 4B, 4C, and 4E will be entitled to receive additional distributions
of Cash, New Common Stock and/or New Secured Notes on a subsequent distribution
date. In that event, each holder of an Allowed Claim in Classes 4A, 4B, 4C, and
4E will receive a Pro Rata Share of Cash in the Disputed Other Secured and
Priority Claims Reserve and the Disputed Unsecured Claims Reserve, and a Pro
Rata Share of New Common Stock and New Secured Notes in the Unsecured Claims
Reserve (or, in the case of the holder of the claim in Class 4E, Cash in the
same proportions as the initial distribution to such holder), on account of such
Claims as if the Disputed Claims had been Disallowed Claims as of the Effective
Date.
e. Limitation on Distributions
Notwithstanding any other provisions of the Plan, in no event
will the holder of an Allowed Claim against either Metallurg or Shieldalloy
receive on the Effective Date of the Plan or any time thereafter pursuant to
sections 11.6(c) or 11.7(b) of the Plan the total value of consideration
distributable to such holder on account of its Allowed Claim against Metallurg
and Shieldalloy (excluding any accrued interest on the New Secured Notes whether
or not paid in Cash) in excess of 100% of the Allowed Claim. In the event that
total distributions of New Secured Notes, New Common Stock, and Cash to be
distributed to such holder of an Allowed Claim results in a recovery of greater
than 100% of the amount of the Allowed Claim the amount in excess of 100% will
be distributed on a Pro Rata basis to holders of Allowed Claims in Class 4A who
have not already received distributions equal to 100% of their Allowed Claims.
3. METHOD OF DISTRIBUTIONS UNDER THE PLAN
Except as set forth below, all distributions under the Plan
(including any distributions made on a subsequent distribution date) will be
made by the applicable Reorganized Debtor to the holder of each Claim as set
forth in the official claims register maintained by the Bankruptcy Court and
Donlin, Recano & Company, as the official claims agent for the Bankruptcy Court,
as of the Effective Date. For purposes of calculating the amount of an Allowed
Claim in a Class of Claims of a holder of more than one Claim in such Class, all
Allowed Claims in such Class held by such holder shall be aggregated and treated
as one Allowed Claim in such Class.
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<PAGE>
a. Distributions of Cash
Any payment of Cash made by Reorganized Metallurg or
Reorganized Shieldalloy pursuant to the Plan will be made, at the election of
the Reorganized Debtors, by check drawn on a domestic bank or by wire transfer
of immediately available funds.
b. De Minimis Distributions
No fractions of cents will be distributed. Whenever a payment
of a fraction of a cent would otherwise be required, the actual payment will
reflect a rounding down of such fraction to the nearest whole cent. No payment
of Cash in an amount of less than $100.00 on account of an Allowed Unsecured
Claim will be made by the Reorganized Debtors to any holder of a Claim unless
the holder of the Claim submits a request in writing to the Reorganized Debtors
within thirty days after the Confirmation Date, provided, however, that no
payment will be made on account of an Allowed Unsecured Claim where the amount
of such payment would be less than $10.00. Any holder of an Allowed Claim on
account of which the amount of Cash to be distributed is less than $10.00 will
have its claim for such distribution discharged and will be forever barred from
asserting any such claim against the Reorganized Debtors or their respective
property.
c. Distributions of New Common Stock
Notwithstanding any other provision of the Plan, only whole
numbers of shares of New Common Stock will be issued. When any distribution on
account of a Disputed or Allowed Unsecured Claim would otherwise result in the
issuance of a number of shares of New Common Stock that is not a whole number,
the actual distribution of shares of such stock will be rounded to the next
higher or lower whole number, as follows: (i) fractions equal to or greater than
one-half will be rounded to the next higher whole number and (ii) fractions less
than one-half will be rounded to the next lower whole number. The total number
of shares of New Common Stock to be distributed to a class of Claims will be
adjusted as necessary to account for this rounding. No consideration will be
provided in lieu of fractional shares that are rounded down.
All distributions of New Common Stock under the Plan will be
issued by Reorganized Metallurg to the holders of Allowed Claims which are
Unsecured Claims of MI, the Canadian Guarantee Claims, Unsecured Claims of SMC,
the Settling Former Preferred Stockholder Claims, and the Multiemployer Pension
Claim (to the extent the holder does not exercise its right to receive Cash in
lieu of New Common Stock) in Classes 4A, 4B, 4C, 4D, and 4E, respectively,
subject to the Management Stock Award and Stock Option Program and the FPS
Settlement Amount, notwithstanding that Metallurg is not primarily liable for a
Claim in Classes 4B and 4C. In the event that any Settling Former Preferred
Stockholder chooses the FPS Settlement Cash Option, the distribution of New
Common Stock to holders of Allowed Claims of Metallurg and the Canadian
Guarantee Claims, and the Multiemployer Pension Claims in Classes 4A and 4B,
respectively, will be reallocated by the amount of the New Common Stock which is
not distributed to the Settling Former Preferred Stockholders who choose the FPS
Settlement Cash Option.
d. Distributions of New Secured Notes
Notwithstanding any other provisions of the Plan, principal
amounts of New Secured Notes will be issued only in denominations of $1,000 and
integral multiples thereof. When any distribution on account of Disputed and
Allowed Unsecured Claims would otherwise result in the issuance of New Secured
Notes with an aggregate principal amount that is not an integral multiple of
$1,000, the actual distribution of such notes will be rounded to the next higher
or lower integral multiple of $1,000, as follows: (i) aggregate principal
amounts that exceed an integral multiple of $1,000 by $500 or more will be
rounded to the next higher integral multiple of $1,000; and (ii) aggregate
principal amounts that exceed an integral multiple of $1,000 by less than $500
will be rounded to the next lower integral multiple of $1,000. If, as a result
of rounding of principal amounts of New Secured Notes to be distributed on
account of Disputed Unsecured Claims and to holders of Allowed Unsecured Claims
in a particular class, the sum of such principal amounts differs from the
aggregate principal amount of New Secured Notes to be distributed pursuant to
Section 2.2 of the Plan: (a) the aggregate principal amount of the New Secured
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<PAGE>
Notes specified in Section 2.2 of the Plan will be adjusted upward or downward
to provide for the distribution of the New Secured Notes in an aggregate
principal amount equal to such sum in accordance with Section 13.5(b) of the
Plan and (b) the corresponding amount of Cash to be distributed pursuant to
Section 2.1 of the Plan will be increased or decreased dollar for dollar to
offset the adjustment to the principal of New Secured Notes described in (a)
above. No consideration will be provided in lieu of principal amounts of any
other issue of the New Secured Notes that are rounded down.
All distributions of New Secured Notes under the Plan will be
issued by Reorganized Metallurg to the holders of Allowed Claims which are
Unsecured Claims of Metallurg, the Canadian Guarantee Claims, Unsecured Claims
of Shieldalloy, and the Multiemployer Pension Claim in Classes 4A, 4B, 4C, and
4E, respectively, notwithstanding Metallurg is not primarily liable for a Claim
in Classes 4B and 4C.
The Reorganized Debtors or their Subsidiaries may elect to
borrow funds under a term loan or revolving credit facilities, the proceeds of
which will be used to redeem on a dollar for dollar basis the principal amount
of the New Secured Notes that would have been issued under the Plan on the
Effective Date to holders of Allowed Claims in Classes 4A, 4B and 4C in
accordance with Sections 5.11(b), 5.12(b), and 5.13(b) of the Plan. Although the
Debtors have had discussions with and received proposals from several financial
institutions to provide such term loan or revolving credit facilities, neither
the Debtors nor any of their Subsidiaries have received a commitment letter or
entered into definitive documentation in respect of any such facilities. There
can be no assurance that any such facilities will be executed.
e. Unclaimed Distributions
If any distribution of Cash or other distributions to the
holder of an Allowed Claim pursuant to the Plan, including any interest, shares
of New Common Stock, any New Secured Notes, or any dividends, interest or other
amounts earned thereon, remain unclaimed for a period of one year after
distribution thereof, such distribution will be revested in the Reorganized
Debtors.
Any Cash or other distributions made on behalf of a holder of
an Allowed Unsecured Claim of MI, Canadian Guarantee Claim, Unsecured Claim of
SMC, or Multiemployer Pension Claims in Classes 4A, 4B, 4C, or 4E respectively,
to the agent under any debt instrument of the Debtors pursuant to the Plan,
including any interest, shares of New Common Stock, any New Secured Note, or any
dividends, interest or other amounts earned thereon, that are unclaimed by the
holder of such Claim governed by the relevant agreement for a period of one year
after distribution thereof will be returned to and revested in the Reorganized
Debtors.
If any Allowed Claim holder's distribution of Cash to the
holder of an Allowed Claim pursuant to the Plan by check or wire transfer is not
negotiated or cleared within ninety (90) days of the date of its issuance, such
payment will be stopped and cancelled and the funds will be returned to and
revested in the Reorganized Debtors, provided, however, that the Reorganized
Debtors will not be required to stop and cancel any check or wire transfer where
the administrative fee and charge, if any, to do so exceeds the amount of the
check or wire transfer.
4. COMPROMISE AND SETTLEMENT OF CLAIMS AND
RESOLUTION OF INTERCOMPANY CLAIMS
The Plan gives effect to the compromise and settlement of the
Claims asserted by the Former Preferred Stockholders and the Environmental
Authorities. For a detailed discussion of such compromises and settlements, see
Section V. above entitled "Compromises and Settlements of Certain Claims Under
the Plan."
In addition, pursuant to Section 12.1 of the Plan,
Intercompany Claims will be treated as though they are extinguished as among the
Debtors. As set forth in Section VI.B.5 and 6 hereof, the Plan provides that
Allowed Intercompany Claims between the Debtors and between the Debtors and
nondebtor Subsidiaries as included in Classes 2A and 2B will be offset and any
balance remaining payable by the Debtors will be eliminated. These claims arose
from normal course of trade and
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intercompany financings. The treatment of these claims in this manner was an
essential element in reaching a consensual agreement with the Creditors'
Committee. Failure to eliminate any net intercompany balances payable by the
Debtors to Subsidiaries would have reduced the estimated recoveries for the
creditors and have made the consensual agreement unlikely, thereby raising the
possibility for prolonged litigation and potential liquidation of the Debtors'
estates. As the nondebtor Subsidiaries will benefit from the continuing
operations of the Reorganized Debtors, the proposed treatment of these claims is
considered fair and reasonable under the circumstances.
B. CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS
1. ADMINISTRATIVE EXPENSE CLAIMS
Administrative Expense Claims are claims constituting a cost
or expense of administration of the Chapter 11 Cases allowed under section
503(b) of the Bankruptcy Code. Such claims include any actual and necessary
costs and expenses of preserving the estates of the Debtors, any actual and
necessary costs and expenses of operating the business of the Debtors in
Possession, any indebtedness or obligations incurred or assumed by the Debtors
in Possession in connection with the conduct of their business or the
acquisition or lease of property or the rendition of services, any allowance of
compensation and reimbursement of expenses to the extent allowed by a Final
Order under section 330 of the Bankruptcy Code, and fees or charges assessed
against the estates of the Debtors under section 1930 of title 28 of the United
States Code.
Pursuant to the Plan, Administrative Expense Claims will be
paid in full, in Cash, on the later of the Effective Date and the date such
Administrative Expense Claim becomes an Allowed Administrative Expense Claim, or
as soon thereafter as is practicable, or as otherwise agreed upon by the
parties. Allowed Administrative Expense Claims representing obligations incurred
in the ordinary course of business by the Debtors in Possession (including
amounts owed to vendors and suppliers that have sold goods or furnished services
to the Debtors in Possession since the Commencement Date) will be assumed and
paid by the Reorganized Debtors in accordance with the terms and conditions of
the particular transactions and any agreements relating thereto. The Debtors
estimate that Allowed Administrative Expense Claims (exclusive of compensation
and reimbursement of expenses payable to professionals retained in the Chapter
11 Cases) to be paid on the Effective Date will be approximately $5.2 million.
In addition, the Debtors estimate that there may be additional administrative
expenses and other costs relating to the Exit Financing Facility (as defined
below) in an amount in excess of $500,000.
The Debtors estimate that as of the Effective Date there will
exist $300,000 in Disputed Administrative Expense Claims and therefore such
amount should be held in the Disputed Other Secured and Priority Claims Reserve
pending resolution of such Disputed Administrative Expense Claims.
All payments to professionals for compensation and
reimbursement of expenses and all payments to reimburse expenses of members of
the Creditors' Committee will be made in accordance with the procedures
established by the Bankruptcy Code, the Bankruptcy Rules, the Bankruptcy Court,
and the Southern District of New York guidelines for the periods commencing on
or after July 1, 1991, relating to the payment of interim and final compensation
and expenses. The Debtors estimate that Allowed Administrative Expenses relating
to compensation and reimbursement of expenses of professionals retained in the
Chapter 11 Cases (not including previous allowances paid) will be in a range of
$2.5 million to $3.5 million. The Bankruptcy Court will review and determine all
requests for compensation and reimbursement of expenses.
In addition to the foregoing, section 503(b) of the Bankruptcy
Code provides for payment of compensation to creditors, indenture trustees and
other persons making a "substantial contribution" to a reorganization case, and
to attorneys for and other professional advisors to such persons. The amounts,
if any, which may be sought by entities for such compensation are not known by
the Debtors at this time. Requests for compensation must be approved by the
Bankruptcy Court after a hearing on notice at which the Debtors and other
parties in interest may participate and, if appropriate, object to the allowance
of any compensation and reimbursement of expenses.
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<PAGE>
2. PRIORITY TAX CLAIMS
Priority Tax Claims are those Claims for taxes entitled to
priority in payment under section 507(a)(7) of the Bankruptcy Code. The Debtors
estimate that the amount of Allowed Priority Tax Claims is approximately
$256,000. Of such amount, approximately $13,000 relates to sales and use taxes
due in various states in which the Debtors operated immediately prior to the
Commencement Date. The remainder of Allowed Priority Tax Claims ($243,000)
relate to income taxes ($19,000) and real and personal property taxes
($224,000).
The aggregate amount of Priority Tax Claims as reflected in
the proofs of claim filed by creditors, or in the event no proof of claim was
filed, in the Debtors' schedules, is $9,942,895, excluding Claims for which no
amount was specified or which are otherwise unliquidated Claims. The Debtors
estimate that as of the Effective Date there will be no Disputed Priority Tax
Claims.
Each holder of an Allowed Priority Tax Claim will receive,
except to the extent that the holder of an Allowed Priority Tax Claim agrees to
a different treatment, Cash in an amount equal to such Allowed Priority Tax
Claim on the later of the Effective Date and the date such Priority Tax Claim
becomes an Allowed Priority Tax Claim.
3. CLASS 1A -- OTHER PRIORITY CLAIMS OF MI
The Other Priority Claims Of MI are Claims asserted against
Metallurg which are entitled to priority in accordance with section 507(a) of
the Bankruptcy Code (other than Administrative Expense Claims and Priority Tax
Claims). Such Claims include (i) unsecured claims for accrued employee
compensation earned within ninety days prior to commencement of the Chapter 11
Cases to the extent of $2,000 per employee and (ii) contributions to employee
benefit plans arising from services rendered within 180 days prior to the
commencement of the Chapter 11 Cases, but only for each such plan to the extent
of (x) the number of employees covered by such plan multiplied by $2,000, less
(y) the aggregate amount paid to such employees from Metallurg's estate for
wages, salaries or commissions. The Debtors estimate that there will be no
Allowed Other Priority Claims Of MI as of the Effective Date.
Pursuant to the Plan, holders of Allowed Other Priority Claims
Of MI, if any exist, will be paid in full, in Cash on the later of the Effective
Date and the date such Claim becomes an Allowed Claim, or as soon thereafter as
is practicable.
4. CLASS 1B -- OTHER PRIORITY CLAIMS OF SMC
The Other Priority Claims Of SMC are Claims asserted against
Shieldalloy which are entitled to priority in accordance with section 507(a) of
the Bankruptcy Code (other than Administrative Expense Claims and Priority Tax
Claims). Such Claims include (i) unsecured claims for accrued employee
compensation earned within ninety days prior to commencement of the Chapter 11
Cases to the extent of $2,000 per employee and (ii) contributions to employee
benefit plans arising from services rendered within 180 days prior to the
commencement of the Chapter 11 Cases, but only for each such plan to the extent
of (x) the number of employees covered by such plan multiplied by $2,000, less
(y) the aggregate amount paid to such employees from Shieldalloy's estate for
wages, salaries or commissions. The Debtors estimate that as of the Effective
Date there will be Allowed Other Priority Claims Of SMC of approximately
$56,000.
Pursuant to the Plan, holders of Allowed Other Priority Claims
of SMC, if any exist, will be paid in full, in Cash on the later of the
Effective Date and the date such Claim becomes an Allowed Claim, or as soon
thereafter as is practicable.
44
<PAGE>
5. CLASS 2A -- MI INTERCOMPANY CLAIMS
Class 2A Claims consist of Intercompany Claims of Shieldalloy
and any Subsidiaries asserted against Metallurg.
On the Effective Date, the Allowed Intercompany Claims in
Class 2A will be offset, any balance payable by Metallurg shall be eliminated
and no distributions shall be made on account thereof. No other distribution
shall be made to Shieldalloy and any Subsidiaries on account of such Allowed
Claims under the Plan.
6. CLASS 2B -- SMC INTERCOMPANY CLAIMS
Class 2B Claims consist of Intercompany Claims of Metallurg
and any Subsidiaries asserted against Shieldalloy.
On the Effective Date, the Allowed Intercompany Claims in
Class 2B will be offset, any balance payable by Shieldalloy shall be eliminated
and no distributions shall be made on account thereof. No other distribution
shall be made to Metallurg and any Subsidiaries on account of such Allowed
Claims under the Plan.
7. CLASS 2C -- MIDLANTIC SECURED CLAIM
Class 2C Claims consist of the Claim of Midlantic arising
under the New Jersey Economic Development Authority Notes, and held by Midlantic
to the extent such Claim is a Secured Claim. The Midlantic Claim is collaterally
secured by Shieldalloy's interest in the real and personal property located in
Newfield, New Jersey. The principal amount of the Midlantic Secured Claim is
estimated to be approximately $766,000 as of March 31, 1997.
The Plan provides that on the Effective Date, or as soon
thereafter as is practicable, Midlantic, as the holder of the Allowed Claim in
Class 2C, will receive Cash in the full amount of its Allowed Claim.
8. CLASS 2D -- MIDLANTIC GUARANTY CLAIM
The Midlantic Guaranty Claim is the Claim of Midlantic
asserted against Metallurg, arising under those certain guarantees, respectively
dated July 12, 1979, November 24, 1980, and June 18, 1981, issued by Metallurg
guaranteeing the indebtedness of Shieldalloy arising under the New Jersey
Economic Development Authority Notes held by Midlantic.
The Plan provides that the Midlantic Guaranty Claim will be
deemed fully satisfied upon the Cash distribution to Midlantic on account of its
Class 2C Claim. No other distribution will be made on account of the Midlantic
Guaranty.
9. CLASS 2E -- MI OTHER SECURED CLAIMS
The MI Other Secured Claims are all Secured Claims other than
the Midlantic Secured Claim, filed against Metallurg. Metallurg estimates that
the allowed amount of MI Other Secured Claims will aggregate approximately
$42,900. On the Effective Date, at Metallurg's option, an Allowed MI Other
Secured Claim will be (a) rendered unimpaired pursuant to section 1124(1) of the
Bankruptcy Code, and the Plan will leave unaltered the legal, equitable and
contractual rights to which an Allowed MI Other Secured Claim entitles its
holder, (b) reinstated and rendered unimpaired in accordance with section
1124(2) of the Bankruptcy Code, in which event, Metallurg will cure any defaults
and compensate the holder of such an Allowed Claim for damages incurred, if any,
as a result of reasonable reliance by such holder on its right to accelerate the
maturity and payment of any indebtedness under any agreement or applicable law,
and the maturity of such Allowed Claim will be reinstated, (c) paid in full, in
cash, (d) satisfied by Metallurg's delivery to such holder of the property
securing such Claim, in which event the value of such holder's interest in that
property shall be determined by agreement of the parties, or if they do not
agree, by the Bankruptcy Court, (e) satisfied by the Debtors' assumption and
assignment of the agreement governing such Claim and the
45
<PAGE>
cure of defaults thereunder as required by section 365(b) of the Bankruptcy
Code, or (f) paid in such manner as the parties agree. Class 2E is unimpaired
under the Plan, and pursuant to section 1126(f) of the Bankruptcy Code, each
holder of an Allowed MI Other Secured Claim is conclusively presumed to have
accepted the Plan and may not vote on the Plan.
10. CLASS 2F -- SMC OTHER SECURED CLAIMS
The SMC Other Secured Claims are all Secured Claims other than
the Midlantic Secured Claim, filed against Shieldalloy. Shieldalloy estimates
that the allowed amount of SMC Other Secured Claims will aggregate approximately
$89,500. On the Effective Date, at SMC's option, an Allowed SMC Other Secured
Claim will be (a) rendered unimpaired pursuant to section 1124(1) of the
Bankruptcy Code, and the Plan will leave unaltered the legal, equitable and
contractual rights to which an Allowed SMC Other Secured Claim entitles its
holder, (b) reinstated and rendered unimpaired in accordance with section
1124(2) of the Bankruptcy Code, in which event, Shieldalloy will cure any
defaults and compensate the holder of such an Allowed Claim for damages
incurred, if any, as a result of reasonable reliance by such holder on its right
to accelerate the maturity and payment of any indebtedness under any agreement
or applicable law, and the maturity of such Allowed Claim will be reinstated,
(c) paid in full, in cash, (d) satisfied by Shieldalloy's delivery to such
holder of the property securing such Claim, in which event the value of such
holder's interest in that property shall be determined by agreement of the
parties, or if they do not agree, by the Bankruptcy Court, (e) satisfied by the
Debtors' assumption and assignment of the agreement governing such Claim and the
cure of defaults thereunder as required by section 365(b) of the Bankruptcy
Code, or (f) paid in such manner as the parties agree. Class 2E is unimpaired
under the Plan, and pursuant to section 1126(f) of the Bankruptcy Code, each
holder of an Allowed SMC Other Secured Claim is conclusively presumed to have
accepted the Plan and may not vote on the Plan.
11. CLASS 3A -- MI CONVENIENCE CLAIMS
This Class consists of an Unsecured Claim asserted against
Metallurg which would otherwise be classified in Class 4A in an amount (i) less
than or equal to $1,000, or (ii) greater than $1,000, but which is reduced to
$1,000 by election of the holder of such Claim made on a validly executed and
timely delivered Ballot. A holder of Allowed Unsecured Claims of Metallurg may
elect on its Ballot to reduce its Claims to $1,000 even though the aggregate
amount of its Allowed Unsecured Claims against Metallurg as set forth in the
Schedules or, if no amount is specified in the Schedules, in the proof(s) of
claim filed by such holder, exceeds $1,000. In calculating the amount of the
Unsecured Claims against Metallurg held by a holder of more than one Unsecured
Claim of Metallurg (as set forth in the official claims register maintained by
Donlin, Recano & Company, Inc., the official claims agent of the Bankruptcy
Court), all Allowed Unsecured Claims against Metallurg held by such holder must
be aggregated and treated as one Unsecured Claim against Metallurg, provided,
however, that all Allowed Unsecured Claims against Shieldalloy, if any, held by
such holder will not be aggregated with the Allowed Unsecured Claims against
Metallurg. Accordingly, a creditor that holds four Allowed Unsecured Claims
against Metallurg in the amount of $250 will be treated as having one Allowed
Unsecured Claim against Metallurg in the amount of $1,000 and would be entitled
to treatment under Class 3A. The Debtors estimate that the Allowed Claims in
Class 3A will aggregate approximately $12,000.
Pursuant to the Plan, each holder of an Allowed Claim in Class
3A will receive Cash in an amount equal to its Allowed Claim on the later of the
Effective Date and the date such Claim becomes an Allowed Claim, or as soon
thereafter as is practicable.
12. CLASS 3B -- SMC CONVENIENCE CLAIMS
This Class consists of an Unsecured Claims asserted against
Shieldalloy which would otherwise be classified in Class 4C in an amount less
(i) than or equal to $1,000, or (ii) greater than $1,000, but which is reduced
to $1,000 by election of the holder of such Claim made on a validly executed and
timely delivered Ballot. A holder of Allowed Unsecured Claims of Shieldalloy may
elect on its Ballot to reduce its Claims to $1,000 even though the aggregate
amount of its Allowed Unsecured Claims against Shieldalloy, as set forth in the
Schedules or, if no amount is specified in the Schedules, in the proof(s) of
claim filed by such holder, exceeds $1,000. In calculating the amount of the
Allowed Unsecured Claims against Shieldalloy held by a holder of more than one
Allowed Unsecured Claim of Shieldalloy (as set forth in the official claims
register maintained by
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<PAGE>
Donlin, Recano & Company, Inc., the official claims agent of the Bankruptcy
Court), all Allowed Unsecured Claims against Shieldalloy held by such holder
must be aggregated and treated as one Unsecured Claim against Shieldalloy,
provided, however, that all Allowed Unsecured Claims against Metallurg, if any,
held by such holder will not be aggregated with the Allowed Unsecured Claims
against Shieldalloy. Accordingly, a creditor that holds four Allowed Unsecured
Claims against Shieldalloy in the amount of $250 will be treated as having one
Allowed Unsecured Claim against Shieldalloy in the amount of $1,000 and would be
entitled to treatment under Class 3B. The Debtors estimate that the Allowed
Claims in Class 3B will aggregate approximately $108,000.
Pursuant to the Plan, each holder of an Allowed Claim in Class
3B will receive Cash in an amount equal to its Allowed Claim on the later of the
Effective Date and the date such Claim becomes an Allowed Claim, or as soon
thereafter as is practicable.
13. CLASS 4A -- MI UNSECURED CLAIMS
Class 4A consists of certain Unsecured Claims against
Metallurg. Such Claims include Claims in respect of the rejection of Executory
Contracts and leases of real property and personal injury claims, as well as the
Claims of Metallurg's institutional lenders, trade vendors and suppliers and
prepetition SERP claims. The Debtors estimate that the amount of the Claims in
Class 4A will aggregate approximately $139,450,000. The aggregate amount of the
Claims of Class 4A, as reflected in proofs of claim filed by creditors in such
Class, or, in the event no proof of claim was filed, in the Debtors' Schedules,
is $139,450,000, excluding Claims to the extent they have been expunged or
reduced by the Debtor by objection or by stipulated agreement, Environmental
Claims, Claims of the Former Preferred Stockholders, or Claims for which no
amounts were specified or which are otherwise unliquidated Claims. The Debtors'
estimates of Allowed Claims are based upon an analysis of the Claims and the
Debtors' experience to date in resolving disputes concerning the amount of such
Claims. For a discussion of the settlement with the Environmental Authorities,
see Section V.B. above entitled "Compromises and Settlements of Certain Claims
- - -- Settlement With Holders of Environmental Claims."
Pursuant to the Plan, the amount of total Cash, New Secured
Notes, and New Common Stock distributable to Class 4A on the Effective Date is
first determined by calculating the MI Unsecured Portion. The MI Unsecured
Portion is one hundred percent (100%) less a percentage equivalent to $2.75
million divided by the Net Reorganization Value or $94.75 million. Each holder
of one or more Allowed Claims in Class 4A that aggregate $1 million or less (11)
shall elect on its Ballot either Class 4A-Option A or Class 4A-Option B and
based on such election, will receive either (A) its Pro Rata Share of (i) the MI
Unsecured Portion (97.1%) multiplied by (X) the Cash in the Cash Distribution
Pool on the Effective Date less the amount of Cash distributed pursuant to
Sections 5.13(b)(A)(i), 5.15(b)(ii), and 5.16(b)(ii), (Y) 70% of the total
principal amount of New Secured Notes issued on the Effective Date (as may be
adjusted in accordance with the Plan), and (Z) the MI Unsecured Portion of an
amount equal to (1) 70% of the New Common Stock issued on the Effective Date
(excluding Management Stock Awards) less (2) New Common Stock issued to Former
Preferred Stockholders who choose the FPS Settlement Stock Option, or (B) the
same distribution made to the holder of an Allowed Class 4A claim electing Class
4A-Option A, except that in lieu of its Pro Rata Share of the MI Unsecured
Portion of 70% of the New Secured Notes, it will receive Cash equal to 66 2/3%
of the principal amount of New Secured Notes that would have been distributed to
it as the holder of an Allowed Claim in Class 4A pursuant to the Class 4A-Option
A. See Section VI.B.16. below entitled "Class 4D -- Settling Former Preferred
Stockholder Claims."
- - --------
(11) For example, the holder of two Allowed Claims in Class 4A in the amounts of
$1 million and $500,000, respectively is not entitled to elect Class 4A-Option B
treatment because such holder has Allowed Claims in Class 4A which exceed $1
million in the aggregate. Accordingly, such holder will be treated under and
receive a distribution in accordance with Class 4A Option-A.
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<PAGE>
The New Secured Notes will mature on the tenth anniversary of
the Effective Date and will accrue interest at a rate not to exceed 12% per
annum (such rate to be determined so that the New Secured Notes would be
expected to trade at par value), commencing on July 1, 1996. The obligations of
Reorganized Metallurg under the New Secured Notes will be secured by (i) all
assets of Reorganized Metallurg, (ii) one hundred percent (100%) of the New
Common Stock of Reorganized Shieldalloy, and (iii) 66-2/3% less one share of the
stock of all nondomestic subsidiaries of Reorganized Metallurg under the New
Secured Notes as set forth in Exhibit A to the Plan. The liens granted with
respect to the New Secured Notes will be subordinate to those assets pledged
pursuant to the post-confirmation working capital facility. Reorganized
Metallurg will be required to make three sinking fund payments in respect of the
New Secured Notes in the amount of $2.5 million on the seventh, eighth, and
ninth anniversaries of the Effective Date.
For purposes of Class 4A-Option A and Class 4A-Option B, to
the extent that the Cash in the Cash Distribution Pool exceeds the Target Cash
Amount of $30 million, a Pro Rata Share of such excess Cash shall be used to
redeem and reduce the original principal amount of the New Secured Notes that
would otherwise be distributed to holders of Allowed Claims in Class 4A. To the
extent that the Cash in the Cash Distribution Pool is less than the Target Cash
Amount, a Pro Rata Share of the difference of the Target Cash Amount less the
Cash in the Cash Distribution Pool will be added to the principal amount of the
New Secured Notes that will be distributed to holders of Allowed Claims in Class
4A, provided, however, that the difference shall not exceed $5 million.
In the event the Reorganized Debtors or their Subsidiaries
obtain Exit Financing, the Plan provides for an automatic Exit Financing Cashout
pursuant to which the proceeds of the Exit Financing shall be used to reduce on
a dollar for dollar basis the principal amount of the New Secured Notes that
will be distributed to holders of Allowed Claims in Class 4A. However, in the
event the holder of an Allowed Claim in Class 4A elects treatment under the
Class 4A-Option B, it shall be entitled to receive the amount of Cash payable as
part of the Exit Financing Cashout of the New Secured Notes that would have been
issued to it under the Class 4A-Option A, and shall also be entitled to receive
Cash equal to 66 2/3% of the balance of the principal amount of New Secured
Notes that would have been distributed to it under the Class 4A-Option A.
The Class 4A-Option B election shall be available only to the
holder of Allowed Claims in Class 4A against Metallurg that aggregate $1 million
dollars or less. Any holder of Allowed Class 4A Claims in excess of $1 million
shall automatically receive the treatment as set forth under Class 4A-Option A.
In the event that the holder of an Allowed Claim in Class 4A fails to make an
election on the Ballot in choosing treatment under either Class 4A-Option A or
Class 4A-Option B, it shall be deemed to have elected Class 4A-Option A. The
total amount of Cash, New Secured Notes and/or New Common Stock will then be
distributed to holders of Allowed Claims in Class 4A and to the Disputed
Unsecured Claims Reserve on a Pro Rata basis.
As an example, the distributions to a holder of an Allowed
Claim in Class 4A in the amount of $10,000 under Class 4A-Option A and Class
4A-Option B, which consist of Cash, New Secured Notes and New Common Stock are
set forth in the table below (assuming a $30,000,000 Cash Distribution Pool and
$60,000,000 of New Secured Notes are issued and omitting any accrued interest
paid in respect of the New Secured Notes and the effect of paying Cash in lieu
of New Secured Notes in a principal amount of less then $1,000):
<TABLE>
<CAPTION>
Total
New Secured Shares of Attributed
Class Claim Cash Notes Common Stock Value
----- ----- ---- ----- ------------ -----
<C> <C> <C> <C> <C> <C>
4A- Option A $10,000 $1,470 $2,930 220 $6,600
4A- Option B $10,000 $3,423 N.A. 220 $5,623
</TABLE>
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<PAGE>
To the extent that Reorganized Metallurg elects to exercise
the Exit Financing Cashout, the holders of Allowed Claims in Class 4A will
receive Cash equal to the principal amount of the New Secured Notes that are
reduced. In the event the holder of Allowed Claims in Class 4A elected Class
4A-Option B, it will be entitled to receive: (i) the amount of Cash payable as a
result of the Exit Financing Cashout and (ii) shall be also entitled to receive
in Cash 66 2/3% of the balance of the New Secured Notes that would have been
distributed to it under Class 4A-Option A. For example, if Reorganized Metallurg
exercised the Exit Financing Cashout so that the New Secured Notes are reduced
by $10,000,000, the holder of an Allowed Claim in Class 4A in the amount of
$10,000 will receive the following (omitting any accrued interest paid in
respect of the New Secured Notes):
<TABLE>
<CAPTION>
Total
New Secured Shares of Attributed
Class Claim Cash Notes Common Stock Value
----- ----- ---- ----- ------------ -----
<C> <C> <C> <C> <C> <C>
4A- Option A $10,000 $1,958 $2,442 220 $6,600
4A- Option B $10,000 $3,586 N.A. 220 $5,786
</TABLE>
There can be no assurance, however, that Reorganized Metallurg
will elect to use the Exit Financing Cashout or, if it does, what amount of New
Secured Notes will be reduced.
It is estimated that, on the Effective Date of the Plan, total
Allowed Unsecured Claims in Class 4A will equal $139,450,000. It is also
estimated that on the Effective Date, total Disputed Unsecured Claims asserted
against Metallurg will be zero, excluding Environmental Claims, Claims of the
Former Preferred Stockholders, or Claims for which no amounts were specified or
which are otherwise unliquidated Claims. To the extent that the total Disputed
Unsecured Claims asserted against Metallurg are greater than zero, the total
amount distributable to holders of Allowed Claims in Class 4A will be diluted.
Therefore, the total amount of Cash, New Secured Notes, and New Common Stock
distributable on a Pro Rata basis (exclusive of Non-Settling Former Preferred
Stockholders) to holders of Allowed Unsecured Claims on the Effective Date in
the event all holders of Class 4A Claims elect Class 4A-Option A will be:
$20,391,000 of Cash; $40,781,000 of New Secured Notes; and 3,082,800 shares of
New Common Stock.(12)
It is estimated that on the Effective Date the distribution of
Cash, New Secured Notes and New Common Stock to holders of Allowed and Disputed
Unsecured Claims will have an aggregate value equal to 66.0% of each Claim. To
the extent that there are Disputed Unsecured Claims in Class 4A and such
Disputed Unsecured Claims are Allowed Claims, the total recovery to holders of
Allowed Unsecured Claims in Class 4A will be reduced.
14. CLASS 4B -- CANADIAN GUARANTEE CLAIMS
The Canadian Guarantees are (i) that certain guarantee issued
by Metallurg (Canada) Ltd. in respect of that certain revolving credit agreement
dated July 31, 1986, as amended as of August 31, 1990, entered into by and among
Metallurg, Shieldalloy and Metallurg (Canada) Ltd., as borrowers, the lenders a
party thereto, and Morgan Guaranty Trust Company of New York as agent for the
lenders, and (ii) that certain guarantee issued by Metallurg (Canada), Ltd. in
respect of that certain note dated August 31, 1989 issued by Metallurg to
Deutsche Bank in the principal amount of $5 million. Class 4B consists of
holders of Class 4A Claims who have the benefit of a Canadian Guarantee.
- - --------
(12) The estimate of distributable Cash and shares of New Common Stock is based
upon (i) all Former Preferred Stockholders electing to settle their Claims, and
(ii) all Settling Former Preferred Stockholders electing the FPS Settlement
Stock Option. See Section VI.B.16. below entitled "Class 4D -- Settling Former
Preferred Stockholder Claims."
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<PAGE>
Pursuant to the Plan, the amount of total Cash, New Secured
Notes, and New Common Stock distributable to Class 4B is first determined by
calculating the Canadian Guarantee Portion. The Canadian Guarantee Portion is
determined by dividing $2.75 million by the Net Reorganization Value or 2.9%.
Accordingly, each holder of an Allowed Claim in Class 4B will receive its Pro
Rata Share of the Canadian Guarantee Portion (2.9%) of (i) the Cash in the Cash
Distribution Pool on the Effective Date less the amount of Cash distributed to
holders of SMC Unsecured Claims in Class 4C, the Multiemployer Pension Claims in
Class 4E, and Environmental Settlement Agreement Claims in Class 4F, pursuant to
Sections 5.13(b)(A)(i), 5.15(b)(ii), and 5.16(b)(ii) of the Plan, (ii) 70% of
the total principal amount of New Secured Notes issued on the Effective Date (as
may be adjusted in accordance with the Plan), and (iii) an amount equal to (x)
70% of the New Common Stock issued on the Effective Date (excluding the
Management Stock Awards) less (y) New Common Stock issued to Former Preferred
Stockholders who elect the FPS Settlement Stock Option. See Section VI.B.16.
below entitled "Class 4D -- Settling Former Preferred Stockholder Claims." The
total amount of Cash, New Secured Notes, and New Common Stock will then be
distributed to holders of Allowed Claims.
To the extent that the Cash in the Cash Distribution Pool
exceeds the Target Cash Amount, a Pro Rata Share of such excess Cash will be
used to redeem and reduce the original principal amount of the New Secured Notes
that would otherwise be distributed to holders of Allowed Claims in Class 4B. To
the extent that the Cash in the Cash Distribution Pool is less than the Target
Cash Amount, a Pro Rata Share of the difference of the Target Cash Amount less
the Cash in the Cash Distribution Pool will be added to the principal amount of
the New Secured Notes that will distributed to holders of Allowed Claims in
Class 4B, provided, however, that the difference shall not exceed $5 million.
Thus, on the Effective Date, each holder of an Allowed Claim in Class 4B will
receive fixed distributions of Cash, New Secured Notes and/or New Common Stock
having an aggregate value approximating 3.9% of its Allowed Claim.
In the event the Reorganized Debtors or their Subsidiaries
obtain Exit Financing, the Plan provides for an automatic Exit Financing Cashout
pursuant to which the proceeds will be used to reduce on a dollar for dollar
basis the principal amount of the New Secured Notes that will be distributed to
holders of Allowed Claims in Class 4B. There can be no assurance, however, that
Reorganized Metallurg will elect to use the Exit Financing Cash out or, if it
does, what amount of New Secured Notes will be reduced.
15. CLASS 4C -- SMC UNSECURED CLAIMS
Class 4C consists of certain Unsecured Claims against
Shieldalloy. Such Claims include Claims in respect of the rejection of Executory
Contracts and leases of real property, personal injury claims, as well as the
Claims of Shieldalloy's trade vendors and suppliers. The Debtors estimate that
the amount of the Claims in Class 4C will aggregate approximately $123,982,000.
The aggregate amount of the Claims in Class 4C, as reflected in proofs of claim
filed by creditors in such Class or, in the event no proof of claim was filed,
in the Debtors' Schedules, is $124,445,000, excluding Claims to the extent they
have been expunged or reduced the Debtor through objection or by stipulated
agreement, Environmental Claims, or Claims for which no amounts were specified
or otherwise unliquidated Claims. The Debtors' estimates of Allowed Claims are
based upon an analysis of the Claims and the Debtors' experience to date in
resolving disputes concerning the amount of such Claims. See Section V.B. above
entitled "Compromises and Settlements of Certain Claims Under the Plan --
Settlement With Holders of Environmental Claims."
Pursuant to the Plan, each holder of an Allowed Claim in Class
4C shall elect on its Ballot either option A or option B, and based on such
election will receive either (A) its Pro Rata Share of (i) the SMC Unsecured
Creditor Portion, which is thirty percent (30%), multiplied by (i) the Cash in
the Cash Distribution Pool, all as of the Effective Date, plus the Cash
distributed to Former Preferred Stockholders who elect the FPS Settlement Cash
Option, (ii) the total principal amount of New Secured Notes to be issued on the
Effective Date (as may be adjusted in accordance with the Plan), and (iii) the
total amount of New Common Stock to be issued on the Effective Date, excluding
the Management Stock Awards, or (B) the same distribution made to the holder of
an Allowed Class 4C Claim electing Class 4C-Option A, except that in lieu of its
Pro Rata Share of the SMC Unsecured Portion of the New Secured Notes, it will
receive Cash equal to 66 2/3% of the principal amount of New Secured Notes that
would have been distributed to it as the holder of an Allowed Claim in Class 4C
pursuant to the
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<PAGE>
Class 4C-Option A. The foregoing election shall be available only to holders of
Allowed Claims against SMC that aggregate $1 million or less. Any holder of
Allowed Claims against SMC that aggregate more than $1 million shall receive the
treatment as set forth under the Class 4C-Option A. See Section VI.B.16. below
entitled "Class 4D -- Settling Former Preferred Stockholder Claims."
In the event that a holder of an Allowed Claim in Class 4C
fails to make an election on the Ballot in choosing treatment under either the
Class 4C-Option A or Class 4C-Option B, it shall be deemed to have elected the
Class 4C-Option A. For purposes of making distributions to Class 4C Claims, the
Pro Rata Share shall be calculated as if Class 4C included holders of Allowed
Claims in Classes 4E and 4F of the Plan. The total amount of Cash, New Secured
Notes and/or New Common Stock will then be distributed to holders of Allowed
Claims in Class 4C and to the Disputed Unsecured Claims Reserve on a Pro Rata
basis.
For purposes of Class 4C-Option A and Class 4C-Option B, to
the extent that the Cash in the Cash Distribution Pool exceeds the Target Cash
Amount, a Pro Rata Share of such excess Cash will be used to redeem and reduce
the original principal amount of the New Secured Notes that would otherwise be
distributed to holders of Allowed Claims in Class 4C. To the extent that the
Cash in the Cash Distribution Pool is less than the Target Cash Amount, a Pro
Rata Share of the difference of the Target Cash Amount less the Cash in the Cash
Distribution Pool will be added to the principal amount of the New Secured Notes
that will distributed to holders of Allowed Claims in Class 4C, provided,
however, that the difference shall not exceed $5 million.
In the event the Reorganized Debtors or their Subsidiaries
obtain Exit Financing, the Plan provides for an Exit Financing Cashout pursuant
to which the proceeds may be used to reduce on a dollar for dollar basis the
principal amount of the New Secured Notes that would have been distributed to
holders of Allowed Claims in Class 4C on the Effective Date. However, in the
event the holder of an Allowed Claim in Class 4C elects treatment under the
Class 4C-Option B, it shall be entitled to receive the amount of Cash payable as
part of the Exit Financing Cashout of the New Secured Notes that would have been
issued to it under the Class 4C-Option A, and shall also be entitled to receive
Cash equal to 66 2/3% of the balance of the principal amount of New Secured
Notes that would have been distributed to it under the Class 4C-Option A.
As an example, the distributions to a holder of an Allowed
Claim in Class 4C in the amount of $10,000 under Class 4C-Option A and Class
4C-Option B which consist of Cash, New Secured Notes and New Common Stock are
set forth in the table below (assuming a $30,000,000 Cash Distribution Pool and
$60,000,000 of New Secured Notes are issued and omitting any accrued interest
paid in respect of the New Secured Notes and the effect of paying Cash in lieu
of New Secured Notes in a principal amount of less than $1,000):
<TABLE>
<CAPTION>
Total
New Secured Shares of Attributed
Class Claim Cash Notes Common Stock Value
----- ----- ---- ----- ------------ -----
<C> <C> <C> <C> <C> <C>
4C-Option A $10,000 $ 670 $1,350 107 $3,090
4C-Option B $10,000 $1,570 N.A. 107 $2,640
</TABLE>
To the extent that Reorganized Metallurg elects to exercise
the Exit Financing Cashout, the holders of Allowed Claims in Class 4C will
receive Cash equal to the principal amount of the New Secured Notes that are
reduced. In the event the holder of Allowed Claims in Class 4C elected Class
4C-Option B, it will be entitled to receive: (i) the amount of Cash payable as a
result of the Exit Financing Cashout and (ii) shall be also entitled to receive
in Cash 66 2/3% of the balance of the New Secured Notes that would have been
distributed to it under Class 4C-Option A. For example, if Reorganized Metallurg
exercised the Exit Financing Cash out so that the New Secured Notes are reduced
by $10,000,000, the holder of an Allowed Claim in Class 4C in the amount of
$10,000 will receive the following (omitting any accrued interest paid in
respect of the New Secured Notes):
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<PAGE>
<TABLE>
<CAPTION>
Total
New Secured Shares of Attributed
Class Claim Cash Notes Common Stock Value
----- ----- ---- ----- ------------ -----
<C> <C> <C> <C> <C> <C>
4C-Option A $10,000 $ 895 $1,125 107 $3,090
4C-Option B $10,000 $1,645 N.A. 107 $2,715
</TABLE>
There can be no assurance, however, that Reorganized Metallurg will elect to use
the Exit Financing Cash out or, if it does, what amount of New Secured Notes
will be reduced.
It is estimated that on the Effective Date of the Plan, total
Allowed Unsecured Claims in Class 4C will equal $123,982,000. It is also
estimated that on the Effective Date, total Disputed Unsecured Claims asserted
against Shieldalloy will equal $463,000, excluding Environmental Claims, or
Claims for which no amounts were specified or which are otherwise unliquidated
Claims. In the event all of the holders in Class 4C elect Class 4C-Option A, the
total amount of Cash, New Secured Notes, and New Common Stock distributable on a
Pro Rata basis (exclusive of Non-Settling Former Preferred Stockholders) to
holders of Allowed Unsecured Claims in Class 4C on the Effective Date will be:
$8,969,000, of Cash; $17,938,000 of New Secured Notes; and 1,420,100 shares of
New Common Stock.(13) The total amount of $31,000 of Cash; $62,000 of New
Secured Notes; and 4,900 shares of New Common Stock will be distributed to the
Disputed Unsecured Claims Reserve. It is estimated that on the Effective Date
the distribution of Cash, New Secured Notes and New Common Stock to holders of
Allowed and Disputed Unsecured Claims will have an aggregate value approximating
30.9% of each Claim. If all Disputed Unsecured Claims are disallowed, the total
recovery to holders of Allowed Unsecured Claims based on Cash, New Secured Notes
and New Common Stock, will approximate 31.1% per Claim.
16. CLASS 4D -- SETTLING FORMER PREFERRED STOCKHOLDER CLAIMS
Former Preferred Stockholders are those individuals who are
listed on Metallurg's schedules of liabilities as holders of Claims on account
of preferred stock issued by Metallurg. On or before December 29, 1996, the
Creditors' Committee intends to file an objection to all Former Preferred
Stockholder Claims, seeking to expunge and disallow all such Claims. Class 4D
consists only of those Former Preferred Stockholders who elect on the election
form accompanying this Disclosure Statement or stipulate with the Debtors and
the Committee to accept the FPS Settlement, thereby releasing, compromising and
settling all Claims on account of preferred stock issued by Metallurg.
Pursuant to the Plan, each holder of a Class 4D Claim will
receive, at their individual option, an amount equal to either, (i) the FPS
Settlement Stock Option or (ii) the FPS Settlement Cash Option. Each Former
Preferred Stockholder will indicate on the election form or in writing whether
it chooses to receive the FPS Settlement Stock Option or FPS Settlement Cash
Option. In the event that such holder fails to do so, it shall be deemed to have
chosen the FPS Settlement Stock Option. The provisions of, and distributions
provided for in Class 4D do not apply to Non-Settling Former Preferred
Stockholders. Those holders of Former Preferred Stockholder Claims who do not
elect on the election form accompanying this Disclosure Statement or stipulate
with the Debtors and the Committee to accept the FPS Settlement to release,
compromise and settle all Claims on account of preferred stock issued by
Metallurg will retain a Claim against Metallurg under Class 4A of the Plan. Such
individuals will have to file a response to the Creditors' Committee's objection
and litigate the merits of their Claims. Pending resolution of the
above-described Committee's objection, the Former Preferred Stockholder's Claim
will be treated as a Disputed Claim in Class 4A of the Plan and the reserve
provisions of Section 11.3 of the Plan will be followed. See Section
- - --------
(13) The estimate of distributable Cash and shares of New Common Stock is based
upon (i) all number of Former Preferred Stockholder electing to settle their
Claims, and (ii) all Settling Former Preferred Stockholders electing the FPS
Settlement Stock Option. See Section VI.B.16. below entitled "Class 4D --
Settling Former Preferred Stockholder Claims."
52
<PAGE>
IV.J.8. above entitled "Objection to Former Preferred Stockholder Claims" and
Section V.A. above entitled "Compromises and Settlements of Certain Claims Under
the Plan -- Former Preferred Stockholders."
Because the Settling Former Preferred Stockholders may elect
to receive either Cash or Common Stock, the distributions of Cash and New Common
Stock to Classes 4A and 4B will depend on how many Former Preferred Stockholders
elect to accept the FPS Settlement and what proportion elect to receive Cash in
lieu of New Common Stock. In the event that Settling Former Preferred
Stockholders elect the FPS Settlement Cash Option, the distribution of New
Common Stock to holders of Allowed Claims in Classes 4A and 4B, respectively,
will be reallocated (proportionately by the MI Unsecured Portion of New Common
Stock and the Canadian Guarantee Portion of New Common Stock, respectively), by
the amount of the New Common Stock which is not distributed to the Settling
Former Preferred Stockholders who elect the FPS Settlement Cash Option.
Similarly, the distribution of Cash to holders of Allowed Claims in Classes 4A
and 4B, respectively, will be decreased (proportionately by the MI Unsecured
Portion of Cash and the Canadian Guarantee Portion of Cash, respectively), by
the amount of Cash which is distributed to the Settling Former Preferred
Stockholders who elect the FPS Settlement Cash Option.
17. CLASS 4E -- MULTIEMPLOYER PENSION CLAIM
Class 4E consists of the Multiemployer Pension Claim asserted
by District 65 Pension Plan against Metallurg and Shieldalloy. The Multiemployer
Pension Claim is for withdrawal liability, "mass" withdrawal liability, and
minimum funding contributions under ERISA and the Internal Revenue Code. The
Debtors have settled the Multiemployer Pension Claim asserted by District 65
Pension Plan and a motion approving such settlement is presently pending before
the Bankruptcy Court. Pursuant to the settlement, District 65 Pension Plan will
receive an Allowed Unsecured Claim of $5 million against Shieldalloy. For a
discussion of the settlement with District 65 Pension Plan, see Section IV.J.6
above entitled, "Settlement of Multiemployer Pension Claims."
Pursuant to the Plan, District 65 Pension Plan, as the holder
of the Class 4E Claim, will receive Cash on an amount equal to: (i) 50% of the
total value of New Common Stock that would have been distributed to the holder
of such Claim on a Pro Rata basis had it been the holder of an Allowed Claim
classified as Class 4C which, as of the Effective Date, would have included the
aggregate of all Allowed Claims classified as "Class 4C" under this Plan, and
all Allowed Claims classified as Classes 4E and 4F under the Plan, and (ii) the
Pro Rata amount of Cash that would have been distributed to the holder of such
Claim had it been the holder of an Allowed Claim classified as Class 4C which,
as of the Effective Date, would have included the aggregate of all Allowed
Claims classified as "Class 4C" under this Plan and all Allowed Claims
classified as Classes 4E and 4F under this Plan.
In addition, District 65 Pension Plan, as the holder of the
Allowed Class 4E Claim, will receive New Secured Notes in an amount equal to the
Pro Rata amount of New Secured Notes that would have been distributed to the
holder of such Claim had it been the holder of an Allowed Claim classified as
Class 4C which, as of the Effective Date, would have included the aggregate of
all Allowed Claims classified as "Class 4C" under this Plan and all Allowed
Claims classified as Classes 4E and 4F under this Plan.
However, District 65 Pension Plan has elected in writing to
receive New Common Stock in lieu of the Cash payout it would have otherwise
received on account of its Multiemployer Pension Claim. Accordingly, the
Debtors, on the Effective Date, shall distribute on account of the Class 4E
Claim, the number of shares of New Common Stock that would have been distributed
to the holder of such Claim on a Pro Rata basis had it been the holder of an
Allowed Claim classified in Class 4C that as of the Effective Date would have
included in the aggregate all Allowed Claims classified as "Class 4C" under the
Plan and Allowed Claims classified under Classes 4E and 4F of the Plan.
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<PAGE>
18. CLASS 4F -- ENVIRONMENTAL SETTLEMENT AGREEMENT CLAIMS
Class 4F consists of those Environmental Claims asserted by
the Environmental Authorities against Metallurg and Shieldalloy which have been
settled pursuant to the Environmental Settlement Agreements. The Debtors intend
to seek approval of the Environmental Settlement Agreements pursuant to
Bankruptcy Rule 9019 at the hearing on confirmation of the Plan. For a
discussion of the settlement with the Environmental Authorities, see Section
V.B. above entitled "Compromises and Settlements of Certain Claims Under the
Plan -- Settlement With Holders of Environmental Claims."
Pursuant to the Plan, each holder of an Environmental
Settlement Agreement Claim will receive on the Effective Date Cash equal to the
sum of: (i) 50% of the total value of New Common Stock that would have been
distributed to the holder of such Claims on a Pro Rata basis had they been the
holders of Allowed Claims classified as Class 4C which, as of the Effective
Date, would have included the aggregate of all Allowed Claims classified as
"Class 4C" under this Plan and all Allowed Claims classified under Classes 4E
and 4F under this Plan, (ii) the Pro Rata amount of Cash that would have been
distributed to the holders of such Claims had they been classified the holders
of an Allowed Claim classified as Class 4C which, as of the Effective Date,
would have included the aggregate of all Allowed Claims classified as Class 4C
under this Plan and all Allowed Claims classified under Classes 4E and 4F under
this Plan, and (iii) 66 2/3% of the value of New Secured Notes (excluding
accrued interest) that would have been distributed to the holder of such Claims
on a Pro Rata basis had they been the holders of Allowed Claims classified as
Class 4C which, as of the Effective Date, would have included the aggregate of
all Allowed Claims classified as "Class 4C" under this Plan and all Allowed
Claims classified as Classes 4E and 4F under this Plan.
In consideration of the treatment afforded holders of Allowed
Environmental Settlement Agreement Claims in Class 4F, such holders will waive
any claim to additional consideration under the Plan, including any additional
right to receive New Common Stock, New Secured Notes, or any payment on account
of accrued interest in respect of the New Secured Notes, or any other payments
made to holders of Allowed Claims under the Plan whether paid upon consummation
of the Plan or any time thereafter.
19. CLASS 5 -- INSURED CLAIMS AGAINST MI
Class 5 Claims consist of those Claims against Metallurg
payable, in whole or in part, by an insurance policy or policies issued by an
insurance company on behalf of Metallurg. The Debtors believe that the only
holders of Claims in this class are the Claimants identified in the Madden Proof
of Claim. For a discussion of the Madden Proof of Claim, see Section IV.J.9.
above entitled "Events During the Chapter 11 Cases--Settlement of Miscellaneous
Claims and Motions--the Madden Class Action Claim." On the Effective Date, each
holder of a Claim in Class 5, to the extent not previously provided for by prior
order of the Bankruptcy Court, is entitled to maintain an action against and
obtain payment on account of such Claims solely from an insurance company
pursuant to an insurance policy issued to or for the benefit of Metallurg,
subject to the terms of said insurance policies. If and to the extent that any
holder of an Insured Claim Against MI obtains a final judgment against Metallurg
in the New Jersey Action and such insurance policies are insufficient to cover
the payment in full of the judgment obtained against Metallurg, then such
deficiency amount shall be paid by the Reorganized Debtor in an amount equal to
the recovery payable to holders of Allowed Claims classified in Class 4A.
Holders of Insured Claims shall receive no other distributions under the Plan on
account of their Unsecured Claims.
20. CLASS 6 -- INSURED CLAIMS AGAINST SMC
Class 6 Claims consist of those Claims against Shieldalloy
payable, in whole or in part, by an insurance policy or policies issued by an
insurance company on behalf of Shieldalloy. The Debtors believe that the only
holders of Claims in this class are the Claimants identified in the Madden Proof
of Claim. For a discussion of the Madden Proof of Claim, see Section IV.J.9.
above entitled "Events During the Chapter 11 Cases--Settlement of Miscellaneous
Claims and Motions--the Madden Class Action Claim." On the Effective Date, each
holder of a Claim in Class 6, to the extent not previously provided for by prior
order of the Bankruptcy Court, is entitled to maintain an action against and
obtain payment on account of such Claims
54
<PAGE>
solely from an insurance company pursuant to an insurance policy issued to or
for the benefit of Shieldalloy, subject to the terms of said insurance policies.
If and to the extent that any holder of an Insured Claim Against SMC obtains a
final judgment against Shieldalloy in the New Jersey Action and such insurance
policies are insufficient to cover the payment in full of the judgment obtained
against Shieldalloy, then such deficiency amount shall be paid by the
Reorganized Debtor in an amount equal to the recovery payable to holders of
Allowed Claims classified in Class 4C. Holders of Insured Claims shall receive
no other distributions under the Plan on account of their Unsecured Claims.
21. CLASS 7 -- MI EQUITY INTERESTS
Class 7 consists of all Equity Interests in Metallurg. Under
the Plan, each holder of a Class 7 Claim will not receive any distributions on
account of such Equity Interests. On the Effective Date, all Equity Interests in
MI shall be extinguished.
22. CLASS 8 -- SMC EQUITY INTERESTS
Metallurg, as the holder of Equity Interests in Class 8, will
retain its ownership of the Equity Interests in Shieldalloy (as Reorganized
Shieldalloy).
C. SUMMARY OF OTHER PROVISIONS OF THE PLAN
The following paragraphs summarize certain other significant
provisions of the Plan. The Plan should be referred to for the complete text of
these and other provisions of the Plan.
1. NEW COMMON STOCK
As stated above, pursuant to the Plan all authorized and
outstanding shares of the common and preferred stock of Metallurg will be
cancelled on the Effective Date and Reorganized Metallurg will distribute New
Common Stock to holders of Allowed Claims in Classes 4A, 4B, 4C, 4D and 4E
except to the extent the holders of Allowed Claims in such classes elect to
receive Cash in lieu of New Common Stock. Pursuant to the Plan, Reorganized
Metallurg is authorized to issue 15,000,000 shares of New Common Stock of which
an aggregate of approximately 4,750,000 shares of New Common Stock will be
issued to such holders and 250,000 shares will be issued as Management Stock
Awards. An additional 250,000 shares will be reserved for issuance upon exercise
of stock options issued pursuant to the Management Stock Award and Stock Option
Plan.
Under the Articles of Incorporation of Reorganized Metallurg,
a copy of which is included in the Plan Supplement, holders of the New Common
Stock will be entitled to receive such dividends as may be declared from time to
time by the Board of Directors of Reorganized Metallurg out of assets available
therefor, after payment of dividends required to be paid on outstanding
preferred stock, if any. See Section XI. below entitled "Certain Risk Factors To
Be Considered." In the event of the liquidation, dissolution, or winding up of
Reorganized Metallurg, the holders of the New Common Stock will be entitled to
share ratably in all assets remaining after payment of liabilities, subject to
the prior distribution rights of the holders of preferred stock then
outstanding, if any. The New Common Stock will have no preemptive or conversion
rights and will not be subject to further calls or assessments by Reorganized
Metallurg. The New Common Stock will, upon issuance, pursuant to the Plan, be
duly authorized, validly issued, fully paid and nonassessable.
Holders of the New Common Stock will be entitled to one vote
per share on all matters to be voted upon by the stockholders. Holders of a
plurality of the shares voting for the election of directors can elect all of
the directors since the holders of the New Common Stock will not have cumulative
voting rights. For a more detailed description of the process by which
Reorganized Metallurg will elect its Board of Directors, see Section VIII.A.
below entitled "Management of the Reorganized Debtors -- Board of Directors and
Management." Certain significant matters will require the approval of the
holders of a majority of the outstanding shares of New Common Stock. See Section
VI.C.8. below entitled "The Plan of Reorganization -- Amendment and Restatement
of the Debtors' Articles of Incorporation and Bylaws."
55
<PAGE>
As described in more detail below in Section IX. entitled
"Applicability of Federal and Other Securities Laws to the New Common Stock To
Be Distributed Under the Plan," Reorganized Metallurg will use reasonable
commercial efforts to cause the shares of New Common Stock to be listed on the
Over the Counter Bulletin Board. There is no assurance, however, that an active
market in which to trade the New Common Stock will develop. See Section XI.
below entitled "Certain Risk Factors To Be Considered."
2. CONDITIONS PRECEDENT TO CONFIRMATION OF THE PLAN
Conditions precedent to confirmation of the Plan
include the following:
a. The allowed amount of Unsecured Claims asserted
against Metallurg (excluding Claims of Former Preferred
Stockholders) in Class 4A will not exceed $142 million.
b. The allowed amount of Unsecured Claims asserted
against Shieldalloy in Class 4C will not exceed $133 million.
c. The allowed amount of Administrative Expense
Claims asserted against Metallurg and Shieldalloy (including
Claims of professionals for services rendered and expenses
incurred) will not exceed $10 million.
d. The Clerk of the Bankruptcy Court will have
entered the Confirmation Order, which will, among other
things:
i. decree that the Confirmation Order will supersede
any Bankruptcy Court orders issued prior to the
Confirmation Date that may be inconsistent with the
Confirmation Order;
ii. authorize the implementation of this Plan in
accordance with its terms;
iii. provide that any transfers effected or to be
effected under this Plan will be exempt from New York
State and New York City transfer taxes, mortgage
recording taxes, and any other stamp or similar tax
under section 1146(c) of the Bankruptcy Code;
iv. provide for approval of the Environmental
Settlement Agreements pursuant to Bankruptcy Rule
9019; and
v. provide for approval of the FPS Settlement
pursuant to Bankruptcy Rule 9019.
3. CONDITIONS PRECEDENT TO CONSUMMATION OF THE PLAN
The Plan will not become effective unless and until:
a. The Confirmation Order have become final and
non-appealable;
b. The Environmental Settlement Agreements will have
been entered into by the parties thereto and will have become
final;
c. All financing provided to the Debtors pursuant to
section 364 of the Bankruptcy Code will have been repaid,
cash-collateralized as provided in the DIP Facility, or
replaced, or other arrangements satisfactory to the lenders
providing such financing, the Debtors and the Committee,
regarding the termination of such financing will have been
made.
56
<PAGE>
d. The Debtors will have obtained a working capital
line of credit in the amount of at least $20,000,000 which may
be secured by a first lien on all assets of Reorganized
Metallurg and Reorganized Shieldalloy. Such working capital
facility will include a letter of credit subfacility and a
foreign exchange facility, in each instance in amount amenable
to the Reorganized Debtors;
e. Reorganized Metallurg will have entered into
employment contracts with its current senior management on
terms and conditions satisfactory to Reorganized MI and
members of senior management.
f. Guaranties of the Debtors' obligations made by any
Subsidiary will be released;
g. Reorganized Metallurg will have established a
Management Stock Award and Stock Option Plan satisfactory to
current senior management;
h. The Bankruptcy Court will have entered a Final
Order decreeing that the transfers of property by the
applicable Debtor:
(i) are or will be legal, valid and effective
transfers of property;
(ii) vest or will vest in the applicable Reorganized
Debtor good title to such property free and clear of
all liens, charges, claims, encumbrances, or
interests, except as expressly provided in the Plan;
(iii) do not and will not constitute avoidable
transfers under the Bankruptcy Code or under
applicable nonbankruptcy law; and
(iv) do not and will not subject the applicable
Reorganized Debtor to any liability by reason of such
transfer under the Bankruptcy Code or under
applicable nonbankruptcy law, including, without
limitation, any laws affecting successor or
transferee liability;
i. The Bankruptcy Court will have entered a Final
Order decreeing that the applicable Debtor is discharged
effective on the Effective Date from any Claim and any "debt"
(as that term is defined in section 101(12) of the Bankruptcy
Code), and such Debtor's liability in respect thereof is
extinguished completely, whether reduced to judgment or
noncontingent, asserted or unasserted, fixed or not, matured
or unmatured, disputed or undisputed, legal or equitable or
known or unknown that arose from any agreement of such Debtor
entered into or obligation of such Debtor incurred before the
Effective Date, or from any conduct of either of the Debtors
prior to the Effective Date, or that otherwise arose before
the Effective Date, including, without limitation, all
interest, if any, on any such debts, whether such interest
accrued before or after the Commencement Date, except for such
Claims that are to be specifically assumed or reinstated under
the Plan;
j. The Bankruptcy Court will have determined that
such Plan is feasible and does not provide for the liquidation
of all or substantially all of the property of the applicable
Debtor's estates, and its confirmation is not likely to be
followed by the liquidation of the applicable Reorganized
Debtor or the need for further financial reorganization;
k. All other steps necessary to effectuate the Plan
will have been taken;
l. No request for revocation of the Confirmation
Order under section 1144 of the Bankruptcy Code will have been
made and not denied;
m. On the Effective Date, the operation of
Reorganized Metallurg will become the general responsibility
of the board of directors, who will thereafter, have the
responsibility of the management,
57
<PAGE>
control, and operation of Reorganized Metallurg. The initial
board of directors of Reorganized Metallurg will have been
selected in accordance with Section 13.3 of the Plan;
n. On the Effective Date, the operation of
Reorganized Shieldalloy will become the general responsibility
of the board of directors, who will thereafter, have the
responsibility of the management, control, and operation of
Shieldalloy. The members of the initial board of directors of
Shieldalloy will be selected by the board of directors of
Metallurg. The initial officers of Shieldalloy shall have been
selected in accordance with Section 13.3 of the Plan;
o. Cash in the Cash Distribution Pool will be equal
to at least $25 million;
p. The Environmental Letters of Credit will have been
drawn upon in full and the proceeds deposited in trust in
accordance with the Environmental Settlement Agreements; and
q. The Other Letters of Credit will have been drawn
upon in full and the proceeds thereof will have been either
(i) deposited in trust with the beneficiaries thereof or (ii)
repaid to the Debtors and the Debtors will have issued
replacement letters of credit.
The Debtors and the Creditors' Committee may waive, by a
writing signed by an authorized representative of each, any of the conditions to
confirmation and consummation of the Plan. If the conditions precedent with
respect to consummation of the Plan fail to occur within ninety (90) days after
the Confirmation Order is issued, (i) the Confirmation Order will be vacated,
(ii) no distributions will be made under the Plan, (iii) the Debtors and all
holders of Claims and Equity Interests will be returned to the status quo ante
and (iv) all of the Debtors' obligations with respect to the Claims and Equity
Interests will remain unchanged.
4. EXECUTORY CONTRACTS AND UNEXPIRED LEASES
The Bankruptcy Code gives the Debtors the power, subject to
the approval of the Bankruptcy Court, to assume or reject executory contracts
and unexpired leases. If an executory contract or unexpired lease is rejected,
the other party to the agreement may file a claim for damages incurred by reason
of the rejection. In the case of rejection of leases of real property, such
damage claims are subject to certain limitations imposed by the Bankruptcy Code.
The Plan provides that all Executory Contracts existing
between the Debtors and any party are rejected, unless the executory contract
(i) has been assumed pursuant to a Bankruptcy Court order entered prior to the
Confirmation Date, (ii) was entered into in the ordinary course of business by
the Debtors in Possession or pursuant to Bankruptcy Court order, (iii) is the
subject of a motion for the approval of such contract filed and served prior to
the Confirmation Date or (iv) is set forth on Schedule 10.1(a) to the Plan. The
insurance policies set forth on Schedule 10.1(a) to the Plan and any related
agreements, documents or instruments, including, without limitation, any
retrospective premium rating plans relating to such policies, will be treated as
Executory Contracts and assumed pursuant to section 365(a) of the Bankruptcy
Code. Notwithstanding the assumption of the insurance policies and related
agreements, the distributions under the Plan to any holder of a Claim covered by
any of such insurance policies will be made in accordance with the treatment
provided under Sections 5.17 and 5.18 of the Plan. In addition, the Debtors do
not waive any claim, right or cause of action they may have against the insurer
under any of the assumed policies of insurance.
Pursuant to Section 10.1 of the Plan, Claims arising out of
the rejection of an Executory Contract must be filed with the Bankruptcy Court
no later than thirty (30) days after the later of (i) notice of entry of an
order approving the rejection of such contract or lease and (ii) notice of entry
of the Confirmation Order. Any Claims not filed within such time will be forever
barred from assertion against the Debtors, their estates, and their property.
Unless otherwise ordered by the Bankruptcy Court, all Allowed Claims arising
from the rejection of Executory Contracts shall be treated as Class 4A or 4C
Claims under the Plan and paid in accordance with the provisions of the Plan.
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<PAGE>
5. INDEMNIFICATION
The Plan provides that the obligations of the Debtors to
indemnify, reimburse or limit the liability of certain officers, directors and
employees of the Debtors against any obligations pursuant to the articles of
incorporation, the bylaws, applicable state law or specific agreement, or any
combination of the foregoing, will remain unaffected by the Plan and will not be
discharged. Specifically, the indemnification, reimbursement and limitation of
liability obligations of the Debtors will continue as to any present or former
officer, director or employee. The continuation of such obligations as to such
persons applies to any event occurring before, on or after the Commencement
Date.
6. COMPENSATION AND BENEFIT PROGRAMS
Unless otherwise specifically agreed between Metallurg and the
Metallurg executive officer, pursuant to Section 10.3 of the Plan, Metallurg's
supplemental executive retirement plans and arrangements will be treated as
Executory Contracts and rejected as of the Effective Date.
Except for the Debtors' supplemental executive retirement
plans or arrangements and employment agreements entered into before the
Commencement Date, the Plan provides that all employee compensation and benefit
plans, policies and arrangements of the Debtors for their directors, officers or
employees, including, without limitation, all savings plans, retirement plans,
health care plans, severance benefit plans, incentive plans, workers'
compensation programs, and life, disability and other insurance plans will be
deemed to be, and will be treated as, Executory Contracts assumed under the
Plan. The Debtors' obligations under such agreements, plans, policies and
programs will be assumed pursuant to section 365(a) and section 1123 of the
Bankruptcy Code, survive confirmation of the Plan, remain unaffected thereby and
not be discharged in accordance with section 1141 of the Bankruptcy Code.
7. PROVISIONS FOR TREATMENT OF DISPUTED CLAIMS
Unless otherwise ordered by the Bankruptcy Court, the Debtors
will have the exclusive right, except with respect to applications for the
allowance of compensation and reimbursement of expenses of professionals under
section 330 of the Bankruptcy Code, to object to the allowance of Claims filed
with the Bankruptcy Court with respect to which the liability is disputed in
whole or in part. All objections will be litigated to Final Order; however, the
Debtors may compromise and settle any objections to Claims, subject to the
approval of the Bankruptcy Court. Unless another date is established by the
Bankruptcy Court, all objections to Claims will be served and filed by the later
of (a) ninety days after the Effective Date and (b) ninety days after the proof
of claim has been filed.
Pursuant to Bankruptcy Rule 3018, holders of Disputed Claims
are not authorized to vote upon the Plan unless the Court temporarily allows
such Claims to vote to accept or reject the Plan. By order, dated November 12,
1996 (the "Scheduling Order"), as amended by the order approving this Disclosure
Statement, the Bankruptcy Court has established December 29, 1996 as the last
date by which parties in interest may file any objections to claims or equity
interests for purposes of accepting or rejecting the Plan. In the event such an
objection to claim or equity interest is filed, the Scheduling Order also
established January 17, 1997 as the date by which a motion for temporary
allowance of a claim or equity interest for purposes of accepting or rejecting
the Plan must be filed by such claimholder or equity interest holder with
responses by the Debtors due January 23, 1997. A hearing on any such temporary
allowance motion has been scheduled for February 5, 1997 at 11:00 a.m.
At such time as a Disputed Claim is resolved by Final Order
and is allowed, the holder thereof will receive the distributions to which such
holder is then entitled under the Plan.
With respect to Disputed Claims in Classes 4A and 4C, the Plan
provides that the Cash, New Secured Notes and New Common Stock which may be
distributed on account of such Claims will be withheld from the distributions to
such Classes on a Pro Rata basis amount based upon the Disputed Claim amount.
The Disputed Claim amount means the amount set
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forth in the proof of claim relating to a Disputed Claim or, if an amount is not
specified in such proof of claim or such Claim is unliquidated in whole or in
part, the amount estimated by the Court. For a discussion of the treatment of
Disputed Claims, see Sections 11.3, 11.6 and 11.7 of the Plan.
With respect to Disputed Priority Claims and Disputed Other
Secured Claims, the Plan provides that an amount sufficient to pay all Disputed
Priority Administrative Expense Claims, Disputed Other Secured Claims, Disputed
Priority Claims and Disputed Priority Tax Claims, as well as the expenses of,
and any taxes imposed on, the Plan Reserves will be set aside in the Disputed
Other Secured and Priority Claims Reserve on the Effective Date.
8. AMENDMENT AND RESTATEMENT OF THE DEBTORS' ARTICLES OF
INCORPORATION AND BYLAWS
Pursuant to the Plan, both Reorganized Metallurg and
Reorganized Shieldalloy will be reincorporated in the State of Delaware. Also,
the articles of incorporation and bylaws of each of the Reorganized Debtors will
be amended and restated effective on the Effective Date, to the extent necessary
to prohibit the issuance of nonvoting equity securities in accordance with
section 1123(a)(6) of the Bankruptcy Code and to effectuate the provisions of
the Plan. The articles of incorporation and bylaws of Metallurg will be amended
and restated substantially in the forms attached as Exhibits A and B to the Plan
Supplement (the "Restated Articles" and "Restated Bylaws," respectively).
The Restated Articles will, among other things, authorize
Reorganized Metallurg to issue up to 15 million shares of New Common Stock. For
a more detailed description of the New Common Stock, see Section VI.C.1., "The
Plan of Reorganization -- New Common Stock."
Generally, unless otherwise required by law, matters to be
acted upon by the stockholders of Reorganized Metallurg will require the
affirmative vote of the holders of a majority of the votes cast, provided that a
quorum (i.e., a majority of the outstanding shares of New Common Stock) is
present.
The first annual meeting of the stockholders of Reorganized
Metallurg will be held on a date to be selected by the Board of Directors of
Reorganized Metallurg in accordance with the Restated Articles and Restated
Bylaws. See Section 13.2 of the Plan. The Restated Bylaws will provide, among
other things, that subsequent meetings of the stockholders of Reorganized
Metallurg shall be held at least once annually each year thereafter.
The Restated Bylaws will also require that any stockholder who
would like to nominate a candidate for election as a Director of Reorganized
Metallurg notify Reorganized Metallurg of such intention and furnish Reorganized
Metallurg with certain written information and undertakings relevant to the
proposed nominee's qualifications as a director. Under applicable law and the
Restated Articles, the Board of Directors and the holders of a majority of the
outstanding shares of New Common Stock will have the authority to amend the
Restated Bylaws from time to time.
The brief statements and descriptions set forth above
concerning the Restated Articles and Restated Bylaws do not purport to be
complete, and are qualified in their entirety by reference to the forms of
Restated Articles and Restated Bylaws of Reorganized Metallurg, copies of which
are included in the Plan Supplement, respectively, and to the General
Corporation Law of the State of Delaware.
In addition, pursuant to the Registration Rights Agreement,
certain shareholders of Metallurg will have certain demand and "piggyback"
registration rights in respect of the shares of New Common Stock received
pursuant to the Plan, which rights will be assignable under certain
circumstances. For a description of such registration rights, see Section IX.
below entitled "Applicability of Federal and Other Securities Laws to the New
Common Stock to be Distributed Under the Plan."
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9. DISCHARGE, RELEASE FROM CLAIMS AND INTERESTS AND
INJUNCTIONS
The rights afforded in the Plan and the treatment of the
Claims and Equity Interests therein will be in exchange for and in complete
satisfaction, discharge and release of all Claims and Equity Interests of any
nature whatsoever, including any interest accrued thereon from and after the
Commencement Date, against the Debtors, or their estates, properties or
interests in property. Except as otherwise provided in the Plan, upon the
Effective Date, all such Claims against and Equity Interests in the Debtors will
be deemed satisfied, discharged and released in full. Pursuant to the
Confirmation Order, all parties (except as specifically provided for the United
States) will be precluded from asserting against the Debtors, the Debtors in
Possession, the Reorganized Debtors, the Committee and its members, including
but not limited to their respective directors, officers, shareholders, agents,
consultants, representatives, financial advisors, attorneys, or employees, or
their respective assets or properties, any other or further liabilities, liens,
Claims, encumbrances, obligations, or equity interests, including but not
limited to all principal and accrued and unpaid interest on the debts of the
Debtors based on any act or omission, transaction or other activity or security
instrument or other agreement of any kind or nature occurring, arising or
existing prior to the Effective Date, that was or could have been the subject of
any Claim or Equity Interest, whether or not Allowed.
10. AMENDMENT OF THE PLAN
The Debtors may alter, amend, modify or withdraw the Plan at
any time, subject, however, to section 1127 of the Bankruptcy Code. In the event
that the Bankruptcy Court determines, prior to the Confirmation Date, that any
provision in the Plan is invalid, void or unenforceable, such provision shall be
invalid, void or unenforceable with respect to the holder or holders of such
Claims or Equity Interests as to which the provision is determined to be
invalid, void or unenforceable but the invalidity, voidness or unenforceability
of any such provision shall in no way limit or affect the enforceability and
operative effect of any other provision of the Plan.
11. REVOCATION OF THE PLAN
The Debtors may revoke or withdraw the Plan at any time prior
to the Confirmation Date. If the Debtors revoke or withdraw the Plan prior to
the Confirmation Date, then it shall be deemed null and void.
12. EXTINGUISHMENT OF CAUSES OF ACTION UNDER THE AVOIDING
POWER PROVISIONS
Under sections 544, 547, 548, and 550, the debtor in
possession has certain powers to recover money or other assets for the debtor's
estate, eliminate security interests in estate property or eliminate debt
incurred by the estate. During the Chapter 11 Cases, the Creditors' Committee
and the Debtors extensively reviewed and analyzed potential claims under such
provisions. The Plan contemplates all claims, rights, causes of action, avoiding
powers, suits and proceedings under these provisions of the Bankruptcy Code
against Creditors will be extinguished on the Effective Date, provided, however,
that the Debtors may assert such avoidance powers, at their option, to offset or
otherwise defend against any Claim of and corresponding payment due to such
holder of a Claim under the Plan.
13. RIGHTS OF ACTION UNDER AVOIDING PROVISIONS
Under sections 502, 510, 541, 544, 545, 547 through 551 and
553 of the Bankruptcy Code, the debtor in possession has certain powers,
including but not limited to, the power to recover money or other assets for the
debtor's estate, eliminate security interests in estate property or eliminate
debt incurred by the estate. The Plan contemplates that the Debtors will retain,
and the Reorganized Debtors will have the exclusive right to enforce, any and
all present or future rights or causes of action against any Person and rights
of the Debtors that arose before or after the Commencement Date, including but
not limited to the avoidance powers, other than those specifically compromised
as part of the Plan or previously waived by the Debtors and any actions to
enforce coverage under insurance policies issued to the Debtors prior to the
Commencement Date.
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14. EXCULPATION
In accordance with the Plan, neither the Reorganized Debtors
nor the Creditors' Committee nor any of their respective members, officers,
directors, employees, advisors or agents will have or incur any liability to any
holder of a Claim or Equity Interest for any act or omission in connection with,
or arising out of, the pursuit of confirmation of the Plan, the consummation of
the Plan or the administration of the Plan or the property to be distributed
under the Plan except for willful misconduct or gross negligence, and, in all
respects, the Reorganized Debtors, the Creditors' Committee and each of their
respective members, officers, directors, employees, advisors and agents shall be
entitled to rely upon the advice of counsel with respect to their duties and
responsibilities under the Plan.
15. TERMINATION OF CREDITORS' COMMITTEE
The appointment of the Creditors' Committee will terminate on
the later of the Effective Date, the date of the hearing to consider
applications for final allowances of compensation and reimbursement of expenses,
and the date a Final Order is entered disallowing and/or resolving all Claims of
Non-Settling Former Preferred Stockholders.
16. SUPPLEMENTAL DOCUMENTS
Forms of the documents relating to the New Secured Notes, the
Registration Rights Agreement, the amended and restated articles of
incorporation and bylaws of the Reorganized Debtors and, the Environmental
Settlement Agreements will be contained in the Plan Supplement and will be filed
with the Clerk of the Bankruptcy Court at least ten days prior to the
Confirmation Hearing. The Plan Supplement may be inspected in the office of the
Clerk of the Bankruptcy Court during normal court hours. In addition, holders of
Claims and holders of Equity Interests may obtain a copy of the Plan Supplement
from the Debtors by contacting Gary T. Holtzer, Esq. at (212) 310-8463.
VII. CONFIRMATION AND CONSUMMATION PROCEDURE
Under the Bankruptcy Code, the following steps must be taken
to confirm the Plan:
A. SOLICITATION OF VOTES
In accordance with sections 1126 and 1129 of the Bankruptcy
Code, the Claims in Classes 2A, 2B, 2C, 2D, 4A, 4B, 4C, 4D, 4E, 4F, 5 and 6 of
the Plan are impaired and the holders of Allowed Claims in each of such Classes
are entitled to vote to accept or reject the Plan. Claims in Classes 1A, 1B, 2E,
2F, 3A, 3B, and 8 are unimpaired. The holders of Allowed Claims in each of such
Classes are conclusively presumed to have accepted the Plan and the solicitation
of acceptances with respect to such Class is not required under section 1126(f)
of the Bankruptcy Code. The Plan provides that the holders of Equity Interests
in Class 7 will not receive any distributions of property or retain any interest
in the Debtors. In accordance with section 1126(g) of the Bankruptcy Code, such
Equity Interests are conclusively presumed to have rejected the Plan.
As to classes of claims entitled to vote on a plan, the
Bankruptcy Code defines acceptance of a plan by a class of creditors as
acceptance by holders of at least two-thirds in dollar amount and more than
one-half in number of the claims of that class that have timely voted to accept
or reject a plan. For purposes of calculating the number of Allowed Claims in a
Class of Claims held by holders of Allowed Claims in such Class that have voted
to accept or reject the Plan under section 1126(c) of the Bankruptcy Code, the
Plan provides that all Allowed Claims in such Class held by the same entity or
affiliate thereof (as defined in the Securities Act of 1933 and the rules and
regulations promulgated thereunder) will be aggregated and treated as one
Allowed Claim in such Class. A vote may be disregarded if the Bankruptcy Court
determines, after notice and a hearing, that such acceptance or rejection was
not solicited or procured in good faith or in accordance with the provisions of
the Bankruptcy Code.
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Any creditor of an impaired Class who timely and properly
filed a proof of claim on or before August 15, 1994 (or, if not filed by such
date, any proof of claim filed with leave of the Bankruptcy Court), which Claim
is not the subject of an objection, is entitled to vote. See Section I. above
entitled "Introduction." Any holder of an Allowed Claim as of the close of
business on February 10, 1997 at 5:00 p.m. (Eastern Standard Time) is also
entitled to vote to accept or reject the Plan.
B. THE CONFIRMATION HEARING
The Bankruptcy Code requires the Bankruptcy Court, after
notice, to hold a confirmation hearing. The Confirmation Hearing in respect of
the Plan has been scheduled for February 20, 1997 at 2:00 p.m. before the
Honorable James L. Garrity, Jr., United States Bankruptcy Judge at the United
States Bankruptcy Court, Alexander Hamilton Custom House, Room 610-2, One
Bowling Green, New York, New York 10004. The Confirmation Hearing may be
adjourned from time to time by the Bankruptcy Court without further notice
except for an announcement of the adjourned date made at the Confirmation
Hearing. Any objection to confirmation must be made in writing and specify in
detail the name and address of the objector, all grounds for the objection and
the amount of the Claim or number of shares of stock of the Debtors held by the
objector. Any such objection must be filed with the Bankruptcy Court (with a
copy to Chambers) and served so that it is received by the Bankruptcy Court,
Chambers and the following parties on or before February 10, 1997 at 5:00 p.m.
(Eastern Standard Time):
Metallurg, Inc.
27 East 39th Street
New York, New York 10016
Attn: Eric L. Schondorf, Esq.
Weil, Gotshal & Manges LLP
Attorneys for the Debtors and
Debtors in Possession
767 Fifth Avenue
New York, New York 10153
Attn: John J. Rapisardi, Esq.
Stroock & Stroock & Lavan
Attorneys for the Creditors' Committee
7 Hanover Square
New York, New York 10004
Attn: Lawrence M. Handelsman, Esq.
Office of the United States Trustee
80 Broad Street
New York, New York 10004
Attn: Doria Stetch, Esq.
Objections to confirmation of the Plan are governed by Bankruptcy Rule 9014.
C. CONFIRMATION
At the Confirmation Hearing, the Bankruptcy Court will confirm
the Plan only if all of the requirements of section 1129 of the Bankruptcy Code
are met. Among the requirements for confirmation of a plan are that the plan is
(i) accepted by all impaired classes of claims and equity interests or, if
rejected by an impaired class, that the plan "does not discriminate unfairly"
and is "fair and equitable" as to such class, (ii) feasible, and (iii) in the
"best interests" of creditors and stockholders which are impaired under the
plan.
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1. ACCEPTANCE OR CRAMDOWN
Classes 2A, 2B, 2C, 2D, 4A, 4B, 4C, 4D, 4E, 4F, 5, and 6 of
the Plan are impaired under the Plan and are entitled to vote to accept or
reject the Plan. Class 7 of the Plan is conclusively deemed to have voted to
reject the Plan. As to such Classes, the Debtors intend to seek nonconsensual
confirmation of the Plan under section 1129(b) of the Bankruptcy Code. In
addition, the Debtors reserve the right to seek nonconsensual confirmation of
the Plan with respect to any Class of Claims that is entitled to vote to accept
or reject the Plan if such Class rejects the Plan.
2. UNFAIR DISCRIMINATION AND FAIR AND EQUITABLE TESTS
To obtain nonconsensual confirmation of the Plan, it must be
demonstrated to the Bankruptcy Court that the Plan "does not discriminate
unfairly" and is "fair and equitable" with respect to each impaired,
nonaccepting Class. The Bankruptcy Code provides a non-exclusive definition of
the phrase "fair and equitable." The Bankruptcy Code establishes "cram down"
tests for secured creditors, unsecured creditors and equity holders, as follows:
(a) Secured Creditors. Either (i) each impaired
secured creditor retains its liens securing its secured claim
and receives on account of its secured claim deferred Cash
payments having a present value equal to the amount of its
allowed secured claim, (ii) each impaired secured creditor
realizes the "indubitable equivalent" of its allowed secured
claim or (iii) the property securing the claim is sold free
and clear of liens with such liens to attach to the proceeds
of the sale and the treatment of such liens on proceeds is
provided in clause (i) or (ii) of this subparagraph.
(b) Unsecured Creditors. Either (i) each impaired
unsecured creditor receives or retains under the plan property
of a value equal to the amount of its allowed claim or (ii)
the holders of claims and interests that are junior to the
claims of the dissenting class will not receive any property
under the plan.
(c) Equity Interests. Either (i) each holder of an
equity interest will receive or retain under the plan property
of a value equal to the greatest of the fixed liquidation
preference to which such holder is entitled, the fixed
redemption price to which such holder is entitled or the value
of the interest or (ii) the holder of an interest that is
junior to the nonaccepting class will not receive or retain
any property under the plan.
The Debtors believe that the Plan and the treatment of all
Classes of Claims and Equity Interests under the Plan satisfy the foregoing
requirements for nonconsensual confirmation of the Plan.
3. FEASIBILITY
The Bankruptcy Code requires that confirmation of a plan is
not likely to be followed by liquidation or the need for further financial
reorganization. For purposes of determining whether the Plan meets this
requirement, the Debtors have analyzed their ability to meet their obligations
under the Plan. As part of this analysis, the Debtors have prepared projections
of their financial performance for each of the three fiscal years in the period
ending December 31, 1998 (the "Projection Period"). These projections, and the
assumptions on which they are based, are included in the Metallurg, Inc. and
Shieldalloy Metallurgical Corporation Projected Financial Information annexed
hereto as Exhibit D. Based upon such projections, the Debtors believe that they
will be able to make all payments required pursuant to the Plan and, therefore,
that confirmation of the Plan is not likely to be followed by liquidation or the
need for further reorganization. The Debtors further believe that they will be
able to repay or refinance any and all of the then-outstanding secured
indebtedness under the Plan at or prior to the maturity of such indebtedness.
The projected financial statements appended to this Disclosure
Statement include separately for (a) the consolidated operations of Metallurg
(for which the successor entity is referred to as "Reorganized Metallurg
Consolidated"), (b) the operations of Metallurg, Inc. -- Parent Company (for
which the successor entity is referred to as "Reorganized Metallurg"),
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and (c) the operations of Shieldalloy (for which the successor entity is
referred to as "Reorganized Shieldalloy"), each of the following:
o Projected Statements of Operations for each of the above
entities (as Debtors in Possession ) for the year ending
December 31, 1996 and the three months ending March 31, 1997;
o Projected Statements of Cash Flows for each of the above
entities (as Debtors in Possession) for the year ending
December 31, 1996 and the three months ending March 31, 1997;
o Projected Opening Balance Sheets for each of the above
successor entities as of March 31, 1997 based on the
respective historical balance sheets as of December 31, 1995,
updated to reflect (a) actual activity from January 1, 1996
through September 30, 1996, (b) projected activity between
October 1, 1996 and March 31, 1997, (c) the projected effects
of the Plan, and (d) the projected accounting effects of fresh
start accounting;
o Projected Balance Sheets for each of the above successor
entities as of December 31, 1997, 1998, and 1999;
o Projected Statements of Operations for each of the above
successor entities for the nine month period April 1, 1997
through December 31, 1997 and the two years ending December
31, 1998 and 1999, respectively; and
o Projected Statements of Cash Flows for each of the above
successor entities for the nine month period April 1, 1997
through December 31, 1997 and the two years ending December
31, 1998 and 1999, respectively.
The projected financial statements were prepared on the basis
of generally accepted accounting principles consistent with those currently
followed by the predecessor entities except as noted in the accompanying
assumptions. The projected financial statements should be read in conjunction
with the assumptions set forth below and with Metallurg's consolidated financial
statements for the years ended December 31, 1995 and 1994 which are annexed as
Exhibit C hereto.
The pro forma financial information and the projections are
based on the assumption that the Plan will be confirmed by the Bankruptcy Court
and, for projection purposes, that the Effective Date under the Plan and the
initial distributions thereunder take place as of March 31, 1997. Although the
projections and information are based upon a March 31, 1997 Effective Date, the
Debtors believe that an actual Effective Date in the second quarter of 1997
would not have any material effect on the projections.
The Debtors have prepared these financial projections based
upon certain assumptions which they believe to be reasonable under the
circumstances. Those assumptions considered to be significant are described in
the Financial Projections, annexed hereto as Exhibit D. The Debtors make no
representation as to the accuracy of the projections or its ability to achieve
the projected results. Many of the assumptions on which the projections are
based are subject to significant uncertainties. Inevitably, some assumptions
will not materialize and unanticipated events and circumstances may affect the
actual financial results. Therefore, the actual results achieved throughout the
Projection Period may vary from the projected results and the variations may be
material. All holders of Claims that are entitled to vote to accept or reject
the Plan are urged to examine carefully all of the assumptions on which the
Financial Projections are based in evaluating the Plan.
4. BEST INTERESTS TEST
Section 1129 of the Bankruptcy Code requires that any impaired
holder of a claim or interest voting against a proposed plan of reorganization
must be provided in the plan with a value at least equal to the value that the
holder would receive if the debtor's operations were terminated and its assets
liquidated under chapter 7 of the Bankruptcy Code. As set forth in Exhibit E
hereto, the Debtors have developed an analysis which assumes the Debtors'
chapter 11 cases are converted to chapter 7 cases and their assets are
liquidated under the direction of two court appointed trustees. The liquidation
valuations have been prepared solely for use in the Disclosure Statement and do
not represent values that are appropriate for any other
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purpose. Nothing contained in these analyses are intended to be or constitute a
concession by or admission of the Debtors for any purpose. The assumptions
utilized in developing these analyses are inherently subject to significant
uncertainties and contingencies, many of which would be beyond the control of
the Debtors or the chapter 7 trustees. Accordingly, there can be no assurances
that the values assumed in the liquidation analyses would be realized if the
Debtors were actually liquidated. In addition, any liquidation would take place
in future circumstances which cannot presently be predicted.
The cash amount which would be available to satisfy Unsecured
Claims would consist of amounts available from the liquidation of the Debtors'
current assets, including (i) the sale of inventory, collection of receivables
and recovery on other assets, (ii) amounts available from the sale of noncurrent
assets, including plan, property and equipment, and (iii) recoveries on
investments in and loans and notes receivable from Subsidiaries.
The cash available from asset liquidation proceeds would pay
administrative and priority claims, including (i) fees and expenses payable to
the chapter 7 trustees and the attorneys and other professionals hired by the
trustees, (ii) employee salaries and other operating expenses incurred to wind
down the Debtors' operations, (iii) accounts payable, accrued expenses and other
expenses incurred and unpaid during the pendency of the Debtors' chapter 11
cases, and (iv) in the case of Shieldalloy, Environmental Claims, the amount of
which cannot currently be determined. Proceeds available after paying
administrative and priority claims in full would be distributed in satisfaction
of allowed unsecured Claims on a Pro Rata basis.
As demonstrated in the liquidation analyses, the Debtors have
concluded that confirmation of the Plan will provide each holder of an Allowed
Claim or Equity Interest with a recovery that is not less than such holder would
receive pursuant to a liquidation of the Debtors under a chapter 7 liquidation.
In preparing the liquidation analyses, the Debtors assumed
that in the event that Shieldalloy's chapter 11 case was converted to a case
under chapter 7 of the Bankruptcy Code, a substantial number of Environmental
Claims would be asserted against Shieldalloy, thereby significantly diluting,
and perhaps eliminating, any recovery to general unsecured creditors of
Shieldalloy. For this reason, the liquidation analysis reflects that no
distribution would be available to Shieldalloy's unsecured creditors in the
event of a conversion to chapter 7.
The recovery to unsecured creditors of Metallurg would also be
uncertain if Shieldalloy's chapter 11 case were converted to a case under
chapter 7 liquidation because of the environmental claims that would be asserted
against Metallurg. Although Metallurg is confident that it would prevail in such
litigation, it would be time-consuming and costly, thereby depleting estate
assets.
A conversion of the Debtors' Chapter 11 Cases to cases under
chapter 7 would also preclude the Debtors from reducing unsecured claims by
cancelling intercompany indebtedness, the inclusion of which would dilute
recoveries to unsecured creditors. Additionally, a chapter 7 liquidation of the
Debtors' receivables and other assets would result in discounts to such assets
which would also lead to dilution of the recoveries to unsecured creditors.
D. CONSUMMATION
The Plan will be consummated on the Effective Date. The
Effective Date of the Plan will occur (i) on the first Business Day that is ten
days (as calculated in accordance with Bankruptcy Rule 9006(a)) after the
Confirmation Date or as soon thereafter as is practicable and (ii) following the
date on which the conditions precedent to the effectiveness of the Plan, as set
forth in Section VI.C.3. hereof, are satisfied or waived. For a more detailed
discussion of the conditions precedent to the Plan and the impact of the failure
to meet such conditions, see Section VI.C.3., above entitled "The Plan of
Reorganization --Conditions Precedent to Consummation of the Plan."
The Plan is to be implemented pursuant to the provisions of
the Bankruptcy Code.
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E. EXIT FINANCING
As a condition precedent to the consummation of the Plan, the
Reorganized Debtors will obtain a working capital facility in an amount not less
than $20 million. The Reorganized Debtors believe that such a working capital
facility would have a first lien on all the inventory and accounts receivable of
both Reorganized Debtors. As of the date hereof, the Reorganized Debtors have
not obtained a commitment letter for such a facility.
As part of their exit financing, the Reorganized Debtors or
their Subsidiaries, at their option, may obtain one or more term loan or
revolving credit facilities for the purpose of reducing the principal amount of
the New Secured Notes which reduction will be on a dollar for dollar basis. It
is not a condition precedent to confirmation or consummation of the Plan that
the Debtors obtain such a facility.
Although the Debtors have had discussions with and received
proposals from several financial institutions, as of the date hereof, the
Debtors have not received a commitment letter or entered into definitive
documentation of any such working capital, term loan or revolving credit
facilities.
VIII. MANAGEMENT OF THE REORGANIZED DEBTORS
As of the Effective Date, the management, control and
operation of the Reorganized Debtors will become the general responsibility of
their respective Boards of Directors.
A. BOARD OF DIRECTORS AND MANAGEMENT
1. COMPOSITION OF THE BOARD OF DIRECTORS
The initial Board of Directors of Reorganized Metallurg will
consist of at least five but no more than seven members (at least two of which
will be nominated by the current management of Metallurg) whose names and
affiliations will be disclosed at or prior to the Confirmation Hearing. The
Committee shall select the remaining individuals and disclose such selections on
or prior to the Confirmation Hearing.
The initial Board of Directors of Reorganized Shieldalloy
shall be selected by the Board of Reorganized Metallurg.
2. IDENTITY OF METALLURG OFFICERS
Each of the officers of Metallurg immediately prior to the
Effective Date will continue in their then current positions as the officers of
the Reorganized Debtors. Set forth below is the name, age and position with
Metallurg of each such officer comprising the senior management, together with a
description of each such officer's employment history:
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<TABLE>
<CAPTION>
Name Age Position
- - ---- --- --------
<S> <C> <C>
Michael A. Standen 59 Chairman, President and Chief Executive
Officer
J. Richard Budd III 44 Senior Vice President
Michael A. Banks 58 Vice President Administration
Barry C. Nuss 43 Vice President Finance
Eric L. Schondorf 33 Vice President, General Counsel
</TABLE>
MICHAEL A. STANDEN -- Mr. Standen has worked at Metallurg for
his entire professional career. He was appointed President and Chief Executive
Officer in 1983 and Chairman in 1992. Mr. Standen joined LSM in 1961 and held
positions in sales and purchasing management before he was appointed Joint
Managing Director of LSM in 1977. He was elected to the Board of Directors of
the Company in 1977 and became sole Managing Director of LSM in 1982. Mr.
Standen has a B.A. degree in languages from Oxford University.
J. RICHARD BUDD III -- Mr. Budd has served as Senior Vice
President of Metallurg since January of 1996. Mr. Budd was previously employed
as a consultant to Metallurg since 1994 while also serving at the same time as a
Vice President and Director of Cityscape Corp. From 1992 to 1994, Mr. Budd
worked as a consultant with Zolfo Cooper LLC. Prior to 1992, Mr. Budd was
Executive Vice President of European American Bank and President and Chief
Executive Officer of Euram Management, Inc. Mr. Budd has a B.S. degree in
finance from Rider College.
MICHAEL A. BANKS -- Mr. Banks joined Metallurg as Director of
Management Services in 1985 and was appointed to his current position in 1989.
Prior to joining the Company, he held several positions in production and sales
management in cement, refractory, and steel industries, and qualified as a
member of the Institute of Refractory Engineers in 1966. From 1975 to 1985, Mr.
Banks worked as a consultant for B.V. Shaw Associates and was appointed Deputy
Managing Director of its subsidiary Europa International Consultants in 1980.
Mr. Banks has a B.A. degree in German and French from Bristol University.
BARRY C. NUSS -- Mr. Nuss joined Metallurg as financial
controller in 1983, was appointed Vice President- Finance of SMC in 1988, and
assumed his current position as Vice President-Finance of Metallurg, Inc. in
1994. He was previously employed as an auditor at Deloitte, Haskins and Sells
(currently Deloitte & Touche) from 1976 to 1981 and as a Financial Analyst at
Cabot Mineral Resources from 1981 to 1983. Mr. Nuss is a Certified Public
Accountant and has B.S. degree in accounting from Fairleigh Dickinson
University. Mr. Nuss is a member of AICPA, the IMA, and the Financial Executives
Institute.
ERIC L. SCHONDORF -- Mr. Schondorf was appointed to his
present position in April 1996. He was previously employed as an associate with
the law firm of Weil, Gotshal & Manges LLP from 1988 to 1996. Mr. Schondorf
received a B.A. degree in economics from Yale University and a JD degree from
the New York University School of Law.
In addition, Metallurg will continue to have the following
additional officers: Robin Brumwell, as President of Metallurg International
Resources, a division of Metallurg, Anthony Cocca, Raymond Taylor, and Charles
J. Jones, as Assistant Treasurer, Vice President, and Treasurer, respectively.
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<PAGE>
3. IDENTITY OF SHIELDALLOY OFFICERS
Each of the officers of Shieldalloy immediately prior to the
Effective Date will continue in their then current positions as the officers of
the Reorganized Debtors. Set forth below is the name, age and position with
Shieldalloy of each such officer:
<TABLE>
<CAPTION>
Name Age Position
- - ---- --- --------
<S> <C> <C>
Michael A. Banks 58 President
Eric Jackson 44 Senior Vice President Commercial
Jay J. Bertsch 43 Vice President Finance
R. James Carter 50 Vice President Sales & Marketing, Alloys & Metals
William D. Shuttleworth 59 Vice President Sales & Marketing, Aluminum Products
Jack M. Dworetzky 43 Vice President Specialty Products Marketing/Customer Services
C. Scott Eves 46 Vice President Environmental Services
Mary B. Higgins 58 Vice President Human Resources
Thomas A. Matthews 48 Vice President General Manager
Charles J. Jones 45 Treasurer & Assistant Secretary
Barry C. Nuss 43 Secretary
</TABLE>
B. COMPENSATION OF EXECUTIVE OFFICERS
1995 Cash Compensation. The following table sets forth all
Cash compensation paid by the Debtors in fiscal year 1995 to each of the ten
most highly compensated executives of Metallurg and Shieldalloy for services
rendered in all of their respective capacities in fiscal year 1995:
<TABLE>
<CAPTION>
Name of Individual Capacities in Which Served Cash Compensation
- - ------------------ -------------------------- -----------------
<S> <C> <C>
Michael A. Standen Chairman, President and Chief Executive Officer of $624,870
Metallurg
Robin Brumwell President of MIR, a division of Metallurg $233,600
Michael A. Banks Vice President Administration of Metallurg $215,700
Barry C. Nuss Vice President of Finance of Metallurg $210,000
Michael A. Finn Corporate Secretary of Metallurg, Vice President of $208,500
Shieldalloy
H. Nils Schooley President of Shieldalloy $210,000
69
<PAGE>
<CAPTION>
Name of Individual Capacities in Which Served Cash Compensation
- - ------------------ -------------------------- -----------------
<S> <C> <C>
William D. Shuttleworth Vice President Aluminum Products, Finance of $127,600
Shieldalloy
Kenneth R. Pugh Vice President of Shieldalloy and General Manager, $110,000
Newfield, New Jersey
R. James Carter Vice President, Metals and Alloys of Shieldalloy $104,000
Jack M. Dworetzky Vice President, Specialty Products and Customer $107,000
Service of Shieldalloy
</TABLE>
C. 1997 STOCK AWARD AND STOCK OPTION PLAN
1. GENERAL
The Board of Directors of Metallurg (the "Board") will adopt
the Metallurg, Inc. Management Stock Award and Stock Option Plan ("SASOP"), a
copy of which is included in the Plan Supplement to be effective on the
Effective Date. The purpose of the SASOP is to motivate certain employees of
Metallurg and Shieldalloy and their subsidiaries to put forth maximum efforts
toward the growth, profitability, and success of the companies by providing
incentives to such employees through the ownership and performance of New Common
Stock. The SASOP will terminate on the date of the tenth anniversary of the
Effective Date, unless terminated earlier by the Board.
CONFIRMATION OF THE PLAN WILL CONSTITUTE APPROVAL OF THE SASOP
BY HOLDERS OF CLAIMS AGAINST AND EQUITY INTERESTS IN THE DEBTORS.
The following is a summary of the SASOP. The summary does not
purport to be complete, and is qualified in its entirety by reference to the
SASOP, the complete text of which is attached hereto as Exhibit F.
Eligibility and Administration. All employees of Metallurg and
its subsidiaries are eligible to participate in the SASOP. Those employees who
will be designated as "Eligible Executives" for purposes of the SASOP will be
disclosed at the Confirmation Hearing. The Compensation Committee of the Board
will select any other employees eligible to participate in the SASOP. The
Compensation Committee will be comprised solely of two or more non-employee
directors each of whom qualifies as a "disinterested person" (as such term is
used in Rule 16b-3 under the Securities Exchange Act of 1934, as amended) and as
an "outside director" (as such term is used in Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Tax Code")), and will have the
responsibility to control and administer the SASOP in accordance with its terms.
Shares Subject to the SASOP. The number of shares of New
Common Stock which will be available for grants of stock awards and stock
options under the SASOP (including incentive stock options ("ISOs") as defined
in Section 422 of the Tax Code) during its term will be 500,000 shares. The
maximum aggregate number of shares of New Common Stock underlying stock awards
and stock options that may be granted to any single participant during the life
of the SASOP is 200,000 and 100,000, respectively. Generally, if there is any
change in the number of outstanding shares of New Common Stock due to stock
dividends, stock splits, reorganization, etc., the number of shares underlying
stock awards and the number of shares subject to any stock option and the
exercise prices of stock options will be adjusted to reflect such change.
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<PAGE>
2. AWARDS UNDER THE SASOP
Stock Awards. The Compensation Committee is authorized to
grant stock awards to employees on or after the Effective Date, subject to such
terms, conditions, restrictions and/or limitations, if any, as the Compensation
Committee deems appropriate, including, but not limited to, restrictions on
transferability and continued employment. The Compensation Committee may
accelerate the date a stock award becomes transferable under such circumstances
as it deems appropriate. During the period in which any shares of New Common
Stock are subject to restrictions, the Compensation Committee may, in its sole
discretion, grant to the participant to whom such restricted shares have been
awarded all or any of the rights of a shareholder with respect to such shares,
including, but not limited to, the right to vote such shares and the right to
receive dividends.
Initial Stock Awards. The Compensation Committee will grant to
the Eligible Executives on the Effective Date an aggregate number of shares of
New Common Stock which equals 250,000 shares of the New Common Stock (the
"Initial Stock Awards"). Twenty percent of each Initial Stock Award will be
transferable on the date of grant, and 40 percent will become transferable on
the day which precedes the first and second anniversaries of the date of grant.
Stock Options. The Compensation Committee is authorized to
grant stock options to employees on or after the Effective Date. These stock
options may be ISOs or nonqualified stock options, or a combination of both. The
Compensation Committee will, in its sole discretion but after having taken into
account the recommendations of the Chief Executive Officer of Metallurg ("CEO"),
determine the recipients of stock option grants and the number of shares of New
Common Stock underlying each stock option. The Compensation Committee will set
the exercise price of each stock option; provided that the exercise price of an
ISO will not be less than 100 percent of Fair Market Value (as defined in the
SASOP) on the date of grant. The Compensation Committee will set the term of
each stock option; provided that no stock option will be exercisable later than
the 10th anniversary of the date of grant. Stock options will vest as follows:
33-1/3 percent on the date of the grant; 33-1/3 percent on the first anniversary
of the date of grant; and 33-1/3 percent on the second anniversary of the date
of grant. In addition to being subject to the above terms and conditions, ISOs
will comply with all other requirements under Section 422 of the Tax Code. The
Compensation Committee may establish such other terms, conditions, restrictions
and/or limitations, if any, of any stock option, provided they are not
inconsistent with the SASOP. Upon exercise, the exercise price of a stock option
may be paid in cash, shares of New Common Stock, a combination of the foregoing,
or such other consideration as the Compensation Committee may deem appropriate.
The Compensation Committee will establish appropriate methods for accepting New
Common Stock, whether restricted or unrestricted, and may impose such conditions
as it deems appropriate on the use of such New Common Stock to exercise a stock
option. The Compensation Committee may permit a participant to satisfy any
amounts required to be withheld under applicable federal, state and local tax
laws, in effect from time to time, by electing to have Metallurg withhold a
portion of the shares of New Common Stock to be delivered for the payment of
such taxes.
Initial Stock Option Grants to Key Worldwide Managers. The
Compensation Committee will grant stock options to Metallurg's Key Worldwide
Managers on the Effective Date with respect to 125,000 shares of the New Common
Stock subject to the SASOP (the "Key Worldwide Managers Initial Stock Option
Grants"). The Compensation Committee, after taking into account the
recommendations of the CEO, will (i) select the employees who will be Key
Worldwide Managers, provided that no Eligible Executive will be selected as a
Key Worldwide Managers and (ii) determine the number of shares of New Common
Stock underlying each Key Worldwide Manager Initial Stock Option Grant. All
other terms, conditions, restrictions and/or limitations with respect to the Key
Worldwide Manager Initial Stock Option Grants will be established by the
Compensation Committee pursuant to the SASOP.
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<PAGE>
3. TERMINATION OF EMPLOYMENT
In the event of a participant's termination of employment for
any reason, nontransferable stock awards and/or unexercisable stock options held
by the participant on the date of termination of employment will immediately be
forfeited unless (i) otherwise provided in such participant's Stock Award
Agreement or Stock Option Agreement, as the case may be, or (ii) as the
Compensation Committee may, in its sole discretion but subject to certain
restrictions relating to ISOs, provide for stock awards and/or stock options to
become transferable and/or exercisable on any termination of employment.
4. FEDERAL INCOME TAX CONSEQUENCES OF THE SASOP
THE FOLLOWING SUMMARY OF THE FEDERAL INCOME TAX CONSEQUENCES
OF THE SASOP IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY. THIS DISCUSSION
DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO EMPLOYEES, OR WITH THE APPLICATION AND EFFECT OF STATE, LOCAL AND
FOREIGN INCOME AND OTHER TAX LAWS.
Stock Awards. Generally, under Section 83 of the Tax Code,
stock awards granted under the SASOP that are nontransferable and subject to a
substantial risk of forfeiture will not be taxed until such shares become
transferable or the substantial risk of forfeiture lapses. At that time, the
grantee will include as ordinary income the fair market value of the stock award
as of that date, less any consideration paid. The grantee may make an election
under Section 83(b) of the Tax Code within 30 days of the date of grant to
include as ordinary income the fair market value of the stock award as of the
date of grant, less any consideration paid.
Generally, a deduction for federal income tax purposes will be
allowed to Metallurg in an amount equal to the ordinary income to be recognized
by the grantee, provided that such amount (i) constitutes an ordinary and
necessary business expense to Metallurg and is reasonable under Section 162(a)
of the Tax Code and (ii) is not subject to the $1 million cap under Section
162(m) of the Tax Code.
Incentive Stock Options. ISOs granted under the SASOP are
intended to meet the definitional requirement of Section 422(b) of the Tax Code
for "incentive stock options." Under the Tax Code, the grantee of an ISO
generally is not subject to regular income tax upon the grant or exercise of the
ISO. Special rules apply to the grantee who exercises an ISO by delivering
shares previously acquired pursuant to the exercise of an ISO.
However, a grantee who disposes of shares of New Common Stock
acquired pursuant to the exercise of an ISO before the expiration of the
"applicable holding period" (the later of two years from the date of grant or
one year from the date of exercise of such option) with respect to such shares
is treated as making a "disqualifying disposition." A grantee who makes a
disqualifying disposition is deemed to be in receipt of ordinary income in the
year of the disqualifying disposition, in an amount equal to the excess of the
fair market value of such stock at the date the ISO was exercised over the
exercise price. If the disqualifying disposition is a sale or exchange that
would permit a loss to be recognized under the Tax Code (were the stock to have
been sold at a loss), and the sales proceeds are less than the fair market value
of the shares sold on the date of exercise, the grantee's ordinary income
therefrom would be limited to the gain (if any) realized on the sale, and any
loss therefrom would be a capital loss (provided that such shares were held by
the grantee as a capital asset at such time). If the amount realized upon
disposition exceeds the fair market value of the shares sold on the date of
exercise, the excess would be treated as capital gain (provided that such shares
were held by the grantee as a capital asset at such time).
If, subsequent to the exercise of an ISO (whether paid for in
cash, in shares of New Common Stock or with a promissory note), the grantee
holds the shares of New Common Stock received upon exercise for a period that
exceeds the applicable holding period, the difference (if any) between the
amount realized from a subsequent sale of such shares and their tax basis to the
grantee will be taxed as long-term capital gain or loss (provided that such
shares were held by the grantee as a capital asset at such time). Generally, a
grantee's tax basis in such shares will be the exercise price paid.
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<PAGE>
A grantee may be subject to the federal alternative minimum
tax by virtue of the exercise of an ISO. A grantee who exercises an ISO
generally is required to increase his or her "alternative minimum taxable
income" by an amount equal to the excess of the fair market value of a share of
New Common Stock at the time the option is exercised over the exercise price,
and must compute his or her tax basis in the acquired share as if such share had
been acquired through the exercise of a nonqualified stock option (as described
below).
The option agreement may permit the exercise of an ISO by the
withholding from the number of shares acquired upon such exercise an amount
sufficient to satisfy the exercise price based on the then fair market value of
the withheld shares. In the event that this method of exercise is selected, the
ISO most likely would be treated in a manner similar to a nonqualified stock
option and not as an incentive stock option for federal income tax purposes.
A deduction will not be allowed to Metallurg for federal
income tax purposes with respect to the grant or exercise of an ISO or the
disposition, after the applicable holding period, of stock acquired upon
exercise of an ISO. In the event of a disqualifying disposition, a federal
income tax deduction generally will be allowed to Metallurg in an amount equal
to the ordinary income to be recognized by the grantee, provided that such
amount (i) constitutes an ordinary and necessary business expense to Metallurg
and is reasonable under Section 162(a) of the Tax Code and (ii) is not subject
to the $1 million cap under Section 162(m) of the Tax Code.
Nonqualified Stock Options. A nonqualified stock option is an
option that does not qualify as an "incentive stock option" under Section 422 of
the Tax Code. A person who is granted a nonqualified stock option should not
recognize any taxable income for federal income tax purposes upon the grant of
such option. Generally, upon exercise of a nonqualified stock option, a grantee
will be treated as having received ordinary income in an amount equal to the
excess of (i) the fair market value of the shares of New Common Stock received
at the time of exercise over (ii) the exercise price. The ordinary income
recognized upon the exercise of a nonqualified stock option granted under the
SASOP will be subject to both wage withholding and employment taxes.
A grantee's tax basis in the shares received upon exercise of
a nonqualified stock option for cash or with a promissory note will be equal to
the amount paid on exercise, plus the amount of ordinary income recognized as a
result of the receipt of such shares. The holding period for such shares
generally will begin immediately after the transfer of such shares.
In view of Section 16(b) of the Securities Exchange Act of
1934, as amended, the timing of income recognition may be deferred for any
grantee who is an officer or director of Metallurg or a beneficial owner of more
than 10 percent of any class of equity securities of Metallurg following the
exercise of a nonqualified stock option. Absent a written election (pursuant to
Section 83(b) of the Tax Code) filed with the Internal Revenue Service within 30
days after the date of transfer of the shares of New Common Stock pursuant to
the exercise of the stock option to include in income, as of the transfer date,
the excess (on such date) of the fair market value of such shares over their
exercise price, recognition of income by the individual will be deferred for the
same period.
In general, a deduction for federal income tax purposes will
be allowed to Metallurg in an amount equal to the ordinary income to be
recognized by the grantee, provided that such amount (i) constitutes an ordinary
and necessary business expense to Metallurg and is reasonable under Section
162(a) of the Tax Code and (ii) is not subject to the $1 million cap under
Section 162(m) of the Tax Code.
Change in Control. In the event of a Change in Control, the
golden parachute provisions under Section 280G of the Tax Code may apply to
compensation attributable to stock awards and/or stock options granted under the
SASOP. Generally, if the total amount of payments to certain employees in the
nature of compensation that are contingent upon a "change in control" of
Metallurg (as defined in Section 280G of the Tax Code) equals or exceeds three
times the recipient's base compensation (generally, such recipient's average
annual compensation for the five years preceding the change in control), then,
subject to certain exceptions, the payments may be treated as "excess parachute
payments" in which case a portion of such
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<PAGE>
payments attributable to the accelerated vesting of the stock awards and/or
stock options would be nondeductible to Metallurg and the recipient would be
subject to a 20 percent excise tax on such portion of the payments.
$1 Million Cap. Section 162(m) of the Tax Code generally
imposes a $1 million limitation on the annual compensation deduction allowable
to a publicly held corporation in respect of its chief executive officer and its
other four most highly paid officers (including any deduction with respect to
the exercise of a nonqualified stock option or the disqualifying disposition of
stock acquired pursuant to an ISO). However, compensation may be exempt from the
$1 million cap if the compensation (i) qualifies as "performance-based"
compensation or (ii) is payable pursuant to a compensation plan or agreement
that existed during the period in which the corporation was not publicly held.
It is possible that compensation attributable to the exercise of nonqualified
stock options granted under the SASOP may qualify as performance-based
compensation. In addition, compensation attributable to certain stock awards
(and also to certain stock options) may be exempt from the $1 million cap if
such compensation is treated as being payable pursuant to a compensation plan or
agreement that existed during the period in which Metallurg was not publicly
held.
D. EXECUTIVE EMPLOYMENT AGREEMENTS
1. GENERAL
Metallurg intends to enter into employment agreements as of
the Effective Date with the following executives: Michael A. Standen, Michael A.
Banks, Robin A. Brumwell, J. Richard Budd, III, Barry C. Nuss, and Eric L.
Schondorf (individually, an "Executive," and collectively, the "Executives").
Each such agreement will be for an initial term of two years, or in Mr.
Standen's case, three years. In all cases, the term of employment automatically
renews for a one-year period on each expiration date unless the Executive or
Metallurg notifies the other in writing at least one year prior to the next
scheduled expiration date that the term shall not be extended. Each Executive
will agree not to compete against Metallurg during the employment term and for a
six-month period thereafter.
2. COMPENSATION
Each Executive will receive an annual base salary equal to his
or her annual base salary in effect on the Effective Date, plus an annual
increase determined by the Compensation Committee, but not less than the
percentage increase in the Consumer Price Index (as defined in the agreements).
Each Executive will be entitled to participate in the compensation incentive and
employee benefit plans generally made available to Metallurg's senior-level
employees.
3. TERMINATION OF EMPLOYMENT
If the Executive's employment is terminated for any reason
other than for Cause (as defined in the agreement) or without Good Reason (as
defined in the agreement), restricted stock and/or stock options held by the
Executive will become transferable and/or exercisable, and for the year in which
such termination occurs, the Executive will receive an award under the Metallurg
Management Incentive Compensation Plan if Metallurg achieves its performance
goal for such year. If the Executive's employment is terminated by Metallurg due
to Disability (as defined in the agreements), the Executive will receive
disability pay of 50 percent of his base salary until he becomes 65, less any
other disability benefits provided to the Executive by Metallurg under any
disability plan. If the Executive is terminated for Cause, the Executive
terminates his or her employment without Good Reason or the Executive does not
renew the term of employment, the Executive will only be entitled to base salary
earned but not paid prior to the date of termination of employment, and certain
other amounts earned but not yet paid. In addition, there will be no termination
of employment for Cause without the Executive first being given written notice
and an opportunity to be heard. If the Executive is terminated by Metallurg
without Cause, or Metallurg fails to renew the employment agreement, the
Executive terminates his employment for Good Reason, he will be entitled to a
lump sum payment of his base salary for a period equal to the longer of (i) the
remaining term of employment or (ii) the corresponding severance period under
Metallurg's existing severance plan, and continued coverage under Metallurg's
employee benefit plans during such period (or the after tax cost equivalent as a
cash payment). If the Executive is terminated following a Change in Control (as
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<PAGE>
defined in the agreements), the Executive will generally be entitled to the same
benefits as for a termination without Cause except that the severance period
will be the longer of (i) the end of the term of employment or (ii) 18 months
(24 months in the Chief Executive Officer's case only). The Executive will
receive a tax gross-up if he is required to pay any golden parachute excise tax
under Section 4999 of the Tax Code.
E. MANAGEMENT INCENTIVE COMPENSATION PLANS
1. GENERAL
The Board has adopted the Metallurg, Inc. Management Incentive
Compensation Plan ("MICP"), to be effective on the Effective Date. The purpose
of the MICP is to provide an annual cash incentive, in the form of Bonus Pool
Cash Awards and Cash Awards, to certain employees of Metallurg and its
subsidiaries to put forth maximum efforts toward the growth, profitability and
success of Metallurg and its subsidiaries and to encourage such employees to
remain in the employ of Metallurg and/or its subsidiaries. The MICP replaces
Metallurg's prior annual bonus program.
CONFIRMATION OF THE PLAN WILL CONSTITUTE APPROVAL OF THE MICP
BY HOLDERS OF CLAIMS AGAINST AND EQUITY INTERESTS IN THE DEBTORS.
Participation and Administration. All of the Executives will
participate in the MICP. In addition, the Compensation Committee may select
other employees to participate in the Plan. Whether a participant will be paid a
Bonus Pool Cash Award or Cash Award under the MICP for a performance period will
be decided solely in accordance with the terms of the MICP. The Compensation
Committee will be responsible to control and administer the MICP.
2. AWARDS
Bonus Pool. The amount in the Bonus Pool available for Awards
will be equal to the sum of (i) 40 percent times the CEO's actual base salary
paid during a specific performance period and (ii) 30 percent times the sum of
all other participants' actual base salaries paid during the same specific
performance period. In addition, if the actual EBITDA with respect to a specific
performance period exceeds the target worldwide EBITDA, the Bonus Pool, as
determined by the preceding sentence, will be increased by the same percentage
by which the actual EBITDA exceeds the target worldwide EBITDA.
Performance Goals. The Performance Goal with respect to the
performance period corresponding to Metallurg's fiscal year ending December 31,
1996 will be based on the projected EBITDA for the fiscal year ending December
31, 1996 for Metallurg and its subsidiaries determined on a consolidated basis
as set forth on Exhibit D of this Disclosure Statement. For the performance
periods corresponding to Metallurg's fiscal years beginning after December 31,
1996, the target worldwide EBITDA will be established by the Board in writing
within the first 90 days of the performance period. Generally, in certain
circumstances, the Board is authorized to adjust or modify the calculation of a
Performance Goal for such performance period at any time in order to prevent the
dilution or enlargement of the rights of participants.
Certification and Payment of Awards by Compensation Committee.
After each performance period, the Compensation Committee will meet to review
and certify in writing whether, and to what extent, the Performance Goal for
such performance period has been achieved. If the Compensation Committee
certifies that the Performance Goal for a performance period has been achieved,
the Compensation Committee will (i) pay the CEO a Bonus Pool Cash Award in an
amount equal to 40 percent of the CEO's salary plus an additional amount (if
any) equal to 40 percent of the CEO's salary times the same percentage by which
the actual EBITDA exceeds the worldwide target EBITDA and (ii) pay all or some
of the participants (other than the CEO) a Bonus Pool Cash Award in an amount
determined by the Compensation Committee in its sole discretion, after taking
into account the recommendations of the CEO. The Compensation Committee may, in
its sole discretion, distribute less than 100 percent of the Bonus Pool and such
undistributed amounts will be reserved for, and applied to, future Bonus Pool
Cash Payments as the Compensation Committee may determine in its sole
discretion. If the Performance Goal with respect to a performance period is not
achieved, the Compensation Committee, in its sole discretion, will determine and
pay Cash Awards
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<PAGE>
(if any) to the CEO and each other participant; provided, however, that the
aggregate of all Cash Awards will be less than the Bonus Pool for such
performance period. At the discretion of the Compensation Committee, a
participant may elect to defer payment of all or any part of any his or her
Bonus Pool Cash Award or Cash Award complying with such procedures as the
Compensation Committee may prescribe.
3. TERMINATION OF EMPLOYMENT
Participants Other than the CEO. If any participant terminates
employment with Metallurg and its subsidiaries during or after the end of a
performance period, the Compensation Committee, in its sole discretion, may pay
such participant a Bonus Pool Cash Award or a Cash Award with respect to such
performance period subject to the terms of any separate written agreement
between Metallurg and such participant.
F. EXECUTIVE RETENTION PLANS
On December 15, 1993, the Bankruptcy Court approved the
Metallurg, Inc. Executive Retention Plan and the Shieldalloy Metallurgical
Corporation Executive Retention Plan (generally, "Retention Plans"). The
Retention Plans protect a select group of key executives against an involuntary
loss of employment so as to attract and retain such employees during the Chapter
11 Cases and shortly thereafter. The Retention Plans will terminate nine months
after the Effective Date.
G. POST-EFFECTIVE DATE SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth estimates for those entities
which, to the knowledge of the Debtors, are expected to own beneficially more
than five percent of the New Common Stock as of the Effective Date. The
estimates set forth below are based upon the records of the Debtors' claims
reconciliation agent as of November 18, 1996 and other transactions reported to
the Debtors but not reflected in such records.
<TABLE>
<CAPTION>
Estimated Estimated
Name and Address Amount and Nature of Percentage
of Beneficial Owner Beneficial Ownership of Ownership
- - ------------------- -------------------- ------------
<S> <C> <C>
SBC Capital Markets, Inc. o 600,000 shares of 12%
45 Broadway Atrium New Common Stock
New York, New York 10006
Contrarian Capital o 600,000 shares of 12%
Management, L.L.C. New Common Stock
411 West Putnam Avenue
Suite 225
Greenwich, Connecticut 06830
Mutual Series Fund, Inc. o 1,500,000 shares of 30%
51 John F. Kennedy Parkway New Common Stock
Short Hills, New Jersey 07078
Cerberus Partners, L.P. o 750,000 shares of 15%
950 Third Avenue New Common Stock
New York, New York 10022
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<PAGE>
<CAPTION>
Estimated Estimated
Name and Address Amount and Nature of Percentage
of Beneficial Owner Beneficial Ownership of Ownership
- - ------------------- -------------------- ------------
<S> <C> <C>
Morgans, Waterfall, Vintiadis o 900,000 shares of 18%
& Company, Inc. New Common Stock
10 East 50th Street
26th Floor
New York, New York 10022
</TABLE>
See Section XI.A.2. below entitled "Certain Risk Factors To Be Considered --
Significant Holders."
IX. APPLICABILITY OF FEDERAL AND OTHER SECURITIES
LAWS TO THE NEW COMMON STOCK TO BE DISTRIBUTED UNDER THE PLAN
In reliance upon an exemption from the registration
requirements of the Securities Act of 1933, as amended (the "1933 Act"), and
state securities and "blue sky" laws afforded by section 1145 of the Bankruptcy
Code, the New Common Stock to be issued on the Effective Date pursuant to the
Plan, will not need to be registered under the 1933 Act or any state securities
or "blue sky" laws. Accordingly, shares of New Common Stock issued pursuant to
the Plan may be resold by any holder without registration under the 1933 Act or
other Federal securities laws pursuant to the exemption provided by Section 4(1)
of the 1933 Act, unless the holder is an "underwriter" with respect to such
securities, as that term is defined in the Bankruptcy Code (a "Statutory
Underwriter"). In addition, such securities generally may be resold by the
recipients thereof without registration on the state level pursuant to various
exemptions provided by the respective laws of the several states. However,
recipients of securities issued under the Plan are advised to consult with their
own counsel as to the availability of any such exemption from registration under
Federal or state law in any given instance and as to any applicable requirements
or conditions to the availability thereof.
Section 1145(b) of the Bankruptcy Code defines a Statutory
Underwriter for purposes of the 1933 Act as one who (i) purchases a claim with a
view to distribution of any security to be received in exchange for the claim,
(ii) offers to sell securities issued under a plan for the holders of such
securities, (iii) offers to buy securities issued under a plan from persons
receiving such securities, if the offer to buy is made with a view to
distribution of such securities or (iv) is a controlling person of the issuer of
the securities, in this case, Reorganized Metallurg.
Entities deemed to be Statutory Underwriters may be able to
sell securities without registration pursuant to the provisions of Rule 144
under the 1933 Act which, in effect, permit the public sale of securities
received pursuant to the Plan by Statutory Underwriters subject to the
availability of public information concerning Reorganized Metallurg, volume
limitations and certain other conditions. Entities who believe they may be
Statutory Underwriters under the definition contained in Section 1145 of the
Bankruptcy Code are advised to consult their own counsel with respect to the
availability of the exemption provided by such Rule.
Pursuant to the Plan, certificates evidencing shares of New
Common Stock received by holders of at least ten percent (without regard to
shares of New Common Stock held by Reorganized Metallurg) of the outstanding New
Common Stock will bear a legend substantially in the form below:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR
OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER
SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE
COMPANY
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RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT
THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED.
Pursuant to the Plan, Reorganized Metallurg will agree to
enter into agreements with certain entities providing for the registration of
the New Common Stock under the 1933 Act. Only entities receiving a distribution
of New Common Stock as of the Effective Date representing at least five percent
of the fully diluted equity interests in Reorganized Metallurg will be entitled
to enter into such an agreement. The registration agreements will provide that:
(i) commencing on the earlier of an initial public offering of Reorganized
Metallurg common stock or one year from the Effective Date of the Plan, holders
of at least 20% of the outstanding common stock of Reorganized Metallurg may
demand that Reorganized Metallurg file with the Securities and Exchange
Commission, and cause to become effective, a registration statement on an
appropriate form (the "Registration Statement") relating to such shares of New
Common Stock as shall be requested to be registered by such holders for public
resale thereof and (ii) that such holders shall have certain piggyback
registration rights, in each case at the expense of Reorganized Metallurg.
X. REORGANIZATION VALUES
Estimates of value do not purport to be appraisals or
necessarily reflect the values which may be realized if assets are sold. The
estimates of value represent hypothetical reorganization values of Reorganized
Metallurg as the continuing owner and operator of its business and assets. Such
estimates reflect computations of the estimated reorganization value of
Reorganized Metallurg through the application of various valuation techniques
and do not purport to reflect or constitute appraisals, liquidation values or
estimates of the actual market value that may be realized through the sale of
any securities to be issued pursuant to the Plan, which may be significantly
different than the amounts set forth herein. The value of operating businesses
such as Shieldalloy and Metallurg's other Subsidiaries is subject to
uncertainties and contingencies which are difficult to predict and will
fluctuate with changes in factors affecting the financial conditions and
prospects of such a business. AS A RESULT, THE ESTIMATE OF THE RANGE OF
REORGANIZATION VALUES SET FORTH HEREIN IS NOT NECESSARILY INDICATIVE OF ACTUAL
OUTCOMES, WHICH MAY BE SIGNIFICANTLY MORE OR LESS FAVORABLE THAN THOSE SET FORTH
THEREIN. BECAUSE SUCH ESTIMATE IS INHERENTLY SUBJECT TO UNCERTAINTIES, NEITHER
THE DEBTORS NOR ANY OTHER PERSON ASSUMES RESPONSIBILITY FOR ITS ACCURACY. IN
ADDITION, THE VALUATION OF NEWLY-ISSUED SECURITIES SUCH AS THE NEW COMMON STOCK
IS SUBJECT TO ADDITIONAL UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE
DIFFICULT TO PREDICT. Actual market prices of such securities at issuance will
depend upon, among other things, prevailing interest rates, conditions in the
financial markets, the anticipated initial securities holdings of prepetition
creditors, some of which may prefer to liquidate their investment rather than
hold it on a long-term basis, and other factors which generally influence the
prices of securities. It should be noted that there is presently no trading
market for the New Common Stock and there can be no assurance that such a
trading market will develop.
Management has undertaken its valuation analysis for purposes
of determining the value available to distribute to creditors pursuant to the
Plan and analyzing relative recoveries to creditors thereunder. The analysis is
based on the projections as well as current market conditions and statistics.
The values are as of June 30, 1996. Management used the discounted cash flow and
guideline comparable company multiple methodologies to value the Debtors'
businesses. These valuation techniques reflect both the market's current view of
the Debtors' value as well as a longer-term focus on the intrinsic value of the
cash flow projections in the business plan. The range for the reorganization
equity value of Reorganized Metallurg's/Shieldalloy's business after Cash
distributions in the Plan is from $40,000,000 to $70,000,000 with a best point
estimate of $50,000,000. The estimated range of total reorganization value
(after giving effect to the Cash distributions in the Plan) is $100,000,000 to
$130,000,000.
Deloitte & Touche LLP has performed certain agreed upon
procedures with respect to management's valuation analysis described above. Such
procedures include, among others, (i) reviewing certain historical financial
information of the Debtors for recent years and interim periods, (ii) reviewing
certain internal financial and operating data of the Debtors, including, on a
test basis, business plans provided by management relating to its business and
prospects, (iii) meeting with certain
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members of senior management of the Debtors to discuss operations and future
prospects, (iv) reviewing projections provided by the Debtors for purposes of
calculation of reorganization value under the discounted cash flow approach and
tracing of amounts to company business plans or other appropriate sources on a
test basis, (v) review of methodology used in the Debtors' discounted cash flow
approach, (vi) comparing of projections to past results of the Debtors, to the
performance of other industry participants and to current and expected economic
and industry conditions, (vii) comparing discount rates used with required rates
of return for similar investments, (viii) calculating, based on the Debtors'
model, sensitivity of reorganization value to changes in certain assumptions
such as business volume, gross margins and discount rate, (ix) reading and
analyzing of publicly available financial data and consideration of the market
values of public companies having investment similarities to the operating
businesses of the Debtors, (x) comparison of publicly available transaction
prices for similar companies to the reorganization value, and (xi) consideration
of certain economic, company and industry information relevant to the operating
businesses. Although Deloitte & Touche LLP performed certain agreed upon
procedures with respect to the Debtors' valuation analysis, business, operating
assets and liabilities and business plans, Deloitte & Touche LLP assumed and
relied upon the accuracy and completeness of (i) financial and other information
furnished to it by the Debtors and by other firms retained by the Debtors and
(ii) publicly available information. Deloitte & Touche LLP did not independently
verify management's projections. No independent evaluations or appraisals of the
Debtors' assets were sought or were obtained in connection with management's
valuation.
THE VALUATIONS REPRESENT ESTIMATED REORGANIZATION VALUES AND
DO NOT NECESSARILY REFLECT VALUES THAT COULD BE ATTAINABLE IN PUBLIC OR PRIVATE
MARKETS. THE EQUITY VALUE ASCRIBED IN THE ANALYSIS DOES NOT PURPORT TO BE AN
ESTIMATE OF THE POST-REORGANIZATION MARKET TRADING VALUE. SUCH TRADING VALUE, IF
ANY, MAY BE MATERIALLY DIFFERENT FROM THE REORGANIZATION EQUITY VALUE RANGES
ASSOCIATED WITH THE VALUATION ANALYSIS.
XI. CERTAIN RISK FACTORS TO BE CONSIDERED
HOLDERS OF CLAIMS AGAINST THE DEBTORS SHOULD READ AND CONSIDER
CAREFULLY THE FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION SET
FORTH IN THIS DISCLOSURE STATEMENT (AND THE DOCUMENTS DELIVERED TOGETHER
HEREWITH, INCLUDED IN THE PLAN SUPPLEMENT, AND/OR INCORPORATED BY REFERENCE),
PRIOR TO VOTING TO ACCEPT OR REJECT THE PLAN. THESE RISK FACTORS SHOULD NOT,
HOWEVER, BE REGARDED AS CONSTITUTING THE ONLY RISKS INVOLVED IN CONNECTION WITH
THE PLAN AND ITS IMPLEMENTATION.
A. OVERALL RISKS TO RECOVERY BY HOLDERS OF CLAIMS
The ultimate recoveries under the Plan to holders of Claims
(other than those holders who are paid in Cash under the Plan) depend upon the
realizable value of the New Secured Notes to be issued pursuant to the Plan and
the New Common Stock. The New Secured Notes and the New Common Stock to be
issued pursuant to the Plan are subject to a number of material risks,
including, but not limited to, those specified below. The factors specified
below assume that the Plan is approved by the Bankruptcy Court and that the
Effective Date occurs no later than the end of the first quarter of 1997. Prior
to voting on the Plan, each holder of a Claim should carefully consider the risk
factors specified or referred to below, including the Exhibits annexed hereto
and the documents included in the Plan Supplement, as well as all of the
information contained in the Plan.
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1. FAILURE TO OBTAIN APPROVAL OF THE ENVIRONMENTAL SETTLEMENT
AGREEMENTS
If for whatever reason final approval of the Environmental
Settlement Agreements is not obtained in accordance with applicable federal
and/or state environmental regulatory procedures prior to confirmation of the
Plan, the Debtors will be compelled to litigate in the Bankruptcy Court all
unresolved Environmental Claims and issues. Such litigation could significantly
delay the confirmation of the Debtors' chapter 11 Plan and, ultimately, threaten
the continued viability of the Debtors' operations.
2. ABILITY TO REFINANCE CERTAIN INDEBTEDNESS
Following the Effective Date and as a condition to the Plan,
the Debtors will obtain a revolving credit facility to provide the Debtors with
working capital and letter of credit requirements in an amount not less than $20
million. In addition to this working capital facility, the Debtors and/or their
Subsidiaries may also enter into one or more term loan or revolving credit
facilities, the proceeds of which will be used to reduce on a dollar for dollar
basis the principal amount of the New Secured Notes to be issued under the Plan.
See Section VII.E., above entitled "Confirmation and Consummation Procedure
- - --Exit Financing." There can be no assurance that the Reorganized Debtors will
be able to obtain replacement financing for either the working capital facility,
refinancing of the New Secured Notes or replacement financing for the other term
loan or revolving credit facilities, or that such replacement financing or
refinancing, if available, will be on terms equally favorable to the Reorganized
Debtors.
3. SIGNIFICANT HOLDERS
Upon the consummation of the Plan, certain holders of Claims
will receive distributions of shares of the New Common Stock representing in
excess of five percent of the outstanding shares of the New Common Stock. If
holders of significant numbers of shares of New Common Stock were to act as a
group, such holders may be in a position to control the outcome of actions
requiring stockholder approval, including the election of directors. This
concentration of ownership could also facilitate or hinder a negotiated change
of control of Reorganized Metallurg and, consequently, impact upon the value of
the New Common Stock.
Further, the possibility that one or more of the holders of
significant numbers of shares of New Common Stock may determine to sell all or a
large portion of their shares of New Common Stock in a short period of time may
adversely affect the market price of the New Common Stock.
4. LACK OF ESTABLISHED MARKET FOR NEW COMMON STOCK
Reorganized Metallurg will use reasonable commercial efforts
to file an application for the New Common Stock to be traded on the Over Counter
Bulletin Board and to comply with applicable state securities and "blue sky"
laws.
There can be no assurance that an application will be approved.
The New Common Stock will be issued to creditors, some of whom
may prefer to liquidate their investment rather than to hold it on a long-term
basis. There is currently no trading market for the New Common Stock nor is it
known whether or when one would develop. There can be no assurance that an
active market will develop therefor. Further, there can be no assurance as to
the degree of price volatility in any such particular market. Any market trading
price is subject to change as a result of market conditions and other factors.
Further, factors such as announcements by the company of quarterly variations in
its financial results and changes in general market conditions, among other
things, could cause the market price of the New Common Stock to fluctuate
significantly. In recent years, the stock market has experienced significant
price and volume fluctuations.
While the Plan was developed based on an assumed
reorganization value of $10 per share of the New Common Stock, such valuation is
not an estimate of the price at which the New Common Stock may trade in the
market. The Debtors
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have not attempted to make any such estimate in connection with the development
of the Plan. No assurance can be given as to the market prices that will prevail
following the Effective Date.
5. DIVIDEND POLICIES
Reorganized Metallurg does not anticipate paying any dividends
on the New Common Stock in the foreseeable future. In addition, the covenants in
certain debt instruments to which Reorganized Metallurg will be a party may
limit the ability of Reorganized Metallurg to pay dividends. Certain
institutional investors may only invest in dividend-paying equity securities or
may operate under other restrictions which may prohibit or limit their ability
to invest in New Common Stock.
6. PROVISIONS OF STOCK AWARD AND OPTION PLAN
The Initial Stock Awards and the options granted under the
SASOP Option Plan will immediately vest upon a "change of control" (as defined
therein), which may be viewed as having possible anti-takeover effects if a
third party's attempt to gain control of Reorganized Metallurg would thereby be
made more costly.
7. PROJECTED FINANCIAL INFORMATION
The Projected Financial Information included in this
Disclosure Statement is dependent upon the successful implementation of the
Business Plan and the validity of the other assumptions contained therein. These
projections reflect numerous assumptions, including confirmation and
consummation of the Plan in accordance with its terms, the anticipated future
performance of Metallurg, industry performance, certain assumptions with respect
to competitors of Metallurg, general business and economic conditions and other
matters, many of which are beyond the control of Metallurg. In addition,
unanticipated events and circumstances occurring subsequent to the preparation
of the projections may affect the actual financial results of Metallurg.
Although Metallurg believes that the projections are reasonably attainable, some
or all of the estimates will vary and variations between the actual financial
results and those projected may be material.
8. BUSINESS FACTORS AND COMPETITIVE CONDITIONS
a. Dependence on Cyclical Markets
The industries which Reorganized Metallurg supplies are mainly
the steel, aluminum and superalloy producers. These industries are in turn
dependent on highly cyclical markets such as automotive, construction, consumer
durables, packaging and aerospace.
World raw steel production rose from 645 million tons in 1982
to a peak of 786 million in 1989 but declined to 701 million tons in 1994. It
rose again to 728 million tons in 1995. World primary aluminum consumption fell
from 16 million tons in 1979 to 14.2 million tons in 1982, then rose to a peak
of 19.2 million tons in 1989 but fell back to 18.5 million tons in 1993 before
rising slightly again. Shipments of US titanium mill products declined from a
high of 54 million pounds in 1989 to 35 million pounds in 1993 following
cutbacks in military spending but rose again above 40 million pounds in 1995.
There can be no assurance as to the extent or duration of the recent recovery.
b. Metals Industry Highly Competitive
The metals industry is highly competitive on a worldwide
basis. Competition is primarily on the basis of price, quality and timely
delivery. In recent years, the industry has been suffering from excess capacity,
which has intensified price competition for available business. Increased
competition as a result of sales of exports from the Commonwealth of Independent
States ("CIS") of excess stocks of metal and alloy additives precipitated by the
collapse of the former Soviet Union and the end of the Cold War have severely
hurt the price of ferroalloys in Europe. Although Reorganized Metallurg believes
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that the downward effect of this increased competition has ended, there can be
no assurance that such price competition would not return.
c. Dependence on Others for Raw Materials
Certain of Reorganized Metallurg's subsidiaries are dependent
on third parties for raw material supplies. Raw materials for the manufacture of
ferrovanadium in the US production unit in Cambridge, Ohio, are sourced from
utilities and petrochemical plants throughout the world, occasionally on an open
tender basis as well as from a South African vanadium containing slag producer
through a contract negotiated annually on a volume basis.
Titanium and boron salts for the manufacture of sophisticated
aluminum master alloys are sourced from long-time suppliers who in certain
instances also supply competitive producers with these raw materials.
Although these and other raw materials are generally priced
with reference to perceived related market prices, any increase in demand could
cause raw material costs to rise. To the extent the company is unable to recover
its increased costs, operating results may be adversely affected.
d. Environmental Regulation
The operations of Shieldalloy's alloy manufacturing business
are subject to extensive federal, state, local and foreign laws, regulations,
rules and ordinances concerning, among other things, emissions to air,
discharges and releases to land an water, the generation, handling, storage,
transportation treatment and disposal of wastes and other materials, including
materials containing low levels of radioactivity and the remediation of
environmental pollution caused by releases of wastes and other material, as well
as worker exposure to hazardous or toxic substances. There can be no assurance
that the risks identified above will not result in future liabilities and
obligations that could be material to the company's business operations,
financial condition or cash flow. With regard to the Environmental Claims
relating to the Shieldalloy facilities in Newfield, New Jersey and Cambridge,
Ohio, the Debtors expect that the Environmental Settlement Agreements will be
approved by the Bankruptcy Court at the hearing on confirmation of the Plan. For
a detailed discussion of these matters, see Section V.B. above entitled
"Compromises and Settlements of Certain Claims Under the Plan -- Settlement With
Holders of Environmental Claims."
B. HART-SCOTT-RODINO ACT REQUIREMENTS
Holders of Claims that acquired such Claims after the
commencement of the Chapter 11 Cases and that are to receive equity securities
under the Plan on account of such Claims may have to observe the filing and
waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR Act"). Holders required to make HSR Act filings cannot receive
any such distribution of equity securities until the expiration or early
termination of the waiting periods under the HSR Act. Such holders should
consult their own counsel regarding their potential responsibilities under the
HSR Act.
XII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following discussion summarizes certain federal income tax
consequences of the implementation of the Plan to the Debtors and certain
creditors of the Debtors. The following summary does not address the federal
income tax consequences to holders entitled to payment in full in cash under the
Plan (e.g., holders of the Midlantic Claim, Priority Claims and Convenience
Claims).
The following summary is based on the Tax Code, treasury
regulations promulgated and proposed thereunder, judicial decisions and
published administrative rules and pronouncements of the Internal Revenue
Service ("IRS") as in effect on the date hereof. Changes in such rules or new
interpretations thereof may have retroactive effect and could significantly
affect the federal income tax consequences described below.
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The federal income tax consequences of the Plan are complex
and are subject to significant uncertainties. The Debtors have not requested a
ruling from the IRS or an opinion of counsel with respect to any of the tax
aspects of the Plan. Thus, no assurance can be given as to the interpretation
that the IRS will adopt. In addition, this summary does not address foreign,
state or local tax consequences of the Plan, nor does it purport to address the
federal income tax consequences of the Plan to special classes of taxpayers
(such as foreign taxpayers, broker-dealers, banks, mutual funds, insurance
companies, financial institutions, small business investment companies,
regulated investment companies, tax-exempt organizations, and investors in
pass-through entities).
ACCORDINGLY, THE FOLLOWING SUMMARY OF CERTAIN FEDERAL INCOME
TAX CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR
CAREFUL TAX PLANNING AND ADVICE BASED UPON A CREDITOR'S INDIVIDUAL
CIRCUMSTANCES. ALL CREDITORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS FOR THE
FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES APPLICABLE UNDER THE PLAN.
A. CONSEQUENCES TO THE DEBTORS
The Debtors have reported for federal income tax purposes a
consolidated net operating loss ("NOL") carryforward of approximately $13.6
million as of December 31, 1995 and certain tax credit carryforwards, and expect
to incur a consolidated NOL for the current taxable year. In addition, the
Debtors have substantial tax basis in their assets. As discussed below, certain
tax attributes of the Debtors, such as any NOLs and tax basis, may be subject to
reduction and limitation as the result of implementation of the Plan.
1. CANCELLATION OF DEBT. In general, the Tax Code provides
that a debtor in a bankruptcy proceeding must reduce its tax attributes -- such
as its NOL carryforwards and current year NOLs, tax credits, and tax basis in
its assets --by any cancellation of indebtedness ("COD"), that is, the amount by
which the indebtedness discharged exceeds any consideration given in exchange
therefor. Any reduction in tax attributes generally occurs on a separate company
basis, even though the Debtors file a consolidated federal income tax return. As
a result of the discharge of Claims pursuant to the Plan, the Debtors may suffer
attribute reduction in respect of Claims of certain holders, except to the
extent that one or more statutory or case law exceptions to COD and attribute
reduction apply, such as the so-called "stock-for-debt" exception (which
continues to apply in bankruptcy cases, such as the Debtors', filed before 1994)
or where the payment of the cancelled debt would have given rise to a tax
deduction. Although not free from doubt, the Debtors believe that, under case
law, no COD or attribute reduction should result from the discharge of the
Former Preferred Stockholder Claims.
Under the stock-for-debt exception, COD generally will not be
realized with respect to a given claim if, in discharge of such claim pursuant
to a plan confirmed by the bankruptcy court, the holder receives a sufficient
equity interest in the debtor which satisfies certain de minimis rules. Under
such de minimis rules, the stock-for-debt exception does not apply to the
issuance of nominal or token shares, or in respect of any unsecured claim that
does not receive at least half the stock it would have received had all stock
issued in respect of unsecured claims of the debtor been distributed
proportionally among all unsecured claims of the debtor.
Due to certain factual and interpretational issues (including
whether the use of parent corporation stock to satisfy outstanding debt of a
subsidiary qualifies for the stock-for-debt exception), the application of the
stock-for-debt exception with respect to the MI Unsecured Claims and SMC
Unsecured Claims is not entirely clear. However, with respect to the use of
parent corporation stock, the IRS recently released a private letter ruling (the
"PLR") holding that, subject to the de minimis rules, the use of parent
corporation stock does qualify for the stock-for-debt exception. Although it may
not be cited as precedent, the PLR is reflective of the IRS's position at the
time of issuance. Accordingly, based in part on the PLR, the Debtors believe
that the issuance of New Common Stock, New Secured Notes and Cash in
satisfaction of both the MI Unsecured Claims and SMC Unsecured Claims should
qualify for the stock-for-debt exception.
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Accordingly, the Debtors believe that, due to various
statutory and case law exceptions to COD and assuming a reorganization equity
value after cash distributions of $50 million (see Section X. above entitled
"Reorganization Values"), the Plan should not result in COD and attribute
reduction with respect to Claims in Classes 4A and 4C and Former Preferred
Stockholder Claims; however, the Debtors estimate that they would incur, in the
aggregate, approximately $3 million of COD and attribute reduction from the
discharge of Claims in various classes. Nevertheless there is no assurance that
the IRS would not take a contrary position. In the event that the discharge of
Claims in Classes 4A or 4C that receive stock and/or the Former Preferred
Stockholder Claims were to result in COD and attribute reduction, it is possible
that any NOLs remaining as of the end of the year in which the discharge occurs
could be eliminated and that the Debtors' tax basis in their assets could be
significantly reduced.
2. LIMITATIONS ON NOL CARRYFORWARDS AND OTHER TAX ATTRIBUTES.
Following the implementation of the Plan, any NOLs and certain other tax
attributes of the Debtors allocable to periods prior to the effective date of
the Plan will be subject to the limitations imposed by Section 382 of the Tax
Code.
Under Section 382, if a corporation undergoes an "ownership
change," the amount of its pre-change losses that may be utilized to offset
future taxable income generally will be subject to an annual limitation.
Similarly, such limitation may also apply to subsequently recognized "built-in"
losses, that is, economically accrued but unrecognized losses or deductions that
are subsequently recognized. The issuance of New Common Stock pursuant to the
Plan will constitute an ownership change of the Debtors.
The amount of the annual limitation to which the Debtors would
be subject generally should be equal to the product of (i) the lesser of the
value of the outstanding New Common Stock immediately after the ownership change
or the value of the Debtors' consolidated gross assets immediately before such
change (with certain adjustments) and (ii) the "long-term tax exempt rate" in
effect for the month in which the ownership change occurs (5.64% for ownership
changes occurring in November 1996). However, if the Debtors do not continue
their historic business or use a significant portion of their assets in a new
business for two years after the ownership change, the annual limitation would
be zero.
As mentioned above, Section 382 can also operate to limit
subsequently recognized built-in losses. If a loss corporation has a net
built-in loss at the time of an ownership change (taking into account most
assets and all items of "built-in" income and deductions), then any built-in
losses recognized during the following five years (up to the amount of the
original net built-in loss) generally will be treated as a pre-change loss and
similarly will be subject to the annual limitation. Conversely, if the loss
corporation has a net built-in gain on the change date, any built-in gains
recognized during the following five years (up to the amount of the original net
built-in gain) generally will increase the annual limitation in the year
recognized, such that the loss corporation would be permitted to use its
pre-change losses against such built-in gain income in addition to its regular
annual allowance. It is not known whether the Debtors will be in a net built-in
gain or a net built-in loss position on the effective date of the Plan.
Although an exception to the foregoing annual limitation rules
generally applies where so-called "old and cold" creditors of the debtor receive
at least 50% of the vote and value of the stock of the reorganized debtor, the
Debtors do not believe that they will qualify for this exception.
3. ALTERNATIVE MINIMUM TAX. In general, an alternative minimum
tax ("AMT") is imposed on a corporation's alternative minimum taxable income at
a 20% rate to the extent such tax exceeds the corporation's regular federal
income tax. For purposes of computing taxable income for AMT purposes, certain
tax deductions and other beneficial allowances are modified or eliminated. In
particular, even though a corporation might otherwise be able to offset all of
its taxable income for regular tax purposes by available NOL carryforwards, only
90% of a corporation's taxable income for AMT purposes may be offset by
available NOL carryforwards (as recomputed for AMT purposes).
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In addition, if a corporation undergoes an "ownership change"
within the meaning of Section 382 of the Tax Code and is in a net built-in loss
position (as determined for AMT purposes) on the date of the ownership change,
the corporation's aggregate tax basis in its assets would be reduced for AMT
purposes to reflect the fair market value of such assets as of the change date.
Any AMT that a corporation pays generally will be allowed as a
nonrefundable credit against its regular federal income tax liability in future
taxable years when the corporation is no longer subject to the AMT.
4. TREATMENT OF NEW SECURED NOTES. If the New Secured Notes
are issued with original issue discount ("OID"), such notes may be treated as
applicable high-yield discount obligations ("AHYDO") within the meaning of
Section 163(e)(5) of the Tax Code if, among other requirements, their yield to
maturity is at least five percentage points over the applicable federal rate in
effect for the calendar month in which such notes are issued (7.02% for November
1996) and the notes have significant OID (in general, where there is unamortized
OID as of the end of the fifth year after issuance that exceeds the amount of
one year's interest). If the New Secured Notes are treated as AHYDOs, a portion
of the accrued discount attributable to the "disqualified portion", if any, of
the interest deduction otherwise allowable as OID would be disallowed (as
discussed below), and the balance of such deduction would be deferred until
actually paid in cash. See Section XII.B. below entitled "Consequences to
Holders of Claims in Classes 4A, 4B, 4C and 4D -- Additional Tax Considerations
for All Holders -- Original Issue Discount on New Secured Notes."
The "disqualified portion" of any interest deduction otherwise
allowable as OID on the New Secured Notes is that portion, if any, of the total
OID multiplied by a fraction, the numerator of which is equal to the
"disqualified yield" (i.e., the excess of the yield to maturity of the notes
over the sum of the applicable federal rate for the calendar month in which the
notes are issued plus six percentage points) and the denominator of which is
equal to the total yield to maturity of the notes.
B. CONSEQUENCES TO HOLDERS OF CLAIMS IN CLASSES 4A, 4B, 4C AND 4D
Pursuant to the Plan, holders of MI Unsecured Claims, SMC
Unsecured Claims and Canadian Guarantee Claims will receive, in discharge of
their Allowed Claims, cash, New Secured Notes and New Common Stock (distribution
option A) or, in the case of certain eligible holders who so elect, only cash
and New Common Stock (distribution option B). Holders of Settling Former
Preferred Stockholder Claims will receive, in discharge of their Allowed Claims,
either cash or New Common Stock (at their election). Any Former Preferred
Stockholder not electing to settle its Claim pursuant to the Plan will be
entitled to distributions as a holder of an MI Unsecured Claim, if and when its
Claim is ultimately allowed.
1. HOLDERS OF MI UNSECURED CLAIMS AND CANADIAN GUARANTEE
CLAIMS The federal income tax consequences of the Plan to a holder of an MI
Unsecured Claim or a Canadian Guarantee Claim depend, in part, on whether such
Claim constitutes a "security" for federal income tax purposes and on whether
the New Secured Notes constitute "securities" for federal income tax purposes.
The term "securities" is not defined in the Tax Code or in the regulations
issued thereunder and has not been clearly defined by judicial decisions. The
determination of whether a particular claim or debt constitutes a "security"
depends upon an overall evaluation of the nature of the claims. One of the most
significant factors considered in determining whether a particular debt is a
security is its original term. In general, debt obligations issued with a
weighted average maturity at issuance of five years or less (e.g., trade debt
and revolving credit obligations) do not constitute securities, whereas debt
obligations with a weighted average maturity at issuance of 10 years or more
constitute securities. The following discussion assumes that the New Secured
Notes would constitute "securities" for federal income tax purposes. Each holder
is urged to consult its tax advisor regarding the status of its Claim and the
New Secured Notes.
In addition, it is likely, and the following discussion
assumes, that any amounts received by a holder of an MI Unsecured Claim in
respect of such Claim and any Canadian Guarantee Claim or secondary liability
claim against Shieldalloy (whether as guarantor, co-obligor or otherwise) with
respect to the same underlying debt of Metallurg would be treated as paid
directly by Metallurg in satisfaction of a single debt.
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a. Holders of Claims Not Constituting "Securities"
In general, each holder of an MI Unsecured Claim that does not
constitute a "security" for federal income tax purposes will recognize gain or
loss upon implementation of the Plan in an amount equal to the difference
between (i) the "amount realized" in respect of its Claim (other than any Claim
for accrued interest) and (ii) the tax basis in its Claim (other than any Claim
for accrued interest). A holder's "amount realized" in respect of its Claim will
equal the sum of the amount of the cash (possibly including any pre-issuance
interest in respect of any New Secured Notes, particularly any such interest
payable on the Effective Date), the fair market value of the New Common Stock
and the issue price of any New Secured Notes received, whether received on the
effective date of the Plan or as a subsequent distribution from the Disputed
Unsecured Claims Reserve (except to the extent treated as imputed interest), and
including any amounts received by such holder in respect of a corresponding
Canadian Guarantee Claim and SMC Unsecured Claim. Thus, it is possible that any
loss, or a portion of any gain, realized (as the case may be) may be deferred
until all, if any, subsequent distributions from the Disputed Unsecured Claims
Reserve are actually received. See discussion under "Additional Tax
Considerations For All Holders".
The character of any gain or loss recognized as long-term or
short-term capital gain or loss or as ordinary income or loss will be determined
by a number of factors, including the tax status of the holder, whether the
Claim constitutes a capital asset in the hand of the holder, whether the Claim
has been held for more than one year or was purchased at a discount, and whether
and to what extent the holder has previously claimed a bad debt deduction. In
this regard, Section 582(c) of the Tax Code provides that the sale or exchange
of a bond, debenture, note, certificate or other evidence of indebtedness by
certain financial institutions shall be considered the sale or exchange of a
non-capital asset. Accordingly, any gain or loss recognized by such financial
institutions as a result of the implementation of the Plan will be ordinary gain
or loss, regardless of the nature of their Claims.
A holder's tax basis in the New Common Stock received will be
the fair market value of such stock, and the tax basis in any New Secured Notes
received will be the issue price of such notes. The holding period for both the
New Common Stock and New Secured Notes received will begin on the day following
their issuance.
b. Holders of Claims Constituting "Securities"
In general, each holder of an MI Unsecured Claim that
constitutes a "security" for federal income tax purposes will not recognize any
loss upon implementation of the Plan, and will recognize gain (computed as
described in the prior section), if any, but only to the extent of any
consideration other than stock or securities (i.e., the amount of cash) received
in satisfaction of its Claim, including any such consideration received by such
holder in respect of a corresponding Canadian Guarantee Claim and SMC Unsecured
Claim. The character and timing of such gain would also be determined in
accordance with the principles discussed in the prior section. See also
discussion under "Additional Tax Considerations For All Holders" (including
distributions in discharge of accrued interest).
A holder's aggregate tax basis in the New Common Stock and New
Secured Notes received in satisfaction of its Claim will equal the holder's
adjusted tax basis in its Claim (including any Claim for accrued interest),
decreased by the amount of cash received, and increased by any gain or interest
income recognized in respect of its Claim. The holder's holding period for the
New Common Stock and New Secured Notes received will include the holder's
holding period for the Claim.
2. HOLDERS OF SMC UNSECURED CLAIMS. In general, each holder of
an SMC Unsecured Claim (other than in respect of a secondary liability claim
with respect to debt of Metallurg, as discussed above) probably will recognize
gain or loss upon implementation of the Plan in an amount equal to the
difference between (i) the "amount realized" in respect of its Claim (other than
any Claim for accrued interest) and (ii) the tax basis in its Claim (other than
any Claim for accrued interest). A holder's "amount realized" in respect of its
Claim will equal the sum of the amount of the cash (possibly including any
pre-issuance interest in respect of the New Secured Notes, particularly any such
interest payable on the Effective Date), the fair market value of any New Common
Stock and the issue price of any New Secured Notes received, whether received on
the effective date of the Plan or as a subsequent distribution from the Disputed
Unsecured Claims Reserve (except to the extent
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treated as imputed interest). Thus, it is possible that any loss, or a portion
of any gain, realized (as the case may be) may be deferred until all, if any,
subsequent distributions from the Disputed Unsecured Claims Reserve are actually
received. See discussion under "Additional Tax Considerations For All Holders".
The character of any gain or loss recognized as long-term or
short-term capital gain or loss or as ordinary income or loss will be determined
by a number of factors, including the tax status of the holder, whether the
Claim constitutes a capital asset in the hand of the holder, whether the Claim
has been held for more than one year or was purchased at a discount, and whether
and to what extent the holder has previously claimed a bad debt deduction. In
this regard, Section 582(c) of the Tax Code provides that the sale or exchange
of a bond, debenture, note, certificate or other evidence of indebtedness by
certain financial institutions shall be considered the sale or exchange of a
non-capital asset. Accordingly, any gain or loss recognized by such financial
institutions as a result of the implementation of the Plan will be ordinary gain
or loss, regardless of the nature of their Claims.
A holder's tax basis in the New Common Stock received will be
the fair market value of such stock, and the tax basis in any New Secured Notes
received will be the issue price of such notes. The holding period for both the
New Common Stock and New Secured Notes received will begin on the day following
their issuance.
3. HOLDERS OF SETTLING FORMER PREFERRED STOCKHOLDER CLAIMS.
The federal income tax consequences of the Plan to a holder of a Settling Former
Preferred Stockholder Claim will depend, in part, on whether the holder elects
to receive cash or New Common Stock in satisfaction of its Claim and, if New
Common Stock is received, whether such Claim constitutes a "security" for
federal income tax purposes. As discussed above with respect to the discussion
to "Holders of MI Unsecured Claims and Canadian Guarantee Claims", the
determination of whether a particular claim constitutes a "security" depends
upon an overall evaluation of the nature of the claim. The Debtors believe that
it is likely, and the following discussion assumes, that the Settling Preferred
Stockholder Claim would constitute "securities" for federal income tax purposes.
If a holder of a Settling Preferred Stockholder Claim elects
to receive cash, the holder generally will recognize gain or loss in an amount
equal to the difference between (i) the amount of cash received (other than any
Claim for accrued interest) and (ii) the tax basis in its Claim (other than any
Claim for accrued interest). See discussion under "Additional Tax Considerations
For All Holders". The character of any gain or loss recognized as long-term or
short-term capital gain or loss or as ordinary income or loss will be determined
by a number of factors, including the tax status of the holder, whether the
Claim constitutes a capital asset in the hand of the holder, whether the Claim
has been held for more than one year or was purchased at a discount, and whether
and to what extent the holder has previously claimed a bad debt deduction.
If a holder of a Settling Preferred Stockholder Claim elects
to receive New Common Stock, the holder should recognize no gain or loss upon
implementation of the Plan (other than possibly in respect of a Claim for
accrued interest). See discussion under "Additional Tax Considerations For All
Holders" (including distributions in discharge of accrued interest). The
holder's tax basis in the New Common Stock received will equal its tax basis in
its Claim (increased by any interest income recognized upon satisfaction of its
Claim), and the holder's holding period for the New Common Stock received will
include the holder's holding period for the Claim.
4. ADDITIONAL TAX CONSIDERATIONS FOR ALL HOLDERS
a. Distribution in Discharge of Accrued Interest
To the extent any amount received by a holder (whether cash,
stock or other property) is received in discharge of a Claim for interest
accrued during its holding period other than any interest which is tax-exempt,
such amount will be taxable to the holder as interest income (if not previously
included in the holder's gross income). A holder will recognize a deductible
loss (or, possibly, a write-off against a reserve for bad debts) to the extent
any accrued interest claimed was previously included in its gross income and is
not paid in full.
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b. Installment Method
Each holder should consult its tax advisor regarding the
potential for reporting on the installment method a portion of any gain realized
upon satisfaction of its Claim.
c. Original Issue Discount on New Secured Notes
It is possible that the New Secured Notes will be treated as
having been issued with OID. OID is the excess, beyond a statutory de minimis
amount (as discussed below), of the stated redemption price at maturity of a
debt obligation over its issue price. The "stated redemption price at maturity"
of the New Secured Notes should be its stated principal amount, increased by any
pre-issuance accrued interest treated as additional interest on such notes for
federal income tax purposes. The "issue price" of the New Secured Notes will
depend upon whether the New Secured Notes are traded on an "established
securities market". If traded on an established securities market, the issue
price of the New Secured Notes would be their fair market value, with the
potential for OID to the extent the fair market value is less than the stated
principal amount of the notes; if not, the issue price of the New Secured Notes
would also be the stated principal amount of the notes, with no resulting OID.
Pursuant to Treasury Regulations, an "established securities market" includes a
system of general circulation (including a computer listing disseminated to
subscribing brokers, dealers, or traders) that provides a reasonable basis to
determine fair market value by disseminating either recent price quotations or
actual prices of recent sale transactions.
The New Secured Notes generally would be considered to be
issued with OID only if the amount that would be OID equal or exceeds .25% of
the stated redemption price at maturity times the weighted average maturity of
the notes (as determined for federal income tax purposes). If the New Secured
Notes are issued with OID (which could occur, for example, if any pre-issuance
accrued interest treated as additional interest on such notes for federal income
tax purposes exceeds such de minimis amount), such OID would have to be accrued
and generally includible in the holder's gross income as interest over the term
of the notes, based on the constant interest method. As a result, holders would
be required to include amounts in gross income in advance of any receipt of cash
in respect of such income.
If the New Secured Notes are treated as "Applicable High-Yield
Debt Obligations" (AHYDOs) (see Section XII.A. above entitled "Consequences to
the Debtors -- Treatment of New Secured Notes"), a portion of a corporate
holder's share of the accrued OID attributable to the "disqualified portion", if
any, of the interest deduction otherwise allowable to Reorganized Metallurg as
OID (as described in the above-referenced discussion) may be treated as a
dividend for purposes of the dividend-received-deduction to the extent such
amount would be so treated if it had been a distribution made by Reorganized
Metallurg with respect to its stock (i.e., to the extent Reorganized Metallurg
has sufficient earnings and profits such that a distribution in respect of stock
would constitute a dividend for federal income tax purposes and, presumably,
subject to certain holding period and taxable income requirements and other
limitations on the dividend-received-deduction. In determining the amount of the
disqualified portion that is characterized as a dividend for any year, the
earnings and profits of the issuer are not reduced by any amount of OID
attributable to the disqualified portion for that year. The legislative history
provides that, for purposes of determining earnings and profits in subsequent
years, however, this special rule does not apply.
Non-corporate holders of the New Secured Notes are not
affected by the AHYDO rules, and must include all OID on such notes as interest
income as its accrues under the regular OID rules.
d. Disputed Claims Reserves
Under Section 468B(g) of the Tax Code, amounts earned by an
escrow account, settlement fund or similar fund must be subject to current tax.
The manner by which this is done is to be prescribed in Treasury Regulations
providing for the taxation of such an account or fund as a grantor trust or
otherwise. Although certain Treasury Regulations have been issued under this
section, no Treasury Regulations have as yet been promulgated to address the tax
treatment of accounts in a bankruptcy setting. Thus, depending on the facts,
such accounts possibly could be treated as a separately taxable trust, as a
grantor trust to the holders of Disputed Claims, or otherwise.
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The Debtors intend to treat any interest earned in respect of
the Disputed Other Secured and Priority Claims Reserve and Disputed Unsecured
Claims Reserve as taxable to, and includible in the gross income of, the
Debtors, and to treat any expenses of the Reserves in a similar manner. Each
holder is urged to consult its tax advisor regarding the potential taxation of
the Disputed Other Secured and Priority Claims Reserve and Disputed Unsecured
Claims Reserve (including the effect on the computation of such holder's gain or
loss in respect of its Claim).
e. Subsequent Sale of New Common Stock
Any gain recognized by a holder upon a subsequent taxable
disposition of New Common Stock received pursuant to the Plan in satisfaction of
a Claim (or any stock or other property received for it in a later tax-free
exchange) will be treated as ordinary income to the extent of (i) any bad debt
deductions (or additions to a bad debt reserve) claimed with respect to its
Claim and any ordinary loss deduction incurred upon satisfaction of its Claim,
less any income (other than interest income) recognized by the holder upon
satisfaction of its Claim, and (ii) with respect to a cash-basis holder, also
any amounts which would have been included in its gross income if the holder's
Claim had been satisfied in full but which was not included by reason of the
cash method of accounting.
In addition, the Treasury Department is expected to promulgate
regulations that will provide that any accrued "market discount" not treated as
ordinary income upon a tax-free exchange of market discount bonds would carry
over to the nonrecognition property received in the exchange. If such
regulations are promulgated and applicable to the Plan, any holder that holds a
Claim which constitutes a "security" of Metallurg for federal income tax
purposes and which has accrued market discount would carry over such accrued
market discount to any New Common Stock and New Secured Notes received pursuant
to the Plan, such that any gain recognized by the holder upon a subsequent
disposition of such New Common Stock and New Secured Notes also would be treated
as ordinary income to the extent of any accrued market discount not previously
included in income. In general, a Claim will have accrued "market discount" if
such Claim was acquired after its original issuance at a discount to its
adjusted issue price.
f. Withholding
All distributions to holders of Allowed Claims under the Plan
are subject to any applicable withholding (including employment tax
withholding). Under federal income tax law, interest, dividends and other
reportable payments may, under certain circumstances, be subject to "backup
withholding" at a 31% rate. Backup withholding generally applies if the holder
(a) fails to furnish its social security number or other taxpayer identification
number ("TIN"), (b) furnishes an incorrect TIN, (c) fails properly to report
interest or dividends, or (d) under certain circumstances, fails to provide a
certified statement, signed under penalty of perjury, that the TIN provided is
its correct number and that it is not subject to backup withholding. Backup
withholding is not an additional tax but merely an advance payment, which may be
refunded to the extent it results in an overpayment of tax. Certain persons are
exempt from backup withholding, including, in certain circumstances,
corporations and financial institutions.
THE FOREGOING SUMMARY HAS BEEN PROVIDED FOR INFORMATIONAL
PURPOSES ONLY. ALL CREDITORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES APPLICABLE UNDER
THE PLAN.
XIII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN
If the Plan is not confirmed and consummated, the Debtors'
alternatives include (i) liquidation of each of the Debtors' estates under
chapter 7 of the Bankruptcy Code and (ii) the preparation and presentation of an
alternative plan or plans of reorganization.
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A. LIQUIDATION UNDER CHAPTER 7
If no chapter 11 plan can be confirmed, each of the Chapter 11
Cases may be converted to cases under chapter 7 of the Bankruptcy Code, trustees
would be elected or appointed for each of the Debtor's estates to liquidate the
assets of the Debtors. A discussion of the effect that a chapter 7 liquidation
would have on the recovery of holders of Claims and Equity Interests is set
forth in Section VII.C.4. above entitled "Confirmation and Consummation
Procedure -- Best Interests Test." The Debtors believe that liquidation under
chapter 7 for each of their respective estates would result in (i) smaller
distributions being made to creditors than those provided for in the Plan
because of the additional administrative expenses involved in the appointment of
trustees and attorneys and other professionals to assist such trustees, (ii)
additional expenses and claims, some of which would be entitled to priority,
which would be generated during the liquidation and from the rejection of leases
and other executory contracts in connection with a cessation of the Debtors'
operations and (iii) the failure to realize the greater, going concern value of
the Debtors' assets.
B. ALTERNATIVE PLAN OF REORGANIZATION
If the Plan is not confirmed, the Debtors or any other party
in interest could attempt to formulate a different plan of reorganization. Such
a plan might involve either a reorganization and continuation of the Debtors'
business or an orderly liquidation of their assets.
Consequently, the Debtors believe that the Plan enables the
Debtors to successfully and expeditiously emerge from chapter 11, preserves
their business and allows creditors to realize the highest recoveries under the
circumstances. In a liquidation under chapter 11 of the Bankruptcy Code, the
assets of the Debtors would be sold in an orderly fashion over a more extended
period of time than in a liquidation under chapter 7 and a trustee need not be
appointed. Accordingly, creditors would receive greater recoveries than in a
chapter 7 liquidation. Although a chapter 11 liquidation is preferable to a
chapter 7 liquidation, the Debtors believe that a liquidation under chapter 11
is a much less attractive alternative to creditors because a greater return is
provided for in the Plan to creditors.
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XIV. CONCLUSION AND RECOMMENDATION
The Debtors believe that confirmation and implementation of
the Plan is preferable to any of the alternatives described above because it
will provide the greatest recoveries to holders of Claims. In addition, other
alternatives would involve significant delay, uncertainty and substantial
additional administrative costs. The Debtors urge holders of impaired Claims
entitled to vote on the Plan to vote to accept the Plan and to evidence such
acceptance by returning their ballots so that they will be received not later
than 5:00 p.m., Eastern Standard Time, on February 20, 1997.
Dated: New York, New York
December 18, 1996
METALLURG, INC., a New York corporation
By: /s/ Eric L. Schondorf
-------------------------
Name: Eric L. Schondorf
Title: Vice President and
General Counsel
SHIELDALLOY METALLURGICAL CORPORATION,
a New York corporation
By: /s/ Barry C. Nuss
--------------------------
Name: Barry C. Nuss
Title: Secretary
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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - ----------------------------------x
In re :
Chapter 11 Case Nos.
METALLURG, INC. and : 93 B 44468 (JLG)
SHIELDALLOY METALLURGICAL 93 B 44469 (JLG)
CORPORATION, : (Jointly Administered)
Debtors. :
- - ----------------------------------x
DEBTORS' FOURTH AMENDED AND RESTATED JOINT PLAN
OF REORGANIZATION PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE
WEIL, GOTSHAL & MANGES LLP
Attorneys for Debtors and Debtors
in Possession
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
Dated: New York, New York
December 18, 1996
<PAGE>
TABLE OF CONTENTS
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ARTICLE I DEFINITION AND CONSTRUCTION OF TERMS...............................................................................A-1
1.1 Administrative Expense Claim.......................................................................A-1
1.2 Allowed Claim......................................................................................A-1
1.3 Allowed Equity Interest............................................................................A-1
1.4 Articles of Incorporation..........................................................................A-1
1.5 Ballot.............................................................................................A-1
1.6 Bankruptcy Code....................................................................................A-1
1.7 Bankruptcy Court...................................................................................A-2
1.8 Bankruptcy Rules...................................................................................A-2
1.9 Bar Date...........................................................................................A-2
1.10 Business Day.......................................................................................A-2
1.11 Bylaws.............................................................................................A-2
1.12 Canadian Guarantee Portion.........................................................................A-2
1.13 Canadian Guarantees................................................................................A-2
1.14 Cash...............................................................................................A-2
1.15 Cash Distribution Pool.............................................................................A-2
1.16 Chapter 11 Cases...................................................................................A-2
1.17 Claim..............................................................................................A-2
1.18 Commencement Date..................................................................................A-3
1.19 Committee..........................................................................................A-3
1.20 Compensation Claim.................................................................................A-3
1.21 Confirmation Date..................................................................................A-3
1.22 Confirmation Order.................................................................................A-3
1.23 Convenience Claims.................................................................................A-3
1.24 Debtors............................................................................................A-3
1.25 Debtors in Possession..............................................................................A-3
1.26 Deficiency Amount..................................................................................A-3
1.27 Disclosure Statement...............................................................................A-3
1.28 Disputed Claim.....................................................................................A-3
1.29 Disputed Claims Agent..............................................................................A-3
1.30 Disputed Other Secured and Priority Claims Reserve.................................................A-4
1.31 Disputed Unsecured Claims Reserve..................................................................A-4
1.32 District Court.....................................................................................A-4
1.33 DOI................................................................................................A-4
1.34 Effective Date.....................................................................................A-4
1.35 Employee Withholding Requirement...................................................................A-4
1.36 Environmental Authorities..........................................................................A-4
1.37 Environmental Claim................................................................................A-4
1.38 Environmental Law..................................................................................A-4
1.39 Environmental Letters of Credit....................................................................A-4
1.40 Environmental Settlement Agreements................................................................A-4
1.41 Environmental Settlement Agreement Claims..........................................................A-5
1.42 Equity Interest....................................................................................A-5
1.43 Escrow Agent.......................................................................................A-5
1.44 Estates............................................................................................A-5
1.45 Excess Distribution................................................................................A-5
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1.46 Executory Contract.................................................................................A-5
1.47 Exit Financing.....................................................................................A-5
1.48 Exit Financing Cashout.............................................................................A-5
1.49 Final Order........................................................................................A-5
1.50 Former Preferred Stockholders......................................................................A-5
1.51 FPS Settlement.....................................................................................A-5
1.52 FPS Settlement Amount..............................................................................A-5
1.53 FPS Settlement Cash Option.........................................................................A-6
1.54 FPS Settlement Stock Option........................................................................A-6
1.55 Intercompany Claim.................................................................................A-6
1.56 Insured Claim......................................................................................A-6
1.57 Management Stock Award and Stock Option Plan ......................................................A-6
1.58 Management Stock Awards ...........................................................................A-6
1.59 MCL ...............................................................................................A-6
1.60 Midlantic Guarantee................................................................................A-6
1.61 MI Unsecured Portion...............................................................................A-6
1.62 Midlantic..........................................................................................A-6
1.63 Midlantic Claim....................................................................................A-6
1.64 Multiemployer Pension Claims.......................................................................A-6
1.65 Net Reorganization Value...........................................................................A-6
1.66 New Common Stock...................................................................................A-6
1.67 New Secured Note Indenture.........................................................................A-7
1.68 New Secured Notes..................................................................................A-7
1.69 NJDEP..............................................................................................A-7
1.70 NJDEP Settlement Agreement.........................................................................A-7
1.71 Non-Settling Former Preferred Stockholders.........................................................A-7
1.72 NRC................................................................................................A-7
1.73 ODH................................................................................................A-7
1.74 Ohio EPA...........................................................................................A-7
1.75 Ohio Settlement Agreement..........................................................................A-7
1.76 Old Preferred Stock................................................................................A-7
1.77 Other Letters of Credit............................................................................A-7
1.78 Other Priority Claim...............................................................................A-7
1.79 Other Secured Claim................................................................................A-7
1.80 Person.............................................................................................A-7
1.81 Plan...............................................................................................A-7
1.82 Plan Proponents....................................................................................A-7
1.83 Plan Reserves......................................................................................A-8
1.84 Plan Supplement....................................................................................A-8
1.85 Priority Tax Claim.................................................................................A-8
1.86 Pro Rata Share.....................................................................................A-8
1.87 Reallocation Date..................................................................................A-8
1.88 Reorganization Value...............................................................................A-8
1.89 Reorganized Debtors................................................................................A-8
1.90 Reorganized Metallurg..............................................................................A-8
1.91 Reorganized SMC....................................................................................A-8
1.92 Reserved Notes.....................................................................................A-8
1.93 Reserved Securities................................................................................A-8
1.94 Reserved Stock.....................................................................................A-8
1.95 Schedules..........................................................................................A-8
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1.96 Secured Claim......................................................................................A-8
1.97 Settling Former Preferred Stockholders.............................................................A-8
1.98 Settling Former Preferred Stockholder Claim........................................................A-9
1.99 SMC Unsecured Portion..............................................................................A-9
1.100 Subsidiary.........................................................................................A-9
1.101 Target Cash Amount.................................................................................A-9
1.102 Unsecured Claim....................................................................................A-9
1.103 USEPA..............................................................................................A-9
1.104 United States Settlement Agreement.................................................................A-9
1.105 Voting Deadline....................................................................................A-9
Other Terms........................................................................................A-9
Construction of Certain Terms......................................................................A-9
ARTICLE II PROPERTY DISTRIBUTIONS ...........................................................................................A-9
2.1 Cash..............................................................................................A-10
2.2 New Secured Notes.................................................................................A-10
2.3 New Common Stock..................................................................................A-10
ARTICLE III TREATMENT OF ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS .............................................A-10
3.1 Administrative Expense Claims.....................................................................A-10
3.2 Priority Tax Claims...............................................................................A-10
ARTICLE IV CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS....................................................................A-11
ARTICLE V TREATMENT OF CLAIMS AND EQUITY INTERESTS..........................................................................A-12
5.1 CLASS 1A -- OTHER PRIORITY CLAIMS OF MI...........................................................A-12
(a) Impairment and Voting......................................................................A-12
(b) Distributions..............................................................................A-12
5.2 CLASS 1B -- OTHER PRIORITY CLAIMS OF SMC..........................................................A-12
(a) Impairment and Voting......................................................................A-12
(b) Distributions..............................................................................A-12
5.3 CLASS 2A -- MI INTERCOMPANY CLAIMS................................................................A-13
(a) Impairment and Voting......................................................................A-13
(b) Distributions..............................................................................A-13
5.4 CLASS 2B -- SMC INTERCOMPANY CLAIMS...............................................................A-13
(a) Impairment and Voting......................................................................A-13
(b) Distributions..............................................................................A-13
5.5 CLASS 2C -- MIDLANTIC SECURED CLAIM...............................................................A-13
(a) Impairment and Voting......................................................................A-13
(b) Distributions..............................................................................A-13
(c) Release of Liens...........................................................................A-13
5.6 CLASS 2D -- MIDLANTIC GUARANTY CLAIM..............................................................A-13
(a) Impairment and Voting......................................................................A-13
(b) Distributions..............................................................................A-13
5.7 CLASS 2E -- MI OTHER SECURED CLAIMS........................................................A-13
(a) Impairment and Voting......................................................................A-13
(b) Distributions..............................................................................A-13
5.8 CLASS 2F -- SMC OTHER SECURED CLAIMS..............................................................A-14
(a) Impairment and Voting......................................................................A-14
(b) Distributions..............................................................................A-14
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5.9 CLASS 3A -- MI CONVENIENCE CLAIMS.................................................................A-14
5.10 CLASS 3B -- SMC CONVENIENCE CLAIMS................................................................A-14
5.11 CLASS 4A -- MI UNSECURED CLAIMS...................................................................A-14
(a) Impairment and Voting......................................................................A-14
(b) Distributions..............................................................................A-15
5.12 CLASS 4B -- CANADIAN GUARANTEE CLAIMS.............................................................A-15
(a) Impairment and Voting......................................................................A-15
(b) Distributions..............................................................................A-15
5.13 CLASS 4C -- SMC UNSECURED CLAIMS..................................................................A-15
(a) Impairment and Voting......................................................................A-15
(b) Distributions..............................................................................A-16
5.14 CLASS 4D -- SETTLING FORMER PREFERRED STOCKHOLDER CLAIMS..........................................A-16
(a) Impairment and Voting......................................................................A-16
(b) Distributions..............................................................................A-16
5.15 CLASS 4E -- MULTIEMPLOYER PENSION CLAIM...........................................................A-16
(a) Impairment and Voting......................................................................A-16
(b) Distributions..............................................................................A-16
5.16 CLASS 4F -- ENVIRONMENTAL SETTLEMENT AGREEMENT CLAIMS.............................................A-17
(a) Impairment and Voting......................................................................A-17
(b) Distributions..............................................................................A-17
(c) Waiver of Additional Consideration.........................................................A-17
5.17 CLASS 5 -- INSURED CLAIMS AGAINST MI..............................................................A-17
5.18 CLASS 6 -- INSURED CLAIMS AGAINST SMC.............................................................A-18
5.19 CLASS 7 -- MI EQUITY INTERESTS....................................................................A-18
5.20 CLASS 8 -- SMC EQUITY INTERESTS...................................................................A-18
5.21 ADDITIONAL TREATMENT PROVISION....................................................................A-18
ARTICLE VI SATISFACTION OF CLAIMS AND INTERESTS.............................................................................A-18
ARTICLE VII ENVIRONMENTAL SETTLEMENT AGREEMENTS.............................................................................A-18
ARTICLE VIII THE FPS SETTLEMENT.............................................................................................A-19
ARTICLE IX PROVISIONS REGARDING VOTING AND DISTRIBUTIONS UNDER THE PLAN, MEANS
OF IMPLEMENTATION AND TREATMENT OF DISPUTED, CONTINGENT, AND
UNLIQUIDATED ADMINISTRATIVE EXPENSE CLAIMS, CLAIMS AND EQUITY INTERESTS.........................................A-19
9.1 Voting of Claims..................................................................................A-19
9.2 Effect of Compromises and Settlements.............................................................A-19
(a) FPS Settlement.............................................................................A-19
(b) Environmental Settlement Agreements........................................................A-19
9.3 Method of Distributions Under the Plan............................................................A-19
(a) In General.................................................................................A-19
(b) Method of Payment..........................................................................A-19
(c) Transactions on Business Days..............................................................A-19
(d) Hart-Scott-Rodino Compliance...............................................................A-19
(e) Minimum Distributions and Fractional Cents.................................................A-20
(f) Fractional Shares..........................................................................A-20
(g) Distribution of New Secured Notes..........................................................A-20
(h) Unclaimed Distributions....................................................................A-21
(i) Limitation on Distributions................................................................A-21
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9.4 Cancellation and Surrender of Existing Securities and Agreements..................................A-21
9.5 Registration of New Common Stock..................................................................A-21
9.6 Listing of New Common Stock.......................................................................A-21
9.7 Setoffs...........................................................................................A-21
9.8 Obligations Under the Plan Are Without Recourse...................................................A-22
9.9 Insured Claims....................................................................................A-22
ARTICLE X EXECUTORY CONTRACTS...............................................................................................A-22
10.1 Assumption or Rejection of Executory Contracts....................................................A-22
(a) Executory Contracts........................................................................A-22
(b) Unexpired Leases...........................................................................A-22
(c) Approval of Assumption or Rejection of Leases and Contracts................................A-22
(d) Cure of Defaults...........................................................................A-23
(e) Bar Date for Filing Proofs of Claim Relating to Executory Contracts Rejected
Pursuant to the Plan.......................................................................A-23
10.2 Indemnification Obligations.......................................................................A-23
10.3 Compensation and Benefit Programs.................................................................A-23
ARTICLE XI CERTAIN MATTERS RELATING TO THE DISPUTED CLAIMS..................................................................A-23
11.1 Objections to Claims; Prosecution of Disputed Claims; Non-Settling Former Preferred
Stockholders......................................................................................A-23
11.2 Disputed Other Secured And Priority Claims Reserve................................................A-24
11.3 Disputed Unsecured Claims Reserve.................................................................A-24
11.4 The Disputed Claims Agent.........................................................................A-24
11.5 Distributions, Generally..........................................................................A-24
11.6 Disputed Administrative Expense Claims, Other Secured Claims, Priority Tax Claims
and Other Priority Claims.........................................................................A-25
(a) Estimation.................................................................................A-25
(b) Distributions Upon Allowance...............................................................A-25
(c) Disallowed Claims..........................................................................A-25
11.7 Disputed Unsecured Claims.........................................................................A-25
(a) Estimation.................................................................................A-25
(b) Distributions Upon Allowance...............................................................A-25
(c) Disallowed Disputed Unsecured Claims.......................................................A-26
ARTICLE XII CERTAIN MATTERS RELATING TO THE DEBTORS AND THEIR SUBSIDIARIES..................................................A-26
12.1 Intercompany Claims...............................................................................A-26
12.2 Subsidiary Guarantees.............................................................................A-26
ARTICLE XIII PROVISIONS REGARDING CORPORATE GOVERNANCE OF THE REORGANIZED
DEBTORS.........................................................................................................A-27
13.1 General...........................................................................................A-27
13.2 Meetings of Stockholders..........................................................................A-27
13.3 Directors and Officers of Reorganized Debtors.....................................................A-27
(a) Boards of Directors........................................................................A-27
(b) Officers...................................................................................A-27
13.4 Articles of Incorporation and Bylaws..............................................................A-27
13.5 Issuance of New Securities by Reorganized Metallurg...............................................A-28
(a) Authorization..............................................................................A-28
(b) Amount.....................................................................................A-28
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ARTICLE XIV EFFECT OF CONFIRMATION OF PLAN..................................................................................A-28
14.1 Revesting of Assets...............................................................................A-28
14.2 General Discharge of and Release from Claims and Interests........................................A-29
14.3 Releases of Claims and Injunction.................................................................A-29
14.4 Avoidance Powers..................................................................................A-29
14.5 Rights of Action..................................................................................A-29
ARTICLE XV EFFECTIVENESS OF THE PLAN........................................................................................A-30
15.1 Conditions Precedent to Confirmation..............................................................A-30
15.2 Conditions Precedent to Consummation..............................................................A-30
15.3 Waiver of Conditions..............................................................................A-32
15.4 Effective Date....................................................................................A-32
ARTICLE XVI RETENTION OF JURISDICTION.......................................................................................A-32
ARTICLE XVII ACCEPTANCE OR REJECTION OF PLAN................................................................................A-33
17.1 Acceptance by a Class of Creditors................................................................A-33
17.2 Impaired Classes to Vote..........................................................................A-33
17.3 Cram Down.........................................................................................A-33
ARTICLE XVIII MISCELLANEOUS PROVISIONS......................................................................................A-33
18.1 Effectuating Documents and Further Transactions...................................................A-33
18.2 Exemption from Transfer Taxes.....................................................................A-33
18.3 Exculpation.......................................................................................A-34
18.4 Committee.........................................................................................A-34
(a) Power to Negotiate Intercreditor Agreements................................................A-34
(b) Termination................................................................................A-34
18.5 Amendment or Modification of the Plan; Severability...............................................A-34
18.6 Revocation or Withdrawal of the Plan..............................................................A-34
18.7 Binding Effect....................................................................................A-34
18.8 Notices...........................................................................................A-35
18.9 Governing Law.....................................................................................A-35
18.10 Withholding and Reporting Requirements............................................................A-35
18.11 Plan Supplement...................................................................................A-35
18.12 Headings..........................................................................................A-35
18.13 Construction......................................................................................A-35
18.14 Exhibits..........................................................................................A-36
18.15 Filing of Additional Documents....................................................................A-36
18.16 Execution of Additional Documentation.............................................................A-37
</TABLE>
SCHEDULES TO PLAN
Schedule 10.1(a) Executory Contracts to Be Assumed Under the Plan
Schedule 10.1(b) Executory Contracts to be Rejected Under the Plan
EXHIBIT TO PLAN
Exhibit A Summary of Terms and Conditions of New Secured Notes
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FOURTH AMENDED AND RESTATED JOINT PLAN OF REORGANIZATION FOR
METALLURG, INC. AND SHIELDALLOY METALLURGICAL CORPORATION
Metallurg, Inc. ("MI"), a New York corporation, Shieldalloy
Metallurgical Corporation ("SMC"), a New York corporation, propose the following
joint plan of reorganization pursuant to section 1121(a) of title 11, United
States Code:
ARTICLE I
DEFINITION AND CONSTRUCTION OF TERMS
Definitions. As used herein, the following terms have the respective
meanings specified below, unless the context otherwise requires:
1.1 Administrative Expense Claim means a Claim for payment of costs or
expenses of administration specified in sections 503(b) and 507(a)(1) of the
Bankruptcy Code, including without limitation: (a) the actual, necessary costs
and expenses incurred after the Commencement Date of preserving the Estates of
the Debtors and operating the businesses of the Debtors; (b) compensation for
legal, financial advisory, accounting and other services and reimbursement of
expenses awarded pursuant to sections 330(a) or 331 of the Bankruptcy Code; (c)
allowed claims for reclamation of goods under section 546(c) of the Bankruptcy
Code, and (d) all fees and charges assessed against the Estates of the Debtors
pursuant to section 1930 of title 28 of the United States Code.
1.2 Allowed Claim means a Claim against any of the Debtors (a) proof of
which was timely and properly filed on or before the Bar Date, or (b) listed by
the Debtors in their Schedules as liquidated in amount and not disputed or
contingent and, in either case, and in the case of an Administrative Expense
Claim, (i) which currently is due and payable, and (ii) as to which no objection
to the allowance thereof has been interposed within the applicable period of
limitation fixed by the Plan, the Bankruptcy Code, the Bankruptcy Rules, or the
Bankruptcy Court, or as to which an objection has been interposed and such Claim
has been allowed, in whole or in part, by a Final Order. For purposes of
determining the amount of an "Allowed Claim" or an "Allowed Administrative
Expense Claim," there shall be deducted therefrom an amount equal to the amount
of any claim which the Debtors may hold against the holder thereof, to the
extent such claim may be set off pursuant to applicable law. Unless otherwise
specified herein or by order of the Bankruptcy Court, an "Allowed Claim" shall
not, for purposes of distribution under the Plan, include interest on such
"Allowed Claim" from the Commencement Date.
1.3 Allowed Equity Interest means an Equity Interest in any of the
Debtors (a) proof of which was filed on or before the Bar Date, or (b) listed by
the Debtors in their Schedules as liquidated in amount and not disputed or
contingent and, in either case, as to which no objection to the allowance
thereof has been interposed within the applicable period of limitation fixed by
the Plan, the Bankruptcy Code, the Bankruptcy Rules, or the Bankruptcy Court, or
as to which an objection has been interposed and such Equity Interest has been
allowed, in whole or in part, by a Final Order.
1.4 Articles of Incorporation means the Restated Articles of
Incorporation of the Reorganized Debtors (as applicable to each of the
Reorganized Debtors), as certified by the Secretary of State as of the Effective
Date.
1.5 Ballot means the form, approved by the Bankruptcy Court, and
distributed to holders of Claims for acceptance or rejection of the Plan.
1.6 Bankruptcy Code means title 11 of the United States Code, as amended
from time to time, as applicable to the Chapter 11 Cases.
<PAGE>
1.7 Bankruptcy Court means the United States District Court for the
Southern District of New York, having jurisdiction over the Chapter 11 Cases
and, to the extent of any reference made pursuant to section 157 of title 28 of
the United States Code, the unit of such District Court pursuant to section 151
of title 28 of the United States Code.
1.8 Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure, as
amended from time to time, as applicable to the Chapter 11 Cases, including the
Local Rules of the Bankruptcy Court, as amended.
1.9 Bar Date means the date fixed by order of the Bankruptcy Court,
pursuant to which all proofs of claim and interest must have been filed. The Bar
Date in the Chapter 11 Cases is August 15, 1994.
1.10 Business Day means any day other than a Saturday, Sunday or any
other day on which commercial banks in New York, New York are required or
authorized to be closed.
1.11 Bylaws means the Restated Bylaws of Reorganized Metallurg in effect
as of the Effective Date.
1.12 Canadian Guarantee Portion means the percentage equivalent of a
fraction, the numerator of which shall be $2,750,000 and the denominator of
which shall be the Net Reorganization Value.
1.13 Canadian Guarantees means (i) that certain guarantee issued by MCL
of that certain revolving credit agreement, dated July 31, 1986, as amended as
of August 31, 1990 entered into by and among MI, SMC and MCL, as borrowers, the
lenders a party thereto, and Morgan Guaranty Trust Company of New York, as agent
for the lenders, and (ii) that certain guarantee issued by MCL of that certain
note, dated August 31, 1989, issued by MI to Deutsche Bank in the principal
amount of $5 million.
1.14 Cash means the lawful currency of the United States of America and
cash equivalents.
1.15 Cash Distribution Pool means all available Cash (excluding any Cash
held or to be held in trust or letters of credit issued, for the benefit of the
Environmental Authorities pursuant to the Environmental Settlement Agreements)
of MI and SMC as of the Effective Date in excess of $5,000,000, after giving
effect to all Cash distributions to be made to: (a) holders of Allowed
Administrative Expense Claims and Allowed Priority Tax Claims pursuant to
Sections 3.1 and 3.2 of the Plan; (b) holders of Allowed Other Priority Claims
pursuant to Sections 5.1 and 5.2 of the Plan; (c) holders of Allowed Convenience
Claims pursuant to Sections 5.9 and 5.10 of the Plan; (d) the holder of the
Class 2C-Midlantic Secured Claim; (e) fund the Disputed Other Secured and
Priority Claims Reserve pursuant to Section 11.2 of the Plan; (f) holders of
Allowed Claims on account of accrued interest in respect of the New Secured
Notes made on the Effective Date pursuant to Section 9.3(g) of the Plan; and (g)
Former Preferred Stockholders who elect to participate in the FPS Settlement and
chose the FPS Settlement Cash Option. Cash in the Cash Distribution Pool shall
be (x) distributed to holders of Allowed Unsecured Claims and (y) used to fund
the Disputed Unsecured Claims Reserve pursuant to Section 11.3(b) of the Plan
and shall be subject to adjustment pursuant to Section 9.3(g) of the Plan. Cash
in the Cash Distribution Pool shall be equal to at least $25,000,000 less any
adjustment made pursuant to Section 9.3(g) of the Plan.
1.16 Chapter 11 Cases means the cases under chapter 11 of the Bankruptcy
Code commenced by the Debtors, styled In re METALLURG, INC. and SHIELDALLOY
METALLURGICAL CORPORATION, Jointly Administered Chapter 11 Case Nos. 93 B 44468
(JLG) and 93 B 44469 (JLG), currently pending in the Bankruptcy Court, under
which the Debtors are the Debtors in Possession.
1.17 Claim means (a) any right to payment from the Debtors, whether or
not such right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured,
or unsecured or (b) any right to an equitable remedy for breach of performance
if such breach gives rise to a right of payment from the
2
<PAGE>
Debtors, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured,
or unsecured.
1.18 Commencement Date means September 2, 1993, the date on which the
Debtors filed their voluntary petitions for relief under the Bankruptcy Code
commencing the Chapter 11 Cases.
1.19 Committee means the statutory committee of unsecured creditors
appointed by the United States Trustee in the Chapter 11 Cases pursuant to
section 1102 of the Bankruptcy Code.
1.20 Compensation Claim means that portion of an Allowed Claim
representing compensation that is subject to withholding and employment tax
requirements under applicable law.
1.21 Confirmation Date means the date on which the Clerk of the
Bankruptcy Court enters the Confirmation Order.
1.22 Confirmation Order means the order of the Bankruptcy Court
confirming the Plan pursuant to section 1129 of the Bankruptcy Code.
1.23 Convenience Claims means (a) Unsecured Claims of MI or Unsecured
Claims of SMC equal to $1,000 or less; (b) an Allowed Unsecured Claim against MI
or SMC of a holder that has irrevocably elected on its Ballot to reduce its
Claim against either MI or SMC to the amount of $1,000 or less and/or (c) a
Disputed Claim against either MI or SMC which became an Allowed Unsecured Claim
of $1,000 with the consent of either MI or SMC, as the case may be; provided,
however, that the Unsecured Claim of a holder of more than one Unsecured Claim
against either MI or SMC may not be a Convenience Claim unless the holder has
irrevocably elected on its Ballot to withdraw, consolidate, amend and reduce all
Unsecured Claims held by it against any of the Debtors to one consolidated
Unsecured Claim against either MI or SMC, as the case may be, in the amount of
$1,000 or less; provided, further, however, such holder shall not be required to
aggregate its Claims against MI, if any, with its Claims against SMC, if any.
1.24 Debtors means MI and SMC.
1.25 Debtors in Possession means the Debtors, as debtors in possession
pursuant to sections 1107 and 1108 of the Bankruptcy Code in the Chapter 11
Cases.
1.26 Deficiency Amount means the amount of Cash in the Cash Distribution
Pool which is less than the Target Cash Amount on the Effective Date.
1.27 Disclosure Statement means the disclosure statement, as it may be
amended and modified, relating to the Plan, and approved by the Bankruptcy Court
pursuant to section 1125 of the Bankruptcy Code.
1.28 Disputed Claim means a Claim against any of the Debtors, proof of
which is timely and properly filed with the Bankruptcy Court and the allowance
of which, in whole or in part, is subject to a timely objection interposed by
the Debtors or any other party in interest prior to or after the Confirmation
Date pursuant to Section 11.1 herein; provided, however, that in the event the
Bankruptcy Court or District Court shall estimate a Disputed Claim for purposes
of allowance pursuant to section 502(c) of the Bankruptcy Code, such estimation
shall constitute and represent the maximum amount in which such Claim may
ultimately become an Allowed Claim. Prior to the time that an objection has been
or may be timely filed, for the purposes of the Plan, a Claim shall be
considered a Disputed Claim to the extent that the amount of the Claim specified
in the proof of claim exceeds the amount of the Claim scheduled by the Debtors
as other than disputed, contingent or unliquidated.
1.29 Disputed Claims Agent means Reorganized Metallurg.
3
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1.30 Disputed Other Secured and Priority Claims Reserve means the
reserve to be established under the Plan in a segregated, interest-bearing
account into which the Debtors will deposit Cash from and after the Effective
Date in an amount equal to (i) the aggregate of all Disputed Administrative
Expense Claims, Disputed Other Secured Claims, Disputed Priority Tax Claims and
Disputed Other Priority Claims, (ii) the reasonable costs and expenses incurred
by the Disputed Claims Agent to administer the Plan Reserves, and (iii) any
taxes payable by the Plan Reserves. Cash in the Disputed Other Secured and
Priority Claims Reserve will be distributed by the Reorganized Debtors on
account of Disputed Administrative Expense Claims, Disputed Other Secured
Claims, Disputed Priority Tax Claims and Disputed Other Priority Claims if and
when any such Claims become Allowed Claims, as set forth more fully in Article
11 of the Plan.
1.31 Disputed Unsecured Claims Reserve means the escrow to be
established under the Plan into which (i) Reserved Securities shall be deposited
on the Effective Date in an amount equal to the Reserved Securities that would
be distributed by the Reorganized Debtors on account of Disputed Unsecured
Claims in Classes 4A and 4C if and when such Claims become Allowed Claims, as
set forth more fully in Article XI of the Plan and (ii) the Debtors will deposit
Cash on the Effective Date into an interest-bearing account in an amount equal
to the Cash that would be distributed by the Reorganized Debtors on account of
Disputed Unsecured Claims in Classes 4A and 4C if and when any such Claims
become Allowed Claims, as set forth more fully in Article XI of the Plan.
1.32 District Court means the United States District Court for the
Southern District of New York.
1.33 DOI means the United States Department of Interior.
1.34 Effective Date means the date on which the Plan shall take effect,
as provided for in Section 15.4 of the Plan.
1.35 Employee Withholding Requirement means any requirement pursuant to
applicable law that a percentage of the Cash and other property paid or
distributed on account of a Compensation Claim be withheld from such payment or
distribution.
1.36 Environmental Authorities means any government, any state or other
political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government which administers any federal, state
and local laws, statutes, ordinances and regulations, now or hereafter in
effect, and any judicial or administrative interpretation thereof, relating to
the regulation and protection of human health, safety, the environment and
natural resources, including, but not limited to, USEPA, DOI, NJDEP, NRC, Ohio
EPA and ODH.
1.37 Environmental Claim means any Claim arising under any Environmental
Law.
1.38 Environmental Law means any federal, state or local statute, rule,
regulation or ordinance governing, regulating or relating to health, safety,
hazardous substances or the environment.
1.39 Environmental Letters of Credit means (i) the $8,000,000 letter of
credit, dated as of December 29, 1989, issued by Deutsche Bank AG in favor of
the NJDEP; (ii) the $1,500,000 letter of credit, dated as of July 18, 1990,
issued by Deutsche Bank AG in favor of the NRC; (iii) the $8,000,000 letter of
credit, dated as of February 23, 1989, issued by National Westminster Bank PLC
in favor of the NJDEP; and (iv) the $200,000 irrevocable standby letter of
credit, dated as of June 3, 1986, issued by Midlantic Bank in favor of the
NJDEP.
1.40 Environmental Settlement Agreements means those agreements entered
into by and among MI and SMC, as Debtors and Reorganized Debtors, and the
Environmental Authorities providing for the resolution of all Environmental
Claims and other related issues included in the Plan Supplement.
4
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1.41 Environmental Settlement Agreement Claims means those Environmental
Claims against MI and SMC which pursuant to the Environmental Settlement
Agreements will be classified and treated as Allowed Claims against SMC under
Class 4F of the Plan.
1.42 Equity Interest means any equity interest in the Debtors, and any
option, warrant or other agreement requiring the issuance of any such equity
interest; provided however that Equity Interest shall not include any Old
Preferred Stock.
1.43 Escrow Agent means Reorganized Metallurg.
1.44 Estates means the estates created pursuant to section 541 of the
Bankruptcy Code upon the commencement of the Chapter 11 Cases.
1.45 Excess Distribution means the amount of Cash in the Cash
Distribution Pool which exceeds the Target Cash Amount on the Effective Date.
1.46 Executory Contract means any executory contract or unexpired lease,
within the meaning of section 365 of the Bankruptcy Code, in effect between any
of the Debtors and any other Person or Persons as of the Commencement Date.
1.47 Exit Financing means the term loan or revolving credit facilities
for the purpose of (i) obtaining a working capital facility or (ii) reducing the
amount of the New Secured Notes, or both.
1.48 Exit Financing Cashout means the proceeds from the Exit Financing
distributed to holders of Allowed General Unsecured Claims on the Effective Date
in lieu of and up to an equal principal amount of the New Secured Notes that
would have otherwise been distributed to such holders.
1.49 Final Order means an order or judgment entered by the Bankruptcy
Court or any other court exercising jurisdiction over the subject matter and the
parties as to which the time to appeal, petition for certiorari, or move for
reargument or rehearing has expired and as to which no appeal, petition for
certiorari, or other proceedings for reargument or rehearing shall then be
pending or as to which any right to appeal, petition for certiorari, reargue, or
rehear shall have been waived in writing in form and substance satisfactory to
Reorganized Debtors or, in the event that an appeal, writ of certiorari, or
reargument or rehearing thereof has been sought, such order or judgment shall
have been determined by the highest court to which such order or judgment was
appealed, or certiorari, reargument or rehearing shall have been denied and the
time to take any further appeal, petition for certiorari or move for reargument
or rehearing shall have expired.
1.50 Former Preferred Stockholders means those individuals who are
listed on MI's schedules of liabilities as holders of claims on account of
preferred stock issued by MI.
1.51 FPS Settlement means the settlement agreement as negotiated with
the Committee by MI's management on behalf of Former Preferred Stockholders,
incorporated into the Plan, and approved by the Bankruptcy Court pursuant to
which the FPS Settlement Amount upon election on the election form accompanying
the Plan or by stipulation with the Debtors and the Committee is accepted by
Former Preferred Stockholders in full settlement of their claims on account of
preferred stock issued by MI.
1.52 FPS Settlement Amount means the distribution to be made to Settling
Former Preferred Stockholders in an amount equal to, at their individual option,
either: (i) the FPS Settlement Stock Option; or (ii) the FPS Settlement Cash
Option. If a Former Preferred Stockholder elects to accept the FPS Settlement
Amount, it shall be deemed to hold an Allowed Claim in Class 4D of the Plan.
5
<PAGE>
1.53 FPS Settlement Cash Option means those Former Preferred
Stockholders who elect into the FPS Settlement and choose to receive their Pro
Rata Share of Cash in the amount of $750,000.
1.54 FPS Settlement Stock Option means those Former Preferred
Stockholders who elect into the FPS Settlement and choose to receive their Pro
Rata Share of 150,000 shares (approximately three percent (3%)) of the New
Common Stock.
1.55 Intercompany Claim means any Claims of the Debtors against each
other and any claims of a Subsidiary against either of the Debtors.
1.56 Insured Claim means any Claim, other than an Environmental Claim,
against any of the Debtors payable, in whole or in part, by an insurance policy
or policies issued by an insurance company on behalf of any of the Debtors.
1.57 Management Stock Award and Stock Option Plan means the stock option
program for management of MI and its Subsidiaries to be adopted by the board of
directors of Reorganized Metallurg. The Management Stock Award and Stock Option
Plan shall provide for distribution of the options in the time and manner as
fully set forth in Exhibit F to the Disclosure Statement.
1.58 Management Stock Awards means the New Common Stock issued or
issuable as a stock award under the Management Stock Award and Stock Option Plan
as in effect on the Effective Date.
1.59 MCL means Metallurg (Canada) Ltd.
1.60 Midlantic Guarantee means those certain guarantees respectively
dated July 12, 1979; November 24, 1980; and June 18, 1981 issued by MI
guaranteeing the indebtedness arising under the New Jersey Economic Development
Authority Notes held by Midlantic.
1.61 MI Unsecured Portion means 100% less a percentage equivalent of a
fraction, the numerator of which shall be $2,750,000 and the denominator of
which shall be the Net Reorganization Value.
1.62 Midlantic means Midlantic Bank, N.A.
1.63 Midlantic Claim means the Claim of Midlantic arising under the New
Jersey Economic Development Authority Notes held by Midlantic to the extent such
Claim is a Secured Claim.
1.64 Multiemployer Pension Claims means those Claims asserted by
District 65 Pension Plan against MI and SMC.
1.65 Net Reorganization Value means Reorganization Value less (i) the
value of the Management Stock Awards, (ii) the value of the New Common Stock
distributed to the Settling Former Preferred Stockholders, (iii) the value of
New Common Stock, New Secured Notes and Cash distributed to holders of Class 4C
Claims assuming all Class 4C Claims elect "Class 4C-Option A," and (iv) the
value of New Common Stock, New Secured Notes and Cash that would have been
distributed to holders of Allowed Claims in Classes 4E and 4F had they been
classified as holders of Allowed Claims in Class 4C which as of the Effective
Date of the Plan would have included the aggregate of all Allowed Claims
classified as Class 4C under this Plan (with all such Claims having been treated
or elected under Class 4C-Option A) and all Allowed Claims classified as Class
4E and Class 4F under this Plan.
1.66 New Common Stock means the common stock of Reorganized Metallurg
authorized pursuant to Section 13.5 of the Plan, par value of $0.01 per share.
6
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1.67 New Secured Note Indenture means that certain indenture dated as of
the Effective Date, between Reorganized Metallurg, as issuer, and a financial
institution selected by Reorganized Metallurg, as trustee, which indenture shall
be on the terms and subject to the conditions described in Exhibit A to the Plan
and substantially in the form included in the Plan Supplement.
1.68 New Secured Notes means the promissory notes in the aggregate
original principal amount of $60 million less the amount of Cash distributed
from the Cash Distribution Pool in excess of the Target Cash Amount on the
Effective Date and authorized to be issued pursuant to the Plan on the terms and
subject to the conditions described in Exhibit A to the Plan and as adjusted in
accordance with Section 13.5(b) of the Plan.
1.69 NJDEP means the New Jersey Department of Environmental Protection
and Energy or any successor thereto.
1.70 NJDEP Settlement Agreement means the settlement agreement entered
into by and between the Debtors and NJDEP settling Environmental Claims and
other related issues.
1.71 Non-Settling Former Preferred Stockholders means those Former
Preferred Stockholders who do not elect on their Ballot to participate in the
FPS Settlement and do not become holders of Allowed Class 4D Claims.
1.72 NRC means the Nuclear Regulatory Commission or any successor
thereto.
1.73 ODH means the State of Ohio Department of Health.
1.74 Ohio EPA means the State of Ohio Environmental Protection Agency or
any successor thereto.
1.75 Ohio Settlement Agreement means the settlement agreement entered
into by and among the Ohio EPA, ODH and the Debtors providing for the resolution
of Environmental Claims and other related issues.
1.76 Old Preferred Stock means the preferred stock issued by MI prior to
the Petition Date.
1.77 Other Letters of Credit means (i) the $100,000 irrevocable standby
letter of credit, dated as of March 21, 1989, by Midlantic Bank in favor of the
Board of Chosen Freeholders County of Cumberland, New Jersey; and (ii) the
$15,000 letter of credit, dated as of March 17, 1992 issued by Midlantic Bank in
favor of the Board of Chosen Freeholders County of Cumberland, New Jersey, each
of the foregoing as amended or modified from time to time.
1.78 Other Priority Claim means any Claim, other than an Administrative
Expense Claim or a Priority Tax Claim, entitled to priority in payment under
section 507(a) of the Bankruptcy Code, but only to the extent such Claim is
entitled to such priority.
1.79 Other Secured Claim means any Secured Claim other than the
Midlantic Claim classified in Class 2C.
1.80 Person means an individual, a corporation, a partnership, an
association, a joint stock company, a joint venture, an estate, a trust, an
unincorporated organization, a government or any subdivision thereof, or any
other entity.
1.81 Plan means this joint chapter 11 plan of reorganization (including
all exhibits and schedules annexed hereto), either in its present form or as it
may be altered, amended, or modified from time to time.
1.82 Plan Proponents means the Debtors.
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1.83 Plan Reserves means, collectively, the Disputed Other Secured and
Priority Claims Reserve and the Disputed Unsecured Claims Reserve.
1.84 Plan Supplement means the forms of documents specified in Section
18.11 of the Plan.
1.85 Priority Tax Claim means a Claim of a governmental unit entitled to
priority in payment under section 507(a)(7) of the Bankruptcy Code, but only to
the extent such Claim is entitled to such priority.
1.86 Pro Rata Share means the proportion that the amount of a Claim in a
particular Class bears to the aggregate amount of all Claims in such Class,
including Disputed Claims.
1.87 Reallocation Date means the first Business Day of each successive
three month period following the Effective Date until such time as there are no
Disputed Claims.
1.88 Reorganization Value means the reorganized value of Reorganized
Metallurg immediately prior to the Effective Date (inclusive of Cash, equity in
Reorganized SMC and the Subsidiaries, but excluding Cash and other assets
distributed under the Plan in payment of all MI and SMC Administrative, Priority
Tax, Other Priority Claims, Convenience Claims of MI and SMC and Settling Former
Preferred Stockholder Claims).
1.89 Reorganized Debtors means Reorganized Metallurg and Reorganized
SMC.
1.90 Reorganized Metallurg means MI or any successors thereto by merger,
consolidation or otherwise, on or after the Effective Date.
1.91 Reorganized SMC means SMC or any successors thereto by merger,
consolidation or otherwise, on or after the Effective Date.
1.92 Reserved Notes means those of New Secured Notes held in the
Disputed Unsecured Claims Reserve for the account of Disputed Unsecured Claims
in Classes 4A and 4C as if such Claims were Allowed in their full claimed
amounts.
1.93 Reserved Securities means the Reserved Notes and the Reserved
Stock.
1.94 Reserved Stock means those shares of New Common Stock held in the
Disputed Unsecured Claims Reserve for the account of Disputed Unsecured Claims
in Classes 4A and 4C as if such Claims were Allowed in their full claimed
amounts.
1.95 Schedules means the schedules of assets and liabilities and the
statement of financial affairs filed by the Debtors as required by section 521
of the Bankruptcy Code and Bankruptcy Rule 1007, and all amendments and
modifications thereto through the Confirmation Date.
1.96 Secured Claim means a Claim against any of the Debtors secured by a
lien on any asset of that Debtor, which lien is valid, perfected and enforceable
under applicable law and is not subject to avoidance under the Bankruptcy Code
or applicable non-bankruptcy law, but only to the extent of the value, as
determined pursuant to subsection 506(a) of the Bankruptcy Code, of any interest
of the claimant in property of the Estates securing such Claim. No Secured
Claims against the Estates have been created pursuant to an election under
section 1111(b) of the Bankruptcy Code.
1.97 Settling Former Preferred Stockholders means those Former Preferred
Stockholders who elect on their election form to release, compromise and settle
all Claims on account of preferred stock issued by MI. Each Settling Former
Preferred Stockholder shall be deemed to have an Allowed Claim in Class 4D upon
making an election to settle their Claim
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by so indicating on the enclosed election form, or by entering into an agreement
with MI approved by the Committee and the Bankruptcy Court. Such election shall
be incorporated in the Plan as a settlement and compromise and approved by the
Bankruptcy Court pursuant to Bankruptcy Rule 9019.
1.98 Settling Former Preferred Stockholder Claim means the Claim of each
Settling Former Preferred Stockholder as listed and set forth in Schedule F of
the schedules of liabilities as filed and amended by MI on account of preferred
stock issued by MI.
1.99 SMC Unsecured Portion means 30%.
1.100 Subsidiary means (i) any Person existing on the Effective Date of
which at least a majority of the capital stock or other equity interest having
ordinary voting power for the election of directors or other governing body of
such Person is owned by Reorganized Metallurg or Reorganized SMC, directly or
indirectly, or (ii) any other Person of which at least a majority of the capital
stock or other equity interest having ordinary voting power for the election of
directors or other governing body of such Person is owned by Reorganized
Metallurg or Reorganized SMC, directly or indirectly.
1.101 Target Cash Amount means Cash in the Cash Distribution Pool equal
to $30 million.
1.102 Unsecured Claim means any Claim that is not a Secured Claim,
Administrative Expense Claim, Priority Tax Claim, Other Priority Claim, Secured
Intercompany Claim, Insured Claim, Settling Former Preferred Stockholder Claim,
or the Midlantic Secured Claim, including, without limitation, Claims arising as
a result of the rejection of Executory Contracts pursuant to section 365 of the
Bankruptcy Code.
1.103 USEPA means the United States Environmental Protection Agency.
1.104 United States Settlement Agreement means the settlement agreement
entered into by and among the USEPA, DOI and the Debtors providing for the
resolution of Environmental Claims and other related issues.
1.105 Voting Deadline means the last day for written acceptance or
rejection of the Plan, and for the Former Preferred Stockholders to elect to
participate in the FPS Settlement, as set by the Court.
Other Terms. A term used herein that is not defined herein or elsewhere
in the Plan shall have the meaning ascribed to that term, if any, in the
Bankruptcy Code or Bankruptcy Rules.
Construction of Certain Terms.
(a) The words "herein," "hereof," "hereto," "hereunder," and others of
similar import refer to the Plan as a whole and not to any particular section,
subsection, or clause contained in the Plan.
(b) Wherever from the context it appears appropriate, each term stated
in either the singular or the plural shall include the singular and the plural
and pronouns stated in the masculine, feminine or neuter gender shall include
the masculine, the feminine and the neuter.
ARTICLE II
PROPERTY DISTRIBUTIONS
The Reorganized Debtors shall distribute the following property to the
holders of Allowed Claims in accordance with the treatment provisions in Article
V of this Plan.
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2.1 Cash. Cash as described in Section 1.15 of the Plan and Sections
5.11, 5.12, 5.13, 5.15 and 5.16, including Cash in excess of the Target Cash
Amount.
2.2 New Secured Notes. The New Secured Notes shall be issued by
Reorganized Metallurg on the terms and conditions specified on Exhibit A to the
Plan. The New Secured Notes will be governed by the New Secured Note Indenture.
As specified in Sections 5.11, 5.12 and 5.13 of the Plan, the New Secured Notes
will be distributed to holders of Allowed Claims which are Unsecured Claims of
MI (which includes Classes 4A and 4B) and Unsecured Claims of SMC in Classes 4C
and 4E. To the extent there is an Excess Distribution, the Excess Distribution
shall be used to reduce the principal amount of New Secured Notes that would
otherwise be distributed to holders of Allowed Unsecured Claims in Classes 4A,
4B, 4C and 4E. To the extent that there is a Deficiency Amount, the Deficiency
Amount shall be added to increase the principal amount of the New Secured Notes,
which increase shall in no event be greater than $5 million. In the event that
holders of Allowed Claims in Classes 4A, 4B, or 4C elect "Option B" thereunder,
the principal amount of the New Secured Notes will be reduced accordingly. In
the event the Reorganized Debtors or their Subsidiaries borrow funds under one
or more term loan or revolving credit facilities, the proceeds thereof may be
used to reduce on a dollar for dollar basis the principal amount of the New
Secured Notes that would otherwise be distributed to holders of Allowed
Unsecured Claims in Classes 4A, 4B, 4C and 4E.
2.3 New Common Stock. Reorganized Metallurg shall issue a single class
of common stock which, as specified in Sections 5.11 5.12, 5.13, and 5.15 of the
Plan, will be distributed to holders of Allowed Claims which are Unsecured
Claims of MI (Class 4A), Canadian Guarantee Claims (Class 4B), Unsecured Claims
of SMC (Class 4C), and Multiemployer Pension Claim (Class 4E), respectively,
subject to the Management Stock Awards and the FPS Settlement Amount. The
aggregate amount of New Common Stock issued by Reorganized Metallurg under the
Plan shall be adjusted as set forth in Section 13.5 of the Plan.
ARTICLE III
TREATMENT OF ADMINISTRATIVE EXPENSE
CLAIMS AND PRIORITY TAX CLAIMS
3.1 Administrative Expense Claims. Except to the extent that the holder
of an Allowed Administrative Expense Claim agrees to a different treatment,
Reorganized Debtors shall pay to each holder of an Allowed Administrative
Expense Claim, that has not been paid prior to the Effective Date in the
ordinary course of business, Cash in an amount equal to such Allowed
Administrative Expense Claim, which shall be paid on the later of the Effective
Date and the date such Administrative Expense Claim becomes an Allowed
Administrative Expense Claim, or as soon thereafter as is practicable, or as
otherwise agreed to by the parties; provided, however, that Allowed
Administrative Expense Claims representing obligations incurred in the ordinary
course of business of or assumed by the Debtors in Possession shall be paid in
full and performed by the Reorganized Debtors in the ordinary course of business
in accordance with the terms and conditions of the particular transactions and
any agreements relating thereto.
3.2 Priority Tax Claims. Except to the extent that the holder of an
Allowed Priority Tax Claim agrees to a different treatment, Reorganized Debtors
shall pay to each holder of an Allowed Priority Tax Claim Cash in an amount
equal to such Allowed Priority Tax Claim on the later of the Effective Date and
the date such Priority Tax Claim becomes an Allowed Priority Tax Claim, or as
soon thereafter as is practicable.
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ARTICLE IV
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
This classification of Claims, other than Administrative Expense
Claims, Priority Tax Claims and Insured Claims, and Equity Interests is made for
all purposes, including voting, confirmation, and distribution, under the Plan
and for ease of administration hereof. A Claim or Equity Interest shall be
deemed classified in a particular Class only to the extent that the Claim or
Equity Interest qualifies within the description of that Class and shall be
deemed classified in a different Class to the extent that any remainder of the
Claim or Equity Interest qualifies within the description of such different
Class. A Claim or Equity Interest is in a particular Class only to the extent
that the Claim or Equity Interest is an Allowed Claim or an Allowed Equity
Interest in that Class and has not been paid prior to the Effective Date. The
classifications set forth below are subject to revision by the Plan Proponents
in order to meet applicable legal and technical requirements, provided that the
distributions to holders of Allowed Claims and Allowed Equity Interests in
classes accepting the Plan shall conform to the distributions set forth herein
in all material respects. The treatment of classes that reject the Plan shall be
as agreed by the Plan Proponents, and the provisions hereof with respect thereto
are subject to change.
<TABLE>
<S> <C> <C>
Class 1A -- Other MI Priority Claims: Class 1A consists of all Other Priority Claims against MI.
Class 1B -- Other SMC Priority Claims: Class 1B consists of all Other Priority Claims against
SMC.
Class 2A -- MI Intercompany Claims: Class 2A consists of the Claims of SMC and the
Subsidiaries of MI and SMC against MI.
Class 2B -- SMC Intercompany Claims: Class 2B consists of the claims of MI and Subsidiaries
against SMC.
Class 2C -- Midlantic Secured Claim of SMC: Class 2C consists of the Midlantic Claim against SMC to
the extent such Claim is a Secured Claim.
Class 2D -- Midlantic Guaranty: Class 2D consists of the Midlantic Guaranty Claim against
MI.
Class 2E -- MI Other Secured Claims: Class 2E consists of all Other Secured Claims against MI.
Class 2F -- SMC Other Secured Claims: Class 2F consists of all Other Secured Claims against
SMC.
Class 3A -- MI Convenience Claims: Class 3A consists of all Convenience Claims against MI.
Class 3B -- SMC Convenience Claims: Class 3B consists of all Convenience Claims against SMC.
Class 4A -- MI Unsecured Claims: Class 4A consists of all Unsecured Claims against MI,
other than the Unsecured Claims specified in Classes 2A,
2D, 3A, 4D, 4E and 4F of the Plan.
Class 4B -- Canadian Guarantee Claims: Class 4B consists of the holders of MI Unsecured Claims
who have the benefit of a Canadian Guarantee.
</TABLE>
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<TABLE>
<S> <C> <C>
Class 4C -- SMC Unsecured Claims: Class 4C consists of all Unsecured Claims against SMC,
other than the Unsecured Claims specified in Classes 2B,
3B, 4E and 4F of the Plan.
Class 4D -- Settling Former Preferred Stockholder Claims: Class 4D consists of all Settling Former Preferred
Stockholder Claims against MI.
Class 4E -- Multiemployer Pension Claims: Class 4E consists of all Multiemployer Pension Claims by
District 65 Pension Plan against MI and SMC.
Class 4F -- Environmental Settlement Agreement Claims: Class 4F consists of all Claims against MI and SMC as
identified in the Environmental Claims Settlement
Agreements.
Class 5 -- Insured Claims Against MI: Class 5 consists of all Insured Claims against MI.
Class 6 -- Insured Claims Against SMC: Class 6 consists of all Insured Claims against SMC.
Class 7 -- MI Equity Interests: Class 7 consists of all Equity Interests in MI.
Class 8 -- SMC Equity Interests: Class 8 consists of all Equity Interests in SMC.
</TABLE>
ARTICLE V
TREATMENT OF CLAIMS AND EQUITY INTERESTS
5.1 CLASS 1A -- OTHER PRIORITY CLAIMS OF MI.
(a) Impairment and Voting. Class 1A is unimpaired by the Plan. Each
holder of an Allowed Claim in Class 1A is conclusively presumed to have accepted
the Plan as a holder of Class 1A Claims and is not entitled to vote to accept or
reject the Plan.
(b) Distributions. Reorganized Metallurg shall pay to each holder of an
Allowed Claim in Class 1A Cash in an amount equal to such Allowed Claim on the
later of the Effective Date and the date such Claim becomes an Allowed Claim, or
as soon thereafter as is practicable.
5.2 CLASS 1B -- OTHER PRIORITY CLAIMS OF SMC.
(a) Impairment and Voting. Class 2E is unimpaired by the Plan. Each
holder of an Allowed Claim in Class 2E is conclusively presumed to have accepted
the Plan as a holder of Class 1B Claims and is not entitled to vote to accept or
reject the Plan.
(b) Distributions. Reorganized SMC shall pay to each holder of an
Allowed Claim in Class 1B Cash in an amount equal to such Allowed Claim on the
later of the Effective Date and the date such Claim becomes an Allowed Claim, or
as soon thereafter as is practicable.
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5.3 CLASS 2A -- MI INTERCOMPANY CLAIMS.
(a) Impairment and Voting. Class 2A Claims are impaired by the Plan.
Each holder of an Allowed Intercompany Claim in Class 2A shall be entitled to
vote to accept or reject the Plan.
(b) Distributions. On the Effective Date, the Allowed Intercompany
Claims in Class 2A will be offset, and no other distribution shall be made to
SMC and any Subsidiaries on account of such Allowed Claims under the Plan.
5.4 CLASS 2B -- SMC INTERCOMPANY CLAIMS.
(a) Impairment and Voting. Class 2B Claims are impaired by the Plan.
Each holder of an Allowed SMC Intercompany Claim in Class 2B shall be entitled
to vote to accept or reject the Plan.
(b) Distributions. On the Effective Date, the allowed Intercompany
Claims in Class 2B will be offset, and no other distribution shall be made to MI
and any Subsidiaries on account of such Allowed Claims under the Plan.
5.5 CLASS 2C -- MIDLANTIC SECURED CLAIM.
(a) Impairment and Voting. The Claim in Class 2C shall be Allowed in the
full amount of such Claim. Class 2C is impaired by the Plan. Midlantic, as the
holder of the Allowed Claim in Class 2C, is entitled to vote to accept or reject
the Plan.
(b) Distributions. On the Effective Date or as soon thereafter as is
practicable, Midlantic shall receive Cash in the full amount of its Allowed
Claim in Class 2C.
(c) Release of Liens. Midlantic, in consideration of the Cash
distribution set forth in Section 5.5(b) of the Plan, shall release all liens
and security interests securing said Secured Claims as of the Effective Date.
5.6 CLASS 2D -- MIDLANTIC GUARANTY CLAIM.
(a) Impairment and Voting. The Claims in Class 2D shall be allowed in
the full the amount of such Claim. Class 2D is impaired by the Plan. Midlantic,
as the holder of the Allowed Claim in Class 2D is entitled to vote to accept or
reject the Plan.
(b) Distributions. The Midlantic Guaranty Claim shall be deemed fully
satisfied upon the Cash distribution as set forth in Section 5.5(b) of the Plan.
5.7 CLASS 2E -- MI OTHER SECURED CLAIMS.
(a) Impairment and Voting. Class 2E is unimpaired by the Plan. Each
holder of an Allowed Claim in Class 2E is conclusively presumed to have accepted
the Plan as a holder of Class 2E Claims and is not entitled to vote to accept or
reject the Plan.
(b) Distributions. At Reorganized Metallurg's option, on the Effective
Date (a) the Plan may leave unaltered the legal, equitable, and contractual
rights of the holder of an Allowed Other Secured Claim, or (b) notwithstanding
any contractual provision or applicable law that entitles the holder of an
Allowed Other Secured Claim to demand or receive accelerated payment from
Reorganized Metallurg after the occurrence of a default, Reorganized Metallurg
may cure any such default, other than a default of a kind specified in section
365(b)(2) of the Bankruptcy Code, reinstate the maturity of such Claim as such
maturity existed before such default, compensate the holder of such Claim for
any damages incurred as a result
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of any reasonable reliance by such holder on such contractual provision or such
applicable law, and otherwise leave unaltered the legal, equitable or
contractual rights to which such Claim entitles the holder, all pursuant to
section 1124 of the Bankruptcy Code, or (c) Reorganized Metallurg may pay an
Allowed Other Secured Claim in full, in cash, or (d) Reorganized Metallurg may
deliver to the holder of an Allowed Other Secured Claim the property securing
such Claim, in which event, the value of such holder's interest in such property
shall be determined (i) by agreement of Reorganized Metallurg and the holder of
such Allowed Other Secured Claim or (ii) if they do not agree, by the Bankruptcy
Court, or (e) Reorganized Metallurg may assume and assign the contract or
agreement governing an Allowed Other Secured Claim pursuant to section 365 or
1123(b)(2) of the Bankruptcy Code and cure any default required to be cured
pursuant to section 365(b) of the Bankruptcy Code, or (f) Reorganized Metallurg
may pay an Allowed Other Secured Claim in such manner as may be agreed to by the
holder of such Claim.
5.8 CLASS 2F -- SMC OTHER SECURED CLAIMS.
(a) Impairment and Voting. Class 2F is unimpaired by the Plan. Each
holder of an Allowed Claim in Class 2F is conclusively presumed to have accepted
the Plan as a holder of Class 2F Claims and is not entitled to vote to accept or
reject the Plan.
(b) Distributions. At Reorganized SMC's option, on the Effective Date
(a) the Plan may leave unaltered the legal, equitable, and contractual rights of
the holder of an Allowed Other Secured Claim, or (b) notwithstanding any
contractual provision or applicable law that entitles the holder of an Allowed
Other Secured Claim to demand or receive accelerated payment from Reorganized
SMC after the occurrence of a default, Reorganized SMC may cure any such
default, other than a default of a kind specified in section 365(b)(2) of the
Bankruptcy Code, reinstate the maturity of such Claim as such maturity existed
before such default, compensate the holder of such Claim for any damages
incurred as a result of any reasonable reliance by such holder on such
contractual provision or such applicable law, and otherwise leave unaltered the
legal, equitable or contractual rights to which such Claim entitles the holder,
all pursuant to section 1124 of the Bankruptcy Code, or (c) Reorganized SMC may
pay an Allowed Other Secured Claim in full, in cash, or (d) Reorganized SMC may
deliver to the holder of an Allowed Other Secured Claim the property securing
such Claim, in which event, the value of such holder's interest in such property
shall be determined (i) by agreement of Reorganized SMC and the holder of such
Allowed Other Secured Claim or (ii) if they do not agree, by the Bankruptcy
Court, or (e) Reorganized SMC may assume and assign the contract or agreement
governing an Allowed Other Secured Claim pursuant to section 365 or 1123(b)(2)
of the Bankruptcy Code and cure any default required to be cured pursuant to
section 365(b) of the Bankruptcy Code, or (f) Reorganized SMC may pay an Allowed
Other Secured Claim in such manner as may be agreed to by the holder of such
Claim.
5.9 CLASS 3A -- MI CONVENIENCE CLAIMS. Reorganized Metallurg shall pay
to each holder of an Allowed Claim in Class 3A Cash in an amount equal to such
Allowed Claim on the later of the Effective Date and the date such Claim becomes
an Allowed Claim, or as soon thereafter as is practicable, subject to
satisfaction of the Employee Withholding Requirement for Class 3A-MI Convenience
Claims that are Compensation Claims.
5.10 CLASS 3B -- SMC CONVENIENCE CLAIMS. Reorganized SMC shall pay to
each holder of an Allowed Claim in Class 3B Cash in an amount equal to such
Allowed Claim on the later of the Effective Date and the date such Claim becomes
an Allowed Claim, or as soon thereafter as is practicable, subject to
satisfaction of the Employee Withholding Requirement for Class 3B-SMC
Convenience Claims that are Compensation Claims.
5.11 CLASS 4A -- MI UNSECURED CLAIMS.
(a) Impairment and Voting. Class 4A is impaired by the Plan. Each holder
of an Allowed Claim in Class 4A is entitled to vote to accept or reject the Plan
and to make the elections on the Ballot as set forth in Section 5.11(b).
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<PAGE>
(b) Distributions. Each holder of an Allowed Claim in Class 4A which is
$1 million or less shall elect on the Ballot, subject to the restrictions set
forth herein, the following treatment under the Plan (with distributions on such
Claims to be made on the later of the Effective Date and the date that such
Class 4A Claim becomes an Allowed Claim, or as soon thereafter as is
practicable) either: (A) its Pro Rata Share of (i) the MI Unsecured Portion of
Cash in the Cash Distribution Pool less the amount of Cash distributed pursuant
to Sections 5.13(b)(A)(i), 5.15(b)(ii) and 5.16(b)(ii) of the Plan, (ii) the MI
Unsecured Portion of 70% of the New Secured Notes, and (iii) the MI Unsecured
Portion of an amount equal to (x) 70% of the New Common Stock excluding the
Management Stock Awards less (y) New Common Stock issued to Former Preferred
Stockholders who elect the FPS Settlement Stock Option (collectively, the "Class
4A-Option A"), or (B) the same distribution made to the holder of an Allowed
Class 4A Claim electing Class 4A-Option A, except that in lieu of its Pro Rata
Share of the MI Unsecured Portion of 70% of the New Secured Notes, it will
receive Cash equal to 66 2/3% of the principal amount of New Secured Notes that
would have been distributed to it as the holder of an Allowed Claim in Class 4A
pursuant to the Class 4A-Option A, (collectively, the "Class 4A-Option B"). Any
holder of an Allowed Claim against MI in Class 4A that is more than $1 million
shall receive the treatment under this Plan as set forth under the Class
4A-Option A. For purposes of determining whether the holder of an Allowed Claim
in Class 4A has an Allowed Claim of $1 million or less, all of such holder's
Allowed Claims in Class 4A shall be aggregated. For purposes of Class 4A-Option
A and Class 4A-Option B, to the extent that there is an Excess Distribution, a
Pro Rata Share of such excess Cash shall be on the Effective Date distributed to
holders of Allowed Claims in Class 4A in lieu of an equal principal amount of
the New Secured Notes that would otherwise be distributed to holders of Allowed
Claims in Class 4A. In the event the Reorganized Debtors or their Subsidiaries
elect to obtain Exit Financing, a Pro Rata Share of the MI Unsecured Portion of
70% of the proceeds from the Exit Financing Cashout shall be distributed to
holders of Allowed Claims in Class 4A; provided, however, that in the event the
holder of an Allowed Claim in Class 4A elects treatment under the Class
4A-Option B, it shall be entitled to receive the amount of Cash payable as part
of the Exit Financing Cashout of the New Secured Notes that would have been
issued to it under the Class 4A-Option A, and shall also be entitled to receive
Cash equal to 66 2/3% of the balance of the principal amount of New Secured
Notes that would have been distributed to it under the Class 4A-Option A. To the
extent the holder of an Allowed Claim in Class 4A fails to make an election on
the Ballot in choosing treatment under either the Class 4A-Option A or Class
4A-Option B, it shall be deemed to have elected the Class 4A-Option A.
5.12 CLASS 4B -- CANADIAN GUARANTEE CLAIMS.
(a) Impairment and Voting. Class 4B is impaired by the Plan. Each holder
of an Allowed Claim in Class 4B is entitled to vote to accept or reject the
Plan.
(b) Distributions. Each holder of an Allowed Claim in Class 4B shall
receive, subject to the restrictions set forth herein, the following treatment
under the Plan (with distributions on such Claims to be made on the later of the
Effective Date and the date that such Class 4B Claim becomes an Allowed Claim,
or as soon thereafter as is practicable): its Pro Rata Share of (i) the Canadian
Guarantee Portion of Cash in the Cash Distribution Pool less the amount of Cash
distributed pursuant to Sections 5.13(b)(A)(i), 5.15(b)(ii) and 5.16(b)(ii) of
the Plan, (ii) the Canadian Guarantee Portion of 70% of the New Secured Notes,
and (iii) the Canadian Guarantee Portion of an amount equal to (x) 70% of the
New Common Stock excluding the Management Stock Awards less (y) New Common Stock
issued to Former Preferred Stockholders who elect the FPS Settlement Stock
Option. To the extent that there is an Excess Distribution, a Pro Rata Share of
such excess Cash shall be distributed to holders of Allowed Claims in Class 4B
in lieu of and up to an equal principal amount of the New Secured Notes that
would otherwise be distributed to holders of Allowed Claims in Class 4B. In the
event the Reorganized Debtors or their Subsidiaries obtain an Exit Financing, a
Pro Rata Share of the Canadian Guarantee Portion of 70% of the proceeds from the
Exit Financing Cashout shall be distributed to holders of Allowed Claims in
Class 4B.
5.13 CLASS 4C -- SMC UNSECURED CLAIMS.
(a) Impairment and Voting. Class 4C is impaired by the Plan. Each holder
of an Allowed Claim in Class 4C is entitled to vote to accept or reject the Plan
and to make the election as set forth in Section 5.13(b).
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<PAGE>
(b) Distributions. Each holder of an Allowed Claim in Class 4C which is
$1 million or less shall elect on the Ballot, subject to the restrictions set
forth herein, the following treatment under the Plan (which shall be distributed
on the later of the Effective Date and the date that such Class 4C Claim becomes
an Allowed Claim, or as soon thereafter as is practicable) either: (A) its Pro
Rata Share of (i) the SMC Unsecured Portion of the total amount of Cash equal to
the Cash Distribution Pool plus the Cash distributions to Former Preferred
Stockholders who elect the FPS Settlement Cash Option, (ii) the SMC Unsecured
Portion of the New Secured Notes, and (iii) the SMC Unsecured Portion of the New
Common Stock excluding the Management Stock Awards (collectively, the "Class
4C-Option A") or (B) the same distribution made to the holder of an Allowed
Class 4C Claim electing Class 4C-Option A, except that in lieu of its Pro Rata
Share of the SMC Unsecured Portion of the New Secured Notes, it will receive
Cash equal to 66 2/3% of the principal amount of New Secured Notes that would
have been distributed to it as the holder of an Allowed Claim in Class 4C
pursuant to the Class 4C-Option A (collectively, the "Class 4C-Option B"). Any
holder of an Allowed Claim against SMC in Class 4C that is more than $1 million
shall receive the treatment as set forth under the Class 4C-Option A. For
purposes of determining whether the holder of an Allowed Claim in Class 4C has
an Allowed Claim of $1 million or less, all of such holder's Allowed Claims in
Class 4C shall be aggregated. For purposes of making the distributions
hereunder, the Pro Rata Share shall be calculated as if Class 4C included
holders of Allowed Claims in Classes 4E and 4F of this Plan. For purposes of the
Class 4C-Option A and Class 4C-Option B, to the extent that there is an Excess
Distribution, a Pro Rata Share of such excess Cash shall be distributed to
holders of Allowed Claims in Class 4C in lieu of and up to an equal principal
amount of the New Secured Notes that would otherwise be distributed to holders
of Allowed Claims in Class 4C. In the event the Reorganized Debtors or their
Subsidiaries obtain Exit Financing, a Pro Rata Share of the SMC Unsecured
Portion of the proceeds from the Exit Financing Cashout shall be distributed to
holders of Allowed Claims in Class 4C; provided, however, that in the event the
holder of an Allowed Claim in Class 4C elects treatment under the Class
4C-Option B, it shall be entitled to receive the amount of Cash payable as part
of the Exit Financing Cashout of New Secured Notes that would have been issued
to it under the Class 4C-Option A election and shall also be entitled to receive
Cash equal to 66 2/3% of the balance of the principal amount of the New Secured
Notes that would have been distributed to it as the holder of an Allowed Claim
in Class 4C under the Class 4C-Option A. To the extent the holder of an Allowed
Claim in Class 4C fails to make an election on the Ballot in choosing treatment
under either the Class 4C-Option A or Class 4C-Option B, it shall be deemed to
have elected the Class 4C-Option A.
5.14 CLASS 4D -- SETTLING FORMER PREFERRED STOCKHOLDER CLAIMS.
(a) Impairment and Voting. Class 4D is impaired by the Plan. Each holder
of an Allowed Claim in Class 4D is entitled to vote to accept or reject the
Plan.
(b) Distributions. Each Settling Former Preferred Stockholder shall
receive its Pro Rata Share of the FPS Settlement Amount. Each Former Preferred
Stockholder shall indicate on the election form accompanying the Plan and
Disclosure Statement or in writing whether it chooses to receive the FPS
Settlement Stock Option or FPS Settlement Cash Option. In the event that it
fails to do so it shall be deemed to have chosen the FPS Settlement Stock
Option. The provisions of, and distributions provided for in, this Section
5.14(b) shall not apply to Non-Settling Former Preferred Stockholders.
5.15 CLASS 4E -- MULTIEMPLOYER PENSION CLAIM.
(a) Impairment and Voting. Claim 4E is impaired under the Plan. Each
holder of an Allowed Claim in Class 4E is entitled to vote to accept or reject
the Plan.
(b) Distributions. On the Effective Date, or as soon thereafter as is
practicable, the holder of the Multiemployer Pension Claim shall be entitled to
Cash in an amount equal to: (i) 50% of the total value of New Common Stock that
would have been distributed to the holder of such Claim on a Pro Rata basis had
it been the holder of an Allowed Claim classified as Class 4C, that as of the
Effective Date, would have been included in the aggregate of all Allowed Claims
classified as Class 4C under this Plan and Allowed Claims classified as Classes
4E and 4F under this Plan; provided, however, that in the event
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the holder of the Allowed Claim in Class 4E elects in writing on notice to the
Debtors on or before December 1, 1996 to receive New Common Stock in lieu of the
Cash as provided for in this Section 5.15(b)(i), the Debtors on the Effective
Date, or as soon as practicable, shall distribute, in lieu of the Cash described
in Section 5.15(b)(i), the number of shares of New Common Stock that would have
been distributed to the holder of such Claim on a Pro Rata basis had it been the
holder of an Allowed Claim classified as Class 4C which, as of the Effective
Date, would have included in the aggregate of all Allowed Claims classified as
"Class 4C" under this Plan and Allowed Claims classified under Classes 4E and 4F
of this Plan; and (ii) the Pro Rata amount of Cash that would have been
distributed to the holder of such Claim had it been the holder of an Allowed
Claim classified as Class 4C which, as of the Effective Date, would have
included in the aggregate of all Allowed Claims classified as "Class 4C" under
this Plan and all Allowed Claims classified as Classes 4E and 4F under this
Plan.
In addition, the holder of an Allowed Class 4E Claim shall receive New
Secured Notes in an amount equal to the Pro Rata amount of New Secured Notes
that would have been distributed to the holder of such Claim had it been the
holder of an Allowed Claim in Class 4C which, as of the Effective Date, would
have included the aggregate of all Allowed Claims classified as "Class 4C" under
this Plan and all Allowed Claims classified under Classes 4E and 4F of this
Plan.
In the event the Debtors obtain Exit Financing, they may in their
discretion distribute Cash to the holder of the Allowed Class 4E Claim in lieu
of and up to an equal principal amount of the New Secured Notes that would
otherwise be distributed to the holder of the Allowed Claim in Class 4E.
5.16 CLASS 4F -- ENVIRONMENTAL SETTLEMENT AGREEMENT CLAIMS.
(a) Impairment and Voting. Class 4F is impaired under the Plan. Each
holder of an Allowed Claim in Class 4F is entitled to vote to accept or reject
the Plan.
(b) Distributions. On the Effective Date, or as soon thereafter as is
practicable, each holder of an Environmental Settlement Agreement Claim shall be
entitled to Cash equal to the sum of:
(i) 50% of the total value of New Common Stock that would have
been distributed to the holder of such Claims on a Pro Rata basis had
they been the holders of Allowed Claims classified as Class 4C which, as
of the Effective Date, would have included the aggregate of all Allowed
Claims classified as Class 4C under this Plan and all Allowed Claims
classified under Classes 4E and 4F under this Plan; (ii) the Pro Rata
amount of Cash that would have been distributed to the holders of such
Claims had they been classified as holders of an Allowed Claim
classified as "Class 4C" which, as of the Effective Date, would have
included the aggregate of all Allowed Claims classified as "Class 4C"
under this Plan and all Allowed Claims classified under Classes 4E and
4F under this Plan; and (iii) 66 2/3% of the value of New Secured Notes
(excluding accrued interest) that would have been distributed to the
holder of such Claims on a Pro Rata basis had they been the holders of
Allowed Claims classified as Class 4C which, as of the Effective Date,
would have included the aggregate of all Allowed Claims classified as
"Class 4C" under this Plan and all Allowed Claims classified as Class 4E
and 4F Claims under this Plan.
(c) Waiver of Additional Consideration. In consideration of the
treatment set forth in Section 5.16(b), holders of Allowed Environmental
Settlement Agreement Claims shall waive any claim to additional consideration
under this Plan, including any additional right to receive New Common Stock, New
Secured Notes, or any payment on account of accrued interest in respect of the
New Secured Notes, or any other payments made to holders of Allowed Claims under
the Plan whether paid upon consummation of the Plan or any time thereafter.
5.17 CLASS 5 -- INSURED CLAIMS AGAINST MI. On the Confirmation Date,
each holder of an Insured Claim against MI shall be entitled to maintain actions
against and obtain payment on account of such Claims from an insurance company
pursuant to an insurance policy or policies issued to or for the benefit of MI,
subject to the terms of said insurance policies. If and to the extent that any
holder of an Insured Claim against MI obtains a final judgment against MI for a
Claim
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covered by an insurance policy or policies issued to or for the benefit of MI
and the proceeds from such insurance policy or policies are insufficient to
cover the payment in full of the judgment obtained against MI, then such holder
of an Insured Claim shall be entitled, on account of such deficiency amount, to
a cash distribution by the Reorganized Debtor in an amount equal to the recovery
payable to holders of Allowed Claims classified in Class 4A. Holders of Insured
Claims against MI shall receive no distributions under the Plan on account of
their Unsecured Claims.
5.18 CLASS 6 -- INSURED CLAIMS AGAINST SMC. On the Confirmation Date,
each holder of an Insured Claim against SMC shall be entitled to maintain
actions against and obtain payment on account of such Claims from an insurance
company pursuant to an insurance policy or policies issued to or for the benefit
of SMC, subject to the terms of said insurance policies. If and to the extent
that any holder of an Insured Claim against SMC obtains a final judgment against
SMC for a Claim covered by an insurance policy or policies issued to or for the
benefit of SMC and the proceeds from such insurance policy or policies are
insufficient to cover the payment in full of the judgment obtained against SMC,
then such holder of an Insured Claim shall be entitled, on account of such
deficiency amount, to a cash distribution by the Reorganized Debtor in an amount
equal to the recovery payable to holders of Allowed Claims classified in Class
4C. Holders of Insured Claims against SMC shall receive no distributions under
the Plan on account of their Unsecured Claims.
5.19 CLASS 7 -- MI EQUITY INTERESTS. Class 7 is impaired by the Plan.
The holders of Equity Interests in Class 7 shall not receive any distributions
on account of such Equity Interests. On the Effective Date, all Equity Interests
in MI shall be extinguished. Each holder of an Equity Interest in Class 7 is
conclusively presumed to have rejected the Plan as a holder of a Class 7 Equity
Interest and is not entitled to vote to accept or reject the Plan.
5.20 CLASS 8 -- SMC EQUITY INTERESTS. Class 8 is unimpaired by the Plan.
MI, as the holder of Equity Interests in Class 8, shall retain its ownership of
the Equity Interests in SMC (as Reorganized SMC). MI, as the holder of the
Equity Interest in Class 8, is presumed to have accepted the Plan as a holder of
Class 8 Equity Interest.
5.21 ADDITIONAL TREATMENT PROVISION. Notwithstanding any provision
herein to the contrary, MI will acquire, for the distributions provided for
herein, from the holders thereof, each Claim as to which the non-cash
distributions provided for herein are in the form of the debt of Reorganized
Metallurg or the New Common Stock of Reorganized Metallurg, regardless of
whether such claim is against MI or SMC. Thereafter, MI will, directly or
indirectly, contribute all Claims against SMC to the capital of Reorganized SMC.
Immediately upon such contribution, all promissory notes and other instruments,
indentures or other agreements or documents evidencing such Claims will be
deemed cancelled and terminated without further action under any applicable
agreement, law, regulation, order or rule, and the obligation of SMC under such
promissory notes and other instruments, indenture or other agreements or
documents evidencing such Claims will be discharged in full.
ARTICLE VI
SATISFACTION OF CLAIMS AND INTERESTS
The treatment of, and consideration to be received by, holders
of Allowed Claims and Allowed Equity Interests pursuant to Article V of the Plan
shall be in full satisfaction, release and discharge of their Claims against,
and in full satisfaction of their Equity Interests in, the Debtors.
ARTICLE VII
ENVIRONMENTAL SETTLEMENT AGREEMENTS
The Environmental Settlement Agreements are included in the Plan
Supplement and shall be approved as part of this Plan pursuant to Bankruptcy
Rule 9019.
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ARTICLE VIII
THE FPS SETTLEMENT
The FPS Settlement and the consideration that will be provided
in connection therewith are set forth in Sections 1.51, 1.52, and 5.14 of the
Plan. The FPS Settlement and the FPS Settlement Amount shall be approved as part
of this Plan pursuant to Bankruptcy Rule 9019.
ARTICLE IX
PROVISIONS REGARDING VOTING AND DISTRIBUTIONS
UNDER THE PLAN, MEANS OF IMPLEMENTATION AND TREATMENT OF
DISPUTED, CONTINGENT, AND UNLIQUIDATED ADMINISTRATIVE
EXPENSE CLAIMS, CLAIMS AND EQUITY INTERESTS
9.1 Voting of Claims. Each holder of Claims in an impaired class of
Claims shall be entitled to vote separately to accept or reject the Plan as
provided in that certain order entered by the Bankruptcy Court establishing
certain procedures with respect to the solicitation and tabulation of votes to
accept or reject the Plan.
9.2 Effect of Compromises and Settlements.
(a) FPS Settlement. The holders of Allowed Claims in Class 4D
compromise and settle their Claims on account of preferred stock issued by MI.
(b) Environmental Settlement Agreements. The holders of Allowed Claims
in Class 4F compromise and settle their Claims in consideration for the
treatment set forth therein. Moreover, the holders of Environmental Claims have
entered into the Environmental Settlement Agreements which either address or
resolve such claims with respect to the Debtors' chapter 11 cases.
9.3 Method of Distributions Under the Plan.
(a) In General. All distributions under the Plan shall be made by the
Reorganized Debtors; provided, however, that, subject to Section 5.21 of the
Plan, all references in the Plan to distributions by the Reorganized Debtors
shall be construed to mean the applicable Debtor. All distributions under the
Plan shall be made to the holder of each Claim as set forth in the official
claims register maintained by the Bankruptcy Court and Donlin, Recano & Company,
Inc. as the official claims agent for the Bankruptcy Court, or, with respect to
Claims governed by an indenture, to the indenture trustee on behalf of the
holder of each such Claim, in each case as of the Effective Date.
(b) Method of Payment. Cash payments to be made pursuant to the Plan
shall, at the election of the Reorganized Debtors, be made by check drawn on a
domestic bank, or by wire transfer of immediately available funds. At the
election of the Reorganized Debtors, the Reorganized Debtors or their
Subsidiaries may obtain the Exit Financing, the proceeds of which shall be used
to reduce on a dollar for dollar basis the principal amount of the New Secured
Notes.
(c) Transactions on Business Days. If the Effective Date or any other
date on which a transaction may occur under the Plan, including a payment or
distribution provided for hereunder, shall occur on a day that is not a Business
Day, the transactions contemplated by the Plan to occur on such day shall
instead occur on the next succeeding Business Day.
(d) Hart-Scott-Rodino Compliance. Any shares of New Common Stock to be
distributed under the Plan to any entity required to file a Premerger
Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvement
Act of
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1976, as amended, shall not be distributed until the notification and waiting
periods applicable under such Act to such entity shall have expired or been
terminated.
(e) Minimum Distributions and Fractional Cents.
(i) Notwithstanding any other provision of the Plan to the
contrary, no payment of fractions of cents will be made. Whenever a
payment of a fraction of a cent would otherwise be required, the actual
payment shall reflect a rounding down of such fraction to the nearest
whole cent.
(ii) Notwithstanding any other provision of the Plan to the
contrary, no payment of Cash on account of an Allowed Unsecured Claim
where the amount of such payment would be less than one hundred
($100.00) dollars shall be made by the Reorganized Debtors to any holder
of a Claim unless a request therefor is made in writing to the
Reorganized Debtors thirty days after the Confirmation Date; provided,
however, that no payment will be made on account of an Allowed Unsecured
Claim where the amount of such payment would be less than ten ($10.00)
dollars.
(f) Fractional Shares. Notwithstanding any other provision of the Plan
to the contrary, no fractional shares of New Common Stock shall be distributed.
When any distribution on account of a Disputed or Allowed Unsecured Claim would
otherwise result in the issuance of a number of shares of New Common Stock that
is not a whole number, the actual distribution of shares of such stock will be
rounded to the next higher or lower number, as follows: (i) fractions equal to
or greater than one-half will be rounded to the next higher whole number; and
(ii) fractions less than one-half will be rounded to the next lower whole
number. The total number of shares of New Common Stock to be distributed to a
class of Claims will be adjusted as necessary to account for this rounding. No
consideration will be provided in lieu of fractional shares that are rounded
down.
(g) Distribution of New Secured Notes. Notwithstanding any other
provisions of the Plan, principal amounts of New Secured Notes will be issued
only in denominations of $1,000 and integral multiples thereof. When any
distribution on account of Disputed and Allowed Unsecured Claims would otherwise
result in the issuance of New Secured Notes with an aggregate principal amount
that is not an integral multiple of $1,000, the actual distribution of such
notes will be rounded to the next higher or lower integral multiple of $1,000,
as follows:
(i) aggregate principal amounts that exceed an integral multiple
of $1,000 by $500 or more will be rounded to the next higher integral
multiple of $1,000; and
(ii) aggregate principal amounts that exceed an integral
multiple of $1,000 by less than $500 will be rounded to the next lower
integral multiple of $1,000. If, as a result of rounding of principal
amounts of the New Secured Notes to be distributed on account of
Disputed Unsecured Claims and to holders of Allowed Unsecured Claims in
a particular class, the sum of such principal amounts differs from the
aggregate principal amount of New Secured Notes to be distributed
pursuant to Section 2.2 of the Plan: (a) the aggregate principal amount
of the New Secured Notes specified in Section 2.2 will be adjusted
upward or downward to provide for the distribution of the New Secured
Notes in an aggregate principal amount equal to such sum and (b) the
corresponding amount of Cash to be distributed pursuant to Section 2.1
of the Plan, will be increased or decreased dollar for dollar to offset
the adjustment to the principal of New Secured Notes described in (i).
In addition, accrued interest on account of the New Secured
Notes (assuming an aggregate principal amount of $60 million) for all interest
payment dates prior to the Effective Date shall be paid on the Effective Date in
Cash to holders of Allowed Claims and to the Disputed Unsecured Claims Reserve
entitled to receive either the New Secured Notes hereunder or Cash in lieu of
such New Secured Notes pursuant to the Exit Financing Cashout or as a result of
the Cash Distribution Pool exceeding the Target Cash Amount, unless otherwise
specified herein. All accrued interest on the New Secured Notes as of the
Effective Date in respect of interest payment dates after the Effective Date:
(i) in the case of New Secured Notes issued
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under the Plan, will be paid on the next succeeding interest payment date and
(ii) in the case of New Secured Notes not issued solely as a result of
Reorganized Metallurg reducing the principal amount of New Secured Notes
pursuant to the Exit Financing Cashout on the Effective Date or as a result of
the Cash Distribution Pool exceeding the Target Cash Amount shall be paid in
Cash on the Effective Date to holders of Allowed and Disputed Claims entitled to
receive payment hereunder.
(h) Unclaimed Distributions.
(i) Any Cash or other distributions pursuant to the Plan,
including any interest, shares of New Common Stock, any New Secured
Notes, or any dividends, interest or other amounts earned thereon, that
are unclaimed for a period of one year after distribution thereof shall
be revested in Reorganized Debtors.
(ii) Any Cash or other distributions made on behalf of a holder of
an Allowed Class 4A, 4B, 4C, 4D, 4E or 4F Claim to the agent under any
debt instrument of the Debtors pursuant to the Plan, including any
interest, shares of New Common Stock, any New Secured Note, or any
dividends, interest or other amounts earned thereon, that are unclaimed
by the holder of such Claim governed by the relevant agreement for a
period of one year after distribution thereof shall be returned to and
revested in Reorganized Debtors.
(iii) All Cash payments disbursed pursuant to the Plan by check or
wire transfer which are not negotiated or cleared within ninety (90)
days of the date of its issuance shall be stopped and cancelled and the
funds shall be returned to and revested in the Reorganized Debtors;
provided, however, that the Reorganized Debtors shall not be required to
stop and cancel any check or wire transfer where the administrative fee
and charge, if any, to do so exceeds the amount of the check or wire
transfer.
(i) Limitation on Distributions. Notwithstanding any other provisions of
the Plan, in the event a creditor holds an Allowed Claim against MI and SMC
pursuant to which each Debtor is jointly and severally liable or secondarily
liable by operation of law or agreement, the total value of consideration
distributable to the creditor on the Effective Date of the Plan or any time
thereafter pursuant to Section 11.5 of the Plan on account of the claimant's
Allowed Claim against MI and SMC (excluding any accrued interest on the New
Secured Notes whether or not paid in Cash) shall in no event exceed in the
aggregate 100% of the Allowed Claim. The total distributions of New Secured
Notes, New Common Stock and Cash to be distributed to such holder in the event
the total value of consideration exceeds 100% shall be reduced proportionately
by the amount in excess of 100% and will be distributed on a Pro Rata basis to
holders of Allowed Claims in Class 4A who have not already received
distributions equal to 100% of their Allowed Claims.
9.4 Cancellation and Surrender of Existing Securities and Agreements.
Subject to Section 5.21 herein, on the Effective Date, the promissory notes,
share certificates and other instruments evidencing any Claim or Equity Interest
shall be deemed cancelled and terminated without further act or action under any
applicable agreement, law, regulation, order, or rule and the obligations of the
Debtors under the agreements, indentures and certificates of designations
governing such Claims and Equity Interests, as the case may be, shall be
discharged.
9.5 Registration of New Common Stock. Each Person receiving a
distribution of New Common Stock as of the Effective Date representing at least
five percent of the fully diluted equity interests in Reorganized Metallurg
shall have the right to become a party to the registration rights agreement
substantially in the form included in the Plan Supplement.
9.6 Listing of New Common Stock. Reorganized Metallurg shall use
reasonable commercial efforts to cause the shares of New Common Stock to be
listed on the Over the Counter Bulletin Board, if applicable.
9.7 Setoffs. The Debtors may, but shall not be required to, set off
against any Claim and the payments to be made pursuant to the Plan in respect of
such Claim, any Claims of any nature whatsoever the Debtors may have against the
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claimant, but neither the failure to do so nor the allowance of any Claim under
the Plan shall constitute a waiver or release by the Debtors of any such Claim
the Debtors may have against such claimant.
9.8 Obligations Under the Plan Are Without Recourse.
(a) Neither the Debtors, nor the Reorganized Debtors, nor the Disputed
Claims Agent, nor the Escrow Agent, nor the Committee (including the members of
the Committee), nor any of their respective officers, directors, employees or
agents, shall have any obligation under the Plan, except as otherwise set forth
in the Plan.
(b) Neither the Debtors, nor the Reorganized Debtors, nor the Disputed
Claims Agent, nor the Escrow Agent, nor the Committee (including the members of
the Committee), nor any of their respective officers, directors, employees or
agents, shall have or incur any liability to any creditor or Equity Interest
holder for any act or omission in connection with or arising out of the
administration of the Plan or the property to be distributed under the Plan
except for fraud or willful misconduct and, in all respects, shall be entitled
to rely upon the advice of counsel with respect to their duties and
responsibilities under the Plan.
9.9 Insured Claims. The Debtors' insurance companies shall be entitled
to defend, liquidate, settle and compromise all Claims classified in Classes 5
and 6 under this Plan affecting the Debtors in accordance with any applicable
insurance policies issued on behalf of the Debtors. Nothing provided for in this
Plan shall be deemed to impose an obligation on any of the Debtors' insurance
companies that does not exist under the applicable insurance policies or is not
otherwise provided for or required under any applicable law.
ARTICLE X
EXECUTORY CONTRACTS
10.1 Assumption or Rejection of Executory Contracts.
(a) Executory Contracts. Except as otherwise provided for herein, all
Executory Contracts that exist between the Debtors and any Person as set forth
on Schedule 10.1(b) will be deemed rejected by the Debtors on the Confirmation
Date in accordance with the provisions of section 365 and section 1123 of the
Bankruptcy Code, except for any Executory Contract (i) previously assumed, (ii)
entered into by the Debtors in Possession in the ordinary course of business or
pursuant to an order of the Bankruptcy Court, (iii) as to which a motion to
assume is pending prior to the Confirmation Date or (iv) which is set forth in
Schedule 10.1(a) annexed hereto. The insurance policies set forth in Schedule
10.1(a) annexed hereto and any agreements, documents or instruments relating
thereto, including, without limitation, any retrospective premium rating plans
relating to such policies, are treated as Executory Contracts under the Plan and
are hereby assumed pursuant to section 365(a) of the Bankruptcy Code. Nothing
contained in this Section 10.1(a) shall constitute a waiver of any claim, right
or cause of action that the Debtors may hold against the insurer under any
policy of insurance.
(b) Unexpired Leases. All Executory Contracts that are unexpired leases
that exist between the Debtors and any Person shall be deemed assumed as of the
Effective Date, except for any unexpired lease (i) which has been rejected
pursuant to an order of the Bankruptcy Court entered prior to the Confirmation
Date, or (ii) as to which a motion for approval of the rejection of such lease
has been filed and served prior to the Confirmation Date.
(c) Approval of Assumption or Rejection of Leases and Contracts. Entry
of the Confirmation Order shall constitute (i) the approval, pursuant to
sections 365(a) and section 1123 of the Bankruptcy Code, of the assumption of
the Executory Contracts assumed pursuant to Section 10.1(a) and (b) hereof, (ii)
the extension of time pursuant to section 365(d)(4) of the Bankruptcy Code
within which the Debtors may assume or reject the Executory Contracts that are
unexpired
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leases specified in Section 10.1(b) hereof through the date of entry of an order
approving the assumption or rejection of such leases, and (iii) the approval,
pursuant to section 365(a) and section 1123 of the Bankruptcy Code, of the
rejection of the Executory Contracts rejected pursuant to Section 10.1(a) and
(b) hereof.
(d) Cure of Defaults. On the Effective Date or as soon thereafter as is
practicable, Reorganized Debtors shall cure any and all defaults under any
Executory Contract assumed pursuant to the Plan in accordance with section
365(b)(1) of the Bankruptcy Code.
(e) Bar Date for Filing Proofs of Claim Relating to Executory Contracts
Rejected Pursuant to the Plan. Claims arising out of the rejection of an
Executory Contract pursuant to this Section 10.1 must be filed with the
Bankruptcy Court no later than thirty (30) days after the later of (i) notice of
entry of an order approving the rejection of such contract or lease and (ii)
notice of entry of the Confirmation Order. Any Claims not filed within such time
will be forever barred from assertion against the Debtors, their estates, and
their property. Unless otherwise ordered by the Bankruptcy Court, all Allowed
Claims arising from the rejection of Executory Contracts shall be treated as
Class 4A or 4C Claims under the Plan and paid in accordance with the provisions
of the Plan.
10.2 Indemnification Obligations. For purposes of the Plan, the
obligations of the Debtors to indemnify, reimburse or limit the liability of
their present and any former directors, officers or employees against any
obligations pursuant to the articles of incorporation, the bylaws, applicable
state law or specific agreement, or any combination of the foregoing, shall
survive confirmation of the Plan, remain unaffected thereby, and not be
discharged irrespective of whether indemnification, reimbursement or limitation
is owed in connection with an event occurring before, on, or after the
Commencement Date.
10.3 Compensation and Benefit Programs. Unless otherwise specifically
agreed between MI and the MI executive officer, MI's supplemental executive
retirement plans (collectively, the "Retirement Plans") shall be treated as
Executory Contracts and rejected as of the Effective Date. All employment and
severance practices and policies, and all compensation and benefit plans,
policies, and programs of the Debtors applicable to their directors, officers or
employees, including, without limitation, all savings plans, retirement plans,
health care plans, severance benefit plans, incentive plans, workers'
compensation programs and life, disability and other insurance plans are treated
as Executory Contracts under the Plan and are hereby assumed pursuant to section
365(a) and section 1123 of the Bankruptcy Code.
ARTICLE XI
CERTAIN MATTERS RELATING TO THE DISPUTED CLAIMS
11.1 Objections to Claims; Prosecution of Disputed Claims; Non-Settling
Former Preferred Stockholders. Except as to applications for allowances of
compensation and reimbursement of expenses under sections 330 and 503 of the
Bankruptcy Code, after the Effective Date, only the Disputed Claims Agent shall
have the authority and exclusive right to file objections, settle, compromise,
withdraw or litigate to judgment objections to the allowance of Claims, whether
arising before or after the Commencement Date, filed with the Bankruptcy Court
with respect to which the Debtors shall dispute liability in whole or in part.
Unless another date is established by the Bankruptcy Court, all objections to
Claims (other than Old Preferred Stock Claims) shall be filed and served on the
holders of such Claims by the later of: (a) ninety (90) days after the Effective
Date; and (b) ninety (90) days after the proof of claim has been filed.
Notwithstanding the foregoing, the Committee shall have the authority and right
to file objections to the allowance of Claims of any Former Preferred
Stockholder in connection with Old Preferred Stock issued by MI, which objection
shall be filed by the Committee and served on the holders of all Former
Preferred Stockholder Claims and the Reorganized Debtors on or before the date
the Disclosure Statement accompanying the Plan is mailed to creditors; provided,
however, that any Settlement of any Claims of Former Preferred Stockholders
shall be subject to the consent of the Committee and the Disputed Claims Agent.
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11.2 Disputed Other Secured And Priority Claims Reserve. On or prior to
the Effective Date, the Debtors will determine the amount of Cash required to
fund the Disputed Other Secured and Priority Claims Reserve. Such amount shall
be sufficient to pay (i) the expenses of the Plan Reserves, including the fees
and expenses incurred by the Disputed Claims Agent and the Escrow Agent, (ii)
any taxes imposed on the Plan Reserves, and (iii) all Disputed Administrative
Expense Claims, Disputed Priority Claims and Disputed Priority Tax Claims, and
such aggregate amount shall, on the Effective Date, be transferred to the
Disputed Other Secured and Priority Claims Reserve.
11.3 Disputed Unsecured Claims Reserve.
(a) On or prior to the Effective Date, the Debtors will determine the
amount of Reserved Securities by calculating the amount of shares of New Common
Stock and New Secured Notes that would be distributed on account of all Disputed
Unsecured Claims in Classes 4A and 4C (including Old Preferred Stock Claims of
Non-Settling Former Preferred Stockholders) as if such Claims were Allowed
Claims on the Effective Date. On the Effective Date, the Reserved Securities
shall be deposited in a Disputed Unsecured Claims Reserve. From and after the
Effective Date, dividends issued in kind or interest, if any, on the Reserved
Securities shall be added to, and deposited in, the Disputed Unsecured Claims
Reserve.
(b) On or prior to the Effective Date, the Debtors will determine the
amount of Cash from the Cash Distribution Pool or Cash paid on account of
accrued interest on the New Secured Notes required for distribution on account
of Disputed Unsecured Claims in Classes 4A and 4C (including Old Preferred Stock
Claims of Non-Settling Former Preferred Stockholders) as if such Claims were
Allowed Claims on the Effective Date. Such Cash shall be held in the Disputed
Unsecured Claims Reserve. From and after the Effective Date, cash dividends, and
interest, if any, on the Reserved Securities shall be added to, and deposited
in, the Disputed Unsecured Claims Reserve.
(c) The amount of Reserved Securities held on account of Disputed Claims
in Classes 4A and 4C, (which aggregate $1 million or less with respect to each
claim respectively), shall be based upon the assumption that if such holders of
Disputed Claims become holders of Allowed Claims, such holders would elect
treatment under the Class 4A-Option A and Class 4C-Option A, respectively.
11.4 The Disputed Claims Agent. The Disputed Claims Agent shall receive
compensation and reimbursement of expenses for services performed pursuant to
the Plan from the Disputed Other Secured and Priority Claims Reserve.
Reorganized Metallurg, as the Disputed Claims Agent, may retain such
professionals or others as necessary in its sole discretion to effectively
administer the Plan Reserves. Reorganized Metallurg, as the Disputed Claims
Agent, shall not be liable for any act it may do or omit to do as the Disputed
Claims Agent hereunder unless such act or omission is a result of willful
misconduct or gross negligence on the part of Reorganized Metallurg, as the
Disputed Claims Agent. The Disputed Claims Agent shall maintain a reserve within
the Disputed Other Secured and Priority Claims Reserve to fund the reasonable
fees and expenses incurred by it and the Escrow Agent in respect of the Plan
Reserves, including the payment of all taxes payable by such reserves. The
Disputed Claims Agent shall pay, or cause to be paid, out of the funds held in
the Disputed Other Secured and Priority Claims Reserve, any tax imposed by any
governmental unit on the income generated by the funds held in the Plan
Reserves. The Disputed Claims Agent shall also file or cause to be filed any tax
or information returns related to the Plan Reserves that are required by any
governmental unit.
11.5 Distributions, Generally.
(a) Notwithstanding any other provision of the Plan, no Cash or other
property, including Reserved Securities, shall be distributed under the Plan on
account of any Disputed Claim, unless and until such Claim becomes an Allowed
Claim.
(b) No holder of a Disputed Claim will have any Claim against any Cash
or, in the case of a Disputed Unsecured Claim, the Reserved Securities, until
such Disputed Claim becomes an Allowed Claim. In no event will any holder of a
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Disputed Claim be entitled to receive from the Reorganized Debtors any payment
or distribution which is greater than the amount reserved for such Claim
pursuant to this Plan.
11.6 Disputed Administrative Expense Claims, Other Secured Claims,
Priority Tax Claims and Other Priority Claims.
(a) Estimation. For purposes of effectuating the reserve provisions of
the Plan and the allocations and distributions to holders of Allowed
Administrative Expense Claims, Other Secured Claims, Priority Tax Claims and
Other Priority Claims, the Bankruptcy Court will, on or prior to the Effective
Date, pursuant to section 502 of the Bankruptcy Code, fix or liquidate the
amount of any contingent or unliquidated Administrative, Other Secured, Priority
Tax and Other Priority Claim not otherwise treated in the Plan, in which event
the amount so fixed will be deemed the Allowed amount of such Claim for purposes
of this Plan, or, in lieu thereof, the Bankruptcy Court will determine the
maximum contingent or unliquidated amount for such Claim, which amount will be
the maximum amount in which such Claim ultimately may be allowed under this
Plan, if such Claim is allowed in whole or in part.
(b) Distributions Upon Allowance. To the extent a Disputed
Administrative Expense Claim, Other Secured Claim, Priority Tax Claim or Other
Priority Claim becomes an Allowed Claim, forty-five (45) days after the next
succeeding Reallocation Date, there will be distributed to the holder of such
Allowed Claim out of the Disputed Other Secured and Priority Claims Reserve, in
accordance with the provisions of this Plan, (a) Cash in the amount of such
Allowed Claim, and (b) such claimholder's "pro rata share" of net interest from
the Disputed Other Secured and Priority Claims Reserve on such Allowed Claim.
For purposes of the immediately preceding sentence, such holder's "pro rata
share" of net interest (including an appropriate reserve for expenses relating
to such interest) shall be calculated by multiplying the amount of net interest
on deposit in the Disputed Other Secured and Priority Claims Reserve on the date
immediately preceding the date on which such Allowed Claim is to be paid by a
fraction, the numerator of which shall equal the amount of such Allowed Claim
and the denominator of which shall equal the amount of all Disputed Claims for
which deposits are being held in the Disputed Other Secured and Priority Claims
Reserve on the date immediately preceding the date on which such Allowed Claim
is to be paid. Following any distribution from the Disputed Other Secured and
Priority Claims Reserve, said reserve will be adjusted accordingly.
(c) Disallowed Claims. To the extent that, after the Effective Date, a
Disputed Administrative Expense Claim, Other Secured Claim, Priority Tax Claim
or Other Priority Claim is disallowed and expunged, in whole or in part, then an
amount reserved in the Disputed Other Secured and Priority Claims Reserve equal
to the disallowed portion of such Disputed Claim together with any accrued net
interest with respect thereto shall be distributed to the holders of Allowed
Unsecured Claims and the Disputed Unsecured Claims Reserve in an amount equal to
the Pro Rata Share of Cash that would have been distributed to such holders had
such Disputed Administrative Expense Claim, Other Secured Claim, Priority Tax
Claim or Other Priority Claim been Disallowed Claims as of the Effective Date.
11.7 Disputed Unsecured Claims.
(a) Estimation. For purposes of effectuating the reserve provisions of
the Plan and the allocations and distributions to holders of Allowed Unsecured
Claims, the Bankruptcy Court will, on or prior to the Effective Date, pursuant
to section 502 of the Bankruptcy Code, fix or liquidate the amount of any
contingent or unliquidated Unsecured Claim not otherwise treated in the Plan, in
which event the amount so fixed will be deemed the allowed amount of such Claim
for purposes of this Plan, or, in lieu thereof, the Bankruptcy Court or District
Court, as the case may be, will determine the maximum contingent or unliquidated
amount for such Claim, which amount will be the maximum amount in which such
Claim ultimately may be allowed under this Plan, if such Claim is allowed in
whole or in part.
(b) Distributions Upon Allowance. To the extent that a Disputed
Unsecured Claim in Classes 4A and 4C (including any Claim of a Non-Settling
Former Preferred Stockholder asserted in connection with the Old Preferred
Stock)
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becomes an Allowed Claim, forty-five (45) days after the next succeeding
Reallocation Date, there will be distributed to the holder of such Allowed Claim
out of the Disputed Unsecured Claims Reserve in accordance with the provisions
of this Plan: (a) shares of New Common Stock, New Secured Notes (including
dividends issued in kind, if any), and Cash from the Disputed Unsecured Claims
Reserve in an amount that would have been distributed to such holder of such
Claim as if such holder had an Allowed Claim which, on the Effective Date, would
have included the aggregate of all Allowed Claims classified as "Class 4C" under
this Plan and Allowed Claims classified as Class 4E and Class 4F under this Plan
and (b) such claimholder's "pro rata share" of net earnings (including cash
dividends, if any, and interest) from the Disputed Unsecured Claims Reserve on
such Allowed Claim. For purposes of the immediately preceding sentence, such
holder's "pro rata share" of net earnings shall be calculated by multiplying the
amount of net earnings (including an appropriate reserve for expenses for such
earnings) in the Disputed Unsecured Claims Reserve on the date immediately
preceding the date on which such Allowed Claim is to be paid by a fraction, the
numerator of which shall equal the amount of such Allowed Claim and the
denominator of which shall equal the amount of all Disputed Claims for which
deposits are being held in the Disputed Unsecured Claims Reserve on the date
immediately preceding the date on which such Allowed Claim is to be paid.
Following any distribution from the Disputed Unsecured Claims Reserve said
reserves will be adjusted accordingly. At least thirty (30) days prior to the
distribution out of the Disputed Claims Reserve, the holder of any Claim that
will be treated as an Allowed Claim under either Class 4A or 4C will be given
notice of its opportunity to elect treatment under Class 4A-Option A or Class
4A-Option B or Class 4C-Option A or Class 4C-Option B, as the case may be. Such
election shall be made by the holder of such Allowed Claim within 10 days of
receipt of notice. If a timely election is not made by the holder of the Allowed
Class 4A or 4C Claim, then such holders shall be deemed to have elected "Option
A".
(c) Disallowed Disputed Unsecured Claims. To the extent that, after the
Effective Date, a Disputed Unsecured Claim in Classes 4A and 4C (including any
Claim of a Non-Settling Former Preferred Stockholder asserted in connection with
the Old Preferred Stock) is disallowed and expunged, in whole or in part, then
an amount reserved in the Disputed Unsecured Claims Reserve equal to the
disallowed portion of such Disputed Claim shall be reallocated and distributed
as follows: The undistributed Reserved Securities (including dividends issued in
kind, if any) and Cash (including net earnings, interest and dividends, if any)
reserved in respect of such Disallowed Claim shall be reallocated and any and
all payments in respect of such Reserved Securities and Cash in the Disputed
Unsecured Claims Reserve shall be distributed to the holders of Allowed
Unsecured Claims in Classes 4A, 4C, and 4E in an amount equal to the Reserved
Securities and Cash that would have been distributed to such holders had such
Disputed Unsecured Claims in Classes 4A and 4C (including any Claim of a
Non-Settling Former Preferred Stockholder asserted in connection with the Old
Preferred Stock) been disallowed Unsecured Claims as of the Effective Date. Such
reallocation and distribution shall be made on the sixth month after the
Effective Date and every six months thereafter until all Disputed Claims have
been allowed or expunged, in whole or in part, and no reallocation and
distribution shall be made prior thereto. To the extent that the holder elects
treatment under Class 4A-Option B or Class 4C- Option B, the Reserved Securities
(including interest and dividends paid thereon after the Effective Date) shall
be revested with Reorganized Metallurg.
ARTICLE XII
CERTAIN MATTERS RELATING TO THE
DEBTORS AND THEIR SUBSIDIARIES
12.1 Intercompany Claims. On the Effective Date all Intercompany Claims
shall be offset and any balance payable by any of the Debtors shall be
eliminated and no distributions shall be made on account thereof.
12.2 Subsidiary Guarantees. All claims based upon guarantees of
collection, payment or performance of any obligation of the Debtors made by any
Subsidiary which is not a Debtor and all claims against any such Subsidiary for
which any of the Debtors are jointly or severally liable, in each case which
arise at any time prior to the Confirmation Date, except as otherwise provided
for in this Plan, shall be discharged, released, extinguished and of no further
force and effect.
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ARTICLE XIII
PROVISIONS REGARDING CORPORATE
GOVERNANCE OF THE REORGANIZED DEBTORS
13.1 General. On the Effective Date, the management, control and
operation of the Reorganized Debtors shall become the general responsibility of
the respective Boards of Directors of the Reorganized Debtors, who shall,
thereafter, have the responsibility for the management, control and operation of
the Reorganized Debtors.
13.2 Meetings of Stockholders. The first annual meeting of the
stockholders of Reorganized Metallurg shall be held on a date to be selected by
the Board of Directors of Reorganized Metallurg in accordance with the Articles
of Incorporation and Bylaws of Reorganized Metallurg, and subsequent meetings of
the stockholders of Reorganized Metallurg shall be held at least once annually
each year thereafter in accordance with the Articles of Incorporation and Bylaws
of Reorganized Metallurg.
13.3 Directors and Officers of Reorganized Debtors.
(a) Boards of Directors.
(i) Reorganized Metallurg. The initial Board of Directors of
Reorganized Metallurg shall consist of at least five but no more than
seven members (at least two of which shall be nominated by current
management of MI) whose names shall be disclosed prior to the hearing to
consider confirmation of the Plan. The Committee shall nominate the
remaining members on or prior to the hearing to consider Confirmation of
the Plan. Each of the members of such initial Board of Directors shall
serve until the first annual meeting of stockholders of Reorganized
Metallurg or their earlier resignation or removal in accordance with the
Articles of Incorporation or Bylaws of Reorganized Metallurg.
(ii) Reorganized SMC. The initial Board of Directors of
Reorganized SMC shall consist of members appointed by the Board of
Directors of Reorganized Metallurg whose names shall be disclosed prior
to or at the hearing to consider confirmation of the Plan. Each of the
members of such initial Board of Directors shall serve until the first
meeting of stockholders of Reorganized SMC or their earlier resignation
or removal in accordance with the Articles of Incorporation or Bylaws of
Reorganized SMC.
(b) Officers. The officers of the respective Debtors immediately prior
to the Effective Date shall serve as the initial officers of the respective
Reorganized Debtors on and after the Effective Date in accordance with any
employment agreement with the Reorganized Debtors and applicable nonbankruptcy
law.
13.4 Articles of Incorporation and Bylaws. The Articles of Incorporation
and Bylaws of Reorganized Metallurg shall be amended and restated in
substantially the form included in the Plan Supplement. The Articles of
Incorporation and Bylaws of the Reorganized SMC shall be amended and restated in
substantially the form included in the Plan Supplement. Each of the foregoing
shall be amended and restated as of the Effective Date to the extent necessary
(a) to prohibit the issuance of nonvoting equity securities as required by
section 1123(a)(6) of the Bankruptcy Code, subject to further amendment of such
Articles of Incorporation as permitted by applicable law, and (b) to effectuate
the provisions of the Plan, in each case without any further action by the
stockholders or directors of the Debtors, the Debtors in Possession or the
Reorganized Debtors.
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13.5 Issuance of New Securities by Reorganized Metallurg.
(a) Authorization. The issuance of the following securities and
notes by Reorganized Metallurg is hereby authorized pursuant to the terms as set
forth in Exhibit A to this Plan without further act or action under applicable
law, regulation, order, or rule:
(i) 15,000,000 shares of New Common Stock, of which
approximately 5,000,000 shares shall be issued and
distributed pursuant to the Plan (as adjusted pursuant
to this Section 13.5);
(ii) the New Secured Notes.
(b) Amount. For purposes of Sections 5.11, 5.12, 5.13, 5.15, and
5.16 of this Plan, the number of shares of New Common Stock available for
distribution shall be 5,000,000 shares (inclusive of the Management Stock
Awards). In the event that any Settling Former Preferred Stockholder elects the
FPS Settlement Cash Option, the distribution of New Common Stock to holders of
Allowed Unsecured Claims of MI (Class 4A) and Allowed Canadian Guarantee Claims
(Class 4B) will be reallocated (proportionately by the MI Unsecured Portion of
New Common Stock and Canadian Guarantee Portion of New Common Stock,
respectively) by the amount of the New Common Stock which is not distributed to
the Settling Former Preferred Stockholders who elect the FPS Settlement Cash
Option.
The amount of New Secured Notes shall be reduced by: (i) the
principal amount of the New Secured Notes that would have been distributed to
holders of Allowed Class 4F Claims, had they been classified as holders of
Allowed Claims in "Class 4C" that as of the Effective Date would have included
the aggregate of all Allowed Claims classified as "Class 4C" under this Plan and
all Allowed Claims classified as Classes 4E and 4F under this Plan; and (ii) the
principal amount of the New Secured Notes that would have been distributed to
holders of Allowed Claims in Classes 4A, 4B and 4C that elect "Option B," as
provided in Sections 5.11(b), 5.12(b), and 5.13(b), respectively. In the event
that Cash in the Cash Distribution Pool is less than the Target Amount on the
Effective Date, the principal amount of the promissory notes shall be increased
by the difference equal to the Target Amount less the Cash in the Cash
Distribution Pool, which difference is not to exceed $5 million. In the event
the Reorganized Debtors or their Subsidiaries borrow funds under one or more
term loan or revolving credit facilities, the proceeds thereof may be used to
reduce on a dollar for dollar basis the principal amount of the New Secured
Notes in lieu of issuing such New Secured Notes on the Effective Date.
ARTICLE XIV
EFFECT OF CONFIRMATION OF PLAN
14.1 Revesting of Assets.
(a) The property of the Estates of the Debtors shall revest in the
Reorganized Debtors on the Effective Date.
(b) From and after the Effective Date, the Reorganized Debtors may
operate their businesses, and may use, acquire, and dispose of property free of
any restrictions of the Bankruptcy Code.
(c) As of the Effective Date, all property of the Debtors shall be free
and clear of all Claims and interests of holders of Claims and Equity Interests,
except as expressly provided for in the Plan.
(d) Any rights or causes of action accruing to the Debtors and Debtors
in Possession shall remain assets of the Estates of the Reorganized Debtors,
except as set forth in Section 14.3 of the Plan.
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14.2 General Discharge of and Release from Claims and Interests.
(a) Except as expressly otherwise provided in this Plan, the
distributions and rights afforded in this Plan shall be in complete and full
satisfaction, discharge and release, effective as of the Effective Date, of all
Claims against and Equity Interests in the Debtors or any of their assets or
properties of any nature whatsoever. Commencing on the Effective Date, except as
expressly otherwise provided in this Plan, all holders of Claims and Equity
Interests shall be precluded forever from asserting against the Debtors, the
Debtors in Possession, the Committee and its members, including but not limited
to their respective directors, officers, shareholders, agents, consultants,
representatives, financial advisors, attorneys, or employees, or their
respective assets and properties, any other or further liabilities, liens,
Claims, encumbrances, obligations, or equity interests, including but not
limited to all principal and accrued and unpaid interest on the debts of the
Debtors based on any act or omission, transaction or other activity or security
instrument or other agreement of any kind or nature occurring, arising or
existing prior to the Effective Date, that was or could have been the subject of
any Claim or Equity Interest, whether or not Allowed.
(b) The obligations of the Debtors and their Subsidiaries to First
National Bank of Boston, including but not limited to the Claim or Claims of
First National Bank of Boston, arising from that certain Debtor In Possession
Loan Agreement, dated September 2, 1993, as amended, and any orders entered by
the Bankruptcy Court in connection therewith, shall not be discharged upon entry
of the Confirmation Order.
(c) On and after the Confirmation Date, as to every discharged Claim,
every holder of a Claim shall be precluded from asserting against the Debtors or
their assets or properties any further Claim based on any document, instrument
or act, omission, transaction or other activity of any kind or nature that
occurred prior to the Effective Date.
14.3 Releases of Claims and Injunction. Pursuant to Bankruptcy Rule
9019, confirmation of the Plan shall constitute, and all consideration
distributed under this Plan shall be in exchange for and in complete
satisfaction, settlement, discharge and release of and an injunction against,
all as of the Effective Date, any and all Claims, demands, allegations or causes
of action, including any interest accrued on such Claims from and after the
Commencement Date, against the Debtors, the Debtors in Possession, the Committee
and its members, including but not limited to their respective directors,
officers, shareholders, agents, consultants, representatives, financial
advisors, attorneys, or employees for any liability for actions taken or omitted
to be taken in good faith under or in connection with the Plan or in connection
with the Chapter 11 Cases or the operation of the Debtors during the pendency of
the Chapter 11 Cases that accrued on or prior to the Effective Date and which
may be asserted by or through the Debtors or by and through any or all holders
of Claims or Equity Interests, whether known or unknown.
14.4 Avoidance Powers. From and after the Effective Date of the Plan, to
the extent not otherwise adjudicated or settled prior to or as part of the Plan,
any and all Claims, demands, allegations and/or causes of action that the
Debtors as Debtors in Possession may assert against Creditors pursuant to
sections 544, 547, 548, and 550 of the Bankruptcy Code, are hereby waived;
provided, however, that such Claims, demands, allegations and/or causes of
action of the Debtors against any holder of a Claim may be used by the Debtors,
at their option, to offset or otherwise defend against any Claim of and
corresponding payment due to such holder of a Claim under the Plan.
14.5 Rights of Action. Pursuant to section 1123(b)(3) of the Bankruptcy
Code, except as specifically provided in Article XI of this Plan and in this
Article XIV, the Debtors will retain, and the Reorganized Debtors will have the
exclusive right to enforce, any and all present or future rights or causes of
action against any Person and rights of the Debtors that arose before or after
the Commencement Date, including but not limited to the rights and powers of a
trustee and debtor in possession, against any Person whatsoever, including but
not limited to all avoidance powers granted to the Debtors under the Bankruptcy
Code and all causes of action and remedies granted pursuant to sections 502,
510, 541, 544, 545, 547 through 551, and 553 of the Bankruptcy Code, other than
those specifically compromised as part of this Plan or previously waived by the
Debtors, and any act to enforce coverage under insurance policies issued to the
Debtors prior to the Commencement Date.
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ARTICLE XV
EFFECTIVENESS OF THE PLAN
15.1 Conditions Precedent to Confirmation. It shall be a condition
precedent to confirmation of this Plan that, on or before the Confirmation Date:
(a) The allowed amount of Unsecured Claims asserted against MI
(excluding Claims of Former Preferred Stockholders) in Class 4A shall
not exceed $142 million.
(b) The allowed amount of Unsecured Claims asserted against SMC
in Class 4C shall not exceed $133 million.
(c) The allowed amount of Administrative Expense Claims asserted
against MI and SMC (including Claims of professionals for services
rendered and expenses incurred) shall not exceed $10 million.
(d) The Clerk of the Bankruptcy Court shall have entered the
Confirmation Order, which shall, among other things:
(i) decree that the Confirmation Order shall supersede
any Bankruptcy Court orders issued prior to the Confirmation
Date that may be inconsistent with the Confirmation Order;
(ii) authorize the implementation of the Plan in
accordance with its terms;
(iii) provide that any transfers effected or to be
effected under this Plan shall be and are exempt from New York
State and New York City transfer taxes, mortgage recording
taxes, and any stamp or similar tax under section 1146(c) of the
Bankruptcy Code;
(iv) provide for approval of each of the Environmental
Settlement Agreements pursuant to Bankruptcy Rule 9019; and
(v) provide for approval of the FPS Settlement pursuant
to Bankruptcy Rule 9019.
15.2 Conditions Precedent to Consummation. The Plan shall not become
effective unless and until:
(a) The Confirmation Order with respect to such Plan shall have
become a Final Order.
(b) The Environmental Settlement Agreements shall have been
entered into by the parties thereto and shall have become final.
(c) MI and SMC shall have obtained a commitment to provide the
Reorganized Debtors with a working capital line of credit in the amount
of at least $20,000,000, which may be secured by a first lien on all of
the assets of Reorganized Metallurg and Reorganized SMC. Such working
capital facility shall include a letter of credit subfacility and a
foreign exchange facility, in each instance in amounts acceptable to the
Reorganized Debtors.
(d) All financing provided to the Debtors pursuant to section
364 of the Bankruptcy Code shall have been repaid, cash-collateralized
as provided in the Debtor In Possession Loan Agreement, dated September
2, 1993, as amended, or replaced, or other arrangements satisfactory to
the lenders providing such financing, the Debtors and the Committee,
regarding the termination of such financing shall have been made.
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(e) Reorganized Metallurg shall have entered into employment
contracts with its current senior management on terms and conditions
satisfactory to Reorganized Metallurg and members of senior management.
(f) Guaranties of the Debtors' obligations made by any
Subsidiary shall be released.
(g) Reorganized Metallurg shall have established a Management
Stock Award and Stock Option Plan as defined herein to be satisfactory
to current senior management.
(h) The Bankruptcy Court shall have entered a Final Order
decreeing that the transfers of property by the applicable Debtor (i)
are or will be legal, valid and effective transfers of property; (ii)
vest or will vest in the applicable Reorganized Debtor good title to
such property free and clear of all liens, charges, claims,
encumbrances, or interests, except as expressly provided in such Plan;
(iii) do not and will not constitute avoidable transfers under the
Bankruptcy Code or under applicable nonbankruptcy law; and (iv) do not
and will not subject the applicable Reorganized Debtor to any liability
by reason of such transfer under the Bankruptcy Code or under applicable
nonbankruptcy law, including, without limitation, any laws affecting
successor or transferee liability.
(i) The Bankruptcy Court shall have entered a Final Order
decreeing that the applicable Debtor is discharged effective on the
Effective Date from any Claim and any "debt" (as that term is defined in
section 101(12) of the Bankruptcy Code), and such Debtor's liability in
respect thereof is extinguished completely, whether reduced to judgment
or noncontingent, asserted or unasserted, fixed or not, matured or
unmatured, disputed or undisputed, legal or equitable or known or
unknown that arose from any agreement of such Debtor entered into or
obligation of such Debtor incurred before the Effective Date, or from
any conduct of either of the Debtors prior to the Effective Date, or
that otherwise arose before the Effective Date, including, without
limitation, all interest, if any, on any such debts, whether such
interest accrued before or after the Commencement Date, except for such
Claims that are to be specifically assumed or reinstated under the Plan.
(j) The Bankruptcy Court shall have determined that such Plan is
feasible and does not provide for the liquidation of all or
substantially all of the property of the applicable Debtor's estates,
and its confirmation is not likely to be followed by the liquidation of
the applicable Reorganized Debtor or the need for further financial
reorganization.
(k) All other steps necessary to effectuate the Plan shall have
been taken.
(l) No request for revocation of the Confirmation Order under
section 1144 of the Bankruptcy Code shall have been made and not denied.
(m) On the Effective Date, the operation of Reorganized
Metallurg shall become the general responsibility of the board of
directors, who shall, thereafter, have the responsibility of the
management, control, and operation of Reorganized Metallurg. The initial
board of directors of Reorganized Metallurg shall have been selected in
accordance with Section 13.3 of this Plan.
(n) On the Effective Date, the operation of Reorganized SMC
shall become the general responsibility of the board of directors, who
shall, thereafter, have the responsibility of the management, control,
and operation of SMC. The members of the initial board of directors of
SMC shall have been selected in accordance with Section 13.3 of this
Plan.
(o) Cash in the Cash Distribution Pool shall be equal to at
least $25 million.
(p) The Environmental Letters of Credit shall have been drawn
upon in full and the proceeds deposited in trust in accordance with the
Environmental Settlement Agreements.
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(q) The Other Letters of Credit shall have been drawn upon in
full and the proceeds shall have been either (i) deposited in trust with
the beneficiaries thereof or (ii) repaid to the Debtors and the Debtors
shall have issued replacement letters of credit.
15.3 Waiver of Conditions. The Debtors and the Committee may waive, by a
writing signed by an authorized representative of each, any of the conditions to
effectiveness of the Plan set forth in Section 15.1 and 15.2 of the Plan, other
than those set forth in Section 15.2(d). If the conditions precedent under
Section 15.2 of this Plan fail to occur and are not waived by the Debtors and
the Committee within ninety (90) days after the Confirmation Order is issued,
then (i) the Confirmation Order will be vacated, (ii) no distributions will be
made under the Plan, (iii) the Debtors and all holders of Claims and Equity
Interests will be returned to the status quo ante and (iv) all of the Debtors'
obligations with respect to the Claims and Equity Interests will remain
unchanged.
15.4 Effective Date. The Effective Date of the Plan shall occur, and the
Plan shall take effect, on the first Business Day that is ten (10) days (as
calculated in accordance with Bankruptcy Rule 9006(a)) after the Confirmation
Date, or as soon thereafter as practicable, and in any event on a date on which
no stay of the Confirmation Order is in effect. If the Confirmation Order is
stayed, the Effective Date shall be eleven (11) days after such stay is
dissolved by a Final Order, or as soon thereafter as practicable.
Notwithstanding the foregoing, the Effective Date shall not occur until such
time as all of the conditions specified in this Section 15 of the Plan have been
satisfied or waived.
ARTICLE XVI
RETENTION OF JURISDICTION
16.1 The Bankruptcy Court shall have exclusive jurisdiction of all
matters arising out of, and related to, the Chapter 11 Cases and the Plan
pursuant to, and for the purposes of, sections 105(a) and 1142 of the Bankruptcy
Code and for, among other things, the following purposes:
(a) To hear and determine pending applications for the
assumption or rejection of Executory Contracts, if any are pending, and
the allowance of Claims resulting therefrom;
(b) To determine any and all pending adversary proceedings,
motions, applications, and contested matters.
(c) To hear and determine any objection to Administrative
Expense Claims or to Claims;
(d) To enter and implement such orders as may be appropriate in
the event the Confirmation Order is for any reason stayed, revoked,
modified, or vacated;
(e) To issue such orders in aid of execution of the Plan, to the
extent authorized by section 1142 of the Bankruptcy Code;
(f) To consider any modifications of the Plan, to cure any
defect or omission, or reconcile any inconsistency in any order of the
Bankruptcy Court, including, without limitation, the Confirmation Order;
(g) To hear and determine all applications for compensation and
reimbursement of expenses of professionals under sections 330, 331, and
503(b) of the Bankruptcy Code;
(h) To hear and determine disputes arising in connection with
the interpretation, implementation, or enforcement of the Plan;
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(i) To recover all assets of the Debtors and property of the
estate, wherever located, including any action to enforce coverage under
insurance policies issued to the Debtors prior to the Commencement Date;
(j) To hear and determine matters concerning state, local, and
federal taxes in accordance with sections 346, 505, and 1146 of the
Bankruptcy Code;
(k) To hear and determine disputes arising in connection with
the interpretation, implementation, or enforcement of the FPS
Settlement;
(l) To hear and determine disputes arising in connection with
the interpretation, implementation, or enforcement of the Environmental
Settlement Agreements;
(m) To hear any other matter not inconsistent with the
Bankruptcy Code; and
(n) To enter a final decree closing the Chapter 11 Cases.
ARTICLE XVII
ACCEPTANCE OR REJECTION OF PLAN
17.1 Acceptance by a Class of Creditors. Consistent with section 1126(c)
of the Bankruptcy Code and except as provided for in section 1126(e) of the
Bankruptcy Code, a Class of creditors shall have accepted the Plan if it is
accepted by at least two-thirds in dollar amount and more than one-half in
number of the holders of Allowed Claims of such Class that have timely and
properly voted to accept or reject the Plan.
17.2 Impaired Classes to Vote. Each impaired Class of Claims shall be
entitled to vote separately to accept or reject the Plan.
17.3 Cram Down. In the event that any impaired class shall fail to
accept the Plan in accordance with section 1129(a) of the Bankruptcy Code, the
Debtors shall utilize the provisions of section 1129(b) of the Bankruptcy Code
to satisfy the requirements for confirmation of the Plan.
ARTICLE XVIII
MISCELLANEOUS PROVISIONS
18.1 Effectuating Documents and Further Transactions. Each of the
President, the Vice President, Finance, the Secretary and the Treasurer of each
of the Debtors and each of the Reorganized Debtors is authorized in accordance
with their authority under the resolutions of the respective Boards of Directors
of the Debtors or Reorganized Debtors, as the case may be, to execute, deliver,
file, or record such contracts, instruments, releases, indentures and other
agreements or documents and take such actions as may be necessary or appropriate
to effectuate and further evidence the terms and conditions of the Plan and any
notes or securities issued pursuant to the Plan.
18.2 Exemption from Transfer Taxes. Pursuant to section 1146(c) of the
Bankruptcy Code, the issuance, transfer or exchange of notes or equity
securities under the Plan, the creation of any mortgage, deed of trust or other
security interest, the making or assignment of any lease or sublease, or the
making or delivery of any deed or other instrument of transfer under, in
furtherance of, or in connection with the Plan, including, without limitation,
any merger agreements or agreements of consolidation, deeds, bills of sale or
assignments executed in connection with any of the transactions contemplated
under the Plan, including but not limited to the sale of those certain buildings
located at 23 East 39th Street, New York, New York;
33
<PAGE>
25 East 39th Street, New York, New York; and 27-29 East 39th Street, New York,
New York, respectively, and that certain real property located at 3690 North
West Boulevard, Vineland, New Jersey and further including, without limitation,
the sale of any assets of one or both of the Debtors and/or Reorganized Debtors
contemplated in connection with the New Secured Notes, shall not be subject to
any stamp, real estate transfer, mortgage recording or other similar tax whether
transaction occurs prior to or subsequent to the Effective Date.
18.3 Exculpation. Neither the Reorganized Debtors nor the Committee nor
any of their respective members, officers, directors, employees, advisors or
agents shall have or incur any liability to any holder of a Claim or Equity
Interest for any act or omission in connection with, or arising out of, the
pursuit of confirmation of the Plan, the consummation of the Plan or the
administration of the Plan or the property to be distributed under the Plan
except for willful misconduct or gross negligence, and, in all respects, the
Reorganized Debtors, the Committee and each of their respective members,
officers, directors, employees, advisors and agents shall be entitled to rely
upon the advice of counsel with respect to their duties and responsibilities
under the Plan.
18.4 Committee.
(a) Power to Negotiate Intercreditor Agreements. The Committee shall
have the power and authority to negotiate any intercreditor agreements with any
financial institutions which provide exit financing to the Debtors in the form
of a working capital, term loan or revolving credit facility.
(b) Termination. The appointment of the Committee shall terminate on the
later of (i) the Effective Date, (ii) the date of the hearing to consider
applications for final allowances of compensation and reimbursement of expenses,
and (iii) the disallowance and/or resolution, pursuant to a Final Order, of all
Claims of Non-Settling Former Preferred Stockholders asserted in connection with
preferred stock of MI.
18.5 Amendment or Modification of the Plan; Severability.
(a) The Plan Proponents may alter, amend, modify or withdraw the Plan at
any time, subject, however, to section 1127 of the Bankruptcy Code.
(b) In the event that the Bankruptcy Court determines, prior to the
Confirmation Date, that any provision in the Plan is invalid, void or
unenforceable, such provision shall be invalid, void or unenforceable with
respect to the holder or holders of such Claims or Equity Interests as to which
the provision is determined to be invalid, void or unenforceable. The
invalidity, voidness or unenforceability of any such provision shall in no way
limit or affect the enforceability and operative effect of any other provision
of the Plan.
18.6 Revocation or Withdrawal of the Plan.
(a) The Plan Proponents reserve the right to revoke or withdraw the Plan
prior to the Confirmation Date.
(b) If the Plan Proponents revoke or withdraw the Plan prior to the
Confirmation Date, or if the Confirmation Date or the Effective Date does not
occur, then the Plan shall be deemed null and void. In such event, nothing
contained herein shall be deemed to constitute a waiver or release of any claims
by or against the Debtors or any other Person or to prejudice in any manner the
rights of the Debtors or any Person in any further proceedings involving the
Debtors.
18.7 Binding Effect. The Plan shall be binding upon and inure to the
benefit of the Debtors, the holders of Claims and Equity Interests, and their
respective successors and assigns.
34
<PAGE>
18.8 Notices.
(a) Any notices or requests in connection with the Plan shall be in
writing and served either by (i) certified mail, return receipt requested,
postage prepaid, (ii) hand delivery, or (iii) reputable overnight delivery
service, freight prepaid, and will be deemed to have been given when received by
mail addressed to the following parties:
Metallurg, Inc.
27 East 39th Street
New York, New York 10016
Attn: Eric L. Schondorf, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: John J. Rapisardi, Esq.
Official Committee of Unsecured Creditors
c/o Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Lawrence Handelsman, Esq.
(b) All notices and requests to any Person, and all distributions to
holders of Allowed Claims, shall be sent to them at their last known address or
to the last known address of their attorney of record and shall be deemed to
have been given when mailed to such address. The Debtors and any Person may
designate in writing any other address for purposes of this Section 18.8(b)
which designation will be effective upon actual receipt.
18.9 Governing Law. Except to the extent the Bankruptcy Code or
Bankruptcy Rules are applicable, the rights and obligations arising under this
Plan shall be governed by, and construed and enforced in accordance with, the
laws of the State of New York, without giving effect to the principles of
conflicts of law thereof.
18.10 Withholding and Reporting Requirements. In connection with the
Plan and all instruments issued in connection therewith and distributions
thereon, the Debtors or the Reorganized Debtors, as the case may be, shall
comply with all withholding and reporting requirements imposed by any federal,
state, local, or foreign taxing authority and all distributions hereunder shall
be subject to any such withholding and reporting requirements.
18.11 Plan Supplement. Forms of the documents relating to the New
Secured Notes and the New Secured Note Indenture described in the Plan, the
amended and restated Articles of Incorporation and Bylaws of the Reorganized
Debtors, and the Environmental Settlement Agreements shall be contained in the
Plan Supplement and filed with the Clerk of the Bankruptcy Court at least ten
days prior to the hearing on confirmation of the Plan. Upon its filing with the
Court, the Plan Supplement may be inspected in the office of the Clerk of the
Bankruptcy Court during normal court hours. Holders of Claims or Equity
Interests may obtain a copy of the Plan Supplement upon written request to MI in
accordance with Section 18.8 of the Plan.
18.12 Headings. Headings are used in the Plan for convenience and
reference only, and shall not constitute a part of the Plan for any other
purpose.
18.13 Construction. The rules of construction used in section 102 of the
Bankruptcy Code shall apply to the construction of the Plan.
35
<PAGE>
18.14 Exhibits. All Exhibits to the Plan, and the Plan Supplement, are
incorporated into and are a part of the Plan as if set forth in full herein.
18.15 Filing of Additional Documents. On or before substantial
consummation of the Plan, the Debtors shall file with the Bankruptcy Court such
agreements and other documents as may be necessary or appropriate to effectuate
and further evidence the terms and conditions of the Plan.
36
<PAGE>
18.16 Execution of Additional Documentation. The Debtors or Reorganized
Debtors, as applicable, shall execute and deliver any and all documents and take
such other action necessary to implement and consummate the terms and provisions
of the Plan.
Dated: New York, New York
December 18, 1996
METALLURG, INC.
By: /s/ Eric L. Schondorf
-------------------------------
Name: Eric L. Schondorf
Title: Vice President and
General Counsel
SHIELDALLOY METALLURGICAL CORPORATION
By: /s/ Barry C. Nuss
------------------------------
Name: Barry C. Nuss
Title: Secretary
/s/ John J. Rapisardi,
- - ---------------------------------
John J. Rapisardi, Esq. (JR 7781)
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue New York, New York 10153
(212) 310-8000
Attorneys for the Debtors
in Possession
37
<PAGE>
Schedule 10.1(a) to Plan
Executory Contracts To Be Assumed Under The Plan
To be filed with the Bankruptcy Court no later than ten (10) days prior to the
Confirmation Hearing.
<PAGE>
Schedule 10.1(b) to Plan
Executory Contracts To Be Rejected Under The Plan
To be filed with the Bankruptcy Court no later than ten (10) days prior to the
Confirmation Hearing.
<PAGE>
EXHIBIT A TO JOINT PLAN OF REORGANIZATION
FOR METALLURG, INC. AND
SHIELDALLOY METALLURGICAL CORPORATION
SUMMARY OF PROPOSED TERMS
Capitalized terms, unless defined herein or in the Joint Plan of Reorganization,
shall have the meanings set forth in Schedule I hereto.
SECURED NOTES (THE "NOTES")
ISSUER: Reorganized Metallurg
TRUSTEE: To be selected by Reorganized Metallurg (the "Trustee").
GUARANTOR: Reorganized SMC
PRINCIPAL: $60 million less the amount of cash in excess of the $30 Million
Target Amount distributed on the Effective Date. In the event that
the Cash in the Cash Distribution Pool is less than the Target
Amount, the principal amount of the New Senior Notes will be
increased by the difference equal to the Target Amount less the Cash
in the Cash Distribution Pool, which difference is not to exceed $5
million. Such principal amount shall be otherwise adjusted in
accordance with the terms of the Plan.
COUPON: Interest fixed at at a rate to be determined in accordance with the
Plan (not to exceed 12%) will be payable semi-annually in arrears.
Interest will accrue commencing the earlier of July 1, 1996 and the
Effective Date (such interest to be calculated on the basis of 365
or 366 days).
MATURITY: Ten years from the Effective Date.
SECURITY
All assets of Reorganized Metallurg (with a second lien on those
assets pledged pursuant to the post-confirmation working capital facility, i.e.,
accounts receivable and inventory) and a second lien on 100% of the stock of
Reorganized SMC and 66-2/3% less one share of the stock of all nondomestic
subsidiaries of Reorganized Metallurg.
OPTIONAL REDEMPTION
The Notes will be redeemable, at Reorganized Metallurg's option, in
whole or in part, at any time or from time to time, prior to maturity, upon not
less than 30 nor more than 60 days' prior notice, at 103% of the principal
amount , plus accrued and unpaid interest, if any, to the Redemption Date, if
redeemed during the 36-month period
<PAGE>
commencing the earlier of July 1, 1996 and Effective Date, and thereafter at
100% of the principal amount plus accrued and unpaid interest, if any, to the
Redemption Date.
MANDATORY REDEMPTION/OFFER TO PURCHASE
Reorganized Metallurg will be required to make a mandatory
redemption or sinking fund payments in respect of the Notes as follows:
Date Sinking Fund Payment.
---- ---------------------
Seventh anniversary of Effective Date $2,500,000
Eighth anniversary of Effective Date $2,500,000
Ninth anniversary of Effective Date $2,500,000
However, (i) upon the occurrence of a Change of Control, Reorganized
Metallurg will be required to make a mandatory offer to purchase of the entire
remaining balance of the New Secured Notes, and (ii) in the event that cash
proceeds are received by Reorganized Metallurg in respect of an Asset Sale,
Reorganized Metallurg will be required to make a mandatory offer to purchase of
100% of the principal amount equal to Excess Net Cash Proceeds.
COVENANTS
The indenture (the "Indenture") governing the Notes shall contain,
in addition to customary covenants, the following affirmative and negative
covenants.
Reporting Requirements
Whether or not required by the rules and regulations of the
Securities and Exchange Commission ("SEC"), so long as any Notes are
outstanding, Reorganized Metallurg shall furnish to the Trustee and the holders
of such Notes, within 15 days after it would have been required to file such
information with the SEC pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 (the "Exchange Act"), all quarterly and annual financial
information that would have been required to have been contained in a filing
with the SEC on Forms 10-Q and 10-K if Reorganized Metallurg were subject to the
reporting requirements of the Exchange Act.
Limitation on Additional Indebtedness
Reorganized Metallurg will not, and will not permit any Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty
or otherwise become directly or indirectly liable, contingently or otherwise, or
otherwise become responsible for (collectively, "incur"), any Indebtedness for
borrowed money, other than Permitted Indebtedness; provided, however, that
Reorganized Metallurg or its Restricted Subsidiary may incur Indebtedness for
borrowed money if, after giving effect thereto, the Fixed Charge Coverage Ratio
of Reorganized Metallurg for the four fiscal quarter period ending immediately
prior to the date of determination would have been at least 1.5 to 1.0 after
giving pro forma effect to such incurrence or issuance.
2
Term Sheet -- Plan of Reorganization
<PAGE>
An Unrestricted Subsidiary may incur Indebtedness for borrowed money
in connection with the acquisition by such Unrestricted Subsidiary of the
business, property or assets of, or the Capital Stock or other evidence of
ownership of, any other Person, entity or business only if the recourse of the
holder or holders of such Indebtedness is entirely to the business, property or
assets of such Unrestricted Subsidiary or acquired Person, entity or business
and neither Reorganized Metallurg nor any Restricted Subsidiary has any
liability with respect thereto.
Limitation on Liens
Reorganized Metallurg will not, directly or indirectly, create,
incur, assume or suffer to exist any Lien upon any of its assets or property now
owned or hereafter acquired by it, except for: (i) Liens existing on the
Effective Date (the "Existing Liens"); and (ii) Permitted Liens.
Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries
Reorganized Metallurg will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to: (i) pay dividends or make any
other distributions to Reorganized Metallurg or any of its Restricted
Subsidiaries (x) on its Capital Stock or (y) with respect to any other interest
or participation in, or measured by, its profits; (ii) pay any Indebtedness or
other obligations owed to Reorganized Metallurg or any Restricted Subsidiary;
(iii) make loans or advances to Reorganized Metallurg or any Restricted
Subsidiary; (iv) transfer any of its property or assets to Reorganized Metallurg
or any Restricted Subsidiary; (v) grant Liens on the assets in favor of the
holders of Notes; or (vi) guarantee the Notes or any renewals or refinancings
thereof, except for such encumbrances or restrictions existing under or by
reason of: (A) applicable law, (B) restrictions contained in agreements in
effect on the Issue Date and (C) Permitted Indebtedness of Reorganized Metallurg
and its Restricted Subsidiaries and Refinancing Indebtedness with respect
thereto that satisfies the requirements of clause (v) of the definition of
"Permitted Indebtedness".
Limitation on Restricted Payments
Reorganized Metallurg will not, nor will any Restricted Subsidiary:
(i) declare or pay any dividend or make any distribution on account of
Reorganized Metallurg's Capital Stock (other than dividends or distributions
payable in Capital Stock of Reorganized Metallurg (other than Disqualified
Stock)); (ii) purchase, redeem or otherwise acquire or retire for value any of
Reorganized Metallurg's Capital Stock; (iii) make any principal payment on,
purchase, redeem, retire, defease, prepay, decrease or otherwise acquire or
retire for value prior to a scheduled final maturity, scheduled repayment or
scheduled mandatory payment date (including pursuant to mandatory repurchase
covenants) or maturity date any Indebtedness subordinated to the Notes of
Reorganized Metallurg or (iv) make any Restricted Investments in any Person;
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments") if, after giving effect
to such Restricted Payment:
3
Term Sheet -- Plan of Reorganization
<PAGE>
(1) a Default or Event of Default has occurred and is
continuing; or
(2) Reorganized Metallurg could not incur at least $1.00
of additional Indebtedness in compliance with the "Limitation
on Additional Indebtedness" covenant; or
(3) the aggregate amount expended for all Restricted
Payments subsequent to the Effective Date (the amount of such
expenditures, if other than cash, to be reasonably determined
in good faith by the board of directors of Reorganized
Metallurg) exceeds the sum of (i) 50% of the aggregate
Consolidated Net Income of Reorganized Metallurg calculated on
a cumulative basis for the period from the Effective Date to
the last day of Reorganized Metallurg's fiscal quarter
immediately preceding Reorganized Metallurg's fiscal quarter
in which the Restricted Payment is proposed to be made plus
(ii) the aggregate net proceeds, including cash and the fair
market value of property other than cash (as determined in
good faith by the board of directors of Reorganized Metallurg)
received by Reorganized Metallurg from (x) the issuance after
the Effective Date of Capital Stock of Reorganized Metallurg
(other than Disqualified Stock) and (y) upon the exercise
after the Effective Date of any options, warrants or other
rights to acquire the Capital Stock of Reorganized Metallurg.
The foregoing limitations on Restricted Payments shall not
prohibit:
(a) the payment of any dividend within 60 days after the
date of declaration thereof, if at said date of
declaration such payment would comply with the
provisions hereof; or
(b) the retirement of any shares of Reorganized Metallurg's
Capital Stock in exchange for, or out of the net
proceeds of the substantially concurrent sale (other
than to a Restricted Subsidiary of Reorganized
Metallurg) of, other shares of Reorganized Metallurg's
Capital Stock (other than Disqualified Stock); or
(c) the redemption, repurchase, defeasance or other
acquisition or retirement for value of Indebtedness that
is subordinated in right of payment to the Notes
including premium, if any, and accrued and unpaid
interest, with the proceeds of, or in exchange or
conversion for, (A) shares of Capital Stock (other than
Disqualified Stock) of Reorganized Metallurg or (B)
Refinancing Indebtedness which is subordinated in right
of payment to the Notes to the same extent as the
Indebtedness so refinanced;
(d) Restricted Payments as provided in the Plan; or
4
Term Sheet -- Plan of Reorganization
<PAGE>
(e) Investments by Reorganized Metallurg or a Restricted
Subsidiary that operates in a Related Business in an
aggregate amount not to exceed $15 million; or
(f) payments or distributions pursuant to mergers permitted
by Indenture;
(g) extension by Reorganized Metallurg or any Restricted
Subsidiary of trade credit to Unrestricted Subsidiaries
represented as accounts receivable on ordinary terms;
(h) advances or capital contributions by Reorganized
Metallurg or Restricted Subsidiaries in Unrestricted
Subsidiaries in an aggregate amount not to exceed $10
million (net of any amounts paid as dividends or other
capital distributions or repayment of advances to
Reorganized Metallurg or any of its Restricted
Subsidiaries by Unrestricted Subsidiaries after the
Issue Date), other than capital contributions arising as
a result of a conversion of permitted advances to
Unrestricted Subsidiaries to equity in such Unrestricted
Subsidiary;
(i) Investments in Unrestricted Subsidiaries from capital
contributions to Reorganized Metallurg or sale of
Capital Stock of Reorganized Metallurg; or
(j) Repurchases of Capital Stock of Reorganized Metallurg
owned by employees of Reorganized Metallurg or any of
its Subsidiaries.
Limitations On Transactions with Affiliates
Reorganized Metallurg will not, and will not permit any of its
Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of any of
their properties or assets to, or purchase any property or assets from, or enter
into any transaction, contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (other than Reorganized
Metallurg or any of its Restricted Subsidiaries) (each of the foregoing, an
"Affiliate Transaction"), unless such Affiliate Transaction is on terms that are
no less favorable to Reorganized Metallurg or Restricted Subsidiary than those
that would have been obtained on an arms-length basis in a comparable
transaction by Reorganized Metallurg or Restricted Subsidiary with an unrelated
Person, as determined by a majority of the independent members of the board of
directors of Reorganized Metallurg in their good faith judgment as evidenced by
a board resolution filed with the Trustee. Any Affiliate Transaction in excess
of $10 million is subject to the further requirement that Reorganized Metallurg
obtain an opinion of an independent financial advisor stating that the Affiliate
Transaction is fair from a financial point of view to Reorganized Metallurg or
such Restricted Subsidiary.
5
Term Sheet -- Plan of Reorganization
<PAGE>
Limitation on Mergers, Consolidations, or Sale of Assets
Reorganized Metallurg shall not consolidate or merge with or into,
or sell, convey, transfer, lease or otherwise dispose of all or substantially
all of its assets as an entirety to, any Person unless:
(a) the Person formed by or surviving any such consolidation
or merger (if other than Reorganized Metallurg), or to
which such sale or conveyance shall have been made, is a
corporation organized and existing under the laws of the
United States, any state thereof or the District of
Columbia;
(b) the corporation formed by or surviving any such
consolidation or merger (if other than Reorganized
Metallurg), or to which such sale or conveyance shall
have been made, assumes by supplemental indenture in a
form reasonably satisfactory to the Trustees all the
obligations of Reorganized Metallurg under the Notes and
this Indenture;
(c) immediately after the transaction no Default or Event of
Default exists;
(d) immediately after the transaction, Reorganized Metallurg
or any corporation formed by or surviving any such
consolidation or merger, or to which such sale or
conveyance shall have been made, would be permitted to
incur at least $1.00 of additional Indebtedness for
borrowed money as described above in the first paragraph
under "Limitation on Additional Indebtedness."
The surviving corporation shall be the successor obligor under
the Indenture, but the predecessor obligor under the Indenture
in the case of a sale, conveyance or transfer (but not in the
case of a lease) shall be released from the obligation to pay
the principal of and interest on the Notes.
Limitations on Asset Sales
Reorganized Metallurg will not, and will not permit any Restricted
Subsidiary to, make any Asset Sale unless (a) Reorganized Metallurg or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the Fair Market Value of the shares or assets
sold or otherwise disposed of and (b) at least 80% of such consideration
consists of cash or Cash Equivalents. To the extent the Net Cash Proceeds of any
Asset Sale are not required to be applied to repay, and permanently reduce the
commitments under, any Indebtedness of any Restricted Subsidiary, or are not so
applied, Reorganized Metallurg or any Restricted Subsidiary, may apply such Net
Cash Proceeds within 270 days thereof, to an investment in properties and assets
that will be used in a Related Business (or in Capital Stock of any Person that
will become a Restricted Subsidiary as a result of such investment if such
Person's primary business consists of a
6
Term Sheet -- Plan of Reorganization
<PAGE>
Related Business) of Reorganized Metallurg or any Restricted Subsidiary
("Replacement Assets"). Notwithstanding the foregoing, Reorganized Metallurg or
its Restricted Subsidiaries may retain up to 25% of Net Cash Proceeds
from Asset Sales for any purpose. Any Net Cash Proceeds from any Asset Sale that
are neither used to repay, and permanently reduce the commitments under, any
Indebtedness of any Restricted Subsidiary nor invested in Replacement Assets
within such 270-day period (exclusive of the up to such 25% amount referred to
in the preceding sentence) shall constitute "Excess Proceeds" subject to
disposition as provided below.
Within 20 days after the aggregate amount of Excess Proceeds equals
or exceeds $5 million, Reorganized Metallurg shall make an offer to purchase (an
"Excess Proceeds Offer"), from all Holders of the Notes, that aggregate
principal amount at maturity of Notes as can be purchased by application of such
Excess Proceeds at a price in cash equal to 100% of the outstanding principal
amount at maturity thereof plus accrued and unpaid interest, if any. Each Excess
Proceeds Offer shall remain open for a period of 20 Business Days or such longer
period as may be required by law. To the extent that the principal and accrued
interest of Notes validly tendered and not withdrawn pursuant to an Excess
Proceeds Offer is less than the Exceeds Proceeds, Reorganized Metallurg may use
such deficiency for general corporate purposes. If the principal and accrued
interest of Notes validly tendered and not withdrawn by Holders thereof exceeds
the amount of Notes which can be purchased with the Excess Proceeds, Notes to be
purchased will be selected on a pro rata basis. Upon completion of such Excess
Proceeds Offer, the amount of Excess Proceeds shall be reset to zero.
Notwithstanding the two immediately preceding paragraphs,
Reorganized Metallurg and the Restricted Subsidiaries will be permitted to
consummate an Asset Sale without compliance with such paragraphs to the extent
(i) at least 80% of the consideration for such Asset Sale constitutes
Replacement Assets and (ii) such Asset Sale is for Fair Market Value; provided
that any consideration not constituting Replacement Assets received by
Reorganized Metallurg or any of the Restricted Subsidiaries in connection with
any Asset Sale permitted to be consummated under this paragraph shall constitute
Net Cash Proceeds subject to the provisions of the two preceding paragraphs.
Reorganized Metallurg shall commence an Excess Proceeds Offer by
mailing a notice to the Trustee and each Holder stating: (i) that the Excess
Proceeds Offer is being made pursuant to this "Limitation on Asset Sales"
covenant and that all Notes validly tendered will be accepted for payment on a
pro rata basis; (ii) the purchase price and the date of purchase (which shall be
a Business Day five Business Days after the expiration date of the Excess
Proceeds Offer) (the "Excess Proceeds Payment Date"); (iii) that any Note not
tendered will continue to accrue interest, as the case may be, pursuant to its
terms; (iv) that, unless Reorganized Metallurg defaults in the payment of the
Excess Proceeds Payment, any Note accepted for payment pursuant to the Excess
Proceeds Offer shall cease to accrue interest, as the case may be, on and after
the Excess Proceeds Payment Date; (v) that Holders electing to have a Note
purchased pursuant to the Excess Proceeds Offer will be required to surrender
the Note, together with the form entitled "Option of the Holder to Elect
Purchase" on the reverse side of the Note completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the Business
Day immediately preceding the Excess Proceeds Payment Date; (vi) that Holders
will be entitled to withdraw their election if the Paying Agent receives, not
later than the
7
Term Sheet -- Plan of Reorganization
<PAGE>
close of business on the date of the expiration of the Excess Proceeds Offer, a
telegram, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Notes delivered for purchase and a statement
that such Holder is withdrawing his election to have such Notes purchased; and
(vii) that Holders whose Notes are being purchased only in part will be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered; provided that each Note purchased and each new Note issued shall be
in a principal amount of $1,000 or integral multiples thereof.
On the date of the expiration of the Excess Proceeds Offer,
Reorganized Metallurg shall accept for payment on a pro rata basis Notes or
portions thereof tendered pursuant to the Excess Proceeds Offer; and on or prior
to the Excess Proceeds Payment Date, (i) deposit with the Paying Agent money
sufficient to pay the purchase price of all Notes or portions thereof so
accepted; and (ii) deliver, or cause to be delivered, to the Trustee all Notes
or portions thereof so accepted together with an Officers' Certificate
specifying the Notes or portions thereof accepted for payment by Reorganized
Metallurg. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail to such Holders a new Note equal in principal
amount to any unpurchased portion of the Note surrendered; provided that each
Note purchased and each new Note issued shall be in a principal amount of $1,000
or integral multiples thereof. Reorganized Metallurg will publicly announce the
results of the Excess Proceeds Offer as soon as practicable after the Excess
Proceeds Payment Date. For purposes of this "Limitation on Asset Sales"
covenant, the Trustee shall act as the Paying Agent.
Reorganized Metallurg will comply with Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in the event that an Excess Proceeds Offer
is required to be commenced and Reorganized Metallurg is required to repurchase
the Notes under this "Limitation on Asset Sales" covenant.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder shall have
the right to require the repurchase of its Notes by Reorganized Metallurg in
cash pursuant to the offer described below (the "Change of Control Offer") at a
purchase price equal to 100% of the principal amount at maturity thereof, plus
accrued and unpaid interest thereon, if any, to the date of payment (the "Change
of Control Payment"). Reorganized Metallurg is not required to make a Change of
Control Offer following a Change of Control if a third party makes a Change of
Control Offer that would be in compliance with the provisions described in this
section if it were made by Reorganized Metallurg and purchases the Notes validly
tendered and not withdrawn. Prior to the mailing of the notice to Holders
provided for in the succeeding paragraph, but in any event within 30 days
following any Change of Control, Reorganized Metallurg covenants to (i) repay in
full all Indebtedness of Reorganized Metallurg that would prohibit the
repurchase of the Notes as provided for in the succeeding paragraph or (ii)
obtain any requisite consents under instruments governing any such Indebtedness
of Reorganized Metallurg to permit the repurchase of the Notes as provided for
in the succeeding paragraph. Reorganized Metallurg shall first comply with the
covenant in the preceding sentence before it shall be required to repurchase
Notes pursuant to this "Change of Control" covenant.
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Term Sheet -- Plan of Reorganization
<PAGE>
Within 30 days following the Change of Control, Reorganized
Metallurg shall mail a notice to the Trustee and each Holder stating: (i) that a
Change of Control has occurred, that the Change of Control Offer is being made
pursuant to this "Change of Control" covenant and that all Notes validly
tendered will be accepted for payment; (ii) the purchase price and the date of
purchase (which shall be a Business Day no earlier than 30 days nor later than
60 days from the date such notice is mailed) (the "Change of Control Payment
Date"); (iii) that any Note not tendered will continue to accrue interest
pursuant to its terms; (iv) that, unless Reorganized Metallurg defaults in the
payment of the Change of Control Payment, any Note accepted for payment pursuant
to the Change of Control Offer shall cease to accrue interest on and after the
Change of Control Payment Date; (v) that Holders electing to have any Note or
portion thereof purchased pursuant to the Change of Control Offer will be
required to surrender such Note, together with the form entitled "Option of the
Holder to Elect Purchase" on the reverse side of such Note completed, to the
Paying Agent at the address specified in the notice prior to the close of
business on the Business Day immediately preceding the Change of Control Payment
Date; (vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Notes delivered for purchase and a statement
that such Holder is withdrawing his election to have such Notes purchased; and
(vii) that Holders whose Notes are being purchased only in part will be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered; provided that each Note purchased and each new Note issued shall be
in a principal amount of $1,000 or integral multiples thereof.
On the Change of Control Payment Date, Reorganized Metallurg shall:
(i) accept for payment Notes or portions thereof tendered pursuant to the Change
of Control Offer; (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof so accepted; and (iii) deliver,
or cause to be delivered, to the Trustee, all Notes or portions thereof so
accepted together with an Officers' Certificate specify the Notes or portions
thereof accepted for payment by Reorganized Metallurg. The Paying Agent shall
promptly mail, to the Holders of Notes so accepted, payment in an amount equal
to the purchase price, and the Trustee shall promptly authenticate and mail to
such Holders a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered; provided that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or integral multiples thereof.
Reorganized Metallurg will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date. For purposes of this "Change of Control" covenant, the Trustee shall act
as Paying Agent.
Reorganized Metallurg will comply with Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in the event that a Change of Control occurs
and Reorganized Metallurg is required to repurchase the Notes under this "Change
of Control" covenant.
If Reorganized Metallurg is unable to repay all of its indebtedness
that would prohibit repurchase of the Notes or is unable to obtain the consents
of the holders of Indebtedness, if any, of Reorganized Metallurg outstanding at
the time of a Change of
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Term Sheet -- Plan of Reorganization
<PAGE>
Control whose consent would be so required to permit the repurchase of Notes,
then Reorganized Metallurg will have breached such covenant. This breach will
constitute an Event of Default under the Indenture if it continues for a period
of 30 consecutive days after written notice is given to Reorganized Metallurg by
the Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes outstanding. In addition, the failure by Reorganized Metallurg to
repurchase Notes at the conclusion of the Change of Control Offer will
constitute an Event of Default without any waiting period or notice
requirements.
EVENTS OF DEFAULT
Events of Default shall include: (1) default for 30 days in payment
of any interest due on, the Notes; (2) default in the payment of the principal
of or premium, if any, on any Notes when due upon redemption or otherwise or
default in the purchase of Notes on the Excess Proceeds Payment Date or the
Change of Control Payment Date, pursuant to an Excess Proceeds Offer or Change
of Control Offer which has been made to Holders; (3) default for 30 days in the
performance of any other covenant at Maturity or warrant after written notice by
the Trustee or holders of at least 30% of the aggregate principal amount of the
Notes outstanding; (4) default by Reorganized Metallurg or any Significant
Subsidiary which is a Restricted Subsidiary in the payment of any principal of
or interest on any Indebtedness for borrowed money when due (after giving effect
to any applicable grace periods) and the principal amount of such Indebtedness
exceeds $5,000,000 in the aggregate; (5) default by Reorganized Metallurg or any
Significant Subsidiary which is a Restricted Subsidiary on any Indebtedness for
borrowed money exceeding $5,000,000 in the aggregate, which results in such
Indebtedness becoming due or being declared due and payable; (6) any final
judgments or orders rendered against Reorganized Metallurg or any Significant
Subsidiary which is a Restricted Subsidiary for more than $5,000,000 and such
judgment or order has not been paid, discharged or stayed for 60 days; (7)
certain events of bankruptcy, insolvency and reorganization of Reorganized
Metallurg or any Significant Subsidiary which is a Restricted Subsidiary; and
(8) the failure of any pledge agreement or security agreement to be in full
force and effect.
If an Event of Default other than certain events with respect to
bankruptcy, insolvency and reorganization of Reorganized Metallurg shall occur
and be continuing, then the Trustee(s) or the holders of 25% of the aggregate
principal amount of the Notes outstanding may declare by written notice to
Reorganized Metallurg the principal amount of the Notes to be due and payable
immediately in an amount equal to the principal amount of the Notes, together
with accrued interest on the date the Notes become due and payable. If an Event
of Default with respect to certain events of bankruptcy, insolvency and
reorganization of Reorganized Metallurg occurs and is continuing, then the
principal of all the Notes shall automatically be immediately due and payable
without any act on the part of the Trustee or any holder of Notes.
DEFEASANCE
The Indenture will provide that (A) if applicable, Reorganized
Metallurg will be discharged from any and all obligations in respect of all
outstanding Notes other than certain obligations of Reorganized Metallurg to
transfer the Notes, or (B) if applicable, Reorganized Metallurg may omit to
comply with certain restrictive covenants, and certain
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Term Sheet -- Plan of Reorganization
<PAGE>
events will cease to be Events of Default under the Indenture and the Notes, in
either case (A) or (B), upon irrevocable deposit by Reorganized Metallurg with
the Trustee, in trust, of money and/or U.S. Government Obligations which will
provide money in an amount sufficient to pay the principal of and each
installment of interest, if any, on the outstanding Notes. With respect to
clause (B), the obligations under the Indenture other than with respect to
certain covenants and Events of Default will remain in full force and effect.
Such trust may only be established if, among other things (i) with respect to
clause (A), Reorganized Metallurg has received from, or there has been published
by, the Internal Revenue Service a ruling or there has been a change in law,
which in the opinion of counsel provides that holders of the Notes will not
recognize gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to federal income tax on
the same amount, in the same manner and at the same times as would have been the
case if such deposit, defeasance and discharge had not occurred; or, with
respect to clause (B), Reorganized Metallurg has delivered to the Trustee an
opinion of counsel (which may be based on an Internal Revenue Service ruling) to
the effect that the holders of the Notes will not recognize gain or loss for
federal income tax purposes as a result of such deposit and defeasance and will
be subject to federal income tax on the same amount, in the same manner and at
the same times as would have been the case if such deposit and defeasance had
not occurred; (ii) no Default shall have occurred or be continuing; (iii)
Reorganized Metallurg has delivered to the Trustee an opinion of counsel to the
effect that such deposit shall not cause the Trustee or the trust so created to
be subject to the Investment Company Act of 1940; and (iv) certain other
customary conditions precedent are satisfied.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by
Reorganized Metallurg and the Trustee with the consent of the Holders of not
less than a majority in aggregate principal amount of the outstanding Notes;
provided, however, that no such modification or amendment may, without the
consent of each Holder affected thereby, (i) change the Stated Maturity of the
principal of, or any installment of interest on, any Note, (ii) reduce the
principal amount of, or premium, if any, or interest on, any Note, (iii) change
the place or currency of payment of principal of, or premium, if any, or
interest on, any Note, (iv) impair the right to institute suit for the
enforcement of any payment on or after the Stated Maturity (or, in the case of a
redemption, on or after the Redemption Date or, in the case of an Excess
Proceeds Offer or a Change of Control Offer which has been made, on or after the
applicable Payment Date of any Note), (v) reduce the above-stated percentage of
outstanding Notes the consent of whose Holders is necessary to modify or amend
the Indenture, (vi) waive a default in the payment of principal of, premium, if
any, or interest on the Notes, (vii) reduce the percentage or aggregate
principal amount of outstanding Notes the consent of whose Holders is necessary
for waiver of compliance with certain provisions of the Indenture or for waiver
of certain defaults, or (viii) following the mailing of an Excess Proceeds Offer
or a Change of Control Offer, modify the provisions of the Indenture with
respect to such offer in a manner adverse to the Holders of the Notes.
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Term Sheet -- Plan of Reorganization
<PAGE>
NO PERSONAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS,
DIRECTORS, OR EMPLOYEES
The Indenture provides that no recourse for the payment of the
principal of or interest on any of the Notes or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of Reorganized Metallurg in the Indenture, or in any of
the Notes or because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator, shareholder, officer, director, employee
or controlling person of Reorganized Metallurg or of any successor Person
thereof. Each Holder, by accepting the Notes, waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the SEC that such a waiver is
against public policy.
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Term Sheet -- Plan of Reorganization
<PAGE>
Schedule I
DEFINITIONS
Definitions. For purposes of this Designation, the following
definitions shall apply:
"Affiliate" is defined to mean, as applied to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any Person, is
defined to mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Asset Acquisition" is defined to mean (i) an Investment or capital
contribution (by means of transfers of cash or other property to others or
payments for property or services for the account or use of others, or
otherwise) by Reorganized Metallurg or any Restricted Subsidiary in any other
Person, or any acquisition or purchase of Capital Stock of another Person by
Reorganized Metallurg or any Restricted Subsidiary, in either case pursuant to
which such Person shall become a Restricted Subsidiary or shall be merged with
or into or consolidated with Reorganized Metallurg or any Restricted Subsidiary
or (ii) an acquisition by Reorganized Metallurg or any Restricted Subsidiary of
the property and assets of any Person other than Reorganized Metallurg or any
Restricted Subsidiary which constitute substantially all of a division,
operating unit or line of business of such Person or which is otherwise outside
the ordinary course of business.
"Asset Sale" is defined to mean any direct or indirect sale,
transfer, conveyance or lease (which has the effect of a disposition and is not
for security purposes) or other disposition (including by way of merger,
consolidation or sale-leaseback transactions, but not including Restricted
Payments permitted under the Indenture) in one transaction or a series of
related transactions by Reorganized Metallurg or any Restricted Subsidiary to
any Person other than Reorganized Metallurg or any Restricted Subsidiary of (i)
all or any of the Capital Stock of any Restricted Subsidiary, (ii) all or
substantially all of the property and assets of an operating unit or business of
Reorganized Metallurg or any Restricted Subsidiary or (iii) any other property
and assets of Reorganized Metallurg or any Restricted Subsidiary outside the
ordinary course of business of Reorganized Metallurg or such Restricted
Subsidiary and, in each case, that is not governed by the provisions of the
Indenture applicable to mergers, consolidations and sales of assets of
Reorganized Metallurg; provided, however, that the term "Asset Sale" shall in no
case include any sale, transfer, conveyance, lease or other disposition in one
transaction or a series of related transactions (i) of property or equipment
that has become worn out, obsolete or damaged or otherwise unsuitable for use in
connection with the business of Reorganized Metallurg or any Restricted
Subsidiary, as the case may be, (ii) involving assets with a Fair Market Value
not in excess of $500,000 or (iii) of inventory in the ordinary course of
business.
"Board" shall mean the Board of Directors of Reorganized Metallurg.
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Term Sheet -- Plan of Reorganization
<PAGE>
"Capital Stock" is defined to mean, with respect to any Person, any
and all shares, interests, participations, rights in or other equivalents
(however designated, whether voting or non-voting) in equity of such Person,
whether outstanding at the Issue Date or issued after the Issue Date, including,
without limitation, all Common Stock and Preferred Stock, and any and all
rights, warrants or options exchangeable for or convertible into any thereof.
"Capitalized Lease" means any Lease that would be required to be
capitalized on the balance sheet in accordance with generally accepted
accounting principles.
"Change of Control" is defined to mean the occurrence of any of the
following events: (a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total Voting Stock of Reorganized Metallurg; or (b) Reorganized
Metallurg consolidates with, or merges with or into, another person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person, or any person consolidates with,
or merges with or into, Reorganized Metallurg, in any such event pursuant to a
transaction in which the outstanding Voting Stock of Reorganized Metallurg is
converted into or exchanged for cash, securities or other property, other than
any such transaction where (i) the outstanding Voting Stock of Reorganized
Metallurg is converted into or exchanged for (1) Voting Stock (other than
Disqualified Stock) of the surviving or transferee corporation or (2) cash,
securities and other property in an amount which could be paid by Reorganized
Metallurg as a Restricted Payment under the Indenture and (ii) immediately after
such transaction no "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act) is the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 50% of the total
Voting Stock of the surviving or transferee corporation; or (c) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board (together with any new directors whose election by the
Board or whose nomination for election by the stockholders of Reorganized
Metallurg was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board then in office, including, without
limitation, by reason of the provisions of Reorganized Metallurg's Articles of
Association relating to the rights of certain classes of stockholders to
designate and remove directors of Reorganized Metallurg.
"Common Stock" is defined to mean, with respect to any Person, any
and all shares, interests or other participations in, and other equivalents
(however designated and whether voting or non-voting) of such Person's common
stock or ordinary shares,
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Term Sheet -- Plan of Reorganization
<PAGE>
whether or not outstanding at the Issue Date, and includes, without limitation,
all series and classes of such common stock or ordinary shares.
"Consolidated Income Tax Expense" of any Person is defined to mean,
for any period, the provision for corporation, local, foreign and all other
income taxes of such Person for such period as determined in accordance with
generally accepted accounting principles; provided, that there shall be excluded
therefrom the tax effect of any of the items described in clauses (i) through
(vii) of the definition of Consolidated Net Income to the extent included in
Consolidated Net Income of such Person for such period.
"Consolidated Interest Expense" is defined to mean, for any period,
the aggregate amount of interest in respect of Indebtedness for borrowed money
(including, without limitation, amortization of original issue discount on any
Indebtedness for borrowed money and the interest portion of any deferred payment
obligation (other than pension obligations), calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges accrued with respect to letters of credit and bankers'
acceptance financing; the net costs associated with interest rate protection
Obligations; and interest in respect of Indebtedness for borrowed money that is
Guaranteed or secured by Reorganized Metallurg or any of its Restricted
Subsidiaries), all but the principal component of rent or other amounts in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by Reorganized Metallurg and its Restricted Subsidiaries during
such period and all dividends on any Preferred Stock or Disqualified Stock of
Reorganized Metallurg to the extent paid, accrued or scheduled to be paid or to
be accrued during such period; excluding, however, any premiums, fees and
expenses (and any amortization thereof) payable in connection with the offering
of the Notes, all as determined on a consolidated basis in conformity with
generally accepted accounting principles.
"Consolidated Net Income" is defined to mean, for any period, the
consolidated net income (or loss) of Reorganized Metallurg and the Restricted
Subsidiaries for such period, adjusted, to the extent included in calculating
such consolidated net income, by excluding, without duplication, (i) all
extraordinary gains or losses of such Person (net of fees and expenses relating
to the transaction giving rise thereto) for such period, (ii) income of
Reorganized Metallurg and the Restricted Subsidiaries derived from or in respect
of all Investments in Persons other than Restricted Subsidiaries of Reorganized
Metallurg or any Restricted Subsidiary, (iii) the portion of net income (or
loss) of such Person allocable to minority interests in unconsolidated Persons
for such period, except to the extent actually received by Reorganized Metallurg
or any Restricted Subsidiary, (iv) net income (or loss) of any other Person
combined with such Person on a "pooling of interests" basis attributable to any
period prior to the date of combination, (v) any gain or loss, net of taxes,
realized by such Person upon the termination of any employee pension benefit
plan during such period, (vi) gains or losses in respect of any Asset Sales (net
of fees and expenses relating to the transaction giving rise thereto) during
such period and (vii) except in the case of any restriction or encumbrance
permitted under clause (B) of the covenant "Limitation on Dividends and Other
Payment Restrictions Affecting Restricted Subsidiaries," the net income of any
Restricted Subsidiary for such period to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is not at the time permitted directly or indirectly, by operation of the terms
of its
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Term Sheet -- Plan of Reorganization
<PAGE>
constitutional documents or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulations applicable to that Restricted
Subsidiary or its stockholders.
"Consolidated Operating Cash Flow" is defined to mean, with respect
to any period, the Consolidated Net Income of Reorganized Metallurg and the
Restricted Subsidiaries for such period increased by the sum of (i) the
Consolidated Income Tax Expense of Reorganized Metallurg and the Restricted
Subsidiaries accrued according to generally accepted accounting principles for
such period (other than taxes attributable to extraordinary, unusual or
non-recurring gains or losses); (ii) Consolidated Interest Expense for such
period; (iii) depreciation of Reorganized Metallurg and the Restricted
Subsidiaries for such period; (iv) amortization of Reorganized Metallurg and the
Restricted Subsidiaries for such period, including, without limitation,
amortization of capitalized debt issuance costs for such period, all determined
on a consolidated basis in accordance with generally accepted accounting
principles; and (v) all other non-cash charges deducted in determining
Consolidated Net Income including, without limitation, non-cash write-off,
write-downs or adjustments, and minus (vi) non-cash items increasing revenues in
determining Consolidated Net Income. For purposes of this definition, (i) any
Subsidiary of Reorganized Metallurg that is a Restricted Subsidiary on the
Transaction Date shall be deemed to have been a Restricted Subsidiary at all
times during such period and (ii) any Subsidiary of Reorganized Metallurg that
is not a Restricted Subsidiary on the Transaction Date shall be deemed not to
have been a Restricted Subsidiary at any time during such period. In addition to
and without limitation of the foregoing, for purposes of this definition,
"Consolidated Operating Cash Flow" shall be calculated after giving effect on a
pro forma basis for the applicable fiscal quarter to, without duplication, any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of
Reorganized Metallurg or one of the Restricted Subsidiaries (including any
Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition)
incurring, assuming or otherwise being liable for Acquired Indebtedness)
occurring during the period commencing on the first day of such period to and
including the Transaction Date (the "Reference Period"), as if such Asset Sale
or Asset Acquisition occurred on the first day of the Reference Period.
"Disqualified Stock" is defined to mean, with respect to any Person,
any Capital Stock of such Person which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is exchangeable for Indebtedness, or is
redeemable at the option of the holder thereof, in whole or in part, on or prior
to the final maturity date of the Notes.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934, as amended,
shall include reference to the comparable section, if any, of any such similar
Federal statute.
"Fair Market Value" shall mean the amount which a willing buyer
would pay a willing seller in an arm's-length transaction, with neither being
under any compulsion to buy or sell.
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Term Sheet -- Plan of Reorganization
<PAGE>
"Fixed Charge Coverage Ratio" means, for any period, the ratio of
(i) Consolidated Operating Cash Flow to (ii) Consolidated Interest Expense, in
each case for such period for Reorganized Metallurg and its Restricted
Subsidiaries determined on a consolidated basis.
"Indebtedness" with respect to any Person, means any indebtedness,
whether or not contingent, whether recourse to all or a portion of the assets of
such Person, 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 representing the balance deferred and unpaid
of the purchase price of any property (including pursuant to capital leases),
except any such balance that constitutes an accrued expense or a trade payable,
if and to the extent any of the foregoing indebtedness would appear as a
liability upon a balance sheet of such Person prepared on a consolidated basis
in accordance with generally accepted accounting principles, and shall also
include, to the extent not otherwise included, any guaranty of indebtedness
which would be included within this definition.
"Investments" means any direct or indirect advance, loan (other than
advances to customers in the ordinary course of business, which are recorded as
accounts receivable on the balance sheet of any Person or its Subsidiaries and
other than advances or loans to officers, directors and employees permitted by
the Indenture) or other extension of credit or capital contribution to (by means
of any transfer of cash or other property to others or any payment for property
or services for the account or use of others), or any purchase or acquisition of
Capital Stock, bonds, notes, debentures or other securities issued by, any other
Person.
"Issue Date" means the date of the issuance of the Notes.
"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 and any filing of or
agreement to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"Net Cash Proceeds" is defined to mean, with respect to any Asset
Sale, the proceeds of such Asset Sale in the form of cash or Cash Equivalents,
including payments in respect of deferred payment obligations when received in
the form of cash or Cash Equivalents and proceeds from the conversion of other
property received when converted to cash or Cash Equivalents, net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of counsel and investment bankers) related to such Asset Sale, (ii) provisions
for all taxes (to the extent such taxes are paid or payable) as a result of such
Asset Sale , (iii) payments made to repay Indebtedness or any other obligation
outstanding at the time of such Asset Sale that either (A) is secured by a Lien
on the property or assets sold or (B) is required to be paid as a result of such
sale (iv) reserves for any amounts which are prohibited to be paid to
Reorganized Metallurg by reason of law, contract or otherwise and (v)
appropriate amounts to be provided by Reorganized Metallurg or any Restricted
Subsidiary of Reorganized Metallurg as a reserve
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Term Sheet -- Plan of Reorganization
<PAGE>
against any liabilities associated with such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as determined
in conformity with generally accepted accounting principles.
"Permitted Indebtedness" means: (i) the incurrence by Reorganized
SMC and Reorganized Metallurg and its Subsidiaries of Indebtedness under the
Working Capital Credit Facility in an aggregate principal amount outstanding at
the time not to exceed the sum of 90% of receivables and 75% of inventory as
shown on Reorganized Metallurg's and Reorganized SMC's balance sheet; (ii) the
incurrence by any Restricted Subsidiary (other than Reorganized SMC) of
Indebtedness under a working capital, overdraft or similar line of credit in an
aggregate amount not to exceed the sum of 90% of receivables and 75% of
inventory of such Restricted Subsidiary; (iii) Indebtedness secured by purchase
money security interests upon or in any property acquired or held by Reorganized
Metallurg or its Restricted Subsidiaries in the ordinary course of business to
secure the purchase price of such property incurred solely for the purpose of
financing the acquisition of such property and Indebtedness in respect of
capitalized Leases; (iv) the incurrence by Reorganized Metallurg and its
Restricted Subsidiaries of other Indebtedness in an aggregate principal amount
not to exceed $10,000,000 at any one time outstanding; (iii) the incurrence by
Reorganized Metallurg of Indebtedness represented by the Notes and the
Indenture; (iv) Indebtedness existing as of the Effective Date including,
without limitation, any term loan or revolving credit facility, the net proceeds
of which are used to reduce the principal amount of the Notes (the "Existing
Indebtedness") (other than Indebtedness described in clauses (i) and (ii)) of
Reorganized Metallurg and its Subsidiaries); (v) the incurrence by Reorganized
Metallurg and its Subsidiaries of Indebtedness issued in exchange for, or the
proceeds of which are used to extend, refinance, renew, replace, defease or
refund Indebtedness referred to in clause (iv) above (the "Refinancing
Indebtedness"); provided, however, that (a) the principal amount of such
Refinancing Indebtedness shall not exceed the principal amount of Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded, and (b) the
Refinancing Indebtedness shall have a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded and the Notes; and
(vi) Indebtedness between or among Reorganized Metallurg and its Restricted
Subsidiaries.
"Permitted Investments" means: (i) any Investments by Reorganized
Metallurg or any of its Restricted Subsidiaries in property or assets owned or
used in Related Businesses; (ii) Investments by Reorganized Metallurg or any of
its Restricted Subsidiaries in any Person engaged in a Related Business as a
result of such Investment (x) such Person becomes a Wholly Owned Restricted
Subsidiary of Reorganized Metallurg or (y) such Person is merged or consolidated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, Reorganized Metallurg or a Wholly Owned Restricted Subsidiary
of Reorganized Metallurg; (iii) Investments in certificates of deposit or
Eurodollar deposits due within one year issued by commercial banks organized
under the laws of the United States or any state thereof having capital and
surplus in excess of $500,000,000; (iv) Investments in commercial paper having a
rating of at least A-1 by Standard & Poor's Corporation or at least P-1 by
Moody's Investors Service Inc.; (v) Investments in U.S. Government Obligations
maturing within one year of the date of acquisition thereof;
6
Term Sheet -- Plan of Reorganization
<PAGE>
(vi) Investments in mutual or similar funds having assets in excess of
$500,000,000; and (vii) Investments by Reorganized Metallurg or any Restricted
Subsidiary in Reorganized Metallurg or any Restricted Subsidiary.
"Permitted Liens" means: (i) Liens in favor of Reorganized
Metallurg; (ii) liens on fixed assets, receivables and inventory (as such terms
are defined in the Working Capital Credit Facility) of Reorganized Metallurg and
Reorganized SMC and their respective Subsidiaries in favor of the lenders under
the Working Capital Credit Facility to secure obligations of Reorganized SMC and
the Subsidiaries under the Working Capital Credit Agreement; (iii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with Reorganized Metallurg or any Subsidiary thereof in a
transaction not prohibited by the terms of the Indenture; provided, however,
that such Liens were in existence prior to and were not granted in contemplation
of such merger or consolidation; (iv) Liens on property existing at the time of
acquisition thereof by Reorganized Metallurg or any Subsidiary thereof in a
transaction not prohibited by the terms of the Indenture; provided, however,
that such Liens were in existence prior to the contemplation of such
acquisition; (v) statutory Liens of landlords and warehousemen's, carriers',
mechanics', suppliers', materialmen's or repairmen's or other like Liens, or
Liens relating to surety or appeal bonds, performance bonds, workmen's
compensation, unemployment insurance and other types of social security or other
obligations of a like nature incurred in the ordinary course of business; (vi)
Liens existing on the Effective Date; (vii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded; (viii) Liens securing purchase money Indebtedness and
capitalized Leases; (ix) easements, rights-of-way, zoning, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of Reorganized Metallurg
or any of its Subsidiaries; (x) Liens upon specific items of inventory or other
goods and proceeds of any Person securing such Person's obligations in respect
of bankers' acceptances issued or created for the account of such Person to
facilitate the purchases, shipment or storage of such inventory or other goods
in the ordinary course of business; (xi) Liens securing reimbursement
obligations with respect to letters of credit which encumber documents and other
property relating to such letters of credit and the products and proceeds
thereof; (xii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of nondelinquent customs duties in connection
with the importation of goods; (xiii) judgment and attachment Liens not giving
rise to a default or Event of Default; (xiv) Liens arising out of consignment or
similar arrangements for the sale of goods entered into by Reorganized Metallurg
or any Subsidiary in the ordinary course of business in accordance with industry
practice; (xv) any interest or title of a lessor in the property subject to any
lease, whether characterized as capitalized or operating, entered into by
Reorganized Metallurg or any of its Subsidiaries in the ordinary course of
business; (xvi) Liens arising from filing Uniform Commercial Code financing
statements for precautionary purposes in connection with true leases of personal
property that are otherwise permitted under the Indenture and under which
Reorganized Metallurg or any of its Subsidiaries is the lessee; (xvii) Liens
arising by reason of any judgment, decree or order of any court, as long as such
Lien is being contested in good faith and is adequately bonded or stayed, and
any appropriate legal proceedings which may have been duly initiated for the
review of such judgment, decree or order shall not have been fully terminated or
the period within which such proceedings may be initiated shall not have
expired; (xviii) pledges of or Liens on raw materials or on manufactured
products as
7
Term Sheet -- Plan of Reorganization
<PAGE>
security for any drafts or bills of exchange drawn in connection with the
importation of such raw materials or manufactured products in the ordinary
course of business; (xix) all other Liens incurred in the ordinary course of
business; provided that the aggregate amount of such Liens shall not exceed
$10,000,000 at any one time outstanding; and (xx) extensions, renewals or
regranting of any liens referred to in clauses (i) through (xix) above in
connection with any Refinancing Indebtedness permitted under the Indenture; and
(xxi) liens in favor of the Trustee provided for in the Indenture.
"Related Business" means the same or a similar line of business as
Reorganized Metallurg and its Subsidiaries were engaged in on the Effective
Date.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of Reorganized
Metallurg which is not a Unrestricted Subsidiary.
"Significant Subsidiary" is defined to mean, at any date of
determination, any Subsidiary of Reorganized Metallurg that, together with its
Subsidiaries, (i) for the most recent fiscal year of Reorganized Metallurg,
accounted for more than 10% of the consolidated revenues of Reorganized
Metallurg and its Restricted Subsidiaries or (ii) as of the end of such fiscal
year, was the owner of more than 10% of the consolidated assets of Reorganized
Metallurg and Its Restricted Subsidiaries, all as set forth on the most recently
available consolidated financial statements of Reorganized Metallurg for such
fiscal year.
"Subsidiary" of any Person shall mean a corporation, partnership or
other entity more than 50% of the Voting Stock of which is owned by such Person
or a one or more Subsidiaries of such Person.
"Total Consolidated Indebtedness" is defined to mean, at the time of
determination, an amount equal to the aggregate amount of all Indebtedness of
Reorganized Metallurg and the Restricted Subsidiaries outstanding as of the date
of determination.
"Transaction Date" is defined to mean, with respect to the
incurrence of any Indebtedness by Reorganized Metallurg or any of its Restricted
Subsidiaries, the date such Indebtedness is to be incurred and, with respect to
any Restricted Payment, the date such Restricted Payment is to be made.
"Unrestricted Subsidiary" means any Person of which a majority of
the Capital Stock or other equity securities having ordinary voting power for
the election of directors or other governing body of such Person is owned by
Reorganized Metallurg, directly or indirectly, and that has been designated by
Reorganized Metallurg (by written notice to the Trustee), as a "Unrestricted
Subsidiary," and each Subsidiary of a Unrestricted Subsidiary; provided,
however, that a Person that is a Subsidiary may not subsequently be designated
as a "Unrestricted Subsidiary" if such designation would be a Default or Event
of Default. For purposes of the foregoing, the net Investment in any Subsidiary
at the time of such designation shall be deemed made at the time of such
designation. The Board of Directors of Reorganized Metallurg may, by a Board
Resolution delivered to the Trustee, designate any Restricted Subsidiary of
Reorganized Metallurg (other than a Significant
8
Term Sheet -- Plan of Reorganization
<PAGE>
Subsidiary) (including any newly acquired or newly formed Subsidiary of
Reorganized Metallurg) to be an Unrestricted Subsidiary unless such Restricted
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, Reorganized Metallurg or any Restricted Subsidiary, and provided that (i) no
Default or Event of Default shall have occurred and be continuing at the time of
or after giving effect to such designation, and (ii) either (A) the Subsidiary
to be so designated has total assets of $10,000 or less or (B) if such
Subsidiary has assets greater than $10,000, that such designation would be
permitted under the "Limitation on Restricted Payments" covenant described
above. The Board of Directors of Reorganized Metallurg may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary of Reorganized Metallurg,
provided that (i) no Default shall have occurred and be continuing at the time
of or after giving effect to such designation; (ii) immediately after giving
effect to such designation Reorganized Metallurg could incur $1.00 of additional
Indebtedness under the proviso in paragraph (a) of the "Limitation on
Indebtedness" covenant described above; and (iii) all Liens and Indebtedness of
such Unrestricted Subsidiary outstanding immediately following such designation
would, if incurred at such time, have been permitted to be incurred for all
purposes of the Indenture. Any designation by the Board of Directors of
Reorganized Metallurg pursuant to this paragraph shall be evidenced to the
Trustee by promptly filing with the Trustee a copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions. Notwithstanding the
foregoing, (i) Gesellschaft fur Elektrometallugie GmbH and its Subsidiaries,
(ii) Elektrowerk Weisweller GmbH,and its Subsidiaries, (iii) Metallurg do Brasil
Ltda and its Subsidiaries and (iv) Companhia Industrial Fluminense and its
Subsidiaries, shall be deemed to be Unrestricted Subsidiaries.
"Voting Stock" is defined to mean with respect to any Person,
Capital Stock of any class or kind ordinarily having the power to vote for the
election of directors, managers or other voting members of the governing body of
such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the then
outstanding aggregate principal amount of such Indebtedness into (ii) the total
of the product obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned" is defined to mean, with respect to any Subsidiary of
any Person, such Subsidiary if all of the outstanding Capital Stock in such
Subsidiary (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) is owned by such Person or one or
more Wholly Owned Subsidiaries of such Person.
"Working Capital Credit Facility" means a credit facility provided
to Reorganized Metallurg and Reorganized SMC and their Subsidiaries, as such
facility may be amended, supplemented or otherwise modified and any extensions,
renewals, refinancings, replacements or refundings thereof.
9
Term Sheet -- Plan of Reorganization
<PAGE>
EXHIBIT B TO DISCLOSURE STATEMENT
Order of the Bankruptcy Court, dated December 18, 1996, among
other things, approving this Disclosure Statement and
establishing certain procedures with respect to the solicitation
and tabulation of votes to accept or reject the Plan.
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - -------------------------------x
In re : Chapter 11 Case Nos.
92 B 44468 (JLG)
METALLURG, INC. AND : 92 B 44469 (JLG)
SHIELDALLOY METALLURGICAL (Jointly Administered)
CORPORATION :
Debtors. :
- - -------------------------------x
ORDER (A) PURSUANT TO SECTION 1125 OF THE BANKRUPTCY CODE
AND BANKRUPTCY RULE 3017(b) APPROVING THE DEBTORS'
DISCLOSURE STATEMENT, (B) PURSUANT TO BANKRUPTCY RULE
3017(c) FIXING TIME WITHIN WHICH CLAIM HOLDERS AND EQUITY
INTEREST HOLDERS MAY ACCEPT OR REJECT THE DEBTORS' PLAN OF
REORGANIZATION, (C) APPROVING THE EMPLOYMENT OF GEORGESON &
COMPANY INC. AS BALLOT SOLICITATION AGENT AND VOTE
TABULATION AGENT, (D) PURSUANT TO BANKRUPTCY RULE 3017(c)
FIXING DATE TIME AND PLACE OF HEARING ON CONFIRMATION OF THE
DEBTORS' PLAN OF REORGANIZATION, (E) APPROVING FORM OF
BALLOT, (F) APPROVING NOTICE OF (i) THE LAST DAY FOR RECEIPT
OF BALLOTS WITH RESPECT TO THE PLAN OF REORGANIZATION, (ii)
THE LAST DAY FOR FILING OBJECTIONS TO CONFIRMATION OF THE
DEBTORS' PLAN OF REORGANIZATION, AND (iii) THE HEARING ON
CONFIRMATION OF THE DEBTORS' PLAN OF REORGANIZATION
Upon the record of the hearing held on December 18, 1996 (the
"Disclosure Hearing") to consider the request of the debtors in the
above-captioned chapter 11 cases (collectively, the "Debtors") for approval of
the Debtors' proposed Disclosure Statement Pursuant to Section 1125 of the
Bankruptcy Code, dated December 18, 1996 (the "Disclosure Statement"); and each
of the objections filed with respect to the Disclosure Statement having been
withdrawn, overruled by the Court or rendered moot by reason
<PAGE>
of modifications made to the Disclosure Statement; and the Debtors having
amended and modified the Disclosure Statement and the Plan of Reorganization
under Chapter 11 of the United States Bankruptcy Code, dated December 18, 1996
(the "Plan"), to reflect the resolution of certain issues; and the Court having
found that notice of the Disclosure Hearing (as hereinafter defined) has been
provided by the Debtors as directed by the Court pursuant to an order, dated
November 12, 1996 (i) fixing the date, time and place for a hearing to consider
(a) approval of Debtors' Disclosure Statement and solicitation procedures, and
(b) confirmation of the Debtors' Plan of Reorganization, (ii) fixing the date,
time and place for voting on the Debtors' Plan, and (iii) prescribing the form
and manner of notice therefor (the "Scheduling Order"); and it appearing that no
further notice need be given; and the Court having determined after due
deliberation that the Disclosure Statement contains adequate information as such
term is defined in section 1125 of the Bankruptcy Code; and sufficient cause
appearing therefor, it is
ORDERED that in accordance with section 1125 of the Bankruptcy Code
and Bankruptcy Rule 3017(b), the Disclosure Statement (and all exhibits and
schedules thereto), as the same may be amended and modified from time
2
<PAGE>
to time to incorporate immaterial modifications, fill in blanks, and reflect any
modifications that the Debtors determine to be appropriate which do not
materially change the Disclosure Statement or materially affect any rights of a
party in interest be, and hereby are, approved as containing "adequate
information" within the meaning of section 1125(a) of the Bankruptcy Code; and
it is further
ORDERED that ballots, substantially in the form annexed hereto as
Exhibit "A" (the "Ballots") be, and they hereby are, approved in all respects
pursuant to Bankruptcy Rule 3018(c) as conforming with Official Form No. 14; and
it is further
ORDERED that pursuant to Bankruptcy Rule 3018(a) and the Plan, the
record date for determining the equity interest holders and holders of claims
who may vote to accept or reject the Plan shall be the date of execution of this
Order (the "Record Date"); and it is further
ORDERED that only the holders of claims and equity interests as of
the Record Date that are impaired under the Plan may vote to accept or reject
the Plan by indicating their acceptance or rejection of the Plan on the Ballots
provided therefor; and it is further
ORDERED that for purposes of calculating the number of claims in a
class that vote to accept or reject
3
<PAGE>
the Plan, all claims in a class held by one entity or any affiliate thereof (as
defined in the Securities Act of 1933 and the rules and regulations promulgated
thereunder), including any entity that acquired record ownership of such claims
after the date that each of the Debtors filed its respective chapter 11 petition
(the "Petition Date"), be and they hereby are, aggregated and treated as one
claim in such class for voting purposes; and it is further
ORDERED that the Debtors' appointment of the firm of Georgeson &
Company Inc. ("Georgeson") as Debtors' ballot solicitation agent (the "Ballot
Solicitation Agent") in connection with (i) the accommodation of requests for
information concerning the Plan, Disclosure Statement, Letter, Ballots or other
related matters; (ii) the distribution of copies of the Plan, Disclosure
Statement, Ballots and this Order; and (iii) the solicitation of Ballots in
respect of the Plan, in a reasonable and customary manner, is hereby approved;
and it is further
ORDERED that the Debtors' appointment of Georgeson as the Debtors'
vote tabulating agent (the "Tabulation Agent") in connection with the review,
determination of validity, and tabulation of votes for acceptance and rejection
of the Plan as well as reporting with respect
4
<PAGE>
thereto, in a reasonable and customary manner, is hereby approved; and it is
further
ORDERED that pursuant to Bankruptcy Rule 3017(c) in order to be
considered as acceptances or rejections of the Plan, all Ballots must be
properly completed, executed, marked and received by Georgeson & Company Inc.,
88 Pine Street, 30th Floor, Wall Street Plaza, New York, New York 10005 on or
before 5:00 p.m. (Eastern Standard Time) on February 10, 1997 (the "Voting
Deadline); and it is further
ORDERED that the Solicitation Agent be, and it hereby is, authorized
and directed to effect any action reasonably necessary to accomplish the
solicitation and ballot tabulation services, as contemplated by the Disclosure
Statement, including, without limitation, to review, tabulate, and make
preliminary determinations as to the validity of all acceptances and rejections
of the Plan and to provide a written report of the results of such tabulation to
the Court, pursuant to Rule 3018-1(a) of the Local Rules, two (2) Business days
prior to the date of the Confirmation Hearing; and it is further
ORDERED that any Ballot that is properly completed, executed and
timely returned to the Tabulation Agent but does not indicate an acceptance or a
rejection of the Plan or is otherwise materially defective be, and it
5
<PAGE>
hereby is, deemed to be a vote to accept the Plan; and it is further
ORDERED that any holder of an Allowed Claim in MI-Class 4A and
SMC-Class 4C who is eligible to make an election between Option A and Option B
under the Plan fails to make such election on the Ballot, such claimant shall be
deemed to have elected Option A; and it is further
ORDERED that any election made on a Ballot by the holder of an
Allowed Claim in accordance with the Plan shall be irrevocable, which may only
be changed upon the Debtors' written consent; and it is further
ORDERED that any Former Preferred Stockholder (as defined in the
Plan) who elects on the Ballot to participate in the FPS Settlement (as defined
in the Plan) shall by such election release, compromise and settle all claims
against the Debtors on account of the Old Preferred Stock (as defined in the
Plan) issued by Metallurg; provided, however, that the FPS Settlement is
approved by this Court, the Plan is confirmed and approved by this Court, and
the consideration payable under the FPS Settlement is paid to such claimant in
accordance with the terms and provisions of the Plan and FPS Settlement; and it
is further
ORDERED that any holder of an Allowed Claim (as defined in the Plan)
that elects to participate in Class 3A-
6
<PAGE>
MI Convenience Claims or Class 3B-SMC Convenience Claims shall be deemed to have
accepted the Plan under each respective convenience class; and it is further
ORDERED that if a claim holder or equity security holder casts more
than one Ballot voting the same claim or equity interest, as applicable, prior
to the Voting Deadline, the last Ballot received prior to the Voting Deadline
shall be deemed to reflect the voter's intent and thus to supersede any prior
Ballots; and it is further
ORDERED that each of the Environmental Agencies (as defined in the
Plan) shall be entitled to vote those claims as identified and agreed to by the
Debtors and the Environmental Agencies in the Environmental Settlement
Agreements (as defined in the Plan), and such claims shall be voted under Class
4F in both the Metallurg and Shieldalloy chapter 11 cases; and it is further
ORDERED that the holder of the Multiemployer Pension Claim (as
defined in the Plan) shall be entitled to vote in Class 4E in the Shieldalloy
chapter 11 case in the amount of $5,000,000 and shall not be entitled to
exercise any vote in the Metallurg chapter 11 case; and it is further
ORDERED that objections, if any, to confirmation of the Plan shall
be in writing, and shall (a) state the name and address of the objecting party
and the nature of
7
<PAGE>
the claim or interest of such party, (b) state with particularity the basis and
nature of each objection and the specific grounds therefor and (c) be filed,
together with proof of service, with the Court (with a copy to Chambers) and
served so that such objections are received no later than, February 10, 1997 at
5:00 p.m., Eastern Standard Time (the "Objection Deadline"), by the Court,
Chambers and the following parties:
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, NY 10153
Attn: John J. Rapisardi, Esq.
Attorneys for the Debtors
STROOCK & STROOCK & LAVAN
7 Hanover Square
New York, NY 10004
Attn: Lawrence Handelsman, Esq.
Attorneys for the Statutory
Creditors' Committee
OFFICE OF THE UNITED STATES TRUSTEE
80 Broad Street
New York, NY 10004
Attn: Diana Adams, Esq.
(the above-referenced parties are referred to herein as the "Abbreviated Service
List"); and it is further
ORDERED that responses to objections, if any, to confirmation of the
Plan by any party in interest be filed with the Court together with proof of
service, and served in a manner so as to be received on or before 5:00 p.m.
Eastern
8
<PAGE>
Standard Time on February 17, 1997 by the Abbreviated Service List; and it is
further
ORDERED that a hearing (the "Confirmation Hearing") to consider
confirmation of the Plan and any amendments thereto shall be held before the
Court in Room 610-2 of the United States Bankruptcy Court, Alexander Hamilton
Custom House, One Bowling Green, New York, New York on February 20, 1997 at 2:00
p.m., or as soon thereafter as counsel may be heard; and it is further
ORDERED that the Confirmation Hearing may be adjourned from time to
time without prior notice to holders of claims, holders of equity interests or
parties in interest other than the announcement of the adjourned hearing date at
the Confirmation Hearing; and it is further
ORDERED that pursuant to Bankruptcy Rule 3017(d), the form of the
notice of, among other things, the Voting Deadline, the Objection Deadline, and
the Confirmation Hearing (the "Notice") annexed hereto as Exhibit "B" be, and it
hereby is, approved in all respects; and it is further
ORDERED that the Debtors be, and hereby are, authorized and directed
to mail or cause to be mailed by first-class mail no later than December 30,
1996, a copy of the Notice and the Disclosure Statement and all exhibits and
attachments thereto excluding Exhibit F (the 1997 Stock
9
<PAGE>
Award and Stock Option and excluding the Plan Supplements and Plan Schedules)
which shall be filed in accordance with the provisions of this Order described
below (collectively, the "Disclosure Package"), to the following persons or
entities, unless such person or entity is otherwise to receive a Solicitation
Package (as hereinafter defined) pursuant to this Order: (1) all persons or
entities that have filed proofs of claim or equity interests with the Court on
or before the Record Date, other than any person or entity that has filed with
the Court a notice (or notices) of transfer of claim under Bankruptcy Rule
3001(e) on or before the Record Date reflecting the transfer of all of such
holder's claims; (2) all persons or entities listed in the Schedules and lists
of equity security holders and all amendments thereto through the Record Date,
other than any person or entity that has filed with the Court a notice (or
notices) of transfer of claim under Bankruptcy Rule 3001(e) on or before the
Record Date reflecting the transfer of all of such holder's claims; (3) all
other known holders of record of claims or equity interests against the Debtors,
if any, as of the Record Date, (4) all persons or entities that have acquired a
claim pursuant to a notice of the transfer of a claim under Bankruptcy Rule
3001(e) filed with the Court on or before the Record Date, (5) all parties in
10
<PAGE>
interest that have filed a notice pursuant to Bankruptcy Rule 2002 in the
Debtors' chapter 11 cases on or before the Record Date, and (6) the Abbreviated
Service List; and it is further
ORDERED that the Debtors be, and hereby are, authorized and directed
to mail or cause to be mailed by first-class mail no later than December 30,
1996 to the holders of record on the Record Date of all claims and equity
interests that are entitled to vote on the Plan as specified herein in
accordance with Bankruptcy Rule 3018(a), (a) the Notice, (b) the Disclosure
Statement and all exhibits and attachments thereto (as provided for above in the
preceding paragraph) and (c) an appropriate form of Ballot (collectively, a
"Solicitation Package"); provided, however, that Solicitation Packages for (i)
holders of claims against or interests in any Debtor placed within a class under
the Plan that is deemed to accept or reject the Plan under section 1126(f) or
1126(g) of the Bankruptcy Code and (ii) holders of claims or equity interests
that have been objected to for voting or distribution purposes in accordance
with the Scheduling Order shall not include a Ballot and a Ballot return
envelope; and it is further
ORDERED that, all parties in interest shall have until December 29,
1996 to file any objections to claims or
11
<PAGE>
equity interests for purposes of accepting or rejecting the
Plan; and it is further
ORDERED that, pursuant to Bankruptcy Rule 3018(a), in the event an
objection to a claim or equity interest is filed in the time and manner
specified herein, any motion for temporary allowance of a claim or equity
interest for purposes of accepting or rejecting the Plan (a "Temporary Allowance
Motion") shall be made by the claimholder or equity interest holder in writing,
indicate the legal basis for such request, and be filed with and received by the
Bankruptcy Court, with two (2) copies to chambers, and served upon and received
by the Abbreviated Service List, together with proof of service, on or before
January 17, 1997 at 5:00 p.m. (Eastern Standard Time); and it is further
ORDERED that, pursuant to Bankruptcy Rule 3018(a), a hearing to
consider all Temporary Allowance Motions shall be held on January 29, 1997 at
10:00 a.m. (Eastern Standard Time), or such other date and time as the Court may
set; and it is further
ORDERED that, the Debtors shall file and serve a response to any
Temporary Allowance Motion on or before January 23, 1997 at 5:00 p.m. (Eastern
Standard Time); and it is further
12
<PAGE>
ORDERED that, in the event a creditor is allowed to vote its claim
by virtue of the Court having granted its Temporary Allowance Motion, the
Debtors shall forthwith provide the creditor with a Ballot for purposes of
voting; and it is further
ORDERED that the Debtors be, and hereby are, directed to cause the
Notice to be published no later than twenty-five days prior to the date of the
Confirmation Hearing in the international edition of The Wall Street Journal,
the national edition of The New York Times, The Newark Star Ledger, The Columbus
Dispatch and The Daily Jeffersonian; and it is further
ORDERED that the provision of notice in accordance with the
procedures set forth in this Order shall be deemed good and sufficient notice of
the Confirmation Hearing, the time fixed for filing objections to the Plan and
the time within which holders of claims may vote to accept or reject the Plan;
and it is further
ORDERED that Exhibit F (the 1997 Stock Award and Stock Option Plan)
to the Disclosure Statement which was not annexed thereto upon mailing (the
"Exhibit") shall be filed by the Debtors with the Clerk of the Bankruptcy Court
not less than ten (10) days prior to the Voting Deadline and (i) any party shall
be allowed inspection of the Exhibit during
13
<PAGE>
normal court hours and (ii) any interested parties shall receive one copy of the
Exhibit upon written request addressed to Weil, Gotshal & Manges LLP, 767 Fifth
Avenue, New York, New York 10153, Attention: John J. Rapisardi, Esq. and the
foregoing shall be deemed good and sufficient notice of the contents of such
Exhibit and no other further notice of the Exhibit need be given; and it is
further
ORDERED that the Plan Supplement and the schedules to the Plan shall
be filed by the Debtors with the Clerk of the Bankruptcy Court not less than ten
(10) days prior to the Confirmation Hearing and (i) any party shall be allowed
inspection of the Plan Supplement and schedules during normal court hours and
(ii) any interested parties shall receive one copy of the Plan Supplement and
schedules upon written request to Weil, Gotshal & Manges LLP, 767 Fifth Avenue,
New York, New York 10153, Attention: John J. Rapisardi, Esq. and the foregoing
shall be deemed good and sufficient notice of the contents of such documents and
no other further notice documents need by given; and it is further
ORDERED that in the event the Environmental Agencies have failed to
file the Approval Statements (as defined in the Scheduling Order) prior to the
Approval Deadline (as defined in the Scheduling Order) as required
14
<PAGE>
pursuant to the Scheduling Order, such Approval Statement shall be filed with
the Court no later than January 15, 1997, and in the event such document is not
filed by that date, an appropriate representative of each such agency is hereby
directed to appear before the Court on January 16, 1997 at 2:00 p.m. to report
to the Court; and it is further
ORDERED that the Debtors be, and hereby are, authorized and
empowered to take such steps and perform such acts as may be necessary to
implement and effectuate this Order.
Dated: New York, New York
December 18, 1996
/s/ James L. Garrity
United States Bankruptcy Judge
15
NYFS05...:\40\63140\0003\180\ORD0246S.50C
<PAGE>
EXHIBITS A AND B TO THIS ORDER INTENTIONALLY OMITTED
<PAGE>
EXHIBIT C TO DISCLOSURE STATEMENT
AUDITED FINANCIAL STATEMENTS OF METALLURG, INC. AND CONSOLIDATED
SUBSIDIARIES FOR YEARS ENDED DECEMBER 31, 1995 AND 1994.
<PAGE>
Deloitte &
Touche LLP
METALLURG, INC. AND CONSOLIDATED
SUBSIDIARIES
Consolidated Financial Statements as of
December 31, 1995 and 1994 and for each of the
Three Years in the Period Ended
December 31, 1995, and
Independent Auditors' Report
-------------------
Deloitte Touche
Tohmatsu
International
-------------------
<PAGE>
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------------------------
TABLE OF CONTENTS PAGE
----------------- ----
Independent Auditors' Report 1
Financial Statements:
Statements of Consolidated Operations and
Retained Earnings (Deficit) for the Years
Ended December 31, 1995, 1994 and 1993 2
Consolidated Balance Sheets,
December 31, 1995 and 1994 3
Statements of Consolidated Cash Flows for
the Years Ended December 31, 1995, 1994
and 1993 5
Notes to the Consolidated Financial Statements
for the Years Ended December 31, 1995, 1994
and 1993 6
<PAGE>
Deloitte &
Touche LLP
- - --------------------------------------------------------------------------------
Two World Financial Center Telephone: (212) 436-2000
New York, New York 10281-1414 Facsimile: (212) 436-5000
INDEPENDENT AUDITORS' REPORT
Metallurg, Inc.:
We have audited the accompanying consolidated balance sheets of
Metallurg, Inc. and consolidated subsidiaries as of December 31, 1995
and 1994 and the related statements of consolidated operations and
deficit and of consolidated cash flows for the years ended December
31, 1995, 1994 and 1993. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the consolidated financial position of
Metallurg, Inc. and consolidated subsidiaries at December 31, 1995 and
1994 and the results of their consolidated operations and their
consolidated cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Notes 1 and 2 to the consolidated financial
statements, the Company has filed for reorganization under Chapter 11
of the Federal Bankruptcy Code. The accompanying consolidated
financial statements do not purport to reflect or provide for the
consequences of the bankruptcy proceedings. In particular, such
financial statements do not purport to show (a) as to assets, their
realizable value on a liquidation basis or their availability to
satisfy liabilities; (b) as to prepetition liabilities, the amounts
that may be allowed for claims or contingencies, or the status and
priority thereof; (c) as to shareholder accounts, the effect of any
changes that may be made in the capitalization of the Company; or (d)
as to operations, the effect of any changes that may be made in its
business. The outcome of these matters is not presently determinable.
Accordingly, the accompanying consolidated financial statements do not
include adjustments that might result from the ultimate outcome of
these uncertainties.
As discussed in Note 1 to the consolidated financial statements,
effective January 1, 1993, the Company deconsolidated its German
operations and changed its method of accounting for income taxes.
/s/ Deloitte & Touche LLP
March 22, 1996
Deloitte Touche
Tohmatsu
International
<PAGE>
<TABLE>
<CAPTION>
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------
STATEMENTS OF CONSOLIDATED OPERATIONS AND RETAINED EARNINGS
(DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------------------------
NOTES 1995 1994 1993
----- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Gross volume 1 $684,266 $519,477 $515,476
======= ======= =======
Sales 1 $600,605 $471,869 $472,496
Commission income 1 1,836 1,130 1,021
------- ------- -------
Total revenue 602,441 472,999 473,517
Cost of sales 1 532,747 426,320 441,357
------- ------- -------
Gross margin 69,694 46,679 32,160
Selling, general and
administrative expenses 40,911 38,827 43,747
Restructuring charges 1 5,250 2,653 6,717
------- ------- -------
Operating income (loss) 23,533 5,199 (18,304)
Other:
Other income (expense), net 12 2,007 3,023 (11,475)
Interest income (expense), net 2,8 1,149 451 (3,840)
Reorganization expense 2 (3,927) (7,118) (3,409)
------- ------- -------
Income (loss) before income tax
provision and cumulative effect
of change in accounting principle 22,762 1,555 (37,028)
Income tax provision 1,9 7,146 2,230 103
------- ------- -------
Income (loss) before cumulative
effect of change in accounting
principle 15,616 (675) (37,131)
Cumulative effect of change in
accounting principle 1 (2,496)
------- ------- -------
Net income (loss) 15,616 (675) (39,627)
(Deficit) retained earnings -
beginning of year (3,955) (3,280) 36,345
Net excess of stated value of common
shares over redemption price 10 2
------- ------- -------
Retained earnings (deficit) -
end of year $11,661 ($3,955) ($3,280)
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
- - --------------------------------------------------------------------------------
2
<PAGE>
<TABLE>
<CAPTION>
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
------------------------------------------------------------------------------
ASSETS NOTES 1995 1994
----- ---- ----
(In Thousands)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents 1 $ 35,899 $ 27,853
Trade receivables, less allowance for
doubtful accounts (1995, $3,304,000;
1994, $5,065,000) 1 90,033 84,375
Inventories 1,4 89,300 84,795
Prepaid expenses 1 12,185 9,014
--------- --------
Total current assets 227,417 206,037
Investments in affiliates 1 2,505 2,228
Property, plant and equipment, net 1,5 36,606 43,985
Other assets 13 11,718 1,762
--------- --------
TOTAL $ 278,246 $254,012
========= ========
</TABLE>
See notes to consolidated financial statements.
- - --------------------------------------------------------------------------------
3
<PAGE>
<TABLE>
<CAPTION>
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY NOTES 1995 1994
------------------------------------ ----- ---- ----
(In thousands)
<S> <C> <C> <C>
CURRENT LIABILITIES
Short-term debt 8 $4,992 $3,161
Current portion of long-term debt 8 151 1,732
Trade payables 40,062 44,671
Accrued expenses 18,634 14,380
Taxes payable 9 6,330 2,783
-------- --------
Total current liabilities 70,169 66,727
-------- --------
LONG-TERM LIABILITIES
Long-term debt 8 232
Accrued pension liabilities 1,7 2,247 2,041
Other liabilities 2,965 3,202
-------- --------
Total long-term liabilities 5,212 5,475
LIABILITIES SUBJECT TO COMPROMISE 6 185,890 180,906
-------- --------
Total liabilities 261,271 253,108
-------- --------
SHAREHOLDERS' EQUITY
Common stock 20 20
Cumulative foreign currency translation
adjustment 11 5,294 4,839
Retained earnings (deficit) 11,661 (3,955)
-------- --------
Total shareholders' equity 16,975 904
-------- --------
TOTAL $278,246 $254,012
======== ========
</TABLE>
See notes to consolidated financial statements
- - --------------------------------------------------------------------------------
4
<PAGE>
<TABLE>
<CAPTION>
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
-------------------------------------------------------------------------------------------------------------
1995 1994 1993
---- ---- ----
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 15,616 $ (675) $(39,627)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization 7,815 7,537 9,326
Cumulative effect of change in accounting principle 2,496
(Gain) loss on sales of property (1,964) (2,373) 104
Write-down of investment in subsidiaries 5,732
Reorganization expense, net of payments (609) 1,087 691
Deferred income taxes (256) (1,584) (677)
Provision for doubtful accounts 1,669 1,541 2,519
Provision for environmental costs, net of payments (2,769) (676) 5,843
Provision for restructuring costs 5,250 2,653 6,717
Other, net (239) (2,334)
-------- -------- --------
Total 24,513 7,510 (9,210)
Change in operating assets and liabilities:
(Increase) decrease in trade receivables (4,651) (27,235) 2,800
(Increase) decrease in inventories (4,443) (6,187) 4,949
(Increase) decrease in other current assets (1,131) 1,669 11,058
(Decrease) increase in trade payables and accrued expenses (2,491) 22,975 467
(Decrease) in prepetition liabilities (263) (181) (658)
Other assets and liabilities, net (9,582) 226 531
-------- -------- --------
Net cash provided (used) by operating activities 1,952 (1,223) 9,937
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment, net (4,809) (4,656) (4,306)
Proceeds from asset sales 2,432 3,843 47
Other, net (6) 23 (94)
-------- -------- --------
Net cash used by investing activities (2,383) (790) (4,353)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 8,000 661 535
Net borrowings of short-term debt 1,644 1,077 184
Repayment of long-term debt (1,824) (135) (1,580)
-------- -------- --------
Net cash provided (used) by financing activities 7,820 1,603 (861)
-------- -------- --------
Effect of Germany deconsolidation (458)
Effect of exchange rate changes on cash and cash equivalents 657 1,104 (254)
-------- -------- --------
Net increase in cash and cash equivalents 8,046 694 4,011
Cash and cash equivalents - beginning of year 27,853 27,159 23,148
-------- -------- --------
Cash and cash equivalents - end of year $ 35,899 $ 27,853 $ 27,159
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes $ 5,126 $ 1,634 $ 2,474
========= ======== ========
Cash paid for interest $ 1,751 $ 2,307 $ 4,745
========= ======== ========
Cash paid for reorganization expense $ 4,536 $ 6,031 $ 2,718
========= ======== ========
</TABLE>
See notes to consolidated financial statements
- - --------------------------------------------------------------------------------
5
<PAGE>
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation - The consolidated
---------------------------------------
financial statements include the accounts of Metallurg, Inc.
("Metallurg") and its significant majority-owned subsidiaries
(collectively, the "Company") with the exception of certain
German operations due to deconsolidation as discussed below. All
significant intercompany transactions and balances have been
eliminated in consolidation. The accounts of foreign
subsidiaries have been translated into U.S. dollars in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 52.
The consolidated financial statements have been prepared on a
going concern basis. On September 2, 1993 (the "Petition Date"),
Metallurg and one of its subsidiaries, Shieldalloy Metallurgical
Corporation (collectively, the "Debtors"), filed separate
voluntary petitions for relief under Chapter 11 of the U.S.
Bankruptcy Code with the United States Bankruptcy Court for the
Southern District of New York (the "Bankruptcy Court") as further
described in Note 2. Preparation of the consolidated financial
statements on a going concern basis contemplates continuity of
operations, realization of assets and liquidation of liabilities
in the ordinary course of business. It also contemplates, among
other things, confirmation of a plan of reorganization, future
successful operations and the ability to generate sufficient cash
from operations and financing sources to meet obligations.
However, as a result of the Chapter 11 proceedings, the
realization of assets and liquidation of liabilities are subject
to significant uncertainty. While under the protection of
Chapter 11, the Company may sell or otherwise dispose of assets
and liquidate liabilities for amounts other than those reflected
in the consolidated financial statements. Further, a plan of
reorganization could materially change the amounts currently
recorded in the consolidated financial statements. As the
Company is presently unable to determine the amount of claims
that will be allowed by the Bankruptcy Court or the amount that
will ultimately be paid on such claims, no adjustments have been
effected to the recorded pre-filing liabilities.
Accounting Estimates - The preparation of financial statements in
--------------------
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amount of revenues and
expenses during the reported period. Actual results could differ
from those estimates.
Inventories - Inventories are stated at the lower of cost or
-----------
market. The cost of inventories is determined using principally
the average cost and specific lot identification methods.
Investments - Investments in affiliates in which the Company has
-----------
a 20% to 50% ownership interest and exercises significant
management influence are accounted for in accordance with the
equity method.
German Deconsolidation - The principal German subsidiary,
----------------------
together with its subsidiaries, have incurred cumulative losses
which, when consolidated, exceed the Company's investment in
those entities. Additionally, the Company has neither the
ability, nor the obligation, to continue to support the operation
of these entities and, pursuant to Bankruptcy Court orders, the
Company is prohibited from extending further financial support.
Accordingly, these entities, with net non-cash assets of
$10,277,000 as of January 1, 1993, have been deconsolidated
effective January 1, 1993. Approximately $13,947,000, $1,308,000
and $25,851,000 in losses subsequently incurred by those entities
have not been reflected in consolidated net income for the years
ended December 31, 1995, 1994 and 1993, respectively. At
6
<PAGE>
December 31, 1995 and 1994, the consolidated entities held German
outstanding trade receivables of $4,246,000 and $2,718,000 and
payables of $3,886,000 and $7,416,000, respectively, which are
reflected in trade receivables and trade payables in the
consolidated balance sheet, as appropriate.
Property and Depreciation - Property, plant and equipment is
-------------------------
stated at cost. Depreciation is computed using the straight-line
and declining balance methods over the estimated useful lives of
the assets.
Gross Volume and Sales - Sales represent amounts invoiced to
----------------------
customers by the Company and its consolidated subsidiaries. In
certain instances, the Company's subsidiaries arrange sales for
which the supplier invoices the customer directly ("agency
sales"). In such cases, the subsidiaries receive commission
income. Gross volume represents the sum of sales and agency
sales. The Company sells manufactured and merchanted products
primarily to the steel, aluminum, superalloy, hard metal and
foundry industries.
Restructuring Charges - Restructuring charges represent severance
---------------------
pay and other costs provided in connection with the reduction and
restructuring of certain operations. During 1995, the Brazilian
operating affiliate adopted a plan to restructure mining
operations along with certain other operations. Analysis of
remaining ore deposits indicated that remaining ore contained
insufficient material to provide continued economic feasibility.
The restructuring expenses reflect severance costs and losses
expected in connection with the disposal of mining property and
equipment at the closure of the mines during 1996.
Income Taxes - The Financial Accounting Standards Board issued
------------
SFAS No. 109, "Accounting for Income Taxes," which required a
change from the deferred method to the asset and liability method
of accounting for income taxes. The Company adopted SFAS No. 109
effective January 1, 1993 and has reported the effect of the
change in the method of accounting for income taxes as of the
beginning of the year in the Statement of Consolidated Operations
and Retained Earnings (Deficit).
Deferred income taxes are provided for the temporary differences
between the financial reporting basis and the tax basis of the
Company's assets and liabilities. The Company does not provide
for U.S. Federal income taxes on the accumulated earnings
considered permanently reinvested in its foreign subsidiaries
which approximated $87,000,000 and $63,000,000 at
December 31, 1995 and 1994, respectively. These earnings have
been invested in facilities and other assets and have been
subject to substantial foreign income taxes, which may or could
offset a major portion of any tax liability resulting from their
inclusion in U.S. taxable income.
Retirement Plans - Pension costs of Metallurg and its domestic
----------------
consolidated subsidiaries are funded or accrued currently. The
Company's foreign subsidiaries maintain separate pension plans
for their employees. Such foreign plans are either funded
currently or accruals are recorded in the respective balance
sheets to reflect pension plan liabilities.
Foreign Exchange Gains and Losses - Foreign exchange losses of
---------------------------------
$881,000, $611,000 and $121,000 were recorded in 1995, 1994 and
1993, respectively. Such amounts usually arise from foreign
currency hedging programs designed to minimize the negative
effects of changes in exchange rates on operations and are
therefore included in cost of sales.
The Company enters into foreign exchange contracts with various
major financial institutions in connection with the above-
mentioned hedging programs and to hedge receivables and payables
denominated in foreign currencies. At December 31, 1995, the
Company had foreign exchange contracts, substantially maturing
through December 1996, with a contractual amount of approximately
$33,000,000, which approximates market.
7
<PAGE>
Cash and Cash Equivalents - The Company considers all highly
-------------------------
liquid instruments maturing within 30 days or less when purchased
to be cash equivalents. The carrying amount of cash and cash
equivalents approximates fair value because of the short
maturities of these instruments.
Reclassification - Certain amounts in 1994 and 1993 have been
----------------
reclassified to conform with the 1995 presentation.
2. PETITION FOR RELIEF UNDER CHAPTER 11
As indicated in Note 1, on September 2, 1993, the Debtors filed
separate voluntary petitions for reorganization under Chapter 11
of the U.S. Bankruptcy Code. The Chapter 11 proceedings are
being jointly administered for procedural purposes by the
Bankruptcy Court while the Debtors are operating their businesses
as debtors-in-possession, subject to the approval of the
Bankruptcy Court for certain of their proposed actions.
As of the Petition Date, all acts and actions to collect
prepetition indebtedness were automatically stayed under the
Bankruptcy Code. Substantially all unsecured liabilities of the
Debtors as of the Petition Date are subject to compromise under a
plan of reorganization to be voted upon by all impaired classes
of creditors and equity security holders and approved by the
Bankruptcy Court. Those claims are reflected in the Consolidated
Balance Sheets as liabilities subject to compromise. Additional
claims may arise subsequent to the Petition Date resulting from
rejection of executory contracts and from the determination by
the court (or agreed to by parties in interest) of allowed claims
for contingencies and other disputed amounts. Claims secured
against the Debtors' assets ("secured claims") also are stayed,
although the holders of such claims have the right to move the
court for relief from the stay. Secured claims are secured
primarily by liens on the Debtors' plant and equipment.
Costs of administration of the Chapter 11 cases approximating
$3,927,000, $7,118,000 and $2,200,000 were incurred by the
Debtors during 1995, 1994 and 1993, respectively, and have been
included as reorganization expense in the Statements of
Consolidated Operations. Those expenses consisted primarily of
legal, consulting and other similar expenses. During 1993,
reorganization expense also included certain amounts incurred
prior to the Petition Date resulting from legal and consulting
costs associated with the Company's attempt to negotiate a
financial restructuring of debt.
Subsequent to the Petition Date, the Bankruptcy Court approved
certain financing and security agreements (the "Agreements")
between the Debtors and the First National Bank of Boston
providing for a two-year committed line of credit. The agreement
was amended during 1995 to extend its termination date to the
earliest of (a) December 31, 1996 or (b) the commencement of the
substantial consummation of a Reorganization Plan that has been
confirmed by an order of the Bankruptcy Court. The Agreements
currently authorize the Debtors to borrow up to an aggregate
amount of $20,000,000 subject to an asset-based formula.
Interest on direct borrowings is to be charged monthly at an
annualized rate of the sum of one and one-half percent plus
prime. As collateral for borrowings under the Agreements, the
Debtors have granted the First National Bank of Boston a
continuing security interest and general lien upon substantially
all of the assets of the Debtors. As of December 31, 1995, there
have been no direct borrowings under the Agreements. Outstanding
letters of credit under the Agreements approximated $3,835,000 at
December 31, 1995.
At the Debtors request, the Bankruptcy Court established a bar
date of August 15, 1994 for all prepetition claims against the
Debtors other than those arising from any future rejection of
executory contracts or unexpired leases in the Chapter 11 cases.
A bar date is the date by which claims against the Debtors must
be filed if the claimants wish to receive any distribution in the
Chapter 11 cases. The Debtors have notified all known or
potential claimants subject to the August 15, 1994 bar date of
their
8
<PAGE>
need to file a proof of claim with the Bankruptcy Court. Proofs
of claim have been filed in connection with the August 15, 1994
bar date and the Debtors have been reconciling claims that differ
from the Debtors' records. Any remaining differences that cannot
be resolved by negotiated agreement between the Debtors and the
claimant will be resolved by the Bankruptcy Court. Certain
creditors have filed claims substantially in excess of amounts
reflected in the Company's records. Consequently, the amount
included in the Consolidated Balance Sheets at December 31, 1995
and 1994 as liabilities subject to compromise may be subject to
adjustment.
On January 16, 1996, the Debtors filed a Joint Plan of
Reorganization (the "Joint Plan") with the Bankruptcy Court.
Although the Debtors and the Official Committee of Unsecured
Creditors have reached agreement on the principal terms of the
Joint Plan, there is no assurance that the Joint Plan will
receive the requisite approval of the creditors or, ultimately,
of the Bankruptcy Court. After a plan of reorganization is
approved by the Bankruptcy Court, continuation of the business
thereafter is dependent upon the success of future operations and
the Company's ability to meet its obligations as they become due.
<TABLE>
<CAPTION>
Selected financial data for the Debtors is as follows (in thousands):
As of December 31,
------------------
1995 1994
------------------------------------------------------------------------
<S> <C> <C>
Assets $262,194 $227,767
Liabilities 206,259 199,150
------------------------------------------------------------------------
Net Assets $ 55,935 $ 28,617
========================================================================
<CAPTION>
For the Years Ended December 31,
--------------------------------
1995 1994 1993
------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $230,988 $ 213,971 $250,011
========================================================================
Net Income (Loss) $ 15,616 $ (675) $(39,627)
========================================================================
</TABLE>
9
<PAGE>
3. GEOGRAPHIC DATA
The Company operates in one industry segment, the manufacture and
sale of ferrous and nonferrous metals and alloys. Data by
geographical area is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------------------------------------------
<S> <C> <C> <C>
Identifiable Assets
North America $158,491 $140,176 $126,541
Foreign 136,770 128,272 111,513
Eliminations (17,015) (14,436) (11,098)
------------------------------------------------------------------------
Total $278,246 $254,012 $226,956
========================================================================
Total Revenue from Unaffiliated
Customers
North America $313,031 $261,567 $285,797
Foreign 289,410 211,432 187,720
------------------------------------------------------------------------
Total $602,441 $472,999 $473,517
========================================================================
Net Income (Loss)
North America $ 8,160 $ (2,887) $(37,826)
Foreign 7,456 2,212 (1,801)
------------------------------------------------------------------------
Total $ 15,616 $ (675) $(39,627)
========================================================================
</TABLE>
4. INVENTORIES
Inventories, net of reserves, consist of the following (in
thousands):
<TABLE>
<CAPTION>
As of December 31,
------------------
1995 1994
------------------------------------------------------------------------
<S> <C> <C>
Finished goods and work in process $ 71,635 $69,856
Raw materials 14,750 12,913
Other 2,915 2,026
------------------------------------------------------------------------
Total $ 89,300 $84,795
========================================================================
</TABLE>
10
<PAGE>
5. PROPERTY, PLANT AND EQUIPMENT
The major classes of property, plant and equipment are as
follows:
<TABLE>
<CAPTION>
As of December 31,
------------------
Estimated
---------
1995 1994 Lives
---- ---- -----
(in thousands) (in years)
------------------------------------------------------------------------
<S> <C> <C> <C>
Land $ 4,517 $ 4,477
Buildings and leasehold improvements 24,641 23,007 10-32
Machinery 74,287 80,769 5-17
Office furniture and equipment 3,801 3,687 3-17
Transportation equipment 6,474 6,297 3-5
Deferred mining costs 920 920 10
Construction in progress 1,341 448
------------------------------------------------------------------------
Total 115,981 119,605
Less accumulated
depreciation and amortization 79,375 75,620
------------------------------------------------------------------------
Property, plant and equipment-net $ 36,606 $ 43,985
========================================================================
</TABLE>
Depreciation expense related to property, plant and equipment
charged to operations for the years ended December 31, 1995, 1994
and 1993 was $7,748,000, $7,470,000 and $8,679,000, respectively.
6. LIABILITIES SUBJECT TO COMPROMISE
Pursuant to the provisions of the Bankruptcy Code, liabilities
attributable to the period prior to the Petition Date may not be
paid without prior approval of the Bankruptcy Court. Recorded
liabilities subject to the Chapter 11 proceedings are as follows:
(in thousands):
<TABLE>
<CAPTION>
As of December 31,
------------------
1995 1994
------------------------------------------------------------------------
<S> <C> <C>
Long-term debt $112,349 $104,602
Trade payables and
other accrued liabilities 23,099 23,091
Accrued pension liabilities 6,980 6,980
Accrued interest payable 3,412 3,412
Accrued environmental liabilities 14,343 17,114
Liabilities to former shareholders 25,707 25,707
------------------------------------------------------------------------
Total liabilities subject to compromise $185,890 $180,906
========================================================================
</TABLE>
7. RETIREMENT PLANS
Parent Company and Domestic Subsidiaries
The Company and its domestic consolidated subsidiaries have
several defined benefit pension plans covering substantially all
salaried and certain hourly paid employees. The plans generally
provide benefit payments using a formula based on an employee's
compensation and length of service. The company funds United
States pension plans in amounts equal to the minimum funding
requirements of the
11
<PAGE>
Employee Retirement Income Security Act. Substantially all plan
assets are invested in cash and short-term investments or listed
stocks and bonds.
The Company's net periodic pension cost for the defined benefit
plans included the following components (in thousands):
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1995 1994 1993
-------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned $ 476 $ 531 $ 437
during the period
Interest cost on projected 939 908 831
benefit obligation
Actual return on plan assets (862) (872) (805)
Net amortization and deferral 180 76 (49)
-------------------------------------------------------------------------
Net periodic pension cost $ 733 $ 643 $ 414
=========================================================================
</TABLE>
Assumptions used to calculate pension costs and projected benefit
obligations are as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1995 1994 1993
------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.0% 7.5% 7.5%
Rate of increase in future
compensation levels 4.0% 5.0% 5.0%
Expected long-term rate of
return on plan assets 7.5% - 9.0% 7.5% - 9.0% 9.0%
------------------------------------------------------------------------
</TABLE>
The funded status of these defined benefit pension plans and a
reconciliation of the funded status to the amounts recorded in
the balance sheet is set forth below (in thousands):
<TABLE>
<CAPTION>
As of December 31,
------------------
1995 1994
------------------------------------------------------------------------
<S> <C> <C>
Vested benefit obligation $(13,115) $(11,264)
Non-vested benefit obligation (171) (249)
---------------------
Accumulated benefit obligation (13,286) (11,513)
Effect of projected future compensation (1,138) (1,732)
---------------------
Projected benefit obligation (14,424) (13,245)
Plan assets at fair value 11,813 10,472
---------------------
Funded status (2,611) (2,773)
Unrecognized net transition obligation (100) (207)
Unrecognized prior service cost 195 263
Unrecognized net gain 1,499 2,218
---------------------
Accrued pension cost recorded $ (1,017) $ (499)
=====================
</TABLE>
The Company maintains certain non-qualified retirement benefit
arrangements for certain individuals. As of the Petition Date,
amounts due by the Debtors related to certain of those benefit
arrangements have been included in the liabilities subject to
compromise. Pension expense relating to certain of those
arrangements was $509,000 and $268,000 in 1995 and 1994,
respectively. During 1993, pension expense relating to these
arrangements was not significant.
12
<PAGE>
The Company maintains a discretionary defined contribution
profit-sharing plan covering substantially all of the salaried
employees of the Company and its domestic consolidated
subsidiaries. For the year ended December 31, 1995, the related
expense was $208,000. During 1994 and 1993, no expense was
recorded for this plan.
Foreign Subsidiaries
The Company's United Kingdom subsidiary maintains a defined
benefit pension plan covering all eligible employees. The net
periodic pension cost for the defined benefit plan included the
following components (in thousands):
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1995 1994 1993
------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned $ 918 $ 889 $ 640
during the period
Interest cost on projected 2,781 2,354 2,072
benefit obligation
Actual return on plan assets (5,174) 1,071 (7,919)
Net amortization and deferral 2,120 (3,975) 5,428
------------------------------------------------------------------------
Net periodic pension cost $ 645 $ 339 $ 221
========================================================================
</TABLE>
Assumptions used to calculate pension costs and projected benefit
obligations are as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1995 1994 1993
------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 8.5% 8.5% 8.0%
Rate of increase in future
compensation levels 6.5% 6.5% 6.0%
Expected long-term rate of
return on plan assets 8.5% 8.5% 8.0%
------------------------------------------------------------------------
</TABLE>
The funded status of the defined benefit pension plan and a
reconciliation of the funded status to the amounts recorded in
the balance sheet is set forth below (in thousands):
<TABLE>
<CAPTION>
As of December 31,
------------------
1995 1994
------------------------------------------------------------------------
<S> <C> <C>
Vested benefit obligation $(32,024) $(27,967)
Non-vested benefit obligation - -
--------------------------
Accumulated benefit obligation (32,024) (27,967)
Effect of projected future compensation (3,337) (3,840)
--------------------------
Projected benefit obligation (35,361) (31,807)
Plan assets at fair value 39,821 34,284
--------------------------
Funded status 4,460 2,477
Unrecognized net transition obligation (1,370) (1,470)
Unrecognized net (loss) gain (973) 841
--------------------------
Prepaid pension cost recorded $ 2,117 $ 1,848
========================================================================
</TABLE>
Pension fund assets and balance sheet accruals for the pension
plans of the Company's other foreign subsidiaries approximate or
exceed the related actuarially computed value of accumulated
benefit obligations. Pension expense relating to the Company's
foreign subsidiaries' pension plans was
13
<PAGE>
$854,000, $704,000 and $1,150,000 for the years ended December
31, 1995, 1994 and 1993, respectively.
8. BORROWINGS
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
As of December 31,
------------------
1995 1994
------------------------------------------------------------------------
<S> <C> <C>
Parent Company and Domestic Subsidiaries:
----------------------------------------
11.75 to 12.30% Note Purchase Agreement $ 6,000 $ 6,000
9.50 to 9.54% Note Purchase Agreement 21,000 21,000
9.50% Note Agreement 5,000 5,000
8.89% Note Agreement 6,000 6,000
Revolving Credit Agreement 64,000 64,000
Letter of Credit Reimbursement Agreement 8,000
3.90 to 8.00% New Jersey Economic
Development Authority mortgage notes 987 1,233
6% Notes 1,362 1,362
Capital Lease Agreements - 7
------------------------------------------------------------------------
Long Term Debt - Parent Company
and Domestic Subsidiaries 112,349 104,602
Foreign Subsidiaries:
--------------------
Credit Agreement (United Kingdom) 1,300
Other 151 664
------------------------------------------------------------------------
Long Term Debt - Foreign Subsidiaries 151 1,964
Less:
Amounts classified as liabilities
subject to compromise 112,349 104,602
Amounts due within one year 151 1,732
------------------------------------------------------------------------
Total Long Term Debt $ - $ 232
========================================================================
</TABLE>
Parent Company and Domestic Subsidiaries
At the Petition Date, the Debtors were in default of certain
provisions of certain debt agreements. With minor exceptions,
repayment of the amounts outstanding at that date has been
deferred pursuant to the Chapter 11 proceedings. The timing,
extent and manner of any eventual payments will be affected by a
number of variables during the Chapter 11 proceedings.
Subsequent to the Chapter 11 filings, the Debtors have not
accrued interest on any of these obligations, except for secured
debt, incurred on or before the Petition Date. Contractual
interest on these unsecured obligations approximates $9,200,000,
$8,300,000 and $2,600,000 in excess of interest expense reflected
in the Statements of Consolidated Operations for the years ended
December 31, 1995, 1994 and 1993, respectively. Interest expense
totaled $1,682,000, $1,661,000 and $6,049,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.
Foreign Subsidiaries
London & Scandinavian Metallurgical Co. Limited ("LSM"), a United
Kingdom subsidiary, entered into a three-year Credit Agreement
with two banks in July 1990, providing for committed lines of
credit approximating $12,000,000. The Credit Agreement was
amended during 1995 to extend its termination date to May 31,
1997. This Credit Agreement requires LSM to comply with various
covenants,
14
<PAGE>
including restrictions on dividends and the maintenance of
minimum levels of working capital and net worth. At December 31,
1995 there were no borrowings under this Credit Agreement.
The Company's foreign subsidiaries maintain short-term secured
and unsecured borrowing arrangements, generally in local
currencies, with various banks. Borrowings under these
arrangements aggregated $4,992,000 and $3,161,000 at December 31,
1995 and 1994, respectively.
9. INCOME TAXES
The income tax provision represents the following (in thousands):
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1995 1994 1993
------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
U.S. $ 175
Foreign $7,226 3,362 $563
State and local 149 277 217
------------------------------------------------------------------------
Total current 7,375 3,814 780
------------------------------------------------------------------------
Deferred
U.S. 50 (2,038)
Foreign (279) 454 (677)
------------------------------------------------------------------------
Total deferred (229) (1,584) (677)
------------------------------------------------------------------------
Total income tax provision $7,146 $2,230 $103
========================================================================
</TABLE>
The difference between income taxes at the statutory U.S. Federal
income tax rate and the actual provisions for income taxes relates
principally to the results of foreign operations, foreign, state
and local income taxes, utilization of losses for which the U.S.
benefit had been fully provided for in the valuation allowance
and the differential between foreign and U.S. statutory rates.
As indicated in Note 1, deferred income taxes are provided for
the effects of temporary differences between the tax basis of an
asset or liability and its reported amount in the financial
statements. These temporary differences, principally relating to
depreciation and environmental liabilities, result in taxable or
deductible amounts in future years. During 1994, the U.S.
deferred benefit represents the reversal of a portion of the
valuation allowance reflecting the partial utilization of the
U.S. Federal net operating loss carryforward in 1994 and the
projected ability to utilize the remainder during 1995, together
with recognition of Federal Alternative Minimum Tax Credit
carryforwards.
The Internal Revenue Service has completed the examination of the
consolidated U.S. Federal tax returns for years through 1991.
U.S. Federal income tax refund receivables of $618,000 and
$333,000 at December 31, 1995 and 1994, respectively, relating
primarily to the carryback effect of net operating losses are
reflected in prepaid expenses in the accompanying Consolidated
Balance Sheets.
The Company had the following deferred tax attributes recorded
(in thousands):
<TABLE>
<CAPTION>
As of December 31,
------------------
1995 1994
------------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Assets $ 18,500 $ 21,600
------------------------------------------------------------------------
Deferred Tax Liabilities $ (2,300) $ (2,700)
------------------------------------------------------------------------
Valuation Allowance $(17,600) $(19,600)
------------------------------------------------------------------------
</TABLE>
15
<PAGE>
As of December 31, 1995, the Company has net operating loss
carryforwards relating to domestic operations of $6,155,000 which
expire in 2008 and Alternative Minimum Tax Credit carryforwards
of approximately $860,000 which can be carried forward
indefinitely. The Company's consolidated foreign subsidiaries
have income tax loss carryforwards aggregating approximately
$10,158,000 which expire through 2001. Due to significant
uncertainties surrounding the realization of these loss
carryforwards, the related deferred tax assets for these foreign
subsidiaries have been fully provided for in the valuation
allowances at December 31, 1995.
10. STOCKHOLDERS' EQUITY
There are 10,000 shares of common stock authorized which have no
par value and a stated value of $10 per share. At December 31,
1995 and 1994, there were 2,005 shares outstanding. There are
300,000 shares of preferred stock authorized which have a par
value of $100 per share. No shares of preferred stock were
outstanding at December 31, 1995 or 1994. The Company has
agreements with all of its shareholders to repurchase their
shares under certain circumstances pursuant to formulas contained
in such agreements.
Previously, the preferred shareholders of the Company, all of
whom were common shareholders, tendered their preferred shares
for redemption under the repurchase agreements. Amounts due to
former shareholders were payable over periods not exceeding ten
years. At December 31, 1995 and 1994, the total liability due to
former shareholders was $25,707,000 and is included in
liabilities subject to compromise.
During the years ended December 31, 1995 and 1994, no common
stock was redeemed or retired. In 1993, the Company redeemed and
retired 175 shares of common stock.
11. FOREIGN CURRENCY TRANSLATION
The changes in the cumulative foreign currency translation
adjustment account are as follows (in thousands):
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1995 1994
------------------------------------------------------------------------
<S> <C> <C>
Balance at January 1 $4,839 $1,424
Aggregate adjustment arising from
translation of the statements of
foreign subsidiaries 455 3,415
------------------------------------------------------------------------
Balance at December 31 $5,294 $4,839
========================================================================
</TABLE>
16
<PAGE>
12. OTHER INCOME (EXPENSE), NET
Other income (expense), net consists of the following (in
thousands):
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1995 1994 1993
------------------------------------------------------------------------
<S> <C> <C> <C>
Provision for environmental costs $ (6,400)
Provision for reduction in value of
certain investments in subsidiaries (5,732)
Net gain (loss) on asset sales $1,964 $ 2,373 (104)
Other, net 43 650 761
------------------------------------------------------------------------
Total $2,007 $ 3,023 $ (11,475)
========================================================================
</TABLE>
13. ENVIRONMENTAL LIABILITIES
The Company has provided for certain estimated costs associated
with environmental remediation activities at some of its current
sites. During 1988, Shieldalloy Metallurgical Corporation
("SMC"), a wholly-owned domestic subsidiary, entered into an
Administrative Consent Order with the State of New Jersey
relative to certain future environmental cleanup operations at
its New Jersey facility. The nature and extent of the costs
needed to fulfill the obligations under the Administrative
Consent Order, as well as other environmental regulations, are
not yet fully determinable.
Accrued environmental liabilities of $14,343,000 and $17,114,000
as of December 31, 1995 and 1994, respectively, for SMC are
included in liabilities subject to compromise. These also
include amounts related to the assumption of the environmental
obligations at the Cambridge, Ohio facility acquired in 1987.
Previously, Standby Letters of Credit had been arranged totaling
$17,700,000 for the benefit of various environmental agencies
related to environmental matters at the SMC sites. During 1995,
$8,000,000, was drawn upon and deposited in a trust fund in
accordance with the Administrative Consent Order. The Joint Plan
contemplates that the remainder of these Standby Letters of
Credit will be drawn upon for the funding of certain remediation
efforts as a condition precedent to consummation of the Joint
Plan. The obligations for repayment will be subject to
compromise under the Joint Plan. At December 31, 1995, the
amount of the trust fund is reflected in other assets.
As a result of the voluntary petitions under Chapter 11 of the
Bankruptcy Code as discussed in Notes 1 and 2, the environmental
agencies filed claims related to various environmental matters at
the SMC sites. The Company is currently working vigorously with
legal counsel, the environmental agencies and other parties-in-
interest to resolve open environmental matters and reach
agreement as to the effective and efficient resolution of these
matters. Consummation of the Joint Plan is contingent on a
mutual agreement regarding the nature and method of remediation
for these sites. The outcome of these matters and resultant
additional costs, if any, is not presently determinable and could
result in significant adjustments to the amounts recorded.
14. CONTINGENT LIABILITIES
In addition to environmental matters which are discussed in Note
13, the Company continues defending various claims and legal
actions arising in the normal course of business. Management
believes, based on the advice of counsel, that the outcome of
such litigation will not have a material adverse effect on the
Company's consolidated financial statements.
17
<PAGE>
EXHIBIT D TO DISCLOSURE STATEMENT
METALLURG, INC. AND SHIELDALLOY METALLURGICAL
CORPORATION PROJECTED FINANCIAL INFORMATION.
18
<PAGE>
PROJECTED FINANCIAL INFORMATION
Introduction
The Projections should be read in conjunction with the assumptions,
qualifications, and explanations set forth herein, the historical
consolidated financial information (including the notes and schedules
thereto) and the other information set forth in Exhibit C and the
information appearing under "Classification and Treatment of Claims
and Equity Interests."
Metallurg, Inc. and Shieldalloy Metallurgical Corporation (the
"Debtors") do not, as a matter of course, publish their business plans
and strategies or make external projections or forecasts of their
anticipated financial positions or results of operations.
Accordingly, the Debtors (including Reorganized Metallurg and
Reorganized Shieldalloy (the "Reorganized Debtors")) do not anticipate
that they will, and disclaim any obligation to, furnish updated
business plans or projections to holders of Claims or Interests prior
to the Effective Date or to stockholders or debtholders after the
Effective Date, or otherwise make such information public.
Principal Assumptions - General
See "Certain Risk Factors to be Considered" for a discussion of
certain factors that may affect the future financial performance of
the Debtors and of various risks associated with the securities of
Reorganized Metallurg to be issued pursuant to the Plan.
While management of the Debtors believe that the assumptions
underlying the Projections for the period October 1, 1996 through
December 31, 1999 (the "Projection Period"), when considered on an
overall basis, are reasonable in light of current circumstances, no
assurance can be, or is being, given that the Projections will be
realized. Holders of Claims must make their own determinations as to
the reasonableness of such assumptions and the reliability of the
Projections in reaching their determinations of whether to accept or
reject the Plan.
Entities Presented
The projected financial statements below present separately (a) the
operations of Metallurg, Inc. Consolidated (for which the successor
entity is referred to as "Reorganized Metallurg Consolidated"), (b)
the operations of Metallurg, Inc. (for which the successor entity is
referred to as "Reorganized Metallurg"), and (c) the operations of
Shieldalloy Metallurgical Corporation (for which the successor entity
is referred to as "Reorganized Shieldalloy").
19
<PAGE>
A. Reorganized Metallurg Consolidated
ASSUMPTIONS
Additional information relating to the principal assumptions used
in preparing the Projections is set forth below.
(i) Plan Terms: The Projections assume that (i) the total
amount of each Class of Allowed Claims is the estimated amount as
set forth in "Classification and Treatment of Claims and Equity
Interests" and (ii) the total amount of reorganization expenses
in the year ending December 31, 1996 and the three months ending
March 31, 1997 is $3.6 million and $1.2 million, respectively.
See "Overview of the Plan" for a brief summary of the principal
provisions of the Plan, including the classification and
treatment of Claims and Interests, settlement of Environmental
Claims, the principal financial terms of certain securities to be
issued pursuant to the Plan and conditions to Confirmation and
consummation of the Plan.
(ii) Business Factors and Competitive Conditions: See Section
XI (A)(7) of the Disclosure Statement. Reorganized Metallurg
Consolidated's principal cost assumptions are summarized in
paragraphs (vi) and (vii) below.
(iii) German Deconsolidation: See Note 1 to the historical
financial statements in Exhibit C. As indicated, certain German
affiliates were deconsolidated effective January 1, 1993. The
following projections reflect reconsolidation of these entities.
Presentation of amounts at December 31, 1995 have been restated
for comparative purposes.
(iv) Fresh-Start Reporting: The American Institute of
Certified Public Accountants has issued a Statement of Position
on Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code ("SOP 90-7"). SOP 90-7 is intended to provide
guidance for financial reporting by chapter 11 debtors during and
following their chapter 11 cases. The Projections, where
applicable, have been prepared in accordance with the "fresh-
start" reporting principles set forth in SOP 90-7, giving effect
thereto as of March 31, 1997. The principal effects of the
application of these fresh-start reporting principles are
summarized below:
(a) Net Asset Value in Excess of Reorganization Value:
Under SOP 90-7, Reorganized Metallurg Consolidated will be
required to recognize as a reduction of long-term assets the
excess of the fair value of its identifiable net assets over its
total reorganization value as of the Effective Date. For
purposes of the Projections, it has been assumed that (1) the
reorganization equity value of Reorganized Metallurg Consolidated
is equal to $50 million (See also Section X of the Disclosure
Statement), (2) the fair value of fixed assets is equal to the
projected net book value of such assets as of the effective date,
(3) the fair value of inventory is equal to the projected net
book value of such assets, and (4) the fair value of investments
is $2.8 million. Based on these assumptions, the assumed
reorganization value of Reorganized Metallurg Consolidated as of
the Effective Date would be less than the assumed fair value of
Reorganized Metallurg Consolidated's net assets by approximately
$5.9 million. For purposes of the Projections, such amount is
reflected as a reduction of $4.3 million in property plant and
equipment and other long-term assets and an increase of $1.6
million in pension liabilities.
The foregoing assumptions and resultant computations were made
solely for purposes of preparing the Projections. Reorganized
Metallurg Consolidated will be required to determine the amount
by which its reorganization value as of the Effective Date
exceeds, or is less than, the fair value of its net assets as of
the Effective Date. Such determination will be based upon the
fair values as of that time, which could be materially higher or
lower than the values assumed in the foregoing computations, and
may be based on
20
<PAGE>
a different methodology, including, with respect to the valuation
of Reorganized Metallurg Consolidated's reorganization value, the
use of a measure of reorganization value other than the valuation
as described in Section X of the Disclosure Statement. In all
events, such valuation, as well as the determination of the fair
value of Reorganized Metallurg Consolidated's fixed assets and
inventories and the determination of its actual liabilities, will
be made as of the Effective Date, and the changes between the
amounts of any or all of the foregoing items as assumed in the
Projections and the actual amounts thereof as of the Effective
Date may be material.
(b) Valuation of Liabilities: Each liability existing as
of the Effective Date, other than deferred taxes and
environmental liabilities, is generally stated at the present
value of the amount to be paid pursuant to the Plan. Deferred
taxes are reported in conformity with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes,"
which requires an asset and liability approach for financial
accounting and reporting for income taxes. Under this approach,
deferred tax assets and liabilities are recorded based upon
differences between the carrying values of assets and liabilities
and the tax bases of such assets and liabilities using the
enacted tax laws in effect at the time the differences are
expected to be resolved. See Note 9 to the historical financial
statements included as Exhibit C to the Disclosure Statement.
(c) Extraordinary Item: Discharge of indebtedness income
is reported as an extraordinary item in the projected
consolidated statements of operations.
(d) Environmental Liabilities: Pursuant to settlements
with the various environmental agencies as more fully described
in Section V.B. and in accordance with the American Institute of
Certified Public Accountants' recently issued Statement of
Position 96-1 - Environmental Remediation Liabilities, Metallurg
Consolidated has recorded an additional accrual of $31.2 million
for environmental liabilities in 1996.
The environmental liability is reflected net of certain amounts
projected to be held in trust for the benefit of various
environmental agencies for the remediation of contaminated sites
included in the environmental liability.
Also see Note 13 to the historical financial statements at
Exhibit C.
(v) Sales: Sales projections are based on projections
provided by local management at each operating unit of Metallurg,
Inc. Local management included various assumptions regarding
unit sales prices, volume, product mix and economic assumptions
affecting demand in local markets which they serve. Sales are
assumed to decrease by 5.8% in 1996 (based on actual results
through September 30, 1996 and projected results for the three
months ending December 31, 1996) and increase 7.0% in 1997
(including (1) Metallurg, Inc. Consolidated for the three month
period ending March 31, 1997 and (2) Reorganized Metallurg
Consolidated for the nine months ending December 31, 1997), and
increase by 5.7% and 4.9% in 1998 and 1999, respectively.
(vi) Cost of Sales: The Projections assume that cost of sales
decreases from 87.8% of sales in 1995 to 87.3% of sales in 1996
(based on actual results through September 30, 1996 and projected
results for the three months ending December 31, 1996) and
increases to 88.1% in 1997 (including (1) Metallurg, Inc.
Consolidated for the three month period ending March 31, 1997 and
(2) Reorganized Metallurg Consolidated for the nine months ending
December 31, 1997), and decreases from 88.2% in 1998 to 88.1% in
1999 for Reorganized Metallurg Consolidated. Due to the
reduction of Reorganized Metallurg Consolidated's Property, Plant
and Equipment (PPE) as described in (iv)(a) above, cost of sales
does not reflect certain depreciation expense for PPE related to
consolidated assets held as of March 31, 1997. The impact is a
reduction in Cost of Sales of $0.4 million, $0.6 million, and
$0.6 million for the nine month period ending December 31, 1997,
and for the years 1998 and 1999, respectively.
21
<PAGE>
(vii) SG&A Expense: The Projections assume that selling,
general and administrative expense as a percentage of total
revenue increases from 7.1% in 1995 for Metallurg, Inc.
Consolidated to 8.9% in 1996 (based on actual results through
September 30, 1996 and projected results for the three months
ending December 31, 1996) and decreases to 8.3% in 1997
(including (1) Metallurg, Inc. Consolidated for the three months
ending March 31, 1997 and (2) Reorganized Metallurg Consolidated
for the nine months ending December 31, 1997). Reorganized
Metallurg Consolidated's selling, general and administrative
expense as a percentage of total revenue is assumed to decrease
to 8.0% in 1998 and 7.8% in 1999. The decrease is based on the
assumption that the Debtors' business plan will be effectively
implemented.
(viii) Capital Expenditures: Annual cash capital expenditures
are assumed to be $8.2 million for Reorganized Metallurg
Consolidated for the nine months ending December 31, 1997 and
$16.9 million and $11.9 million for 1998 and 1999, respectively.
These assumed capital expenditures relate primarily to
improvements in production processes and capacity as well as
replacement of certain assets.
(ix) Income Taxes: See Section XII of the Disclosure
Statement for a discussion of income tax effects of the Plan.
(x) Post-Reorganization Debt: The Projections assume that
$59.8 million of New Secured Notes will be issued pursuant to the
Plan and that such New Debt will have the terms described in
Exhibit A to the Joint Plan of Reorganization. The Projections
also assume that the net annual interest expense will be
approximately $7.6 million in 1997, $7.5 million in 1998 and $7.1
million in 1999.
As discussed in Section VI A.3. of the Disclosure Statement, the
Debtors or their subsidiaries may elect to borrow funds under
term loan or revolving credit facilities, the proceeds of which
will be used to redeem on a dollar for dollar basis the principal
amount of the New Secured Notes that would have been issued under
the Plan on the Effective Date. In the event that such an
election is made, the Debtors expect that interest expense may
decline due to a reduction of the assumed fixed interest rate
(12% on the New Secured Notes) to a substantially lower variable
interest rate, which is assumed to be 2.00% to 2.50% over LIBOR.
In addition, dividends assumed to be received by Reorganized
Metallurg from operating subsidiaries could also be affected by
such an election. No provision for this election has been
presented in the Projections. The overall impact of this
election is dependent on the amount of the exit financing
available and the relevant interest rates. The ultimate impact
on the financial condition of Reorganized Metallurg Consolidated,
if any, may be material.
The Debtors are in discussions with various lenders to provide
new credit facilities to (i) Reorganized Metallurg and the U.S.
and Canadian subsidiaries and (ii) Reorganized Metallurg's United
Kingdom subsidiaries. A portion of the proceeds would be used to
reduce the New Secured Notes pursuant to the terms of the Plan.
Pursuant to proposal letters received by Metallurg, Inc.'s United
Kingdom subsidiaries (the "UK Proposal"), the United Kingdom
subsidiaries would borrow up to $15.0 million as a term loan, the
proceeds of which would be repatriated to Metallurg, Inc. The
U.K. Proposal limits the amount of future dividends that may be
made by the U.K. subsidiaries, subject to the satisfaction of
certain conditions, to an amount not to exceed $1.5 million per
year beginning after 1998.
Metallurg, Inc. and its U.S. and Canadian subsidiaries are
currently in discussions with several lenders to provide a
working capital facility to Reorganized Metallurg and Metallurg
Canada, Ltd. (the "U.S. Proposal"). Under the U.S. Proposal,
approximately $13.0 million would be borrowed under such a credit
facility which would be used to reduce the New Secured Notes
pursuant to the Plan.
Assuming that Reorganized Metallurg Consolidated is able to raise
the $28.0 million under the facilities as outlined above, net
income could be expected to increase by approximately $1.6
million per year after consideration of taxes on income.
22
<PAGE>
PROJECTIONS
The last day of the Debtors' current year is December 31, 1996.
The projected consolidated financial statements have been
prepared on the assumption that the Effective Date is March 31,
1997.
The Reorganized Metallurg Consolidated Projected Opening Balance
Sheet as of March 31, 1997 set forth below presents (i) the
projected financial position of Metallurg, Inc. Consolidated
prior to the assumed Confirmation and consummation of
transactions contemplated by the Plan on March 31, 1997, (ii)
projected adjustments to such projected financial position
required to reflect Confirmation and the consummation of the Plan
(collectively, the "Balance Sheet Adjustments"), and (iii) the
projected financial position of Reorganized Metallurg
Consolidated (as the successor), after giving effect to the
Balance Sheet Adjustments, as of March 31, 1997. The Balance
Sheet Adjustments set forth in the column captioned "Effects of
Joint Plan" reflect the assumed effects of the Confirmation and
consummation of the transactions contemplated by the Plan,
including the settlement of various liabilities and related
securities issuances, cash payments and borrowings. The Balance
Sheet Adjustments set forth in the column captioned "Adoption of
Fresh-Start Reporting" reflect the projected effects of the
application of the "fresh-start" reporting principles as
summarized in paragraph (iv) above. The various Balance Sheet
Adjustments are described in greater detail in the Notes to the
Reorganized Metallurg Consolidated Projected Opening Balance
Sheet as of March 31, 1997. The Reorganized Metallurg
Consolidated Projected Opening Balance Sheet as of March 31, 1997
has been prepared based upon the balance sheet for Metallurg,
Inc. Consolidated as of December 31, 1995, combined and restated
as discussed in Note (iii) in the Assumptions above and brought
forward to March 31, 1997 to reflect the actual results of
operations for Metallurg, Inc. Consolidated for the nine months
ended September 30, 1996 and projected results of operations for
the period October 1, 1996 through March 31, 1997 as reflected in
the Metallurg, Inc. Consolidated Projected Statements of
Operations and the Metallurg, Inc. Consolidated Projected
Statements of Cash Flows set forth below.
23
<PAGE>
<TABLE>
<CAPTION>
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
- - ---------------------------------------------
PROJECTED OPENING BALANCE SHEET OF REORGANIZED
METALLURG CONSOLIDATED AS OF MARCH 31, 1997
(COMPARATIVE BALANCES AS OF DECEMBER 31, 1995 AND 1996)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Projected
----------------------------------------------------
March 31,
December 31, 1997 Opening
1995 December 31, Prior to Adoption of Balance Sheet
Actual 1996 Joint Plan Effects of Fresh Start March 31,
(Note 1) (Note 2) Effectiveness Joint Plan Reporting 1997
-------- -------- ------------- ---------- --------- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 36,828 $ 55,879 $ 60,694 $ (41,077)(a) $ - $ 19,617
Trade receivables, less
allowance for doubtful
accounts 111,276 101,610 102,954 (107)(a) - 102,847
Inventories 129,049 109,595 111,478 - - 111,478
Other current assets 15,388 12,164 8,705 (749)(a) - 7,956
----------------------------------------------------------------------------
Total current assets 292,541 279,248 283,831 (41,933) - 241,898
INVESTMENTS 2,605 2,748 2,835 - (186)(c) 2,649
PROPERTY, PLANT AND
EQUIPMENT - NET 53,516 52,918 53,890 - (3,531)(c) 50,359
OTHER ASSETS 3,534 5,003 5,409 - (576)(c) 4,833
----------------------------------------------------------------------------
TOTAL $ 352,196 $ 339,917 $ 345,965 $ (41,933) $ (4,293) $299,739
============================================================================
LIABILITIES AND SHAREHOLDERS'
(DEFICIT) EQUITY
CURRENT LIABILITIES:
Short-term debt $ 29,663 $ 17,338 $ 21,864 $ - $ - $ 21,864
Current portion of
long-term debt 989 792 785 - - 785
Current portion of environ-
mental liabilities, net 2,700 7,500 6,000 - - 6,000
Trade payables 57,926 50,964 55,691 - - 55,691
Accrued expenses 30,699 28,087 21,732 (1,040)(a) - 20,692
Taxes payable 6,330 5,614 6,409 - - 6,409
----------------------------------------------------------------------------
Total current liabilities 128,307 110,295 112,481 (1,040) - 111,441
LONG-TERM LIABILITIES:
Long-term debt 6,973 6,801 4,792 59,753 (a) - 64,545
Accrued pension liabilities 55,223 53,183 53,029 (1,396)(a) 1,590(e) 53,223
Other liabilities 2,591 3,166 3,198 - - 3,198
Environmental liabilities, net 5,962 25,680 28,182 (10,850)(a) - 17,332
----------------------------------------------------------------------------
Total long-term liabilities 70,749 88,830 89,201 47,507 1,590 138,298
LIABILITIES SUBJECT TO
COMPROMISE 171,547 179,612 180,755 (180,755)(a) - -
----------------------------------------------------------------------------
Total liabilities 370,603 378,737 382,437 (134,288) 1,590 249,739
----------------------------------------------------------------------------
SHAREHOLDERS' (DEFICIT) EQUITY:
Common stock 20 20 20 50,000(a) (20)(b) 50,000(d)
Cumulative foreign currency
translation adjustment 10,978 10,712 12,985 - (12,985)(b) -
Accumulated deficit (29,405) (49,552) (49,477) 42,355(a) 7,122 (b) -
----------------------------------------------------------------------------
Total shareholders' (deficit)
equity (18,407) (38,820) (36,472) 92,355 (5,883) 50,000
----------------------------------------------------------------------------
TOTAL $ 352,196 $ 339,917 $ 345,965 $ (41,933) $ (4,293) $299,739
============================================================================
<FN>
The projections should be read only in conjunction with the assumptions, qualifications and explanations set forth under the
captions "Principal Assumptions - General" and "Reorganized Metallurg Consolidated - Assumptions", and the consolidated
historical financial statements presented in Exhibit C.
Note 1 - The December 31, 1995 balances have been restated to reflect the reconsolidation of Germany as discussed in the
projection assumptions. Certain amounts have been reclassified for comparative purposes.
Note 2 - The December 31, 1996 balances were determined based on actual results for the nine months ended September 30, 1996
and projected results for the three months ending December 31, 1996.
</FN>
</TABLE>
24
<PAGE>
NOTES TO REORGANIZED METALLURG CONSOLIDATED
PROJECTED OPENING BALANCE SHEET
{a} To record settlement of liabilities subject to compromise and
other transactions in connection with the plan.
{b} To adjust equity accounts in accordance with fresh-start
reporting, including the effects of notes {c} through {e}.
{c} To record the reduction of long-term assets by the amount that
the fair value of identifiable assets exceeds the reorganization
value in accordance with fresh-start reporting. See section
(iv)(a) in "Assumptions".
{d} Shareholders' equity includes New Common Stock that is to be
awarded under the Stock Award Plan. The Projections assume
250,000 shares are awarded on the Effective Date and are being
amortized to expense in accordance with APB 25 and the vesting
provisions as described in the Plan. See Exhibit F of the
Disclosure Statement.
{e} To adjust the pension obligation in accordance with fresh-start
reporting.
25
<PAGE>
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------
(DEBTOR-IN-POSSESSION)
PROJECTED STATEMENTS OF OPERATIONS OF METALLURG, INC.
CONSOLIDATED FOR THE YEAR ENDING DECEMBER 31, 1996 AND
THE THREE MONTHS ENDING MARCH 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Year Three
Ending Months
December 31, Ending
1996 March 31,
(Note 1) 1997
-------- ----
Sales $667,019 $179,876
Commission income 1,505 422
-------------------
Total revenue 668,524 180,298
Cost of sales 582,484 158,156
-------------------
Gross margin 86,040 22,142
Selling, general and
administrative expenses 59,404 14,902
Provision for environmental
liabilities 31,200 -
-------------------
Operating (loss) income (4,564) 7,240
Other:
Other expense, net (3,689) (753)
Interest income (expense), net 706 (1,609)
Reorganization expense (3,600) (1,200)
Fresh-start revaluation - 7,122
-------------------
(Loss) income before income tax
provision and extraordinary item (11,147) 10,800
Income tax provision 9,000 2,181
-------------------
(Loss) income before extraordinary
item (20,147) 8,619
Extraordinary item - 40,933
-------------------
Net (loss) income $(20,147) $49,552
===================
The projections should be read only in conjunction with the
assumptions, qualifications and explanations set forth under the
captions "Principal Assumptions - General" and "Reorganized Metallurg
Consolidated - Assumptions", and the consolidated historical financial
statements presented in Exhibit C.
Note 1 - The December 31, 1996 amounts represent actual results for
the nine months ended September 30, 1996 and projected results for the
three months ending December 31, 1996.
26
<PAGE>
<TABLE>
<CAPTION>
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------
(Debtor-in-Possession)
PROJECTED CONSOLIDATED STATEMENTS OF CASH FLOWS OF METALLURG, INC.
CONSOLIDATED FOR THE YEAR ENDING DECEMBER 31, 1996 AND
THE THREE MONTHS ENDING MARCH 31, 1997
(Unaudited)
(Dollars in thousands)
Year Ending Three
December 31, Months Ending
1996 (Note 1)March 31, 1997
---------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(20,147) $49,552
Adjustments to reconcile net income to net cash
provided by operating activities:
Issuance of executive stock awards - 529
Extraordinary item - (40,933)
Fresh start revaluation - (7,122)
Depreciation and amortization 9,728 1,863
Gain on sale of assets (3,243) (3,114)
Reorganization expense, net of payments 594 (1,783)
Provision for environmental liabilities 31,200 -
Provision for pension costs, net of payments (2,040) (1,550)
Provision for allowed claims 6,922 -
Other, net (1,109) 273
----------------------
Total 21,905 (2,285)
Change in operating assets and liabilities:
Decrease (increase) in trade receivables 9,666 (1,237)
Decrease (increase) in inventories 19,454 (1,883)
Decrease in other current assets 2,109 2,447
Decrease in trade payables and accrued expenses (9,868) (885)
(Increase) decrease in other current liabilities (716) 795
Contribution to environmental trust (200) (9,200)
Environmental remediation expenditures (2,919) (2,200)
----------------------
Net cash provided by (used for) operating activities 39,431 (14,448)
----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (11,867) (3,448)
Proceeds from asset sales 5,472 4,273
(Purchase) sale of investments (1,075) 932
----------------------
Net cash provided by (used for) investing activities (7,470) 1,757
----------------------
CASH FLOWS FROM FINANCING AND REORGANIZATION ACTIVITIES:
Payment of reclamation and convenience claims - (1,415)
Cash distribution pursuant to plan - (34,473)
Increase in other accounts subject to settlement under
reorganization proceedings - 9,800
Payments of short-term debt, net (12,325) -
(Repayment of) proceeds from long-term debt (585) 2,517
----------------------
Net cash used for financing and reorganization activities (12,910) (23,571)
----------------------
Net increase (decrease) in cash and cash equivalents 19,051 (36,262)
Cash and cash equivalents - beginning of period 36,828 55,879
----------------------
Cash and cash equivalents - end of period $55,879 $19,617
======================
<FN>
The projections should be read only in conjunction with the assumptions,
qualifications and explanations set forth under the captions "Principal Assumptions
- General" and "Reorganized Metallurg Consolidated - Assumptions", and the
consolidated historical financial statements presented in Exhibit C.
Note 1 - The December 31, 1996 amounts represent actual results for the nine months
ended September 30, 1996 and projected results for the three months ending December
31, 1996.
</FN>
</TABLE>
27
<PAGE>
The accompanying projected balance sheets, projected statements of
operations and projected statements of cash flows for Reorganized
Metallurg Consolidated for the periods beginning April 1, 1997 through
December 31, 1999 are presented after giving effect to Confirmation
and consummation of the transactions contemplated by the Plan. Also
see "Principal Assumptions - General" and "Reorganized Metallurg
Consolidated - Assumptions" above.
28
<PAGE>
<TABLE>
<CAPTION>
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------
PROJECTED BALANCE SHEETS OF REORGANIZED METALLURG CONSOLIDATED
(Unaudited)
(Dollars in thousands)
As of December 31,
--------------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 18,793 $ 21,084 $ 18,527
Trade receivables, less allowance for
doubtful accounts 103,942 107,178 112,355
Inventories 107,571 110,978 114,723
Other current assets 7,710 7,743 7,953
------------------------------------
Total current assets 238,016 246,983 253,558
INVESTMENTS 2,737 2,738 2,738
PROPERTY, PLANT AND EQUIPMENT - NET 52,208 59,299 60,786
OTHER ASSETS 4,115 4,089 4,100
------------------------------------
TOTAL $297,076 $313,109 $321,182
====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 18,144 $ 14,829 $ 7,954
Current portion of long-term debt 786 786 607
Current portion of environmental liabilities, net 3,600 9,700 5,600
Trade payables 51,151 55,320 57,035
Accrued expenses 23,427 22,758 23,250
Taxes payable 4,940 4,356 4,835
------------------------------------
Total current liabilities 102,048 107,749 99,281
LONG-TERM LIABILITIES:
Long-term debt 63,688 62,451 61,392
Accrued pension liabilities 53,837 54,673 55,503
Other liabilities 3,074 2,469 2,680
Environmental liabilities, net 13,516 7,016 2,616
------------------------------------
Total long-term liabilities 134,115 126,609 122,191
Total liabilities 236,163 234,358 221,472
------------------------------------
SHAREHOLDERS' EQUITY:
Common stock 56,450 62,300 70,600
Retained earnings 4,463 16,451 29,110
------------------------------------
Total shareholders' equity 60,913 78,751 99,710
------------------------------------
TOTAL $297,076 $313,109 $321,182
====================================
<FN>
The projections should be read only in conjunction with the assumptions, qualifications and explanations set
forth under the captions "Principal Assumptions - General" and "Reorganized Metallurg Consolidated -
Assumptions", and the consolidated historical financial statements presented in Exhibit C.
</FN>
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------
PROJECTED STATEMENTS OF OPERATIONS OF REORGANIZED METALLURG CONSOLIDATED
(Unaudited)
(Dollars in thousands)
Year Ending December 31,
------------------------
Nine Months
Ending
December 31,
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Sales $533,901 $754,545 $791,746
Commission income 1,174 2,418 2,673
-----------------------------------
Total revenue 535,075 756,963 794,419
Cost of sales 470,479 665,603 697,125
-----------------------------------
Gross margin 64,596 91,360 97,294
Selling, general and administrative
expenses 44,185 60,289 61,787
-----------------------------------
Operating income 20,411 31,071 35,507
Other:
Other income, net 1,365 967 651
Interest expense, net (5,966) (7,470) (7,124)
Reorganization expense (750) - -
-----------------------------------
Income before income tax provision 15,060 24,568 29,034
Income tax provision 10,597 12,580 16,375
-----------------------------------
Net income $ 4,463 $ 11,988 $ 12,659
===================================
<FN>
The projections should be read only in conjunction with the assumptions,
qualifications and explanations set forth under the captions "Principal
Assumptions - General" and "Reorganized Metallurg Consolidated -
Assumptions", and the consolidated historical financial statements
presented in Exhibit C.
</FN>
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------
PROJECTED STATEMENTS OF CASH FLOWS OF REORGANIZED METALLURG CONSOLIDATED
(Unaudited)
(Dollars in thousands)
Year Ending December 31,
Nine Months ------------------------
Ending
December 31,
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,463 $ 11,988 $12,659
Adjustments to reconcile net income to net cash
provided by operating activities:
Issuance of executive stock awards 1,125 750 125
Depreciation 5,988 9,183 9,964
Reorganization expense, net of payments (500) - -
Provision for pension liability, net of payments 614 836 830
Provision for deferred income taxes 5,191 4,484 8,308
Other, net 641 36 67
------------------------------------
Total 17,522 27,277 31,953
Change in operating assets and liabilities:
Increase in trade receivables (1,095) (3,236) (5,177)
Decrease (increase) in inventories 3,907 (3,407) (3,745)
Decrease (increase) in other current assets 246 (33) (210)
(Decrease) increase in other current liabilities (2,774) 2,916 2,686
(Contribution to) reimbursement from environmental
trust, net (600) 3,900 1,900
Environmental remediation expenditures (5,216) (3,700) (9,800)
------------------------------------
Net cash provided by operating activities 11,990 23,717 17,607
------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (8,238) (16,874) (12,051)
------------------------------------
Net cash used for investing activities (8,238) (16,874) (12,051)
------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt (856) (1,237) (1,238)
Payments of short-term debt (3,720) (3,315) (6,875)
------------------------------------
Net cash used for financing activities (4,576) (4,552) (8,113)
------------------------------------
Net (decrease) increase in cash and cash equivalents (824) 2,291 (2,557)
Cash and cash equivalents - beginning of period 19,617 18,793 21,084
------------------------------------
Cash and cash equivalents - end of period $ 18,793 $ 21,084 $18,527
====================================
<FN>
The projections should be read only in conjunction with the assumptions, qualifications and explanations set
forth under the captions "Principal Assumptions - General" and "Reorganized Metallurg Consolidated -
Assumptions", and the consolidated historical financial statements presented in Exhibit C.
</FN>
</TABLE>
31
<PAGE>
B. Reorganized Metallurg
ASSUMPTIONS
Additional information relating to the principal assumptions used
in preparing the Projections is set forth below.
(i) Plan Terms: The Projections assume that (i) the total
amount of each Class of Allowed Claims is the estimated amount as
set forth in "Classification and Treatment of Claims and Equity
Interests" and (ii) the total amount of reorganization expenses
in the year ending December 31, 1996 and the three months ending
March 31, 1997 is $1.6 million and $0.6 million, respectively.
See "Overview of the Plan" for a brief summary of the principal
provisions of the Plan, including the classification and
treatment of Claims and Interests, the principal financial terms
of certain securities to be issued pursuant to the Plan and
conditions to Confirmation and consummation of the Plan.
(ii) Business Factors and Competitive Conditions: See Section
XI (A) (7) of the Disclosure Statement. Reorganized Metallurg's
principal cost assumptions are summarized in paragraph (v) below.
(iii) German Deconsolidation: See Note 1 to the historical
financial statements in Exhibit C. As indicated, certain German
affiliates were deconsolidated effective January 1, 1993. Losses
subsequent to that date were not reflected in the equity in
earnings of subsidiaries. The following projections reflect the
effect of the reconsolidation of these entities. Presentation of
amounts at December 31, 1995 have been restated for comparative
purposes.
(iv) Fresh-Start Reporting: The American Institute of
Certified Public Accountants has issued a Statement of Position
on Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code ("SOP 90-7"). SOP 90-7 is intended to provide
guidance for financial reporting by chapter 11 debtors during and
following their chapter 11 cases. The Projections have been
prepared in accordance with the "fresh-start" reporting
principles set forth in SOP 90-7, giving effect thereto as of
March 31, 1997. The principal effects of the application of
these fresh-start reporting principles are summarized below:
(a) Net Asset Value in Excess of Reorganization Value: Under
SOP 90-7, Reorganized Metallurg will be required to recognize as a
reduction of long-term assets the excess of the fair value of its
identifiable net assets over its total reorganization value as of the
Effective Date. For purposes of the Projections, it has been assumed
that (1) the reorganization equity value of Reorganized Metallurg is
equal to $50 million (Also see Section X of the Disclosure Statement),
(2) the fair value of fixed assets is equal to the projected net book
value of such assets as of the effective date, (3) the fair value of
inventory is equal to the projected net book value of such assets, (4)
the fair value of investments in affiliates is equal to $131.5
million, (5) the fair value of the notes receivables - intergroup is
equal to $13.5 million, and (6) the fair value of other long-term
assets is equal to the projected net book value of such assets. Based
on these assumptions, the assumed reorganization value of Reorganized
Metallurg as of the Effective Date would be less than the fair value
of Reorganized Metallurg's net assets by approximately $5.9 million.
For purposes of the Projections, such amount is reflected as a
reduction of property, plant and equipment of $0.1 million, an
increase of investments in affiliates of $11.4 million, a reduction of
notes receivable - intergroup of $16.2 million, a reduction of other
long-term assets of $0.5 million and an increase in pension
liabilities of $0.4 million.
The foregoing assumptions and resultant computations were
made solely for purposes of preparing the Projections.
Reorganized Metallurg will be required to determine the
amount by which its reorganization value as the Effective
Date exceeds, or is less than, the fair value of its assets
as of the Effective Date. Such determination will be based
upon the fair values as of that time, which could be
materially higher or lower than the values assumed in the
foregoing computations, and may be based on a different
methodology, including, with respect to the valuation of
Reorganized Metallurg's reorganization value, the use of a
measure of reorganization value other than the valuation as
described in Section X of the Disclosure
32
<PAGE>
Statement. In all events, such valuation, as well as the
determination of the fair value of Reorganized Metallurg's
fixed assets and inventories and the determination of its
actual liabilities, will be made as of the Effective Date,
and the changes between the amounts of any or all of the
foregoing items as assumed in the Projections and the actual
amounts thereof as of the Effective Date may be material.
(b) Valuation of Liabilities: Each liability existing as of
the Effective Date, other than deferred taxes, is generally stated at
the present value of the amount to be paid pursuant to the Plan.
Deferred taxes are reported in conformity with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which
requires an asset and liability approach for financial accounting and
reporting for income taxes. Under this approach, deferred tax assets
and liabilities are recorded based upon differences between the
carrying values of assets and liabilities and the tax bases of such
assets and liabilities using the enacted tax laws in effect at the
time the differences are expected to be resolved.
(c) Extraordinary Item: Discharge of indebtedness income is
reported as an extraordinary item in the projected statement of
operations.
(v) SG&A Expense: The Projections assume that selling, general
and administrative expense as a percentage of sales increases
from 11.3% in 1995 for Metallurg, Inc. to 14.5% in 1996 (based on
actual results through September 30, 1996 and projected results
for the three months ending December 31, 1996) and to 16.7% in
1997 (including (1) Metallurg, Inc. for the three months ending
March 31, 1997 and (2) Reorganized Metallurg for the nine months
ending December 31, 1997). Reorganized Metallurg's selling,
general and administrative expense as a percentage of sales is
assumed to decrease to 14.9% in 1998 and to 13.5% in 1999. The
decrease is based on the assumption that Metallurg, Inc.'s
business plan will be effectively implemented.
(vi) Income Taxes: See Section XII of the Disclosure Statement
for a discussion of income tax effects of the Plan.
(vii) Post Reorganization Debt: The Projections assume that
$59.8 million of New Secured Notes will be issued pursuant to the
Plan and that such New Debt will have the terms described in
Exhibit A to the Joint Plan of Reorganization. The Projections
also assume that the net annual interest expense will be
approximately $6.0 million in 1997, $6.4 million in 1998 and $6.5
million in 1999.
As discussed in Section VI A.3. of the Disclosure Statement, the
Debtors or their subsidiaries may elect to borrow funds under
term loan or revolving credit facilities, the proceeds of which
will be used to redeem on a dollar for dollar basis the principal
amount of the New Secured Notes that would have been issued under
the Plan on the Effective Date. In the event that such an
election is made, the Debtors expect that interest expense may
decline due to a reduction of the assumed fixed interest rate
(12% on the New Secured Notes) to a substantially lower variable
interest rate. In addition, dividends assumed to be received by
Reorganized Metallurg from operating subsidiaries could also be
affected by such an election. No provision for this election has
been presented in the Projections. The overall impact of this
election is dependent on the amount of the exit financing
available and the relevant interest rates. The ultimate impact on
the financial condition of Reorganized Metallurg, if any, may be
material.
The Debtors are in discussions with various lenders to provide
new credit facilities to (i) Reorganized Metallurg and the U.S
and Canadian subsidiaries and (ii) Reorganized Metallurg's United
Kingdom subsidiaries. A portion of the proceeds would be used to
reduce the New Secured Notes pursuant to the terms of the Plan.
Pursuant to proposal letters received by Metallurg, Inc.'s United
Kingdom subsidiaries (the "UK Proposal"), the United Kingdom
subsidiaries would borrow up to $15.0 million as a term loan, the
proceeds of which would be repatriated to Metallurg, Inc. The
U.K. Proposal limits the amount of future dividends that may be
made by the U.K. subsidiaries, subject to the satisfaction of
certain conditions, to an amount not to exceed $1.5 million per
year beginning after 1998.
33
<PAGE>
Metallurg, Inc. and its U.S. and Canadian subsidiaries are
currently in discussions with several lenders to provide a
working capital facility to Reorganized Metallurg and Metallurg
Canada, Ltd. (the "U.S. Proposal"). Under the U.S. Proposal,
approximately $13.0 million would be borrowed under such a credit
facility which would be used to reduce the New Secured Notes
pursuant to the Plan.
Assuming that Reorganized Metallurg Consolidated is able to raise
the $28.0 million under the facilities as outlined above, net
income could be expected to increase by approximately $0.7
million per year after giving consideration to the effect of
taxes on income. Reorganized Metallurg's long-term debt would be
decreased by $18.0 million accordingly. As a result, Reorganized
Metallurg's cash flow would be expected to decrease by
approximately $0.3 for the nine months ended December 31, 1997.
In 1998 and 1999, cash flow could be expected to increase by
approximately $0.4 and $2.5, respectively.
PROJECTIONS
The last day of the Debtors' current year is December 31, 1996.
The projected financial statements have been prepared on the
assumption that the Effective Date is March 31, 1997.
The Reorganized Metallurg Projected Opening Balance Sheet as
of March 31, 1997 set forth below presents (i) the projected
financial position of Metallurg, Inc. prior to the assumed
Confirmation and consummation of transactions contemplated by the
Plan on March 31, 1997, (ii) projected adjustments to such
projected financial position required to reflect Confirmation and
the consummation of the Plan (collectively, the "Balance Sheet
Adjustments"), and (iii) the projected financial position of
Reorganized Metallurg (as the successor), after giving effect to
the Balance Sheet Adjustments, as of March 31, 1997. The Balance
Sheet Adjustments set forth in the column captioned "Effects of
Joint Plan" reflect the assumed effects of the Confirmation and
consummation of the transactions contemplated by the Plan,
including the settlement of various liabilities and related
securities issuances, cash payments, and borrowings. The Balance
Sheet Adjustments set forth in the column captioned "Adoption of
Fresh-Start Reporting" reflect the projected effects of the
application of the "fresh-start" reporting principles as
summarized in paragraph (iv) above. The various Balance Sheet
Adjustments are described further in the Notes to the Reorganized
Metallurg Projected Opening Balance Sheet as of March 31, 1997.
The Reorganized Metallurg Projected Opening Balance Sheet as of
March 31, 1997 has been prepared based upon the balance sheet for
Metallurg, Inc. as of December 31, 1995, restated as discussed in
(iii) in the Assumptions above and brought forward to March 31,
1997 to reflect the actual results of operations for Metallurg,
Inc. for the nine months ended September 30, 1996 and projected
results of operations for the period October 1, 1996 through
March 31, 1997 as reflected in the Metallurg, Inc. Projected
Statements of Operations and the Metallurg, Inc. Projected
Statements of Cash Flows set forth below.
34
<PAGE>
<TABLE>
<CAPTION>
METALLURG, INC.
- - ---------------
PROJECTED OPENING BALANCE SHEET OF REORGANIZED
METTALURG AS OF MARCH 31, 1997 (COMPARATIVE BALANCES
AS OF DECEMBER 31, 1995 AND 1996)
(Unaudited)
(Dollars in thousands)
Projected
---------------------------------------------------
March 31, Opening
December 31, 1997 Balance
1995 December 31, Prior to Adoption of Sheet
Actual 1996 Joint Plan Effects of Fresh Start March 31,
(Note 1) (Note 2) Effectiveness Joint Plan Reporting 1997
-------- -------- ------------- ---------- --------- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 24,470 $ 38,389 $ 43,064 $ (41,077)(a) $ - $ 1,987
Trade receivables, less allowance for
doubtful accounts 2,338 1,639 2,150 - - 2,150
Trade receivables - intergroup 8,823 4,892 5,001 (481)(a) - 4,520
Inventories 7,068 4,318 3,000 - - 3,000
Other current assets 4,514 5,122 3,270 (749)(a) - 2,521
------------------------------------------------------------------------------
Total current assets 47,213 54,360 56,485 (42,307) - 14,178
INVESTMENTS - INTERGROUP 60,828 55,389 55,773 23,556 (a) 11,827 (c) 91,156
INVESTMENTS 2,459 1,527 1,527 - (456)(c) 1,071
PROPERTY, PLANT AND EQUIPMENT - NET 1,033 384 397 - (119)(c) 278
NOTES RECEIVABLE - INTERGROUP 53,671 40,177 37,699 (13,949)(a) (16,244)(c) 7,506
OTHER ASSETS 1,293 1,131 1,205 - (526)(c) 679
------------------------------------------------------------------------------
TOTAL $ 166,497 $ 152,968 $ 153,086 $ (32,700) $ (5,518) $ 114,868
==============================================================================
LIABILITIES AND SHAREHOLDERS'
(DEFICIT) EQUITY
CURRENT LIABILITIES:
Trade payables $ 730 $ 1,700 $ 1,400 $ - $ - $ 1,400
Trade payables - intergroup 1,193 625 242 - (a) - 242
Accrued expenses 3,012 3,252 3,917 (944)(a) - 2,973
Loans payable - intergroup 8,540 12,950 10,657 (10,657)(a) - -
------------------------------------------------------------------------------
Total current liabilities 13,475 18,527 16,216 (11,601) - 4,615
LONG-TERM LIABILITIES:
Long-term debt - - - 59,753 (a) - 59,753
Accrued pension liabilities 1,287 1,531 1,531 (1,396)(a) 365 (e) 500
Other liabilities 28 - - - - -
----------------------------------------------------------------------------
Total long-term liabilities 1,315 1,531 1,531 58,357 365 60,263
LIABILITIES SUBJECT TO COMPROMISE 170,113 171,730 171,811 (171,811)(a) - -
------------------------------------------------------------------------------
Total liabilities 184,903 191,788 189,558 (125,055) 365 64,868
-----------------------------------------------------------------------------
SHAREHOLDERS' (DEFICIT) EQUITY:
Common stock 20 20 20 50,000 (a) (20) (b) 50,000(d)
Cumulative foreign currency translation
adjustment 10,979 10,712 12,985 (12,985) (b) -
Accumulated deficit (29,405) (49,552) (49,477) 42,355 (a) 7,122 (b) -
------------------------------------------------------------------------------
Total shareholders' (deficit) equity (18,406) (38,820) (36,472) 92,355 (5,883) 50,000
------------------------------------------------------------------------------
TOTAL $ 166,497 $ 152,968 $ 153,086 $(32,700) $ (5,518) $114,868
==============================================================================
<FN>
The projections should be read only in conjunction with the assumptions, qualifications and explanations set forth under the
captions "Principal Assumptions - General" and "Reorganized Metallurg - Assumptions", and the consolidated historical financial
statements presented in Exhibit C.
Note 1 - The December 31, 1995 amounts have been restated to reflect the reconsolidation of Germany discussed in projection
assumptions. Certain other amounts have been reclassified for comparative purposes.
Note 2 - The December 31, 1996 balances were determined based on actual results for the nine months ended September 30, 1996
and projected results for the three months ending December 31, 1996.
</FN>
</TABLE>
35
<PAGE>
NOTES TO REORGANIZED METALLURG
PROJECTED OPENING BALANCE SHEET
{a} To record settlement of liabilities subject to compromise and
other transactions in connection with the plan.
{b} To adjust equity accounts in accordance with fresh-start
reporting, including the effects of notes {c} through {e}.
{c} To record the reduction of long-term assets by the amount that
the fair value of identifiable assets exceeds the reorganization
value in accordance with fresh-start reporting. See section
(iv)(a) in "Assumptions".
{d} Shareholders' equity includes New Common Stock that is to be
awarded under the Stock Award Plan. The Projections assume
250,000 shares are awarded on the Effective Date and are being
amortized to expense in accordance with APB 25 and the vesting
provisions as described in the Plan. See Exhibit F of the
Disclosure Statement.
{e} To adjust the pension obligation in accordance with fresh-start
reporting.
36
<PAGE>
<TABLE>
<CAPTION>
METALLURG, INC.
(Debtor-in-Possession)
PROJECTED STATEMENTS OF OPERATIONS OF METALLURG, INC. FOR
THE YEAR ENDING DECEMBER 31, 1996 AND THE THREE MONTHS ENDING MARCH 31, 1997
(Unaudited)
(Dollars in thousands)
Year Three
Ending Months
December 31, Ending
1996 March 31,
(Note 1) 1997
------------ ----------
<S> <C> <C>
Sales $ 33,619 $ 10,165
Cost of sales 31,276 9,565
---------------------------------
Gross margin 2,343 600
Selling, general and administrative expenses 4,881 1,748
---------------------------------
Operating loss (2,538) (1,148)
Other:
Other (expense) income, net (11,588) 2,407
Interest income (expense), net 1,031 (1,469)
Reorganization expense (1,600) (600)
Fresh-start revaluation - 7,122
----------------------------------
(Loss) income before income tax expense, equity in
operations of subsidiaries and extraordinary item (14,695) 6,312
Income tax provision (benefit) 180 (297)
----------------------------------
(Loss) income before equity in operations and
extraordinary item (14,875) 6,609
Equity in operations of subsidiaries (5,272) (23,401)
----------------------------------
Loss before extraordinary item (20,147) (16,792)
Extraordinary item - 66,344
---------------------------------
Net (loss) income $(20,147) $ 49,552
=================================
<FN>
The projections should be read only in conjunction with the assumptions, qualifications and explanations set
forth under the captions "Principal Assumptions - General" and "Reorganized Metallurg - Assumptions", and the
consolidated historical financial statements presented in Exhibit C.
Note 1 - The December 31, 1996 amounts represent actual results for the nine months ended September 30, 1996
and projected results for the three months ending December 31, 1996.
</FN>
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
METALLURG, INC.
---------------
(Debtor-in-Possession)
PROJECTED STATEMENTS OF CASH FLOWS FOR METALLURG, INC.
FOR THE YEAR ENDING DECEMBER 31, 1996 AND THE THREE
MONTHS ENDING MARCH 31, 1997
(Unaudited)
(Dollars in thousands)
Year Three
Ending Months
December 31, Ending
1996 March 31,
(Note 1) 1997
------------ ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(20,147) $ 49,552
Adjustments to reconcile net income to net cash
provided by operating activities:
Issuance of executive stock awards - 529
Extraordinary item - (66,344)
Fresh start revaluation - (7,122)
Depreciation and amortization 174 32
Gain on sales of property - (2,406)
Reorganization expense, net of payments 301 (1,583)
Provision for partial write-off of Brazilian loan 10,000 -
Provision for allowed claims 1,617 -
Provision for pension liability, net of payments 244 (1,396)
Equity in operations of subsidiaries 5,272 23,401
Other, net 297 7
---------------------
Total (2,242) (5,330)
Change in operating assets and liabilities:
Decrease (increase) in trade receivables 4,630 (620)
Decrease in inventories 2,750 1,318
Decrease (increase) in other current assets 967 (23)
Increase in trade payables and accrued expenses 341 575
---------------------
Net cash provided by (used for) operating activities 6,446 (4,080)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment, net (98) (45)
Proceeds from asset sales - 3,981
Purchase of subsidiary (6,167) -
---------------------
Net cash (used for) provided by investing activities (6,265) 3,936
---------------------
CASH FLOWS FROM FINANCING AND REORGANIZATION ACTIVITIES:
Cash distribution pursuant to plan of reorganization - (34,118)
Payment of reclamation and convenience claims - (50)
Increase in other accounts subject to settlement under
reorganization proceedings - 8,200
Proceeds (issuance) of intercompany debt, net 7,647 (10,745)
Receipt of dividends from subsidiaries 6,091 455
---------------------
Net cash provided by (used for) financing and
reorganization activities 13,738 (36,258)
Net increase (decrease) in cash and cash equivalents 13,919 (36,402)
Cash and cash equivalents - beginning of period 24,470 38,389
---------------------
Cash and cash equivalents - end of period $38,389 $ 1,987
=====================
<FN>
The projections should be read only in conjunction with the assumptions,
qualifications and explanations set forth under the captions "Principal Assumptions
- General" and "Reorganized Metallurg - Assumptions", and the consolidated historical financial
statements presented in Exhibit C.
Note 1 - The December 31, 1996 amounts represent actual results for the nine months
ended September 30, 1996, and projected results for the three months ending December
31, 1996.
</FN>
</TABLE>
38
<PAGE>
The accompanying projected balance sheets, projected statements of
operations and projected statements of cash flows for Reorganized
Metallurg for the periods beginning April 1, 1997 through December 31,
1999 are presented after giving effect to Confirmation and consummation of
the transactions contemplated by the Plan. Also see "Principal Assumptions
- General" and "Reorganized Metallurg - Assumptions" above.
39
<PAGE>
<TABLE>
<CAPTION>
METALLURG, INC.
---------------
PROJECTED BALANCE SHEETS OF REORGANIZED METALLURG
(Unaudited)
(Dollars in thousands)
As of December 31,
---------------------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,562 $ 5,018 $ 500
Trade receivables, less allowance for
doubtful accounts 2,150 2,150 2,150
Trade receivables - intergroup 4,621 4,551 4,481
Inventories 3,403 3,403 3,428
Other current assets 2,232 2,232 2,366
-------------------------------------------
Total current assets 14,968 17,354 12,925
INVESTMENTS - INTERGROUP 103,575 125,066 148,970
INVESTMENTS 1,071 1,071 1,071
PROPERTY, PLANT AND EQUIPMENT - NET 316 300 284
NOTES RECEIVABLE - INTERGROUP 7,209 1,051 3,591
OTHER ASSETS 679 679 679
-------------------------------------------
TOTAL $127,818 $ 145,521 $167,520
===========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ - $ - $ 1,269
Trade payables 1,400 1,400 1,400
Trade payables - intergroup 508 508 508
Accrued expenses 4,744 4,609 4,520
-------------------------------------------
Total current liabilities 6,652 6,517 7,697
LONG-TERM LIABILITIES:
Long-term debt 59,753 59,753 59,753
Accrued pension liabilities 500 500 500
-------------------------------------------
Total long-term liabilities 60,253 60,253 60,253
-------------------------------------------
Total liabilities 66,905 66,770 67,950
-------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock 56,450 62,300 70,600
Retained earnings 4,463 16,451 28,970
-------------------------------------------
Total shareholders' equity 60,913 78,751 99,570
-------------------------------------------
TOTAL $127,818 $ 145,521 $167,520
===========================================
<FN>
The projections should be read only in conjunction with the assumptions, qualifications and explanations set
forth under the captions "Principal Assumptions - General" and "Reorganized Metallurg - Assumptions", and the
consolidated historical financial statements presented in Exhibit C.
</FN>
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
METALLURG, INC.
---------------
PROJECTED STATEMENTS OF OPERATIONS OF REORGANIZED METALLURG
(Unaudited)
(Dollars in thousands)
Year Ending December 31,
-----------------------------
Nine Months
Ending
December 31,
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Sales $ 30,495 $ 41,850 $ 43,075
Cost of sales 28,666 39,340 40,491
-------------------------------------------
Gross margin 1,829 2,510 2,584
Selling, general and administrative
expenses 5,053 6,246 5,810
-------------------------------------------
Operating loss (3,224) (3,736) (3,226)
Other:
Other income, net 188 250 250
Interest expense, net (4,563) (6,424) (6,543)
Reorganization expense (375) - -
-------------------------------------------
Loss before income tax expense and equity in
operations of subsidiaries (7,974) (9,910) (9,519)
Income tax benefit (73) (59) (96)
-------------------------------------------
Loss before equity in operations of subsidiaries (7,901) (9,851) (9,423)
Equity in operations of subsidiaries 12,364 21,839 21,942
-------------------------------------------
Net income $ 4,463 $ 11,988 $ 12,519
===========================================
<FN>
The projections should be read only in conjunction with the assumptions, qualifications and explanations set
forth under the captions "Principal Assumptions - General" and "Reorganized Metallurg - Assumptions", and the
consolidated historical financial statements presented in Exhibit C.
</FN>
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
METALLURG, INC.
---------------
PROJECTED STATEMENTS OF CASH FLOWS OF REORGANIZED METALLURG
(Unaudited)
(Dollars in thousands)
Year Ending December 31,
-----------------------------
Nine Months
Ending
December 31,
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,463 $ 11,988 $ 12,519
Adjustments to reconcile net income to net cash
used for operating activities:
Issuance of executive stock awards 1,125 750 125
Depreciation 67 91 91
Equity in operations of subsidiaries (12,364) (21,839) (21,942)
Provision for deferred taxes 11 15 15
-------------------------------------------
Total (6,698) (8,995) (9,192)
Change in operating assets and liabilities:
(Increase) decrease in trade receivables (101) 70 70
Increase in inventories (403) - (25)
Decrease (increase) in other current assets 289 - (134)
Increase (decrease) in other current liabilities 2,037 (135) (89)
-------------------------------------------
Net cash used for operating activities (4,876) (9,060) (9,370)
-------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment, net (105) (75) (75)
-------------------------------------------
Net cash used for investing activities (105) (75) (75)
-------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (issuance) of intercompany debt, net 297 6,158 (2,540)
Receipt of dividends from subsidiaries 5,259 5,433 6,198
Proceeds of short term debt, net - - 1,269
-------------------------------------------
Net cash provided by financing activities 5,556 11,591 4,927
-------------------------------------------
Net increase (decrease) in cash and cash equivalents 575 2,456 (4,518)
Cash and cash equivalents - beginning of period 1,987 2,562 5,018
-------------------------------------------
Cash and cash equivalents - end of period $ 2,562 $ 5,018 $ 500
===========================================
<FN>
The projections should be read only in conjunction with the assumptions, qualifications and explanations set
forth under the captions "Principal Assumptions - General" and "Reorganized Metallurg - Assumptions", and the
consolidated historical financial statements presented in Exhibit C.
</FN>
</TABLE>
42
<PAGE>
C. Reorganized Shieldalloy
ASSUMPTIONS
Additional information relating to the principal assumptions used
in preparing the Projections is set forth below.
(i) Plan Terms: The Projections assume that (i) the total
amount of each Class of Allowed Claims is the estimated amount as
set forth in "Classification and Treatment of Claims and Equity
Interests" and (ii) the total amount of reorganization expenses
in the year ending December 31, 1996 and the three months ending
March 31, 1997 is $2.0 million and $0.6 million, respectively.
See "The Plan of Reorganization" for a brief summary of the
principal provisions of the Plan, including the classification
and treatment of Claims and Interests, settlement of
Environmental Claims, the principal financial terms of certain
securities to be issued pursuant to the Plan and conditions to
Confirmation and consummation of the Plan.
(ii) Business Factors and Competitive Conditions: See Section
XI(A)(7) of the Disclosure Statement. Reorganized Shieldalloy's
principal cost assumptions are summarized in paragraphs (iv) and
(v) below.
(iii) Sales: Sales projections are based on various assumptions
regarding unit sales prices, volume, product mix and economic
assumptions affecting demand in local markets which they serve.
Sales are assumed to increase by 5.0% in 1996 (based on actual
results through September 30, 1996 and projected results for the
three months ending December 31, 1996) and 6.6% in 1997
(including (1) Shieldalloy Metallurgical Corporation for the
three month period ending March 31, 1997 and (2) Reorganized
Shieldalloy for the nine months ending December 31, 1997),
decrease by 0.5% in 1998 and increase by 2.5% in 1999,
respectively.
(iv) Cost of Sales: The Projections assume that cost of sales
as a percentage of sales increases from 89.5% in 1995 to 93.1% in
1996 (based on actual results through September 30, 1996 and
projected results for the three months ending December 31, 1996)
and to 93.2% in 1997 (including (1) Shieldalloy Metallurgical
Corporation for the three month period ending March 31, 1997 and
(2) Reorganized Shieldalloy for the nine months ending
December 31, 1997), and decreases from 93.1% in 1998 to 92.9% in
1999 for Reorganized Shieldalloy. These decreases are based on
the assumption that Shieldalloy's business plan, which reflects
both gross margin improvements and expense control resulting from
certain of the strategies in the business plan, will be
effectively implemented.
(v) SG&A Expense: The Projections assume that selling, general
and administrative expense as a percentage of total revenue
increases from 4.6% in 1995 (1995 SG&A expenses were adjusted for
comparative purposes) for Shieldalloy Metallurgical Corporation
to 5.6% in 1996 (based on actual results through September 30,
1996 and projected results for the three months ending
December 31, 1996) and decreases to 4.5% in 1997 (including (1)
Shieldalloy Metallurgical Corporation for the three months ending
March 31, 1997 and (2) Reorganized Shieldalloy for the nine
months ending December 31, 1997). Reorganized Shieldalloy's
selling, general and administrative expense as a percentage of
total revenue is assumed to decrease to 4.7% in 1998 and 1999.
The decrease is based on the assumption that Shieldalloy's
business plan will be effectively implemented.
(vi) Capital Expenditures: Annual cash capital expenditures are
assumed to be $1.4 million for the nine months ending
December 31, 1997 and $3.0 million and $2.5 million for 1998 and
1999,
43
<PAGE>
respectively. These assumed capital expenditures relate
primarily to improvements in production processes and capacity as
well as replacement of certain assets.
(vii) Environmental Liabilities: Pursuant to settlements with the
various environmental agencies as more fully described in Section
V.B. and in accordance with the American Institute of Certified
Public Accountants' recently issued Statement of Position 96-1 -
Environmental Remediation Liabilities, Shieldalloy has recorded
an additional accrual of $31.2 million for environmental
liabilities in 1996.
The environmental liability is reflected net of certain amounts
projected to be held in trust for the benefit of various
environmental agencies for the remediation of contaminated sites
included in the environmental liability.
Also see Note 13 to the historical financial statements at
Exhibit C.
(viii) Extraordinary Item: Discharge of indebtedness income
is reported as an extraordinary item in the projected
consolidated statements of operations.
44
<PAGE>
PROJECTIONS
The last day of Shieldalloy's current year is December 31, 1996. The
projected financial statements have been prepared on the assumption
that the Effective Date is March 31, 1997.
The Reorganized Shieldalloy Projected Opening Balance Sheet as of
March 31, 1997 set forth below presents (i) the projected financial
position of Shieldalloy Metallurgical Corporation prior to the assumed
Confirmation and consummation of transactions contemplated by the Plan
on March 31, 1997, (ii) projected adjustments to such projected
financial position required to reflect Confirmation and the
consummation of the Plan, and (iii) the projected financial position
of Reorganized Shieldalloy (as the successor), after giving effect to
the Balance Sheet Adjustments, as of March 31, 1997. The balance
sheet adjustments as set forth in the column captioned "Effects of
Joint Plan" reflect the assumed effects of the Confirmation and
consummation of the transactions contemplated by the Plan, including
the settlement of various liabilities and related securities
issuances, cash payments, and borrowings. The various balance sheet
adjustments are described further in the Notes to the Reorganized
Shieldalloy Projected Opening Balance Sheet as of March 31, 1997. The
Reorganized Shieldalloy Projected Opening Balance Sheet as of
March 31, 1997 has been prepared based upon the balance sheet for
Shieldalloy as of December 31, 1995, brought forward to March 31, 1997
to reflect the actual results of operations for Shieldalloy
Metallurgical Corporation for the nine months ended September 30, 1996
and projected results of operations for the period October 1, 1996
through March 31, 1997 as reflected in the Shieldalloy Projected
Statements of Operations and the Shieldalloy Projected Statements of
Cash Flows set forth below.
45
<PAGE>
<TABLE>
<CAPTION>
SHIELDALLOY METALLURGICAL CORPORATION
- - -------------------------------------
PROJECTED OPENING BALANCE SHEET OF REORGANIZED
SHIELDALLOY AS OF MARCH 31, 1997 (COMPARATIVE BALANCES
AS OF DECEMBER 31, 1995 AND 1996)
(Unaudited)
(Dollars in thousands) Projected
-----------------------------------------
March 31,
December 31, 1997
1995 December 31, Prior to Opening
Actual 1996 Joint Plan Effects of Balance Sheet
(Note 1) (Note 2) Effectiveness Joint Plan March 31, 1997
-------- -------- ------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 988 $ 1,650 $ 1,650 $ - $ 1,650
Trade receivables, less allowance for
doubtful accounts 27,605 29,760 31,092 (107)(a) 30,985
Trade receivables - intergroup 1,523 1,620 1,618 (1,118)(a) 500
Loan receivables - intergroup 20,613 22,949 23,928 (23,928)(a) -
Inventories 30,432 30,700 29,847 - 29,847
Other current assets 248 300 300 - 300
-------------------------------------------------------------
Total current assets 81,409 86,979 88,435 (25,153) 63,282
INVESTMENTS - INTERGROUP 657 - - - -
PROPERTY, PLANT AND EQUIPMENT - NET 13,599 11,275 11,158 - 11,158
NOTE RECEIVABLE - INTERGROUP 4,047 4,370 4,457 (4,457)(a) -
OTHER ASSETS - 200 200 - 200
-------------------------------------------------------------
TOTAL $99,712 $102,824 $104,250 $(29,610) $ 74,640
=============================================================
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES:
Trade payables $4,016 $ 4,394 $ 4,074 $ - $ 4,074
Trade payables - intergroup 4,208 8,000 10,624 - 10,624
Loans payable - intergroup - - - 6,700 (a) 6,700
Accrued expenses 3,375 4,000 2,819 (50)(a) 2,769
Current portion of environmental
liabilities, net 2,700 7,500 6,000 - 6,000
Taxes payable 181 100 125 - 125
--------------------------------------------------------------
Total current liabilities 14,480 23,994 23,642 6,650 30,292
LONG-TERM LIABILITIES:
Note payable - intergroup 8,287 8,700 8,800 (8,800)(a) -
Accrued pension liabilities 389 389 400 1,225 (a) 1,625
Environmental liabilities, net 3,356 25,100 25,850 (10,850)(a) 15,000
--------------------------------------------------------------
Total long-term liabilities 12,032 34,189 35,050 (18,425) 16,625
LIABILITIES SUBJECT TO COMPROMISE 34,240 76,115 76,065 (76,065)(a) -
--------------------------------------------------------------
Total liabilities 60,752 134,298 134,757 (87,840) 46,917
--------------------------------------------------------------
SHAREHOLDER'S EQUITY (DEFICIT):
Common stock 1,207 1,207 1,207 42,646 (a) 43,853
Retained earnings (accumulated deficit) 37,753 (32,681) (31,714) 15,584 (a) (16,130)
--------------------------------------------------------------
Total shareholder's equity (deficit) 38,960 (31,474) (30,507) 58,230 27,723
--------------------------------------------------------------
TOTAL $99,712 $102,824 $104,250 $(29,610) $ 74,640
==============================================================
<FN>
The projections should be read only in conjunction with the assumptions, qualifications and explanations set forth
under the captions "Principal Assumptions - General" and "Reorganized Shieldalloy - Assumptions", and the consoli-
dated historical financial statements presented in Exhibit C.
Note 1 - Certain amounts have been reclassified for comparative purposes.
Note 2 - The December 31, 1996 balances were determined based on actual results for the nine months ended
September 30, 1996 and projected results for the three months ending December 31, 1996.
</FN>
</TABLE>
46
<PAGE>
NOTE TO REORGANIZED SHIELDALLOY
PROJECTED OPENING BALANCE SHEET
{a} To record settlement of liabilities subject to compromise and
other transactions in connection with the plan.
47
<PAGE>
<TABLE>
<CAPTION>
SHIELDALLOY METALLURGICAL CORPORATION
-------------------------------------
(Debtor-in-Possession)
PROJECTED STATEMENTS OF OPERATIONS FOR THE YEAR
ENDING DECEMBER 31, 1996 AND THE THREE MONTHS
ENDING MARCH 31, 1997
(Unaudited)
(Dollars in thousands)
Year Ending Three
December 31, Months Ending
1996 (Note 1) March 31, 1997
------------- --------------
<S> <C> <C>
Sales $ 200,000 $ 54,060
Commission income 40 20
------------------------------
Total revenue 200,040 54,080
Cost of sales 186,140 50,396
------------------------------
Gross margin 13,900 3,684
Selling, general and administrative expenses 11,200 2,408
Provision for environmental liabilities 31,200 -
------------------------------
Operating (loss) income (28,500) 1,276
Other:
Other expense, net (41,555) (1,259)
Interest income, net 1,500 350
Reorganization expense (2,000) (600)
------------------------------
Loss before income tax provision, equity in
operations of subsidiaries and extraordinary item (70,555) (233)
Income tax provision 100 25
------------------------------
Loss before equity in operations and
extraordinary item (70,655) (258)
Equity in operations of subsidiaries 221 -
------------------------------
Loss before extraordinary item (70,434) (258)
Extraordinary item - 16,809
------------------------------
Net (loss) income $ (70,434) $ 16,551
==============================
<FN>
The projections should be read only in conjunction with the assumptions, qualifications and explanations set
forth under the captions "Principal Assumptions - General" and "Reorganized Shieldalloy - Assumptions", and
the consolidated historical financial statements presented in Exhibit C.
Note 1 - The December 31, 1996 amounts reflect actual results for the nine months ended September 30, 1996
and projected results for the three months ending December 31, 1996.
</FN>
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
SHIELDALLOY METALLURGICAL CORPORATION
-------------------------------------
(Debtor-in-Possession)
PROJECTED STATEMENTS OF CASH FLOWS FOR THE
YEAR ENDING DECEMBER 31, 1996 AND THE THREE
MONTHS ENDING MARCH 31, 1997
(Unaudited)
(Dollars in thousands)
Year Ending Three
December 31, Months Ending
1996 (Note 1) March 31, 1997
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (70,434) $ 16,551
Adjustments to reconcile net loss to net cash
used for operating activities:
Loss on sale of subsidiary 530 -
Extraordinary item - (16,809)
Depreciation and amortization 3,000 550
Gain on sales of property (12) -
Reorganization expense 510 (200)
Provision for doubtful accounts 90 22
Provision for environmental liabilities 31,200 -
Provision for pension liabilities, net of payments - 1,236
Undistributed equity earnings (221) -
Provision for allowed claims 40,305 -
Other, net (156) -
-----------------------------
Total 4,812 1,350
Change in operating assets and liabilities:
Increase in trade receivables (2,342) (234)
(Increase) decrease in inventories (268) 853
Increase in other current assets (52) -
Increase in trade payables and accrued expenses 4,585 1,273
(Decrease) increase in other current liabilities (81) 25
Contribution to environmental trust (200) (9,200)
Environmental remediation expenditures (2,691) (2,200)
-----------------------------
Net cash provided by (used for) operating activities 3,763 (8,133)
-----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment, net (803) (633)
Proceeds from sale of assets 139 -
Proceeds from sale of subsidiary 348 -
-----------------------------
Net cash provided for investing activities (316) (633)
-----------------------------
CASH FLOWS FROM FINANCING AND REORGANIZATION ACTIVITIES:
Payment of reclamation and convenience claims - (1,365)
(Payments) proceeds from intercompany debt, net (2,569) 10,945
Repayment of long-term secured debt, net (216) (814)
-----------------------------
Net cash (used for) provided by financing and reorganization
activities (2,785) 8,766
-----------------------------
Net increase (decrease) in cash and cash equivalents 662 -
Cash and cash equivalents - beginning of period 988 1,650
-----------------------------
Cash and cash equivalents - end of period $ 1,650 $ 1,650
=============================
<FN>
The projections should be read only in conjunction with the assumptions, qualifications and explanations set
forth under the captions "Principal Assumptions - General" and "Reorganized Shieldalloy - Assumptions", and
the consolidated historical financial statements presented in Exhibit C.
Note 1 - The December 31, 1996 amounts reflect actual results for the nine months ended September 30, 1996
and projected results for the three months ending December 31, 1996.
</FN>
</TABLE>
49
<PAGE>
The accompanying projected balance sheets, projected statements of
operations and projected statements of cash flows for Reorganized
Shieldalloy for the periods beginning April 1, 1997 through December
31, 1999, are presented after giving effect to Confirmation and
consummation of the transactions contemplated by the Plan. Also see
"Principal Assumptions - General" and "Reorganized Shieldalloy -
Assumptions" above.
50
<PAGE>
<TABLE>
<CAPTION>
SHIELDALLOY METALLURGICAL CORPORATION
-------------------------------------
PROJECTED BALANCE SHEETS OF REORGANIZED SHIELDALLOY
(Unaudited)
(Dollars in thousands)
As of December 31,
--------------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,524 $ 1,400 $ 1,400
Trade receivables, less allowance for
doubtful accounts 29,825 29,055 29,802
Trade receivables - intergroup 500 500 500
Inventories 28,811 29,400 30,060
Other current assets 300 300 300
-----------------------------------
Total current assets 60,960 60,655 62,062
PROPERTY, PLANT AND EQUIPMENT - NET 10,301 10,501 10,201
OTHER ASSETS 50 - -
-----------------------------------
TOTAL $ 71,311 $71,156 $72,263
===================================
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Trade payables $ 5,704 $ 6,844 $ 8,144
Trade payables - intergroup 9,159 9,171 9,185
Loans payable - intergroup 6,600 743 3,413
Accrued expenses 2,602 2,400 2,425
Current portion of environmental liabilities, net 3,600 9,700 5,600
Taxes payable 100 100 100
-----------------------------------
Total current liabilities 27,765 28,958 28,867
LONG-TERM LIABILITIES:
Accrued pension liabilities 1,625 1,625 1,625
Environmental liabilities, net 11,300 4,900 600
-----------------------------------
Total long-term liabilities 12,925 6,525 2,225
-----------------------------------
Total liabilities 40,690 35,483 31,092
-----------------------------------
SHAREHOLDER'S EQUITY:
Common stock 43,853 43,853 43,853
Accumulated deficit (13,232) (8,180) (2,682)
-----------------------------------
Total shareholder's equity 30,621 35,673 41,171
-----------------------------------
TOTAL $71,311 $ 71,156 $72,263
===================================
<FN>
The projections should be read only in conjunction with the assumptions, qualifications and explanations set
forth under the captions "Principal Assumptions - General" and "Reorganized Shieldalloy - Assumptions", and
the consolidated historical financial statements presented in Exhibit C.
</FN>
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
SHIELDALLOY METALLURGICAL CORPORATION
-------------------------------------
PROJECTED STATEMENTS OF OPERATIONS OF REORGANIZED SHIELDALLOY
(Unaudited)
(Dollars in thousands)
Nine Months Year Ending December 31,
------------------------
Ending
December 31,
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Sales $ 159,106 $212,129 $217,416
Commission income 60 80 80
-------------------------------------
Total revenue 159,166 212,209 217,496
Cost of sales 148,368 197,439 201,974
-------------------------------------
Gross margin 10,798 14,770 15,522
Selling, general and administrative expenses 7,227 9,905 10,220
-------------------------------------
Operating income 3,571 4,865 5,302
Other:
Other expense, net (58) - -
Interest (expense) income, net (165) 287 296
Reorganization expense (375) - -
-------------------------------------
Income before income tax provision 2,973 5,152 5,598
Income tax provision 75 100 100
-------------------------------------
Net income $ 2,898 $ 5,052 $ 5,498
=====================================
<FN>
The projections should be read only in conjunction with the assumptions, qualifications and explanations set
forth under the captions "Principal Assumptions - General" and "Reorganized Shieldalloy - Assumptions", and
the consolidated historical financial statements presented in Exhibit C.
</FN>
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
SHIELDALLOY METALLURGICAL CORPORATION
-------------------------------------
PROJECTED STATEMENTS OF CASH FLOWS OF REORGANIZED SHIELDALLOY
(Unaudited)
(Dollars in thousands)
Year Ending December 31,
------------------------
Nine Months
Ending
December 31,
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 2,898 $5,052 $ 5,498
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,850 2,200 2,200
Reorganization expense, net of payments (500) - -
Provision for doubtful accounts 68 95 100
Other, net 150 50 -
-------------------------------------------
Total 4,466 7,397 7,798
Change in operating assets and liabilities:
Decrease (increase) in trade receivables 1,092 675 (847)
Decrease (increase) in inventories 1,036 (589) (660)
Increase in trade payables and accrued expenses 498 950 1,339
Decrease in other current liabilities (25) - -
Contribution to environmental trust, net of reimbursement (600) 3,900 1,900
Environmental remediation expenditures (5,100) (3,600) (9,700)
-------------------------------------------
Net cash provided by (used for) operating activities 1,367 8,733 (170)
-------------------------------------------
Cash Flows from Investing Activities:
Additions to property, plant and equipment, net (1,393) (3,000) (2,500)
-------------------------------------------
Cash Flows from Financing Activities:
(Payments) proceeds from intercompany debt, net (100) (5,857) 2,670
-------------------------------------------
Net decrease in cash and cash equivalents (126) (124) -
Cash and cash equivalents - beginning of period 1,650 1,524 1,400
-------------------------------------------
Cash and cash equivalents - end of period $ 1,524 $1,400 $ 1,400
-------------------------------------------
<FN>
The projections should be read only in conjunction with the assumptions, qualifications and explanations set
forth under the captions "Principal Assumptions - General" and "Reorganized Shieldalloy - Assumptions", and
the consolidated historical financial statements presented in Exhibit C.
</FN>
</TABLE>
53
<PAGE>
EXHIBIT E TO DISCLOSURE STATEMENT
METALLURG, INC. AND SHIELDALLOY METALLURGICAL
CORPORATION LIQUIDATION ANALYSIS.
54
<PAGE>
Exhibit E
<TABLE>
<CAPTION>
Metallurg, Inc.
Liquidation Analysis
($000's)
Graphic Material (1) Omitted.
Balance Recovery Percentage Recovery $
Description @12/31/95 Lower Higher Lower Higher
----------- --------- ----- ------ ----- ------
<S> <C> <C> <C> <C> <C>
Intercompany Receivables $ 46,750 43% 53% $20,227 $ 24,584
Investments in Subsidiaries 96,209 28% 51% 27,060 49,148
Other Assets 43,175 82% 91% 35,277 39,117
--------- ------- --------
Total 186,134 82,565 112,849
Priority and Administrative Claims n/a 30,228 31,137
------- --------
Total Available for Unsecured Creditors n/a 52,337 81,712
General Unsecured Creditors
Institutional 122,896 31% 49% 38,559 60,202
Trade 9,943 31% 49% 3,120 4,871
Former Preferred Shareholders 25,707 31% 49% 8,066 12,593
Intercompany 1,189 31% 49% 373 582
Pension 7,073 31% 49% 2,219 3,465
--------- ------- --------
Total General Unsecured Claims $ 166,808 $52,337 $ 81,712
========= ======= ========
</TABLE>
55
<PAGE>
Exhibit E
<TABLE>
<CAPTION>
Shieldalloy Metallurgical Corp.
Liquidation Analysis
($000's)
Balance Recovery Percentage Recovery $
Description @12/31/95 Lower Higher Lower Higher
----------- --------- ----- ------ ----- ------
<S> <C> <C> <C> <C> <C>
Pledged Assets
Plant, Property & Equipment $ 8,663 32% 62% $ 2,800 $ 5,400
Secured Claims
Institutional Debt 900 100% 100% 900 900
--------- --------- ---------
Excess Asset Value Available
For Unsecured Creditors n/a 1,900 4,500
Non-Pledged Assets
External Accounts Receivable 27,605 75% 85% 20,704 23,464
Intercompany Receivables 2,909 73% 93% 2,114 2,695
Inventory 30,432 56% 81% 17,109 24,683
Property, Plant & Equipment 4,936 3% 6% 154 307
Investments in Subsidiaries 657 0% 0% 0 0
Other 19,223 99% 100% 19,100 19,133
--------- --------- ---------
Total 85,762 59,181 70,283
--------- ---------
Total Available for Priority, Administrative
and Unsecured Claims 61,081 74,783
Priority and Administrative Claims(1) n/a 46,647 46,980
--------- ---------
Total Available for Unsecured Creditors n/a 14,433 27,802
General Unsecured Creditors
Institutional 110,185 0% 0% 0 0
Trade 12,492 0% 0% 0 0
Intercompany 3,992 0% 0% 0 0
Pension 2,360 0% 0% 0 0
--------- --------- ---------
Total General Unsecured Claims $ 129,029 $ 0 $ 0
========= ========= =========
<FN>
Note (1) Includes environmental claims which are undetermined. SMC has been informed by its professional
advisors that in the event SMC's reorganization proceedings were to be converted to a case under
chapter 7, it is probable that substantial environmental claims will be asserted and allowed
against the SMC estate thereby eliminating any recovery to the general unsecured creditors of SMC.
For this reason, the SMC liquidation analysis reflects a zero distribution to the general
unsecured creditors.
</FN>
</TABLE>
56
<PAGE>
EXHIBIT F TO DISCLOSURE STATEMENT
METALLURG, INC. 1997 STOCK AWARD AND STOCK OPTION PLAN.
TO BE FILED WITH THE BANKRUPTCY COURT NO LATER THAN JANUARY 31, 1997.
58
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - ------------------------------------------------------------X
IN RE : CHAPTER 11 CASE NOS.
: 93 B 44468 (JLG)
METALLURG, INC. AND : 93 B 44469 (JLG)
SHIELDALLOY METALLURGICAL :
CORPORATION, : (JOINTLY ADMINISTERED)
:
DEBTORS. :
- - ------------------------------------------------------------X
BALLOT FOR ACCEPTING OR REJECTING THE DEBTORS' FOURTH AMENDED AND RESTATED JOINT
PLAN OF REORGANIZATION PURSUANT TO CHAPTER 11 OF THE UNITED STATES BANKRUPTCY
CODE
CLASS 4A - MI UNSECURED CLAIMS BALLOT
- - --------------------------------------------------------------------------------
THE DATE AND TIME BY WHICH YOUR BALLOT MUST BE ACTUALLY RECEIVED BY THE
BALLOTING AGENT IS 5:00 P.M., EASTERN STANDARD TIME, ON FEBRUARY 10, 1997 OR
YOUR BALLOT WILL NOT BE COUNTED
- - --------------------------------------------------------------------------------
This Ballot is submitted to you to solicit your vote to accept or reject
that certain Debtors' Fourth Amended And Restated Joint Plan of Reorganization
of Metallurg, Inc. ("Metallurg") and Shieldalloy Metallurgical Corporation,
dated December 18, 1996 (as the same may be amended from time to time, the
"Plan"), described in the accompanying disclosure statement, dated December 18,
1996 (the "Disclosure Statement") and in certain cases to allow you to make
certain elections under the Plan. PLEASE READ THE VOTING INFORMATION AND
INSTRUCTIONS ON THE REVERSE SIDE BEFORE COMPLETING THIS BALLOT.
The Plan can be confirmed by the Bankruptcy Court and thereby be made
binding upon you if it is accepted by the holders of at least two-thirds in
amount and more than one-half in number of the Claims in each impaired Class
that votes on the Plan, and if it otherwise satisfies the requirements of
section 1129(a) of the Bankruptcy Code. If the requisite acceptances are not
obtained, the Bankruptcy Court may nonetheless confirm the Plan if it finds that
the Plan provides fair and equitable treatment to, and does not discriminate
unfairly against, the Class or Classes rejecting it, and otherwise satisfies the
requirements of section 1129(b) of the Bankruptcy Code. To have your vote
counted, you must complete, sign and return this Ballot to: Metallurg, Inc., c/o
Ballot Agent, Georgeson & Company Inc., 88 Pine Street, 30th Floor, Wall Street
Plaza, New York, New York 10005.
- - --------------------------------------------------------------------------------
PLEASE COMPLETE ITEMS 2 AND 3. IF YOU FAIL TO CHECK THE "ACCEPT" OR THE "REJECT"
OR THE "CONVENIENCE CLASS OPTION" BOX IN ITEM 2, THIS BALLOT, IF SIGNED, WILL BE
COUNTED AS AN ACCEPTANCE. IF THIS BALLOT IS NOT SIGNED ON THE APPROPRIATE LINES
BELOW, THIS BALLOT WILL NOT BE VALID OR COUNTED AS HAVING BEEN CAST.
- - --------------------------------------------------------------------------------
ITEM 1. VOTING CLASSIFICATION AND AMOUNT. The undersigned is a holder of Claims
(as defined in the Plan) against Metallurg, which Claims are classified in Class
4A (MI Unsecured Claims) under the Plan, in the aggregate unpaid amount of
$_______.
ITEM 2. VOTING AND ELECTION.
|_| I ACCEPT THE PLAN.
IF YOU HAVE ACCEPTED THE PLAN AND THE AGGREGATE OF CLAIMS LISTED IN ITEM 1
ABOVE IS $1 MILLION OR LESS, YOU ARE ENTITLED TO ELECT TREATMENT UNDER
EITHER CLASS 4A- OPTION A OR CLASS 4A-OPTION B. FOR MORE INFORMATION
CONCERNING EACH OPTION, SEE INSTRUCTION NUMBER 5 IN THE VOTING INFORMATION
AND INSTRUCTIONS FOR COMPLETING THE BALLOT ON THE REVERSE SIDE OF THIS
BALLOT.
|_| I ELECT CLASS 4A-OPTION A.
|_| I ELECT CLASS 4A-OPTION B.
|_| I ELECT THE CONVENIENCE CLASS OPTION. I understand that by electing the
Convenience Class Option, I am agreeing to reduce all of my Allowed Claims
in Class 4A (MI Unsecured Claims) as identified in Item 1 to $1,000 and to
be treated in Class 3A (MI Convenience Claims) under the Plan. See
Instruction Number 4 in the Voting Information and Instructions for
Completing the Ballot on the reverse side of this Ballot. Holders that
elect this option to be treated in Class 3A (MI Convenience Claims) are
deemed to have accepted the Plan.
|_| I REJECT THE PLAN.
ITEM 3. ACKNOWLEDGMENTS. By signing this Ballot, the undersigned acknowledges
receipt of the Disclosure Statement and other applicable solicitation materials
and certifies that the undersigned is the claimant or has the power and
authority to vote to accept or reject the Plan and to make the applicable
elections on behalf of the claimant. The undersigned understands that any
elections made on this Ballot, which he or she is entitled to make under the
Plan, are irrevocable and may only be changed upon written consent of Metallurg.
The undersigned also understands that if this Ballot is validly executed but
does not indicate either acceptance or rejection of the Plan, this Ballot will
be counted as an acceptance.
PRINT OR TYPE NAME OF CLAIMANT:_________________________________
SOCIAL SECURITY OR FEDERAL TAX I.D. NO. (OPTIONAL):_____________
SIGNATURE:______________________________________________________
IF BY AUTHORIZED AGENT, NAME AND TITLE:_________________________
NAME OF INSTITUTION:____________________________________________
ADDRESS:________________________________________________________
TELEPHONE NUMBER:_______________________________________________
DATE COMPLETED:_________________________________________________
<PAGE>
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE BALLOT
1. This Ballot is submitted to you to solicit (i)(a) your vote to accept or
reject the Debtors' Fourth Amended and Restated Joint Plan of
Reorganization Pursuant to Chapter 11 of the Bankruptcy Code, dated
December 18, 1996 (the "Plan") described in the accompanying disclosure
statement, dated December 18, 1996 (the "Disclosure Statement"); and (b)
if eligible, your election to receive treatment under either Class
4A-Option A or Class 4A-Option B of the Plan; or (ii) your acceptance of
the Plan and agreement to reduce all of your Class 4A Claims against
Metallurg identified on the reverse side of this Ballot to $1,000 and be
treated in Class 3A (MI Convenience Claims) under the Plan.
2. PLEASE INDICATE ACCEPTANCE OR REJECTION OF THE PLAN, OR ELECTION OF THE
CONVENIENCE CLASS OPTION (SEE INSTRUCTION 4 BELOW), OR, IF ELIGIBLE,
ELECTION UNDER CLASS 4A- OPTION A OR CLASS 4A-OPTION B OF THE PLAN IN THE
BOX INDICATED. COMPLETE THE BALLOT BY PROVIDING ALL OF THE INFORMATION
REQUESTED AND SIGN, DATE AND RETURN THIS BALLOT BY MAIL OR OVERNIGHT
COURIER TO GEORGESON & COMPANY INC., THE BALLOTING AGENT (THE "BALLOTING
AGENT"), AT THE FOLLOWING ADDRESSES:
BY MAIL: METALLURG, INC.
C/O BALLOT AGENT
GEORGESON & COMPANY INC.
88 PINE STREET, 30TH FLOOR
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
BY COURIER: METALLURG, INC.
C/O BALLOT AGENT
GEORGESON & COMPANY INC.
88 PINE STREET, 30TH FLOOR
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
Ballots must be received by 5:00 p.m. (Eastern Standard Time) on February
10, 1997 (the "Voting Deadline"). If a Ballot is received after the Voting
Deadline, it will not be counted. An envelope addressed to the Balloting
Agent is enclosed for your convenience.
3. You must vote the total of all of your Class 4A general unsecured Claims
against Metallurg either to accept or reject the Plan. However, if you
have asserted duplicate or multiple Claims against one or both of the
Debtors which are based on the same transaction, obligation or liability,
you may vote only the amount of one such Claim. A Ballot that partially
rejects and partially accepts the Plan will not be counted. If your Claim
is the subject of an objection pending before the Bankruptcy Court on
December 23, 1996, you may vote only the undisputed portion of that Claim
unless the Bankruptcy Court, upon motion, orders otherwise. A motion for
temporary allowance of your Claim for voting purposes (if it is the
subject of an objection) must be filed with the Bankruptcy Court on or
before January 17, 1997 at 5:00 p.m. (Eastern Standard Time). In the event
a temporary allowance motion is timely filed with the Bankruptcy Court,
the Bankruptcy Court will conduct a hearing, if necessary, on your
temporary allowance motion on February 5, 1997 at 11:00 a.m.
4. Acceptance of the Convenience Class Option (and reduction of your Claims)
must be indicated by a check in the Convenience Class Option box on the
reverse side. If you elect the Convenience Class Option, you will also be
deemed to have accepted the Plan. The Convenience Class Option operates as
follows. An Allowed Claim against Metallurg of $1,000 or less is
classified automatically in Class 3A (MI Convenience Claims). Each holder
of an Allowed Claim or Claims against Metallurg in excess of $1,000 that
would be otherwise classified in Class 4A (MI Unsecured Claims) under the
Plan may elect to reduce the aggregate amount of all such creditor's
Allowed Claims against Metallurg to $1,000 and receive $1,000 in cash
through classification in Class 3A (MI Convenience Claims).
5. If you vote to accept the Plan and the aggregate amount of your Class 4A
Claim or Claims is $1 million or less, you may elect either Class
4A-Option A or Class 4A-Option B. Under Option A you are allowed to elect
to cash out at a discount the Senior Secured Notes that you would
otherwise be entitled to receive on account of the entire amount of your
Allowed Claim more fully described in Section 5.11 of the Plan, and pages
8 and 47-49 of the Disclosure Statement. Under Option B, in lieu of the
cash out available under Option A, you will receive a Pro Rata share of
New Secured Notes all as more fully described in Section 5.11 of the Plan,
and pages 8 and 47-49 of the Disclosure Statement. If neither the Class
4A-Option A nor Class 4A-Option B box is checked in Item 2 on the Ballot,
you will receive a distribution on account of your Class 4A Claims under
Class 4A-Option A.
6. The Ballot does not constitute and shall not be deemed a proof of Claim or
equity interest or an assertion of a Claim or equity interest.
PLEASE RETURN YOUR BALLOT PROMPTLY
IF YOU RECEIVED A DAMAGED BALLOT OR LOST YOUR BALLOT, OR IF YOU HAVE ANY
QUESTIONS CONCERNING THE DISCLOSURE STATEMENT, THE PLAN, THIS BALLOT OR THE
VOTING PROCEDURES, PLEASE CALL THE BALLOTING AGENT AT 1-800-223-2064.
2
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - ---------------------------------------------------------------------x
In re : Chapter 11 Case Nos.
93 B 44468 (JLG)
METALLURG, INC. AND : 93 B 44469 (JLG)
SHIELDALLOY METALLURGICAL
CORPORATION, : (Jointly Administered)
Debtors. :
- - ---------------------------------------------------------------------x
NOTICE OF CORRECTION ON BALLOT ACCOMPANYING METALLURG, INC. AND
SHIELDALLOY METALLURGICAL CORPORATION DISCLOSURE STATEMENT
CLASS 4A CLAIMANTS
A Ballot together with the Fourth Amended and Restated Joint Plan of
Reorganization of Metallurg, Inc. and Shieldalloy Metallurgical Corporation
dated December 18, 1996 (the "Plan") and accompanying Disclosure Statement dated
December 18, 1996 (the "Disclosure Statement") were mailed to you on or before
December 30, 1996.
PLEASE BE ADVISED that instruction number 5 on the reverse side of
the Ballot incorrectly describes Option A and Option B, which is provided to
holders of Allowed Claims in Classes 4A and 4C of the Plan.
INSTRUCTION NUMBER 5 SHOULD READ AS FOLLOWS:
"If you vote to accept the Plan and the aggregate amount of your
Class 4A Claim or Claims is $1 million or less you may elect either
Class 4A - Option A or Class 4A - Option B. Under Option A, in lieu
of the cash out of New Secured Notes available under Option B, you
will receive a Pro Rata Share of New Secured Notes as more fully
described in section 5.11 of the Plan and pages 8 and 47-49 of the
Disclosure Statement. Under Option B you are allowed to elect to
cash out at a discount the New Secured Notes that you would
otherwise be entitled to receive on account of the entire amount of
your Allowed Claim as more fully described in section 5.11 of the
Plan and pages 8 and 47-49 of the Disclosure Statement. If neither
of the Class 4A - Option A nor Class 4A - Option B box is checked in
Item 2 of the Ballot, you will receive a distribution on account of
your Class 4A Claims under Class 4A - Option A."
ALL OTHER INSTRUCTIONS ON THE BALLOT REMAIN UNCHANGED.
If you have already mailed in your ballot and have selected either
Option A or Option B and now wish to change your selection of options, please
contact the Balloting Agent at (800) 223-2064.
PLEASE BE REMINDED THAT THE BALLOTS MUST BE RECEIVED BY 5:00 P.M.
(E.S.T.) ON FEBRUARY 10, 1997.
WEIL, GOTSHAL & MANGES LLP
Attorneys for the Debtors and
Debtors in Possession
767 Fifth Avenue
New York, New York 10153
(212) 310-8568
Dated: New York, New York
January 9, 1997
By: /s/John J. Rapisardi
John J. Rapisardi, Esq. (JR-7781)
NYFS05...:\40\63140\0003\180\RID1077P.170
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - ------------------------------------------------------------X
IN RE : CHAPTER 11 CASE NOS.
: 93 B 44468 (JLG)
METALLURG, INC. AND : 93 B 44469 (JLG)
SHIELDALLOY METALLURGICAL :
CORPORATION, : (JOINTLY ADMINISTERED)
:
DEBTORS. :
- - ------------------------------------------------------------X
BALLOT FOR ACCEPTING OR REJECTING THE DEBTORS' FOURTH AMENDED AND RESTATED JOINT
PLAN OF REORGANIZATION PURSUANT TO CHAPTER 11 OF THE UNITED STATES BANKRUPTCY
CODE
CLASS 4B - MI CANADIAN GUARANTEE CLAIMS BALLOT
- - --------------------------------------------------------------------------------
THE DATE AND TIME BY WHICH YOUR BALLOT MUST BE ACTUALLY RECEIVED BY THE
BALLOTING AGENT IS 5:00 P.M., EASTERN STANDARD TIME, ON FEBRUARY 10, 1997 OR
YOUR BALLOT WILL NOT BE COUNTED
- - --------------------------------------------------------------------------------
This Ballot is submitted to you to solicit your vote to accept or reject
that certain Debtors' Fourth Amended And Restated Joint Plan of Reorganization
of Metallurg, Inc. ("Metallurg") and Shieldalloy Metallurgical Corporation,
dated December 18, 1996 (as the same may be amended from time to time, the
"Plan"), described in the accompanying disclosure statement, dated December 18,
1996 (the "Disclosure Statement"). PLEASE READ THE VOTING INFORMATION AND
INSTRUCTIONS ON THE REVERSE SIDE BEFORE COMPLETING THIS BALLOT.
The Plan can be confirmed by the Bankruptcy Court and thereby be made
binding upon you if it is accepted by the holders of at least two-thirds in
amount and more than one-half in number of the Claims in each impaired Class
that votes on the Plan, and if it otherwise satisfies the requirements of
section 1129(a) of the Bankruptcy Code. If the requisite acceptances are not
obtained, the Bankruptcy Court may nonetheless confirm the Plan if it finds that
the Plan provides fair and equitable treatment to, and does not discriminate
unfairly against, the Class or Classes rejecting it, and otherwise satisfies the
requirements of section 1129(b) of the Bankruptcy Code. To have your vote
counted, you must complete, sign and return this Ballot to:
Metallurg, Inc.
c/o Ballot Agent
Georgeson & Company Inc.
88 Pine Street, 30th Floor
Wall Street Plaza
New York, New York 10005
- - --------------------------------------------------------------------------------
PLEASE COMPLETE ITEMS 2 AND 3. IF NEITHER THE "ACCEPT" NOR "REJECT" BOX IS
CHECKED IN ITEM 2, THIS BALLOT, IF SIGNED, WILL BE COUNTED AS AN ACCEPTANCE. IF
THIS BALLOT IS NOT SIGNED ON THE APPROPRIATE LINES BELOW, THIS BALLOT WILL NOT
BE VALID OR COUNTED AS HAVING BEEN CAST.
- - --------------------------------------------------------------------------------
ITEM 1. VOTING CLASSIFICATION AND AMOUNT. The undersigned is a holder of Claims
(as defined in the Plan) against Metallurg, which Claims are classified in Class
4B (MI Canadian Guarantee Claims) under the Plan, in the aggregate unpaid amount
of $_______.
ITEM 2. VOTING AND ELECTION.
|_| I ACCEPT THE PLAN.
|_| I REJECT THE PLAN.
ITEM 3. ACKNOWLEDGMENTS. By signing this Ballot, the undersigned acknowledges
receipt of the Disclosure Statement and other applicable solicitation materials
and certifies that the undersigned is the claimant or has the power and
authority to vote to accept or reject the Plan on behalf of the claimant. The
undersigned understands that if this Ballot is validly executed but does not
indicate either acceptance or rejection of the Plan, this Ballot will be counted
as an acceptance.
PRINT OR TYPE NAME OF CLAIMANT:_________________________________
SOCIAL SECURITY OR FEDERAL TAX I.D. NO. (OPTIONAL):_____________
SIGNATURE:______________________________________________________
IF BY AUTHORIZED AGENT, NAME AND TITLE:_________________________
NAME OF INSTITUTION:____________________________________________
ADDRESS:________________________________________________________
TELEPHONE NUMBER:_______________________________________________
DATE COMPLETED:_________________________________________________
<PAGE>
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE BALLOT
1. This Ballot is submitted to you to solicit your vote to accept or reject
the Debtors' Fourth Amended and Restated Joint Plan of Reorganization
Pursuant to Chapter 11 of the Bankruptcy Code, dated December 18, 1996
(the "Plan") described in the accompanying disclosure statement, dated
December 18, 1996 (the "Disclosure Statement").
2. PLEASE INDICATE ACCEPTANCE OR REJECTION OF THE PLAN IN THE BOX INDICATED.
COMPLETE THE BALLOT BY PROVIDING ALL OF THE INFORMATION REQUESTED AND
SIGN, DATE AND RETURN THIS BALLOT BY MAIL OR OVERNIGHT COURIER TO
GEORGESON & COMPANY INC., THE BALLOTING AGENT (THE "BALLOTING AGENT"), AT
THE FOLLOWING ADDRESSES:
BY MAIL: METALLURG, INC.
C/O BALLOT AGENT
GEORGESON & COMPANY INC.
88 PINE STREET, 30TH FLOOR
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
BY COURIER: METALLURG, INC.
C/O BALLOT AGENT
GEORGESON & COMPANY, INC.
88 PINE STREET, 30TH FLOOR
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
Ballots must be received by 5:00 p.m. (Eastern Standard Time) on February
10, 1997 (the "Voting Deadline"). If a Ballot is received after the Voting
Deadline, it will not be counted. An envelope addressed to the Balloting
Agent is enclosed for your convenience.
3. You must vote the total of all of your Class 4B Canadian Guarantee Claims
against Metallurg either to accept or reject the Plan. However, if you
have asserted duplicate or multiple Claims against one or both of the
Debtors which are based on the same transaction, obligation or to
liability, you may vote only the amount of one such Claim. A Ballot that
partially rejects and partially accepts the Plan will not be counted.
4. The Ballot does not constitute and shall not be deemed a proof of Claim or
equity interest or an assertion of a Claim or equity interest.
PLEASE RETURN YOUR BALLOT PROMPTLY
IF YOU RECEIVED A DAMAGED BALLOT OR LOST YOUR BALLOT, OR IF YOU HAVE ANY
QUESTIONS CONCERNING THE DISCLOSURE STATEMENT, THE PLAN, THIS BALLOT OR THE
VOTING PROCEDURES, PLEASE CALL THE BALLOTING AGENT AT 1-800-223-2064.
2
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - ------------------------------------------------------------X
IN RE : CHAPTER 11 CASE NOS.
: 93 B 44468 (JLG)
METALLURG, INC. AND : 93 B 44469 (JLG)
SHIELDALLOY METALLURGICAL :
CORPORATION, : (JOINTLY ADMINISTERED)
:
DEBTORS. :
- - ------------------------------------------------------------X
BALLOT FOR ACCEPTING OR REJECTING THE DEBTORS' FOURTH AMENDED AND RESTATED JOINT
PLAN OF REORGANIZATION PURSUANT TO CHAPTER 11 OF THE UNITED STATES BANKRUPTCY
CODE
CLASS 4C - SMC UNSECURED CLAIMS BALLOT
- - --------------------------------------------------------------------------------
THE DATE AND TIME BY WHICH YOUR BALLOT MUST BE ACTUALLY RECEIVED BY THE
BALLOTING AGENT IS 5:00 P.M., EASTERN STANDARD TIME, ON FEBRUARY 10, 1997 OR
YOUR BALLOT WILL NOT BE COUNTED
- - --------------------------------------------------------------------------------
This Ballot is submitted to you to solicit your vote to accept or reject
that certain Debtors' Fourth Amended And Restated Joint Plan of Reorganization
of Metallurg, Inc. and Shieldalloy Metallurgical Corporation ("Shieldalloy"),
dated December 18, 1996 (as the same may be amended from time to time, the
"Plan"), described in the accompanying disclosure statement, dated December 18,
1996 (the "Disclosure Statement") and in certain cases. PLEASE READ THE VOTING
INFORMATION AND INSTRUCTIONS ON THE REVERSE SIDE BEFORE COMPLETING THIS BALLOT.
The Plan can be confirmed by the Bankruptcy Court and thereby be made
binding upon you if it is accepted by the holders of at least two-thirds in
amount and more than one-half in number of the Claims in each impaired Class
that votes on the Plan, and if it otherwise satisfies the requirements of
section 1129(a) of the Bankruptcy Code. If the requisite acceptances are not
obtained, the Bankruptcy Court may nonetheless confirm the Plan if it finds that
the Plan provides fair and equitable treatment to, and does not discriminate
unfairly against, the Class or Classes rejecting it, and otherwise satisfies the
requirements of section 1129(b) of the Bankruptcy Code. To have your vote
counted, you must complete, sign and return this Ballot to: Metallurg, Inc., c/o
Ballot Agent, Georgeson & Company Inc., 88 Pine Street, 30th Floor, Wall Street
Plaza, New York, New York 10005.
- - --------------------------------------------------------------------------------
PLEASE COMPLETE ITEMS 2 AND 3. IF YOU FAIL TO CHECK THE "ACCEPT" OR "REJECT" OR
THE "CONVENIENCE CLASS OPTION" BOX IN ITEM 2, THIS BALLOT, IF SIGNED, WILL BE
COUNTED AS AN ACCEPTANCE. IF THIS BALLOT IS NOT SIGNED ON THE APPROPRIATE LINES
BELOW, THIS BALLOT WILL NOT BE VALID OR COUNTED AS HAVING BEEN CAST.
- - --------------------------------------------------------------------------------
ITEM 1. VOTING CLASSIFICATION AND AMOUNT. The undersigned is a holder of Claims
(as defined in the Plan) against Shieldalloy, which Claims are classified in
Class 4C (SMC Unsecured Claims) under the Plan, in the aggregate unpaid amount
of $_______.
ITEM 2. VOTING AND ELECTION.
|_| I ACCEPT THE PLAN.
IF YOU HAVE ACCEPTED THE PLAN AND THE AGGREGATE OF CLAIMS LISTED IN ITEM 1
ABOVE IS $1 MILLION OR LESS, YOU ARE ENTITLED TO ELECT TREATMENT UNDER
EITHER CLASS 4C- OPTION A OR CLASS 4C-OPTION B. FOR MORE INFORMATION
CONCERNING EACH OPTION, SEE INSTRUCTION NUMBER 5 IN THE VOTING INFORMATION
AND INSTRUCTIONS FOR COMPLETING THIS BALLOT ON THE REVERSE SIDE OF THIS
BALLOT.
|_| I ELECT CLASS 4C-OPTION A.
|_| I ELECT CLASS 4C-OPTION B.
|_| I ELECT THE CONVENIENCE CLASS OPTION. I understand that by electing the
Convenience Class Option, I am agreeing to reduce all of my Allowed Claims
in Class 4C (SMC Unsecured Claims) as identified in Item 1 to $1,000 and
be treated in Class 3B (SMC Convenience Claims) under the Plan. See
Instruction Number 4 in the Voting Information and Instructions for
Completing the Ballot on the reverse side of this Ballot. Holders that
elect this option to be treated in Class 3B (SMC Convenience Claims) are
deemed to have accepted the Plan.
|_| I REJECT THE PLAN.
ITEM 3. ACKNOWLEDGMENTS. By signing this Ballot, the undersigned acknowledges
receipt of the Disclosure Statement and other applicable solicitation materials
and certifies that the undersigned is the claimant or has the power and
authority to vote to accept or reject the Plan and to make the applicable
elections on behalf of the claimant. The undersigned understands that any
elections made on this Ballot, which he or she is entitled to make under the
Plan, are irrevocable and may only be changed upon the written consent of
Shieldalloy. The undersigned also understands that if this Ballot is validly
executed but does not indicate either acceptance or rejection of the Plan, this
Ballot will be counted as an acceptance.
PRINT OR TYPE NAME OF CLAIMANT:_________________________________
SOCIAL SECURITY OR FEDERAL TAX I.D. NO. (OPTIONAL):_____________
SIGNATURE:______________________________________________________
IF BY AUTHORIZED AGENT, NAME AND TITLE:_________________________
NAME OF INSTITUTION:____________________________________________
ADDRESS:________________________________________________________
TELEPHONE NUMBER:_______________________________________________
DATE COMPLETED:_________________________________________________
<PAGE>
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE BALLOT
1. This Ballot is submitted to you to solicit (i)(a) your vote to accept or
reject the Debtors' Fourth Amended and Restated Joint Plan of
Reorganization Pursuant to Chapter 11 of the Bankruptcy Code, dated
December 18, 1996 (the "Plan") described in the accompanying disclosure
statement, dated December 18, 1996 (the "Disclosure Statement"); and (b)
if eligible, your election to receive treatment under either Class
4C-Option A or Class 4C-Option B of the Plan; or (ii) your acceptance of
the Plan and agreement to reduce all of your Class 4C Claims against
Shieldalloy identified on the reverse side of this Ballot to $1,000 and be
treated in Class 3B (SMC Convenience Claims) under the Plan.
2. PLEASE INDICATE ACCEPTANCE OR REJECTION OF THE PLAN, OR ELECTION OF THE
CONVENIENCE CLASS OPTION (SEE INSTRUCTION 4 BELOW), OR, IF ELIGIBLE,
ELECTION UNDER CLASS 4C- OPTION A OR CLASS 4C-OPTION B OF THE PLAN (SEE
INSTRUCTION 5 BELOW) IN THE BOX INDICATED. COMPLETE THE BALLOT BY
PROVIDING ALL OF THE INFORMATION REQUESTED AND SIGN, DATE AND RETURN THIS
BALLOT BY MAIL OR OVERNIGHT COURIER TO GEORGESON & COMPANY INC., THE
BALLOTING AGENT (THE "BALLOTING AGENT"), AT THE FOLLOWING ADDRESSES:
BY MAIL: METALLURG, INC.
C/O BALLOT AGENT
GEORGESON & COMPANY INC.
88 PINE STREET, 30TH FLOOR
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
BY COURIER: METALLURG, INC.
C/O BALLOT AGENT
GEORGESON & COMPANY INC.
88 PINE STREET, 30TH FLOOR
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
Ballots must be received by 5:00 p.m. (Eastern Standard Time) on February
10, 1997 (the "Voting Deadline"). If a Ballot is received after the Voting
Deadline, it will not be counted. An envelope addressed to the Balloting
Agent is enclosed for your convenience.
3. You must vote the total of all of your Class 4C general unsecured Claims
against Shieldalloy either to accept or reject the Plan. However, if you
have asserted duplicate or multiple Claims against one or both of the
Debtors which are based on the same transaction, obligation or liability,
you may vote only the amount of one such Claim. A Ballot that partially
rejects and partially accepts the Plan will not be counted. If your Claim
is the subject of an objection pending before the Bankruptcy Court on
December 23, 1996, you may vote only the undisputed portion of that Claim
unless the Bankruptcy Court, upon motion, orders otherwise. A motion for
temporary allowance of your Claim for voting purposes (if it is the
subject of an objection) must be filed with the Bankruptcy Court on or
before January 17, 1997 at 5:00 p.m. (Eastern Standard Time). In the event
a temporary allowance motion is timely filed with the Bankruptcy Court,
the Bankruptcy Court will conduct a hearing, if necessary, on your
temporary allowance motion on February 5, 1997 at 11:00 a.m.
4. Acceptance of the Convenience Class Option (and reduction of your Claims)
must be indicated by a check in the Convenience Class Option box on the
reverse side. If you elect the Convenience Class Option, you will also be
deemed to have accepted the Plan. The Convenience Class Option operates as
follows. An Allowed Claim against Shieldalloy of $1,000 or less is
classified automatically in Class 3B (SMC Convenience Claims). Each holder
of an Allowed Claim or Claims against Shieldalloy in excess of $1,000 that
would be otherwise classified in Class 4C (SMC Unsecured Claims) under the
Plan may elect to reduce the aggregate amount of all such creditor's
Allowed Claims against Shieldalloy to $1,000 and receive $1,000 in cash
through classification in Class 3B (SMC Convenience Claims).
5. If you vote to accept the Plan and the aggregate amount of your Class 4C
Claim or Claims is $1 million or less, you may elect either Class
4C-Option A or Class 4C-Option B. Under Option A you are allowed to elect
to cash out at a discount the Senior Secured Notes that you would
otherwise be entitled to receive on account of the entire amount of your
Allowed Claim as more fully described in Section 5.13 of the Plan, and
pages 9, 10 and 50-52 of the Disclosure Statement. Under Option B, in lieu
of the cash out available under Option A, you will receive a Pro Rata
share of New Secured Notes all as more fully described in Section 5.13 of
the Plan and pages 9, 10 and 50- 52 of the Disclosure Statement. If
neither the Class 4C-Option A nor Class 4C-Option B box is checked in Item
2 on the Ballot, you will receive a distribution on account of your Class
4C Claims under Class 4C-Option A.
6. The Ballot does not constitute and shall not be deemed a proof of Claim or
equity interest or an assertion of a Claim or equity interest.
PLEASE RETURN YOUR BALLOT PROMPTLY
IF YOU RECEIVED A DAMAGED BALLOT OR LOST YOUR BALLOT, OR IF YOU HAVE ANY
QUESTIONS CONCERNING THE DISCLOSURE STATEMENT, THE PLAN, THIS BALLOT OR THE
VOTING PROCEDURES, PLEASE CALL THE BALLOTING AGENT AT 1-800-223-2064.
2
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - ---------------------------------------------------------------------x
In re : Chapter 11 Case Nos.
93 B 44468 (JLG)
METALLURG, INC. AND : 93 B 44469 (JLG)
SHIELDALLOY METALLURGICAL
CORPORATION, : (Jointly Administered)
Debtors. :
- - ---------------------------------------------------------------------x
NOTICE OF CORRECTION ON BALLOT ACCOMPANYING METALLURG, INC. AND
SHIELDALLOY METALLURGICAL CORPORATION DISCLOSURE STATEMENT
CLASS 4C CLAIMANTS
A Ballot together with the Fourth Amended and Restated Joint Plan of
Reorganization of Metallurg, Inc. and Shieldalloy Metallurgical Corporation
dated December 18, 1996 (the "Plan") and accompanying Disclosure Statement dated
December 18, 1996 (the "Disclosure Statement") were mailed to you on or before
December 30, 1996.
PLEASE BE ADVISED that instruction number 5 on the reverse side of
the Ballot incorrectly describes Option A and Option B, which is provided to
holders of Allowed Claims in Classes 4A and 4C of the Plan.
INSTRUCTION NUMBER 5 SHOULD READ AS FOLLOWS:
"If you vote to accept the Plan and the aggregate amount of your
Class 4C Claim or Claims is $1 million or less you may elect either
Class 4C - Option A or Class 4C - Option B. Under Option A, in lieu
of the cash out of New Secured Notes available under Option B, you
will receive a Pro Rata Share of New Secured Notes as more fully
described in section 5.13 of the Plan and pages 9, 10 and 50-52 of
the Disclosure Statement. Under Option B you are allowed to elect to
cash out at a discount the New Secured Notes that you would
otherwise be entitled to receive on account of the entire amount of
your Allowed Claim as more fully described in section 5.13 of the
Plan and pages 9, 10 and 50-52 of the Disclosure Statement. If
neither of the Class 4C - Option A nor Class 4C - Option B box is
checked in Item 2 of the Ballot, you will receive a distribution on
account of your Class 4C Claims under Class 4C - Option A."
ALL OTHER INSTRUCTIONS ON THE BALLOT REMAIN UNCHANGED.
If you have already mailed in your ballot and have selected either
Option A or Option B and now wish to change your selection of options, please
contact the Balloting Agent at (800) 223-2064.
PLEASE BE REMINDED THAT THE BALLOTS MUST BE RECEIVED BY 5:00 P.M.
(E.S.T.) ON FEBRUARY 10, 1997.
WEIL, GOTSHAL & MANGES LLP
Attorneys for the Debtors and
Debtors in Possession
767 Fifth Avenue
New York, New York 10153
(212) 310-8568
Dated: New York, New York
January 9, 1997
By: /s/John J. Rapisardi
John J. Rapisardi, Esq. (JR-7781)
NYFS05...:\40\63140\0003\180\RID1067T.380
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - ------------------------------------------------------------X
IN RE : CHAPTER 11 CASE NOS.
: 93 B 44468 (JLG)
METALLURG, INC. AND : 93 B 44469 (JLG)
SHIELDALLOY METALLURGICAL :
CORPORATION, : (JOINTLY ADMINISTERED)
:
DEBTORS. :
- - ------------------------------------------------------------X
BALLOT FOR ACCEPTING OR REJECTING THE DEBTORS' FOURTH AMENDED AND RESTATED JOINT
PLAN OF REORGANIZATION PURSUANT TO CHAPTER 11 OF THE UNITED STATES BANKRUPTCY
CODE
CLASS 4E - SMC MULTIEMPLOYER PENSION CLAIM BALLOT
- - --------------------------------------------------------------------------------
THE DATE AND TIME BY WHICH YOUR BALLOT MUST BE ACTUALLY RECEIVED BY THE
BALLOTING AGENT IS 5:00 P.M., EASTERN STANDARD TIME, ON FEBRUARY 10, 1997 OR
YOUR BALLOT WILL NOT BE COUNTED
- - --------------------------------------------------------------------------------
This Ballot is submitted to you to solicit your vote to accept or reject
that certain Debtors' Fourth Amended And Restated Joint Plan of Reorganization
of Metallurg, Inc. and Shieldalloy Metallurgical Corporation ("Shieldalloy"),
dated December 18, 1996 (as the same may be amended from time to time, the
"Plan"), described in the accompanying disclosure statement, dated December 18,
1996 (the "Disclosure Statement"). PLEASE READ THE VOTING INFORMATION AND
INSTRUCTIONS ON THE REVERSE SIDE BEFORE COMPLETING THIS BALLOT.
The Plan can be confirmed by the Bankruptcy Court and thereby be made
binding upon you if it is accepted by the holders of at least two-thirds in
amount and more than one-half in number of the Claims in each impaired Class
that votes on the Plan, and if it otherwise satisfies the requirements of
section 1129(a) of the Bankruptcy Code. If the requisite acceptances are not
obtained, the Bankruptcy Court may nonetheless confirm the Plan if it finds that
the Plan provides fair and equitable treatment to, and does not discriminate
unfairly against, the Class or Classes rejecting it, and otherwise satisfies the
requirements of section 1129(b) of the Bankruptcy Code. To have your vote
counted, you must complete, sign and return this Ballot to:
Metallurg, Inc.
c/o Ballot Agent
Georgeson & Company Inc.
88 Pine Street, 30th Floor
Wall Street Plaza
New York, New York 10005
- - --------------------------------------------------------------------------------
PLEASE COMPLETE ITEMS 2 AND 3. IF NEITHER THE "ACCEPT" NOR "REJECT" BOX IS
CHECKED IN ITEM 2, THIS BALLOT, IF SIGNED, WILL BE COUNTED AS AN ACCEPTANCE. IF
THIS BALLOT IS NOT SIGNED ON THE APPROPRIATE LINES BELOW, THIS BALLOT WILL NOT
BE VALID OR COUNTED AS HAVING BEEN CAST.
- - --------------------------------------------------------------------------------
ITEM 1. VOTING CLASSIFICATION AND AMOUNT. The undersigned is a holder of an
Allowed Claim (as defined in the Plan) against Shieldalloy, which Claim is
classified in Class 4E (SMC Multiemployer Pension Claim) under the Plan, in the
aggregate unpaid amount of $5 million.
ITEM 2. VOTING AND ELECTION.
|_| I ACCEPT THE PLAN.
|_| I REJECT THE PLAN.
ITEM 3. ACKNOWLEDGMENTS. By signing this Ballot, the undersigned acknowledges
receipt of the Disclosure Statement and other applicable solicitation materials
and certifies that the undersigned is the claimant or has the power and
authority to vote to accept or reject the Plan on behalf of the claimant. The
undersigned understands that if this Ballot is validly executed but does not
indicate either acceptance or rejection of the Plan, this Ballot will be counted
as an acceptance.
PRINT OR TYPE NAME OF CLAIMANT:_________________________________
SOCIAL SECURITY OR FEDERAL TAX I.D. NO. (OPTIONAL):_____________
SIGNATURE:______________________________________________________
IF BY AUTHORIZED AGENT, NAME AND TITLE:_________________________
NAME OF INSTITUTION:____________________________________________
ADDRESS:________________________________________________________
TELEPHONE NUMBER:_______________________________________________
DATE COMPLETED:_________________________________________________
<PAGE>
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE BALLOT
1. This Ballot is submitted to you to solicit your vote to accept or reject
the Debtors' Fourth Amended and Restated Joint Plan of Reorganization
Pursuant to Chapter 11 of the Bankruptcy Code, dated December 18, 1996
(the "Plan") described in the accompanying disclosure statement, dated
December 18, 1996 (the "Disclosure Statement").
2. PLEASE INDICATE ACCEPTANCE OR REJECTION OF THE PLAN IN THE BOX INDICATED.
COMPLETE THE BALLOT BY PROVIDING ALL OF THE INFORMATION REQUESTED AND
SIGN, DATE AND RETURN THIS BALLOT BY MAIL OR OVERNIGHT COURIER TO
GEORGESON & COMPANY INC., THE BALLOTING AGENT (THE "BALLOTING AGENT"), AT
THE FOLLOWING ADDRESSES:
BY MAIL: METALLURG, INC.
C/O BALLOT AGENT
GEORGESON & COMPANY INC.
88 PINE STREET, 30TH FLOOR
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
BY COURIER: METALLURG, INC.
C/O BALLOT AGENT
GEORGESON & COMPANY INC.
88 PINE STREET, 30TH FLOOR
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
Ballots must be received by 5:00 p.m. (Eastern Standard Time) on February
10, 1997 (the "Voting Deadline"). If a Ballot is received after the Voting
Deadline, it will not be counted. An envelope addressed to the Balloting
Agent is enclosed for your convenience.
3. You must vote the total of all of your Class 4E Multiemployer Pension
Claim against Shieldalloy either to accept or reject the Plan. A Ballot
that partially rejects and partially accepts the Plan will not be counted.
4. The Ballot does not constitute and shall not be deemed a proof of Claim or
equity interest or an assertion of a Claim or equity interest.
PLEASE RETURN YOUR BALLOT PROMPTLY
IF YOU RECEIVED A DAMAGED BALLOT OR LOST YOUR BALLOT, OR IF YOU HAVE ANY
QUESTIONS CONCERNING THE DISCLOSURE STATEMENT, THE PLAN, THIS BALLOT OR THE
VOTING PROCEDURES, PLEASE CALL THE BALLOTING AGENT AT 1-800-223-2064.
2
EXHIBIT T3E.3
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - -------------------------------------x
In re : Chapter 11 Case Nos.
93 B 44468 (JLG)
METALLURG, INC. AND : 93 B 44469 (JLG)
SHIELDALLOY METALLURGICAL
CORPORATION, : (Jointly Administered)
Debtors. :
- - -------------------------------------x
SUPPLEMENT TO SECOND AMENDED AND RESTATED JOINT
DISCLOSURE STATEMENT DATED DECEMBER 18, 19961
The Debtors hereby Supplement the Second Amended and Restated Joint Disclosure
Statement dated December 18, 1996 as follows:
Metallurg, Inc. ("Metallurg") and Shieldalloy Metallurgical Corporation
("Shieldalloy"), the debtors and debtors in possession in the above-captioned
cases on or before December 30, 1996 mailed to all creditors and parties in
interest the Debtors' Second Amended Joint Disclosure Statement dated December
18, 1996 (the "Disclosure Statement") and the Debtors' Fourth Amended and
Restated Joint Plan of Reorganization dated December 18, 1996 (the "Plan").
Sections 1.50, 5.14(b) and 11.3 of the Plan have been supplemented and
modified as annexed hereto as Exhibit A. The foregoing supplement reflects the
following facts:
1. The FPS Settlement was based upon the assumption that in the event a
Non-Settling Former Preferred Stockholder subsequently enters into a
settlement agreement with the Committee and Metallurg which is
economically better than the FPS Settlement, then any Former
Preferred Stockholder who elected into the FPS Settlement and who is
similarly situated to the Non-Settling Former Preferred Stockholder
with respect to the timing of the redemption of Old Preferred Stock
and any payments made in connection therewith will be
- - --------
(1) All capitalized terms not otherwise defined herein shall have their meaning
as set forth in the Disclosure Statement or Plan.
<PAGE>
entitled to the same treatment under any settlement entered into
between the Committee, Metallurg or Reorganized Metallurg and the
Non-Settling Former Preferred Stockholder.
2. In the event incremental distributions must be made to those
individuals who elected into the FPS Settlement, see ss. 5.14(b) of
the Plan, as modified, the distribution of Cash, New Secured Notes
and New Common Stock to holders of Allowed Claims in Class 4A of the
Plan on the Effective Date will be reduced on a pro rata basis.
In the event you are a holder of an Allowed Claim in Class 4A or 4B of the
Plan and already submitted a Ballot prior to having received this Supplement,
you may change your vote. Should you wish to change your vote, please contact
the Balloting Agent at Georgeson & Company Inc., 88 Pine Street, 30th Floor,
Wall Street Plaza, New York, New York 10005, (800) 223-2064 (Telephone) or (212)
440-9009 (Fax) and a new ballot will be provided to you which will be required
to be received, by mail or by courier, no later than February 17, 1997, 5:00
P.M. (EST) (the "Extended Voting Deadline"). If you do not change your vote
prior to the Extended Voting Deadline, then your vote will be counted as
originally cast. In the event you are a Former Preferred Stockholder and you
already accepted or rejected the FPS Settlement prior to having received this
Supplement, you may change your election on or prior to the Extended Voting
Deadline.
Dated: New York, New York
January 24, 1997
METALLURG, INC.
By: /S/ Eric L. Schondorf
----------------------------
Name: Eric L. Schondorf
Title: Vice President and
General Counsel
SHIELDALLOY METALLURGICAL
CORPORATION
By: /S/ Barry C. Nuss
----------------------------
Name: Barry C. Nuss
Title: Secretary
2
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - -------------------------------------x
In re : Chapter 11 Case Nos.
93 B 44468 (JLG)
METALLURG, INC. AND : 93 B 44469 (JLG)
SHIELDALLOY METALLURGICAL
CORPORATION, : (Jointly Administered)
Debtors. :
- - -------------------------------------x
SUPPLEMENT TO DEBTORS' FOURTH AMENDED AND RESTATED
JOINT PLAN OF REORGANIZATION DATED DECEMBER 18, 1996
The Debtors hereby supplement and modify the Fourth Amended and Restated Joint
Plan of Reorganization dated December 18, 1996 as follows:
After Section 1.50 the following paragraph should be added:
Section 1.50A. FPS Claims means those Claims scheduled by Metallurg on
behalf of, or filed by, Former Preferred Stockholders on account of the Old
Preferred Stock issued by Metallurg.
Section 5.14(b) should be modified after the last sentence set forth
therein to include the following:
In the event any Non-Settling Former Preferred Stockholder enters
into an agreement with the Committee, and Metallurg or Reorganized
Metallurg, which settles an FPS Claim asserted by the Non-Settling
Former Preferred Stockholder and such agreement provides economic
treatment to such FPS Claim that is better than the treatment
provided for FPS Claims settled under the FPS Settlement, then any
Former Preferred Stockholder who elected into the FPS Settlement and
who is similarly situated to the Non-Settling Former Preferred
Stockholder with respect to the timing of the redemption of Old
Preferred Stock and any payments made in connection therewith will
be entitled to the same pro rata amount of Cash, New Secured Notes
and New Common Stock (the "Incremental FPS Settlement Payment")
provided for under the settlement entered into between the
Committee, Metallurg or Reorganized Metallurg and the Non-Settling
Preferred Stockholder with respect to an FPS Claim.
<PAGE>
Section 11.3 should be modified after the last paragraph set forth therein
to provide:
(d) In the event the Committee's objection to any Non-Settling
Preferred Stockholder FPS Claim remains pending before the
Bankruptcy Court as of the Effective Date and has not other-
wise been resolved through a decision rendered by the Court,
Reorganized Metallurg shall reserve on account of future
Incremental FPS Settlement Payments (as defined in Section
5.14(b) of the Plan, as modified), an amount of Cash, New
Secured Notes and New Common Stock to be determined and
disclosed by the Committee and Metallurg on or before the
Confirmation Date of the Plan.
Dated: New York, New York
January 24, 1997
METALLURG, INC.
By: /S/ Eric L. Schondorf
----------------------------
Name: Eric L. Schondorf
Title: Vice President and
General Counsel
SHIELDALLOY METALLURGICAL
CORPORATION
By: /S/ Barry C. Nuss
----------------------------
Name: Barry C. Nuss
Title: Secretary
John J. Rapisardi, Esq.
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
(212) 310-8568
Attorneys for the Debtors in Possession
2
WEIL, GOTSHAL & MANGES LLP
Attorneys for Debtors and Debtors
in Possession
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
John J. Rapisardi, Esq. [JR 7781]
Gary T. Holtzer, Esq. [GH 7732]
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - ------------------------------x
In re : Chapter 11 Case Nos.
METALLURG, INC. AND : 93 B 44468 (JLG)
SHIELDALLOY METALLURGICAL 93 B 44469 (JLG)
CORPORATION, : (Jointly Administered)
Debtors. :
- - ------------------------------x
NOTICE OF ENTRY OF ORDER CONFIRMING DEBTORS' FOURTH
AMENDED AND RESTATED JOINT PLAN OF REORGANIZATION
PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE,
DATED DECEMBER 18, 1996, AS SUPPLEMENTED
TO: THE PARTIES LISTED ON THE ANNEXED SERVICE LIST
PLEASE TAKE NOTICE that on February 26, 1997 an order, dated
February 26, 1997 (the "Confirmation Order"), was duly entered in the office of
the Clerk of the United States Bankruptcy Court for the Southern District of New
York confirming the Debtors' Fourth Amended and Restated Joint Plan of
Reorganization Pursuant to Chapter 11 of the Bankruptcy Code, dated December 18,
1996, as supplemented (the "Plan").
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PLEASE TAKE FURTHER NOTICE that a complete copy of the Confirmation
Order (including the Plan) may be obtained by sending a written request to
MaLora Mathis-McCullough, Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New
York, New York 10153.
Dated: New York, New York
February 27, 1997
/s/ John J. Rapisardi
---------------------
John J. Rapisardi
JR 7781
A Member of the Firm
WEIL, GOTSHAL & MANGES LLP
Attorneys for Debtors and Debtors
in Possession
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
2
WEIL, GOTSHAL & MANGES LLP
Attorneys for Debtors and Debtors
in Possession
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
John J. Rapisardi, Esq. [JR 7781]
Gary T. Holtzer, Esq. [GH 7732]
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - ------------------------------x
In re : Chapter 11 Case Nos.
METALLURG, INC. AND : 93 B 44468 (JLG)
SHIELDALLOY METALLURGICAL 93 B 44469 (JLG)
CORPORATION, : (Jointly Administered)
Debtors. :
- - ------------------------------x
AMENDED NOTICE OF ENTRY OF ORDER CONFIRMING DEBTORS' FOURTH
AMENDED AND RESTATED JOINT PLAN OF REORGANIZATION
PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE,
DATED DECEMBER 18, 1996, AS SUPPLEMENTED
TO: THE PARTIES LISTED ON THE ANNEXED SERVICE LIST
PLEASE TAKE NOTICE that on February 28, 1997 an order, dated
February 26, 1997 (the "Confirmation Order"), was duly entered in the office of
the Clerk of the United States Bankruptcy Court for the Southern District of New
York confirming the Debtors' Fourth Amended and Restated Joint Plan of
Reorganization Pursuant to Chapter 11 of the Bankruptcy Code, dated December 18,
1996, as supplemented (the "Plan").
<PAGE>
PLEASE TAKE FURTHER NOTICE that the prior Notice of Entry of Order
Confirming Debtors' Plan, dated February
27, 1997 should be disregarded.
PLEASE TAKE FURTHER NOTICE that a complete copy of the Confirmation
Order (including the Plan) may be obtained by sending a written request to
MaLora Mathis-McCullough, Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New
York, New York 10153.
Dated: New York, New York
March 3, 1997
John J. Rapisardi
JR 7781
A Member of the Firm
WEIL, GOTSHAL & MANGES LLP
Attorneys for Debtors and Debtors
in Possession
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
2
NYFS05...:\40\63140\0003\1839\NOT3037N.310
WEIL, GOTSHAL & MANGES LLP
Attorneys for Debtors in
Possession
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
John J. Rapisardi, Esq. [JR 7781]
Gary T. Holtzer, Esq. [GH 7732]
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - -------------------------------x
In re : Chapter 11 Case Nos.
93 B 44468 (JLG)
METALLURG, INC. and : 93 B 44469 (JLG)
SHIELDALLOY METALLURGICAL
CORPORATION, : (Jointly Administered)
Debtors. :
- - -------------------------------x
POST CONFIRMATION ORDER AND NOTICE
WHEREAS, an order of confirmation was issued by this Court on
February 26, 1997 confirming the Debtors' Fourth Amended and Restated Joint Plan
of Reorganization, dated December 18, 1996, as supplemented (the "Plan"), of
Metallurg, Inc. and Shieldalloy Metallurgical Corporation, as debtors and
debtors in possession in the above-captioned cases (collectively, the
"Debtors"); and
WHEREAS, pursuant to Local Bankruptcy Rule 3021-1, it is the
Debtors' responsibility to inform the Court of the progress made towards (i)
consummation of the Plan under section 1101(2) of title 11, United States Code
(the "Bankruptcy Code"), (ii) entry of a final decree pursuant to
<PAGE>
Federal Rule of Bankruptcy Procedure 3022, and (iii) closing of the Debtors'
chapter 11 cases pursuant to section 350 of the Bankruptcy Code.
NOW, THEREFORE, IT IS HEREBY ORDERED that the Debtors shall comply
with the following:
1. Reports. Subject to the requirements of paragraph 5 herein and
pursuant to section 1106(a)(7) of the Bankruptcy Code, the Debtors shall file,
within forty-five (45) days after the date of this Order, a status report
detailing the actions taken by the Debtors and the progress made towards
consummation of the Plan. Such reports shall be filed thereafter every January
15th, April 15th, July 15th and October 15th until a final decree closing these
chapter 11 cases has been entered.
2. Notice. The Debtors shall mail a copy of the order confirming the
Plan and a copy of this Order to the creditors and equity interest holders of
the Debtors, to the Statutory Committee of Unsecured Creditors and its counsel,
and to all parties who have filed a notice of appearance in these chapter 11
cases.
3. Clerk's Charges and Report Information. Within fifteen (15) days
of the date of this Order, the Debtors shall submit a written request to the
Clerk of the Court to obtain the amount of any notice and excess claim
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<PAGE>
charges. The amount, if any, shall be paid by the Debtors in full within fifteen
(15) days after receipt by the Debtors of the Clerk's response to such request.
4. Closing Report and Final Decree. Within fifteen (15) days of
"substantial consummation" of the Plan, the Debtors shall file an application
for a final decree closing these chapter 11 cases in accordance with section
1106(a)(7) of the Bankruptcy Code and Local Bankruptcy Rule 3022-1; provided,
however, that such final decree shall reserve such jurisdiction to the Court as
is reserved in the Plan. The application shall include a statement of the
actions effected in compliance with the Plan and the information typically
contained in the report referred to in paragraph 1 hereof. For the purposes of
this paragraph and unless demonstrated otherwise, "substantial consummation"
shall mean the occurrence of the Effective Date as defined in the Plan.
5. Case Closing. Unless the Court orders otherwise, the Debtors
shall submit the information described in paragraph 4 herein, including a final
decree closing these cases, within six (6) calendar months from the date of the
order confirming the Plan. If the Debtors fail
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<PAGE>
to comply with this Order, the Clerk of the Court shall so advise the Court and
an order to show cause may be issued.
Dated: New York, New York
February 26, 1997
/s/ James L. Garrity, Jr.
------------------------------
UNITED STATES BANKRUPTCY JUDGE
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