<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 31, 1997
REGISTRATION NO. 333-42141, 333-42141-01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
METALLURG, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3398 13-1661467
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
6 EAST 43RD STREET
NEW YORK, NEW YORK 10017
(212) 835-0200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ERIC L. SCHONDORF, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
METALLURG, INC.
6 EAST 43RD STREET
NEW YORK, NEW YORK 10017
(212) 835-0200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
SAMUEL M. FEDER, ESQ.
ROGERS & WELLS
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 878-8000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the exchange offer ("Exchange Offer") pursuant to the registration
agreement (the "Registration Agreement") described in the enclosed Prospectus
have been satisfied or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 12, 1997
OFFER TO EXCHANGE 11% SERIES B SENIOR NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR
ANY AND ALL OUTSTANDING 11% SERIES A SENIOR NOTES DUE 2007
($100,000,000 PRINCIPAL AMOUNT OUTSTANDING)
[METALLURG, INC. LOGO]
OF
METALLURG, INC.
UNCONDITIONALLY GUARANTEED BY
SHIELDALLOY METALLURGICAL CORPORATION, METALLURG HOLDINGS CORPORATION, METALLURG
SERVICES, INC. AND MIR (CHINA), INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M. NEW YORK CITY
TIME,
ON , 1998 (AS SUCH DATE MAY BE EXTENDED, THE "EXPIRATION DATE").
Metallurg, Inc. ("Metallurg" or the "Company") hereby offers (the "Exchange
Offer"), upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal"), to exchange an aggregate of up to $100,000,000 principal amount
of 11% Series B Senior Notes due 2007 (the "New Notes") for an identical face
amount of the outstanding 11% Series A Senior Notes due 2007 (the "Old Notes"
and, with the New Notes, the "Notes"). The Old Notes were, and the New Notes
will be, fully and unconditionally guaranteed (the "Guaranties") on a general
unsecured basis by Shieldalloy Metallurgical Corporation ("Shieldalloy"),
Metallurg Holdings Corporation, Metallurg Services, Inc. and MIR (China), Inc.
(the "Guarantors"). The terms of the New Notes are identical in all material
respects to the terms of the Old Notes except that the rights relating to the
exchange of Old Notes for New Notes and the restrictions on transfer set forth
on the Old Notes will not appear on the New Notes. See "The Exchange Offer." The
New Notes are being offered hereunder in order to satisfy certain obligations of
the Company under a Registration Agreement dated as of November 20, 1997 (the
"Registration Agreement") among the Company, the Guarantors, Salomon Brothers
Inc and BancBoston Securities Inc. (the "Initial Purchasers"). Based on an
interpretation by the staff of the Securities and Exchange Commission (the
"Commission") set forth in no-action letters issued to third parties unrelated
to the Company, New Notes issued pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold, and otherwise transferred by a
holder thereof (other than a holder which is an "affiliate" of the Company
within the meaning of Rule 405, under the Securities Act of 1933, as amended
(the "Securities Act"), without compliance with the registration and the
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business and such
holder has no arrangement with any person to participate in or is engaged in the
distribution of such New Notes.
The New Notes will mature on December 1, 2007. Interest on the New Notes will
be payable semiannually on June 1 and December 1 of each year, commencing June
1, 1998. The New Notes will be redeemable at the option of the Company, in whole
or in part, at any time on or after December 1, 2002, at the redemption prices
set forth herein, plus accrued and unpaid interest, if any, to the date of
redemption. In addition, prior to December 1, 2000, up to 34% of the aggregate
principal amount of the New Notes originally issued may be redeemed at the
option of the Company, in whole or in part, at any time and from time to time,
at 111% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of redemption, with the net proceeds of one or more Public
Equity Offerings (as defined) following which there is a Public Market (as
defined), provided that at least 66% of the aggregate principal amount of the
New Notes originally issued remains outstanding immediately after such
redemption. In the event of a Change of Control (as defined), the Company will
be required to make an offer to repurchase all or any part of each holder's New
Notes at a cash purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the date of purchase. See
"Description of the New Notes."
The New Notes will be general unsecured obligations of the Company,
effectively subordinated in right of payment to all existing and future secured
indebtedness of the Company to the extent of the value of the assets securing
such indebtedness. The New Notes will rank pari passu with all senior
indebtedness of the Company and senior to all subordinated indebtedness of the
Company. The Guaranties will effectively rank subordinate in right of payment to
all secured indebtedness of the Guarantors to the extent of the value of the
assets securing such indebtedness. The Guaranties will rank pari passu with all
senior indebtedness of the Guarantors and senior to all subordinated
indebtedness of the Guarantors. The New Notes will be effectively subordinated
in right of payment to all existing and future liabilities of the Company's
subsidiaries which are not guaranteeing the Notes. The Guaranties could also be
effectively subordinated to all the obligations of the Guarantors under certain
circumstances. The Company's subsidiaries may incur significant additional
indebtedness and other liabilities in the future. As of July 31, 1997, after
giving effect to the offering of the Old Notes (the "Offering") and the
application of the estimated net proceeds therefrom, the secured obligations of
the Company and the Guarantors would have consisted of approximately $24.6
million of contingent obligations in respect of outstanding letters of credit
under the Revolving Credit Facility (as defined). As of July 31, 1997, after
giving effect to the Offering and the application of the estimated net proceeds
therefrom, the Guarantors would have had approximately $92.0 million of balance
sheet liabilities (including trade payables, accrued liabilities and
intercompany amounts), none of which would have been indebtedness, and
subsidiaries of the Company which are not guaranteeing the Notes would have had
approximately $168.4 million of balance sheet liabilities (including trade
payables, accrued liabilities and intercompany amounts), of which $5.5 million
would have been indebtedness. Furthermore, the indenture governing the Notes
(the "Indenture") permits the Company's subsidiaries to incur additional
indebtedness, which may be substantial.
The Company will accept for exchange from an Eligible Holder any and all Old
Notes that are validly tendered prior to 5:00 p.m., New York City time, on the
Expiration Date. For purposes of the Exchange Offer, "Eligible Holder" shall
mean the registered owner of any Old Notes that remain Transfer Restricted
Securities, as reflected on the records of IBJ Schroder Bank & Trust Company, as
registrar for the Old Notes (in such capacity, the "Registrar"), or any person
whose Old Notes are held of record by the depositary of the Old Notes. Tenders
of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the Expiration Date. For purposes of the Exchange Offer, "Transfer
Restricted Securities" means each Old Note until the earliest to occur of (i)
the date on which such Old Note is exchanged in this Exchange Offer and entitled
to be resold to the public by the holder thereof without complying with the
prospectus delivery provisions of the Securities Act, (ii) the date on which
such Old Note is registered under the Securities Act and is disposed of in a
shelf registration statement, if applicable, or (iii) the date on which such Old
Note has been distributed to the public pursuant to Rule 144 under the
Securities Act or by a broker-dealer pursuant to the plan of distribution
described herein. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer and will
pay all the expenses incident to the Exchange Offer. If the Company terminates
the Exchange Offer and does not accept for exchange any Old Notes, it will
promptly return the Old Notes to the holders thereof. See "The Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company and the Guarantors have agreed that it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale beginning on the date hereof ("Expiration Date") and ending on the close
of business on the first anniversary of the Expiration Date. See "The Exchange
Offer" and "Plan of Distribution." Any broker-dealer that acquired Old Notes
directly from the Company and not as a result of market-making activities or
other trading activities, in the absence of an exemption from the registration
requirements of the Securities Act, must comply with such registration
requirements and the prospectus delivery requirements of the Securities Act in
connection with any secondary resales of New Notes received in exchange for such
Old Notes.
Prior to this Exchange Offer, there has been no public market for the Notes.
To the extent that Old Notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered Old Notes could be adversely affected. If a
market for the New Notes should develop, the New Notes could trade at a discount
from their principal amount. The Company does not currently intend to list the
New Notes on any securities exchange or to seek approval for quotation through
any automated quotation system. There can be no assurance that an active public
market for the New Notes will develop.
The Exchange Agent for the Exchange Offer is IBJ Schroder Bank & Trust
Company.
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY ELIGIBLE HOLDERS IN EVALUATING THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 3
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement (which
term shall include any amendments thereto) on Form S-4 under the Securities Act
with respect to the securities offered by this Prospectus. This Prospectus,
which constitutes a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, to which reference is hereby made. Each statement made in
this Prospectus referring to a document filed as an exhibit or schedule to the
Registration Statement is qualified in its entirety by reference to the exhibit
or schedule for a complete statement of its terms and conditions, although all
of the material terms of the Company's contracts and agreements that would be
material to an investor have been summarized in this Prospectus. In addition,
upon the effectiveness of the Registration Statement filed with the Commission,
the Company will be subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith the Company will file periodic reports and other information with the
Commission relating to its business, financial statements and other matters. Any
interested parties may inspect and/or copy the Registration Statement, its
schedules and exhibits, and the periodic reports and other information filed in
connection therewith, at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices located at Citicorp Center,
500 W. Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such materials can be
obtained at prescribed rates by addressing written requests for such copies to
the Public Reference Section of the Commission at its principal office at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. The
Commission also maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants. The
Commission's Web site can be accessed on the World Wide Web at
http://www.sec.gov. The obligations of the Company under the Exchange Act to
file periodic reports and other information with the Commission may be
suspended, under certain circumstances, if the New Notes are held of record by
fewer than 300 holders at the beginning of any fiscal year and are not listed on
a national securities exchange. The Company has agreed that, whether or not it
is required to do so by the rules and regulations of the Commission, for so long
as any of the New Notes remain outstanding it will furnish to the holders of the
New Notes, and if required by the Exchange Act, file with the Commission all
annual, quarterly and current reports that the Company is or would be required
to file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange
Act. In addition, for so long as any of the Old Notes remain outstanding, the
Company has agreed to make available to any prospective purchaser of the Old
Notes or beneficial owner of the Old Notes in connection with any sale thereof
the information required by Rule 144A(d)(4) under the Securities Act.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION WITH RESPECT TO ANY SECURITY OTHER THAN THE SECURITIES OFFERED
HEREBY OR AN OFFER TO OR SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH
SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes to the financial
statements, appearing elsewhere in this Prospectus. References in this
Prospectus to the "Company" and "Metallurg" refer to Metallurg, Inc. and its
subsidiaries, unless the context indicates otherwise. Financial information
contained in this Prospectus for periods and dates after March 31, 1997 reflect
the effects of the Company's Reorganization Plan (as defined herein), including
the implementation of fresh-start reporting, as of March 31, 1997. Accordingly,
the Company's consolidated financial statements for periods and dates prior to
March 31, 1997 are not comparable to subsequent consolidated financial
statements. In addition, as a result of Metallurg, Inc.'s change in its fiscal
year from a calendar year to January 31 (beginning with the fiscal year ending
January 31, 1998 (the "1997 fiscal year")), effective as of April 1, 1997, the
consolidated operating results of the Company for periods which include the
quarter ended July 31, 1997 contained in this Prospectus include the results of
Metallurg, Inc. for the four-month period ended July 31, 1997 and the results of
its operating subsidiaries (whose fiscal years remain the calendar year) for the
three-month period ended June 30, 1997, and the consolidated balance sheet data
of the Company at July 31, 1997 reflects the financial position of Metallurg,
Inc. at July 31, 1997 and of the operating subsidiaries at June 30, 1997. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
THE COMPANY
GENERAL
Metallurg is a leading international producer and seller of high quality
metal alloys and specialty metals used by manufacturers of steel, aluminum,
superalloys and chemicals and other metal consuming industries. The Company
sells more than 500 different products to over 3,000 customers worldwide. In
addition to selling products manufactured by the Company, Metallurg also
distributes products manufactured by third parties ("Merchanted Products")
through its global sales force. For the year ended December 31, 1996, the
Company had $648.8 million in sales, $365.1 million of which were from products
manufactured by the Company and $283.7 million of which were from Merchanted
Products. Giving effect to the Pro Forma Transactions (as defined), for the four
quarters ended July 31, 1997, Metallurg had sales of $639.9 million and EBITDA
(as defined under "Summary Financial Data") of $39.8 million.
The Company sells products principally to customers in the iron and steel
industry, the aluminum industry and the superalloy and titanium industries.
Approximately 51% of the Company's 1996 sales were made to the iron and steel
industry, 15% to the aluminum industry, 11% to the superalloy and titanium alloy
industries, 4% to the chemicals industry, and the remaining 19% were made to
other industries, none of which was individually significant to the Company.
Based on customer location, for the year ended December 31, 1996, approximately
40% of the Company's sales were made in North America, 45% in Europe, 5% in
Asia, 2% in South America and 8% throughout the rest of the world.
Iron and Steel Industry; Specialty Ferroalloys. The Company manufactures
and sells specialty ferroalloys for use in the iron and steel industry.
Metallurg's principal specialty ferroalloy products are ferrovanadium and
standard grades of low carbon ferrochrome. The Company also manufactures and
sells ferrosilicon, ferrotitanium, ferrocolumbium and ferroboron. These products
are used by iron and steel producers to increase temperature and corrosion
resistance and strength-to-weight ratios in the end-use products. Ferroalloys
are found in many end-use products in a wide variety of industries such as the
aerospace, automotive, energy and construction industries. The Company's iron
and steel industry customers include some of the world's largest producers, such
as Algoma Steel Inc., British Steel plc, Nucor Corporation, Sandvik AB, Thyssen
AG and US Steel Group. For the year ended December 31, 1996, the Company had
sales to the iron and steel industry of approximately $328.1 million,
representing 50.6% of the Company's total sales.
3
<PAGE> 5
Aluminum Industry; Aluminum Master Alloys and Compacted Products. The
Company manufactures a series of grain refining and other alloys for sale to the
primary aluminum industry. Metallurg's principal products in this category
include titanium boron tertiary alloys, strontium master alloys and chrome, iron
and manganese briquettes and tablets. The Company also manufactures binary
master alloys containing boron, zirconium or titanium. Master alloys containing
boron improve the conductivity of aluminum alloys for electric cable, while
master alloys containing strontium modify silicon-containing foundry alloys for
improved mechanical properties, as in automotive wheels. Compacted products in
the form of briquettes containing chrome, iron, manganese or other metals
maximize the efficiency of recovery and enhance rapid solubility when added to
aluminum melt in order to provide ductility for can sheet or strength for
aerospace applications. Titanium binary master alloys and titanium boron
tertiary alloys are widely utilized for the grain refining of cast aluminum
alloy rolling ingots, billets and continuously cast sheet. This grain refinement
improves the castability and the mechanical properties of the aluminum. The
Company sells aluminum master alloys and compacted products worldwide to major
aluminum producers, including Alcan Aluminum Limited, Alcoa Aluminum Co. of
America, Aluminium Pechiney, Reynolds Metals Co. and Sumitomo Metals Industries
Ltd. For the year ended December 31, 1996, the Company had sales to the aluminum
industry of $96.6 million, representing 14.9% of the Company's total sales.
Superalloy and Titanium Alloy Industries; Specialty Metals and Alloys. The
Company manufactures and sells specialty metals and alloys used by producers of
superalloys and titanium alloys to enhance the performance of finished metal
products. Metallurg's principal products in this category include chromium
metal, special grades of low carbon ferrochrome and vanadium aluminum. The
Company also manufactures and sells high purity ferrocolumbium and nickel
columbium. Use of these specialty metals and alloys results in elevated
temperature strength and oxidation resistance. End-uses for specialty metals
include high performance castings and forgings for aircraft engines and frames,
gas turbines and boiler tubes. While the aerospace and defense industries are
the largest consumers of these specialty metals and alloys, many new
applications for these metals and alloys have been developed for use in the
power generation, oil and gas, chemical, consumer goods and biomedical
industries. The Company's customers for specialty metals and alloys include
Allegheny Teledyne, Inc., Carpenter Technology Corp., INCO Alloys, Kanthal AB,
Oregon Metallurgical Corp., RMI Titanium Company, Special Metals Corporation and
Titanium Metals Corp. For the year ended December 31, 1996, the Company had
sales of metals and alloys to these industries of $71.3 million, representing
11.0% of the Company's total sales.
Other Industries and Products. In addition to the product lines described
above, Metallurg manufactures and distributes a number of products used outside
of the steel, aluminum and superalloy industries. These products include coating
materials, which are sold to electronic and tool manufacturers, vanadium
oxytrichloride for use in the synthetic rubber industry and polishing powders
used by the glass polishing industry. These products generally are
higher-margin, technically sophisticated products. For the year ended December
31, 1996, the Company had $152.8 million in sales of these products,
representing 23.5% of the Company's total sales. The most significant customer
industry for products in this category is the chemicals industry, which
accounted for $29.4 million of the Company's 1996 sales in this category,
representing 4.5% of the Company's total sales.
The merchanting of products manufactured by third parties is a natural
complement to the Company's manufacturing operations. Merchanted Products
leverage the Company's global 124 member sales staff by providing a broader
product offering to its existing customers without incurring significant
additional overhead. As a result of offering a broader product line, Metallurg
becomes more important to its customers, as they can more conveniently procure
supplies and decrease their sourcing costs by reducing their number of vendors
and optimizing freight costs. In addition, merchanting activities provide the
Company with greater access to raw materials and to products for resale. The
Company's merchanting revenues are from three sources: "back-to-back" purchases
and sales which eliminate price risk to the Company, purchases of stocks for the
Company's own account for subsequent resale to customers and agency sales for
the account of another party where the Company receives a commission and does
not take title to the inventory. For the year ended December 31, 1996 the
Company received
4
<PAGE> 6
commissions of $1.2 million for acting as agent with regard to third party sales
of $46.3 million. Commission revenues are not included in the sales figures
contained herein.
Metallurg, a Delaware corporation, operates smelting and refining
facilities in the United States, the United Kingdom, Germany and Brazil, mines
chrome ore in Turkey for use in its production facilities, and operates 17
separate sales offices in most of the world's major metals consuming markets.
Metallurg employs approximately 1,500 people worldwide. Metallurg's executive
office is located at 6 East 43rd Street, New York, New York 10017, and its
telephone number is (212) 835-0200.
BUSINESS STRATEGIES
The Company's business objective is to maximize the long-term profitability
of its operations while maintaining a strong financial position through the
various business and market cycles. The Company's continuing strategies for
achieving this objective are as follows:
Focus on Core Businesses. The Company seeks to achieve high market shares
in markets where the Company can differentiate itself on the basis of technical
expertise and production quality. As part of this strategy, the Company is
focusing its production and sales efforts on higher margin specialized alloy
businesses, and is investing in capital projects that will expand its capacity
or lower its costs in those areas. The Company recently completed construction
of a chromium metal plant in the United Kingdom that will increase its
production capacity of chromium metal for use in the steel, aluminum and
superalloy industries. The Company has also expanded its vacuum furnace capacity
at its German facilities, which will enhance its production of vanadium aluminum
and molybdenum aluminum for use by the titanium industry, and has undertaken an
upgrade of its aluminum furnace facilities at its United Kingdom plant. In
recent years, the Company has divested certain non-core and lower margin
businesses, including its tantalum carbide, U.S. titanium scrap processing and
tin and aluminum trading businesses.
Maintain Leading Market Position in Niche Products. The Company believes
that it maintains leading global market shares in special grades of low carbon
ferrochrome consumed by the superalloy industry, chromium metal and aluminum
master alloys. The Company believes that its competitive advantages include
strong relationships with its customers and suppliers and a field sales force
comprised primarily of metallurgists who are knowledgeable about the products
and their many applications. In addition, the Company's access to high quality
and continuing supplies of chrome ore through its ownership of mines in Turkey
gives the Company a significant competitive advantage over other low carbon
ferrochrome producers.
Improve Financial Flexibility. With the Offering, the Company has improved
its financial position by increasing liquidity and extending the maturities and
the amortization schedule of its debt. Metallurg and Shieldalloy also have
recently increased the maximum amount of their Revolving Credit Facility (as
defined) from $40.0 million to $50.0 million. Management believes that the
Company's capital structure
following the Offering and the increase in availability of funds under the
Revolving Credit Facility will improve the Company's ability to withstand future
cyclical downturns in the steel, aluminum and superalloy industries. See "Risk
Factors -- Dependence on Cyclical Markets." At July 31, 1997, after giving
effect to the Offering and the application of the estimated net proceeds
therefrom, the Company would have had approximately $44.7 million of cash and
cash equivalents on hand. After giving effect to the Offering and the
application of the estimated net proceeds therefrom, Metallurg expects to have
available borrowing capacity under the Revolving Credit Facility of
approximately $25.0 million. See "Description of Credit Facilities and Other
Financing Arrangements." In addition, in order to increase dividends from its
foreign subsidiaries, the Company (i) has taken steps to enable its German
operating subsidiaries to make dividend payments by late 1998, and (ii) has
obtained consent from its working capital lender at its United Kingdom operating
subsidiaries to permit increased dividends to the Company of up to 100% of such
subsidiaries' annual net income, contingent upon repayment of the LSM Term Loan
Facility (as defined). The Company has repaid the LSM Term Loan Facility with
proceeds from the Offering. See "Risk Factors -- Holding Company Structure;
Restrictions on Dividend Payments by Subsidiaries."
5
<PAGE> 7
Aggressively Manage Costs. In recent years, Metallurg has instituted
measures to reduce operating costs and enhance profitability. Through a
combination of divesting non-core businesses, using contractors and improving
productivity, the Company has reduced headcount from 2,508 at the end of 1992 to
1,523 as of June 30, 1997, while sales have grown from $591.1 million in 1992 to
$639.9 million for the four quarters ended July 31, 1997. The Company has
established representation offices in Russia and China which have enabled the
Company to develop new sources of product supply for the Company's manufacturing
and distribution businesses, as it seeks to have as many low cost providers of
raw materials as possible. The Company has achieved certain savings through this
process, particularly in procuring chromium-, titanium- and vanadium-containing
materials. In addition, the Company has restructured its operations into
individual business units focused on particular customer groups in order to
better manage costs and improve profitability.
The Company expects to spend approximately $10.4 million of its $24.5
million of 1998 budgeted capital expenditures on capital projects which the
Company believes will improve production efficiencies, lower manufacturing costs
and expand production capacities. The remaining capital expenditures planned for
1998 are primarily for replacement and major repairs of existing facilities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Capital Expenditures."
Improve Product Mix. The Company continually pursues opportunities to
maximize sales through the Company's existing distribution network by improving
its product mix. The Company realizes improvements in its product mix by (i)
divesting low margin products, (ii) developing value added products such as
titanium carbide, which the Company sells to the forging industry, and vanadium
tetrachloride, which the Company sells to the synthetic rubber industry, and
(iii) acquiring, or entering into merchanting arrangements for, product lines
which complement the Company's core product offerings.
EMERGENCE FROM CHAPTER 11
In April 1997, Metallurg and Shieldalloy consummated their Joint Plan of
Reorganization dated December 18, 1996, pursuant to Chapter 11 of the United
States Bankruptcy Code (the "Reorganization Plan"). Metallurg and Shieldalloy
sought Chapter 11 protection in September 1993 following the Company's inability
to restructure or refinance its long-term indebtedness and revolving credit
facility in light of a confluence of negative economic factors which caused the
Company to default on certain of its then outstanding indebtedness. The Company
was particularly affected by (i) "dumping" by exporters from the former Soviet
Union of excess stocks of metals and alloys, which drove prices of ferroalloys
in Europe and the United States to very low levels and (ii) the general economic
recession that began in 1989 in the end-use markets of the Company's customers.
As part of the Reorganization Plan, Shieldalloy entered into settlement
agreements with various environmental regulatory authorities relating to all of
Shieldalloy's significant known environmental liabilities. Pursuant to these
agreements, Shieldalloy has agreed to perform environmental remediation which,
as of July 31, 1997, had an estimated cost of completion of $44.5 million.
Shieldalloy expects to expend $2.5 million in the second half of 1997, $4.5
million in 1998, $4.3 million in 1999 and $8.1 million in 2000. See "Risk
Factors -- Environmental Regulation" and "Business -- Environmental Matters."
The Company has sought to stabilize and strengthen its business since the
bankruptcy filing through the implementation of the business strategies
described above. As a result of the consummation of the Offering and other
financial arrangements made by the Company, the Company believes that its
financial position has improved from 1993 with enhanced liquidity and extended
maturities of its debt. In addition, the Company believes that the flow of
competitive products from the former Soviet Union has slowed due to reduced
stockpiles of inventory and temporary anti-dumping duties imposed in the United
States on ferrovanadium from Russia and duties imposed in Europe on low carbon
ferrochrome from several former Soviet states. See "Risk Factors -- End of
Anti-dumping Duties." These factors, as well as increased steel and aluminum
consumption, particularly in the aerospace industry and automotive and durable
6
<PAGE> 8
goods sectors, have contributed to the strength of the steel, aluminum and
superalloy markets since 1993.
ISSUANCE OF THE OLD NOTES
The outstanding $100.0 million principal amount of 11% Series A Senior
Notes due 2007 (the "Old Notes") were sold by the Company to Salomon Brothers
Inc and BancBoston Securities Inc. (the "Initial Purchasers") on November 25,
1997 (the "Closing Date") pursuant to a Purchase Agreement, dated as of November
20, 1997 (the "Purchase Agreement"), between the Company and the Initial
Purchasers. The Initial Purchasers subsequently resold the Old Notes in reliance
on Rule 144A under the Securities Act and other available exemptions under the
Securities Act on or about November 25, 1997. The Company and the Initial
Purchasers also entered into the Registration Agreement pursuant to which the
Company granted certain registration rights for the benefit of the holders of
the Old Notes. The Exchange Offer is intended to satisfy certain of the
Company's obligations under the Registration Agreement with respect to the Old
Notes. See "The Exchange Offer -- Purpose and Effects."
The Old Notes were issued under an indenture, dated as of November 25, 1997
(the "Indenture"), between the Company, the Guarantors and IBJ Schroder Bank and
Trust Company as trustee (in such capacity, the "Trustee"). The New Notes are
also being issued under the Indenture and are entitled to the benefits of the
Indenture. The Old Notes were, and the New Notes will be, fully and
unconditionally guaranteed on a general unsecured basis by the Guarantors. The
form and terms of the New Notes will be identical in all material respects to
the form and terms of the Old Notes except that (i) the New Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof, and (ii) holders of New Notes will not be, and
upon the consummation of the Exchange Offer, Eligible Holders of Old Notes will
no longer be, entitled to certain rights under the Registration Agreement
intended for the holders of unregistered securities. The Exchange Offer shall be
deemed consummated upon the delivery by the Company to the Exchange Agent under
the Indenture of New Notes in the same aggregate principal amount as the
aggregate principal amount of Old Notes that are validly tendered by holders
thereof pursuant to the Exchange Offer. See "The Exchange Offer -- Termination
of Certain Rights" and "-- Procedures for Tendering" and "Description of New
Notes -- General."
The proceeds received by the Company from the issuance of the Old Notes
were used to fund an overall recapitalization of the Company (the
"Recapitalization"), pursuant to which the Company (i) retired its 12% Senior
Notes due 2007 (the "12% Senior Notes"), (ii) repaid the outstanding balance on
the German Subfacility (as defined in "Description of Credit Facilities and
Other Financing Arrangements") (but did not reduce the commitment thereunder),
(iii) retired the LSM Term Loan Facility (as defined in "Description of Credit
Facilities and Other Financing Arrangements") and (iv) paid a cash dividend and
dividend equivalent (the "Dividend") to the holders of the Company's common
stock, $.01 par value ("Common Stock") and stock options of approximately $20.0
million in the aggregate. The balance of the net proceeds will be used for
general corporate purposes. There will be no proceeds to the Company from any
exchange pursuant to the Exchange Offer.
7
<PAGE> 9
THE EXCHANGE OFFER
The Exchange Offer............ The Company is offering, upon the terms and
subject to the conditions set forth herein and
in the accompanying letter of transmittal (the
"Letter of Transmittal"), to exchange its 11%
Series B Senior Notes due 2007 (the "New
Notes," and, with the Old Notes, the "Notes")
for an identical face amount of the outstanding
Old Notes (the "Exchange Offer"). As of the
date of this Prospectus, $100.0 million in
aggregate principal amount of the Old Notes is
outstanding, the maximum amount authorized by
the Indenture for all Notes. As of
, 1997, there were registered
holders of the Old Notes, which held $100.0
million of aggregate principal amount of the
Old Notes. See "The Exchange Offer -- Terms of
the Exchange Offer."
Expiration Date............... 5:00 p.m., New York City time, on ,
1998, as the same may be extended. See "The
Exchange Offer -- Expiration Date; Extension;
Termination; Amendments."
Conditions of the Exchange
Offer......................... The Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being
tendered for exchange. However, the Exchange
Offer is subject to certain customary
conditions, which may be waived by the Company.
See "The Exchange Offer -- Conditions of the
Exchange Offer."
Accrued Interest on the Old
Notes......................... The New Notes will bear interest at a rate
equal to 11% per annum from and including their
date of issuance. Eligible Holders whose Old
Notes are accepted for exchange will have the
right to receive interest accrued thereon from
the date of original issuance of the Old Notes
or the last Interest Payment Date, as
applicable, to, but not including, the date of
issuance of the New Notes, such interest to be
payable with the first interest payment on the
New Notes. Interest on the Old Notes accepted
for exchange, which accrues at the rate of 11%
per annum, will cease to accrue on the day
prior to the issuance of the New Notes. The
interest rate on the Old Notes may increase
under certain circumstances if the Company is
not in compliance with its obligations under
the Registration Agreement. See "Description of
New Notes -- General."
Procedures for Tendering Old
Notes....................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof,
in accordance with the instructions contained
herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with the Old Notes and any
other required documentation to the exchange
agent (as defined herein) at the address set
forth herein. Old Notes may be physically
delivered, but physical delivery is not
required if a confirmation of a book-entry of
such Old Notes to the Exchange Agent's account
at The Depository Trust Company ("DTC") is
delivered in a timely fashion. By executing the
Letter of Transmittal, each holder will
represent to the Company that, among other
things, the New Notes acquired pursuant to the
Exchange Offer are being obtained in the
ordinary course of
8
<PAGE> 10
business of the person receiving such New
Notes, whether or not such person is the
holder, that neither the holder nor any such
other person is engaged in, or intends to
engage in, or has an arrangement or
understanding with any person to participate
in, the distribution of such New Notes and that
neither the holder nor any such other person is
an "affiliate," as defined under Rule 405 of
the Securities Act, of the Company. Each broker
or dealer that receives New Notes for its own
account in exchange for Old Notes, where such
Old Notes were acquired by such broker or
dealer as a result of market-making activities
or other trading activities, must acknowledge
that it will deliver a prospectus in connection
with any resale of such New Notes. See "The
Exchange Offer -- Procedures for Tendering" and
"Plan of Distribution."
Guaranteed Delivery
Procedures.................... Eligible Holders of Old Notes who wish to
tender their Old Notes and (i) whose Old Notes
are not immediately available or (ii) who
cannot deliver their Old Notes or any other
documents required by the Letter of Transmittal
to the Exchange Agent prior to the Expiration
Date (or complete the procedure for book-entry
transfer on a timely basis), may tender their
Old Notes according to the guaranteed delivery
procedures set forth in the Letter of
Transmittal. See "The Exchange
Offer -- Guaranteed Delivery Procedures."
Acceptance of Old Notes and
Delivery of New Notes....... Upon satisfaction or waiver of all conditions
of the Exchange Offer, the Company will accept
any and all Old Notes that are properly
tendered in the Exchange Offer prior to 5:00
p.m., New York City time, on the Expiration
Date. The New Notes issued pursuant to the
Exchange Offer will be delivered promptly after
acceptance of the Old Notes. See "The Exchange
Offer -- Procedures for Tendering."
Withdrawal Rights............. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on
the Expiration Date. See "The Exchange
Offer -- Withdrawal of Tenders."
The Exchange Agent............ IBJ Schroder Bank & Trust Company is the
exchange agent (in such capacity, the "Exchange
Agent"). The address and telephone number of
the Exchange Agent are set forth in "The
Exchange Offer -- Exchange Agent."
Fees and Expenses............. All expenses incident to the Company's
consummation of the Exchange Offer and
compliance with the Registration Agreement will
be borne by the Company. The Company will also
pay certain transfer taxes applicable to the
Exchange Offer. See "The Exchange Offer -- Fees
and Expenses."
Resales of the New Notes...... Based on interpretations by the staff of the
Commission set forth in no-action letters
issued to third parties, the Company believes
that New Notes issued pursuant to the Exchange
Offer to an Eligible Holder in exchange for Old
Notes may be offered for resale, resold and
otherwise transferred by such Eligible Holder
(other than (i) a broker-dealer who purchased
the Old Notes directly from the Company for
resale pursuant to
9
<PAGE> 11
Rule 144A under the Securities Act or any other
available exemption under the Securities Act or
(ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under
the Securities Act), without compliance with
the registration and prospectus delivery
provisions of the Securities Act, provided that
the Eligible Holder is acquiring the New Notes
in the ordinary course of business and is not
participating, and has no arrangement or
understanding with any person to participate,
in a distribution of the New Notes. Each
broker-dealer that receives New Notes for its
own account in exchange for Old Notes, where
such Old Notes were acquired by such broker as
a result of market-making or other trading
activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of such New Notes. See "The Exchange
Offer -- Purpose and Effects" and "Plan of
Distribution."
DESCRIPTION OF NEW NOTES
The Exchange Offer applies to $100.0 million aggregate principal amount of
Old Notes. The terms of the New Notes are identical in all material respects to
the Old Notes, except for certain transfer restrictions and other rights
relating to the exchange of the Old Notes for New Notes. The New Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits of
the Indenture under which both the Old Notes were, and the New Notes will be,
issued. See "Description of New Notes."
Notes Offered................. $100,000,000 aggregate principal amount of 11%
Series B Senior Notes due 2007 (the "Notes").
Maturity Date................. December 1, 2007.
Interest Payment Dates........ June 1 and December 1 of each year, commencing
June 1, 1998.
Optional Redemption........... The New Notes will be redeemable at the option
of the Company in whole or in part, in cash, at
any time on or after December 1, 2002, at the
redemption prices set forth herein, together
with accrued and unpaid interest, if any, to
the date of redemption. In addition, at the
option of the Company, up to 34% of the New
Notes may be redeemed prior to December 1, 2000
at the redemption price set forth herein with
the net proceeds of one or more Public Equity
Offerings of the Company following which there
is a Public Market; provided that at least 66%
of the aggregate principal amount of the New
Notes remain outstanding following such
redemption. See "Description of the New
Notes -- Optional Redemption."
Sinking Fund.................. None.
Change of Control............. Upon the occurrence of a Change of Control each
holder of the New Notes will have the right to
require the Company to purchase all or a
portion of such holder's New Notes at a cash
purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid
interest, if any, thereon to the date of
purchase. See "Description of the New
Notes -- Repurchase at the Option of Holders
Upon a Change of Control."
10
<PAGE> 12
Guaranties.................... The New Notes are fully and unconditionally
guaranteed by Shieldalloy, Metallurg Holdings
Corporation, Metallurg Services, Inc. and MIR
(China), Inc. on a senior unsecured basis. See
"Description of the New Notes -- Guaranties."
Ranking....................... The New Notes will be general unsecured
obligations of the Company. The New Notes will
be effectively subordinated in right of payment
to all existing and future secured indebtedness
of the Company to the extent of the value of
the assets securing such indebtedness. The New
Notes will rank pari passu with all senior
indebtedness of the Company and senior to all
subordinated indebtedness of the Company. The
Guaranties will effectively rank subordinate in
right of payment to all secured indebtedness of
the Guarantors to the extent of the value of
the assets securing such indebtedness. The
Guaranties will rank pari passu with all senior
indebtedness of the Guarantors and senior to
all subordinated indebtedness of the
Guarantors. The New Notes will be effectively
subordinated in right of payment to all
existing and future liabilities of the
Company's subsidiaries which are not
guaranteeing the Notes. The Guaranties could
also be effectively subordinated to all the
obligations of the Guarantors under certain
circumstances. As of July 31, 1997, after
giving effect to the Offering and the
application of the estimated net proceeds
therefrom, the secured obligations of the
Company and the Guarantors would have consisted
of approximately $24.6 million of contingent
obligations in respect to outstanding letters
of credit under the Revolving Credit Facility.
As of July 31, 1997, after giving effect to the
Offering and the application of the estimated
net proceeds therefrom, the Guarantors would
have had approximately $92.0 million of balance
sheet liabilities (including trade payables,
accrued liabilities and intercompany amounts),
none of which would have been indebtedness, and
subsidiaries of the Company which are not
guaranteeing the Notes would have had
approximately $168.4 million of balance sheet
liabilities (including trade payables, accrued
liabilities and intercompany amounts), of which
$5.5 million would have been indebtedness. See
"Risk Factors -- Asset Encumbrance,"
"-- Holding Company Structure; Restrictions on
Dividend Payments by Subsidiaries,"
"-- Fraudulent Conveyance Considerations," and
"Description of the New Notes -- Ranking."
Certain Covenants............. The Indenture will contain limitations on,
among other things, the ability of the Company
and the Restricted Subsidiaries (as defined)
to: (i) incur indebtedness; (ii) make
restricted payments; (iii) enter into certain
transactions with affiliates; (iv) dispose of
assets; (v) create liens; (vi) enter into sale
and leaseback transactions; (vii) restrict
dividends and other payments from subsidiaries;
(viii) issue capital stock of subsidiaries; and
(ix) enter into certain mergers, consolidations
or asset sales. All of such covenants are
subject to significant exceptions. See
"Description of the New Notes -- Certain
Covenants."
11
<PAGE> 13
Use of Proceeds............... There will be no proceeds to the Company from
any exchange pursuant to the Exchange Offer.
The net proceeds to the Company from the sale
of the Old Notes were used to fund the
Recapitalization, including payment of a $20.0
million dividend, and for general corporate
purposes.
Absence of Public Market...... The New Notes and the Guaranties will be new
securities for for the New Notes which there is
currently no established trading market.
Although the Initial Purchasers have informed
the Company that they currently intend to make
a market in the Notes, they are not obligated
to do so and they may discontinue market-making
activity at any time without notice. In
addition, such marketmaking activities may be
limited during the Exchange Offer or the
pendency of the Shelf Registration Statement,
if it is filed. Accordingly, no assurance can
be given that an active trading market for the
New Notes will develop or, if such a market
develops, as to the liquidity of such market.
Following the Exchange Offer, the Company does
not intend to list the New Notes on any
securities exchange or to arrange for the New
Notes to be quoted on the Nasdaq National
Market or other quotation system.
RISK FACTORS
See "Risk Factors" beginning on page 15 for a discussion of certain factors
which should be considered by Eligible Holders in evaluating the Exchange Offer.
12
<PAGE> 14
SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table presents summary historical financial data of the
Company for each of the fiscal years in the three-year period ended December 31,
1996 and the quarters ended March 31 and July 31, 1997 and pro forma financial
data for the year ended December 31, 1996 and the quarters ended March 31, 1997
and July 31, 1997. The historical year end and March 31, 1997 information is
derived from the consolidated financial statements of the Company, which have
been audited by Deloitte & Touche LLP, independent public accountants. The data
for the quarter ended July 31, 1997 are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the results of operations for
such periods. The unaudited pro forma data were prepared to illustrate the
estimated effects of (i) the adoption of fresh-start reporting following the
consummation of the Reorganization Plan and (ii) the Recapitalization (as
defined) as if such transactions had occurred, in the case of the statement of
operations data and other data, as of January 1, 1996 (except that the pro forma
statement of operations data for the quarter ended July 31, 1997 illustrates the
estimated effects of the Recapitalization only), and in the case of balance
sheet data, as of the date of the balance sheet data presented. The pro forma
data do not purport to be indicative of the results of operations or financial
position of the Company that actually would have been obtained if such
transactions had been completed as of such dates or to project the results of
operations or financial position of the Company for any future date or period.
Historical financial information contained in this Prospectus for periods and
dates after March 31, 1997 reflect the effects of the Reorganization Plan,
including the implementation of fresh-start reporting, as of March 31, 1997.
Accordingly, the Company's consolidated financial statements for periods and
dates prior to March 31, 1997 are not comparable to subsequent consolidated
financial statements. The information should be read in conjunction with "Pro
Forma Financial Information," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
of the Company, and related notes thereto, included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
PRE-CONFIRMATION POST-CONFIRMATION
------------------------------------------------------------------------- --------------------
PRO FORMA PRO FORMA
PRO FORMA QUARTER QUARTER QUARTER QUARTER
YEARS ENDED DECEMBER 31, YEAR ENDED ENDED ENDED ENDED ENDED
---------------------------------- DECEMBER 31, MARCH 31, MARCH 31, JULY 31, JULY 31,
1994 1995 1996 1996 1997 1997 1997 1997
-------- -------- -------- ------------ --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales...................... $553,479 $688,002 $648,816 $648,816 $155,427 $155,427 $166,718 $166,718
Commission income.......... 838 1,362 1,186 1,186 160 160 161 161
Total revenue.............. 554,317 689,364 650,002 650,002 155,587 155,587 166,879 166,879
Gross margin............... 58,099 85,829 83,464 83,662 21,527 21,889 24,744 24,744
Operating income (loss).... 2,712 15,705 (11,221) 24,294 6,481 7,348 10,317 10,317
Earnings (loss) before
reorganization items,
interest, taxes and
extraordinary items....... 10,189 15,712 (17,980) 27,720 9,660 7,674 10,241 10,241
Reorganization items,
net....................... 7,118 3,927 3,535 -- (2,444) -- -- --
Earnings (loss) before
interest, taxes and
extraordinary items....... 3,071 11,785 (21,515) 27,720 12,104 7,674 10,241 10,241
Interest expense (income),
net ...................... 2,555 1,949 (1,473) 10,674 245 2,696 1,479 3,133
Income taxes (benefit)..... 2,507 8,171 8,453 8,260 (3,063) (1,193) 5,111 4,711
Earnings (loss) before
extraordinary item........ (1,991) 1,665 (28,495) 8,786 14,922 6,171 3,651 2,397
Net income (loss).......... (1,991) 1,665 (28,495) 8,786 57,954 6,171 3,651 2,397
Earnings per share(a)...... $(0.40) $0.34 $(5.75) $1.77 $11.69 $1.25 $0.74 $0.48
</TABLE>
- ---------------
(a) The computation of earnings per share for all periods presented prior to
April 1, 1997 is based on 4,956,406 common shares and common stock
equivalents which were outstanding as of the Effective Date.
13
<PAGE> 15
<TABLE>
<CAPTION>
POST-CONFIRMATION
PRE-CONFIRMATION --------------------------------------------
------------------------------------------------- PRO FORMA PRO FORMA
PRO FORMA QUARTER QUARTER QUARTER QUARTER
YEARS ENDED DECEMBER 31, YEAR ENDED ENDED ENDED ENDED ENDED
---------------------------------- DECEMBER 31, MARCH 31, MARCH 31, JULY 31, JULY 31,
1994 1995 1996 1996 1997 1997 1997 1997
-------- -------- -------- ------------ --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT
PERIOD END):
Cash and cash
equivalents............... $ 28,158 $ 36,828 $ 63,274 $ 30,340 $ 29,163 $ 44,675
Trade receivables.......... 93,733 101,237 88,595 94,150 85,277 85,277
Inventories................ 116,016 129,049 106,363 109,258 117,002 117,002
Total assets............... 326,981 342,610 331,626 305,704 299,816 319,328
Total debt................. 37,719 37,625 19,869 66,488 64,304 105,478
Pension liabilities........ 43,921 47,409 43,926 41,090 39,623 39,623
Environmental
liabilities............... 17,762 12,780 44,011 48,135 47,504 47,504
Liabilities subject to
compromise................ 162,042 169,519 179,897
Total shareholders' equity
(deficit)................. (18,561) (17,952) (42,179) 50,000 56,381 35,114
</TABLE>
<TABLE>
<CAPTION>
PRE-CONFIRMATION POST-CONFIRMATION
-------------------------------------------------------------------- --------------------
PRO FORMA PRO FORMA
PRO FORMA QUARTER QUARTER QUARTER QUARTER
YEARS ENDED DECEMBER 31, YEAR ENDED ENDED ENDED ENDED ENDED
----------------------------- DECEMBER 31, MARCH 31, MARCH 31, JULY 31, JULY 31,
1994 1995 1996 1996 1997 1997 1997 1997
------- ------- ------- ------------ --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(a)..................... $25,715 $47,149 $38,928 $ 37,150 $10,498 $ 9,880 $13,644 $13,701
Environmental remediation
expenditures(b).............. 814 2,769 2,282 2,282 1,729 1,729 393 393
Capital expenditures.......... 7,566 6,712 9,531 9,531 2,774 2,774 3,309 3,309
Gross margin as percentage of
sales........................ 10.5% 12.5% 12.9% 12.9% 13.9% 14.1 % 14.8 % 14.8%
EBITDA as percentage of
sales........................ 4.6% 6.9% 6.0% 5.7% 6.8% 6.4 % 8.2 % 8.2%
Ratio of earnings to fixed
charges(c)................... NM 1.0x NM 2.9x 3.4x 3.3 x 4.4 x 3.5x
Ratio of EBITDA to interest
expense...................... 2.8x 2.9x(d)
Ratio of total debt to
EBITDA....................... 2.9x 2.7x(d)
Cash flow from operating
activities................... (589) 5,658 47,665 6,416 2,510
Cash flow from investing
activities................... (3,700) (3,945) (5,019) 2,167 (2,071)
Cash flow from financing and
reorganization activities.... 3,673 6,182 (16,117) (40,991) (1,691)
</TABLE>
- ---------------
(a) For purposes of this Prospectus, "EBITDA" is defined as income (loss) before
(i) income taxes; (ii) interest expense; (iii) extraordinary gain; (iv)
depreciation; (v) amortization; (vi) non-cash stock compensation; (vii) loss
(gain) on sale of fixed assets; (viii) restructuring expenses; (ix)
reorganization items; (x) non-cash fresh-start adjustments; and (xi)
non-cash environmental provisions. EBITDA should not be considered an
alternative to operating income determined in accordance with GAAP as an
indicator of operating performance or to cash flows from operating
activities determined in accordance with GAAP as a measure of liquidity.
EBITDA has not been reduced to reflect environmental remediation
expenditures. This definition of EBITDA differs from the definition of
EBITDA used in the indenture governing the Notes. The Company's use of
EBITDA may not be comparable to similarly titled measures due to the use by
other companies of different financial statement components in calculating
EBITDA. See "Description of the Notes."
(b) Environmental remediation expenditures represent the costs associated with
certain remedial activities and do not include expenditures associated with
environmental compliance related to ongoing operations. Such remediation
expenditures are charged to previously established accruals and are
therefore excluded from the calculation of EBITDA.
(c) The ratio of earnings to fixed charges is computed by dividing pretax income
from operations before fixed charges (other than capitalized interest) by
fixed charges. Fixed charges consist of interest charges (including
contractual interest stayed pursuant to the Chapter 11 proceedings) and that
portion of rental expense Metallurg believes to be representative of
interest. For the years ended December 31, 1994 and 1996, earnings were
insufficient to cover fixed charges by $7.8 million and $28.6 million,
respectively.
(d) Ratios are calculated based on pro forma EBITDA of $39.8 million and
interest expense of $13.6 million for the last four quarters ended July 31,
1997. Because of the Company's change in fiscal year, EBITDA and interest
expense include 13 months of operating results of Metallurg, Inc. If the
change in fiscal year had not been made, EBITDA and interest expense would
have been $40.1 million and $12.7 million, respectively, for the 12 month
period ended June 30, 1997.
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FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All statements other than statements
of historical facts included in this Prospectus, including, without limitation,
statements under "Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business"
regarding budgeted capital expenditures, the Company's financial position,
chrome ore reserve estimates, estimated environmental expenditures, business
strategy and other plans and objectives for future operations, are
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct, particularly
given the cyclical nature of the Company's businesses and the inherent
uncertainty in estimating future expenditures for environmental remediation.
There are numerous uncertainties inherent in estimating quantities of proved
chrome ore reserves and in projecting future rates of production and timing of
development expenditures, including many factors beyond the control of the
Company, such as general economic, business and market conditions, changes in
product demand, changes in competition and interest rate fluctuations.
Additional important factors that could cause actual results to differ
materially from the Company's expectations are disclosed under "Risk Factors"
and elsewhere in this Prospectus. Should one or more of these risks or
uncertainties occur, the Company's actual results and plans for 1997 and beyond
could differ materially from those expressed in forward-looking statements. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by such factors.
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating an investment in
the Notes.
SUBSTANTIAL LEVERAGE
As of July 31, 1997, after giving effect to the Recapitalization, the
Company would have had $104.0 million of long-term indebtedness outstanding,
representing approximately 74.8% of its total capitalization. See
"Capitalization." The significant indebtedness to be incurred as a result of the
Offering will have several important consequences to the holders of the New
Notes, including, but not limited to, the following: (i) a substantial portion
of the Company's and its subsidiaries' cash flow from operations must be
dedicated to servicing their indebtedness; (ii) the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
development of new products, acquisitions or other purposes may be impaired;
(iii) the Company's flexibility to expand, make capital expenditures and respond
to changes in industry and general economic conditions may be limited; (iv) the
Revolving Credit Facility and credit facilities of the Company's subsidiaries
contain and the Indenture will contain numerous financial and other restrictive
covenants, including, among other things, limitations on the ability of the
Company and its subsidiaries to incur additional indebtedness, to create liens
and other encumbrances, to make certain payments and investments, to sell or
otherwise dispose of assets, or to merge or consolidate with another entity; and
(v) indebtedness under the Revolving Credit Facility and credit facilities of
the Company's subsidiaries are at variable rates of interest, which will cause
the Company and its subsidiaries to be vulnerable to increases in interest
rates. See "Description of Credit Facilities and Other Financing Arrangements,"
"Description of the New Notes" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The Company also has substantial
environmental and pension liabilities, which could further restrict its
financial flexibility. See "Consolidated Balance Sheets at March 31, 1997 and
December 31, 1996 and 1995" and Notes 8 and 13 thereto.
The ability of the Company to satisfy its debt service obligations,
including the obligations under the New Notes, will depend upon the Company's
future performance which, in turn, will be subject to
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management, financial, business, regulatory and other factors affecting the
business and operations of the Company, many of which are beyond its control. If
the Company is unable to generate sufficient cash flow to meet its debt
obligations, the Company will have to adopt one or more alternatives, such as
restructuring its debt, reducing or delaying capital expenditures, selling
assets or obtaining additional equity or debt financing. There can be no
assurance that any of these actions could be effected on a timely basis or on
satisfactory terms, if at all, or that these actions would enable the Company to
continue to satisfy its capital requirements. The terms of the Company's
indebtedness, including the Revolving Credit Facility and the Indenture, also
may prohibit the Company from taking such actions. If the Company is unable to
satisfy its obligations related to its indebtedness, substantially all of its
long-term debt could be declared immediately due and payable.
RECENT BANKRUPTCY
Metallurg and Shieldalloy sought protection under Chapter 11 of the United
States Bankruptcy Code in September 1993 following the Company's inability to
restructure or refinance its long-term indebtedness and revolving credit
facility in light of the confluence of several negative economic factors which
caused the Company to default on certain then-outstanding indebtedness. The
Company was particularly affected by recessionary conditions in the end-markets
for its products and "dumping" by certain foreign competitors. There can be no
assurance that such economic factors will not recur in the future. See
"-- Dependence on Cyclical Markets" and "-- End of Anti-dumping Duties."
The Company consummated its Reorganization Plan in April 1997. While in
Chapter 11 proceedings, the Company substantially reduced its debt, restructured
significant obligations, restructured its operations and made certain management
changes, reduced expenses and entered into settlement agreements with various
environmental regulatory authorities. Certain of these activities, particularly
reducing debt and restructuring obligations, could only have been accomplished
in the context of Chapter 11 and should not be viewed as indicative of the
Company's performance in the future.
ASSET ENCUMBRANCE
Although the New Notes and the Guaranties will be senior obligations
ranking pari passu in right of payment with all other existing and future senior
obligations of the Company and the Guarantors, respectively, the New Notes and
the Guaranties will not be secured by any of the Company's or any Guarantor's
assets. The Revolving Credit Facility is secured by virtually all of the assets
of Metallurg, Shieldalloy and the other Guarantors, including liens on their
inventory, accounts receivable, machinery and stock of all subsidiaries.
Accordingly, the New Notes and the Guaranties will be effectively subordinated
to any indebtedness under the Revolving Credit Facility to the extent of the
value of the assets securing the Revolving Credit Facility. If an event of
default occurs under the Revolving Credit Facility, the lenders under the
Revolving Credit Facility will have a prior right to substantially all of the
assets of the Company and the Guarantors, and may foreclose upon such assets to
the exclusion of the holders of the New Notes, notwithstanding the existence of
an event of default under the Indenture. In such event, the assets of the
Company and the Guarantors securing the Revolving Credit Facility would first be
used to repay in full amounts outstanding under the Revolving Credit Facility,
resulting in all or a portion of such assets being unavailable to satisfy the
claims of holders of the New Notes and other unsecured indebtedness. See
"Description of the New Notes -- Ranking."
HOLDING COMPANY STRUCTURE; RESTRICTIONS ON DIVIDEND PAYMENTS BY SUBSIDIARIES
Metallurg is a holding company with limited operations of its own.
Substantially all of the Company's operating income is generated by its
subsidiaries. As a result, the Company will rely upon distributions or advances
from its subsidiaries to provide the funds necessary to meet its debt service
obligations, including the payment of principal and interest on the New Notes.
The holders of the New Notes will have no direct claim against such subsidiaries
other than the claim created by the Guaranties, which may be subject to legal
challenge. See "-- Fraudulent Conveyance Considerations." If the Guaranties were
to be held to be invalid, claims of the holders of the New Notes would also be
effectively subordinated to claims
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of the creditors of the Guarantors. As of July 31, 1997, after giving effect to
the Offering and the application of the estimated net proceeds therefrom, the
Guarantors would have had approximately $92.0 million of balance sheet
liabilities (including trade payables, accrued liabilities and intercompany
amounts), none of which would have been indebtedness. In addition, the claims of
holders of the New Notes will be effectively subordinated to the claims of
creditors of subsidiaries of the Company which do not guarantee the Notes. The
Company's subsidiaries which are not guaranteeing the Notes generate a majority
of the Company's revenues and EBITDA. As of July 31, 1997, the Company's
subsidiaries which are not guaranteeing the Notes would have had approximately
$168.4 million of balance sheet liabilities (including trade payables, accrued
liabilities and intercompany amounts), of which $5.5 million would have been
indebtedness. These subsidiaries may also have other liabilities, including
contingent liabilities, which could be substantial. Under the Indenture, the
Company's subsidiaries are permitted to incur additional indebtedness, which may
be substantial.
In some cases, local law applicable to the Company's subsidiaries restricts
the ability of companies to pay dividends. The Company's German subsidiaries,
Elektrowerk Weisweiler GmbH ("EWW"), in which the Company owns a 98.0% interest,
and GfE Gesellschaft fur Elektrometallurgie mbH ("GfE"), in which the Company
owns a 99.2% interest, are currently prohibited from paying dividends under
German law because their stated capital as reported in the commercial register
is higher than their actual capital as reported under German accounting
principles. The Company has made certain filings to reduce the stated capital of
its German operating subsidiaries which should enable such German operating
subsidiaries to make dividend payments by late 1998. However, there can be no
assurance that the Company's subsidiaries will be permitted or able to pay to
the Company dividends necessary to service its indebtedness, including the New
Notes. See "Description of Credit Facilities and Other Financing Arrangements."
In addition, the Company's Turkish subsidiary is limited in its ability to pay
dividends from retained earnings, as a result of historical currency
devaluation. The Company's South African subsidiary must obtain central bank
approval prior to paying dividends.
In addition, working capital facilities and other financing arrangements at
the Company's subsidiaries restrict such subsidiaries' ability to pay dividends.
For example, EWW must obtain the consent of a German governmental authority,
which guarantees a portion of EWW's $8.6 million working capital facility, in
order to pay dividends to Metallurg. EWW's ability to pay dividends to Metallurg
is also restricted by the terms of a settlement arrangement entered into with a
German state pension board with regard to its pension liability. The stock of
EWW has been pledged to secure obligations owed by EWW to the German
governmental authority and the German state pension board. London & Scandinavian
Metallurgical Co., Limited ("LSM") was party to a working capital facility which
limited its ability to pay dividends and management fees to Metallurg. LSM has
obtained consent from its working capital lender to permit increased dividends
to the Company in an amount of up to 100% of LSM's annual net income, contingent
upon the repayment of the LSM Term Loan Facility. The Company repaid the LSM
Term Loan Facility with proceeds from the Offering. In addition, the Company's
Swiss merchanting subsidiary may only pay dividends to the Company in amounts up
to 50% of its net income. In the event that the Company is prohibited from
receiving dividends from these subsidiaries, the Company's ability to make
required principal and interest payments on the New Notes will be adversely
effected. See "Description of Credit Facilities and Other Financing
Arrangements."
The contribution to EBITDA generated by GfE and EWW for the four quarters
ended July 31, 1997 was $21.8 million, or 52.4% of the Company's EBITDA.
Although the Company may seek, subject to compliance with applicable laws and
other restrictions, to repatriate funds from these subsidiaries through means
other than dividend payments, such as by causing those subsidiaries to repay
principal and interest on outstanding obligations to Metallurg or to make loans
to Metallurg, there can be no assurance that any such arrangements could be
made.
FRAUDULENT CONVEYANCE CONSIDERATIONS
Under fraudulent conveyance laws, the New Notes and the Guaranties might,
under certain circumstances, be subordinated to existing or future indebtedness
of the Company or the Guarantors or
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found not to be enforceable in accordance with their terms. Under such laws, if
a court in a lawsuit by an unpaid creditor or representative of creditors of the
Company or the Guarantors, such as a trustee in bankruptcy or the Company or any
Guarantor as debtor-in-possession, were to find that the Company or such
Guarantor (a) received less than a reasonably equivalent value or fair
consideration for the New Notes or the Guaranties and the Company or such
Guarantor, as applicable, (b)(i) was insolvent immediately prior to the time the
New Notes were issued and the Guaranties were incurred, (ii) was rendered
insolvent by the issuance of the New Notes or its Guaranty, (iii) was engaged in
a business or transaction for which the assets remaining with the Company or
such Guarantor constituted unreasonably small capital or (iv) intended to incur,
or believed that it would incur, debts beyond its ability to pay such debts as
they matured, such court could void the Company's and such Guarantor's
obligations under the New Notes and the Guaranties, subordinate the New Notes
and the Guaranties to all other indebtedness of the Company and the Guarantors,
or direct the return of any payments made thereunder to the Company or the
Guarantors or to a fund for the benefit of the creditors of the Company or the
Guarantors. Among other things, a legal challenge of the Guaranties on
fraudulent conveyance grounds may allege an absence of benefits, if any,
realized by the Guarantors as a result of the issuance by the Company of the New
Notes. In addition, a legal challenge of the issuance of the New Notes may
allege an absence of benefits, if any, realized by the Company as a result of
the payment of a cash dividend to the holders of Common Stock and stock options
out of the proceeds of the Offering. Moreover, regardless of the factors
identified in the foregoing clauses (i) through (iv), such court could avoid
such obligation and direct such repayment if it found that the obligation was
incurred with an intent to hinder, delay or defraud such creditors of the
Company or the Guarantors. In that event, there would be no assurance that any
repayment on the New Notes would ever be recovered by the holders of the New
Notes and the Guaranties.
Although the definition of insolvency varies among the jurisdictions,
generally, a person would be considered insolvent if the sum of its debts were
then greater than all of its property at a fair valuation, or if the fair
saleable value of its assets was less than the amount that was then required to
pay its probable liability on its existing debts as they become absolute and
matured. There can be no assurance as to what standard a court would apply in
order to determine whether the Company or any Guarantor was "insolvent" as of
the date the New Notes were issued, or that, regardless of the method of
valuation, a court would not determine that the Company or any Guarantor was
insolvent on that date. Nor can there be any assurance that a court would not
determine, regardless of whether the Company or any Guarantor was insolvent on
the date the New Notes were issued, that the payments constituted fraudulent
transfers on another ground.
DEPENDENCE ON CYCLICAL MARKETS
The performance of the Company's businesses is directly related to the
production levels of the Company's customers, which are mainly steel, aluminum,
superalloy and titanium alloy producers whose businesses are dependent on highly
cyclical markets, such as the automotive, construction, consumer durables and
aerospace markets. The iron and steel, aluminum, superalloy and titanium
industries have all exhibited a high degree of cyclicality. Consequently, the
Company's financial performance could fluctuate with the general economic cycle,
which could have a material adverse effect on the Company's business, financial
condition, and results of operations. In addition, many of the Company's
products are internationally traded products with prices that are significantly
affected by worldwide supply and demand. Although there has been an economic
recovery in certain of the Company's markets beginning in 1993, there can be no
assurance that the current recovery will continue for any extended period of
time.
LIMITED SOURCES FOR RAW MATERIALS
Certain of Metallurg's subsidiaries are dependent on third parties for raw
material supplies. Shieldalloy's production unit in Cambridge, Ohio currently
obtains a majority of its raw materials requirements for the manufacture of
ferrovanadium from two sources. Although alternative sources of
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ferrovanadium raw materials exist, there can be no assurance that the Company
would be able to obtain adequate supplies of such materials, if at all, on
acceptable terms from other sources. 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 would be adversely affected.
END OF ANTI-DUMPING DUTIES
Since July 1995, the Department of Commerce has imposed incremental
anti-dumping duties of 3.8% to 108% on imports of Russian ferrovanadium and
nitrided vanadium into the United States. These duties are subject to review in
2000, after which time the International Trade Commission will determine whether
to terminate or extend them. If the incremental duties are not maintained at
their current levels, the Company may be materially adversely affected. Normal
duties on these products are 4.2%.
Since 1993, the Council of the European Communities has imposed duties on
imports of ferrochrome from Russia, Kazakhstan and Ukraine as high as 0.276 ECU
per kilogram of material. These duties will expire in October 1998. The
expiration of these duties may have a material adverse effect on the Company.
HIGHLY COMPETITIVE INDUSTRY
The metals industry is highly competitive on a worldwide basis. Competition
is primarily based on price, quality and timely delivery. In recent years, price
competition has intensified as a result of excess capacity in certain products.
In addition, export sales from the former Soviet Union of excess stocks of metal
and alloy additives severely hurt the price of ferroalloys in Europe and the
United States, which in turn exerted a negative impact on the price of the
Company's products. Although Metallurg believes that the downward effect of this
increased competition has abated, there can be no assurance that excessive price
competition will not recur. There can be no assurance that new entrants will not
increase competition in the metals industry, which could materially adversely
affect the Company. An increase in the use of substitutes for metal alloys also
could have a material adverse effect on the financial condition and operations
of the Company.
ENVIRONMENTAL REGULATION
The Company's manufacturing businesses are subject to extensive regulation
governing, among other things, emissions to air, discharges and releases to land
and 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 contamination 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 requirements of these regulations
will not result in future liabilities and obligations that would be material to
the Company's business operations, financial condition or cash flow. The
Company's cost of compliance with environmental laws and remediation obligations
under such laws has been and is expected to continue to be significant. In
addition to its ongoing compliance obligations in connection with the
Reorganization Plan, Shieldalloy entered into environmental settlement
agreements with Federal and state regulators pursuant to which it has agreed to
remediate historical contamination at the Shieldalloy facilities in Newfield,
New Jersey and Cambridge, Ohio, which will require the Company to make
significant expenditures in coming years. Although the scope of Shieldalloy's
remediation obligations relating to the historical contamination at these
facilities has been defined, there can be no assurance that the ultimate cost of
fulfilling these obligations will not materially exceed Shieldalloy's current
estimates. Such expenditures are currently estimated at $44.5 million, of which
approximately $2.5 million is expected to be expended in the second half of
1997, $4.5 million in 1998, $4.3 million in 1999 and $8.1 million in 2000. In
addition, the Company estimates it will make expenditures of $5.8 million for
remediation at its foreign facilities. Of this amount, approximately $2.2
million is expected to be
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expended in 1998, $0.7 million in 1999 and $0.7 million in 2000. For a detailed
discussion of these matters, see "Business -- Environmental Matters."
FOREIGN OPERATIONS AND CURRENCY FLUCTUATIONS
The Company has substantial operations outside the United States. At
December 31, 1996, the Company's operations located outside the United States
represented approximately 59% (based on book values) of the Company's assets.
Approximately 80% of the Company's employees were outside the United States.
Based on customer location, for the year ended December 31, 1996, approximately
40% of the Company's sales were made in North America, 45% in Europe, 5% in
Asia, 2% in South America and 8% throughout the rest of the world. Foreign
operations are subject to special risks that can materially affect the sales,
profits, cash flows and financial position of the Company, including taxes on
distributions or deemed distributions to the Company or any U.S. subsidiary,
currency exchange rate fluctuations, limitations on repatriation of funds,
maintenance of minimum capital requirements, and import and export controls. In
general, the Company's cost of sales for products manufactured in certain
foreign locations has in the past been adversely impacted by the appreciation of
the respective local currencies of those locations relative to the U.S. dollar
and other currencies in which it sells. While the Company engages in hedging
transactions to reduce certain of the risks of currency rate fluctuations, there
can be no assurances regarding the effectiveness or adequacy of those
transactions.
LABOR RELATIONS
Approximately 50% of the Company's employees are covered by collective
bargaining or similar agreements. Many of these agreements are renewable on an
annual basis. There can be no assurance that new labor agreements will be
reached without a work stoppage or strike or will be reached on terms
satisfactory to the Company. See "Business -- Labor Relations."
PAYMENT UPON A CHANGE OF CONTROL
Under the terms of the Indenture, upon the occurrence of a Change of
Control (as defined), the Company is required to offer to repurchase all of the
outstanding New Notes at 101% of the principal amount thereof, plus accrued and
unpaid interest thereon. The provisions of the Indenture relating to a Change of
Control in and of themselves may not afford holders of the New Notes protection
in the event of a highly leveraged transaction, reorganization, restructuring,
merger or similar transaction involving the Company that may adversely affect
holders of the New Notes, if such transaction is not the type of transaction
included within the definition of a Change of Control. Furthermore, there can be
no assurance that the Company will have adequate resources to repurchase or
refinance all indebtedness owing under the New Notes in the event a Change of
Control offer is required to be made. If the Company does not have sufficient
financial resources to effect a Change of Control offer, it would be required to
seek additional financing from outside sources to enable it to repurchase the
New Notes. There can be no assurance that such financing would be available to
the Company on satisfactory terms. Any failure of the Company to pay the
purchase price with respect to such Change of Control offer when due will give
the Trustee (as defined) and the holders of the New Notes the rights described
under "Description of the New Notes -- Events of Default." See "Description of
the New Notes -- Repurchase at the Option of Holders Upon a Change of Control."
The events that constitute a Change of Control under the Indenture may also
be events of default under the Revolving Credit Facility or other indebtedness
of the Company or its subsidiaries. Such events may permit the lenders under
such debt instruments to accelerate the indebtedness and, if the indebtedness is
not paid, to enforce security interests on substantially all the assets of the
Company, thereby limiting the Company's ability to raise cash to repurchase the
New Notes.
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ABSENCE OF PUBLIC MARKET FOR THE NEW NOTES
If the New Notes are traded after their initial issuance, they may trade at
a discount from their initial offering price, depending upon prevailing interest
rates, the market for similar securities, the performance of the Company and
certain other factors. Historically, the market for noninvestment grade debt has
been subject to disruptions that have caused substantial volatility in the
prices of securities similar to the New Notes. There can be no assurance that
the market, if any, for the New Notes will not be subject to similar
disruptions. Any such disruptions may have an adverse effect on holders of the
New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Old Notes under the Securities Act. New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold or otherwise transferred by Holders thereof (other than any such
holder which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the distribution
of such Notes. Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that, by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that it will make
this Prospectus available to any such broker-dealer for use in connection with
any such resale. See "Plan of Distribution." However, to comply with the
securities laws of certain jurisdictions, if applicable, the New Notes may not
be offered or sold unless they have been registered or qualified for sale in
such jurisdictions or an exemption from registration or qualification is
available and is complied with. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Old Notes will be adversely affected.
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THE EXCHANGE OFFER
PURPOSE AND EFFECTS
The Old Notes were sold by the Company on November 25, 1997 to the Initial
Purchasers, who resold the Old Notes to "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act) and other institutional
"accredited investors" (as defined in Rule 501(a) under the Securities Act). In
connection with the sale of the Old Notes, the Company and the Initial
Purchasers entered into the Registration Agreement pursuant to which the Company
agreed to file with the Commission a registration statement (the "Exchange Offer
Registration Statement") with respect to an offer to exchange the Old Notes for
New Notes within 60 days following the closing date of the Old Notes. In
addition, the Company agreed to cause the Exchange Offer Registration Statement
to become effective under the Securities Act and to issue the New Notes pursuant
to the Exchange Offer. A copy of the Registration Agreement has been filed as an
exhibit to the Exchange Offer Registration Statement.
The Exchange Offer is being made pursuant to the Registration Agreement to
satisfy the Company's obligations thereunder. For purposes of the Exchange
Offer, the term "Eligible Holder" shall mean the registered owner of any Old
Notes that remain Transfer Restricted Securities, as reflected on the records of
IBJ Schroder Bank and Trust Company as registrar for the Old Notes (in such
capacity, the "Registrar"), or any person whose Old Notes are held of record by
the depositary of the Old Notes. The Company is not required to include any
securities other than the New Notes in the Exchange Offer Registration
Statement. Holders of Old Notes who do not tender their Old Notes or whose Old
Notes are tendered but not accepted would have to rely on exemptions from
registration requirements under the securities laws, including the Securities
Act, if they wish to sell their Old Notes.
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties unrelated to the Company, the Company
believes that the New Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise transferred by any
holder of such New Notes (other than a person that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act and except as
set forth in the next paragraph) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business and such
holder is not participating and does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of such New Notes.
If any person were to be participating in the Exchange Offer for the
purpose of distributing securities in a manner not permitted by the Commission's
interpretation, (i) the position of the staff of the Commission enunciated in
interpretive letters would be inapplicable to such person and (ii) such person
would be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
See "Plan of Distribution."
The Exchange Offer is not being made to, nor will the Company accept
surrenders for exchange from, holders of Old Notes in any jurisdiction in which
the Exchange Offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction. Prior to the Exchange Offer,
however, the Company will register or qualify or cooperate with the holders of
the Old Notes and their respective counsel in connection with the registration
or qualification of the New Notes for offer and sale under the securities or
blue sky laws of such jurisdictions as is necessary to permit consummation of
the Exchange Offer and do any and all other acts or things necessary or
advisable to enable the offer and sale in such jurisdictions of the New Notes.
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TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept any and
all Old Notes validly tendered prior to 5:00 p.m., New York City time, on the
Expiration Date (as defined below). The Company will issue up to $100,000,000
aggregate principal amount of New Notes in exchange for a like principal amount
of outstanding Old Notes which are validly tendered and accepted in the Exchange
Offer. Subject to the conditions of the Exchange Offer described below, the
Company will accept any and all Old Notes which are so tendered. Holders may
tender some or all of their Old Notes pursuant to the Exchange Offer; however,
the Old Notes may be tendered only in multiples of $1,000. See "Description of
New Notes."
The form and terms of the New Notes will be the same in all material
respects as the form and terms of the Old Notes, except that (i) the New Notes
will be registered under the Securities Act and hence will not bear legends
restricting the transfer thereof and (ii) because the New Notes will be
registered, holders of New Notes will not be, and upon the consummation of the
Exchange Offer, Eligible Holders of Old Notes will no longer be, entitled to
certain rights under the Registration Agreement intended for the holders of
unregistered securities.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of the State of Delaware or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the provisions of the Registration Agreement. Old Notes
which are not tendered for exchange or are tendered but not accepted in the
Exchange Offer will remain outstanding and be entitled to the benefits of the
Indenture, but will not be entitled to any registration rights under the
Registration Agreement.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent for the Exchange Offer. The Exchange Agent will act as agent for
the tendering holders for the purposes of receiving the New Notes from the
Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Eligible Holders who tender Old Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENTS
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998, subject to extension by the Company by notice to the
Exchange Agent as herein provided. The Company reserves the right to so extend
the Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the time and date on which the Exchange Offer as so extended shall
expire. The Company will notify the Exchange Agent of any extension by oral or
written notice and will make a public announcement thereof, each prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
The Company reserves the right (i) to delay accepting for exchange any Old
Notes for any New Notes or to extend or terminate the Exchange Offer and not
accept for exchange any Old Notes for any New Notes if any of the events set
forth below under the caption "Conditions of the Exchange Offer" shall have
occurred and shall not have been waived by the Company by giving oral or written
notice of such delay or termination to the Exchange Agent, or (ii) to amend the
terms of the Exchange Offer in any manner. Any such delay in acceptance for
exchange, extension or amendment will be followed as
23
<PAGE> 25
promptly as practicable by public announcement thereof. If the Exchange Offer is
amended in a manner determined by the Company to constitute a material change,
the Company will promptly disclose such amendment in a manner reasonably
calculated to inform the holders of Old Notes of such amendment, and the Company
will extend the Exchange Offer for a minimum of five business days, depending
upon the significance of the amendment and the manner of disclosure to the
holders of Old Notes, if the Exchange Offer would otherwise expire during such
five business-day period. The rights reserved by the Company in this paragraph
are in addition to the Company's rights set forth below under the caption
"Conditions of the Exchange Offer."
TERMINATION OF CERTAIN RIGHTS
The Registration Agreement provides that, subject to certain exceptions, in
the event that (i) neither the Exchange Offer Registration Statement nor the
Shelf Registration Statement has been filed with the Commission on or prior to
the 60th calendar day following the date of original issue of the Old Notes,
(ii) neither the Exchange Offer Registration Statement nor the Shelf
Registration Statement has been declared effective on or prior to the 120th
calendar day following the date of original issue of the Old Notes, (iii) the
Exchange Offer is not consummated or, if an Exchange Offer has not been
consummated, a Shelf Registration Statement is not declared effective, in either
case, on or prior to the 150th day following the date of original issue of the
Old Notes, or (iv) after the Shelf Registration Statement has been declared
effective, such Registration Statement thereafter ceases to be effective or
usable in connection with resales of the Notes at any time that the Company is
obligated to maintain the effectiveness thereof pursuant to the Registration
Agreement (each such event referred to in clauses (i) through (iv) above, a
"Registration Default"), the interest rate borne by the Old Notes shall be
increased by one quarter of one percent per annum upon the occurrence of any
Registration Default, which rate will increase by an additional one quarter of
one percent each 90-day period that such additional interest continues to accrue
under any such circumstance, with an aggregate maximum increase in the interest
rate equal to one percent (1%) per annum. Following the cure of all Registration
Defaults the accrual of additional interest will cease and the interest rate
will revert to the original rate.
Holders of New Notes will not be and, upon consummation of the Exchange
Offer, Eligible Holders of Old Notes will no longer be, entitled to certain
other rights under the Registration Agreement intended for holders of Transfer
Restricted Securities. The Exchange Offer shall be deemed consummated upon the
occurrence of the delivery by the Company to the Registrar under the Indenture
of New Notes in the same aggregate principal amount as the aggregate principal
amount of Old Notes that are tendered by holders thereof pursuant to the
Exchange Offer.
PROCEDURES FOR TENDERING
Only an Eligible Holder of Old Notes may tender such Old Notes in the
Exchange Offer. To tender in the Exchange Offer, an Eligible Holder must
complete, sign and date the Letter of Transmittal, or a facsimile thereof, have
the signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise deliver such Letter of Transmittal or such facsimile, together
with the Old Notes (unless such tender is being effected pursuant to the
procedure for book-entry transfer described below) and any other required
documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility System may make book-entry delivery of the Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account in
accordance with DTC's procedure for such transfer. Although delivery of Old
Notes may be effected through book-entry transfer into the Exchange Agent's
account at DTC, the Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received or confirmed by the Exchange Agent at its
addresses as set forth under the caption "Exchange Agent" below prior to 5:00
p.m., New York City time, on the Expiration Date. DELIVERY OF DOCUMENTS TO DTC
IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
24
<PAGE> 26
The tender by an Eligible Holder of Old Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the Eligible Holders. Instead of delivery by mail, it is recommended that
Eligible Holders use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure delivery to the Exchange Agent on or
before the Expiration Date. No Letter of Transmittal or Old Notes should be sent
to the Company. Eligible Holders may request their respective brokers, dealers,
commercial banks, trust companies or nominees to effect the tenders for such
holders.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered for the account of
an Eligible Institution. In the event that signatures on a Letter of Transmittal
or a notice of withdrawal, as the case may be, are required to be guaranteed,
such guarantee must be by a member of a signature guarantee program within the
meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance and withdrawal of tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which might,
in the judgment of the Company or its counsel, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such times as the Company in its sole discretion shall determine.
Although the Company intends to request the Exchange Agent to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
In addition, the Company reserves the right in its sole discretion (subject
to limitations contained in the Indenture) (i) to purchase or make offers for
any Old Notes that remain outstanding subsequent to the Expiration Date and (ii)
to the extent permitted by applicable law, to purchase Old Notes in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
could differ from the terms of the Exchange Offer.
By tendering, each Eligible Holder will represent to the Company that,
among other things, the New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business by the person receiving such
New Notes, whether or not such person is the holder and that neither the
Eligible Holder nor any such other person has an arrangement or understanding
with any person to participate in the distribution of such New Notes and that
neither the Eligible Holder nor any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company. If the holder is a
broker-dealer that will receive New Notes for its own account in exchange for
Old Notes that were
25
<PAGE> 27
acquired as a result of market-making activities or other trading activities,
such holder by tendering will acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes.
GUARANTEED DELIVERY PROCEDURES
Eligible Holders who wish to tender their Old Notes and (i) whose Old Notes
are not immediately available, or (ii) who cannot deliver their Old Notes and
other required documents to the Exchange Agent or cannot complete the procedure
for book-entry transfer prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand) setting forth
the name and address of the Eligible Holder, the certificate number(s) of
such Old Notes (if available) and the principal amount of Old Notes
tendered together with a duly executed Letter of Transmittal (or a
facsimile thereof), stating that the tender is being made thereby and
guaranteeing that, within three business days after the Expiration Date,
the certificate(s) representing the Old Notes to be tendered in proper form
for transfer (or a confirmation of a book entry transfer into the Exchange
Agent's account at the depositary of the Old Notes delivered
electronically) and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) Such certificate(s) representing all tendered Old Notes in proper
form for transfer (or confirmation of a book-entry transfer into the
Exchange Agent's account at the depositary of the Old Notes delivered
electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five business days
after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Eligible Holders who wish to tender their Old Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date,
unless previously accepted for exchange.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date, and prior to acceptance for exchange thereof by the
Company. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify
the Old Notes to be withdrawn (including the certificate number or numbers and
principal amount of such Old Notes), (iii) be signed by the Depositor in the
same manner as the original signature on the Letter of Transmittal by which such
Old Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee with respect
to the Old Notes register the transfer of such Old Notes into the name of the
person withdrawing the tender, and (iv) specify the name in which any such Old
Notes are to be registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including time of receipt)
of such withdrawal notices will be determined by the Company in its sole
discretion, whose determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer, and no New Notes will be issued with respect
thereto unless the Old Notes so withdrawn are validly re-tendered. Any Old Notes
which have been tendered but which are not accepted for exchange or which are
withdrawn will be returned to the holder thereof without cost to such holder as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be re-tendered by following one
of the procedures described above under "Procedures for Tendering" at any time
prior to the Expiration Date.
26
<PAGE> 28
CONDITIONS OF THE EXCHANGE OFFER
In addition, and notwithstanding any other term of the Exchange Offer, the
Company will not be required to accept for exchange any Old Notes tendered for
any New Notes and may terminate or amend the Exchange Offer as provided herein
before the acceptance of such Old Notes, if any of the following conditions
exist:
(a) Any action or proceeding is instituted or threatened in any court
or by or before any governmental agency or regulatory authority with
respect to the Exchange Offer which, in the sole judgment of the Company,
might materially impair the ability of the Company to proceed with the
Exchange Offer or have a material adverse effect on the contemplated
benefits of the Exchange Offer to the Company; or
(b) There shall have occurred any change, or any development involving
a prospective change, in the business or financial affairs of the Company,
which in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or materially
impair the contemplated benefits of the Exchange Offer to the Company; or
(c) There shall have been proposed, adopted or enacted any law,
statute, rule or regulation which, in the sole judgment of the Company,
might materially impair the ability of the Company to proceed with the
Exchange Offer or have a material adverse effect on the contemplated
benefits of the Exchange Offer to the Company; or
(d) There shall have occurred (i) any general suspension of,
shortening of hours for, or limitation on prices for, trading in securities
on the New York Stock Exchange (whether or not mandatory), (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks by Federal or state authorities in the United States
(whether or not mandatory), (iii) a commencement of a war, armed
hostilities or other international or national crisis directly or
indirectly involving the United States, (iv) any limitation (whether or not
mandatory) by any governmental authority on, or other event having a
reasonable likelihood of affecting, the extension of credit by banks or
other lending institutions in the United States, or (v) in the case of any
of the foregoing existing at the time of the commencement of the Exchange
Offer, a material acceleration or worsening thereof.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
conditions or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. If the Company waives or amends the
foregoing conditions, the Company will, if required by applicable law, extend
the Exchange Offer for a minimum of five business days from the date that the
Company first gives notice, by public announcement or otherwise, of such waiver
or amendment, if the Exchange Offer would otherwise expire within such five
business-day period. Any determination by the Company concerning the events
described above will be final and binding upon all parties.
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitation may be
made by telecopy, telephone or in person by officers and regular employees of
the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The
Company may also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this Prospectus, Letters of Transmittal and related documents to the
beneficial owners of the Old Notes and in handling or forwarding tenders for
exchange.
27
<PAGE> 29
The Company will pay the other expenses to be incurred in connection with the
Exchange Offer, including fees and expenses of the Trustee, accounting and legal
fees and printing costs.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The exchange of the Old Notes for the New Notes in the Exchange Offer
should not constitute an exchange for federal income tax purposes. Consequently,
(i) no gain or loss should be realized by a U.S. Holder upon receipt of a New
Note; (ii) the holding period of the New Note should include the holding period
of the Old Note exchanged therefor and (iii) the adjusted tax basis of the New
Note should be the same as the adjusted tax basis of the Old Note exchanged
therefor immediately before the exchange. Even if the exchange of an Old Note
for a New Note were treated as an exchange, however, such an exchange should
constitute a tax-free recapitalization for federal income tax purposes.
Accordingly, a New Note should have the same issue price as an Old Note and a
U.S. Holder should have the same adjusted basis and holding period in the New
Note as it had in an Old Note immediately before the exchange. As used herein,
the term "U.S. Holder" means a person who is, for United States federal income
tax purposes, (i) a citizen or resident of the United States; (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof; or (iii) an
estate or trust the income of which is subject to United States federal income
taxation regardless of its source.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Generally, Eligible Holders (other than any holder who is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act) who
exchange their Old Notes for New Notes pursuant to the Exchange Offer may offer
such New Notes for resale, resell such New Notes, and otherwise transfer such
New Notes without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided such New Notes are acquired in the
ordinary course of the holders' business, and such holders have no arrangement
with any person to participate in a distribution of such New Notes. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution." To comply with the securities laws of certain
jurisdictions, it may be necessary to qualify for sale or register the New Notes
prior to offering or selling such New Notes. Upon request by Eligible Holders
prior to the Exchange Offer, the Company will register or qualify the New Notes
in certain jurisdictions subject to the conditions in the Registration
Agreement. If an Eligible Holder does not exchange such Old Notes for New Notes
pursuant to the Exchange Offer, such Old Notes will continue to be subject to
the restrictions on transfer contained in the legend thereon and will not have
the benefit of any covenant regarding registration under the Securities Act. In
general, the Old Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered Old Notes could be adversely affected.
28
<PAGE> 30
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept the Exchange Offer and tender their Old
Notes. Holders of Old Notes are urged to consult their financial and tax
advisors in making their own decisions on what action to take.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the consummation of the Exchange Offer. The expenses of the
Exchange Offer will be amortized by the Company over the term of the New Notes.
EXCHANGE AGENT
IBJ Schroder Bank and Trust Company has been appointed as Exchange Agent
for the Exchange Offer. All correspondence in connection with the Exchange Offer
and the Letter of Transmittal should be addressed to the Exchange Agent, as
follows:
<TABLE>
<S> <C> <C>
By Facsimile: By Overnight Courier: By Registered or
(212) 858-2611 IBJ Schroder Bank and Trust Certified Mail:
Corporate Trust Department Corporate Trust Department P.O. Box 84
Company Attn: Securities Processing Bowling Green Station
Attn: Reorganization Window, SC-1 New York, New York 10274-0084
Operations Department One State Street Attn: Reorganization
Confirm by telephone: New York, New York 10004 Operations Department
(212) 858-2103
</TABLE>
Requests for additional copies of this Prospectus or the Letter of
Transmittal should be directed to the Exchange Agent.
29
<PAGE> 31
CAPITALIZATION
The following table sets forth as of July 31, 1997 the Company's (i) cash
and cash equivalents, (ii) short-term debt and (iii) capitalization, in each
case on an historical basis (unaudited) and as adjusted to give effect to the
Recapitalization. This table should be read in conjunction with the information
set forth under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the other financial information appearing elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
AS OF JULY 31, 1997
--------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents........................................... $ 29,163 $ 44,675
-------- --------
Short-term debt:
Bank debt......................................................... $ 11,460 $ 418(a)
Current portion of long-term debt................................. 1,022 1,022(a)
-------- --------
Total short-term debt............................................... $ 12,482 $ 1,440
======== ========
Long-term debt, less current maturities:
U.S.:
Revolving Credit Facility(b)................................... -- --
12% Senior Notes............................................... $ 39,461 --
Notes offered hereby........................................... -- $ 100,000
Foreign:(a)
Germany........................................................ 3,903 3,903
United Kingdom................................................. 8,323 --
Other.......................................................... 135 135
-------- --------
Total long-term debt, less current maturities....................... 51,822 104,038
-------- --------
Shareholders' equity:
Common stock, $.01 par value per share, authorized 15,000,000
shares, 4,956,406 shares issued and outstanding................ 50 50
Additional paid-in capital........................................ 51,435 33,819(c)
Cumulative foreign currency translation adjustment................ 1,245 1,245
Retained earnings................................................. 3,651 --(c)
-------- --------
Total shareholders' equity.......................................... 56,381 35,114
-------- --------
Total capitalization................................................ $ 108,203 $ 139,152
======== ========
</TABLE>
- ---------------
(a) Represents debt of foreign subsidiaries which are not guarantors of the
Notes.
(b) Commitments under the $50 million Revolving Credit Facility were not reduced
following the Offering. After the consummation of the Offering, the Company
had approximately $25.0 million of available borrowing capacity under the
Revolving Credit Facility, subject to certain limitations. See "Description
of Credit Facilities and Other Financing Arrangements -- Revolving Credit
Facility" for a description of the Revolving Credit Facility.
(c) Reflects the payment of a dividend of $20.0 million and prepayment penalties
of $1.3 million out of retained earnings and additional paid-in capital.
30
<PAGE> 32
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Pro Forma
Financial Information") of the Company is based on the historical financial
statements of the Company included elsewhere herein. The pro forma condensed
statements of operations for the quarter ended March 31, 1997 and the year ended
December 31, 1996 illustrate the estimated effects of (i) the adoption of
fresh-start reporting following the consummation of the Reorganization Plan and
(ii) the Recapitalization (collectively, the "Pro Forma Transactions"). The pro
forma condensed statement of operations for the quarter ended July 31, 1997
illustrates the estimated effects of the Recapitalization only.
The Pro Forma Financial Information has been prepared as if the Pro Forma
Transactions had occurred as of January 1, 1996. The Pro Forma Financial
Information does not purport to represent what the Company's results of
operations would have been had the transactions in fact occurred on such dates,
nor does it give effect to any transactions other than those discussed in the
notes to the Pro Forma Financial Information set forth below.
The pro forma adjustments are based upon available information and upon
certain assumptions that management of the Company believes are reasonable under
the circumstances. The Pro Forma Financial Information and accompanying notes
should be read in conjunction with the consolidated financial statements of the
Company included elsewhere in this Prospectus.
31
<PAGE> 33
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
EFFECTS OF
REORGANIZATION
PLAN AND
FRESH-START OTHER OFFERING
HISTORICAL REPORTING ADJUSTMENTS SUBTOTAL ADJUSTMENTS PRO FORMA
-------- -------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total revenue............. $650,002 $ 650,002 $ 650,002
Cost of sales............. (566,538) $ 1,450(a) $(1,252)(h) (566,340) (566,340)
--------- ------- ------- --------- ---------
Gross margin............ 83,464 1,450 (1,252) 83,662 83,662
Selling, general and
administrative
expenses................ (57,103) (1,111)(b) (58,214) (58,214)
Environmental expenses.... (37,582) 35,176(c) 1,252(h) (1,154) (1,154)
--------- ------- ------- --------- ---------
Operating income
(loss)................ (11,221) 35,515 24,294 24,294
Other income (expense),
net..................... (6,759) (362)(d) 10,547(i) 3,426 3,426
Reorganization items...... (3,535) 3,535(e)
Interest income (expense),
net..................... 1,473 (2,984)(f) (1,511) $(9,163)(j) (10,674)
--------- ------- ------- --------- ------- ---------
Income (loss) before
income tax
provision............. (20,042) 35,704 10,547 26,209 (9,163) 17,046
Income tax provision...... 8,453 (420)(g) 8,033 227(k) 8,260
--------- ------- ------- --------- ------- ---------
Income before
extraordinary item.... $(28,495) $ 36,124 $10,547 $ 18,176 $(9,390) $ 8,786
========= ======= ======= ========= ======= =========
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
(a) Reflects amortization of fresh-start adjustments.
(b) Reflects the following:
Amortization of executive stock awards.............................................................. $ (1,500)
Reversal of historical amortization of goodwill and deferred charges written off in fresh-start..... 345
Amortization of fresh-start adjustments............................................................. 44
---------
$ (1,111)
=========
(c) Removal, for presentation purposes, of the environmental provision recorded by the Company
reflecting the terms of various environmental settlement agreements with federal and state
regulators, in accordance with the terms of the Reorganization Plan.
(d) Reflects the following:
Finalization of prepetition claims to the amounts allowed pursuant to the Chapter 11 proceedings.... $ (454)
Amortization of fresh-start adjustments............................................................. 92
---------
$ (362)
=========
(e) To reverse reorganization expenses recorded after the assumed consummation date of January 1, 1996.
</TABLE>
32
<PAGE> 34
<TABLE>
<S> <C> <C>
(f) Reflects the following:
Amortization of bank fees related to the Revolving Credit Facility entered into pursuant to the
Reorganization Plan............................................................................. $ (251)
Reversal of historical interest earned on environmental trust funds withdrawn and transferred to
the Company pursuant to the Reorganization Plan................................................. (440)
Reversal of historical interest earned on cash balances in 1996 assumed eliminated upon
consummation of the Reorganization Plan on January 1, 1996...................................... (1,628)
Pro forma interest on the LSM Term Loan Facility (as defined under "Description of Credit
Facilities and Other Financing Arrangements") incurred pursuant to the Reorganization Plan to
pay a dividend at consummation.................................................................. (689)
Other loan interest............................................................................... 24
---------
$ (2,984)
=========
(g) Reflects the following:
Tax effect of Reorganization Plan and fresh-start adjustments recorded at the assumed consummation
date of January 1, 1996. Pro forma income taxes have been provided at local statutory rates by
tax jurisdiction. The benefit of pre-bankruptcy net operating loss carryforwards would be
reflected as an addition to paid-in capital rather than a reduction of the tax provision........ $ (873)
Tax effect related to the amortization of fresh-start adjustments................................... 680
Tax effect of pro forma interest expense on the LSM Term Loan Facility incurred pursuant to the
Reorganization Plan............................................................................. (227)
---------
$ (420)
=========
(h) Certain reclassifications have been made to the historical amounts to present them on a basis
consistent with the current year.
(i) To remove, for presentation purposes, non-recurring charges resulting from settlement with various
prepetition creditors in 1996, as follows:
District 65 Pension Plan withdrawal liability claim................................................. $ 5,050
Prepetition environmental settlement claims....................................................... 3,791
Additional institutional debt claims.............................................................. 1,706
---------
$ 10,547
=========
(j) Reflects the following:
Interest on the Notes............................................................................... $(11,000)
Amortization of deferred issuance costs on the Notes.............................................. (400)
Reversal of historical interest expense on the prior GfE credit facility which was replaced with
the German Subfacility.......................................................................... 1,548
Reversal of pro forma interest expense on the LSM Term Loan Facility replaced with a Company loan
at the time of the Offering..................................................................... 689
---------
$ (9,163)
=========
(k) Reflects tax effect of the reversal of pro forma interest expense on the LSM Term Loan Facility
replaced with a Company loan at the time of the Offering.
</TABLE>
33
<PAGE> 35
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
EFFECTS OF
REORGANIZATION
PLAN AND
FRESH-START OTHER OFFERING
HISTORICAL REPORTING ADJUSTMENTS SUBTOTAL ADJUSTMENTS PRO FORMA
--------- -------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total revenue......... $ 155,587 $ 155,587 $ 155,587
Cost of sales......... (134,060) $ 362(a) (133,698) (133,698)
--------- ------- --------- ---------
Gross margin........ 21,527 362 21,889 21,889
Selling, general and
administrative
expenses............ (15,046) (305)(b) $ 810(f) (14,541) (14,541)
--------- ------- ------- --------- ---------
Operating income.... 6,481 57 810 7,348 7,348
Other income
(expense), net...... 3,179 24(a) (2,877)(g) 326 326
Reorganization
items............... 2,444 (2,444)(c)
Interest income
(expense) net....... (245) (1,237)(d) (1,482) $(1,214)(h) (2,696)
--------- ------- ------- --------- ------- ---------
Income before income
tax provision..... 11,859 (3,600) (2,067) 6,192 (1,214) 4,978
Income tax provision
(benefit)........... (3,063) 1,814(e) (1,249) 56(i) (1,193)
--------- ------- ------- --------- ------- ---------
Income before
extraordinary
item.............. $ 14,922 $ (5,414) $(2,067) $ 7,441 $(1,270) $ 6,171
========= ======= ======= ========= ======= =========
</TABLE>
- ---------------
<TABLE>
<C> <S> <C>
(a) Reflects amortization of fresh-start adjustments.
(b) Reflects the following:
$ (375)
Amortization of executive stock awards.............................................................
59
Reversal of historical amortization of goodwill and deferred charges written off in fresh-start....
11
Amortization of fresh-start adjustments............................................................
-------
$ (305)
=======
(c) To reverse reorganization expenses and fresh-start adjustments recorded after the assumed
consummation date of January 1, 1996.
(d) Reflects the following:
$ (85)
Amortization of bank fees related to the Revolving Credit Facility entered into pursuant to the
Reorganization Plan............................................................................
(367)
Reversal of historical interest earned on environmental trust funds withdrawn and transferred to
the Company pursuant to the Reorganization Plan................................................
(619)
Reversal of historical interest earned on cash balances assumed eliminated upon consummation of
the Reorganization Plan on January 1, 1996.....................................................
(172)
Pro forma interest on the LSM Term Loan Facility incurred pursuant to the Reorganization Plan to
pay a dividend at consummation.................................................................
6
Other loan interest................................................................................
-------
$(1,237)
=======
(e) Reflects the following:
$ 1,700
Tax effect of the Reorganization Plan and fresh-start adjustments recorded as of the assumed
consummation date of January 1, 1996...........................................................
170
Tax effect related to the amortization of fresh-start adjustments..................................
(56)
Tax effect of pro forma interest expense on the LSM Term Loan Facility incurred pursuant to the
Reorganization Plan............................................................................
-------
$ 1,814
=======
</TABLE>
34
<PAGE> 36
<TABLE>
<C> <S> <C>
(f) To remove, for presentation purposes, non-recurring charges incurred pursuant to the Reorganization
Plan for stock awards and bonuses.
(g) To remove, for presentation purposes, non-recurring credits recorded pursuant to the Reorganization
Plan, as follows:
$(2,747)
Gain on the sale of commercial real estate property................................................
(130)
Gain on the sale of an investment in a joint venture...............................................
-------
$(2,877)
=======
(h) Reflects the following:
$(2,750)
Interest on the Notes..............................................................................
(100)
Amortization of deferred issuance costs on the Notes...............................................
1,184
Reversal of historical interest expense on the 12% Senior Notes being repaid.....................
280
Reversal of historical interest expense on the prior GfE credit facility which was replaced with
the German Subfacility.........................................................................
172
Reversal of pro forma interest expense on the LSM Term Loan Facility replaced with a Company loan
at the time of the Offering....................................................................
-------
$(1,214)
=======
(i) Reflects tax effect of the reversal of pro forma interest expense on the LSM Term Loan Facility
replaced with a Company loan at the time of the Offering.
</TABLE>
35
<PAGE> 37
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED JULY 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
OFFERING
HISTORICAL ADJUSTMENT PRO FORMA
---------- ---------- ---------
<S> <C> <C> <C>
Total revenue......................................... $ 166,879 $ 166,879
Cost of sales......................................... (142,135) (142,135)
--------- ---------
Gross margin........................................ 24,744 24,744
Selling, general and administrative expenses.......... (14,427) (14,427)
--------- ---------
Operating income.................................... 10,317 10,317
Other income (expense), net........................... (76) (76)
Interest income (expense), net........................ (1,479) $ (1,654)(a) (3,133)
--------- ------- ---------
Income before income tax provision.................. 8,762 (1,654) 7,108
Income tax provision.................................. 5,111 (400)(b) 4,711
--------- ------- ---------
Income before extraordinary item.................... $ 3,651 $ (1,254) $ 2,397
========= ======= =========
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
(a) Reflects the following Offering adjustments:
Interest on the Notes................................................................................ $(3,667)
Reversal of historical interest expense on the 12% Senior Notes being repaid......................... 1,580
Amortization of deferred issuance costs on the Notes................................................. (133)
Reversal of historical interest expense on prior GfE credit facility loans and the LSM Term Loan 566
Facility.............................................................................................
$(1,654)
(b) Tax effect of Offering adjustments.
</TABLE>
36
<PAGE> 38
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table presents selected historical financial data of the
Company for each of the years in the five-year period ended December 31, 1996,
the six months ended June 30, 1996, and the quarters ended March 31 and July 31,
1997. Information as of December 31, 1992, 1993 and 1994 and for the years ended
December 31, 1992 and 1993 is derived from the consolidated financial statements
of the Company, which have been audited by Deloitte & Touche LLP, independent
public accountants. The information as of December 31, 1995 and 1996 and March
31, 1997 and for each of the three years in the period ended December 31, 1996
and for the quarter ended March 31, 1997 is derived from the consolidated
financial statements of the Company included elsewhere herein, which have been
audited by Deloitte & Touche LLP, independent public accountants. The selected
financial data for the Company as of June 30, 1996 and for the Company's six
months ended June 30, 1996, and as of July 31, 1997 and for the quarter ended
July 31, 1997, are unaudited and reflect all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation of the results of operations for such periods. Financial
information contained in this Prospectus for periods after March 31, 1997
reflect the effects of the Reorganization Plan, including the implementation of
fresh-start reporting, as of March 31, 1997. Accordingly, the Company's
consolidated financial statements for periods and dates prior to March 31, 1997
are not comparable to subsequent consolidated financial statements. The results
of operations for the quarters ended March 31 and July 31, 1997 are not
necessarily indicative of results for the full year. The information in this
table should be read in conjunction with "Pro Forma Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of the Company, and
related notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
POST-
PRE-CONFIRMATION CONFIRMATION
----------------------------------------------------------------------------- ------------
QUARTER
SIX MONTHS ENDED QUARTER
YEARS ENDED DECEMBER 31, ENDED MARCH ENDED
---------------------------------------------------- JUNE 30, 31, JULY 31,
1992 1993 1994 1995 1996 1996 1997 1997
-------- -------- -------- -------- -------- ----------- -------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales.............................. $591,072 $541,188 $553,479 $688,002 $648,816 $ 331,097 $155,427 $166,718
Commission income.................. 862 674 838 1,362 1,186 658 160 161
-------- -------- -------- -------- -------- -------- -------- --------
Total revenue.................... 591,934 541,862 554,317 689,364 650,002 331,755 155,587 166,879
Cost of sales...................... 559,107 508,424 496,218 603,535 566,538 288,675 134,060 142,135
-------- -------- -------- -------- -------- -------- -------- --------
Gross margin..................... 32,827 33,438 58,099 85,829 83,464 43,080 21,527 24,744
Selling, general and administrative
expenses......................... 60,829 55,735 50,652 52,842 57,103 27,375 15,046 14,427
Environmental expenses(a).......... 2,992 2,342 2,082 2,072 37,582 1,160 -- --
Restructuring charges.............. 4,349 -- 2,653 15,210 -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Operating income (loss).......... (35,343) (24,639) 2,712 15,705 (11,221) 14,545 6,481 10,317
Other:
Other income (expense), net...... 1,928 (27,682) 7,477 7 (6,759) 3,420 3,179 (76)
Interest income (expense), net... (8,157) (7,027) (2,555) (1,949) 1,473 247 (245) (1,479)
Reorganization expense........... -- (3,409) (7,118) (3,927) (3,535) (1,430) (2,663) --
Fresh-start revaluation.......... -- -- -- -- -- -- 5,107 --
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income tax
provision and extraordinary
item............................. (41,572) (62,757) 516 9,836 (20,042) 16,782 11,859 8,762
Income tax provision (benefit)..... (102) 225 2,507 8,171 8,453 5,344 (3,063) 5,111
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
item............................. (41,470) (62,982) (1,991) 1,665 (28,495) 11,438 14,922 3,651
Extraordinary item, net of
tax(b)........................... -- -- -- -- -- -- 43,032 --
Cumulative effect of change in
accounting principle............. (8,088) (2,496) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss).................. $(49,558) $(65,478) $ (1,991) $ 1,665 $(28,495) $ 11,438 $ 57,954 $ 3,651
======== ======== ======== ======== ======== ======== ======== ========
Earnings per share(c).............. $(10.00) $(13.21) $(0.40) $0.34 $(5.75) $2.31 $11.69 $0.74
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
37
<PAGE> 39
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
POST-CONFIRMATION
----------------------
PRE-CONFIRMATION
------------------------------------------------------------------ QUARTER
SIX MONTHS ENDED QUARTER
YEARS ENDED DECEMBER 31, ENDED MARCH ENDED
---------------------------------------------------- JUNE 30, 31, JULY 31,
1992 1993 1994 1995 1996 1996 1997 1997
-------- -------- -------- -------- -------- ----------- -------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
(AT PERIOD END):
Total assets........... $380,646 $306,948 $326,981 $342,610 $331,626 $ 362,488 $305,704 $ 299,816
Working capital........ 71,398 140,857 152,627 166,823 173,734 168,428 143,316 148,552
Property, plant and
equipment............ 109,459 81,254 65,921 53,516 47,885 50,190 38,907 40,210
Total debt............. 147,470 29,212 37,719 37,625 19,869 26,400 66,488 64,304
Pension liabilities.... 57,873 46,750 43,921 47,409 43,926 44,964 41,090 39,623
Environmental
liabilities.......... 12,262 18,497 17,762 12,780 44,011 15,128 48,135 47,504
Liabilities subject to
compromise........... -- 162,320 162,042 169,519 179,897 171,747 -- --
</TABLE>
- ---------------
(a) As part of the Reorganization Plan, Shieldalloy entered into settlement
agreements with various environmental regulatory authorities with regard to
all of Shieldalloy's known significant environmental remediation
liabilities. Pursuant to these agreements, Shieldalloy has agreed to perform
environmental remediation which as of July 31, 1997 had an estimated cost of
completion of $44.5 million, including approximately $19.4 million to be
incurred by Shieldalloy through the end of 2000. See "Risk
Factors -- Environmental Regulation."
(b) Reflects discharge of indebtedness income, net of tax effects, relating to
the consummation of the Reorganization Plan.
(c) The computation of earnings per share for all periods presented prior to
April 1, 1997 is based on 4,956,406 common shares and common stock
equivalents which were outstanding as of the Effective Date.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
POST-
PRE-CONFIRMATION CONFIRMATION
----------------------------------------------------------------------------- ------------
QUARTER
SIX MONTHS ENDED QUARTER
YEARS ENDED DECEMBER 31, ENDED MARCH ENDED
---------------------------------------------------- JUNE 30, 31, JULY 31,
1992 1993 1994 1995 1996 1996 1997 1997
-------- -------- -------- -------- -------- ----------- -------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(a)............ $ (8,255) $ (3,768) $ 25,715 $ 47,149 $ 38,928 $ 21,466 $ 10,498 $ 13,644
Environmental
remediation
expenditures(b).... 365 751 814 2,769 2,282 1,394 1,729 393
Capital
expenditures....... 17,343 6,280 7,566 6,712 9,531 2,668 2,774 3,309
Gross margin
as percentage
of sales........... 5.6% 6.2% 10.5% 12.5% 12.9% 13.0 % 13.9% 14.8 %
EBITDA as percentage
of sales........... NM NM 4.6% 6.9% 6.0% 6.5 % 6.8% 8.2 %
Ratio of earnings to
fixed charges(c)... NM NM NM 1.0x NM 3.0x 3.4x 4.4x
Cash flow from
operating
activities......... (4,819) 22,247 (589) 5,658 47,665 29,195 6,416 2,510
Cash flow from
investing
activities......... (14,646) (6,785) (3,700) (3,945) (5,019) 1,333 2,167 (2,071)
Cash flow from
financing and
reorganization
activities......... 32,859 (11,371) 3,673 6,182 (16,117) (9,302) (40,991) (1,691)
</TABLE>
- ---------------
(a) For purposes of this Prospectus, "EBITDA" is defined as income (loss) before
(i) income taxes; (ii) interest expense; (iii) extraordinary gain; (iv)
depreciation; (v) amortization; (vi) non-cash stock compensation; (vii) loss
(gain) on sale of fixed assets; (viii) restructuring expenses; (ix)
reorganization items; (x) non-cash fresh-start adjustments; and (xi)
non-cash environmental provisions. EBITDA should not be considered an
alternative to operating income determined in accordance with GAAP as an
indicator of operating performance or to cash flows from operating
activities determined in accordance with GAAP as a measure of liquidity.
EBITDA has not been reduced to reflect environmental remediation
expenditures. The definition of EBITDA differs from the definition of EBITDA
used in the indenture governing the Notes. The Company's use of EBITDA may
not be comparable to similarly titled measures due to the use by other
companies of different financial statement components in calculating EBITDA.
See "Description of New Notes."
38
<PAGE> 40
(b) Environmental remediation expenditures represent the costs associated with
certain remedial activities and do not include expenditures associated with
environmental compliance related to ongoing operations. Such remediation
expenditures are charged to previously established accruals and are
therefore excluded from the calculation of EBITDA.
(c) The ratio of earnings to fixed charges is computed by dividing pretax income
from operations before fixed charges (other than capitalized interest) by
fixed charges. Fixed charges consist of interest charges (including
contractual interest deferred pursuant to the Chapter 11 proceedings) and
that portion of rental expense Metallurg believes to be representative of
interest. For the years ended December 31, 1992, 1993, 1994 and 1996,
earnings were insufficient to cover fixed charges by $41.6 million, $65.4
million, $7.8 million and $28.6 million, respectively.
CALCULATION OF EBITDA
<TABLE>
<CAPTION>
POST-
CONFIRMATION
PRE-CONFIRMATION ------------
----------------------------------------------------------------------------
SIX MONTHS QUARTER QUARTER
YEARS ENDED DECEMBER 31, ENDED ENDED ENDED
-------------------------------------------------- JUNE 30, MARCH 31, JULY 31,
1992 1993 1994 1995 1996 1996 1997 1997
-------- -------- ------- ------- -------- ----------- --------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss)........... $(49,558) $(65,478) $(1,991) $ 1,665 $(28,495) $11,438 $ 57,954 $ 3,651
------- ------- ------ ------ ------- ------ ------- ------
Adjustments:
Income tax provision
(benefit)............... (102) 225 2,507 8,171 8,453 5,344 (3,063) 5,111
Interest expense.......... 11,455 9,434 4,815 4,851 3,043 1,772 1,706 2,426
Depreciation and
amortization............ 17,960 20,294 12,986 15,296 10,688 4,746 2,143 1,962
Non-cash charges:
Environmental
provisions.............. -- 6,400 -- -- 34,754 -- -- --
Provision for allowed
claims.................. -- -- -- -- 10,547 -- -- --
Fresh-start revaluation... -- -- -- -- -- -- (5,107) --
Writedown of investment in
subsidiaries............ -- 5,732 -- -- -- -- -- --
Extraordinary item, net of
tax..................... -- -- -- -- -- -- (43,032) --
Restructuring provision... 4,349 13,616 2,653 15,210 -- -- -- --
Non-cash cumulative effect
of accounting changes... 8,088 2,496 -- -- -- -- -- --
(Gains) losses on asset
sales................... (447) 104 (2,373) (1,971) (3,597) (3,264) (3,266) (6)
Reorganization expense.... -- 3,409 7,118 3,927 3,535 1,430 2,663 --
Stock awards.............. -- -- -- -- -- -- 500 500
------- ------- ------ ------ ------- ------ ------- ------
41,303 61,710 27,706 45,484 67,423 10,028 (47,456) 9,993
------- ------- ------ ------ ------- ------ ------- ------
EBITDA...................... $ (8,255) $ (3,768) $25,715 $47,149 $ 38,928 $21,466 $ 10,498 $ 13,644
======= ======= ====== ====== ======= ====== ======= ======
</TABLE>
39
<PAGE> 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements and the related notes thereto included
elsewhere in this Prospectus.
OVERVIEW
In 1994, the Company began to recover from the effects of depressed
industry conditions principally caused by (i) a recession in the iron and steel
industry which lasted from 1989 to 1993 and particularly affected the aerospace,
automotive, durable goods, construction and defense sectors in North America and
Europe and (ii) the impact of the "dumping" of low-priced vanadium and
ferrochrome products by former Soviet Union exporters. The Company's recovery
started approximately two years after the recovery of its customers because the
stockpiles of metals being sold by those exporters took some time to be
consumed. The subsequent reduction of stockpiles of metals in the former Soviet
Union, the implementation of duties from successful anti-dumping petitions by
the Company and increased production by the steel, aluminum and superalloy
industries since 1993, have contributed to the Company's operating performance
beginning in 1994. See "Risk Factors -- End of Anti-dumping Duties."
The industries which the Company supplies are cyclical. See "Risk
Factors -- Dependence on Cyclical Markets." Worldwide steel and aluminum
consumption levels were significantly higher in 1996 than they were in 1992, and
the strength of the aerospace industry has positively impacted superalloy
producers. Significant price competition among aluminum master alloy producers
has reduced the Company's profitability in that area of its operations. The
Company has substantial operations outside the United States. At December 31,
1996, the Company's operations located outside the United States represented
approximately 59% of the Company's assets based on book values. Approximately
80% of the Company's employees were outside the United States. Approximately 40%
of the Company's sales (based on customer location) for the year ended December
31, 1996 were made in North America, 45% in Europe, 5% in Asia, 2% in South
America and 8% throughout the rest of the world. See "Risk Factors -- Foreign
Operations and Currency Fluctuations."
In April 1997, Metallurg and Shieldalloy consummated the Reorganization
Plan. The Company settled its prepetition liabilities by distributing cash and
issuing shares of its Common Stock and its 12% Senior Notes. As a result of the
Reorganization Plan, the Company reduced its indebtedness and shareholder
obligations (including undrawn letters of credit) from approximately $170.0
million to approximately $66.5 million. As part of the Reorganization Plan,
Shieldalloy entered into various settlements with the relevant environmental
authorities with regard to its obligations to remediate certain conditions at
its New Jersey and Ohio facilities.
Effective March 31, 1997, the Company implemented fresh-start reporting
relating to its emergence from bankruptcy. Accordingly, all assets and
liabilities were restated to reflect their respective fair values, and the
consolidated financial statements subsequent to that date include the related
amortization credits associated with the fair value adjustments. The
consolidated financial statements after that date are those of a new reporting
entity and are not comparable to the pre-confirmation periods. However, for
purposes of the discussion below of the Company's results of operations for the
first two quarters of 1997 compared to the first two quarters of 1996, the
quarter ended March 31, 1997 (pre-confirmation) was combined with the quarter
ended July 31, 1997 (post-confirmation) and then compared to 1996. Significant
differences between periods due to fresh-start reporting adjustments are
explained below where necessary. For example, the adoption of fresh-start
reporting resulted in a reduction of depreciation expense for the 1997 period,
thus increasing gross margin and operating income. Additionally, the adoption of
fresh-start reporting will result in an increase in additional paid-in capital,
rather than an income tax benefit, as the benefits relating to existing net loss
carryforwards are recognized in the future.
In addition, as a result of Metallurg, Inc.'s change in its fiscal year
from a calendar year to January 31 (beginning with the 1997 fiscal year)
effective as of April 1, 1997, the consolidated operating results of
40
<PAGE> 42
the Company for periods which include the quarter ended July 31, 1997 contained
in this Prospectus include the results of Metallurg, Inc. for the four-month
period ended July 31, 1997 and the results of its operating subsidiaries (whose
fiscal years remain the calendar year) for the three-month period ended June 30,
1997, and the consolidated balance sheet data of the Company at July 31, 1997
reflect the financial position of Metallurg, Inc. at July 31, 1997 and of the
operating subsidiaries at June 30, 1997. Consequently, an extra month of
Metallurg, Inc.'s results are included in the Company's results of operations
for the first two quarters of 1997.
RESULTS OF OPERATIONS -- FIRST TWO QUARTERS OF 1997 COMPARED TO FIRST TWO
QUARTERS OF 1996
Total revenues for Metallurg and its subsidiaries decreased by 2.8% from
$331.8 million to $322.5 million in the first two quarters of 1997 compared to
the prior period. The sale of Frankel Metal Company, the Company's former
titanium scrap processing subsidiary, in December 1996 accounted for $6.9
million of the decrease, and a reduction in the Company's sales of manganese and
ferrochrome products manufactured by third parties principally accounted for the
balance of the decrease. Tonnages shipped of manganese products were 8% lower
due to a shortage of raw materials from China resulting from anti-dumping
duties, while prices fell 20% because of a change in product mix to lower
grades. The Company's sales volume of high carbon ferrochrome distributed for
third parties fell by $1.8 million because of restricted availability of this
product to the Company. In the first two quarters of 1997, the price of
ferrovanadium increased in the United States and the price of low carbon
ferrochrome remained strong.
Gross margins increased by 7.4% in the first two quarters of 1997 compared
to the first two quarters of 1996, due principally to the price increases in
ferrovanadium and low carbon ferrochrome discussed above. In aluminum master
alloys and compacted products, increased volumes of 21% improved production
variances and significantly offset a decrease in margins at the Company's United
Kingdom operations caused by the impact of a strong sterling. Although the
Company's United Kingdom aluminum powder producing division recorded a 30%
decrease in sales in the first two quarters of 1997 compared to 1996, margins
increased by 45%, due to a change in product mix. The values of the Company's
assets were reduced pursuant to fresh-start reporting, reducing depreciation
expense in the second quarter of 1997 by $0.4 million and increasing gross
margin by an equal amount.
Selling, general and administrative expenses ("SG&A") increased from $27.4
million for the first two quarters of 1996 to $29.5 million for the first two
quarters of 1997, an increase of 7.7%. For the first two quarters of 1997, SG&A
represented 9.1% of the Company's sales compared to 8.3% for the first two
quarters of 1996. SG&A increased as a result of the inclusion of an extra month
(July 1997) of the holding company's operations, increased bonus accruals and
awards under the Stock Award and Stock Option Plan of Metallurg incurred in
connection with the consummation of the Reorganization Plan, and additional
costs related to the audit of the March 31, 1997 financial statements.
Operating income was $16.8 million for the first two quarters of 1997
compared to $14.5 million for the first two quarters of 1996, an increase of
15.5%, including the $0.4 million reduction in depreciation expense due to
freshstart reporting as described above. The improvement resulted from an
increase in margins on sales of ferrovanadium, low carbon ferrochrome and
aluminum powders due to the strength of
the steel, superalloy and chemicals industries, offset by a decrease in margins
on aluminum master alloys and briquettes resulting from a highly competitive
marketplace. Operating income for the first two quarters of 1996 included $1.2
million of environmental expenses related to the operation of the water
remediation facility at the Company's Newfield site. As a result of the
Company's adoption of SOP 96-1 (as defined below), operating income in the first
two quarters of 1997 does not include such water remediation expenses. In
addition, as discussed above, as a result of the change of the holding company's
fiscal year, 1997 operating income of $16.8 million included approximately $0.4
million of expenses related to the operations of the holding company for the
month of July 1997.
Net income was $61.6 million for the first two quarters of 1997 compared to
$11.4 million for the first two quarters of 1996. Net income for the first two
quarters of 1997 included a loss of approximately $0.8
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<PAGE> 43
million related to the operations of Metallurg, Inc. for the month of July 1997.
Included in 1997 net income is an extraordinary item of $43.0 million
representing the cancellation of debt resulting from the consummation of the
Company's Reorganization Plan and a $5.1 million credit representing the effects
of revaluing the Company's assets and liabilities under fresh-start reporting.
Reorganization expenses for the first two quarters of 1997 and 1996 were $2.7
million and $1.4 million, respectively. Other income included gains on the sales
of the Company's New York office building of $2.7 million for the first two
quarters of 1997 and $3.2 million on the sale of land in Turkey in 1996.
RESULTS OF OPERATIONS -- 1996 COMPARED TO 1995
Total revenues for Metallurg and its subsidiaries decreased by 5.7%, from
$689.4 million in 1995 to $650.0 million in 1996, due to a significant decrease
in prices of certain products, particularly ferrovanadium and ferrotitanium, and
a decrease in the availability to the Company of raw materials from the former
Soviet Union. As described below, worldwide consumption of aluminum was
unchanged from 1995, but pricing competition among suppliers adversely affected
Metallurg's sales.
Gross margins decreased by 2.8% in 1996 compared to 1995. The price
increase of ferrovanadium in the first quarter of 1995 was not repeated in 1996,
as quoted prices stayed relatively steady throughout 1996. As a result, margins
on vanadium products fell by 45% in 1996, compared to the prior year. Tonnage
sales and prices of low carbon ferrochrome continued to improve in 1996 as
demand from the expanding aerospace industry increased, resulting in a 20% rise
in margins from 1995. Chromium metal margins increased by almost 80% due to
price improvements resulting from the strength of the aerospace industry and the
closure of an important competitor. Sales of aluminum products fell by 8% and
margins by 40%, as LSM declined to compete at some of the very low prices
offered by competitors. In the fourth quarter of 1996 a sharp appreciation of
sterling by almost 20% against the European currencies also negatively impacted
LSM. Gross margins on aluminum products at the Company's Brazilian operations
fell by 40% as overseas competition cut prices in an effort to penetrate the
South American market.
SG&A increased by 8.1% from $52.8 million in 1995 to $57.1 million in 1996
due to the restructuring of German operations into a holding company with
subsidiaries and a resulting reclassification of certain fixed personnel costs
from production costs to SG&A. SG&A represented 8.8% of the Company's sales in
1996, compared to 7.7% in 1995.
Operating loss was $11.2 million in 1996, compared to operating income of
$15.7 million in 1995. The loss in 1996 was principally due to an environmental
provision of $37.6 million, representing the anticipated future costs of
remediation and maintenance of various environmental projects at Shieldalloy. In
1995, operating income included a charge of $15.2 million for a restructuring of
the Company's principal German subsidiary into separate business units, and a
restructuring of the Company's mining operations in Brazil. Operating income in
1996 also was negatively impacted by the increase in SG&A and decrease in gross
margins in 1996, compared to 1995 as described above.
Other expense for 1996 was $6.8 million. The significant items included in
this expense consisted of the allowance of additional unsecured prepetition
claims of $10.5 million relating to withdrawal by Shieldalloy from a
multiemployer pension plan, the settlement of certain environmental claims and
additional claims by institutional debtholders. This was partially offset by the
gain on the sale in 1996 of a parcel of land owned by the Company's Turkish
subsidiary.
Net loss was $28.5 million in 1996, compared to net income of $1.7 million
in 1995. As discussed above, the principal reasons for this net loss were the
environmental provision of $37.6 million and the other expense of $6.8 million,
offset partially by $15.2 million in restructuring charges relating to the
Company's German and Brazilian subsidiaries recorded in 1995.
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<PAGE> 44
RESULTS OF OPERATIONS -- 1995 COMPARED TO 1994
Total revenues for Metallurg and its subsidiaries increased in 1995 by
24.4% from $554.3 million in 1994 to $689.4 million in 1995 because of increased
sales tonnages and prices of ferrochrome and master alloys and prices for
ferrovanadium. The major customer industries of aluminum, steel and superalloys
had strong production in 1995.
Gross margins increased by 47.7% from 1994 levels. Margins on vanadium
products increased by 250% as a perceived shortage of material at the end of
1994 and in the first quarter of 1995 caused prices to climb from an average of
$6.50/lb vanadium in the United States at the end of 1994 to $12.35/lb vanadium
by March 1995. By June 1995, prices averaged $7.75/lb vanadium. Margins on low
carbon ferrochrome rose by 170% due to the effect of anti-dumping duties imposed
on such products. Aluminum master alloys and compacted products also experienced
an increase in margins of 70%, as prices and volumes improved in the first three
quarters with increased aluminum consumption worldwide.
SG&A increased by 4.3% from $50.7 million in 1994 to $52.8 million in 1995
mainly due to the dollar weakening against European currencies. SG&A represented
7.7% of the Company's sales in 1995, compared to 9.2% in 1994. Reorganization
expenses in connection with the Company's Chapter 11 proceedings fell by $3.2
million from 1994 to 1995.
Operating income increased from $2.7 million in 1994 to $15.7 million in
1995. This increase resulted from significantly improved gross margins (an
increase of 47.7%), partially offset by increased restructuring charges relating
to the Company's German and Brazilian operations described above.
Included in other income for 1995 was a gain of $0.8 million on the sale of
property in New York. Also in 1995, the Company's Turkish subsidiary received
the first $1.0 million tranche of its gain on the sale of land that was no
longer in productive use. Other income for 1994 totaled $7.5 million and
included a gain on the sale of a building in New York and the gain on the
abandonment of a mining project in Zaire.
Net income was $1.7 million in 1995, compared to a loss of $2.0 million in
1994. As discussed above, the principal reasons were an increase of $27.7
million in gross margin and a decrease in reorganization expense of $3.2
million, partially offset by an increase of $12.6 million in restructuring
charges relating to the Company's German and Brazilian subsidiaries and $7.5
million in other income recognized in 1994.
LIQUIDITY AND FINANCIAL RESOURCES
General. The Company's sources of liquidity include cash and cash
equivalents, cash from operations and amounts available under credit facilities
including the proceeds of the Offering. Management believes that these sources
are sufficient to fund the current and anticipated future requirements of
working capital, capital expenditures, pension benefits, potential acquisitions
and environmental expenditures through at least 1998.
At July 31, 1997, the Company had $29.2 million in cash and cash
equivalents, and working capital of $148.6 million, as compared to $63.3 million
and $173.7 million, respectively, at December 31, 1996. For the two quarters
ended July 31, 1997, the Company generated $8.9 million in cash from operations.
In connection with the Reorganization Plan, however, the Company distributed
$59.4 million in cash, offset by a drawdown of prepetition letters of credit of
$9.7 million and proceeds from LSM debt of $8.1 million.
In connection with the Recapitalization, the Company paid a dividend of
$20.0 million.
Credit Facilities and Other Financing Arrangements. The Company has a
credit facility with certain financial institutions led by BankBoston, N.A., an
affiliate of BancBoston Securities Inc., as agent (the "Revolving Credit
Facility") which provides Metallurg, Shieldalloy and certain of their
subsidiaries with up to $50.0 million of financing resources at a rate per annum
equal to (i) the Alternate Base Rate plus 1.0% per annum, (the Alternate Base
Rate is the greater of the Base Rate or the Federal Funds Effective Rate plus
0.5%) or (ii) the reserve adjusted Eurodollar rate plus 2.5% for interest
periods of one, two or three months. The Revolving Credit Facility permits
borrowings of up to $50.0 million for working capital
43
<PAGE> 45
requirements and general corporate purposes, up to $30.0 million of which may be
used for letters of credit in the United States. Pursuant to the Revolving
Credit Facility, BankBoston, N.A. through its Frankfurt office, is providing up
to DM 20.5 million (approximately $11.7 million) of financing to GfE and its
subsidiaries (the "German Subfacility"), which is guaranteed by Metallurg, Inc.
and the other U.S. borrowers. Outstanding obligations under the Revolving Credit
Facility are limited to a borrowing base based on eligible accounts receivable,
eligible inventory and certain equipment. To the extent that the outstanding
amounts to GfE and its subsidiaries exceed the borrowing base of those
companies, a reserve will be established against the U.S. borrowing base. At
October 31, 1997, there were no outstanding loans and $23.6 million of letters
of credit outstanding in the United States under the Revolving Credit Facility
and approximately DM 20.5 million (approximately $11.7 million) of outstanding
loans under the German Subfacility. The Revolving Credit Facility and the German
Subfacility contain various covenants that restrict, among other things,
payments of dividends, share repurchases, capital expenditures, investments in
subsidiaries and borrowings. Substantially all of the assets of the U.S.
borrowers and guarantors under the Revolving Credit Facility are pledged to
secure all of the obligations under the Revolving Credit Facility (including the
German Subfacility), and all accounts receivable, inventory, the stock of GfE's
subsidiaries and certain other assets are pledged to secure the German
Subfacility. See "Description of Credit Facilities and Other Financing
Arrangements." The Company used a portion of the proceeds of the Offering to
repay outstanding loans under the German Subfacility (but not to reduce the
related commitment thereunder).
LSM has several credit facilities with Barclays Bank plc which provide LSM
and its subsidiaries with up to L7.0 million (approximately $11.3 million) of
borrowings, up to L3.0 million (approximately $4.9 million) of foreign exchange
exposure and up to L2.2 million (approximately $3.6 million) for other ancillary
banking arrangements including bank guarantees (the "LSM Credit Facility"). At
July 31, 1997, there were no outstanding borrowings under the LSM Credit
Facility. Borrowings under the LSM Credit Facility are payable on demand. The
outstanding loans under the LSM Credit Facility bear interest at the lender's
base rate plus 1.0%.
On April 11, 1997, LSM entered into a term loan facility with NM Rothschild
& Sons Limited in the amount of L5.0 million (approximately $8.1 million) (the
"LSM Term Loan Facility"), the proceeds of which were used to make a dividend to
Metallurg in order to fund the Reorganization Plan.
The LSM Credit Facility, together with the LSM Term Loan Facility, were
secured by substantially all of the assets of LSM and its subsidiaries. The LSM
Credit Facility restricted LSM's ability to pay dividends and management fees to
Metallurg. LSM has obtained consent from its working capital lender to permit
increased dividends to the Company in an amount up to 100% of LSM's annual net
income, contingent upon repayment of the LSM Term Loan Facility. The Company
used proceeds from the Offering to repay the LSM Term Loan Facility. As a
result, the lender under the LSM Credit Facility released the security pledged
for its benefit and permitted increased dividends to the Company in an amount up
to 100% of LSM's annual net income. See "Description of Credit Facilities and
Other Financing Arrangements."
EWW has committed lines of credit with several banks in the aggregate
amount of DM 15.0 million (approximately $8.6 million). The credit facilities
expire July 1, 1999 and bear interest at a rate from 7.0% to 7.5%. As of July
31, 1997, there were no outstanding borrowings under this facility. See
"Description of Credit Facilities and Other Financing Arrangements."
In addition, several of the other foreign subsidiaries of Metallurg, have
credit facility arrangements with local banking institutions to provide funds
for working capital and general corporate purposes. These local credit
facilities contain restrictions which vary from company to company. At July 31,
1997, there were $0.4 million of outstanding loans under these local credit
facilities. See "Description of Credit Facilities and Other Financing
Arrangements."
The Company's subsidiaries are, in certain circumstances, subject to
restrictions under local law and under their credit facilities that limit their
ability to pay dividends to Metallurg. See "Risk Factors -- Holding Company
Structure; Restrictions on Dividend Payments by Subsidiaries" and "Description
of Credit Facilities and Other Financing Arrangements."
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<PAGE> 46
EWW has a contingent obligation to a German state pension authority which
as of July 31, 1997, was DM 8.2 million (approximately $4.7 million). The
Company expects that EWW will pay approximately DM 6.5 million (approximately
$3.7 million) to the pension authority in 1998 in respect of this obligation.
See "Description of Credit Facilities and Other Financing Arrangements -- EWW
Financial Arrangement with German State Pension Board."
Capital Expenditures. The Company invested $9.5 million in capital
expenditures during 1996 and $6.1 million during the first two quarters of 1997.
The Company's capital expenditures include projects related to improving the
Company's operations and productivity improvements, and replacement projects and
ongoing environmental requirements (which are in addition to expenditures
discussed in "-- Environmental Remediation Costs"). The Company anticipates
capital expenditures will be approximately $12.3 million during 1997, including
approximately $3.0 million to install a new plant for the production of chromium
metal. Capital expenditures are expected to increase significantly over 1997
levels to approximately $24.5 million in 1998, including $10.4 million of
capital investments which the Company believes will result in decreased costs of
production, improved efficiency and expanded production capacities. The
remaining capital expenditures planned for 1998 are primarily for replacement
and major repairs of existing facilities, some of which were deferred from
earlier periods. Although the Company has budgeted these items in 1998, the
Company has not committed to complete these projects which are contingent on
senior management approval and other conditions. The Company believes that these
projects will be funded through internally generated cash, borrowings under the
Revolving Credit Facility and local credit lines.
Environmental Remediation Costs. In 1996, the Company elected early
adoption of the American Institute of Certified Public Accountants Statement of
Position ("SOP") 96-1, "Environmental Remediation Liabilities," which among
other requirements, states that losses associated with environmental remediation
obligations are accrued when such losses are deemed probable and reasonably
estimable. Such accruals generally are recognized no later than the completion
of the remedial feasibility study and are adjusted as further information
develops or circumstances change. Costs of future expenditures for environmental
remediation obligations are generally not discounted to their present value.
During the first two quarters of 1997, the Company expended $2.1 million for
environmental remediation.
As part of the Reorganization Plan, Shieldalloy entered into settlement
agreements with various environmental regulatory authorities with regard to all
of the significant environmental remediation liabilities of which it is aware.
Pursuant to these agreements, Shieldalloy has agreed to perform environmental
remediation which, as of July 31, 1997, had an estimated cost of completion of
$44.5 million. Of this amount, approximately $2.5 million is expected to be
expended in the second half of 1997, $4.5 million in 1998, $4.3 million in 1999
and $8.1 million in 2000. In addition, the Company estimates it will make
expenditures of $5.8 million with respect to environmental remediation at its
foreign facilities. Of this amount, approximately $2.2 million is expected to be
expended in 1998, $0.7 million in 1999 and $0.7 million in 2000. These amounts
are not included in the calculation of operating income.
Effects of Recent Issued Accounting Standards. In February 1997, the
Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share." This statement is
effective for financial statements issued for periods ending after December 15,
1997. Management has evaluated the effect on its financial reporting from the
adoption of this statement and does not believe it to be significant.
In February 1997, the FASB also issued SFAS No. 129, "Disclosure of
Information about Capital Structure." This statement is effective for financial
statements issued for periods ending after December 15, 1997. Management has
evaluated the effect on its financial reporting and, as it contains no change in
disclosure requirements of Opinions 10 and 15 and Statement 47, no further
disclosures are needed.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement is effective for financial statements issued for periods
ending after December 15, 1997. Management has
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<PAGE> 47
evaluated the effect on its financial reporting from the adoption of this
statement and has found the majority of required disclosures to be not
applicable and the remainder to be not significant.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information." SFAS No. 131 requires the reporting of
profit and loss, specific revenue and expense items, and assets for reportable
segments. It also requires the reconciliation of total segment revenues, total
segment profit or loss, total segment assets, and other amounts disclosed for
segments to the corresponding amounts in the general purpose financial
statements. SFAS No. 131 is effective for fiscal years beginning after December
15, 1997. Management has not yet determined what additional disclosures may be
required in connection with adopting SFAS No. 131.
EFFECTS OF INFLATION
Inflation has not had a significant effect on the Company's operations.
However, there can be no assurance that inflation will not have a material
effect on the Company's operations in the future. The Company is subject to
price fluctuations in its raw materials and products. These fluctuations have
affected and will continue to affect the Company's results of operations. See
"-- Results of Operations."
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<PAGE> 48
BUSINESS
OVERVIEW
Metallurg is a leading international producer and seller of high quality
metal alloys and specialty metals used by manufacturers of steel, aluminum,
superalloys and chemicals and other metal consuming industries. The Company
sells more than 500 different products to over 3,000 customers worldwide. In
addition to selling products manufactured by the Company, Metallurg also
distributes products manufactured by third parties ("Merchanted Products")
through its global sales force. For the year ended December 31, 1996, the
Company had $648.8 million in sales, $365.1 million of which were from products
manufactured by the Company and $283.7 million of which were from Merchanted
Products. The Company sells products principally to customers in the iron and
steel industry, the aluminum industry and the superalloy and titanium
industries. Approximately 51% of the Company's 1996 sales were made to the iron
and steel industry, 15% to the aluminum industry, 11% to the superalloy and
titanium alloy industries, 4% to the chemicals industry, and the remaining 19%
were made to other industries, none of which was individually significant to the
Company.
The Metallurg group was founded in 1911 with the construction of a vanadium
alloy and chemical producing plant in Nuremberg, Germany. The Company began
mining chrome ore in Turkey in 1916, and constructed a ferrochrome manufacturing
plant in Weisweiler, Germany in 1917. In subsequent years, the Company's
customer base grew throughout Europe and, in 1938, the Company added its first
subsidiary in the United Kingdom and a sales and distribution subsidiary in
Switzerland. Metallurg was established as a New York holding company in 1947 and
reincorporated as a Delaware corporation in 1997.
BUSINESS STRATEGIES
The Company's business objective is to maximize the long-term profitability
of its operations while maintaining a strong financial position through the
various business and market cycles. The Company's continuing strategies for
achieving this objective are as follows:
Focus on Core Businesses. The Company seeks to achieve high market shares
in markets where the Company can differentiate itself on the basis of technical
expertise and production quality. As part of this strategy, the Company is
focusing its production and sales efforts on higher margin specialized alloy
businesses, and is investing in capital projects that will expand its capacity
or lower its costs in those areas. The Company recently completed construction
of a chromium metal plant in the United Kingdom that will increase its
production capacity of chromium metal for use in the steel, aluminum and
superalloy industries. The Company has also expanded its vacuum furnace capacity
at its German facilities, which will enhance its production of vanadium aluminum
and molybdenum aluminum for use by the titanium industry, and has undertaken an
upgrade of its aluminum furnace facilities at its United Kingdom plant. In
recent years, the Company has divested certain non-core and lower margin
businesses, including its tantalum carbide, U.S. titanium scrap processing and
tin and aluminum trading businesses.
Maintain Leading Market Position in Niche Products. The Company believes
that it maintains leading global market shares in special grades of low carbon
ferrochrome consumed by the superalloy industry, chromium metal and aluminum
master alloys. The Company believes that its competitive advantages include
strong relationships with its customers and suppliers and a field sales force
comprised primarily of metallurgists who are knowledgeable about the products
and their many applications. In addition, the Company's access to high quality
and continuing supplies of chrome ore through its ownership of mines in Turkey
gives the Company a significant competitive advantage over other low carbon
ferrochrome producers.
Improve Financial Flexibility. With the Offering, the Company has improved
its financial position by increasing liquidity and extending the maturities and
the amortization schedule of its debt. Metallurg and Shieldalloy also have
recently increased the maximum amount of their Revolving Credit Facility from
$40.0 million to $50.0 million. Management believes that the Company's capital
structure following the Offering and the increase in availability of funds under
the Revolving Credit Facility will improve the
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<PAGE> 49
Company's ability to withstand future cyclical downturns in the steel, aluminum
and superalloy industries. See "Risk Factors -- Dependence on Cyclical Markets."
At July 31, 1997, after giving effect to the Offering and the application of the
estimated net proceeds therefrom, the Company would have had approximately $44.7
million of cash and cash equivalents on hand. After giving effect to the
Offering and the application of the estimated net proceeds therefrom, Metallurg
expects to have available borrowing capacity under the Revolving Credit Facility
of approximately $25 million. See "Description of Credit Facilities and Other
Financing Arrangements." In addition, in order to increase dividends from its
foreign subsidiaries, the Company (i) has taken steps to enable its German
operating subsidiaries to make dividend payments by late 1998, and (ii) has
obtained consent from its working capital lender at its United Kingdom operating
subsidiaries to permit increased dividends to the Company in an amount up to
100% of such subsidiaries' net income in any year, contingent upon repayment of
the LSM Term Loan Facility. The Company repaid the LSM Term Loan Facility with
proceeds from the Offering. See "Risk Factors -- Holding Company Structure;
Restrictions on Dividend Payments by Subsidiaries."
Aggressively Manage Costs. In recent years, Metallurg has instituted
measures to reduce operating costs and enhance profitability. Through a
combination of divesting non-core businesses, using contractors and improving
productivity, the Company has reduced headcount from 2,508 at the end of 1992 to
1,523 as of June 30, 1997, while sales have grown from $591.1 million in 1992 to
$639.9 million for the four quarters ended July 31, 1997. The Company has
established representation offices in Russia and China which have enabled the
Company to develop new sources of product supply for the Company's manufacturing
and distribution businesses, as it seeks to have as many low cost providers of
raw materials as possible. The Company has achieved certain savings through this
process, particularly in procuring chromium-, titanium- and vanadium-containing
materials. In addition, the Company has restructured its operations into
individual business units focused on particular customer groups in order to
better manage costs and improve profitability.
The Company expects to spend approximately $10.4 million of its $24.5
million of 1998 budgeted capital expenditures on capital projects which the
Company believes will improve production efficiencies, lower manufacturing costs
and expand production capacities. The remaining capital expenditures planned for
1998 are primarily for replacement and major repairs of existing facilities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Capital Expenditures."
Improve Product Mix. The Company continually pursues opportunities to
maximize sales through the Company's existing distribution network by improving
its product mix. The Company realizes improvements in its product mix by (i)
divesting low margin products, (ii) developing value added products such as
titanium carbide, which the Company sells to the forging industry, and vanadium
tetrachloride, which the Company sells to the synthetic rubber industry, and
(iii) acquiring, or entering into merchanting arrangements for, product lines
which complement the Company's core product offerings.
The Company believes that there may be attractive opportunities for it to
acquire product lines or businesses in the future. Although the Company has no
existing arrangements or understandings with regard to any acquisitions, to the
extent that the Company determines to acquire any product lines or businesses,
the Company currently expects that it would fund those acquisitions from its
available cash and credit lines and, possibly, from additional third party
financing.
PRODUCTS AND MARKETS
The Company sells more than 500 different products to over 3,000 customers
worldwide. The following table sets forth the dollar amounts and percentages of
the Company's sales attributable to the
48
<PAGE> 50
Company's various markets for the periods presented, exclusive of commissions
earned by the Company:
<TABLE>
<CAPTION>
TWO QUARTERS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------------- JULY 31,
SECTOR 1994 1995 1996 1997
- ----------------------------- ------------- ------------- ------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Steel........................ $286.1 51.7% $369.8 53.8% $328.1 50.6% $150.6 46.7%
Aluminum..................... 85.4 15.4 105.9 15.4 96.6 14.9 49.2 15.3
Superalloy................... 58.0 10.5 61.7 9.0 71.3 11.0 49.0 15.2
Chemicals.................... 23.9 4.3 35.7 5.2 29.4 4.5 14.4 4.5
Other........................ 100.1 18.1 114.9 16.6 123.4 19.0 58.9 18.3
------ ---- ------ ---- ------ ---- ------ ----
Total................... $553.5 100% $688.0 100% $648.8 100% $322.1 100%
====== ==== ====== ==== ====== ==== ====== ====
</TABLE>
The following table sets forth the most significant product groups based on
the Company's sales for the year ended December 31, 1996:
TOP TEN PRODUCT GROUPS BY SALES
----------------------------------------
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PERCENT
NAME OF PRODUCT GROUP 1996 SALES OF TOTAL
------------------------------------- ---------- ---------
<S> <C> <C>
Chrome products...................... $111.0 17.1%
Aluminum products.................... 88.6 13.7
Vanadium products.................... 76.0 11.7
Silicon products..................... 60.3 9.3
Columbium products................... 43.8 6.8
Metal powders........................ 31.3 4.8
Boron products....................... 15.0 2.3
Nickel products...................... 14.8 2.3
Titanium products.................... 14.5 2.2
Tantalum products.................... 10.6 1.6
------ -----
Total...................... $465.9 71.8%
====== =====
Total sales.......................... $648.8 100.0%
====== =====
</TABLE>
Iron and Steel Industry; Specialty Ferroalloys. The Company manufactures
and sells specialty ferroalloys for use in the iron and steel industry.
Metallurg's principal specialty ferroalloy products are ferrovanadium and
standard grades of low carbon ferrochrome. The Company also manufactures and
sells ferrosilicon, ferrotitanium, ferrocolumbium and ferroboron. These products
are used by iron and steel producers to increase temperature and corrosion
resistance and strength-to-weight ratios in the end-use products. Ferroalloys
are found in many end-use products in a wide variety of industries such as the
aerospace, automotive, energy and construction industries. The Company's iron
and steel industry customers include some of the world's largest producers, such
as Algoma Steel Inc., British Steel plc, Nucor Corporation, Sandvik AB, Thyssen
AG and US Steel Group. For the year ended December 31, 1996, the Company had
sales to the iron and steel industry of approximately $328.1 million,
representing 50.6% of the Company's total sales.
The iron and steel industry is cyclical, with iron and steel consumption
depending greatly on demand for durable goods, such as automobiles, construction
materials, machinery, appliances and miscellaneous manufactured products. The
Company believes that the iron and steel industry is currently strong, having
emerged from a prolonged recession, particularly in North America and Europe,
which lasted from 1989 to 1992. The recession resulted in negative pressures on
alloy prices and volumes and in iron and
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<PAGE> 51
steel production cutbacks. In addition, the Company's markets were disrupted in
recent years by large flows of competing products from the former Soviet Union.
The end of the Cold War and the resulting decrease in United States and Russian
defense spending also contributed to a reduced demand for the Company's products
and low levels in the prices of ferroalloys. Specifically, global raw steel
production declined from a peak of 786 million tons in 1989 to 722 million tons
in 1992. Production then increased to 752 million tons in 1996.
The Company's profitability has improved due to increases in production
volumes and sales prices as demand for steel has increased. Furthermore, during
the prolonged industry recession, the Company achieved significant reductions in
costs that have contributed to improvements in profitability and cash flow and
increased stabilization in its business. Management also believes that the flow
of competitive products from the former Soviet Union has slowed due to reduced
stockpiles of inventory and anti-dumping actions affecting imports of low carbon
ferrochrome and ferrovanadium from the former Soviet Union.
According to Resource Strategies, Inc. ("RSI"), growth of approximately
3.7% per year is forecast for Asian raw steel production from 1996 through 2001,
while the growth in output in North America and Europe is projected to remain
stable at approximately 0.6% per year for that period. If actual results reflect
the forecasted growth and stability, the Company would not expect a recurrence
of the severe price cutting which took place in the 1980's when steel production
fell. The Company believes that it is well positioned to take advantage of
opportunities in Eastern Europe, with its offices in Poland and Yugoslavia,
where growth rates of raw steel production of approximately 2.8% per year from
1996 through 2001 are forecast by RSI, and of a more stable and developing Latin
America, with its operations in Mexico and Brazil, where RSI forecasts growth
rates of raw steel production of approximately 3.3% per year from 1996 through
2001. Worldwide 1997 raw steel production through August is running at an annual
rate of 770 million tons, up 18 million tons from 1996.
Aluminum Industry; Aluminum Master Alloys and Compacted Products. The
Company manufactures a series of grain refining and other alloys for sale to the
primary aluminum industry. Metallurg's principal products in this category
include titanium boron tertiary alloys, strontium master alloys and chrome, iron
and manganese briquettes and tablets. The Company also manufactures binary
master alloys containing boron, zirconium or titanium. Master alloys containing
boron improve the conductivity of aluminum alloys for electric cable, while
master alloys containing strontium modify silicon-containing foundry alloys for
improved mechanical properties, as in automotive wheels. Compacted products in
the form of briquettes containing chrome, iron, manganese or other metals
maximize the efficiency of recovery and enhance rapid solubility when added to
aluminum melt in order to provide ductility for can sheet or strength for
aerospace applications. Titanium binary master alloys and titanium boron
tertiary alloys are widely utilized for the grain refining of cast aluminum
alloy rolling ingots, billets and continuously cast sheet. This grain refinement
improves the castability and the mechanical properties of the aluminum. The
Company sells aluminum master alloys and compacted products worldwide to major
aluminum producers, including Alcan Aluminum Limited, Alcoa Aluminum Co. of
America, Aluminium Pechiney, Reynolds Metals Co. and Sumitomo Metals Industries
Ltd. For the year ended December 31, 1996, the Company had sales to the aluminum
industry of $96.6 million, representing 14.9% of the Company's total sales.
Like the iron and steel industry, the aluminum industry is cyclical.
Aluminum consumption fluctuates with demand for durable goods, such as
construction materials, machinery, transportation and miscellaneous manufactured
products. Global demand for aluminum is heavily concentrated in the economically
advanced regions of North America, Europe and Japan. In 1996, these markets
collectively accounted for 70% of the western world demand for primary aluminum.
According to RSI, western world primary aluminum production is expected to
increase by 4.4% per year from 1996 through 2001.
Although exports of primary aluminum from the former Soviet Union have
contributed to increased supply and reduced prices in the industry since 1989,
the Company was less affected by the recession in this industry than in the iron
and steel industry. This is because the Company's products are not used in
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<PAGE> 52
the primary metal stage, but instead are used in the downstream processing of
aluminum products. Increases in the substitution of aluminum for steel, such as
in automobile manufacturing, have a significant positive impact on the aluminum
industry, but only a small effect on the iron and steel industry. The Company
believes that it is well positioned to capitalize on future growth areas in the
aluminum industry, such as transportation, due to the increased use of aluminum
in forging and casting applications, and building and construction.
Superalloy and Titanium Alloy Industries; Specialty Metals and Alloys. The
Company manufactures and sells specialty metals and alloys used by producers of
superalloys and titanium alloys to enhance the performance of finished metal
products. Metallurg's principal products in this category include chromium
metal, special grades of low carbon ferrochrome and vanadium aluminum. The
Company also manufactures and sells high purity ferrocolumbium and nickel
columbium. Use of these specialty metals and alloys results in elevated
temperature strength and oxidation resistance. End-uses for specialty metals
include high performance castings and forgings for aircraft engines and frames,
gas turbines and boiler tubes. While the aerospace and defense industries are
the largest consumers of these specialty metals and alloys, many new
applications for these metals and alloys have been developed for use in the
power generation, oil and gas, chemical, consumer goods and biomedical
industries. The Company's customers for specialty metals and alloys include
Allegheny Teledyne, Inc., Carpenter Technology Corp., INCO Alloys, Kanthal AB,
Oregon Metallurgical Corp., RMI Titanium Company, Special Metals Corporation and
Titanium Metals Corp. For the year ended December 31, 1996, the Company had
sales of metals and alloys to these industries of $71.3 million, representing
11.0% of the Company's total sales.
The aerospace industry is the largest user of superalloys. A significant
reduction in the manufacture of military and civilian aircraft between 1989 and
1992 resulted in a 30% decrease in global demand for superalloys and a resulting
adverse impact on the Company and other superalloy producers. The producers of
superalloys have partly counteracted this decline by finding new consumers in
the power generation, oil and gas, chemical, consumer goods and biomedical
industries.
Since 1994, however, demand by the aerospace industry has positively
impacted the titanium and superalloy producers. According to the Aerospace
Industries Association, there were 595 orders for commercial transports in 1996
while in 1993 there were 31 orders. Superalloy and titanium producers are adding
capacity to cope with demand and shorter lead times. The industry built 496
airliners in 1996 and expects to deliver 701 in 1997 and a further 15,000
between 1997 and 2015. Additionally, the number of surplus airplanes declined
from 800 in 1991 to 250 in 1996 and is expected to reach zero in 1997 or 1998.
If these forecasts prove to be accurate, the Company believes that it will
experience continued profitability of its chromium metal, low carbon
ferrochrome, vanadium aluminum and high purity nickel and ferrocolumbium which
are produced in the Company's U.S., UK and German facilities.
Other Industries and Products. In addition to the product lines described
above, Metallurg manufactures and distributes a number of products used outside
of the steel, aluminum and superalloy industries. These products include coating
materials, which are sold to electronic and tool manufacturers, vanadium
oxytrichloride for use in the synthetic rubber industry and polishing powders
used by the glass polishing industry. These products generally are
higher-margin, technically sophisticated products. For the year ended December
31, 1996, the Company had $152.8 million in sales of these products,
representing 23.5% of the Company's total sales. The most significant customer
industry for products in this category is the chemicals industry, which
accounted for $29.4 million of the Company's 1996 sales in this category,
representing 4.5% of the Company's total sales.
MANUFACTURING PROCESSES
The Company's manufacturing processes involve melting, refining, casting,
sizing, blending and packaging operations, which vary from product to product.
For example, in the manufacture of low carbon ferrochrome, EWW consumes raw
materials including chrome ore, predominantly from the Company's Turkish mines,
and silicochrome. The raw materials are melted and reductants are added to
refine the chemistry of the production batch. The batch is poured into casting
molds which are cooled
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and then crushed, sized, blended and packaged. The manufacture of ferrovanadium
at the Company's Cambridge, Ohio, plant follows an analogous process of melting,
casting and crushing, except that vanadium-containing raw materials are used. In
general, the manufacture of aluminum master alloys also follows similar
principles using aluminum and other additives; however, these master alloys are
generally cast as waffle plate or processed to a solid rod form for delivery to
the customer. The manufacture of briquettes and tablets involves the grinding
and blending of raw materials, the compression of these materials into a
compacted form and packaging for delivery to the customer. More sophisticated
production routes are used for highly specialized products which can require
chemical processing or the use of vacuum furnaces and a variety of other
equipment.
CUSTOMERS
For the year ended December 31, 1996, approximately 51% of the Company's
sales were made to the iron and steel industry, 15% to the aluminum industry,
11% to the superalloy and titanium alloy industries, 4% to the chemicals
industry, and the remaining 19% were made to other industries, none of which was
individually significant to the Company. No single customer accounted for more
than 5% of the Company's sales in 1996.
The following table sets forth a representative sample of the Company's
significant customers in each of its customer industry categories:
<TABLE>
<CAPTION>
IRON AND STEEL ALUMINUM SUPERALLOY AND TITANIUM OTHER
- --------------------------- ----------------------- --------------------------- -------------------------------
<S> <C> <C> <C>
Algoma Steel Inc. Alcan Aluminum Limited Allegheny Teledyne, Inc. AKZO Chemical Company
Allegheny Teledyne, Inc. Alcoa Aluminum Co. of Carpenter Technology Corp. BASF Corporation
Armco Inc. America INCO Alloys Cabot Corp.
Avesta AB Aluminium Pechiney Kanthal AB Treibacher Schleifmittel Corp.
British Steel plc Reynolds Metals Co. Oregon Metallurgical Corp. Rwe Dea
Inland Steel Co. Sumitomo Metals RMI Titanium Company
Iscor Limited Industries Ltd. Sandvik AB
The LTV Corporation Shinwa Bussan Titanium Metals Corp.
Northwest Steel & Wire Co.
Nucor Corporation
Outokumpu OY
Svenskt Stal AB
Sandvik AB
Thyssen AG
US Steel Group
</TABLE>
MERCHANTED PRODUCTS
The merchanting of products manufactured by third parties is a natural
complement to the Company's manufacturing operations. Merchanted Products
leverage the Company's global 124 member sales staff by providing a broader
product offering to its existing customers without incurring significant
additional overhead. As a result of offering a broader product line, Metallurg
becomes more important to its customers, as they can more conveniently procure
supplies and decrease their sourcing costs by reducing their number of vendors
and optimizing freight costs. In addition, merchanting activities provide the
Company with greater access to raw materials and to products for resale. The
Company's merchanting revenues are from three sources: "back-to-back" purchases
and sales which eliminate price risk to the Company, purchases of stocks for the
Company's own account for subsequent resale to customers and agency sales for
the account of another party where the Company receives a commission and does
not take title to the inventory. For the year ended December 31, 1996, the
Company received commissions of $1.2 million for acting as agent with regard to
third party sales of $46.3 million. Commission revenues are not included in the
sales figures contained herein.
FACILITIES AND OPERATIONS
Production Facilities. Metallurg is organized geographically, having
established a worldwide sales network built around the Company's core production
facilities in the United States, the United Kingdom and Germany. These
production units have sophisticated laboratories providing analytical, research
and
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<PAGE> 54
development support to in-house operations, as well as analytical services to
customers and third parties. The Company owns all of the facilities listed.
The following table sets forth for each Metallurg operating subsidiary the
location of its facilities, the key products manufactured by such subsidiary and
each facility's 1996 sales of manufactured products and Merchanted Products:
<TABLE>
<CAPTION>
SALES FOR THE
YEAR ENDED
DECEMBER 31,
OPERATING SUBSIDIARY LOCATION KEY PRODUCTS 1996(A)
- ------------------------- ------------------ ----------------------------------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Shieldalloy Newfield, New Aluminum Briquettes and $ 163.9
Jersey Tablets
(Plant) Aluminum Master Alloys
Ferrotitanium
Metal Powders
Cambridge, Ohio Ferrovanadium 35.8
(Plant) Grainal
Vanadium Chemicals
LSM Rotherham, UK Aluminum Alloying Tablets 147.6
(Plant) Aluminum Master Alloys
Chromium Metal
Ferroboron
Ferrotitanium
Glass Polishing Powders
Metal Powders
Nickel Boron
Nickel Cobalt Magnet
Alloys
GfE Nuremberg, Germany Chromium Metal 91.7
(Plant) Columbium Alloys
Magnet Alloys
Special Master Alloys
Vanadium Aluminum
Vanadium Chemicals
EWW Eschweiler- Low Carbon Ferrochrome 71.2
Weisweiler,
Germany
(Plant)
Aluminium Powder Co. Ltd. Holyhead, UK Atomized Aluminum 19.2
(Plant) Powder
Companhia Industrial Sao Joao del Rei, Aluminum Master Alloys 13.0
Fluminense Brazil Columbium Oxide
(Plant) Tantalum Oxide
Turk Maadin Sirketi A.S. Kavak, Tavas and Chrome Ore 7.1
Gocek, Turkey
(Mines)
</TABLE>
- ---------------
(a) Includes external and intercompany sales, except for sales by Aluminium
Powder Co. Ltd., which do not include sales to its parent company LSM.
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<PAGE> 55
Sales. The Company has sales personnel both at its production facilities
and at its 17 separate sales offices. Set forth below is a list of sales
personnel by the country in which they are located as of June 30, 1997.
<TABLE>
<CAPTION>
NUMBER OF SALES
LOCATION PERSONNEL
--------------------------------------------- ---------------
<S> <C>
Brazil....................................... 5
Canada....................................... 2
Germany...................................... 39
Italy........................................ 3
Japan........................................ 1
Mexico....................................... 3
Poland....................................... 3
South Africa................................. 8
Sweden....................................... 6
Switzerland.................................. 4
United Kingdom............................... 24
United States................................ 25
Yugoslavia................................... 1
---
Total.............................. 124
===
</TABLE>
RAW MATERIALS
Metallurg produces a wide variety of products which are sold into a number
of different metals industries. The Company also has followed a strategy of
specializing in products which command higher premiums because of their relative
technical sophistication; consequently, there is no single raw material which
makes up the basis of the Company's entire production.
The Company's Turkish subsidiary mines chrome ore which is supplied to EWW
for the production of low carbon ferrochrome. Management believes the mines have
identifiable reserves of 1.3 million tons and probable reserves of 700,000 tons
that would last until 2013.
For the production of chromium metal, the Company's UK-based subsidiary
purchases chromium oxide from the world's major producer, British Chrome
Chemicals, and supplements this supply with additional quantities from the
former Soviet Union. This product also requires large quantities of aluminum
powder substantially sourced from an affiliate of the Company.
The Company's four aluminum processing plants in the U.S., UK and Brazil
buy approximately 30,000 tons of virgin aluminum from producers worldwide while
important alloying chemicals are sourced from five different suppliers around
the world.
Titanium scrap is sourced in significant quantities for the production of
ferrotitanium and other titanium containing products from countries active in
the aerospace industry, such as the U.S., Russia and the UK, and from sellers of
surplus military equipment.
Vanadium pentoxide in its various forms is the source of raw material for
the Company's production of ferrovanadium, vanadium chemicals and vanadium
aluminum. For ferrovanadium production, the Company purchases slag containing
vanadium resulting from steel-making in South Africa and residues from
petrochemical companies resulting from the refining of petrochemical products
and from electric utilities which generate ash containing vanadium as a result
of burning fuel oil. The Company currently obtains a majority of these raw
materials from two sources. See "Risk Factors -- Limited Sources for Raw
Materials." Vanadium chemicals and vanadium aluminum are produced from vanadium
pentoxide which is purchased on the open market and from vanadium residues which
are consumed in the Company's own production.
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<PAGE> 56
Niobium (columbium) oxide which is used as a raw material for the
production of sophisticated alloys by GfE and Shieldalloy is principally
supplied by the Company's Brazilian subsidiary which processes a variety of
tantalum- and niobium containing minerals, ores and residues through its
chemical plant.
The Company also utilizes a host of other raw materials such as cobalt,
nickel, boric acid, mischmetal, manganese, chrome silicide, etc., in the
manufacture of its wide product range which are purchased as required from
producers or traders. Most purchases are made on a spot basis at market price to
minimize the risk of exposure to market fluctuations.
COMPETITION
Although the Company faces competition in each of its markets, the Company
does not believe that any single competitor competes with Metallurg in all of
its products or markets.
Iron and Steel Industry. In North America, products manufactured by
Strategic Minerals Corp. (Stratcor) and Masterloy Products Ltd. (Aimcor) compete
with the Company's ferrovanadium products. In Europe and the rest of the world,
Treibacher Industrie AG competes with the Company in its ferrovanadium products,
and a number of small producers and products from Russia compete with
Metallurg's ferrotitanium products. In standard grades of low carbon
ferrochrome, competition comes worldwide from Samancor Ltd. and Zimbabwe Alloys
Ltd. (Zimalloys).
Aluminum Industry. Competition is becoming more international because of
the growing number of master alloy and compacted product manufacturers. In
Europe and the Far East, KBM Affilips Ltd., Hydelko, Anglo Blackwells and
Aleastur-Asturiana de Aleaciones SA compete against products manufactured by
LSM, while in North and South America, KB Alloys and Milward Alloys Inc. (a
distribution agent of KBM Affilips Ltd.) compete against the Company in master
alloys. Competition in compacted products comes mainly from Elkem SA in North
America and Hoesch in the rest of the world.
Superalloy and Titanium Alloy Industries. Strategic Minerals Corp.
(Stratcor) and Reading Alloys Inc. compete internationally with the Company in
vanadium aluminum. Reading Alloys Inc. also competes in sophisticated alloys for
the superalloy industry, as do CBMM-Cia Brasileira de Metalurgica e Mineracao,
Cabot Corporation and H.C. Starck GmbH in certain products. The Company has no
significant competitor in special grades of low carbon ferrochrome. Delachaux
Division Metaux and, to a limited extent, Elkem SA compete with the Company in
chromium metal.
RESEARCH AND DEVELOPMENT
Research and development ("R&D") is carried out on behalf of the Company in
its two Technical Centers by a 15-member team at LSM and a five-member team at
GfE, both supported as necessary by staff drawn from production. The Technical
Centers have furnaces, laboratories, milling and testing equipment with R&D
efforts linked to product and process improvement as well as the development of
new product lines. Strong relationships are maintained with customers and
materials departments of universities. Recently, successful projects in LSM
include a new carbon-based grain refiner for the aluminum industry developed
jointly with Shieldalloy, titanium carbide alloys for addition to rolls in the
iron and steel industry and Raney type catalysts for the chemical industry. In
Germany the research and development is focused on advanced intermetallic phases
for structural and functional applications as well as development recently of
nickel aluminum sputtering targets, improvement of granulation techniques for
metal alloy powders and development of multinary master alloys.
EMPLOYEES
As of June 30, 1997, the Company employed over 1,500 people worldwide.
Labor unions represent approximately 50% of the Company's employees. Employees
are represented by unions at seven locations in the United States, the United
Kingdom, Germany and Brazil. The Company's bargaining agreement with the United
Steel Workers, which covers approximately 70 employees at the Cambridge, Ohio
plant, is scheduled to be renegotiated in June 1998. Many of the collective
bargaining agreements covering the Company's union employees at its foreign
subsidiaries are renewable on an annual basis. The Company's relationships with
its unions are managed at the local level and are considered by
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<PAGE> 57
management to be good. The Company has not been affected by strikes in the last
ten years (other than one in Turkey which occurred in 1988), and there has not
been a strike at any of the Company's United States facilities for over twenty
years.
BANKRUPTCY
On April 14, 1997, Metallurg and Shieldalloy consummated the Reorganization
Plan. Metallurg and Shieldalloy sought Chapter 11 protection in September 1993
following the Company's inability to restructure or refinance its long-term
indebtedness and revolving credit facility in light of the confluence of
numerous economic factors which negatively impacted the Metallurg Group's
businesses and caused the Company to default on certain then-outstanding
indebtedness. In particular, the economic recession that began in 1989 in
end-use markets, such as the aerospace, 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 former Soviet Union of excess stocks of 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 very low levels. Moreover, in the wake
of reductions in United States defense spending, there was a reduction in demand
in the market for superalloys.
The Company has sought to stabilize and strengthen its business since the
bankruptcy filing through the implementation of the business strategies
described above. As a result of the consummation of the Offering and the other
financial arrangements made by the Company, the Company believes that its
financial position has improved from 1993 with enhanced liquidity and extended
maturities of its debt. In response to the dumping by the former Soviet Union,
the Company sought and obtained anti-dumping orders against Russia for imports
of ferrovanadium into the United States and against Russia, Kazakhstan and
Ukraine for imports of low carbon ferrochrome into Europe. See "Risk
Factors -- End of Anti-dumping Duties." The Company believes that most of the
stockpiles in the former Soviet Union have been depleted and, therefore, if the
anti-dumping duties are reduced, the impact will be less than that experienced
by the Company in the early 1990's.
ENVIRONMENTAL MATTERS
The operations of the Company's alloy manufacturing business are subject to
extensive regulation concerning, among other things, emissions to air,
discharges and releases to land and 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
contamination caused by releases of wastes and other material, as well as worker
exposure to hazardous or toxic substances. There can be no assurance that these
requirements will not result in future liabilities and obligations that would be
material to the Company's business operations, financial condition or cash flow.
Management believes that the Company is faced with a number of environmental
issues which have largely resulted from changing environmental regulations,
particularly in the area of solid and hazardous waste removal. To fulfill the
terms of comprehensive settlement agreements with the environmental regulatory
authorities described more fully below, Shieldalloy expects to make
environmental remediation expenditures of approximately $2.5 million in the
second half of 1997, $4.5 million in 1998, $4.3 million in 1999 and $8.1 million
in 2000. Although the scope of Shieldalloy's remediation obligations has been
defined pursuant to such settlement agreements, there can be no assurance that
the ultimate cost of fulfilling these obligations will not materially exceed
Shieldalloy's current estimates.
The historical manufacture of several products in Newfield, New Jersey and
Cambridge, Ohio resulted in the production of various by-products which
Shieldalloy is obligated to remediate under Federal and state environmental laws
and regulations. The release or threatened release of hazardous substances
contained in these by-products at the Newfield facility led that facility to be
placed on the National Priorities List for cleanup under the Federal Superfund
law. Pursuant to the Reorganization Plan, all known off-site liabilities for
disposal of solid and hazardous wastes were discharged. Shieldalloy also entered
into comprehensive settlement agreements with governmental authorities covering
remediation of various on-site and facility-related environmental conditions at
its Newfield and Cambridge facilities.
56
<PAGE> 58
The Company has also provided for certain estimated costs associated with its
operating sites in Germany and Brazil. The Company believes that total
environmental remediation and monitoring liabilities consist of the following:
<TABLE>
<CAPTION>
AS OF JULY 31, 1997
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Domestic:
Shieldalloy -- New Jersey.................................. $ 32,343
Shieldalloy -- Ohio........................................ 12,156
-------
44,499
Foreign......................................................... 5,817
-------
Total environmental liabilities................................. 50,316
Less: trust funds............................................... 2,812
-------
Net environmental liabilities.............................. $ 47,504
=======
</TABLE>
As part of the Reorganization Plan, the Company and Shieldalloy entered
into an Environmental Settlement Agreement with the Environmental Protection
Agency (the "EPA"), the Department of the Interior (the "DOI") and the Nuclear
Regulatory Commission (the "NRC") with respect to the Newfield and Cambridge
sites and with the New Jersey Department of Environmental Protection (the
"NJDEP") with respect to the Newfield site (the "U.S. and NJDEP Environmental
Settlement Agreement"). In addition to settling claims with federal authorities,
the U.S. and NJDEP Environmental Settlement Agreement memorialized prior
commitments to the State of New Jersey pursuant to Administrative Consent Orders
("ACOs") issued on September 5, 1984 and October 5, 1988. The U.S. and NJDEP
Environmental Settlement Agreement obligates Shieldalloy to complete a number of
environmental projects, including groundwater, soils and sediment remediation,
closure of nine wastewater and treatment lagoons, and related operation and
maintenance activities. The cost of fulfilling these obligations is currently
estimated to be approximately $32.3 million. The Company and Shieldalloy have
agreed to provide, create or make available financial assurance in this amount
for these projects through a combination of letters of credit and cash reserves.
At July 31, 1997, outstanding letters of credit issued as financial assurance in
favor of various environmental agencies were $21.4 million, and cash reserves
established as financial assurance total $0.8 million. The costs of providing
financial assurance over the term of the remediation activities have been
included in the accrued amounts to be disbursed over the next fifteen years.
The Company, Shieldalloy and Cyprus Foote Mineral Company ("Cyprus Foote"),
the former owner of the Cambridge site, have entered into a Permanent Injunction
Consent Order (the "Consent Order") with the State of Ohio resolving known
environmental remediation claims relating to the Cambridge site. The terms of
the Consent Order are incorporated by reference into the Settlement Agreement
entered into among the Company, Shieldalloy, Cyprus Foote, the Ohio
Environmental Protection Agency (the "OEPA") and the Ohio Department of Health
(the "ODH") (the "Ohio Environmental Settlement Agreement," and together with
the U.S. and NJDEP Environmental Settlement Agreement, the "Settlement
Agreements"). Under the Ohio Environmental Settlement Agreement, Shieldalloy and
Cyprus Foote will perform remedial design and remedial action at the Cambridge
site, estimated to cost approximately $8.7 million. Additionally, Shieldalloy
and Cyprus Foote will enhance, restore and preserve certain wetlands in the
vicinity of the Cambridge site. The Consent Order requires Shieldalloy and
Cyprus Foote to provide financial assurance for the above remediation projects
in an initial amount of $9.0 million. Pursuant to an agreement between
Shieldalloy and Cyprus Foote, Cyprus Foote will satisfy this requirement. In
addition, the Consent Order requires Shieldalloy to provide financial assurance
for the long-term operation and maintenance of the east and west slag piles at
the Cambridge site, in the amount of approximately $1.2 million, which was
funded as part of the Reorganization Plan, and an additional $0.1 million to
fund extension of the annuity for an additional 900 years. The Company has
accrued its best estimate of associated costs which it expects to substantially
disburse over the next six years.
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<PAGE> 59
As a result of historic manufacturing activities, slag piles which contain
low levels of naturally occurring radioactivity have accumulated at the
Cambridge and Newfield sites. These slag piles are subject to regulation by the
NRC and state agencies. As related production has ceased at the Cambridge
location, Shieldalloy is required to decommission the two slag piles at that
facility and obtain approval from the State of Ohio and the NRC to stabilize and
cap the slag piles. Authorization to cap on-site the larger slag pile at the
Cambridge site has been approved as protective of human health and the
environment by the State of Ohio. The NRC is expected to issue its final
environmental impact statements for Cambridge in January or February of 1998. As
Ohio did before it selected the cap on-site remedy, the NRC has considered a
range of remedial alternatives including removal of the slag pile to an off-site
disposal facility in previously issued draft environmental impact statements
which have been circulated to the public. The estimated costs for off-site
disposal approached $100.0 million; however, in the two draft environmental
impact statements for Cambridge issued in 1996 and 1997 and presented for public
comment at two public meetings in Cambridge, the NRC stated its current
intention to accept the cap on-site alternative already adopted by Ohio. As long
as Shieldalloy continues its ongoing efforts to sell the slag located at the
Newfield location, the NRC will allow the slag pile to remain in place, subject
to submission of a conceptual decommissioning plan and financial assurance for
implementation of that plan. The Company's obligation for decommissioning costs
for these sites is partially assured by cash funds held in trust. As a condition
precedent to consummation of the Reorganization Plan, draws aggregating $1.5
million were made under prepetition letters of credit relating to both the
Newfield and Cambridge facilities, and the proceeds were deposited in a trust
fund for purposes of NRC decommissions.
The Company is defending an action brought by local residents alleging
personal injury and property damage from groundwater contamination and other
exposure to hazardous materials allegedly originating from the Company's
Newfield, New Jersey plant. The Company is vigorously defending this action. The
Company believes that this matter is covered by its insurance and the costs of
such defense are being borne by the Company's insurance carriers. The Company
does not believe that the outcome of this litigation or the ongoing costs of
defense will have a material adverse effect on the Company's operations or
financial position.
The Company has also provided for certain estimated costs associated with
its sites in Germany and Brazil. The Company's German subsidiaries have accrued
environmental liabilities in the amount of $5.4 million at July 31, 1997 to
cover the costs of closing an off-site dump and for certain environmental
conditions at a site in Nuremberg owned by a subsidiary. In Brazil, $0.4 million
has been accrued at July 31, 1997 to cover reclamation costs of the closed mine
sites.
In addition to its substantial remediation and monitoring obligations for
historical contamination, the Company's ongoing operations at its Cambridge
facility continue to be affected by actual and proposed changes to environmental
laws and regulations involving the treatment, storage and disposal of classified
hazardous wastes under the Resource Conservation and Recovery Act ("RCRA") and
control of air emissions under the Clean Air Act Amendments of 1990 ("CAAA"). In
particular, the Company is currently considering various options in connection
with its production of ferrovanadium, which may be affected by increasingly
stringent sulfur dioxide emission limitations under the CAAA, and by the
proposed reclassification of spent catalyst, one of the Company's raw materials,
as a hazardous waste under RCRA. Spent catalyst currently makes up approximately
8.0% of the Company's raw materials. The combination of these pending regulatory
requirements will compel the Company to monitor the cost and constituents of its
raw product slate with increased care, and may require substantial capital
expenditures at the Cambridge facility in order to install appropriate pollution
control devices, reconfigure material handling facilities, or both, to allow the
Company to process the most cost-effective raw product mix.
LEGAL PROCEEDINGS
The Company and certain of its subsidiaries are parties to a variety of
legal proceedings relating to their operations. Management does not expect that
these matters, individually or in the aggregate, would have a material adverse
impact on the Company's operations or financial position.
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<PAGE> 60
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to the
individuals who are the directors and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- ---------------------------------------------
<S> <C> <C>
Michael A. Standen............... 60 Chairman, President and Chief Executive
Officer
Alan D. Ewart.................... 50 Joint Managing Director of LSM and Director
J. Richard Budd III.............. 45 Senior Vice President
Michael A. Banks................. 59 Vice President-Administration
Barry C. Nuss.................... 44 Vice President-Finance and Chief Financial
Officer
Eric L. Schondorf................ 34 Vice President, General Counsel and Secretary
Jon R. Bauer..................... 41 Director
Peter A. Langerman............... 42 Director
Herbert E. Seif.................. 48 Director
</TABLE>
Each director of the Company holds office until the next annual meeting of
stockholders of the Company or until his or her successor has been elected and
qualified. Officers of the Company are selected by the Board of Directors and
serve at the discretion of the Board of Directors.
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.
Mr. Standen has a B.A. degree in languages from Oxford University.
Alan D. Ewart -- Mr. Ewart joined LSM in 1969 and held several positions in
sales and purchasing management before he was appointed Joint Managing Director
of LSM in 1984. He was elected to the Board of Directors of the Company in 1987.
Prior to joining LSM, Mr. Ewart worked in the British Civil Service as a Patent
Examiner. Mr. Ewart has a BSc degree in metallurgy from the University of Wales.
J. Richard Budd III -- Mr. Budd has served as Senior Vice President of
Metallurg since January 1996. Mr. Budd was previously employed as a consultant
to Metallurg since 1994 while serving 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 in 1994. He was previously
employed as an auditor at Deloitte Haskins & Sells (now known as Deloitte &
Touche LLP) 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 a
B.S. degree in accounting from Fairleigh Dickinson University.
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<PAGE> 61
Eric L. Schondorf -- Mr. Schondorf was appointed Vice President and General
Counsel in April 1996 and became Secretary in December 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 J.D. degree from the New York University School of Law.
Jon R. Bauer -- Mr. Bauer joined the Board in April 1997. He is a Managing
Partner of Contrarian Capital Management, L.L.C., an investment management firm
founded in May 1995 and located in Greenwich, Connecticut. From 1986 to 1995,
Mr. Bauer was at Oppenheimer & Co., Inc. where he was a Managing Director, head
of the High Yield Department, and co-manager of the Horizon series of
Partnerships. Before joining Oppenheimer, Mr. Bauer worked for Bear, Stearns &
Co., Inc. for five years in the High Yield Bond Department's bankruptcy area.
Prior to that, he spent two years in the Credit Department's bankruptcy area and
two years in the Credit Audit area of Chase Manhattan Bank, analyzing and
identifying companies in the bank's portfolio that were likely to default. He
received a B.A. from Rutgers University in 1977 and an M.B.A. degree from
Harvard Business School in 1981.
Peter A. Langerman -- Mr. Langerman joined the Board in April 1997. He is
Executive Vice President of Franklin Mutual Advisers, Inc., investment adviser
to Franklin Mutual Series Fund, Inc., a mutual fund group. Mr. Langerman is also
Director and Executive Vice President of Franklin Mutual Series Fund, Inc. He
joined the Mutual Series Fund group in 1986, prior to which time he was an
associate with Weil, Gotshal & Manges LLP. Mr. Langerman received a B.A. degree
from Yale University, M.S. degree from New York University Graduate School of
Business and J.D. degree from Stanford University Law School. Mr. Langerman also
serves on the board of directors of Franklin Mutual Series Fund, Inc. (since
1989) and Sunbeam Oster (since 1990).
Herbert E. Seif -- Mr. Seif joined the Board in April 1997. He has been a
Managing Director of SBC Warburg Dillon Read since May 1996. Mr. Seif became a
managing Director of SBC Capital Markets Inc. in January 1995, when Swiss Bank
Corporation consummated the acquisition of O'Connor & Associates, a general
partnership of which Mr. Seif was the Senior Partner. Mr. Seif joined O'Connor &
Associates in 1980 and three months later was named a General Partner. During
his tenure at O'Connor & Associates, he established and led the development of
the firm's risk arbitrage and special situations business. In 1987, Mr. Seif was
named Co-Managing Partner and held that title until 1989, when he became Senior
Partner and Chairman of the Executive Committee of O'Connor & Associates. Prior
to joining O'Connor & Associates, he was President of Herbert E. Seif & Company,
where he traded options on the American Stock Exchange. Mr. Seif has a B.A.
degree in economics and political science from Brooklyn College.
The Board of Directors has compensation and audit committees which include
Messrs. Langerman, Bauer and Seif.
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<PAGE> 62
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned, whether paid or
deferred, by the Company's Chief Executive Officer and four other most highly
compensated executive officers during 1996 (collectively, the "Named Officers")
for services rendered in all capacities to the Company during that fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------
NAME AND PRINCIPAL POSITION SALARY($) BONUS($)
-------------------------------------------------------------- ------- --------
<S> <C> <C>
Michael A. Standen Chairman, President and Chief Executive
Officer....................................................... 617,364(a) 195,000
J. Richard Budd III Senior Vice President..................... 300,000 77,500
Michael A. Banks Vice President, Administration............... 202,000 55,000
Barry C. Nuss Vice President, Finance and Chief Financial
Officer....................................................... 200,000 62,500
Robin A. Brumwell President of Metallurg International
Resources, a division of Metallurg, Inc....................... 215,000 37,500
</TABLE>
- ---------------
(a) Includes approximately $70,000 paid for directors' fees for the Company and
certain of its subsidiaries.
1997 STOCK AWARD AND STOCK OPTION PLAN
The Board of Directors of Metallurg adopted the Metallurg, Inc. Management
Stock Award and Stock Option Plan ("SASOP") in 1997. 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 those employees through the
ownership and performance of Common Stock. The SASOP will terminate in 2007,
unless terminated earlier by the Board.
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.
Eligibility and Administration. All employees of Metallurg and its
subsidiaries are eligible to participate in the SASOP. The Compensation
Committee is 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. There are 500,000 shares of Common Stock
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. The maximum aggregate number of shares of 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 Common
Stock due to stock dividends, stock splits, reorganization, etc.,
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<PAGE> 63
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.
Stock Awards. The Compensation Committee is authorized to grant stock
awards to employees 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 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. At the commencement of the SASOP, the Compensation
Committee granted to certain eligible executives an aggregate of 250,000 shares
of Common Stock (the "Initial Stock Awards"). Twenty percent of each Initial
Stock Award will be transferable on the date of grant, and 40% 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 under the SASOP. 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 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% 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% on
the date of the grant; 33 1/3% on the first anniversary of the date of grant;
and 33 1/3% 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
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 Common Stock, whether restricted or
unrestricted, and may impose such conditions as it deems appropriate on the use
of such 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 Common Stock to
be delivered for the payment of such taxes. The recipient of the stock options
is entitled to the payment of dividend equivalents at the time the dividend is
paid to the holder of Common Stock whether or not such stock option has vested.
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.
Pursuant to the Company's SASOP, the Compensation Committee of Metallurg's
board of directors awarded options to purchase 167,000 shares of Common Stock at
$11.38, effective as of September 1, 1997. Mr. Standen, Mr. Budd, Mr. Banks, Mr.
Nuss and Mr. Brumwell received stock options in the amount of 50,000, 17,500,
12,500, 17,500 and 5,000, respectively.
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<PAGE> 64
Pursuant to the terms of the SASOP and/or the individual employment
agreements, the Company may make loans to employees in order to pay any federal,
state or local taxes with respect to any Stock Award granted under the SASOP.
Each of Messrs. Standen, Budd, Banks, Nuss, Brumwell and Schondorf were given
loans of $320,250, $22,875, $25,162, $29,737, $16,012 and $14,484, respectively,
with respect to their stock awards. Such loans bear interest at 5.91% and are
payable on April 14, 2000.
PROFIT SHARING PLAN
The Company has a profit sharing plan for the employees of Metallurg and
Shieldalloy (the "Profit Sharing Plan") pursuant to which it may deposit a
percentage of the employee's annual salary in a segregated account. Such profit
sharing percentage is determined by the management of the Company based on the
prior year's results. The employee vests in his or her participation in the
Profit Sharing Plan over a five-year period. In 1996, the Company made a 3%
contribution pursuant to the Profit Sharing Plan or $0.2 million in the
aggregate.
PENSION PLAN
The Pension Plan of Metallurg, Inc., effective as of January 1, 1989 (the
"Pension Plan") covers substantially all of Metallurg and Shieldalloy's U.S.
salaried employees. The Pension Plan is maintained as a tax-qualified defined
benefit plan, which covers most officers and salaried employees on a
noncontributory basis. Such employees generally become eligible to receive a
vested retirement benefit under such plan after completion of five years of
service. Benefits under the Pension Plan are generally based upon the number of
years of service credit, up to 30 years, the final average compensation of each
individual employee, and a percentage of such employee's eligible earnings.
Final average compensation is calculated using the highest 60 consecutive
calendar months of compensation during the last 120 months prior to the date of
calculation. Normal retirement is age 65.
The following table shows the estimated annual retirement benefits payable
at age 65 under the Pension Plan to participating employees, including the Named
Officers, in the remuneration and years of service classifications indicated.
The following table reflects benefits payable under the Pension Plan:
<TABLE>
<CAPTION>
PENSION PLAN TABLE (YEARS OF SERVICE)
----------------------------------------------------
RENUMERATION 10 15 20 25 30
- ------------ ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
$100,000 17,095 25,643 34,190 42,738 51,286
$125,000 21,845 32,768 43,690 54,613 65,536
$150,000 26,595 39,893 53,190 66,488 79,786
$175,000 31,345 47,018 62,690 78,363 94,036
$200,000 36,095 54,143 72,190 90,238 108,286
</TABLE>
The respective years of service credited for pension purposes as of
December 31, 1996 and the estimated years of service at age 65 for each of the
Named Officers are as follows:
<TABLE>
<CAPTION>
COMPLETED
YEARS OF SERVICE COMPLETED
AT YEARS OF SERVICE AT
NAMED OFFICER DECEMBER 31, 1996 NORMAL RETIREMENT
-------------------------------------------------- ----------------- -------------------
<S> <C> <C>
Michael A. Standen................................ 30 30
J. Richard Budd III............................... 1 21
Robin A. Brumwell................................. 5 17
Michael A. Banks.................................. 11 18
Barry C. Nuss..................................... 13 30
</TABLE>
In addition, Mr. Standen is entitled to an annual estimated benefit of
approximately $80,000 per year under LSM's pension plan, based on his 22 years
of credited service with LSM. In 1996, Mr. Standen accrued $327,550 under a
senior executive retirement plan which was cancelled as of June 30, 1996. This
amount was paid to Mr. Standen upon the consummation of the Reorganization Plan.
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<PAGE> 65
EXECUTIVE EMPLOYMENT AGREEMENTS
Metallurg has entered into employment agreements 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 agreement is 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 will not be
extended. Each Executive has agreed not to compete against Metallurg during the
employment term and for a six-month period thereafter.
Each Executive receives an annual base salary equal to his or her annual
base salary in effect on the date of the agreement, 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 is entitled to participate in the compensation incentive and employee
benefit plans generally made available to Metallurg's senior-level employees.
If the Executive's employment is terminated for any reason other than for
Cause (as defined in the agreements) or without Good Reason (as defined in the
agreements), restricted stock and/or stock options held by the Executive will
become transferable and/or exercisable, and for the year in which the
termination occurs, the Executive will receive an award under the Metallurg
Management Incentive Compensation Plan if Metallurg achieves its performance
goal for the 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% 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
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.
Alan Ewart entered into an employment agreement with LSM in 1992 which
extends his original employment agreement originally entered into in 1983. The
new employment agreement provides that Mr. Ewart shall be the Managing Director
of LSM until age 65 provided that if Mr. Ewart's employment is terminated by
LSM, LSM is required to pay him two years salary. Mr. Ewart has also entered
into a consulting agreement with Metallurg. See "Certain Transactions." Mr.
Ewart is entitled to a pension under a pension plan with LSM based on a
percentage of his final salary for each year of service up to a maximum of 40
years. Mr. Ewart has 28 years of service with LSM.
MANAGEMENT INCENTIVE COMPENSATION PLANS
The Board has adopted the Metallurg, Inc. Management Incentive Compensation
Plan ("MICP"). 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
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<PAGE> 66
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.
Participation and Administration. All of the Executives 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 is
responsible for the control and administration of the MICP.
Bonus Pool. The amount in the Bonus Pool available for Awards will be
equal to the sum of (i) 40% of the CEO's actual base salary paid during a
specific performance period and (ii) 30% of the sum of all other participants'
actual base salaries paid during the same specific performance period. In
addition, if the actual EBITDA (as defined in the MICP) 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 was
based on the projected EBITDA for the fiscal year ending December 31, 1996. 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% of the CEO's salary plus an additional amount (if any) equal to 40%
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% of the Bonus Pool and such undistributed
amounts will be reserved for, and applied to, future Bonus Pool Cash Awards 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 (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 his or her Bonus
Pool Cash Award or Cash Award complying with such procedures as the Compensation
Committee may prescribe.
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.
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 proceedings and
shortly thereafter. The Retention Plans will terminate in January, 1998.
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<PAGE> 67
PRINCIPAL STOCKHOLDERS
The Company is authorized to issue 15,000,000 shares of Common Stock, par
value $.01 per share ("Common Stock"). As of September 1, 1997, 5,012,073 shares
of Common Stock were issued and outstanding, including 55,667 shares issuable on
exercise of stock options.
The following table sets forth certain information as of August 31, 1997,
with respect to the shares of Common Stock of the Company beneficially owned by
each person or group that is known by the Company to be a beneficial owner of
more than 5% of the outstanding Common Stock and all directors and executive
officers of the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF TITLE OF BENEFICIAL OWNERSHIP PERCENTAGE
BENEFICIAL OWNER CLASS (NUMBER OF SHARES) OF TOTAL
- ------------------------------------------- ------------- -------------------- ----------
<S> <C> <C> <C>
Franklin Mutual Advisors, Inc.............. Common Stock 1,371,883 27.4%
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Contrarian Capital Advisors L.L.C.......... Common Stock 853,738 17.0
411 West Putnam Avenue
Suite 225
Greenwich, Connecticut 06830
Cerberus Partners, L.P..................... Common Stock 709,271 14.2
450 Park Avenue
New York, New York 10022
Morgens, Waterfall Overseas Partners....... Common Stock 704,116 14.1
10 East 50th Street
26th Floor
New York, New York 10022
SBC Warburg Dillon Read.................... Common Stock 544,870 10.9
222 Broadway
New York, New York 10006
Michael A. Standen(a)...................... Common Stock 155,888 3.1
Alan D. Ewart(b)........................... Common Stock 56,120 1.1
J. Richard Budd III(c)..................... Common Stock 30,833 *
Michael A. Banks(d)........................ Common Stock 32,401 *
Barry C. Nuss(e)........................... Common Stock 39,894 *
Eric L. Schondorf(f)....................... Common Stock 17,500 *
Robin A. Brumwell(g)....................... Common Stock 19,167 *
All executive officers and directors as
group
(10 persons)............................. Common Stock 351,803 7.0
</TABLE>
- ---------------
(*) Less than 1%.
(a) Such person's stockholding includes 70,000 shares of stock as a stock award
under the SASOP and options to purchase 50,000 shares as an option award
under the SASOP. The stock awards vested 20% on April 14, 1997 and vest 40%
on each of April 13, 1998 and 1999. The options vested 33 1/3% on September
1, 1997 and vest 33 1/3% on each of September 1, 1998 and 1999.
(b) Such person's stockholding includes 40,000 shares of stock as a stock award
under the SASOP and options to purchase 25,000 shares as an option award
under the SASOP. The stock awards vested 20% on April 14, 1997 and vest 40%
on each of April 13, 1998 and 1999. The options vested 33 1/3% on September
1, 1997 and vest 33 1/3% on each of September 1, 1998 and 1999.
(c) Such person's stockholding includes 25,000 shares of stock as a stock award
under the SASOP and options to purchase 17,500 shares as an option award
under the SASOP. The stock awards vested 20% on April 14, 1997 and vest 40%
on each of April 13, 1998 and 1999. The options vested 33 1/3% on September
1, 1997 and vest 33 1/3% on each of September 1, 1998 and 1999.
(d) Such person's stockholding includes 27,500 shares of stock as a stock award
under the SASOP and options to purchase 12,500 shares as an option award
under the SASOP. The stock awards vested 20% on April 14, 1997 and vest 40%
on each of April 13, 1998 and 1999. The options vested 33 1/3% on September
1, 1997 and vest 33 1/3% on each of September 1, 1998 and 1999.
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<PAGE> 68
(e) Such person's stockholding includes 32,500 shares of stock as a stock award
under the SASOP and options to purchase 17,500 shares as an option award
under the SASOP. The stock awards vested 20% on April 14, 1997 and vest 40%
on each of April 13, 1998 and 1999. The options vested 33 1/3% on September
1, 1997 and vest 33 1/3% on each of September 1, 1998 and 1999.
(f) Such person's stockholding includes 15,000 shares of stock as a stock award
under the SASOP and options to purchase 7,500 shares as an option award
under the SASOP. The stock awards vested 20% on April 14, 1997 and vest 40%
on each of April 13, 1998 and 1999. The options vested 33 1/3% on September
1, 1997 and vest 33 1/3% on each of September 1, 1998 and 1999.
(g) Such person's stockholding includes 17,500 shares of stock as a stock award
under the SASOP and options to purchase 5,000 shares as an option award
under the SASOP. The stock awards vested 20% on April 14, 1997 and vest 40%
on each of April 13, 1998 and 1999. The options vested 33 1/3% on September
1, 1997 and vest 33 1/3% on each of September 1, 1998 and 1999.
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CERTAIN TRANSACTIONS
The Company has a consulting agreement with Alan D. Ewart, one of its
Directors. Pursuant to this agreement, Mr. Ewart provides consulting services as
a director of Metallurg and management advice with respect to the Company's
European operation. The Company pays Mr. Ewart $20,000 annually for his
services. The consulting agreement may be terminated by the Company after notice
to Mr. Ewart.
The Company has a Registration Rights Agreement with the holders of 5% or
more of its Common Stock issued and outstanding as of April 14, 1997 (the
"Effective Date") of the Reorganization Plan (each a "Qualified Holder"). This
Agreement covers all of the shares of Common Stock owned by such Qualified
Holders as of the Effective Date and gives the Qualified Holders the right to
demand registration at any time beginning with the earlier to occur of (i) the
first anniversary of the Effective Date and (ii) the consummation of an initial
public offering of the Company and ending on the earlier to occur of (i) the
first date there are no Qualified Holders and (ii) the fifth anniversary of the
Effective Date, upon the written request of one or more Qualified Holders which,
in the aggregate, constitute at least 20% of the outstanding Common Stock on the
date of the request. However, the Company is not required to comply with any
request if less than one million registrable securities are proposed to be
registered, and it is not required to effect more than two registrations during
the above mentioned period. In addition, this Agreement gives the holders
"piggyback" registration rights beginning in April 1998.
Owners of more than 5% of the Common Stock of the Company, directors and
executive officers beneficially own approximately $30.0 million aggregate
principal amount of the outstanding 12% Senior Notes which are to be repaid,
together with accrued interest and prepayment penalty of 3% with the proceeds of
the Offering. In addition, as part of the Recapitalization, holders of the
Common Stock, or options with respect thereto, including certain directors and
officers of the Company, will receive a dividend of $3.90 per share and stock
option.
Pursuant to the terms of the employment agreements between the Company and
certain executive officers, those officers have received loans from the Company
with regard to their Initial Stock Awards. See "Management -- 1997 Stock Award
and Stock Option Plan."
DESCRIPTION OF CREDIT FACILITIES AND OTHER FINANCING ARRANGEMENTS
Revolving Credit Facility. In April 1997, the Company and Shieldalloy
entered into a senior secured credit facility ("Revolving Credit Facility") with
BankBoston, N.A., an affiliate of one of the Initial Purchasers, and a syndicate
of financial institutions (collectively, the "Lenders") providing for a $40
million three-year revolving credit loan facility. In October 1997, the maximum
amount available under the Revolving Credit Facility was increased to $50.0
million, of which approximately $12.0 million is a subfacility for GfE.
The Revolving Credit Facility matures on April 14, 2000 and bears interest
at a rate per annum equal to (i) the Alternate Base Rate plus 1.00% per annum,
(the Alternate Base Rate is the greater of BankBoston, N.A.'s base rate or the
Federal Funds Effective Rate plus 0.5%) or (ii) the reserve adjusted Eurodollar
rate plus 2.5% for interest periods of one, two or three months. The Revolving
Credit Facility has a $30.0 million sublimit for letters of credit. The
Revolving Credit Facility is available (subject to borrowing base availability)
to fund working capital requirements and for general corporate purposes.
The obligations of the Company and Shieldalloy under the Revolving Credit
Facility are secured by first priority security interests in virtually all
assets of the Company, Shieldalloy and their U.S. subsidiaries, including, among
other things, all goods, accounts, instruments, documents, chattel paper,
investment property, intellectual property and other general intangibles. The
capital stock of all direct subsidiaries of the Company and Shieldalloy other
than EWW are also pledged.
Revolving credit loans under the Revolving Credit Facility are subject to
maintenance by the Company of a borrowing base, which is equal to the sum of
specified fixed percentages of eligible
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accounts receivable, eligible inventory and eligible equipment. The Company is
required to make immediate mandatory prepayments if and to the extent that loans
exceed availability.
The Company is required to pay Lenders under the Revolving Credit Facility,
on a quarterly basis, a commitment fee equal to 0.375% per annum on the average
amount by which the maximum commitment exceeds the sum of (i) the outstanding
revolving credit loans under the Revolving Credit Facility, plus (ii) the
maximum drawing amount and all unpaid reimbursement obligations in respect of
all Letters of Credit issued under the Revolving Credit Facility net of any
unused commitment fees paid under the German Subfacility. The Company is also
required to pay a Collateral Administration Fee of $30,000 per annum.
The Revolving Credit Facility contains a number of covenants that, among
other things, restrict the ability of the Company and Shieldalloy to engage in
mergers or consolidations, create new liens on assets, incur additional
indebtedness, issue guarantees, pay dividends, conduct business with affiliates
on anything but an arms' length basis, make investments, and make acquisitions
and/or sell assets. The Revolving Credit Facility also contains customary events
of default, including defaults relating to payment defaults, change in
ownership/control, uninsured judgments or insured judgments where a dispute
exists with the insurance carrier in excess of an amount to be determined,
breach of any representation or warranty, and certain events of bankruptcy and
insolvency.
The German Subfacility. GfE and certain other subsidiaries of the Company
(collectively, the "German Borrowers"), severally and not jointly, are parties
to a Metallurg German Credit Facility (the "German Subfacility") with
BankBoston, N.A. (the "German Subfacility Lender") providing for an
approximately $12.0 million revolving credit facility. The German Subfacility is
structured as a subfacility of the Revolving Credit Facility.
The German Subfacility will mature on April 14, 2000 and bears interest at
a rate per annum equal to (i) the Overdraft Rate as determined by the German
Subfacility Lender from time to time or (ii) an alternative rate equal to the
reserve adjusted DM Frankfurt interbank offered rate plus 2.5% for interest
periods of one, two or three months (an "Interbank Rate Loan"). The German
Subfacility has a $0.6 million sublimit for letters of credit and bank
guarantees. The German Subfacility is available (subject to borrowing base
availability) to repay all existing bank overdraft and revolver indebtedness and
to finance the German Borrowers' working capital needs.
The obligations of the German Borrowers under the German Subfacility are
secured by a first priority perfected security interest in all of the German
Borrowers' existing and future accounts, instruments, chattel paper, inventory,
documents, investments and general intangibles and all proceeds, including
insurance proceeds, of the foregoing. In addition, the obligations of GfE are
further secured by a pledge of the stock of each other German Borrower.
The German Borrowers are required to make mandatory prepayments of loans
under the German Subfacility, subject to certain exceptions, (i) if loans and
other credit extended exceed the maximum commitment, (ii) from net cash proceeds
of asset sales other than sales of inventory and obsolete equipment in the
ordinary course of business and from net cash proceeds of up to $5.0 million of
intercompany cash investments in the German Borrowers by the Company and (iii)
on the last day of each interest period related to the Interbank Rate Loan, to
the extent that any German Borrower's overdraft account credit balance exceeds
prescribed limits.
The German Borrowers are required to pay the German Subfacility Lender on a
quarterly basis a commitment fee equal to 0.375% per annum on the unutilized
portion of the revolving credit facility. The German Borrowers are also required
to pay administration fees, to be computed on an annual basis and paid
quarterly.
The German Subfacility contains a number of covenants that, among other
things, restrict the ability of the German Borrowers to dispose of assets, incur
additional indebtedness, create liens on assets, make investments, guaranties,
capital expenditures or acquisitions, or engage in mergers. In addition, the
German Borrowers are required to comply with a net worth test defined in the
German Subfacility. The
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German Subfacility contains customary events of default, including defaults
relating to payments, breach of representations and warranties, covenants,
cross-defaults and cross-acceleration to certain other indebtedness, certain
events of bankruptcy and insolvency, actual or asserted invalidity of security
and change of control.
The German Subfacility is guaranteed by Metallurg, Shieldalloy and
Metallurg's other U.S. subsidiaries under the Revolving Credit Facility. If
obligations under the German Subfacility exceed the borrowing base generated by
the German Borrowers (which is based on accounts receivable and inventory), the
excess is reserved from the borrowing base available to the U.S. borrowers under
the Revolving Credit Facility.
LSM Credit Facility and LSM Term Loan Facility. LSM has several bank
credit facilities which provide LSM and its subsidiaries with up to L7.0 million
(approximately $11.3 million) of borrowings, up to 3.0 million (approximately
$4.9 million) of foreign exchange exposure and up to L2.2 million (approximately
$3.6 million) for other ancillary banking arrangements including bank guarantees
(the "LSM Credit Facility"). At July 31, 1997, there were no outstanding loans
under the LSM Credit Facility. Borrowings under the LSM Credit Facility are
payable on demand. The outstanding loans under the LSM Credit Facility bear
interest at the lender's base rate plus 1.0%.
On April 11, 1997, LSM entered into a term loan facility with NM Rothschild
& Sons Limited in the amount of L5.0 million (approximately $8.1 million) (the
"LSM Term Loan Facility"), the proceeds of which were used to make a dividend to
Metallurg in order to fund the Reorganization Plan. The LSM Term Loan Facility
expires on April 28, 2000 and bears interest at 2.0% above LIBOR. LSM has
entered into an interest rate swap which effectively fixes the interest rate at
9.4%.
The LSM Credit Facility, together with the LSM Term Loan Facility, are
secured by substantially all of the assets of LSM and its subsidiaries. The LSM
Credit Facility and the LSM Term Loan Facility limit LSM's ability to pay
dividends and management fees to Metallurg. Under the terms of these facilities,
LSM is currently (a) permitted to pay dividends to Metallurg in fiscal year 1998
and each year thereafter in an amount not to exceed the lesser of $1.6 million
and the Profit After Tax (as defined in the LSM Term Loan Facility) for that
fiscal year (such dividends are payable only after the preparation of the
audited financial statements by LSM for such fiscal year) and (b) permitted to
pay management fees in any fiscal year in an amount not to exceed $0.8 million
in fiscal year 1997 and 1998 and $1.0 million per fiscal year thereafter. In
addition, if there is a default under either of the LSM credit facilities, LSM
is prohibited from paying any dividends or management fees to Metallurg.
LSM has obtained consent from its working capital lender to modify the
limitations described above to (i) permit LSM to pay dividends to the Company of
up to 100% of LSM's annual net income and (ii) eliminate the limitations on
management fees, in each case contingent upon repayment of the LSM Term Loan
Facility. The Company repaid the LSM Term Loan Facility with proceeds from the
Offering. As a result, the lender under the LSM Credit Facility released the
security pledged for its benefit and permitted increased dividends to the
Company in an amount up to 100% of LSM's annual net income. On October 9, 1997,
LSM entered into a L1.0 million (approximately $1.6 million) facility for
borrowings and foreign exchange exposure.
EWW Credit Facility. EWW has committed lines of credit with several banks
in the aggregate amount of DM 15.0 million (approximately $8.6 million). The
credit facilities expire July 1, 1999 and bear interest at a rate from 7.0% to
7.5%. EWW's accounts receivable, inventory and certain fixed assets are pledged
to secure the credit facilities. A portion of these credit facilities are also
guaranteed by a regional German governmental authority (the "State Guaranty"),
which guaranty is secured by a pledge on the stock of EWW. The State Guaranty
requires that the governmental authority consent to certain transactions by EWW,
including the making of dividends and the reduction of its stated capital. There
are no amounts currently outstanding under this working capital facility.
Although the Company believes that if EWW were otherwise in a position to pay
dividends, either the guarantor would consent to such payment or the working
capital facility at EWW could be refinanced or terminated, there can be no
assurance that this will be the case.
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In addition, EWW has a term loan outstanding to a German state pension
authority in the amount of DM 3.6 million (approximately $2.1 million) as of
July 31, 1997, which is secured by a mortgage on certain real property and bears
interest at 4.5%.
EWW Financial Arrangement with German State Pension Board. EWW's ability
to pay dividends to Metallurg is further restricted by the terms of a settlement
agreement entered into with a German State pension board with regard to a
portion of its pension liability. As of July 31, 1997, EWW's contingent
obligation to the German state pension authority was DM 8.2 million
(approximately $4.7 million). Pursuant to the terms of its settlement agreement,
EWW is required to pay 75% of its net income to satisfy such contingent
obligation, and 25% of its net income may be dividended to Metallurg, subject to
other contractual and statutory restrictions. The obligations to the German
state pension board are secured by the capital stock of EWW.
Other GfE Credit Facilities. In addition to the German Subfacility
described above, GfE has long term debt of DM 3.2 million (approximately $1.8
million) due to Dresdner Bank which is secured by a lien on certain property of
GfE which bears interest at a weighted average rate of 6.0% and DM 1.1 million
(approximately $0.6 million) which is secured by a lien on certain property of a
GfE subsidiary ("Keramed"). Keramed also has an overdraft facility in the amount
of DM 0.5 million, which has no outstanding balance as of July 31, 1997.
Ferrolegeringar Aktiengesellschaft ("FAG") Credit Facility. FAG, the
Company's trading and merchanting subsidiary in Switzerland, has an uncommitted
credit facility with Union Bank of Switzerland in the amount of CHF 7.0 million
(approximately $5.0 million), one-third of which is used for letters of credit
and foreign exchange and two-thirds of which is used for loans and overdrafts.
Usage under the line is limited to 50% of eligible accounts receivable of FAG as
defined in the agreement. The line of credit is secured by the accounts
receivable of FAG. As of July 31, 1997, the outstanding amount under the credit
facility was CHF 0.5 million (approximately $0.3 million). This facility
restricts dividend payments to no more than 50% of FAG's net income.
Other Credit Facilities. The Company's other foreign subsidiaries maintain
short-term secured and unsecured borrowing arrangements, generally in local
currencies, with various banks. Borrowings under these arrangements aggregated
$0.4 million at July 31, 1997.
DESCRIPTION OF THE NEW NOTES
The New Notes offered hereby will be issued under an indenture to be dated
as of November 25, 1997 (the "Indenture"), among the Company, the Guarantors and
IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"). A copy of the
Indenture is available upon request to the Company at the address set forth
under "Available Information." The following summaries of certain provisions of
the Indenture do not purport to be complete and are subject, and are qualified
in their entirety by reference, to the Trust Indenture Act of 1939 (the "Trust
Indenture Act") and to all the provisions of the New Notes and the Indenture,
including the definitions therein of certain terms. For purposes of this
Section, references to the "Company" shall mean Metallurg, Inc., excluding its
subsidiaries. Capitalized terms used in this Section and not otherwise defined
below have the respective meanings assigned to them in the Indenture.
GENERAL
The New Notes will mature on December 1, 2007, and will be limited to an
aggregate principal amount of $100.0 million. The New Notes will bear interest
at the rate set forth on the cover page hereof from November 25, 1997, or from
the most recent interest payment date to which interest has been paid, payable
semiannually on June 1 and December 1 of each year, beginning on June 1, 1998,
to the Persons who are registered holders of the New Notes at the close of
business on the preceding May 15 or November 15, as the case may be. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months.
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Principal of, and premium, if any, and interest on, the New Notes will be
payable in immediately available funds, and the New Notes will be exchangeable
and transferable, at an office or agency of the Company, one of which will be
maintained for such purpose in The City of New York (which initially will be the
corporate trust office of the Trustee); provided, however, that payment of
interest may be made at the option of the Company by check mailed to the Person
entitled thereto as shown on the Security Register. The New Notes will be issued
only in fully registered form without coupons, in denominations of $1,000 or any
integral multiple thereof. No service charge will be made for any registration
of transfer or exchange of New Notes, except for any tax or other governmental
charge that may be imposed in connection therewith.
Pursuant to the Registration Agreement, the Company has agreed to file with
the Commission the Exchange Offer Registration Statement relating to an offer to
exchange the Old Notes for New Notes. The interest rate on the Old Notes is
subject to increase in certain circumstances if the Company does not file such
registration statement or, in lieu thereof, a resale shelf registration
statement for the Old Notes, if such registration statement is not declared
effective on a timely basis or if certain other conditions are not satisfied,
all as further described under "The Exchange Offer."
GUARANTIES
The obligations of the Company under the Indenture, including the
repurchase obligation resulting from a Change of Control, will be
unconditionally guaranteed, jointly and severally, on a senior unsecured basis,
by each of the Guarantors.
Upon the sale or other disposition of a Guarantor or the sale or
disposition of all or substantially all the assets of a Guarantor permitted by
the Indenture, such Guarantor will be released from all its obligations under
its Guaranty. See "-- Certain Covenants -- Limitation on Issuance or Sale of
Capital Stock of Restricted Subsidiaries" and "-- Merger, Consolidation and Sale
of Property." Any Guarantor that is designated an Unrestricted Subsidiary in
accordance with the terms of the Indenture will be released from all its
obligations under its Guaranty upon execution and delivery of a supplemental
indenture in form satisfactory to the Trustee.
Each of the Company and the Guarantors will agree to contribute to any
other Guarantor which makes payments pursuant to its Guaranty an amount equal to
the Company's or such Guarantor's proportionate share of such payment, based on
the net worth of the Company or such Guarantor relative to the aggregate net
worth of the Company and the Guarantors.
RANKING
The New Notes will be senior unsecured obligations of the Company,
effectively subordinated in right of payment to all existing and future secured
indebtedness of the Company to the extent of the value of the assets securing
such indebtedness. The New Notes will rank pari passu with all senior
indebtedness of the Company and senior to all subordinated indebtedness of the
Company. The New Notes will be guaranteed on a senior unsecured basis by certain
domestic Restricted Subsidiaries of the Company which, for the fiscal quarter
ended July 31, 1997, generated 31.2% of the Company's revenue and certain future
domestic Restricted Subsidiaries of the Company. The Guaranties will be senior
unsecured obligations of the Guarantors and will effectively rank subordinate in
right of payment to all secured indebtedness of the Guarantors to the extent of
the value of the assets securing such indebtedness. The Guaranties will rank
pari passu with all senior indebtedness of the Guarantors and senior to all
subordinated indebtedness of the Guarantors. As of July 31, 1997, after giving
effect to the Offering and the application of the estimated net proceeds
therefrom, the secured obligations of the Company and the Guarantors would have
consisted of approximately $24.6 million of contingent obligations in respect of
outstanding letters of credit under the Credit Facility. None of the Company's
or any Guarantor's debt as of such date, after giving such effect, would have
been subordinated to the New Notes or the Guaranties.
All debt and other liabilities of the Company's Subsidiaries which are not
Guarantors, including the claims of trade creditors, secured creditors and
creditors holding debt and guarantees issued by such
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Subsidiaries, and claims of preferred stockholders, if any, of such
Subsidiaries, will be effectively senior to the New Notes. The Guaranties could
also be effectively subordinated to all of the obligations of the Guarantors
under certain circumstances. As of July 31, 1997, after giving effect to the
Offering and the application of the estimated net proceeds therefrom, the
Company's Subsidiaries which are not Guarantors would have had approximately
$168.4 million of balance sheet liabilities (including trade payables, accrued
liabilities and intercompany amounts), of which $5.5 million would have been
indebtedness, and the Guarantors would have had approximately $92.0 million of
balance sheet liabilities (including trade payables, accrued liabilities and
intercompany amounts), none of which would have been indebtedness.
The Company and its Subsidiaries have other liabilities, including
contingent liabilities, which may be significant. Although the Indenture
contains limitations on the amount of additional Debt which the Company and the
Restricted Subsidiaries may Incur, all such Debt may be Incurred by Subsidiaries
and the amounts of such Debt could be substantial. See "-- Certain
Covenants -- Limitation on Debt."
See "Risk Factors -- Asset Encumbrance," "-- Holding Company Structure;
Restrictions on Dividend Payments by Subsidiaries," "-- Fraudulent Conveyance
Considerations" and "-- Substantial Leverage" and "Description of Credit
Facilities and Other Financing Arrangements."
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the New Notes will not be
redeemable at the option of the Company prior to December 1, 2002. Thereafter,
the New Notes will be redeemable at the option of the Company, in whole or in
part, on not less than 30 nor more than 60 days' prior notice, at the following
redemption prices (expressed as percentages of principal amount), plus accrued
and unpaid interest (if any) to the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month period
commencing on December 1 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
----------------------------------------------------------------- ----------
<S> <C>
2002............................................................. 105.500%
2003............................................................. 103.667%
2004............................................................. 101.833%
2005 and thereafter.............................................. 100.000%
</TABLE>
In addition, prior to December 1, 2000, the Company may redeem up to a
maximum of 34% of the original aggregate principal amount of the New Notes with
the proceeds of one or more Public Equity Offerings following which there is a
Public Market, at a redemption price equal to 111% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the redemption
date (subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date); provided, however,
that after giving effect to any such redemption, at least 66% of the original
aggregate principal amount of the New Notes remains outstanding. Any such
redemption shall be made within 60 days of such Public Equity Offering upon not
less than 30 nor more than 60 days' notice mailed to each holder of New Notes
being redeemed and otherwise in accordance with the procedures set forth in the
Indenture.
SINKING FUND
There are no sinking fund payments for the New Notes.
REPURCHASE AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of New Notes shall
have the right to require the Company to repurchase all or any part of such
holder's New Notes pursuant to the offer described below (the "Change of Control
Offer") at a purchase price (the "Change of Control Purchase Price")
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equal to 101% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the purchase date (subject to the right of holders of record
on the relevant record date to receive interest due on the relevant interest
payment date).
Within 30 days following any Change of Control, the Company shall (a) cause
a notice of the Change of Control Offer to be sent at least once to the Dow
Jones News Service or similar business news service in the United States and (b)
send, by first-class mail, with a copy to the Trustee, to each holder of New
Notes, at such holder's address appearing in the Security Register, a notice
stating: (i) that a Change of Control has occurred and a Change of Control Offer
is being made pursuant to the covenant entitled "Repurchase at the Option of
Holders Upon a Change of Control" and that all New Notes timely tendered will be
accepted for payment; (ii) the Change of Control Purchase Price and the purchase
date, which shall be, subject to any contrary requirements of applicable law, a
business day no earlier than 30 days nor later than 60 days from the date such
notice is mailed; (iii) the circumstances and relevant facts regarding such
Change of Control (including information with respect to pro forma historical
income, cash flow and capitalization after giving effect to the Change of
Control); and (iv) the procedures that holders of New Notes must follow in order
to tender their New Notes (or portions thereof) for payment, and the procedures
that holders of New Notes must follow in order to withdraw an election to tender
New Notes (or portions thereof) for payment.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of New Notes pursuant to a Change of Control
Offer. To the extent that the provisions of any securities laws or regulations
conflict with the provisions of the covenant described hereunder, the Company
will comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under the covenant described hereunder
by virtue of such compliance.
The Change of Control repurchase feature is a result of negotiations
between the Company and the Initial Purchasers. Management has no present
intention to engage in a transaction involving a Change of Control, although it
is possible that the Company would decide to do so in the future. Subject to
certain covenants described below, the Company could, in the future, enter into
certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of debt outstanding at such time
or otherwise affect the Company's capital structure or credit ratings.
The definition of Change of Control includes a phrase relating to the sale,
assignment, lease, conveyance, disposition or transfer of "all or substantially
all" the Company's assets. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of New Notes to require the Company to repurchase such New Notes as a
result of a sale, assignment, lease, conveyance, disposition or transfer of less
than all the assets of the Company may be uncertain.
The Credit Facility prohibits the Company from purchasing any Notes, and
also provides that the occurrence of a Change of Control would constitute a
default under such existing debt. Other future debt of the Company may contain
prohibitions of certain events which would constitute a Change of Control or
require such debt to be repurchased upon a Change of Control. Moreover, the
exercise by holders of New Notes of their right to require the Company to
repurchase such New Notes could cause a default under existing or future debt of
the Company, even if the Change of Control itself does not, due to the financial
effect of such repurchase on the Company. Finally, the Company's ability to pay
cash to holders of New Notes upon a repurchase may be limited by the Company's
then existing financial resources. There can be no assurance that sufficient
funds will be available when necessary to make any required repurchases. The
Company's failure to purchase the New Notes in connection with a Change of
Control would result in a default under the Indenture which would, in turn,
constitute a default under the existing or future debt of the Company. The
provisions under the Indenture relative to the Company's obligation to make an
offer to repurchase the New Notes as a result of a Change of Control may be
waived or modified (at any time prior to the occurrence of such Change of
Control) with the written consent of the holders of a majority in principal
amount of the New Notes.
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CERTAIN COVENANTS
Limitation on Debt. The Company shall not, and shall not permit any
Restricted Subsidiary to, Incur, directly or indirectly, any Debt (which
includes, in the case of Restricted Subsidiaries, Preferred Stock) unless, after
giving pro forma effect to the application of the proceeds thereof, no Default
or Event of Default would occur as a consequence of such Incurrence or be
continuing following such Incurrence and either (a) after giving effect to the
Incurrence of such Debt and the application of the proceeds thereof, the
Consolidated Coverage Ratio would be greater than 2.00 to 1.00 or (b) such Debt
is Permitted Debt.
The term "Permitted Debt" is defined to include the following:
(a) Debt of the Company evidenced by the New Notes and of Guarantors
evidenced by Guaranties;
(b) Debt under the Credit Facility, provided that the aggregate
principal amount of all such Debt under the Credit Facility at any one time
outstanding shall not exceed the greater of (i) $50.0 million, which amount
shall be permanently reduced by the amount of Net Available Cash used to
repay Debt under the Credit Facility, and not subsequently reinvested in
Additional Assets or used to purchase Notes, pursuant to the covenant
described under "-- Limitation on Asset Sales" and (ii) the sum of the
amounts equal to (x) 65% of the book value of the inventory of the Company
and the Restricted Subsidiaries and (y) 90% of the book value of the
accounts receivable of the Company and the Restricted Subsidiaries, in each
case as of the most recently ended quarter of the Company for which
financial statements of the Company have been provided to the holders of
New Notes (the greater of (i) and (ii) being the "Permitted Debt Amount");
provided, further, that the aggregate amount of Debt Incurred pursuant to
this clause (b), together with the aggregate amount of Debt Incurred
pursuant to clause (c) below shall not exceed an amount equal to the
Permitted Debt Amount at any one time outstanding;
(c) Debt of any Restricted Subsidiary under one or more debt
facilities with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing (including
through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables),
letters of credit, foreign exchange, bankers acceptances or similar
financial arrangements, and any Permitted Refinancing Debt Incurred with
respect thereto, provided that the aggregate principal amount of all such
Debt at any one time outstanding shall not exceed the sum of (i) 65% of the
book value of the inventory of such Restricted Subsidiary and (ii) 90% of
the book value of the accounts receivable of such Restricted Subsidiary, in
each case as of the most recently ended quarter of the Company for which
financial statements of the Company have been provided to the holders of
the New Notes; provided, further, that the aggregate amount of Debt
Incurred pursuant to this clause (c), together with the aggregate amount of
Debt Incurred pursuant to clause (b) above shall not exceed the Permitted
Debt Amount at any one time outstanding;
(d) Debt in respect of Capital Lease Obligations and Purchase Money
Debt, provided that (i) the aggregate principal amount of such Debt does
not exceed the Fair Market Value (on the date of the Incurrence thereof) of
the Property acquired, constructed or leased and (ii) the aggregate
principal amount of all Debt Incurred and then outstanding pursuant to this
clause (d) (together with all Permitted Refinancing Debt Incurred in
respect of Debt previously Incurred pursuant to such clause (d) does not
exceed $15.0 million;
(e) Debt of the Company owing to and held by any Restricted Subsidiary
or Debt of a Restricted Subsidiary owed to and held by the Company or
another Restricted Subsidiary; provided, however, that any subsequent
transfer of Capital Stock or other event that results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of any such Debt (except to the Company or a Restricted
Subsidiary) shall be deemed, in each case, to constitute the Incurrence of
such Debt by the issuer thereof;
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(f) Debt under Interest Rate Agreements entered into by the Company or
a Restricted Subsidiary for the purpose of limiting interest rate risk in
the ordinary course of the financial management of the Company or such
Restricted Subsidiary and not for speculative purposes, provided that the
obligations under such agreements are directly related to payment
obligations on Debt otherwise permitted by the terms of this covenant;
(g) Debt under Currency Exchange Protection Agreements entered into by
the Company or a Restricted Subsidiary for the purpose of limiting currency
exchange rate risks directly related to transactions entered into by the
Company or such Restricted Subsidiary in the ordinary course of business
and not for speculative purposes;
(h) Debt Incurred in connection with cash pooling arrangements by and
among the Company and its Restricted Subsidiaries, provided that no
liability is required under GAAP to be reflected in the consolidated
financial statements of the Company with respect thereto;
(i) Debt outstanding on the Issue Date not otherwise described in
clauses (a) through (h) above;
(j) Debt (other than Debt permitted by the immediately preceding
paragraph or the other clauses of this paragraph) in an aggregate principal
amount outstanding at any one time not to exceed $25.0 million; and
(k) Permitted Refinancing Debt Incurred in respect of Debt Incurred
pursuant to clause (a) of the immediately preceding paragraph and clauses
(a) and (i) above.
Notwithstanding the immediately foregoing two paragraphs, the Company shall
not, and shall not permit any Restricted Subsidiary to, Incur any Debt pursuant
to such paragraphs if the proceeds thereof are used, directly or indirectly, to
Refinance any Subordinated Obligations unless such Debt shall be subordinated to
the New Notes and the Guaranties, as applicable, to at least the same extent as
such Subordinated Obligations.
Limitation on Restricted Payments. The Company shall not make, and shall
not permit any Restricted Subsidiary to make, directly or indirectly, any
Restricted Payment if at the time of, and after giving pro forma effect to, such
proposed Restricted Payment,
(a) a Default or Event of Default shall have occurred and be continuing,
(b) the Company could not Incur at least $1.00 of additional Debt pursuant
to clause (a) of the first paragraph of the covenant described under
"-- Limitation on Debt" or
(c) the aggregate amount of such Restricted Payment and all other
Restricted Payments declared or made since the Issue Date (the amount of any
Restricted Payment, if made other than in cash, to be based upon Fair Market
Value) would exceed an amount equal to the sum of:
(i) 50% of the aggregate amount of Consolidated Net Income accrued
during the period (treated as one accounting period) from and after the
first day of the fiscal quarter following the end of the most recent fiscal
quarter ended immediately prior to the Issue Date to the end of the most
recent fiscal quarter ending at least 45 days prior to the date of such
Restricted Payment (or if the aggregate amount of Consolidated Net Income
for such period shall be a deficit, minus 100% of such deficit),
(ii) Capital Stock Sale Proceeds,
(iii) the amount by which Debt (other than Subordinated Obligations)
of the Company or any Guarantor or any other Restricted Subsidiary is
reduced on the Company's balance sheet upon the conversion or exchange
(other than by a Subsidiary of the Company) subsequent to the Issue Date of
any Debt of the Company or any Guarantor or any other Restricted Subsidiary
convertible or exchangeable for Capital Stock (other than Disqualified
Stock) of the Company (less the amount of any cash or other Property
distributed by the Company or any Restricted Subsidiary upon such
conversion or exchange),
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(iv) an amount equal to the sum of (A) the net reduction in
Investments in any Person other than a Restricted Subsidiary resulting from
dividends, repayments of loans or advances or other transfers of assets, in
each case to the Company or any Restricted Subsidiary from such Person, and
(B) the portion (proportionate to the Company's equity interest in such
Unrestricted Subsidiary) of the Fair Market Value of the net assets of an
Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary; provided, however, that the foregoing
sum shall not exceed, in the case of any Person, the amount of Investments
previously made (and treated as a Restricted Payment) by the Company or any
Restricted Subsidiary in such Person, and
(v) $5.0 million.
Notwithstanding the foregoing limitation, the Company may:
(a) pay dividends on its Capital Stock within 60 days of the
declaration thereof if, on said declaration date, such dividends could have
been paid in compliance with the Indenture; provided, however, that such
dividend shall be included in the calculation of the amount of Restricted
Payments;
(b) purchase, repurchase, redeem, legally defease, acquire or retire
for value Capital Stock of the Company or Subordinated Obligations in
exchange for, or out of the proceeds of the substantially concurrent sale
of, Capital Stock of the Company (other than Disqualified Stock and other
than Capital Stock issued or sold to a Subsidiary of the Company or an
employee stock ownership plan or trust established by the Company or any of
its Subsidiaries for the benefit of their employees); provided, however,
that (i) such purchase, repurchase, redemption, legal defeasance,
acquisition or retirement shall be excluded in the calculation of the
amount of Restricted Payments and (ii) the Capital Stock Sale Proceeds from
such exchange or sale shall be excluded from the calculation pursuant to
clause (c)(ii) above;
(c) purchase, repurchase, redeem, legally defease, acquire or retire
for value any Subordinated Obligations in exchange for, or out of the
proceeds of the substantially concurrent sale of, Permitted Refinancing
Debt; provided, however, that such purchase, repurchase, redemption, legal
defeasance, acquisition or retirement shall be excluded in the calculation
of the amount of Restricted Payments;
(d) make Investments in an aggregate amount not to exceed $20.0
million; provided, however, that such Investments shall be excluded in the
calculation of the amount of Restricted Payments;
(e) repurchase shares of, or options to purchase shares of, common
stock of the Company or any of its Subsidiaries from employees or former
employees of the Company or any of its Subsidiaries, pursuant to the terms
of agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors under which such individuals
purchase or sell, or are granted the option to purchase or sell, shares of
such common stock; provided, however, that the aggregate amount of such
repurchases shall not exceed $2.0 million in any calendar year; provided
further, however, that such repurchases shall be excluded in the
calculation of the amount of Restricted Payments;
(f) expend up to $10.0 million for Restricted Payments in addition to
amounts permitted pursuant to clauses (a) through (e) above; provided,
however, that at the time of, and after giving pro forma effect to, any
such expenditure, no Default or Event of Default shall have occurred and be
continuing; provided further, however, that such expenditures shall be
excluded in the calculation of the amount of Restricted Payments;
(g) make Restricted Payments, including a cash dividend in an
aggregate amount not to exceed $20.0 million, in connection with the
Recapitalization; provided, however, that such Restricted Payments shall be
excluded in the calculation of the amount of Restricted Payments; and
(h) make Restricted Payments required pursuant to the Joint Plan of
Reorganization of the Company and Shieldalloy Metallurgical Corporation
dated December 18, 1996, in an aggregate
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amount not to exceed the lesser of (i) the amount held in reserve
thereunder and (ii) $4.0 million, plus, in each case, interest and
dividends thereon; provided, however, that such Restricted Payments shall
be excluded in the calculation of the amount of Restricted Payments.
Limitation on Liens. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur or suffer to exist, any
Lien (other than Permitted Liens) upon any of its Property (including Capital
Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter
acquired, or any interest therein or any income or profits therefrom, unless it
has made or will make effective provision whereby the New Notes or the
applicable Guaranty will be secured by such Lien equally and ratably with (or
prior to) all other Debt of the Company or any Restricted Subsidiary secured by
such Lien.
Limitation on Issuance or Sale of Capital Stock of Restricted
Subsidiaries. The Company shall not (a) sell or otherwise dispose of any shares
of Capital Stock of a Restricted Subsidiary or (b) permit any Restricted
Subsidiary to, directly or indirectly, issue or sell or otherwise dispose of any
shares of its Capital Stock other than (i) directors' qualifying shares, (ii) to
the Company or a Wholly Owned Subsidiary or (iii) if, immediately after giving
effect to such disposition, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary; provided, however, that, in the case of this
clause (iii), such disposition is effected in compliance with the covenant
described under "-- Limitation on Asset Sales."
Limitation on Asset Sales. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale
unless (a) the Company or such Restricted Subsidiary receives consideration at
the time of such Asset Sale at least equal to the Fair Market Value of the
Property subject to such Asset Sale; (b) at least 75% of the consideration paid
to the Company or such Restricted Subsidiary in connection with such Asset Sale
is in the form of cash or cash equivalents; and (c) the Company delivers an
Officers' Certificate to the Trustee certifying that such Asset Sale complies
with the foregoing clauses (a) and (b). For purposes of this covenant, the
following are deemed to be cash: (x) the amount of any liabilities (other than
liabilities that are by their terms subordinated to any other Debt of the
Company or such Restricted Subsidiary, as the case may be) of the Company or
such Restricted Subsidiary (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto) that are assumed
by the transferee of any such assets or other property in such Asset Sale, as a
result of which the Company or the Restricted Subsidiaries are no longer
obligated with respect to such liabilities and (y) securities received by the
Company or any Restricted Subsidiary from the transferee that are immediately
converted by the Company or such Restricted Subsidiary into cash.
The Net Available Cash (or any portion thereof) from Asset Sales (or an
amount equal thereto) may be applied by the Company or a Restricted Subsidiary,
to the extent the Company or such Restricted Subsidiary elects (or is required
by the terms of any Debt): (a) to prepay, repay, legally defease or purchase
Senior Debt of the Company or any Guarantor or Debt of any Restricted Subsidiary
that is not a Guarantor (excluding, in any such case, any Debt owed to the
Company or an Affiliate of the Company); or (b) to reinvest in Additional Assets
(including by means of an Investment in Additional Assets by a Restricted
Subsidiary in an amount equal to such Net Available Cash received by the Company
or another Restricted Subsidiary); provided, however, that in connection with
any prepayment, repayment, legal defeasance or purchase of Debt pursuant to
clause (a) above, the Company or such Guarantor or other Restricted Subsidiary
shall retire such Debt and shall cause the related loan commitment (if any) to
be permanently reduced by an amount equal to the principal amount so prepaid,
repaid, legally defeased or purchased.
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In the event that any Net Available Cash from an Asset Sale (or an amount
equal thereto) is not applied in accordance with the preceding paragraph within
270 days from the date of the receipt of such Net Available Cash, such Net
Available Cash shall constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $5.0 million (taking into account income earned on such
Excess Proceeds, if any), the Company will be required to make an offer to
purchase (the "Prepayment Offer") the New Notes which offer shall be in the
amount of the Excess Proceeds, on a pro rata basis according to principal
amount, at a purchase price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon, if any, to the purchase date (subject to
the right of holders of record on the relevant record date to receive interest
due on the relevant interest payment date) in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture. To the extent that any portion of the amount of Net Available Cash
remains after compliance with the preceding sentence and provided that all
holders of New Notes have been given the opportunity to tender their New Notes
for purchase in accordance with the Indenture, the Company may use such
remaining amount for any purpose permitted by the Indenture and the amount of
Excess Proceeds will be reset to zero.
Within ten business days after the Company is obligated to make a
Prepayment Offer as described in the preceding paragraph, the Company shall send
a written notice, by first-class mail, to the holders of New Notes, accompanied
by such information regarding the Company and its Subsidiaries as the Company in
good faith believes will enable such holders to make an informed decision with
respect to such Prepayment Offer. Such notice shall state, among other things,
the purchase price and the purchase date, which shall be, subject to any
contrary requirements of applicable law, a business day no earlier than 30 days
nor later than 60 days from the date such notice is mailed.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of New Notes pursuant to the covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with provisions of the covenant described hereunder, the
Company will comply with the applicable securities laws and regulations and will
not be deemed to have breached its obligations under the covenant described
hereunder by virtue thereof.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist any consensual restriction on the right of any Restricted Subsidiary to
(a) pay dividends, in cash or otherwise, or make any other distributions on or
in respect of its Capital Stock, or pay any Debt or other obligation owed, to
the Company or any other Restricted Subsidiary, except that any Debt owed by a
Restricted Subsidiary to the Company or any other Restricted Subsidiary may be
subordinated in right of payment to other Debt obligations of such Restricted
Subsidiary, (b) make any loans or advances to the Company or any other
Restricted Subsidiary, except that any repayment obligations of the Company or
any other Restricted Subsidiary in respect of such loans or advances may be
subordinated in right of payment to other Debt obligations of the Company or
such other Restricted Subsidiary or (c) transfer any of its Property to the
Company or any other Restricted Subsidiary. The foregoing limitations will not
apply (i) with respect to clauses (a), (b) and (c), to restrictions (A) in
effect on the Issue Date, (B) relating to Debt of a Restricted Subsidiary and
existing at the time it became a Restricted Subsidiary if such restriction was
not created in connection with or in anticipation of the transaction or series
of transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company or (C) which result from the
Refinancing of Debt Incurred pursuant to an agreement referred to in the
immediately preceding clause (i)(A) or (B) above or in clause (ii)(A) or (B)
below, provided such restriction is not materially less favorable to the holders
of New Notes than those under the agreement evidencing the Debt so Refinanced,
and (ii) with respect to clause (c) only, to restrictions (A) relating to Debt
that is permitted to be Incurred and is not prohibited from being secured
without also securing the New Notes or the Guaranties pursuant to the covenants
described under "-- Limitation on Debt" and "-- Limitation on Liens" that limit
the right of the debtor to dispose of the Property securing such Debt, (B)
encumbering Property at the time such Property was acquired by the Company or
any Restricted Subsidiary, so long as such restriction relates solely to the
Property so
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acquired and was not created in connection with or in anticipation of such
acquisition, (C) resulting from customary provisions restricting subletting or
assignment of leases or customary provisions in other agreements that restrict
assignment of such agreements or rights thereunder, (D) customary restrictions
contained in asset sale or stock purchase agreements limiting the transfer of
such Property pending the closing of such transaction or (E) any restriction
imposed by applicable law.
Limitation on Transactions with Affiliates. The Company shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, conduct
any business or enter into or suffer to exist any transaction or series of
transactions (including the purchase, sale, transfer, assignment, lease,
conveyance or exchange of any Property or the rendering of any service) with, or
for the benefit of, any Affiliate of the Company (an "Affiliate Transaction"),
unless (a) the terms of such Affiliate Transaction are (i) set forth in writing
and (ii) no less favorable to the Company or such Restricted Subsidiary, as the
case may be, than those that could be obtained in a comparable arm's-length
transaction with a Person that is not an Affiliate of the Company, (b) if such
Affiliate Transaction involves aggregate payments or value in excess of $2.0
million, the Board of Directors (including a majority of the disinterested
members of the Board of Directors) approves such Affiliate Transaction and, in
its good faith judgment, believes that such Affiliate Transaction complies with
clause (a) (ii) of this paragraph as evidenced by a Board Resolution promptly
delivered to the Trustee and (c) if such Affiliate Transaction involves
aggregate payments or value in excess of $15.0 million, the Company obtains a
written opinion from an Independent Appraiser to the effect that the
consideration to be paid or received in connection with such Affiliate
Transaction is fair, from a financial point of view, to the Company or such
Restricted Subsidiary, as the case may be.
Notwithstanding the foregoing limitation, the Company or any Restricted
Subsidiary may enter into or suffer to exist the following:
(i) any transaction or series of transactions between the Company and
one or more Restricted Subsidiaries or between two or more Restricted
Subsidiaries in the ordinary course of business, provided that no more than
5% of the total voting power of the Voting Stock (on a fully diluted basis)
of any such Restricted Subsidiary is owned by an Affiliate of the Company
(other than a Restricted Subsidiary);
(ii) any Restricted Payment permitted to be made pursuant to the
covenant described under "-- Limitation on Restricted Payments";
(iii) the payment of compensation (including amounts paid pursuant to
employee benefit plans) for the personal services of officers, directors
and employees of the Company or any of the Restricted Subsidiaries, so long
as the Board of Directors in good faith shall have approved the terms
thereof and deemed the services theretofore or thereafter to be performed
for such compensation to be fair consideration therefor; and
(iv) the payment of reasonable fees to directors of the Company or
such Restricted Subsidiary (x) who are not employees of the Company or any
Restricted Subsidiary or (y) who are employees of the Company or any
Restricted Subsidiary, provided that such fees are consistent with the past
practices of the Company or such Restricted Subsidiary.
Limitation on Sale and Leaseback Transactions. The Company shall not, and
shall not permit any Restricted Subsidiary to, enter into any Sale and Leaseback
Transaction with respect to any Property unless (a) the Company or such
Restricted Subsidiary would be entitled to (i) Incur Debt in an amount equal to
the Attributable Debt with respect to such Sale and Leaseback Transaction
pursuant to the covenant described under "-- Limitation on Debt" and (ii) create
a Lien on such Property securing such Attributable Debt without securing the New
Notes pursuant to the covenant described under "-- Limitation on Liens" and (b)
such Sale and Leaseback Transaction is effected in compliance with the covenant
described under "-- Limitation on Asset Sales."
Designation of Restricted and Unrestricted Subsidiaries. The Board of
Directors may designate any Subsidiary of the Company to be an Unrestricted
Subsidiary if (a) the Subsidiary to be so designated
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does not own any Capital Stock or Debt of, or own or hold any Lien on any
Property of, the Company or any other Restricted Subsidiary, (b) the Subsidiary
to be so designated is not obligated under any Debt, Lien or other obligation
that, if in default, would result (with the passage of time or notice or
otherwise) in a default on any Debt of the Company or of any Restricted
Subsidiary and (c) either (i) the Subsidiary to be so designated has total
assets of $1,000 or less or (ii) such designation is effective immediately upon
such entity becoming a Subsidiary of the Company. Unless so designated as an
Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company
will be classified as a Restricted Subsidiary; provided, however, that such
Subsidiary shall not be designated a Restricted Subsidiary and shall be
automatically classified as an Unrestricted Subsidiary if either of the
requirements set forth in clauses (x) and (y) of the immediately following
paragraph will not be satisfied after giving pro forma effect to such
classification. Except as provided in the first sentence of this paragraph, no
Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary if, immediately after giving pro forma effect to such
designation, (x) the Company could Incur at least $1.00 of additional Debt
pursuant to clause (a) of the first paragraph of the covenant described under
"-- Limitation on Debt" and (y) no Default or Event of Default shall have
occurred and be continuing or would result therefrom.
Any such designation or redesignation by the Board of Directors will be
evidenced to the Trustee by filing with the Trustee a Board Resolution giving
effect to such designation or redesignation and an Officers' Certificate (a)
certifying that such designation or redesignation complies with the foregoing
provisions and (b) giving the effective date of such designation or
redesignation, such filing with the Trustee to occur within 45 days after the
end of the fiscal quarter of the Company in which such designation or
redesignation is made (or, in the case of a designation or redesignation made
during the last fiscal quarter of the Company's fiscal year, within 90 days
after the end of such fiscal year).
Future Guarantors. The Company shall cause each domestic Restricted
Subsidiary of the Company that Incurs Debt, including pursuant to a Guarantee of
the Credit Facility, following the Issue Date to execute and deliver to the
Trustee a Guaranty.
MERGER, CONSOLIDATION AND SALE OF PROPERTY
The Company shall not merge, consolidate or amalgamate with or into any
other Person (other than a merger of a Wholly Owned Subsidiary into the Company)
or sell, transfer, assign, lease, convey or otherwise dispose of all or
substantially all its Property in any one transaction or series of transactions
unless: (a) the Company shall be the surviving Person (the "Surviving Person")
or the Surviving Person (if other than the Company) formed by such merger,
consolidation or amalgamation or to which such sale, transfer, assignment,
lease, conveyance or disposition is made shall be a corporation organized and
existing under the laws of the United States of America, any State thereof or
the District of Columbia; (b) the Surviving Person (if other than the Company)
expressly assumes, by supplemental indenture in form satisfactory to the
Trustee, executed and delivered to the Trustee by such Surviving Person, the due
and punctual payment of the principal of, and premium, if any, and interest on,
all the New Notes, according to their tenor, and the due and punctual
performance and observance of all the covenants and conditions of the Indenture
to be performed by the Company; (c) in the case of a sale, transfer, assignment,
lease, conveyance or other disposition of all or substantially all the Property
of the Company, such Property shall have been transferred as an entirety or
virtually as an entirety to one Person; (d) immediately before and after giving
effect to such transaction or series of transactions on a pro forma basis (and
treating, for purposes of this clause (d) and clauses (e) and (f) below, any
Debt which becomes, or is anticipated to become, an obligation of the Surviving
Person or any Restricted Subsidiary as a result of such transaction or series of
transactions as having been Incurred by the Surviving Person or such Restricted
Subsidiary at the time of such transaction or series of transactions), no
Default or Event of Default shall have occurred and be continuing; (e)
immediately after giving effect to such transaction or series of transactions on
a pro forma basis, the Company or the Surviving Person, as the case may be,
would be able to Incur at least $1.00 of additional Debt under clause (a) of the
first
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paragraph of the covenant described under "-- Certain Covenants -- Limitation on
Debt"; (f) immediately after giving effect to such transaction or series of
transactions on a pro forma basis, the Surviving Person shall have a
Consolidated Net Worth in an amount which is not less than the Consolidated Net
Worth of the Company immediately prior to such transaction or series of
transactions; and (g) the Company shall deliver, or cause to be delivered, to
the Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel, each stating that such
transaction and the supplemental indenture, if any, in respect thereto comply
with this covenant and that all conditions precedent herein provided for
relating to such transaction have been satisfied.
The Surviving Person shall succeed to, and be substituted for, and may
exercise every right and power of the Company under the Indenture, but the
predecessor Company in the case of a sale, transfer, assignment, lease,
conveyance or other disposition shall not be released from the obligation to pay
the principal of, and premium, if any, and interest on, the New Notes.
SEC REPORTS
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file
with the Commission and provide the Trustee and holders of New Notes with such
annual reports and such information, documents and other reports as are
specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S.
corporation subject to such Sections, such information, documents and reports to
be so filed and provided within 15 days after the times specified for the filing
of such information, documents and reports under such Sections; provided,
however, that the Company shall not be so obligated to file such information,
documents and reports with the Commission if the Commission does not permit such
filings. The Company shall file with the Commission and provide the Trustee and
holders of New Notes with the information, documents and reports described
herein whether or not the Exchange Offer Registration Statement (as defined
under "Exchange Offer; Registration Rights") has been filed or declared
effective.
EVENTS OF DEFAULT
Events of Default in respect of the New Notes as set forth in the Indenture
include: (a) failure to make the payment of any interest on the New Notes when
the same becomes due and payable, and such failure continues for a period of 30
days; (b) failure to make the payment of any principal of, or premium, if any,
on, any of the New Notes when the same becomes due and payable at its Stated
Maturity, upon acceleration, redemption, optional redemption, required
repurchase or otherwise; (c) failure to comply with the covenant described above
under "-- Merger, Consolidation and Sale of Property"; (d) failure to comply
with any other covenant or agreement in the New Notes or in the Indenture (other
than a failure which is the subject of the foregoing clause (a), (b) or (c)) and
such failure continues for 30 days after written notice is given to the Company
as provided below; (e) a default under any Debt by the Company or any Restricted
Subsidiary which results in acceleration of the maturity of such Debt, or
failure to pay any such Debt at maturity, in an aggregate amount greater than
$5.0 million (the "cross-acceleration provisions"); (f) any judgment or
judgments for the payment of money in an aggregate amount in excess of $5.0
million shall be rendered against the Company or any Restricted Subsidiary and
shall not be waived, satisfied or discharged for any period of 30 consecutive
days during which a stay of enforcement shall not be in effect (the "judgment
default provisions"); (g) certain events involving bankruptcy, insolvency or
reorganization of the Company or any Significant Subsidiary (the "bankruptcy
provisions"); and (h) any Guaranty ceases to be in full force and effect (other
than in accordance with the terms of such Guaranty) or any Guarantor denies or
disaffirms its obligations under its Guaranty (the "guaranty provisions").
A Default under clause (d) is not an Event of Default until the Trustee or
the holders of not less than 25% in principal amount of the New Notes then
outstanding notify the Company of the Default and the Company does not cure such
Default within the time specified after receipt of such notice. Such notice must
specify the Default, demand that it be remedied and state that such notice is a
"Notice of Default."
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The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default, its status and what action the Company is taking or proposes
to take with respect thereto.
The Indenture provides that if an Event of Default with respect to the New
Notes (other than an Event of Default resulting from certain events involving
bankruptcy, insolvency or reorganization with respect to the Company or any
Significant Subsidiary) shall have occurred and be continuing, the Trustee or
the registered holders of not less than 25% in aggregate principal amount of the
New Notes then outstanding may declare to be immediately due and payable the
principal amount of all the New Notes then outstanding, plus accrued but unpaid
interest to the date of acceleration. In case an Event of Default resulting from
certain events of bankruptcy, insolvency or reorganization with respect to the
Company or any Significant Subsidiary shall occur, such amount with respect to
all the New Notes shall be due and payable immediately without any declaration
or other act on the part of the Trustee or the holders of the New Notes. After
any such acceleration, but before a judgment or decree based on acceleration is
obtained by the Trustee, the registered holders of a majority in aggregate
principal amount of the New Notes then outstanding may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than the nonpayment of accelerated principal, premium or interest, have
been cured or waived as provided in the Indenture.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders of the New Notes,
unless such holders shall have offered to the Trustee reasonable indemnity.
Subject to such provisions for the indemnification of the Trustee, the holders
of a majority in aggregate principal amount of the New Notes then outstanding
will have the right to 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 the Trustee with respect to the New Notes.
No holder of New Notes will have any right to institute any proceeding with
respect to the Indenture, or for the appointment of a receiver or trustee, or
for any remedy thereunder, unless (a) such holder has previously given to the
Trustee written notice of a continuing Event of Default, (b) the registered
holders of at least 25% in aggregate principal amount of the New Notes then
outstanding have made written request and offered reasonable indemnity to the
Trustee to institute such proceeding as trustee and (c) the Trustee shall not
have received from the registered holders of a majority in aggregate principal
amount of the New Notes then outstanding a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a holder of any
Note for enforcement of payment of the principal of, and premium, if any, or
interest on, such Note on or after the respective due dates expressed in such
Note.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the registered holders of a majority in aggregate principal amount of
the New Notes then outstanding (including consents obtained in connection with a
tender offer or exchange offer for the New Notes) and any past default or
compliance with any provisions may also be waived (except a default in the
payment of principal, premium or interest and certain covenants and provisions
of the Indenture which cannot be amended without the consent of each holder of
an outstanding Note) with the consent of the registered holders of at least a
majority in aggregate principal amount of the New Notes then outstanding.
However, without the consent of each holder of an outstanding Note, no amendment
may, among other things, (a) reduce the amount of New Notes whose holders must
consent to an amendment or waiver, (b) reduce the rate of or extend the time for
payment of interest on any Note, (c) reduce the principal of or extend the
Stated Maturity of any Note, (d) make any Note payable in money other than that
stated in the Note, (e) impair the right of any holder of the New Notes to
institute suit for the enforcement of any payment on or with respect to such
holder's New Notes or any Guaranty, (f) subordinate the New Notes
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to any other obligation of the Company, (g) release any security interest that
may have been granted in favor of the holders of the New Notes, (h) reduce the
premium payable upon the redemption or repurchase of any Note as described under
"-- Optional Redemption," or "-- Purchase at the Option of Holders Upon a Change
of Control," (i) at any time after a Change of Control or Asset Sale has
occurred, change the time at which the Change of Control Offer or any Prepayment
Offer relating thereto must be made or at which the New Notes must be
repurchased pursuant to such Change of Control Offer or Prepayment Offer, or (j)
make any change in any Guaranty that would adversely affect the holders of the
New Notes.
Without the consent of any holder of the New Notes, the Company and the
Trustee may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Company under the Indenture, to provide for uncertificated
New Notes in addition to or in place of certificated New Notes (provided that
the uncertificated New Notes are issued in registered form for purposes of
Section 163(f) of the Code, or in a manner such that the uncertificated New
Notes are described in Section 163(f)(2)(B) of the Code), to add additional
Guaranties with respect to the New Notes or to release Guarantors from
Guaranties as provided by the terms of the Indenture, to secure the New Notes,
to add to the covenants of the Company for the benefit of the holders of the New
Notes or to surrender any right or power conferred upon the Company, to make any
change that does not adversely affect the rights of any holder of the New Notes,
or to comply with any requirement of the Commission in connection with the
qualification of the Indenture under the Trust Indenture Act.
The consent of the holders of the New Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to each registered holder of the New Notes at such holder's
address appearing in the Security Register a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the New
Notes, or any defect therein, will not impair or affect the validity of the
amendment.
DEFEASANCE
The Company at any time may terminate all its obligations under the New
Notes and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the New Notes, to replace mutilated, destroyed, lost or
stolen New Notes and to maintain a registrar and paying agent in respect of the
New Notes. The Company at any time may terminate its obligations under the
covenants described under "-- Repurchase at the Option of Holders Upon a Change
of Control" and "-- Certain Covenants," the operation of the cross-acceleration
provisions, the judgment default provisions, the bankruptcy provisions with
respect to Significant Subsidiaries, the guaranty provisions described under
"-- Events of Default" above and the limitations contained in clauses (d) (with
respect to the covenants described under "-- Certain Covenants"), (e) and (f)
under the first paragraph of "-- Merger, Consolidation and Sale of Property"
above ("covenant defeasance"). The Company may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the New
Notes may not be accelerated because of an Event of Default with respect
thereto. If the Company exercises its covenant defeasance option, payment of the
New Notes may not be accelerated because of an Event of Default specified in
clause (d) (with respect to the covenants described under "-- Certain
Covenants"), (e), (f), (g) (with respect only to Significant Subsidiaries) or
(h) under "-- Events of Default" above or because of the failure of the Company
to comply with clauses (d) (with respect to the covenants described under
"-- Certain Covenants"), (e) and (f) under the first paragraph of "-- Merger,
Consolidation and Sale of Property" above. If the Company exercises its legal
defeasance option or its covenant defeasance option, each Guarantor will be
released from all its obligations under its Guaranty.
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In order to exercise either defeasance option, the Company must, among
other things, irrevocably deposit in trust (the "defeasance trust") with the
Trustee money or U.S. Government Obligations for the payment of principal and
interest on the New Notes to maturity or redemption, as the case may be, and
must comply with certain other conditions, including delivery to the Trustee of
an Opinion of Counsel to the effect that holders of the New Notes will not
recognize income, 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 amounts and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred (and, in the case of legal
defeasance only, such Opinion of Counsel must be based on a ruling of the
Internal Revenue Service or other change in applicable Federal income tax law).
GOVERNING LAW
The Indenture and the New Notes are governed by the internal laws of the
State of New York without reference to principles of conflicts of law.
THE TRUSTEE
IBJ Schroder Bank & Trust Company is the Trustee under the Indenture.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such of the rights and powers vested in it under the Indenture and use
the same degree of care and skill in its exercise as a prudent Person would
exercise under the circumstances in the conduct of such Person's own affairs.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
"Additional Assets" means (a) any Property (other than cash, cash
equivalents and securities) to be owned by the Company or any Restricted
Subsidiary and used in a Related Business; (b) the costs of improving or
developing any Property owned by the Company or a Restricted Subsidiary which is
used in a Related Business; or (c) Capital Stock of a Person that becomes a
Restricted Subsidiary as a result of the acquisition of such Capital Stock by
the Company or another Restricted Subsidiary from any Person other than an
Affiliate of the Company; provided, however, that, in the case of clause (c),
such Restricted Subsidiary is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the covenant described under "-- Certain Covenants -- Limitation on
Transactions with Affiliates," "-- Limitation on Asset Sales" and the definition
of "Additional Assets" only, "Affiliate" shall also mean any beneficial owner of
shares representing 10% or more of the total voting power of the Voting Stock
(on a fully diluted basis) of the Company or of rights or warrants to purchase
such Voting Stock (whether or not currently exercisable) and any Person who
would be an Affiliate of any such beneficial owner pursuant to the first
sentence hereof.
"Asset Sale" means any sale, lease, transfer, issuance or other disposition
(or series of related sales, leases, transfers, issuances or dispositions)
(other than the grant of a security interest) by the Company or any Restricted
Subsidiary, including any disposition by means of a merger, consolidation or
similar transaction (each referred to for the purposes of this definition as a
"disposition"), of (a) any
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shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares) or (b) any other assets of the Company or any Restricted
Subsidiary outside of the ordinary course of business of the Company or such
Restricted Subsidiary (other than, in the case of clauses (a) and (b) above, (i)
any disposition by a Restricted Subsidiary to the Company or by the Company or a
Restricted Subsidiary to a Restricted Subsidiary, (ii) for purposes of the
covenant described under "-- Certain Covenants -- Limitation on Asset Sales"
only, any disposition that constitutes a Permitted Investment or Restricted
Payment permitted by the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments," (iii) any disposition effected
in compliance with the first paragraph of the covenant described under
"-- Merger, Consolidation and Sale of Property," (iv) any disposition of
Property or equipment that has become obsolete or otherwise unsuitable for use
in connection with the business of the Company or such Restricted Subsidiary or
(v) any disposition or series of related dispositions of assets having a Fair
Market Value and sale price of less than $500,000).
"Attributable Debt" in respect of a Sale and Leaseback Transaction means,
at any date of determination, (a) if such Sale and Leaseback Transaction is a
Capital Lease Obligation, the amount of Debt represented thereby according to
the definition of "Capital Lease Obligation" and (b) in all other instances, the
present value (discounted at the interest rate borne by the New Notes,
compounded annually), of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale and Leaseback
Transaction (including any period for which such lease has been extended).
"Average Life" means, as of any date of determination, with respect to any
Debt or Preferred Stock, the quotient obtained by dividing (a) the sum of the
product of the numbers of years (rounded to the nearest one-twelfth of one year)
from the date of determination to the dates of each successive scheduled
principal payment of such Debt or redemption or similar payment with respect to
such Preferred Stock multiplied by the amount of such payment by (b) the sum of
all such payments.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Capital Lease Obligations" means any obligation under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP; and the amount of Debt represented by such obligation shall be the
capitalized amount of such obligations determined in accordance with GAAP; and
the Stated Maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty. For purposes of
"-- Certain Covenants -- Limitation on Liens," a Capital Lease Obligation shall
be deemed secured by a Lien on the Property being leased.
"Capital Stock" means, with respect to any Person, any shares or other
equivalents (however designated) of corporate stock, partnership interests,
membership interests in limited liability companies or any other participations,
rights, warrants, options or other interests in the nature of an equity interest
in such Person, including Preferred Stock, but excluding any debt security
convertible or exchangeable into such equity interest.
"Capital Stock Sale Proceeds" means the aggregate cash proceeds received by
the Company from the issuance or sale (other than to a Subsidiary of the Company
or an employee stock ownership plan or trust established by the Company or any
of its Subsidiaries for the benefit of their employees) by the Company of any
class of its Capital Stock (other than Disqualified Stock) after the Issue Date,
net of attorneys' fees, accountants' fees, underwriters' or placement agents'
fees, discounts or commissions and brokerage, consultant and other fees incurred
in connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Change of Control" means the occurrence of any of the following events:
(a) if (i) any "Person" or "group" (as such terms are used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act or any successor provisions to
either of the foregoing) becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act, except that a Person will be
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deemed to have "beneficial ownership" of all shares that any such Person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of 35% or more of
the voting power of the Voting Stock of the Company and (ii) the Permitted
Holders are "beneficial owners" (as defined in Rule 13d-3 under the
Exchange Act except that a Person will be deemed to have "beneficial
ownership" of all shares that any such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, in the aggregate of a lesser percentage of
the total voting power of all classes of the Voting Stock of the Company
than such other Person or group referred to in clause (i) (for purposes of
this clause (a), such Person or group, and the Permitted Holders, shall be
deemed to beneficially own any Voting Stock of a corporation (the
"specified corporation") held by any other corporation (the "parent
corporation") so long as such Person or group beneficially owns, directly
or indirectly, in the aggregate a majority of the voting power of the
Voting Stock of such parent corporation); or
(b) the sale, transfer, assignment, lease, conveyance or other
disposition, directly or indirectly, of all or substantially all the assets
of the Company and the Restricted Subsidiaries, considered as a whole
(other than a disposition of such assets as an entirety or virtually as an
entirety to a Wholly Owned Subsidiary) shall have occurred, or the Company
merges, consolidates or amalgamates with or into any other Person or any
other Person merges, consolidates or amalgamates with or into the Company,
in any such event pursuant to a transaction in which the outstanding Voting
Stock of the Company is reclassified into or exchanged for cash, securities
or other Property, other than any such transaction where (i) the
outstanding Voting Stock of the Company is reclassified into or exchanged
for Voting Stock of the surviving corporation and (ii) the holders of the
Voting Stock of the Company immediately prior to such transaction own,
directly or indirectly, not less than a majority of the Voting Stock of the
surviving corporation immediately after such transaction and in
substantially the same proportion as before the transaction; or
(c) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election or appointment by such Board or whose
nomination for election by the shareholders of the Company was approved by
a vote of 66 2/3% 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 of Directors then in office; or
(d) the shareholders of the Company shall have approved any plan of
liquidation or dissolution of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" means, as of any date of determination, the
ratio of (a) the aggregate amount of EBITDA for the most recent four consecutive
fiscal quarters ending at least 45 days prior to such determination date to (b)
Consolidated Fixed Charges for such four fiscal quarters; provided, however,
that (i) if the Company or any Restricted Subsidiary has Incurred any Debt since
the beginning of such period that remains outstanding or if the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio is an
Incurrence of Debt, or both, Consolidated Fixed Charges for such period shall be
calculated after giving effect on a pro forma basis to such Debt as if such Debt
had been Incurred on the first day of such period and the discharge of any other
Debt repaid, repurchased, defeased or otherwise discharged with the proceeds of
such new Debt as if such discharge had occurred on the first day of such period,
(ii) if since the beginning of such period the Company or any Restricted
Subsidiary shall have made any Asset Sale or if the transaction giving rise to
the need to calculate the Consolidated Coverage Ratio is an Asset Sale, or both,
EBITDA for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the Property which is the subject of such
Asset Sale for such period, or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period, in either case as if
such Asset Sale had occurred on the first day of such period, and Consolidated
Fixed Charges for such period shall be reduced by an amount equal to the
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Consolidated Fixed Charges directly attributable to any Debt of the Company or
any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged
with respect to the Company and its continuing Restricted Subsidiaries in
connection with such Asset Sale, as if such Asset Sale had occurred on the first
day of such period (or, if the Capital Stock of any Restricted Subsidiary is
sold, by an amount equal to the Consolidated Fixed Charges for such period
directly attributable to the Debt of such Restricted Subsidiary to the extent
the Company and its continuing Restricted Subsidiaries are no longer liable for
such Debt after such sale), (iii) if since the beginning of such period the
Company shall have consummated a Public Equity Offering following which there is
a Public Market, Consolidated Fixed Charges for such period shall be reduced by
an amount equal to the Consolidated Fixed Charges directly attributable to any
Debt of the Company or any Restricted Subsidiary repaid, repurchased, defeased
or otherwise discharged with respect to the Company and its Restricted
Subsidiaries in connection with such Public Equity Offering for such period,
(iv) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or
an acquisition of Property, including any acquisition of Property occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, EBITDA
and Consolidated Fixed Charges for such period shall be calculated after giving
pro forma effect thereto (including the Incurrence of any Debt) as if such
Investment or acquisition occurred on the first day of such period, (v) if since
the beginning of such period any Person that subsequently became a Restricted
Subsidiary or was merged with or into the Company or any Restricted Subsidiary
since the beginning of such period shall have made any Asset Sale, Investment or
acquisition of Property that would have required an adjustment pursuant to
clause (ii), (iii) or (iv) above if made by the Company or a Restricted
Subsidiary during such period, EBITDA and Consolidated Fixed Charges for such
period shall be calculated after giving pro forma effect thereto as if such
Asset Sale, Investment or acquisition of Property occurred on the first day of
such period and (vi) if since the beginning of such period any Restricted
Subsidiary shall have obtained relief from any limitation on the ability of such
Restricted Subsidiary to pay dividends to the Company, EBITDA and Consolidated
Fixed Charges for such period shall be calculated after giving pro forma effect
thereto as if the ability of such Restricted Subsidiary to pay dividends to the
Company had not been so limited from the first day of such period. For purposes
of this definition, pro forma calculations shall be determined in good faith by
a responsible financial or accounting Officer of the Company and as further
contemplated by the definition of the term "pro forma." If any Debt bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Debt shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any Interest Rate Agreement applicable to such Debt if such Interest
Rate Agreement has a remaining term in excess of 12 months).
"Consolidated Fixed Charges" means, for any period, the sum (without
duplication) of (a) Consolidated Interest Expense for such period plus (b) all
Preferred Stock Dividends (other than to the Company or a Wholly Owned
Subsidiary, and other than Redeemable Dividends) paid, accrued, declared or
accumulated during such period.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, (a) interest expense
attributable to capital leases, (b) amortization of debt discount and debt
issuance cost, including commitment fees, (c) capitalized interest, (d) noncash
interest expenses, (e) to the extent required under GAAP to be reflected as
interest expense in the consolidated financial statements of the Company,
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (f) to the extent required under
GAAP to be reflected as an expense in the consolidated financial statements of
the Company, net costs associated with Hedging Obligations (including
amortization of fees), (g) Redeemable Dividends, (h) interest incurred in
connection with Investments in discontinued operations, (i) interest accruing on
any Debt of any other Person to the extent such Debt is Guaranteed by the
Company or any Restricted Subsidiary and (j) the cash contributions to any
employee stock ownership plan or similar trust to the extent such contributions
are
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used by such plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Debt Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its consolidated Subsidiaries, less the aggregate amount of
recurring expenditures made by the Company and its consolidated Subsidiaries
during such period with respect to environmental matters which were not deducted
in determining such net income (loss) as a result of the adoption of American
Institute of Certified Public Accountants Statement of Position 96-1,
"Environmental Remediation Liabilities"; provided, however, that there shall not
be included in such Consolidated Net Income (a) any net income (loss) of any
Person (other than the Company) if such Person is not a Restricted Subsidiary,
except that (i) subject to the exclusion contained in clause (d) below, the
Company's equity in the net income of any such Person for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
distributed by such Person during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution to a Restricted Subsidiary, to the limitations
contained in clause (c) below) and (ii) the Company's equity in a net loss of
any such Person other than an Unrestricted Subsidiary for such period shall be
included in determining such Consolidated Net Income to the extent of the
Company's obligation to fund such net loss in cash, (b) any net income (loss) of
any Person acquired by the Company or any of its consolidated Subsidiaries in a
pooling of interests transaction for any period prior to the date of such
acquisition, (c) any net income (but not loss) of any Restricted Subsidiary, to
the extent that the payment of dividends or the making of distributions by such
Restricted Subsidiary to the Company is not at the time permitted, directly or
indirectly, without prior approval (that has not been obtained), pursuant to the
terms of its charter or any agreement, instrument or governmental regulation
applicable to such Restricted Subsidiary, (d) any gain (loss) realized upon the
sale or other disposition of any Property of the Company or any of its
consolidated Subsidiaries (including pursuant to any Sale and Leaseback
Transaction) which is not sold or otherwise disposed of in the ordinary course
of business, (e) any extraordinary gain or loss and (f) the cumulative effect of
a change in accounting principles. Notwithstanding the foregoing, for the
purposes of the covenant described under "-- Certain Covenants -- Limitation on
Restricted Payments" only, there shall be excluded from Consolidated Net Income
any dividends, repayments of loans or advances or other transfers of assets from
Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the
extent such dividends, repayments or transfers increase the amount of Restricted
Payments permitted under such covenant pursuant to clause (c)(iv) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
consolidated balance sheet of the Company and its Restricted Subsidiaries as of
the end of the most recent fiscal quarter of the Company ending at least 45 days
prior to the taking of any action for the purpose of which the determination is
being made, as (a) the par or stated value of all outstanding Capital Stock of
the Company plus (b) paid-in capital or capital surplus relating to such Capital
Stock plus (c) any retained earnings or earned surplus less (i) any accumulated
deficit and (ii) any amounts attributable to Disqualified Stock.
"Credit Facility" means one or more debt facilities with banks or other
institutional lenders (including pursuant to (a) the Loan Agreement dated April
14, 1997, by and among the Company, the Guarantors, BankBoston, N.A. and the
other Banks party thereto, and BankBoston, N.A. as agent for such Banks, (b) the
Loan Agreement dated October 20, 1997, by and among GfE, certain of its
subsidiaries and BankBoston, N.A., Frankfurt Branch and (c) each of the Loan
Documents (as defined in such Loan Agreements) relating to such Loan Agreements)
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, foreign exchange, bankers' acceptances or similar financial
arrangements, in each case as amended, restated, supplemented or modified and in
effect from time to time, together with any extensions, revisions, refinancings
or replacements thereof by a lender or syndicate of lenders.
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"Currency Exchange Protection Agreement" means, in respect of a Person, any
foreign exchange contract, currency swap agreement, currency option or other
similar agreement or arrangement designed to protect such Person against
fluctuations in currency exchange rates.
"Debt" means, with respect to any Person on any date of determination
(without duplication), (a) the principal of and premium (if any) in respect of
(i) debt of such Person for money borrowed and (ii) debt evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable; (b) all Capital Lease Obligations of such
Person and all Attributable Debt in respect of Sale and Leaseback Transactions
entered into by such Person; (c) all obligations of such Person issued or
assumed as the deferred purchase price of Property, all conditional sale
obligations of such Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable and customer advance
payments or deposits arising in the ordinary course of business); (d) all
obligations of such Person for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in (a) through (c) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (e) the amount of
all obligations of such Person with respect to the redemption, repayment or
other repurchase of any Disqualified Stock or, with respect to any Subsidiary of
such Person, any Preferred Stock (but excluding, in each case, any accrued
dividends); (f) all obligations of the type referred to in clauses (a) through
(e) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee; (g) all obligations of the type referred to in clauses (a) through
(f) of other Persons secured by any Lien on any Property of such Person (whether
or not such obligation is assumed by such Person), the amount of such obligation
being deemed to be the lesser of the value of such Property or the amount of the
obligation so secured; and (h) to the extent not otherwise included in this
definition, Hedging Obligations of such Person. The amount of Debt of any Person
at any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date; provided that the amount outstanding at any time of any Debt issued
with original issue discount is the face amount of such Debt less the remaining
unamortized portion of the original issue discount of such Debt at such time as
determined in accordance with GAAP.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, Redeemable Stock of
such Person as to which (a) the maturity, (b) mandatory redemption or (c)
redemption, conversion or exchange at the option of the holder thereof occurs,
or may occur, on or prior to the first anniversary of the Stated Maturity of the
New Notes; provided, however, that Redeemable Stock of such Person that would
not otherwise be characterized as Disqualified Stock under this definition shall
not constitute Disqualified Stock if such Redeemable Stock is convertible or
exchangeable into Debt or Disqualified Stock solely at the option of the issuer
thereof.
"EBITDA" means, for any period, an amount equal to, for the Company and its
consolidated Restricted Subsidiaries, (a) the sum of Consolidated Net Income for
such period, plus the following to the extent reducing Consolidated Net Income
for such period: (i) the provision for taxes based on income or profits or
utilized in computing net loss, (ii) Consolidated Interest Expense, (iii)
depreciation, (iv) amortization of intangibles and (v) any other non-cash items
(other than any such non-cash item to the extent that it represents an accrual
of or reserve for cash expenditures in any future period), minus (b) all
non-cash items increasing Consolidated Net Income for such period (other than
any such non-cash item to the extent that it will result in the receipt of cash
payments in any future period). Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the
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depreciation and amortization of, a Restricted Subsidiary shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income and only if a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Event of Default" has the meaning set forth under "-- Events of Default."
"Exchange Act" means the Securities Exchange Act of 1934.
"Fair Market Value" means, with respect to any Property, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value will be
determined, except as otherwise provided, (a) if such Property has a Fair Market
Value of less than $5.0 million, by any Officer of the Company or (b) if such
Property has a Fair Market Value in excess of $5.0 million, by a majority of the
Board of Directors and evidenced by a Board Resolution, dated within 30 days of
the relevant transaction, delivered to the Trustee.
"GAAP" means United States generally accepted accounting principles as in
effect on the Issue Date, including those set forth (a) in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants, (b) in the statements and pronouncements of the
Financial Accounting Standards Board, (c) in such other statements by such other
entity as approved by a significant segment of the accounting profession and (d)
the rules and regulations of the Commission governing the inclusion of financial
statements (including pro forma financial statements) in periodic reports
required to be filed pursuant to Section 13 of the Exchange Act, including
opinions and pronouncements in staff accounting bulletins and similar written
statements from the accounting staff of the Commission.
"GfE" means GfE Gesellschaft fur Elektrometallurgie mbH.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Debt of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor" means each domestic Restricted Subsidiary designated as such on
the signature pages of the Indenture and any other domestic Restricted
Subsidiary that becomes a Guarantor pursuant to the covenant described under
"-- Certain Covenants -- Future Guarantors," in each case, until such Restricted
Subsidiary is released from its Guaranty.
"Guaranty" means a Guarantee on the terms set forth in the Indenture by a
Guarantor of the Company's obligations with respect to the New Notes.
"Hedging Obligation" of any Person means any obligation of such Person
pursuant to any Interest Rate Agreement, Currency Exchange Protection Agreement
or any other similar agreement or arrangement.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by merger, conversion, exchange or otherwise), extend,
assume, Guarantee or become liable in respect of such Debt or other obligation
or the recording, as required pursuant to GAAP or otherwise, of any such Debt or
obligation on the balance sheet of such Person (and "Incurrence" and "Incurred"
shall have
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meanings correlative to the foregoing); provided, however, that a change in GAAP
that results in an obligation of such Person that exists at such time, and is
not theretofore classified as Debt, becoming Debt shall not be deemed an
incurrence of such Debt; provided further, however, that solely for purposes of
determining compliance with "-- Certain Covenants -- Limitation on Debt,"
amortization of debt discount shall not be deemed to be the Incurrence of Debt,
provided that in the case of Debt sold at a discount, the amount of such Debt
Incurred shall at all times be the aggregate principal amount at Stated
Maturity.
"Independent Appraiser" means an investment banking firm of national
standing or any third party appraiser of national standing, provided that such
firm or appraiser is not an Affiliate of the Company.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect against fluctuations in interest rates.
"Investment" by any Person means any direct or indirect loan (other than
advances to customers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of such Person), advance or other
extension of credit 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) to, or Incurrence of a Guarantee of any obligation
of, or purchase or acquisition of Capital Stock, bonds, notes, debentures or
other securities or evidence of Debt issued by, any other Person. For purposes
of the covenants described under "-- Certain Covenants -- Limitation on
Restricted Payments," "-- Designation of Restricted and Unrestricted
Subsidiaries" and the definition of "Restricted Payment," "Investment" shall
include the portion (proportionate to the Company's equity interest in such
Subsidiary) of the Fair Market Value of the net assets of any Subsidiary of the
Company at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if
positive) equal to (a) the Company's "Investment" in such Subsidiary at the time
of such redesignation less (b) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the Fair Market Value of the net assets
of such Subsidiary at the time of such redesignation. In determining the amount
of any Investment made by transfer of any Property other than cash, such
Property shall be valued at its Fair Market Value at the time of such
investment.
"Issue Date" means the date on which the New Notes are initially issued.
"Lien" means, with respect to any Property of any Person, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such Property (including any Capital Lease
Obligation, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing or any Sale and
Leaseback Transaction).
"LSM" means London & Scandinavian Metallurgical Co., Limited.
"Moody's" means Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.
"Net Available Cash" from any Asset Sale means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other obligations relating to the
Property that is the subject of such Asset Sale or received in any other noncash
form), in each case net of (a) all legal, title and recording tax expenses,
commissions and other fees and expenses incurred, and all Federal, state,
provincial, foreign and local taxes required to be accrued as a liability under
GAAP, as a consequence of such Asset Sale, whether paid or payable, (b) all
payments made on any Debt which is
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secured by any Property subject to such Asset Sale, in accordance with the terms
of any Lien upon or other security agreement of any kind with respect to such
Property, or which must by its terms, or in order to obtain a necessary consent
to such Asset Sale, or by applicable law, be repaid out of the proceeds from
such Asset Sale, (c) all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of such
Asset Sale, and (d) the deduction of appropriate amounts provided by the seller
as a reserve, in accordance with GAAP, against any liabilities associated with
the Property disposed in such Asset Sale and retained by the Company or any
Restricted Subsidiary after such Asset Sale.
"Officer" means the Chairman, President and Chief Executive Officer, the
Vice President, Finance and Chief Financial Officer or any Vice President of the
Company.
"Officers' Certificate" means a certificate signed by two Officers of the
Company, at least one of whom shall be the principal executive officer or
principal financial officer of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Permitted Holders" means Franklin Mutual Advisors, Inc., Contrarian
Capital Management, L.L.C., Cerberus Partners, L.P., Morgens, Waterfall Overseas
Partners and SBC Warburg Dillon Read, or any Person of which any of the
foregoing "beneficially owns" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act) voting securities representing at least 51% of the voting power of
all classes of Voting Stock of such Person (exclusive of any matters as to which
class voting rights exist) or any Person which "beneficially owns" (as defined
above) voting securities representing at least 51% of the voting power of all
classes of Voting Stock of any of the foregoing (exclusive of any matters as to
which class voting rights exist).
"Permitted Investment" means any Investment by the Company or a Restricted
Subsidiary in (a) the Company, any Restricted Subsidiary or any Person that
will, upon the making of such Investment, become a Restricted Subsidiary,
provided that the primary business of such Restricted Subsidiary is a Related
Business; (b) any Person if as a result of such Investment such Person is merged
or consolidated with or into, or transfers or conveys all or substantially all
its Property to, the Company or a Restricted Subsidiary, provided that such
Person's primary business is a Related Business; (c) Temporary Cash Investments;
(d) receivables owing to the Company or a Restricted Subsidiary, if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however, that such trade terms
may include such concessionary trade terms as the Company or such Restricted
Subsidiary deems reasonable under the circumstances; (e) payroll, travel or
similar advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (f) loans and advances to employees made in
the ordinary course of business consistent with past practices of the Company or
such Restricted Subsidiary, as the case may be, provided that such loans and
advances do not exceed $2.5 million at any one time outstanding; (g) stock,
obligations or other securities received in settlement of debts created in the
ordinary course of business and owing to the Company or a Restricted Subsidiary
or in satisfaction of judgments; and (h) any Person to the extent such
Investment represents the non-cash portion of the consideration received in
connection with an Asset Sale consummated in compliance with the convenant
described under "-- Certain Covenants Limitation on Asset Sales."
"Permitted Liens" means:
(a) Liens to secure Debt permitted to be Incurred under clause (b) or
(c) of the second paragraph of the covenant described under "-- Certain
Covenants -- Limitation on Debt.";
(b) Liens to secure Debt permitted to be Incurred under clause (d) of
the second paragraph of the covenant described "-- Certain
Covenants -- Limitation on Debt," provided that any such Lien may not
extend to any Property of the Company or any Restricted Subsidiary, other
than the
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Property acquired, constructed or leased with the proceeds of such Debt and
any improvements or accessions to such Property;
(c) Liens for taxes, assessments or governmental charges or levies on
the Property of the Company or any Restricted Subsidiary if the same shall
not at the time be delinquent or thereafter can be paid without penalty, or
are being contested in good faith and by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision that shall be required in conformity with GAAP shall
have been made therefor;
(d) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens, on the Property of the Company or any Restricted
Subsidiary arising in the ordinary course of business and securing payment
of obligations which are not more than 60 days past due or are being
contested in good faith and by appropriate proceedings;
(e) Liens on the Property of the Company or any Restricted Subsidiary
Incurred in the ordinary course of business to secure performance of
obligations with respect to statutory or regulatory requirements,
performance or return-of-money bonds, surety bonds or other obligations of
a like nature and Incurred in a manner consistent with industry practice,
in each case which are not incurred in connection with the borrowing of
money, the obtaining of advances or credit or the payment of the deferred
purchase price of Property and which do not in the aggregate impair in any
material respect the use of Property in the operation of the business of
the Company and the Restricted Subsidiaries taken as a whole;
(f) Liens on Property at the time the Company or any Restricted
Subsidiary acquired such Property, including any acquisition by means of a
merger or consolidation with or into the Company or any Restricted
Subsidiary; provided, however, that any such Lien may not extend to any
other Property of the Company or any Restricted Subsidiary; provided
further, however, that such Liens shall not have been Incurred in
anticipation or in connection with the transaction or series of
transactions pursuant to which such Property was acquired by the Company or
any Restricted Subsidiary;
(g) Liens on the Property of a Person at the time such Person becomes
a Restricted Subsidiary; provided, however, that any such Lien may not
extend to any other Property of the Company or any other Restricted
Subsidiary which is not a direct Subsidiary of such Person; provided
further, however, that any such Lien was not Incurred in anticipation of or
in connection with the transaction or series of transactions pursuant to
which such Person became a Restricted Subsidiary;
(h) pledges or deposits by the Company or any Restricted Subsidiary
under workmen's compensation laws, unemployment insurance laws or similar
legislation, or good faith deposits in connection with bids, tenders,
contracts (other than for the payment of Debt) or leases to which the
Company or any Restricted Subsidiary is party, or deposits to secure public
or statutory obligations of the Company, or deposits for the payment of
rent, in each case Incurred in the ordinary course of business;
(i) utility easements, building restrictions and such other
encumbrances or charges against real Property as are of a nature generally
existing with respect to properties of a similar character;
(j) Liens in favor of the Company or any Guarantor;
(k) Liens existing on the Issue Date not otherwise described in
clauses (a) through (j) above;
(l) Liens on the Property of the Company or any Restricted Subsidiary
to secure any Refinancing, in whole or in part, of any Debt secured by
Liens referred to in clause (b), (f), (g) or (k) above; provided, however,
that any such Lien shall be limited to all or part of the same Property
that secured the original Lien (together with improvements and accessions
to such Property) and the aggregate principal amount of Debt that is
secured by such Lien shall not be increased to an amount greater than the
sum of (i) the outstanding principal amount, or, if greater, the committed
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amount, of the Debt secured by Liens described under clause (b), (f), (g)
or (k) above, as the case may be, at the time the original Lien became a
Permitted Lien under the Indenture and (ii) an amount necessary to pay any
premiums, fees and other expenses incurred by the Company or a Restricted
Subsidiary in connection with such Refinancing; or
(m) Liens not otherwise permitted by clauses (a) through (l) above
encumbering assets having an aggregate Fair Market Value not in excess of
$25.0 million.
"Permitted Refinancing Debt" means any Debt that Refinances any other Debt,
including any successive Refinancings, so long as (a) such Debt is in an
aggregate principal amount (or if Incurred with original issue discount, an
aggregate issue price) not in excess of the sum of (i) the aggregate principal
amount (or if Incurred with original issue discount, the aggregate accreted
value) then outstanding of the Debt being Refinanced and (ii) an amount
necessary to pay any fees and expenses, including premiums and defeasance costs,
related to such Refinancing, (b) the Average Life of such Debt is equal to or
greater than the Average Life of the Debt being Refinanced and (c) the Stated
Maturity of such Debt is no earlier than the Stated Maturity of the Debt being
Refinanced and (d) the new Debt shall not be senior in right of payment to the
Debt that is being Refinanced; provided, however, that Permitted Refinancing
Debt shall not include (x) Debt of a Subsidiary that Refinances Debt of the
Company or (y) Debt of the Company or a Restricted Subsidiary that Refinances
Debt of an Unrestricted Subsidiary.
"Person" means any individual, corporation, company (including any limited
liability company), partnership, joint venture, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Plan of Reorganization" means the Joint Plan of Reorganization dated
December 18, 1996, of the Company and Shieldalloy Metallurgical Corporation.
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect 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 any other class of
Capital Stock issued by such Person.
"Preferred Stock Dividends" means for any dividend with respect to
Preferred Stock, the quotient of the dividend divided by the difference between
one and the maximum statutory federal income rate (expressed as a decimal number
between 1 and 0) then applicable to the issuer of such Preferred Stock.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms hereof, a calculation performed in accordance with
Article 11 of Regulation S-X promulgated under the Securities Act, as
interpreted in good faith by the Board of Directors after consultation with the
independent certified public accountants of the Company, or otherwise a
calculation made in good faith by the Board of Directors after consultation with
the independent certified public accountants of the Company, as the case may be.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, including Capital Stock in, and other securities of, any other
Person. For purposes of any calculation required pursuant to the Indenture, the
value of any Property shall be its Fair Market Value.
"Public Equity Offering" means an underwritten public offering of common
stock of the Company pursuant to an effective registration statement under the
Securities Act.
"Public Market" means any time after (a) a Public Equity Offering has been
consummated and (b) at least 10% of the total issued and outstanding common
stock of the Company has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 under the
Securities Act.
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"Purchase Money Debt" means Debt (a) consisting of the deferred purchase
price of property, conditional sale obligations, obligations under any title
retention agreement, other purchase money obligations and obligations in respect
of industrial revenue bonds, in each case where the maturity of such Debt does
not exceed the anticipated useful life of the asset being financed and (b)
Incurred to finance the acquisition (including costs of design and installation)
by the Company or a Restricted Subsidiary of such asset, including additions and
improvements; provided, however, that such Debt is incurred within 180 days
after such acquisition of such asset by the Company or a Restricted Subsidiary.
"Recapitalization" means the consummation of the following transactions in
connection with the sale of the Old Notes: (a) the satisfaction and discharge of
the Company's 12% Senior Secured Old Notes due 2007, (b) the repayment of
outstanding Debt under the Credit Facility, (c) the retirement of the
outstanding Debt of LSM under the term loan agreement dated April 11, 1997,
between LSM and NM Rothschild & Sons Limited and (d) payment of a dividend and
dividend equivalent in an aggregate amount of $20.0 million to holders of the
Company's common stock, par value $.01 per share, and common stock equivalents.
"Redeemable Dividend" means, for any dividend with respect to Redeemable
Stock, the quotient of the dividend divided by the difference between one and
the maximum statutory federal income tax rate (expressed as a decimal number
between 1 and 0) then applicable to the issuer of such Redeemable Stock.
"Redeemable Stock" means, with respect to any Person, any Capital Stock
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable, in either case, at the option of the holder
thereof) or otherwise (a) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (b) is or may become redeemable or
repurchaseable at the option of the holder thereof, in whole or in part, or (c)
is convertible or exchangeable at the option of the holder thereof for Debt or
Disqualified Stock.
"Refinance" means, in respect of any Debt, to refinance, extend, renew,
refund, replace, prepay, redeem, defease or retire, or to issue other Debt, in
exchange or replacement for, such Debt. "Refinanced" and "Refinancing" shall
have correlative meanings.
"Related Business" means any business that is related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
on the Issue Date.
"Restricted Payment" means (a) any dividend or distribution (whether made
in cash, securities or other Property) declared or paid on or with respect to
any shares of Capital Stock of the Company or any Restricted Subsidiary
(including any payment in connection with any merger or consolidation with or
into the Company or any Restricted Subsidiary), except for any dividend or
distribution which is made solely to the Company or a Restricted Subsidiary
(and, if such Restricted Subsidiary is not a Wholly Owned Subsidiary, to the
other shareholders of such Restricted Subsidiary on a pro rata basis or on a
basis that results in the receipt by the Company or a Restricted Subsidiary of
dividends or distributions of greater value than it would receive on a pro rata
basis) or any dividend or distribution payable solely in shares of Capital Stock
(other than Redeemable Stock) of the Company; (b) the purchase, repurchase,
redemption, acquisition or retirement for value of any Capital Stock of the
Company or any Affiliate of the Company (other than from the Company or a
Restricted Subsidiary) or any warrants, rights or options to directly or
indirectly purchase or acquire any such Capital Stock or any securities
exchangeable for or convertible into any such Capital Stock, including the
exercise of any option to exchange any Capital Stock (other than for or into
Capital Stock of the Company that is not Disqualified Stock); (c) the purchase,
repurchase, redemption, acquisition, defeasance or retirement for value, prior
to any scheduled maturity, scheduled sinking fund or mandatory redemption
payment, any Subordinated Obligation (other than the purchase, repurchase or
other acquisition of any Subordinated Obligation purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition); or (d) any
Investment (other than Permitted Investments) in any Person.
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"Restricted Subsidiary" means (a) any Subsidiary of the Company unless such
Subsidiary shall have been designated an Unrestricted Subsidiary as permitted or
required pursuant to the covenant described under "-- Certain
Covenants -- Designation of Restricted and Unrestricted Subsidiaries" and (b) an
Unrestricted Subsidiary which is redesignated as a Restricted Subsidiary as
permitted pursuant to the covenant described under "-- Certain
Covenants -- Designation of Restricted and Unrestricted Subsidiaries."
"S&P" means Standard & Poor's Ratings Service or any successor to the
rating agency business thereof.
"Sale and Leaseback Transaction" means any arrangement relating to Property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such Property to another Person and the Company or a Restricted
Subsidiary leases it from such Person.
"Securities Act" means the Securities Act of 1933.
"Senior Debt" of the Company means (a) all obligations consisting of the
principal, premium, if any, and accrued and unpaid interest in respect of (i)
Debt of the Company for borrowed money and (ii) Debt of the Company evidenced by
notes, debentures, bonds or other similar instruments permitted under the
Indenture for the payment of which the Company is responsible or liable; (b) all
Capital Lease Obligations of the Company; (c) all obligations of the Company (i)
for the reimbursement of any obligor on any letter of credit, bankers'
acceptance or similar credit transaction, (ii) under Hedging Obligations or
(iii) issued or assumed as the deferred purchase price of Property and all
conditional sale obligations of the Company and all obligations under any title
retention agreement permitted under the Indenture; and (d) all obligations of
other Persons of the type referred to in clauses (a), (b) and (c) for the
payment of which the Company is responsible or liable as Guarantor; provided,
however, that Senior Debt shall not include (a) Debt of the Company that is by
its terms subordinate in right of payment to the New Notes; (B) any Debt
Incurred in violation of the provisions of the Indenture; (C) accounts payable
or any other obligations of the Company to trade creditors created or assumed by
the Company in the ordinary course of business in connection with the obtaining
of materials or services (including Guarantees thereof or instruments evidencing
such liabilities); (D) any liability for Federal, state, local or other taxes
owed or owing by the Company; (E) any obligation of the Company to any
Subsidiary; or (F) any obligations with respect to any Capital Stock of the
Company. "Senior Debt" of any Guarantor has a correlative meaning, provided that
clause (E) above shall be deemed to refer to any obligations of such Guarantor
to the Company or any Subsidiary of the Company.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the Commission.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Debt of the Company or any Guarantor
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the New Notes or the applicable
Guaranty pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation, company,
association, partnership, joint venture or other business entity of which more
than 50% of the total voting power of shares of Capital Stock or other interests
(including partnership interests) entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled directly or indirectly, by (i) such
Person, (ii) such Person and one or more Subsidiaries of such Person or (iii)
one or more Subsidiaries of such Person.
97
<PAGE> 99
"Temporary Cash Investments" means any of the following: (a) Investments
in U.S. Government Obligations maturing within one year of the date of
acquisition thereof; (b) Investments in time deposit accounts, certificates of
deposit and money market deposits maturing within one year of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America or any state thereof or any foreign
country recognized by the United States having capital, surplus and undivided
profits aggregating in excess of $500.0 million (or the foreign currency
equivalent thereof) and whose long-term debt is rated "A-3" or "A-" or higher
according to Moody's or S&P (or such similar equivalent rating by at least one
"nationally recognized statistical rating organization" (as defined in Rule 436
under the Securities Act)); (c) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (a)
entered into with a bank meeting the qualifications described in clause (b)
above; and (d) Investments in commercial paper, maturing not more than 270 days
after the date of acquisition, issued by a corporation (other than an Affiliate
of the Company) organized and in existence under the laws of the United States
of America with a rating at the time as of which any Investment therein is made
of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P
(or such similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the Securities
Act)).
"Unrestricted Subsidiary" means (a) any Subsidiary of the Company that is
designated after the Issue Date as an Unrestricted Subsidiary as permitted
pursuant to the covenant described under "-- Certain Covenants -- Designation of
Restricted and Unrestricted Subsidiaries" and not thereafter redesignated as a
Restricted Subsidiary as permitted pursuant thereto and (b) any Subsidiary of an
Unrestricted Subsidiary.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of any Person means all shares or other equivalents of
Capital Stock of such Person then outstanding and normally entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary all
the Voting Stock of which (except directors' qualifying shares and shares held
by third parties which, in the aggregate, represent no more than 2% of the
outstanding Voting Stock of such Restricted Subsidiary) is at such time owned,
directly or indirectly, by the Company and its other Wholly Owned Subsidiaries.
BOOK-ENTRY SYSTEM
The certificates representing the New Notes will be issued in fully
registered form. The New Notes initially will be represented by a single,
permanent global New Note, in definitive, fully registered form without interest
coupons (the "Global Note") and will be deposited with the Trustee as custodian
for DTC and registered in the name of Cede & Co., as DTC's nominee.
Upon the issuance of a Global Note, DTC or its nominee will credit the
accounts of Persons holding through it with the respective principal amounts of
the New Notes represented by such Global Note purchased by such Persons in the
Offering. Such accounts shall be designated by the Initial Purchasers. Ownership
of beneficial interests in a Global Note will be limited to Persons that have
accounts with DTC ("participants") or Persons that may hold interests through
participants. Any Person acquiring an interest in a Global Note through an
offshore transaction in reliance on Regulation S of the Securities Act may hold
such interest through Cedel or Euroclear. Ownership of beneficial interests in a
Global Note will be shown on, and the transfer of that ownership interest will
be effected only through, records maintained by DTC (with respect to
participants' interests) and such participants (with respect to the owners of
beneficial interests in such Global Note other than participants). The laws of
some jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Note.
98
<PAGE> 100
Payment of principal of and interest on New Notes represented by a Global
Note will be made in immediately available funds to DTC or its nominee, as the
case may be, as the sole registered owner and the sole holder of the New Notes
represented thereby for all purposes under the Indenture. The Company has been
advised by DTC that upon receipt of any payment of principal of or interest on
any Global Note, DTC will immediately credit, on its book-entry registration and
transfer system, the accounts of participants with payments in amounts
proportionate to their respective beneficial interests in the principal or face
amount of such Global Note as shown on the records of DTC. Payments by
participants to owners of beneficial interests in a Global Note held through
such participants will be governed by standing instructions and customary
practices as is now the case with securities held for customer accounts
registered in "street name" and will be the sole responsibility of such
participants.
A Global Note may not be transferred except as a whole by DTC or a nominee
of DTC to a nominee of DTC or to DTC. A Global Note is exchangeable for
certificated New Notes only if (a) DTC notifies the Company that it is unwilling
or unable to continue as a depositary for such Global Note or if at any time DTC
ceases to be a clearing agency registered under the Exchange Act, (b) the
Company in its discretion at any time determines not to have all the New Notes
represented by such Global Note, or (c) there shall have occurred and be
continuing a Default or an Event of Default with respect to the New Notes
represented by such Global Note. Any Global Note that is exchangeable for
certificated New Notes pursuant to the preceding sentence will be exchanged for
certificated New Notes in authorized denominations and registered in such names
as DTC or any successor depositary holding such Global Note may direct. Subject
to the foregoing, a Global Note is not exchangeable, except for a Global Note of
like denomination to be registered in the name of DTC or any successor
depositary or its nominee. In the event that a Global Note becomes exchangeable
for certificated New Notes, (a) certificated New Notes will be issued only in
fully registered form in denominations of $1,000 or integral multiples thereof,
(b) payment of principal of, and premium, if any, and interest on, the
certificated New Notes will be payable, and the transfer of the certificated New
Notes will be registerable, at the office or agency of the Company maintained
for such purposes and (c) no service charge will be made for any registration of
transfer or exchange of the certificated New Notes, although the Company may
require payment of a sum sufficient to cover any tax or governmental charge
imposed in connection therewith.
So long as DTC or any successor depositary for a Global Note, or any
nominee, is the registered owner of such Global Note, DTC or such successor
depositary or nominee, as the case may be, will be considered the sole owner or
holder of the New Notes represented by such Global Note for all purposes under
the Indenture and the New Notes. Except as set forth above, owners of beneficial
interests in a Global Note will not be entitled to have the New Notes
represented by such Global Note registered in their names, will not receive or
be entitled to receive physical delivery of certificated New Notes in definitive
form and will not be considered to be the owners or holders of any New Notes
under such Global Note. Accordingly, each Person owning a beneficial interest in
a Global Note must rely on the procedures of DTC or any successor depositary,
and, if such Person is not a participant, on the procedures of the participant
through which such Person owns its interest, to exercise any rights of a holder
under the Indenture. The Company understands that under existing industry
practices, in the event that the Company requests any action of holders or that
an owner of a beneficial interest in a Global Note desires to give or take any
action which a holder is entitled to give or take under the Indenture, DTC or
any successor depositary would authorize the participants holding the relevant
beneficial interest to give or take such action and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
DTC has advised the Company that DTC is a limited-purpose trust company
organized under the Banking Law of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered under the
Exchange Act. DTC was created to hold the securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for
99
<PAGE> 101
physical movement of securities certificates. DTC's participants include
securities brokers and dealers (which may include the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations
some of whom (or their representatives) own DTC. Access to DTC's book-entry
system is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in Global Securities among participants of DTC, it is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Company, the Trustee or
the Initial Purchasers will have any responsibility for the performance by DTC
or its participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. Each of the Company and the Guarantors has agreed that,
starting on the Expiration Date and ending on the close of business on the first
anniversary following the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until , 1998, all dealers
effecting transactions in the Exchange Securities may be required to deliver a
prospectus.
Neither the Company nor any Guarantor will receive any proceeds from any
sale of New Notes by broker-dealers. New Notes received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Notes or a combination
of such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of one year after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company and the Guarantors, jointly and
severally have agreed to pay all expenses incident to the Exchange Offer
(including the expenses of one counsel for the holders of the Old Notes) other
than commissions or concessions of any brokers or dealers and will indemnify the
holders of the Old Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
100
<PAGE> 102
LEGAL MATTERS
The legality of the New Notes being offered hereby will be passed upon for
the Company by Rogers & Wells, New York, New York.
EXPERTS
The financial statements of the Company at March 31, 1997 and December 31,
1996 and 1995 and for the three months ended March 31, 1997 and for each of the
three years in the period ended December 31, 1996 included in this Prospectus
and Registration Statement have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
101
<PAGE> 103
INDEX TO FINANCIAL STATEMENTS
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
AUDITED AND UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following audited and unaudited consolidated financial statements of
Metallurg, Inc. and Consolidated Subsidiaries are presented herein on the pages
indicated below:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
AUDITED FINANCIAL STATEMENTS:
Independent Auditors' Report.................................................... F-2
Statements of Consolidated Operations for the Quarter Ended March 31, 1997 and
Years Ended December 31, 1996, 1995 and 1994................................... F-3
Consolidated Balance Sheets at March 31, 1997 and December 31, 1996 and 1995.... F-4
Statements of Consolidated Cash Flows for the Quarter Ended March 31, 1997 and
Years Ended December 31, 1996, 1995 and 1994................................... F-5
Notes to Consolidated Financial Statements for the Quarter Ended March 31, 1997
and Years Ended December 31, 1996, 1995 and 1994............................... F-6
UNAUDITED FINANCIAL STATEMENTS:
Condensed Statements of Consolidated Operations for the Quarter Ended July 31,
1997, the Quarter ended March 31, 1997, the Three Months Ended June 30, 1996
and the Six Months Ended June 30, 1996......................................... F-35
Condensed Consolidated Balance Sheets at July 31, 1997, March 31, 1997 and
December 31, 1996.............................................................. F-36
Condensed Statements of Consolidated Cash Flows for the Quarter Ended July 31,
1997, the Quarter ended March 31, 1997, the Three Months Ended June 30, 1996
and the Six Months Ended June 30, 1996......................................... F-37
Notes to Condensed Consolidated Financial Statements............................ F-38
</TABLE>
F-1
<PAGE> 104
INDEPENDENT AUDITORS' REPORT
Metallurg, Inc.:
We have audited the accompanying consolidated balance sheets of Metallurg, Inc.
and consolidated subsidiaries as of March 31, 1997 and December 31, 1996 and
1995 and the related statements of consolidated operations and of consolidated
cash flows for the quarter ended March 31, 1997 and for each of the three years
in the period ended December 31, 1996. 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 March 31, 1997 and December 31, 1996 and 1995 and
the results of their consolidated operations and their consolidated cash flows
for the quarter ended March 31, 1997 and for each of the three years in the
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
As discussed in Notes 1 and 2 to the consolidated financial statements, on April
14, 1997, the U.S. Bankruptcy Court for the Southern District of New York
entered an order confirming the Company's plan of reorganization which became
effective after the close of business on this day. Accordingly, the accompanying
consolidated financial statements for the quarter ended March 31, 1997 have been
prepared in conformity with the American Institute of Certified Public
Accountants Statement of Position No. 90-7, "Financial Reporting for Entities in
Reorganization Under the Bankruptcy Code," for the Company as a new entity with
assets, liabilities, and a capital structure having carrying values not
comparable with prior periods as described in Notes 1 and 2.
As discussed in Note 1 to the consolidated financial statements, effective
January 1, 1996, the Company elected early adoption of the American Institute of
Certified Public Accountants Statement of Position No. 96-1, "Environmental
Remediation Liabilities."
DELOITTE & TOUCHE LLP
New York, New York
July 11, 1997 (November 25, 1997 as to Notes 16 and 17)
F-2
<PAGE> 105
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1997 AND
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER
ENDED YEARS ENDED DECEMBER 31,
MARCH 31, --------------------------------
NOTES 1997 1996 1995 1994
----- ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
Gross volume........................... 1 $162,337 $695,095 $755,927 $586,881
======== ======== ======== ========
Sales.................................. 1 $155,427 $648,816 $688,002 $553,479
Commission income...................... 1 160 1,186 1,362 838
-------- -------- -------- --------
Total revenue..................... 155,587 650,002 689,364 554,317
Cost of sales.......................... 1 134,060 566,538 603,535 496,218
-------- -------- -------- --------
Gross margin...................... 21,527 83,464 85,829 58,099
Selling, general and administrative
expenses............................. 15,046 57,103 52,842 50,652
Environmental expenses................. 1 -- 37,582 2,072 2,082
Restructuring charges.................. 1 -- -- 15,210 2,653
-------- -------- -------- --------
Operating income (loss)........... 6,481 (11,221) 15,705 2,712
Other:
Other income (expense), net.......... 12 3,179 (6,759) 7 7,477
Interest income (expense), net....... 2,9 (245) 1,473 (1,949) (2,555)
Reorganization expense............... 2 (2,663) (3,535) (3,927) (7,118)
Fresh-start revaluation.............. 2 5,107 -- -- --
-------- -------- -------- --------
Income (loss) before income tax
provision and extraordinary item..... 11,859 (20,042) 9,836 516
Income tax provision (benefit)......... 1,10 (3,063) 8,453 8,171 2,507
-------- -------- -------- --------
Income (loss) before extraordinary
item................................. 14,922 (28,495) 1,665 (1,991)
Extraordinary item, net of tax......... 2 43,032 -- -- --
-------- -------- -------- --------
Net income (loss)...................... $ 57,954 $(28,495) $ 1,665 $ (1,991)
======== ======== ======== ========
Pro forma common shares and common
share equivalents.................... 1 4,956 4,956 4,956 4,956
Pro forma earnings per common share:
Income (loss) before extraordinary
item................................. $ 3.01 $ (5.75) $ 0.34 $ (0.40)
Extraordinary item, net of tax......... 8.68 -- -- --
-------- -------- -------- --------
Net income............................. $ 11.69 $ (5.75) $ 0.34 $ (0.40)
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 106
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, DECEMBER 31,
NOTES 1997 1996 1995
------ --------- ------------ ------------
(NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents..................... 1 $ 30,340 $ 63,274 $ 36,828
Trade receivables, less allowance for doubtful
accounts (1997, $-0-; 1996, $4,303,000;
1995, $3,995,000).......................... 1 94,150 88,595 101,237
Inventories................................... 1,5 109,258 106,363 129,049
Prepaid expenses and other current assets..... 16,312 14,315 15,388
Assets held for sale.......................... 1 1,180 1,843 --
--------- ------------ ------------
Total current assets....................... 251,240 274,390 282,502
Investments in affiliates....................... 1 1,461 2,938 3,058
Property, plant and equipment, net 1,6... 38,907 47,885 53,516
Other assets.................................... 13 14,096 6,413 3,534
--------- ------------ ------------
Total................................. $ 305,704 $331,626 $342,610
========= =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Short-term debt............................... 9 $ 13,500 $ 13,468 $ 29,663
Current portion of long-term debt............. 9 1,277 1,352 989
Trade payables................................ 55,947 48,264 49,916
Accrued expenses.............................. 25,351 21,599 26,581
Current portion of environmental
liabilities................................ 1,13 5,270 9,374 2,200
Taxes payable................................. 10 6,579 6,599 6,330
--------- ------------ ------------
Total current liabilities.................. 107,924 100,656 115,679
--------- ------------ ------------
Long-term Liabilities:
Long-term debt................................ 9 51,711 5,049 6,973
Accrued pension liabilities................... 1,8 41,090 43,926 47,409
Environmental liabilities, net................ 1,13 42,865 34,637 10,580
Other liabilities............................. 12,114 9,640 10,402
--------- ------------ ------------
Total long-term liabilities................ 147,780 93,252 75,364
--------- ------------ ------------
Liabilities Subject to Compromise............... 7 -- 179,897 169,519
--------- ------------ ------------
Total liabilities.......................... 255,704 373,805 360,562
--------- ------------ ------------
Commitments and Contingencies................... 14
Shareholders' Equity (Deficit):
Common stock -- 1997: par value $.01 per
share, authorized 15,000,000 shares, issued
and outstanding 4,956,406 shares; 1996 and
1995: stated value $10 per share,
authorized 10,000 shares, issued and
outstanding 2,005 shares
Preferred stock -- 1996 and 1995: par value
$100 per share, authorized 300,000 shares,
no shares issued and outstanding........... 11 50 20 20
Additional paid-in capital.................... 11 49,950 -- --
Cumulative foreign currency translation
adjustment................................. 11 -- 15,755 11,487
Deficit....................................... -- (57,954) (29,459)
--------- ------------ ------------
Total shareholders' equity (deficit)....... 50,000 (42,179) (17,952)
--------- ------------ ------------
Total................................. $ 305,704 $331,626 $342,610
========= =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 107
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE QUARTER ENDED MARCH 31, 1997 AND
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER
ENDED YEARS ENDED DECEMBER 31,
MARCH 31, --------------------------------
1997 1996 1995 1994
------------ -------- -------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................................... $ 57,954 $(28,495) $ 1,665 $ (1,991)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Issuance of executive stock awards.................. 500 -- -- --
Extraordinary item, net of taxes.................... (43,032) -- -- --
Fresh-start revaluation............................. (5,107) -- -- --
Depreciation and amortization....................... 2,143 10,688 15,296 12,986
Gain on sales of assets............................. (3,266) (3,597) (1,971) (2,373)
Reorganization expense, net of payments............. 1,538 894 (609) 1,087
Deferred income taxes............................... (3,767) (51) (229) (1,584)
Provision for doubtful accounts..................... 162 696 1,669 1,541
Provision for environmental costs, net of
payments.......................................... (256) 32,473 (2,769) (814)
Provision for restructuring costs................... -- -- 15,210 2,653
Provision for allowed claims........................ -- 10,547 -- --
Other, net.......................................... 3,057 5,961 (9,032) (1,291)
-------- -------- -------- --------
Total........................................ 9,926 29,116 19,230 10,214
Change in operating assets and liabilities:
(Increase) decrease in trade receivables............ (20,272) 9,916 (1,917) (23,690)
(Increase) decrease in inventories.................. (6,120) 14,308 (10,517) (4,225)
(Increase) decrease in other current assets......... (355) (1,210) 5,850 (3,842)
Increase in trade payables and accrued expenses..... 18,895 1,412 2,857 20,631
Decrease in prepetition liabilities................. (39) (189) (263) (181)
Receipt from environmental trust, net............... 5,928 -- -- --
Other assets and liabilities, net................... (1,547) (5,688) (9,582) 504
-------- -------- -------- --------
Net cash provided by (used in) operating
activities................................. 6,416 47,665 5,658 (589)
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment, net..... (2,774) (9,531) (6,712) (7,566)
Proceeds from asset sales........................... 4,966 5,806 2,663 3,843
Other, net.......................................... (25) (1,294) 104 23
-------- -------- -------- --------
Net cash provided by (used in) investing
activities................................. 2,167 (5,019) (3,945) (3,700)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING AND REORGANIZATION
ACTIVITIES:
Cash distribution pursuant to plan of
reorganization.................................... (59,366) -- -- --
Drawdown of prepetition letters of credit........... 9,700 -- 8,000 --
Proceeds from long-term debt, net................... 8,100 -- -- 2,731
Net borrowing (repayment) of short-term debt........ 1,062 (14,709) 420 1,077
Repayment of long-term debt......................... (487) (1,408) (2,238) (135)
-------- -------- -------- --------
Net cash provided by (used in) financing and
reorganization activities.................. (40,991) (16,117) 6,182 3,673
-------- -------- -------- --------
Effects of exchange rate changes on cash and cash
equivalents......................................... (526) (83) 774 110
-------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents....................................... (32,934) 26,446 8,669 (506)
Cash and cash equivalents -- beginning of period...... 63,274 36,828 28,159 28,665
-------- -------- -------- --------
Cash and cash equivalents -- end of period............ $ 30,340 $ 63,274 $ 36,828 $ 28,159
======== ======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes............................ $ 1,524 $ 5,817 $ 6,031 $ 1,634
======== ======== ======== ========
Cash paid for interest................................ $ 619 $ 3,021 $ 4,777 $ 4,812
======== ======== ======== ========
Cash paid for reorganization expense.................. $ 1,125 $ 2,641 $ 4,536 $ 6,031
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 108
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1997 AND
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation -- The consolidated financial
statements include the accounts of Metallurg, Inc. ("Metallurg") and its
majority-owned subsidiaries (collectively, the "Company"). All 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.
On February 26, 1997, the Fourth Amended and Restated Joint Plan of
Reorganization (the "Plan") of Metallurg and one of its subsidiaries,
Shieldalloy Metallurgical Corporation ("SMC") (collectively, the
"Debtors"), was confirmed by the U.S. Bankruptcy Court for the Southern
District of New York. Transactions contemplated by the Plan were
consummated on April 14, 1997 (the "Effective Date"). For financial
reporting purposes, the Company has reflected the effects of the Plan
consummation as of March 31, 1997. In accordance with Statement of Position
No. 90-7 ("SOP 90-7") of the American Institute of Certified Public
Accountants, the Company was required to account for the reorganization
using fresh-start reporting (see Note 2). Accordingly, a black line is
shown to separate the March 31, 1997 consolidated balance sheet from the
prior periods since they are not prepared on a comparable basis.
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 and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
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.
Inventories -- Inventories are stated at the lower of cost or market. The
cost of inventories is determined using principally the average cost and
specific identification methods.
Assets Held for Sale -- Assets held for sale are stated at the lower of
cost or estimated net realizable value. At March 31, 1997, office buildings
owned by the Company's United Kingdom subsidiary, valued at approximately
$1,180,000, were held for sale. At December 31, 1996, Metallurg's
investments in a joint venture and a building were held for sale in the
amounts of $1,200,000 and $643,000, respectively.
Investments in Affiliates -- 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.
Property and Depreciation -- In accordance with fresh-start reporting,
property, plant and equipment previously stated at cost have been restated
to the estimated fair value as of March 31, 1997 and historical accumulated
depreciation has been eliminated. Major renewals and improvements are
capitalized, while maintenance and repairs are expensed when incurred.
Depreciation is computed using the straight-line and declining-balance
methods over the estimated useful lives of the assets. Upon sale or
retirement, the costs and related accumulated depreciation are eliminated
from the respective accounts and any resulting gain or loss is included in
income.
F-6
<PAGE> 109
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Gross Volume and Sales -- Sales represent amounts invoiced to customers by
the Company. In certain instances, the Company arranges sales for which the
supplier invoices the customer directly ("agency sales"). In such cases,
the Company receives 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.
Environmental Remediation Costs -- In 1996, the Company elected early
adoption of the American Institute of Certified Public Accountants
Statement of Position No. 96-1, "Environmental Remediation Liabilities."
Losses associated with environmental remediation obligations are accrued
when such losses are deemed probable and reasonably estimable. Such
accruals generally are recognized no later than the completion of the
remedial feasibility study and are adjusted as further information develops
or circumstances change. Costs of future expenditures for environmental
remediation obligations are generally not discounted to their present
value.
Impairment of Assets -- In 1995, the Company implemented Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ." This
standard prescribes the method of asset impairment evaluation for long-
lived assets and certain identifiable intangibles that are either held and
used or to be disposed of. Such impairment losses have been included in
restructuring charges for the respective periods.
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 subsidiary adopted
a plan to restructure mining operations along with certain other
operations. Analysis of remaining ore deposits indicated that such ore
deposits 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.
Also during 1995, the principal German subsidiary adopted a plan to
restructure the company into separate business units and to exit certain
unprofitable manufacturing processes. The restructuring expenses reflect
severance for workforce reductions and impairment losses on assets which
are no longer expected to be used in the Company's operations.
Income Taxes -- The Company uses the liability method whereby 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 $38,000,000, $53,000,000 and $87,000,000 at
March 31, 1997 and December 31, 1996 and 1995, 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 gains (losses) of
$712,000, $1,853,000, $(904,000) and $(619,000) were recorded for the
quarter ended March 31, 1997 and the years ended December 31, 1996, 1995
and 1994, 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
F-7
<PAGE> 110
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
denominated in foreign currencies. At March 31, 1997, the Company had
foreign exchange contracts, substantially maturing through August 1999,
with a notional amount of approximately $42,000,000, which approximates
market value.
Financial Instruments -- The Company's financial instruments consist
principally of cash and cash equivalents, trade receivables, debt and
payables. The carrying amounts of such financial instruments approximate
their fair values.
Extraordinary Item -- Discharge of indebtedness income relating to the
consummation of the Plan of Metallurg and SMC is reported as an
extraordinary item, net of tax effects, in the Statements of Consolidated
Operations.
Earnings per Share -- The computation of pro forma earnings per share is
based on the number of common shares and common stock equivalents,
consisting of restricted stock awards, outstanding as of the Effective
Date.
Recently Issued Accounting Pronouncements -- In February 1997, the
Financial Accounting Standards Board ("FASB") issued SFAS No. 128,
"Earnings per Share." This statement is effective for financial statements
issued for periods ending after December 15, 1997. Management has evaluated
the effect on its financial reporting from the adoption of this statement
and does not believe it to be significant.
In February 1997, the FASB also issued SFAS No. 129 "Disclosure of
Information about Capital Structure." This statement is effective for
financial statements issued for periods ending after December 15, 1997.
Management has evaluated the effect on its financial reporting and as it
contains no change in the disclosure requirements of Accounting Principles
Board Opinions 10 and 15 and SFAS No. 47, no further disclosures are
needed.
2. PLAN OF REORGANIZATION AND FRESH-START REPORTING
Costs of administration of the Chapter 11 proceedings approximating
$2,663,000, $3,535,000, $3,927,000 and $7,118,000 were recorded by the
Debtors during the quarter ended March 31, 1997 and the years ended
December 31, 1996, 1995 and 1994, respectively, and have been included as
reorganization expense in the Statements of Consolidated Operations. Those
expenses consisted primarily of legal, administration, consulting and other
similar expenses.
Selected financial data for the Debtors is as follows (in thousands):
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AS OF MARCH 31, ---------------------
1997 1996 1995
--------------- -------- --------
<S> <C> <C> <C>
Assets...................................... $ 181,503 $209,542 $227,267
Liabilities................................. 111,844 247,053 206,259
-------- -------- --------
Net assets(deficit)......................... $ 69,659 $(37,511) $ 21,008
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FOR THE QUARTER FOR THE YEARS ENDED DECEMBER 31,
ENDED MARCH 31, ----------------------------------
1997 1996 1995 1994
--------------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue........................ $56,858 $224,572 $230,988 $229,626
======= ======== ======== ========
Net income (loss).............. $57,954 $(28,495) $ 1,665 $ (1,991)
======= ======== ======== ========
</TABLE>
On the Effective Date, claims related to prepetition liabilities and
administrative expenses were discharged through distributions of
$59,366,000 in cash, the issuance of $39,461,000 of senior-
F-8
<PAGE> 111
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
secured notes and 4,706,406 shares of new common stock. The value of the
cash and securities distributed was less than the recorded liabilities and
the resultant gain was recorded as an extraordinary item, net of tax
effects.
The Company was required to adopt fresh-start reporting because the holders
of the existing voting shares immediately prior to filing and confirmation
of the Plan received less than 50% of the voting shares of the emerging
entity and its reorganization value was less than the total of its
post-petition liabilities and allowed claims. SOP 90-7 required the Company
to revalue its assets and liabilities to their estimated fair value and 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. Accordingly, the Company's property, plant and
equipment and other noncurrent assets were reduced by approximately
$5,520,000. In addition, the Company's accumulated equity of approximately
$4,733,000 and cumulative foreign currency translation adjustment of
approximately $14,587,000 were eliminated.
The total reorganization value assigned to the Company's assets was
estimated by calculating projected cash flows before debt service
requirements for a three-year period, plus an estimated terminal value of
the Company calculated using an estimate of normalized operating
performance and discount rates ranging from 13.5% to 16.5%. This amount was
increased by (i) the estimated net realizable value of assets to be sold
and (ii) estimated cash in excess of normal operating requirements. The
above calculations resulted in an estimated reorganization equity value,
after distributions, of approximately $50,000,000.
F-9
<PAGE> 112
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effect of the Plan and the implementation of fresh-start reporting on
the Company's consolidated balance sheet as of March 31, 1997 was as
follows (in thousands):
<TABLE>
<CAPTION>
PRIOR TO ADOPTION OF OPENING
JOINT PLAN EFFECTS OF FRESH-START BALANCE
EFFECTIVENESS JOINT PLAN(A) REPORTING SHEET
------------- ------------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......... $ 66,670 $ (36,330) $ 30,340
Trade receivables, less allowance
for doubtful accounts........... 94,255 (105) 94,150
Inventories........................ 109,258 -- 109,258
Prepaid expenses and other current
assets.......................... 16,382 180 $ (250)(b) 16,312
Assets held for sale............... 341 -- 839(b) 1,180
-------- --------- -------- ---------
Total current assets............ 286,906 (36,255) 589 251,240
Investments in affiliates............ 2,779 -- (1,318)(c) 1,461
Property, plant and equipment, net... 42,348 -- (3,441)(c) 38,907
Other assets......................... 14,243 614 (761)(c) 14,096
-------- --------- -------- ---------
Total...................... $ 346,276 $ (35,641) $ (4,931) $305,704
======== ========= ======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Short-term debt.................... $ 13,500 $ 13,500
Current portion of long-term
debt............................ 1,277 1,277
Trade payables..................... 55,947 55,947
Accrued expenses................... 22,736 $ 2,338 $ 277(b) 25,351
Current portion of environmental
liabilities..................... 5,270 -- -- 5,270
Taxes payable...................... 7,136 (557) -- 6,579
-------- --------- -------- ---------
Total current liabilities....... 105,866 1,781 277 107,924
-------- --------- -------- ---------
Long-term Liabilities:
Long-term debt..................... 4,248 47,463 -- 51,711
Accrued pension liabilities........ 39,610 (1,345) 2,825(b) 41,090
Environmental liabilities, net..... 37,495 5,370 -- 42,865
Other liabilities.................. 10,293 -- 1,821(b) 12,114
-------- --------- -------- ---------
Total long-term liabilities..... 91,646 51,488 4,646 147,780
-------- --------- -------- ---------
Liabilities Subject to Compromise.... 180,247 (180,247) -- --
-------- --------- -------- ---------
Total liabilities............... 377,759 (126,978) 4,923 255,704
-------- --------- -------- ---------
Commitments and Contingencies........
Shareholders' Equity (Deficit):
Common stock....................... 20 30 -- 50
Additional paid-in capital......... -- 49,950 -- 49,950
Cumulative foreign currency
translation adjustment.......... 14,531 56 (14,587)(d) --
Deficit............................ (46,034) 41,301 4,733(d) --
-------- --------- -------- ---------
Total shareholders' equity
(deficit)..................... (31,483) 91,337 (9,854) 50,000
-------- --------- -------- ---------
Total...................... $ 346,276 $ (35,641) $ (4,931) $305,704
======== ========= ======== =========
</TABLE>
- ---------------
Notes:
(a) To record the distribution of cash and securities, the settlement of
liabilities subject to compromise and other transactions in accordance
with the Plan.
(b) To adjust assets and liabilities to their estimated fair value.
(c) To reduce long-term assets for the excess of the fair value of
identifiable net assets over the total reorganization value as of the
Effective Date.
(d) To eliminate the accumulated deficit and cumulative foreign currency
translation adjustment in accordance with fresh-start reporting.
F-10
<PAGE> 113
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. GEOGRAPHIC DATA
The Company operates in one significant industry segment, the manufacture
and sale of ferrous and non-ferrous metals and alloys. Data by geographical
area is as follows (in thousands):
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AS OF MARCH 31, ----------------------------------
1997 1996 1995 1994
-------------------- -------- -------- --------
<S> <C> <C> <C> <C>
Identifiable assets
North America................. $107,254 $148,719 $150,281 $139,940
Foreign....................... 228,668 214,953 219,460 214,298
Eliminations.................. (30,218) (32,046) (27,131) (27,257)
-------- -------- -------- --------
Total................. $305,704 $331,626 $342,610 $326,981
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FOR THE QUARTER FOR THE YEARS ENDED DECEMBER 31,
ENDED MARCH 31, ----------------------------------
1997 1996 1995 1994
--------------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenue from unaffiliated
customers
North America................. $ 68,540 $294,843 $300,200 $260,580
Foreign....................... 87,047 355,159 389,164 293,737
-------- -------- -------- --------
Total................. $ 155,587 $650,002 $689,364 $554,317
======== ======== ======== ========
Net income (loss)
North America................. $ 48,262 $(56,506) $ 8,160 $ (2,887)
Foreign....................... 9,692 28,011 (6,495) 896
-------- -------- -------- --------
Total................. $ 57,954 $(28,495) $ 1,665 $ (1,991)
======== ======== ======== ========
</TABLE>
4. INVESTMENT ACTIVITIES
On March 20, 1997, Metallurg sold its 50% interest in AMPAL, Inc. for
proceeds approximating book value of $1,200,000.
In August 1996, the Company purchased approximately 5% of the outstanding
stock of Solikamsk Magnesium Works ("SMW"), a Russian magnesium metal
producer, for approximately $1,000,000. The acquisition has allowed the
Company and its subsidiaries to strengthen existing business ties with SMW
and secure a continuing supply of materials from Russia.
In December 1996, SMC sold its wholly-owned subsidiary, Frankel Metal
Company ("FMC"), a processor of titanium scrap, to FMC's management for a
purchase price which was based on an adjusted net book value formula. SMC
recorded a net loss on the sale of this business of $460,000. The sale
followed SMC's decision that FMC's operations no longer produced the
strategic benefits which had been envisaged for it.
5. INVENTORIES
Inventories, net of reserves, consist of the following (in thousands):
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AS OF MARCH 31, ---------------------
1997 1996 1995
--------------- -------- --------
<S> <C> <C> <C>
Raw materials............................... $ 21,769 $ 25,181 $ 26,996
Work in process............................. 2,330 2,237 4,243
Finished goods.............................. 80,500 75,478 94,183
Other....................................... 4,659 3,467 3,627
-------- -------- --------
Total............................. $ 109,258 $106,363 $129,049
======== ======== ========
</TABLE>
F-11
<PAGE> 114
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. PROPERTY, PLANT AND EQUIPMENT
The major classes of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
ESTIMATED
AS OF DECEMBER 31, LIVES
AS OF MARCH 31, --------------------- ----------
1997 1996 1995
--------------- -------- -------- (IN YEARS)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Land............................ $ 3,019 $ 6,177 $ 7,569
Buildings and leasehold
improvements.................. 13,205 43,826 47,260 10 - 32
Machinery....................... 17,729 181,172 183,820 5 - 17
Office furniture and
equipment..................... 2,046 6,940 7,045 3 - 17
Transportation equipment........ 1,588 6,992 6,222 3 - 5
Construction in progress........ 1,320 1,142 2,440
------- -------- --------
Total................. 38,907 246,249 254,356
Less accumulated depreciation... -- 198,364 200,840
------- -------- --------
Property, plant and equipment,
net........................... $38,907 $ 47,885 $ 53,516
======= ======== ========
</TABLE>
Depreciation expense related to property, plant and equipment charged to
operations for the quarter ended March 31, 1997 and the years ended
December 31, 1996, 1995 and 1994 was $2,126,000, $10,621,000, $15,227,000
and $12,921,000, respectively.
7. LIABILITIES SUBJECT TO COMPROMISE
Pursuant to the provisions of the Bankruptcy Code, certain liabilities
attributable to the period prior to the Petition Date could not be paid
without prior approval of the Bankruptcy Court and were reclassified to
liabilities subject to compromise. Substantially all of these claims were
settled at the Effective Date in accordance with the Plan of
Reorganization. The liabilities subject to compromise at December 31, 1996
and 1995 consisted of the following (in thousands):
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Long-term debt.............................................. $112,158 $112,349
Trade payables and other accrued liabilities................ 22,520 20,792
Prepetition environmental liabilities....................... 4,070 279
Accrued pension liabilities................................. 12,030 6,980
Accrued interest payable.................................... 3,412 3,412
Liabilities to former shareholders.......................... 25,707 25,707
-------- --------
Total liabilities subject to compromise........... $179,897 $169,519
======== ========
</TABLE>
In 1996, after an extended reconciliation process and upon reaching
settlement with a number of prepetition creditors, the Debtors recorded
additional prepetition claims in the amount of $1,706,000. As part of an
agreement with various environmental regulatory authorities, SMC agreed to
allow certain unsecured claims in its Chapter 11 proceedings in the amount
of $4,070,000.
In addition, during 1996, SMC completed the withdrawal from a multiemployer
pension plan which covered certain union employees at its Newfield, New
Jersey site. In connection with this withdrawal, the Debtors negotiated a
settlement with the District 65 Pension Plan in which SMC agreed to allow
an unsecured prepetition claim in the amount of $5,000,000 and an
administrative claim of $50,000.
As discussed in more detail in Note 13, the Debtors entered into settlement
agreements with certain of the relevant environmental agencies during 1996.
Therefore, accrued environmental liabilities of $14,343,000, reported as a
component of liabilities subject to compromise at December 31, 1995, were
reclassified as current and noncurrent to conform with the 1996
presentation.
F-12
<PAGE> 115
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. RETIREMENT PLANS
Defined Benefit Plans
Metallurg and its domestic consolidated subsidiaries have 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. These plans are
funded in amounts equal to the minimum funding requirements of the Employee
Retirement Income Security Act. Substantially all plan assets are invested
in cash and short-term investments or listed stocks and bonds.
Net periodic pension cost for the domestic defined benefit plans included
the following components (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
FOR THE QUARTER DECEMBER 31,
ENDED MARCH 31, ---------------------------
1997 1996 1995 1994
-------------------- ------- ----- -----
<S> <C> <C> <C> <C>
Service cost -- benefits earned
during the period............... $ 107 $ 493 $ 476 $ 531
Interest cost on projected benefit
obligation...................... 280 964 939 908
Return on plan assets............. (309) (1,074) (862) (872)
Net amortization and deferral..... 32 (18) 180 76
----- ------- ----- -----
Net periodic pension cost......... $ 110 $ 365 $ 733 $ 643
===== ======= ===== =====
</TABLE>
Assumptions used to calculate pension costs and projected benefit
obligations are as follows:
<TABLE>
<CAPTION>
FOR THE QUARTER FOR THE YEARS ENDED DECEMBER 31,
ENDED MARCH 31, ----------------------------------
1997 1996 1995 1994
-------------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Discount rate................ 7.0% 7.0% 7.0% 7.5%
Rate of increase in future
compensation levels........ 4.0% 4.0% 4.0% 5.5%
Expected long-term rate of
return on plan assets...... 7.5%-9.0% 7.5%-9.0% 7.5%-9.0% 7.5%-9.0%
</TABLE>
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,
AS OF MARCH 31, ---------------------
1997 1996 1995
--------------- -------- --------
<S> <C> <C> <C>
Vested benefit obligation................... $ (15,037) $(13,166) $(13,115)
Nonvested benefit obligation................ (396) (912) (171)
-------- -------- --------
Accumulated benefit obligation............ (15,433) (14,078) (13,286)
Effect of projected future compensation..... (1,056) (767) (1,138)
-------- -------- --------
Projected benefit obligation.............. (16,489) (14,845) (14,424)
Plan assets at fair value................... 14,346 14,284 11,813
-------- -------- --------
Funded status............................. (2,143) (561) (2,611)
Unrecognized net transition obligation...... -- 7 (100)
Unrecognized prior service cost............. -- 128 195
Unrecognized net loss....................... -- 211 1,499
-------- -------- --------
Accrued pension cost recorded............... $ (2,143) $ (215) $ (1,017)
======== ======== ========
</TABLE>
F-13
<PAGE> 116
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
FOR THE QUARTER 31,
ENDED MARCH 31, -------------------------------
1997 1996 1995 1994
-------------------- ------- ------- -------
<S> <C> <C> <C> <C>
Service cost -- benefits
earned during the period.... $ 250 $ 954 $ 918 $ 889
Interest cost on projected
benefit obligation.......... 839 3,004 2,781 2,354
Return on plan assets......... (1,669) (4,586) (5,174) 1,071
Net amortization and
deferral.................... 286 1,093 2,120 (3,975)
------- ------- ------- -------
Net periodic pension cost
(credit).................... $ (294) $ 465 $ 645 $ 339
======= ======= ======= =======
</TABLE>
Assumptions used to calculate pension costs and projected benefit
obligations are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
FOR THE QUARTER DECEMBER 31,
ENDED MARCH 31, ------------------------
1997 1996 1995 1994
-------------------- ---- ---- ----
<S> <C> <C> <C> <C>
Discount rate.......................... 8.5% 8.5 % 8.5 % 8.0 %
Rate of increase in future compensation
levels............................... 6.5% 6.5 % 6.5 % 6.5 %
Expected long-term rate of return on
plan assets.......................... 8.5% 8.5 % 8.5 % 8.5 %
</TABLE>
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,
AS OF MARCH 31, ---------------------
1997 1996 1995
--------------- -------- --------
<S> <C> <C> <C>
Vested benefit obligation................... $ (39,869) $(37,238) $(32,024)
Nonvested benefit obligation................ -- -- --
-------- -------- --------
Accumulated benefit obligation............ (39,869) (37,238) (32,024)
Effect of projected future compensation..... (4,153) (3,879) (3,337)
-------- -------- --------
Projected benefit obligation.............. (44,022) (41,117) (35,361)
Plan assets at fair value................... 51,677 48,479 39,821
-------- -------- --------
Funded status............................. 7,655 7,362 4,460
Unrecognized net transition asset........... -- (1,361) (1,370)
Unrecognized net gain....................... -- (3,244) (973)
-------- -------- --------
Prepaid pension cost recorded............... $ 7,655 $ 2,757 $ 2,117
======== ======== ========
</TABLE>
The Company's German subsidiaries maintain unfunded defined benefit pension
plans covering substantially all eligible employees. The plans were amended
in 1992 in a manner that terminated any credit for future service. Pension
expense, therefore, is related primarily to interest cost on the projected
benefit obligation and approximated $591,000, $2,531,000, $2,991,000 and
$2,630,000 in the quarter ended March 31, 1997 and the years ended December
31, 1996, 1995 and 1994, respectively. Assumptions used to calculate
pension costs and projected benefit obligations included discount rates of
6% for the quarter ended March 31, 1997 and the year ended December 31,
1996 and 6.5% and 7.5% for the years ended December 31, 1995 and 1994,
respectively. Increases in future compensation levels were assumed at rates
of 3% in 1997, 1996 and 1995 and 4.5% in 1994.
F-14
<PAGE> 117
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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,
AS OF MARCH 31, ---------------------
1997 1996 1995
--------------- -------- --------
<S> <C> <C> <C>
Vested benefit obligation................... $ (37,014) $(39,855) $(40,477)
Nonvested benefit obligation................ -- -- --
-------- -------- --------
Accumulated benefit obligation............ (37,014) (39,855) (40,477)
Effect of projected future compensation..... (1,514) (2,025) (2,100)
-------- -------- --------
Projected benefit obligation.............. (38,528) (41,880) (42,577)
Unrecognized net (gain) loss................ -- 942 (1,349)
-------- -------- --------
Accrued pension cost recorded............... $ (38,528) $(40,938) $(43,926)
======== ======== ========
</TABLE>
Other Benefit Plans
The Company maintained certain non-qualified retirement benefit
arrangements for certain individuals. As of the Petition Date, amounts due
by the Debtors related to certain of those executory contracts were
rejected and reflected as liabilities subject to compromise. Pension
expense relating to certain of those arrangements was $300,000, $509,000
and $268,000 in the years ended December 31, 1996, 1995 and 1994,
respectively. No expense was recorded for these arrangements in the quarter
ended March 31, 1997.
Metallurg maintains a discretionary defined contribution profit-sharing
plan covering substantially all of the salaried employees of Metallurg and
its domestic consolidated subsidiaries. The related expense was $62,000,
$229,000 and $208,000 in the quarter ended March 31, 1997 and the years
ended December 31, 1996 and 1995, respectively. No expense was recorded for
this plan in 1994.
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 other foreign subsidiaries' pension plans was $96,000, $228,000,
$209,000 and $704,000 for the quarter ended March 31, 1997 and the years
ended December 31, 1996, 1995 and 1994, respectively.
9. BORROWINGS
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
AS OF MARCH 31, -----------------
1997 1996 1995
--------------- ------ ------
<S> <C> <C> <C>
Parent company and domestic subsidiaries:
12% senior-secured notes...................... $39,461
-------
Foreign subsidiaries:
Germany....................................... 5,133 $6,061 $7,811
United Kingdom................................ 8,100 -- --
Other......................................... 294 340 151
------- ------ ------
Long-term debt -- foreign subsidiaries..... 13,527 6,401 7,962
-------
Less: Amounts due within one year............... 1,277 1,352 989
------- ------ ------
Total long-term debt............................ $51,711 $5,049 $6,973
======= ====== ======
</TABLE>
Parent Company and Domestic Subsidiaries
On the Effective Date, Metallurg issued $39,461,000 of senior-secured notes
which mature in 2007 and accrue interest at a rate of 12% per annum,
payable semi-annually. Metallurg will be required to make mandatory
redemptions or sinking fund payments in the amount of $2,500,000 in 2004,
2005
F-15
<PAGE> 118
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and 2006, respectively. All assets of Metallurg are pledged as collateral
(with a second lien on those assets pledged pursuant to the revolving
credit facility, i.e. accounts receivable and inventory), including a
second lien on 100% of all domestic subsidiaries and 66 2/3% less one share
of the stock of substantially all foreign subsidiaries of Metallurg.
Approximately $30,000,000 principal amount of the senior-secured notes are
held by related parties.
Pursuant to the Plan, Metallurg and SMC (the "Borrowers") entered into an
agreement with BankBoston, N.A. for a revolving credit facility, in the
amount of $40,000,000, to provide working capital and to finance other
general corporate purposes. Borrowings under this facility bear interest at
a rate per annum equal to (i) the Base Rate plus 1% per annum (the Base
Rate is the greater of BankBoston N.A.'s base rate or the Federal Funds
Effective Rate plus 0.5%) or (ii) the reserve adjusted Eurodollar rate plus
2.5% for interest periods of one, two or three months. The Company is
required to pay a fee of 0.375% per annum on the unused portion of the
commitment. The total amount the Borrowers may borrow at any time is
limited to a borrowing base calculation which includes accounts receivable,
inventory and fixed assets. The revolving credit agreement, which expires
on April 14, 2000, requires the Borrowers to comply with various covenants,
including restrictions on dividends and the maintenance of minimum levels
of earnings before interest, taxes, depreciation and amortization.
Substantially all assets of the Borrowers are pledged as collateral under
this agreement. At March 31, 1997, there were no borrowings under this
facility; however, outstanding letters of credit approximated $7,092,000.
In October 1997, this facility was increased to $50,000,000.
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 had been deferred pursuant to the Chapter 11
proceedings. Subsequent to the Chapter 11 filings, the Debtors did not
accrue interest on any of these obligations, except for secured debt,
incurred on or before the Petition Date. Contractual interest on these
unsecured obligations approximated $2,136,000, $8,600,000, $9,200,000 and
$8,300,000 in excess of interest expense reflected in the Statements of
Consolidated Operations for the quarter ended March 31, 1997 and years
ended December 31, 1996, 1995 and 1994, respectively.
Foreign Subsidiaries
London & Scandinavian Metallurgical Co., Limited ("LSM"), a United Kingdom
subsidiary, has a revolving credit facility agreement approximating
$11,500,000 which bears interest at the lender's base rate plus 1.0%. In
addition, LSM maintains a term loan, in the amount of approximately
$8,100,000, which funded a dividend in connection with the consummation of
the Plan. The term loan bears interest at 2.0% above LIBOR. LSM has entered
into an interest rate swap which effectively fixes the interest rate at
9.4%. Both of these facilities have a tenure of three years, are secured by
essentially all of LSM's assets and are subject to various financial
covenants, including minimum tangible net worth and restrictions on
dividends. At March 31, 1997, there were no borrowings under the revolving
credit facility and $8,100,000 was outstanding under the term loan.
Elektrowerk Weisweiler GmbH ("EWW"), a German subsidiary, had committed
lines of credit with several banks approximating $9,000,000. The credit
facilities expire in 1999 and bear interest at a rate from 7.0% to 7.5%.
The credit agreements require EWW to pledge certain assets, which include
accounts receivable, inventory and fixed assets. At March 31, 1997, there
were no borrowings under these agreements. EWW also has a term loan
approximating $2,200,000 maturing in 2001. The term loan is secured by a
mortgage on certain real property and bears interest at 4.5%.
GfE Gesellschaft fur Elektrometallurgie mbH ("GfE"), a German subsidiary,
and its subsidiaries have uncommitted bank lines of credit with a number of
financial institutions amounting to
F-16
<PAGE> 119
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$12,567,000 at March 31, 1997. The credit agreements require GfE to pledge
certain assets, including accounts receivable and inventory. At March 31,
1997, borrowings under these agreements approximated $11,883,000 at a
weighted average interest rate of 9.1%. The GfE group also have term loans
approximating $2,900,000 maturing through 2004 and bearing interest at a
weighted average rate of 6.0%.
The Company's other foreign subsidiaries maintain short-term secured and
unsecured borrowing arrangements, generally in local currencies, with
various banks. Borrowings under these arrangements aggregated $1,617,000 at
March 31, 1997 at a weighted average interest rate of 19.3%.
Interest expense totaled $1,706,000, $3,043,000, $4,851,000 and $4,815,000
for the quarter ended March 31, 1997 and the years ended December 31, 1996,
1995 and 1994, respectively.
The scheduled maturities of long-term debt during the next five years are
$1,277,000 in 1998, $960,000 in 1999, $8,720,000 in 2000, $1,277,000 in
2001, $650,000 in 2002 and $40,104,000 thereafter.
10. INCOME TAXES
For financial reporting purposes, income (loss) before income tax provision
and extraordinary item includes the following components (in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED FOR THE YEAR ENDED DECEMBER 31,
MARCH 31, -------------------------------
1997 1996 1995 1994
------------- -------- ------ -------
<S> <C> <C> <C> <C>
United States........................ $ 1,472 $(45,882) $7,158 $(5,211)
Foreign.............................. 10,387 25,840 2,678 5,727
------- -------- ------ -------
Total........................... $11,859 $(20,042) $9,836 $ 516
======= ======== ====== =======
</TABLE>
The reconciliation of income tax from continuing operations computed at the
U.S. Federal statutory tax rate to the Company's effective tax rate is as
follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
QUARTER ENDED
MARCH 31, 1997 1996 1995 1994
------------------ ------------------- ------------------- -------------------
TAX TAX TAX TAX
PROVISION PROVISION PROVISION PROVISION
(BENEFIT) PERCENT (BENEFIT) PERCENT (BENEFIT) PERCENT (BENEFIT) PERCENT
-------- ------ -------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income tax provision at
statutory rate............... $ 4,032 34.0% $ (6,814) 34.0% $ 3,344 34.0% $ 175 34.0%
State and local income taxes,
net of federal income tax
effect....................... 86 0.7 280 (1.4) 98 1.0 183 35.4
Foreign rates and foreign
dividends.................... (6,886) (58.1) (757) 3.8 7,061 71.8 2,146 415.9
Changes in domestic valuation
allowance.................... (500) (4.2) 15,600 (77.8) (2,434) (24.7) (353) (68.5)
Other.......................... 205 1.7 144 (0.7) 102 1.0 356 69.1
-------- ------ -------- ------ -------- ------ -------- ------
Total...................... $ (3,063) (25.9%) $ 8,453 (42.1%) $ 8,171 83.1% $ 2,507 485.9%
======= ====== ======= ====== ======= ====== ======= ======
</TABLE>
F-17
<PAGE> 120
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The income tax provision (benefit) represents the following (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
FOR THE QUARTER 31,
ENDED MARCH 31, -----------------------------
1997 1996 1995 1994
-------------------- ------ ------ -------
<S> <C> <C> <C> <C>
Current:
U.S............................ $ 175
Foreign........................ $ 573 $8,080 $8,251 3,639
State and local................ 131 424 149 277
------- ------ ------ -------
Total current............... 704 8,504 8,400 4,091
------- ------ ------ -------
Deferred:
U.S............................ 160 -- 50 (2,038)
Foreign........................ (3,927) (51) (279) 454
------- ------ ------ -------
Total deferred.............. (3,767) (51) (229) (1,584)
------- ------ ------ -------
Total income tax (benefit)
provision...................... $ (3,063) $8,453 $8,171 $ 2,507
======= ====== ====== =======
</TABLE>
The Internal Revenue Service has completed the examination of the
consolidated U.S. Federal tax returns for years through 1992. U.S. Federal
income tax refunds receivable of $1,043,000 at March 31, 1997 and December
31, 1996 and $618,000 at December 31, 1995, relating primarily to the
carryback effect of net operating losses, are reflected in prepaid expenses
in the accompanying Consolidated Balance Sheets.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and amounts used for income tax purposes. Significant
components of the Company's deferred tax assets and liabilities are as
follows (in thousands):
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
MARCH 31, -------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Deferred Tax Assets:
NOL and other credit carryforwards........ $ 39,160 $ 47,996 $ 62,292
Retirement benefits....................... 18,359 25,950 9,677
Environmental liabilities................. 16,976 20,139 6,004
Tax intangibles........................... 7,188 9,570 13,914
Allowance for doubtful accounts........... 2,762 445 258
Fixed assets.............................. 1,848 -- --
Other..................................... 3,907 1,800 655
--------- --------- ---------
Total deferred assets.................. 90,200 105,900 92,800
Deferred tax asset valuation allowance.... (76,400) (95,100) (88,200)
--------- --------- ---------
Net deferred tax assets................ 13,800 10,800 4,600
--------- --------- ---------
Deferred Tax Liabilities:
Tax writeoffs and reserves................ (3,339) (3,329) (2,905)
Pension credits........................... (2,968) (128) --
Fixed assets.............................. (2,088) (2,785) (1,697)
Earnings of foreign subsidiaries expected
to be remitted......................... (558) (5,851) --
Other..................................... (2,547) (1,007) (1,298)
--------- --------- ---------
Total deferred liabilities............. (11,500) (13,100) (5,900)
--------- --------- ---------
Net deferred tax asset (liability)..... $ 2,300 $ (2,300) $ (1,300)
========= ========= =========
</TABLE>
As of March 31, 1997, the Company has net operating loss carryforwards
relating to domestic operations of approximately $9,900,000 (subject to
certain limitations relative to utilization) which
F-18
<PAGE> 121
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expire through 2009 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 $79,000,000, a substantial portion
of which relates to certain Brazilian and German operations which do not
expire under current regulations. Due to significant uncertainties
surrounding the realization of certain loss carryforwards, the related
deferred tax assets have been substantially provided for in the valuation
allowances at March 31, 1997.
The adoption of fresh-start reporting will result in an increase of
additional paid-in capital, rather than an income tax benefit, as the
benefits relating to existing net operating loss carryforwards are
recognized in the future.
11. SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN TOTAL
ADDITIONAL CURRENCY RETAINED SHAREHOLDERS'
COMMON PAID-IN TRANSLATION EARNINGS EQUITY
STOCK CAPITAL ADJUSTMENT (DEFICIT) (DEFICIT)
------ --------- ----------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at January 1,
1994...................... $ 20 -- $ 12,124 $(29,133) $ (16,989)
Net loss.................... -- -- -- (1,991) (1,991)
Change in translation
adjustment................ -- -- 419 -- 419
------ --------- ----------- -------- -------------
Balance at December 31,
1994...................... 20 -- 12,543 (31,124) (18,561)
Net income.................. -- -- -- 1,665 1,665
Change in translation
adjustment................ -- -- (1,056) -- (1,056)
------ --------- ----------- -------- -------------
Balance at December 31,
1995...................... 20 -- 11,487 (29,459) (17,952)
Net loss.................... -- -- -- (28,495) (28,495)
Change in translation
adjustment................ -- -- 4,268 -- 4,268
------ --------- ----------- -------- -------------
Balance at December 31,
1996...................... 20 -- 15,755 (57,954) (42,179)
Net income (excluding
effects of the
consummation)............. -- -- -- 11,920 11,920
Change in translation
adjustment................ -- -- (1,224) -- (1,224)
Issuance of new common stock
and consummation
adjustments............... 30 $ 49,950 (14,531) 46,034 81,483
------ --------- ----------- -------- -------------
Balance at March 31, 1997... $ 50 $ 49,950 -- -- $ 50,000
======= ======== ========= ========= ===========
</TABLE>
Effective April 14, 1997, the Certificate of Incorporation of the Company
was amended, whereby the authorized number of shares of common stock was
increased to 15,000,000 shares with a par value of $.01 per share, and each
original outstanding share of common stock of the Company was canceled. In
addition, in accordance with the Plan, 4,706,406 shares were issued to
prepetition unsecured claimholders. The Company was subsequently merged
into a new corporation, organized
F-19
<PAGE> 122
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
under the laws of the State of Delaware, and all common shares then
outstanding were exchanged on a one-for-one basis for shares in the new
corporation.
On the Effective Date, the Company adopted the Metallurg, Inc. Management
Stock Award and Stock Option Plan (the "SASOP"), which is to be
administered by the Compensation Committee of the Board of Directors for a
term of 10 years. Under terms of the SASOP, the Board may grant stock
awards and stock options (including incentive stock options, nonqualified
stock options or a combination of both) to officers and key employees of
the Company. Under the SASOP, 500,000 shares of common stock were made
available for stock awards and stock options. Pursuant to the Plan, the
Board granted to eligible executives 250,000 shares of common stock (the
"Initial Stock Awards"). Twenty percent of each Initial Stock Award was
transferable on the date of grant and 40 percent will become transferable
on the first and second anniversary of the date of grant. Additionally, the
Board granted to eligible employees options to purchase 167,000 shares of
common stock at $11.38 (fair market value on the date of grant), effective
as of September 1, 1997. Such options vest 33 1/3% on the date of grant and
33 1/3% will vest on the first and second anniversary of the date of grant.
At December 31, 1996 and 1995, 10,000 shares of common stock were
authorized, of which 2,005 shares were outstanding. This stock had no par
value and a stated value of $10 per share. In addition, 300,000 shares of
preferred stock were authorized, having a par value of $100 per share, of
which no shares were outstanding at December 31, 1996 or 1995.
12. OTHER INCOME (EXPENSE), NET
Other income (expense), net consists of the following (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
FOR THE QUARTER 31,
ENDED MARCH 31, ------------------------------
1997 1996 1995 1994
-------------------- ------- ------- ------
<S> <C> <C> <C> <C>
Additional institutional
claims....................... $(1,706)
District 65 Pension Plan
claims....................... (5,050)
Prepetition environmental
claims....................... (3,791)
Net gain on asset sales........ $3,266 3,597 $ 1,971 $2,373
Other, net..................... (87) 191 (1,964) 5,104
------ ------- ------- ------
Total................ $3,179 $(6,759) $ 7 $7,477
====== ======= ======= ======
</TABLE>
During 1997, 1995 and 1994, Metallurg sold three of its commercial real
estate properties located in New York City in contemplation of the Plan.
Gains of $2,747,000, $765,000 and $2,185,000 are reflected in other income
in the quarter ended March 31, 1997 and the years ended December 31, 1995
and 1994, respectively.
Upon reaching settlement in 1996 with various prepetition creditors, the
District 65 Pension Plan and certain environmental regulatory authorities,
the Debtors recorded additional expenses of approximately $10,500,000 which
are discussed further in Notes 7 and 13.
During 1995, Turk Maadin Sirketi A.S., a Turkish chrome ore mining
operation, entered into an agreement to sell a parcel of land no longer in
productive use in an installment sale arrangement. As a result, gains on
this transaction of $3,787,000 in 1996 and $960,000 in 1995 have been
reflected in other income.
13. ENVIRONMENTAL LIABILITIES
SMC operates manufacturing facilities in Newfield, New Jersey and
Cambridge, Ohio which produce alloys and other specialty products. The
historical manufacture of several products at the two
F-20
<PAGE> 123
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
facilities has resulted in the production of various by-products which SMC
is obligated to clean up under Federal and state environmental laws and
regulations. These clean-up obligations are under the jurisdiction of the
United States Environmental Protection Agency, the New Jersey Department of
Environmental Protection, the Ohio Environmental Protection Agency, the
United States Nuclear Regulatory Commission ("NRC"), the United States
Department of Interior and the Ohio Department of Health. The Company has
also provided for certain estimated costs associated with its sites in
Germany and Brazil. Total environmental liabilities consist of the
following (in thousands):
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AS OF MARCH 31, -------------------
1997 1996 1995
---------------- ------- -------
<S> <C> <C> <C>
Domestic:
SMC -- New Jersey............................ $ 32,584 $33,540 $ 9,721
SMC -- Ohio.................................. 12,264 12,600 4,622
------- ------- -------
44,848 46,140 14,343
Foreign........................................ 6,086 6,598 6,724
------- ------- -------
Total environmental liabilities.............. 50,934 52,738 21,067
Less: trust funds.............................. 2,799 8,727 8,287
------- ------- -------
Net environmental liabilities................ 48,135 44,011 12,780
Less: current portion.......................... 5,270 9,374 2,200
------- ------- -------
Environmental liabilities.................... $ 42,865 $34,637 $10,580
======= ======= =======
</TABLE>
SMC entered into Administrative Consent Orders ("ACO's") with the State of
New Jersey, dated October 5, 1988 and September 5, 1984, under which SMC,
as required, has conducted a remedial investigation and feasibility study
("RI/FS") of alternatives to remedy groundwater contamination at the
Newfield facility. The ACO's also require SMC to evaluate, and where
appropriate, remediate certain additional environmental conditions pursuant
to state laws and regulations. These activities include the closure of nine
wastewater lagoons, soil remediation, surface water and sediment clean up,
as well as miscellaneous operation and maintenance activities and onsite
controls. The Company accrued its best estimate of the associated costs
with respect to remedial activities at the site which it expects to
disburse over the next fifteen years. During 1995, $8,000,000 in a
prepetition letter of credit was drawn upon and deposited in a trust fund.
During 1997, remaining prepetition letters of credit, in the amount of
$8,200,000, were drawn upon and deposited in a trust fund. Subsequently,
pursuant to an agreement with the State of New Jersey, the Company was
permitted to withdraw cash from the environmental trust and substitute
letters of credit in an equivalent dollar amount. At March 31, 1997,
outstanding letters of credit issued as financial assurances in favor of
various environmental agencies total $21,400,000. The costs of providing
financial assurance over the term of the remediation activities have been
contemplated in the accrued amounts.
As a result of NRC-regulated manufacturing activities, slag piles have
accumulated at the Cambridge and Newfield sites which contain low levels of
naturally occurring radioactivity. As related production has ceased at the
Cambridge location, SMC is required to decommission the slag piles. SMC
obtained approval from the State of Ohio and is currently awaiting approval
from the NRC to stabilize and cap the slag piles in situ. As long as
production continues at the Newfield location, the NRC will allow the slag
pile to remain in place, subject to submission of a conceptual
decommissioning plan and financial assurance for implementation of that
plan. The Company's obligation for decommissioning costs for these sites is
partially assured by cash funds held in trust. As a condition
F-21
<PAGE> 124
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
precedent to consummation of the Plan, $1,500,000 in a prepetition letter
of credit, relating to both the Newfield and Cambridge facilities, was
drawn upon and deposited in a trust fund.
In 1987, SMC purchased the Cambridge manufacturing facility from Foote
Mineral Company. Cyprus Foote Mineral Company ("Cyprus Foote") is the
successor in interest to Foote. During 1995, SMC, Cyprus Foote and the
State of Ohio entered into a Consent Order for Permanent Injunction (the
"Consent Order") under which SMC and Cyprus Foote agreed to conduct an
RI/FS of the Cambridge site and the State of Ohio agreed to review such
information on an expedited basis and issue a Preferred Plan setting forth
a final remedy for the site. On December 16, 1996, the State of Ohio issued
its Preferred Plan and, subsequently, SMC and Cyprus Foote agreed to
perform remedial design and remedial action at the site. These activities
include remediation of slag piles, clean up of wetland soils and clean up
of on-site and off-site sediments. The Company has accrued its best
estimate of associated costs which it expects to substantially disburse
over the next 6 years. Cyprus Foote has agreed to provide financial
assurance of approximately $9,000,000 as required by the State of Ohio. SMC
has purchased an annuity contract which will provide for future payments
into the trust fund to cover certain of the estimated operation and
maintenance costs over the next 100 years.
The Company has also provided for certain estimated costs associated with
its sites in Germany and Brazil. The Company's German subsidiaries have
accrued environmental liabilities in the amounts of $5,611,000, $5,918,000
and $6,151,000 at March 31, 1997, December 31, 1996 and 1995, respectively,
to cover the costs of closing an off-site dump and for certain
environmental conditions at a subsidiary's Nuremburg site. In Brazil, costs
of $475,000, $506,000 and $573,000 have been accrued at March 31, 1997,
December 31, 1996 and 1995, respectively, to cover reclamation costs of the
closed mine sites.
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 position or results
of operations.
15. LEASES
The Company leases office space, facilities and equipment. The leases
generally provide that the Company pay the tax, insurance and maintenance
expenses related to the leased assets. At March 31, 1997, future minimum
lease payments required under noncancelable operating leases having
remaining lease terms in excess of one year are as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
-----------------------------------------------------------------
<S> <C>
1998............................................................. $1,038
1999............................................................. 1,005
2000............................................................. 883
2001............................................................. 763
2002............................................................. 696
Thereafter....................................................... 3,942
------
Total.................................................. $8,327
======
</TABLE>
F-22
<PAGE> 125
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Rent expense under operating leases for the quarter ended March 31, 1997
and the years ended December 31, 1996, 1995 and 1994 was $511,000,
$868,000, $815,000 and $813,000, respectively.
In December 1996, Metallurg entered into a fifteen year lease for its new
headquarters location. No rent payments are required for the first 15
months of the lease. Such rental concessions are being amortized over the
lease term on a straight-line basis.
16. SUBSEQUENT EVENTS
On June 23, 1997, LSM sold its office building located in Wimbledon, United
Kingdom, for proceeds of $1,180,000, which approximated book value. LSM
will lease these facilities for a term of five years at a cost of
approximately $74,000 per annum.
On November 25, 1997, Metallurg sold $100,000,000 principal amount of 11%
Senior Notes due 2007 (the "Senior Notes") to Salomon Brothers Inc and
BancBoston Securities Inc. (the "Initial Purchasers") pursuant to a
Purchase Agreement dated as of November 20, 1997. Metallurg and the Initial
Purchasers also entered into a Registration Agreement, dated as of November
20, 1997, whereby the Company agreed to file with the Securities and
Exchange Commission a registration statement with respect to an offer to
exchange the Senior Notes for notes of the Company with substantially
identical terms.
The proceeds received by Metallurg from the issuance of the Senior Notes
were used to fund an overall recapitalization of Metallurg, pursuant to
which Metallurg retired the 12% senior-secured notes, repaid the
outstanding balance on its German borrowings, retired the LSM term loan and
paid a cash dividend and dividend equivalent (aggregating approximately
$20,000,000) to the holders of Metallurg's common stock and stock options.
The balance of the net proceeds will be used for general corporate
purposes.
F-23
<PAGE> 126
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. SUPPLEMENTAL GUARANTOR INFORMATION
Under the terms of the Senior Notes, SMC, Metallurg Holdings Corporation,
Metallurg Services, Inc., and MIR (China), Inc. (collectively, the
"Guarantors"), wholly-owned subsidiaries of the Company, will fully and
unconditionally guarantee on a joint and several basis the Company's
obligations to pay principal, premium and interest in respect of the Senior
Notes due 2007. Management has determined that separate, full financial
statements of the Guarantors would not be material to potential investors
and, accordingly, such financial statements are not provided. Supplemental
financial information of the Guarantors is presented below:
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
METALLURG, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total revenue................... $10,578 $ 52,475 $ 117,652 $(25,118) $155,587
------- ------- -------- -------- --------
Operating costs and expenses:
Cost of sales................. 10,219 47,590 100,709 (24,458) 134,060
Selling, general and
administrative expenses.... 2,662 2,118 10,266 -- 15,046
------- ------- -------- -------- --------
Total operating costs and
expenses...................... 12,881 49,708 110,975 (24,458) 149,106
------- ------- -------- -------- --------
Operating income (loss)......... (2,303) 2,767 6,677 (660) 6,481
Other income (expense):
Other income (expense), net... (7,041) 9,903 317 -- 3,179
Reorganization expense, net... (1,698) (965) -- -- (2,663)
Fresh-start revaluation....... 5,769 (4,719) 4,057 -- 5,107
Interest income (expense),
net........................ (795) 554 (4) -- (245)
Equity in earnings of
subsidiaries............... (8,756) -- -- 8,756 --
Dividend income............... 8,423 -- -- (8,423) --
------- ------- -------- -------- --------
Income (loss) before income tax
provision and extraordinary
item.......................... (6,401) 7,540 11,047 (327) 11,859
Income tax provision
(benefit)..................... (241) 30 (2,852) -- (3,063)
------- ------- -------- -------- --------
Income (loss) before
extraordinary item............ (6,160) 7,510 13,899 (327) 14,922
Extraordinary item.............. 64,114 (17,036) (4,046) -- 43,032
------- ------- -------- -------- --------
Net income (loss)............... $57,954 $ (9,526) $ 9,853 $ (327) $ 57,954
======= ======= ======== ======== ========
</TABLE>
F-24
<PAGE> 127
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET AT MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
METALLURG, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents... $ 8,363 $ 1,645 $ 20,332 $ 30,340
Accounts and notes
receivable, net.......... 16,664 43,011 79,068 $ (44,593) 94,150
Inventories................. 4,300 31,900 75,733 (2,675) 109,258
Other assets................ 4,342 308 11,662 -- 16,312
Assets held for sale........ -- -- 1,180 -- 1,180
-------- -------- -------- --------- --------
Total current
assets............ 33,669 76,864 187,975 (47,268) 251,240
Investments -- intergroup..... 84,431 49,632 -- (134,063) --
Investments -- other.......... 244 -- 1,217 -- 1,461
Property, plant and equipment,
net......................... 828 6,967 31,112 -- 38,907
Other assets.................. (4,177) 1,586 16,740 (53) 14,096
-------- -------- -------- --------- --------
Total............... $ 114,995 $135,049 $ 237,044 $ (181,384) $305,704
======== ======== ======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt and current
portion of long-term
debt..................... $ 14,777 $ 14,777
Trade payables.............. $ 16,992 $ 17,708 56,386 $ (35,139) 55,947
Accrued expenses............ 6,389 4,517 14,445 -- 25,351
Loans
payable -- intergroup.... -- 1,353 18,101 (19,454) --
Other current liabilities... 236 5,429 6,184 -- 11,849
-------- -------- -------- --------- --------
Total current
liabilities....... 23,617 29,007 109,893 (54,593) 107,924
-------- -------- -------- --------- --------
Long-term liabilities:
Long-term debt.............. 39,461 -- 12,250 -- 51,711
Accrued pension liability... 522 1,621 38,947 -- 41,090
Environmental liabilities,
net...................... -- 36,949 5,916 -- 42,865
Other liabilities........... 1,395 -- 10,772 (53) 12,114
-------- -------- -------- --------- --------
Total long-term
liabilities....... 41,378 38,570 67,885 (53) 147,780
-------- -------- -------- --------- --------
Total liabilities... 64,995 67,577 177,778 (54,646) 255,704
-------- -------- -------- --------- --------
Shareholders' Equity:
Common stock outstanding.... 50 1,227 80,226 (81,453) 50
Additional paid-in
capital.................. 49,950 90,867 222 (91,089) 49,950
Cumulative foreign currency
translation adjustment... -- -- 21,704 (21,704) --
Retained (deficit)
earnings................. -- (24,622) (42,886) 67,508 --
-------- -------- -------- --------- --------
Shareholders' equity........ 50,000 67,472 59,266 (126,738) 50,000
-------- -------- -------- --------- --------
Total............... $ 114,995 $135,049 $ 237,044 $ (181,384) $305,704
======== ======== ======== ========= ========
</TABLE>
F-25
<PAGE> 128
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDED MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
METALLURG, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating
Activities................... $ (1,796) $ 7,677 $ 535 -- $ 6,416
-------- -------- -------- --------- --------
Cash Flows from Investing
Activities:
Additions to property, plant
and equipment, net........ (711) (311) (1,752) -- (2,774)
Proceeds from asset sales.... 4,215 -- 751 -- 4,966
Other, net................... -- -- (25) -- (25)
-------- -------- -------- --------- --------
Net cash provided by (used in)
investing activities......... 3,504 (311) (1,026) -- 2,167
-------- -------- -------- --------- --------
Cash Flows from Financing and
Reorganization Activities:
Cash distribution pursuant to
plan of reorganization.... (55,865) (3,501) -- -- (59,366)
Drawdown of prepetition
letters of credit......... 9,700 -- -- -- 9,700
Intergroup borrowings
(repayments).............. 2,088 (2,652) 564 -- --
Proceeds from long-term debt,
net....................... -- -- 8,100 -- 8,100
Net repayment of short-term
debt...................... -- -- 1,062 -- 1,062
Repayment of long-term
debt...................... -- -- (487) -- (487)
Dividends received (paid).... 9,423 -- (9,423) --
-------- -------- -------- --------- --------
Net cash used in financing and
reorganization activities.... (34,654) (6,153) (184) -- (40,991)
-------- -------- -------- --------- --------
Effects of exchange rate
changes on cash and cash
equivalents............... -- -- (526) -- (526)
-------- -------- -------- --------- --------
Net increase (decrease) in cash
and cash equivalents......... (32,946) 1,213 (1,201) -- (32,934)
Cash and cash equivalents --
beginning of quarter......... 41,309 432 21,533 -- 63,274
-------- -------- -------- --------- --------
Cash and cash equivalents --
end of quarter............... $ 8,363 $ 1,645 $ 20,332 -- $ 30,340
======== ======== ======== ========= ========
</TABLE>
F-26
<PAGE> 129
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
METALLURG, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total revenue................. $ 35,536 $199,864 $ 489,110 $ (74,508) $650,002
-------- -------- -------- -------- --------
Operating costs and expenses:
Cost of sales............... 33,640 185,827 420,929 (73,858) 566,538
Selling, general and
administrative
expenses................. 5,150 9,363 42,590 -- 57,103
Environmental expenses...... -- 35,176 2,406 -- 37,582
-------- -------- -------- -------- --------
Total operating costs and
expenses.................... 38,790 230,366 465,925 (73,858) 661,223
-------- -------- -------- -------- --------
Operating income (loss)....... (3,254) (30,502) 23,185 (650) (11,221)
Other income (expense):
Other income (expense),
net...................... (11,881) (9,897) 11,200 3,819 (6,759)
Interest income (expense),
net...................... 1,254 1,517 (1,298) -- 1,473
Reorganization expense...... (1,500) (2,035) -- -- (3,535)
Dividend income............. 6,091 -- -- (6,091) --
Equity in earnings of
subsidiaries............. (19,132) 231 -- 18,901 --
-------- -------- -------- -------- --------
Income (loss) before income
tax provision............... (28,422) (40,686) 33,087 15,979 (20,042)
Income tax provision.......... 73 128 8,252 -- 8,453
-------- -------- -------- -------- --------
Net income (loss)............. $ (28,495) $(40,814) $ 24,835 $ 15,979 $(28,495)
======== ======== ======== ======== ========
</TABLE>
F-27
<PAGE> 130
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET AT DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
METALLURG, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.... $ 41,309 $ 432 $ 21,533 $ 63,274
Accounts and notes
receivable, net........... 40,613 60,521 75,135 $ (87,674) 88,595
Inventories.................. 6,392 29,155 72,831 (2,015) 106,363
Other assets................. 3,996 255 10,064 -- 14,315
Assets held for sale......... 1,843 -- -- -- 1,843
-------- -------- -------- --------- --------
Total current
assets............. 94,153 90,363 179,563 (89,689) 274,390
Investments -- intergroup...... 52,622 -- -- (52,622) --
Investments -- other........... 1,530 -- 1,408 -- 2,938
Property, plant and equipment,
net.......................... 364 11,053 36,468 -- 47,885
Other assets................... 10,030 4,699 4,841 (13,157) 6,413
-------- -------- -------- --------- --------
Total................ $ 158,699 $106,115 $ 222,280 $ (155,468) $331,626
======== ======== ======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Short-term debt and current
portion of long-term
debt...................... $ 14,820 $ 14,820
Trade payables............... $ 22,296 $ 16,249 48,405 $ (38,686) 48,264
Accrued expenses............. 4,913 3,531 13,155 -- 21,599
Loans
payable -- intergroup..... -- 10,101 17,268 (27,369) --
Other current liabilities.... 235 9,501 7,237 (1,000) 15,973
-------- -------- -------- --------- --------
Total current
liabilities........ 27,444 39,382 100,885 (67,055) 100,656
-------- -------- -------- --------- --------
Long-term Liabilities:
Long-term debt............... -- -- 5,049 -- 5,049
Accrued pension liability.... 1,441 -- 42,485 -- 43,926
Environmental liabilities,
net....................... -- 28,213 6,424 -- 34,637
Other liabilities............ -- 8,727 9,690 (8,777) 9,640
-------- -------- -------- --------- --------
Total long-term
liabilities........ 1,441 36,940 63,648 (8,777) 93,252
-------- -------- -------- --------- --------
Liabilities Subject To
Compromise................... 171,993 42,902 -- (34,998) 179,897
-------- -------- -------- --------- --------
Total liabilities.... 200,878 119,224 164,533 (110,830) 373,805
-------- -------- -------- --------- --------
Shareholders' Equity (Deficit):
Common stock outstanding..... 20 1,987 80,424 (82,411) 20
Cumulative foreign currency
translation adjustment.... 15,755 -- 21,816 (21,816) 15,755
Retained earnings
(deficit)................. (57,954) (15,096) (44,493) 59,589 (57,954)
-------- -------- -------- --------- --------
Shareholders' equity
(deficit)................. (42,179) (13,109) 57,747 (44,638) (42,179)
-------- -------- -------- --------- --------
Total................ $ 158,699 $106,115 $ 222,280 $ (155,468) $331,626
======== ======== ======== ========= ========
</TABLE>
F-28
<PAGE> 131
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
METALLURG, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Cash Flows from Operating
Activities................... $ 1,922 $ 9,748 $ 35,995 -- $ 47,665
------- -------- -------- --------
Cash Flows from Investing
Activities:
Additions to property, plant
and equipment, net........ (90) (599) (8,842) -- (9,531)
Proceeds from asset sales.... -- 493 5,313 -- 5,806
Other, net................... (6,192) 25 4,873 -- (1,294)
------- -------- -------- --------
Net cash provided by (used in)
investing activities......... (6,282) (81) 1,344 -- (5,019)
------- -------- -------- --------
Cash Flows from Financing
Activities:
Intergroup borrowings
(repayments).............. 16,108 (10,223) (5,885) -- --
Net repayment of short-term
debt...................... -- -- (14,709) -- (14,709)
Repayment of long-term
debt...................... -- -- (1,408) -- (1,408)
Dividends received (paid).... 5,091 -- (5,091) -- --
------- -------- -------- --------
Net cash provided by (used in)
financing activities......... 21,199 (10,223) (27,093) -- (16,117)
------- -------- -------- --------
Effects of exchange rate
changes on cash and cash
equivalents............... -- -- (83) -- (83)
------- -------- -------- --------
Net increase (decrease) in cash
and cash equivalents......... 16,839 (556) 10,163 -- 26,446
Cash and cash equivalents --
beginning of year............ 24,470 988 11,370 -- 36,828
------- -------- -------- --------
Cash and cash equivalents --
end of year.................. $41,309 $ 432 $ 21,533 -- $ 63,274
======= ======== ======== ========
</TABLE>
F-29
<PAGE> 132
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
METALLURG, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total revenue.................. $40,858 $190,417 $ 534,687 $(76,598) $689,364
------- -------- -------- -------- --------
Operating costs and expenses:
Cost of sales................ 39,385 170,504 470,244 (76,598) 603,535
Selling, general and
administrative expenses... 4,600 8,745 39,497 -- 52,842
Environmental expenses....... -- 1,657 415 -- 2,072
Restructuring charges........ -- -- 15,210 -- 15,210
------- -------- -------- -------- --------
Total operating costs and
expenses..................... 43,985 180,906 525,366 (76,598) 673,659
------- -------- -------- -------- --------
Operating income (loss)........ (3,127) 9,511 9,321 -- 15,705
Other income (expense):
Other income (expense),
net....................... 1,270 (339) (924) -- 7
Interest income (expense),
net....................... 900 1,026 (3,875) -- (1,949)
Reorganization expense....... (1,615) (2,312) -- -- (3,927)
Equity in earnings of
subsidiaries.............. (3,095) 1,203 -- 1,892 --
Dividend income.............. 6,407 -- -- (6,407) --
------- -------- -------- -------- --------
Income (loss) before income tax
provision.................... 740 9,089 4,522 (4,515) 9,836
Income tax provision
(benefit).................... (925) 308 8,788 -- 8,171
------- -------- -------- -------- --------
Net income (loss).............. $ 1,665 $ 8,781 $ (4,266) $ (4,515) $ 1,665
======= ======== ======== ======== ========
</TABLE>
F-30
<PAGE> 133
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
METALLURG, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents..... $ 24,470 $ 988 $ 11,370 $ 36,828
Accounts and notes receivable,
net........................ 53,679 50,568 80,603 $ (83,613) 101,237
Inventories................... 7,068 30,432 92,914 (1,365) 129,049
Other assets.................. 4,514 254 10,620 -- 15,388
-------- -------- -------- --------- --------
Total current
assets.............. 89,731 82,242 195,507 (84,978) 282,502
Investments -- intergroup....... 61,282 657 -- (61,939) --
Investments -- other............ 2,459 -- 599 -- 3,058
Property, plant and equipment,
net........................... 1,033 13,599 38,884 -- 53,516
Other assets.................... 12,446 4,047 2,241 (15,200) 3,534
-------- -------- -------- --------- --------
Total................. $ 166,951 $100,545 $ 237,231 $ (162,117) $342,610
======== ======== ======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Short-term debt and current
portion of long-term
debt....................... $ 30,652 $ 30,652
Trade payables................ $ 10,463 $ 10,286 51,592 $ (22,425) 49,916
Accrued expenses.............. 3,012 3,375 20,194 -- 26,581
Loans payable -- intergroup... -- 10,051 20,350 (30,401) --
Other current liabilities..... -- 2,381 6,149 -- 8,530
-------- -------- -------- --------- --------
Total current
liabilities......... 13,475 26,093 128,937 (52,826) 115,679
-------- -------- -------- --------- --------
Long-term Liabilities:
Long-term debt................ -- -- 6,973 -- 6,973
Accrued pension liability..... 1,287 389 45,733 -- 47,409
Environmental liabilities,
net........................ -- 3,856 6,724 -- 10,580
Other liabilities............. 28 8,287 13,240 (11,153) 10,402
-------- -------- -------- --------- --------
Total long-term
liabilities......... 1,315 12,532 72,670 (11,153) 75,364
-------- -------- -------- --------- --------
Liabilities Subject to
Compromise.................... 170,113 34,240 -- (34,834) 169,519
-------- -------- -------- --------- --------
Total liabilities..... 184,903 72,865 201,607 (98,813) 360,562
-------- -------- -------- --------- --------
Shareholders' Equity (Deficit):
Common stock outstanding...... 20 1,962 76,933 (78,895) 20
Cumulative foreign currency
translation adjustment..... 11,487 -- 11,445 (11,445) 11,487
Retained earnings (deficit)... (29,459) 25,718 (52,754) 27,036 (29,459)
-------- -------- -------- --------- --------
Shareholders' equity
(deficit).................. (17,952) 27,680 35,624 (63,304) (17,952)
-------- -------- -------- --------- --------
Total................. $ 166,951 $100,545 $ 237,231 $ (162,117) $342,610
======== ======== ======== ========= ========
</TABLE>
F-31
<PAGE> 134
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
METALLURG, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Cash Flows from Operating
Activities.................... $ (2,571) $ (1,685) $ 9,914 -- $ 5,658
------- ------- ------- ------ -------
Cash Flows from Investing
Activities:
Additions to property, plant
and equipment, net......... (116) (1,461) (5,135) -- (6,712)
Proceeds from asset sales..... 940 54 1,669 -- 2,663
Other, net.................... -- -- 104 -- 104
------- ------- ------- ------ -------
Net cash provided by (used in)
investing activities.......... 824 (1,407) (3,362) -- (3,945)
------- ------- ------- ------ -------
Cash Flows from Financing
Activities:
Drawdown of prepetition
letters of credit.......... 8,000 -- -- -- 8,000
Intergroup borrowings
(repayments)............... (1,107) 2,175 (1,068) -- --
Net repayment of short-term
debt....................... -- -- 420 -- 420
Repayment of long-term debt... -- -- (2,238) -- (2,238)
Dividends received (paid)..... 6,407 -- (6,407) -- --
------- ------- ------- ------ -------
Net cash provided by (used in)
financing activities.......... 13,300 2,175 (9,293) -- 6,182
------- ------- ------- ------ -------
Effects of exchange rate
changes on cash and cash
equivalents................ -- -- 774 -- 774
------- ------- ------- ------ -------
Net increase (decrease) in cash
and cash equivalents.......... 11,553 (917) (1,967) -- 8,669
Cash and cash equivalents --
beginning of year............. 12,917 1,905 13,337 -- 28,159
------- ------- ------- ------ -------
Cash and cash equivalents -- end
of year....................... $ 24,470 $ 988 $11,370 -- $ 36,828
======= ======= ======= ====== =======
</TABLE>
F-32
<PAGE> 135
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
METALLURG, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total revenue.............. $66,572 $163,255 $ 414,612 $(90,122) $554,317
--------------- ------------ ------------- ------------ ------------
Operating costs and
expenses:
Cost of sales............ 64,644 150,289 371,407 (90,122) 496,218
Selling, general and
administrative
expenses.............. 4,574 8,593 37,485 -- 50,652
Environmental expenses... -- 1,784 298 -- 2,082
Restructuring charges.... -- 343 2,310 -- 2,653
--------------- ------------ ------------- ------------ ------------
Total operating costs and
expenses................. 69,218 161,009 411,500 (90,122) 551,605
--------------- ------------ ------------- ------------ ------------
Operating income (loss).... (2,646) 2,246 3,112 -- 2,712
Other income (expense):
Other income (expense),
net................... 1,531 (159) 2,578 3,527 7,477
Interest income
(expense), net........ 469 268 (3,292) -- (2,555)
Reorganization expense... (3,163) (3,955) (7,118)
Dividend income.......... 3,785 -- -- (3,785) --
Equity in earnings of
subsidiaries.......... (3,612) 150 -- 3,462 --
--------------- ------------ ------------- ------------ ------------
Income (loss) before income
tax provision............ (3,636) (1,450) 2,398 3,204 516
Income tax provision
(benefit)................ (1,645) 143 4,009 -- 2,507
--------------- ------------ ------------- ------------ ------------
Net income (loss).......... $(1,991) $ (1,593) $ (1,611) $ 3,204 $ (1,991)
=========== ========== ============ ========== ==========
</TABLE>
F-33
<PAGE> 136
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
METALLURG, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Cash Flows from Operating
Activities................... $ 309 $ 4,006 $(4,904) -- $ (589)
------- ------ ------- ------ -------
Cash Flows from Investing
Activities:
Additions to property, plant
and equipment, net........ (324) (401) (6,841) -- (7,566)
Proceeds from asset sales.... 2,690 90 1,063 -- 3,843
Other, net................... 1,055 (1,055) 23 -- 23
------- ------ ------- ------ -------
Net cash provided by (used in)
investing activities......... 3,421 (1,366) (5,755) -- (3,700)
------- ------ ------- ------ -------
Cash Flows from Financing
Activities:
Intergroup borrowings
(repayments).............. 576 (1,998) 1,422 -- --
Proceeds from long-term debt,
net....................... -- -- 2,731 -- 2,731
Net repayment of short-term
debt...................... -- -- 1,077 -- 1,077
Repayment of long-term
debt...................... -- -- (135) -- (135)
------- ------ ------- ------ -------
Net cash provided by (used in)
financing activities......... 576 (1,998) 5,095 -- 3,673
------- ------ ------- ------ -------
Effects of exchange rate
changes on cash and cash
equivalents............... -- -- 110 -- 110
------- ------ ------- ------ -------
Net increase (decrease) in cash
and cash equivalents......... 4,306 642 (5,454) -- (506)
Cash and cash equivalents --
beginning of year............ 8,611 1,263 18,791 -- 28,665
------- ------ ------- ------ -------
Cash and cash equivalents --
end of year.................. $12,917 $ 1,905 $13,337 -- $ 28,159
======= ====== ======= ====== =======
</TABLE>
F-34
<PAGE> 137
UNAUDITED FINANCIAL STATEMENTS
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
REORGANIZED PREDECESSOR PREDECESSOR COMPANY
COMPANY COMPANY ---------------------------------
------------- -------------- THREE MONTHS SIX MONTHS
QUARTER QUARTER ENDED ENDED
ENDED ENDED JUNE 30, JUNE 30,
JULY 31, 1997 MARCH 31, 1997 1996 1996
------------- -------------- ------------ ----------------
<S> <C> <C> <C> <C>
Total revenue.................... $ 166,879 $155,587 $184,933 $331,755
-------- -------- -------- --------
Operating costs and expenses:
Cost of sales.................. 142,135 134,060 163,003 288,675
Selling, general and
administrative expenses..... 14,427 15,046 13,094 27,375
Other operating expenses....... -- -- 914 1,160
-------- -------- -------- --------
Total operating costs and
expenses.................. 156,562 149,106 177,011 317,210
-------- -------- -------- --------
Operating income.......... 10,317 6,481 7,922 14,545
Other income (expense):
Other income (expense), net.... (76) 3,179 1,765 3,420
Interest income (expense),
net......................... (1,479) (245) 701 247
Reorganization expense......... -- (2,663) (820) (1,430)
Fresh-start revaluation........ -- 5,107 -- --
-------- -------- -------- --------
Income before income tax
provision and extraordinary
item........................... 8,762 11,859 9,568 16,782
Income tax provision (benefit)... 5,111 (3,063) 2,695 5,344
-------- -------- -------- --------
Income before extraordinary
item........................... 3,651 14,922 6,873 11,438
Extraordinary item, net of tax... -- 43,032 -- --
-------- -------- -------- --------
Net income....................... $ 3,651 $ 57,954 $ 6,873 $ 11,438
======== ======== ======== ========
Pro forma common shares and
common share equivalents....... 4,956 4,956 4,956 4,956
Pro forma earnings per common
share:
Income before extraordinary
item........................... $ 0.74 $ 3.01 $ 1.39 $ 2.31
Extraordinary item, net of tax... -- 8.68 -- --
-------- -------- -------- --------
Net income....................... $ 0.74 $ 11.69 $ 1.39 $ 2.31
======== ======== ======== ========
</TABLE>
See notes to condensed unaudited consolidated financial statements.
F-35
<PAGE> 138
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
REORGANIZED COMPANY COMPANY
-------------------------- ------------
JULY 31, MARCH 31, DECEMBER 31,
1997 1997 1996
------------ --------- ------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................... $ 29,163 $ 30,340 $ 63,274
Accounts and notes receivable, net................. 85,277 94,150 88,595
Inventories........................................ 117,002 109,258 106,363
Other assets....................................... 14,471 17,492 16,158
-------- -------- --------
Total current assets....................... 245,913 251,240 274,390
Property, plant and equipment, net................... 40,210 38,907 47,885
Other assets......................................... 13,693 15,557 9,351
-------- -------- --------
Total...................................... $299,816 $ 305,704 $331,626
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Short-term debt and current portion of long-term
debt............................................ $ 12,482 $ 14,777 $ 14,820
Trade payables..................................... 52,583 55,947 48,264
Accrued expenses................................... 19,861 25,351 21,599
Other current liabilities.......................... 12,435 11,849 15,973
-------- -------- --------
Total current liabilities.................. 97,361 107,924 100,656
-------- -------- --------
Long-term Liabilities:
Long-term debt..................................... 51,822 51,711 5,049
Accrued pension liabilities........................ 39,623 41,090 43,926
Environmental liabilities, net..................... 42,641 42,865 34,637
Other liabilities.................................. 11,988 12,114 9,640
-------- -------- --------
Total long-term liabilities................ 146,074 147,780 93,252
-------- -------- --------
Liabilities Subject to Compromise.................... -- -- 179,897
-------- -------- --------
Total liabilities.......................... 243,435 255,704 373,805
-------- -------- --------
Shareholders' Equity (Deficit)
Common stock....................................... 50 50 20
Additional paid-in capital......................... 51,435 49,950 --
Cumulative foreign currency translation
adjustment...................................... 1,245 -- 15,755
Retained earnings (deficit)........................ 3,651 -- (57,954)
-------- -------- --------
Total shareholders' equity (deficit)....... 56,381 50,000 (42,179)
-------- -------- --------
Total...................................... $299,816 $ 305,704 $331,626
======== ======== ========
</TABLE>
See notes to condensed unaudited consolidated financial statements.
F-36
<PAGE> 139
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZED PREDECESSOR PREDECESSOR COMPANY
COMPANY COMPANY -----------------------------
------------- -------------- THREE MONTHS
QUARTER QUARTER ENDED SIX MONTHS
ENDED ENDED JUNE 30, ENDED
JULY 31, 1997 MARCH 31, 1997 1996 JUNE 30, 1996
------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $ 3,651 $ 57,954 $ 6,873 $11,438
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Executive stock awards.............................. 500 500 -- --
Extraordinary item.................................. -- (43,032) -- --
Fresh-start revaluation............................. -- (5,107) -- --
Depreciation and amortization....................... 1,962 2,143 2,332 4,746
Gain on sales of assets............................. (6) (3,266) (1,341) (3,264)
Reorganization expense, net of payments............. (3,989) 1,538 630 795
Deferred income taxes............................... 1,661 (3,767) -- --
Provision for doubtful accounts..................... 61 162 118 237
Provision for environmental costs, net of
payments.......................................... (393) (256) (822) (1,394)
Other, net.......................................... 1,628 3,057 (9,143) (8,251)
------- -------- ------- -------
Total............................................. 5,075 9,926 (1,353) 4,307
Change in operating assets and liabilities:
Decrease (increase) in trade receivables............ 8,032 (20,272) 6,890 3,034
(Increase) decrease in inventories.................. (8,953) (6,120) 4,591 14,117
Decrease (increase) in other current assets......... 1,769 (355) (2,957) (1,981)
(Decrease) increase in trade payables and accrued
expenses.......................................... (2,890) 18,895 8,776 11,701
Decrease in prepetition liabilities................. -- (39) (52) (106)
Receipt from environmental trust, net............... -- 5,928 -- --
Other assets and liabilities, net................... (523) (1,547) (1,583) (1,877)
------- -------- ------- -------
Net cash provided by operating activities......... 2,510 6,416 14,312 29,195
------- -------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment, net..... (3,309) (2,774) (1,654) (2,668)
Proceeds from asset sales........................... 1,205 4,966 1,858 3,967
Other, net.......................................... 33 (25) (22) 34
------- -------- ------- -------
Net cash (used in) provided by investing
activities..................................... (2,071) 2,167 182 1,333
------- -------- ------- -------
CASH FLOWS FROM FINANCING AND REORGANIZATION
ACTIVITIES:
Cash distribution pursuant to plan of
reorganization.................................... -- (59,366) -- --
Drawdown of prepetition letters of credit........... -- 9,700 -- --
Proceeds from long-term debt, net................... -- 8,100 -- --
Net borrowing (repayment) of short-term debt........ (1,608) 1,062 (4,475) (8,575)
Repayment of long-term debt......................... (83) (487) (203) (727)
------- -------- ------- -------
Net cash used in financing and reorganization
activities..................................... (1,691) (40,991) (4,678) (9,302)
------- -------- ------- -------
Effects of exchange rate changes on cash and cash
equivalents......................................... 75 (526) (257) (380)
------- -------- ------- -------
Net (decrease) increase in cash and cash
equivalents.................................... (1,177) (32,934) 9,559 20,846
Cash and cash equivalents -- beginning of period...... 30,340 63,274 48,115 36,828
------- -------- ------- -------
Cash and cash equivalents -- end of period............ $29,163 $ 30,340 $ 57,674 $57,674
======= ======== ======= =======
</TABLE>
See notes to condensed unaudited consolidated financial statements.
F-37
<PAGE> 140
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed unaudited consolidated financial statements
include the accounts of Metallurg, Inc. ("Metallurg") and its majority-owned
subsidiaries (collectively, the "Company"). These financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information pursuant to Accounting Principles Board
Opinion No. 28. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The condensed consolidated balance sheets as of March
31, 1997 and December 31, 1996 and the related condensed statements of
consolidated operations and of consolidated cash flows for the quarter ended
March 31, 1997 were derived from audited financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been
included. Operating results for the interim periods presented are not
necessarily indicative of the results to be expected for a full year.
On February 26, 1997, the Fourth Amended and Restated Joint Plan of
Reorganization (the "Plan") of Metallurg and one of its subsidiaries,
Shieldalloy Metallurgical Corporation, was confirmed by the U.S. Bankruptcy
Court. Transactions contemplated by the Plan were consummated on April 14,
1997, the effective date. For financial reporting purposes, the Company has
reflected the effects of the Plan consummation as of March 31, 1997. As a
result of the consummation of the Plan and the adoption of fresh-start
reporting under the American Institute of Certified Public Accountants'
Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code," the Company was required to
report its financial results for the period ending July 31, 1997 in two
separate periods. One period contains financial statements for the quarter
ended March 31, 1997, which includes the effects of the adoption of
fresh-start reporting and consummation of the Plan and is referred to as the
"Predecessor Company." The other period contains financial statements for
the quarter ended July 31, 1997 for the reorganized Company. The financial
statements of the Company after consummation of the Plan are not comparable
to the Company's financial statements of prior periods and accordingly, a
black line has been used to separate the periods.
For further information, see the financial statements and footnotes thereto
included in the Company's audited consolidated financial statements for the
quarter ended March 31, 1997 and the year ended December 31, 1996.
Effective April 1, 1997, the Company changed the reporting period of
Metallurg from a calendar year ending December 31 to a fiscal year ending
January 31 and has begun reporting the results of its operating subsidiaries
on a one-month lag to facilitate financial reporting capabilities for its
worldwide consolidation. Accordingly, the quarter ended July 31, 1997
includes three months of worldwide operating results plus, in this
transitional period, an additional month of operating results of Metallurg,
the parent holding company, in the amount of an $803,000 loss.
F-38
<PAGE> 141
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. INVENTORIES
Inventories, net of reserves, consist of the following (in thousands):
<TABLE>
<CAPTION>
JULY 31, DECEMBER 31,
1997 1996
-------- ------------
<S> <C> <C>
Raw materials............................................... $ 22,577 $ 25,181
Work in process............................................. 2,198 2,237
Finished goods.............................................. 87,807 75,478
Other....................................................... 4,420 3,467
-------- --------
Total............................................. $117,002 $106,363
======== ========
</TABLE>
3. INCOME TAXES
The Company's income tax provision for the fiscal quarter ended July 31,
1997 approximated $5,111,000. The differences between the statutory Federal
income tax rate and the Company's effective rate results primarily because
of: (i) the excess of foreign tax rates over the statutory Federal income
tax rate; (ii) certain deductible temporary differences which, in other
circumstances would have generated a deferred tax benefit, have been fully
provided for in a valuation allowance; (iii) the deferred tax effects of
certain tax assets, primarily foreign NOL's, for which the benefit had been
previously recognized approximating $1,989,000; and (iv) the deferred tax
effects of certain deferred tax assets for which a corresponding credit has
been recorded to "Additional paid-in capital" approximating $985,000. The
deferred tax expenses referred to in items (iii) and (iv) above will not
result in cash payments in future periods.
4. COMMITMENTS AND CONTINGENCIES
The Company continues defending various claims and legal actions arising in
the normal course of business, including those relating to environmental
matters. 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.
5. NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130 "Reporting
Comprehensive Income." This statement is effective for financial statements
issued for periods ending after December 15, 1997. Management has evaluated
the effect on its financial reporting from the adoption of this statement
and has found the majority of required disclosures to be not applicable and
the remainder to be not significant.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." SFAS No. 131 requires the reporting of
profit and loss, specific revenue and expense items, and assets for
reportable segments. It also requires the reconciliation of total segment
revenues, total segment profit or loss, total segment assets, and other
amounts disclosed for segments to the corresponding amounts in the general
purpose financial statements. SFAS No. 131 is effective for fiscal years
beginning after December 15, 1997. Management has not yet determined what
additional disclosures may be required in connection with adopting SFAS No.
131.
F-39
<PAGE> 142
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. SUPPLEMENTAL GUARANTOR INFORMATION
Under the terms of the Senior Notes, SMC, Metallurg Holdings Corporation,
Metallurg Services, Inc., and MIR (China), Inc. (collectively, the
"Guarantors"), wholly-owned subsidiaries of the Company, will fully and
unconditionally guarantee on a joint and several basis the Company's
obligations to pay principal, premium and interest in respect of the Senior
Notes due 2007. Management has determined that separate, full financial
statements of the Guarantors would not be material to potential investors
and, accordingly, such financial statements are not provided. Supplemental
financial information of the Guarantors is presented below:
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED JULY 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
METALLURG, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total revenue.................. $18,740 $ 52,006 $ 127,459 $(31,326) $166,879
-------- -------- -------- --------- --------
Operating costs and expenses:
Cost of sales................ 17,463 46,704 108,224 (30,256) 142,135
Selling, general and
administrative expenses... 2,552 2,452 9,423 -- 14,427
-------- -------- -------- --------- --------
Total operating costs and
expenses..................... 20,015 49,156 117,647 (30,256) 156,562
-------- -------- -------- --------- --------
Operating income (loss)........ (1,275) 2,850 9,812 (1,070) 10,317
Other income (expense):
Other income (expense),
net....................... 23 (17) (82) -- (76)
Interest income (expense),
net....................... (1,427) 301 (353) -- (1,479)
Equity in earnings of
subsidiaries.............. 5,755 1,880 -- (7,635) --
-------- -------- -------- --------- --------
Income before income tax
provision.................... 3,076 5,014 9,377 (8,705) 8,762
Income tax provision
(benefit).................... (575) 1,081 4,605 -- 5,111
-------- -------- -------- --------- --------
Net income..................... $ 3,651 $ 3,933 $ 4,772 $ (8,705) $ 3,651
======== ======== ======== ========= ========
</TABLE>
F-40
<PAGE> 143
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET AT JULY 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
METALLURG, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.... $ 3,860 $ 3,109 $ 22,194 $ 29,163
Accounts and notes
receivable, net........... 18,680 41,028 75,998 $ (50,429) 85,277
Inventories.................. 5,353 39,802 75,592 (3,745) 117,002
Other assets................. 4,523 237 9,711 -- 14,471
-------- -------- -------- --------- --------
Total current
assets............. 32,416 84,176 183,495 (54,174) 245,913
Investments -- intergroup...... 89,410 50,400 (568) (139,242) --
Investments -- other........... 244 -- 1,278 -- 1,522
Property, plant and equipment,
net.......................... 914 6,814 32,482 -- 40,210
Other assets................... (3,735) 1,586 14,372 (52) 12,171
-------- -------- -------- --------- --------
Total................ $ 119,249 $142,976 $ 231,059 $ (193,468) $299,816
======== ======== ======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt and current
portion of long-term
debt...................... $ 12,482 $ 12,482
Trade payables............... $ 1,569 $ 22,724 51,881 $ (23,591) 52,583
Accrued expenses............. 2,161 4,505 13,195 -- 19,861
Loans
payable -- intergroup..... 17,175 1,618 18,045 (36,838) --
Other current liabilities.... 636 5,054 6,745 -- 12,435
-------- -------- -------- --------- --------
Total current
liabilities........ 21,541 33,901 102,348 (60,429) 97,361
-------- -------- -------- --------- --------
Long-term Liabilities:
Long-term debt............... 39,461 -- 12,361 -- 51,822
Accrued pension
liabilities............... 471 1,745 37,407 -- 39,623
Environmental liabilities,
net....................... -- 36,987 5,654 -- 42,641
Other liabilities............ 1,395 -- 10,645 (52) 11,988
-------- -------- -------- --------- --------
Total long-term
liabilities........ 41,327 38,732 66,067 (52) 146,074
-------- -------- -------- --------- --------
Total liabilities.... 62,868 72,633 168,415 (60,481) 243,435
-------- -------- -------- --------- --------
Shareholders' Equity:
Common stock outstanding..... 50 1,227 80,226 (81,453) 50
Additional paid-in capital... 51,435 90,867 222 (91,089) 51,435
Cumulative foreign currency
translation adjustment.... 1,245 1,188 22,949 (24,137) 1,245
Retained earnings
(deficit)................. 3,651 (22,939) (40,753) 63,692 3,651
-------- -------- -------- --------- --------
Shareholders' equity......... 56,381 70,343 62,644 (132,987) 56,381
-------- -------- -------- --------- --------
Total................ $ 119,249 $142,976 $ 231,059 $ (193,468) $299,816
======== ======== ======== ========= ========
</TABLE>
F-41
<PAGE> 144
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDED JULY 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
METALLURG, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Cash Flows from Operating
Activities................... $(7,062) $2,720 $ 7,556 $ (704) $ 2,510
------- ------ ------- ----- -------
Cash Flows from Investing
Activities:
Additions to property, plant
and equipment, net........ (137) (279) (2,893) -- (3,309)
Proceeds from asset sales.... 8 1,197 -- 1,205
Other, net................... 31 -- 2 -- 33
------- ------ ------- ----- -------
Net cash used in investing
activities................... (106) (271) (1,694) -- (2,071)
------- ------ ------- ----- -------
Cash Flows from Financing
Activities:
Intergroup borrowings
(repayments)............ 27 (985) 254 704 --
Net repayment of
short-term debt......... -- -- (1,608) -- (1,608)
Repayment of long-term
debt.................... -- -- (83) -- (83)
Dividends received
(paid).................. 2,638 -- (2,638) -- --
------- ------ ------- ----- -------
Net cash provided by (used in)
financing activities......... 2,665 (985) (4,075) 704 (1,691)
------- ------ ------- ----- -------
Effects of exchange rate
changes on cash and cash
equivalents............... -- -- 75 -- 75
------- ------ ------- ----- -------
Net increase (decrease) in cash
and cash equivalents......... (4,503) 1,464 1,862 -- (1,177)
Cash and cash equivalents --
beginning of quarter......... 8,363 1,645 20,332 -- 30,340
------- ------ ------- ----- -------
Cash and cash equivalents --
end of quarter............... $ 3,860 $3,109 $22,194 $ -- $ 29,163
======= ====== ======= ===== =======
</TABLE>
F-42
<PAGE> 145
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE INITIAL PURCHASERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE AN OFFER OR SOLICITATION.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information................. 2
Prospectus Summary.................... 3
Forward Looking Statements............ 16
Risk Factors.......................... 16
The Exchange Offer.................... 23
Capitalization........................ 31
Pro Forma Financial Information....... 32
Selected Financial Data............... 38
Management's Discussions and Analysis
of Financial Condition and Results
of Operations....................... 41
Business.............................. 48
Management............................ 61
Principal Stockholders................ 68
Certain Transactions.................. 70
Description of Credit Facilities and
Other Financing Arrangements........ 70
Description of the New Notes.......... 73
Plan of Distribution.................. 102
Legal Matters......................... 103
Experts............................... 103
Index to Financial Statements......... F-1
</TABLE>
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW
NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
$100,000,000
METALLURG, INC.
OFFER TO EXCHANGE 11% SERIES B
SENIOR NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT FOR ANY AND ALL
OUTSTANDING 11% SERIES A
SENIOR NOTES DUE 2007
[METALLURG, INC. LOGO]
PROSPECTUS
DATED , 1997
<PAGE> 146
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law (the "DGCL"), which enables a corporation in its original certificate of
incorporation or an amendment thereto to eliminate or limit the personal
liability of a director for violations of the director's fiduciary duty, except
(i) for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the DGCL (providing for liability of directors for the unlawful payment
of dividends or unlawful stock purchases or redemptions) or (iv) for any
transaction from which a director derived an improper personal benefit.
Section 145 of the DGCL empowers the Company to indemnify, subject to the
standards set forth therein, any person in connection with any action, suit or
proceeding brought before or threatened by reason of the fact that the person
was a director, officer, employee or agent of such company, or is or was serving
as such with respect to another entity at the request of such company. The DGCL
also provides that the Company may purchase insurance of behalf of any such
director, officer, employee or agent.
The Company's Certificate of Incorporation provides in effect for the
indemnification by the Company of each director and officer of the Company to
the fullest extent permitted by applicable law.
ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ------------------------------------------------------------------------------------
<C> <S>
1.1 Purchase Agreement, dated as of November 20, 1997, by and among Metallurg, Inc. (the
"Company"), Shieldalloy Metallurgical Corporation ("Shieldalloy"), Metallurg
Holdings Corporation, Metallurg Services, Inc. and MIR (China), Inc. (collectively,
the "Guarantors") and Salomon Brothers Inc and BancBoston Securities Inc. (the
"Initial Purchasers").
3.1 Certificate of Incorporation of the Company (incorporated herein by reference to
Exhibit T3A.3 to the Form T-3 filed by the Company with the Securities and Exchange
Commission on March 21, 1997 (File No. 022-22265)).
3.2 By-laws of the Company (incorporated herein by reference to Exhibit T3B.2 to the
Form T-3 filed by the Company with the Securities and Exchange Commission on March
21, 1997 (File No. 022-22265)).
3.3 Certificate of Incorporation of Shieldalloy.
3.4 By-laws of Shieldalloy.
3.5 Certificate of Incorporation of Metallurg Holdings Corporation.
3.6 By-laws of Metallurg Holdings Corporation.
3.7 Certificate of Incorporation of Metallurg Services, Inc.
3.8 By-laws of Metallurg Services, Inc.
3.9 Certificate of Incorporation of MIR (China), Inc.
3.10 By-laws of MIR (China), Inc.
4.1 Indenture, dated as of November 25, 1997, by and among the Company, the Guarantors
and IBJ Schroder Bank & Trust Company (the "Trustee").
4.2 Form of 11% Series A Senior Notes due 2007, dated as of November 25, 1997
(incorporated by reference to Appendix A to Exhibit 4.1).
4.3 Form of 11% Series B Senior Notes due 2007.*
4.4 Registration Agreement, dated as of November 20, 1997, by and among the Company, the
Guarantors and the Initial Purchasers.
5.1 Opinion of Rogers & Wells.
</TABLE>
II-1
<PAGE> 147
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ------------------------------------------------------------------------------------
<C> <S>
10.1 Loan Agreement dated April 14, 1997 among Metallurg, Inc. and Shieldalloy
Metallurgical Corporation as borrowers, Metallurg Services, Inc., MIR (China), Inc.
and Metallurg Holdings Corporation, as Guarantors and BankBoston, N.A. as Agent for
the lending institutions, as amended by the First, Second and Third Amendments
thereto.
10.2 German Loan Agreement, dated October 20, 1997, by and among GfE Gesellschaft fur
Elektrometallurgic GmbH, GfE Umwelttechnik GmbH, GfE Giessrei und Stahlwerksbedarf,
GfE Metalle und Metarielien and Keramed Medizintechnik GmbH and BankBoston, N.A.
acting through its Frankfurt, Germany branch.
10.3 Joint Disclosure Statement for the Fourth Amended and Restated Joint Plan of
Reorganization dated December 18, 1996 (incorporated herein by reference to Exhibit
T3E.1 to the Form T-3 filed by the Company with the Securities and Exchange
Commission on March 21, 1997 (File No. 022-22265)).
10.4 Supplement to Joint Disclosure Statement for the Fourth Amended and Restated Joint
Plan of Reorganization dated December 18, 1996 (incorporated herein by reference to
Exhibit T3E.3 to the Form T-3 filed by the Company with the Securities and Exchange
Commission on March 21, 1997 (File No. 022-22265)).
10.5 Settlement Agreement dated December 27, 1996 between MI, SMC, the Environmental
Protection Agency, the Department of the Interior, the Nuclear Regulatory Commission
and the New Jersey Department of Environmental Protection.
10.6 Permanent Injunction Consent Order dated December 23, 1996 between the State of
Ohio, SMC, and Cyprus Foote Mineral Company.
10.7 Registration Rights Agreement dated April 14, 1997 among the Company and certain
holders of the Company's common stock.
10.8 1997 Stock Award and Stock Option Plan.
10.9 Management Incentive Compensation Plan.
10.10 Employment Agreements dated April 14, 1997 with Michael A. Standen, Michael A.
Banks, Barry C. Nuss, Eric L. Schondorf, J. Richard Budd III, and Robin A. Brumwell.
10.11 Agreement dated December 20, 1983 between LSM and Alan D. Ewart.
12.1 Statement re computation of ratio of earnings to fixed charges.
21.1 Subsidiaries of Metallurg, Shieldalloy, Metallurg Holdings Corporation, Metallurg
Services, Inc. and MIR (China), Inc.
23.1 Consent of Deloitte & Touche LLP.**
23.2 Consent of Rogers & Wells (to be contained in the opinion filed as Exhibit 5.1).
24.1 Power of attorney (incorporated by reference in the signature pages).
25.1 Form T-1 Statement of Eligibility and Qualification of IBJ Schroder Bank & Trust
Company, as trustee.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Exchange Agent Agreement.
</TABLE>
- ---------------
* To be filed by pre-effective amendment.
** Previously filed.
ITEM 22. UNDERTAKING.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing
II-2
<PAGE> 148
provisions, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(b) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) The undersigned registrants hereby undertake:
(i) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement
(ii) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(iii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iv) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
II-3
<PAGE> 149
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of New York, New York, on
December 31, 1997.
METALLURG, INC.
By: /s/ ERIC L. SCHONDORF
------------------------------------
Eric L. Schondorf
Vice President, General
Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this amendment
has been signed by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
- ------------------------------------------ --------------------------- ------------------
<C> <S> <C>
/s/ MICHAEL A. STANDEN* Chairman, President, Chief December 31, 1997
- ------------------------------------------ Executive Officer and
Michael A. Standen Director
/s/ ALAN D. EWART* Joint Managing Director of December 31, 1997
- ------------------------------------------ LSM and Director
Alan D. Ewart
/s/ BARRY C. NUSS* Vice President -- Finance December 31, 1997
- ------------------------------------------ and Chief Financial Officer
Barry C. Nuss
/s/ JON R. BAUER* Director December 31, 1997
- ------------------------------------------
Jon R. Bauer
/s/ PETER A. LANGERMAN* Director December 31, 1997
- ------------------------------------------
Peter A. Langerman
/s/ HERBERT E. SEIF* Director December 31, 1997
- ------------------------------------------
Herbert E. Seif
*By: /s/ ERIC L. SCHONDORF
- ------------------------------------------
Eric L. Schondorf
Attorney In Fact
</TABLE>
II-4
<PAGE> 150
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of New York, New York, on
December 31, 1997.
SHIELDALLOY METALLURGICAL CORPORATION
By: /s/ ERIC L. SCHONDORF
------------------------------------
Eric L. Schondorf
Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment
has been signed by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
- ------------------------------------------ ----------------------------- ------------------
<C> <C> <S>
/s/ MICHAEL A. STANDEN* Director December 31, 1997
- ------------------------------------------
Michael A. Standen
/s/ J. RICHARD BUDD III* Director December 31, 1997
- ------------------------------------------
J. Richard Budd III
/s/ MICHAEL A. BANKS* Director December 31, 1997
- ------------------------------------------
Michael A. Banks
/s/ BARRY C. NUSS* Director December 31, 1997
- ------------------------------------------
Barry C. Nuss
/s/ ERIC E. JACKSON* Director December 31, 1997
- ------------------------------------------
Eric E. Jackson
*By: /s/ ERIC L. SCHONDORF
- ------------------------------------------
Eric L. Schondorf
Attorney In Fact
</TABLE>
II-5
<PAGE> 151
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of New York, New York, on
December 31, 1997.
METALLURG HOLDINGS CORPORATION
By: /s/ ERIC L. SCHONDORF
------------------------------------
Eric L. Schondorf
Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment
has been signed by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
- ------------------------------------------ ----------------------------- ------------------
<C> <C> <S>
/s/ MICHAEL A. STANDEN* Director December 31, 1997
- ------------------------------------------
Michael A. Standen
/s/ BARRY C. NUSS* Director December 31, 1997
- ------------------------------------------
Barry C. Nuss
/s/ ERIC L. SCHONDORF* Director December 31, 1997
- ------------------------------------------
Eric L. Schondorf
*By: /s/ ERIC L. SCHONDORF
- ------------------------------------------
Eric L. Schondorf
Attorney In Fact
</TABLE>
II-6
<PAGE> 152
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of New York, New York, on
December 31, 1997.
METALLURG SERVICES, INC.
By: /s/ ERIC L. SCHONDORF
------------------------------------
Eric L. Schondorf
Secretary
Pursuant to the requirements of the Securities Act of 1933, this amendment
has been signed by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
- ------------------------------------------ ----------------------------- ------------------
<C> <C> <S>
/s/ MICHAEL A. STANDEN* Director December 31, 1997
- ------------------------------------------
Michael A. Standen
/s/ MICHAEL A. BANKS* Director December 31, 1997
- ------------------------------------------
Michael A. Banks
/s/ BARRY C. NUSS* Director December 31, 1997
- ------------------------------------------
Barry C. Nuss
/s/ ERIC L. SCHONDORF* Director December 31, 1997
- ------------------------------------------
Eric L. Schondorf
*By: /s/ ERIC L. SCHONDORF
- ------------------------------------------
Eric L. Schondorf
Attorney In Fact
</TABLE>
II-7
<PAGE> 153
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of New York, New York, on
December 31, 1997.
MIR (CHINA), INC.
By: /s/ ERIC L. SCHONDORF
------------------------------------
Eric L. Schondorf
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this amendment
has been signed by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
- ------------------------------------------ ----------------------------- ------------------
<C> <C> <S>
/s/ MICHAEL A. STANDEN* Director December 31, 1997
- ------------------------------------------
Michael A. Standen
/s/ ROBIN A. BRUMWELL* Director December 31, 1997
- ------------------------------------------
Robin A. Brumwell
/s/ BARRY C. NUSS* Director December 31, 1997
- ------------------------------------------
Barry C. Nuss
*By: /s/ ERIC L. SCHONDORF
- ------------------------------------------
Eric L. Schondorf
Attorney In Fact
</TABLE>
II-8
<PAGE> 154
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ------------------------------------------------------------------------------------
<C> <S>
1.1 Purchase Agreement, dated as of November 20, 1997, by and among Metallurg, Inc. (the
"Company"), Shieldalloy Metallurgical Corporation ("Shieldalloy"), Metallurg
Holdings Corporation, Metallurg Services, Inc. and MIR (China), Inc. (collectively,
the "Guarantors") and Salomon Brothers Inc and BancBoston Securities Inc. (the
"Initial Purchasers").
3.1 Certificate of Incorporation of the Company (incorporated herein by reference to
Exhibit T3A.3 to the Form T-3 filed by the Company with the Securities and Exchange
Commission on March 21, 1997 (File No. 022-22265)).
3.2 By-laws of the Company (incorporated herein by reference to Exhibit T3B.2 to the
Form T-3 filed by the Company with the Securities and Exchange Commission on March
21, 1997 (File No. 022-22265)).
3.3 Certificate of Incorporation of Shieldalloy.
3.4 By-laws of Shieldalloy.
3.5 Certificate of Incorporation of Metallurg Holdings Corporation.
3.6 By-laws of Metallurg Holdings Corporation.
3.7 Certificate of Incorporation of Metallurg Services, Inc.
3.8 By-laws of Metallurg Services, Inc.
3.9 Certificate of Incorporation of MIR (China), Inc.
3.10 By-laws of MIR (China), Inc.
4.1 Indenture, dated as of November 25, 1997, by and among the Company, the Guarantors
and IBJ Schroder Bank & Trust Company (the "Trustee").
4.2 Form of 11% Series A Senior Notes due 2007, dated as of November 25, 1997
(incorporated by reference to Appendix A to Exhibit 4.1).
4.3 Form of 11% Series B Senior Notes due 2007.*
4.4 Registration Agreement, dated as of November 20, 1997, by and among the Company, the
Guarantors and the Initial Purchasers.
5.1 Opinion of Rogers & Wells.
10.1 Loan Agreement dated April 14, 1997 among Metallurg, Inc. and Shieldalloy
Metallurgical Corporation as borrowers, Metallurg Services, Inc., MIR (China), Inc.
and Metallurg Holdings Corporation, as Guarantors and BankBoston, N.A. as Agent for
the lending institutions, as amended by the First, Second and Third Amendments
thereto.
10.2 German Loan Agreement, dated October 20, 1997, by and among GfE Gesellschaft fur
Elektrometallurgic GmbH, GfE Umwelttechnik GmbH, GfE Giessrei und Stahlwerksbedarf,
GfE Metalle und Metarielien and Keramed Medizintechnik GmbH and BankBoston, N.A.
acting through its Frankfurt, Germany branch.
10.3 Joint Disclosure Statement for the Fourth Amended and Restated Joint Plan of
Reorganization dated December 18, 1996 (incorporated herein by reference to Exhibit
T3E.1 to the Form T-3 filed by the Company with the Securities and Exchange
Commission on March 21, 1997 (File No. 022-22265)).
10.4 Supplement to Joint Disclosure Statement for the Fourth Amended and Restated Joint
Plan of Reorganization dated December 18, 1996 (incorporated herein by reference to
Exhibit T3E.3 to the Form T-3 filed by the Company with the Securities and Exchange
Commission on March 21, 1997 (File No. 022-22265)).
10.5 Settlement Agreement dated December 27, 1996 between MI, SMC, the Environmental
Protection Agency, the Department of the Interior, the Nuclear Regulatory Commission
and the New Jersey Department of Environmental Protection.
10.6 Permanent Injunction Consent Order dated December 23, 1996 between the State of
Ohio, SMC, and Cyprus Foote Mineral Company.
10.7 Registration Rights Agreement dated April 14, 1997 among the Company and certain
holders of the Company's common stock.
10.8 1997 Stock Award and Stock Option Plan.
10.9 Management Incentive Compensation Plan.
</TABLE>
II-9
<PAGE> 155
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ------------------------------------------------------------------------------------
<C> <S>
10.10 Employment Agreements dated April 14, 1997 with Michael A. Standen, Michael A.
Banks, Barry C. Nuss, Eric L. Schondorf, J. Richard Budd III, and Robin A. Brumwell.
10.11 Agreement dated December 20, 1983 between LSM and Alan D. Ewart.
12.1 Statement re computation of ratio of earnings to fixed charges.
21.1 Subsidiaries of Metallurg, Shieldalloy, Metallurg Holdings Corporation, Metallurg
Services, Inc. and MIR (China), Inc.
23.1 Consent of Deloitte & Touche LLP.**
23.2 Consent of Rogers & Wells (to be contained in the opinion filed as Exhibit 5.1).
24.1 Power of attorney (incorporated by reference in the signature pages).
25.1 Form T-1 Statement of Eligibility and Qualification of IBJ Schroder Bank & Trust
Company, as trustee.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Exchange Agent Agreement.
</TABLE>
- ---------------
* To be filed by pre-effective amendment.
** Previously filed.
II-10
<PAGE> 1
EXHIBIT 1.1
1
EXECUTION COPY
METALLURG, INC.
$100,000,000
11% Senior Notes due 2007
PURCHASE AGREEMENT
New York, New York
November 20, 1997
To: SALOMON BROTHERS INC
BANCBOSTON SECURITIES INC.
In care of:
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Metallurg, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to you (the "Purchasers"), $100,000,000 aggregate principal
amount of its 11% Senior Notes due 2007 (the "Notes") to be fully and
unconditionally guaranteed on a senior unsecured basis (the "Subsidiary
Guarantees" and, together with the Notes, the "Securities") by certain of the
Company's subsidiaries signatory hereto (the "Guarantors"). The Securities are
to be issued under an indenture (the "Indenture") dated as of November 25, 1997,
among the Company, the Guarantors and IBJ Schroder Bank & Trust Company, as
trustee (the "Trustee").
The sale of the Securities to you will be made without registration
of the Securities under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance upon the exemption from the registration requirements of the
Securities Act provided by Section 4(2) thereof. You have advised the Company
that you will make an offering of the Securities purchased by you hereunder in
accordance with Section 4 hereof as soon as you deem advisable after the
execution and delivery of this Agreement.
In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum, dated November 4, 1997 (the
"Preliminary Memorandum"), and a final offering memorandum, dated November 20,
1997 (the
<PAGE> 2
2
"Final Memorandum"). Each of the Preliminary Memorandum and the Final Memorandum
sets forth certain information concerning the Company, the Guarantors and the
Securities. The Company and the Guarantors, jointly and severally, hereby
confirm that they have authorized the use of the Preliminary Memorandum and the
Final Memorandum, and any amendment or supplement thereto, in connection with
the offer and sale of the Securities by the Purchasers. Unless stated to the
contrary, all references herein to the Final Memorandum are to the Final
Memorandum at the Execution Time (as defined below) and are not meant to include
any amendment or supplement thereto subsequent to the Execution Time.
The holders of the Securities will be entitled to the benefits of
the Registration Agreement dated the date hereof, between the Company, the
Guarantors and the Purchasers (the "Registration Agreement").
Capitalized terms used herein without definition have the respective
meanings assigned to them in the Final Memorandum.
1. Representations and Warranties. The Company and the Guarantors
jointly and severally represent and warrant to, and agree with, the Purchasers
as set forth below in this Section 1.
(a) The Preliminary Memorandum, at the date thereof, did not contain
any untrue statement of a material fact or omit to state any material fact
(other than pricing terms and other financial terms for the Securities
intentionally left blank) necessary to make the statements therein, in the
light of the circum stances under which they were made, not misleading.
The Final Memorandum, at the date hereof, does not, and at the Closing
Date (as defined below) will not (and any amendment or supplement thereto,
at the date thereof and at the Closing Date, will not), contain any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that no
representation or warranty is made as to the information contained in or
omitted from the Preliminary Memorandum or the Final Memorandum, or any
amendment or supplement thereto, in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of the
Purchasers specifically for inclusion therein, it being understood that
the only such information is that described in Section 8(b) hereof.
<PAGE> 3
3
(b) None of the Company, the Guarantors, any of their respective
Affiliates (as defined in Rule 501(b) of Regulation D under the Securities
Act ("Regula tion D")), nor any person acting on its or their behalf has,
directly or indirectly, (i) sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of, any security (as defined in the
Securities Act) under circumstances that would require the registration of
the Securities under the Securities Act or (ii) engaged in any form of
general solicitation or general advertising (within the meaning of
Regulation D) in connection with any offer or sale of the Securities in
the United States.
(c) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(d) None of the Company, the Guarantors, any of their respective
Affiliates, nor any person acting on its or their behalf has engaged in
any directed selling efforts with respect to the Securities, and each of
them has complied with the offering restrictions requirement of Regulation
S ("Regulation S") under the Securities Act. Terms used in this paragraph
have the meanings given to them by Regulation S.
(e) Neither the Company nor any Guarantor has taken nor will they
take, directly or indirectly, any action prohibited by Regulation M under
the Exchange Act of 1934, as amended (the "Exchange Act"), in connection
with the offering of the Securities.
(f) Neither the Company nor any Guarantor is an "investment company"
within the meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), without taking account of any exemption arising
out of the number of holders of the Company's or any Guarantor's
securities.
(g) Neither the Company nor any Guarantor has paid or agreed to pay
to any person any compensation for soliciting another to purchase any
securities of the Company or the Guarantors (except as contemplated by
this Agreement).
(h) The information provided by the Company pursuant to Section 5(h)
hereof will not, at the date thereof, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not
<PAGE> 4
4
misleading.
(i) Each of the Company and the Guarantors has full corporate power
and authority to enter into this Agreement, the Registration Agreement,
the Indenture and the Securities and to perform the transactions
contemplated hereby and thereby (the "Transactions"). This Agreement and
the Registration Agreement have been duly authorized, executed and
delivered by the Company and each Guarantor. The execution and delivery of
the Indenture has been duly authorized by the Company and each Guarantor
and, when duly executed and delivered by the parties thereto, the
Indenture will constitute a valid and binding obligation of the Company
and each Guarantor, enforceable against the Company and each Guarantor in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(j) Upon execution and delivery of the Indenture, and when the Notes
are issued, authenticated and delivered in accordance with the Indenture
and paid for in accordance with the terms of this Agreement, (i) the Notes
will constitute valid and binding obligations of the Company enforceable
against the Company in accordance with their terms and entitled to the
benefits of the Indenture and (ii) the Guarantees will constitute a valid
and binding obligation of the Guarantors enforceable against the
Guarantors in accordance with its terms, in each case subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(k) The execution, delivery and performance of this Agreement, the
Registration Agreement, the Indenture and the Securities by the Company
and each Guarantor and the consummation of the Transactions will not
conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under, (i) the articles of
incorporation, by-laws or other organizational documents of the Company or
any of the Subsidiaries (as defined below), (ii) any statute, rule or
regulation applicable to the Company or any Subsidiary or any order of any
governmental agency or body or any court having jurisdiction over the
Company or any Subsidiary or any of their
<PAGE> 5
5
respective properties, (iii) any agreement or instrument relating to
borrowed money to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary is bound or to which any of their
respective properties is subject or (iv) any other material agreement or
instrument to which the Company or any Subsidiary is a party or by which
the Company or any Subsidiary is bound or to which any of their respective
properties is subject. No consent, approval, authorization or other order
of any court, regulatory body, administrative agency or other governmental
body which has not already been obtained is required for the execution and
delivery of this Agreement, the Registration Agreement, the Indenture or
the Securities or for the consummation of the Transactions, except for
compliance with state securities or blue sky laws. The term "Subsidiary"
means each person of which a majority of the voting equity securities or
other interests is owned, directly or indirectly, by the Company.
(l) The consolidated financial statements with respect to the
Company included in the Final Memorandum present fairly the consolidated
financial position of the Company and its consolidated subsidiaries as of
the dates shown and their results of operations and cash flows for the
periods shown, and such consolidated financial statements have been
prepared in conformity with the generally accepted accounting principles
in the United States applied on a consistent basis.
(m) Since the date of the latest audited consolidated financial
statements of the Company included in the Final Memorandum, there has been
no material adverse change, nor to the Company's and the Guarantors'
knowledge, after due inquiry, any development or event involving a
prospective material adverse change in the condition (financial or
otherwise), business, properties or results of operations or prospects of
the Company and its Subsidiaries taken as a whole.
(n) Except as disclosed in the Final Memorandum, (i) there are no
legal or governmental actions, suits or proceedings pending or, to the
best of the Company's and the Guarantors' knowledge, threatened to which
the Company or any of its Subsidiaries is or is threatened to be made a
party or of which property owned or leased by the Company or any of its
Subsidiaries is or is threatened to be made the subject, which actions,
suits or proceedings could, individually or in the aggregate, reasonably
be expected to have a material adverse
<PAGE> 6
6
effect on the condition (financial or otherwise), business, properties,
results of operations or prospects of the Company and its Subsidiaries,
taken as a whole, or materially and adversely affect the ability of the
Company or any Guarantor to perform its obligations under this Agreement,
the Indenture, the Registration Agreement or the Securities or to
consummate the Transactions (a "Material Adverse Effect"), and (ii) no
labor disturbance by the employees of the Company or any of its
Subsidiaries exists or is imminent, in either case which could have a
Material Adverse Effect. Except as described in the Final Memorandum,
neither the Company nor any of its Subsidiaries is a party or subject to
the provisions of any material injunction, judgment, decree or order of
any court, regulatory body, administrative agency or other governmental
body.
(o) Except as disclosed in the Final Memorandum, the Company and the
Subsidiaries have good and marketable title to all real properties and all
other properties and assets owned by them and necessary to conduct the
business now operated by them, in each case free from liens, encumbrances
and defects that would materially affect the value thereof or materially
interfere with the use made or to be made thereof by them or that could
reasonably be expected to have a Material Adverse Effect; and except as
disclosed in the Final Memorandum, the Company and its Subsidiaries hold
any leased real or personal property necessary to the conduct of the
business now operated by them under valid and enforceable leases with no
exceptions that would materially interfere with the use made or to be made
thereof by them or that could reasonably be expected to have a Material
Adverse Effect.
(p) Except as disclosed in the Final Memorandum, the Company and the
Subsidiaries have all necessary material permits, licenses and other
authorizations required by applicable law for the Company and the
Subsidiaries to conduct their businesses as now conducted.
(q) Except as disclosed in the Final Memorandum, neither the Company
nor any of its Subsidiaries (i) is in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
radioactive, hazardous or toxic materials,
<PAGE> 7
7
wastes or substances or relating to the protection or restoration of the
environment or human exposure to radioactive, hazardous or toxic
materials, wastes or substances or the operation or decommissioning of
facilities at which such radioactive, hazardous or toxic materials, wastes
or substances are present (collectively, "Environmental Laws"), (ii) owns
or operates any real property contaminated with any substance that is
subject to any Environmental Laws, (iii) is liable for any off-site
disposal or contamination pursuant to any Environmental Laws, or (iv) is
subject to any claim relating to any Environmental Laws, which violation,
contamination, liability or claim referred to in clauses (i), (ii), (iii)
or (iv) could reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect; and neither the Company nor any Guarantor
is aware of any pending investigation which might lead to such a violation
or claim.
(r) It is not necessary in connection with the offer, sale and
delivery of the Securities in the manner contemplated by this Agreement
and the Final Memorandum to register the Securities under the Securities
Act or to qualify the Indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
(s) The Company has agreed to permit the Securities to be designated
PORTAL eligible securities, will pay the requisite fees related thereto
and has provided all necessary information to the National Association of
Securities Dealers, Inc., in order to ensure that the Securities are
designated PORTAL eligible securities.
(t) On or prior to the Closing Date, the Company's 12% Senior
Secured Notes due 2007 (the "Secured Notes") shall have been fully and
validly satisfied and discharged in accordance with the terms of the
Indenture governing the Secured Notes (the "Secured Notes Indenture").
2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to the Purchasers, and the Purchasers agree to purchase from the
Company, severally and not jointly at a purchase price of 97.0% of the principal
amount thereof, plus accrued interest, if any, from November 25, 1997, to the
Closing Date, the principal amount of Securities set forth opposite each
Purchaser's name in Schedule I hereto.
3. Delivery and Payment. Delivery of and payment for the Securities
shall be made at 10:00 AM, New York City
<PAGE> 8
8
time, on November 25, 1997, or such later date (not later than December 2, 1997)
as the Purchasers may agree or as provided in Section 9 hereof (such date and
time of delivery and payment for the Securities being herein called the "Closing
Date"). Delivery of the Securities shall be made to the Purchasers against
payment by the Purchasers of the purchase price thereof to or upon the order of
the Company by wire transfer in Federal (same day) funds to a U.S. dollar
account in New York previously designated by the Company or such other manner of
payment as may be designated by the Company and agreed to by the Purchasers not
less than two business days prior to the Closing Date. Delivery of the
Securities shall be made at the office of Cravath, Swaine & Moore, 825 Eighth
Avenue, New York, New York. Certificates for the Securities shall be registered
in such names and in such denominations as the Purchasers may request not less
than three full business days in advance of the Closing Date.
The Company agrees to have the Securities available for inspection,
checking and packaging by the Purchasers in New York, New York, not later than
1:00 PM on the business day prior to the Closing Date.
4. Offering of Securities. Each Purchaser (i) acknowledges that the
Securities have not been registered under the Securities Act and may not be
offered or sold except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act or pursuant to
an effective registration statement under the Securities Act and (ii) severally
and not jointly, represents and warrants to and agrees with the Company that:
(a) It has not offered or sold, and will not offer or sell, any
Securities except (i) to those it reasonably believes to be qualified
institutional buyers (as defined in Rule 144A under the Securities Act)
and that, in connection with each such sale, it has taken or will take
reasonable steps to ensure that the purchaser of such Securities is aware
that such sale is being made in reliance on Rule 144A or (ii) in
accordance with the restrictions set forth in Exhibit A hereto.
(b) Neither it nor any person acting on its behalf has made or will
make offers or sales of the Securities in the United States by means of
any form of general solicitation or general advertising (within the
meaning of Regulation D) in the United States, except pursuant to a
registered public offering as provided in the Registration Agreement.
<PAGE> 9
9
5. Agreements. The Company and the Guarantors jointly and severally
agree with the Purchasers that:
(a) At any time prior to completion of the sale of the Securities,
the Company and the Guarantors will furnish to the Purchasers, without
charge, as many copies of the Final Memorandum and any supplements or
amendments thereof or thereto as the Purchasers may reasonably request.
The Company and the Guarantors will pay the expenses of printing or other
production of all documents relating to the offering.
(b) The Company will not amend or supplement the Final Memorandum
without the prior written consent of the Purchasers.
(c) If at any time prior to the completion of the sale of the
Securities by the Purchasers, any event occurs as a result of which the
Final Memorandum, as then amended or supplemented, would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it shall
be necessary to amend or supplement the Final Memorandum to comply with
applicable law, the Company and the Guarantors promptly will notify the
Purchasers of the same and, subject to paragraph (b) of this Section 5,
will prepare and provide to the Purchasers pursuant to paragraph (a) of
this Section 5 an amendment or supplement which will correct such
statement or omission or effect such compliance. Neither the Initial
Purchasers' consent to, nor the Initial Purchasers' delivery to offerees
or investors of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6 of this Agreement.
(d) The Company will arrange for the qualification of the Securities
for sale by the Purchasers under the laws of such jurisdictions as the
Purchasers may designate and will maintain such qualifications in effect
so long as required for the sale of the Securities. Each of the Company
and the Guarantors promptly will advise the Purchasers of the receipt by
it of any notification with respect to the suspension of the qualification
of the Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose.
(e) The Company and the Guarantors will not, and will not permit any
of their respective Affiliates to, resell any Securities that have been
acquired by any of
<PAGE> 10
10
them.
(f) Except pursuant to the Registration Agreement, none of the
Company, the Guarantors, any of their Affiliates, nor any person acting on
its or their behalf will, directly or indirectly, make offers or sales of
any security, or solicit offers to buy any security, under circumstances
that would require the registration of the Securities under the Securities
Act.
(g) None of the Company, the Guarantors, any of their respective
Affiliates, nor any person acting on its or their behalf will engage in
any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with any offer or sale of the
Securities in the United States, except pursuant to a registered public
offering as provided in the Registration Agreement.
(h) So long as any of the Securities are "restricted securities"
within the meaning of the Securities Act, the Company will, unless it
becomes subject to and complies with Section 13 or 15(d) of the Exchange
Act, provide to each holder of such restricted securities and to each
prospective purchaser (as designated by such holder) of such restricted
securities, upon the request of such holder or prospective purchaser, any
information required to be provided by Rule 144A(d)(4) under the
Securities Act. This covenant is intended to be for the benefit of the
holders, and the prospective purchasers designated by such holders, from
time to time of such restricted securities.
(i) None of the Company, the Guarantors, any of their respective
Affiliates, nor any person acting on its or their behalf will engage in
any directed selling efforts with respect to the Securities except
pursuant to a registered public offering as provided in the Registration
Agreement and each of them will comply with the offering restrictions
requirement of Regulation S. Terms used in this paragraph have the
meanings given to them by Regulation S.
(j) The Company and the Guarantors will cooperate with the
Purchasers and use their best efforts to permit the Securities to be
eligible for clearance and settlement through The Depository Trust
Company.
(k) The Company will not, until 180 days following the Closing Date,
without the prior written
<PAGE> 11
11
consent of Salomon Brothers Inc, offer, sell or contract to sell, or
otherwise dispose of, directly or indirectly, or announce the offering of,
or file a registration statement for, any debt securities issued or
guaranteed by the Company or any Guarantor (other than (i) the Securities
and (ii) pursuant to a registered public offering as provided in the
Registration Agreement). Neither the Company nor any Guarantor will at any
time offer, sell, contract to sell or otherwise dispose of, directly or
indirectly, any securities under circumstances where such offer, sale,
contract or disposition would cause the exemption afforded by Section 4(2)
of the Securities Act or the safe harbor of Regulation S thereunder to
cease to be applicable to the offer and sale of the Securities as
contemplated by this Agreement and the Final Memorandum.
(l) Neither the Company nor any Guarantor will take, directly or
indirectly, any action prohibited by Regulation M under the Exchange Act,
in connection with any offering of the Securities.
(m) The Company and the Guarantors hereby agree to permit the
Securities to be designated PORTAL eligible securities, will pay the
requisite fees related thereto and have been advised by the National
Association of Securities Dealers, Inc. PORTAL Market that the Securities
have or will be designated PORTAL eligible securities in accordance with
the rules and regulations of the National Association of Securities
Dealers, Inc.
(n) The Company will apply the net proceeds of the offering and sale
of the Securities in the manner set forth in the Final Memorandum under
the caption "Use of Proceeds".
6. Conditions to the Obligations of the Purchasers. The obligations
of the Purchasers to purchase the Securities shall be subject to the accuracy of
the representations and warranties on the part of the Company and the Guarantors
contained herein at the date and time that this Agreement is executed and
delivered by the parties hereto (the "Execution Time") and the Closing Date, to
the accuracy of the statements of the Company and the Guarantors made in any
certificates pursuant to the provisions hereof, to the performance by the
Company and the Guarantors of their respective obligations hereunder and to the
following additional conditions:
(a) The Company shall have furnished to the
<PAGE> 12
12
Purchasers the opinion of Rogers & Wells, counsel for the Company, dated
the Closing Date, to the effect that:
(i) each of the Company and Shieldalloy Metallurgical
Corporation, Metallurg Services, Inc., and MIR (China), Inc. has
been duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction in which it is
chartered or organized, with full corporate power and authority to
own its properties and conduct its business as described in the
Final Memorandum, and each Guarantor is duly qualified to do
business as a foreign corporation and is in good standing under the
laws of each jurisdiction which requires such qualification wherein
it owns or leases material properties or conducts material business;
(ii) the Company's authorized equity capitalization is as set
forth in the Final Memorandum and the Securities conform in all
material respects to the description thereof contained in the Final
Memorandum;
(iii) the Indenture has been duly authorized, executed and
delivered, and constitutes a legal, valid and binding instrument
enforceable against the Company and the Guarantors in accordance
with its terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting creditors' rights generally from time to time
in effect); the Securities are in the form contemplated by the
Indenture and have been duly authorized and executed by the Company
and the Guarantors and, when authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the
Purchasers pursuant to this Agreement, will constitute legal, valid
and binding obligations of the Company and the Guarantors entitled
to the benefits of the Indenture and enforceable in accordance with
their terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting creditors' rights generally from time to time
in effect); and the statements set forth under the heading
"Description of the Notes" in the Final Memorandum, insofar as such
statements purport to summarize certain provisions of the Securities
and the Indenture, provide a fair summary of such
<PAGE> 13
13
provisions;
(iv) the Indenture conforms as to form in all material
respects with the requirements of the Trust Indenture Act, and the
rules and regulations of the Securities and Exchange Commission (the
"Commission") applicable to an indenture which is qualified
thereunder;
(v) the information contained in the Final Memorandum under
the headings "Business--Environmental Matters", "Business--Legal
Proceedings", "Certain Transactions", "Description of Credit
Facilities and Other Financing Arrangements" and "Certain Federal
Income Tax Considerations", fairly summarizes the matters therein
described;
(vi) this Agreement and the Registration Agreement have been
duly authorized, executed and delivered by the Company and the
Guarantors;
(vii) no consent, approval, authorization or order of, or
filing or registration with, any court or governmental agency or
body is required for the execution, delivery and performance of this
Agreement, the Indenture, the Registration Agreement and the
Securities or for the consummation of the Transactions, except such
as may be required under the blue sky or securities laws of any
jurisdiction in connection with the purchase and sale of the
Securities by the Purchasers and except such as may be required
under the Securities Act with respect to the Registration Agreement
and the transactions contemplated thereunder;
(viii) none of the issue and sale of the Securities, the
execution and delivery of this Agreement, the Registration Agreement
or the Indenture, the fulfillment of the terms hereof or thereof or
the consummation of the Transactions will conflict with, result in a
breach or violation of, or constitute a default under any provision
of applicable law or the charter or by-laws of the Company or any
Guarantor or the terms of any indenture or other agreement or
instrument set forth in an exhibit to such opinion, or any judgment,
order or decree known to such counsel to be applicable to the
Company or any of the Guarantors of any court, regulatory body,
administrative agency, governmental body or
<PAGE> 14
14
arbitrator having jurisdiction over the Company or any of the
Guarantors;
(ix) assuming the accuracy of the representations and
warranties and compliance with the agreements contained herein, no
registration of the Securities under the Securities Act is required,
and no qualification of the Indenture under the Trust Indenture Act
is necessary, for the offer, sale and delivery of the Securities in
the manner contemplated by this Agreement;
(x) none of the Company or any of the Guarantors is, or after
giving effect to the offering and sale of the Securities and the
application of the net proceeds therefrom, will be, an "investment
company" within the meaning of the Investment Company Act and the
rules and regulations of the Commission thereunder, without taking
account of any exemption arising out of the number of holders of the
Company's securities;
(xi) to the best of such counsel's knowledge, there is no
pending or threatened action or suit or judicial, arbitral or other
administrative proceeding to which the Company or any of the
Guarantors is a party or of which any property or assets of the
Company or any of the Guarantors is the subject that, individually
or in the aggregate, questions the validity of this Agreement, the
Registration Agreement, the Indenture, the Securities, the
Transactions or any action taken or to be taken pursuant hereto or
thereto; and
(xii) following the deposit with the Trustee of funds in an
amount sufficient to cover the redemption of the Secured Notes, the
Secured Notes Indenture will be of no further force and effect,
except as to any surviving rights of transfer or exchange of the
Secured Notes expressly provided for therein and the obligations of
the Company regarding compensation and indemnity.
Such counsel shall also state that while they have not (except
as provided above) independently verified and are not passing upon, and do
not assume any responsibility for the accuracy, completeness or fairness
of the information contained in the Final Memorandum (except as provided
above), on the basis of their participation in the preparation of the
Preliminary Memorandum and the Final Memorandum and
<PAGE> 15
15
their discussions with certain officers, directors and employees of the
Company, representatives of Deloitte & Touche LLP, the independent
accountants who examined certain of the financial statements of the
Company and the Guarantors included in the Final Memorandum, and the
Purchasers, they have no reason to believe that at the Execution Time the
Final Memorandum contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein (other than the financial statements and other financial and
statistical data therein), in the light of the circumstances under which
they were made, not misleading or that the Final Memorandum (other than
the financial statements and other financial and statistical data therein)
includes an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely as to matters of
fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials, copies of which shall be
provided to the Purchasers.
All references in this Section 6(a) to the Final Memorandum
shall be deemed to include any amendment or supplement thereto at the
Closing Date.
(b) The Company shall have furnished to the Purchasers the opinion
of Eric L. Schondorf, Esq., Vice President and General Counsel of the
Company, dated the Closing Date, to the effect that:
(i) all the outstanding shares of capital stock of the Company
and each Guarantor have been duly and validly authorized and issued
and are fully paid and nonassessable. Except as otherwise set forth
in the Final Memorandum, all outstanding shares of capital stock of
each Guarantor, London & Scandinavian Metallurgical Co., Limited
("LSM"), GfE Gesellschaft fur Elektrometallurgie mbH ("GfE") and
Elektrowerk Weisweiller GmbH ("EWW") (collectively with the
Guarantors, the "Specified Subsidiaries") are owned by the Company
either directly or through wholly owned subsidiaries free and clear
of any perfected security interest and, to the knowledge of such
counsel, after due inquiry, any other security interests, claims,
liens or encumbrances;
<PAGE> 16
16
(ii) none of the issue and sale of the Securities, the
execution and delivery of this Agreement, the Registration Agreement
or the Indenture, the fulfillment of the terms hereof or thereof or
the consummation of the Transactions will conflict with, result in a
breach or violation of, or constitute a default under any law or the
terms of any indenture or other agreement or instrument known to
such counsel and to which the Company or any of the Specified
Subsidiaries is a party or bound or any judgment, order or decree
known to such counsel to be applicable to the Company or any of the
Specified Subsidiaries of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over the
Company or any of the Specified Sub- sidiaries;
(iii) to the best of such counsel's knowledge, there is no
pending or threatened action or suit or judicial, arbitral or other
administrative proceeding to which the Company, the Guarantors or
any of their respective subsidiaries is a party or of which any
property or assets of the Company, the Guarantors or any of their
respective subsidiaries is the subject that, individually or in the
aggregate, (A) questions the validity of this Agreement, the
Registration Agreement, the Indenture, the Securities, the
Transactions or any action taken or to be taken pursuant hereto or
thereto, or (B) if determined adversely to the Company, the
Guarantors or any of their respective subsidiaries, is reasonably
likely to have a Material Adverse Effect;
Such counsel shall also state that while he has not
independently verified and is not passing upon, and does not assume any
responsibility for the accuracy, completeness or fairness of the
information contained in the Final Memorandum, on the basis of his
participation in the preparation of the Preliminary Memorandum and the
Final Memorandum and his discussions with certain officers, directors and
employees of the Company, representatives of Deloitte & Touche LLP, the
independent accountants who examined certain of the financial statements
of the Company and the Guarantors included in the Final Memorandum, and
the Purchasers, he has no reason to believe that at the Execution Time the
Final Memorandum contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein
<PAGE> 17
17
(other than the financial statements and other financial and statistical
data therein), in the light of the circumstances under which they were
made, not misleading or that the Final Memorandum (other than the
financial statements and other financial and statistical data therein)
includes an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other than
the State of New York, the State of Delaware or the United States, to the
extent he deems proper and specified in such opinion, upon the opinion of
other counsel of good standing whom he believes to be reliable and who are
satisfactory to Cravath, Swaine & Moore, copies of which shall be provided
to the Purchasers, and (B) as to matters of fact, to the extent he deems
proper, on certificates of responsible officers of the Company and public
officials, copies of which shall be provided to the Purchasers.
All references in this Section 6(b) to the Final Memorandum
shall be deemed to include any amendment or supplement thereto at the
Closing Date.
(c) The Company shall have furnished to the Purchasers the opinion
of Mr. Dietrich Kessel, special German counsel to EWW and GfE dated the
Closing Date, to the effect that:
(i) each of EWW and GfE has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
Germany, with full corporate power and authority to own its
properties and conduct its business as described in the Preliminary
Memorandum and the Final Memorandum;
(ii) the information contained in the Final Memorandum under
the headings "Offering Memorandum Summary--Business
Strategies--Improve Financial Flexibility," "Risk Factors--Holding
Company Structure; Restrictions on Dividend Payments by
Subsidiaries" and "Business--Business Strategy--Improve Financial
Flexibility," insofar as they purport to describe the legal
requirements relating to the payment of dividends under German law,
fairly summarizes the matters therein
<PAGE> 18
18
described;
(iii) except as otherwise set forth in the Final Memorandum,
there are no consents, permissions, authorizations, approvals or
orders of, or filings or registrations with or notices to, any
court, regulatory body, administrative agency or other governmental
body, other than those which have been obtained or duly requested or
made by EWW and GfE, which are required under German law for the
payment of dividends by GfE and EWW. As a result of such actions,
such entities will be permitted under German law to pay dividends on
or before December 31, 1998;
(iv) all of the outstanding shares of capital stock of EWW
have been duly and validly authorized and issued and are fully paid
and nonassessable, and all outstanding shares of capital stock of
EWW are owned by the Company, except as otherwise set forth in the
Final Memorandum, either directly or through wholly owned
subsidiaries free and clear of any perfected security interest and,
to such counsel's knowledge, after due inquiry, any other security
interests, claims, liens or encumbrances, except as otherwise set
forth in the Final Memorandum; and
(v) all of the outstanding shares of capital stock of GfE have
been duly and validly authorized and issued and are fully paid and
nonassessable, and all outstanding shares of capital stock of GfE
are owned by Metallurg Holdings Corporation, except as otherwise set
forth in the Final Memorandum, either directly or through wholly
owned subsidiaries free and clear of any perfected security interest
and, to such counsel's knowledge, after due inquiry, any other
security interests, claims, liens or encumbrances, except as
otherwise set forth in the Final Memorandum.
All references in this Section 6(c) to the Final Memorandum
shall be deemed to include any amendment or supplement thereto at the
Closing Date.
(d) The Company shall have furnished to the Purchasers the opinion
of Dibb Lupton Alsop, special English counsel to LSM dated the Closing
Date, to the effect that:
(i) LSM has been duly incorporated and is validly existing as
a company under the laws of
<PAGE> 19
19
England and has all requisite power and authority to carry on its
business as currently conducted and own property;
(ii) all of the shares in the capital of LSM (x) have been
duly and validly authorized and are issued and fully paid and (y)
are registered in the name of Metallurg Holdings Corporation.
(e) The Company shall have furnished to the Purchasers the opinion
of Archer & Greiner, special New Jersey counsel to Metallurg Holdings
Corporation ("Holdings") dated the Closing Date, to the effect that:
(i) Holdings has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of New Jersey, with full corporate power and authority to own
its properties and conduct its business as described in the Final
Memorandum; and
(ii) the execution, delivery and performance of this
Agreement, the Registration Agreement and the Indenture have been
duly authorized by all necessary corporate action on the part of
Holdings.
All references in this Section 6(e) to the Final Memorandum
shall be deemed to include any amendment or supplement thereto at the
Closing Date.
(f) The Purchasers shall have received from Cravath, Swaine & Moore
such opinion or opinions, dated the Closing Date, with respect to the
issuance and sale of the Securities, the Final Memorandum (as amended or
supplemented at the Closing Date) and other related matters as the
Purchasers may reasonably require, and the Company shall have furnished to
such counsel such documents as they request for the purpose of enabling
them to pass upon such matters.
(g) The Company shall have furnished to the Purchasers a certificate
of the Company, signed by the Chairman, President and Chief Executive
Officer and the Vice President-Finance and Chief Financial Officer of the
Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Final Memorandum, any amendment or
supplement to the Final Memorandum and this Agreement and the Registration
Agreement and that:
(i) the representations and warranties of the
<PAGE> 20
20
Company and the Guarantors in this Agreement and the Registration
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing
Date, and the Company and the Guarantors have complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied hereunder or thereunder at or prior to the
Closing Date; and
(ii) since the date of the most recent financial statements
included in the Final Memorandum, there has been no material adverse
change in the condition (financial or otherwise), earnings, business
or properties, of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated by the
Final Memorandum (exclusive of any amendment or supplement thereof
or thereto).
(h) At the Execution Time and at the Closing Date, Deloitte & Touche
LLP shall have furnished to the Purchasers a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, in form
and substance satisfactory to the Purchasers, confirming that they are
independent accountants within the meaning of Rule 101 of the Code of
Professional Conduct of the American Institute of Certified Public
Accountants (the "AICPA") and stating in effect that:
(i) based upon (x) their review, in accordance with standards
established under Statement on Auditing Standards No. 71, of the
unaudited interim financial information for the quarter ended July
31, 1997, and as at July 31, 1997, and (y) the procedures detailed
in such letter with respect to the period subsequent to the date of
the latest audited financial statements included in the Final
Memorandum, including the reading of the minutes and inquiries of
certain officials of the Company who have responsibility for the
financial and accounting matters and certain other limited
procedures requested by the Purchasers and described in detail in
such letter, nothing has come to their attention that causes them to
believe that:
(A) any unaudited financial statements of the Company
included in the Final Memorandum are not, in all material
respects, in conformity with generally accepted
<PAGE> 21
21
accounting principles applied on a basis substantially
consistent with that of the audited financial statements of
the Company included in the Final Memorandum; or
(B) with respect to the period subsequent to July 31,
1997, there were, at a specified date not more than five
business days prior to the date of the letter, any changes in
the total debt of the Company and its subsidiaries or capital
stock of the Company or decreases in the shareholders' equity
of the Company or decreases in working capital of the Company
and its subsidiaries, as compared with the amounts shown on
the July 31, 1997, consolidated balance sheet included in the
Final Memorandum, or for the period from August 1, 1997, to
such specified date there were any decreases, as compared with
the corresponding period in the preceding year in total
revenue, income (loss) before income tax provision, net income
or EBITDA, as defined in the Indenture, except in all
instances for changes or decreases set forth in such letter,
in which case the letter shall be accompanied by an
explanation by the Company as to the significance thereof
unless said explanation is not deemed necessary by the
Purchasers;
(ii) they have performed certain other specified procedures as
a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and its subsidiaries) set
forth in the Final Memorandum, including the information set forth
under the captions "Offering Memorandum Summary", "Risk Factors",
"Use of Proceeds", "Capitalization" "Selected Financial Data",
"Management's Discussion and Analysis of Financial Condition and
Results of Operations", "Business", "Management", "Description of
Credit Facilities", "Description of the Notes" and "Exchange Offer;
Registration Rights" in the Final Memorandum, agrees with the
accounting records of the Company and its subsidiaries, excluding
any questions of legal interpretation; and
(iii) on the basis of a reading of the unaudited pro forma
financial statements (the "pro
<PAGE> 22
22
forma financial statements") included in the Final Memorandum,
carrying out certain specified procedures, inquiries of certain
officials of the Company who have responsibility for financial and
accounting matters, and proving the arithmetic accuracy of the
application of the pro forma adjustments to the historical amounts
in the pro forma financial statements, nothing came to their
attention which caused them to believe that the pro forma
adjustments have not been properly applied to the historical amounts
in the compilation of such statements.
All references in this Section 6(h) to the Final Memorandum shall be
deemed to include any amendment or supplement thereto at the date of the letter.
(i) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Final Memorandum, there shall not have
been (i) any change or decrease specified in the letter or letters
referred to in paragraph (h) of this Section 6 or (ii) any change, or any
development involving a prospective change, in or affecting the business
or properties of the Company and its subsidiaries the effect of which, in
any case referred to in clause (i) or (ii) above, is, in the judgment of
the Purchasers, so material and adverse as to make it impractical or
inadvisable to market the Securities as contemplated by the Final
Memorandum.
(j) On or prior to the Closing Date, the Registration Agreement
shall have been executed substantially in the form hereto delivered to you
and shall have been delivered to you and the Trustee.
(k) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of the Securities or any of the Company's other
debt securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Securities
Act) or any notice given of any intended or potential decrease in any such
rating or that such organization has under surveillance or review (other
than any such notice with positive implications of a possible upgrading)
its rating of the Securities or any of the Company's other debt
securities.
(l) The Third Amendment dated as of November 25, 1997 to the Loan
Agreement dated as of April 14, 1997, among the Company, the Guarantors,
BankBoston, N.A. and
<PAGE> 23
23
the Banks party thereto shall be in full force and effect on the Closing
Date.
(m) Prior to the Closing Date, the Company and the Guarantors shall
have furnished to the Purchasers such further information, certificates
and documents as the Purchasers may reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as provided in this Agreement, or if any of the opinions
and certificates mentioned above or elsewhere in this Agreement shall not be
reasonably satisfactory in form and substance to the Purchasers and Cravath,
Swaine & Moore, this Agreement and all obligations of the Purchasers hereunder
may be canceled at, or at any time prior to, the Closing Date by the Purchasers.
Notice of such cancelation shall be given to the Company in writing or by
telephone or telegraph confirmed in writing.
The documents required to be delivered by this Section 6 will be
delivered at the office of Cravath, Swaine & Moore, 825 Eighth Avenue, New York,
New York, on the
Closing Date.
7. Reimbursement of Expenses. If the sale of the Securities provided
for herein is not consummated because any condition to the obligations of the
Purchasers set forth in Section 6 hereof is not satisfied or because of any
refusal, inability or failure on the part of the Company or any Guarantor to
perform any agreement herein or comply with any provision hereof, in each case
other than by reason of a default by any of the Purchasers, the Company and the
Guarantors jointly and severally will reimburse the Purchasers upon demand for
all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by them in connection with the proposed
purchase and sale of the Securities.
8. Indemnification and Contribution. (a) The Company and the
Guarantors jointly and severally agree to indemnify and hold harmless each
Purchaser, each director, officer, employee and agent of any Purchaser and each
other person, if any, who controls any Purchaser within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Securities Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue
<PAGE> 24
24
statement or alleged untrue statement of a material fact contained in the
Preliminary Memorandum, the Final Memorandum or any information provided by the
Company to any holder or prospective purchaser of Securities pursuant to Section
5(i), or in any amendments thereof or supplements thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that neither the Company nor any Guarantor will be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon any such untrue statement or alleged untrue statement or omission or
alleged omission made in the Preliminary Memorandum or the Final Memorandum, or
in any amendment thereof or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Purchasers specifically for inclusion therein, it being understood that the
only such information is that described in Section 8(b); provided further,
however, that the indemnity agreement contained in this Section 8(a) shall not
inure to the benefit of any indemnified party to the extent that it is
determined by a final, non-appealable judgment that (i) the Preliminary
Memorandum contained an untrue statement of a material fact or omitted to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, (ii) the sale to the person asserting any such losses, claims,
damages or liabilities was an initial resale of the Securities by any Purchaser,
(iii) any such loss, claim, damage or liability of such indemnified party
results from the fact that there was not sent or given to such person, at or
prior to the written confirmation of the sale of such Securities to such person,
a copy of any revised Preliminary Memorandum, the Final Memorandum or the Final
Memorandum as amended or supplemented, and the Company had previously furnished
copies thereof to such Purchaser and (iv) the revised Preliminary Memorandum,
the Final Memorandum or the Final Memorandum as amended or supplemented
corrected such untrue statement or omission. This indemnity agreement will be in
addition to any liability that the Company or the Guarantors may otherwise have.
(b) Each Purchaser, severally and not jointly, agrees to indemnify
and hold harmless each of the Company and the Guarantors, their respective
directors and officers,
<PAGE> 25
25
and each other person, if any, who controls the Company or any Guarantor within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, to the same extent as the foregoing indemnity from the Company and
the Guarantors to the Purchasers, but only with reference to written information
relating to the Purchasers furnished to the Company by or on behalf of the
Purchasers specifically for inclusion in the Preliminary Memorandum or the Final
Memorandum (or in any amendment thereof or supplement thereto). This indemnity
agreement will be in addition to any liability which the Purchasers may
otherwise have. The Company and the Guarantors acknowledge that the statements
set forth in the last paragraph of the cover page and under the heading "Plan of
Distribution" in the Preliminary Memorandum and the Final Memorandum (or in any
amendment thereof or supplement thereto) constitute the only information
furnished in writing by or on behalf of the Purchasers for inclusion in the
Preliminary Memorandum or the Final Memorandum (or in any amendment thereof or
supplement thereto).
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint as counsel one firm of attorneys of the indemnifying party's choice
at the indemnifying party's expense which counsel, together with one local
counsel in each applicable jurisdiction, shall act on behalf of all the
indemnified parties in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the fees, costs and expenses of such separate counsel, if (i) the use of
counsel chosen by the
<PAGE> 26
26
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such action or
(iv) the indemnifying party shall authorize the indemnified party to employ
separate counsel at the expense of the indemnifying party. An indemnifying party
will not, without the prior written consent of the indemnified parties, settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Guarantors on the one hand
and the Purchasers on the other hand agree to contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company and the Guarantors or the
Purchasers, as applicable, may be subject in such proportion as is appropriate
to reflect the relative benefits received by the Company and the
Guarantors or
the Purchasers, as applicable, from the offering of the Securities; provided,
however, that in no case shall any Purchaser be responsible for any amount in
excess of the purchase discount or commission applicable to the Securities
purchased by such Purchaser hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Company and
the Guarantors on the one hand and the Purchasers on the other hand shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and the Guarantors
or the Purchasers, as applicable, in connection with the statements or omissions
which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company and the
<PAGE> 27
27
Guarantors shall be deemed to be equal to the total net proceeds from the
offering of the Securities (before deducting expenses), and benefits received by
the Purchasers shall be deemed to be equal to the total purchase discounts and
commissions, in each case as set forth on the cover page of the Final
Memorandum. Relative fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information provided by the
Company or the Guarantors on the one hand and the Purchasers on the other hand.
The Company, the Guarantors and the Purchasers agree that it would not be just
and equitable if contribution were determined by pro rata allocation or any
other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who controls a
Purchaser within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act and each director, officer, employee and agent of a
Purchaser shall have the same rights to contribution as such Purchaser, and each
person who controls the Company or any Guarantor within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act and each officer and
director of the Company or any Guarantor shall have the same rights to
contribution as the Company and the Guarantors, subject in each case to the
applicable terms and conditions of this paragraph (d).
9. Default by a Purchaser. If any one of the Purchasers shall fail
to purchase and pay for any of the Securities agreed to be purchased by such
Purchaser hereunder and such failure to purchase shall constitute a default in
the performance of its obligations under this Agreement, the remaining Purchaser
shall be obligated to take up and pay for the Securities that the defaulting
Purchaser agreed but failed to purchase; provided, however, that in the event
that the aggregate principal amount of Securities that the defaulting Purchaser
agreed but failed to purchase shall exceed 10% of the aggregate principal amount
of Securities set forth in Schedule I hereto, the remaining Purchaser shall have
the right to purchase all, but shall not be under any obligation to purchase
any, of the Securities, and if such non-defaulting Purchaser does not purchase
all the Securities, this Agreement will terminate without liability to such
non-defaulting Purchaser, the Company or any Guarantor. In the event of a
default by any Purchaser as set forth in this Section 9, the Closing Date shall
be postponed for such period, not exceeding seven days, as the Purchasers shall
determine in
<PAGE> 28
28
order that the required changes in the Final Memorandum or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Purchaser of its liability, if any, to the Company,
any Guarantor or any non-defaulting Purchaser for damages occasioned by its
default hereunder.
10. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Purchasers, by notice given to the Company prior
to delivery of and payment for the Securities, if prior to such time (i) trading
in securities generally on the New York Stock Exchange shall have been suspended
or limited or minimum prices shall have been established on such Exchange, (ii)
a banking moratorium shall have been declared either by Federal or New York
State authorities or (iii) there shall have occurred any outbreak or escalation
of hostilities, declaration by the United States of a national emergency or war
or other calamity or crisis the effect of which on financial markets is such as
to make it, in the judgment of the Purchasers, impracticable or inadvisable to
proceed with the offering or delivery of the Securities as contemplated by the
Final Memorandum.
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company, the Guarantors or their respective officers and of the Purchasers set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of the Purchasers,
the Company or the Guarantors or any of the officers, directors or controlling
persons referred to in Section 8 hereof, and will survive delivery of and
payment for the Securities. The provisions of Sections 7 and 8 hereof shall
survive the termination or cancelation of this Agreement.
12. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Purchasers, will be mailed,
delivered or telegraphed and confirmed to them, care of Salomon Brothers Inc, at
Seven World Trade Center, New York, New York, 10048; or, if sent to the Company,
will be mailed, delivered or telegraphed and confirmed to it at 6 East 43rd
Street, 12th Floor, New York, New York 10017, Fax: (212) 687-9621, Attention:
Secretary.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and,
except as expressly set forth in Section 5(i) hereof, no other person will have
any right or obligation hereunder.
<PAGE> 29
29
14. APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE
CONFLICT OF LAW PROVISIONS THEREOF).
15. Business Day. For purposes of this Agreement, "business day"
means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on
which banking institutions in The City of New York, New York are authorized or
obligated by law, executive order or regulation to close.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this Agreement and your
<PAGE> 30
30
acceptance shall represent a binding agreement among the Company, the Guarantors
and the Purchasers.
Very truly yours,
METALLURG, INC.
By:
---------------------------------
Name:
Title:
SHIELDALLOY METALLURGICAL CORPORATION
By:
---------------------------------
Name:
Title:
METALLURG HOLDINGS CORPORATION
By:
---------------------------------
Name:
Title:
METALLURG SERVICES, INC.
By:
---------------------------------
Name:
Title:
MIR (CHINA), INC.
By:
---------------------------------
Name:
Title:
The foregoing Agreement is hereby
<PAGE> 31
31
confirmed and accepted as of the
date first above written.
SALOMON BROTHERS INC
BANCBOSTON SECURITIES INC.
By: SALOMON BROTHERS INC
By:
-----------------------
Name:
Title:
For themselves and the other
Purchasers named in
Schedule I to the foregoing Agreement
<PAGE> 32
32
SCHEDULE I
Principal
Amount of
Securities to
Purchasers be Purchased
- ---------- -------------
Salomon Brothers Inc ......................... $ 50,000,000
BancBoston Securities Inc. ................... 50,000,000
------------
Total ...................... $100,000,000
<PAGE> 33
1
EXHIBIT A
Selling Restrictions for Offers and
Sales outside the United States
(1)(a) The Securities have not been and will not be registered under
the Securities Act and may not be offered or sold within the United States or
to, or for the account or benefit of, U.S. persons except in accordance with
Regulation S under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act. Each Purchaser represents and
agrees that, except as otherwise permitted by Section 4(a)(i) of the Agreement
to which this is an exhibit, it has offered and sold the Securities, and will
offer and sell the Securities, (i) as part of their distribution at any time and
(ii) otherwise until 40 days after the later of the commencement of the offering
and the Closing Date, only in accordance with Rule 903 of Regulation S under the
Securities Act. Accordingly, each Purchaser represents and agrees that neither
it, nor any of its affiliates nor any person acting on its or their behalf has
engaged or will engage in any directed selling efforts with respect to the
Securities, and that it and they have complied and will comply with the offering
restrictions requirement of Regulation S. Each Purchaser agrees that, at or
prior to the confirmation of sale of Securities (other than a sale of Securities
pursuant to Section 4(a)(i) of the Agreement to which this is an exhibit), it
shall have sent to each distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases Securities from it during
the restricted period a confirmation or notice to substantially the following
effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be offered
or sold within the United States or to, or for the account or benefit of,
U.S. persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of the
offering and November 25, 1997, except in either case in accordance with
Regulation S or Rule 144A under the Securities Act. Terms used above have
the meanings given to them by Regulation S.
<PAGE> 34
2
(b) Each Purchaser also represents and agrees that it has not
entered and will not enter into any contractual arrangement with any distributor
with respect to the distribution of the Securities, except with its affiliates
or with the prior written consent of the Company.
(c) Terms used in this section have the meanings given to them by
Regulation S.
(2) Each Purchaser represents and agrees that (i) it has not offered
or sold, and will not offer or sell, in the United Kingdom, by means of any
document, any Securities other than to persons whose ordinary business it is to
buy or sell shares or debentures, whether as principal or as agent (except in
circumstances which do not constitute an offer to the public within the meaning
of the Companies Act 1985 of Great Britain), (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of the
United Kingdom with respect to anything done by it in relation to the Securities
in, from or otherwise involving the United Kingdom, and (iii) it has only issued
or passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Securities to a person who is
of a kind described in Article 9(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1988 or is a person to whom the
document may otherwise lawfully be issued or passed on.
<PAGE> 1
Exhibit 3.3
CERTIFICATE OF INCORPORATION
OF
SHIELDALLOY METALLURGICAL CORPORATION
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 Shieldalloy Metallurgical
Corporation.
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 3,000, 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 incorporator 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> 2
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.
(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
2
<PAGE> 3
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
<PAGE> 1
Exhibit 3.4
BY-LAWS
OF
SHIELDALLOY METALLURGICAL CORPORATION
(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
<PAGE> 2
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 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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<PAGE> 3
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. 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
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<PAGE> 4
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 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.
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Members of special or standing committees may be allowed like compensation for
attending committee meetings.
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
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<PAGE> 6
President's absence or inability to act any Vice-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
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<PAGE> 7
of the Board of Directors. Except as otherwise provided by law, the presence of
a majority of the then appointed members of a 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
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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 assistant officer assists as such officer or the
Board of Directors shall from time to time prescribe.
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<PAGE> 9
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 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
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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 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
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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 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
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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 execution, 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.
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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.
ARTICLE XII
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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.
ARTICLE XIII
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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.
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Exhibit 3.5
CERTIFICATE OF INCORPORATION
of
METALLURG HOLDINGS CORPORATION
THIS IS TO CERTIFY that the undersigned incorporator hereby constitutes
and forms a corporation under and by virtue of the provisions of the New Jersey
Business Corporation Act.
FIRST: The name of the corporation is:
METALLURG HOLDINGS CORPORATION
SECOND: The address of the corporation's initial registered office is One
Centennial Square, Haddonfield, New Jersey 08033, and name of the corporation's
initial registered agent at such address is AGH&R Service Company.
THIRD: This corporation is formed for the purpose of engaging in any
activity within the purposes for which corporations may be organized under the
New Jersey Business Corporation Act.
FOURTH: The aggregate number of shares which the corporation shall have
the authority to issue is Twenty-five hundred (2500) shares of common stock with
no nominal or par value per share.
FIFTH: The number of directors constituting the initial Board of Directors
of the corporation shall be three (3) and their names and addresses are:
<PAGE> 2
Name Address
---- -------
Michael A. Standen c/o Shieldalloy Metallurgical Corporation
West Boulevard
P.O. Box 768
Newfield, New Jersey 08344
Barry C. Nuss c/o Shieldalloy Metallurgical Corporation
West Boulevard
P.O. Box 768
Newfield, New Jersey 08344
Eric L. Schondorf c/o Shieldalloy Metallurgical Corporation
West Boulevard
P.0. Box 768
Newfield, New Jersey 08344
SIXTH: The incorporator's name and address are Deborah A. Hays, One
Centennial Square, Haddonfield, New Jersey 08033.
SEVENTH: (a) A Director of the corporation shall not be personally liable
to the corporation or its shareholders for damages or breach of any duty owed to
the corporation or its shareholders, except for breaches of duty based upon an
act or omission (i) in breach of the Director's duty of loyalty to the
corporation or its shareholders, (ii) not in good faith or involving a knowing
violation of law, or (iii) resulting in receipt by the Director of an improper
personal benefit. Any repeal or modification of this Article SEVENTH shall not
adversely affect any right or protection of a Director of the corporation
existing at the time of such repeal or modification. The liability of a Director
of the corporation shall be further eliminated or limited to the fullest extent
allowable under New Jersey law, as it may in the future be amended.
(b) To the extent permitted by applicable New Jersey law, an Officer of
the corporation shall not be personally liable to the corporation or its
shareholders for damages for breach of any duty owed to the corporation or its
shareholders, except for breaches of duty based upon an act or omission (i) in
breach of the Officer's duty of loyalty to the corporation
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or its shareholders, (ii) not in good faith or involving a knowing violation of
law, or (iii) resulting in receipt by the Officer of an improper personal
benefit. Any repeal or modification of this Article SEVENTH shall not adversely
affect any right or protection of an Officer of the corporation existing at the
time of such repeal or modification. The liability of an Officer of the
corporation shall be further eliminated or limited to the fullest extent
allowable under New Jersey law, as it may in the future be amended.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 3rd
day of March, 1997.
/S/ DEBORAH A. HAYS
----------------------------
DEBORAH A. HAYS, ESQUIRE
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CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION OF
METALLURG HOLDINGS CORPORATION
To: The Secretary of State
State of New Jersey
Pursuant to the provisions of Sections 14A:9-1 and 14:9-4 of the New Jersey
Business Corporation Act, the undersigned corporation executes the following
Certificate of Amendment to its Certificate of Incorporation, as follows:
1. The name of the corporation is Metallurg Holdings Corporation.
2. An amendment to the corporation's Certificate of Incorporation
was duly adopted by the board of directors and sole shareholder of the
corporation to add a paragraph EIGHT to the corporation's Certificate of
Incorporation to read in it entirety as follows:
"EIGHTH: Neither the corporation, nor any foreign entity owned by
the corporation whose stock is pledged, either in whole or in part,
to a third party, shall be dissolved or liquidated, or merged into
the corporation or another entity, without the consent of at least
66 2/3% of the holders of all of the then outstanding shares of the
common stock of the corporation."
3. The amendment was adopted by all of the directors and the sole
shareholder of the corporation on April 9, 1997.
4. The number of shares entitled to vote on the amendment at the
time of the adoption thereof was 100. The number of shares voted in favor
of the amendment was 100. The number of shares voted against the amendment
was 0.
5. This Certificate of Amendment shall be effective upon filing.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this 9th day of April, 1997.
METALLURG HOLDINGS CORPORATION
BY:/S/ ERIC L. SCHONDORF
-------------------------------
ERIC L. SCHONDORF, Vice President
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Exhibit 3.6
BY-LAWS
ARTICLE I - OFFICES
Section 1. The registered office of the Corporation shall be at One
Centennial Square, Haddonfield, New Jersey 08033, or at such other place or
places as may from time to time be selected by the Board of Directors.
Section 2. The Corporation may have such other offices either within or
without the state as the Board of Directors may designate or as the business of
the Corporation may require from time to time.
ARTICLE II - SEAL
Section 1. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its creation and the words "Corporate Seal, New
Jersey".
ARTICLE III - SHAREHOLDERS' MEETINGS
Section 1. All meetings of the shareholders shall be held at the
registered office of the Corporation or at such other place or places, either
within or without the State of New Jersey, as may from time to time be selected
by the Board of Directors.
Section 2. Annual Meetings: The annual meeting of shareholders, after the
year 1997 shall be held on the second Tuesday of May in each year if not a legal
holiday, and if a legal holiday, then on the next full business day following,
at 10:00 o'clock a.m., or on such other day as may be fixed by the Board, when
the shareholders shall elect, by a plurality vote, a Board of Directors, and
transact such other business as may properly be brought before the meeting.
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If the annual meeting for election of directors is not held on the day
designated therefor, the directors shall cause the meeting to be held as soon
thereafter as convenient.
Section 3. Special Meetings: Special meetings of the shareholders may be
called by the President or the Board of Directors, and shall be called at the
request in writing to the President by the holder or holders of not less than
ten percent of all the shares entitled to vote at a meeting.
Section 4. Notice of Shareholders' Meetings: Written notice of the time,
place and purpose or purposes of every meeting of shareholders shall be given
not less than ten or more than sixty days before the date of the meeting, either
personally or by mail, to each shareholder of record entitled to vote at the
meeting, unless a greater period of notice is required by statute in a
particular case.
When a meeting is adjourned to another time or place, it shall not be
necessary to give notice of the adjourned meeting if the time and place to which
the meeting is adjourned are announced at the meeting at which the adjournment
is taken and at the adjourned meeting only such business is transacted as might
have been transacted at the original meeting. However, if after the adjournment
the Board fixes a new record date for the adjourned meeting, a notice the
adjourned meeting shall be given to each shareholder of record on the new record
date entitled to notice.
Section 5. Waiver of Notice: Notice of a meeting need not be given to any
shareholder who signs a waiver of such notice, in person or by proxy, whether
before or after the meeting. The attendance of any shareholder at a meeting, in
person or by proxy, without protesting prior to the conclusion of the meeting
the lack of notice of such meeting, shall constitute a waiver of notice by him.
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Whenever shareholders are authorized to take any action after the lapse of
a prescribed period of time, the action may be taken without such lapse if such
requirement is waived in writing, in person, or by proxy, before or after the
taking of such action, by every shareholder entitled to vote thereon as of the
date of the taking of such action.
Section 6. Action by Shareholders Without Meeting:
(1) Any action required or permitted to be taken at a meeting of
shareholders by statute, or the Certificate of Incorporation, or By-Laws of the
Corporation, may be taken without a meeting if all the shareholders entitled to
vote thereon consent thereto in writing, except that in the case of any action
to be taken pursuant to Chapter 10 of the New Jersey Business Corporation Act
(the "Act") (concerning mergers, etc.), such action may be taken without a
meeting only if all shareholders entitled to vote consent thereto in writing and
the Corporation provides to all other shareholders the advance notification
required by paragraph (2)(b) of this section.
(2) Except as otherwise provided in the Certificate of Incorporation
and subject to the provisions of this subsection, any action required or
permitted to be taken at a meeting of shareholders by the Act, the Certificate
of Incorporation, or By-Laws, other than the annual election of directors, may
be taken without a meeting upon written consent of shareholders who would have
been entitled to cast the minimum number of votes which would be necessary to
authorize such action at a meeting at which all shareholders entitled to vote
thereon were present and voting.
(a) If any shareholder shall have the right to dissent from a
proposed action, pursuant to Chapter 11 of the Act, the Board shall fix a date
on which written consents are to be tabulated; in any other case, it may fix a
date for tabulation. If no date is fixed,
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consents may be tabulated us they are received. No consent shall be counted
which is received more than sixty days after the date of the Board action
authorizing the solicitation of consents or, in a case in which consents, or
proxies for consents, are solicited from all shareholders who would have been
entitled to vote at a meeting called to take such action, more than sixty days
after the date of mailing of solicitation of consents, or proxies for consents.
(b) Except as provided in paragraph (2)(c), the Corporation,
upon receipt and tabulation of the requisite number of written consents, shall
promptly notify all nonconsenting shareholders, who would have been entitled to
notice of a meeting to vote upon such action, of the action consented to, the
proposed effective date of such action, and any condition precedent to such
action. Such notification shall be given at least twenty days in advance of the
proposed effective date of such action in the case of any action taken pursuant
to Chapter 10 of the Act, and at least ten days in advance in the case of any
other action.
(c) The Corporation need not provide the notification required
to be given by paragraph (2)(b) if it
(i) solicits written consents or proxies for consents from
all shareholders who would have been entitled to vote at a meeting
called to take the specified action, and at the same time gives
notice of the proposed action to all other shareholders who would
have been entitled to notice of a meeting called to vote upon such
action;
(ii) advises all shareholders, if any, who are entitled to
dissent from the proposed action, as provided in Chapter 11 of the
Act, of their right to do so and to be paid the fair value of their
shares; and
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(iii) fixes a date for tabulation of consents not less than
twenty days, in the case of any proposed action to be taken pursuant
to Chapter 10 of the Act, or not less than ten days in the case of
any other proposed action, and not more than sixty days after the
date of mailing of solicitation of consents or proxies for consents.
(d) Any consent obtained pursuant to paragraph (2)(c) may he
revoked at any time prior to the day fixed for tabulation of consents. Any other
consent may be revoked at any time prior to the day on which the proposed action
could be taken upon compliance with paragraph (2)(b). The revocation must be in
writing and be received by the Corporation.
(3) Whenever action is taken pursuant to subsection (1) or (2), the
written consents of the shareholders consenting hereto or the written report of
inspectors appointed to tabulate such consents shall be filed with the minutes
or proceedings of shareholders.
In case the Corporation is involved in a merger, consolidation or other
type of acquisition or disposition regulated by Chapters 10 and 11 of the Act,
the pertinent provisions of the statute should be referred to and strictly
complied with.
Section 7. Fixing Record Date:
(1) The Board may fix, in advance, a date as the record date for
determining the Corporation's shareholders with regard to any corporate action
or event and, in particular, for determining the shareholders who are entitled
to
(a) notice of or to vote at any meeting of shareholders or any
adjournment thereof;
(b) give a written consent to any action without a meeting; or
(c) receive payment of any dividend or allotment of any right.
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The record date may in no case be more than sixty days prior to the
shareholders' meeting or other corporate action or event to which it relates.
The record date for a shareholders' meeting may not be less than ten days before
the date of the meeting. The record date to determine shareholders to give a
written consent may not be more than sixty days before the date fixed for
tabulation of the consent or, if no date has been fixed for tabulation more than
sixty days before the last day on which consents received may be counted.
(2) If no record date is fixed,
(a) the record date for a shareholders' meeting shall be the
close of business on the day next proceeding the day on which notice
is given, or, if no notice is given, the day next preceding the day
on which the meeting is held; and
(b) the record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the
resolution of the Board relating thereto is adopted. (3) When a
determination of shareholders of record for a shareholders'
meeting has been made as provided in this section, such determination shall
apply to any adjournment thereof, unless the Board fixes a new record date under
this section for the adjourned meeting.
Section 8. Voting Lists: The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make a complete list of
shareholders entitled to vote at a shareholders' meeting or any adjournment
thereof. A list required by this section may consist of cards arranged
alphabetically or a list maintained on any equipment which permits the visual
display of such information. Such list shall be arranged (a) alphabetically
within each class, series or group of shareholders maintained by the Corporation
for convenience of
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reference, with the address of and the number of shares held by, each
shareholder; (b) be produced at the time and place of the meeting; (c) be
subject to the inspection of any shareholder for reasonable periods during the
meeting; (d) and be prima facie evidence as to who are the shareholders entitled
to examine such list or to vote at any meeting.
If the requirements of this section have not been complied with, the
meeting shall, on demand of any shareholder in person or by proxy, be adjourned
until the requirements are complied with. Failure to comply with the
requirements of this section shall not affect the validity of any action taken
at such meeting prior to the making of any such demand.
Section 9. Quorum: Unless otherwise provided in the Certificate of
Incorporation or by statute, the holders of shares entitled to cast a majority
of the votes at a meeting shall constitute a quorum at such meeting. The
shareholders present in person or by proxy at a duly called meeting may
continued to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum.
Whenever the holders of any class or series of shares are entitled to vote
separately on a specified item of business, the provisions of this section shall
apply in determining the presence of a quorum of such class or series for the
transaction of such specified item of business.
Section 10. Voting: Each holder of shares with voting rights shall be
entitled to one vote for each such share registered in his name, except as
otherwise provided in the Certificate of Incorporation. Whenever any action,
other than the election of directors, is to be taken by vote of the
shareholders, it shall be authorized by a majority of the votes cast at a
meeting of shareholders by the holders of shares entitled to vote thereon,
unless a greater plurality is required by the Certificate of Incorporation.
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Every shareholder entitled to vote at a meeting of shareholders or to
express consent without a meeting may authorize another person or persons to act
for him by proxy. Every proxy shall be executed in writing by the shareholder or
his agent, except that a proxy may be given by a shareholder or his agent by
telegram or cable or by any means of electronic communication which results in a
writing. No proxy shall be valid for more than eleven months unless a longer
period is expressly provided therein. A proxy shall be revocable at will unless
the proxy states that it is irrevocable and is coupled with an interest either
in the stock itself or in the Corporation and, in particular and without
limitation, if it is held by a pledgee, a person who has purchased or agreed to
purchase the shares, a creditor who is given the proxy in consideration of the
extension of credit to the Corporation, a person who has agree to perform
services as an employee, or a person designated pursuant to the terms of an
agreement as to voting between two or more shareholders. An irrevocable proxy
becomes revocable when the interest which supports the proxy has terminated. The
grant of a later proxy revokes any earlier proxy unless the earlier proxy is
irrevocable. A proxy shall not be revoked by the death or incapacity of the
shareholder, but the proxy shall continue to be in force until revoked by the
personal representative or guardian of the shareholder. The presence at any
meeting of any shareholder who has given a proxy does not revoke the proxy
unless the shareholder files written notice of the revocation with the secretary
of the meeting prior to the voting of the proxy or votes the shares subject to
the proxy by written ballot.
Section 11. Elections of Directors: At each election of directors every
shareholder entitled to vote at such election shall have the right to vote the
number of shares owned by him for as many persons as there are directors to be
elected and for whose election he has a right
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to vote. Directors shall be elected by a plurality of the votes cast at the
election, except as otherwise provided by the Certificate of Incorporation.
Elections of directors need not be by written ballot unless a shareholder
demands election by ballot at the election and before voting begins.
Section 12. Inspectors of Election: The Board may, in advance of any
shareholders' meeting, or the tabulation of written consents of the shareholders
without a meeting, appoint one or more inspectors to act at the meeting or any
adjournment thereof or to tabulate such consents and make a writing thereof. If
inspectors to act at any meeting of shareholders are not so appointed or shall
fail to qualify, the person presiding at a shareholders' meeting may, and on the
request of any shareholder entitled to vote thereat, shall, make such
appointment.
Each inspector, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his ability. No person shall be
elected a director in an election for which he has served as an inspector.
ARTICLE IV - DIRECTORS
Section 1. The business and affairs of this Corporation shall be managed
by or under the direction of its Board of Directors, not less than three (3) in
number. The exact number of directors constituting the Board of Directors shall
be fixed from time to time by the Board of Directors. Vacancies in the Board of
Directors shall be filled by the directors then in office. A director shall be
at least eighteen years of age and need not be a United States citizen or a
resident of this state or a shareholder in this corporation. The Directors named
in the Certificate of Incorporation shall hold office until the first annual
meeting of shareholders, and until their
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successors shall have been elected and qualified. At the first annual meeting of
shareholders and at each annual meeting thereafter the shareholders shall elect
directors to hold office until the next succeeding annual meeting. Each director
shall hold office for the term of one year and until his successor shall have
been elected and qualified.
Section 2. First Meeting After Election: After the election of the
directors, the newly elected Board may meet at such place and time as shall be
fixed by the vote of the shareholders at the annual meeting, for the purpose of
organization and otherwise, and no notice of such meeting shall be necessary to
the newly elected directors in order to legally constitute the meeting; provided
a majority of the whole Board shall be present; or such place and time may be
fixed by the consent in writing of the directors.
Section 3. Regular Meetings: Regular meetings of the Board shall be held
without notice immediately following the annual meeting of shareholders at the
registered office of the Corporation, or at such other time and place as shall
be determined by the Board.
Section 4. Quorum: Each director shall have one vote at a meeting of the
Board or at meetings of Board committees unless the Certificate of Incorporation
provides the director is entitled to more than one vote pursuant to a provision
in the Certificate of Incorporation.
The participation of directors with a majority of the votes of the entire
Board, or of any committee thereof, shall constitute a quorum for the
transaction of business, unless the Certificate of Incorporation provides that a
greater or lesser proportion shall constitute a quorum, which in no case shall
be less than one-third of the entire Board or committee.
Any action approved by a majority of the votes of directors present at a
meeting at which a quorum is present shall be the act of the Board or of a
committee of the Board, unless the Act, or the Certificate of Incorporation,
requires a greater proportion, including a unanimous vote.
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Any action required or permitted to be taken pursuant to authorization
voted at a meeting of the Board or any committee thereof, may be taken without a
meeting if, prior or subsequent to such action, all members of the Board or of
such committee, as the case may be, consent thereto in writing and such written
consents are filed with the minutes of the proceedings of the Board or
committee.
Where appropriate communication facilities are reasonably available, any
or all directors shall have the right to participate in all or any part of a
meeting of the Board or committee of the Board by means of conference telephone
or any means of communication by which all persons participating in the meeting
are able to hear each other.
Section 5. Special Meetings: Special meetings of the Board may be called
by the President on two (2) days notice to each director, either personally or
by mail; special meetings may be called in a like manner and on like notice, on
the written request of any director.
Section 6. Waiver of Notice: Notice of any meeting need not be given to
any director who signs a waiver of notice, whether before or after the meeting.
The attendance of any director 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. Neither the business to be transacted at, nor the
purposes of, any meeting of the Board need be specified in the notice or waiver
of notice of such meeting. Notice of an adjourned meeting need not be given if
the time and place are fixed at the meeting adjourning and if the period of
adjournment does not exceed ten days in any one adjournment.
Section 7. Powers of Directors: The Board of Directors shall have the full
power of management of the business of the Corporation. In addition to the
powers and authorities by these By-Laws expressly conferred upon them, the Board
may exercise all such powers of the
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Corporation and do all such lawful acts and things as are not by statute or by
these By-Laws directed or required to be exercised or done by the shareholders.
Section 8. Compensation of Directors: The Board, by the affirmative vote
of a majority of directors in office and irrespective of any personal interest
of any of them, shall have authority to establish reasonable compensation of
directors for services to the Corporation as directors, officers or otherwise.
Section 9. Executive Committee: If deemed advisable, the Board of
Directors, by resolution adopted by a majority of the entire board, may appoint
from among its members an executive committee and one or more other committees,
each of which shall have one or more members. Each committee shall have and
exercise all the authority of the Board, except that no __________ committee
shall make, alter or repeal any By-Law of the corporation; elect or appoint any
__________ officer or director; submit to shareholders any action that requires
__________ or repeal any resolution theretofore adopted or repealable only
__________.
__________ any such committee shall be reported to the Board at its
__________ committee meeting; except that, when the meeting of the Board is held
within two days after the committee meeting, such report shall, if not made at
the first meeting, be made to the Board at its second meeting following such
committee meeting.
One or more or all directors of the Corporation may be removed for cause
or, unless otherwise provided in the Certificate of Incorporation, without cause
by the shareholders by the affirmative vote of the majority of the votes cast by
the holders of shares entitled to vote for the election of directors, except in
any case where cumulative voting is authorized, if less than the total number of
directors then serving on the Board is to be removed by the shareholders, no one
of the directors may be so removed if the votes cast against his removal would
be sufficient to
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elect him if then voted cumulatively at an election of the entire Board; or a
director elected by a class vote may be removed only by a class vote of the
holders of shares entitled to vote for his election; or if the Certificate of
Incorporation requires a greater vote than a plurality of the votes cast for the
election of directors, no director may be removed except by the greater vote
required to elect him and shareholders of a corporation whose Board of Directors
is classified as provided in 14A:6-4(l) shall not be entitled to remove
directors without cause.
ARTICLE V - OFFICERS
Section 1. The officers of the Corporation shall consist of a President, a
Secretary, a Treasurer, and, if desired, a Chairman of the Board, one or more
Vice Presidents, and such other officers as may be required. They shall be
annually elected by the Board of Directors and shall hold office for one year
and until successors are elected and have qualified, subject to earlier
termination by removal or resignation. The Board may also choose such employees
and agents as it shall deem necessary, who shall hold their offices for such
terms and shall have such authority and shall perform such duties as from time
to time shall be prescribed by the Board.
Any two or more offices may be held by the same person but no officer
shall execute, acknowledge, or verify any instrument in more than one capacity
if such instrument is required by law or by these By-Laws to be executed,
acknowledged, or verified by two or more officers.
Section 2. Salaries: The salaries of all officers, employees and agents of
the Corporation shall be fixed by the Board of Directors.
Section 3. Removal: Any officer elected by the Board of Directors may be
removed by the Board with or without cause. Any officer elected by the
shareholders may be removed,
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with or without cause, only by vote of the shareholders but his authority to act
as an officer may be suspended by the Board for cause.
Section 4. President: The President shall be the chief executive officer
of the Corporation; he shall preside at all meetings of shareholders and
directors; he shall have general and active management of the business of the
Corporation, shall see that all orders and resolutions of the Board are carried
into effect, subject, however, to the right of the directors to delegate any
specific powers, except such as may be by statute exclusively conferred on the
President, to any other officer or officers of the Corporation. He shall execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
Corporation. He shall be EX-OFFICIO a member of all committees, and shall have
the general powers and duties of supervision and management usually vested in
the office of a President of a Corporation.
Section 5. Vice President: The Vice President, if one has been appointed,
shall be vested with all the powers and be required to perform all duties of the
President in his absence.
Section 6. Chairman of the Board: The Chairman of the Board, if one has
been appointed, shall exercise such powers and perform such duties as shall be
provided in the resolution proposing that a Chairman of the Board be elected.
Section 7. Secretary: The Secretary shall keep full minutes of all
meetings of the shareholders and directors; he shall be EX-OFFICIO Secretary of
the Board of Directors; he shall attend all sessions of the Board, shall act as
clerk thereof, and record all votes and minutes of all proceedings in a book to
be kept for that purpose; and shall perform like duties for the standing
committees when required. He shall give or cause to be given, notice of all
meetings of the shareholders of the Corporation and the Board of Directors, and
shall perform such other
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duties as may be prescribed by the Board of Directors or the President, under
whose supervision he shall be.
Section 8. Treasurer: The Treasurer shall keep full and accurate accounts
of the receipts and disbursements in books belonging to the Corporation, and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation, in such depositories as may be designated by the
Board of Directors.
He shall disburse the funds of the Corporation as may be ordered by the
Board, taking proper vouchers for such disbursements, and shall render to the
President and directors, at regular meetings of the Board, or whenever they may
require it, an account of all transactions as Treasurer and of the financial
condition of the Corporation, and shall submit a full financial report at the
annual meeting of the shareholders.
ARTICLE VI - VACANCIES
Section 1. Directors: Any directorship not filled at the annual meeting,
any vacancy, however caused, occurring in the Board and newly created
directorships resulting from an increase in the authorized number of directors
may be filled by the affirmative vote of a majority of the remaining directors
even though less than a quorum of the Board, or by a sole remaining director. A
director so elected by the Board shall hold office until his successor shall
have been elected and qualified.
If by reason of death, resignation or other cause the Corporation has no
directors in office, any shareholder, or the executor or administrator of a
deceased shareholder, may call a special meeting of the shareholders for the
election of directors and over his own signature, shall give notice of said
meeting, except to the extent that such notice is waived.
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Section 2. Officers: Any vacancy occurring among the officers, however
caused, shall be filled by the Board of Directors.
Section 3. Resignations: Any director or other officer may resign by
written notice to the Corporation. The resignation shall be effective upon
receipt thereof by the Corporation or at such subsequent time as shall be
specified in the notice of resignation.
ARTICLE VII - SHARE CERTIFICATES
Section 1. The share certificates of the Corporation shall be numbered and
registered in the transfer records of the Corporation as they are issued. They
shall bear the corporate seal or a facsimile thereof, and be signed by the
President or any Vice President and the Secretary or any Assistant Secretary.
Section 2. Transfers: All transfers of the shares of the Corporation shall
be made upon the books of the Corporation by the holder of the shares in person,
or by his legal representative. Share certificates shall be surrendered and
canceled at the time of transfer.
Section 3. Loss of Certificates: In the event that a share certificate
shall be lost, destroyed or mutilated, a new certificate may be issued therefor
upon such terms and indemnity to the Corporation as the Board of Directors may
prescribe.
ARTICLE VIII - BOOKS AND ACCOUNTS
Section 1. The Corporation shall keep books and records of account and
minutes of the proceedings of the shareholders, Board of Directors and executive
committee, if any. Such books, records and minutes may be kept outside of this
state. The Corporation shall keep at its principal office, its registered
office, or at the office of a transfer agent, a record or records
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containing the names and addresses of all shareholders, the number, class, and
series of shares held by each and the dates when they respectively became 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 readable form
within a reasonable time. The Corporation shall convert into readable form
without charge any such records not in such form, upon the written request of
any person entitled to inspect them.
Section 2. Upon the written request of any shareholder, the Corporation
shall mail to such shareholder its balance sheet as at the end of the preceding
fiscal year, and its profit and loss and surplus statement for such fiscal year.
Section 3. Inspection: Any person who shall have been a shareholder of
record of the Corporation for at least six months immediately preceding his
demand, or any person holding, or so authorized in writing by the holders of, at
least five percent of the outstanding shares of any class or series, upon at
least five days written demand, shall have the right for any proper purpose to
examine in person or by agent or attorney, during usual business hours, the
minutes of the proceedings of the shareholders and the record of shareholders
and to make extracts therefrom at the places where the same are kept.
ARTICLE IX - MISCELLANEOUS PROVISIONS
Section 1. Monetary Disbursements: All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers as the
Board of Directors may from time to time designate.
Section 2. Dividends: The Board of Directors may declare and pay dividends
upon the outstanding shares of the Corporation from time to time and to such
extent as they deem
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advisable, in the manner and upon the terms and conditions provided by statute
and the Certificate of Incorporation.
Section 3. Reserve: Before payment of any dividend there may be set aside
such sum or sums as the directors, from time to time, in their absolute
discretion, think proper as a reserve fund to meet contingencies, or for the
equalizing of dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the directors shall think conducive to
the interests of the Corporation, and the directors may abolish any such reserve
in the manner in which it was created.
Section 4. Giving Notice: Whenever written notice is required to be given
to any person, it may be given by personal delivery to the person to whom it is
directed or by sending a copy thereof by mail or certified mail. If notice is
given by mail, the notice shall be deemed to be given when deposited in the mail
addressed to the person to whom it is directed at his last address as it appears
on the records of the Corporation, with postage prepaid thereon. Such notice
shall specify the place, day and hour of the meeting and, in the case of a
shareholders' meeting, the general nature of the business to be transacted. In
computing the period of time for the giving of any notice required or permitted
by statute, or by the Certificate of Incorporation or by these By-Laws or any
resolution of the Board of Directors or shareholders, the day on which the
notice is given shall be excluded, and the day on which the matter noticed is to
occur shall be included.
Section 5. Loans to Officers or Employees: The Corporation may lend money
to, or guarantee any obligation of, or otherwise assist, any officer or other
employee of the Corporation or of any subsidiary, whenever it may reasonably be
expected to benefit the Corporation. If the officer or employee is also a
director of the Corporation, such loan,
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guarantee or assistance, unless pursuant to a plan adopted by the shareholders
in accordance with the provisions of Chapter 8 of the act (Employee Benefit
Plans), shall be authorized by a majority of the entire Board of Directors. The
loan, guarantee or other assistance may be made with or without interest, and
may be unsecured, or secured in such manner as the Board shall approve,
including, without limitation, a pledge of shares of the corporation, and may be
made upon such other terms and conditions as the Board may determine.
Section 6. Disallowed Compensation: Any payments made to an officer or
employee of the Corporation such as a salary, commission, bonus, interest, rent,
travel or entertainment expense incurred by him, which is disallowed by the
Internal Revenue Service, shall be reimbursed by such officer or employee to the
Corporation to the full extent of such disallowance. It shall be the duty of the
directors, as a Board, to enforce payment of each such amount disallowed. In
lieu of payment by the officer or employee, subject to the determination of the
directors, proportionate amounts may be withheld from his future compensation
payments until the amount owed to the Corporation has been recovered.
ARTICLE X - INDEMNIFICATION
Section 1. Indemnification of Directors and Officers: To the full extent
permitted by the laws of the state of New Jersey, as they exist on the date
hereof or as they may hereafter be amended, the Corporation shall indemnify any
person who is or was a director, officer, employee or other agent of the
Corporation or of any constituent corporation absorbed by this Corporation in a
consolidation or merger and any person who is or was a director, officer,
trustee, employee or agent of any other enterprise serving as such at the
request of the Corporation, or of any such constituent corporation, or the legal
representative of any such
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director, officer, trustee, employee or agent, (an "Indemnitee") who was or is
involved in any manner (including without limitation, as a party or witness) in
any threatened, pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative, arbitrative, legislative or
investigative (including, without limitation, any action, suit or proceeding by
or in the right of the Corporation to procure a judgment in its favor) (a
"Proceeding"), or who is threatened with being so involved, by reason of the
fact that he or she was a director or officer of the Corporation or, while
serving as a director or officer of the Corporation, is or was at the request of
the Corporation also serving as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
(including, without limitation, any employee benefit plan), against all expenses
(including attorneys' fees), judgments, fines, penalties, excise taxes and
amounts paid in settlement and reasonably incurred by the Indemnitee in
connection with such Proceeding, provided that, there shall be no
indemnification hereunder with respect to any settlement or other nonadjudicated
disposition of any threatened or pending Proceeding unless the Corporation has
given its prior consent to such settlement or disposition. The right of
indemnification created by this Article shall be a contract right enforceable by
an Indemnitee against the Corporation, and it shall be exclusive of any other
rights to which an Indemnitee may otherwise be entitled. The provisions of this
Article shall inure to the benefit of the heirs and legal representatives of an
Indemnitee and shall be applicable to proceedings commenced or continuing after
the adoption of this Article, whether arising from acts or omissions occurring
before or after such adoption. No amendment, alteration, change or repeal of or
to these By-Laws shall deprive any Indemnitee of any rights under this Article
with respect to any act or omission of such Indemnitee occurring prior to such
amendment, alteration, change, addition or repeal.
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ARTICLE XI - RELIANCE ON CORPORATE RECORDS BY DIRECTORS
Section 1. Liability of Directors; Reliance on Corporate Records:
Directors and members of any committee designated by the Board shall discharge
their duties in good faith and with that degree of diligence, care and skill
which ordinarily prudent people would exercise under similar circumstances in
like positions. In discharging their duties, directors and members of any
committee designated by the Board shall not be liable if, acting in good faith,
they rely upon the opinion of counsel for the Corporation or upon written
reports setting forth financial data concerning the Corporation and prepared by
an independent public accountant or certified public accountant or firm of such
accountants or upon financial statements, books of account or reports of the
Corporation represented to them to be correct by the President, the officer of
the Corporation having charge of its books of account, or the person presiding
at a meeting of the Board, or upon written reports of committees of the Board.
ARTICLE XII - EMPLOYEE BENEFIT PLANS
Section 1. Employee benefit plans may be adopted, amended or terminated by
the Board, a committee of the Board, or officers to whom the responsibility has
been designated. Notwithstanding the foregoing, any plan for the issuance of
shares shall be initially adopted by the Board or any committee thereof.
ARTICLE XIII - AMENDMENTS
Section 1. The Board of Directors shall have the power to make, alter and
repeal these By-Laws, but By-Laws made by the Board may be altered or repealed,
and new By-Laws may be made, by the shareholders.
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Exhibit 3.7
CERTIFICATE OF INCORPORATION
OF
METALLURG SERVICES, INC.
Under Section 402 of the Business Corporation Law
The undersigned, being a natural person of at least 18 years of age
and acting as the incorporator of the corporation hereby being formed under the
Business Corporation Law, certifies that:
FIRST: The name of the corporation is METALLURG SERVICES, INC.
SECOND: The corporation is formed for the following purpose or
purposes:
To engage in any lawful act or activity for which corporations
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 office of the corporation is to be located in the City of
New York, County of New York, State of New York.
FOURTH: The aggregate number of shares which the corporation shall
have authority to issue is TWO HUNDRED (200), no par value per share and all of
which are of the same class.
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, NY 10016.
SIXTH: The duration of the corporation is to be perpetual.
SEVENTH: Any one or more members of the Board of Directors of the
corporation or of any committee thereof may
<PAGE> 2
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.
EIGHTH: Except as may otherwise be specifically provided in this
certificate of incorporation, no provision of this certificate of incorporation
is intended by the corporation to be construed as limiting, prohibiting,
denying, or abrogating any of the general or specific powers or rights conferred
under the Business Corporation Law upon the corporation, upon its shareholders,
bondholders, and security holders, and upon its directors, officers, and other
corporate personnel, including, in particular, the power of the corporation to
furnish indemnification to any person or persons in the capacities defined and
prescribed by the Business Corporation Law and the defined and prescribed rights
of said person or persons to indemnification as the same are conferred by the
Business Corporation Law.
NINTH: Section 1. The corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
including an action by or in the right of any other company of any type or kind,
domestic or foreign, or any partnership joint venture, trust, employee benefit
plan or other enterprise which any director or officer of the corporation served
in any capacity at the request of the corporation, by reason of the fact that
he, his testator or intestate, is or was a director or officer of the
corporation, or is or was serving such other company, partnership, joint
venture, trust, employee benefit plan or other enterprise in any capacity,
against judgments, fines, amounts paid in settlement and expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with such
action, suit or proceeding or any appeal therein, if he acted in good faith and
in a manner he reasonably believed to be in, or, in the case of service for any
other company or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the corporation, and,
with respect to any criminal action or proceeding, and no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding whether civil or criminal, by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not in or
of itself, create a presumption that the person did not act in good faith and in
a manner he reasonably believed to be in, or, in the case of service for any
other company or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the corporation, or had
reasonable cause to believe that his conduct was unlawful.
Section 2. The corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any
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<PAGE> 3
threatened, pending or completed action, suit or proceeding, or any appeal
therein, by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he, his testator or intestate, is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer of another company of any type or kind,
domestic or foreign, of any partnership, joint venture, trust, employee benefit
plan or other enterprise against amounts paid in settlement and expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action, suit or proceeding or
in connection with an appeal therein if he acted in good faith and in a manner
he reasonably believed to be in, or, in the case of service for any other
company or any partnership, joint venture, trust, employee benefit plan or other
enterprise, not opposed to, the best interests of the corporation, except that
no indemnification shall be made in respect of (1) a threatened action, or a
pending action which is settled or otherwise disposed of, or (2) any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation, unless and only to the extent that the court in which such
action, suit or proceeding was brought, or if no action, suit or proceeding was
brought, any court of competent jurisdiction shall determine upon application
that, despite the adjudication of liability and in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses and settlement amount which the court shall deem proper.
Section 3. To the extent that a director or officer has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1 and 2, or in defense of any claim, issue or
matter therein, he shall be entitled to indemnification as authorized in such
sections.
Section 4. Any indemnification under Section 1 and 2 (except as set
forth in Section 3 or unless ordered by a court) shall be made by the
corporation only as authorized in the specific case: (1) by the Board of
Directors by a majority vote of a quorum consisting of directors who are not
parties to such action, suit or proceeding upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in Sections 1
and 2, or (2) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, (a) by the Board upon the written
opinion of independent legal counsel that indemnification is proper in the
circumstances because the applicable standard of conduct set forth in Sections 1
and 2 has been met, or (b) by the shareholders upon a finding that the director
or officer has met the applicable standard of conduct set forth in Sections 1
and 2.
Section 5. Expenses incurred in defending a civil or criminal
action, suit or proceeding shall be paid by the corporation in advance of the
final disposition of such action,
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suit or proceeding as set forth in Section 4 or as ordered by a court in the
specific case, upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined as set forth
in Section 4 or as ordered by a court that he is not entitled to be indemnified
by the corporation as authorized in this Article or otherwise or where
indemnification is granted, to the extent the expenses so advanced by the
corporation or allowed by the court exceed the indemnification to which he is
entitled.
Section 6. The indemnification and advancement of expenses provided
by or granted pursuant to the other sections of this Article shall not be deemed
exclusive of any other rights to which a director or officer seeking
indemnification and advancement of expenses may be entitled under any agreement,
vote of stockholders or disinterested directors or otherwise, in connection with
any action, suit or proceeding, civil or criminal (including an action brought
by or on behalf of the corporation), by reason of the fact that he, his testator
or intestate, is or was a director or officer of the corporation, or is or was
serving at the request of the corporation as a director or officer of another
company, of any type or kind, domestic or foreign, or of any partnership, joint
venture, trust, employee benefit plan or other enterprise, 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 the 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.
Section 7. (A) The corporation shall have power to purchase and
maintain insurance:
(1) To indemnify the corporation for any obligation which it
incurs as a result of the indemnification of directors and officers
under the provisions of this article, and
(2) To indemnify directors and officers in instances in which
they may be indemnified by the corporation under the provisions of
this article, and
(3) To indemnify directors and officers in instances in which
they may not otherwise be indemnified by the corporation under the
provisions of this article provided the contract of insurance
covering such directors and officers provides, in a manner
acceptable to the superintendent of insurance, for a retention
amount and for co-insurance.
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<PAGE> 5
(B) No insurance under paragraph (A) may provide for any
payment, other than cost of defense, to or on behalf of any director or officer:
(1) if a judgment or other final adjudication adverse to the
insured director or officer establishes that his acts of active and
deliberate dishonesty 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, or
(2) in relation to any risk the insurance of which is
prohibited under the insurance law of this state.
Section 8. The personal liability of the directors of the Company is
hereby eliminated to the fullest extent permitted by the provisions of paragraph
(b) of Section 402 of the Business Corporation Law of the State of New York, as
the same may be amended and supplemented.
Subscribed and affirmed by me as true under the penalties of perjury
on November 20, 1987.
/S/ FRANCINE EIDELBERG
-----------------------------------------
Francine Eidelberg, INCORPORATOR
460 Park Avenue
New York, New York 10022
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<PAGE> 1
Exhibit 3.8
BY-LAWS
OF
METALLURG SERVICES, 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 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
<PAGE> 2
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 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 or 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 notice 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
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<PAGE> 3
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 the first annual meeting shall be
held on a date within thirteen months after the formation of the corporation,
and 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 meeting and special meeting 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.
- 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 business 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
the notice of any
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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
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. 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.
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<PAGE> 5
- 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, 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 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 shall constitute a
quorum at a meeting of shareholders for the transaction of any 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. 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.
7. SHAREHOLDER ACTION WITHOUT MEETINGS. 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
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<PAGE> 6
"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 or 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 first Board of Directors shall be elected
by the incorporator or incorporators and shall hold office until the first
annual meeting of shareholders and until their successors have been elected and
qualified. Thereafter, directors who are elected at an annual meeting of
shareholders, and directors who are elected in the interim by the shareholders
to fill vacancies and newly created directorships, shall hold office until the
next annual meeting of shareholders and until their successors have been elected
and qualified; and directors who are elected in the interim by the 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 elected and qualified. In
the interim between annual meetings of shareholders or of 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 meetings of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
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- 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.
- QUORUM AND ACTION. A majority of the entire Board shall constitute
a quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided such
majority shall constitute at least one-third of the entire Board. 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 Chairman of the Board, if any and if
present and acting, shall preside at all meetings. Otherwise, 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 an Executive Committee and other committees, each of
which, to the extent provided in the resolution designating it,
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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 ACTION. 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.
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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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 dates 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 from time to time, by the Board of Directors.
ARTICLE VIII
CONTROL OVER BY-LAWS
The shareholders entitled to vote in the election of directors or
the directors upon compliance with any statutory requisite may amend or repeal
the By-Laws and may adopt new ByLaws, except that the directors may not amend or
repeal any By-Law or adopt any new By-Law, the statutory control over which is
vested exclusively in the said shareholders or in the incorporators. ByLaws
adopted by the incorporators or directors may be amended or repealed by the said
shareholders.
* * * * * * * * * * * *
The undersigned incorporator certifies that he has examined the
foregoing By-Laws and has adopted the same as the first By-Laws of the
corporation; that said By-Laws contain specific and general provisions, which,
in order to be operative,
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must be adopted by the incorporator or incorporators or the shareholders
entitled to vote in the election of directors; and that he has adopted each of
said specific and general provisions in accordance with the requirements of the
Business Corporation Law.
Dated: November 25, 1987
By: /S/ FRANCINE EIDELBERG
-------------------------
Incorporator
(SEAL)
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<PAGE> 1
Exhibit 3.9
RESTATED CERTIFICATE OF INCORPORATION
OF
MIR (CHINA), INC.
It is hereby certified that:
1. (a) The present name of the corporation (hereinafter called the
"Corporation") is MIR (China), Inc.
(b) The name under which the Corporation was originally
incorporated is 211th Shelf Corporation, and the date of filing the original
certificate of incorporation of the Corporation with the Secretary of State of
the State of Delaware is December 30, 1994.
2. The certificate of incorporation of the Corporation is hereby
amended by striking out Articles One through and including Six thereof and by
substituting in lieu thereof new Articles FIRST through and including TENTH
which are set forth in the Restated Certificate of Incorporation hereinafter
provided for.
3. The provisions of the certificate of incorporation of the
Corporation as heretofore amended and/or supplemented, and as herein amended,
are hereby restated and integrated into the single instrument which is
hereinafter set forth, and which is entitled Restated Certificate of
Incorporation of MIR (China), Inc. without any further amendments other than the
amendments herein certified and without any discrepancy between the provisions
of the certificate of incorporation as heretofore amended and supplemented and
the provisions of the said single instrument hereinafter set forth.
4. The amendments and the restatement of the certificate of
incorporation herein certified have been duly adopted by the stockholders in
accordance with the provisions of Sections 228, 242, and 245 of the General
Corporation Law of the State of Delaware.
5. The certificate of incorporation of the Corporation, as amended
and restated herein, shall at the effective time of this Restated Certificate of
Incorporation, read as follows:
<PAGE> 2
"Restated Certificate of Incorporation
of
MIR (CHINA), INC.
FIRST: The name of the corporation (hereinafter called the
"Corporation") is MIR (China), Inc.
SECOND: The address, including street, number, city, and county, of
the registered office of the Corporation in the State of Delaware is Corporation
Trust Center, 1209 Orange Street, Wilmington, Delaware 19807, County of New
Castle; and 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 shall be to conduct any lawful
business, to promote any lawful purpose, and to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is one hundred (100) shares. The par
value of each of such shares is one cent ($.01). All such shares are of one
class and are shares of Common Stock.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
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<PAGE> 3
SEVENTH: For the management of the business and for the conduct of
the affairs of the Corporation, and in further definition, limitation and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of
the Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the By-Laws. The phrase "whole
Board" and the phrase "total number of directors" shall be deemed to have
the same meaning, to wit, the total number of directors which the
Corporation would have if there were no vacancies. No election of
directors need be by written ballot.
2. After the original or other By-Laws of the Corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of Section 109 of the General Corporation Law of the State of
Delaware, and, after the Corporation has received any payment for any of
its stock, the power to adopt, amend, or repeal the By-Laws of the
Corporation may be exercised by the Board of Directors of the Corporation;
provided, however, that any provision for the classification of directors
of the Corporation for staggered terms pursuant to the provisions of
subsection (d) of Section 141 of the General Corporation Law of the State
of Delaware shall be set forth in an initial By-Law adopted by the
stockholders entitled to vote of the Corporation unless provisions for
such classification shall be set forth in this certificate of
incorporation.
3. Whenever the Corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever
the Corporation shall be authorized to issue more than one class of stock,
no outstanding share of any class of stock which is denied voting power
under the provisions of the certificate of incorporation shall entitle the
holder thereof to the right to vote at any meeting of stockholders except
as the provisions of paragraph (c)(2) of Section 242 of the General
Corporation Law of the State of Delaware shall otherwise require;
provided, that no share of any such class which is otherwise denied voting
power shall entitle the holder thereof to vote upon the increase or
decrease in the number of authorized shares of said class.
EIGHTH: The personal liability of the directors of the Corporation
is hereby eliminated to the fullest extent permitted by the provisions of
paragraph (7) of subsection (b) of Section 102 of the General Corporation Law of
the State of Delaware, as the same may be amended and supplemented, or of any
successor statute.
NINTH: The Corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the General Corporation Law of the State of
Delaware, as the same day be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities, or other matters referred to
in or covered by said section, and the indemnification provided for herein
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shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any By-Law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has to be a director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
TENTH: From time to time any of the provisions of this certificate
of incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH."
Signed on April 25, 1996
/S/ ROBIN A. BRUMWELL
-------------------------
Robin A. Brumwell
President
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Exhibit 3.10
MIR (CHINA), INC.
* * * * *
B Y - L A W S
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Wilmington, State of Delaware, at such
place as may be fixed from time to time by the board of directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
<PAGE> 2
Section 2. Annual meetings of stockholders, commencing with the year
1995, shall be held on the Thursday following the second Tuesday in April if not
a legal holiday, and if a legal holiday, then on the next secular day following,
at 4:00 P.M., or at such other date and time as shall be designated from time to
time by the board of directors and stated in the notice of the meeting, at which
they shall elect by a plurality vote a board of directors, and transact such
other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten nor more than sixty days before the date of
the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten 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, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the
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meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by
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proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation,
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or any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be not less than one nor more than five. The first board shall
consist of three directors. Thereafter, within the limits above specified, the
number of directors shall be determined by resolution of the board of directors
or by the stockholders at the annual meeting. The directors shall be elected at
the annual meeting of the stockholders, except as provided in Section 2 of this
Article, and each director elected shall hold office until his successor is
elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and the
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directors so chosen shall hold office until the next annual election and until
their successors are duly elected and shall qualify, unless sooner displaced. If
there are no directors in office, then an election of directors may be held in
the manner provided by statute. If, at the time of filling any vacancy or any
newly created directorship, the directors then in office shall constitute less
than a majority of the whole board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.
Section 3. The business of the corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these by-laws directed or required
to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be
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fixed by the vote of the stockholders at the annual meeting and no notice of
such meeting shall be necessary to the newly elected directors in order legally
to constitute the meeting, provided a quorum shall be present. In the event of
the failure of the stockholders to fix the time or place of such first meeting
of the newly elected board of directors, or in the event such meeting is not
held at the time and place so fixed by the stockholders, the meeting may be held
at such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the board of directors, or as shall be
specified in a written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the
president on ten day's notice to each director, either personally or by mail or
by telegram; special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of two directors unless
the board consists of only one director; in which case special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of the sole director.
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by
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statute or by the certificate of incorporation. If a quorum shall not be present
at any meeting of the board of directors the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more
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directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.
Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, (except
that a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) fix any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation) adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the by-laws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock or to adopt a certificate of ownership and
merger. Such committee or committees shall have such
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name or names as may be determined from time to time by resolution adopted by
the board of directors.
Section 12. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The 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.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or by law, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
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ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
board of directors and shall be a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers. Any number of
offices may be
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held by the same person, unless the certificate of incorporation or these
by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a president, one or more
vice-presidents, a secretary and a treasurer.
Section 3. The board of directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
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Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other of officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of
13
<PAGE> 14
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 10. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the board of directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking
14
<PAGE> 15
proper vouchers for such disbursements, and shall render to the president and
the board of directors, at its regular meetings, or when the board of directors
so requires, an account of all his transactions as treasurer and of the
financial condition of the corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by a
certificate or shall be uncertificated.
15
<PAGE> 16
Certificates shall be signed by, or in the name of the corporation by, the
chairman or vice-chairman of the board of directors, or the president or a
vice-president, and by the treasurer or an assistant treasurer, or the secretary
or an assistant secretary of the corporation.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to Sections 151, 156, 202(a) or 218(a) or a statement
that the corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 2. Any of or all the signatures on a certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by
16
<PAGE> 17
the corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new certificate
or certificates or uncertificated shares, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent
of the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be cancelled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the corporation.
17
<PAGE> 18
FIXING RECORD DATE
Section 5. 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, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. 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.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the party of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
18
<PAGE> 19
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. 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 directors from time to time, in their absolute discretion, think 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 directors shall think conducive to the interests of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
19
<PAGE> 20
CHECKS
Section 4. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name
of the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 7. The corporation shall indemnify its officers, directors,
employees and agents to the extent permitted by the General Corporation Law of
Delaware.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board
20
<PAGE> 21
of directors by the certificate of incorporation at any regular meeting of the
stockholders or of the board of directors or at any special meeting of the
stockholders or of the board of directors if notice of such alteration,
amendment, repeal or adoption of new by-laws be contained in the notice of such
special meeting. If the power to adopt, amend or repeal by-laws is conferred
upon the board of directors by the certificate of incorporation it shall not
divest or limit the power of the stockholders to adopt, amend or repeal by-laws.
21
<PAGE> 1
EXHIBIT 4.1
1
EXECUTION COPY
================================================================================
METALLURG, INC.
11% Senior Notes due 2007
SHIELDALLOY METALLURGICAL CORPORATION
METALLURG HOLDINGS CORPORATION
METALLURG SERVICES, INC.
MIR (CHINA), INC.
Guarantors
<PAGE> 2
2
INDENTURE
Dated as of November 25, 1997
IBJ SCHRODER BANK & TRUST COMPANY
Trustee
================================================================================
<PAGE> 3
i
TABLE OF CONTENTS
Page
----
ARTICLE 1 Definitions and Incorporation by Reference
SECTION 1.01. Definitions 1
SECTION 1.02. Other Definitions 33
SECTION 1.03. Incorporation by Reference of
Trust Indenture Act 34
SECTION 1.04. Rules of Construction 35
ARTICLE 2 The Securities
SECTION 2.01. Amount of Securities 36
SECTION 2.02. Form and Dating 36
SECTION 2.03. Execution and Authentication 37
SECTION 2.04. Registrar and Paying Agent 38
SECTION 2.05. Paying Agent To Hold Money in Trust 39
SECTION 2.06. Securityholder Lists 39
SECTION 2.07. Replacement Securities 40
<PAGE> 4
ii
SECTION 2.08. Outstanding Securities 40
SECTION 2.09. Temporary Securities 41
SECTION 2.10. Cancelation 41
SECTION 2.11. Defaulted Interest 42
SECTION 2.12. CUSIP Numbers 42
SECTION 2.13. Transfer and Exchange of Interests in
Temporary Regulation S Notes 42
ARTICLE 3 Redemption
SECTION 3.01. Notices to Trustee 44
SECTION 3.02. Selection of Securities
To Be Redeemed 44
SECTION 3.03. Notice of Redemption 44
SECTION 3.04. Effect of Notice of Redemption 46
SECTION 3.05. Deposit of Redemption Price 46
SECTION 3.06. Securities Redeemed in Part 46
ARTICLE 4 Covenants
SECTION 4.01. Payment of Securities 47
<PAGE> 5
iii
SECTION 4.02. SEC Reports 47
SECTION 4.03. Limitation on Debt 47
SECTION 4.04. Limitation on Restricted Payments 48
SECTION 4.05. Limitation on Restrictions on
Distributions from Restricted
Subsidiaries 52
SECTION 4.06. Limitation on Asset Sales 53
SECTION 4.07. Limitation on Transactions with
Affiliates 57
SECTION 4.08. Change of Control 58
SECTION 4.09. Compliance Certificate 60
SECTION 4.10. Further Instruments and Acts 61
SECTION 4.11. Limitation on Liens 61
SECTION 4.12. Future Guarantors 61
SECTION 4.13. Limitation on Sale and Leaseback
Transactions 61
SECTION 4.14. Limitation on the Sale or Issuance of
Capital Stock of Restricted Subsidiaries 62
SECTION 4.15. Designation of Restricted and
Unrestricted Subsidiaries 62
ARTICLE 5 Successor Company
<PAGE> 6
iv
SECTION 5.01. When Company May Merge or
Transfer Assets 63
ARTICLE 6 Defaults and Remedies
SECTION 6.01. Events of Default 65
SECTION 6.02. Acceleration 68
SECTION 6.03. Other Remedies 68
SECTION 6.04. Waiver of Past Defaults 69
SECTION 6.05. Control by Majority 69
SECTION 6.06. Limitation on Suits 69
SECTION 6.07. Rights of Holders to Receive Payment 70
SECTION 6.08. Collection Suit by Trustee 70
SECTION 6.09. Trustee May File Proofs of Claim 70
SECTION 6.10. Priorities 71
SECTION 6.11. Undertaking for Costs 72
SECTION 6.12. Waiver of Stay or Extension Laws 72
ARTICLE 7 Trustee
SECTION 7.01. Duties of Trustee 72
<PAGE> 7
v
SECTION 7.02. Rights of Trustee 74
SECTION 7.03. Individual Rights of Trustee 75
SECTION 7.04. Trustee's Disclaimer 75
SECTION 7.05. Notice of Defaults 76
SECTION 7.06. Reports by Trustee to Holders 76
SECTION 7.07. Compensation and Indemnity 76
SECTION 7.08. Replacement of Trustee 77
SECTION 7.09. Successor Trustee by Merger 79
SECTION 7.10. Eligibility; Disqualification 79
SECTION 7.11. Preferential Collection of
Claims Against Company 80
ARTICLE 8 Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities;
Defeasance 80
SECTION 8.02. Conditions to Defeasance 81
SECTION 8.03. Application of Trust Money 83
SECTION 8.04. Repayment to Company 83
SECTION 8.05. Indemnity for U.S. Government
Obligations 84
SECTION 8.06. Reinstatement 84
<PAGE> 8
vi
ARTICLE 9 Amendments
SECTION 9.01. Without Consent of Holders 85
SECTION 9.02. With Consent of Holders 86
SECTION 9.03. Compliance with Trust Indenture Act 88
SECTION 9.04. Revocation and Effect of Consents
and Waivers 88
SECTION 9.05. Notation on or Exchange of Securities 88
SECTION 9.06. Trustee To Sign Amendments 89
SECTION 9.07. Payment for Consent 89
ARTICLE 10 Guaranties
SECTION 10.01. Guaranties 89
SECTION 10.02. Contribution 92
SECTION 10.03. Successors and Assigns 92
SECTION 10.04. No Waiver 92
SECTION 10.05. Modification 93
SECTION 10.06. Execution of Supplemental Indenture
for Future Guarantors 93
<PAGE> 9
vii
ARTICLE 11 Miscellaneous
SECTION 11.01. Trust Indenture Act Controls 93
SECTION 11.02. Notices 94
SECTION 11.03. Communication by Holders with
Other Holders 95
SECTION 11.04. Certificate and Opinion as to
Conditions Precedent 95
SECTION 11.05. Statements Required in Certificate
or Opinion 96
SECTION 11.06. When Securities Disregarded 96
SECTION 11.07. Rules by Trustee, Paying Agent
and Registrar 96
SECTION 11.08. Legal Holidays 97
SECTION 11.09. Governing Law 97
SECTION 11.10. No Recourse Against Others 97
SECTION 11.11. Successors 97
SECTION 11.12. Multiple Originals 97
SECTION 11.13. Table of Contents; Headings 98
Appendix A - Provisions Relating to Initial Securities and
Exchange Securities
Exhibit 1 to
<PAGE> 10
viii
Appendix A - Form of Initial Security
Exhibit A - Form of Exchange Security
Exhibit B - Form of Supplemental Indenture
<PAGE> 11
ix
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- -------
<PAGE> 12
x
310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(b) 7.08; 7.10
(c) N.A.
311(a) 7.11
(b) 7.11
(c) N.A.
312(a) 2.06
(b) 11.03
(c) 11.03
313(a) 7.06
(b)(1) N.A.
(b)(2) 7.06
(c) 11.02
(d) 7.06
314(a) 4.02; 4.12; 11.02
(b) N.A.
(c)(1) 11.04
(c)(2) 11.04
(c)(3) N.A.
(d) N.A.
(e) 11.05
(f) 4.12
315(a) 7.01
(b) 7.05; 11.02
(c) 7.01
(d) 7.01
(e) 6.11
316(a)(last
sentence) 11.06
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
317(a)(1) 6.08
(a)(2) 6.09
(b) 2.05
318(a) 11.01
N.A. means Not Applicable.
- ----------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of this Indenture.
<PAGE> 13
1
INDENTURE dated as of November 25, 1997, among
METALLURG, INC., a Delaware corporation (the "Company"),
SHIELDALLOY METALLURGICAL CORPORATION, a Delaware
corporation, METALLURG HOLDINGS CORPORATION, a New
Jersey corporation, METALLURG SERVICES, INC., a New York
corporation and MIR (CHINA), INC., a Delaware
corporation (collectively, the "Guarantors") and IBJ
SCHRODER BANK & TRUST COMPANY, a New York banking
corporation (the "Trustee").
Each party agrees as follows for the benefit of each of the other
parties and for the equal and ratable benefit of the Holders of the Company's
11% Senior Notes Due 2007 (the "Initial Securities") and, if and when issued
pursuant to a registered exchange offer for the Initial Securities, the
Company's 11% Senior Notes Due 2007 (the "Exchange Securities", and together
with the Initial Securities, the "Securities").
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Additional Assets" means (a) any Property (other than cash, cash
equivalents and securities) to be owned by the Company or any Restricted
Subsidiary and used in a Related Business; (b) the costs of improving or
developing any Property owned by the Company or a Restricted Subsidiary which is
used in a Related Business; or (c) Capital Stock of a Person that becomes a
Restricted Subsidiary as a result of the acquisition of such Capital Stock by
the Company or another Restricted Subsidiary from any Person other than an
Affiliate of the Company; provided, however, that, in the case of clause (c),
such Restricted Subsidiary is primarily
<PAGE> 14
2
engaged in a Related Business.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings
correlative to the foregoing. For purposes of the covenants contained in Section
4.06, Section 4.07 and the definition of "Additional Assets" only, "Affiliate"
shall also mean any beneficial owner of shares representing 10% or more of the
total voting power of the Voting Stock (on a fully diluted basis) of the Company
or of rights or warrants to purchase such Voting Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Agent Member" means any member of, or participant in, the
Depositary.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Temporary Regulation S Global Note or beneficial
interest therein, the rules and procedures of the Depositary for such Global
Note, Euroclear and Cedel, in each case to the extent applicable to such
transaction and as in effect from time to time.
"Asset Sale" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions) (other than the grant of a security interest) by the Company or
any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (a) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares) or (b) any other
assets of the Company or any Restricted Subsidiary outside of the ordinary
course of business of the Company or such Restricted Subsidiary (other
<PAGE> 15
3
than, in the case of clauses (a) and (b) above, (i) any disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Restricted Subsidiary, (ii) for purposes of Section 4.06 only,
any disposition that constitutes a Permitted Investment or Restricted Payment
permitted by Section 4.04, (iii) any disposition effected in compliance with
Section 5.01(a), (iv) any disposition of Property or equipment that has become
obsolete or otherwise unsuitable for use in connection with the business of the
Company or such Restricted Subsidiary or (v) any disposition or series of
related dispositions of assets having a Fair Market Value and sale price of less
than $500,000).
"Attributable Debt" in respect of a Sale and Leaseback Transaction
means, at any date of determination, (a) if such Sale and Leaseback Transaction
is a Capital Lease Obligation, the amount of Debt represented thereby according
to the definition of "Capital Lease Obligation" and (b) in all other instances,
the present value (discounted at the interest rate borne by the Securities,
compounded annually), of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale and Leaseback
Transaction (including any period for which such lease has been extended).
"Average Life" means, as of any date of determination, with respect
to any Debt or Preferred Stock, the quotient obtained by dividing (a) the sum of
the product of the numbers of years (rounded to the nearest one-twelfth of one
year) from the date of determination to the dates of each successive scheduled
principal payment of such Debt or redemption or similar payment with respect to
such Preferred Stock multiplied by the amount of such payment by (b) the sum of
all such payments.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
<PAGE> 16
4
"Capital Lease Obligations" means any obligation under a lease that
is required to be capitalized for financial reporting purposes in accordance
with GAAP; and the amount of Debt represented by such obligation shall be the
capitalized amount of such obligations determined in accordance with GAAP; and
the Stated Maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty. For purposes of
Section 4.11, a Capital Lease Obligation shall be deemed secured by a Lien on
the Property being leased.
"Capital Stock" means, with respect to any Person, any shares or
other equivalents (however designated) of corporate stock, partnership
interests, membership interests in limited liability companies or any other
participations, rights, warrants, options or other interests in the nature of an
equity interest in such Person, including Preferred Stock, but excluding any
debt security convertible or exchangeable into such equity interest.
"Capital Stock Sale Proceeds" means the aggregate cash proceeds
received by the Company from the issuance or sale (other than to a Subsidiary of
the Company or an employee stock ownership plan or trust established by the
Company or any of its Subsidiaries for the benefit of their employees) by the
Company of any class of its Capital Stock (other than Disqualified Stock) after
the Issue Date, net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
"Cedel" means Cedel Bank, S.A., or any successor securities clearing
agency.
"Change of Control" means the occurrence of any of the following
events:
(a) if (i) any "Person" or "group" (as such terms
<PAGE> 17
5
are used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any
successor provisions to either of the foregoing) becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act, except that a
Person will be deemed to have "beneficial ownership" of all shares that
any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of 35% or more of the voting power of the Voting Stock of the
Company and (ii) the Permitted Holders are "beneficial owners" (as defined
in Rule 13d-3 under the Exchange Act except that a Person will be deemed
to have "beneficial ownership" of all shares that any such Person has the
right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, in the aggregate of a
lesser percentage of the total voting power of all classes of the Voting
Stock of the Company than such other Person or group referred to in clause
(i) (for purposes of this clause (a), such Person or group, and the
Permitted Holders, shall be deemed to beneficially own any Voting Stock of
a corporation (the "specified corporation") held by any other corporation
(the "parent corporation") so long as such Person or group beneficially
owns, directly or indirectly, in the aggregate a majority of the voting
power of the Voting Stock of such parent corporation); or
(b) the sale, transfer, assignment, lease, conveyance or other
disposition, directly or indirectly, of all or substantially all the
assets of the Company and the Restricted Subsidiaries, considered as a
whole (other than a disposition of such assets as an entirety or virtually
as an entirety to a Wholly Owned Subsidiary) shall have occurred, or the
Company merges, consolidates or amalgamates with or into any other Person
or any other Person merges, consolidates or amalgamates with or into the
Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is reclassified into or exchanged
for cash, securities or other Property, other than any such transaction
where (i) the outstanding Voting Stock of the Company is reclassified into
or exchanged for Voting Stock of the surviving corporation and (ii) the
Holders of the Voting Stock of the Company immediately prior to such
transaction own, directly or indirectly, not less than a majority of the
Voting Stock of the surviving corporation immediately after such
transaction and in substantially the same
<PAGE> 18
6
proportion as before the transaction; or
(c) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors (together
with any new directors whose election or appointment by such Board or
whose nomination for election by the shareholders of the Company was
approved by a vote of 66 2/3% 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 of Directors then in office; or
(d) the shareholders of the Company shall have approved any plan of
liquidation or dissolution of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the indenture securities.
"Consolidated Coverage Ratio" means, as of any date of
determination, the ratio of (a) the aggregate amount of EBITDA for the most
recent four consecutive fiscal quarters ending at least 45 days prior to such
determination date to (b) Consolidated Fixed Charges for such four fiscal
quarters; provided, however, that (i) if the Company or any Restricted
Subsidiary has Incurred any Debt since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Incurrence of Debt, or both, Consolidated
Fixed Charges for such period shall be calculated after giving effect on a pro
forma basis to such Debt as if such Debt had been Incurred on the first day of
such period and the discharge of any other Debt repaid,
<PAGE> 19
7
repurchased, defeased or otherwise discharged with the proceeds of such new Debt
as if such discharge had occurred on the first day of such period, (ii) if since
the beginning of such period the Company or any Restricted Subsidiary shall have
made any Asset Sale or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Asset Sale, or both, EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the Property which is the subject of such Asset Sale for such
period, or increased by an amount equal to the EBITDA (if negative) directly
attributable thereto for such period, in either case as if such Asset Sale had
occurred on the first day of such period, and Consolidated Fixed Charges for
such period shall be reduced by an amount equal to the Consolidated Fixed
Charges directly attributable to any Debt of the Company or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to
the Company and its continuing Restricted Subsidiaries in connection with such
Asset Sale, as if such Asset Sale had occurred on the first day of such period
(or, if the Capital Stock of any Restricted Subsidiary is sold, by an amount
equal to the Consolidated Fixed Charges for such period directly attributable to
the Debt of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Debt after such
sale), (iii) if since the beginning of such period the Company shall have
consummated a Public Equity Offering following which there is a Public Market,
Consolidated Fixed Charges for such period shall be reduced by an amount equal
to the Consolidated Fixed Charges directly attributable to any Debt of the
Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company and its Restricted Subsidiaries in
connection with such Public Equity Offering for such period, (iv) if since the
beginning of such period the Company or any Restricted Subsidiary (by merger or
otherwise) shall have made an Investment in any Restricted Subsidiary (or any
Person which becomes a Restricted Subsidiary) or an acquisition of Property,
including any acquisition of Property occurring in connection with a transaction
causing a calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, EBITDA and Consolidated
Fixed Charges for such period shall be calculated after giving pro forma effect
thereto (including the Incurrence of any Debt) as if such Investment or
acquisition occurred on the first day of such period, (v) if since the beginning
of such period any Person that subsequently became a Restricted Subsidiary or
was merged with or into the Company or any Restricted Subsidiary since the
beginning of such period shall have made any Asset Sale, Investment or
acquisition of Property that would have
<PAGE> 20
8
required an adjustment pursuant to clause (ii), (iii) or (iv) above if made by
the Company or a Restricted Subsidiary during such period, EBITDA and
Consolidated Fixed Charges for such period shall be calculated after giving pro
forma effect thereto as if such Asset Sale, Investment or acquisition of
Property occurred on the first day of such period and (vi) if since the
beginning of such period any Restricted Subsidiary shall have obtained relief
from any limitation on the ability of such Restricted Subsidiary to pay
dividends to the Company, EBITDA and Consolidated Fixed Charges for such period
shall be calculated after giving pro forma effect thereto as if the ability of
such Restricted Subsidiary to pay dividends to the Company had not been so
limited from the first day of such period. For purposes of this definition, pro
forma calculations shall be determined in good faith by a responsible financial
or accounting Officer of the Company and as further contemplated by the
definition of the term "pro forma." If any Debt bears a floating rate of
interest and is being given pro forma effect, the interest expense on such Debt
shall be calculated as if the rate in effect on the date of determination had
been the applicable rate for the entire period (taking into account any Interest
Rate Agreement applicable to such Debt if such Interest Rate Agreement has a
remaining term in excess of 12 months).
"Consolidated Fixed Charges" means, for any period, the sum (without
duplication) of (a) Consolidated Interest Expense for such period plus (b) all
Preferred Stock Dividends (other than to the Company or a Wholly Owned
Subsidiary, and other than Redeemable Dividends) paid, accrued, declared or
accumulated during such period.
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
plus, to the extent not included in such total interest expense, and to the
extent incurred by the Company or its Restricted Subsidiaries, (a) interest
expense attributable to capital leases, (b) amortization of debt discount and
debt issuance cost, including commitment fees, (c) capitalized interest, (d)
noncash interest expenses, (e) to the extent required under GAAP to be reflected
as interest expense in the consolidated financial statements of the Company,
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (f) to the extent required under
GAAP to be reflected as an expense in the consolidated financial
<PAGE> 21
9
statements of the Company, net costs associated with Hedging Obligations
(including amortization of fees), (g) Redeemable Dividends, (h) interest
incurred in connection with Investments in discontinued operations, (i) interest
accruing on any Debt of any other Person to the extent such Debt is Guaranteed
by the Company or any Restricted Subsidiary and (j) the cash contributions to
any employee stock ownership plan or similar trust to the extent such
contributions are used by such plan or trust to pay interest or fees to any
Person (other than the Company) in connection with Debt Incurred by such plan or
trust.
"Consolidated Net Income" means, for any period, the net income
(loss) of the Company and its consolidated Subsidiaries, less the aggregate
amount of recurring expenditures made by the Company and its consolidated
Subsidiaries during such period with respect to environmental matters which were
not deducted in determining in such net income (loss) as a result of the
adoption of American Institute of Certified Public Accountants Statement of
Position 96-1, "Environmental Remediation Liabilities"; provided, however, that
there shall not be included in such Consolidated Net Income (a) any net income
(loss) of any Person (other than the Company) if such Person is not a Restricted
Subsidiary, except that (i) subject to the exclusion contained in clause (d)
below, the Company's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate amount of
cash distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution to a Restricted Subsidiary, to the
limitations contained in clause (c) below) and (ii) the Company's equity in a
net loss of any such Person other than an Unrestricted Subsidiary for such
period shall be included in determining such Consolidated Net Income to the
extent of the Company's obligation to fund such net loss in cash, (b) any net
income (loss) of any Person acquired by the Company or any of its consolidated
Subsidiaries in a pooling of interests transaction for any period prior to the
date of such acquisition, (c) any net income (but not loss) of any Restricted
Subsidiary, to the extent that the payment of dividends or the making of
distributions by such Restricted Subsidiary to the Company is not at the time
permitted, directly or indirectly, without prior approval (that has not been
obtained), pursuant to the terms of its charter or any agreement, instrument or
governmental regulation applicable to such Restricted Subsidiary, (d) any gain
(loss) realized upon the sale or other disposition of any Property of the
Company or any of its consolidated
<PAGE> 22
10
Subsidiaries (including pursuant to any Sale and Leaseback Transaction) which is
not sold or otherwise disposed of in the ordinary course of business, (e) any
extraordinary gain or loss and (f) the cumulative effect of a change in
accounting principles. Notwithstanding the foregoing, for the purposes of
Section 4.04 only, there shall be excluded from Consolidated Net Income any
dividends, repayments of loans or advances or other transfers of assets from
Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the
extent such dividends, repayments or transfers increase the amount of Restricted
Payments permitted under such covenant pursuant to clause (c)(iv) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
consolidated balance sheet of the Company and its Restricted Subsidiaries as of
the end of the most recent fiscal quarter of the Company ending at least 45 days
prior to the taking of any action for the purpose of which the determination is
being made, as (a) the par or stated value of all outstanding Capital Stock of
the Company plus (b) paid-in capital or capital surplus relating to such Capital
Stock plus (c) any retained earnings or earned surplus less (i) any accumulated
deficit and (ii) any amounts attributable to Disqualified Stock.
"Credit Facility" means one or more debt facilities with banks or
other institutional lenders (including pursuant to (a) the Loan Agreement dated
April 14, 1997, by and among the Company, the Guarantors, BankBoston, N.A. and
the other Banks party thereto, and BankBoston, N.A. as agent for such Banks, (b)
the Loan Agreement dated October 20, 1997, by and among GfE, certain of its
subsidiaries and BankBoston, N.A., Frankfurt Branch and (c) each of the Loan
Documents (as defined in such Loan Agreements) relating to such Loan Agreements)
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, foreign exchange, bankers' acceptances or similar financial
arrangements, in each case as amended, restated, supplemented or modified and in
effect from time to time, together with any extensions, revisions, refinancings
or replacements thereof by a lender or syndicate of lenders.
<PAGE> 23
11
"Currency Exchange Protection Agreement" means, in respect of a
Person, any foreign exchange contract, currency swap agreement, currency option
or other similar agreement or arrangement designed to protect such Person
against fluctuations in currency exchange rates.
"Debt" means, with respect to any Person on any date of
determination (without duplication), (a) the principal of and premium (if any)
in respect of (i) debt of such Person for money borrowed and (ii) debt evidenced
by notes, debentures, bonds or other similar instruments for the payment of
which such Person is responsible or liable; (b) all Capital Lease Obligations of
such Person and all Attributable Debt in respect of Sale and Leaseback
Transactions entered into by such Person; (c) all obligations of such Person
issued or assumed as the deferred purchase price of Property, all conditional
sale obligations of such Person and all obligations of such Person under any
title retention agreement (but excluding trade accounts payable and customer
advance payments or deposits arising in the ordinary course of business); (d)
all obligations of such Person for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in (a) through (c) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (e) the amount of
all obligations of such Person with respect to the redemption, repayment or
other repurchase of any Disqualified Stock or, with respect to any Subsidiary of
such Person, any Preferred Stock (but excluding, in each case, any accrued
dividends); (f) all obligations of the type referred to in clauses (a) through
(e) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee; (g) all obligations of the type referred to in clauses (a) through
(f) of other Persons secured by any Lien on any Property of such Person (whether
or not such obligation is assumed by such Person), the amount of such obligation
being deemed to be the lesser of the value of such Property or the amount of the
obligation so secured; and (h) to the extent not otherwise included in this
definition, Hedging Obligations of such Person. The amount of Debt of any Person
at any date shall be the outstanding balance at such date of
<PAGE> 24
12
all unconditional obligations as described above and the maximum liability, upon
the occurrence of the contingency giving rise to the obligation, of any
contingent obligations at such date; provided that the amount outstanding at any
time of any Debt issued with original issue discount is the face amount of such
Debt less the remaining unamortized portion of the original issue discount of
such Debt at such time as determined in accordance with GAAP.
"Depositary" means, with respect to the Securities issuable or
issued in whole or in part in the form of one or more Global Notes, The
Depository Trust Company for so long as it shall be a clearing agency registered
under the Exchange Act, or such successor as the Company shall designate from
time to time in an Officers' Certificate delivered to the Trustee.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, Redeemable
Stock of such Person as to which (a) the maturity, (b) mandatory redemption or
(c) redemption, conversion or exchange at the option of the holder thereof
occurs, or may occur, on or prior to the first anniversary of the Stated
Maturity of the Securities; provided, however, that Redeemable Stock of such
Person that would not otherwise be characterized as Disqualified Stock under
this definition shall not constitute Disqualified Stock if such Redeemable Stock
is convertible or exchangeable into Debt or Disqualified Stock solely at the
option of the issuer thereof.
"EBITDA" means, for any period, an amount equal to, for the Company
and its consolidated Restricted Subsidiaries, (a) the sum of Consolidated Net
Income for such period, plus the following to the extent reducing Consolidated
Net Income for such period: (i) the provision for taxes based on income or
profits or utilized in computing net loss, (ii) Consolidated Interest Expense,
(iii) depreciation, (iv) amortization of intangibles and (v) any other noncash
items (other than any such noncash item to the extent that it represents an
accrual of or
<PAGE> 25
13
reserve for cash expenditures in any future period), minus (b) all noncash items
increasing Consolidated Net Income for such period (other than any such noncash
item to the extent that it will result in the receipt of cash payments in any
future period). Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, and the depreciation and amortization of, a Restricted
Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to
the extent (and in the same proportion) that the net income of such Restricted
Subsidiary was included in calculating Consolidated Net Income and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or its
stockholders.
"Euroclear" means the Euroclear Clearance System or any successor
securities clearing agency.
"Exchange Act" means the Securities Exchange Act of 1934.
"Fair Market Value" means, with respect to any Property, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value will be
determined, except as otherwise provided, (a) if such Property has a Fair Market
Value of less than $5,000,000, by any Officer of the Company or (b) if such
Property has a Fair Market Value in excess of $5,000,000, by a majority of the
Board of Directors and evidenced by a Board Resolution, dated within 30 days of
the relevant transaction, delivered to the Trustee.
"GAAP" means United States generally accepted accounting principles
as in effect on the Issue Date, including those set forth (a) in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants, (b) in the statements and pronouncements of the
Financial Accounting
<PAGE> 26
14
Standards Board, (c) in such other statements by such other entity as approved
by a significant segment of the accounting profession and (d) the rules and
regulations of the SEC governing the inclusion of financial statements
(including pro forma financial statements) in periodic reports required to be
filed pursuant to Section 13 of the Exchange Act, including opinions and
pronouncements in staff accounting bulletins and similar written statements from
the accounting staff of the SEC.
"GfE" means GfE Gesellschaft fur Elektrometallurgie mbH.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Debt of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Global Note" means the Security or Securities that evidences all or
part of the Securities and bears the legend set forth in Exhibit I to Appendix
A.
"Guarantor" means each domestic Restricted Subsidiary designated as
such on the signature pages of this Indenture and any other domestic Restricted
Subsidiary that becomes a Guarantor pursuant to Section 4.12, in each case,
until such Restricted Subsidiary is released from its Guaranty.
"Guaranty" means a Guarantee on the terms set
<PAGE> 27
15
forth in this Indenture by a Guarantor of the Company's obligations with respect
to the Securities.
"Hedging Obligation" of any Person means any obligation of such
Person pursuant to any Interest Rate Agreement, Currency Exchange Protection
Agreement or any other similar agreement or arrangement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means, with respect to any Debt or other obligation of any
Person, to create, issue, incur (by merger, conversion, exchange or otherwise),
extend, assume, Guarantee or become liable in respect of such Debt or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Debt or obligation on the balance sheet of such Person (and "Incurrence"
and "Incurred" shall have meanings correlative to the foregoing); provided,
however, that a change in GAAP that results in an obligation of such Person that
exists at such time, and is not theretofore classified as Debt, becoming Debt
shall not be deemed an Incurrence of such Debt; provided further, however, that
solely for purposes of determining compliance with Section 4.03, amortization of
debt discount shall not be deemed to be the Incurrence of Debt, provided that in
the case of Debt sold at a discount, the amount of such Debt Incurred shall at
all times be the aggregate principal amount at Stated Maturity.
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Independent Appraiser" means an investment banking firm of national
standing or any third party appraiser of national standing, provided that such
firm or appraiser is not an Affiliate of the Company.
"Initial Securities" has the meaning stated in the
<PAGE> 28
16
first recital of this Indenture.
"Interest Rate Agreement" means, for any Person, any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement designed to protect against fluctuations in interest
rates.
"Investment" by any Person means any direct or indirect loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of such Person), advance or other
extension of credit 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) to, or Incurrence of a Guarantee of any obligation
of, or purchase or acquisition of Capital Stock, bonds, notes, debentures or
other securities or evidence of Debt issued by, any other Person. For purposes
of the definition of "Restricted Payment", Section 4.04 and Section 4.15,
"Investment" shall include the portion (proportionate to the Company's equity
interest in such Subsidiary) of the Fair Market Value of the net assets of any
Subsidiary of the Company at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (a) the Company's "Investment" in such Subsidiary
at the time of such redesignation less (b) the portion (proportionate to the
Company's equity interest in such Subsidiary) of the Fair Market Value of the
net assets of such Subsidiary at the time of such redesignation. In determining
the amount of any Investment made by transfer of any Property other than cash,
such Property shall be valued at its Fair Market Value at the time of such
Investment.
"Issue Date" means the date on which the Securities are initially
issued.
"Lien" means, with respect to any Property of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest,
<PAGE> 29
17
lien, charge, easement (other than any easement not materially impairing
usefulness or marketability), encumbrance, preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
on or with respect to such Property (including any Capital Lease Obligation,
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing or any Sale and Leaseback
Transaction).
"LSM" means London & Scandinavian Metallurgical Co., Limited.
"Moody's" means Moody's Investors Service, Inc. or any successor to
the rating agency business thereof.
"Net Available Cash" from any Asset Sale means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Debt or other obligations
relating to the Property that is the subject of such Asset Sale or received in
any other noncash form), in each case net of (a) all legal, title and recording
tax expenses, commissions and other fees and expenses incurred, and all Federal,
state, provincial, foreign and local taxes required to be accrued as a liability
under GAAP, as a consequence of such Asset Sale, whether paid or payable, (b)
all payments made on any Debt which is secured by any Property subject to such
Asset Sale, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such Property, or which must by its terms,
or in order to obtain a necessary consent to such Asset Sale, or by applicable
law, be repaid out of the proceeds from such Asset Sale, (c) all distributions
and other payments required to be made to minority interest holders in
Subsidiaries or joint ventures as a result of such Asset Sale, and (d) the
deduction of appropriate amounts provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the Property
disposed in such Asset Sale and retained by the Company or any Restricted
Subsidiary after such Asset Sale.
<PAGE> 30
18
"Officer" means the Chairman, President and Chief Executive Officer,
the Vice President, Finance and Chief Financial Officer or any Vice President of
the Company.
"Officers' Certificate" means a certificate signed by two Officers
of the Company, at least one of whom shall be the principal executive officer or
principal financial officer of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee. The counsel may be an employee of or counsel to
the Company or the Trustee.
"Permitted Debt" means:
(a) Debt of the Company evidenced by the Securities and of
Guarantors evidenced by Guaranties;
(b) Debt under the Credit Facility, provided that the aggregate
principal amount of all such Debt under the Credit Facility at any one
time outstanding shall not exceed the greater of (i) $50,000,000, which
amount shall be permanently reduced by the amount of Net Available Cash
used to repay Debt under the Credit Facility, and not subsequently
reinvested in Additional Assets or used to purchase Securities, pursuant
to Section 4.06 and (ii) the sum of the amounts equal to (x) 65% of the
book value of the inventory of the Company and the Restricted Subsidiaries
and (y) 90% of the book value of the accounts receivable of the Company
and the Restricted Subsidiaries, in each case as of the most recently
ended quarter of the Company for which financial statements of the Company
have been provided to the Holders of Securities (the greater of (i) and
(ii) being the "Permitted Debt Amount"); provided, further, that the
aggregate amount of Debt Incurred pursuant to this clause (b), together
with the aggregate amount of Debt Incurred pursuant to clause (c) below
shall not exceed an amount equal to the Permitted Debt Amount at any one
time outstanding;
<PAGE> 31
19
(c) Debt of any Restricted Subsidiary under one or more debt
facilities with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing (including
through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables),
letters of credit, foreign exchange, bankers acceptances or similar
financial arrangements, and any Permitted Refinancing Debt Incurred with
respect thereto, provided that the aggregate principal amount of all such
Debt at any one time outstanding shall not exceed the sum of (i) 65% of
the book value of the inventory of such Restricted Subsidiary and (ii) 90%
of the book value of the accounts receivable of such Restricted
Subsidiary, in each case as of the most recently ended quarter of the
Company for which financial statements of the Company have been provided
to the Holders of the Securities; provided, further, that the aggregate
amount of Debt Incurred pursuant to this clause (c), together with the
aggregate amount of Debt Incurred pursuant to clause (b) above shall not
exceed the Permitted Debt Amount at any one time outstanding;
(d) Debt in respect of Capital Lease Obligations and Purchase Money
Debt, provided that (i) the aggregate principal amount of such Debt does
not exceed the Fair Market Value (on the date of the Incurrence thereof)
of the Property acquired, constructed or leased and (ii) the aggregate
principal amount of all Debt Incurred and then outstanding pursuant to
this clause (d) (together with all Permitted Refinancing Debt Incurred in
respect of Debt previously Incurred pursuant to such clause (d)) does not
exceed $15,000,000;
(e) Debt of the Company owing to and held by any Restricted
Subsidiary or Debt of a Restricted Subsidiary owed to and held by the
Company or another Restricted Subsidiary; provided, however, that any
subsequent transfer of Capital Stock or other event that results in any
such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of any such Debt (except to the Company or a
Restricted Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Debt by the issuer thereof;
<PAGE> 32
20
(f) Debt under Interest Rate Agreements entered into by the Company
or a Restricted Subsidiary for the purpose of limiting interest rate risk
in the ordinary course of the financial management of the Company or such
Restricted Subsidiary and not for speculative purposes, provided that the
obligations under such agreements are directly related to payment
obligations on Debt otherwise permitted by Section 4.03;
(g) Debt under Currency Exchange Protection Agreements entered into
by the Company or a Restricted Subsidiary for the purpose of limiting
currency exchange rate risks directly related to transactions entered into
by the Company or such Restricted Subsidiary in the ordinary course of
business and not for speculative purposes;
(h) Debt Incurred in connection with cash pooling arrangements by
and among the Company and its Restricted Subsidiaries, provided that no
liability is required under GAAP to be reflected in the consolidated
financial statements of the Company with respect thereto;
(i) Debt outstanding on the Issue Date not otherwise described in
clauses (a) through (h) above;
(j) Debt (other than Debt permitted by the immediately preceding
paragraph or the other clauses of this paragraph) in an aggregate
principal amount outstanding at any one time not to exceed $25,000,000;
and
(k) Permitted Refinancing Debt Incurred in respect of Debt Incurred
pursuant to Section 4.03(a) and clauses (a) and (i) above.
"Permitted Holders" means Franklin Mutual
<PAGE> 33
21
Advisors, Inc., Contrarian Capital Management, L.L.C., Cerberus Partners, L.P.,
Morgens, Waterfall Overseas Partners and SBC Warburg Dillon Read, or any Person
of which any of the foregoing "beneficially owns" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act) voting securities representing at least 51% of the
voting power of all classes of Voting Stock of such Person (exclusive of any
matters as to which class voting rights exist), or any Person which
"beneficially owns" (as defined above) voting securities representing at least
51% of the voting power of all classes of Voting Stock of any of the foregoing
(exclusive of any matters as to which class voting rights exist).
"Permitted Investment" means any Investment by the Company or a
Restricted Subsidiary in (a) the Company, any Restricted Subsidiary or any
Person that will, upon the making of such Investment, become a Restricted
Subsidiary, provided that the primary business of such Restricted Subsidiary is
a Related Business; (b) any Person if as a result of such Investment such Person
is merged or consolidated with or into, or transfers or conveys all or
substantially all its Property to, the Company or a Restricted Subsidiary,
provided that such Person's primary business is a Related Business; (c)
Temporary Cash Investments; (d) receivables owing to the Company or a Restricted
Subsidiary, if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or such Restricted Subsidiary deems reasonable under the circumstances;
(e) payroll, travel and similar advances to cover matters that are expected at
the time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (f) loans and
advances to employees made in the ordinary course of business consistent with
past practices of the Company or such Restricted Subsidiary, as the case may be,
provided that such loans and advances do not exceed $2,500,000 at any one time
outstanding; (g) stock, obligations or other securities received in settlement
of debts created in the ordinary course of business and owing to the Company or
a Restricted Subsidiary or in satisfaction of judgments; and (h) any Person to
the extent such Investment represents the non-cash portion of the consideration
received in connection with an Asset Sale consummated in compliance with the
covenant described under Section 4.06.
<PAGE> 34
22
"Permitted Liens" means:
(a) Liens to secure Debt permitted to be Incurred under clause (b)
or (c) of the definition of "Permitted Debt";
(b) Liens to secure Debt permitted to be Incurred under clause (d)
of the definition of "Permitted Debt", provided that any such Lien may not
extend to any Property of the Company or any Restricted Subsidiary, other
than the Property acquired, constructed or leased with the proceeds of
such Debt and any improvements or accessions to such Property;
(c) Liens for taxes, assessments or governmental charges or levies
on the Property of the Company or any Restricted Subsidiary if the same
shall not at the time be delinquent or thereafter can be paid without
penalty, or are being contested in good faith and by appropriate
proceedings promptly instituted and diligently concluded, provided that
any reserve or other appropriate provision that shall be required in
conformity with GAAP shall have been made therefor;
(d) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens, on the Property of the Company or any Restricted
Subsidiary arising in the ordinary course of business and securing payment
of obligations which are not more than 60 days past due or are being
contested in good faith and by appropriate proceedings;
(e) Liens on the Property of the Company or any Restricted
Subsidiary Incurred in the ordinary course of business to secure
performance of obligations with respect to statutory or regulatory
requirements, performance or return-of-money bonds, surety bonds or other
obligations of a like nature and Incurred in a manner consistent with
industry practice, in each case which are not incurred in connection with
the borrowing of money, the obtaining of advances or credit or the payment
of the deferred purchase price of Property and
<PAGE> 35
23
which do not in the aggregate impair in any material respect the use of
Property in the operation of the business of the Company and the
Restricted Subsidiaries taken as a whole;
(f) Liens on Property at the time the Company or any Restricted
Subsidiary acquired such Property, including any acquisition by means of a
merger or consolidation with or into the Company or any Restricted
Subsidiary; provided, however, that any such Lien may not extend to any
other Property of the Company or any Restricted Subsidiary; provided,
further, however, that such Liens shall not have been Incurred in
anticipation or in connection with the transaction or series of
transactions pursuant to which such Property was acquired by the Company
or any Restricted Subsidiary;
(g) Liens on the Property of a Person at the time such Person
becomes a Restricted Subsidiary; provided, however, that any such Lien may
not extend to any other Property of the Company or any other Restricted
Subsidiary which is not a direct Subsidiary of such Person; provided,
further, however, that any such Lien was not Incurred in anticipation of
or in connection with the transaction or series of transactions pursuant
to which such Person became a Restricted Subsidiary;
(h) pledges or deposits by the Company or any Restricted Subsidiary
under workmen's compensation laws, unemployment insurance laws or similar
legislation, or good faith deposits in connection with bids, tenders,
contracts (other than for the payment of Debt) or leases to which the
Company or any Restricted Subsidiary is party, or deposits to secure
public or statutory obligations of the Company, or deposits for the
payment of rent, in each case Incurred in the ordinary course of business;
(i) utility easements, building restrictions and such other
encumbrances or charges against real Property as are of a nature generally
existing with respect to properties of a similar character;
<PAGE> 36
24
(j) Liens in favor of the Company or any Guarantor;
(k) Liens existing on the Issue Date not otherwise described in
clauses (a) through (j) above;
(l) Liens on the Property of the Company or any Restricted
Subsidiary to secure any Refinancing, in whole or in part, of any Debt
secured by Liens referred to in clause (b), (f), (g) or (k) above;
provided, however, that any such Lien shall be limited to all or part of
the same Property that secured the original Lien (together with
improvements and accessions to such Property) and the aggregate principal
amount of Debt that is secured by such Lien shall not be increased to an
amount greater than the sum of (i) the outstanding principal amount, or,
if greater, the committed amount, of the Debt secured by Liens described
under clause (b), (f), (g) or (k) above, as the case may be, at the time
the original Lien became a Permitted Lien under this Indenture and (ii) an
amount necessary to pay any premiums, fees and other expenses incurred by
the Company or a Restricted Subsidiary in connection with such
Refinancing; or
(m) Liens not otherwise permitted by clauses (a) through (l) above
encumbering assets having an aggregate Fair Market Value not in excess of
$25,000,000 at any time.
"Permitted Refinancing Debt" means any Debt that Refinances any
other Debt, including any successive Refinancings, so long as (a) such Debt is
in an aggregate principal amount (or if Incurred with original issue discount,
an aggregate issue price) not in excess of the sum of (i) the aggregate
principal amount (or if Incurred with original issue discount, the aggregate
accreted value) then outstanding of the Debt being Refinanced and (ii) an amount
necessary to pay any fees and expenses, including premiums and defeasance costs,
related to such Refinancing, (b) the Average Life of such Debt is equal to or
greater than the Average Life of the Debt being Refinanced, (c) the Stated
Maturity of such Debt is no earlier than the Stated Maturity
<PAGE> 37
25
of the Debt being Refinanced and (d) the new Debt shall not be senior in right
of payment to the Debt that is being Refinanced; provided, however, that
Permitted Refinancing Debt shall not include (x) Debt of a Subsidiary that
Refinances Debt of the Company or (y) Debt of the Company or a Restricted
Subsidiary that Refinances Debt of an Unrestricted Subsidiary.
"Person" means any individual, corporation, company (including any
limited liability company), partnership, joint venture, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Plan of Reorganization" means the Joint Plan of Reorganization
dated December 18, 1996, of the Company and Shieldalloy Metallurgical
Corporation.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect 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 any
other class of Capital Stock issued by such Person.
"Preferred Stock Dividends" means for any dividend with respect to
Preferred Stock, the quotient of the dividend divided by the difference between
one and the maximum statutory federal income rate (expressed as a decimal number
between 1 and 0) then applicable to the issuer of such Preferred Stock.
"principal" of any Debt (including the Securities) means the
principal amount such Debt plus the premium, if any, on such Debt.
"pro forma" means, with respect to any calculation made or required
to be made pursuant to the terms hereof, a calculation performed in accordance
with Article 11 of
<PAGE> 38
26
Regulation S-X promulgated under the Securities Act, as interpreted in good
faith by the Board of Directors after consultation with the independent
certified public accountants of the Company, or otherwise a calculation made in
good faith by the Board of Directors after consultation with the independent
certified public accountants of the Company, as the case may be.
"Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including Capital Stock in, and other securities of, any
other Person. For purposes of any calculation required pursuant to this
Indenture, the value of any Property shall be its Fair Market Value.
"Public Equity Offering" means an underwritten public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Public Market" means any time after (a) a Public Equity Offering
has been consummated and (b) at least 10% of the total issued and outstanding
common stock of the Company has been distributed by means of an effective
registration statement under the Securities Act or sales pursuant to Rule 144
under the Securities Act.
"Purchase Agreement" means the Purchase Agreement, dated as of
November 20, 1997, among the Company, the Guarantors and the Purchasers.
"Purchase Money Debt" means Debt (a) consisting of the deferred
purchase price of property, conditional sale obligations, obligations under any
title retention agreement, other purchase money obligations and obligations in
respect of industrial revenue bonds, in each case where the maturity of such
Debt does not exceed the anticipated useful life of the asset being financed and
(b) Incurred to finance the acquisition (including costs of design and
installation) by the Company or a Restricted Subsidiary of such asset, including
additions and improvements; provided,
<PAGE> 39
27
however, that such Debt is incurred within 180 days after such acquisition of
such asset by the Company or a Restricted Subsidiary.
"Purchasers" means Salomon Brothers Inc and BancBoston Securities
Inc.
"Recapitalization" means the consummation of the following
transactions in connection with the sale of the Initial Securities: (a) the
satisfaction and discharge of the Company's 12% Senior Secured Notes due 2007,
(b) the repayment of outstanding Debt under the Credit Facility, (c) the
retirement of the outstanding Debt of LSM under the term loan agreement dated
April 11, 1997, between LSM and NM Rothschild & Sons Limited and (d) payment of
a dividend and dividend equivalent in an aggregate amount of $20,000,000 to
holders of the Company's common stock, par value $.01 per share, and common
stock equivalents.
"Redeemable Dividend" means, for any dividend with respect to
Redeemable Stock, the quotient of the dividend divided by the difference between
one and the maximum statutory federal income tax rate (expressed as a decimal
number between 1 and 0) then applicable to the issuer of such Redeemable Stock.
"Redeemable Stock" means, with respect to any Person, any Capital
Stock that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable, in either case, at the option of
the holder thereof) or otherwise (a) matures or is mandatorily redeemable
pursuant to a sinking fund obligation or otherwise, (b) is or may become
redeemable or repurchaseable at the option of the holder thereof, in whole or in
part, or (c) is convertible or exchangeable at the option of the holder thereof
for Debt or Disqualified Stock.
"Refinance" means, in respect of any Debt, to refinance, extend,
renew, refund, replace, prepay, redeem, defease or retire, or to issue other
Debt, in exchange or replacement for, such Debt. "Refinanced" and "Refinancing"
shall have correlative meanings.
<PAGE> 40
28
"Regulation S" means Regulation S under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Regulation S Securities" means all Initial Securities offered and
sold outside the United States in reliance on Regulation S.
"Related Business" means any business that is related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
on the Issue Date.
"Restricted Payment" means (a) any dividend or distribution (whether
made in cash, securities or other Property) declared or paid on or with respect
to any shares of Capital Stock of the Company or any Restricted Subsidiary
(including any payment in connection with any merger or consolidation with or
into the Company or any Restricted Subsidiary), except for any dividend or
distribution which is made solely to the Company or a Restricted Subsidiary
(and, if such Restricted Subsidiary is not a Wholly Owned Subsidiary, to the
other shareholders of such Restricted Subsidiary on a pro rata basis or on a
basis that results in the receipt by the Company or a Restricted Subsidiary of
dividends or distributions of greater value than it would receive on a pro rata
basis) or any dividend or distribution payable solely in shares of Capital Stock
(other than Redeemable Stock) of the Company; (b) the purchase, repurchase,
redemption, acquisition or retirement for value of any Capital Stock of the
Company or any Affiliate of the Company (other than from the Company or a
Restricted Subsidiary) or any warrants, rights or options to directly or
indirectly purchase or acquire any such Capital Stock or any securities
exchangeable for or convertible into any such Capital Stock, including the
exercise of any option to exchange any Capital Stock (other than for or into
Capital Stock of the Company that is not Disqualified Stock); (c) the purchase,
repurchase, redemption, acquisition, defeasance or retirement for value, prior
to any scheduled maturity, scheduled sinking fund or mandatory redemption
payment, any Subordinated Obligation (other than the purchase, repurchase or
other acquisition of any Subordinated Obligation purchased in anticipation of
satisfying a sinking fund obligation, principal installment
<PAGE> 41
29
or final maturity, in each case due within one year of the date of acquisition);
or (d) any Investment (other than Permitted Investments) in any Person.
"Restricted Period" means the period of 40 consecutive days
beginning on and including the later of (i) the day on which Securities are
first offered to persons other than distributors (as defined in Regulation S) in
reliance on Regulation S and (ii) the Issue Date.
"Restricted Subsidiary" means (a) any Subsidiary of the Company
after the Issue Date unless such Subsidiary shall have been designated an
Unrestricted Subsidiary as permitted or required pursuant to Section 4.15 and
(b) an Unrestricted Subsidiary which is redesignated as a Restricted Subsidiary
as permitted pursuant to Section 4.15.
"Rule 144A" means Rule 144A under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Rule 144A Securities" means the Initial Securities purchased by the
Purchasers from the Company pursuant to the Purchase Agreement, other than the
Regulation S Securities.
"S&P" means Standard & Poor's Ratings Service or any successor to
the rating agency business thereof.
"Sale and Leaseback Transaction" means any arrangement relating to
Property now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such Property to another Person and the Company or a
Restricted Subsidiary leases it from such Person.
"SEC" means the Securities and Exchange Commission or any successor
thereto.
<PAGE> 42
30
"Securities" has the meaning stated in the first recital of this
Indenture.
"Securities Act" means the Securities Act of 1933.
"Senior Debt" of the Company means (a) all obligations consisting of
the principal, premium, if any, and accrued and unpaid interest in respect of
(i) Debt of the Company for borrowed money and (ii) Debt of the Company
evidenced by notes, debentures, bonds or other similar instruments permitted
under this Indenture for the payment of which the Company is responsible or
liable; (b) all Capital Lease Obligations of the Company; (c) all obligations of
the Company (i) for the reimbursement of any obligor on any letter of credit,
bankers' acceptance or similar credit transaction, (ii) under Hedging
Obligations or (iii) issued or assumed as the deferred purchase price of
Property and all conditional sale obligations of the Company and all obligations
under any title retention agreement permitted under this Indenture; and (d) all
obligations of other Persons of the type referred to in clauses (a), (b) and (c)
for the payment of which the Company is responsible or liable as Guarantor;
provided, however, that Senior Debt shall not include (a) Debt of the Company
that is by its terms subordinate in right of payment to the Securities; (B) any
Debt Incurred in violation of the provisions of this Indenture; (C) accounts
payable or any other obligations of the Company to trade creditors created or
assumed by the Company in the ordinary course of business in connection with the
obtaining of materials or services (including Guarantees thereof or instruments
evidencing such liabilities); (D) any liability for Federal, state, local or
other taxes owed or owing by the Company; (E) any obligation of the Company to
any Subsidiary; or (F) any obligations with respect to any Capital Stock of the
Company. "Senior Debt" of any Guarantor has a correlative meaning, provided that
clause (E) above shall be deemed to refer to any obligations of such Guarantor
to the Company or any Subsidiary of the Company.
"Significant Subsidiary" means any Restricted Subsidiary that would
be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02
under Regulation S-X promulgated by the SEC.
<PAGE> 43
31
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Debt of the Company or any
Guarantor (whether outstanding on the Issue Date or thereafter Incurred) which
is subordinate or junior in right of payment to the Securities or the applicable
Guaranty pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
company, association, partnership, joint venture or other business entity of
which more than 50% of the total voting power of shares of Capital Stock or
other interests (including partnership interests) entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled directly or
indirectly, by (i) such Person, (ii) such Person and one or more Subsidiaries of
such Person or (iii) one or more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (a)
Investments in U.S. Government Obligations maturing within one year of the date
of acquisition thereof; (b) Investments in time deposit accounts, certificates
of deposit and money market deposits maturing within one year of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America or any state thereof or any foreign
country recognized by the United States having capital, surplus and undivided
profits aggregating in excess of $500,000,000 (or the foreign currency
equivalent thereof) and whose long-term debt is rated "A-3" or "A-" or higher
according to Moody's or S&P (or such similar equivalent rating by at least one
"nationally recognized statistical rating organization" (as defined in Rule 436
under the Securities Act)); (c) repurchase obligations with a term of not more
than 30 days for underlying securities of the types
<PAGE> 44
32
described in clause (a) entered into with a bank meeting the qualifications
described in clause (b) above; and (d) Investments in commercial paper, maturing
not more than 270 days after the date of acquisition, issued by a corporation
(other than an Affiliate of the Company) organized and in existence under the
laws of the United States of America with a rating at the time as of which any
Investment therein is made of "P-1" (or higher) according to Moody's or "A-1"
(or higher) according to S&P (or such similar equivalent rating by at least one
"nationally recognized statistical rating organization" (as defined in Rule 436
under the Securities Act)).
"Temporary Regulation S Global Notes" has the meaning set forth in
Section 2.01(b) hereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of this Indenture except as required by
Section 9.03 hereof; provided that in the event the Trust Indenture Act of 1939
is amended after such date, "Trust Indenture Act" means, to the extent required
by any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means an officer of the Trustee within the corporate
trust department, including any vice president or trust officer of the Trustee
and also means, with respect to a particular corporate trust matter, any other
officer to whom such corporate trust matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Unrestricted Subsidiary" means (a) any Subsidiary of the Company
that is designated after the Issue Date as an Unrestricted Subsidiary as
permitted pursuant to Section 4.15 and not thereafter redesignated as a
Restricted Subsidiary as permitted pursuant thereto and (b) any Subsidiary of an
Unrestricted Subsidiary.
<PAGE> 45
33
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of any Person means all shares or other equivalents
of Capital Stock of such Person then outstanding and normally entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means, at any time, a Restricted
Subsidiary all the Voting Stock of which (except directors' qualifying shares
and shares held by third parties which, in the aggregate, represent no more than
2% of the outstanding Voting Stock of such Restricted Subsidiary) is at such
time owned, directly or indirectly, by the Company and its other Wholly Owned
Subsidiaries.
SECTION 1.02. Other Definitions.
Defined in
Term Section
"Affiliate Transaction" ......................... 4.07
"Bankruptcy Law" ................................ 6.01(a)
"Change of Control Offer" ....................... 4.08(a)
"Change of Control Payment Date" ................ 4.08(b)
"Change of Control Purchase Price"............... 4.08(a)
"Claiming Guarantor" ............................ 10.02
"Contributing Party" ............................ 10.02
<PAGE> 46
34
"covenant defeasance option" .................... 8.01(b)
"Custodian" ..................................... 6.01(a)
"Events of Default" ............................. 6.01(a)
"Excess Proceeds" ............................... 4.06(c)
"Exchange Offer Registration
Statement".................................... Exhibit 1 to
Appendix A
"legal defeasance option" ....................... 8.01(b)
"Legal Holiday" ................................. 11.08
"Notice of Default" ............................. 6.01(a)
"Obligations" ................................... 10.01
"Offer Amount" .................................. 4.06(d)(2)
"Offer Period" .................................. 4.06(d)(2)
"Paying Agent" .................................. 2.04
"Prepayment Offer" .............................. 4.06(c)
"Prepayment Offer Notice" ....................... 4.06(d)(1)
"Purchase Date" ................................. 4.06(d)(1)
"Registrar"...................................... 2.04
"Surviving Person" .............................. 5.01(a)
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
<PAGE> 47
35
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the
Guarantors and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it by definition in this
Indenture;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
<PAGE> 48
36
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Debt shall not be deemed to be subordinate or junior
to secured Debt merely by virtue of its nature as unsecured Debt;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared
in accordance with GAAP; and
(8) the principal amount of any Preferred Stock shall be the greater
of (i) the maximum liquidation value of such Preferred Stock or (ii) the
maximum mandatory redemption or mandatory repurchase price with respect to
such Preferred Stock.
ARTICLE 2
The Securities
SECTION 2.01. Amount of Securities. The aggregate principal amount
of Securities which may be authenticated and delivered under this Indenture is
$100,000,000. Subject to Section 2.03, the Trustee shall authenticate Initial
Securities for original issue on the Issue Date in the aggregate principal
amount of $100,000,000.
SECTION 2.02. Form and Dating. (a) Provisions relating to the
Initial Securities and the Exchange Securities are set forth in Appendix A,
which is hereby
<PAGE> 49
37
incorporated in and expressly made a part of this Indenture. The Initial
Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit 1 to Appendix A, which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange
Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A, which is incorporated in and expressly
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, if any, or usage, provided that any such notation, legend or
endorsement is in a form reasonably acceptable to the Company. Each Security
shall be dated the date of its authentication. The terms of the Securities set
forth in Exhibit 1 to Appendix A and Exhibit A are part of the terms of this
Indenture.
(b) Upon their original issuance, Rule 144A Securities shall be
issued in the form of one or more Global Notes registered in the name of the
Depositary or its nominee and deposited with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the Trustee, for
credit by the Depositary to the respective accounts of beneficial owners of the
Securities represented thereby (or such other accounts as they may direct). Such
Global Notes are collectively herein called the "Rule 144A Global Note". Upon
their original issuance, Regulation S Securities shall be issued in the form of
one or more temporary Global Notes registered in the name of the Depositary or
its nominee and deposited with the Trustee as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee, for credit to the
Agent Member accounts at the Depositary of Euroclear and/or Cedel for further
credit by Euroclear and Cedel, as the case may be, to the respective accounts of
the beneficial owners of the Securities represented thereby (or such other
accounts as they my direct) (the "Temporary Regulation S Global Notes").
Interests in the Temporary Regulation S Global Notes may only be held by the
Agent Members of the Depositary for Euroclear and Cedel.
SECTION 2.03. Execution and Authentication. Two Officers shall sign
the Securities for the Company by manual or facsimile signature. The Company's
seal shall be impressed, affixed, imprinted or reproduced on the Securities and
may be in facsimile form.
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38
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a written order of the Company for
the authentication and delivery of such Securities signed by two Officers or by
an Officer and either an Assistant Treasurer or an Assistant Secretary of the
Company, and the Trustee in accordance with such written order of the Company
shall authenticate and deliver such Securities.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by the
terms 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 any Registrar, Paying Agent or agent
for service of notices and demands.
SECTION 2.04. Registrar and Paying Agent. The Company shall maintain
in the Borough of Manhattan, City of New York an office or agency where
Securities may be presented for registration of transfer or for exchange (the
"Registrar"), an office or agency where Securities may be presented for payment
(the "Paying Agent") and an office or agency where notices and demands to or
upon the Company in respect of the Securities and this Indenture may be served.
The Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may have one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional paying
<PAGE> 51
39
agent. The Company may change any Paying Agent, Registrar or co-registrar
without notice to any Holder.
The Company shall enter into an appropriate agency agreement with
any Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall notify
the Trustee of the name and address of any such agent 15 days prior to entering
into such agency agreement. If the Company fails to maintain a Registrar or
Paying Agent or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation therefor pursuant to
Section 7.07. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
SECTION 2.05. Paying Agent To Hold Money in Trust. Prior to each due
date of the principal and interest on any Security, the Company shall deposit
with the Paying Agent a sum sufficient to pay such principal and interest when
so becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Securityholders or the Trustee all money held by the Paying Agent for
the payment of principal of or interest on the Securities and shall promptly
notify the Trustee of any default by the Company in making any such payment. If
the Company or a Wholly Owned Subsidiary acts as Paying Agent, it shall
segregate the money held by it as Paying Agent and hold it as a separate trust
fund. 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 shall have no further
liability for the money delivered to the Trustee.
SECTION 2.06. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably
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40
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee, in writing at least five 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, addresses and, if available,
taxpayer identification numbers of Securityholders.
SECTION 2.07. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that such
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the Holder
satisfies any reasonable requirements of the Trustee. If required by the Trustee
or the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Trustee to protect the Company, the Trustee, the Paying Agent,
the Registrar and any co-registrar from any loss that any of them may suffer if
a Security is replaced. The Company and the Trustee may charge the Holder for
their expenses in replacing a Security.
Every replacement Security is an additional obligation of the
Company.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
of mutilated, lost, destroyed or wrongfully taken Securities.
SECTION 2.08. Outstanding Securities. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancelation and those described in this Section
as not outstanding. A Security does not cease to be outstanding because the
Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee
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41
and the Company receive proof satisfactory to them that the replaced Security is
held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money, in immediately
available funds, sufficient to pay all principal and interest payable on that
date with respect to the Securities (or portions thereof) to be redeemed or
maturing, as the case may be, and the Paying Agent is not prohibited from paying
such money to the Securityholders on that date pursuant to the terms of this
Indenture, then on and after that date such Securities (or portions thereof)
cease to be outstanding and interest on them ceases to accrue.
SECTION 2.09. 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. Every such temporary Security shall be
authenticated upon the same conditions and in substantially the same manner, and
with the same effect, as the definitive Securities. Without unreasonable delay,
the Company shall prepare and the Trustee shall authenticate definitive
Securities and deliver them in exchange for temporary Securities. Such exchange
shall be made by the Company at its own expense and without any charge therefor.
Until so exchanged, the temporary Securities shall in all respects be entitled
to the same rights, privileges and benefits under this Indenture as definitive
Securities authenticated and delivered hereunder.
SECTION 2.10. Cancelation. The Company at any time may deliver
Securities to the Trustee for cancelation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
destroy (subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancelation and deliver a certificate of such destruction to the Company, unless
the Company directs the Trustee to deliver canceled Securities to the Company.
If the Company shall acquire any of the Securities, such acquisition shall
<PAGE> 54
42
not operate as a redemption or satisfaction of the indebtedness represented by
such Securities unless and until the same are delivered to the Trustee for
cancelation. The Company may not issue new Securities to replace Securities it
has redeemed, paid or delivered to the Trustee for cancelation.
SECTION 2.11. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, the Company shall pay defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided, however, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
SECTION 2.13. Transfer and Exchange of Interests in Temporary
Regulation S Notes. (a) Beneficial ownership interests in Temporary Regulation S
Global Notes will not be exchangeable for interests in the Rule 144A Global Note
or the Permanent Regulation S Global Note (as defined below), or any other note
without a legend containing restrictions on transfer, until the expiration of
the Restricted Period and then only upon certification in form reasonably
satisfactory to the Trustee that beneficial interests in such Temporary
Regulation S Global Notes are owned either by non-U.S. persons or U.S. persons
who purchased such interests in a transaction that did not require registration
under the Securities Act (the "Regulation S Certification"). During the
Restricted Period, beneficial ownership interests
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in Temporary Regulation S Global Notes may only be sold, pledged or transferred
through Euroclear or Cedel in accordance with the Applicable Procedures and only
(i) to the Company, (ii) so long as such security is eligible for resale
pursuant to Rule 144A under the Securities Act ("Rule 144A"), to a person whom
the selling Holder reasonably believes is a "qualified institutional buyer"
("QIB") as defined in Rule 144A that purchases for its own account or for the
account of a QIB to whom notice is given that the resale, pledge or transfer is
being made in reliance on Rule 144A, (iii) in an offshore transaction in
accordance with Regulation S, (iv) pursuant to an exemption from registration
under the Securities Act provided by Rule 144 (if applicable) under the
Securities Act, or (v) pursuant to an effective registration statement under the
Securities Act, in each case in accordance with any applicable securities laws
of any state of the United States. During the Restricted Period, interests in
the Temporary Regulation S Global Note may not be transferred to institutions
that are "Accredited Investors" (but not QIBs) as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act. Holders of interests in Temporary
Regulation S Global Notes will notify any purchaser of such resale restrictions,
if then applicable.
(b) Following the termination of the Restricted Period, beneficial
ownership interests in the Temporary Regulation S Global Notes may be exchanged
for equivalent beneficial ownership interests in a permanent Global Note (a
"Permanent Regulation S Global Note") in fully registered form, the Rule 144A
Global Note, or any other Security without a legend containing restrictions or
transfer pursuant to the Applicable Procedures of the Depositary and only upon
the receipt by the Trustee and Euroclear or Cedel of the Regulation S
Certification from the owner of such beneficial ownership interest in such
Temporary Regulation S Global Note. The Company shall instruct the Depositary
that, until the expiration of the Restricted Period, beneficial ownership
interests in Regulation S Global Notes may be held only in or through accounts
maintained at the Depositary by Euroclear or Cedel (or by Agent Members acting
for the account thereof), and no person shall be entitled to effect any transfer
or exchange that would result in any such interest being held otherwise than in
or through such an account.
<PAGE> 56
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ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed, the redemption price and that such redemption is being made
pursuant to paragraph 5 of the Securities.
The Company shall give each notice to the Trustee provided for in
this Section at least 45 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which the Securities are listed, or, if the
Securities are not so listed, pro rata or by lot or by a method that the Trustee
considers fair and appropriate. The Trustee shall make the selection from
outstanding Securities not previously called for redemption. The Trustee may
select for redemption portions of the principal of Securities that have
denominations larger than $1,000. Securities and portions of them the Trustee
selects shall be in amounts of $1,000 or a whole multiple of $1,000, except that
if all 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. Provisions of this Indenture that apply to Securities called
for redemption also apply to portions of Securities called for redemption. The
Trustee shall notify the Company promptly of the Securities or portions of
Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least
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45
30 days but not more than 60 days before a date for redemption of Securities,
the Company shall mail a notice of redemption by first-class mail to each Holder
of Securities to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to
be redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, interest on Securities (or
portion thereof) called for redemption ceases to accrue on and after the
redemption date; and
(7) the CUSIP numbers, if any, of the Securities and that no
representation is made as to the correctness or accuracy of such CUSIP
number, if any, listed in such notice or printed on the Securities.
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At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest, if any, to the redemption
date (subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of redemption). 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.
SECTION 3.05. Deposit of Redemption Price. Prior to the redemption
date, the Company shall deposit with the Paying Agent (or, if the Company or a
Wholly Owned 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 (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date that
is on or prior to the date of redemption) 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 cancelation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE 4
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Covenants
SECTION 4.01. Payment of Securities. The Company shall promptly 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, not later than 11:00 a.m. New York City
time, on such date the Trustee or 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 Trustee or the Paying Agent, as the case may be,
is not prohibited from paying such money to the Securityholders on that date
pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. Notwithstanding that the Company may not
be subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with the SEC and provide the Trustee and
Securityholders with such annual reports and such information, documents and
other reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections, such information,
documents and reports to be so filed and provided within 15 days after the times
specified for the filing of such information, documents and reports under such
Sections; provided, however, that the Company shall not be so obligated to file
such information, documents and reports with the SEC if the SEC does not permit
such filings. The Company shall file with the SEC and provide the Trustee and
Securityholders with the information, documents and reports described herein
whether or not (a) the Exchange Offer Registration Statement has been filed or
declared effective or (b) the period to which any such specified information,
document or report relates includes the Issue Date.
SECTION 4.03. Limitation on Debt. The Company shall not, and shall
not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Debt
(which includes,
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48
in the case of Restricted Subsidiaries, Preferred Stock) unless, after giving
pro forma effect to the application of the proceeds thereof, no Default or Event
of Default would occur as a consequence of such Incurrence or be continuing
following such Incurrence and either (a) after giving effect to the Incurrence
of such Debt and the application of the proceeds thereof, the Consolidated
Coverage Ratio would be greater than 2.00 to 1.00 or (b) such Debt is Permitted
Debt.
Notwithstanding the foregoing, the Company shall not, and shall not
permit any Restricted Subsidiary to, Incur any Debt if the proceeds thereof are
used, directly or indirectly, to Refinance any Subordinated Obligations unless
such Debt shall be subordinated to the Securities and the Guaranties, as
applicable, to at least the same extent as such Subordinated Obligations.
SECTION 4.04. Limitation on Restricted Payments. (a) The Company
shall not make, and shall not permit any Restricted Subsidiary to make, directly
or indirectly, any Restricted Payment if at the time of, and after giving pro
forma effect to, such proposed Restricted Payment,
(i) a Default or Event of Default shall have occurred and be
continuing;
(ii) the Company could not Incur at least $1.00 of additional Debt
pursuant to Section 4.03(a); or
(iii) the aggregate amount of such Restricted Payment and all other
Restricted Payments declared or made since the Issue Date (the amount of
any Restricted Payment, if made other than in cash, to be based upon Fair
Market Value) would exceed an amount equal to the sum of:
(A) 50% of the aggregate amount of Consolidated Net Income
accrued during the period (treated as one accounting period) from
and after
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49
the first day of the fiscal quarter following the end of the most
recent fiscal quarter ended immediately prior to the Issue Date to
the end of the most recent fiscal quarter ending at least 45 days
prior to the date of such Restricted Payment (or if the aggregate
amount of Consolidated Net Income for such period shall be a
deficit, minus 100% of such deficit);
(B) Capital Stock Sale Proceeds;
(C) the amount by which Debt (other than Subordinated
Obligations) of the Company or any Guarantor or any other Restricted
Subsidiary is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Subsidiary of the Company)
subsequent to the Issue Date of any Debt of the Company or any
Guarantor or any other Restricted Subsidiary convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of
the Company (less the amount of any cash or other Property
distributed by the Company or any Restricted Subsidiary upon such
conversion or exchange);
(D) an amount equal to the sum of (1) the net reduction in
Investments in any Person other than a Restricted Subsidiary
resulting from dividends, repayments of loans or advances or other
transfers of assets, in each case to the Company or any Restricted
Subsidiary from such Person, and (2) the portion (proportionate to
the Company's equity interest in such Unrestricted Subsidiary) of
the Fair Market Value of the net assets of an Unrestricted
Subsidiary at the time such Unrestricted Subsidiary is designated a
Restricted Subsidiary; provided, however, that the foregoing sum
shall not exceed, in the case of any Person, the amount of
Investments previously made (and treated as a Restricted Payment) by
the Company or any Restricted Subsidiary in such Person; and
(E) $5,000,000.
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(b) Notwithstanding the foregoing limitation, the Company may:
(i) pay dividends on its Capital Stock within 60 days of the
declaration thereof if, on said declaration date, such dividends could
have been paid in compliance with this Indenture; provided, however, that
such dividend shall be included in the calculation of the amount of
Restricted Payments;
(ii) purchase, repurchase, redeem, legally defease, acquire or
retire for value Capital Stock of the Company or Subordinated Obligations
in exchange for, or out of the proceeds of the substantially concurrent
sale of, Capital Stock of the Company (other than Disqualified Stock and
other than Capital Stock issued or sold to a Subsidiary of the Company or
an employee stock ownership plan or trust established by the Company or
any of its Subsidiaries for the benefit of their employees); provided,
however, that (A) such purchase, repurchase, redemption, legal defeasance,
acquisition or retirement shall be excluded in the calculation of the
amount of Restricted Payments and (B) the Capital Stock Sale Proceeds from
such exchange or sale shall be excluded from the calculation pursuant to
clause (a)(iii)(B) above;
(iii) purchase, repurchase, redeem, legally defease, acquire or
retire for value any Subordinated Obligations in exchange for, or out of
the proceeds of the substantially concurrent sale of, Permitted
Refinancing Debt; provided, however, that such purchase, repurchase,
redemption, legal defeasance, acquisition or retirement shall be excluded
in the calculation of the amount of Restricted Payments;
(iv) make Investments in an aggregate amount not to exceed
$20,000,000; provided, however, that such Investments shall be excluded in
the calculation of the amount of Restricted Payments;
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51
(v) repurchase shares of, or options to purchase shares of, common
stock of the Company or any of its Subsidiaries from employees or former
employees of the Company or any of its Subsidiaries, pursuant to the terms
of agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors under which such individuals
purchase or sell, or are granted the option to purchase or sell, shares of
such common stock; provided, however, that the aggregate amount of such
repurchases shall not exceed $2,000,000 in any calendar year; provided
further, however, that such repurchases shall be excluded in the
calculation of the amount of Restricted Payments;
(vi) expend up to $10,000,000 for Restricted Payments in addition to
amounts permitted pursuant to clauses (i) through (v) above; provided,
however, that at the time of, and after giving pro forma effect to, any
such expenditure, no Default or Event of Default shall have occurred and
be continuing; provided further, however, that such expenditures shall be
excluded in the calculation of the amount of Restricted Payments;
(vii) make Restricted Payments, including a cash dividend in an
aggregate amount not to exceed $20,000,000, in connection with the
Recapitalization; provided, however, that such dividends shall be excluded
in the calculation of the amount of Restricted Payments; and
(viii) make Restricted Payments required pursuant to the Plan of
Reorganization in an aggregate amount not to exceed the lesser of (A) the
amount held in reserve thereunder and (B) $4,000,000, plus, in each case,
interest and dividends thereon; provided, however, that such payments
shall be excluded in the calculation of the amount of Restricted Payments.
(c) In computing Consolidated Net Income of the Company under
paragraph (a) above, (i) the Company shall use audited financial statements for
the portions of the relevant period for which audited financial statements are
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52
available on the date of determination and unaudited financial statements and
other current financial data based on the books and records of the Company for
the remaining portion of such period and (ii) the Company shall be permitted to
rely in good faith on the financial statements and other financial data derived
from the books and records of the Company that are available on the date of
determination. If the Company makes a Restricted Payment which, at the time of
the making of such Restricted Payment, would in the good faith determination of
the Company be permitted under the requirements of this Indenture, such
Restricted Payment shall be deemed to have been made in compliance with this
Indenture notwithstanding any subsequent adjustments made in good faith to the
Company's financial statements affecting Consolidated Net Income of the Company
for any period.
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist any consensual restriction on the right of any Restricted
Subsidiary to (a) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock, or pay any Debt or other
obligation owed, to the Company or any other Restricted Subsidiary, except that
any Debt owed by a Restricted Subsidiary to the Company or any other Restricted
Subsidiary may be subordinated in right of payment to other Debt obligations of
such Restricted Subsidiary, (b) make any loans or advances to the Company or any
other Restricted Subsidiary, except that any repayment obligations of the
Company or any other Restricted Subsidiary in respect of such loans or advances
may be subordinated in right of payment to other Debt obligations of the Company
or such other Restricted Subsidiary or (c) transfer any of its Property to the
Company or any other Restricted Subsidiary. The foregoing limitations will not
apply (i) with respect to clauses (a), (b) and (c), to restrictions (A) in
effect on the Issue Date, (B) relating to Debt of a Restricted Subsidiary and
existing at the time it became a Restricted Subsidiary if such restriction was
not created in connection with or in anticipation of the transaction or series
of transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company or (C) which result from the
Refinancing of Debt Incurred pursuant to an agreement referred to in the
immediately preceding clause (i)(A) or (B) above or in clause (ii)(A) or (B)
below, provided such restriction is not materially less favorable to the Holders
of Securities than those under the
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agreement evidencing the Debt so Refinanced, and (ii) with respect to clause (c)
only, to restrictions (A) relating to Debt that is permitted to be Incurred and
is not prohibited from being secured without also securing the Notes or the
Guaranties pursuant to Section 4.03 and Section 4.11 that limit the right of the
debtor to dispose of the Property securing such Debt, (B) encumbering Property
at the time such Property was acquired by the Company or any Restricted
Subsidiary, so long as such restriction relates solely to the Property so
acquired and was not created in connection with or in anticipation of such
acquisition, (C) resulting from customary provisions restricting subletting or
assignment of leases or customary provisions in other agreements that restrict
assignment of such agreements or rights thereunder, (D) customary restrictions
contained in asset sale or stock purchase agreements limiting the transfer of
such Property pending the closing of such transaction or (E) any restriction
imposed by applicable law.
SECTION 4.06. Limitation on Asset Sales. (a) The Company shall not,
and shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Sale unless (i) the Company or such Restricted Subsidiary
receives consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the Property subject to such Asset Sale; (ii) at least 75% of
the consideration paid to the Company or such Restricted Subsidiary in
connection with such Asset Sale is in the form of cash or cash equivalents; and
(iii) the Company delivers an Officers' Certificate to the Trustee certifying
that such Asset Sale complies with the foregoing clauses (i) and (ii). For
purposes of this covenant, the following are deemed to be cash: (x) the amount
of any liabilities (other than liabilities that are by their terms subordinated
to any other Debt of the Company or such Restricted Subsidiary, as the case may
be) of the Company or such Restricted Subsidiary (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet or in the notes thereto)
that are assumed by the transferee of any such assets or other property in such
Asset Sale, as a result of which the Company or the Restricted Subsidiaries are
no longer obligated with respect to such liabilities and (y) securities received
by the Company or any Restricted Subsidiary from the transferee that are
immediately converted by the Company or such Restricted Subsidiary into cash.
<PAGE> 66
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(b) The Net Available Cash (or any portion thereof) from Asset Sales
(or an amount equal thereto) may be applied by the Company or a Restricted
Subsidiary, to the extent the Company or such Restricted Subsidiary elects (or
is required by the terms of any Debt): (i) to prepay, repay, legally defease or
purchase Senior Debt of the Company or any Guarantor or Debt of any Restricted
Subsidiary that is not a Guarantor (excluding, in any such case, any Debt owed
to the Company or an Affiliate of the Company); or (ii) to reinvest in
Additional Assets (including by means of an Investment in Additional Assets by a
Restricted Subsidiary in an amount equal to such Net Available Cash received by
the Company or another Restricted Subsidiary); provided, however, that in
connection with any prepayment, repayment, legal defeasance or purchase of Debt
pursuant to clause (i) above, the Company or such Guarantor or other Restricted
Subsidiary shall retire such Debt and shall cause the related loan commitment
(if any) to be permanently reduced by an amount equal to the principal amount so
prepaid, repaid, legally defeased or purchased.
(c) In the event that any Net Available Cash from an Asset Sale (or
an amount equal thereto) is not applied in accordance with the preceding
paragraph within 270 days from the date of the receipt of such Net Available
Cash, such Net Available Cash shall constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $5,000,000 (taking into account
income earned on such Excess Proceeds, if any), the Company will be required to
make an offer to purchase (the "Prepayment Offer") the Securities which offer
shall be in the amount of the Excess Proceeds, on a pro rata basis according to
principal amount, at a purchase price equal to 100% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the purchase date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) in accordance with
the procedures (including prorating in the event of oversubscription) set forth
in this Indenture. To the extent that any portion of the amount of Net Available
Cash remains after compliance with the preceding sentence and provided that all
Holders of Securities have been given the opportunity to tender their Securities
for purchase as described in Section 4.06(d), the Company may use such remaining
amount for any purpose permitted by this Indenture and the amount of Excess
Proceeds will be reset to zero.
(d)(1) Within ten business days after the Company
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is obligated to make a Prepayment Offer as described in the preceding paragraph,
the Company shall send a written notice, by first-class mail, to the Trustee and
the Holders of Securities (the "Prepayment Offer Notice"), accompanied by such
information regarding the Company and its Subsidiaries as the Company in good
faith believes will enable such Holders to make an informed decision with
respect to such Prepayment Offer. The Prepayment Offer Notice shall state, among
other things, (i) that the Company is offering to purchase Securities pursuant
to the provisions of this Indenture, (ii) that any Security (or any portion
thereof) accepted for payment (and duly paid on the Purchase Date) pursuant to
the Prepayment Offer shall cease to accrue interest on the Purchase Date, (iii)
that any Securities (or portions thereof) not properly tendered shall continue
to accrue interest, (iv) the purchase price and purchase date, which shall be,
subject to any contrary requirements of applicable law, no less than 30 days nor
more than 60 days after the date the Prepayment Offer Notice is mailed (the
"Purchase Date"), (v) the aggregate principal amount of Securities to be
purchased, (vi) a description of the procedures which Holders of Securities must
follow in order to tender their Securities and the procedures that Holders of
Securities must follow in order to withdraw an election to tender their
Securities for payment and (vii) all other instructions and materials necessary
to enable Holders to tender Securities pursuant to the Prepayment Offer.
(2) Not later than the date upon which written notice of a
Prepayment Offer is delivered to the Trustee as provided above, the Company
shall deliver to the Trustee an Officers' Certificate as to (i) the amount of
the Prepayment Offer (the "Offer Amount"), (ii) the allocation of the Net
Available Cash from the Asset Sales pursuant to which such Prepayment Offer is
being made and (iii) the compliance of such allocation with the provisions of
Section 4.06(a). On such date, the Company shall also irrevocably deposit with
the Trustee or with the Paying Agent (or, if the Company or a Wholly Owned
Subsidiary is the Paying Agent, shall segregate and hold in trust) in Temporary
Cash Investments, maturing on the last day prior to the Purchase Date or on the
Purchase Date if funds are immediately available by open of business, an amount
equal to the Offer Amount to be held for payment in accordance with the
provisions of this Section. Upon the expiration of the period for which the
Prepayment Offer remains open (the "Offer Period"), the Company shall deliver to
the Trustee for cancelation the Securities or portions thereof which have been
properly tendered to and are to be accepted by the Company. The Trustee or the
Paying Agent shall, on the Purchase Date,
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mail or deliver payment to each tendering Holder in the amount of the purchase
price. In the event that the aggregate purchase price of the Securities
delivered by the Company to the Trustee is less than the Offer Amount, the
Trustee or the Paying Agent shall deliver the excess to the Company immediately
after the expiration of the Offer Period for application in accordance with this
Section.
(3) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Company or its agent at the address specified in the notice at least three
Business Days prior to the Purchase Date. Holders shall be entitled to withdraw
their election if the Trustee or the Company receives not later than one
Business Day prior to the Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security which was delivered for purchase by the Holder and a
statement that such Holder is withdrawing his election to have such Security
purchased. If at the expiration of the Offer Period the aggregate principal
amount of Securities surrendered by Holders exceeds the Offer Amount, the
Company shall select the Securities to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000, or integral multiples thereof, shall be
purchased). Holders whose Securities are purchased only in part shall be issued
new Securities equal in principal amount to the unpurchased portion of the
Securities surrendered.
(4) At the time the Company delivers Securities to the Trustee which
are to be accepted for purchase, the Company shall also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Company
pursuant to and in accordance with the terms of this Section. A Security shall
be deemed to have been accepted for purchase at the time the Trustee or the
Paying Agent mails or delivers payment therefor to the surrendering Holder.
(e) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any
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securities laws or regulations conflict with provisions of this Section, the
Company will comply with the applicable securities laws and regulations and will
not be deemed to have breached its obligations under this Section by virtue
thereof.
SECTION 4.07. Limitation on Transactions with Affiliates. (a) The
Company shall not, and shall not permit any Restricted Subsidiary to, directly
or indirectly, conduct any business or enter into or suffer to exist any
transaction or series of transactions (including the purchase, sale, transfer,
assignment, lease, conveyance or exchange of any Property or the rendering of
any service) with, or for the benefit of, any Affiliate of the Company (an
"Affiliate Transaction"), unless (a) the terms of such Affiliate Transaction are
(i) set forth in writing and (ii) no less favorable to the Company or such
Restricted Subsidiary, as the case may be, than those that could be obtained in
a comparable arm's-length transaction with a Person that is not an Affiliate of
the Company, (b) if such Affiliate Transaction involves aggregate payments or
value in excess of $2,000,000, the Board of Directors (including a majority of
the disinterested members of the Board of Directors) approves such Affiliate
Transaction and, in its good faith judgment, believes that such Affiliate
Transaction complies with clause (a) (ii) of this paragraph as evidenced by a
Board Resolution promptly delivered to the Trustee and (c) if such Affiliate
Transaction involves aggregate payments or value in excess of $15,000,000, the
Company obtains a written opinion from an Independent Appraiser to the effect
that the consideration to be paid or received in connection with such Affiliate
Transaction is fair, from a financial point of view, to the Company or such
Restricted Subsidiary, as the case may be.
(b) Notwithstanding the foregoing limitation, the Company or any
Restricted Subsidiary may enter into or suffer to exist the following:
(i) any transaction or series of transactions between the Company
and one or more Restricted Subsidiaries or between two or more Restricted
Subsidiaries in the ordinary course of business, provided that no more
than 5% of the total voting power of the Voting Stock (on a fully diluted
basis) of any such Restricted Subsidiary is owned by an Affiliate of
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the Company (other than a Restricted Subsidiary);
(ii) any Restricted Payment permitted to be made pursuant to Section
4.04;
(iii) the payment of compensation (including amounts paid pursuant
to employee benefit plans) for the personal services of officers,
directors and employees of the Company or any of the Restricted
Subsidiaries, so long as the Board of Directors in good faith shall have
approved the terms thereof and deemed the services theretofore or
thereafter to be performed for such compensation to be fair consideration
therefor; and
(iv) the payment of reasonable fees to directors of the Company or
such Restricted Subsidiary (x) who are not employees of the Company or any
Restricted Subsidiary or (y) who are employees of the Company or any
Restricted Subsidiary, provided that such fees are consistent with the
past practices of the Company or such Restricted Subsidiary.
SECTION 4.08. Change of Control. (a) Upon the occurrence of a Change
of Control, each Holder of Securities shall have the right to require the
Company to repurchase all or any part (equal to $1,000 in principal amount or an
integral multiple thereof) of such Holder's Securities pursuant to the offer
described below (the "Change of Control Offer") at a purchase price (the "Change
of Control Purchase Price") equal to 101% of the principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the purchase date (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant interest payment date).
(b) Within 30 days following any Change of Control, the Company
shall (a) cause a notice of the Change of Control Offer to be sent at least once
to the Dow Jones News Service or similar business news service in the United
States and (b) send, by first-class mail, with a copy to the Trustee, to each
Holder of Securities, at such
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Holder's address appearing in the Security Register, a notice stating: (i) that
a Change of Control has occurred and a Change of Control Offer is being made
pursuant to this Section and that all Securities (or portions thereof) timely
tendered will be accepted for payment; (ii) the Change of Control Purchase Price
and the purchase date, which shall be, subject to any contrary requirements of
applicable law, 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) the circumstances and relevant facts regarding such Change of Control
(including information with respect to pro forma historical income, cash flow
and capitalization after giving effect to the Change of Control); (iv) that any
Securities (or portion thereof) accepted for payment (and duly paid on the
Change of Control Payment Date) pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Payment Date; (v) that any
Securities (or portions thereof) not tendered will continue to accrue interest;
and (vi) the procedures that Holders of Securities must follow in order to
tender their Securities (or portions thereof) for payment, and the procedures
that Holders of Securities must follow in order to withdraw an election to
tender Securities (or portions thereof) for payment.
(c) Holders electing to have a Security purchased will be required
to surrender the Security, with an appropriate form (which may include the form
on the reverse thereof) duly completed, to the Company or its agent at the
address specified in the notice at least three Business Days prior to the Change
of Control Payment Date. Holders will be entitled to withdraw their election if
the Trustee or the Company receives not later than one Business Day prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Security which was delivered for purchase by the Holder and a statement that
such Holder is withdrawing his election to have such Security purchased. Holders
whose Securities are purchased only in part shall be issued new Securities equal
in principal amount to the unpurchased portion of the Securities surrendered.
(d) On or prior to the Change of Control Payment Date, the Company
shall irrevocably deposit with the Trustee or with the Paying Agent (or, if the
Company or any of its Wholly Owned Subsidiaries is acting as the Paying Agent,
segregate and hold in trust) in cash an amount equal to the
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Change of Control Purchase Price payable to the Holders entitled thereto, to be
held for payment in accordance with the provisions of this Section. On the
Change of Control Payment Date, the Company shall deliver to the Trustee the
Securities or portions thereof which have been properly tendered to and are to
be accepted by the Company for payment. The Trustee or the Paying Agent shall,
on the Change of Control Payment Date, mail or deliver payment to each tendering
Holder of the Change of Control Purchase Price. In the event that the aggregate
Change of Control Purchase Price is less than the amount delivered by the
Company to the Trustee or the Paying Agent, the Trustee or the Paying Agent, as
the case may be, shall deliver the excess to the Company immediately after the
Change of Control Payment Date.
(e) At the time the Company delivers Securities to the Trustee which
are to be accepted for purchase, the Company shall also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Company
pursuant to and in accordance with the terms of this Section. A Security shall
be deemed to have been accepted for purchase at the time the Trustee or the
Paying Agent mails or delivers payment therefor to the surrendering Holder.
(f) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to a
Change of Control Offer. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of the covenant described
hereunder, the Company will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the
covenant described hereunder by virtue of such compliance.
SECTION 4.09. Compliance Certificate. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
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Default, its status and what action the Company is taking or proposes to take
with respect thereto. The Company and the Guarantors also shall comply with
Section 314(a)(4) of the TIA.
SECTION 4.10. Further Instruments and Acts. Upon request of the
Trustee, the Company shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.11. Limitation on Liens. The Company shall not, and shall
not permit any Restricted Subsidiary to, directly or indirectly, Incur or suffer
to exist, any Lien (other than Permitted Liens) upon any of its Property
(including Capital Stock of a Restricted Subsidiary), whether owned at the Issue
Date or thereafter acquired, or any interest therein or any income or profits
therefrom, unless it has made or will make effective provision whereby the
Initial Securities or the applicable Guaranty will be secured by such Lien
equally and ratably with (or prior to) all other Debt of the Company or any
Restricted Subsidiary secured by such Lien.
SECTION 4.12. Future Guarantors. The Company shall cause each
domestic Restricted Subsidiary of the Company that Incurs Debt, including
pursuant to a Guarantee of the Credit Facility, following the Issue Date to
execute and deliver to the Trustee a Guaranty.
SECTION 4.13. Limitation on Sale and Leaseback Transactions. The
Company shall not, and shall not permit any Restricted Subsidiary to, enter into
any Sale and Leaseback Transaction with respect to any Property unless (a) the
Company or such Restricted Subsidiary would be entitled to (i) Incur Debt in an
amount equal to the Attributable Debt with respect to such Sale and Leaseback
Transaction pursuant to Section 4.03 and (ii) create a Lien on such Property
securing such Attributable Debt without securing the Securities pursuant to
Section 4.11 and (b) such Sale and Leaseback Transaction is effected in
compliance with Section 4.06.
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SECTION 4.14. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries. The Company shall not (a) sell or otherwise dispose of
any shares of Capital Stock of a Restricted Subsidiary or (b) permit any
Restricted Subsidiary to, directly or indirectly, issue or sell or otherwise
dispose of any shares of its Capital Stock other than (i) directors' qualifying
shares, (ii) to the Company or a Wholly Owned Subsidiary or (iii) if,
immediately after giving effect to such disposition, such Restricted Subsidiary
would no longer constitute a Restricted Subsidiary; provided, however, that, in
the case of this clause (iii), such disposition is effected in compliance with
Section 4.06. In the event of the consummation of a sale of all the Capital
Stock of a Restricted Subsidiary that is also a Guarantor pursuant to the
foregoing clause (iii) and the execution and delivery of a supplemental
indenture in form satisfactory to the Trustee, such Guarantor shall be released
from all its obligations under its Guaranty.
SECTION 4.15. Designation of Restricted and Unrestricted
Subsidiaries. The Board of Directors may designate any Subsidiary of the Company
to be an Unrestricted Subsidiary if (a) the Subsidiary to be so designated does
not own any Capital Stock or Debt of, or own or hold any Lien on any Property
of, the Company or any other Restricted Subsidiary, (b) the Subsidiary to be so
designated is not obligated under any Debt, Lien or other obligation that, if in
default, would result (with the passage of time or notice or otherwise) in a
default on any Debt of the Company or of any Restricted Subsidiary and (c)
either (i) the Subsidiary to be so designated has total assets of $1,000 or less
or (ii) such designation is effective immediately upon such entity becoming a
Subsidiary of the Company. Unless so designated as an Unrestricted Subsidiary,
any Person that becomes a Subsidiary of the Company will be classified as a
Restricted Subsidiary; provided, however, that such Subsidiary shall not be
designated a Restricted Subsidiary and shall be automatically classified as an
Unrestricted Subsidiary if either of the requirements set forth in clauses (x)
and (y) of the immediately following paragraph will not be satisfied after
giving pro forma effect to such classification. Except as provided in the first
sentence of this paragraph, no Restricted Subsidiary may be redesignated as an
Unrestricted Subsidiary.
The Board of Directors may designate any
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Unrestricted Subsidiary to be a Restricted Subsidiary if, immediately after
giving pro forma effect to such designation, (x) the Company could Incur at
least $1.00 of additional Debt pursuant to clause (a) of the first paragraph of
Section 4.03 and (y) no Default or Event of Default shall have occurred and be
continuing or would result therefrom.
Any such designation or redesignation by the Board of Directors will
be evidenced to the Trustee by filing with the Trustee a Board Resolution giving
effect to such designation or redesignation and an Officers' Certificate (a)
certifying that such designation or redesignation complies with the foregoing
provisions and (b) giving the effective date of such designation or
redesignation, such filing with the Trustee to occur within 45 days after the
end of the fiscal quarter of the Company in which such designation or
redesignation is made (or, in the case of a designation or redesignation made
during the last fiscal quarter of the Company's fiscal year, within 90 days
after the end of such fiscal year).
ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets. (a) The
Company shall not merge, consolidate or amalgamate with or into any other Person
(other than a merger of a Wholly Owned Subsidiary into the Company) or sell,
transfer, assign, lease, convey or otherwise dispose of all or substantially all
its Property in any one transaction or series of transactions unless: (i) the
Company shall be the surviving Person (the "Surviving Person") or the Surviving
Person (if other than the Company) formed by such merger, consolidation or
amalgamation or to which such sale, transfer, assignment, lease, conveyance or
disposition is made shall be a corporation organized and existing under the laws
of the United States of America, any State thereof or the District of Columbia;
(ii) the Surviving Person (if other than the Company) expressly assumes, by
supplemental indenture in form satisfactory to
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the Trustee, executed and delivered to the Trustee by such Surviving Person, the
due and punctual payment of the principal of, and premium, if any, and interest
on, all the Securities, according to their tenor, and the due and punctual
performance and observance of all the covenants and conditions of this Indenture
to be performed by the Company; (iii) in the case of a sale, transfer,
assignment, lease, conveyance or other disposition of all or substantially all
the Property of the Company, such Property shall have been transferred as an
entirety or virtually as an entirety to one Person; (iv) immediately before and
after giving effect to such transaction or series of transactions on a pro forma
basis (and treating, for purposes of this clause (iv) and clauses (v) and (vi)
below, any Debt which becomes, or is anticipated to become, an obligation of the
Surviving Person or any Restricted Subsidiary as a result of such transaction or
series of transactions as having been Incurred by the Surviving Person or such
Restricted Subsidiary at the time of such transaction or series of
transactions), no Default or Event of Default shall have occurred and be
continuing; (v) immediately after giving effect to such transaction or series of
transactions on a pro forma basis, the Company or the Surviving Person, as the
case may be, would be able to Incur at least $1.00 of additional Debt under
Section 4.03(a); (vi) immediately after giving effect to such transaction or
series of transactions on a pro forma basis, the Surviving Person shall have a
Consolidated Net Worth in an amount which is not less than the Consolidated Net
Worth of the Company immediately prior to such transaction or series of
transactions; and (vii) the Company shall deliver, or cause to be delivered, to
the Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel, each stating that such
transaction and the supplemental indenture, if any, in respect thereto comply
with this covenant and that all conditions precedent herein provided for
relating to such transaction have been satisfied.
(b) The Surviving Person shall succeed to, and be substituted for,
and may exercise every right and power of the Company under this Indenture, but
the predecessor Company in the case of a sale, transfer, assignment, lease,
conveyance or other disposition shall not be released from the obligation to pay
the principal of, and premium, if any, and interest on, the Securities.
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ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. The following events shall be
"Events of Default":
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and payable, and such default continues for a
period of 30 days;
(2) the Company defaults in the payment of the principal of, or
premium, if any, on, any Security when the same becomes due and payable at
its Stated Maturity, upon optional redemption, upon required repurchase,
upon acceleration or otherwise;
(3) the Company fails to comply with Article 5;
(4) the Company fails to comply with any other covenant or agreement
in the Securities or in this Indenture (other than a failure which is the
subject of the foregoing clause (1), (2) or (3)) and such failure
continues for 30 days after written notice is given to the Company as
provided below;
(5) a default by the Company or any Restricted Subsidiary under any
Debt of the Company or any Restricted Subsidiary which results in
acceleration of the maturity of such Debt, or failure to pay any such Debt
at maturity, in an aggregate amount greater than $5,000,000;
(6) any judgment or judgments for the payment of money in an
aggregate amount in excess of $5,000,000
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shall be rendered against the Company or any Restricted Subsidiary and
shall not be waived, satisfied or discharged for any period of 30
consecutive days during which a stay of enforcement shall not be in
effect;
(7) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its property;
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(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary; or
(D) is for any similar relief granted under any foreign laws;
and in each such case the order or decree remains unstayed and in effect
for 60 days; and
(9) any Guaranty ceases to be in full force and effect (other than
in accordance with the terms of this Indenture and such Guaranty) or any
Guarantor denies or disaffirms its obligations under its Guaranty.
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (4) is not an Event of Default until the
Trustee or the Holders of not less than 25% in aggregate principal amount of the
Securities then outstanding notify the Company (and, in the case of such notice
by Holders, the Trustee) of the Default and the Company does not cure such
Default within the time specified after receipt of such notice. Such notice must
specify the Default, demand that it be remedied and state that such notice is a
"Notice of Default."
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The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Default or Event of Default, its status and what action the Company is
taking or proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.01(7) or (8)) occurs and is continuing,
the Trustee by notice to the Company, or the Holders of at least 25% in
aggregate principal amount of the Securities then outstanding by notice to the
Company and the Trustee, may declare the principal amount of all the Securities
then outstanding plus accrued but unpaid interest to the date of acceleration to
be immediately due and payable. In the case of an Event of Default specified in
Section 6.01(7) or (8), such amount with respect to all the Securities shall be
due and payable immediately without any declaration or other act on the part of
the Trustee or the Securityholders. The Holders of a majority in aggregate
principal amount of the Securities then outstanding by notice to the Trustee and
the Company may rescind any declaration of acceleration if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration. No such rescission shall affect
any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal 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 Securityholder 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. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
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SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
aggregate principal amount of the Securities by notice to the Trustee may waive
an existing Default and its consequences except (i) a Default in the payment of
the principal of or interest on a Security or (ii) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each
Securityholder affected. When a Default is waived, it is deemed cured, but no
such waiver shall extend to any subsequent or other Default or impair any
consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in
aggregate principal amount of the Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee with respect to the
Securities. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture or, subject to Section 7.01, that the
Trustee determines is unduly prejudicial to the rights of other Securityholders
or would involve the Trustee in personal liability; provided, however, that the
Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction. Prior to taking any action hereunder, the
Trustee shall be entitled to reasonable indemnity against all losses and
expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. A Securityholder may not pursue
any remedy with respect to this Indenture or the Securities unless:
(1) such Holder shall have previously given to the Trustee written
notice of a continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of the
Securities then outstanding shall have made a written request, and such
Holder of or Holders shall have offered reasonable indemnity, to the
Trustee to pursue such proceeding as trustee; and
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(3) the Trustee has failed to institute such proceeding and has not
received from the Holders of at least a majority in aggregate principal
amount of the Securities then outstanding a direction inconsistent with
such request, within 60 days after such notice, request and offer.
The foregoing limitations on the pursuit of remedies by a
Securityholder shall not apply to a suit instituted by a Securityholder for the
enforcement of payment of the principal of or interest on such Security on or
after the applicable due date specified in such Security. A Securityholder may
not use this Indenture to prejudice the rights of another Securityholder or to
obtain a preference or priority over another Securityholder.
SECTION 6.07. 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 held by such Holder, 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 such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may 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 and the Securityholders
allowed in any judicial proceedings relative to the Company, any Guarantor,
their creditors or their property and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee
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and, if the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, and any liquidated damages
without preference or priority of any kind, according to the amounts due
and payable on the Securities for principal and interest, respectively;
and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment
to Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Trustee a notice
that states the record date, the payment date and amount to be paid.
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SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in aggregate principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. Neither the Company
nor any Guarantor (to the extent it may lawfully do so) shall at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension 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 and each Guarantor (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and shall not hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise 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.
(b) Except during the continuance of an Event of
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Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section;
(2) 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; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) and (f) of this Section.
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(e) 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.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture 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 in the exercise of any of its
rights or powers, if it 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.
(h) 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 and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated in
the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) 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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(d) 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; provided, however, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) Unless otherwise specifically provided herein, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(g) The Company, the Paying Agent, the Registrar, the Trustee and
any agent of the Company, the Paying Agent, the Registrar or the Trustee 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 or on
account of the principal of and, subject to the provisions of this Indenture,
interest on such Security and for all other purposes; and neither the Company,
the Paying Agent, the Registrar nor the Trustee nor any agent of the Company,
the Paying Agent, the Registrar or the Trustee shall be affected by any notice
to the contrary.
SECTION 7.03. 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 its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as
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to the validity or adequacy of this Indenture or the Securities, it shall not be
accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company or any Guarantor in
this Indenture or in any document issued in connection with the sale of the
Securities or in the Securities other than the Trustee's certificate of
authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the employees of the Trustee with
responsibility for the Securities, the Trustee shall mail to each Securityholder
notice of the Default within the earlier of 90 days after it is known to such
employees of the Trustee or written notice of it is received by the Trustee.
Except in the case of a Default in payment of principal of or interest 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 Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning May 15, 1998, and in any event prior to
July 15 in each year, the Trustee shall mail to each Securityholder a brief
report dated as of such May 15 that complies with Section 313(a) of the TIA. The
Trustee shall also comply with Section 313(b) of the TIA.
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to
the Trustee from time to time reasonable compensation for its services. 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 out-of-pocket expenses incurred or made by it,
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including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company shall indemnify the Trustee against any and all loss,
liability or expense (including reasonable attorneys' fees) incurred by it in
connection with the acceptance and administration of this trust and the
performance of its duties hereunder or in connection with the placement or
administration of the Securities, including the costs and expenses of enforcing
this Indenture against the Company and of defending itself against any claim
(whether asserted by any Holder or by the Company). The Trustee shall notify the
Company of any claim for which it may seek indemnity. Failure by the Trustee to
so notify the Company shall not relieve the Company of its obligations
hereunder. The Company shall defend any such claim at the Company's expense with
counsel satisfactory to the Trustee. If the Trustee shall not consent to the
Company's assumption of defense, the Trustee may have separate counsel and the
Company shall pay the fees and expenses of such counsel. The Company need not
reimburse any expense or indemnify against any loss, liability or expense
incurred by an indemnified party through such party's own wilful misconduct,
negligence or bad faith. The Company need not pay for any settlement made by the
Trustee without the Company's consent, such consent not to be unreasonably
withheld or delayed.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities. Such lien shall survive the
satisfaction and discharge of this Indenture and the resignation or removal of
the Trustee.
The Company's payment obligations pursuant to this Section shall
survive the satisfaction or discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of a Default specified in Section 6.01(7) or (8),
the expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any
time by so notifying the Company. The Holders of a majority in aggregate
principal amount of
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the Securities then outstanding may remove the Trustee by so notifying the
Trustee and may appoint a successor Trustee. The Company shall remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders
of a majority in aggregate principal amount of the Securities then outstanding
and such Holders do not reasonably promptly appoint a successor Trustee, or if a
vacancy exists in the office of Trustee for any reason (the Trustee in such
event being referred to herein as the retiring Trustee), the Company shall
promptly appoint 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 Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
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 aggregate principal amount of the Securities then
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outstanding may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
(who has been bona fide Holder of a Security for at least six months) may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
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 to the 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 to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the 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 7.10. Eligibility; Disqualification. The Trustee shall at
all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
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recent published annual report of condition. The Trustee shall comply with TIA
ss. 310(b); provided, however, that there shall be excluded from the operation
of TIA ss. 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a)
When (i) the Company delivers to the Trustee all outstanding Securities (other
than Securities replaced pursuant to Section 2.07) for cancelation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article 3 and the
Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity or upon redemption all outstanding Securities, including interest
thereon to maturity or such redemption date (other than Securities replaced
pursuant to Section 2.07), and if in either case the Company pays all other sums
payable hereunder by the Company, then this Indenture shall, subject to Section
8.01(c), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel and at the
cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the
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Company at any time may terminate (i) all its obligations under the Securities
and this Indenture ("legal defeasance option") or (ii) its obligations under
Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14, 4.15,
5.01(a)(iv) (to the extent relating to such other Sections), 5.01(a)(v) and
5.01(a)(vi) and the operation of Section 6.01(4) (to the extent relating to such
other Sections), Section 6.01(5), 6.01(6), 6.01(7) (with respect only to
Significant Subsidiaries), 6.01(8) (with respect only to Significant
Subsidiaries) and 6.01(9) ("covenant defeasance option"). The Company may
exercise its legal defeasance option notwithstanding its prior exercise of its
covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Section 6.01(3) and
6.01(4) (with respect to the Sections of Articles 4 and 5 identified in the
immediately preceding paragraph), 6.01(5), 6.01(6), 6.01(7) (with respect only
to Significant Subsidiaries), 6.01(8) (with respect only to Significant
Subsidiaries) and 6.01(9). If the Company exercises its legal defeasance option
or its covenant defeasance option, each Guarantor shall be released from all its
obligations under its Guaranty.
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.05 and 8.06 and
Appendix A shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
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(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of principal of and
interest on the Securities to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest when due
on all the Securities to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Section 6.01(7) or (8) with respect to the
Company occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or
is qualified as, a regulated investment company under the Investment
Company Act of 1940;
(6) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this Indenture there
has been a change in the applicable Federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Securityholders will not recognize income, gain or loss
for Federal income
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tax purposes as a result of such defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times
as would have been the case if such defeasance had not occurred;
(7) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders will not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and will be subject
to Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such covenant defeasance had not
occurred; and
(8) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
8 have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. 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 8.04. Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Company
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upon written request any money held by them for the payment of principal or
interest that remains unclaimed for two years, and, thereafter, Securityholders
entitled to the money must look to the Company for payment as general creditors;
provided, however, that the Trustee or such Paying Agent before being required
to make any such repayment, may at the expense of the Company cause to be mailed
to each such Holder a notice that said moneys have not been so applied and that
after a date named therein any unclaimed balance of said moneys then remaining
will be returned to the Company.
SECTION 8.05. 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 deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 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 8 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 8; 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 9
Amendments
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SECTION 9.01. Without Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(a) to cure any ambiguity, omission, defect or inconsistency;
(b) to comply with Article 5;
(c) to provide for uncertificated Securities in addition to or in
place of certificated Securities (provided that the uncertificated
Securities are issued in registered form for purposes of Section 163(f) of
the Code, or in a manner such that the uncertificated Securities are
described in Section 163(f)(2)(B) of the Code);
(d) to add additional Guaranties with respect to the Securities or
to release Guarantors from Guaranties as provided by the terms of this
Indenture;
(e) to secure the Securities;
(f) to add to the covenants of the Company for the benefit of the
Holders of the Securities or to surrender any right or power conferred
upon the Company;
(g) to comply with any requirement of the SEC in connection with the
qualification of this Indenture under the Trust Indenture Act; or
(h) to make any change that does not adversely affect the rights of
any Holder of the Securities; or
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(i) to evidence and provide for the acceptance of the appointment of
a successor Trustee hereunder.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment
under this Section.
SECTION 9.02. With Consent of Holders. The Company and the Trustee
may amend this Indenture or the Securities without notice to any Securityholder
but with the written consent of the Holders of at least a majority in aggregate
principal amount of the Securities then outstanding (including consents obtained
in connection with a tender offer or exchange offer for the Securities).
However, without the consent of each Securityholder affected thereby, an
amendment may not:
(a) reduce the amount of Securities whose Holders must consent to an
amendment or waiver;
(b) reduce the rate of or extend the time for payment of interest on
any Security;
(c) reduce the principal of or extend the Stated Maturity of any
Security;
(d) make any Security payable in money other than that stated in the
Security;
(e) impair the right of any Securityholder to institute suit for the
enforcement of any payment on or with respect to such Holder's Securities
or any Guaranty;
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(f) subordinate the Securities to any other obligation of the
Company;
(g) release any security interest that may have been granted in
favor of the Securityholders;
(h) reduce the amount payable upon the redemption or repurchase of
any Note under Article 3 or Section 4.06 or Section 4.08 or change the
time at which any Security may be redeemed in accordance with Article 3;
(i) at any time after a Change of Control or Asset Sale has
occurred, change the time at which the Change of Control Offer or any
Prepayment Offer relating thereto must be made or at which the Securities
must be repurchased pursuant to such Change of Control Offer or Prepayment
Offer;
(j) make any change in any Guaranty that would adversely affect the
Holders of the Securities; or
(k) make any change in Section 6.04 or Section 6.07 or the second
sentence of this Section.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
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SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Securityholder. An
amendment or waiver becomes effective once the requisite number of consents are
received by the Company or the Trustee.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms.
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Failure to make the appropriate notation or to issue a new Security shall not
affect the validity of such amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article 9 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 such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture.
SECTION 9.07. Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 10
Guaranties
SECTION 10.01. Guaranties. Each Guarantor hereby unconditionally
guarantees, jointly and severally, to each Holder and to the Trustee and its
successors and assigns (a) the full and punctual payment of principal of and
interest on the Securities when due, whether at maturity, by acceleration, by
redemption or otherwise, and all other monetary obligations of the Company under
this Indenture and the Securities and (b) the full and punctual performance
within applicable grace periods of all other obligations of the Company under
this Indenture and the
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Securities (all the foregoing being hereinafter collectively called the
"Obligations"). Each Guarantor further agrees that the Obligations may be
extended or renewed, in whole or in part, without notice or further assent from
such Guarantor and that such Guarantor will remain bound under this Article 10
notwithstanding any extension or renewal of any Obligation.
Each Guarantor waives presentation to, demand of, payment from and
protest to the Company of any of the Obligations and also waives notice of
protest for nonpayment. Each Guarantor waives notice of any default under the
Securities or the Obligations. The obligations of each Guarantor hereunder shall
not be affected by (a) the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any right or remedy against the Company or any
other Person under this Indenture, the Securities or any other agreement or
otherwise; (b) any extension or renewal of any thereof; (c) any rescission,
waiver, amendment or modification of any of the terms or provisions of this
Indenture, the Securities or any other agreement; (d) the release of any
security held by any Holder or the Trustee for the Obligations or any of them;
(e) the failure of any Holder or the Trustee to exercise any right or remedy
against any other guarantor of the Obligations; or (f) any change in the
ownership of such Guarantor.
Each Guarantor further agrees that its Guaranty herein constitutes a
guarantee of payment, performance and compliance when due (and not a guarantee
of collection) and waives any right to require that any resort be had by any
Holder or the Trustee to any security held for payment of the Obligations.
Except as expressly set forth in Sections 4.14 and 8.01(b), the
obligations of each Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any defense of setoff, counterclaim, recoupment or termination whatsoever or
by reason of the invalidity, illegality or unenforce-ability of the Obligations
or otherwise. Without limiting the generality of the foregoing, the obligations
of each Guarantor herein shall not be discharged or impaired or otherwise
affected by the failure of any Holder or the Trustee to assert any claim
<PAGE> 103
91
or demand or to enforce any remedy under this Indenture, the Securities or any
other agreement, by any waiver or modification of any thereof, by any default,
failure or delay, willful or otherwise, in the performance of the Obligations,
or by any other act or thing or omission or delay to do any other act or thing
which may or might in any manner or to any extent vary the risk of such
Guarantor or would otherwise operate as a discharge of such Guarantor as a
matter of law or equity.
Each Guarantor further agrees that its Guaranty herein shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any Obligation is
rescinded or must otherwise be restored by any Holder or the Trustee upon the
bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Guarantor by virtue hereof, upon the failure of the Company to pay the principal
of or interest on any Obligation when and as the same shall become due, whether
at maturity, by acceleration, by redemption or otherwise, or to perform or
comply with any other Obligation, each Guarantor hereby promises to and will,
upon receipt of written demand by the Trustee, forthwith pay, or cause to be
paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i)
the unpaid amount of such Obligations, (ii) accrued and unpaid interest on such
Obligations (but only to the extent not prohibited by law) and (iii) all other
monetary Obligations of the Company to the Holders and the Trustee.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in respect of any Obligations guaranteed hereby until payment in
full in cash of all Obligations. Each Guarantor further agrees that, as between
it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the
maturity of the Obligations guaranteed hereby may be accelerated as provided in
Article 6 for the purposes of such Guarantor's Guaranty herein, notwithstanding
any stay, injunction or other prohibition preventing such acceleration in
respect of the Obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided
<PAGE> 104
92
in Article 6, such Obligations (whether or not due and payable) shall forthwith
become due and payable by such Guarantor for the purposes of this Section.
Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees) incurred by the Trustee or any Holder in
enforcing any rights under this Section.
SECTION 10.02. Contribution. Each of the Company and any Guarantor
(a "Contributing Party") agrees that, in the event a payment shall be made by
any other Guarantor under any Guaranty (the "Claiming Guarantor"), the
Contributing Party shall indemnify the Claiming Guarantor in an amount equal to
the amount of such payment multiplied by a fraction, the numerator of which
shall be the net worth of the Contributing Party on the date hereof and the
denominator of which shall be the aggregate net worth of the Company and all the
Guarantors on the date hereof (or, in the case of any Guarantor becoming a party
hereto pursuant to Section 9.01, the date of the amendment hereto executed and
delivered by such Guarantor).
SECTION 10.03. Successors and Assigns. This Article 10 shall be
binding upon each Guarantor and its successors and assigns and shall enure to
the benefit of the successors and assigns of the Trustee and the Holders and, in
the event of any transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges conferred upon that party in this Indenture and in the
Securities shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions of this Indenture.
SECTION 10.04. No Waiver. Neither a failure nor a delay on the part
of either the Trustee or the Holders in exercising any right, power or privilege
under this Article 10 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 10 at law,
in equity, by statute or
<PAGE> 105
93
otherwise.
SECTION 10.05. Modification. No modification, amendment or waiver of
any provision of this Article 10, nor the consent to any departure by any
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any Guarantor in any case shall entitle such Guarantor to
any other or further notice or demand in the same, similar or other
circumstances.
SECTION 10.06. Execution of Supplemental Indenture for Future
Guarantors. Each Restricted Subsidiary which is required to become a Guarantor
pursuant to Section 4.12 shall promptly execute and deliver to the Trustee a
supplemental indenture in the form of Exhibit B hereto pursuant to which such
Restricted Subsidiary shall become a Guarantor under this Article 10 and shall
guarantee the Obligations. Concurrently with the execution and delivery of such
supplemental indenture, the Company shall deliver to the Trustee an Opinion of
Counsel to the effect that such supplemental indenture has been duly authorized,
executed and delivered by such Restricted Subsidiary and that, subject to the
application of bankruptcy, insolvency, moratorium, fraudulent conveyance or
transfer and other similar laws relating to creditors' rights generally and to
the principles of equity, whether considered in a proceeding at law or in
equity, the Guaranty of such Guarantor is a legal, valid and binding obligation
of such Guarantor, enforceable against such Guarantor in accordance with its
terms.
ARTICLE 11
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls. If any provision of
this Indenture limits, qualifies or
<PAGE> 106
94
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
SECTION 11.02. Notices. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail or sent by
facsimile (with a hard copy delivered in person or by mail promptly thereafter)
or overnight courier guaranteeing next-day delivery and addressed as follows:
if to the Company or any Guarantor:
Metallurg, Inc.
6 East 43rd Street
New York, New York 10017
Facsimile: (212) 687-9621
Attention of:
if to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Facsimile: (212) 858-2000
Attention of: Corporate Trust Department
The Company or the Trustee by notice to the other
<PAGE> 107
95
may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall be
mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. Notices shall be effective only upon receipt.
SECTION 11.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA ss. 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take or refrain
from taking 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 stating that, in the opinion of the signers,
all conditions 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 stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
<PAGE> 108
96
SECTION 11.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual 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;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 11.06. When Securities Disregarded. In determining whether
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for
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97
action by or a meeting of Securityholders. The Registrar the Paying Agent and
any co-registrar may make reasonable rules for their functions.
SECTION 11.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in the
State of New York. If a payment date is a Legal Holiday, payment shall be made
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If a regular record date is a Legal Holiday,
the record date shall not be affected.
SECTION 11.09. Governing Law. THIS INDENTURE AND THE SECURITIES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
SECTION 11.10. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company or any Guarantor shall not have
any liability for any obligations of the Company or such Guarantor under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder shall waive and release all such liability. The waiver and
release shall be part of the consideration for the issue of the Securities.
SECTION 11.11. Successors. All agreements of the Company and each
Guarantor in this Indenture and the Securities shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 11.12. Multiple 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. One signed copy is enough to prove
this Indenture.
<PAGE> 110
98
SECTION 11.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be
<PAGE> 111
99
considered a part hereof and shall not modify or restrict any of the terms or
provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
METALLURG, INC.
by
--------------------------------
Name:
Title:
SHIELDALLOY METALLURGICAL
CORPORATION,
by
--------------------------------
Name:
Title:
METALLURG HOLDINGS CORPORATION,
<PAGE> 112
100
by
--------------------------------
Name:
Title:
METALLURG SERVICES, INC.,
by
--------------------------------
Name:
Title:
MIR (CHINA), INC.,
by
--------------------------------
Name:
Title:
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
by
--------------------------------
<PAGE> 113
101
Name:
Title:
<PAGE> 114
APPENDIX A
PROVISIONS RELATING TO INITIAL SECURITIES
AND EXCHANGE SECURITIES
1. Definitions
1.1 Definitions
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Temporary Regulation S Global Security or beneficial
interest therein, the rules and procedures of the Depositary for such Global
Security, Euroclear and Cedel, in each case to the extent applicable to such
transaction and as in effect from time to time.
"Cedel" means Cedel Bank, S.A., or any successor securities clearing
agency.
"Definitive Security" means a certificated Initial Security or
Exchange Security bearing, if required, the restricted securities legend set
forth in Section 2.3(e).
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
<PAGE> 115
2
"Euroclear" means the Euroclear Clearance System or any successor
securities clearing agency.
"Exchange Securities" means the 11% Senior Notes due 2007 to be
issued pursuant to this Indenture in connection with a Registered Exchange Offer
or a Private Exchange pursuant to a Registration Agreement.
"IAI" means an institutional "accredited investor" as described in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Salomon Brothers Inc and BancBoston
Securities Inc.
"Initial Securities" means the 11% Senior Notes due 2007 in the
aggregate principal amount of $100,000,000 issued on November 25, 1997.
"Private Exchange" means the offer by the Company, pursuant to
Section 2(f) of the Registration Agreement dated November 20, 1997, or pursuant
to any similar provision of any other Registration Agreement, to issue and
deliver to certain purchasers, in exchange for the Initial Securities held by
such purchasers as part of their initial distribu tion, a like aggregate
principal amount of Private Exchange Securities.
"Private Exchange Securities" means the 11% Senior Notes due 2007 to
be issued pursuant to this Indenture in connection with a Private Exchange
pursuant to a Registration Agreement
<PAGE> 116
3
"Purchase Agreement" means the Purchase Agreement dated November 20,
1997, among the Company, the Guarantors and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Registered Exchange Offer" means the offer by the Company, pursuant
to the Registration Agreement, to certain Holders of Initial Securities, to
issue and deliver to such Holders, in exchange for the Initial Securities, a
like aggregate principal amount of Exchange Securities registered under the
Securities Act.
"Registration Agreement" means the Registration Agreement dated
November 20, 1997, among the Company, the Guarantors and the Initial Purchasers.
"Regulation S Securities" means all Initial Securities offered and
sold outside the United States in reliance on Regulation S under the Securities
Act.
"Restricted Period" means the period of 40 consecutive days
beginning on and including the later of (i) the day on which Securities are
first offered to persons other than distributors (as defined in Regulation S
under the Securities Act) in reliance on Regulation S and (ii) the Issue Date.
"Rule 144A Securities" means the Initial Securities purchased by the
Purchasers from the Company pursuant to the Purchase Agreement, other than the
Regulation S Securities.
<PAGE> 117
4
"Securities" means the Initial Securities and the Exchange
Securities, treated as a single class.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depository), or any successor person thereto who
shall initially be the Trustee.
"Shelf Registration Statement" means the registration statement
issued by the Company in connection with the offer and sale of Initial
Securities pursuant to the Registration Agreement.
"Transfer Restricted Securities" means Definitive Securities and any
other Securities that bear or are required to bear the legend set forth in
Section 2.3(d) hereto.
1.2 Other Definitions
Defined in
Term Section:
---- --------
"Agent Members" 2.1(b)
"Global Security" 2.1(a)
"Regulation S" 2.1
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5
"Rule 144A" 2.1
"Temporary Regulation S Global Security 2.1(a)
2. The Securities
2.1 Form and Dating
The Initial Securities are being offered and sold by the Company
pursuant to the Purchase Agreement. The Initial Securities will be resold,
initially only to QIBs in reliance on Rule 144A under the Securities Act ("Rule
144A") and in reliance on Regulation S under the Securities Act ("Regulation
S"). Initial Securities may thereafter be transferred to, among others, QIBs,
purchasers in reliance on Regulation S and, except as set forth below, IAIs
under Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
(a) Global Securities. Rule 144A Securities shall be issued
initially in the form of one or more permanent global Securities in definitive,
fully registered form and Regulation S Securities shall be issued initially in
the form of one or more temporary global Securities (collectively, the
"Temporary Regulation S Global Security"), in each case without interest coupons
with the global securities legend and restricted securities legend set forth in
Exhibit 1 hereto, which shall be deposited on behalf of the purchasers of the
Initial Securities represented thereby with the Securities Custodian, and
registered in the name of the Depository or a nominee of the Depository, duly
executed by the Company and authenticated by the Trustee as provided in this
Indenture. Beneficial ownership interests in the Temporary Regulation S Global
Security will not be exchangeable for interests in the Rule 144A Global
Security, a permanent global security (the "Permanent Regulation S Global
Security"), or any other security without a legend containing restrictions or
transfer until the expiration of the Restricted Period and then only upon
certification in form reasonably satisfactory to the Trustee that beneficial
ownership interests in such Temporary
<PAGE> 119
6
Regulation S Global Security are owned either by non-U.S. persons or U.S.
persons who purchased such interests in a transaction that did not require
registration under the Securities Act. The Rule 144A Global Securities,
Temporary Regulation S Global Security and Permanent Regulation S Global
Security are collectively referred to herein as "Global Securities." The
aggregate principal amount of the Global Securities may from time to time be
increased or decreased by adjustments made on the records of the Trustee and the
Depository or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
Global Security deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(b) and pursuant to an order of the Company, authenticate and
deliver initially one or more Global Securities that (a) shall be registered in
the name of the Depository for such Global Security or Global Securities or the
nominee of such Depository and (b) shall be delivered by the Trustee to such
Depository or pursuant to such Depository's instructions or held by the Trustee
as Securities Custodian.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depository or by the Trustee as Securities Custodian
or under such Global Security, and the Depository may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depository or impair, as between the
Depository and its Agent Members, the operation of customary practices of such
Depository governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.
<PAGE> 120
7
(c) Definitive Securities. Except as provided in Section 2.3 or 2.4,
owners of beneficial interests in Global Securities will not be entitled to
receive physical delivery of certificated Securities.
2.2 Authentication. The Trustee shall authenticate and deliver: (1)
Initial Securities for original issue in an aggregate principal amount of
$100,000,000 and (2) Exchange Securities for issue only in a Registered Exchange
Offer pursuant to the Registration Agreement, for a like principal amount of
Initial Securities, upon a written order of the Company signed by two Officers
or by an Officer and either an Assistant Treasurer or an Assistant Secretary of
the Company. Such order shall specify the amount of the Securities to be
authenticated and the date on which the issue of Securities is to be
authenticated and whether the Securities are to be Initial Securities or
Exchange Securities. The aggregate principal amount of Securities outstanding at
any time may not exceed $100,000,000, except as provided in Section 2.08 of this
Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Registrar or a
co-registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
exchange:
<PAGE> 121
8
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar
or co-registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section
2.3(b) or pursuant to clause (A), (B) or (C) below, and are accompanied by
the following additional information and documents, as applicable:
(A) if such Definitive Securities are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect;
or
(B) if such Definitive Securities are being transferred to the
Company, a certification to that effect; or
(C) if such Definitive Securities are being transferred
pursuant to an exemption from registration in accordance with Rule
144 under the Securities Act, (i) a certification to that effect and
(ii) if the Company so requests, an opinion of counsel or other
evidence reasonably satisfactory to it as to the compliance with the
restrictions set forth in the legend set forth in Section 2.3(d)(i).
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial
<PAGE> 122
9
interest in a Global Security except upon satisfaction of the requirements set
forth below. Upon receipt by the Trustee of a Definitive Security, duly endorsed
or accompanied by a written instrument of transfer in form reasonably
satisfactory to the Company and the Registrar or co-registrar, together with:
(i) certification that such Definitive Security is being transferred
(A) to a QIB in accordance with Rule 144A, (B) to an IAI that has
furnished to the Trustee a signed letter or (C) outside the United States
in an offshore transaction within the meaning of Regulation S and in
compliance with Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to
direct the Securities Custodian to make, an adjustment on its books and
records with respect to such Global Security to reflect an increase in the
aggregate principal amount of the Securities represented by the Global
Security, such instructions to contain information regarding the
Depositary account to be credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so canceled. If no
Global Securities are then outstanding and the Global Security has not been
previously exchanged pursuant to Section 2.4, the Company shall issue and the
Trustee shall authenticate, upon written order of the Company in the form of an
Officers' Certificate, a new Global Security in the appropriate principal
amount.
<PAGE> 123
10
(c) Transfer and Exchange of Global Securities. (i) The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depository, in accordance with this Indenture (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Depository therefor. A transferor of a beneficial interest in a Global Security
shall deliver a written order given in accordance with the Depository's
procedures containing information regarding the participant account of the
Depository to be credited with a beneficial interest in the Global Security and
such account shall be credited in accordance with such instructions with a
beneficial interest in the Global Security and the account of the Person making
the transfer shall be debited by an amount equal to the beneficial interest in
the Global Security being transferred. In the case of a transfer of a beneficial
interest in a Global Security to an IAI, the transferee must furnish a signed
letter to the Trustee containing certain representations and agreements (the
form of which letter can be obtained from the Trustee or the Company).
(ii) If the proposed transfer is a transfer of a beneficial interest
in one Global Security to a beneficial interest in another Global
Security, the Registrar shall reflect on its books and records the date
and an increase in the principal amount of the Global Security to which
such interest is being transferred in an amount equal to the principal
amount of the interest to be so transferred, and the Registrar shall
reflect on its books and records the date and a corresponding decrease in
the principal amount of Global Security from which such interest is being
transferred.
(iii) Notwithstanding any other provisions of this Appendix A (other
than the provisions set forth in Section 2.4), a Global Security may not
be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
<PAGE> 124
11
(iv) In the event that a Global Security is exchanged for Securities
in definitive registered form pursuant to Section 2.4 prior to the
consummation of a Registered Exchange Offer or the effectiveness of a
Shelf Registration Statement with respect to such Securities, such
Securities may be exchanged only in accordance with such procedures as are
substantially consistent with the provisions of this Section 2.3
(including the certification requirements set forth on the reverse of the
Initial Securities intended to ensure that such transfers comply with Rule
144A, Regulation S or such other applicable exemption from registration
under the Securities Act, as the case may be) and such other procedures as
may from time to time be adopted by the Company.
(d) Restrictions on Transfer of Temporary Regulation S Global
Securities. During the Restricted Period, beneficial ownership interests in
Temporary Regulation S Global Securities may only be sold, pledged or
transferred through Euroclear or Cedel in accordance with the Applicable
Procedures and only (i) to the Company, (ii) so long as such security is
eligible for resale pursuant to Rule 144A under the Securities Act ("Rule
144A"), to a person whom the selling holder reasonably believes is a "qualified
institutional buyer" ("QIB") as defined in Rule 144A that purchases for its own
account or for the account of a QIB to whom notice is given that the resale,
pledge or transfer is being made in reliance on Rule 144A, (iii) in an offshore
transaction in accordance with Regulation S, (iv) pursuant to an exemption from
registration under the Securities Act provided by Rule 144 (if applicable) under
the Securities Act, or (v) pursuant to an effective registration statement under
the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States. During the Restricted Period, interests
in the Temporary Regulation S Global Security may not be transferred to
institutions that are "Accredited Investors" (but not QIBs) as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act.
(e) Legend.
<PAGE> 125
12
(i) Except as permitted by the following para graphs (ii), (iii),
(iv) and (vi), each Security certificate evidencing the Global Securities
and the Definitive Securities (and all Securities issued in exchange
therefor or in substitution thereof) shall bear a legend in substantially
the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND
ANNIVERSARY OF THE ISSUANCE HEREOF (OR OF A PREDECESSOR SECURITY HERETO)
OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME
DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER
CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A") TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR
ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES
ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE
OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO AN INSTITUTION THAT
IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY)
THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION, AND A CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR
THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE
(PROVIDED THAT CERTAIN HOLDERS SPECIFIED IN THE INDENTURE MAY NOT TRANSFER
THIS SECURITY PURSUANT TO THIS CLAUSE (4) PRIOR TO THE EXPIRATION OF THE
"40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF
REGULATION S UNDER THE SECURITIES ACT)), (5) PURSUANT
<PAGE> 126
13
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES
IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER
INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY
IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER
HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT
OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT
PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE
REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE
SECURITIES ACT."
Each Definitive Security will also bear the following additional
legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION
AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Security, the
<PAGE> 127
14
Registrar shall permit the Holder thereof to exchange such Transfer
Restricted Security for a Definitive Security that does not bear the
legends set forth above and rescind any restriction on the transfer
of such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security that is
represented by a Global Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security for a
Definitive Security that does not bear the legends set forth above
and rescind any restriction on the transfer of such Transfer
Restricted Security,
in either case, if the Holder certifies in writing to the Registrar that its
request for such exchange was made in reliance on Rule 144 (such certification
to be in the form set forth on the reverse of the Initial Security).
(iii) After a transfer of any Initial Securities during the period
of the effectiveness of a Shelf Registration Statement with respect to
such Initial Securities, all requirements pertaining to legends on such
Initial Security will cease to apply, the require ments requiring that any
such Initial Security be issued in global form will cease to apply, and an
Initial Security in certificated or global form without legends will be
available to the transferee of the Holder of such Initial Securities upon
exchange of such transferring Holder's certificated Initial Security. Upon
the occurrence of any of the circumstances described in this paragraph,
the Company will deliver an Officers' Certificate to the Trustee
instructing the Trustee to issue Securities without legends.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which certain Holders of
such Initial Securities are offered Exchange Securities in exchange for
their Initial
<PAGE> 128
15
Securities, all requirements pertaining to such Initial Securities that
Initial Securities be issued in global form will cease to apply, and
certificated Initial Securities with the restricted securities legend set
forth in Exhibit 1 hereto will be available to Holders of such Initial
Securities that do not exchange their Initial Securities, and Exchange
Securities in certificated or global form will be available to Holders
that exchange such Initial Securities in such Registered Exchange Offer.
Upon the occurrence of any of the circumstances described in this
paragraph, the Company will deliver an Officers' Certificate to the
Trustee instructing the Trustee to issue Securities without legends.
(v) Upon the consummation of a Private Exchange with respect to the
Initial Securities pursuant to which Holders of such Initial Securities
are offered Private Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities that
Initial Securities issued to certain Holders be issued in global form will
continue to apply, and Private Exchange Securities in global form will be
available to Holders that exchange such Initial Securities in such Private
Exchange.
(vi) Upon a sale or transfer of any Initial Security acquired
pursuant to Regulation S, all require ments pertaining to legends on such
Initial Security will cease to apply, the requirements requiring any such
Initial Security be issued in global form will cease to apply, and an
Initial Security in certificated or global form without the Restricted
Security Legend will be available to the transferee of the Holder of such
Initial Securities.
(f) Cancelation or Adjustment of Global Security. At such time as
all beneficial interests in a Global Security have either been exchanged for
certificated or Definitive Securities, redeemed, repurchased or canceled, such
Global Security shall be returned by the Depository to the Trustee
<PAGE> 129
16
for cancelation or retained and canceled by the Trustee. At any time prior to
such cancelation, if any beneficial interest in a Global Security is exchanged
for certificated or Definitive Securities, redeemed, repurchased or canceled,
the principal amount of Securities represented by such Global Security shall be
reduced and an adjustment shall be made on the books and records of the Trustee
(if it is then the Securities Custodian for such Global Security) with respect
to such Global Security, by the Trustee or the Securities Custodian, to reflect
such reduction.
(g) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate certificated Securities,
Definitive Securities and Global Securities at the Registrar's or
co-registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar governmental
charge payable in connection therewith (other than any such transfer
taxes, assessments or similar governmental charge payable upon exchange or
transfer pursuant to Section 3.06, 4.06, 4.08 and 9.05).
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of any Security for a period
beginning 15 days before the mailing of a notice of redemption or an offer
to repurchase Securities or 15 days before an interest payment date.
(iv) Prior to the due presentation for registration
<PAGE> 130
17
of transfer of any Security, the Company, the Trustee, the Paying Agent,
the Registrar or any co-registrar may deem and treat the person in whose
name a 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 Company, the Trustee, the Paying
Agent, the Registrar or any co-registrar shall be affected by notice to
the con trary.
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(h) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in
the Depository or any other Person with respect to the accuracy of the
records of the Depository or its nominee or of any participant or member
thereof, with respect to any ownership interest in the Securities or with
respect to the delivery to any participant, member, beneficial owner or
other Person (other than the Depository) of any notice (including any
notice of redemption or repurchase) or the payment of any amount, under or
with respect to such Securities. All notices and communications to be
given to the Holders and all payments to be made to Holders under the
Securities shall be given or made only to the registered Holders (which
shall be the Depository or its nominee in the case of a Global Security).
The rights of beneficial owners in any Global Security shall be exercised
only through the Depository subject to the applicable rules and pro
cedures of the Depository. The Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository with
respect to its members, participants and any beneficial owners.
<PAGE> 131
18
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among Depository participants, members or beneficial owners in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
2.4 Certificated Securities
(a) A Global Security deposited with the Depository or with the
Trustee as Securities Custodian pursuant to Section 2.1 shall be transferred to
the beneficial owners thereof in the form of certificated Securities in an
aggregate principal amount equal to the principal amount of such Global
Security, in exchange for such Global Security, only if such transfer complies
with Section 2.3 and (i) the Depository notifies the Company that it is
unwilling or unable to continue as a Depository for such Global Security or if
at any time the Depository ceases to be a "clearing agency" registered under the
Exchange Act, and a successor depositary is not appointed by the Company within
90 days of such notice, or (ii) an Event of Default has occurred and is
continuing or (iii) the Company, in its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of certificated Securities under
this Indenture.
(b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section 2.4 shall be surrendered by the
Depository to the Trustee, to be so transferred, in whole or from time to time
in part, without charge, and the Trustee shall authenticate and deliver, upon
such transfer of each portion of such Global Security, an
<PAGE> 132
19
equal aggregate principal amount of certificated Securities of authorized
denominations. Any portion of a Global Security transferred pursuant to this
Section shall be executed, authenticated and delivered only in denominations of
$1,000 and any integral multiple thereof and registered in such names as the
Depository shall direct. Any certificated Initial Security delivered in exchange
for an interest in the Global Security shall, except as otherwise provided by
Section 2.3(d), bear the restricted securities legend set forth in Exhibit 1
hereto.
(c) Subject to the provisions of Section 2.4(b), the registered
Holder of a Global Security may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of either of the events specified
in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to
the Trustee a reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.
<PAGE> 133
i
EXHIBIT 1
to APPENDIX A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND
<PAGE> 134
ii
ANNIVERSARY OF THE ISSUANCE HEREOF (OR OF A PREDECESSOR SECURITY HERETO) OR (Y)
BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE
MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED
BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER
THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO AN INSTITUTION
THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING
THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A
CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED
BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS
SPECIFIED IN THE INDENTURE MAY NOT TRANSFER THIS SECURITY PURSUANT TO THIS
CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE
MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT)), (5)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT
WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER
INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF
THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY
THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
OR (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S.
PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING
THE REQUIREMENTS OF PARAGRAPH (o)(2) OF
<PAGE> 135
iii
RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT.
[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.]
<PAGE> 136
i
[FORM OF FACE OF SECURITY]
No. $__________
11% Senior Note due 2007
CUSIP No. ______
Metallurg, Inc., a Delaware corporation, promises to pay to Cede &
Co., or registered assigns, the principal sum of Dollars on December 1,
2007.
Interest Payment Dates: June 1 and December 1.
Record Dates: May 15 and November 15.
<PAGE> 137
ii
Additional provisions of this Security are set forth on the other
side of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be
duly executed.
METALLURG, INC.,
by
Name:
Title:
by
Name:
Title:
[CORPORATE SEAL]
<PAGE> 138
iii
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By:_________________________
Authorized Signatory
<PAGE> 139
iv
[FORM OF REVERSE SIDE OF SECURITY]
11% Senior Note due 2007
1. Interest
(a) Metallurg, Inc., a Delaware corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above. The Company will pay
interest semiannually on June 1 and December 1 of each year. Interest on the
Securities will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from November 25, 1997. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. The Company
shall pay interest on overdue principal at the rate borne by the Securities plus
1% per annum, and it shall pay interest on overdue installments of interest at
the same rate to the extent lawful.
(b) Special Interest. The holder of this Security is entitled to the
benefits of a Registration Agreement, dated as of November 20, 1997, among the
Company, Shieldanoy Metallurgical Corporation, Metallurg Holdings Corporation,
Metallurg Services, Inc. and MIR (China), Inc. (the "Guarantors") and the
Purchasers named therein (the "Registration Agreement"). Capitalized terms used
in this paragraph (b) but not defined herein have the meanings assigned to them
in the Registration Agreement. In the event that (i) neither the Exchange Offer
Registration Statement nor the Shelf Registration Statement has been filed with
the Commission on or prior to the 60th day following the date of the original
issuance of the Securities, (ii) the Exchange Offer Registration Statement has
not been declared effective on or prior to the 120th day following the date of
the original issuance of the Securities, (iii) neither the
<PAGE> 140
v
Registered Exchange Offer has been consummated nor the Shelf Registration
Statement has been declared effective on or prior to the 150th day following the
date of the original issuance of the Securities, or (iv) after either the
Exchange Offer Registration Statement or the Shelf Registration Statement has
been declared effective, such Registration Statement thereafter ceases to be
effective or usable in connection with resales of the Securities at any time
that the Company is obligated to maintain the effectiveness thereof pursuant to
the Registration Agreement (each such event referred to in clauses (i) through
(iv) above being referred to herein as a "Registration Default"), interest (the
"Special Interest") shall accrue (in addition to stated interest on the
Securities) from and including the date on which the first such Registration
Default shall occur to but excluding the date on which all Registration Defaults
have been cured, at a rate per annum equal to 0.25% of the principal amount of
the Securities; provided, however, that such rate per annum shall increase by
0.25% per annum from and including the 91st day after the first such
Registration Default (and each successive 91st day thereafter) unless and until
all Registration Defaults have been cured; provided further, however, that in no
event shall the Special Interest accrue at a rate in excess of 1.00% per annum.
The Special Interest will be payable in cash semiannually in arrears each June 1
and December 1.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the May 15 or November 15 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States of America that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium and interest)
will be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Company will make all payments in
respect of a certificated Security
<PAGE> 141
vi
(including principal, premium and interest), by mailing a check to the
registered address of each Holder thereof; provided, however, that payments on
the Securities may also be made, in the case of a Holder of at least $1,000,000
aggregate principal amount of Securities, by wire transfer to a U.S. dollar
account maintained by the payee with a bank in the United States if such Holder
elects payment by wire transfer by giving written notice to the Trustee or the
Paying Agent to such effect designating such account no later than 30 days
immediately preceding the relevant due date for payment (or such other date as
the Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, IBJ Schroder Bank & Trust Company, a New York banking
association (the "Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
November 25, 1997 (the "Indenture"), among the Company, the Guarantors 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
"TIA"). Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the TIA for a statement of
those terms.
The Securities are senior unsecured obligations of
<PAGE> 142
vii
the Company limited to $100,000,000 aggregate principal amount at any one time
outstanding (subject to Sections 2.01 and 2.08 of the Indenture). This Security
is one of the Initial Securities referred to in the Indenture issued in an
aggregate principal amount of $100,000,000. The Securities include the Initial
Securities and any Exchange Securities issued in exchange for Initial
Securities. The Initial Securities and the Exchange Securities are treated as a
single class of securities under the Indenture. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, make certain Investments and other Restricted Payments, pay
dividends and other distributions, incur Indebtedness, enter into consensual
restrictions upon the payment of certain dividends and distributions by such
Restricted Subsidiaries, issue or sell shares of capital stock of such
Restricted Subsidiaries, enter into or permit certain transactions with
Affiliates, create or incur Liens and make Asset Sales. The Indenture also
imposes limitations on the ability of the Company to consolidate or merge with
or into any other Person or convey, transfer or lease all or substantially all
of the Property of the Company.
To guarantee the due and punctual payment of the principal 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 Guarantors will, jointly and severally,
unconditionally guarantee the Obligations on a senior basis pursuant to the
terms of the Indenture.
5. Optional Redemption
Except as set forth in the following paragraph, the Securities will
not be redeemable at the option of the Company prior to December 1, 2002.
Thereafter, the Securities will be redeemable at the option of the Company, in
whole or in part, on not less than 30 nor more than 60 days' prior notice, at
the following redemption prices (expressed as percentages of principal amount),
plus accrued and unpaid interest (if any)
<PAGE> 143
viii
to the redemption date (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the 12-month period commencing on December 1 of the
years set forth below:
Redemption
Year Price
---- ----------
2002 105.500%
2003 103.667%
2004 101.833%
2005 and thereafter 100.000%
In addition, prior to December 1, 2000, the Company may redeem up to
a maximum of 34% of the original aggregate principal amount of the Securities
with the proceeds of one or more Public Equity Offerings following which there
is a Public Market, at a redemption price equal to 111% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the redemption
date (subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date); provided, however,
that after giving effect to any such redemption, at least 66% of the original
aggregate principal amount of the Securities remains outstanding. Any such
redemption shall be made within 60 days of such Public Equity Offering upon not
less than 30 nor more than 60 days' notice mailed to each holder of Notes being
redeemed and otherwise in accordance with the procedures set forth in the
Indenture.
6. Sinking Fund
<PAGE> 144
ix
The Securities are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his or her registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
8. Repurchase of Securities at the Option of Holders upon Change of Control
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions specified in the Indenture, to cause the
Company to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of purchase) as provided in, and subject to the terms of, the
Indenture.
9. Denominations; Transfer; Exchange
The Securities are in registered form without
<PAGE> 145
x
coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may
transfer or exchange Securities in accordance with the Indenture. Upon any
transfer or exchange, the Registrar and the Trustee may require a Holder, among
other things, to furnish appropriate endorsements or transfer documents and to
pay any taxes required by law or permitted by the Indenture. The Registrar need
not register the transfer of or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or to transfer or exchange any Securities for a
period of 15 days prior to a selection of Securities to be redeemed or 15 days
before an interest payment date.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some of or all its obligations under
<PAGE> 146
xi
the Securities and the Indenture if the Company deposits with the Trustee money
or U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in aggregate principal amount of the outstanding Securities and (ii)
any default or noncompliance with any provision may be waived with the written
consent of the Holders of at least a majority in principal amount of the
outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Securities, the Company, the
Guarantors and the Trustee may amend the Indenture or the Securities (i) to cure
any ambiguity, omission, defect or inconsistency; (ii) to comply with Article 5
of the Indenture; (iii) to provide for uncertificated Securities in addition to
or in place of certificated Securities; (iv) to add Guaranties with respect to
the Securities and to release Guarantors from Guaranties as provided by the
terms thereof; (v) to secure the Securities; (vi) to add additional covenants or
to surrender rights and powers conferred on the Company; (vii) to comply with
the requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the TIA; (viii) to make any change that
does not adversely affect the rights of any Securityholder; or (ix) to evidence
and provide for the acceptance of the appointment of a successor Trustee.
14. Defaults and Remedies
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities, subject to
certain limitations, may declare all the Securities to be immediately due and
payable. Certain events of bankruptcy or insolvency are Events of Default and
shall result in the Securities being immediately due and payable upon the
occurrence of such Events of Default without any further act of the Trustee or
any Holder.
<PAGE> 147
xii
Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power under the Indenture. The Holders of a majority in aggregate principal
amount of the Securities, by written notice to the Trustee and the Company, may
rescind any declaration of acceleration and its conse quences if the rescission
would not conflict with any judgment or decree, and if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or any Guarantor shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
<PAGE> 148
xiii
17. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
20. 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 Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any
<PAGE> 149
xiv
notice of redemption and reliance may be placed only on the other identification
numbers placed thereon.
The Company will furnish to any Holder of Securities upon written
request and without charge to the Holder a copy of the Indenture which has in it
the text of this Security.
<PAGE> 150
xv
GUARANTEE
For value received, each of the undersigned, as principal obligor
and not merely as surety, hereby unconditionally and irrevocably guaranties on
an unsecured senior subordinated basis, jointly and severally, to the Holder of
this Security and to the Trustee and its successors and assigns (a) the full and
punctual payment of principal of, premium, if any, and interest on this Security
when due, whether at maturity, by acceleration, by redemption or otherwise, and
all other monetary obligations of the Company under the Indenture (including,
without limitation, obligations to the Trustee and the obligation each of the
undersigned to pay Special Interest, if any) and the Securities and (b) the full
and punctual performance within applicable grace periods of all other
obligations of the Company under the Indenture and the Securities (all the
foregoing being hereinafter collectively called the "Obligations"). Each of the
undersigned further agrees that the Obligations may be extended or renewed, in
whole or in part, without notice or further assent, and that each of the
undersigned will remain bound by Article 10 of the Indenture notwithstanding any
extension or renewal of any Obligation.
The obligations of each of the undersigned to the Holder of this
Security and to the Trustee pursuant to this Guaranty and the Indenture are
expressly set forth in the Indenture to which reference is hereby made for the
precise terms of such obligations.
<PAGE> 151
xvi
This Guaranty is dated the date of the Security upon which it is
endorsed.
IT WITNESS WHEREOF, each of the undersigned has caused this Guaranty
to be duly executed.
SHIELDALLOY METALLURGICAL
CORPORATION,
by
------------------------------
Name:
Title:
by
------------------------------
Name:
Title:
METALLURG HOLDINGS CORPORATION,
by
<PAGE> 152
xvii
by
------------------------------
Name:
Title:
by
------------------------------
Name:
Title:
METALLURG SERVICES, INC.,
by
------------------------------
Name:
Title:
by
------------------------------
Name:
Title:
MIR (CHINA), INC.,
<PAGE> 153
xviii
by
------------------------------
Name:
Title:
by
------------------------------
Name:
Title:
<PAGE> 154
xix
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
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.
<PAGE> 155
xx
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such Securities are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) _ to the Company; or
(2) _ pursuant to an effective registration statement
under the Securities Act of 1933; or
(3) _ inside the United States to a "qualified
institutional buyer" (as defined in Rule 144A
under the Securities Act of 1933) that
purchases for its own account or for the
account of a qualified institutional buyer to
whom notice is given that such transfer is
being made in reliance on Rule 144A, in each
case pursuant to and in compliance with
Rule 144A under the Securities Act of 1933; or
(4) _ outside the United States in an offshore
transaction within the meaning of Regulation S
under the Securities Act in compliance with
Rule 904 under the Securities Act of 1933; or
(5) _ to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act of 1933) that has
<PAGE> 156
xxi
furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can
be obtained from the Trustee or the Company); or
(6) _ pursuant to another available exemption from
registration provided by Rule 144 under the
Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any person
other than the registered holder thereof; provided, however, that if box
(4), (5) or (6) is checked, the Trustee may require, prior to registering
any such transfer of the Securities, such legal opinions, certifications
and other information as the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act of 1933.
__________________________
Your Signature
Signature Guarantee:
Date: _____________________ __________________________
Signature must be guaranteed Signature of Signature
<PAGE> 157
xxii
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
- --------------------------------------------------------------------------------
<PAGE> 158
xxiii
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
<PAGE> 159
xxiv
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $[ ]. The
following increases or decreases in this Global Security have been made:
<TABLE>
<CAPTION>
Date of Amount of decrease Amount of increase Principal amount of Signature of
in Principal Amount in Principal Amount this Global authorized
Exchange of this Global of this Global Security following signatory of
Security Security such decrease or Trustee or
increase Securities
Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 160
xxv
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06 or 4.08 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture,
state the amount:
$
Date: __________________ Your Signature: ___________________________________
(Sign exactly as your name appears on the other side of
the Security)
Signature Guarantee:________________________________________________________
Signature must be guaranteed by a participant in a
recognized signature guaranty medallion program or other
signature guarantor acceptable to the Trustee
<PAGE> 161
i
EXHIBIT A
[FORM OF FACE OF EXCHANGE SECURITY]
No. $__________
11% Senior Note due 2007
CUSIP No. ______
Metallurg, Inc., a Delaware corporation, promises to pay to Cede &
Co., or registered assigns, the principal sum of Dollars on December 1,
2007.
Interest Payment Dates: June 1 and December 1.
Record Dates: May 15 and November 15.
<PAGE> 162
ii
Additional provisions of this Security are set forth on the other
side of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be
duly executed.
METALLURG, INC.,
by
Name:
Title:
by
Name:
Title:
[CORPORATE SEAL]
<PAGE> 163
iii
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
- ----------
*/ If the Security is to be issued in global form, add the Global Securities
Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1
captioned "TO BE ATTACHED TO
<PAGE> 164
iv
GLOBAL SECURITIES - SCHEDULE OF INCREASES OR DECREASES IN
GLOBAL SECURITY".
<PAGE> 165
v
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
11% Senior Note due 2007
1. Interest.
Metallurg, Inc., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Company"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above. The Company will pay interest
semiannually on June 1 and December 1 of each year. Interest on the Securities
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from November 25, 1997. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. The Company shall pay interest
on overdue principal at the rate borne by the Securities plus 1% per annum, and
it shall pay interest on overdue installments of interest at the same rate to
the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the May 15 or November 15 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States of America that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium and interest)
will be made by
<PAGE> 166
vi
wire transfer of immediately available funds to the accounts specified by The
Depository Trust Company. The Company will make all payments in respect of a
certificated Security (including principal, premium and interest), by mailing a
check to the registered address of each Holder thereof; provided, however, that
payments on the Securities may also be made, in the case of a Holder of at least
$1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S.
dollar account maintained by the payee with a bank in the United States if such
Holder elects payment by wire transfer by giving written notice to the Trustee
or the Paying Agent to such effect designating such account no later than 30
days immediately preceding the relevant due date for payment (or such other date
as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, IBJ Schroder Bank & Trust Company, a New York banking
association (the "Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
November 25, 1997 (the "Indenture"), among the Company, the Guarantors 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
"TIA"). Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the TIA for a statement of
those terms.
<PAGE> 167
vii
The Securities are senior unsecured obligations of the Company
limited to $100,000,000 aggregate principal amount at any one time outstanding
(subject to Sections 2.01 and 2.08 of the Indenture). This Security is one of
the Exchange Securities referred to in the Indenture issued in exchange for
Initial Securities. The Securities include the Exchange Securities and the
Initial Securities in the aggregate principal amount of $100,000,000. The
Exchange Securities and the Initial Securities are treated as a single class of
securities under the Indenture. The Indenture imposes certain limitations on the
ability of the Company and its Restricted Subsidiaries to, among other things,
make certain Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
issue or sell shares of capital stock of such Restricted Subsidiaries, enter
into or permit certain transactions with Affiliates, create or incur Liens and
make Asset Sales. The Indenture also imposes limitations on the ability of the
Company to consolidate or merge with or into any other Person or convey,
transfer or lease all or substantially all of the Property of the Company.
To guarantee the due and punctual payment of the principal and
interest, if any, 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 Guarantors will, jointly and
severally, unconditionally guarantee the Obligations on a senior basis pursuant
to the terms of the Indenture.
5. Optional Redemption
Except as set forth in the following paragraph, the Securities will
not be redeemable at the option of the Company prior to December 1, 2002.
Thereafter, the Securities will be redeemable at the option of the Company, in
whole or in part, on not less than 30 nor more than 60 days' prior notice, at
<PAGE> 168
viii
the following redemption prices (expressed as percentages of principal amount),
plus accrued and unpaid interest (if any) to the redemption date (subject to the
right of holders of record on the relevant record date to receive interest due
on the relevant interest payment date), if redeemed during the 12-month period
commencing on December 1 of the years set forth below:
Redemption
Year Price
---- ----------
2002 105.500%
2003 103.667%
2004 101.833%
2005 and thereafter 100.000%
In addition, prior to December 1, 2000, the Company may redeem up to
a maximum of 34% of the original aggregate principal amount of the Securities
with the proceeds of one or more Public Equity Offerings following which there
is a Public Market, at a redemption price equal to 111% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the redemption
date (subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date); provided, however,
that after giving effect to any such redemption, at least 66% of the original
aggregate principal amount of the Securities remains outstanding. Any such
redemption shall be made within 60 days of such Public Equity Offering upon not
less than 30 nor more than 60 days' notice mailed to each holder of Notes being
redeemed and otherwise in accordance with the procedures set forth in the
Indenture.
<PAGE> 169
ix
6. Sinking Fund
The Securities are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his or her registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
8. Repurchase of Securities at the Option of Holders upon Change of Control
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions specified in the Indenture, to cause the
Company to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of purchase) as provided in, and subject to the terms of, the
Indenture.
9. Denominations; Transfer; Exchange
<PAGE> 170
x
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. Upon any transfer or
exchange, the Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or to transfer or exchange any Securities for a
period of 15 days prior to a selection of Securities to be redeemed or 15 days
before an interest payment date.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some of or all its obligations under the
<PAGE> 171
xi
Securities and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in aggregate principal amount of the outstanding Securities and (ii)
any default or noncompliance with any provision may be waived with the written
consent of the Holders of at least a majority in principal amount of the
outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Securities, the Company, the
Guarantors and the Trustee may amend the Indenture or the Securities (i) to cure
any ambiguity, omission, defect or inconsistency; (ii) to comply with Article 5
of the Indenture; (iii) to provide for uncertificated Securities in addition to
or in place of certificated Securities; (iv) to add Guaranties with respect to
the Securities and to release Guarantors from Guaranties as provided by the
terms thereof; (v) to secure the Securities; (vi) to add additional covenants or
to surrender rights and powers conferred on the Company; (vii) to comply with
the requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the TIA; (viii) to make any change that
does not adversely affect the rights of any Securityholder; or (ix) to evidence
and provide for the acceptance of the appointment of a successor Trustee.
14. Defaults and Remedies
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities, subject to
certain limitations, may declare all the Securities to be immediately due and
payable. Certain events of bankruptcy or insolvency are Events of Default and
<PAGE> 172
xii
shall result in the Securities being immediately due and payable upon the
occurrence of such Events of Default without any further act of the Trustee or
any Holder.
Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power under the Indenture. The Holders of a majority in aggregate principal
amount of the Securities, by written notice to the Trustee and the Company, may
rescind any declaration of acceleration and its conse quences if the rescission
would not conflict with any judgment or decree, and if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or any Guarantor shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and
<PAGE> 173
xiii
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
20. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the
<PAGE> 174
xiv
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 Securityholders. 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 thereon.
The Company will furnish to any Holder of Securities upon written
request and without charge to the Holder a copy of the Indenture which has in it
the text of this Security.
<PAGE> 175
xv
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
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
must be guaranteed by a participant in a recognized signature guaranty medallion
program or other
<PAGE> 176
xvi
signature guarantor acceptable to the Trustee.
<PAGE> 177
xvii
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06 or 4.08 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture,
state the amount:
$
Date: __________________ Your Signature: _____________________________________
(Sign exactly as your name appears on the other side of
the Security)
Signature Guarantee:__________________________________________________________
Signature must be guaranteed by a participant in a
recognized signature guaranty medallion program or other
signature guarantor acceptable to the Trustee.
<PAGE> 178
xviii
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture")
dated as of , among [GUARANTOR] (the "New Guarantor"), a
subsidiary of Metallurg, Inc. (or its successor), a Delaware
corporation (the "Company"), METALLURG, INC., and IBJ Schroder
Bank & Trust Company, a New York banking association, as
trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS the Company has heretofore executed and delivered to the
Trustee an Indenture (the "Indenture") dated as of November 25, 1997, providing
for the issuance of an aggregate principal amount of up to $100,000,000 of 11%
Senior Notes due 2007 (the "Securities");
WHEREAS Section 4.12 of the Indenture provides that under certain
circumstances the Company is required to cause the New Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the New
Guarantor shall unconditionally guarantee all the Company's obligations under
the Securities pursuant to a Guaranty on the terms and conditions set forth
herein; and
WHEREAS pursuant to Section 9.01 of the Indenture,
<PAGE> 179
ii
the Trustee, the Company and the Existing Guarantors are authorized to execute
and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor, the Company, the Existing Guarantors and the Trustee mutually
covenant and agree for the equal and ratable benefit of the holders of the
Securities as follows:
1. Agreement to Guarantee. The New Guarantor hereby agrees, jointly
and severally with all other Guarantors, to unconditionally guarantee the
Company's obligations under the Securities on the terms and subject to the
conditions set forth in Article 10 of the Indenture and to be bound by all other
applicable provisions of the Indenture and the Securities.
2. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby.
3. Governing Law. THIS SUPPLEMENTAL INDENTURE
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
4. Trustee Makes No Representation. The Trustee
<PAGE> 180
iii
makes no representation as to the validity or sufficiency of this Supplemental
Indenture.
5. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. Effect of Headings. The Section headings herein are for
convenience only and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR],
by
Name:
Title:
METALLURG, INC.,
<PAGE> 181
iv
by
Name:
Title:
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee,
by
Name:
Title:
<PAGE> 1
EXHIBIT 4.4
EXECUTION COPY
METALLURG, INC.
$100,000,000
11% Senior Notes due 2007
REGISTRATION AGREEMENT
New York, New York
November 20, 1997
To: SALOMON BROTHERS INC
BANCBOSTON SECURITIES INC.
In care of:
Salomon Brothers Inc
<PAGE> 2
2
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Metallurg, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to certain purchasers (the "Purchasers"), upon the terms set
forth in a purchase agreement dated the date hereof (the "Purchase Agreement"),
$100,000,000 aggregate principal amount of its 11% Senior Notes due 2007 (the
"Notes") (the "Initial Placement") to be fully and unconditionally guaranteed on
a senior unsecured basis (the "Subsidiary Guarantees" and, together with the
Notes, the "Securities") by certain of the Company's subsidiaries signatory
hereto (the "Guarantors"). As an inducement to the Purchasers to enter into the
Purchase Agreement and in satisfaction of a condition to your obligations
thereunder, the Company and the Guarantors jointly and severally agree with you,
(i) for your benefit and the benefit of the other Purchasers and (ii) for the
benefit of the holders from time to time of the Securities (including you and
the other Purchasers) (each of the foregoing a "Holder" and together the
"Holders"), as follows:
1. Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:
"Act" means the Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such specified person. For purposes of this definition, control
<PAGE> 3
3
of a person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such person whether by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Closing Date" has the meaning set forth in the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Offer Registration Period" means the one-year period
following the consummation of the Registered Exchange Offer, exclusive of any
period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement.
"Exchange Offer Registration Statement" means a registration
statement of the Company on an appropriate form under the Act with respect to
the Registered Exchange Offer, all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Exchanging Dealer" means any Holder (which may include the
Purchasers) which is a broker-dealer, electing to exchange Securities acquired
for its own account as a result of market-making activities or other trading
activities, for New Securities.
<PAGE> 4
4
"Guarantors" has the meaning set forth in the preamble hereto.
"Holder" has the meaning set forth in the preamble hereto.
"Indenture" means the Indenture relating to the Securities dated as
of November 25, 1997, among the Company, the Guarantors and IBJ Schroder Bank &
Trust Company as trustee, as the same may be amended from time to time in
accordance with the terms thereof.
"Initial Placement" has the meaning set forth in the preamble
hereto.
"Majority Holders" means the Holders of a majority of the aggregate
principal amount of securities registered under a Registration Statement.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering.
"New Securities" means debt securities of the Company identical in
all material respects to the Securities (except that the cash interest and the
transfer restrictions will be modified or eliminated, as appropriate), to be
issued under the Indenture.
"New Securities Indenture" means an indenture between the Company
and the New Securities Trustee, identical in all material respects with the
Indenture (except that the cash interest will be modified or eliminated, as
appropriate).
<PAGE> 5
5
"New Securities Trustee" means a bank or trust company reasonably
satisfactory to the Purchasers, as trustee with respect to the New Securities
under the New Securities Indenture.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Securities or the New Securities, covered by such
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"Registered Exchange Offer" means the proposed offer to the Holders
to issue and deliver to such Holders, in exchange for the Securities, a like
principal amount of the New Securities.
"Registration Securities" has the meaning set forth in Section 3(a)
hereof.
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Securities or
the New Securities pursuant to the provisions of this Agreement, all amendments
and supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Securities" has the meaning set forth in the preamble hereto.
<PAGE> 6
6
"Shelf Registration" means a registration effected pursuant to
Section 3 hereof.
"Shelf Registration Period" has the meaning set forth in Section
3(b) hereof.
"Shelf Registration Statement" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 3 hereof which
covers some of or all the Securities or New Securities, as applicable, on an
appropriate form under Rule 415 under the Act, or any similar rule that may be
adopted by the Commission, all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Subsidiary Guarantees" has the meaning set forth in the preamble
hereto.
"Trustee" means the trustee with respect to the Securities and the
New Securities under the Indenture.
"underwriter" means any underwriter of Securities in connection with
an offering thereof under a Shelf Registration Statement.
2. Registered Exchange Offer; Resales of New Securities by
Exchanging Dealers; Private Exchange. (a) The Company and the Guarantors shall
prepare and, not later than 60 days after the date of the original issuance of
the Notes, shall file with the Commission the Exchange Offer Registration
Statement with respect to the Registered Exchange Offer. The Company and the
Guarantors shall cause the Exchange Offer Registration Statement to become
effective under the Act within 120 days after the date of the original issuance
of the Notes.
<PAGE> 7
7
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder electing to exchange Securities for New Securities (assuming
that such Holder is not an affiliate of the Company within the meaning of the
Act, acquires the New Securities in the ordinary course of such Holder's
business and has no arrangements with any person to participate in the
distribution of the New Securities) to trade such New Securities from and after
their receipt without any limitations or restrictions under the Act and without
material restrictions under the securities laws of a substantial proportion of
the several states of the United States.
(c) In connection with the Registered Exchange Offer, the Company
and the Guarantors shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) keep the Registered Exchange Offer open for not less than 30
days and not more than 45 days after the date notice thereof is mailed to
the Holders (or longer if required by applicable law);
(iii) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York; and
(iv) comply in all respects with all applicable laws.
(d) As soon as practicable after the close of the
<PAGE> 8
8
Registered Exchange Offer, the Company and the Guarantors shall:
(i) accept for exchange all Securities duly tendered and not validly
withdrawn pursuant to the Registered Exchange Offer;
(ii) deliver to the Trustee for cancelation all Securities so
accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to each
Holder of Securities, New Securities equal in principal amount to the
Securities of such Holder so accepted for exchange.
(e) The Purchasers, the Company and the Guarantors acknowledge that,
pursuant to current interpretations by the Commission's staff of Section 5 of
the Act, and in the absence of an applicable exemption therefrom, each
Exchanging Dealer is required to deliver a Prospectus in connection with a sale
of any New Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer in exchange for Securities acquired for its own
account as a result of market-making activities or other trading activities.
Accordingly, the Company and the Guarantors shall:
(i) include the information set forth in Annex A hereto on the cover
of the Exchange Offer Registration Statement, in Annex B hereto in the
forepart of the Exchange Offer Registration Statement in a section setting
forth details of the Exchange Offer, in Annex C hereto in the underwriting
or plan of distribution section of the Prospectus forming a part of the
Exchange Offer Registration Statement, and in Annex D hereto in the Letter
of Transmittal delivered pursuant to the Registered Exchange Offer; and
<PAGE> 9
9
(ii) use its best efforts to keep the Exchange Offer Registration
Statement continuously effective under the Act during the Exchange Offer
Registration Period for delivery by Exchanging Dealers in connection with
sales of New Securities received pursuant to the Registered Exchange
Offer, as contemplated by Section 4(h) below.
(f) In the event that any Purchaser determines that it is not
eligible to participate in the Registered Exchange Offer with respect to the
exchange of Securities constituting any portion of an unsold allotment, at the
request of such Purchaser, the Company and the Guarantors shall issue and
deliver to such Purchaser or the party purchasing New Securities registered
under a Shelf Registration Statement as contemplated by Section 3 hereof from
such Purchaser, in exchange for such Securities, a like principal amount of New
Securities. The Company and the Guarantors shall seek to cause the CUSIP Service
Bureau to issue the same CUSIP number for such New Securities as for New
Securities issued pursuant to the Registered Exchange Offer.
3. Shelf Registration. If, (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company and
the Guarantors determine upon advice of outside counsel that they are not
permitted to effect the Registered Exchange Offer as contemplated by Section 2
hereof, or (ii) for any other reason the Exchange Offer Registration Statement
is not declared effective within 120 days after the Closing Date or the
Registered Exchange Offer is not consummated within 150 days after the Closing
Date, or (iii) any Purchaser so requests with respect to Securities (or any New
Securities received pursuant to Section 2(f)) not eligible to be exchanged for
New Securities in a Registered Exchange Offer or, in the case of any Purchaser
that participates in any Registered Exchange Offer, such Purchaser does not
receive freely tradable New Securities, or (iv) any Holder (other than a
Purchaser) is not eligible to participate in the Registered Exchange Offer, or
(v) in the case of any such Holder that participates in the Registered Exchange
Offer, such Holder does not receive freely tradable New Securities in exchange
for tendered securities, other than by reason of such Holder being an affiliate
of the Company within the meaning of the Act (it being understood that, for
purposes of this
<PAGE> 10
10
Section 3, (x) the requirement that a Purchaser deliver a Prospectus containing
the information required by Items 507 and/or 508 of Regulation S-K under the Act
in connection with sales of New Securities acquired in exchange for such
Securities shall result in such New Securities being not "freely tradeable" but
(y) the requirement that an Exchanging Dealer deliver a Prospectus in connection
with sales of New Securities acquired in the Registered Exchange Offer in
exchange for Securities acquired as a result of market-making activities or
other trading activities shall not result in such New Securities being not
"freely tradeable"), the following provisions shall apply:
(a) The Company and the Guarantors shall as promptly as practicable
(but in no event more than 30 days after so required or requested pursuant to
this Section 3), file with the Commission and thereafter shall use its best
efforts to cause to be declared effective under the Act a Shelf Registration
Statement relating to the offer and sale of the Securities or the New
Securities, as applicable, by the Holders from time to time in accordance with
the methods of distribution elected by the Majority Holders participating in the
Shelf Registration and set forth in such Shelf Registration Statement (such
Securities or New Securities, as applicable, to be sold by such Holders under
such Shelf Registration Statement being referred to herein as "Registration
Securities"); provided, however, that, with respect to New Securities received
by a Purchaser in exchange for Securities constituting any portion of an unsold
allotment, the Company and the Guarantors may, if permitted by current
interpretations by the Commission's staff, file a post-effective amendment to
the Exchange Offer Registration Statement containing the information required by
Regulation S-K Items 507 and/or 508, as applicable, in satisfaction of its
obligations under this paragraph (a) with respect thereto, and any such Exchange
Offer Registration Statement, as so amended, shall be referred to herein as, and
governed by the provisions herein applicable to, a Shelf Registration Statement.
(b) The Company and the Guarantors shall use their best efforts to
keep the Shelf Registration Statement continuously effective in order to permit
the Prospectus forming part thereof to be usable by Holders for a period of two
years from the date the Shelf Registration Statement is declared effective by
the Commission or such shorter period
<PAGE> 11
11
that will terminate when all the Securities or New Securities, as applicable,
covered by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement (in any such case, such period being called the "Shelf
Registration Period").
4. Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company and the Guarantors shall furnish to you, prior to
the filing thereof with the Commission, a copy of any Shelf Registration
Statement and any Exchange Offer Registration Statement, and each
amendment thereof and each amendment or supplement, if any, to the
Prospectus included therein and shall use its best efforts to reflect in
each such document, when so filed with the Commission, such comments as
you or any Holder reasonably may propose.
(b) The Company and the Guarantors shall ensure that (i) any
Registration Statement and any amendment thereto and any Prospectus
forming part thereof and any amendment or supplement thereto complies in
all material respects with the Act and the rules and regulations
thereunder, (ii) any Registration Statement and any amendment thereto does
not, when it becomes effective, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any
Prospectus forming part of any Registration Statement, and any amendment
or supplement to such Prospectus, does not include an untrue statement of
a material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(c) (1) The Company and the Guarantors shall advise you and, in the
case of a Shelf Registration Statement, the Holders of securities covered
thereby,
<PAGE> 12
12
and, if requested by you or any such Holder, confirm such advice in
writing:
(i) when a Registration Statement and any amendment thereto
has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become
effective; and
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus included
therein or for additional information.
(2) The Company and the Guarantors shall advise you and, in the case
of a Shelf Registration Statement, the Holders of securities covered
thereby, and, in the case of an Exchange Offer Registration Statement, any
Exchanging Dealer which has provided in writing to the Company a telephone
or facsimile number and address for notices, and, if requested by you or
any such Holder or Exchanging Dealer, confirm such advice in writing:
(i) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(ii) of the receipt by the Company or any Guarantor of any
notification with respect to the suspension of the qualification of
the securities included therein for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
(iii) of the happening of any event that requires the making of
any changes in the Registration Statement or the Prospectus so that,
<PAGE> 13
13
as of such date, the statements therein are not misleading and do
not omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were
made) not misleading (which advice shall be accompanied by an
instruction to suspend the use of the Prospectus until the requisite
changes have been made).
(d) The Company and the Guarantors shall use their best efforts to
obtain the withdrawal of any order suspending the effectiveness of any
Registration Statement at the earliest possible time.
(e) The Company and the Guarantors shall furnish to each Holder of
securities included within the coverage of any Shelf Registration
Statement, without charge, at least one copy of such Shelf Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, and, if the Holder so requests in writing,
documents incorporated by reference therein and exhibits to such Shelf
Registration Statement (including those incorporated by reference
therein).
(f) The Company and the Guarantors shall, during the Shelf
Registration Period, deliver to each Holder of securities included within
the coverage of any Shelf Registration Statement, without charge, as many
copies of the Prospectus (including each preliminary Prospectus) included
in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; and the Company and the
Guarantors consent to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders of securities in
connection with the offering and sale of the securities covered by the
Prospectus or any amendment or supplement thereto.
(g) The Company and the Guarantors shall furnish to each Exchanging
Dealer which so requests, without
<PAGE> 14
14
charge, at least one copy of the Exchange Offer Registration Statement and
any post-effective amendment thereto, including financial statements and
schedules, documents incorporated by reference therein, and, if the
Exchanging Dealer so requests in writing, exhibits to such Shelf
Registration Statement (including those incorporated by reference
therein).
(h) The Company and the Guarantors shall, during the Exchange Offer
Registration Period, promptly deliver to each Exchanging Dealer, without
charge, as many copies of the Prospectus included in such Exchange Offer
Registration Statement and any amendment or supplement thereto as such
Exchanging Dealer may reasonably request for delivery by such Exchanging
Dealer in connection with a sale of New Securities received by it pursuant
to the Registered Exchange Offer; and the Company and the Guarantors
consent to the use of the Prospectus or any amendment or supplement
thereto by any such Exchanging Dealer, as aforesaid.
(i) Prior to the Registered Exchange Offer or any other offering of
securities pursuant to any Registration Statement, the Company and the
Guarantors shall register or qualify or cooperate with the Holders of
securities included therein and their respective counsel in connection
with the registration or qualification of such securities for offer and
sale under the securities or blue sky laws of such jurisdictions as any
such Holder reasonably requests in writing and do any and all other acts
or things necessary or advisable to enable the offer and sale in such
jurisdictions of the securities covered by such Registration Statement;
provided, however, that neither the Company nor any Guarantor will be
required to qualify generally to do business in any jurisdiction where it
is not then so qualified or to take any action which would subject it to
general service of process or to taxation in any such jurisdiction where
it is not then so subject.
(j) The Company and the Guarantors shall cooperate with the Holders
of Securities to facilitate
<PAGE> 15
15
the timely preparation and delivery of certificates representing
Securities to be sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations and registered in such names
as Holders may request prior to sales of securities pursuant to such
Registration Statement.
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) above, the Company and the Guarantors shall promptly prepare a
post-effective amendment to any Registration Statement or an amendment or
supplement to the related Prospectus or file any other required document
so that, as thereafter delivered to purchasers of the securities included
therein, the Prospectus will not include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(l) Not later than the effective date of any such Registration
Statement hereunder, the Company and the Guarantors shall provide a CUSIP
number for the Securities or New Securities, as the case may be,
registered under such Registration Statement, and provide the Trustee with
printed certificates for such Securities or New Securities, in a form, if
requested by the applicable Holder or Holder's counsel, eligible for
deposit with The Depository Trust Company.
(m) The Company and the Guarantors shall use their best efforts to
comply with all applicable rules and regulations of the Commission to the
extent and so long as they are applicable to the Registered Exchange Offer
or the Shelf Registration and will make generally available to its
security holders a consolidated earnings statement covering a twelve-month
period commencing after the effective date of the Registration Statement
and ending not later than 15 months thereafter, as soon as practicable
after the end of such period, which consolidated earnings statement shall
satisfy the provisions of Section 11(a) of the Act.
<PAGE> 16
16
(n) The Company and the Guarantors shall cause the Indenture to be
qualified under the Trust Indenture Act of 1939, as amended, on or prior
to the effective date of any Shelf Registration Statement or Exchange
Offer Registration Statement.
(o) The Company may require each Holder of securities to be sold
pursuant to any Shelf Registration Statement to furnish to the Company
such information regarding the Holder and the distribution of such
securities as the Company may from time to time reasonably require for
inclusion in such Registration Statement. In the case of a Shelf
Registration Statement, the Company may require each Holder, upon receipt
of any notice from the Company of the happening of any event or the
discovery of any fact of the kind described in paragraph (c)(2)(iii)
above, to discontinue disposition of Registrable Securities pursuant to a
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by paragraph (k) above,
and to deliver to the Company (at the Company's expense) all copies in
such Holder's possession, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such registrable
Securities current at the time of receipt of such notice. If the Company
shall give any such notice to suspend the disposition of Registrable
Securities pursuant to a Shelf Registration Statement as a result of the
happening of any event or the discovery of any facts, each of the kind
described in paragraph (c)(2)(iii) hereof, the Company shall be deemed to
have used its best efforts to keep the Shelf Registration Statement
effective during such period of suspension, provided that (i) the Company
shall use its best efforts to file and have declared effective (if an
amendment) as soon as practicable an amendment or supplement to such Shelf
Registration Statement and (ii) the period during which the Shelf
Registration Statement shall be maintained effective pursuant to this
Agreement shall be extended by the number of days during the period from
and including the date of the giving of such notice to and including the
date when the Holders shall have received copies of the supplemented or
amended Prospectus necessary to resume such dispositions. Notwithstanding
the foregoing, the Company shall not allow any Shelf Registration
<PAGE> 17
17
Statement to fail to be effective for more than 30 days during any 360 day
period.
(p) The Company and the Guarantors shall, if requested, promptly
incorporate in a Prospectus supplement or post-effective amendment to a
Shelf Registration Statement, such information as the Managing
Underwriters and Majority Holders reasonably agree should be included
therein and shall make all required filings of such Prospectus supplement
or post-effective amendment as soon as notified of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the Company and
the Guarantors shall enter into such agreements (including underwriting
agreements) and take all other appropriate actions in order to expedite or
facilitate the registration or the disposition of the Securities, and in
connection therewith, if an underwriting agreement is entered into, cause
the same to contain indemnification provisions and procedures no less
favorable than those set forth in Section 6 hereof (or such other
provisions and procedures acceptable to the Majority Holders and the
Managing Underwriters, if any), with respect to all parties to be
indemnified pursuant to Section 6 hereof from Holders of Securities to the
Company and the Guarantors.
(r) In the case of any Shelf Registration Statement, the Company and
the Guarantors shall (i) make reasonably available for inspection by the
Holders of securities to be registered thereunder, any underwriter
participating in any disposition pursuant to such Registration Statement,
and any attorney, accountant or other agent retained by the Holders or any
such underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries;
(ii) cause the Company's and the Guarantors's officers, directors and
employees to supply all relevant information reasonably requested by the
Holders or any such underwriter, attorney, accountant or agent in
connection with any
<PAGE> 18
18
such Registration Statement as is customary for similar due diligence
examinations; provided, however, that any information that is designated
in writing by the Company or any Guarantor, in good faith, as confidential
at the time of delivery of such information shall be kept confidential by
the Holders or any such underwriter, attorney, accountant or agent, unless
such disclosure is made in connection with a court proceeding or required
by law, or such information becomes available to the public generally or
through a third party without an accompanying obligation of
confidentiality; (iii) make such representations and warranties to the
Holders of securities registered thereunder and the underwriters, if any,
in form, substance and scope as are customarily made by issuers to
underwriters in primary underwritten offerings; (iv) obtain opinions of
counsel to the Company and the Guarantors (which counsel and opinions (in
form, scope and substance) shall be reasonably satisfactory to the
Managing Underwriters, if any) addressed to each selling Holder and the
underwriters, if any, covering such matters as are customarily covered in
opinions requested in underwritten offerings and such other matters as may
be reasonably requested by such Holders and underwriters; (v) obtain "cold
comfort" letters (or, in the case of any person that does not satisfy the
conditions for receipt of a "cold comfort" letter specified in Statement
on Auditing Standards No. 72, an "agreed-upon procedures" letter) and
updates thereof from the independent certified public accountants of the
Company and the Guarantors (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to each selling Holder of securities registered
thereunder and the underwriters, if any, in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with primary underwritten offerings; and (vi) deliver such
documents and certificates as may be reasonably requested by the Majority
Holders and the Managing Underwriters, if any, including those to evidence
compliance with Section 4(k) and with any customary conditions contained
in the underwriting agreement or other agreement entered into by the
Company and the Guarantors. The foregoing actions set forth in clauses
(iii), (iv), (v) and (vi) of this Section 4(r) shall be performed (A) on
the effective
<PAGE> 19
19
date of such Registration Statement and each post-effective amendment
thereto and (B) at each closing under any underwriting or similar
agreement as and to the extent required thereunder.
(s) In the case of any Exchange Offer Registration Statement, the
Company and the Guarantors shall (i) make reasonably available for
inspection by each Purchaser, and any attorney, accountant or other agent
retained by such Purchaser, all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries; (ii) cause the Company's and the Guarantors' officers,
directors and employees to supply all relevant information reasonably
requested by such Purchaser or any such attorney, accountant or agent in
connection with any such Registration Statement as is customary for
similar due diligence examinations; provided, however, that any
information that is designated in writing by the Company or any Guarantor,
in good faith, as confidential at the time of delivery of such information
shall be kept confidential by such Purchaser or any such attorney,
accountant or agent, unless such disclosure is made in connection with a
court proceeding or required by law, or such information becomes available
to the public generally or through a third party without an accompanying
obligation of confidentiality; (iii) make such representations and
warranties to such Purchaser, in form, substance and scope as are
customarily made by issuers to underwriters in primary underwritten
offerings; (iv) obtain opinions of counsel to the Company and the
Guarantors (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to such Purchaser and its counsel),
addressed to such Purchaser, covering such matters as are customarily
covered in opinions requested in underwritten offerings and such other
matters as may be reasonably requested by such Purchaser or its counsel;
(v) obtain "cold comfort" letters and updates thereof from the independent
certified public accountants of the Company and the Guarantors (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to such Purchaser, in
customary form and covering matters of
<PAGE> 20
20
the type customarily covered in "cold comfort" letters in connection with
primary underwritten offerings, or if requested by such Purchaser or its
counsel in lieu of a "cold comfort" letter, an agreed-upon procedures
letter under Statement on Auditing Standards No. 35, covering matters
requested by such Purchaser or its counsel; and (vi) deliver such
documents and certificates as may be reasonably requested by such
Purchaser or its counsel, including those to evidence compliance with
Section 4(k) and with conditions customarily contained in underwriting
agreements. The foregoing actions set forth in clauses (iii), (iv), (v)
and (vi) of this Section 4(s) shall be performed (A) at the close of the
Registered Exchange Offer and (B) on the effective date of any
post-effective amendment to the Exchange Offer Registration Statement.
5. Registration Expenses. The Company and the Guarantors, jointly
and severally, shall bear all expenses incurred in connection with the
performance of its obligations under Sections 2, 3 and 4 hereof (other than
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Holder's Securities pursuant to the Shelf
Registration Statement) and, in the event of any Shelf Registration Statement,
will reimburse the Holders for the reasonable fees and disbursements of one firm
or counsel (in addition to one local counsel in each relevant jurisdiction)
designated by the Majority Holders to act as counsel for the Holders in
connection therewith, and, in the case of any Exchange Offer Registration
Statement, will reimburse the Purchasers for the reasonable fees and
disbursements of counsel acting in connection therewith.
6. Indemnification and Contribution. (a) In connection with any
Registration Statement, the Company and the Guarantors, jointly and severally,
agree to indemnify and hold harmless each Holder of securities covered thereby
(including each Purchaser and, with respect to any Prospectus delivery as
contemplated in Section 4(h) hereof, each Exchanging Dealer), the directors,
officers, employees and agents of each such Holder and each other person, if
any, who controls any such Holder within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become
<PAGE> 21
21
subject under the Act, the Exchange Act or other Federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement as originally filed or in any amendment
thereof, or in any preliminary Prospectus or Prospectus, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that (i) neither the Company nor any Guarantor will be liable in any case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any such Holder
specifically for inclusion therein and (ii) neither the Company nor any
Guarantor shall be liable to any indemnified party under this indemnity
agreement with respect to the Registration Statement or Prospectus to the extent
that it is determined by a final non-appealable judgment that (1) any such loss,
claim, damage or liability of such indemnified party results solely from an
untrue statement of a material fact contained in, or the omission of a material
fact from, the Registration Statement or Prospectus which untrue statement or
omission was corrected in an amended or supplemented Registration Statement or
Prospectus, (2) the person alleging such loss, claim, damage or liability was
not sent or given, at or prior to the written confirmation of such sale, a copy
of the amended or supplemented Registration Statement or Prospectus, and the
Company had previously furnished copies thereof to such indemnified party and
(3) delivery of a prospectus is required by the Act and was not so made. This
indemnity agreement will be in addition to any liability which the Company and
the Guarantors may otherwise have.
The Company also agrees to indemnify or contribute to Losses (as
defined below) of, as provided in Section 6(d), any underwriters of Securities
registered under a Shelf Registration Statement, their officers and directors
<PAGE> 22
22
and each person who controls such underwriters on substantially the same basis
as that of the indemnification of the Purchasers and the selling Holders
provided in this Section 6(a) and shall, if requested by any Holder, enter into
an underwriting agreement reflecting such agreement, as provided in Section 4(q)
hereof.
(b) Each Holder of securities covered by a Registration Statement
(including each Purchaser and, with respect to any Prospectus delivery as
contemplated in Section 4(h) hereof, each Exchanging Dealer) severally and not
jointly agrees to indemnify and hold harmless the Company and the Guarantors,
each of their respective directors and officers and each other person, if any,
who controls the Company or any Guarantor within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company and the Guarantors to each such Holder, but only with
reference to written information relating to such Holder furnished to the
Company by or on behalf of such Holder specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint as counsel one firm of attorneys of the indemnifying party's choice
at the indemnifying party's expense, which counsel, together with one local
counsel in each applicable jurisdiction, shall act on behalf of all the
indemnified parties in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible
<PAGE> 23
23
for the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
counsel shall be satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel (and local
counsel) if (i) the use of counsel chosen by the indemnifying party to represent
the indemnified party would, in the reasonable judgment of the indemnified
party, present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the institution
of such action or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative
<PAGE> 24
24
benefits received by such indemnifying party, on the one hand, and such
indemnified party, on the other hand, from the Initial Placement and the
Registration Statement which resulted in such Losses; provided, however, that in
no case shall any Purchaser or any subsequent Holder of any Security or New
Security be responsible, in the aggregate, for any amount in excess of the
purchase discount or commission applicable to such Security, or in the case of a
New Security, applicable to the Security which was exchangeable into such New
Security, as set forth on the cover page of the Final Memorandum, nor shall any
underwriter be responsible for any amount in excess of the underwriting discount
or commission applicable to the securities purchased by such underwriter under
the Registration Statement which resulted in such Losses. If the allocation
provided by the immediately preceding sentence is unavailable for any reason,
the indemnifying party and the indemnified party shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company and the Guarantors shall be
deemed to be equal to the sum of (x) the total net proceeds from the Initial
Placement (before deducting expenses) as set forth on the cover page of the
Final Memorandum and (y) the total amount of additional interest which the
Company was not required to pay as a result of registering the securities
covered by the Registration Statement which resulted in such Losses. Benefits
received by the Purchasers shall be deemed to be equal to the total purchase
discounts and commissions as set forth on the cover page of the Final
Memorandum, and benefits received by any other Holders shall be deemed to be
equal to the value of receiving Securities or New Securities, as applicable,
registered under the Act. Benefits received by any underwriter shall be deemed
to be equal to the total underwriting discounts and commissions, as set forth on
the cover page of the Prospectus forming a part of the Registration Statement
which resulted in such Losses. Relative fault shall be determined by reference
to whether any alleged untrue statement or omission relates to information
provided by the indemnifying party, on the one hand, or by the indemnified
party, on the other hand. The parties agree that it would not be just and
equitable if contribution were determined by pro rata allocation or any other
method of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d), no
<PAGE> 25
25
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 6,
each person who controls a Holder within the meaning of either the Act or the
Exchange Act and each director, officer, employee and agent of such Holder shall
have the same rights to contribution as such Holder, and each person who
controls the Company or any Guarantor within the meaning of either the Act or
the Exchange Act, each officer of the Company or any Guarantor who shall have
signed the Registration Statement and each director of the Company or any
Guarantor shall have the same rights to contribution as the Company and the
Guarantors, subject in each case to the applicable terms and conditions of this
paragraph (d).
(e) The provisions of this Section 6 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
the Company or any Guarantor or any of the officers, directors or controlling
persons referred to in this Section 6, and will survive the sale by a Holder of
securities covered by a Registration Statement.
7. Miscellaneous.
(a) No Inconsistent Agreements. Neither the Company nor any
Guarantor has, as of the date hereof, entered into, nor shall it, on or
after the date hereof, enter into, any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders
herein or otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the
written consent of the Holders of at least a majority of the then
outstanding aggregate principal amount of Securities (or, after the
<PAGE> 26
26
consummation of any Exchange Offer in accordance with Section 2 hereof, of
New Securities); provided that, with respect to any matter that directly
or indirectly affects the rights of any Purchaser hereunder, the Company
shall obtain the written consent of each such Purchaser against which such
amendment, qualification, supplement, waiver or consent is to be
effective. Notwithstanding the foregoing (except the foregoing proviso), a
waiver or consent to departure from the provisions hereof with respect to
a matter that relates exclusively to the rights of Holders whose
securities are being sold pursuant to a Registration Statement and that
does not directly or indirectly affect the rights of other Holders may be
given by the Majority Holders, determined on the basis of securities being
sold rather than registered under such Registration Statement.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this
Section 7(c), which address initially is, with respect to each
Holder, the address of such Holder maintained by the registrar under
the Indenture, with a copy in like manner to Salomon Brothers Inc by
fax (212-783-2823) and confirmed by mail to them at Seven World
Trade Center, New York, New York 10048;
(2) if to you, initially at the address set forth in the
Purchase Agreement; and
(3) if to the Company or any Guarantor, initially at its
address set forth in the Purchase Agreement.
<PAGE> 27
27
All such notices and communications shall be deemed to have been
duly given when received.
The Purchasers, the Company or any Guarantor by notice to the other
may designate additional or different addresses for subsequent notices or
communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any
consent by the Company or any Guarantor thereto, subsequent Holders of
Securities and/or New Securities. The Company hereby agrees to extend the
benefits of this Agreement to any Holder of Securities and/or New
Securities and any such Holder may specifically enforce the provisions of
this Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT
REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF).
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held
<PAGE> 28
28
invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way
impaired or affected thereby, it being intended that all the rights and
privileges of the parties shall be enforceable to the fullest extent
permitted by law.
(i) Securities Held by the Company, etc. Whenever the consent or
approval of Holders of a specified percentage of principal amount of
Securities or New Securities is required hereunder, Securities or New
Securities, as applicable, held by the Company or its Affiliates (other
than subsequent Holders of Securities or New Securities if such subsequent
Holders are deemed to be Affiliates solely by reason of their holdings of
such Securities or New Securities) shall not be counted in determining
whether such consent or
<PAGE> 29
29
approval was given by the Holders of such required percentage.
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Guarantors and you.
Very truly yours,
METALLURG, INC.,
By:
------------------------------
Name:
Title:
SHIELDALLOY METALLURGICAL
CORPORATION
By:
------------------------------
Name:
Title:
<PAGE> 30
30
METALLURG HOLDINGS CORPORATION
By:
------------------------------
Name:
Title:
METALLURG SERVICES, INC.
By:
------------------------------
Name:
Title:
<PAGE> 31
31
MIR (CHINA), INC.
By:
------------------------------
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written
SALOMON BROTHERS INC
BANCBOSTON SECURITIES INC.
By: SALOMON BROTHERS INC,
By:
------------------------------
Name:
Title:
For themselves and the other
Purchasers named in Schedule I to
<PAGE> 32
32
the Purchase Agreement
<PAGE> 33
i
ANNEX A
Each broker-dealer that receives New Securities for its own account pursuant to
the Registered Exchange Offer must acknowledge that it will deliver a prospectus
in connection with any resale of such New Securities. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Act. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of New
Securities received in exchange for Securities where such New Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Company and the Guarantors have agreed that, starting on
the date hereof (the "Expiration Date") and ending on the close of business on
the first anniversary of the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
<PAGE> 34
i
ANNEX B
Each broker-dealer that receives New Securities for its own account in exchange
for Securities, where such Securities were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Securities. See "Plan of Distribution."
<PAGE> 35
i
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Securities for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such New Securities. The
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Securities received in
exchange for Securities where such Securities were acquired as a result of
market-making activities or other trading activities. Each of the Company and
the Guarantors has agreed that, starting on the Expiration Date and ending on
the close of business on the first anniversary following the Expiration Date, it
will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until ,
199 , all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.(1)/
Neither the Company nor any Guarantor will receive any proceeds from
any sale of New Securities by broker-dealers. New Securities received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the New Securities or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such New
Securities. Any broker-dealer that resells New Securities that were received by
it for its own account pursuant to the Registered Exchange Offer and any broker
or dealer that participates in a distribution of such New Securities may be
deemed to be an "underwriter"
- ----------
(1) In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer Prospectus.
<PAGE> 36
ii
within the meaning of the Securities Act and any profit of any such resale of
New Securities and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Act.
For a period of one year after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company and the Guarantors, jointly and
severally, have agreed to pay all expenses incident to the Exchange Offer
(including the expenses of one counsel for the holders of the Securities) other
than commissions or concessions of any brokers or dealers and will indemnify the
holders of the Securities (including any broker-dealers) against certain
liabilities, including liabilities under the Act.
[If applicable, add information required by Regulation S-K Items 507
and/or 508.]
<PAGE> 37
i
ANNEX D
Rider A
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO.
Name:
Address:
Rider B
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of New
Securities. If the undersigned is a broker-dealer that will receive New
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such New Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Act.
<PAGE> 1
EXHIBIT 5.1
[ROGERS & WELLS LETTERHEAD]
December 23, 1997
Metallurg, Inc.
6 East 43rd Street
New York, New York 10017
Ladies and Gentlemen:
We have acted as counsel for Metallurg, Inc. (the "Company") in
connection with the preparation of a registration statement on Form S-4 (Reg.
No. 333-42141) (the "Registration Statement"), filed by the Company with the
Securities and Exchange Commission (the "Commission") relating to the proposed
offer by the Company to exchange (the "Exchange Offer") $100,000,000 aggregate
principal amount of 11% Series B Senior Notes due 2007 (the "New Notes") of the
Company for a like amount of privately placed 11% Series A Senior Notes due 2007
(the "Old Notes"). The New Notes will be issued pursuant to the Indenture (the
"Indenture") dated November 25, 1997 by and among the Company, the Guarantors
and IBJ Schroder Bank & Trust Company, as trustee. All capitalized terms not
otherwise defined herein have the same meanings given to such terms in the
Indenture.
In connection with the foregoing, we have examined, among other
things, (i) the Registration Statement, (ii) the Indenture, (iii) the form of
New Notes to be issued pursuant to the Indenture and (iv) originals or copies of
such other documents, corporate records, certificates and letters of public
officials and such instruments as we have deemed necessary. In examining all
such documents, we have assumed the genuineness of all signatures, the
authenticity of all documents purporting to be originals, and the conformity to
the respective originals of all documents purported to be copies.
As to questions of fact, we have relied upon the representations,
statements or certificates of public officials and officers and representatives
of the Company.
Based on the foregoing, the qualifications set forth below, and
such examination of law as we have deemed necessary, we are of the opinion that:
<PAGE> 2
The New Notes have been duly authorized by the Company and, when
issued and delivered in exchange for the Old Notes in the manner set
forth in the Registration Statement and executed and authenticated in
accordance with the terms and conditions of the Indenture (and assuming
the due authorization, execution and delivery of the Indenture by each
of the parties thereto), will constitute legal, valid and binding
obligations of the Company.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the heading "Legal
Matters" in the prospectus that forms a part thereof.
We are delivering this opinion to the Company, and no person
other than the Company and its securityholders may rely upon it.
Very truly yours,
/s/ Rogers & Wells
<PAGE> 1
EXHIBIT 10.1
-1-
$40,000,000
LOAN AGREEMENT
among
METALLURG, INC. and
SHIELDALLOY METALLURGICAL CORPORATION
as Borrowers
METALLURG SERVICES, INC.
MIR (CHINA), INC. and
METALLURG HOLDINGS CORPORATION
as Guarantors
THE FIRST NATIONAL BANK OF BOSTON
as Agent for the lending institutions listed on
Schedule 1 hereto (collectively, the "Banks")
and
the BANKS
April 14, 1997
<PAGE> 2
-1-
Exhibits and Schedules
Exhibit A Form of Borrowing Base Report
Exhibit B Form of Note
Exhibit C Form of Loan Request
Exhibit D Form of Assignment and Acceptance
Exhibit E Form of Security Agreement
Exhibit F-1 Form of MI Stock Pledge Agreement
Exhibit F-2 Form of MHC Stock Pledge Agreement
Exhibit G Form of Assumption Agreement
Schedule 1 Banks, Commitments, Commitment Percentages
Schedule 1.2 Ports of Entry
Schedule 1.3 Management Service Agreements
Schedule 3.1 Existing Letters of Credit
Schedule 7(i) Collective Bargaining Agreements
Schedule 7(l) Subsidiaries; Joint Ventures
Schedule 7(m) Environmental Matters
Schedule 7(n) Administrative Claims
Schedule 9.2(b) Indebtedness
Schedule 9.2(c) Liens
Schedule 9.2(d) Investments
<PAGE> 3
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LOAN AGREEMENT
This LOAN AGREEMENT (this "Agreement") is made as of April 14, 1997, by
and among (a) METALLURG, INC., a New York corporation having its principal place
of business at 6 East 43rd Street, New York, New York 10017 ("MI"), and
SHIELDALLOY METALLURGICAL CORPORATION, a New York corporation having its
principal place of business at 12 West Boulevard, Newfield, New Jersey 08344
("SMC" and together with MI, the "Borrowers"), (b) METALLURG SERVICES, INC., a
New York corporation having its principal place of business at 6 East 43rd
Street, New York, New York 10017 ("MSI"), MIR (CHINA), INC., a Delaware
corporation having its principal place of business at 6 East 43rd Street, New
York, New York 10017 ("MIR China"), and METALLURG HOLDINGS CORPORATION, a New
Jersey corporation having its principal place of business at 12 West Boulevard,
Newfield, New Jersey 08344 ("MHC" and collectively with MSI and MIR China, the
"Guarantors"), (c) THE FIRST NATIONAL BANK OF BOSTON, a national banking
association with its head office at 100 Federal Street, Boston, Massachusetts
02110 and the other lending institutions listed on Schedule 1 hereto, and (d)
THE FIRST NATIONAL BANK OF BOSTON, as agent for itself and such other lending
institutions.
BACKGROUND
On September 2, 1993, the Borrowers filed voluntary petitions for
protection under chapter 11 of title 11 of the United States Code (the "Cases").
Pursuant to an order entered on or about February 26, 1997, (the "Confirmation
Order"), the Bankruptcy Court confirmed the Fourth Amended and Restated Joint
Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code, dated
December 18, 1996 ( as amended, supplemented or otherwise modified with the
consent of the Agent, the "Plan").
In connection with the Effective Date (as defined in the Plan) and as
contemplated by the Plan, the Borrowers have applied to the Banks for a
revolving credit facility in an aggregate principal amount not to exceed
$40,000,000 with a sublimit for letters of credit of $30,000,000. The Banks are
agreeable to providing such facility to the Borrowers, with such facility to be
on the terms and conditions set forth in this Agreement. The proceeds of the
loans and the letters of credit will be used to fund payments contemplated by
the Plan and to provide working capital to, and to finance other general
corporate purposes of, the Borrowers and MCL (as hereinafter defined).
Pursuant to the Confirmation Order, the Borrowers were authorized to enter
into this Agreement and the other Loan Documents (as hereinafter defined).
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NOW, THEREFORE, in consideration of the promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, each of the parties hereto agrees as follows:
ss.1. DEFINITIONS. Certain capitalized terms are defined below:
Accounts: All rights of either of the Borrowers or MCL to any payment of
money for goods sold, leased or otherwise marketed in the ordinary course of
business, whether evidenced by or under or in respect of a contract or
instrument, and to all proceeds in respect thereof.
Adjusted Operating Cash Flow: For any period with respect to the North
American Group, the amount equal to (a) EBITDA for such period, plus (b) to the
extent not otherwise included in calculating EBITDA, interest income during such
period and dividends from foreign Subsidiaries during such period, minus (c) to
the extent not otherwise deducted in calculating EBITDA, cash payments for all
taxes paid during such period for the North American Group, minus (d) to the
extent not otherwise deducted in calculating EBITDA, capital expenditures made
during such period for the North American Group to the extent permitted
hereunder.
Agency Agreement: See ss.2.3(c).
Agent: The First National Bank of Boston acting as agent for the Banks.
Agent's Head Office: The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
Agent's Special Counsel: Bingham, Dana & Gould LLP or such other counsel
as may be approved by the Agent.
Agreement: See preamble, which term shall include this Agreement and the
Schedules and Exhibits hereto, each as amended and in effect from time to time.
Allowed LME Traded Metal: Tin, aluminum and nickel.
Assignment and Acceptance: See ss.14.1.
Assumption Agreement. The Assumption Agreement, to be entered into
simultaneously with the Reincorporation Mergers by each of the surviving
corporations of such Reincorporation Mergers, substantially in the form of
Exhibit G hereto, pursuant to which, among other things, such successor
corporations shall agree to assume all of the Obligations hereunder and to
become the Borrowers for all purposes under the Loan Documents.
<PAGE> 5
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Banks: FNBB and the other lending institutions listed on Schedule 1 hereto
and any other Person who becomes an assignee of any rights and obligations of a
Bank pursuant to ss.14.
Bankruptcy Code: Title 11, United States Code.
Bankruptcy Court: The United States Bankruptcy Court for the Southern
District of New York or such other court having jurisdiction over the Cases.
Base Rate: The higher of (a) the annual rate of interest announced from
time to time by FNBB at its head office as FNBB's "base rate" and (b) one-half
of one percent (1/2%) above the Federal Funds Effective Rate.
Base Rate Loans: Loans bearing interest calculated by reference to the
Base Rate.
Borrowers: See preamble.
Borrowing Base: At the relevant time of reference thereto, an amount
determined by the Agent by reference to the most recent Borrowing Base Report
and the most recent appraisal of the Eligible Fixed Assets delivered to the
Banks and the Agent pursuant to ss.9(a)(v), which is equal to (a) the sum of (i)
85% of Eligible Accounts at such time, plus (ii) 60% of the net book value
(valued on an average cost basis at the lower of cost or market (except as
provided below in this definition) by the Borrowers in a manner consistent with
their past practices) of Eligible Consignment Accounts at such time, plus (iii)
60% of the net book value (valued on an average cost basis at the lower of cost
or market (except as provided below in this definition) by the Borrowers in a
manner consistent with their past practices) of Eligible Inventory at such time,
plus (iv) 70% of the Determined Value of Eligible Fixed Assets at such time,
plus (b) after taking into account any requested Loan or Letter of Credit, the
proceeds of which are to be used to fund the Canadian Intercompany Facility, an
amount equal to the lesser of (i) the aggregate amount of the Canadian
Intercompany Outstandings at such time, and (ii) the Canadian Borrowing Base at
such time, plus (c) 60% of the maximum aggregate amount that the beneficiaries
may draw under outstanding documentary Letters of Credit issued in connection
with the purchase of inventory by the Borrowers solely to the extent that such
inventory being purchased, immediately upon any drawing of any such documentary
Letter of Credit, would constitute Eligible Inventory, minus (d) a reserve in
the amount of $5,000,000, minus (e) the amount of any Warehousemen Lien Reserve
with respect to inventory of the Borrowers at such time. Notwithstanding that
the Eligible Consignment Accounts and Eligible Inventory of the Borrowers shall
be reported at the lower of cost or market as provided above, the Agent and the
Banks hereby acknowledge that the Borrowers review their inventory for market
adjustment on a quarterly basis only. The Borrowers hereby agree to adjust their
inventory to the lower of cost or market on a more current basis in the event of
any material decrease in the market price for any such inventory which would
cause the amount of Eligible Consignment Accounts and/or Eligible Inventory to
be materially misstated if not so
<PAGE> 6
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currently adjusted, and at any time during which the amount of unused
availability that the Borrowers may use to request Loans or Letters of Credit
hereunder shall be less than $5,000,000 in the aggregate, the Agent may, in its
discretion, require the Borrowers to adjust their inventory to the lower of cost
or market on a monthly basis.
The Borrowing Base shall be determined monthly (or at such other interval
as may be specified pursuant to ss.9(a)(v)) by the Agent by reference to the
Borrowing Base Report and the appraisals of Eligible Fixed Assets delivered to
the Banks and the Agent pursuant to ss.9(a)(vi). The components of the Borrowing
Base and the Canadian Borrowing Base, the advance rates provided for therein,
and the definitions contained in this Agreement governing eligibility criteria
for such components of the Borrowing Base and the Canadian Borrowing Base may
hereafter be adjusted or revised by the Agent in its reasonable judgment on the
basis of any then recently completed commercial finance examination or appraisal
or other information then recently delivered by the Borrowers to the Agent and
the Banks.
Borrowing Base Report: A report, with supporting details satisfactory to
the Agent and the Banks, setting forth the Borrowers' computation of the
Borrowing Base, such report to be in the form of the Exhibit A attached hereto.
Business Day: Any day on which banks in Boston, Massachusetts, are open
for business generally and, in the case of Eurodollar Rate Loans, also a day
which is a Eurodollar Business Day.
Canadian Assignment Documents: The Acknowledgment from MCL to the Agent,
dated on or prior to the Closing Date, the Collateral Assignment of Movable
Hypothec from MI to the Agent, dated on or prior to the Closing Date, and the
assignments in favor or the Agent of all security filings against MCL made under
Canadian law, and each of the documents, instruments and agreements executed and
delivered in connection therewith, each as amended from time to time with the
consent of the Agent and the Banks, and each in form and substance satisfactory
to the Agent and the Banks.
Canadian Borrowing Base: At the relevant time of reference thereto, an
amount determined by the Agent by reference to the most recent Borrowing Base
Report delivered to the Banks and the Agent pursuant to ss.9(a)(v), which is
equal to the lesser of (a) $5,000,000 and (b) the sum of (i) 85% of Eligible
Canadian Accounts at such time plus (ii) 60% of the net book value (valued on an
average cost basis at the lower of cost or market (except as provided below in
this definition) by MCL in a manner consistent with its past practice) of
Eligible Canadian Inventory at such time, plus (iii) 60% of the maximum
aggregate amount that the beneficiaries may draw under outstanding documentary
Letters of Credit issued for the account of MCL in connection with the purchase
of inventory by MCL solely to the extent that such inventory being purchased,
immediately upon any drawing of any such documentary Letter of Credit, would
constitute Eligible Canadian Inventory, minus (iv) the amount of any
Warehousemen Lien Reserve with respect to inventory of MCL at such time. For
purposes of determining the Canadian Borrowing Base, in order to convert
<PAGE> 7
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the value of Eligible Canadian Accounts and Eligible Canadian Inventory from a
given amount of Canadian currency into Dollars, such conversion shall be made at
the Agent's spot rate of exchange for buying Dollars with such amount of
Canadian currency prevailing at the Agent's close of business as of the first
Business Day of the month during which the date of determination occurs or as of
such other date as the Agent may from time to time reasonably require.
Notwithstanding that the Eligible Canadian Inventory of MCL shall be reported at
the lower of cost or market as provided above, the Agent and the Banks hereby
acknowledge that MCL reviews its inventory for market adjustment on a quarterly
basis only. The Borrowers hereby agree to cause MCL to adjust its inventory to
the lower of cost or market on a more current basis in the event of any material
decrease in the market price for any such inventory which would cause the amount
of Eligible Canadian Inventory to be materially misstated if not so currently
adjusted, and at any time during which the amount of unused availability that
the Borrowers may use to request Loans or Letters of Credit hereunder shall be
less than $5,000,000 in the aggregate, the Agent may, in its discretion, require
the Borrowers to cause MCL to adjust its inventory to the lower of cost or
market on a monthly basis.
Canadian Intercompany Facility: Loans made by MI to, and Letters of Credit
issued for the account of, MCL (for which MCL has agreed to reimburse MI in
respect of any drawing thereunder), in each case pursuant to the Canadian Loan
Documents.
Canadian Intercompany Outstandings: At any time of reference, the sum of
(a) the aggregate principal amount of outstanding loans made by MI to MCL under
the Canadian Intercompany Facility plus (b) the aggregate Maximum Drawing Amount
under all Letters of Credit issued for the account of MCL under the Canadian
Intercompany Facility plus the aggregate amount of unpaid Reimbursement
Obligations under all Letters of Credit issued for the account of MCL under the
Canadian Intercompany Facility, in each case in respect of which MCL has agreed
to reimburse MI for any drawing thereunder. For purposes of determining the
Canadian Intercompany Outstandings, in order to convert the amount of loans and
Letters of Credit in respect thereof from a given amount of Canadian currency
into Dollars, such conversion shall be made at the Agent's spot rate of exchange
for buying Dollars with such amount of Canadian currency prevailing at the
Agent's close of business as of the first Business Day of the month during which
the date of determination occurs or as of such other date as the Agent may from
time to time reasonably require.
Canadian Loan Documents: The Canadian Security Agreements, the Canadian
Note and each of the documents, instruments and agreements executed and
delivered in connection therewith, each as amended from time to time with the
consent of the Agent and the Banks, and each in form and substance satisfactory
to the Agent and the Banks.
Canadian Note: The amended and restated note dated October 28, 1993 and
amended and restated on or prior to the Closing Date issued by MCL in favor of
MI, in a principal amount up to $5,000,000, as amended from time to time with
the consent of the Agent and the Banks, and in form and substance satisfactory
to the Agent and the Banks.
<PAGE> 8
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Canadian Security Agreements: (a) the General Security Agreement dated on
or prior to the Closing Date, made by MCL in favor of MI, and (b) the Hypothec
on Movable Property dated on or prior to the Closing Date, between MCL and MI,
each as amended from time to time with the consent of the Agent and the Banks,
and each in form and substance satisfactory to the Agent and the Banks.
Cases: See preamble.
Cash Collateral Account: In relation to either Borrower, one or more
accounts of such Borrower with the Agent in which funds are held by the Agent,
for the benefit of the Banks and the Agent, as cash collateral pursuant to the
express provisions of this Agreement to secure Reimbursement Obligations and
other funds from time to time invested by the Agent for the account of such
Borrower as permitted hereby and, in each case, in which the Agent has a prior,
perfected Lien, for the benefit of the Banks and the Agent, to secure the
payment of the Obligations.
CERCLA: See ss.7(m).
Charter Documents: In respect of any entity, the certificate or articles
of incorporation or organization and the by-laws of such entity, or other
constitutive documents of such entity.
Closing Date: The first date on which the conditions set forth in ss.8
have been satisfied and any Loans are to be made or any Letter of Credit is to
be issued hereunder.
Code: The Internal Revenue Code of 1986, as amended or modified and in
effect from time to time.
Collateral: All of the property, rights and interests of the Borrowers and
the Guarantors that are or are intended to be subject to the security interests
and mortgages created by the Security Documents.
Commitment: With respect to each Bank, the amount set forth on Schedule 1
hereto as the amount of such Bank's commitment to make Loans to, and to
participate in the issuance, extension and renewal of Letters of Credit for the
account of, the Borrowers, as the same may be reduced from time to time; or if
such commitment is terminated pursuant to the provisions hereof, zero. The
aggregate Commitments of all the Banks shall initially be $40,000,000.
Commitment Percentage: With respect to each Bank, the percentage set forth
on Schedule 1 hereto as such Bank's percentage of the aggregate Commitments of
all of the Banks.
Confirmation Order: See preamble.
<PAGE> 9
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Consent: In respect of any person or entity, any permit, license or
exemption from, approval, consent of, registration or filing with any local,
state or federal governmental or regulatory agency or authority, required under
applicable law.
Consignment Accounts: Accounts arising from the sale of Consignment
Inventory prior to the time when title thereto has passed to the ultimate buyer
thereof from the applicable Borrower or MCL or (as the case may be) to the
consignee.
Consignment Inventory: Inventory located at the plant, warehouse or other
location designated by the proposed consignee thereof, or in transit thereto,
but as to which title has not yet passed to the ultimate buyer of such inventory
from the applicable Borrower or MCL or (as the case be) to the consignee.
Consolidated or consolidated: With reference to any term defined herein,
shall mean that term as applied to the accounts of a given Person and its
Subsidiaries, consolidated in accordance with GAAP.
Conversion Request: A notice given by the Borrowers to the Agent of the
Borrowers' election to convert or continue a Loan in accordance with ss.2.5
hereof.
Default: An event or act which, with the giving of notice and/or the lapse
of time, would become an Event of Default.
Delinquent Bank: See ss.13.5(c).
Determined Value: At the relevant time of reference thereto, the appraised
value of such assets on a "forced liquidation basis" determined by the most
recent appraisal thereof conducted pursuant to ss.9(a)(vi). To the extent that
any Eligible Fixed Asset is encumbered by a Lien which is a Permitted Lien not
securing the Obligations and which has priority over the Lien securing the
Obligations, the amount of the Indebtedness secured by such Lien shall be
deducted from the value determined in accordance with the immediately preceding
sentence of this definition of the term "Determined Value".
DIP Agreement: The Debtor in Possession Loan Agreement dated as of
September 2, 1993, among the Borrowers, as debtors and debtors in possession,
the guarantors thereunder, and FNBB, as amended or modified and in effect from
time to time prior to the Closing Date.
Direct Collection Letter: See ss.2.3(c).
Disclosure Statement: The Borrowers' Second Amended Joint Disclosure
Statement Pursuant to Section 1125 of the Bankruptcy Code, dated December 18,
1996, as filed with the Bankruptcy Court and as amended or modified with the
consent of the Agent through the conclusion of the hearing which resulted in the
entry of the Confirmation Order.
<PAGE> 10
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Dollars or $: Dollars in lawful currency of the United States of America.
Domestic Lending Office: Initially, the office of each Bank designated as
such in Schedule 1 hereto; thereafter, such other office of such Bank, if any,
located within the United States that will be making or maintaining Base Rate
Loans.
Drawdown Date: The date on which any Loan is made or is to be made, and
the date on which any Loan is converted or continued in accordance with ss.2.5.
EBITDA: With respect to the North American Group and any particular fiscal
period (a) consolidated net income (or loss) of the North American Group for
such period, after eliminating therefrom all extraordinary nonrecurring items of
income (including gains on the sale of assets and earnings from the sale of
discontinued business lines), and after all expenses and other proper charges
but before payment or provision for (i) any income taxes or interest expenses
for such period, (ii) depreciation for such period, (iii) amortization for such
period, and (iv) all other noncash charges for such period, all determined in
accordance with GAAP, minus (b) to the extent not otherwise deducted in
calculating consolidated net income (or loss) of the North American Group,
non-cash items of income during such period.
Effective Date: As defined in the Plan.
Eligible Accounts: Those Accounts of the Borrowers (net of any finance
charges, late charges, credits, rebates, contras or other offsets, commissions,
counterclaims or adjustments) (a) which the Borrowers reasonably determine to be
collectible, (b) the account debtors in respect of which are not reasonably
deemed uncreditworthy by the Majority Banks, are not debtors in any bankruptcy,
insolvency, liquidation, reorganization, dissolution or similar case or
proceeding or assignors for the benefit of creditors, are not affiliated with
the Borrowers or the Guarantors, and purchased the goods or services for
reasonably equivalent value, (c) which are not outstanding for more than ninety
(90) days past the earlier to occur of (i) the date of invoice and (ii) the date
of shipment (as to goods) or of provision (as to services), (d) which are not
more than sixty (60) days past due from the due date thereof and which are on
terms not to exceed thirty (30) days, (e) over which there is no Lien in favor
of any person or entity other than the Agent, for the benefit of the Agent and
the Banks (and other than the subordinated Lien securing the Senior Secured
Notes), and in which the Agent has a valid and perfected first-priority security
interest, (f) which are in payment of fully performed and undisputed
obligations, (g) that are not due from any account debtor with respect to which
more than fifty percent (50%) of the aggregate amount of all Accounts owing from
such account debtor are not Eligible Accounts by reason of the foregoing clause
(c) or (d), (h) which are not Consignment Accounts, (i) which are payable in
Dollars from an account debtor with its chief executive office or a branch
office located within the United States and invoiced to and payable from such
office (except to the extent that the Agent in its sole discretion shall have
agreed to include Accounts payable by certain specified account debtors from
offices outside of the United States, provided, that the Agent
<PAGE> 11
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may in its discretion, upon thirty (30) days prior notice to the Borrowers,
exclude any such Accounts payable from offices outside of the United States and
theretofore includable in Eligible Accounts), (j) that are not due from an
account debtor located in Minnesota or New Jersey unless the owner of such
Account (i) has received a certificate of authority to do business and is in
good standing in such state or (ii) has filed a notice of business activities
report with the appropriate office or agency of such state for the current year,
and (k) that are not supported by a letter of credit unless the Agent has a
prior, perfected security interest in such letter of credit for the benefit of
the Banks and the Agent.
Eligible Assignee: Any of (a) a commercial bank or finance company
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (b) a
savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (c) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000, provided that such
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (d) the central
bank of any country which is a member of the OECD; and (e) if, but only if, any
Event of Default has occurred and is continuing, any other bank, insurance
company, commercial finance company or other financial institution or other
Person approved by the Agent, such approval not to be unreasonably withheld.
Eligible Canadian Accounts: Those Accounts of MCL (net of any finance
charges, late charges, credits, rebates, contras or other offsets, commissions,
counterclaims or adjustments) (a) which the Borrowers reasonably determine to be
collectible, (b) the account debtors in respect of which are not reasonably
deemed uncreditworthy by the Majority Banks, are not debtors in any bankruptcy,
insolvency, liquidation, reorganization, dissolution or similar case or
proceeding or assignors for the benefit of creditors, are not affiliated with
the Borrowers, MCL or the Guarantors, and purchased the goods or services for
reasonably equivalent value, (c) which are not outstanding for more than ninety
(90) days past the earlier to occur of (i) the date of invoice and (ii) the date
of shipment (as to goods) or of provision (as to services), (d) which are not
more than sixty (60) days past due from the due date thereof and which are on
terms not to exceed thirty (30) days, (e) over which there is no Lien in favor
of any person or entity other than MI, and in which MI has a valid and perfected
first-priority security interest (which security interest in favor of MI is
collaterally assigned in favor of the Agent, for the benefit of the Agent and
the Banks), (f) which are in payment of fully performed and undisputed
obligations, (g) that are not due from any account debtor with respect to which
more than fifty percent (50%) of the aggregate amount of all Accounts owing from
such account debtor are not Eligible Accounts by reason of the foregoing clause
(c) or (d), (h) which are not Consignment Accounts, (i) which are payable in
Dollars or Canadian dollars from an account debtor with its chief executive
office or a branch office located within Canada or the United States and
invoiced to and payable from
<PAGE> 12
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such office, and (j) that are not supported by a letter of credit unless MI has
a prior, perfected security interest in such letter of credit and such security
interest has been collaterally assigned in favor of the Agent for the benefit of
the Banks and the Agent.
Eligible Canadian Inventory: Inventory owned by MCL (net of reserves for
off grade inventory and intercompany profit, as such reserves may be adjusted by
the Agent in its reasonable discretion on account of improvements or
deteriorations in reporting of inventory), (a) which is owned, possessed and
held for sale by MCL within Canada but not yet shipped (other than Eligible
In-Transit Inventory, which shall not be excluded from Eligible Canadian
Inventory pursuant to this clause (a)), (b) for which, if held on premises
leased by MCL (other than with respect to any warehouses, the storage expenses
with respect to which have been included in calculating the Warehousemen Lien
Reserve for any period as set forth in the definition of Warehousemen Lien
Reserve), a waiver of the lessor and, if any, sublessor, in each case reasonably
satisfactory to the Agent has been delivered to the Agent, (c) over which there
is no Lien in favor of any person or entity other than MI, and in which MI has a
valid and perfected first-priority security interest (which Lien in favor of MI
is collaterally assigned in favor of the Agent, for the benefit of the Agent and
the Banks), (d) which is not Consignment Inventory and which is otherwise in the
possession of MCL (other than Eligible In-Transit Inventory, which shall not be
excluded from Eligible Canadian Inventory solely because it is not in the
possession of MCL) unless the Agent has received a waiver from the party in
possession of such inventory in form and substance reasonably satisfactory to
the Agent, (e) which is not work in process, (f) which is not production and
packing supplies, (g) which does not reflect any capitalized inventory
variances, (h) which is not slow moving, (i) which has not been deemed by the
Majority Banks to be otherwise either obsolete or unmarketable, (j) which is not
held on consignment and is actually owned by MCL, and (k) which is not damaged.
Eligible Consignment Accounts: Consignment Inventory of SMC which would
constitute Eligible Inventory but for the provisions of clause (d) of the
definition of Eligible Inventory (a) as to which appropriate Uniform Commercial
Code financing statements showing SMC as debtor and the Agent as secured party
have been filed in the appropriate filing office or offices in order to perfect
the Agent's security interest therein, (b) as to which appropriate Uniform
Commercial Code financing statements showing SMC as the owner and consignor of
such Consignment Inventory have been filed in the appropriate filing office or
offices in order to evidence SMC's ownership interest therein, such filing(s) to
have been made prior to the relevant consignee's taking possession of such
Consigned Inventory, and as to which such financing statements have been
appropriately assigned in favor of the Agent, and (c) as to which SMC shall have
notified, prior to the relevant consignee's taking possession of such Consigned
Inventory, all secured creditors of such relevant consignee having a security
interest of record in inventory of such relevant consignee of the intention of
SMC to consign inventory to such relevant consignee.
Eligible Fixed Assets: Those fixed personal property assets (excluding all
leaseholds and real property) (a) owned by SMC and located at SMC's Newfield,
New Jersey or
<PAGE> 13
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Cambridge, Ohio facilities at the relevant time of reference thereto, (b) in
which the Agent has a valid and perfected security interest for the benefit of
the Banks and the Agent, (c) which are properly insured in accordance with the
provisions of ss.9.1(c) and the provisions of the Security Documents, and (d)
with respect to which insurance the Agent is an additional loss payee.
Eligible In-Transit Inventory: Inventory (a) which is in transit and which
has been shipped from its original place of embarkation and with respect to
which the next place of debarkation is a port of entry in the United States
specified on Schedule 1.2 hereto, (b) which is represented by negotiable
documents of title as to which the Agent is a holder to whom such negotiable
documents of title have been duly negotiated, and (c) as to which the Agent, for
the benefit of the Banks and the Agent, is an additional but primary loss payee
under all insurance policies covering any casualty with respect thereto.
Eligible Inventory: Inventory owned by either of the Borrowers (net of
reserves for off grade inventory and intercompany profit, as such reserves may
be adjusted by the Agent in its reasonable discretion on account of improvements
or deteriorations in reporting of inventory), (a) which is owned, possessed and
held for sale by SMC or MI within the United States of America but not yet
shipped (other than Eligible In-Transit Inventory, which shall not be excluded
from Eligible Inventory pursuant to this clause (a)), (b) for which, if held on
premises leased by SMC or MI (other than with respect to any warehouses, the
storage expenses with respect to which have been included in calculating the
Warehousemen Lien Reserve for any period as set forth in the definition of
Warehousemen Lien Reserve), a waiver of the lessor and, if any, sublessor, in
each case reasonably satisfactory to the Agent has been delivered to the Agent,
(c) over which there is no Lien in favor of any person or entity other than the
Agent, for the benefit of the Banks and the Agent (and other than the
subordinated Lien securing the Senior Secured Notes), and in which the Agent has
a valid and perfected first-priority security interest, (d) which is not
Consignment Inventory and which is otherwise in the possession of one of the
Borrowers (other than Eligible In-Transit Inventory, which shall not be excluded
from Eligible Inventory solely because it is not in the possession of the
Borrowers) unless the Agent has received a waiver from the party in possession
of such inventory in form and substance reasonably satisfactory to the Agent,
(e) which is not work in process (other than, in the case of SMC, readily
measurable and identifiable work in process awaiting only final packaging in
bags, drums or cans), (f) which is not production and packing supplies, (g)
which does not reflect any capitalized inventory variances, (h) which, in the
case of SMC, is not slow moving, (i) which has not been deemed by the Majority
Banks to be otherwise either obsolete or unmarketable, (j) which is not held by
the Borrowers on consignment and is actually owned by one of the Borrowers, and
(k) which is not damaged.
Environmental Laws: See ss.7(m).
EPA: See ss.7(m).
<PAGE> 14
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ERISA: The Employee Retirement Income Security Act of 1974, as amended and
in effect from time to time, and all applicable rules and regulations
thereunder.
ERISA Affiliate: Any Person which is treated as a single employer with the
Borrower under Section 414 of the IRC.
Eurocurrency Reserve Rate: For any day with respect to a Eurodollar Rate
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
Eurodollar Business Day: Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or such
other eurodollar interbank market as may be selected by the Agent in its sole
discretion acting in good faith.
Eurodollar Lending Office: Initially, the office of each Bank designated
as such in Schedule 1 hereto; thereafter, such other office of such Bank, if
any, that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate: For any Interest Period with respect to a Eurodollar Rate
Loan, the rate of interest equal to (i) the rate per annum of interest for the
Agent (rounded upwards to the nearest 1/16 of one percent) at which the Agent's
Eurodollar Lending Office is offered Dollar deposits two Eurodollar Business
Days prior to the beginning of such Interest Period in the interbank eurodollar
market where the eurodollar and foreign currency and exchange operations of such
Eurodollar Lending Office are customarily conducted, for delivery on the first
day of such Interest Period for the number of days comprised therein and in an
amount comparable to the amount of the Eurodollar Rate Loan of the Agent to
which such Interest Period applies, divided by (ii) a number equal to 1.00 minus
the Eurocurrency Reserve Rate, if applicable.
Eurodollar Rate Loans: Loans bearing interest calculated by reference to
the Eurodollar Rate.
Event of Default: See ss.10.
Excess Proceeds: As defined in the Indenture, as in effect on the Closing
Date or as otherwise amended with the consent of the Agent and the Banks.
Excess Proceeds Offer: As defined in the Indenture, as in effect on the
Closing Date or as otherwise amended with the consent of the Agent and the
Banks.
<PAGE> 15
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Existing Letters of Credit: See ss.3.1(a).
Federal Funds Effective Rate: For any day, the rate per annum equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
funds brokers of recognized standing selected by the Agent.
Fee Letter: See ss.5(a).
Financials: For any person or entity in respect of any period, the
consolidated and consolidating balance sheet of such person or entity and its
Subsidiaries as at the end of such period, and the related consolidated and
consolidating statement of income and consolidated and consolidating statement
of cash flow of such person or entity for such period, each setting forth in
comparative form the consolidated figures for the previous comparable fiscal
period, all in reasonable detail and prepared in accordance with GAAP.
Foreign Exchange Contract: Any foreign exchange contract on FNBB's
customary form or any other writing or confirmation customary for FNBB, entered
into from time to time between one or both of the Borrowers and FNBB.
Foreign Pledge Agreements: The Charge Over Shares dated on or prior to the
Closing Date, between MHC and the Agent, the Supplemental Swiss Stock Agreement
dated on or prior to the Closing Date, between MHC and the Agent, the documents
and instruments executed and delivered in connection with either of such
agreements, and any other agreement or instrument entered into from time to time
at the request of the Agent among the Agent and the Borrowers in connection with
the pledge in favor of the Agent of the capital stock of any direct Subsidiary
of the Borrowers or the Guarantors organized under the laws of any foreign
country, each as amended from time to time with the consent of the Agent and the
Banks, and each in form and substance satisfactory to the Agent and the Banks.
FNBB: The First National Bank of Boston, a national banking association,
in its individual capacity.
GAAP: Generally accepted accounting principles consistent with those
adopted by the Financial Accounting Standards Board and its predecessor, (a)
generally, as in effect from time to time, and (b) for purposes of determining
compliance by the Borrowers with their financial covenants set forth herein, as
in effect for the fiscal year reported in the most recent Financials submitted
to the Agent and the Banks prior to execution of this Agreement.
Guaranteed Pension Plan: See ss.10(o).
<PAGE> 16
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Guarantors: See preamble.
Guaranty: The guaranty by each of the Guarantors, pursuant to ss.6.4
hereof, of the Obligations of the Borrowers under this Agreement and each of the
other Loan Documents.
Hazardous Substances: See ss.7(m).
Indebtedness: In respect of any entity, all obligations, contingent and
otherwise, that in accordance with GAAP should be classified as liabilities,
including without limitation (a) all debt obligations, (b) all liabilities
secured by Liens, (c) all guarantees of Indebtedness of others, and (d) all
liabilities in respect of bankers' acceptances or letters of credit.
Indenture: The Indenture dated as of April 14, 1997 among MI as principal
obligor, SMC as guarantor, and the Trustee.
Interest Payment Date: (i) As to any Base Rate Loan, the first day of the
calendar month following the calendar month which includes the Drawdown Date
thereof; and (ii) as to any Eurodollar Rate Loan, the last day of each Interest
Period applicable thereto.
Interest Period: With respect to each Loan, (i) initially, the period
commencing on the Drawdown Date of such Loan and ending on the last day of one
of the periods set forth below, as selected by the Borrowers in a Loan Request
(A) for any Base Rate Loan, the last day of the calendar month; and (B) for any
Eurodollar Rate Loan, 1, 2 or 3 months; and (ii) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to
such Loan and ending on the last day of one of the periods set forth above, as
selected by the Borrowers in a Conversion Request; provided that all of the
foregoing provisions relating to Interest Periods are subject to the following:
(a) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Eurodollar Business Day;
(b) if any Interest Period with respect to a Base Rate Loan would
end on a day that is not a Business Day, that Interest Period shall end on
the next succeeding Business Day;
(c) if the Borrowers shall fail to give notice as provided in
ss.2.5, the Borrowers shall be deemed to have requested a conversion of
the affected Eurodollar Rate Loan to a Base Rate Loan and the continuance
of all Base Rate Loans as Base Rate Loans on the last day of the then
current Interest Period with respect thereto;
<PAGE> 17
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(d) any Interest Period relating to any Eurodollar Rate Loan that
begins on the last Eurodollar Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last Eurodollar
Business Day of a calendar month; and
(e) any Interest Period relating to any Eurodollar Rate Loan that
would otherwise extend beyond the Maturity Date shall end on the Maturity
Date.
IRC: The Internal Revenue Code of 1986, as amended.
Letter of Credit: See ss.3.1(a).
Letter of Credit Application: See ss.3.1(a).
Letter of Credit Participation: See ss.3.1(e).
Letter of Credit Fees: See ss.3.6.
Liens: Any lien, encumbrance, mortgage, pledge, hypothecation, charge,
restriction or other security interest of any kind securing any obligation of
any Person including, without limitation, all statutory trust claims under the
laws of Canada or any province thereof.
Loan: Any loan made or to be made to the Borrowers pursuant to ss.2.
Loan Documents: This Agreement (including the Guaranty contained herein),
the Notes, the Letter of Credit Applications, the Letters of Credit, the Fee
Letter, the Security Documents and, upon and after the effectiveness of the
Reincorporation Mergers only, the Assumption Agreement, in each case as from
time to time amended or supplemented, and all of the instruments, agreements and
documents executed in connection therewith.
Loan Request: See ss.2.1(c).
Lock Box Account: See ss.2.3(c).
Lock Box Agreement: The Lock Box Agreement among the Borrowers, the
Guarantors and the Agent, as the same may be amended, restated, supplemented or
otherwise modified and in effect from time to time, and in form and substance
satisfactory to the Agent and the Banks.
Majority Banks: As of any date (a) the Banks holding at least fifty-one
percent (51%) of the sum of (i) the outstanding principal amount of the Notes on
such date plus (ii) the Letter of Credit Participations of all of the Banks in
the sum of (A) the Maximum Drawing Amount on such date plus (B) any Unpaid
Reimbursement Obligations on such date; and (b)
<PAGE> 18
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if no such principal amount of the Notes and no Letters of Credit are
outstanding, the Banks whose aggregate Commitments constitute at least fifty-one
percent (51%) of the Total Commitment.
Management Service Agreements: The several Management Service Agreements
between MSI and several of MI's Subsidiaries described on Schedule 1.3 hereto.
Materially Adverse Effect: Any materially adverse effect on the financial
condition or business operations of the Borrowers and the Guarantors (or, as the
case may be, of the Borrowers, the Guarantors and MCL), taken together, or
material impairment of the ability of either of the Borrowers or any of the
Guarantors (or, as the case may be, of either of the Borrowers, any of the
Guarantors or MCL) to perform their obligations hereunder or under any of the
other Loan Documents.
Material Subsidiaries: At any date of determination, any Subsidiary of MI
that, together with its Subsidiaries, (a) for the most recent fiscal year of MI,
accounted for more than 10% of the consolidated revenues of MI and its
Subsidiaries or (b) as of the end of such fiscal year, was the owner of more
than 10% of the consolidated assets of MI and its Subsidiaries, all as set forth
on the most recently available consolidated financial statements of MI and its
Subsidiaries for such fiscal year, other than Gesellschaft fuer
Elektrometallurgie m.b.H. or Elektrowerk Weisweiler GmbH and their Subsidiaries.
Maturity Date: April 14, 2000.
Maximum Drawing Amount: The maximum aggregate amount from time to time
that the beneficiaries may draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.
MCL: Metallurg (Canada) Ltee./Metallurg (Canada) Ltd., a corporation
organized under the laws of Quebec.
MHC: See preamble.
MI: See preamble.
MIR China: See preamble
MSI: See preamble.
Net Cash Proceeds: As defined in the Indenture, as in effect on the
Closing Date or as otherwise amended with the consent of the Agent and the
Banks.
New Lending Office: See ss.5(f)(iv).
<PAGE> 19
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Non-U.S. Lender: See ss.5(f)(iv).
North American Group: MI, Metallurg International Resources GmbH,
Metallurg Mexico S.A. de C.V., SMC, MCL, MSI, MIR China, and MHC.
Notes: See ss.2.1(b).
Obligations: All indebtedness, obligations and liabilities of the
Borrowers and the Guarantors to any of the Banks and the Agent, individually or
collectively, existing on the date of this Agreement or arising thereafter,
direct or indirect, joint or several, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising by
contract, operation of law or otherwise, arising or incurred under this
Agreement or any other Loan Document or any Foreign Exchange Contract or in
respect of any of the Loans made or Reimbursement Obligations incurred or any
obligations under any Foreign Exchange Contract or any of the Notes, Letter of
Credit Applications, Letters of Credit or other instruments at any time
evidencing any thereof.
Operating Account: In relation to either Borrower, the operating account
of such Borrower maintained with the Agent.
OSHA: The Occupational Safety and Health Act, as amended, and all rules,
regulations, judgments, decrees and orders arising thereunder.
PBGC: The Pension Benefit Guaranty Corporation, and any successor entity
or entities bearing similar responsibilities.
Permitted Liens: See ss.9.2(c).
Person: Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Plan: The Fourth Amended and Restated Joint Plan of Reorganization
Pursuant to Chapter 11 of the Bankruptcy Code, dated December 18, 1996, attached
as Exhibit A to the Disclosure Statement, as amended with the consent of the
Agent through the conclusion of the hearing which resulted in the entry of the
Confirmation Order, as further amended and/or modified with the consent of the
Agent through and including the Effective Date.
Real Estate: All real property at any time owned or leased (as lessee or
sublessee) by either of the Borrowers or any of the Guarantors.
Record: The grid attached to a Note, or the continuation of such grid, or
any other similar record, including computer records, maintained by any Bank
with respect to any Loan referred to in such Note.
<PAGE> 20
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Register: See ss.14.3.
Reimbursement Obligation: The Borrowers' obligation to reimburse the Agent
and the Banks on account of any drawing under any Letter of Credit as provided
in ss.3.2.
Reincorporation Mergers: See ss.9.2(f)(i).
Requirement of Law: In respect of any person or entity, any law, treaty,
rule, regulation or determination of an arbitrator, court, or other governmental
authority, in each case applicable to or binding upon such person or entity or
affecting any of its property.
Security Agreement: The Security Agreement, dated or to be dated on or
prior to the Closing Date, among the Borrowers, the Guarantors and the Agent, as
amended, restated, supplemented or otherwise modified and in effect from time to
time, substantially in the form of Exhibit E hereto.
Security Documents: The Security Agreement, the Stock Pledge Agreements,
the Foreign Pledge Agreements, the Canadian Assignment Documents, the Agency
Agreements, the Lock Box Agreement and all other security agreements, mortgages,
deeds of trust, assignments, or other instruments or documents, in form and
substance satisfactory to the Agent and the Banks, which shall grant to the
Agent, for the benefit of the Banks and the Agent, Liens upon all of the
Collateral.
Senior Secured Note Documents: The Senior Secured Notes, the Indenture,
and each of the security documents and other documents, instruments and
agreements executed and delivered in connection therewith, as each may be
amended in accordance with the provisions of ss.9.2(j) hereof.
Senior Secured Notes: MI's 12% Senior Secured Notes due 2007, each issued
by MI pursuant to the Indenture, as in effect on the Closing Date and as amended
in accordance with the provisions of ss.9.2(j) hereof.
Settlement: The making of, or receiving of payments, in immediately
available funds, by the Banks, to the extent necessary to cause each Bank's
actual share of the outstanding amount of Loans (after giving effect to any Loan
Request) to be equal to each Bank's Commitment Percentage of the outstanding
amount of such Loans (after giving effect to any Loan Request), in any case
where, prior to such event or action, the actual share is not so equal.
Settlement Amount: See ss.2.4(a).
Settlement Date: (a) The Drawdown Date relating to any Loan Request, (b)
Friday of each week, or if Friday is not a Business Day, the Business Day
immediately following such Friday, (c) the Business Day immediately following
the Agent's becoming aware of the
<PAGE> 21
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existence of an Event of Default, (d) any Business Day on which the amount of
Loans outstanding from FNBB plus FNBB's Commitment Percentage of the sum of the
Maximum Drawing Amount and any Unpaid Reimbursement Obligations is equal to or
greater than FNBB's Commitment Percentage of the Total Commitment, (e) the
Business Day immediately following any Business Day on which the amount of Loans
outstanding increases or decreases by more than $5,000,000 as compared to the
previous Settlement Date, (f) any day on which any conversion of a Base Rate
Loan to a Eurodollar Rate Loan occurs or (g) any Business Day on which (i) the
amount of outstanding Loans decreases due to a repayment or prepayment pursuant
to the provisions of ss.2.3 or otherwise, and (ii) the amount of the Agent's
Loans outstanding equals zero Dollars ($0).
Settling Bank: See ss.2.4(a).
SMC: See preamble.
Specified Letters of Credit: The Letters of Credit issued or to be issued
hereunder for the benefit of the New Jersey Department of Environmental
Protection pursuant to Section 24 of the US/NJ Environmental Settlement
Agreement (as defined in the Plan).
Stock Pledge Agreements: The several stock pledge agreements, dated or to
be dated on or prior to the Closing Date, between each of MI and MHC,
respectively, and the Agent, each as amended, restated, supplemented or
otherwise modified and in effect from time to time, substantially in the form of
Exhibits F-1 and F-2, respectively, hereto.
Subsidiary: Any corporation, association, trust, or other business entity
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority (by number of votes) of
the outstanding shares of stock having voting power, regardless of whether such
right to vote depends upon the occurrence of a contingency.
Super-Majority Banks: As of any date (a) the Banks holding at least eighty
percent (80%) of the sum of (i) the outstanding principal amount of the Notes on
such date plus (ii) the Letter of Credit Participations of all of the Banks in
the sum of (A) the Maximum Drawing Amount on such date plus (B) any Unpaid
Reimbursement Obligations on such date; and (b) if no such principal amount of
the Notes and no Letters of Credit are outstanding, the Banks whose aggregate
Commitments constitute at least eighty percent (80%) of the Total Commitment.
Taxes: See ss.5(f)(i).
Total Commitment: The sum of the Commitments of the Banks, as in effect
from time to time.
<PAGE> 22
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Total Debt Service: For any period, the aggregate liability of the North
American Group for interest on Indebtedness, whether expensed or capitalized
including payments consisting of interest in respect of capitalized leases, for
principal payments in respect of Indebtedness and for commitment fees, financing
fees, and other fees and expenses in connection with the borrowing of money or
obtaining of credit which are classified as interest expense, determined in
accordance with GAAP (excluding the Facility Fee (as defined in the Fee
Letter)).
Total Outstandings: At any time of reference thereto, the sum of (a) the
aggregate principal amount of the Loans outstanding at such time, (b) the
Maximum Drawing Amount at such time, and (c) any Unpaid Reimbursement
Obligations at such time to the extent not included in the Maximum Drawing
Amount.
Transferee: See ss.5(f)(i).
Trustee: IBJ Schroder Bank & Trust Company, in its capacity as trustee
under the Indenture, or any successor thereto.
Type: As to any Loan, its nature as a Base Rate Loan or a Eurodollar Rate
Loan.
Uniform Customs: The Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500 or any
successor thereto.
Unpaid Reimbursement Obligation: Any Reimbursement Obligation for which
the Borrowers do not reimburse the Agent and the Banks on the date specified in,
and in accordance with, ss.3.2.
Warehousemen Lien Reserve: At the time of reference thereto, the sum of
(a) all storage expenses not then due by either Borrower for the then current
billing period related thereto and (b) all unpaid storage expenses due by such
Borrower for that or any earlier billing period, in each case owing by such
Borrower to a warehouseman for storage of inventory in a warehouse for which a
waiver of the warehouseman's lien satisfactory to the Bank has not been
delivered to the Bank and which, in the case of each such location, does not
exceed the amount of Eligible Inventory or, as the case may be, Eligible
Canadian Inventory, at such location.
ss.2. REVOLVING CREDIT FACILITY.
ss.2.1. Commitment to Lend. (a) Subject to the terms and conditions set
forth in this Agreement, each of the Banks severally agrees to lend to the
Borrowers and the Borrowers may borrow, repay, and reborrow from time to time
between the Closing Date and the Maturity Date upon notice by the Borrowers to
the Agent given in accordance with ss.2.1(c), such sums as are requested by the
Borrowers up to a maximum aggregate amount
<PAGE> 23
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outstanding (after giving effect to all amounts requested) at any one time equal
to such Bank's Commitment minus such Bank's Commitment Percentage of the sum of
the Maximum Drawing Amount and all Unpaid Reimbursement Obligations, provided
that the aggregate amount of the Total Outstandings (after giving effect to all
amounts requested) shall not at any time exceed the lesser of (i) the Total
Commitment and (ii) the Borrowing Base. The Loans shall be made pro rata in
accordance with each Bank's Commitment Percentage. Each request for a Loan
hereunder shall constitute a representation and warranty by the Borrowers that
the conditions set forth in ss.8(a) and ss.8(b), in the case of the initial
Loans to be made on the Closing Date, and ss.8(b), in the case of all other
Loans, have been satisfied on the date of such request.
(b) The Loans shall be evidenced by separate promissory notes of the
Borrowers in substantially the form of Exhibit B hereto (each a "Note"), dated
as of the Closing Date and completed with appropriate insertions. One Note shall
be payable to the order of each Bank in a principal amount equal to such Bank's
Commitment or, if less, the outstanding amount of all Loans made by such Bank,
plus interest accrued thereon, as set forth below. Each of the Borrowers
irrevocably authorizes each Bank to make or cause to be made, at or about the
time of the Drawdown Date of any Loan or at the time of receipt of any payment
of principal on such Bank's Note, an appropriate notation on such Bank's Record
reflecting the making of such Loan or (as the case may be) the receipt of such
payment. The outstanding amount of the Loans set forth on such Bank's Record
shall be prima facie evidence of the principal amount thereof owing and unpaid
to such Bank, but the failure to record, or any error in so recording, any such
amount on such Bank's Record shall not limit or otherwise affect the joint and
several obligations of the Borrowers hereunder or under any Note to make
payments of principal of or interest on any Note when due.
(c) The Borrowers shall give to the Agent written notice in the form
of Exhibit C hereto (or telephonic notice confirmed in a writing in the form of
Exhibit C hereto) of each Loan requested hereunder (a "Loan Request") no less
than (i) one (1) Business Day prior to the proposed Drawdown Date of any Base
Rate Loan and (ii) three (3) Eurodollar Business Days prior to the proposed
Drawdown Date of any Eurodollar Rate Loan. Each such notice shall specify (A)
the principal amount of the Loan requested, (B) the proposed Drawdown Date of
such Loan, (C) the Interest Period for such Loan and (D) the Type of such Loan.
Promptly upon receipt of any such notice, the Agent shall notify each of the
Banks thereof. Each Loan Request shall be irrevocable and binding on the
Borrowers and shall obligate the Borrowers to accept the Loan requested from the
Banks on the proposed Drawdown Date. Each Loan Request shall be in a minimum
aggregate amount of $500,000 or an integral multiple thereof.
(d) Notwithstanding the notice and minimum amount requirements set
forth in ss.2.1(c) but otherwise in accordance with the terms and conditions of
this Agreement, the Agent may, in its sole discretion and without conferring
with the Banks, make Loans to the Borrowers (i) by entry of credits to the
Borrowers' Operating Accounts to cover checks or
<PAGE> 24
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other charges which the Borrowers have drawn or made against such account, (ii)
in an amount sufficient to pay to the Agent any Unpaid Reimbursement Obligations
on the date on which such Reimbursement Obligations become Unpaid Reimbursement
Obligations, (iii) to cover payment of interest, fees or other charges due and
payable by the Borrowers hereunder or under any of the other Loan Documents, or
(iv) in an amount as otherwise requested by the Borrowers. Each of the Borrowers
hereby requests and authorizes the Agent to make from time to time such Loans by
means of paying Unpaid Reimbursement Obligations and by advancing funds that are
credited to the Operating Account sufficient to cover checks and other items or
charges then presented to the Operating Account or to cover such interest, fees
or other charges. Each of the Borrowers acknowledges and agrees that the making
of such Loans shall, in each case, be subject in all respects to the provisions
of this Agreement as if they were Loans covered by a Loan Request including,
without limitation, the limitations set forth in ss.2.1(a) and the requirements
that the applicable provisions of ss.ss.8(a) and 8(b) (in the case of Loans made
on the Closing Date) and ss.8(b) be satisfied. All actions taken by the Agent
pursuant to the provisions of this ss.2.1(d) shall be conclusive and binding on
the Borrowers absent the Agent's gross negligence or willful misconduct. Loans
made pursuant to this ss.2.1(d) shall be Base Rate Loans until converted in
accordance with the provisions of this Agreement and, prior to a Settlement,
such interest shall be for the account of the Agent.
ss.2.2. Interest. (a) So long as no Event of Default has occurred and is
continuing, the Borrowers shall pay interest on the Loans as follows:
(i) Each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at the rate of one percent
(1.00%) per annum above the Base Rate;
(ii) Each Eurodollar Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at the rate of two and one-half
percent (2.50%) per annum above the Eurodollar Rate determined for such
Interest Period; and
(iii) The Borrowers jointly and severally promise to pay interest on
each Loan in arrears on each Interest Payment Date with respect thereto.
(b) While an Event of Default is continuing, amounts payable under
any of the Loan Documents shall bear interest (compounded monthly and payable on
demand in respect of overdue amounts) at a rate per annum which is equal to the
greater of (i) two percent (2.00%) per annum above the Base Rate and (ii) one
percent (1.00%) per annum above the rate of interest otherwise applicable
thereto pursuant to the provisions of ss.2.2(a) hereof, in either case until
such amount is paid in full (after as well as before judgment) or (as the case
may be) such Event of Default has been cured or waived in writing by the
Majority Banks.
ss.2.3. Repayments and Prepayments.
<PAGE> 25
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(a) The Borrowers hereby jointly and severally agree to pay the
Banks on the Maturity Date, and there shall become absolutely due and payable on
the Maturity Date, all of the Loans outstanding on such date, together with any
and all accrued and unpaid interest thereon. If, at any time, the Total
Outstandings shall exceed the lesser of (i) the Total Commitment and (ii) the
Borrowing Base, the Borrowers shall immediately pay the amount of such excess to
the Agent for the respective accounts of the Banks for application to the Loans
or, if no Loans are then outstanding, to be held by the Agent as cash collateral
to secure payment of all Reimbursement Obligations up to the amount of 105% of
the Maximum Drawing Amount. Each payment of any Unpaid Reimbursement Obligations
or prepayment of Loans shall be allocated among the Banks, in proportion, as
nearly as practicable, to each Reimbursement Obligation or (as the case may be)
the respective unpaid principal amount of each Bank's Note, with adjustments to
the extent practicable to equalize any prior payments or repayments not exactly
in proportion.
(b) The Borrowers shall have the right, at their election, to repay
the outstanding amount of the Loans, as a whole or in part, at any time without
penalty or premium, provided that any full or partial prepayment of the
outstanding amount of any Eurodollar Rate Loans pursuant to this ss.2.3 which is
made on a day other than the last day of the Interest Period relating thereto
shall be accompanied by payment of all amounts required to be paid by ss.4.6
hereof. The Borrowers shall give the Agent, no later than 10:00 a.m., Boston
time, at least one (1) Business Day's prior written notice of any proposed
prepayment pursuant to this ss.2.3 of Base Rate Loans, and three (3) Eurodollar
Business Days' prior written notice of any proposed prepayment pursuant to this
ss.2.3 of Eurodollar Rate Loans, in each case specifying the proposed date of
prepayment of Loans and the principal amount to be prepaid, provided that such
notice requirements shall not apply to any required prepayments made pursuant to
the provisions of ss.2.3(c) hereof. Each such partial prepayment of the Loans
pursuant to this ss.2.3 shall be in an integral multiple of $500,000, shall be
accompanied by the payment of accrued interest on the principal prepaid to the
date of prepayment and shall be applied, in the absence of instruction by the
Borrowers, first to the principal of Base Rate Loans and then to the principal
of Eurodollar Rate Loans. Each partial prepayment shall be allocated among the
Banks, in proportion, as nearly as practicable, to the respective unpaid
principal amount of each Bank's Note, with adjustments to the extent practicable
to equalize any prior repayments not exactly in proportion. Any amounts so
repaid may be reborrowed by the Borrowers before the Maturity Date, upon the
terms and subject to the conditions of this Agreement.
(c) Each of the Borrowers will (i) on or prior to the Closing Date,
either (A) cause each of its banks with which it has an existing depository lock
box account to enter into an agency agreement (an "Agency Agreement") with the
Agent, in form and substance reasonably satisfactory to the Agent and under
which such depository lock box account is subject to the control of the Agent,
or (B) replace any existing depository account with a depository lock box
account with the Agent and under the control of the Agent, as contemplated by
the terms of a Lock Box Agreement (a lock box account of either Borrower
referred to either of the foregoing clauses (A) and (B) being herein referred to
as a "Lock
<PAGE> 26
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Box Account" of such Borrower), and (ii) in the case of clause (B), direct its
account debtors and obligors on instruments or other obligors of such Borrower
with respect to any of the Collateral pursuant to a form of notification letter
(a "Direct Collection Letter") in form and substance reasonably satisfactory to
the Agent and such Borrower to make all payments on or with respect to any of
the Collateral due or to become due to such Borrower directly to a Lock Box
Account of such Borrower. If, notwithstanding the issuance of such Direct
Collection Letters, such Borrower receives any cash proceeds of any of the
Collateral, whether in the form of money, checks, wire transfers or otherwise,
such Borrower will hold such cash proceeds in trust for the benefit of the Agent
and the Banks and turn such cash proceeds promptly over to the Agent in the
identical form received by deposit to a Lock Box Account of such Borrower or to
the Agent. The Agent shall, on the first Business Day (or, in the case of wire
transfers received by the Agent directly or from a Lock Box Account of such
Borrower before 1:00 p.m. (Boston time), on the same Business Day if the Agent
is able to do so with reasonable efforts) immediately following the receipt by
the Agent of any and all cash proceeds from account debtors, obligors or (as the
case may be) such Borrower so deposited in the Lock Box Account of such Borrower
(or such later date as the Agent determines that good collected funds will be
received by the Agent), and on a provisional basis until final receipt of good
collected funds, apply all such cash proceeds which were deposited to a Lock Box
Account of such Borrower or otherwise received by the Agent in the form of
money, checks, wire transfers or like items as follows:
(1) first to be applied to all Obligations then due and
payable;
(2) second to be applied to the Loans (and thereafter, solely
in respect of the net proceeds received in connection with any asset
disposition permitted by ss.9.2(f) or otherwise consented to by the Agent
and the Banks pursuant to ss.9.2(f), to be applied to cash collateralize
Letters of Credit to the extent required by the provisions of such
ss.9.2(f));
(3) third, so long as no Event of Default has occurred and is
continuing, any excess to be credited to the Operating Account of such
Borrower.
From and after the occurrence and during the continuance of an Event of Default,
the Agent shall apply any such cash proceeds from account debtors, obligors or
(as the case may be) either Borrower so deposited in the Lock Box Account of
such Borrower in accordance with the provisions of ss.11 hereof. For purposes of
the foregoing provisions of this ss.2.3(c) the Agent shall not be deemed to have
received any such cash proceeds on any day unless received by the Agent before
3:00 p.m. (Boston time) on such day. Each of the Borrowers further acknowledges
and agrees that any such provisional credit by the Agent shall be subject to
reversal if final collection in good collected funds of the related item is not
received by the Agent in accordance with the Agent's customary procedures and
practices for collecting provisional items.
<PAGE> 27
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(d) The Borrowers jointly and severally agree to pay to the Agent
any and all fees, costs and expenses which the Agent incurs in connection with
the opening of and maintaining each Lock Box Account and depositing for
collection by the Agent any check or other item of payment. Absent gross
negligence or willful misconduct by the Agent, the Borrowers jointly and
severally agree to indemnify the Agent and to hold the Agent harmless from and
against any loss, cost or expense sustained or incurred by the Agent on account
of any claims arising in connection with the Agent's operation of each Lock Box
Account or in respect of any Agency Agreement or the Lock Box Agreement.
(e) The Borrowers shall have the right at any time and from time to
time upon three (3) Business Days' prior written notice to the Agent to reduce
by $1,000,000 or an integral multiple thereof or terminate entirely the Total
Commitment, whereupon the Commitments of the Banks shall be reduced pro rata in
accordance with their respective Commitment Percentages of the amount specified
in such notice or, as the case may be, terminated. Promptly after receiving any
notice of the Borrowers delivered pursuant to this ss.2.3(e), the Agent will
notify the Banks of the substance thereof. Upon the effective date of any such
reduction or termination, the Borrowers shall pay to the Agent for the
respective accounts of the Banks the full amount of any commitment fee then
accrued on the amount of the reduction. No reduction or termination of the
Commitments may be reinstated.
(f) The Agent and the Banks each hereby acknowledge the subordinate
Liens securing the Senior Secured Notes on substantially all assets of MI and on
all proceeds and products of such assets of MI including all cash depository
accounts of MI, such Liens being subordinate to the Liens securing the
Obligations pursuant to the subordination terms contained in the Senior Secured
Note Documents.
ss.2.4. Settlements; Failure to Make Funds Available.
(a) On each Settlement Date, the Agent shall, not later than 10:00
a.m. (Boston time), give telephonic or facsimile notice (i) to the Banks and the
Borrowers of the respective outstanding amount of Loans made by the Agent on
behalf of the Banks from the immediately preceding Settlement Date through the
close of business on the prior day and (ii) to the Banks of the amount (a
"Settlement Amount") that each Bank (the "Settling Bank") shall pay to effect a
Settlement of any Loan. A statement of the Agent submitted to the Banks and the
Borrowers or to the Banks with respect to any amounts owing under this ss.2.4
shall be prima facie evidence of the amount due and owing. The Settling Bank
shall, not later than 3:00 p.m. (Boston time) on such Settlement Date, effect a
wire transfer of immediately available funds to the Agent in the amount of the
Settlement Amount. All funds advanced by any Bank as a Settling Bank pursuant to
this ss.2.4 shall for all purposes be treated as a Loan made by such Settling
Bank to the Borrowers and all funds received by any Bank pursuant to this ss.2.4
shall for all purposes be treated as repayment of amounts owed with respect to
Loans made by such Bank. In the event that any bankruptcy, reorganization,
liquidation, receivership or similar cases or proceedings in which either of the
Borrowers is a debtor prevent a Settling Bank from making any Loan to effect a
Settlement as
<PAGE> 28
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contemplated hereby, such Settling Bank will make such disposition and
arrangements with the other Banks with respect to such Loans, either by way of
purchase of participations, distribution, pro tanto assignment of claims,
subrogation or otherwise as shall result in each Bank's share of the outstanding
Loans being equal, as nearly as may be, to such Bank's Commitment Percentage of
the outstanding amount of the Loans.
(b) The Agent may, unless notified to the contrary by any Bank prior
to a Settlement Date, assume that such Bank has made or will make available to
the Agent on such Settlement Date the amount of such Bank's Settlement Amount,
and the Agent may (but it shall not be required to), in reliance upon such
assumption, make available to the Borrowers a corresponding amount. If any Bank
makes available to the Agent such amount on a date after such Settlement Date,
such Bank shall pay to the Agent on demand an amount equal to the product of (i)
the average computed for the period referred to in clause (iii) below, of the
weighted average interest rate paid by the Agent for federal funds acquired by
such Agent during each day included in such period, times (ii) the amount of
such Settlement Amount, times (iii) a fraction, the numerator of which is the
number of days that elapse from and including such Settlement Date to the date
on which the amount of such Settlement Amount shall become immediately available
to such Agent, and the denominator of which is 360. A statement of the Agent
submitted to such Bank with respect to any amounts owing under this paragraph
shall be prima facie evidence of the amount due and owing to the Agent by such
Bank. If such Bank's Settlement Amount is not made available to the Agent by
such Bank within three (3) Business Days following such Settlement Date, the
Agent shall be entitled to recover such amount from the Borrowers on demand,
with interest thereon at the rate per annum applicable to the Loans as of such
Settlement Date.
(c) The failure or refusal of any Bank to make available to the
Agent at the aforesaid time and place on any Settlement Date the amount of its
Settlement Amount (i) shall not relieve any other Bank from its several
obligations hereunder to make available to the Agent the amount of such other
Bank's Settlement Amount and (ii) shall not impose upon such other Bank any
liability with respect to such failure or refusal or otherwise increase the
Commitment of such other Bank.
ss.2.5. Conversion Options.
(a) The Borrowers may elect from time to time to convert any
outstanding Loan to a Loan of another Type, provided that (i) with respect to
any such conversion of a Loan to a Base Rate Loan, the Borrowers shall give the
Agent at least one (1) Business Day's prior written notice of such election;
(ii) with respect to any such conversion of a Base Rate Loan to a Eurodollar
Rate Loan, the Borrowers shall give the Agent at least three (3) Eurodollar
Business Days' prior written notice of such election; (iii) with respect to any
such conversion of a Eurodollar Rate Loan into a Loan of another Type, such
conversion shall only be made on the last day of the Interest Period with
respect thereto; and (iv) no Loan may be converted into a Eurodollar Rate Loan
when any Default or Event of Default has occurred and is continuing. On the date
on which such conversion is being made each Bank shall take
<PAGE> 29
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such action as is necessary to transfer its Commitment Percentage of such Loans
to its Domestic Lending Office or its Eurodollar Lending Office, as the case may
be. All or any part of outstanding Loans of any Type may be converted into a
Loan of another Type as provided herein, provided that any partial conversion
shall be in an aggregate principal amount of $500,000 or a whole multiple
thereof. Each Conversion Request relating to the conversion of a Loan to a
Eurodollar Rate Loan shall be irrevocable by the Borrowers.
(b) Any Loan of any Type may be continued as a Loan of the same Type
upon the expiration of an Interest Period with respect thereto by compliance by
the Borrowers with the notice provisions contained in ss.2.5(a); provided that
no Eurodollar Rate Loan may be continued as such when any Default or Event of
Default has occurred and is continuing, but shall be automatically converted to
a Base Rate Loan on the last day of the first Interest Period relating thereto
ending during the continuance of any Default or Event of Default of which
officers of the Agent active upon the Borrowers' account have actual knowledge.
In the event that the Borrowers fail to provide any such notice with respect to
the continuation of any Eurodollar Rate Loan as such, then such Eurodollar Rate
Loan shall be automatically converted to a Base Rate Loan on the last day of the
first Interest Period relating thereto. The Agent shall notify the Banks
promptly when any such automatic conversion contemplated by this ss.2.5 is
scheduled to occur.
(c) Any conversion to or from Eurodollar Rate Loans shall be in such
amounts and be made pursuant to such elections so that, after giving effect
thereto, the aggregate principal amount of all Eurodollar Rate Loans having the
same Interest Period shall not be less than $500,000 or a whole multiple of
$500,000 in excess thereof.
ss.2.6. Funds for Loans.
(a) Not later than 11:00 a.m. (Boston time) on the proposed Drawdown
Date of any Loans, each of the Banks will make available to the Agent, at the
Agent's Head Office, in immediately available funds, the amount of such Bank's
Commitment Percentage of the amount of the requested Loans. Upon receipt from
each Bank of such amount, and upon receipt of the documents required by ss.8 and
the satisfaction of the other conditions set forth therein, to the extent
applicable, the Agent will make available to the Borrowers the aggregate amount
of such Loans made available to the Agent by the Banks. The failure or refusal
of any Bank to make available to the Agent at the aforesaid time and place on
any Drawdown Date the amount of its Commitment Percentage of the requested Loans
shall not relieve any other Bank from its several obligation hereunder to make
available to the Agent the amount of such other Bank's Commitment Percentage of
any requested Loans.
(b) The Agent may, unless notified to the contrary by any Bank prior
to a Drawdown Date, assume that such Bank has made available to the Agent on
such Drawdown Date the amount of such Bank's Commitment Percentage of the Loans
to be made on such Drawdown Date, and the Agent may (but it shall not be
required to), in reliance upon such assumption, make available to the Borrowers
a corresponding amount. If any Bank
<PAGE> 30
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makes available to the Agent such amount on a date after such Drawdown Date,
such Bank shall pay to the Agent on demand an amount equal to the product of (i)
the average computed for the period referred to in clause (iii) below, of the
weighted average interest rate paid by the Agent for federal funds acquired by
the Agent during each day included in such period, times (ii) the amount of such
Bank's Commitment Percentage of such Loans, times (iii) a fraction, the
numerator of which is the number of days that elapse from and including such
Drawdown Date to the date on which the amount of such Bank's Commitment
Percentage of such Loans shall become immediately available to the Agent, and
the denominator of which is 360. A statement of the Agent submitted to such Bank
with respect to any amounts owing under this paragraph shall be prima facie
evidence of the amount due and owing to the Agent by such Bank. If the amount of
such Bank's Commitment Percentage of such Loans is not made available to the
Agent by such Bank within three (3) Business Days following such Drawdown Date,
the Agent shall be entitled to recover such amount from the Borrowers on demand,
with interest thereon at the rate per annum applicable to the Loans made on such
Drawdown Date.
ss.3. LETTER OF CREDIT FACILITY.
ss.3.1. Letter of Credit Commitment.
(a) Subject to the terms and conditions hereof and the execution and
delivery by the Borrowers of a letter of credit application on the Agent's
customary form (a "Letter of Credit Application"), the Agent on behalf of the
Banks and in reliance upon the representations and warranties of the Borrowers
and the Guarantors contained herein, agrees, in its individual capacity, to
issue, extend and renew from time to time from the date hereof until but not
including the date which is thirty (30) days prior to the then scheduled
Maturity Date, for the account of the Borrowers, standby and documentary letters
of credit (each a "Letter of Credit"), in such form as may be requested by the
Borrowers and agreed to by the Agent; provided, however, that, after giving
effect to such request, (i) the sum of the aggregate Maximum Drawing Amount and
all Unpaid Reimbursement Obligations shall not exceed $30,000,000 at any one
time and (ii) the sum of the Total Outstandings shall not exceed the lesser of
(A) the Total Commitment and (B) the Borrowing Base. No Letter of Credit shall
be issued, extended or renewed with an expiration date occurring after the date
which is 180 days following the then scheduled Maturity Date or which provides
for drafts which may be paid after the date which is 180 days following the then
scheduled Maturity Date. The Agent, on behalf of the Banks and in reliance upon
the agreement of the Banks set forth in ss.3.1(e) and upon the representations
and warranties of the Borrowers and the Guarantors contained herein, agrees, in
its individual capacity, that all letters of credit issued, extended or renewed
by the FNBB under the DIP Agreement which are outstanding on the Closing Date
and listed on Schedule 3.1 hereto (the "Existing Letters of Credit") shall, from
and after the Closing Date, be deemed Letters of Credit issued pursuant to this
ss.3. All Existing Letters of Credit issued, extended or renewed under the DIP
Agreement prior to the Closing Date shall accrue fees, and all fees thereon
shall be payable, in the amounts and pursuant to the terms of the DIP Agreement.
Any Existing Letters of Credit which are
<PAGE> 31
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extended or renewed from and after the Closing Date shall accrue fees, and all
fees thereon shall be payable, in the amounts and pursuant to the terms of
ss.3.6 of this Agreement. On the Closing Date, FNBB shall make arrangements with
each of the other Banks satisfactory to each such other Bank with respect to
such Bank's pro rata share of any fees for periods after the Closing Date
received by FNBB prior to the Closing Date under the DIP Agreement in respect of
the Existing Letters of Credit.
(b) Each Letter of Credit Application shall be completed to the
satisfaction of the Agent. In the event that any provision of any Letter of
Credit Application shall be inconsistent with any provision of this Agreement,
then the provisions of this Agreement shall, to the extent of any such
inconsistency, govern.
(c) Each Letter of Credit issued, extended or renewed hereunder
shall, among other things, provide for the payment of sight drafts for honor
thereunder when presented in accordance with the terms thereof and when
accompanied by the documents described therein. Each Letter of Credit so issued,
extended or renewed shall be subject to the Uniform Customs.
(d) On or prior to the then scheduled Maturity Date, the Borrowers
shall, with respect to each Letter of Credit then outstanding (i) pay to the
Agent in cash for deposit into the Cash Collateral Account an amount equal to
one hundred and five percent (105%) of the Maximum Drawing Amount of such Letter
of Credit as of such date, which amount shall be held by the Agent as cash
collateral for any Reimbursement Obligations or other obligations incurred with
respect to such Letter of Credit, or (ii) deliver to the Agent a "back-to-back"
letter of credit, in form and substance satisfactory to the Agent, issued by a
financial institution satisfactory to the Agent in its sole discretion and
naming the Agent as beneficiary in an amount equal to one hundred and five
percent (105%) of the Maximum Drawing Amount of such Letter of Credit as of such
date. Any cash sums deposited into the Cash Collateral Account pursuant to
clause (i) shall be reduced or released, and any back-to-back letter of credit
issued pursuant to clause (ii) shall be reduced in amount or returned, if and to
the extent that the Maximum Drawing Amount with respect to the applicable Letter
of Credit has been reduced or the Letter of Credit has expired or been cancelled
and all Unpaid Reimbursement Obligations and other amounts due or to become due
and owing with respect thereto have been paid.
(e) Each Bank severally agrees that it shall be absolutely liable,
without regard to the occurrence of any Default or Event of Default or any other
condition precedent whatsoever, to the extent of such Bank's Commitment
Percentage, to reimburse the Agent on demand for the amount of each draft paid
by the Agent under each Letter of Credit to the extent that such amount is not
reimbursed by the Borrowers pursuant to ss.3.2 (such agreement for a Bank being
called herein the "Letter of Credit Participation" of such Bank).
(f) Each such payment made by a Bank shall be treated as the
purchase by such Bank of a participating interest in the Borrowers'
Reimbursement Obligation under ss.3.2
<PAGE> 32
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in an amount equal to such payment. Each Bank shall share in accordance with its
participating interest in any interest which accrues pursuant to ss.3.2.
ss.3.2. Reimbursement Obligation of the Borrowers. In order to induce the
Agent to issue, extend and renew each Letter of Credit and the Banks to
participate therein, the Borrowers hereby jointly and severally agree to
reimburse or pay to the Agent, for the account of the Agent or (as the case may
be) the Banks, with respect to each Letter of Credit issued, extended or renewed
by the Agent hereunder,
(a) except as otherwise expressly provided in ss.3.2(b) and (c), on
each date that any draft presented under such Letter of Credit is honored by the
Agent, or the Agent otherwise makes a payment with respect thereto, (i) the
amount paid by the Agent under or with respect to such Letter of Credit, and
(ii) the amount of any fees, charges or other costs and expenses whatsoever
incurred by the Agent or any Bank in connection with any payment made by the
Agent or any Bank under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total Commitment
to an amount less than the Maximum Drawing Amount, an amount equal to such
difference, which amount shall be held by the Agent for the benefit of the Banks
and the Agent as cash collateral for all Reimbursement Obligations, and
(c) upon the termination of the Total Commitment, or the
acceleration of the Reimbursement Obligations with respect to all Letters of
Credit in accordance with ss.10, an amount equal to 105% of the Maximum Drawing
Amount, which amount shall be held by the Agent for the benefit of the Banks as
cash collateral for all Reimbursement Obligations.
Unless funded by a Loan pursuant to ss.2.1(d), each such payment shall be made
to the Agent at the Agent's Head Office in immediately available funds. Interest
on any and all amounts remaining unpaid by the Borrowers under this ss.3.2 and
not funded by a Loan pursuant to ss.2.1(d) at any time from the date such
amounts become due and payable (whether as stated in this ss.3.2, by
acceleration or otherwise) until payment in full (whether before or after
judgment) shall be payable to the Agent on demand at the rate specified in
ss.2.2(b) following an Event of Default.
ss.3.3. Letter of Credit Payments. If any draft shall be presented or
other demand for payment shall be made under any Letter of Credit, the Agent
shall notify the Borrowers of the date and amount of the draft presented or
demand for payment and of the date and time when it expects to pay such draft or
honor such demand for payment. If the Borrowers fail to reimburse the Agent as
provided in ss.3.2 on or before the date that such draft is paid or other
payment is made by the Agent, the Agent may at any time thereafter notify the
Banks of the amount of any such Unpaid Reimbursement Obligation. No later than
3:00 p.m. (Boston time) on the Business Day next following the receipt of such
notice, each Bank shall make available to the Agent, at the Agent's Head Office,
in immediately available
<PAGE> 33
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funds, such Bank's Commitment Percentage of such Unpaid Reimbursement
Obligation, together with an amount equal to the product of (i) the average,
computed for the period referred to in clause (iii) below, of the weighted
average interest rate paid by the Agent for federal funds acquired by the Agent
during each day included in such period, times (ii) the amount equal to such
Bank's Commitment Percentage of such Unpaid Reimbursement Obligation, times
(iii) a fraction, the numerator of which is the number of days that elapse from
and including the date the Agent paid the draft presented for honor or otherwise
made payment to the date on which such Bank's Commitment Percentage of such
Unpaid Reimbursement obligation shall become immediately available to the Agent,
and the denominator of which is 360. The responsibility of the Agent to the
Borrowers and the Banks shall be only to determine that the documents (including
each draft) delivered under each Letter of Credit in connection with such
presentment shall be in conformity in all material respects with such Letter of
Credit.
ss.3.4. Obligations Absolute. The Borrowers' joint and several obligations
under this ss.3 relating to Letters of Credit shall be absolute and
unconditional under any and all circumstances and irrespective of the occurrence
of any Default or Event of Default or any condition precedent whatsoever or any
setoff, counterclaim or defense to payment which the Borrowers may have or have
had against the Agent, any Bank or any beneficiary of a Letter of Credit. The
Borrowers further agree with the Agent and the Banks that the Agent and the
Banks shall not be responsible for, and the Reimbursement Obligations shall not
be affected by, among other things, the validity or genuineness of documents or
of any endorsements thereon, even if such documents should in fact prove to be
in any or all respects invalid, fraudulent or forged, or any dispute between or
among the Borrowers, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrowers against the beneficiary of
any Letter of Credit or any such transferee. The Agent and the Banks shall not
be liable for any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit other than as a result of the Agent's or
any Bank's gross negligence or willful misconduct. The Borrowers agree that any
action taken or omitted by the Agent or any Bank under or in connection with
each Letter of Credit and the related drafts and documents, if done in good
faith, shall be binding upon the Borrowers and shall not result in any liability
on the part of the Agent or any Bank to the Borrowers.
ss.3.5. Reliance by Issuer. To the extent not inconsistent with ss.3.4,
the Agent shall be entitled to rely, and shall be fully protected in relying
upon, any Letter of Credit, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document believed by it to be genuine and
correct and to have been signed, sent or made by the proper person or entity and
upon advice and statements of legal counsel, independent accountants and other
experts selected by the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement unless it shall first have
received such advice or concurrence of the Majority Banks as it reasonably deems
appropriate or it shall first be indemnified to its
<PAGE> 34
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reasonable satisfaction by the Banks against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance with a request of the
Majority Banks, and such request and any action taken or failure to act pursuant
thereto shall be binding upon the Banks and all future holders of the Notes or
of a Letter of Credit Participation.
ss.3.6. Letter of Credit Fees. The Borrowers shall (except as provided in
ss.3.1(a) with respect to the Existing Letters of Credit) pay a fee (in each
case, a "Letter of Credit Fee") to the Agent (a) in respect of each Specified
Letter of Credit, an amount equal to two and one-quarter percent (2.25%) per
annum of the face amount of such Specified Letter of Credit, plus the Agent's
customary issuance, amendment and other administrative processing fees, with a
portion of such Letter of Credit Fee equal to one-eighth percent (.125%) per
annum of the face amount of such Specified Letter of Credit (and such issuance,
amendment and other administrative processing fees) to be for the Agent's own
account, and with the remainder of such Letter of Credit Fee (but not such
issuance, amendment and other administrative processing fees) to be for the
accounts of the Banks in accordance with their respective Commitment
Percentages, and (b) in respect of each other Letter of Credit (other than the
Specified Letters of Credit), an amount equal to one and three-quarters percent
(1.75%) per annum of the face amount of such Letter of Credit, plus the Agent's
customary issuance, amendment and other administrative processing fees, with a
portion of such Letter of Credit Fee equal to one-eighth percent (.125%) per
annum of the face amount of such Letter of Credit (and such issuance, amendment
and other administrative processing fees) to be for the Agent's own account, and
with the remainder of such Letter of Credit Fee (but not such issuance,
amendment and other administrative processing fees) to be for the accounts of
the Banks in accordance with their respective Commitment Percentages. Such
Letter of Credit Fees shall be payable (y) with respect to all such per annum
fees (but not such issuance, amendment and other administrative processing fees)
payable on each standby Letter of Credit, in arrears on the first day of each
calendar quarter for the immediately preceding calendar quarter, and (z) with
respect to all such per annum fees payable on each documentary Letter of Credit
and with respect to all such issuance, amendment and other administrative
processing fees payable on all Letters of Credit, on the date of issuance or of
any extension or renewal of any such Letter of Credit and at such other time or
times as such charges are customarily made by the Agent.
ss.4. CHANGES IN CIRCUMSTANCES.
ss.4.1. Inability to Determine Eurodollar Rate. In the event, prior to the
commencement of any Interest Period relating to any Eurodollar Rate Loan, the
Agent shall determine or be notified by the Majority Banks that adequate and
reasonable methods do not exist for ascertaining the Eurodollar Rate that would
otherwise determine the rate of interest to be applicable to any Eurodollar Rate
Loan during any Interest Period, the Agent shall forthwith give notice of such
determination (which shall be conclusive and binding on the Borrowers and the
Banks) to the Borrowers and the Banks. In such event (a) any Loan
<PAGE> 35
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Request or Conversion Request with respect to Eurodollar Rate Loans shall be
automatically withdrawn and shall be deemed a request for Base Rate Loans, (b)
each Eurodollar Rate Loan will automatically, on the last day of the then
current Interest Period relating thereto, become a Base Rate Loan, and (c) the
obligations of the Banks to make Eurodollar Rate Loans shall be suspended until
the Agent or the Majority Banks determine that the circumstances giving rise to
such suspension no longer exist, whereupon the Agent or, as the case may be, the
Agent upon the instruction of the Majority Banks, shall so notify the Borrowers
and the Banks.
ss.4.2. Illegality. Notwithstanding any other provisions herein, if any
change in any present law, regulation, treaty or directive or in the
interpretation or application thereof, or if any future law, regulation, treaty
or directive or interpretation or application thereof, shall make it unlawful
for any Bank to make or maintain Eurodollar Rate Loans, such Bank shall
forthwith give notice of such circumstances to the Borrowers and the other Banks
and thereupon (a) the commitment of such Bank to make Eurodollar Rate Loans or
convert Loans of another Type to Eurodollar Rate Loans shall forthwith be
suspended and (b) such Bank's Loans then outstanding as Eurodollar Rate Loans,
if any, shall be converted automatically to Base Rate Loans on the last day of
each Interest Period applicable to such Eurodollar Rate Loans or within such
earlier period as may be required by law. Each of the Borrowers hereby agrees
promptly to pay the Agent for the account of such Bank, upon demand by such
Bank, any additional amounts necessary to compensate such Bank for any costs
incurred by such Bank in making any conversion in accordance with this ss.4.2,
including any interest or fees payable by such Bank to lenders of funds obtained
by it in order to make or maintain its Eurodollar Rate Loans hereunder.
ss.4.3. Additional Costs, etc. If any change in any present applicable
law, or if any future applicable law, which expression, as used herein, includes
statutes, rules and regulations thereunder and interpretations thereof by any
competent court or by any governmental or other regulatory body or official
charged with the administration or the interpretation thereof and requests,
directives, instructions and notices at any time or from time to time hereafter
made upon or otherwise issued to any Bank or the Agent by any central bank or
other fiscal, monetary or other authority (whether or not having the force of
law), shall:
(a) materially change the basis of taxation (other than
changes in respect of any taxes expressly excluded from the definition of
the term Taxes, and without duplication of any changes in respect of (1)
any Taxes (as defined in ss.5(f)(i)) or (2) any other taxes for which any
Bank or the Agent is otherwise indemnified pursuant to the provisions of
ss.16(a) hereof) of payments to any Bank of the principal of or the
interest on any Loans or any other amounts payable to any Bank or the
Agent under this Agreement or any of the other Loan Documents, or
(b) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not
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having the force of law) against assets held by, or deposits in or for the
account of, or loans by, or letters of credit issued by, or commitments of
an office of any Bank, or
(c) impose on any Bank or the Agent any other conditions or
requirements with respect to this Agreement, the other Loan Documents, any
Letters of Credit, the Loans, such Bank's Commitment, or any class of
loans, letters of credit or commitments of which any of the Loans or such
Bank's Commitment forms a part, and the result of any of the foregoing is
(i) to increase the cost to any Bank of making, funding,
issuing, renewing, extending or maintaining any of the Loans or such
Bank's Commitment or any Letter of Credit, or
(ii) to reduce the amount of principal, interest,
Reimbursement Obligation or other amount payable to such Bank or the
Agent hereunder on account of such Bank's Commitment, any Letter of
Credit or any of the Loans, or
(iii) to require such Bank or the Agent to make any
payment or to forego any interest or Reimbursement Obligation or
other sum payable hereunder, the amount of which payment or foregone
interest or Reimbursement Obligation or other sum is calculated by
reference to the gross amount of any sum receivable or deemed
received by such Bank or the Agent from the Borrower hereunder,
then, and in each such case, the Borrowers will, upon demand made by such Bank
or (as the case may be) the Agent at any time and from time to time and as often
as the occasion therefor may arise, pay to such Bank or the Agent such
additional amounts as will be sufficient to compensate such Bank or the Agent
for such additional cost, reduction, payment or foregone interest or
Reimbursement Obligation or other sum.
ss.4.4. Capital Adequacy. If after the date hereof any Bank or the Agent
determines that (a) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies or any
change in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (b) compliance by such Bank or the
Agent or any corporation controlling such Bank or the Agent with any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) of any such entity regarding capital adequacy, has the
effect of reducing the return on such Bank's or the Agent's commitment with
respect to any Loans to a level below that which such Bank or the Agent could
have achieved but for such adoption, change or compliance (taking into
consideration such Bank's or the Agent's then existing policies with respect to
capital adequacy and assuming full utilization of such entity's capital) by any
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amount deemed by such Bank or (as the case may be) the Agent to be material,
then such Bank or the Agent may notify the Borrowers of such fact. To the extent
that the amount of such reduction in the return on capital is not reflected in
the Base Rate, the Borrowers jointly and severally agree to pay such Bank or (as
the case may be) the Agent for the amount of such reduction in the return on
capital as and when such reduction is determined upon presentation by such Bank
or (as the case may be) the Agent of a certificate in accordance with ss.4.5
hereof. Each Bank shall allocate such cost increases among its customers in good
faith and on an equitable basis.
ss.4.5. Certificate. A certificate setting forth any additional amounts
payable pursuant to ss.ss.4.3, 4.4 or 5(f) and a brief explanation of such
amounts which are due, submitted by any Bank or the Agent to the Borrowers,
shall be conclusive, absent manifest error, that such amounts are due and owing.
ss.4.6. Indemnity. The Borrowers jointly and severally agree to indemnify
each Bank and to hold each Bank harmless from and against any loss, cost or
expense that such Bank may sustain or incur as a consequence of (a) default by
the Borrowers in payment of the principal amount of or any interest on any
Eurodollar Rate Loans as and when due and payable, including any such loss or
expense arising from interest or fees payable by such Bank to lenders of funds
obtained by it in order to maintain its Eurodollar Rate Loans, (b) default by
the Borrowers in making a borrowing or conversion after the Borrowers have given
(or are deemed to have given) a Loan Request or a Conversion Request relating
thereto in accordance with ss.2.1(c) or ss.2.5 or (c) the making of any payment
of a Eurodollar Rate Loan or the making of any conversion of any such Loan to a
Base Rate Loan on a day that is not the last day of the applicable Interest
Period with respect thereto, including interest or fees payable by such Bank to
lenders of funds obtained by it in order to maintain any such Loans.
ss.5. FEES AND PAYMENTS.
(a) The Borrowers jointly and severally agree to pay to the Agent a
facility fee according to the terms of a separate fee letter entered into on or
prior to the Closing Date (the "Fee Letter") among the Borrowers and the Agent.
(b) The Borrowers jointly and severally agree to pay to the Agent
for the accounts of the Banks in accordance with their respective Commitment
Percentages, in arrears on the first day of each calendar quarter, and upon the
Maturity Date or any other date upon which the Commitments shall cease to be any
longer in effect, a commitment fee calculated from the date hereof at a rate per
annum which is equal to three-eighths of one percent (3/8%) per annum of the
average daily difference by which the Total Commitment amount exceeds the sum of
the aggregate principal amount of the outstanding Loans, the Maximum Drawing
Amount and all Unpaid Reimbursement Obligations during the immediately preceding
calendar quarter or portion thereof.
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(c) The Borrowers jointly and severally agree to pay to the Agent,
for the Agent's own account, a Collateral administration fee according to the
terms of the Fee Letter.
(d) All payments of principal, interest, Reimbursement Obligations,
commitment fees, Letter of Credit Fees, facility fees, Collateral administration
fees and any other amounts due hereunder or under any of the other Loan
Documents shall be made to the Agent, for the respective accounts of the Banks
and the Agent, at the Agent's Head Office or at such other location in the
Boston, Massachusetts, area that the Agent may from time to time designate, in
each case in Dollars in immediately available funds. To the extent that the
Agent does not make Loans pursuant to the provisions of ss.2.1(d)(iii) hereof to
cover amounts due and payable under the Loan Documents, the Agent shall be
entitled to charge the Operating Account or any account of the Borrowers or the
Guarantors with the Agent or any of the Agent's affiliates for any sum due and
payable by the Borrowers or the Guarantors to the Agent or any Bank hereunder or
under any of the other Loan Documents.
(e) All computations of interest on the Loans and of commitment
fees, Letter of Credit Fees or other fees shall, unless otherwise expressly
provided herein, be based on a 360-day year and paid for the actual number of
days elapsed. Except as otherwise provided in the definition of the term
"Interest Period" with respect to Eurodollar Rate Loans, whenever a payment
hereunder or under any of the other Loan Documents becomes due on a day that is
not a Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and interest shall accrue during such extension. The
outstanding amount of the Loans as reflected on the Records of the Banks from
time to time shall be considered correct and binding on the Borrowers in the
absence of demonstrable error. All payments of the commitment fee, facility fee,
Collateral administration fee or Letter of Credit Fees payable hereunder shall
be non-refundable.
(f) (i) Any and all payments by or on behalf of the Borrowers
hereunder and under any of the other Loan Documents shall be made, in accordance
with this ss.5, without setoff or counterclaim and free and clear of and without
deduction for any and all current or future taxes, levies, imposts, duties,
charges, fees, deductions or withholdings of any nature now or hereafter imposed
or levied by any jurisdiction or any political subdivision thereof or taxing or
other authority therein, and all liabilities with respect thereto, excluding (A)
taxes based upon or measured by the net income or overall gross receipts of the
Agent or any Bank (or any transferee or assignee thereof, including a
participation holder (any such entity a "Transferee")) and (B) franchise taxes
imposed on the Agent or any such Bank (or Transferee), in each case by the
jurisdiction under the laws of which the Agent or such Bank (or Transferee) is
organized, in which the applicable lending office of the Bank (or Transferee) is
located or in which the Agent or such Bank (or Transferee) is otherwise subject
to tax other than by reason of the execution and performance of this Agreement,
or any political subdivision of such jurisdiction, (all such nonexcluded taxes,
levies, imposts, duties, charges, fees, deductions, withholdings and
liabilities, collectively or individually, being called "Taxes"). If the
Borrowers shall be required to deduct any Taxes from or in respect of any sum
payable hereunder or under any other Loan Document to the Agent or any Bank (or
<PAGE> 39
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Transferee), (x) the sum payable shall be increased by the amount (an
"additional amount") necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this ss.5(f)),
the Agent or such Bank (or Transferee), as the case may be, shall receive an
amount equal to the sum it would have received had no such deductions been made,
(y) the Borrowers shall make such deductions and (z) the Borrowers shall pay the
full amount deducted to the relevant governmental authority in accordance with
applicable law.
(ii) The Borrowers hereby jointly and severally agree to
indemnify the Agent and the Banks (and all Transferees) for the full amount of
Taxes paid by any such Person and any liability (including penalties, interest
and expenses (including reasonable attorney fees and expenses)) arising
therefrom or with respect thereto, whether or not such Taxes were correctly or
legally asserted by the relevant governmental authority. Such indemnification
shall be made within thirty days after the date the Agent or such Bank (or
Transferee) makes written demand therefor. If the Agent or any Bank (or
Transferee) determines that it has received a refund in respect of any Taxes as
to which indemnification or payment has been made by the Borrowers pursuant to
this ss.5(f) and such refund is reasonably determinable by the Agent or such
Bank (or Transferee) to be allocable to such indemnification or payment made by
the Borrowers, it shall promptly remit such refund (including any interest
actually received by it) to the Borrowers, less all out-of-pocket expenses of
the Agent or such Bank (or Transferee); provided, however, that the Borrowers
upon request of the Agent or any Bank (or Transferee), agree promptly to return
such refund (plus any interest) to such party in the event such party is
required to pay the refund to the relevant governmental authorities. The Agent
or such Bank (or Transferee) shall provide the Borrowers with a copy of any
notice or assessment from the relevant governmental authorities (deleting any
confidential information therein) requiring repayment of such refund.
(iii) As soon as practicable after the date of any payment of
Taxes by the Borrowers to the relevant governmental authority, the Borrowers
will promptly deliver to the Agent the original or a certified copy of a receipt
issued by such governmental authority evidencing payment thereof.
(iv) Each Bank (or Transferee) that is organized under the
laws of a jurisdiction other than the United States, any State thereof or the
District of Columbia (a "Non-U.S. Lender") shall deliver to the Borrowers and
the Agent (A) two copies of either United States Internal Revenue Service Form
1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption from
U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code with
respect to payments of "portfolio interest," an Internal Revenue Service Form
W-8, or any subsequent versions of any such forms or successors thereto (and, if
such Non-U.S. Lender delivers a Form W-8, a certificate representing that such
Non-U.S. Lender is not a bank for purposes of Section 881(c) of the Code, is not
a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the
Code) of the Borrowers and is not a controlled foreign corporation related to
the Borrowers (within the meaning of Section 864(d)(4) of the Code)), properly
completed and duly executed by such Non-U.S.
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Lender claiming complete exemption from, or a reduced rate of, U.S. Federal
withholding tax on payments by the Borrowers under this Agreement and the other
Loan Documents, and (B) any other similar documents reasonably requested by the
Borrowers in connection with such Non-U.S Lender's tax status. Such forms shall
be delivered by each Non-U.S. Lender on or before the date it becomes a party to
this Agreement (or, in the case of a Transferee that is a participation holder,
on or before the date such participation holder becomes a Transferee hereunder)
and on or before the date, if any, such Non-U.S. Lender changes its applicable
lending office by designating a different lending office (a "New Lending
Office"). In addition, each Non-U.S. Lender shall deliver such forms promptly
upon the obsolescence or invalidity of any form previously delivered by such
Non-U.S. Lender. Notwithstanding any other provision of this ss.5(f)(iv), a
Non-U.S. Lender shall not be required to deliver any forms pursuant to this
ss.5(f)(iv) that such Non-U.S. Lender is not legally able to deliver.
(v) The Borrowers shall not be required to indemnify any
Non-U.S. Lender or to pay any additional amounts to any Non-U.S. Lender, in
respect of United States Federal withholding tax pursuant to ss.ss.5(f)(i) or
5(f)(ii) to the extent that (A) the obligation to withhold amounts with respect
to United States Federal withholding tax existed on the date such Non-U.S.
Lender became a party to this Agreement (or, in the case of a Transferee that is
a participation holder, on the date such participation holder became a
Transferee hereunder) or, with respect to payments to a New Lending Office, the
date such Non-U.S. Lender designated such New Lending Office with respect to a
Loan; provided, however, that this ss.5(f)(v) shall not apply (x) to any
Transferee or New Lending Office that becomes a Transferee or New Lending Office
as a result of an assignment, participation, transfer or designation made at the
request of the Borrowers and (y) to the extent the indemnity payment or
additional amounts any Transferee, or any Bank (or Transferee), acting through a
New Lending Office would be entitled to receive (without regard to this
ss.5(f)(v)) do not exceed the indemnity payment or additional amounts that the
Person making the assignment, participation or transfer to such Transferee, or
Bank (or Transferee) making the designation of such New Lending Office, would
have been entitled to receive in the absence of such assignment, participation,
transfer or designation or (B) the obligation to pay the indemnity payment or
such additional amounts would not have arisen but for failure by such Non-U.S.
Lender to comply with the provisions of ss.5(f)(iv) hereof.
(vi) Any Bank (or Transferee) claiming any indemnity payments
or additional amounts under this ss.5(f) shall use its best efforts (reasonable
under the circumstances and consistent with internal policy and legal and
regulatory restrictions) to change the jurisdiction of its applicable lending
office if the making of such a change would avoid the need for, or reduce the
amount of, any such indemnity payments or additional amounts which may
thereafter accrue and would not, in the reasonable judgment of such Bank (or
Transferee), be otherwise disadvantageous to such Bank (or Transferee).
ss.6. COLLATERAL SECURITY AND GUARANTY.
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ss.6.1. Security of Borrowers. The Obligations shall be secured by a
perfected first priority security interest (subject only to Permitted Liens
entitled to priority under applicable law) in all of the assets of each of the
Borrowers (excluding all fee and leasehold interests of the Borrowers in any
real property and excluding any annuities and trust fund accounts which are
dedicated to the payment of environmental liabilities of the Borrowers pursuant
to the express provisions of the Plan and the Disclosure Statement), whether now
owned or hereafter acquired, and including the capital stock of all direct
Subsidiaries of the Borrowers (excluding thirty-five percent (35%) of the issued
and outstanding capital stock of each of MCL and MHC which shall not be pledged
in favor of the Agent), all pursuant to the terms of, and to the extent provided
in, the Security Documents to which each of the Borrowers is a party.
ss.6.2. Guaranty and Security of Subsidiaries. The Obligations shall also
be guaranteed pursuant to the terms of the Guaranty as provided for in ss.6.4.
The obligations of each of the Guarantors under the Guaranty shall be in turn
secured by a perfected first priority security interest (subject only to
Permitted Liens entitled to priority under applicable law) in all of the assets
of each such Guarantor, whether now owned or hereafter acquired, and including
the capital stock of all direct Subsidiaries of such Guarantor (excluding
thirty-five percent (35%) of the issued and outstanding capital stock of each of
such Subsidiaries which is organized under the laws of a jurisdiction other than
one of the United States, which shall not be pledged in favor of the Agent), all
pursuant to the terms of the Security Documents to which such Guarantor is a
party.
ss.6.3. Collateral Security Perfection. Each of the Borrowers and each of
the Guarantors agrees to take all action that the Agent or any Bank may
reasonably request as a matter of nonbankruptcy law to perfect and protect the
Agent's Liens, for the benefit of the Banks and the Agent, upon the Collateral
and for such Liens to obtain the priority therefor contemplated hereby,
including, without limitation, executing and delivering such financing
statements, providing such notices and assents of third parties, obtaining such
governmental approvals and providing such other instruments and documents in
recordable form as the Agent or any Bank may reasonably request.
ss.6.4. Guaranty.
(a) The Guarantors absolutely, unconditionally, irrevocably
and jointly and severally guarantee the due and punctual payment and
performance by the Borrowers of the Borrowers' Obligations. Each of the
Guarantors further agrees that
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the Borrowers' Obligations may be extended or renewed, in whole or in
part, without notice to or further assent from it, and it will remain
bound upon this guaranty notwithstanding any extension or renewal of any
of the Borrowers' Obligations.
(b) Each of the Guarantors waives presentation to, demand for
payment from and protest to the Borrowers or any other person liable in
respect of any of the Obligations, and also waives notice of protest for
nonpayment. The joint and several obligations of the Guarantors hereunder
shall not be affected by (i) the failure of the Agent or any Bank to
assert any claim or demand or to enforce any right or remedy against the
Borrowers or any other person liable in respect of any of the Obligations
under the provisions of this Agreement or any other Loan Document or
otherwise; (ii) any extension or renewal of any provision hereof or
thereof; (iii) any rescission, waiver, compromise, acceleration, amendment
or modification of any of the terms or provisions of any of the Loan
Documents or of any of the Collateral; (iv) the release, exchange, waiver
or foreclosure of any Collateral or other security held by the Agent, for
the benefit of the Banks and the Agent, for any of the Obligations; (v)
the failure of the Agent or any Bank to exercise any right or remedy
against any other person liable in respect of any of the Obligations; or
(vi) the release or substitution of any Person liable in respect of any of
the Obligations other than such Guarantor.
(c) Each of the Guarantors further agrees that this guaranty
constitutes a guaranty of performance and of payment when due and not just
of collection, and waives any right to require that any resort be had by
the Agent or any Bank to any security held for payment of any of the
Obligations or to any balance of any deposit, account or credit on the
books of the Agent or any Bank in favor of the Borrowers or any other
person.
(d) Each of the Guarantors hereby waives any defense that it
might have based on a failure to remain informed of the financial
condition of the Borrowers and of any other person liable in respect of
any of the Obligations and any circumstances affecting any of the
Collateral for the obligations or the ability or capacity of the Borrowers
to perform under this Agreement.
(e) The Guarantors' guaranty hereunder shall not be affected
by the genuineness, validity, regularity or enforceability of any of the
Obligations, the Notes, any other Loan Document or any other instrument or
document creating or
<PAGE> 43
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evidencing any of the Obligations, or by the existence, validity,
enforceability, perfection, or extent of any Collateral or Lien or by any
other circumstance relating to any of the Obligations which might
otherwise constitute a defense to this guaranty. None of the Agent or the
Banks makes any representation or warranty in respect of any such
circumstances and none shall have any duty or responsibility whatsoever to
the Guarantors in respect of the management and maintenance of any of the
Obligations.
(f) Upon the Obligations becoming due and payable (by
acceleration or otherwise), the Agent and the Banks shall be entitled to
immediate payment of the Obligations by the Guarantors upon written demand
by any of the Agent or the Banks.
(g) The joint and several obligations of the Guarantors
hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason, including, without limitation, any claim of
waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of
any of the Obligations against any person other than the Guarantors.
Without limiting the generality of the foregoing, the obligations of the
Guarantors hereunder shall not be discharged or impaired or otherwise
affected by the failure of the Agent or any Bank to assert any claim or
demand or to enforce any remedy under this Agreement, any of the other
Loan Documents or any other agreement, by any waiver or modification of
any provision thereof, by any default, failure or delay, willful or
otherwise, in the performance of any of the Obligations, or by any other
act or thing or omission or delay to do any other act or thing which may
or might in any manner or to any extent vary the risk of the Guarantors or
would otherwise operate as a discharge of the Guarantors as a matter of
law, unless and until the Obligations (whether contingent or otherwise)
are paid in full in cash.
(h) All rights of the Guarantors against the Borrowers arising
by way of right of subrogation or otherwise as a result of any payment or
performance by the Guarantors to any of the Agent or the Banks hereunder
shall in all respects be subordinate and junior in right of payment and
performance to the prior final and indefeasible payment in full in cash of
all the Obligations (whether contingent or otherwise). If any amount shall
be paid to the Guarantors for the account of the Borrowers, such amount
shall be held in trust for the benefit of the Agent and the
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Banks and shall forthwith be paid to the Agent to be credited to or held
as collateral security for the Obligations (whether contingent or
otherwise).
ss.6.5. Borrowers' Waivers of Suretyship Defenses. The obligations of the
Borrowers hereunder are joint and several. Each of the Borrowers hereby waives
any and all suretyship defenses relating to any action or omission to act by the
Agent or any Bank with respect to the other Borrower or any Guarantor as fully
as if such Borrower were itself a Guarantor agreeing to be bound by the guaranty
and suretyship waivers set forth in ss.6.4 with respect to Obligations of the
other Borrower, with any subordination of any rights of subrogation of such
Borrower also including a subordination of all rights of such Borrower to
contribution from the other Borrower until the prior final and indefeasible
payment in full in cash of all of the Obligations (whether contingent or
otherwise).
ss.6.6. No Restrictions on Foreign Subsidiaries. Notwithstanding anything
herein or in any other Loan Document to the contrary, no one or more negative
covenants or similar restrictions contained in this Agreement or any other Loan
Document shall be imposed or implied that effectively limit the discretion of
any Subsidiary of MI (other than MCL) incorporated or otherwise organized under
the laws of a jurisdiction outside of the United States with respect to the
disposition of its assets or the incurrence of liabilities (whether or not in
the ordinary course of its business).
ss.7. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers and each of
the Guarantors represents and warrants to each of the Agent and the Banks on the
date hereof, on the date of any Loan Request, on the date of each request for a
Letter of Credit, on each Drawdown Date, and on the date on which each Letter of
Credit is issued, extended or renewed that:
(a) Each of the Borrowers and each of the Guarantors is duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified and in good standing in
every other jurisdiction where it is doing business and where failure to qualify
would have a Materially Adverse Effect, and the execution, delivery and
performance by each of the Borrowers and each of the Guarantors of each of the
Loan Documents to which it is a party (i) are within its corporate authority,
(ii) have been duly authorized by all necessary corporate action, (iii) do not
conflict with or contravene its Charter Documents.
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(b) Upon the execution and delivery of the Loan Documents by the
respective parties thereto, each Loan Document shall constitute the legal, valid
and binding obligation of the Borrowers and the Guarantors party thereto,
enforceable in accordance with its terms, except that the enforceability thereof
may be subject to any applicable bankruptcy, reorganization, insolvency or other
laws affecting creditors' rights generally;
(c) No affiliate of either of the Borrowers or any of the Guarantors
(other than Gesellschaft fuer Elektrometallurgie m.b.H. or Elektrowerk
Weisweiler GmbH or any of their Subsidiaries) is a debtor in any bankruptcy,
insolvency, liquidation, reorganization, dissolution of similar case or
proceeding on the date hereof or, except where there is not reasonably likely to
be a Materially Adverse Effect relating solely to the Borrowers, after the date
hereof.
(d) Each of the Borrowers and each of the Guarantors has good and
marketable title to all its material properties, subject only to Permitted
Liens, and possesses all assets, including intellectual properties, franchises
and Consents, adequate for the conduct of its business as now conducted, without
known conflict with any rights of others. The Borrowers and the Guarantors
maintain insurance from financially responsible insurers, copies of the policies
for which have previously been delivered to the Agent, covering such risks and
in such amounts and with such deductibles as are customary in the Borrowers' and
the Guarantors' businesses and are adequate. The Borrowers have adequate
licensed capacity under Nuclear Regulatory Commission permits to continue
operating at their Cambridge, Ohio plant at levels, current on the date hereof,
through the year 2000. The Borrowers have filed a timely renewal application in
respect of their Nuclear Regulatory Commission permit for operation of their
Newfield, New Jersey plant, and the Borrowers have no reason to believe that a
new Nuclear Regulatory Commission permit for such plant will not be granted by
the Nuclear Regulatory Commission in the ordinary course of such agency's
procedures.
(e) The Borrowers have provided to the Agent and each of the Banks a
consolidated pro forma balance sheet of the Borrowers dated on or about the
Effective Date and giving effect to the changes resulting from the Plan and the
utilization of fresh start accounting under generally accepted accounting
principles. The Borrowers have provided to the Agent and each of the Banks their
audited Financials as at December 31, 1995, and for the fiscal year then ended,
and their unaudited quarterly Financials as at the end of and for each fiscal
quarter thereafter through December 31, 1996. Such Financials are complete and
correct and fairly present the position of the Borrowers and the Guarantors as
at such dates and for such periods in accordance with GAAP consistently applied
(except that
<PAGE> 46
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unaudited Financials are subject to year-end audit adjustments and do not
contain footnote disclosures required by GAAP). The Borrowers have also provided
to the Bank their forecast of the consolidated and consolidating operations of
the Borrowers and the Guarantors for the period from January 1, 1997, through
December 31, 1999, and such forecast has been prepared in good faith based upon
reasonable assumptions.
(f) Since December 31, 1995, there has been no materially adverse
change of any kind in any of the Borrowers or the Guarantors which would
reasonably be expected to have a Materially Adverse Effect, provided, however,
that the confirmation and consummation of the Plan and the emergence of the
Borrowers from the Cases shall not in and of themselves be considered to be
material adverse changes for purposes of this representation and warranty.
(g) Except as described on Schedule 7(n), there are no legal or
other proceedings or investigations pending or threatened against any of the
Borrowers or any of the Guarantors before any court, tribunal or regulatory
authority which would, alone or together, be reasonably expected to have a
Materially Adverse Effect. The Borrowers and the Guarantors have paid all such
taxes as are due and payable (except those being contested in good faith by
appropriate proceedings and for which adequate reserves have been taken) and
have funded all employee payrolls (including all required withholdings) on a
periodic basis in the ordinary course of their businesses consistent with past
practices except to the extent that the failure to pay such taxes or payrolls,
singly or in the aggregate, would not reasonably be expected to have a
Materially Adverse Effect. The Borrowers are not aware of any potential or
actual claims by any third parties against any former officers or directors of
the Borrowers for which the Borrowers have provided an indemnification as
contemplated by the terms of the Plan.
(h) The execution, delivery, performance of its obligations, and
exercise of its rights under the Loan Documents by each of the Borrowers and
each of the Guarantors, including borrowing under this Agreement and the
obtaining of Letters of Credit (i) do not require any Consents other than those
that have been obtained or will be obtained prior to the Closing Date and that
are in full force and effect; and (ii) are not and will not be in conflict with
or prohibited or prevented by (A) any Requirement of Law, or (B) any Charter
Document, corporate minute or resolution, instrument, agreement or provision
thereof, in each case binding on it or affecting the property of the Borrowers
or the Guarantors.
<PAGE> 47
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(i) Neither of the Borrowers nor any of the Guarantors is in
violation of (A) any Charter Document, corporate minute or resolution, (B) any
instrument or agreement, in each case binding on it or affecting its property,
which violation could have a Materially Adverse Effect, or (C) any Requirement
of Law, in a manner which could have a Materially Adverse Effect, including,
without limitation, all applicable federal and state tax laws, ERISA, OSHA and
Environmental Laws. Except as set forth in Schedule 7(i), neither of the
Borrowers nor any of the Guarantors is a party to a collective bargaining
agreement.
(j) Upon execution and delivery of this Agreement and the other Loan
Documents and the filing of the UCC financing statements and the taking of all
similar actions contemplated by the Security Documents, the Agent shall have,
for the benefit of the Banks and the Agent, first-priority perfected Liens in
the Collateral (excluding from this representation (i) the necessity for any
registration or filing of the Agent's security interest in trademarks and
copyrights of the Borrowers and the Guarantors, if any, required to be made with
the United States Patent and Trademark Office or the United States Copyright
Office solely to the extent that the Agent has not made such registrations or
filings and (ii) the effect on perfection or priority of the Liens created by
the Stock Pledge Agreements (other than Liens on shares of capital stock which
are otherwise the subject of a Foreign Pledge Agreement) solely to the extent
that laws other than the laws of the United States of America or any state or
other political subdivision thereof shall be deemed to govern such perfection or
priority), subject only to Liens permitted hereunder and entitled to priority
under applicable law.
(k) There are no Liens on any assets of either of the Borrowers or
any of the Guarantors other than Permitted Liens.
(l) All of the Subsidiaries of the Borrowers and the Guarantors are
set forth on Schedule 7(l). Except as set forth in Schedule 7(l), none of the
Borrowers and the Guarantors is a party to any partnership or joint venture.
(m) The Borrowers and the Guarantors have taken all steps reasonably
necessary to investigate the past and present condition and usage of the Real
Estate and the operations conducted thereon and, based upon such investigation,
have determined that, except as otherwise expressly set forth in the Disclosure
Statement or on Schedule 7(m) hereto:
(i) none of the Borrowers, the Guarantors or any operator of
the Real Estate or any operations thereon is in violation, or alleged
violation, of any
<PAGE> 48
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judgment, decree, order, law, license, rule or regulation pertaining to
environmental matters, including without limitation, those arising under
the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 as amended
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, the
Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances
Control Act, or any state or local statute, regulation, ordinance, order
or decree relating to health, safety or the environment (hereinafter
"Environmental Laws"), which violation would be reasonably likely to have
a Materially Adverse Effect;
(ii) neither of the Borrowers nor any of the Guarantors has
received notice from any third party including, without limitation, any
federal, state or local governmental authority, (A) that any one of them
has been identified by the United States Environmental Protection Agency
("EPA") as a potentially responsible party under CERCLA with respect to a
site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix
B; (B) that any hazardous waste, as defined by 42 U.S.C. ss.6903(5), any
hazardous substances as defined by 42 U.S.C. ss.9601(14), any pollutant or
contaminant as defined by 42 U.S.C. ss.9601(33) and any toxic substances,
oil or hazardous materials or other chemicals or substances regulated by
any Environmental Laws ("Hazardous Substances") which any one of them has
generated, transported or disposed of has been found at any site at which
a federal, state or local agency or other third party has conducted or has
ordered that either Borrower or any of the Guarantors conduct a remedial
investigation, removal or other response action pursuant to any
Environmental Law; or (C) that it is or shall be a named party to any
claim, action, cause of action, complaint, or legal or administrative
proceeding (in each case, contingent or otherwise) arising out of any
third party's incurrence of costs, expenses, losses or damages of any kind
whatsoever in connection with the release of Hazardous Substances, the
result of which, in any such case, would be reasonably likely to have a
Materially Adverse Effect;
(iii) (A) there have been no releases (i.e. any past or
present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing or dumping) or
threatened releases of Hazardous Substances on, upon, into or from the
properties of any of the Borrowers or the Guarantors, which releases would
be reasonably likely to have a Materially Adverse Effect; and (B) to the
best of the Borrowers' and the Guarantors' knowledge, there have been no
releases on, upon, from or into any real property in the vicinity of any
<PAGE> 49
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of the Real Estate which, through soil or groundwater contamination, may
have come to be located on, and which would be reasonably likely to have a
Materially Adverse Effect; and
(iv) None of the Borrowers and the Guarantors or any of the
Real Estate is subject to any applicable environmental law requiring the
performance of Hazardous Substances site assessments, or the removal or
remediation of Hazardous Substances, or the giving of notice to any
governmental agency or the recording or delivery to other Persons of an
environmental disclosure document or statement by virtue of the
transactions set forth herein and contemplated hereby, or as a condition
to the effectiveness of any transactions contemplated hereby.
(n) Except for the administrative claims described on Schedule 7(n)
hereto, none of the administrative claims which have been asserted in the course
of the Cases and which remain unpaid on the Effective Date, would reasonably be
expected to, either singly or in the aggregate, have a Materially Adverse
Effect. To the best of the Borrowers' knowledge, it is anticipated that the
administrative claims described on Schedule 7(n) will not exceed the aggregate
amount set forth thereon for all such claims.
(o) The Borrowers have delivered to each of the Agent and the Banks
a true, accurate and complete copy of the Plan and any amendments thereto (which
amendments shall have been approved by the Agent), as confirmed by the
Bankruptcy Court. The Confirmation Order has been entered by the Bankruptcy
Court, and the Confirmation Order (i) authorizes the Borrowers' entering into
this Agreement and the other Loan Documents, (ii) is in full force and effect,
(iii) has not been revised, modified or amended in any respect, and (iv) is not
subject to appeal and all appeal periods applicable to the Confirmation Order
have expired. All conditions precedent to the Confirmation Order and to the
Effective Date (except Sections 15.2(p) (with respect to the Midlantic Letters
of Credit only) and 15.2(q) of the Plan) have been met (or the waiver thereof
has been consented to by the Agent), and the Effective Date has occurred.
ss.8. CONDITIONS PRECEDENT.
(a) The obligation of the Agent to issue, extend or renew the
initial Letters of Credit, and the obligation of the Banks to make the initial
Loans or to participate in the initial Letters of Credit, is subject to the
satisfaction of the following conditions precedent in addition to those set
forth in ss.8(b):
<PAGE> 50
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(i) Each of the Loan Documents shall have been duly executed
and delivered by the respective parties thereto, and all of such Loan
Documents shall be in full force and effect and shall be in form and
substance satisfactory to the Agent, the Banks and the Borrowers.
(ii) All corporate action, third-party consents and
governmental approvals necessary for the valid execution, delivery and
performance by each of the Borrowers and each of the Guarantors of each of
the Loan Documents to which it is a party shall have been duly and
effectively taken or (as the case may be) obtained and evidence thereof
satisfactory to the Agent and the Banks shall have been provided to the
Agent and the Banks.
(iii) Each of the Agent and the Banks shall have received from
each of the Borrowers and the Guarantors a copy, certified by a duly
authorized officer of such Person to be true and complete on the Closing
Date, of each of (A) its Charter Documents as in effect on such date of
certification, (B) the Confirmation Order as in effect on the Closing
Date, (C) the Indenture and the other Senior Secured Note Documents, each
as in effect on the Closing Date.
(iv) Each of the Agent and the Banks shall have received from
the each of the Borrowers and Guarantors an incumbency certificate, dated
as of the Closing Date, signed by a duly authorized officer of such
Borrower or such Guarantor, and giving the name and bearing a specimen
signature of each individual who shall be authorized: (A) to sign, in the
name and on behalf of such Borrower or such Guarantor, each of the Loan
Documents to which such Borrower or such Guarantor is or is to become a
party; (B) in the case of the Borrowers, to make Loan Requests and
Conversion Requests and to apply for Letters of Credit; and (C) to give
notices and to take other action on its behalf under the Loan Documents.
(v) All Uniform Commercial Code and title searches and all
Canadian Lien searches shall have been made, all Uniform Commercial Code
financing statements, releases and notices and assents and all Canadian
security interest filings shall have been executed and delivered (in
recordable form where applicable) to the Agent, all relevant insurances
shall have been modified to include the Agent, for the benefit of the
Banks and the Agent, as assignee, additional insured or loss payee as
applicable, all Collateral in which a security interest may be perfected
only by the secured party's possession shall, if so requested by the
Agent,
<PAGE> 51
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have been delivered to the Agent or its nominee, and all other actions
necessary or in the reasonable opinion of the Agent desirable for the
perfection and protection and to achieve the priority, as contemplated
hereby, of all Liens in favor of the Agent, for the benefit of the Banks
and the Agent, shall have been taken to the satisfaction of the Agent and
its counsel (including, without limitation, the delivery and pledge to the
Agent of all promissory notes (including the Canadian Note) and other
instruments delivered by MCL in favor of MI under the Canadian Loan
Documents, and execution, delivery and, where appropriate, filing, of all
necessary documents in connection with the Agent's Lien on all rights of
MI under such Canadian Loan Documents).
(vi) The Agent shall have received (A) certificates of
insurance from an independent insurance broker dated as of the Closing
Date, identifying insurers, types of insurance, insurance limits, and
policy terms, and otherwise describing the insurance obtained in
accordance with the provisions of the Security Agreement and (B) certified
copies of all policies evidencing such insurance.
(vii) The Bank shall have received (i) a favorable opinion
from Weil, Gotshal & Manges LLP, counsel to the Borrowers and the
Guarantors in form and substance satisfactory to the Agent and the Banks,
(ii) a favorable opinion from the General Counsel of MI in form and
substance satisfactory to the Agent and the Banks, (iii) favorable
opinions from counsel to the Borrowers in New Jersey and Ohio with respect
to such Collateral security and other matters as requested by the Agent
and the Banks and in form and substance satisfactory to the Agent and the
Banks, (iv) favorable opinions from counsel to the Borrowers in Canada
with respect to the Canadian Loan Documents and the Canadian Assignment
Documents in form and substance satisfactory to the Agent and the Banks,
and (v) a favorable opinion from counsel to MHC in the United Kingdom with
respect to the applicable Foreign Pledge Agreement in form and substance
satisfactory to the Agent and the Banks.
(viii) The Bank shall have received, at least three (3) days
prior to the Drawdown Date of such Loan or the proposed date of the
issuance of such Letter of Credit, the most recent Borrowing Base Report
required to be delivered to the Bank in accordance with ss.9.1(a)(v),
together with such supporting details of receivable aging and inventory
designations as the Bank may reasonably request.
<PAGE> 52
- -50-
(ix) The balance of the facility fee required to have been
paid to the Agent on the date hereof pursuant to the Fee Letter shall have
been paid to the Agent on the date hereof, and the Collateral
administration fee and all other fees and expense reimbursements due and
payable to the Agent and the Banks hereunder shall have been paid to the
Agent or the Banks, as appropriate.
(x) The Plan, with any amendments thereto acceptable to the
Agent, shall have been confirmed, and the Bankruptcy Court shall have
entered the Confirmation Order. The Confirmation Order shall not be
subject to a stay and the Confirmation Order shall not be subject to
appeal and all appeal periods applicable to the Confirmation Order shall
have expired. The Confirmation Order (A) shall have authorized the
Borrowers' entering into and performing their obligations under this
Agreement and the other Loan Documents, (B) shall be in full force and
effect, and (C) shall not have been revised, modified or amended in any
respect. All conditions precedent to the Confirmation Order and to the
Effective Date (except Sections 15.2(p) (with respect to the Midlantic
Letters of Credit only) and 15.2(q) of the Plan) shall have been met (or
the waiver thereof shall have been consented to by the Agent), and the
Effective Date shall have occurred or shall be scheduled to occur but for
the initial extension of credit contemplated hereunder. Except as
consented to by the Agent, the Bankruptcy Court's retention of
jurisdiction under the Confirmation Order shall not govern the enforcement
of the Loan Documents and the Security Documents or any rights or remedies
relating thereto. Each of the Agent and the Banks shall be satisfied with
any amendments to the Plan and the Disclosure Statement and with the
terms, provisions and conditions of the Confirmation Order. The Borrowers
shall not have any funded Indebtedness outstanding other than indebtedness
under the Loan Documents and Indebtedness evidenced by the Senior Secured
Notes.
(xi) The Agent and the Banks shall have received the pro forma
balance sheet, the Financials and the forecast described in ss.7(e)
hereof, and no event or circumstance shall have come to the attention of
the Agent or the Banks that would lead any of them to believe that the
financial projections as to the Borrowers contained in such forecast are
inaccurate or incomplete in any material respect.
(xii) The Agent shall be reasonably satisfied that all allowed
and disputed prepetition and administrative claims (as defined in the
Plan) against the Borrowers shall have been treated in accordance with the
terms of the Plan, in form and substance similar to that described in the
Disclosure Statement. The Agent shall
<PAGE> 53
- -51-
be reasonably satisfied that the Borrowers have sufficient funds and
reserves in order to pay the amount of all prepetition and administrative
claims not discharged on the Effective Date, as and when due, including
without limitation amounts in respect of any disputed claims which are
resolved in favor of the claimants in respect thereof. There shall be no
liabilities of the Borrowers which are material and which are not
otherwise being discharged upon consummation of the Plan as contemplated
by the terms of the Plan other than liabilities disclosed in the Plan as
not being discharged with respect to which, in the reasonable judgment of
the Agent, the Borrowers have sufficient funds and reserves to pay in full
any amounts in respect thereof as and when due. The Environmental Claim
Settlement Agreements (as defined in the Disclosure Statement), similar in
form and substance to the terms outlined in the Disclosure Statement,
shall have been entered into and such settlements shall be otherwise
reasonably satisfactory to the Agent and the Banks, and the Agent and the
Banks shall be reasonably satisfied with the form and substance of any
amendments or modifications to any such Environmental Claim Settlement
Agreements (whether prior to or following entry of the Confirmation Order)
and of any Bankruptcy Court orders entered into prior to or following
entry of the Confirmation Order consenting to any amendment, modification
or other revision of any such Environmental Claim Settlement Agreement.
The Agent and the Banks shall be reasonably satisfied in all material
respects with the terms of all letters of credit to be issued as
contemplated by the terms of the Plan. All sources and uses of funds to
consummate the Plan shall otherwise be substantially as described in the
Disclosure Statement.
(xiii) The Senior Secured Note Documents shall contain
intercreditor terms reasonably satisfactory to the Agent and the Banks
with respect to the junior security interest in favor of the Trustee in
the assets of MI. Such security interest shall be junior and "silent" in
all respects to the security interest of the Agent for the benefit of the
Agent and the Banks.
(xiv) The initial Loans shall be in an amount sufficient to
repay any loans made by FNBB under the DIP Agreement in full (except that
the Existing Letters of Credit issued by FNBB under the DIP Agreement
shall continue as Letters of Credit under this Agreement). No more than
$15,000,000 of the initial Loans and Letters of Credit hereunder shall be
used to reduce the principal amount of the Senior Secured Notes, whether
directly from the proceeds of such Loans or indirectly from the issuance
of such Letters of Credit (thereby permitting funds held in favor of the
<PAGE> 54
- -52-
beneficiaries to be released for purposes of reducing the principal amount
of the Senior Secured Notes).
(b) The obligation of the Agent to issue, extend or renew any
Letters of Credit, and the obligation of the Banks to make any Loans or to
participate in any Letters of Credit, including the initial Loans and Letters of
Credit, is subject to the satisfaction of the following further conditions
precedent:
(i) Each of the representations and warranties of each of the
Borrowers and each of the Guarantors to the Agent and the Banks herein or
in any of the other Loan Documents or any document, certificate or other
paper or notice in connection herewith shall be true and correct in all
material respects as of the time made or deemed to have been made or
repeated and shall also be true and correct in all material respects at
and as of the time of the making of such Loan or the issuance, extension
or renewal of such Letter of Credit, with the same effect as if made at
and as of that time (except to the extent of changes resulting from
transactions contemplated or permitted by this Agreement and the other
Loan Documents and changes occurring in the ordinary course of business
that singly or in the aggregate are not materially adverse, and to the
extent that such representations and warranties relate expressly to an
earlier date).
(ii) No Default or Event of Default shall have occurred and be
continuing.
(iii) All documents and certificates in connection with the
transactions contemplated hereby shall be in form and substance
satisfactory to the Agent and the Banks, and the Agent and the Banks shall
have received all information as any of them may have reasonably
requested. No change shall have occurred in any law or regulation or in
the interpretation thereof that in the reasonable opinion of the any Bank
would make it unlawful for such Bank to make such Loan or to participate
in the issuance, extension or renewal of such Letter of Credit or in the
reasonable opinion of the Agent to issue, extend or renew such Letter of
Credit.
(iv) Each Bank shall have received such statements in
substance and form reasonably satisfactory to such Bank as such Bank shall
require for the purpose
<PAGE> 55
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of compliance with any applicable regulations of the Comptroller of the
Currency or the Board of Governors of the Federal Reserve System.
ss.9. COVENANTS.
ss.9.1. Affirmative Covenants. Each of the Borrowers and the Guarantors
agrees that so long as there are any Loans, Notes, Unpaid Reimbursement
Obligations or Letters of Credit outstanding or any Bank has any obligation to
make Loans or the Agent has any obligation to issue, extend or renew and Letters
of Credit and until the payment and satisfaction in full in cash of all of the
Obligations, the Borrowers will, the Guarantors will, and where applicable the
Borrowers will cause the Guarantors and MCL to, comply with its obligations as
set forth throughout this Agreement and to:
(a) furnish the Agent and each of the Banks:
(i) as soon as available, but in any event within ninety (90)
days after the close of each fiscal year of MI, the audited consolidated
and consolidating Financials for MI and its Subsidiaries for such fiscal
year and the audited consolidated and consolidating Financials for the
North American Group for such fiscal year, in each case including a
balance sheet, income statement and cash flow statement, and, in the case
of world-wide consolidated Financials of MI and its Subsidiaries, with all
required note disclosures, all certified by the Borrowers' accountants,
together with a statement from such accountants as to the absence, to
their knowledge, of any Event of Default;
(ii) as soon as available, but in any event within sixty (60)
days after the end of each fiscal quarter of MI, the unaudited
consolidated and consolidating Financials of the Borrowers and their
Subsidiaries for such quarter and in any event within forty-five (45) days
after the end of each fiscal quarter of the Subsidiaries of MI, the
unaudited consolidated and consolidating Financials of the North American
Group for such quarter, in each case including a balance sheet, income
statement and cash flow statement, certified by the Borrowers' chief
financial officer or chief accounting officer or treasurer, and, in the
case of each of the above-described consolidated Financials only, together
with comparisons to the most recently delivered business plan of the
Borrowers describing any material variations therefrom;
<PAGE> 56
- -54-
(iii) as soon as available, but in any event within forty-five
(45) days after the end of each fiscal month of the Subsidiaries of MI,
the unaudited consolidated and consolidating Financials of the North
American Group for such month, including a balance sheet, income statement
and cash flow statement (in the case of such consolidated Financials with
comparisons to the consolidated Financials for the same fiscal month of
the previous fiscal year), certified by the Borrowers' chief financial
officer or chief accounting officer or treasurer, and, in the case of such
consolidated Financials only, together with comparisons to the most
recently delivered business plan of the Borrowers describing any material
variations therefrom;
(iv) together with its monthly, quarterly and annual
Financials, a certificate of the Borrowers setting forth computations
demonstrating compliance with the Borrowers' financial covenants set forth
herein, and certifying that no Default or Event of Default has occurred,
or if it has, describing the actions taken by the Borrowers with respect
thereto;
(v) (i) within fifteen (15) days following the end of each
calendar month (or at such other interval as the Agent may from time to
time specify), a Borrowing Base Report updating all components of the
Borrowing Base (other than SMC's inventory, with respect to which the
month-end information for the calendar month next previous to the month
most recently ended shall be used, but which information shall be updated
within twenty (20) days following the end of each calendar month to
reflect SMC's inventory as of the end of such calendar month most recently
ended prior thereto) and the Canadian Borrowing Base and recalculating the
Borrowing Base and the Canadian Borrowing Base on the basis thereof,
together with a statement of the Canadian Intercompany Outstandings and a
comprehensive receivables aging for the Borrowers and MCL and inventory
designations of the Borrowers and MCL as of the end of such month as the
Agent or any Bank may have reasonably requested, and together with such
other supporting schedules and documentation as set forth on Exhibit A
hereto or as the Agent or any Bank may have reasonably requested, and (ii)
within eight (8) Business Days after the end of any calendar week during
which any Loans were outstanding, a Borrowing Base Report updating the
Eligible Accounts and Eligible Canadian Accounts components of the
Borrowing Base and the inventory component of the Borrowing Base
attributable to MI's inventory and recalculating the Borrowing Base on the
basis thereof;
<PAGE> 57
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(vi) as soon as practicable, but in any event not later than
45 days after request by the Agent made after determining in its
discretion that a reappraisal of the value of Eligible Fixed Assets of the
Borrowers is necessary to insure the accuracy of the Borrowing Base, a
reappraisal of the value of such Eligible Fixed Assets, which reappraisal
shall be conducted at the expense of the Borrowers by an appraiser
selected by the Agent in form and substance satisfactory to the Agent,
provided, however, that solely so long as no Event of Default shall
occurred and be continuing, such request shall not be made more often than
once in any eighteen month period and so long as no Event of Default shall
have occurred and be continuing, no such request shall be made prior to
October 1, 1998; provided, further, that no such limitations upon the
Agent's ability to make any such request shall apply following the
occurrence and during the continuance of an Event of Default;
(vii) by December 31 of each fiscal year, the Borrowers'
business plan for the immediately following fiscal year;
(viii) from time to time such other information concerning the
Borrowers or the Guarantors as the Agent or any Bank may reasonably
request.
(b) keep true and accurate books of account in accordance with GAAP
and permit the Agent and the Banks or their designated representatives during
normal business hours to inspect the Borrowers', the Guarantors' and MCL's
premises and to examine and be advised as to the Borrowers', the Guarantors' and
MCL's business records upon the request of the Agent or any Bank, and to permit
the Agent's commercial finance examiners to conduct periodic commercial finance
examinations;
(c) maintain its corporate existence, business and assets, keep its
business and assets adequately insured by responsible insurers, maintain its
chief executive office in the United States (or, in the case of MCL, Canada),
continue to engage in the same lines of business, fund its payroll, periodically
in the ordinary course of its business consistent with past practices, on a
current basis (including all withholdings), pay all taxes as and when due and
payable (except where contested in good faith by appropriate proceedings and for
which adequate reserves have been taken) and comply with all other Requirements
of Law, including ERISA, OSHA and Environmental Laws, except where failure to do
so will not have a Materially Adverse Effect;
<PAGE> 58
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(d) notify the Agent and the Banks promptly in writing of (A) the
occurrence of any Default or Event of Default, (B) any noncompliance with or
obligation under ERISA, OSHA or any Environmental Law or proceeding in respect
thereof which would be reasonably likely to have a Materially Adverse Effect,
(C) any change of address, (D) any pending or, to the knowledge of the
Borrowers, the Guarantors or MCL, threatened litigation or similar proceeding
affecting the Borrowers, the Guarantors or MCL or any material change in any
such litigation or proceeding previously reported, where such litigation or
proceeding, if determined adversely to any of the Borrowers, the Guarantors and
MCL, could have a Materially Adverse Effect, (E) any notice which either of the
Borrowers has received under any material supply or other contract terminating
or threatening to terminate the provisions of supply or the provisions of other
goods or services or otherwise claiming a default thereunder, (F) the occurrence
and details relating to any bankruptcy, insolvency, liquidation, reorganization,
dissolution or similar case or proceeding relating to any Subsidiary of MI, (G)
any claims against any material amount of assets or properties of the Borrowers
or the Guarantors constituting Collateral, and (H) any testing or environmental
site assessment reports conducted at any Real Estate of either of the Borrowers
and submitted to any federal or state regulatory agency or authority;
(e) use the proceeds of the Loans solely to finance a portion of the
Borrowers' obligations under the Plan and for working capital and general
corporate purposes of the Borrowers, and use Letters of Credit solely to finance
a portion of the Borrowers' obligations under the Plan and for working capital
and general corporate purposes approved by the Agent for Letters of Credit (such
approval not to be unreasonably withheld by the Agent). The proceeds of the
Loans and Letters of Credit shall not be used for the carrying of "margin
security" or "margin stock" within the meaning of Regulations U and X of the
Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224
unless the Borrowers shall have previously notified the Agent in writing of
their intent to so use the proceeds of the Loans and Letters of Credit, and if
so used, the Borrowers shall comply with, and assist the Agent and the Banks in
complying with, such Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224;
(f) cooperate with the Agent and the Banks, take such action,
execute such documents (including security documents), and provide such
information as the Agent or any Bank may from time to time reasonably request in
order further to effect the transactions contemplated by and the purposes of the
Loan Documents and, if requested by the Agent or any Bank for regulatory reasons
or following the occurrence of an Event of Default, deliver
<PAGE> 59
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to the Agent or such Bank at the Borrowers' expense appraisals, title insurance,
surveys or environmental assessments relating to the Real Estate of the
Borrowers;
(g) unless directed by the Agent in writing, cause all cash, checks
and other payments or proceeds held or received by it, immediately upon receipt
and in the identical form received, to be paid directly into the Lock Box
Accounts or to the Agent in accordance with ss.2.3(c), and notwithstanding
anything herein to the contrary, the Operating Accounts shall at all times be
maintained with the Agent, and neither any of the Borrowers nor any of the
Guarantors shall maintain other deposit or investment accounts, except as
permitted by ss.9.2(d);
(h) promptly give notice to the Agent and each of the Banks (A) of
any violation of any Environmental Law that any of the Borrowers, the Guarantors
or MCL reports in writing or is reportable by such Person in writing (or for
which any written report supplemental to any oral report is made) to any
federal, state or local environmental agency that is reasonably likely to have a
Materially Adverse Effect and (B) upon becoming aware thereof, of any inquiry,
proceeding, investigation, or other action, including a notice from any agency
of potential environmental liability, of any federal, state or local
environmental agency or board, that is reasonably likely to have a Materially
Adverse Effect; and
(i) maintain its current fiscal year, provided, however, that MI
shall be permitted to change its fiscal year end from December 31 to January
31,. In connection with any such change in the fiscal year of MI, the Borrowers
hereby agree to provide to the Agent and the Banks from time to time as and when
requested by the Agent or any Bank such reconciliations and financial
information necessary in order for the Agent and the Banks to determine
compliance with the financial covenants set forth in ss.9.3.
ss.9.2. Negative Covenants. Each of the Borrowers and each of the
Guarantors agrees that so long as there are any Loans, Notes, Unpaid
Reimbursement Obligations or Letters of Credit outstanding or any Bank has any
obligation to make Loans or the Agent has any obligation to issue, extend or
renew any Letters of Credit and until the payment and satisfaction in full in
cash of all of the Obligations, the Borrowers will not, the Guarantors will not,
and where applicable the Borrowers will not cause or permit the Guarantors or
MCL to:
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(a) seek, consent or suffer to exist any modification, stay,
vacation or amendment to the Confirmation Order except as would not, in the
reasonable judgment of the Agent (i) adversely effect the enforceability of any
of the Loan Documents or any of the Agent's or the Banks' rights thereunder or
the validity, priority or perfection of any Lien granted under the Security
Documents and (ii) have a materially adverse effect on the financial condition
or business operations of any of the Borrowers, the Guarantors and MCL;
(b) create, incur or assume any Indebtedness other than (i)
Indebtedness to the Agent and the Banks arising under the Loan Documents, (ii)
Indebtedness in respect of the acquisition of property or capitalized leases
which does not exceed $1,000,000 in cumulative aggregate amount and refinancings
thereof which do not exceed the amount refinanced, (iii) current liabilities of
the Borrowers, the Guarantors or MCL not incurred through the borrowing of money
or the obtaining of credit except credit on an open account customarily
extended, (iv) Indebtedness in respect of taxes or other governmental charges
contested in good faith and by appropriate proceedings and for which adequate
reserves have been taken; (v) Indebtedness (A) owed by either Borrower to the
other Borrower, or (B) owed by either Borrower to a Subsidiary of either
Borrower, (vi) Indebtedness not included above and listed on Schedule 9.2(b)
hereto, (vii) Indebtedness of SMC under the Settlement Agreement with Cyprus
Foote dated as of February 19, 1997 and Indebtedness of MI in respect of its
guaranty of the obligations of SMC under such Settlement Agreement, not to
exceed, in the case of all such Indebtedness of MI relating to its guaranty
thereunder, $2,500,000 in the aggregate, (viii) Indebtedness in respect of the
Senior Secured Notes, (ix) Indebtedness of MCL to MI under the Canadian Loan
Documents, (x) Indebtedness of the Borrowers consisting of their obligation to
reimburse Midlantic Bank in respect of the Other Letters of Credit (as defined
in the Plan), such Indebtedness in respect of such Other Letters of Credit not
to exceed $115,000 in the aggregate, and (xi) other Indebtedness in an aggregate
amount not to exceed $1,000,000;
(c) create or incur any Liens on any of the property or assets of
the Borrowers, the Guarantors or MCL except (collectively, "Permitted Liens")
(i) Liens securing the Obligations; (ii) Liens securing taxes or other
governmental charges not yet due; (iii) deposits for utilities, reasonable
retainers to professionals, deposits or pledges made in connection with
workmen's compensation, unemployment insurance or other social security
obligations or to secure the performance of tenders, bids and other contracts in
the ordinary course of business of any of the Borrowers, the Guarantors and MCL
consistent with past practices; (iv) Liens of carriers, warehousemen, mechanics
and materialmen and similar non-consensual Liens arising by operation of law,
(A) less than 120 days old as to obligations
<PAGE> 61
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not yet due or (B) as to obligations being contested in good faith by
appropriate proceedings, for which adequate reserves have been taken, with
respect to which Liens no foreclosure proceedings have been commenced, and which
Liens shall not have priority over the Liens of the Agent, for the benefit of
the Banks and the Agent, in the Collateral; (v) easements, rights-of-way, zoning
restrictions and similar minor Liens which individually and in the aggregate do
not have a Materially Adverse Effect; (vi) purchase money security interests in
or purchase money mortgages on real or personal property securing purchase money
Indebtedness or capitalized leases permitted by ss.9.2(b)(ii), covering only the
property so acquired or leased; (vii) Liens securing the Senior Secured Notes,
the terms of such Liens to be silent and junior to the Liens securing the
Obligations pursuant to the subordination terms contained in the Senior Secured
Note Documents; (viii) Liens on assets of any Guarantor in respect of loans or
other extensions of credit permitted pursuant to ss.9.2(d)(vi) hereof, which
Liens shall be subject and junior to the Liens granted by such Guarantor in
favor of the Bank; (ix) Liens on assets of MCL in favor of MI pursuant to the
Canadian Loan Documents, which Liens have been assigned in favor of the Agent
pursuant to the Canadian Assignment Documents, and (x) other Liens existing on
the date hereof and listed on Schedule 9.2(c) hereof;
(d) purchase securities, make loans, issue guaranties or other
financial accommodations or make any other investments other than investments
(i) in Subsidiaries of either Borrower as of the Closing Date and listed on
Schedule 9.2(d) hereto; (ii) in bank certificates of deposits, bank eurodollar
deposits, bank money market funds, government securities, commercial paper,
repos and other cash equivalent securities, in each case having maturities of
thirty days or less and otherwise reasonably acceptable to the Agent and
comprised in the Cash Collateral Accounts, (iii) in netting accounts and brokers
accounts required by brokers for margin purposes, maintained by the Borrowers in
accordance with the ordinary course of their businesses and not to exceed
$2,000,000 in the aggregate at any one time; (iv) in payroll, petty cash and
other local and sundry accounts, maintained by the Borrowers in the ordinary
course of their businesses consistent with past practices, not to exceed
$900,000 in the aggregate at any one time; (v) consisting of loans to employees
for relocation expenses and other expense reimbursements not to exceed (A)
$600,000 in the aggregate outstanding at any time during calendar year 1997 and
(B) $300,000 in the aggregate at any time thereafter outstanding, (vi) in
Subsidiaries (other than investments by MI in SMC, which investments are
permitted pursuant to the terms of ss.9.2(d)(ix) hereof) subsequent to the
Closing Date, in each case net of any repayments or dividends made by such
Subsidiaries to the Borrowers, at no time in excess of:
<PAGE> 62
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(A) $5,000,000 in the aggregate in the case of investments in MCL
(including all of the Canadian Intercompany Outstandings),
(B) $5,500,000 in the aggregate in the case of investments in
Brazilian Subsidiaries, Metallurg International Resources GmbH and
Metallurg Mexico S.A. de C.V., considered collectively;
(C) $100,000 in the aggregate in the case of all other Subsidiaries,
considered collectively,
(including, for this purpose, inventory sold to such Subsidiaries and for which
payment has not been made within 90 days following the earlier to occur of
shipment or invoice); provided, however, that such investments in Subsidiaries
which shall be in the form of loans or other extensions of credit may be fully
and adequately secured by a Lien on assets of such Subsidiary which Lien shall,
in the case of any Guarantor, be subject and junior to the Liens granted by such
Guarantor in favor of the Bank, (vii) in the Operating Accounts, the Lock Box
Accounts and operating bank accounts of the Guarantors, (viii) consisting of
other investments not to exceed $750,000 in aggregate cumulative amount, (ix) in
respect of securities received from debtors in settlement of claims in such
debtor's bankruptcy case, (x) by either Borrower in the other Borrower, in the
form of loans or other extensions of credit, pursuant to the terms and
conditions of ss.9.2(b)(v) hereof, (xi) in bid deposits and similar deposits
made in the ordinary course of business, and (xii) by SMC in shares of the Class
C Convertible Preferred Stock, Series II, par value $.01 per share, of Dakota
Catalyst Products, Inc., the aggregate amount of such investment not to exceed
$1,000,040 at any time;
(e) make any distributions on or in respect of its capital of any
nature whatsoever, other than (i) dividends payable solely in shares of common
stock, (ii) distributions by the Guarantors or MCL to the Borrowers, (iii) to
the extent considered distributions in respect of its capital, distributions of
cash to holders of claims in Class 4F under the Plan pursuant to the terms of
the Plan, and (iv) so long as no Default or Event of Default shall have occurred
and be continuing, and none would result therefrom, repurchases of capital stock
from employees of MI in connection with the termination of such employees'
employment with MI in an aggregate amount not to exceed $200,000 during any
fiscal year of MI;
<PAGE> 63
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(f) (i) become party to a merger or sale-leaseback transaction
(other than the merger of each of the Borrowers, respectively, with and into new
Delaware corporations having the same names for the purpose of reincorporating
in Delaware (the "Reincorporation Mergers") so long as, simultaneously with such
Reincorporation Mergers (A) each of the surviving corporations in connection
therewith shall execute and deliver to the Agent the Assumption Agreement, new
Notes in favor of each Bank, and such other documents as the Agent may
reasonably require to effect the assumption by such surviving corporations of
all of the Obligations and the confirmation and ratification of the first
priority perfected Liens in favor of the Agent, for the benefit of the Banks and
the Agent, in all of the assets acquired by such corporations pursuant to the
Reincorporation Mergers and in all after-acquired assets of such corporations,
(B) MI shall deliver to the Agent all certificates representing all shares of
the capital stock of SMC's successor which are acquired by MI in connection with
the Reincorporation Mergers, together with stock powers, duly executed in blank,
with respect to such shares, (C) the Agent shall receive legal opinions
satisfactory to it in all respects as to the due authorization, execution,
delivery and enforceability of the Loan Documents against such surviving
corporations and the validity and perfection of the Agent's security interests,
in each case following consummation of the Reincorporation Mergers, as to the
completion of such Reincorporation Mergers, and as to such other matters as the
Agent shall reasonably require, (D) the Agent shall receive a certificate
satisfactory to it in all respects of an authorized officer of each of such
surviving corporations as to (1) the Charter Documents of each such surviving
corporation, (2) the resolutions of the board of directors of each such
surviving corporation with respect to the mergers and each of the Assumption
Agreement and Loan Documents, and (3) the names, titles, incumbency and specimen
signatures of the officers of each such surviving corporation authorized to
execute and deliver the Assumption Agreement and the other Loan Documents, and
(E) the Agent shall receive certificates satisfactory to it in all respects from
the Secretary of State of Delaware as to each such surviving corporation's legal
existence and good standing and from the secretary of state of each jurisdiction
in which each such survivng corporation shall be required to qualify to do
business as to such corporation's qualification to so do business), (ii) effect
any disposition of assets (other than (A) dispositions of inventory in the
ordinary course, (B) dispositions of obsolete equipment having a value not in
excess of $400,000 in the aggregate, and (C) other dispositions of assets having
an aggregate value not in excess of $500,000 for all such other dispositions of
assets) without the consent of the Agent and the Banks (and in the case of any
such asset dispositions consented to by the Agent and the Banks, unless provided
otherwise by the terms of such consent, (1) the Net Cash Proceeds of any such
disposition, together with all other net cash proceeds therefrom, shall be
applied to the Obligations then outstanding, with the Total Commitment also
being reduced by the
<PAGE> 64
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full amount of any such Net Cash Proceeds and other net cash proceeds, and (2)
to the extent that the Loans are reduced to $0, any Excess Proceeds received in
connection with any such asset disposition which would otherwise be required to
be used by MI to make an Excess Proceeds Offer under the terms of the Indenture
if not used to repay or secure the Obligations, shall be applied to cash
collateralize outstanding Letters of Credit in an amount equal to 105% of the
Maximum Drawing Amount), or (iii) purchase, lease or otherwise acquire assets
other than in the ordinary course;
(g) amend, supplement or otherwise modify the terms of any of the
Management Service Agreements so as to reduce the aggregate amounts payable to
the Borrowers thereunder and likely to be paid without enforcement measures for
all Management Service Agreements or fail to use commercially reasonable efforts
to enforce the terms thereof or to effect renewals thereof on terms not less
favorable to the Borrowers than those then in effect;
(h) permit MI to trade on any metal exchange in any metal other than
Allowed LME Traded Metal, or permit SMC to trade in any metal on any metal
exchange; provided, however, that nothing herein shall prohibit or prevent SMC
from engaging in hedging transactions in the ordinary course of its business,
consistent with past practices;
(i) (i) use any of the Real Estate or any portion thereof for the
handling, processing, storage or disposal of Hazardous Substances, (ii) cause or
permit to be located on any of the Real Estate any underground tank or other
underground storage receptacle for Hazardous Substances, (iii) generate any
Hazardous Substances on any of the Real Estate, (iv) conduct any activity at any
Real Estate or use any Real Estate in any manner so as to cause a release (i.e.
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping) or threatened release of
Hazardous Substances on, upon or into the Real Estate or (v) otherwise conduct
any activity at any Real Estate or use any Real Estate in any manner that would
violate any Environmental Law or bring such Real Estate in violation of any
Environmental Law which, in any such case, would be reasonably likely to have a
Materially Adverse Effect;
(j) (i) amend, supplement or otherwise modify the terms of the
Indentures, the Senior Secured Notes or any of the Senior Secured Note Documents
without the consent of the Agent and each of the Banks except for any such
amendment, supplement or modification which would not (A) in the reasonable
judgment of the Agent, adversely effect the enforceability of any of the Loan
Documents or any of the Agent's or the Banks' rights
<PAGE> 65
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thereunder or the validity, priority or perfection of any Lien granted under the
Security Documents, (B) in the reasonable judgment of the Agent, have a
materially adverse effect on the financial condition or business operations of
any of the Borrowers, the Guarantors and MCL, (C) amend or modify the rate of
interest payable in respect of the Senior Secured Notes or the maturity or
principal installment payment schedule in respect of the Senior Secured Notes,
(D) amend or modify any Lien subordination provisions contained in any of the
Senior Secured Note Documents or otherwise expand or modify the Liens granted in
favor of the Trustee and the holders of the Senior Secured Notes (other than as
expressly provided in the Senior Secured Note Documents as in effect on the
Closing Date), (E) increase the required percentage of holders of the Senior
Secured Notes necessary to amend or waive any provision of the Senior Secured
Note Documents or decrease the required percentage of holders of the Senior
Secured Notes necessary to accelerate the maturity of the Senior Secured Notes,
or (F) amend, modify or supplement any affirmative or negative covenants
contained in the Senior Secured Note Documents, any collateral disposition or
release provisions or related redemption provisions contained in the Senior
Secured Note Documents, any default or event of default provisions contained in
the Senior Secured Note Documents or the change of control definitions or
related redemption provisions contained in the Senior Secured Note Documents, in
any such case in a manner less favorable to the Borrowers than that in effect on
the Closing Date; or (ii) use (A) more than $15,000,000 of the initial Loans and
Letters of Credit hereunder or (B) any other Loans or Letters of Credit
hereunder, to reduce the principal amount of the Senior Secured Notes, whether
directly from the proceeds of such Loans or indirectly from the issuance of such
Letters of Credit (thereby permitting funds held in favor of the beneficiaries
to be released for purposes of reducing the principal amount of the Senior
Secured Notes);
(k) notwithstanding anything herein to the contrary, MHC shall not
engage in any trade or business, incur any Indebtedness other than pursuant to
the Guaranty, incur any liabilities other than nominal expenses necessary to
maintain its corporate existence, hold or own any assets or property other than
the capital stock of its Subsidiaries as set forth on Schedule 7(l) hereto, or
sell, pledge, encumber or transfer or cause or permit the sale, pledge,
encumbrance or transfer of the capital stock of any of its direct or indirect
Subsidiaries set forth on Schedule 7(l) hereto except for any pledge thereof in
favor of the Agent for the benefit of the Banks and the Agent; or
(l) notwithstanding anything herein to the contrary, (i) cause or
permit Tantalum Corporation to engage in any trade or business, incur any
Indebtedness or liabilities (other than existing Indebtedness owing to MI on the
date hereof minus the amount of any
<PAGE> 66
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repayments thereof made after the date hereof), or hold or own any assets or
property (other than an intercompany receivable from MI existing on the date
hereof) or (ii) make any loans to, or other investments in, Tantalum Corporation
(other than the contribution to the capital of Tantalum Corporation by MI of the
above described existing Indebtedness of Tantalum Corporation to MI); or
ss.9.3. Financial Covenants. Each of the Borrowers and each of the
Guarantors agrees that so long as there are any Loans, Notes, Unpaid
Reimbursement Obligations or Letters of Credit outstanding or any Bank has any
obligation to make Loans or the Agent has any obligation to issue, extend or
renew any Letters of Credit and until the payment and satisfaction in full in
cash of all of the Obligations, the Borrowers will not, the Guarantors will not,
and the Borrowers will not cause or permit the Guarantors to:
(a) permit the ratio of Adjusted Operating Cash Flow to Total Debt
Service (i) for the fiscal quarter of the Subsidiaries of MI ending June 30,
1997, (ii) for the period of two consecutive fiscal quarters of the Subsidiaries
of MI ending on September 30, 1997, (iii) for the period of three consecutive
fiscal quarters of the Subsidiaries of MI ending on December 31, 1997, or (iv)
for any period of four consecutive fiscal quarters of the Subsidiaries of MI
ending on or after March 31, 1998, to be less than the respective ratio set
forth opposite each such fiscal quarter ending date in the table below:
6/30/97 1.10:1.00
9/30/97 1.10:1.00
12/31/97 1.10:1.00
3/31/98 1.10:1.00
6/30/98 1.10:1.00
9/30/98 1.10:1.00
12/31/98 1.10:1.00
3/31/99 1.10:1.00
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6/30/99 1.25:1.00
9/30/99 1.25:1.00
12/31/99 1.25:1.00
(b) permit EBITDA for any fiscal quarter of the Subsidiaries of MI
to be less than $1,000,000.
ss.10. EVENTS OF DEFAULT; ACCELERATION. If any of the following events
("Events of Default") shall occur:
(a) the Borrowers or the Guarantors shall fail to pay when due and
payable any principal of the Loans or any Reimbursement Obligations not funded
by a Loan pursuant to ss.2.1(d) when the same becomes due and payable hereunder,
or any interest or other sum due under any of the Loan Documents within five (5)
days following the date when the same becomes due and payable thereunder;
(b) the Borrowers or the Guarantors shall fail to perform any term,
covenant or agreement contained in ss.9.1(d)(A) or (B), ss.9.1(e), ss.9.2 or
ss.9.3;
(c) the Borrowers or the Guarantors shall fail to perform any other
term, covenant or agreement contained in any of the Loan Documents after the
Agent has given written notice of such failure to the Borrowers and a period of
thirty (30) days has passed without such failure having been cured or remedied;
(d) any representation or warranty of the Borrowers or the
Guarantors in any of the Loan Documents or in any document, certificate or other
paper or notice given in connection therewith shall have been false or
misleading in any material respect at the time made or deemed to have been made
or repeated;
(e) any of the Borrowers, the Guarantors or MCL (i) shall be in
default under (A) the Senior Secured Note Documents, (B) any agreement or
agreements (other than the Loan Documents) evidencing Indebtedness owing to the
Agent or any Bank, or any affiliates of the Agent or any Bank, or (C) any
agreement or agreements evidencing other Indebtedness for or in respect of
borrowed money or capitalized leases in excess of
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$1,000,000 in aggregate principal amount, or (ii) shall fail to pay any such
Indebtedness specified in clauses (i)(A), (B) or (C) when due, or within any
applicable period of grace;
(f) any of the Loan Documents executed and delivered shall cease to
be in full force and effect, or the Agent's Liens, for the benefit of the Banks
and the Agent, on substantially all of the Collateral shall fail to be perfected
at any time or shall fail to have the priority contemplated hereby at any time;
(g) any of the Borrowers, the Guarantors, MCL or any of the other
Material Subsidiaries (i) shall make an assignment for the benefit of creditors,
(ii) shall be adjudicated bankrupt or insolvent, (iii) shall seek the
appointment of, or be the subject of an order appointing, a trustee, liquidator
or receiver as to all or part of its assets, (iv) shall commence, approve or
consent to, any case or proceeding under any bankruptcy, reorganization or
similar law and, in the case of an involuntary case or proceeding, such case or
proceeding is not dismissed within sixty (60) days following the commencement
thereof, or (v) shall be the subject of an order for relief in an involuntary
case under federal bankruptcy law;
(h) any of the Borrowers, the Guarantors, MCL or any of the other
Material Subsidiaries shall be generally unable to pay its debts as they mature;
(i) notwithstanding the occurrence of the Effective Date, the
Confirmation Order shall be revoked or there shall occur a material default
under the Plan which default, in the reasonable opinion of the Agent, would
enable the conversion of the Cases to a case under Chapter 7 of the Bankruptcy
Code;
(j) there shall remain undischarged for more than thirty (30) days
any final judgment or execution action against any of the Borrowers, the
Guarantors or MCL that, together with other outstanding claims and execution
actions exceeds $1,000,000 in the aggregate;
(k) any of the Borrowers, the Guarantors or MCL shall be enjoined
from conducting any part of its business, or there shall occur any disruption to
such business or loss or damage to the Borrowers' inventory, in each case where
such condition would reasonably be likely to have a Materially Adverse Effect;
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(l) (i) any person or group of persons (within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the Securities and Exchange Commission under said Act) of more than 50% of the
outstanding shares of common stock of MI; (ii) during any consecutive two-year
period, individuals who were directors of MI on the first day of such period
(together with any new directors whose election by the board of directors of MI
or whose nomination for election by the stockholders of MI 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) shall cease for any reason to constitute a
majority of the board of directors of MI; or (iii) a "Change of Control", as
defined under the Indenture, shall occur;
(m) there shall occur a default by a Service Company (as defined in
the Management Service Agreements), other than Gesellshaft fuer
Elektrometallurgic m.b.H or Elektrowerk Weisweiler GmbH, under the terms of any
of the Management Service Agreements which results in a loss of revenue to the
Borrowers under the Management Service Agreements in excess of $300,000 in the
aggregate during any fiscal year; or
(n) with respect to an employee benefit plan within the meaning of
ss.3.2 of ERISA maintained or contributed to by either Borrower or any ERISA
Affiliate, the benefits of which are guaranteed upon termination in full or in
part by the PBGC (other than a multiemployer plan) (each a "Guaranteed Pension
Plan"), a "reportable event" within the meaning of ss.4043 of ERISA for which
the PBGC requires 30 day notice shall have occurred which the Majority Banks
reasonably believe could reasonably be expected to result in the liability of
either of the Borrowers or any of their Subsidiaries or any Guarantor to the
PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $1,000,000
and such event could reasonably be expected to constitute grounds for the
termination of such Guaranteed Pension Plan by the PBGC or for the appointment
by the appropriate United States District Court of a trustee to administer such
Guaranteed Pension Plan; or a trustee shall have been appointed by the United
States District Court to administer such Guaranteed Pension Plan; or the PBGC
shall have instituted proceedings to terminate such Guaranteed Pension Plan;
THEN, or at any time thereafter:
(1) In the case of any Event of Default under clause (g) or
(h), the Commitments shall automatically terminate, the Agent shall be relieved
of all further
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obligations to issue, extend or renew Letters of Credit, and the Banks shall be
relieved of all further obligations to make Loans or to participate in the
issuance, renewal or extension of any Letters of Credit, and the entire unpaid
principal amount of the Loans, all interest accrued and unpaid thereon, all
Unpaid Reimbursement Obligations, and all other amounts payable thereunder and
under the other Loan Documents shall automatically become forthwith due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived by each of the Borrowers, and the Agent may,
and upon the request of the Majority Banks shall, require that cash be delivered
to the Agent in the amount of 105% of the Maximum Drawing Amount to be held by
the Agent, for the benefit of the Banks and the Agent, as cash collateral for
all Reimbursement Obligations; and
(2) In the case of any Event of Default other than (g) and (h)
which shall have occurred and be continuing, the Agent may, and upon the request
of the Majority Banks shall, by written notice to the Borrowers, terminate the
Commitments and/or declare the unpaid principal amount of the Loans, all
interest accrued and unpaid thereon, all Unpaid Reimbursement Obligations, and
all other amounts payable hereunder and under the other Loan Documents to be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by each of the
Borrowers, and the Agent may, and upon the request of the Majority Banks shall,
require that cash be delivered to the Agent in the amount of 105% of the Maximum
Drawing Amount to be held by the Agent, for the benefit of the Banks and the
Agent, as cash collateral for all Reimbursement Obligations.
In case any one or more of the Events of Default shall have occurred and
be continuing, and whether or not the Banks shall have accelerated the maturity
of the Loans pursuant to this ss.10, each Bank, if owed any amount with respect
to the Loans or the Reimbursement Obligations, may, with the consent of the
Majority Banks but not otherwise, proceed to protect and enforce its rights by
suit in equity, action at law or other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in this Agreement
and the other Loan Documents or any instrument pursuant to which the Obligations
to such Bank are evidenced, including as permitted by applicable law the
obtaining of the ex parte appointment of a receiver, and, if such amount shall
have become due, by declaration or otherwise, proceed to enforce the payment
thereof or any other legal or equitable right of such Bank. No remedy herein
conferred upon any Bank or the Agent or the holder of any Note or purchaser of
any Letter of Credit Participation is intended to be exclusive of any other
remedy and each and every remedy shall be cumulative and shall
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be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or any other provision of law.
ss.11. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that following
the occurrence and during the continuance of an Event of Default, the Agent or
any Bank, as the case may be, receives any monies, whether pursuant to
ss.2.3(c), ss.10 or otherwise with respect to the realization upon any of the
Collateral, such monies shall be distributed for application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such monies by
the Agent, for the exercise, protection or enforcement by the Agent of all
or any of the rights, remedies, powers and privileges of the Agent, for
the benefit of the Agent and the Banks, under this Agreement or any of the
other Loan Documents or in respect of the Collateral or in support of any
provision of adequate indemnity to the Agent against any taxes or liens
which by law shall have, or may have, priority over the rights of the
Agent to such monies;
(b) Second, to all other Obligations in such order or
preference as the Majority Banks may determine; provided, however, that
distributions in respect of (i) such Obligations shall be made pari passu
among Obligations with respect to the Collateral administration fees
payable pursuant to the Fee Letter and all other Obligations and (ii)
Obligations owing to the Banks with respect to each type of Obligation
such as interest, principal, fees and expenses, shall be made among the
Banks pro rata; and provided, further, that the Agent may in its
discretion make proper allowance to take into account any Obligations not
then due and payable (including the retaining, in the Agent's discretion
following two days' prior written notice of the occurrence of an Event of
Default given to the Borrowers by the Agent, of a portion or all of such
monies to provide cash collateral in an amount equal to 105% of the
Maximum Drawing Amount to secure Reimbursement Obligations);
(c) third, upon payment and satisfaction in full or other
provisions for payment in full satisfactory to each of the Banks and the
Agent of all of the Obligations, to the payment of any obligations
required to be paid pursuant to ss.9-
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504(1)(c) of the Uniform Commercial Code of the Commonwealth of
Massachusetts; and
(d) Fourth, the excess, if any, shall be returned to the
Borrowers or to such other Persons as are entitled thereto.
ss.12. SETOFF. Regardless of the adequacy of any collateral, during the
continuance of any Event of Default, any deposits or other sums credited by or
due from any of the Banks to the Borrowers and any securities or other property
of either of the Borrowers in the possession of such Bank may be applied to or
set off by such Bank against the payment of Obligations and any and all other
liabilities, direct, or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, of either of the Borrowers to such Bank. Each
of the Banks agrees with each other Bank that (a) if an amount to be set off is
to be applied to Indebtedness of either of the Borrowers to such Bank, other
than Indebtedness evidenced by the Notes held by such Bank or constituting
Reimbursement Obligations owed to such Bank, such amount shall be applied
ratably to such other Indebtedness and to the Indebtedness evidenced by all such
Notes held by such Bank or constituting Reimbursement Obligations owed to such
Bank, and (b) if such Bank shall receive from either of the Borrowers, whether
by voluntary payment, exercise of the right of setoff, counterclaim, cross
action, enforcement of the claim evidenced by the Notes held by, or constituting
Reimbursement Obligations owed to, such Bank by proceedings against either of
the Borrowers at law or in equity or by proof thereof in bankruptcy,
reorganization, liquidation, receivership or similar proceedings, or otherwise,
and shall retain and apply to the payment of the Note or Notes held by, or
Reimbursement Obligations owed to, such Bank any amount in excess of its ratable
portion of the payments received by all of the Banks with respect to the Notes
held by, and Reimbursement Obligations owed to, all of the Banks, such Bank will
make such disposition and arrangements with the other Banks with respect to such
excess, either by way of distribution, pro tanto assignment of claims,
subrogation or otherwise as shall result in each Bank receiving in respect of
the Notes held by it or Reimbursement obligations owed it, its proportionate
payment as contemplated by this Agreement; provided that if all or any part of
such excess payment is thereafter recovered from such Bank, such disposition and
arrangements shall be rescinded and the amount restored to the extent of such
recovery, but without interest.
ss.13. THE AGENT.
ss.13.1. Authorization.
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(a) The Agent is authorized to take such action on behalf of each of
the Banks and to exercise all such powers as are hereunder and under any of the
other Loan Documents and any related documents delegated to the Agent, together
with such powers as are reasonably incident thereto, provided that no duties or
responsibilities not expressly assumed herein or therein shall be implied to
have been assumed by the Agent.
(b) The relationship between the Agent and each of the Banks is that
of an independent contractor. The use of the term "Agent" is for convenience
only and is used to describe, as a form of convention, the independent
contractual relationship between the Agent and each of the Banks. Nothing
contained in this Agreement nor the other Loan Documents shall be construed to
create an agency, trust or other fiduciary relationship between the Agent and
any of the Banks.
(c) As an independent contractor empowered by the Banks to exercise
certain rights and perform certain duties and responsibilities hereunder and
under the other Loan Documents, the Agent is nevertheless a "representative" of
the Banks, as that term is defined in Article 1 of the Uniform Commercial Code,
for purposes of actions for the benefit of the Banks and the Agent with respect
to all collateral security and guaranties contemplated by the Loan Documents.
Such actions include the designation of the Agent as "secured party",
"mortgagee" or the like on all financing statements and other documents and
instruments, whether recorded or otherwise, relating to the attachment,
perfection, priority or enforcement of any security interests, mortgages or
deeds of trust in collateral security intended to secure the payment or
performance of any of the Obligations, all for the benefit of the Banks and the
Agent.
ss.13.2. Employees and Agents. The Agent may exercise its powers and
execute its duties by or through employees or agents and shall be entitled to
take, and to rely on, advice of counsel concerning all matters pertaining to its
rights and duties under this Agreement and the other Loan Documents. The Agent
may utilize the services of such Persons as the Agent in its sole discretion may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrowers.
ss.13.3. No Liability. Neither the Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences
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of any oversight or error of judgment whatsoever, except that the Agent or such
other Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
ss.13.4. No Representations. The Agent shall not be responsible for the
execution or validity or enforceability of this Agreement, the Notes, the
Letters of Credit, any of the other Loan Documents or any instrument at any time
constituting, or intended to constitute, collateral security for the Notes, or
for the value of any such collateral security or for the validity,
enforceability or collectability of any such amounts owing with respect to the
Notes, or for any recitals or statements, warranties or representations made
herein or in any of the other Loan Documents or in any certificate or instrument
hereafter furnished to it by or on behalf of the Borrowers or any of their
Subsidiaries, or be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein or in
any instrument at any time constituting, or intended to constitute, collateral
security for the Notes or to inspect any of the properties, books or records of
the Borrowers or any of their Subsidiaries. The Agent shall not be bound to
ascertain whether any notice, consent, waiver or request delivered to it by the
Borrowers or any holder of any of the Notes shall have been duly authorized or
is true, accurate and complete. The Agent has not made nor does it now make any
representations or warranties, express or implied, nor does it assume any
liability to the Banks, with respect to the credit worthiness or financial
conditions of the Borrowers or any of their Subsidiaries. Each Bank acknowledges
that it has, independently and without reliance upon the Agent or any other
Bank, and based upon such information and documents as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement.
ss.13.5. Payments; Distributions; Delinquent Banks.
(a) A payment by the Borrowers to the Agent hereunder or any of the
other Loan Documents for the account of any Bank shall constitute a payment to
such Bank. The Agent agrees promptly to distribute to each Bank such Bank's pro
rata share of payments received by the Agent for the account of the Banks except
as otherwise expressly provided herein or in any of the other Loan Documents.
(b) If in the opinion of the Agent the distribution of any amount
received by it in such capacity hereunder, under the Notes or under any of the
other Loan Documents might involve it in liability, it may refrain from making
distribution until its right to make
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distribution shall have been adjudicated by a court of competent jurisdiction.
If a court of competent jurisdiction shall adjudge that any amount received and
distributed by the Agent is to be repaid, each Person to whom any such
distribution shall have been made shall either repay to the Agent its
proportionate share of the amount so adjudged to be repaid or shall pay over the
same in such manner and to such Persons as shall be determined by such court.
(c) Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents, any Bank that fails (i) to make
available to the Agent its pro rata share of any Loan or to purchase any Letter
of Credit Participation or (ii) to comply with the provisions of ss.12 with
respect to making dispositions and arrangements with the other Banks, where such
Bank's share of any payment received, whether by setoff or otherwise, is in
excess of its pro rata share of such payments due and payable to all of the
Banks, in each case as, when and to the full extent required by the provisions
of this Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be
deemed a Delinquent Bank until such time as such delinquency is satisfied. A
Delinquent Bank shall be deemed to have assigned any and all payments due to it
from the Borrowers, whether on account of outstanding Loans, Unpaid
Reimbursement Obligations, interest, fees or otherwise, to the remaining
nondelinquent Banks for application to, and reduction of, their respective pro
rata shares of all outstanding Loans and Unpaid Reimbursement Obligations. The
Delinquent Bank hereby authorizes the Agent to distribute such payments to the
nondelinquent Banks in proportion to their respective pro rata shares of all
outstanding Loans and Unpaid Reimbursement Obligations. A Delinquent Bank shall
be deemed to have satisfied in full a delinquency when and if, as a result of
application of the assigned payments to all outstanding Loans and Unpaid
Reimbursement Obligations of the nondelinquent Banks, the Banks' respective pro
rata shares of all outstanding Loans and Unpaid Reimbursement Obligations have
returned to those in effect immediately prior to such delinquency and without
giving effect to the nonpayment causing such delinquency.
ss.13.6. Holders of Notes. The Agent may deem and treat the payee of any
Note or the purchaser of any Letter of Credit Participation as the absolute
owner or purchaser thereof for all purposes hereof until it shall have been
furnished in writing with a different name by such payee or by a subsequent
holder, assignee or transferee.
13.7. Indemnity. The Banks ratably agree hereby to indemnify and hold
harmless the Agent and its affiliates from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which any of the Agent or its affiliates
has not been reimbursed by the Borrower as required by
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ss.16(a)), and liabilities of every nature and character arising out of or
related to this Agreement, the Notes, or any of the other Loan Documents or the
transactions contemplated or evidenced hereby or thereby, or the Agent's or any
such affiliate's actions taken hereunder or thereunder, except to the extent
that any of the same shall be directly caused by the Agent's or any such
affiliate's willful misconduct or gross negligence.
ss.13.8. Agent as Bank. In its individual capacity, FNBB shall have the
same obligations and the same rights, powers and privileges in respect to its
Commitment and the Loans made by it, and as the holder of any of the Notes and
as the purchaser of any Letter of Credit Participations, as it would have were
it not also the Agent.
ss.13.9. Resignation. The Agent may resign at any time by giving sixty
(60) days prior written notice thereof to the Banks and the Borrowers. Upon any
such resignation, the Majority Banks shall have the right to appoint a successor
Agent. Unless a Default or Event of Default shall have occurred and be
continuing, such successor Agent shall be reasonably acceptable to the
Borrowers. If no successor Agent shall have been so appointed by the Majority
Banks and shall have accepted such appointment within thirty (30) days after the
retiring Agent's giving of notice of resignation, then the retiring Agent may,
on behalf of the Banks, appoint a successor Agent, which shall be a financial
institution having a rating of not less than A or its equivalent by Standard &
Poor's Corporation. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation, the provisions of this
Agreement and the other Loan Documents shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as Agent.
ss.13.10. Notification of Defaults and Events of Default. Each Bank hereby
agrees that, upon learning of the existence of a Default or an Event of Default,
it shall promptly notify the Agent thereof. The Agent hereby agrees that upon
receipt of any notice under this ss.13.10 it shall promptly notify the other
Banks of the existence of such Default or Event of Default.
ss.13.11. Duties in the Case of Enforcement. In case one of more Events of
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Agent shall, if (a) so requested by
the Majority Banks and (b) the Banks have provided to the Agent such additional
indemnities and assurances against expenses
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and liabilities as the Agent may reasonably request, proceed to enforce the
provisions of the Security Documents authorizing the sale or other disposition
of all or any part of the Collateral and exercise all or any such other legal
and equitable and other rights or remedies as it may have in respect of such
Collateral. The Majority Banks may direct the Agent in writing as to the method
and the extent of any such sale or other disposition, the Banks hereby agreeing
to indemnify and hold the Agent, harmless from all liabilities incurred in
respect of all actions taken or omitted in accordance with such directions,
provided that the Agent need not comply with any such direction to the extent
that the Agent reasonably believes the Agent's compliance with such direction to
be unlawful or commercially unreasonable in any applicable jurisdiction.
ss.14. ASSIGNMENT AND PARTICIPATION.
ss.14.1. Conditions to Assignment by Banks. Except as provided herein,
each Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Agreement (including all or a
portion of its Commitment Percentage and Commitment and the same portion of the
Loans at the time owing to it, the Notes held by it and its participating
interest in the risk relating to any Letters of Credit); provided that (a) each
of the Agent and, unless a Default or Event of Default shall have occurred and
be continuing, the Borrowers shall have given its prior written consent to such
assignment, which consent, in the case of the Borrowers, will not be
unreasonably withheld, (b) each such assignment shall be of a constant, and not
a varying, percentage of all the assigning Bank's rights and obligations under
this Agreement, (c) each assignment shall be in an amount that is at least equal
to $5,000,000 or a whole multiple of $1,000,000 in excess thereof, (d) each Bank
which is a Bank on the date hereof shall retain, free of any such assignment, an
amount of its Commitment of not less than $5,000,000, and (e) the parties to
such assignment shall execute and deliver to the Agent, for recording in the
Register, an Assignment and Acceptance, substantially in the form of Exhibit D
hereto (an "Assignment and Acceptance"), together with any Notes subject to such
assignment. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five (5) Business Days after the execution
thereof, (i) the assignee thereunder shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, have the rights and obligations of a
Bank hereunder, and (ii) the assigning Bank shall, to the extent provided in
such assignment and upon payment to the Agent of the registration fee referred
to in ss.14.3, be released from its obligations under this Agreement.
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ss.14.2. Certain Representations and Warranties; Limitations; Covenants.
By executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:
(a) other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned thereby free and
clear of any adverse claim, the assigning Bank makes no representation or
warranty, express or implied, and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection
with this Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or
the attachment, perfection or priority of any security interest or
mortgage,
(b) the assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrowers and their Subsidiaries or any other Person primarily or
secondarily liable in respect of any of the Obligations, or the
performance or observance by the Borrowers and their Subsidiaries or any
other Person primarily or secondarily liable in respect of any of the
Obligations of any of their obligations under this Agreement or any of the
other Loan Documents or any other instrument or document furnished
pursuant hereto or thereto;
(c) such assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent financial statements
referred to in ss.7(e) and ss.9.1(a) and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance;
(d) such assignee will, independently and without reliance
upon the assigning Bank, the Agent or any other Bank and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement;
(e) such assignee represents and warrants that it is an
Eligible Assignee;
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(f) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are delegated to the Agent by
the terms hereof or thereof, together with such powers as are reasonably
incidental thereto;
(g) such assignee agrees that it will perform in accordance
with their terms all of the obligations that by the terms of this
Agreement are required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements
with the assigning Bank satisfactory to such assignee with respect to its
pro rata share of Letter of Credit Fees in respect of outstanding Letters
of Credit.
ss.14.3. Register. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentage of, and principal amount of the Loans owing to and Letter of Credit
Participations purchased by, the Banks from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrowers, the Agent and the Banks may treat each Person whose name is recorded
in the Register as a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrowers and the Banks at any
reasonable time and from time to time upon reasonable prior notice. Upon each
such recordation, the assigning Bank agrees to pay to the Agent a registration
fee in the sum of $1,000.
ss.14.4. New Notes. Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Note subject to
such assignment, the Agent shall (a) record the information contained therein in
the Register, and (b) give prompt notice thereof to the Borrowers and the Banks
(other than the assigning Bank). Within five (5) Business Days after receipt of
such notice, the Borrowers, at their own expense, shall execute and deliver to
the Agent, in exchange for each surrendered Note, a new Note to the order of
such Eligible Assignee in an amount equal to the amount assumed by such Eligible
Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank
has retained some portion of its obligations hereunder, a new Note to the order
of the assigning Bank in an amount equal to the amount retained by it hereunder.
Such new Notes shall provide that they
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are replacements for the surrendered Notes, shall be in an aggregate principal
amount equal to the aggregate principal amount of the surrendered Notes, shall
be dated the effective date of such in Assignment and Acceptance and shall
otherwise be substantially the form of the assigned Notes. The surrendered Notes
shall be cancelled and returned to the Borrowers.
ss.14.5. Participations. Each Bank may sell participations to one or more
banks or other entities in all or a portion of such Bank's rights and
obligations under this Agreement and the other Loan Documents; provided that (a)
each such participation shall be in an amount that is at least equal to
$5,000,000 or a whole multiple of $1,000,000 in excess thereof, (b) any such
sale or participation shall not affect the rights and duties of the selling Bank
hereunder to the Borrowers and (c) the only rights granted to the participant
pursuant to such participation arrangements with respect to waivers, amendments
or modifications of the Loan Documents shall be the rights to approve waivers,
amendments or modifications that would reduce the principal of or the interest
rate on any Loans, extend the term or increase the amount of the Commitment of
such Bank as it relates to such participant, reduce the amount of any commitment
fees or Letter of Credit Fees to which such participant is entitled or extend
any regularly scheduled payment date for principal or interest.
ss.14.6. Disclosure. Each of the Borrowers agrees that in addition to
disclosures made in accordance with standard and customary banking practices any
Bank may disclose information obtained by such Bank pursuant to this Agreement
to assignees or participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential assignees or
participants shall agree (a) to treat in confidence such information unless such
information otherwise becomes public knowledge, (b) not to disclose such
information to a third party, except as required by law or legal process and (c)
not to make use of such information for purposes of transactions unrelated to
such contemplated assignment or participation.
ss.14.7. Assignee or Participant Affiliated with the Borrowers. If any
assignee Bank is an affiliate of the Borrowers, then any such assignee Bank
shall have no right to vote as a Bank hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or other modifications to any of the Loan Documents or
for purposes of making requests to the Agent pursuant to ss.10, and the
determination of the Majority Banks shall for all purposes of this Agreement and
the other Loan Documents be made without regard to such assignee Bank's interest
in any of the Loans. If any Bank sells a participating interest in any of the
Loans or Reimbursement Obligations to a participant, and such participant is one
of the Borrowers or an affiliate of one
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of the Borrowers, then such transferor Bank shall promptly notify the Agent of
the sale of such participation. A transferor Bank shall have no right to vote as
a Bank hereunder or under any of the other Loan Documents for purposes of
granting consents or waivers or for purposes of agreeing to amendments or
modifications to any of the Loan Documents or for purposes of making requests to
the Agent pursuant to ss.10 to the extent that such participation is
beneficially owned by either of the Borrowers or any affiliate of either of the
Borrowers, and the determination of the Majority Banks shall for all purposes of
this Agreement and the other Loan Documents be made without regard to the
interest of such transferor Bank in the Loans to the extent of such
participation.
ss.14.8. Miscellaneous Assignment Provisions. Any assigning Bank shall
retain its rights to be indemnified pursuant to ss.16(b) with respect to any
claims or actions arising prior to the date of such assignment. All assignee
Banks and all participants in the Obligations which are Non-U.S. Lenders shall
comply with the provisions of ss.5(f)(iv) hereof. Anything contained in this
ss.14 to the contrary notwithstanding, any Bank may at any time pledge all or
any portion of its interest and rights under this Agreement (including all or
any portion of its Notes) to any of the twelve Federal Reserve Banks organized
under ss.4 of the Federal Reserve Act, 12 U.S.C. ss.341. No such pledge or the
enforcement thereof shall release the pledgor Bank from its obligations
hereunder or under any of the other Loan Documents.
ss.14.9. Assignment by Borrowers. Neither of the Borrowers shall assign or
transfer any of its rights or obligations under any of the Loan Documents
without the prior written consent of each of the Banks.
ss.15. CONSENTS, AMENDMENTS, WAIVERS, ETC. Any consent or approval
required or permitted by this Agreement to be given by all of the Banks may be
given, and any term of this Agreement, the other Loan Documents or any other
instrument related hereto or mentioned herein may be amended, and the
performance or observance by the Borrowers or any of their Subsidiaries of any
terms of this Agreement, the other Loan Documents or such other instrument or
the continuance of any Default or Event of Default may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with, but only with, the written consent of the Borrowers and the written
consent of the Majority Banks. Notwithstanding the foregoing, (a) the rate of
interest on the Notes (other than interest accruing pursuant to ss.2.2(b)
following the effective date of any waiver by the Majority Banks of the Default
or Event of Default relating thereto), the term of the Notes, the amount of the
Commitments of the Banks, and the amount of commitment fee or Letter of Credit
Fees hereunder may not be changed without the written consent of the Borrowers
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and the written consent of each Bank affected thereby; (b) the definition of
Majority Banks may not be amended without the written consent of all of the
Banks; (c) all or a material portion of the Collateral may not be released
without the written consent of all of the Banks (other than a release of any
Stock Collateral, as defined in each of the Stock Pledge Agreements, with
respect to which the written consent of only the Majority Banks shall be
required); (d) no Guarantor may be released from its guaranty of the Obligations
pursuant to ss.6.4 hereof without the written consent of all of the Banks; (e)
no amendments or waivers hereto which are necessary to permit the making of
Loans or the issuance, extension or renewal of Letters of Credit hereunder such
that the Total Outstandings hereunder shall exceed the Borrowing Base by more
than $200,000 shall be made without the written consent of all of the Banks
(provided that nothing herein shall be construed as an agreement or waiver
permitting any Loans or Letters of Credit to be made hereunder such that the
Total Outstandings would exceed the Borrowing Base, and any such overadvance
would be required to be made in accordance with the immediately preceding
sentence and this clause (e)); (f) the advance rates set forth in the
definitions of Borrowing Base and Canadian Borrowing Base may not be increased
above those in effect on the Closing Date without the written consent of all of
the Banks; (g) the $5,000,000 reserve provided for in clause (d) of the
definition of Borrowing Base may not be amended without the written consent of
the Super-Majority Banks, and (h) the amount of the Collateral administration
fee or any Letter of Credit Fees payable for the Agent's account and ss.13 may
not be amended without the written consent of the Agent. No waiver shall extend
to or affect any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or delay or omission on the part of the Agent or
any Bank in exercising any right shall operate as a waiver thereof or otherwise
be prejudicial thereto. No notice to or demand upon the Borrowers shall entitle
the Borrowers to other or further notice or demand in similar or other
circumstances.
ss.16. MISCELLANEOUS.
(a) The Borrowers jointly and severally agree to pay (i) the
reasonable costs of producing and reproducing this Agreement, the other Loan
Documents and the other agreements and instruments mentioned herein, (ii) any
taxes (including any interest and penalties in respect thereto) payable by the
Agent or any of the Banks (other than taxes expressly excluded from the
definition of the term Taxes, and without duplication of any Taxes (as defined
in ss.5(f)(i))) on or with respect to the transactions contemplated by this
Agreement (the Borrowers hereby jointly and severally agreeing to indemnify the
Agent and each Bank with respect thereto), (iii) the reasonable fees, expenses
and disbursements of the Agent's Special Counsel or any local counsel to the
Agent incurred in connection with the
<PAGE> 83
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preparation, administration or interpretation of the Loan Documents and other
instruments mentioned herein, each closing hereunder, and amendments,
modifications, approvals, consents or waivers hereto or hereunder, (iv) the
fees, expenses and disbursements of the Agent and its affiliates incurred by the
Agent and its affiliates in connection with the preparation, syndication,
administration or interpretation of the Loan Documents and other instruments
mentioned herein, including all title insurance premiums and surveyor,
engineering and appraisal charges, and including all due diligence fees,
expenses and disbursements of the Agent and its affiliates, including without
limitation, the fees and expenses of environmental and other consultants hired
by the Agent in connection with such due diligence, (v) any fees, costs,
expenses and bank charges, including bank charges for returned checks, incurred
by the Agent in establishing, maintaining or handling agency accounts, lock box
accounts and other accounts for the collection of any of the Collateral; (vi)
all reasonable out-of-pocket expenses (including without limitation reasonable
attorneys' fees and costs, which attorneys may be employees of any Bank or the
Agent, and reasonable consulting, accounting, appraisal, investment banking and
similar professional fees and charges) incurred by any Bank or the Agent in
connection with (A) the enforcement of or preservation of rights under any of
the Loan Documents against the Borrowers or any of their Subsidiaries or the
administration thereof after the occurrence of a Default or Event of Default and
(B) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to any Bank's or the Agent's relationship with the
Borrowers or any of their Subsidiaries and (vii) all reasonable fees, expenses
and disbursements of any Bank or the Agent incurred in connection with UCC
searches, UCC filings or mortgage recordings. The covenants of this ss.16(a)
shall survive payment or satisfaction of all other Obligations.
(b) The Borrowers jointly and severally agree to indemnify and hold
harmless the Agent, its affiliates and the Banks from and against any and all
claims, actions and suits whether groundless or otherwise, and from and against
any and all liabilities, losses, damages and expenses of every nature and
character arising out of this Agreement or any of the other Loan Documents or
the transactions contemplated hereby including, without limitation, (i) any
actual or proposed use by the Borrowers or any of their Subsidiaries of the
proceeds of any of the Loans or Letters of Credit, (ii) the reversal or
withdrawal of any provisional credits granted by the Agent upon the transfer of
funds from bank agency or lock box accounts or in connection with the
provisional honoring of checks or other items, (iii) any actual or alleged
infringement of any patent, copyright, trademark, service mark or similar right
of the Borrowers or any of their Subsidiaries comprised in the Collateral, (iv)
the Borrowers or any of their Subsidiaries entering into or performing this
Agreement or any of the other Loan Documents or (v) with respect to the
Borrowers and
<PAGE> 84
- -82-
their Subsidiaries and their respective properties and assets, the violation of
any Environmental Law, the presence, disposal, escape, seepage, leakage,
spillage, discharge, emission, release or threatened release of any Hazardous
Substances or any action, suit, proceeding or investigation brought or
threatened with respect to any Hazardous Substances (including, but not limited
to, claims with respect to wrongful death, personal injury or damage to
property), in each case including, without limitation, the reasonable fees and
disbursements of counsel and allocated costs of internal counsel incurred in
connection with any such investigation, litigation or other proceeding;
provided, however, that the foregoing indemnity will not, as to any indemnified
person, apply to losses, claims, damages, liabilities or related expenses to the
extent that they have been determined by a court of competent jurisdiction by
final order to arise from the bad faith, willful misconduct or gross negligence
of such indemnified person. In litigation, or the preparation therefor, the
Banks and the Agent shall be entitled to select their own counsel and, in
addition to the foregoing indemnity, the Borrowers jointly and severally agree
to pay promptly the reasonable fees and expenses of such counsel. If, and to the
extent that the obligations of the Borrowers under this ss.16(b) are
unenforceable for any reason, each of the Borrowers hereby agrees to make the
maximum contribution to the payment in satisfaction of such obligations which is
permissible under applicable law. The covenants contained in this ss.16(b) shall
survive payment or satisfaction in full of all other Obligations.
(c) Except as otherwise expressly provided in this Agreement, all
notices and other communications made or required to be given pursuant to this
Agreement or the Notes or any Letter of Credit Applications shall be in writing
and shall be delivered in hand, mailed by United States registered or certified
first class mail, postage prepaid, sent by overnight courier, or sent by
telegraph, telecopy, facsimile or telex and confirmed by delivery via courier or
postal service, addressed as follows:
(i) if to the Borrowers or the Guarantors, c/o Metallurg, Inc.
at 6 East 43rd Street, 12th Floor, New York, New York 10017, Attention:
Barry C. Nuss, Vice President, or at such other address for notice as the
Borrowers shall last have furnished in writing to the Person giving the
notice;
(ii) if to the Agent, at 100 Federal Street, Boston,
Massachusetts 02110, USA, Attention: James J. Ward, Vice President, or
such other address for notice as the Agent shall last have furnished in
writing to the Person giving the notice; and
<PAGE> 85
- -83-
(iii) if to any Bank, at such Bank's address set forth on
Schedule 1 hereto, or such other address for notice as such Bank shall
have last furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made and to
have become effective (A) if delivered by hand, overnight courier or facsimile
to a responsible officer of the party to which it is directed, at the time of
the receipt thereof by such officer or the sending of such facsimile and (B) if
sent by registered or certified first-class mail, postage prepaid, on the third
Business Day following the mailing thereof. Any notice or election required to
be made by or on behalf of the Borrowers hereunder may be made by MI on behalf
of both of the Borrowers.
(d) This Agreement shall be binding upon and inure to the benefit of
each party hereto and its successors and assigns, but neither the Borrowers nor
the Guarantors may assign its rights or obligations hereunder.
(e) No failure or delay by the Agent or any Bank to exercise any
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege preclude any other right,
power or privilege. The provisions of this Agreement are severable and if any
one provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, such invalidity or unenforceability shall affect only such
provision in such jurisdiction. This Agreement, together with all Exhibits and
Schedules hereto, expresses the entire understanding of the parties with respect
to the transactions contemplated hereby. This Agreement and any amendment hereof
may be executed in several counterparts, each of which shall be an original, and
all of which shall constitute one agreement. In proving this Agreement, it shall
not be necessary to produce more than one such counterpart executed by the party
to be charged. THIS AGREEMENT AND THE NOTES ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL BE CONSTRUED IN ACCORDANCE THEREWITH AND
GOVERNED THEREBY. EACH OF THE BORROWERS AND THE GUARANTORS AGREES THAT ANY SUIT
FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT
SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND
SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWERS AND THE
GUARANTORS BY MAIL AT THE ADDRESS SPECIFIED
<PAGE> 86
- -84-
IN ss.16(c). EACH OF THE BORROWERS AND THE GUARANTORS HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY
SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. Each of the
Borrowers and the Guarantors, as an inducement to the Agent and the Banks to
enter into this Agreement, hereby waives its right to a jury trial with respect
to any action arising in connection with any Loan Document.
<PAGE> 87
- -85-
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a
sealed instrument as of the date first above written.
METALLURG, INC.
By:
-------------------------------
Name:
Title:
SHIELDALLOY METALLURGICAL
CORPORATION
By:
-------------------------------
Name:
Title:
METALLURG SERVICES, INC.,
as a Guarantor
By:
-------------------------------
Name:
Title:
MIR (CHINA), INC.,
as a Guarantor
By:
-------------------------------
Name:
Title:
METALLURG HOLDINGS
CORPORATION,
<PAGE> 88
- -86-
as a Guarantor
By:
-------------------------------
Name:
Title:
<PAGE> 89
- -87-
THE FIRST NATIONAL BANK
OF BOSTON, individually and as Agent
By:
-------------------------------------
Name:
Title:
BTM CAPITAL CORPORATION
By:
-------------------------------------
Name:
Title:
BANK OF SCOTLAND
By:
-------------------------------------
Name:
Title:
NATIONAL BANK OF CANADA
By:
-------------------------------------
Name:
Title:
<PAGE> 90
-1-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FIRST AMENDMENT
FIRST AMENDMENT dated as of April 28, 1997 (this "Amendment"), by and
among (a) METALLURG, INC., a Delaware corporation ("MI"), having its principal
place of business at 6 East 43rd Street, New York, New York 10017, and
SHIELDALLOY METALLURGICAL CORPORATION, a Delaware corporation ("SMC"), having
its principal place of business at 12 West Boulevard, Newfield, New Jersey 08344
(MI and SMC are collectively referred to herein as the "Borrowers"); (b)
METALLURG SERVICES, INC., a New York corporation ("MSI"), having its principal
place of business at 6 East 43rd Street, New York, New York 10017, MIR (CHINA),
INC., a Delaware corporation ("MIR China"), having its principal place of
business at 6 East 43rd Street, New York, New York 10017, and METALLURG HOLDINGS
CORPORATION, a New Jersey corporation ("MHO"), having its principal place of
business at 12 West Boulevard, Newfield, New Jersey 08344 (MSI, MIR China and
MHO are collectively referred to herein as the "Guarantors"); (c) BANKBOSTON,
N.A. (formerly known as The First National Bank of Boston), a national banking
association, as agent (in such capacity the "Agent") for itself and the other
financial institutions from time to time parties to the Loan Agreement referred
to below (collectively, the "Banks"); and (d) the BANKS, amending certain
provisions of the Loan Agreement dated as of April 14, 1997, by and among the
Borrowers, the Guarantors, the Agent and the Banks (as amended or modified and
in effect from time to time, the "Loan Agreement"). Terms not otherwise defined
herein which are defined in the Loan Agreement shall have the respective
meanings herein assigned to such terms in the Loan Agreement.
WHEREAS, the Borrowers have requested that the Agent and the Banks agree
to amend the terms of the Loan Agreement in certain respects;
WHEREAS, the Agent and the Banks are willing to amend the terms of the
Loan Agreement in such respects, upon the terms and subject to the conditions
contained herein; and
WHEREAS, the Guarantors have no objections to such amendments;
NOW, THEREFORE, in consideration of the mutual agreements contained in the
Loan Agreement, herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ss.1. Amendment of ss.1 of the Loan Agreement. Section 1 of the Loan
Agreement is hereby amended by restating the definition of "Specified Letters of
Credit" appearing therein to read in its entirety as follows:
<PAGE> 91
-2-
"Specified Letters of Credit: The Letters of Credit issued or to be
issued hereunder for the benefit of the New Jersey Department of
Environmental Protection pursuant to Section 24 of the US/NJ Environmental
Settlement Agreement (as defined in the Plan), and the Letter of Credit in
the amount of $1,500,000 issued or to be issued hereunder for the benefit
of the Nuclear Regulatory Commission."
ss.2. Amendment of ss.3.1(a) of the Loan Agreement. Section 3.1(a) of the
Loan Agreement is hereby amended by deleting the reference to the Dollar amount
"$30,000,000" appearing therein and replacing it with a reference to the Dollar
amount "$35,000,000".
ss.3. Representations, Warranties and Covenants; No Default;
Authorization. Each of the Borrowers and Guarantors hereby represents, warrants
and covenants to the Agent and the Banks as follows:
(a) Each of the representations and warranties of such Borrower or
Guarantor contained in the Loan Agreement was true as of the date as of which it
was made and is true as and at the date of this Amendment, and no Default or
Event of Default has occurred and is continuing as of the date of this
Amendment;
(b) This Amendment has been duly authorized, executed and delivered by
each of the Borrowers and Guarantors and is in full force and effect; and
(c) Upon the execution and delivery of this Amendment by the respective
parties hereto, this Amendment shall constitute the legal, valid and binding
obligation of the Borrowers and the Guarantors, enforceable in accordance with
its terms, except that the enforceability thereof may be subject to any
applicable bankruptcy, reorganization, insolvency or other laws affecting
creditors' rights generally.
ss.4. Conditions to Effectiveness. The effectiveness of this Amendment
shall be subject to the due execution and delivery to the Agent of this
Amendment by each of the Borrowers, the Guarantors, the Agent and the Banks.
ss.5. Ratification, etc. Except as expressly amended hereby, the Loan
Agreement and all documents, instruments and agreements related thereto are
hereby ratified and confirmed in all respects. All references in the Loan
Agreement or any related agreement or instrument to the Loan Agreement shall
hereafter refer to the Loan Agreement as amended hereby.
ss.6. No Implied Waiver. Except as expressly provided herein, nothing
contained herein shall constitute a waiver of, impair or otherwise affect any
Obligations, any other obligations of any of the Borrowers or Guarantors or any
right of the Agent or any Bank consequent thereon.
ss.7. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
<PAGE> 92
-3-
ss.8. Governing Law. THIS AMENDMENT SHALL FOR ALL PURPOSES BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICTS
OF LAW).
<PAGE> 93
-4-
IN WITNESS WHEREOF, the undersigned have duly executed this Amendment as a
sealed instrument as of the date first above written.
METALLURG, INC.,
By:____________________________
Name:
Title:
SHIELDALLOY METALLURGICAL
CORPORATION,
By:____________________________
Name:
Title:
METALLURG SERVICES, INC.,
guarantor
By:___________________________
Name:
Title:
MIR (CHINA), INC.,
guarantor
By:___________________________
Name:
Title:
METALLURG HOLDINGS CORPORATION,
guarantor
By:___________________________
Name:
Title:
<PAGE> 94
-5-
BANKBOSTON, N.A. (formerly known as
The First National Bank of Boston),
individually and as Agent
By:____________________________
Name:
Title:
BTM CAPITAL CORPORATION
By:____________________________
Name:
Title:
BANK OF SCOTLAND
By:____________________________
Name:
Title:
NATIONAL BANK OF CANADA
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
<PAGE> 95
-1-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECOND AMENDMENT
SECOND AMENDMENT dated as of October 20, 1997 (this "Amendment"), by and
among (a) METALLURG, INC., a Delaware corporation ("MI"), having its principal
place of business at 6 East 43rd Street, New York, New York 10017, and
SHIELDALLOY METALLURGICAL CORPORATION, a Delaware corporation ("SMC"), having
its principal place of business at 12 West Boulevard, Newfield, New Jersey 08344
(MI and SMC are collectively referred to herein as the "Borrowers"); (b)
METALLURG SERVICES, INC., a New York corporation ("MSI"), having its principal
place of business at 6 East 43rd Street, New York, New York 10017, MIR (CHINA),
INC., a Delaware corporation ("MIR China"), having its principal place of
business at 6 East 43rd Street, New York, New York 10017, and METALLURG HOLDINGS
CORPORATION, a New Jersey corporation ("MHC"), having its principal place of
business at 12 West Boulevard, Newfield, New Jersey 08344 (MSI, MIR China and
MHC are collectively referred to herein as the "Guarantors"); (c) BANKBOSTON,
N.A. (formerly known as The First National Bank of Boston), a national banking
association, as agent (in such capacity the "Agent") for itself and the other
financial institutions from time to time parties to the Loan Agreement referred
to below (collectively, the "Banks"); and (d) the BANKS, amending certain
provisions of the Loan Agreement dated as of April 14, 1997, by and among the
Borrowers, the Guarantors, the Agent and the Banks (as amended or modified and
in effect from time to time, the "Loan Agreement"). Terms not otherwise defined
herein which are defined in the Loan Agreement shall have the respective
meanings herein assigned to such terms in the Loan Agreement. In addition, FNBB,
acting through its Frankfurt-am-Main branch office, hereby joins in this
Amendment for the purposes set forth herein.
WHEREAS, FNBB, acting through its Frankfurt-am-Main branch office, and
certain Subsidiaries (collectively, the "German Borrowers") of the Borrowers and
Guarantors are entering into a Loan Agreement as of the date hereof (the "German
Loan Agreement"),pursuant to which FNBB shall make loans and otherwise extend
credit to or for the account of the German Borrowers;
WHEREAS, it is a condition precedent to FNBB's willingness to so extend
credit to or for the account of the German Borrowers that the Borrowers, the
Guarantors and the Banks agree to amend the terms of the Loan Agreement in
certain respects to, among other things, provide for the guaranty by the
Borrowers and Guarantors of all obligations of the German Borrowers under the
German Loan Agreement and to provide for the participation of the Banks in such
extensions of credit made by FNBB to or for the account of the German Borrowers;
and
WHEREAS, the parties hereto are willing to so amend the terms of the Loan
Agreement as hereinafter more fully set forth, upon the terms and subject to the
conditions contained herein;
<PAGE> 96
-2-
NOW, THEREFORE, in consideration of the mutual agreements contained in the
Loan Agreement, herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ss.1. Amendment of Preamble to the Loan Agreement. The preamble to the
Loan Agreement is hereby amended by adding the following new sentence at the end
of the first paragraph of the Loan Agreement:
"In addition, BankBoston, N.A. (formerly known as The First National Bank
of Boston), acting through its Frankfurt-am-Main branch office, by its
signature to the Second Amendment as of the Second Amendment Effective
Date, agrees to join this Agreement and be bound by the provisions hereof
as the German Lender (as such term is hereinafter defined) hereunder."
ss.2. Amendment of ss.1 of the Loan Agreement. Section 1 of the Loan
Agreement is hereby amended as follows:
(a) by restating the definitions of "Commitment", "FNBB", "Majority
Banks", "Obligations", "Settlement Date", "Super-Majority Banks" and "Total
Outstandings" appearing therein to read in their respective entireties as
follows:
"Commitment: With respect to each Bank, the amount set forth on
Schedule 1 hereto as the amount of such Bank's commitment (a) to make
Loans to and to participate in the issuance, extension and renewal of
Letters of Credit for the account of, the Borrowers, and (b) to purchase
risk participations from the German Lender in the German Loans and the
German Collateral Instruments, in each case as the same may be reduced
from time to time; or if such commitment is terminated pursuant to the
provisions hereof, zero. The aggregate Commitments of all the Banks as of
the Second Amendment Effective Date shall initially be $50,000,000."
"FNBB: BankBoston, N.A. (formerly known as The First National Bank
of Boston), a national banking association, in its individual capacity."
"Majority Banks: As of any date (a) the Banks holding at least
fifty-one percent (51%) of the sum of (i) the outstanding principal amount
of the Notes on such date plus (ii) the Letter of Credit Participations of
all of the Banks in the sum of (A) the Maximum Drawing Amount on such date
plus (B) any Unpaid Reimbursement Obligations on such date plus (iii) the
Dollar Equivalent of the aggregate participating interests of all the
Banks in the German Outstandings; and (b) if no such principal amount of
the Notes and no Letters of Credit are outstanding and there are no German
Outstandings, the Banks whose aggregate Commitments constitute at least
fifty-one percent (51%) of the Total Commitment."
"Obligations: All indebtedness, obligations and liabilities of the
Borrowers and the Guarantors to any of the Banks, the German Lender and
the Agent, individually or collectively, existing on the date of this
Agreement or arising thereafter, direct or indirect, joint or several,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
secured or unsecured, arising by contract, operation of law or otherwise,
arising or incurred under this Agreement
<PAGE> 97
-3-
(including the Guaranty and the German Guaranty hereunder) or any other
Loan Document or any Foreign Exchange Contract or in respect of any of the
Loans or German Loans made or Reimbursement Obligations or German
Reimbursement Obligations incurred or any obligations under any Foreign
Exchange Contract or any of the Notes, Letter of Credit Applications,
Letters of Credit, German Collateral Instruments or other instruments at
any time evidencing any thereof."
"Settlement Date: (a) The Drawdown Date relating to any Loan
Request, (b) Friday of each week, or if Friday is not a Business Day, the
Business Day immediately following such Friday, (c) the Business Day
immediately following the Agent's becoming aware of the existence of an
Event of Default, (d) any Business Day on which the amount of Loans
outstanding from FNBB plus FNBB's Commitment Percentage of the sum of the
Maximum Drawing Amount, any Unpaid Reimbursement Obligations and the
Dollar Equivalent of any German Outstandings is equal to or greater than
FNBB's Commitment Percentage of the Total Commitment, (e) the Business Day
immediately following any Business Day on which the amount of Loans
outstanding increases or decreases by more than $5,000,000 as compared to
the previous Settlement Date, (f) any day on which any conversion of a
Base Rate Loan to a Eurodollar Rate Loan occurs or (g) any Business Day on
which (i) the amount of outstanding Loans decreases due to a repayment or
prepayment pursuant to the provisions of ss.2.3 or otherwise, and (ii) the
amount of the Agent's Loans outstanding equals zero Dollars ($0)."
"Super-Majority Banks: As of any date (a) the Banks holding at least
eighty percent (80%) of the sum of (i) the outstanding principal amount of
the Notes on such date plus (ii) the Letter of Credit Participations of
all of the Banks in the sum of (A) the Maximum Drawing Amount on such date
plus (B) any Unpaid Reimbursement Obligations on such date plus (iii) the
Dollar Equivalent of the aggregate participating interests of all the
Banks in the German Outstandings; and (b) if no such principal amount of
the Notes and no Letters of Credit are outstanding and there are no German
Outstandings, the Banks whose aggregate Commitments constitute at least
eighty percent (80%) of the Total Commitment."
"Total Outstandings: At any time of reference thereto, the sum of
(a) the aggregate principal amount of the Loans outstanding at such time,
(b) the Maximum Drawing Amount at such time, (c) any Unpaid Reimbursement
Obligations at such time to the extent not included in the Maximum Drawing
Amount, and (d) the Dollar Equivalent of the aggregate German Outstandings
at such time."
(c) by inserting the following new definitions of "Deutschemarks",
"Dollar Equivalent", "German Borrowers", "German Borrowing Base", "German
Collateral Instrument Fees", "German Collateral Instruments", "German
Facility Reserve", "German Guaranty", "German Lender", "German Loan
Agreement", "German Loan Documents", "German Loans", "German Maximum
Drawing Amount", "German Obligations", "German Outstandings", "German
Reimbursement Obligations", "German Risk Participation Fee", "German
Unpaid Reimbursement Obligations", "Second Amendment" and "Second
Amendment Effective Date":
"Deutschemarks or DM: Deutschemarks in lawful currency of the
Federal Republic of Germany."
<PAGE> 98
-4-
"Dollar Equivalent: On any date of determination, with respect to an
amount denominated in Dollars, such amount of Dollars, and with respect to
an amount denominated in Deutschemarks, the amount of Dollars required to
purchase that amount of Deutschemarks at the spot rate of exchange quoted
by the Agent in the Frankfurt foreign exchange market at or about 11:00
a.m. (Frankfurt time) on the date of determination for the purchase of
Dollars with Deutschemarks."
"German Borrowers: The "Borrowers", as defined in the German Loan
Agreement."
"German Borrowing Base: In the case of any German Borrower, the
"Borrowing Base" of such German Borrower, for this purpose as the term
Borrowing Base is defined in the German Loan Agreement."
"German Collateral Instrument Fees: The "Collateral Instrument
Fees", as defined in the German Loan Agreement; provided, that for
purposes of this Agreement only, "German Collateral Instrument Fees" shall
include only the per annum fee payable under the German Loan Agreement at
the rate of 1.75% of the face amount of each German Collateral Instrument
and shall not include any of the German Lender's customary issuance,
amendment and other administrative processing fees which are payable under
the German Loan Agreement, which customary issuance, amendment and other
administrative processing fees shall be for the German Lender's own
account."
"German Collateral Instruments: The "Collateral Instruments", as
defined in the German Loan Agreement."
"German Facility Reserve: With respect to each German Borrower at
any time, the Dollar Equivalent of the excess, if any, of (a) the sum of
(i) the aggregate amount of German Loans owing by such German Borrower
under the German Loan Agreement, plus (ii) the maximum aggregate amount
available at such time to be drawn by beneficiaries under all German
Collateral Instruments issued for the account of such German Borrower
under the German Loan Agreement, plus (iii) the aggregate amount of German
Unpaid Reimbursement Obligations at such time in respect of German
Collateral Instruments issued for the account of such German Borrower
under the German Loan Agreement over (b) the German Borrowing Base of such
German Borrower at such time."
"German Guaranty: The guaranty by each of the Borrowers and the
Guarantors, pursuant to ss.6.7 hereof, of the German Obligations of the
German Borrowers under the German Loan Agreement and each of the other
German Loan Documents."
"German Lender: FNBB, acting through its Frankfurt-am-Main branch
office, in its capacity as lender under the German Loan Agreement with
respect to German Loans and German Collateral Instruments."
"German Loan Agreement: The Loan Agreement dated as of October 20,
1997 among the German Borrowers and the German Lender, as the same may be
amended, restated, supplemented or otherwise modified and in effect from
time to time."
<PAGE> 99
-5-
"German Loan Documents: The "Loan Documents", as defined in the
German Loan Agreement."
"German Loans: The "Loans", as defined in the German Loan
Agreement."
"German Maximum Drawing Amount: The "Maximum Drawing Amount", as
defined in the German Loan Agreement."
"German Obligations: The "Obligations", as defined in the German
Loan Agreement."
"German Outstandings: At any time, the sum of (a) the aggregate
principal amount of the German Loans at such time plus (b) the German
Maximum Drawing Amount at such time plus (c) the aggregate amount of
German Unpaid Reimbursement Obligations at such time."
"German Reimbursement Obligations: The "Reimbursement Obligations",
as defined in the German Loan Agreement."
"German Risk Participation Fee: See ss.3A.4."
"German Unpaid Reimbursement Obligations: The "Unpaid Reimbursement
Obligations", as defined in the German Loan Agreement."
"Second Amendment: The Second Amendment hereto dated as of October
20, 1997, among the Borrowers, the Guarantors, the Agent, the Banks and
the German Lender."
"Second Amendment Effective Date: The first date on which the
conditions to the effectiveness of the Second Amendment (such conditions
being set forth in section 18 thereof) shall have been satisfied."
ss.3. Amendment of ss.2 of the Loan Agreement. Section 2 of the Loan
Agreement is hereby amended as follows:
(a) by restating the first sentence of such Section 2.1(a) to read in its
entirety as follows:
"Subject to the terms and conditions set forth in this Agreement, each of
the Banks severally agrees to lend to the Borrowers and the Borrowers may
borrow, repay, and reborrow from time to time between the Closing Date and
the Maturity Date upon notice by the Borrowers to the Agent given in
accordance with ss.2.1(c), such sums as are requested by the Borrowers up
to a maximum aggregate amount outstanding (after giving effect to all
amounts requested) at any one time equal to such Bank's Commitment minus
such Bank's Commitment Percentage of the sum of the Maximum Drawing
Amount, all Unpaid Reimbursement Obligations and the Dollar Equivalent of
the aggregate amount of German Outstandings, provided that (i) the
aggregate amount of the Total Outstandings (after giving effect to all
amounts requested) shall not at any time exceed the Total Commitment and
(ii) the sum of (A) the aggregate amount of the Total
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Outstandings (excluding the German Outstandings) plus (B) the sum of the
German Facility Reserves, if any, of each of the German Borrowers, shall
not at any time exceed the Borrowing Base."
(b) by restating Section 2.3(a) of the Loan Agreement to read in its
entirety as follows:
"(a) The Borrowers hereby jointly and severally agree to pay
the Banks on the Maturity Date, and there shall become absolutely due and
payable on the Maturity Date, all of the Loans outstanding on such date,
together with any and all accrued and unpaid interest thereon. If, at any
time, for any reason, including fluctuations in currency exchange rates,
(i) the aggregate amount of the Total Outstandings shall exceed the Total
Commitment or (ii) the sum of (A) the aggregate amount of the Total
Outstandings (excluding the German Outstandings) plus (B) the sum of the
German Facility Reserves, if any, of each of the German Borrowers, shall
exceed the Borrowing Base, then in either such case, the Borrowers shall
immediately pay the amount of such excess to the Agent for the respective
accounts of the Banks for application to the Loans or, if no Loans are
then outstanding, to be held by the Agent as cash collateral to secure
payment of all Reimbursement Obligations and all obligations of the
Borrowers and the Guarantors in respect of the German Guaranty on a
ratable basis up to the amount of 105% of the sum of the Maximum Drawing
Amount plus the aggregate amount of the German Outstandings. Each payment
of any Unpaid Reimbursement Obligations or German Obligations or
prepayment of Loans shall be allocated among the Banks and the German
Lender, as applicable, in proportion, as nearly as practicable, to each
Reimbursement Obligation or German Obligation or (as the case may be) the
respective unpaid principal amount of each Bank's Note, with adjustments
to the extent practicable to equalize any prior payments or repayments not
exactly in proportion."
ss.4. Addition of New ss.3A to the Loan Agreement. The following new
Section 3A is hereby added to the Loan Agreement immediately following Section 3
thereof:
"ss.3A PARTICIPATION IN GERMAN LOANS AND GERMAN COLLATERAL
INSTRUMENTS.
ss.3A.1. Participation in German Loans. Each of the Banks hereby
unconditionally and irrevocably agrees to purchase, as the Agent or the
German Lender may at any time request, an undivided participating interest
(in Deutschemarks or in Dollars as the case may be) in its ratable share,
determined by reference to its Commitment Percentage, of all German Loans
made by the German Lender under the German Loan Agreement, provided that:
(a) each of the Agent and the German Lender hereby agrees
that, unless an Event of Default has occurred and is continuing, it
will not request any such purchase of participating interests unless
the Agent or, as the case may be, the German Lender, has given to
the German Borrowers at least three (3) Business Days' prior notice
thereof; and
(b) in the event that any of the Events of Default of the
types described in ss.ss.10.1(g) or (h) of the German Loan Agreement
shall have occurred with respect to any of the German Borrowers,
each Bank shall be deemed to have purchased, automatically
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and without request, such participating interest in the German Loans
made by the German Lender to the German Borrowers.
Any such request by the Agent or the German Lender shall be made in
writing to each Bank and shall specify the amount of Deutschemarks or
Dollars required from such Bank in order to effect the purchase by such
Bank of a participating interest in the amount equal to its Commitment
Percentage times the aggregate then outstanding principal amount of the
German Loans (which participating interest shall thereafter also cover
accrued interest thereon and other amounts owing in connection therewith).
Promptly upon receipt of such request, each Bank shall deliver to the
Agent (in immediately available funds) the amount so specified by the
Agent or the German Lender. The Agent shall promptly deliver such amounts
to the German Lender in immediately available funds. Promptly following
receipt thereof, the German Lender will deliver to each Bank (through the
Agent) a certificate setting forth the amount of the German Loans
purchased by such Bank, dated the date of receipt of such funds and in
such amount. From and after such purchase (i) each Bank shall also
purchase a participating interest in any further German Loans made to the
German Borrowers in the manner described in the foregoing provisions of
this ss.3A.1 immediately upon the making thereof in the amount equal to
such Bank's Commitment Percentage thereof (with the Agent hereby agreeing
to provide prompt notice to each such Bank of its receipt from the German
Lender of a notice of borrowing and of the making of any German Loans),
and (ii) all amounts from time to time accruing, and all amounts from time
to time payable, on account of such German Loans (including any interest
and other amounts which were accrued but unpaid on the date of such
purchase) shall be distributed by the German Lender to the Agent, for the
accounts of the Banks, on account of such participating interests.
Notwithstanding anything to the contrary contained in this ss.3A.1, the
failure of any Bank to purchase its participating interest in any German
Loans shall not relieve any other Bank of its obligations hereunder to
purchase its participating interest in a timely manner, but no Bank shall
be responsible for the failure of any other Bank to purchase the
participating interest to be purchased by such other Banks on any date.
ss.3A.2. Participation in German Collateral Instruments. Each Bank
severally agrees that it shall be absolutely liable, to the extent of such
Bank's Commitment Percentage (for this purpose, without regard to whether
such Bank's Commitment shall then be terminated), to reimburse the German
Lender on demand for the amount of each draft or other amounts whatsoever
paid by the German Lender under each German Collateral Instrument to the
extent that such amount is not reimbursed by the German Borrowers pursuant
to the provisions of the German Loan Agreement. If the German Borrowers
fail to reimburse the German Lender as provided in the German Loan
Agreement on or before the date that any draft is paid or other payment is
made by the German Lender in respect of any German Collateral Instrument,
the German Lender may at any time thereafter notify the Banks of the
amount of any such German Unpaid Reimbursement Obligations and shall
specify the amount required from each of the Banks. No later than 10:00
a.m. (Boston time) on the Business Day next following the receipt of such
notice, each Bank shall make available to the German Lender, in
immediately available funds,
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such Bank's Commitment Percentage of such German Unpaid Reimbursement
Obligations. Each such payment made by a Bank shall be treated as the
purchase by such Bank of a participating interest in the German Borrowers'
German Reimbursement Obligations under the German Loan Agreement in an
amount equal to such payment. Each Bank shall share in accordance with any
such participating interest in any interest and fees which accrue thereon
pursuant to the provisions of the German Loan Agreement. The
responsibility of the German Lender to the German Borrowers and the Banks
shall be only to determine that the documents (including each draft)
delivered under each German Collateral Instrument in connection with such
presentment shall be in conformity in all material respects with such
German Collateral Instrument.
ss.3A.3. Common Participation Provisions. (a) If any amount required
to be paid by any Bank pursuant to ss.ss.3A.1 or 3A.2 is paid to the
Agent, for the account of the German Lender, within three (3) Business
Days following the date upon which such Bank receives notice from the
Agent that the German Loan in which such Bank has purchased a
participating interest has been made or, as the case may be, that any
German Reimbursement Obligation has not been paid by the German Borrowers,
such Bank shall pay to the Agent, for the account of the German Lender, on
demand an amount equal to the product of (i) such amount, times (ii) (A)
in the case of any such amount denominated in Deutschemarks, the discount
rate (Diskontsatz) as announced by the German Bundesbank from time to time
and (B) in the case of any such amount denominated in Dollars, the Federal
Funds Effective Rate from time to time, in each case as quoted by the
Agent, during the period from but not including the date such payment is
required to be made to and including the date on which such payment is
immediately available to the Agent, times (iii) a fraction the numerator
of which is the number of days that elapse during such period and the
denominator of which is 360. If any such amount required to be paid by any
Bank pursuant to ss.ss.3A.1 or 3A.2 is not in fact made available to the
Agent within three (3) Business Days following the date upon which such
Bank receives notice from the Agent that the German Loan in which such
Bank has purchased a participating interest has been made or, as the case
may be, that any German Reimbursement Obligation has not been paid by the
German Borrowers, the Agent shall be entitled to recover from such Bank,
on demand, such amount with interest thereon calculated from such due date
at the rate per annum applicable to German Loans which are "Overdraft Rate
Loans" as defined under the German Loan Agreement. A certificate from the
Agent submitted to any Bank with respect to any amounts owing under this
ss.3A.3(a) shall be conclusive in the absence of manifest error. Amounts
payable by any Bank pursuant to this ss.3A.3(a) shall be paid to the
Agent, for the account of the German Lender; provided that, if the Agent
(in its sole discretion) has elected to fund on behalf of such Bank the
amounts owing to the German Lender, then the amounts shall be paid to the
Agent, for its own account. Any obligations of a Bank hereunder owing to
the German Lender in Deutschemarks, if payment therefor is tendered in
Dollars, shall be discharged only to the extent that on the Business Day
next following receipt by the German Lender of such payment in Dollars,
the German Lender may, in accordance with normal banking procedures,
purchase Deutschemarks with such Dollars. If the amount of the
Deutschemarks which the German Lender is able to so purchase is less than
the sum originally due to the German Lender in Deutschemarks, such Bank
agrees, as a separate obligation, to indemnify the German Lender against
such loss, and, if the amount of Deutschemarks which the German Lender is
able to so purchase exceeds the sum originally due to the German Lender in
Deutschemarks, the German Lender agrees to remit to the Agent such excess
for the account of such Bank.
<PAGE> 103
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(b) Whenever, at any time after the German Lender has received from
any Bank such Bank's participating interest in a German Loan or German
Collateral Instrument pursuant to this ss.3A, the German Lender receives
any payment on account thereof, the German Lender will distribute to the
Agent, for the account of such Bank, such Bank's participating interest in
such amount (appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Bank's participating interest
was outstanding and funded) in like funds received; provided, however,
that in the event that any such payment received by the German Lender is
required to be returned, such Bank will return to the German Lender any
portion thereof previously distributed by the German Lender to such Bank
in like funds as such payment is required to be returned by the German
Lender.
(c) Each Bank's obligation to purchase participating interests
pursuant to this ss.3A shall be absolute and unconditional and shall not
be affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Bank may have against the
German Lender, any German Borrower, any Borrower, any Guarantor, or any
other Person for any reason whatsoever; (ii) the occurrence and
continuation of any Default or Event of Default; (iii) any adverse change
in the condition (financial or otherwise) of any German Borrower, any
Borrower, any Guarantor, or any other Bank; (iv) any breach of any of the
Loan Documents or German Loan Documents by any German Borrower, any
Borrower, any Guarantor, or any other Bank; or (v) any other circumstance,
happening or event whatsoever, whether or not similar to any of the
foregoing.
ss.3A.4. German Risk Participation Fees. In consideration of the
agreements of the Banks to purchase participating interests in the German
Loans and the German Collateral Instruments, the German Lender shall pay
to the Agent, for the ratable accounts of the Banks (other than any
Delinquent Bank, with respect to which the German Lender shall retain such
Delinquent Bank's portion of such payments for its own account), the
following amounts (each of the payments described below in this ss.3A.4
being referred to herein as a "German Risk Participation Fee"):
(a) As promptly as is practicable following each date upon
which the German Lender receives a payment of interest under the German
Loan Agreement on account of any German Loans, the German Lender shall pay
to, or arrange for payment by, the Agent, for the ratable accounts of the
Banks in accordance with their Commitment Percentages, a portion of such
interest payment received by the German Lender equal to two and one-half
percent (2.50%) per annum on the outstanding amount of German Loans (or,
with respect to the portion of such payment which is payable for the
account of any Bank which has funded the purchase of a participating
interest in any German Loan pursuant to ss.3A.1, as the case may be, such
Bank's ratable portion of the entire amount of such interest payment
received by the German Lender).
(b) As promptly as is practicable following each date upon
which the German Lender receives a payment of German Collateral Instrument
Fees, the German Lender shall pay to, or arrange for payment by, the
Agent, for the ratable accounts of the Banks in accordance with their
Commitment Percentages, an amount equal to the amount of such German
Collateral Instrument Fees received by the German Lender from the German
Borrowers minus an amount,
<PAGE> 104
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to be retained by the German Lender for its own account, equal to
one-eighth of one percent (0.125%) per annum of the face amount of each
German Collateral Instrument to which such German Collateral Instrument
Fees relate.
(c) As promptly as is practicable following each date upon
which the German Lender receives a payment of commitment fees from the
German Borrowers pursuant to ss.5(b) of the German Loan Agreement, the
German Lender shall pay to, or arrange for payment by, the Agent, for the
ratable accounts of the Banks in accordance with their Commitment
Percentages, an amount equal to the entire amount of such payment received
by the German Lender.
All German Risk Participation Fees shall be payable for the ratable
accounts of the Banks, in the currency in which the underlying payment of
interest, German Collateral Instrument Fees or, as the case may be,
commitment fees, is paid by the German Borrowers to the German Lender, in
each case as promptly as practicable after the date upon which the German
Lender receives the underlying payment of interest, German Collateral
Instrument Fees or, as the case may be, commitment fees, from the German
Borrowers. Upon the request of any Bank, the Agent may pay such Bank in
Dollars its ratable portion of any German Risk Participation Fees received
in Deutschemarks by converting such amount from Deutschemarks into Dollars
in accordance with the Agent's normal banking procedures for purchasing
Dollars with Deutschemarks.
ss.3A.5. Nature of Banks' Interest. For the avoidance of any doubt,
the interest of the Banks in the German Loans and the German Collateral
Instruments (and related interest and fees) shall be a sub-participation
only, and the obligations of the Banks under ss.3A.1 and ss.3A.2 shall not
constitute or be deemed a direct assignment or novation of the German
Obligations in favor of the Banks or otherwise evidence a direct
contractual relationship or any direct rights or obligations between any
of the Banks, on the one hand, and the German Borrowers, on the other. The
German Lender is the sole counterpart to the German Borrowers in respect
of the German Loans and German Collateral Instruments, and the sole claims
of each of the Banks in respect of its interest hereunder shall be to the
German Lender in respect of such Bank's actual share of any payments
actually received by the German Lender in cash or solvent credits, on or
in respect of, the principal of, and interest on, and fees accrued with
respect to, the German Loans and the German Collateral Instruments, in
each case which shall be payable to such Bank pursuant to the provisions
hereof."
ss.5. Amendment of ss.4 of the Loan Agreement. Section 4 of the Loan
Agreement is hereby amended as follows:
(a) by restating Section 4.3 of the Loan Agreement to read in its entirety
as follows:
"ss.4.3. Additional Costs, etc. If any change in any present
applicable law, or if any future applicable law, which expression, as used
herein, includes statutes, rules and regulations thereunder and
interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices
at any time or from time to time hereafter made upon or otherwise issued
to any Bank or the Agent by any central bank or other fiscal, monetary or
other authority (whether or not having the force of law), shall:
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(a) materially change the basis of taxation (other than
changes in respect of any taxes expressly excluded from the definition of
the term Taxes, and without duplication of any changes in respect of (1)
any Taxes (as defined in ss.5(f)(i)) or (2) any other taxes for which any
Bank or the Agent is otherwise indemnified pursuant to the provisions of
ss.16(a) hereof) of payments to any Bank of the principal of or the
interest on any Loans or any other amounts payable to any Bank or the
Agent under this Agreement or any of the other Loan Documents, or
(b) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by, or letters of
credit issued by, or commitments of an office of any Bank, or
(c) impose on any Bank or the Agent any other conditions or
requirements with respect to this Agreement, the other Loan Documents, any
Letters of Credit, the Loans, such Bank's Commitment, such Bank's
participating interest in the German Loans or German Collateral
Instruments, or any class of loans, letters of credit or commitments of
which any of the Loans or such Bank's Commitment, or such Bank's
participating interest in the German Loans or German Collateral
Instruments, forms a part, and the result of any of the foregoing is
(i) to increase the cost to any Bank of making, funding,
issuing, renewing, extending or maintaining any of the Loans or such
Bank's Commitment or any Letter of Credit, or such Bank's
participating interest in the German Loans or German Collateral
Instruments,, or
(ii) to reduce the amount of principal, interest,
Reimbursement Obligation, German Reimbursement Obligation, German
Risk Participation Fees or other amount payable to such Bank or the
Agent hereunder on account of such Bank's Commitment, any Letter of
Credit, any of the Loans or such Bank's participating interest in
the German Loans or German Collateral Instruments, or
(iii) to require such Bank or the Agent to make any
payment or to forego any interest, German Risk Participation Fee,
Reimbursement Obligation, German Reimbursement Obligation or other
sum payable hereunder, the amount of which payment or foregone
interest, German Risk Participation Fee, Reimbursement Obligation,
German Reimbursement Obligation or other sum is calculated by
reference to the gross amount of any sum receivable or deemed
received by such Bank or the Agent from the Borrower hereunder,
then, and in each such case, the Borrowers will, upon demand made by such
Bank or (as the case may be) the Agent at any time and from time to time
and as often as the occasion therefor may arise, pay to such Bank or the
Agent such additional amounts as will be sufficient to compensate such
Bank or the Agent for such additional cost, reduction, payment or foregone
interest, German Risk Participation Fee, Reimbursement Obligation, German
Reimbursement Obligation or other sum."
<PAGE> 106
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(b) by amending Section 4.4 of the Loan Agreement by inserting, following
the word "Loans" appearing therein, the phrase "or with respect to its
participating interest in any German Obligations".
ss.6. Amendment of ss.5(b) of the Loan Agreement. Section 5(b) of the Loan
Agreement is hereby restated to read in its entirety as follows:
"(b) The Borrowers jointly and severally agree to pay to the
Agent for the accounts of the Banks in accordance with their respective
Commitment Percentages, in arrears on the first day of each calendar
quarter, and upon the Maturity Date or any other date upon which the
Commitments shall cease to be any longer in effect, a commitment fee
calculated from the date hereof at a rate per annum which is equal to
three-eighths of one percent (3/8%) per annum of the average daily
difference by which the Total Commitment amount exceeds the aggregate
amount of the Total Outstandings during the immediately preceding calendar
quarter or portion thereof; provided, however, that there shall be
deducted from the commitment fee payable under this ss.5(b) for any
quarter the amount of any commitment fees paid by the German Borrowers
under ss.5(b) of the German Loan Agreement for such quarter."
ss.7. Amendment of ss.6 of the Loan Agreement. Section 6 of the Loan
Agreement is hereby amended as follows:
(a) by restating Section 6.2 of the Loan Agreement to read in its entirety
as follows:
"ss.6.2. Guaranty and Security of Subsidiaries. The Obligations
shall also be guaranteed by the Guarantors pursuant to the terms of the
Guaranty as provided for in ss.6.4, and the German Obligations shall also
be guaranteed by the Borrowers and the Guarantors pursuant to the terms of
the German Guaranty as provided for in ss.6.7. All of the Obligations of
the Borrowers and the Guarantors, including those under the German
Guaranty, shall be in turn secured by a perfected first priority security
interest (subject only to Permitted Liens entitled to priority under
applicable law) in all of the assets of each such Borrower or Guarantor,
whether now owned or hereafter acquired, and including the capital stock
of all direct Subsidiaries of such Borrower or Guarantor (excluding
thirty-five percent (35%) of the issued and outstanding capital stock of
each of such Subsidiaries which is organized under the laws of a
jurisdiction other than one of the United States, which shall not be
pledged in favor of the Agent as collateral security for the Obligations),
all pursuant to the terms of the Security Documents to which such Borrower
or Guarantor is a party."
(b) by adding the following new Section 6.7 to the Loan Agreement
immediately following Section 6.6 thereof:
"ss.6.7. German Guaranty.
(a) The Borrowers and the Guarantors absolutely,
unconditionally, irrevocably and jointly and severally guarantee to each
of the Agent, the Banks and the German
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Lender the due and punctual payment and performance by the German
Borrowers of the German Obligations. Each of the Borrowers and the
Guarantors further agrees that the German Obligations may be extended or
renewed, in whole or in part, without notice to or further assent from it,
and it will remain bound upon this guaranty notwithstanding any extension
or renewal of any of the German Obligations.
(b) Each of the Borrowers and the Guarantors waives
presentation to, demand for payment from and protest to the German
Borrowers or any other person liable in respect of any of the German
Obligations, and also waives notice of protest for nonpayment. The joint
and several obligations of the Borrowers and the Guarantors hereunder
shall not be affected by (i) the failure of the Agent, any Bank or the
German Lender to assert any claim or demand or to enforce any right or
remedy against the German Borrowers or any other person liable in respect
of any of the German Obligations under the provisions of this Agreement,
the German Loan Agreement or any other German Loan Document or otherwise;
(ii) any extension or renewal of any provision hereof or thereof; (iii)
any rescission, waiver, compromise, acceleration, amendment or
modification of any of the terms or provisions of any of the German Loan
Documents or of any of the collateral security for the German Obligations;
(iv) the release, exchange, waiver or foreclosure of any collateral
security for the German Obligations or other security held by any of the
Agent, the Banks or the German Lender, for any of the German Obligations;
(v) the failure of the Agent, any Bank or the German Lender to exercise
any right or remedy against any other person liable in respect of any of
the German Obligations; or (vi) the release or substitution of any Person
liable in respect of any of the German Obligations other than such
Borrower or Guarantor.
(c) Each of the Borrowers and the Guarantors further agrees
that this guaranty constitutes a guaranty of performance and of payment
when due and not just of collection, and waives any right to require that
any resort be had by the Agent, any Bank or the German Lender to any
security held for payment of any of the German Obligations or to any
balance of any deposit, account or credit on the books of the Agent, any
Bank or the German Lender in favor of the German Borrowers or any other
person.
(d) Each of the Borrowers and the Guarantors hereby waives any
defense that it might have based on a failure to remain informed of the
financial condition of the German Borrowers and of any other person liable
in respect of any of the German Obligations and any circumstances
affecting any of the collateral security for the German Obligations or the
ability or capacity of the German Borrowers to perform under the German
Loan Agreement.
(e) The Borrowers' and the Guarantors' guaranty hereunder
shall not be affected by the genuineness, validity, regularity or
enforceability of any of the German Obligations any other German Loan
Document or any other instrument or document creating or evidencing any of
the German Obligations, or by the existence, validity, enforceability,
perfection, or extent of any collateral security for the German
Obligations or Lien or by any other circumstance relating to any of the
German Obligations which might otherwise constitute a defense to this
guaranty. None of the Agent, the Banks or the German Lender makes any
representation or warranty in respect of any such circumstances and none
shall have any duty or
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responsibility whatsoever to any of the Borrowers or the Guarantors in
respect of the management and maintenance of any of the German
Obligations.
(f) Upon the German Obligations becoming due and payable (by
acceleration or otherwise), the Agent, the Banks and the German Lender
shall be entitled to immediate payment of the German Obligations by the
Borrowers and the Guarantors upon written demand by any of the Agent, the
Banks or the German Lender.
(g) The joint and several obligations of the Borrowers and the
Guarantors hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason, including, without limitation,
any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of any of the German Obligations against any person other
than the Borrowers and the Guarantors. Without limiting the generality of
the foregoing, the obligations of the Borrowers and the Guarantors
hereunder shall not be discharged or impaired or otherwise affected by the
failure of the Agent, any Bank or the German Lender to assert any claim or
demand or to enforce any remedy under the German Loan Agreement, any of
the other German Loan Documents or any other agreement, by any waiver or
modification of any provision thereof, by any default, failure or delay,
willful or otherwise, in the performance of any of the German Obligations,
or by any other act or thing or omission or delay to do any other act or
thing which may or might in any manner or to any extent vary the risk of
any of the Borrowers and the Guarantors or would otherwise operate as a
discharge of any of the Borrowers and the Guarantors as a matter of law,
unless and until the German Obligations (whether contingent or otherwise)
are paid in full in cash.
(h) All rights of any of the Borrowers and the Guarantors
against any of the German Borrowers arising by way of right of subrogation
or otherwise as a result of any payment or performance by any of the
Borrowers and the Guarantors to any of the Agent, the Banks or the German
Lender under the German Loan Documents shall in all respects be
subordinate and junior in right of payment and performance to the prior
final and indefeasible payment in full in cash of all the German
Obligations (whether contingent or otherwise) and of all other claims of
any kind of all creditors of any of the German Borrowers (whether
contingent or otherwise). If any amount shall be paid to any of the
Borrowers and the Guarantors for the account of the German Borrowers, such
amount shall be held in trust for the benefit of the Agent, the Banks and
the German Lender and shall forthwith be paid to the Agent to be credited
to or held as collateral security for the German Obligations (whether
contingent or otherwise).
(i) Each of the Borrowers and the Guarantors agrees, as a
separate obligation, to indemnify the Agent, each of the Banks and the
German Lender for the Agent's, such Bank's or the German Lender's costs
and expenses and the amount of any loss or shortfall incurred by the
Agent, such Bank or the German Lender (i) in purchasing Deutschemarks with
Dollars in order to fund any participating interest in any of the German
Obligations, (ii) in purchasing Dollars with Deutschemarks in order to pay
interest or principal on any amounts borrowed or otherwise obtained by the
Agent, such Bank or the German Lender to fund the underlying obligation or
liability in respect of the German Obligations or with respect to any loss
of anticipated profits resulting therefrom and (iii) otherwise in
connection with any payment made
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in Dollars by the Borrowers or the Guarantors under this German Guaranty
to the extent that the amount of such payment, when converted to
Deutschemarks by the Agent, such Bank or the German Lender in accordance
with normal banking procedures, is less than the sum originally due in
Deutschemarks under this German Guaranty. In the case of any of the
foregoing, the Agent, such Bank or the German Lender, as the case may be,
shall have a further separate cause of action against each of the
Borrowers and the Guarantors to recover such amounts.
(j) If and to the extent that the Borrowers and the Guarantors
fail to pay any amount due on demand, the Agent, the Banks and the German
Lender may, in their absolute discretion without notice to any of the
Borrowers or the Guarantors, purchase at any time thereafter so much
Deutschemarks as the Agent considers necessary or desirable to cover the
German Obligations being guarantied at the then prevailing spot rate of
exchange of the Agent, such Bank or the German Lender (as conclusively
determined by the Agent, such Bank or the German Lender) for purchasing
Deutschemarks and each of the Borrowers and the Guarantors hereby agrees
as a separate obligation to indemnify the Agent, the Banks and the German
Lender against the full cost incurred by the Agent, such Bank or the
German Lender for such purchase.
(k) If for the purpose of obtaining judgment in any court it
is necessary to convert a sum due hereunder in one currency (the "first
currency") into any other currency (the "second currency") the conversion
shall be made at the spot rate of exchange of the Agent (as conclusively
determined by the Agent) on the Business Day preceding the day on which
the final judgment is given. If, however, on the Business Day following
receipt by the Agent in the second currency of any sum adjudged to be due
hereunder (or any proportion thereof) the Agent purchases the first
currency with the amount of the second currency so received and the first
currency so purchased falls short of the sum originally due hereunder in
the first currency (or the same proportion thereof) each of the Borrowers
and the Guarantors shall and agrees as a separate obligation and
notwithstanding any judgment to pay to the Agent as agent for the Banks
and the German Lender in the first currency an amount equal to such
shortfall."
ss.8. Amendment of ss.8(b) of the Loan Agreement. Section 8(b) of the Loan
Agreement is hereby amended as follows:
(a) by restating the first paragraph thereof to read in its entirety as
follows:
"(b) The obligation of the Agent to issue, extend or renew any
Letters of Credit, and the obligation of the Banks to make any Loans, to
participate in any Letters of Credit, or to participate in any German
Loans or German Collateral Instruments, including the initial Loans,
Letters of Credit, German Loans and German Letters of Credit, is subject
to the satisfaction of the following further conditions precedent:"
(b) by inserting, immediately following each reference to the word "Loan"
appearing in subsections 8(b)(i) and (iii) thereof, respectively, the phrase "or
German Loan"; and
(c) by inserting, immediately following each reference to the word "Letter
of Credit" appearing in subsections 8(b)(i) and (iii) thereof, respectively, the
phrase "or German Collateral Instrument".
<PAGE> 110
-16-
ss.9. Amendment of ss.9 of the Loan Agreement. Section 9 of the Loan
Agreement is hereby amended as follows:
(a) by restating the first paragraph of Section 9.1 of the Loan Agreement
to read in its entirety as follows:
"ss.9.1. Affirmative Covenants. Each of the Borrowers and the
Guarantors agrees that so long as there are any Loans, Notes, German
Loans, Unpaid Reimbursement Obligations, German Unpaid Reimbursement
Obligations, Letters of Credit or German Collateral Instruments
outstanding or any Bank or the German Lender has any obligation to make
Loans or German Loans or the Agent or the German Lender has any obligation
to issue, extend or renew any Letters of Credit or German Collateral
Instruments and until the payment and satisfaction in full in cash of all
of the Obligations, the Borrowers will, the Guarantors will, and where
applicable the Borrowers will cause the Guarantors and MCL to, comply with
its obligations as set forth throughout this Agreement and to:"
(b) by restating the first paragraph of Section 9.2 of the Loan Agreement
to read in its entirety as follows:
"ss.9.2. Negative Covenants. Each of the Borrowers and each of the
Guarantors agrees that so long as there are any Loans, Notes, German
Loans, Unpaid Reimbursement Obligations, German Unpaid Reimbursement
Obligations, Letters of Credit or German Collateral Instruments
outstanding or any Bank or the German Lender has any obligation to make
Loans or German Loans or the Agent or the German Lender has any obligation
to issue, extend or renew any Letters of Credit or German Collateral
Instruments and until the payment and satisfaction in full in cash of all
of the Obligations, the Borrowers will not, the Guarantors will not, and
where applicable the Borrowers will not cause or permit the Guarantors or
MCL to:"
(c) by restating the first paragraph of Section 9.3 of the Loan Agreement
to read in its entirety as follows:
"ss.9.3. Financial Covenants. Each of the Borrowers and each of the
Guarantors agrees that so long as there are any Loans, Notes, German
Loans, Unpaid Reimbursement Obligations, German Unpaid Reimbursement
Obligations, Letters of Credit or German Collateral Instruments
outstanding or any Bank or the German Lender has any obligation to make
Loans or German Loans or the Agent or the German Lender has any obligation
to issue, extend or renew any Letters of Credit or German Collateral
Instruments and until the payment and satisfaction in full in cash of all
of the Obligations, the Borrowers will not, the Guarantors will not, and
where applicable the Borrowers will not cause or permit the Guarantors or
MCL to:"
(d) by inserting the following new Section 9.3(c) immediately following
Section 9.3(b) thereof:
"(c) at any time, permit the Total Outstandings to exceed the
sum of (i) 90% of the book value of accounts receivable of MI and the
Restricted Subsidiaries (as such term is
<PAGE> 111
-17-
defined in the Indenture) plus (ii) 75% of the book value of the inventory
of MI and the Restricted Subsidiaries (as such term is defined in the
Indenture)."
ss.10. Amendment of ss.10 of the Loan Agreement. Section 10 of the Loan
Agreement is hereby amended as follows:
(a) by restating Section 10(e) of the Loan Agreement to read in its
entirety as follows:
"(e) (i) an "Event of Default" shall have occurred under and
as defined in the German Loan Agreement, (ii) any of the Borrowers, the
Guarantors or MCL shall be in default under (A) the Senior Secured Note
Documents, (B) any agreement or agreements (other than the Loan Documents)
evidencing Indebtedness owing to the Agent or any Bank, or any affiliates
of the Agent or any Bank, or (C) any agreement or agreements evidencing
other Indebtedness for or in respect of borrowed money or capitalized
leases in excess of $1,000,000 in aggregate principal amount, or (iii) any
of the Borrowers, the Guarantors or MCL shall fail to pay any such
Indebtedness specified in clauses (ii)(A), (B) or (C) when due, or within
any applicable period of grace;"
(b) by restating the last three paragraphs of Section 10 of the Loan
Agreement to read in their entirety as follows:
"(1) In the case of any Event of Default under clause
(g) or (h), the Commitments shall automatically terminate, the Agent shall
be relieved of all further obligations to issue, extend or renew Letters
of Credit, and the Banks shall be relieved of all further obligations to
make Loans or to participate in the issuance, renewal or extension of any
Letters of Credit, German Loans or German Collateral Instruments, and the
entire unpaid principal amount of the Loans, all interest accrued and
unpaid thereon, all Unpaid Reimbursement Obligations, all obligations of
the Borrowers and the Guarantors in respect of the German Guaranty and all
other amounts payable hereunder and under the other Loan Documents shall
automatically become forthwith due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived by each of the Borrowers, and the Agent may, and upon the request
of the Majority Banks shall, require that cash be delivered to the Agent
in the amount of 105% of the sum of the Maximum Drawing Amount plus the
aggregate amount of the German Outstandings to be held by the Agent, for
the benefit of the Banks and the Agent, as cash collateral for all
Reimbursement Obligations and the obligations of the Borrowers and the
Guarantors in respect of the German Guaranty; and
(2) In the case of any Event of Default other than (g)
and (h) which shall have occurred and be continuing, the Agent may, and
upon the request of the Majority Banks shall, by written notice to the
Borrowers, terminate the Commitments and/or declare the unpaid principal
amount of the Loans, all interest accrued and unpaid thereon, all Unpaid
Reimbursement Obligations, all obligations of the Borrowers and the
Guarantors in respect of the German Guaranty, and all other amounts
payable hereunder and under the other Loan Documents to be forthwith due
and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by each of the Borrowers,
and the Agent may, and upon the request of the Majority Banks shall,
require that cash be delivered to the Agent in the amount
<PAGE> 112
-18-
of 105% of the sum of the Maximum Drawing Amount plus the aggregate amount
of the German Outstandings to be held by the Agent, for the benefit of the
Banks and the Agent, as cash collateral for all Reimbursement Obligations
and the obligations of the Borrowers and the Guarantors in respect of the
German Guaranty.
In case any one or more of the Events of Default shall have occurred
and be continuing, and whether or not the Banks shall have accelerated the
maturity of the Obligations pursuant to this ss.10, each Bank, if owed any
amount with respect to the Loans, the Reimbursement Obligations, or the
German Outstandings, may, with the consent of the Majority Banks but not
otherwise, proceed to protect and enforce its rights by suit in equity,
action at law or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this Agreement and
the other Loan Documents or any instrument pursuant to which the
Obligations to such Bank are evidenced, including as permitted by
applicable law the obtaining of the ex parte appointment of a receiver,
and, if such amount shall have become due, by declaration or otherwise,
proceed to enforce the payment thereof or any other legal or equitable
right of such Bank. No remedy herein conferred upon any Bank or the Agent
or the holder of any Note or purchaser of any Letter of Credit
Participation or participant in any German Obligations is intended to be
exclusive of any other remedy and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder
or now or hereafter existing at law or in equity or by statute or any
other provision of law."
ss.11. Amendment of ss.11 of the Loan Agreement. Section 11 of the Loan
Agreement is hereby restated to read in its entirety as follows:
"ss.11. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that
following the occurrence and during the continuance of an Event of
Default, the Agent or any Bank, as the case may be, receives any monies,
whether pursuant to ss.2.3(c), ss.10 or otherwise with respect to the
realization upon any of the Collateral, such monies shall be distributed
for application as follows:
(a) First, to the payment of, or (as the case may be)
the reimbursement of the Agent for or in respect of all reasonable
costs, expenses, disbursements and losses which shall have been
incurred or sustained by the Agent in connection with the collection
of such monies by the Agent, for the exercise, protection or
enforcement by the Agent of all or any of the rights, remedies,
powers and privileges of the Agent, for the benefit of the Agent and
the Banks, under this Agreement or any of the other Loan Documents
or in respect of the Collateral or in support of any provision of
adequate indemnity to the Agent against any taxes or liens which by
law shall have, or may have, priority over the rights of the Agent
to such monies;
(b) Second, to all other Obligations (other than the
Obligations of the Borrowers and the Guarantors in respect of the
German Guaranty) in such order or preference as the Majority Banks
may determine; provided, however, that distributions in respect of
(i) such Obligations shall be made pari passu among Obligations with
respect to the Collateral administration fees payable pursuant to
the Fee Letter and all other Obligations and (ii) Obligations owing
to the Banks with respect to each type of
<PAGE> 113
-19-
Obligation such as interest, principal, fees and expenses, shall be
made among the Banks pro rata; and provided, further, that the Agent
may in its discretion make proper allowance to take into account any
Obligations not then due and payable (including the retaining, in
the Agent's discretion following two days' prior written notice of
the occurrence of an Event of Default given to the Borrowers by the
Agent, of a portion or all of such monies to provide cash collateral
in an amount equal to 105% of the Maximum Drawing Amount to secure
Reimbursement Obligations);
(c) Third, to all other Obligations of the Borrowers and
the Guarantors in respect of the German Guaranty in such order or
preference as the Majority Banks may determine; provided, however,
that distributions in respect of (i) such Obligations under the
German Guaranty shall be made pari passu among Obligations with
respect to any fees payable for the account of the German Lender
pursuant to the German Loan Documents and all other such Obligations
under the German Guaranty and (ii) Obligations under the German
Guaranty owing to the Banks or the German Lender with respect to
each type of Obligation such as interest, principal, fees and
expenses, shall be made among the Banks and the German Lender pro
rata; and provided, further, that the Agent may in its discretion
make proper allowance to take into account any Obligations not then
due and payable (including the retaining, in the Agent's discretion
following two days' prior written notice of the occurrence of an
Event of Default given to the Borrowers by the Agent, of a portion
or all of such monies to provide cash collateral in an amount equal
to 105% of the German Outstandings to secure the Obligations under
the German Guaranty);
(d) Fourth, upon payment and satisfaction in full or
other provisions for payment in full satisfactory to each of the
Banks and the Agent of all of the Obligations, to the payment of any
obligations required to be paid pursuant to ss.9- 504(1)(c) of the
Uniform Commercial Code of the Commonwealth of Massachusetts; and
(e) Fifth, the excess, if any, shall be returned to the
Borrowers or to such other Persons as are entitled thereto."
ss.12. Amendment of ss.12 of the Loan Agreement. Section 12 of the Loan
Agreement is hereby amended by inserting, following each reference to the term
"Reimbursement Obligations" appearing in such section, the phrase "or
obligations under the German Guaranty".
ss.13. Amendment of ss.13.5(c) of the Loan Agreement. Section 13.5(c) of
the Loan Agreement is hereby restated to read in its entirety as follows:
"(c) Notwithstanding anything to the contrary contained in
this Agreement or any of the other Loan Documents, any Bank that fails (i)
to make available to the Agent its pro rata share of any Loan, to purchase
any Letter of Credit Participation or to purchase a participation in any
German Loan or German Collateral Instrument as required by ss.3A or (ii)
to comply with the provisions of ss.12 with respect to making dispositions
and arrangements with the other Banks, where such Bank's share of any
payment received, whether by setoff or otherwise, is in excess of its pro
rata share of such payments due and payable to all of the Banks, in each
<PAGE> 114
-20-
case as, when and to the full extent required by the provisions of this
Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be
deemed a Delinquent Bank until such time as such delinquency is satisfied.
A Delinquent Bank shall be deemed to have assigned any and all payments
due to it from the Borrowers, whether on account of outstanding Loans,
German Loans, Unpaid Reimbursement Obligations, German Unpaid
Reimbursement Obligations, interest, fees, German Risk Participation Fees
or otherwise, to the remaining nondelinquent Banks for application to, and
reduction of, their respective pro rata shares of all outstanding Loans,
German Loans, Unpaid Reimbursement Obligations and German Unpaid
Reimbursement Obligations. The Delinquent Bank hereby authorizes the Agent
to distribute such payments to the nondelinquent Banks in proportion to
their respective pro rata shares of all outstanding Loans, German Loans,
Unpaid Reimbursement Obligations and German Unpaid Reimbursement
Obligations. A Delinquent Bank shall be deemed to have satisfied in full a
delinquency when and if, as a result of application of the assigned
payments to all outstanding Loans, German Loans, Unpaid Reimbursement
Obligations and German Unpaid Reimbursement Obligations of the
nondelinquent Banks, the Banks' respective pro rata shares of all
outstanding Loans, German Loans, Unpaid Reimbursement Obligations and
German Unpaid Reimbursement Obligations have returned to those in effect
immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency."
ss.14. Amendment of ss.14 of the Loan Agreement. Section 14 of the Loan
Agreement is hereby amended as follows:
(a) by restating the parenthetical contained in Section 14.1 to read in
its entirety as follows:
"(including all or a portion of its Commitment Percentage and Commitment
and the same portion of the Loans at the time owing to it, the Notes held
by it and its participating interest in the risk relating to any Letters
of Credit, German Loans and German Collateral Instruments)"
(b) by restating Section 14.2(i) to read in its entirety as follows:
"(i) such assignee acknowledges that it has made arrangements
with the assigning Bank satisfactory to such assignee with respect to its
pro rata share of Letter of Credit Fees in respect of outstanding Letters
of Credit and German Risk Participation Fees in respect of German
Outstandings."
(c) by restating the first sentence of Section 14.3 to read in its
entirety as follows:
"The Agent shall maintain a copy of each Assignment and Acceptance
delivered to it and a register or similar list (the "Register") for the
recordation of the names and addresses of the Banks and the Commitment
Percentage of, and principal amount of the Loans owing to, Letter of
Credit Participations purchased by, and participating interests in German
Loans and German Collateral Instruments purchased by, the Banks from time
to time."
(d) by replacing each reference to the word "Loans" contained in Section
14.7 with the word "Obligations".
<PAGE> 115
-21-
ss.15. Amendment of ss.15 of the Loan Agreement. Section 15 of the Loan
Agreement is hereby amended as follows:
(a) by inserting, immediately following the phrase "Letter of Credit Fees"
appearing in clause (a) of such ss.15, the phrase "or German Risk Participation
Fees"; and
(b) by inserting the following new paragraph at the end of such ss.15:
"Any term of the German Loan Agreement, the other German Loan
Documents or any other instrument related thereto may be amended, and the
performance or observance by the Borrowers or any of their Subsidiaries of
any terms of the German Loan Agreement, the other German Loan Documents or
such other instrument or the continuance of any Default or Event of
Default (for this purpose, as such terms are defined in the German Loan
Agreement) may be waived (either generally or in a particular instance and
either retroactively or prospectively) with, but only with, the written
consent of the German Borrowers and the written consent of the Majority
Banks. Notwithstanding the foregoing, the rate of interest on the German
Loans (other than interest accruing pursuant to ss.2.2(b) of the German
Loan Agreement following the effective date of any waiver by the Majority
Banks of the Default or Event of Default (for this purpose, as such terms
are defined in the German Loan Agreement) relating thereto), the maturity
of the German Loans, the amount of the commitments of the Banks to
purchase participating interests in the German Loans and the German
Collateral Instruments, and the amount of commitment fees payable by the
German Borrowers thereunder and fees in respect of the German Collateral
Instruments payable by the German Borrowers thereunder may not be changed,
in each such case without the written consent of the German Borrowers and
the written consent of each Bank affected thereby."
ss.16. Concerning Schedule 1 to the Loan Agreement. Schedule 1 to the Loan
Agreement is hereby deleted in its entirety and replaced with the new Schedule 1
attached hereto.
ss.17. Representations, Warranties and Covenants; No Default;
Authorization. Each of the Borrowers and Guarantors hereby represents, warrants
and covenants to the Agent and the Banks as follows:
(a) Each of the representations and warranties of such Borrower or
Guarantor contained in the Loan Agreement was true as of the date as of which it
was made and is true as and at the date of this Amendment, and no Default or
Event of Default has occurred and is continuing as of the date of this
Amendment;
(b) This Amendment has been duly authorized, executed and delivered by
each of the Borrowers and Guarantors and is in full force and effect; and
(c) Upon the execution and delivery of this Amendment by the respective
parties hereto, this Amendment shall constitute the legal, valid and binding
obligation of the Borrowers and the
<PAGE> 116
-22-
Guarantors, enforceable in accordance with its terms, except that the
enforceability thereof may be subject to any applicable bankruptcy,
reorganization, insolvency or other laws affecting creditors' rights generally.
ss.18. Conditions to Effectiveness. The effectiveness of this Amendment
shall be subject to the satisfaction of the following conditions precedent:
(a) This Amendment and each of the German Loan Documents shall have been
duly executed and delivered by the respective parties thereto, all conditions
precedent to the making of the German Loans as set forth in the German Loan
Agreement shall have been satisfied and all of such documents shall be in full
force and effect and shall be in form and substance satisfactory to the Agent,
the Banks and the Borrowers.
(b) All corporate action, third-party consents and governmental approvals
necessary for the valid execution, delivery and performance by each of the
Borrowers and each of the Guarantors of this Amendment shall have been duly and
effectively taken or (as the case may be) obtained and evidence thereof
satisfactory to the Agent and the Banks shall have been provided to the Agent
and the Banks.
(c) Each of the Agent and the Banks shall have received from each of the
Borrowers and the Guarantors (i) a copy, certified by a duly authorized officer
of such Person to be true and complete, of each of its Charter Documents as in
effect on the date of certification and (ii) an incumbency certificate, signed
by a duly authorized officer of such Borrower or such Guarantor, and giving the
name and bearing a specimen signature of each individual who shall be authorized
to sign this Amendment in the name and on behalf of such Borrower or such
Guarantor.
(d) The Bank shall have received (i) a favorable opinion from Rogers &
Wells, counsel to the Borrowers and the Guarantors in form and substance
satisfactory to the Agent and the Banks, (ii) a favorable opinion from the
General Counsel of MI in form and substance satisfactory to the Agent and the
Banks, and (iii) favorable opinions from counsel to the Borrowers and the
Guarantors in New Jersey and in Ohio, each in form and substance satisfactory to
the Agent and the Banks.
ss.19. Ratification, etc. Except as expressly amended hereby, the Loan
Agreement and all documents, instruments and agreements related thereto are
hereby ratified and confirmed in all respects. All references in the Loan
Agreement or any related agreement or instrument to the Loan Agreement shall
hereafter refer to the Loan Agreement as amended hereby.
ss.20. No Implied Waiver. Except as expressly provided herein, nothing
contained herein shall constitute a waiver of, impair or otherwise affect any
Obligations, any other obligations of any of the Borrowers or Guarantors or any
right of the Agent or any Bank consequent thereon.
<PAGE> 117
-23-
ss.21. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
ss.22. Governing Law. THIS AMENDMENT SHALL FOR ALL PURPOSES BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICTS OF LAW).
<PAGE> 118
-24-
IN WITNESS WHEREOF, the undersigned have duly executed this Amendment as a
sealed instrument as of the date first above written.
METALLURG, INC.
By:____________________________
Name:
Title:
SHIELDALLOY METALLURGICAL
CORPORATION
By:____________________________
Name:
Title:
METALLURG SERVICES, INC.
By:___________________________
Name:
Title:
MIR (CHINA), INC.
By:___________________________
Name:
Title:
METALLURG HOLDINGS CORPORATION
By:___________________________
Name:
Title:
<PAGE> 119
-25-
BANKBOSTON, N.A. (formerly known as
The First National Bank of Boston),
individually and as Agent
By:____________________________
Name:
Title:
BANKBOSTON, N.A.
ZWEIGNIEDERLASSUNG FRANKFURT/MAIN
By:____________________________
Name:
Title:
BTM CAPITAL CORPORATION
By:____________________________
Name:
Title:
BANK OF SCOTLAND
By:____________________________
Name:
Title:
NATIONAL BANK OF CANADA
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
<PAGE> 120
-1-
SCHEDULE I
TO LOAN AGREEMENT
- -----------------------------------------------------------------------
Commitment
Banks Commitment Percentage
- -----------------------------------------------------------------------
BankBoston, N.A.
Domestic Lending Office:
100 Federal Street
Boston, MA 02110 $18,750,000 37.50%
Telefax Number: (617) 434-2309
Answerback: BOSTONBK BSN
Attention: James J. Ward
Eurodollar Lending Office:
100 Federal Street
Boston, MA 02110
Telefax Number: (617) 434-2309
Attention: James J. Ward
- -----------------------------------------------------------------------
BTM Capital Corporation
Domestic Lending Office:
125 Summer Street, 4th Floor
Boston, MA 02110 $12,500,000 25%
Telefax Number: (617) 345-5250
Attention: Daniel Landers
Eurodollar Lending Office:
125 Summer Street, 4th Floor
Boston, MA 02110
Telefax Number: (617) 345-5250
Attention: Daniel Landers
- -----------------------------------------------------------------------
Bank of Scotland
Domestic Lending Office:
565 Fifth Avenue
New York, NY 10017 $9,375,000 18.75%
Telefax Number: (212) 557-9460
Attention: Janet Taffe
Eurodollar Lending Office:
565 Fifth Avenue
New York, NY 10017
Telefax Number: (212) 557-9460
Attention: Janet Taffe
- -----------------------------------------------------------------------
<PAGE> 121
-2-
- -----------------------------------------------------------------------
National Bank of Canada
Domestic Lending Office:
125 W. 55th Street
New York, NY 10019 $9,375,000 18.75%
Telefax Number: (212) 632-8545
Attention: Gaetan Frosina
Eurodollar Lending Office:
125 W. 55th Street
New York, NY 10019
Telefax Number: (212) 632-8545
Attention: Gaetan Frosina
- -----------------------------------------------------------------------
TOTAL: $50,000,000 100.00%
- -----------------------------------------------------------------------
<PAGE> 122
-1-
THIRD AMENDMENT
THIRD AMENDMENT dated as of November 21, 1997 (this "Amendment"), by and
among (a) METALLURG, INC., a Delaware corporation ("MI"), having its principal
place of business at 6 East 43rd Street, New York, New York 10017, and
SHIELDALLOY METALLURGICAL CORPORATION, a Delaware corporation ("SMC"), having
its principal place of business at 12 West Boulevard, Newfield, New Jersey 08344
(MI and SMC are collectively referred to herein as the "Borrowers"); (b)
METALLURG SERVICES, INC., a New York corporation ("MSI"), having its principal
place of business at 6 East 43rd Street, New York, New York 10017, MIR (CHINA),
INC., a Delaware corporation ("MIR China"), having its principal place of
business at 6 East 43rd Street, New York, New York 10017, and METALLURG HOLDINGS
CORPORATION, a New Jersey corporation ("MHC"), having its principal place of
business at 12 West Boulevard, Newfield, New Jersey 08344 (MSI, MIR China and
MHC are collectively referred to herein as the "Guarantors"); (c) BANKBOSTON,
N.A. (formerly known as The First National Bank of Boston), a national banking
association, as agent (in such capacity the "Agent") for itself and the other
financial institutions from time to time parties to the Loan Agreement referred
to below (collectively, the "Banks"); and (d) the BANKS, amending certain
provisions of the Loan Agreement dated as of April 14, 1997, by and among the
Borrowers, the Guarantors, the Agent and the Banks (as amended or modified and
in effect from time to time, the "Loan Agreement"). Terms not otherwise defined
herein which are defined in the Loan Agreement shall have the respective
meanings herein assigned to such terms in the Loan Agreement.
WHEREAS, the Borrowers and the Guarantors have requested that the Agent
and the Banks agree to amend the terms of the Loan Agreement in certain
respects; and
WHEREAS, the Agent and the Banks are willing to so amend the terms of the
Loan Agreement in such respects as hereinafter more fully set forth, upon the
terms and subject to the conditions contained herein;
NOW, THEREFORE, in consideration of the mutual agreements contained in the
Loan Agreement, herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ss.1. Amendment of ss.1 of the Loan Agreement. Section 1 of the Loan
Agreement is hereby amended as follows:
(a) by amending the definition of "Eligible Accounts" by deleting the
parenthetical "(and other than the subordinated Lien securing the Senior Secured
Notes)" appearing in clause (e) of such definition in its entirety;
<PAGE> 123
-2-
(b) by amending the definition of "Eligible Inventory" by deleting the
parenthetical "(and other than the subordinated Lien securing the Senior Secured
Notes)" appearing in clause (c) of such definition in its entirety;
(c) by deleting the definitions of "Excess Proceeds" and "Excess Proceeds
Offer" in their respective entireties.
(d) by restating the definition of "Indenture" to read in its entirety as
follows:
"Indenture: The Indenture dated as of November 25, 1997 among MI as
principal obligor, each of the Guarantors as guarantors, and the Trustee."
(e) by replacing the definition of "Net Cash Proceeds" with the following
new definition of "Net Available Cash" and inserting such new definition in
proper alphabetical order:
"Net Available Cash: As defined in the Indenture, as in effect on
the Third Amendment Effective Date or as otherwise amended with the
consent of the Agent and the Banks."
(f) by replacing the definitions of "Senior Secured Note Documents" and
"Senior Secured Notes" with the following new definitions of "Senior Unsecured
Note Documents" and "Senior Unsecured Notes" and inserting such new definitions
in proper alphabetical order:
"Senior Unsecured Note Documents: The Senior Unsecured Notes, the
Indenture, and each of the other documents, instruments and agreements
executed and delivered in connection therewith, as each may be amended in
accordance with the provisions of ss.9.2(j) hereof."
"Senior Unsecured Notes: MI's 11% Senior Unsecured Notes due 2007,
each issued by MI pursuant to the Indenture, as in effect on the Third
Amendment Effective Date and as amended in accordance with the provisions
of ss.9.2(j) hereof."
(g) by inserting the following new definitions of "Third Amendment" and
"Third Amendment Effective Date" therein in proper alphabetical order:
"Third Amendment: The Third Amendment hereto dated as of November
21, 1997, among the Borrowers, the Guarantors, the Agent and the Banks."
"Third Amendment Effective Date: The date on which the conditions to
the effectiveness of the Third Amendment (such conditions being set forth
in section 7 thereof) shall have been satisfied."
ss.2. Amendment of ss.2.3 of the Loan Agreement. Section 2.3 of the Loan
Agreement is hereby amended by deleting section 2.3(f) in its entirety.
<PAGE> 124
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ss.3. Amendment of ss.9.2 of the Loan Agreement. Section 9.2 of the Loan
Agreement is hereby amended as follows:
(a) by amending Section 9.2(b) of the Loan Agreement by replacing the
reference to the "Senior Secured Notes" appearing in clause (viii) thereof with
a reference to the "Senior Unsecured Notes";
(b) by amending Section 9.2(c) of the Loan Agreement by replacing clause
(vii) thereof with the phrase "(vii) [Intentionally Omitted]";
(c) by amending Section 9.2(d) of the Loan Agreement by replacing clause
(vi)(C) thereof with the following new clauses (vi)(C), (vi)(D) and (vi)(E):
"(C) $5,000,000 in the aggregate in the case of all investments made
subsequent to the Third Amendment Effective Date in the German Borrowers,
considered collectively,
(D) one time investments made on or about the Third Amendment
Effective Date with the proceeds from the issuance of the Senior Unsecured
Notes (i) in London & Scandinavian Metallurgical Co Ltd in an aggregate
amount not to exceed $8,500,000 in order to permit the repayment by such
Subsidiary of an outstanding term loan and (ii) in the German Borrowers,
considered collectively, in an aggregate amount not to exceed $11,500,000
in order to effect the repayment by the German Borrowers of certain of the
German Obligations,
(E) $100,000 in the aggregate in the case of all other Subsidiaries,
considered collectively,"
(d) by amending Section 9.2(f) of the Loan Agreement by restating clause
(ii) thereof to read in its entirety as follows:
"(ii) effect any disposition of assets (other than (A) dispositions of
inventory in the ordinary course, (B) dispositions of obsolete equipment
having a value not in excess of $400,000 in the aggregate, and (C) other
dispositions of assets having an aggregate value not in excess of $500,000
for all such other dispositions of assets) without the consent of the
Agent and the Banks (and in the case of any such asset dispositions
consented to by the Agent and the Banks, unless provided otherwise by the
terms of such consent, (1) the Net Available Cash of any such disposition,
together with all other net cash proceeds therefrom, shall be applied to
the Obligations then outstanding, with the Total Commitment also being
reduced by the full amount of any such Net Available Cash and other net
cash proceeds, and (2) to the extent that the Loans are reduced to $0, any
Net Available Cash and other net cash proceeds received in connection with
any such asset disposition shall be applied to cash collateralize
outstanding Letters of Credit and all obligations of the Borrowers and the
Guarantors in respect of the German Guaranty on a ratable basis in an
amount up to 105% of the sum of the Maximum Drawing Amount plus the
aggregate amount of the German Outstandings),"
(e) by restating Section 9.2(j) of the Loan Agreement to read in its
entirety as follows:
<PAGE> 125
-4-
"(j) (i) amend, supplement or otherwise modify the terms of
the Indenture, the Senior Unsecured Notes or any of the other Senior
Unsecured Note Documents without the consent of the Agent and each of the
Banks except for any such amendment, supplement or modification which
would not (A) in the reasonable judgment of the Agent, adversely effect
the enforceability of any of the Loan Documents or any of the Agent's or
the Banks' rights thereunder or the validity, priority or perfection of
any Lien granted under the Security Documents, (B) in the reasonable
judgment of the Agent, have a materially adverse effect on the financial
condition or business operations of any of the Borrowers, the Guarantors
and MCL, (C) increase the rate of interest payable in respect of the
Senior Unsecured Notes or amend or modify the maturity or principal
installment payment schedule in respect of the Senior Unsecured Notes so
as to make such maturity or any such principal installments due earlier
than otherwise required under the terms of the Senior Unsecured Note
Documents as in effect on the Third Amendment Effective Date, (D) increase
the required percentage of holders of the Senior Unsecured Notes necessary
to amend or waive any provision of the Senior Unsecured Note Documents or
decrease the required percentage of holders of the Senior Unsecured Notes
necessary to accelerate the maturity of the Senior Unsecured Notes, (E)
provide for the granting of any Lien on any property or assets of the
Borrowers or any of their Subsidiaries in favor of the holders of the
Senior Unsecured Notes as collateral security for the obligations of any
of the Borrowers or the Guarantors in respect of the Senior Unsecured
Notes, or (F) amend, modify or supplement any affirmative or negative
covenants contained in the Senior Unsecured Note Documents, any asset sale
proceeds application provisions or related redemption provisions contained
in the Senior Unsecured Note Documents, any default or event of default
provisions contained in the Senior Unsecured Note Documents or the change
of control definitions or related redemption provisions contained in the
Senior Unsecured Note Documents, in any such case in a manner less
favorable to the Borrowers than that in effect on the Third Amendment
Date; or (ii) prepay, redeem, cause the defeasance of or repurchase any of
the Senior Unsecured Notes;"
ss.4. Amendment of ss.10(e) of the Loan Agreement. Section 10(e) of the
Loan Agreement is hereby amended by replacing the reference to the "Senior
Secured Note Documents" appearing in clause (ii)(A) thereof with a reference to
the "Senior Unsecured Note Documents".
ss.5. Limited Consent. Reference is hereby made to that certain Limited
Waiver, Consent and Confirmation dated as of October 31, 1997 (the "Consent")
issued by the Agent and the Banks to the Borrowers. Each of the Agent and the
Banks hereby confirms its waiver of the Affected Sections (as defined in the
Consent) of the Loan Agreement solely in connection with the Proposed Issuance
(as defined in the Consent) and consents to such Proposed Issuance (including
the contemplated use of the proceeds of such Proposed Issuance as described in
the Consent) pursuant to the terms of the Senior Unsecured Note Documents (as
such term is defined in the Loan Agreement, as amended hereby) in the form
delivered to the Agent pursuant to section 7(b) of this Amendment. The foregoing
waiver and consent is limited strictly to its terms, shall apply only to the
specific actions described herein, shall not extend to or affect any of the
Borrowers', the Guarantors' or MCL's other obligations contained in the Loan
Agreement or any
<PAGE> 126
-5-
other Loan Document and shall not impair any rights consequent thereon. None of
the Agent or the Banks shall have any obligation to issue any further waiver or
consent with respect to the subject matter of hereof or any other matter. Except
as expressly set forth herein, nothing contained herein shall be deemed to be a
waiver of, or shall in any way impair or prejudice, any rights of the Agent or
the Banks under the Loan Agreement or any other Loan Document.
ss.6. Representations, Warranties and Covenants; No Default;
Authorization. Each of the Borrowers and Guarantors hereby represents, warrants
and covenants to the Agent and the Banks as follows:
(a) Each of the representations and warranties of such Borrower or
Guarantor contained in the Loan Agreement was true as of the date as of which it
was made and is true as and at the date of this Amendment, and no Default or
Event of Default has occurred and is continuing as of the date of this
Amendment;
(b) This Amendment has been duly authorized, executed and delivered by
each of the Borrowers and Guarantors and is in full force and effect; and
(c) Upon the execution and delivery of this Amendment by the respective
parties hereto, this Amendment shall constitute the legal, valid and binding
obligation of the Borrowers and the Guarantors, enforceable in accordance with
its terms, except that the enforceability thereof may be subject to any
applicable bankruptcy, reorganization, insolvency or other laws affecting
creditors' rights generally.
ss.7. Conditions to Effectiveness. The effectiveness of this Amendment
shall be subject to the satisfaction of the following conditions precedent:
(a) This Amendment shall have been duly executed and delivered by the
respective parties thereto and shall be in full force and effect.
(b) Each of the Agent and the Banks shall have received (i) evidence of
the issuance by MI of $100,000,000 in aggregate principal amount of its 11%
Senior Unsecured Notes (the "New Notes") pursuant to the Indenture dated as of
November 25, 1997 (the "New Indenture") among MI, as principal obligor, each of
the Guarantors, as guarantors, and the Trustee, (ii) evidence of the repayment
of all principal, interest and other amounts due in respect of the Senior
Secured Notes (as such term is defined in the Loan Agreement immediately prior
to giving effect to this Amendment) with the proceeds of the New Notes, and
(iii) a copy, certified by a duly authorized officer of MI to be true and
complete as of the date hereof, of the New Indenture and the other Senior
Unsecured Note Documents (as such term is defined in the Loan Agreement, as
amended hereby), each as in effect on the date hereof.
ss.8. Ratification, etc. Except as expressly amended hereby, the Loan
Agreement and all documents, instruments and agreements related thereto are
hereby ratified and confirmed in all
<PAGE> 127
-6-
respects. All references in the Loan Agreement or any related agreement or
instrument to the Loan Agreement shall hereafter refer to the Loan Agreement as
amended hereby.
ss.9. No Implied Waiver. Except as expressly provided herein, nothing
contained herein shall constitute a waiver of, impair or otherwise affect any
Obligations, any other obligations of any of the Borrowers or Guarantors or any
right of the Agent or any Bank consequent thereon.
ss.10. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
ss.11. Governing Law. THIS AMENDMENT SHALL FOR ALL PURPOSES BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICTS OF LAW).
<PAGE> 128
-7-
IN WITNESS WHEREOF, the undersigned have duly executed this Amendment as a
sealed instrument as of the date first above written.
METALLURG, INC.
By:
--------------------------------------
Name:
Title:
SHIELDALLOY METALLURGICAL
CORPORATION
By:
--------------------------------------
Name:
Title:
METALLURG SERVICES, INC.
By:
--------------------------------------
Name:
Title:
MIR (CHINA), INC.
By:
--------------------------------------
Name:
Title:
METALLURG HOLDINGS CORPORATION
By:
--------------------------------------
Name:
Title:
<PAGE> 129
-8-
BANKBOSTON, N.A. (formerly known as
The First National Bank of Boston),
individually and as Agent
By:
--------------------------------------
Name:
Title:
BTM CAPITAL CORPORATION
By:
--------------------------------------
Name:
Title:
BANK OF SCOTLAND
By:
--------------------------------------
Name:
Title:
NATIONAL BANK OF CANADA
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.2
LOAN AGREEMENT
among
GfE Gesellschaft fur Elektrometallurgie mit beschrankter Haftung
GfE Umwelttechnik GmbH
GfE Gie(beta)erei- und Stahlwerksbedarf GmbH
GfE Metalle und Materialien GmbH
KERAMED Medizintechnik GmbH
as Borrowers
and
BankBoston, N.A.
Zweigniederlassung Frankfurt/Main
20 October 1997
<PAGE> 2
Table of Contents
ss.1. DEFINITIONS..................................................... 1
ss.2. REVOLVING CREDIT AND OVERDRAFT FACILITIES....................... 11
ss.2.1 Commitment to Lend....................................... 11
ss.2.2. Interest................................................ 13
ss.2.3. Repayments and Prepayments.............................. 13
ss.2.4. Reduction of Commitment................................. 16
ss.3. COLLATERAL INSTRUMENTS.......................................... 16
ss.3.1. Issuance of Collateral Instruments...................... 16
ss.3.2. Reimbursement Obligation of the Borrowers............... 17
ss.3.3. Collateral Instrument Payments.......................... 18
ss.3.4. Obligations Absolute.................................... 18
ss.3.5. Reliance by Bank........................................ 19
ss.3.6. Collateral Instrument Fees.............................. 19
ss.4. CHANGES IN CIRCUMSTANCES........................................ 19
ss.4.1. Inability to Determine Interbank Rate................... 19
ss.4.2. Illegality.............................................. 19
ss.4.3. Additional Costs, etc................................... 20
1
<PAGE> 3
ss.4.4. Capital Adequacy........................................ 21
ss.4.5. Certificate............................................. 21
ss.4.6. Indemnity............................................... 21
ss.5. FEES AND PAYMENTS............................................... 22
ss.6. COLLATERAL SECURITY; HOLDING GUARANTEE.......................... 24
ss.6.1. Security of Borrowers................................... 24
ss.6.2. Collateral Security Perfection.......................... 24
ss.6.3. Holding Guarantee and Security.......................... 24
ss.6.4. Borrowers' Waivers of Defences.......................... 24
ss.7. REPRESENTATIONS AND WARRANTIES.................................. 24
ss.8. CONDITIONS PRECEDENT............................................ 28
ss.9. COVENANTS....................................................... 30
ss.9.1. Affirmative Covenants................................... 30
ss.9.2. Negative Covenants...................................... 34
ss.9.3. Financial Covenant...................................... 36
ss.10. EVENTS OF DEFAULT; ACCELERATION................................ 37
ss.11. DISTRIBUTION OF COLLATERAL PROCEEDS............................ 39
ss.12. SETOFF......................................................... 40
2
<PAGE> 4
ss.13. AMENDMENTS, WAIVERS, NOTICES, ETC.............................. 40
ss.14. MISCELLANEOUS.................................................. 40
ss.15. KERAMED DISPOSITION............................................ 43
ss.16. SPLITTING AGREEMENT............................................ 43
3
<PAGE> 5
Exhibits and Schedules
Exhibit A Form of Borrowing Base Report
Exhibit B Form of Loan Request
Schedule 1 Excluded Account Debtors
Schedule 7(l) Subsidiaries
Schedule 7(o) Bank Accounts
Schedule 9.2(a) Indebtedness
1
<PAGE> 6
LOAN AGREEMENT
This LOAN AGREEMENT (this "Agreement") is made as of 20 October 1997, by
and among (a) GfE Gesellschaft fur Elektrometallurgie mit beschrankter Haftung,
a German corporation having its principal place of business at Hofener
Stra(beta)e 45, 90431 Nurnberg ("GfE Holding Company"), GfE Umwelttechnik GmbH,
a German corporation having its principal place of business at Hofener
Stra(beta)e 45, 90431 Nurnberg ("GfE UT"), GfE Gie(beta)erei- und
Stahlwerksbedarf GmbH, a German corporation having its principal place of
business at KreuzStra(beta)e 34, 40210 Dusseldorf ("GfE G&S"), GfE Metalle und
Materialien GmbH, a German corporation having its principal place of business at
Hofener Stra(beta)e 45, 90431 Nurnberg ("GfE M&M"), KERAMED Medizintechnik GmbH,
a German corporation having its principal place of business at An den Trillers
Buschen 2, 07646 Morsdorf/Thuringen ("KERAMED", and collectively with GfE
Holding Company, GfE UT, GfE G&S and GfE M&M, the "Borrowers"), and (b)
BankBoston, N.A., Zweigniederlassung Frankfurt/Main (the "Bank").
ss.1. Definitions. Certain capitalised terms are defined below:
Accounts: All rights of the Borrowers to any payment of money for goods
sold, leased or otherwise marketed in the ordinary course of business, whether
evidenced by or under or in respect of a contract or instrument, and to all
proceeds in respect thereof.
Agreement: See preamble, which term shall include this Agreement and the
Schedules and Exhibits hereto, each as amended and in effect from time to time.
Alternative Interest Rate: See ss.4.1.
Bank: See preamble.
Bank's Special Counsel: Bingham Dana LLP or such other counsel as may be
approved by the Bank.
Borrower Agent: GfE Holding Company, as agent on behalf of the Borrowers.
Borrowers: See preamble.
Borrowing Base: At the relevant time of reference thereto and with respect
to a Borrower, an amount determined by the Bank by reference to such Borrower's
most recent Borrowing Base Report, which is equal to the sum of (a) 85% of the
sum of the Deutschemark Equivalent of the Eligible Accounts of such Borrower at
such time, plus (b) 60% of the net book value (valued on an average cost basis
at the lower of cost or
1
<PAGE> 7
market (except as provided below in this definition) by such Borrower in a
manner consistent with its past practices) of the Eligible Inventory of such
Borrower at such time, minus (c) the aggregate amount owed by such Borrower to
German trade creditors that are raw material suppliers at such time, minus (d)
the aggregate amount owed by such Borrower to non-German trade creditors that
are raw material suppliers at such time and that have valid title retention
claims at such time. Notwithstanding that the Eligible Inventory of each
Borrower shall be reported at the lower of cost or market as provided above, the
Bank hereby acknowledges that each Borrower reviews its inventory for market
adjustment on a quarterly basis only. Each Borrower hereby agrees to adjust its
inventory to the lower of cost or market on a more current basis in the event of
any material decrease in the market price for any such inventory which would
cause the amount of the Eligible Inventory of such Borrower to be materially
misstated if not so currently adjusted.
The Borrowing Base for each Borrower shall be determined monthly (or at
such other interval as may be specified pursuant to ss.9.1(a)(v)) by the Bank by
reference to such Borrower's Borrowing Base Report. The components of any
Borrower's Borrowing Base, the advance rates provided for therein, and the
definitions contained in this Agreement governing eligibility criteria for such
components of such Borrower's Borrowing Base may hereafter be adjusted or
revised by the Bank in its reasonable judgement on the basis of any then
recently completed commercial finance examination or appraisal or other
information then recently delivered by such Borrower to the Bank.
Borrowing Base Report: With respect to a Borrower, a report, with
supporting details satisfactory to the Bank, setting forth such Borrower's
computation of its Borrowing Base, such report to be in the form of Exhibit A
attached hereto.
Business Day: Any day on which banks in Frankfurt are open for business
generally and, in the case of Interbank Rate Loans, also a day that is an
Interbank Business Day.
Charter Documents: In respect of any entity, the memorandum and articles
of association of such entity, or other constitutive documents of such entity.
Closing Agenda: See ss.8(a)(xi).
Closing Date: The first date on which the conditions set forth in ss.8
have been satisfied and any Loans are to be made or any Collateral Instrument is
to be issued hereunder.
Collateral: All of the property, rights and interests of the Borrowers
that are or are intended to be subject to the security interests and mortgages
created by the Security Documents.
Collateral Instrument: Any Letter of Credit or Guarantee issued, renewed
or extended by the Bank pursuant to ss.3 hereof.
2
<PAGE> 8
Collateral Instrument Application: See ss.3.1(a).
Collateral Instrument Fees: See ss.3.6.
Commitment: The amount of the Bank's commitment to make Loans to, and to
issue, extend or renew Collateral Instruments for the account of, the Borrowers,
such amount initially being DM 20,500,000, as the same may be reduced from time
to time pursuant to the provisions hereof; or if such commitment is terminated
pursuant to the provisions hereof, zero.
Consent: In respect of any Person, any permit, licence or exemption from,
approval, consent of, registration or filing with any local, state or federal
governmental or regulatory agency or authority, required under applicable law.
consolidated: With reference to any term defined herein, shall mean that
term as applied to the accounts of a given Person and its Subsidiaries,
consolidated in accordance with German GAAP or U.S. GAAP, as applicable.
Continuation Request: See ss.2.1(c).
Default: An event or act which, with the giving of notice and/or the lapse
of time, would become an Event of Default.
Deutschemarks or DM: The lawful currency of the Federal Republic of
Germany from time to time.
Deutschemark Equivalent: With respect to any amount denominated in
Deutschemarks, such amount in Deutschemarks, and with respect to any amount
denominated in Dollars, the amount of Deutschemarks which could be purchased
with that amount of Dollars at the spot rate of exchange quoted by the Bank at
or about 11.00 a.m. (Frankfurt time) on such date for the purchase of
Deutschemarks with Dollars.
Deutschemark Interbank Rate: With respect to an Interbank Rate Loan
denominated in Deutschemarks and to be made for a specified Interest Period, the
rate of interest at which the Bank is able in accordance with its normal
practice to obtain like deposits in Deutschemarks in the Frankfurt interbank
market for a period comparable in length to such Interest Period, as determined
by the Bank in its sole discretion (excluding, however, arbitrary decisions
which are apparently unreasonable).
Deutschemark Overdraft Facility: See ss.2.1(d).
Deutschemark Overdraft Rate: With respect to Overdraft Rate Loans
denominated in Deutschemarks, the annual rate of interest determined from time
to time by the Bank in its sole discretion (excluding, however, arbitrary
decisions which are
3
<PAGE> 9
apparently unreasonable) as its "overdraft interest rate" for loans denominated
in Deutschemarks.
Dollars or $: Dollars in lawful currency of the United States of America.
Dollar Interbank Rate: With respect to an Interbank Rate Loan denominated
in Dollars and to be made for a specified Interest Period, the rate of interest
at which the Bank is able in accordance with its normal practice to obtain like
deposits in Dollars in the Frankfurt interbank market for a period comparable in
length to such Interest Period, as determined by the Bank in its sole discretion
(excluding, however, arbitrary decisions which are apparently unreasonable).
Dollar Overdraft Facility: See ss.2.1(e).
Dollar Overdraft Rate: With respect to Overdraft Rate Loans denominated in
Dollars, the annual rate of interest determined from time to time by the Bank in
its sole discretion (excluding, however, arbitrary decisions which are
apparently unreasonable) as its "overdraft interest rate" for loans denominated
in Dollars.
Drawdown Date: The date on which any Loan is made or is to be made, and
the date on which any Loan is continued in accordance with ss.2.1(c).
Eligible Accounts: Those Accounts of the Borrowers (net of any finance
charges, late charges, credits, rebates, contras or other offsets, commissions,
counterclaims or adjustments) (a) which the Borrowers reasonably determine to be
collectible, (b) the account debtors in respect of which are not reasonably
deemed uncreditworthy by the Bank, are not debtors in any bankruptcy,
insolvency, liquidation, reorganisation, dissolution or similar case or
proceeding or assignors for the benefit of creditors, are not affiliated with
the Borrowers, and purchased the goods or services for reasonably equivalent
value, (c) which are not outstanding for more than ninety (90) days past the
earlier to occur of (i) the date of invoice and (ii) the date of shipment (as to
goods) or of provision (as to services), (d) which are not more than sixty (60)
days past due from the due date thereof and which are on terms not to exceed
thirty (30) days, (e) over which there is no Lien in favour of any Person other
than the Bank, and in which the Bank has a valid and perfected first-priority
security interest, (f) which are in payment of fully performed and undisputed
obligations, (g) that are not due from any account debtor with respect to which
more than fifty percent (50%) of the aggregate amount of all Accounts owing from
such account debtor are not Eligible Accounts by reason of the foregoing clause
(c) or (d), (h) which are payable in Dollars or Deutschemarks from an account
debtor with its chief executive office or a branch office located within the
Federal Republic of Germany or within any of the Specified Countries and
invoiced to and payable from such office (except to the extent that the
Borrowers may include Accounts payable in Dollars or Deutschemarks by certain
specified account debtors from offices outside of the Federal Republic of
Germany and outside of the Specified Countries that are, in each such case,
insured in full by a policy or policies of receivables insurance in form and
substance satisfactory to the Bank,
4
<PAGE> 10
provided, that the Bank may in its discretion, upon thirty (30) days prior
notice to the Borrowers, exclude any such Accounts payable from offices outside
of the Federal Republic of Germany and theretofore includable in Eligible
Accounts), (i) that are not due from an account debtor listed on Schedule 1
hereto or any affiliate of any such account debtor, and (j) that are not
supported by a letter of credit, guarantee, indemnity or other assurance unless
the Bank has a prior, perfected security interest in such letter of credit,
guarantee, indemnity or other assurance.
Eligible In-Transit Inventory: Inventory (a) which is in transit and which
has been shipped from its original place of embarkation and with respect to
which the next place of debarkation is in the Federal Republic of Germany, (b)
which is represented by negotiable documents of title as to which the Bank is a
holder to whom such negotiable documents of title have been duly negotiated, and
(c) as to which the Bank is an additional but primary loss payee under all
insurance policies covering any casualty with respect thereto.
Eligible Inventory: Inventory owned by any of the Borrowers (net of
reserves for off grade inventory and intercompany profit, as such reserves may
be adjusted by the Bank in its reasonable discretion on account of improvements
or deteriorations in reporting of inventory), (a) which is owned, possessed and
held for sale by a Borrower within the Federal Republic of Germany but not yet
shipped, other than Eligible In- Transit Inventory, which shall not be excluded
from Eligible Inventory pursuant to this clause (a), provided that, at the
Bank's discretion, the Bank will consider including as Eligible Inventory
inventory of the Borrowers held on consignment in Austria and the United Kingdom
so long as (i) the Bank's interest in such inventory is not impaired thereby,
(ii) the Borrowers take such action and execute such documentation as may be
necessary in the opinion of the Bank for the Bank to have a perfected
first-priority security interest in such inventory under all applicable laws and
to have available to it all remedies available to it with respect to inventory
held by the Borrowers for sale in the Federal Republic of Germany, and (iii) the
Bank receives opinions of local counsel to such effect and otherwise in form and
substance satisfactory to the Bank, (b) for which, if held on premises leased by
any of the Borrowers, a waiver of the lessor and, if any, sublessor, in each
case reasonably satisfactory to the Bank has been delivered to the Bank, (c)
over which there is no Lien in favour of any Person other than the Bank and in
which the Bank has a valid and perfected first-priority security interest, (d)
which is otherwise in the possession of one of the Borrowers (other than
Eligible In-Transit Inventory, which shall not be excluded from Eligible
Inventory solely because it is not in the possession of the Borrowers) unless
the Bank has received a waiver from the party in possession of such inventory in
form and substance reasonably satisfactory to the Bank, (e) which is not work in
process, (f) which is not production and packing supplies, (g) which is not
spare parts, (h) which does not reflect any capitalised inventory variances, (i)
which has not been deemed by the Bank to be otherwise either obsolete or
unmarketable, (j) which is not held by the Borrowers on consignment and is
actually owned by one of the Borrowers, and (k) which is not damaged.
Notwithstanding anything herein to the contrary, the Eligible Inventory of
KERAMED shall be deemed to be zero, provided that the Bank, in its sole
discretion, may hereafter
5
<PAGE> 11
consider including (but shall not be required to include) inventory of KERAMED
as Eligible Inventory, with eligibility criteria and advance rates to be
determined by the Bank in its sole discretion based upon the results of
commercial finance examinations performed by the Bank from time to time.
Event of Default: See ss.10.
Fee Letter: The letter agreement dated on or prior to the Closing Date
among the Borrowers and the Bank.
Financials: For any Person in respect of any period, the consolidated and
consolidating balance sheet of such Person and its Subsidiaries as at the end of
such period, and the related consolidated and consolidating statement of income
and consolidated and consolidating statement of cash flow of such Person for
such period, each setting forth in comparative form the consolidated figures for
the previous comparable fiscal period, all in reasonable detail and prepared in
accordance with German GAAP or U.S. GAAP, as the case may be.
German GAAP: Generally accepted accounting principles in the Federal
Republic of Germany, (a) generally, as in effect from time to time, and (b) for
purposes of determining compliance by the Borrowers with their financial
covenants set forth herein, as in effect for the fiscal year reported in the
most recent Financials submitted to the Bank prior to execution of this
Agreement.
GfE G&S: See preamble.
GfE Holding Company: See preamble.
GfE M&M: See preamble.
GfE UT: See preamble.
Global Security Assignment Agreements: The several Global Security
Assignment Agreements (Global-Sicherungsabtretungsvertrag), dated or to be dated
on or prior to the Closing Date, made by the Borrowers in favour of the Bank and
in form and substance satisfactory to the Bank.
Guarantee: A guarantee, indemnity or other assurance, in a form and on
terms acceptable to the Bank, issued, renewed or extended by the Bank for the
account of one or more Borrowers pursuant to ss.3 hereof.
Hazardous Substances: See ss.7(m)(ii).
Holding Guarantee: See ss.6.3.
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Indebtedness: In respect of any entity, all obligations, contingent and
otherwise, that in accordance with German GAAP should be classified as
liabilities, including without limitation (a) all debt obligations, (b) all
liabilities secured by Liens, (c) all guarantees of Indebtedness of others, and
(d) all liabilities in respect of bankers' acceptances or letters of credit.
Interbank Business Day: Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in Frankfurt.
Interbank Rate: With respect to Interbank Rate Loans denominated in
Deutschemarks, the Deutschemark Interbank Rate. With respect to Interbank Rate
Loans denominated in Dollars, the Dollar Interbank Rate.
Interbank Rate Loans: Loans drawn down in accordance with ss.2.1(b)
bearing interest calculated by reference to the Interbank Rate (for which the
Alternative Interest Rate may be substituted in accordance with ss.4.1).
Interest Payment Date: (i) As to any Overdraft Rate Loan, the first day of
the calendar month following the calendar month which includes the Drawdown Date
thereof, and (ii) as to any Interbank Rate Loan, the last day of each Interest
Period applicable thereto; provided that if such Interest Period is 6 months,
also the last day of the third calendar month following the calendar month which
includes the Drawdown Date thereof; and provided further that if such Interest
Period is 12 months, also the last day of the third calendar month, the sixth
calendar month, and the ninth calendar month following the calendar month which
includes the Drawdown Date.
Interest Period: With respect to each Loan, (i) initially, the period
commencing on the Drawdown Date of such Loan and ending on the last day of one
of the periods set forth below, as selected by the Borrower Agent on behalf of a
Borrower in a Loan Request (A) for any Overdraft Rate Loan, the last day of the
calendar month; and (B) for any Interbank Rate Loan, 1, 2, 3, or (to the extent
generally available in the Bank's reasonable discretion) 6 or 12 months; and
(ii) thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Loan and ending on the last day of one of the
periods set forth above, as selected by the Borrower Agent on behalf of such
Borrower in a Continuation Request; provided that all of the foregoing
provisions relating to Interest Periods are subject to the following:
(a) if any Interest Period with respect to an Interbank Rate Loan
would otherwise end on a day that is not an Interbank Business Day, that
Interest Period shall be extended to the next succeeding Interbank
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Interbank Business Day;
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(b) if any Interest Period with respect to an Overdraft Rate Loan
would end on a day that is not a Business Day, that Interest Period shall
end on the next succeeding Business Day;
(c) if the Borrower Agent shall fail to give a Continuation Notice
as provided in ss.2.1(c), such Borrower shall be deemed to have requested
that such Interbank Rate Loan have a succeeding Interest Period of one (1)
month;
(d) any Interest Period relating to any Interbank Rate Loan that
begins on the last Interbank Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Interbank
Business Day of a calendar month; and
(e) any Interest Period relating to any Interbank Rate Loan that
would otherwise extend beyond the Maturity Date shall end on the Maturity
Date.
KERAMED: See preamble.
KERAMED Disposition: The sale or other disposition of all or substantially
all of the assets or all of the issued share capital of KERAMED.
Letter of Credit: A documentary letter of credit or a standby letter of
credit, in a form and on terms acceptable to the Bank, issued, renewed or
extended by the Bank for the account of one or more of the Borrowers pursuant to
ss.3.
Lien: Any lien, encumbrance, mortgage, pledge, hypothecation, charge,
restriction or other security interest of any kind securing any obligation of
any Person.
Loan: Any loan made or to be made to a Borrower pursuant to ss.2(a), any
utilisation by a Borrower of its Deutschemark Overdraft Facility and any
utilisation by a Borrower of its Dollar Overdraft Facility.
Loan Documents: This Agreement, the Holding Guarantee, the Collateral
Instrument Applications, the Collateral Instruments, the Security Documents and
the Fee Letter, in each case as from time to time amended or supplemented, and
all of the instruments, agreements and documents executed in connection
therewith.
Loan Request: See ss.2.1(b).
Materially Adverse Effect: Any materially adverse effect on the financial
condition or business operations of the Borrowers, taken together, or material
impairment of the ability of any of the Borrowers to perform their obligations
hereunder or under any of the other Loan Documents.
Maturity Date: April 14, 2000.
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Maximum Dollar Drawing Amount: With respect to the Collateral Instruments
denominated in Dollars issued for the account of a single Borrower or all of the
Borrowers, as applicable, the maximum aggregate amount from time to time that
the beneficiaries may draw under such outstanding Collateral Instruments, as
such aggregate amount may be reduced from time to time pursuant to the terms of
such Collateral Instruments.
Maximum Drawing Amount: With respect to the Collateral Instruments issued
for the account of a single Borrower or all of the Borrowers, as applicable, the
Deutschemark Equivalent of the maximum aggregate amount from time to time that
the beneficiaries may draw under such outstanding Collateral Instruments, as
such aggregate amount may be reduced from time to time pursuant to the terms of
such Collateral Instruments.
MIR Lease: See ss.9.2(e)(AA).
Net Income (or Deficit): With respect to any Borrower for any period, the
net income (or deficit) of such Borrower for such period, after deduction of all
expenses, taxes and other proper charges, determined in accordance with German
GAAP, after eliminating therefrom all extraordinary nonrecurring items of
income.
Net Worth: With respect to any Borrower at any time, the excess of Total
Assets of such Borrower at such time over Total Liabilities of such Borrower at
such time, less, to the extent otherwise includable in the computations of Net
Worth, any subscriptions receivable.
Obligations: All indebtedness, obligations and liabilities of the
Borrowers to the Bank, individually or collectively, existing on the date of
this Agreement or arising thereafter, direct or indirect, joint or several,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
secured or unsecured, arising by contract, operation of law or otherwise,
arising or incurred under this Agreement or any other Loan Document or in
respect of any of the Loans made or Reimbursement Obligations incurred or in
respect of any obligations under this Agreement or any Collateral Instrument
Applications, Collateral Instruments or other instruments at any time evidencing
any thereof.
Operating Accounts: In relation to any Borrower, the operating accounts of
such Borrower maintained with the Bank.
Overdraft Rate: With respect to Overdraft Rate Loans denominated in
Deutschemarks, the Deutschemark Overdraft Rate. With respect to Overdraft Rate
Loans denominated in Dollars, the Dollar Overdraft Rate.
Overdraft Rate Loans: Loans bearing interest at the Overdraft Rate.
Permitted Liens: See ss.9.2(b).
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Person: Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Real Estate: All real property at any time owned or leased (as lessee or
sublessee) by any of the Borrowers.
Reimbursement Obligation: The Borrowers' obligation to reimburse the Bank
on account of any drawing under any Collateral Instrument as provided in ss.3.2.
Requirement of Law: In respect of any Person, any law, treaty, rule,
regulation or determination of an arbitrator, court, or other governmental
authority, in each case applicable to or binding upon such Person or affecting
any of its property.
Retained Income: With respect to any Borrower for any period, the greater
of (a) zero, or (b) the excess of (i) the Net Income of such Borrower for such
period, over (ii) all distributions on or in respect of such Borrower's capital
of any nature made to GfE Holding Company or to any of the U.S. Affiliates
during such period.
Security Documents: The Share Pledge Agreement, the Global Security
Assignment Agreements, the Security Transfer Agreements and all other security
agreements, debentures, charges over shares, mortgages, deeds of trust,
assignments, or other instruments or documents, in form and substance
satisfactory to the Bank which shall grant to the Bank Liens upon the
Collateral.
Security Transfer Agreements: The several Security Transfer Agreements
(Sicherungsubereingnungsvertrag), dated or to be dated on or prior to the
Closing Date, among the Borrowers and the Bank and in form and substance
satisfactory to the Bank.
Share Pledge Agreement: The Share Pledge Agreement
(Anteilsverpfandungsvertrag), dated or to be dated on or prior to the Closing
Date between GfE Holding Company and the Bank and in form and substance
satisfactory to the Bank.
Specified Countries: Switzerland, Austria, France, Luxemborg,
Lichtenstein, the United States of America, Belgium, Netherlands, Denmark,
Japan, the United Kingdom, Spain, Sweden, Norway, Finland, Australia and Italy.
Splitting Agreement: See ss.9.2(e)(BB).
Subsidiary: Any corporation, association, trust, or other business entity
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority (by number of votes) of
the outstanding issued share capital having voting power, regardless of whether
such right to vote depends upon the occurrence of a contingency.
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Taxes: See ss.5(f)(i).
Total Assets: With respect to any Borrower, all assets of such Borrower
determined in accordance with German GAAP.
Total Dollar Outstandings: At any time of reference thereto, the sum of
(a) the aggregate principal amount of the Loans denominated in Dollars
outstanding at such time, (b) the Maximum Dollar Drawing Amount at such time,
and (d) any Unpaid Reimbursement Obligations with respect to Collateral
Instruments denominated in Dollars at such time to the extent not included in
the Maximum Dollar Drawing Amount.
Total Liabilities: With respect to any Borrower, all liabilities of such
Borrower classified as such in accordance with German GAAP and all Indebtedness
of such Borrower, whether or not so classified.
Total Outstandings: At any time of reference thereto, the sum of (a) the
Deutschemark Equivalent of the aggregate principal amount of the Loans
outstanding at such time, (c) the Maximum Drawing Amount at such time, and (d)
the Deutschemark Equivalent of the Unpaid Reimbursement Obligations at such time
to the extent not included in the Maximum Drawing Amount.
Uniform Customs: The Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500 or any
successor thereto.
Unpaid Reimbursement Obligation: Any Reimbursement Obligation for which
the Borrowers do not reimburse the Bank on the date specified in, and in
accordance with, ss.3.2.
U.S. Affiliates: Metallurg, Inc., Shieldalloy Metallurgical Corporation,
Metallurg Services, Inc., MIR (China), Inc. and Metallurg Holdings Corporation.
U.S. GAAP: Principles that are (a) consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, as in effect from time to time, and (b) consistently applied with
past financial statements of the Borrowers adopting the same principles,
provided that in each case referred to in this definition of "U.S. GAAP" a
certified public accountant would, insofar as the use of such accounting
principles is pertinent, be in a position to deliver an unqualified opinion
(other than a qualification regarding changes in U.S. GAAP) as to financial
statements in which such principles have been properly applied.
ss.2. Revolving Credit and Overdraft Facilities.
ss.2.1. Commitment to Lend.
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(a) Subject to the terms and conditions set forth in this Agreement,
the Bank agrees to lend to the Borrowers and the Borrower Agent on behalf of a
Borrower may borrow, repay, and reborrow from time to time between the Closing
Date and the Maturity Date such sums in Deutschemarks or Dollars as are
requested by the Borrower Agent on behalf of a Borrower in accordance with this
ss.2.1; provided, that at no time shall the Total Outstandings exceed the
Commitment in effect at such time; provided, further, that at no time shall the
Total Dollar Outstandings exceed $5,000,000. Each request for an Interbank Rate
Loan, each utilisation of the Deutschemark Overdraft Facility, and each
utilisation of the Dollar Overdraft Facility shall constitute a representation
and warranty by the Borrowers that the conditions set forth in ss.8(a) and
ss.8(b), in the case of the initial Loans to be made on the Closing Date, and
ss.8(b), in the case of all other Loans, have been satisfied on the date of such
request.
(b) The Borrower Agent shall give to the Bank on behalf of a
Borrower written notice in the form of Exhibit B hereto (or telephonic notice
confirmed in a writing in the form of Exhibit B hereto) of each Interbank Rate
Loan requested hereunder by such Borrower (a "Loan Request") no later than 11.00
a.m. (Frankfurt time) two (2) Interbank Business Days prior to the proposed
Drawdown Date for such Loan. Each such notice shall specify (A) the principal
amount of the Interbank Rate Loan requested, (B) whether such Interbank Rate
Loan is to be denominated in Deutschemarks or Dollars, (C) the proposed Drawdown
Date of such Loan, and (D) the Interest Period for such Loan. Each Loan Request
shall be irrevocable and binding on such Borrower and shall obligate such
Borrower to accept the Loan requested from the Bank on the proposed Drawdown
Date. Each Loan Request shall be in a minimum aggregate amount of (i) DM 500,000
or an integral multiple thereof with respect to any Interbank Rate Loan to be
denominated in Deutschemarks, and (ii) $250,000 or an integral multiple thereof
with respect to any Interbank Rate Loan to be denominated in Dollars. Each
request for an Interbank Rate Loan shall be made on a separate Loan Request.
(c) Two (2) Interbank Business Days immediately preceding the last
day of an Interest Period with respect to any Interbank Rate Loan, the Borrower
Agent shall notify the Bank in writing (a "Continuation Request") of the
determination of the Borrower of such Loan of the duration of such succeeding
Interest Period with respect to such Loan. In the event that the Borrower Agent
fails to provide any such Continuation Request, then such Borrower shall be
deemed to have elected a succeeding Interest Period of one (1) month (or such
shorter period as will result in the Interest Period not extending beyond the
Maturity Date). Each such notice delivered pursuant to this ss.2.1(c) shall be
irrevocable.
(d) Any Borrower may from time to time between the date hereof and
the Maturity Date utilise an overdraft facility on such Borrower's Operating
Account denominated in Deutschemarks (the "Deutschemark Overdraft Facility") by
causing cheques or other items denominated in Deutschemarks to be presented for
payment against such Operating Account in amounts greater than the then
available balance in such account. Each such presentation shall be deemed to be
a request by such Borrower
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for an Overdraft Rate Loan denominated in Deutschemarks in an amount equal to
the excess of such cheque or other item over such available balance, and shall
be irrevocable. Each of the Borrowers acknowledges and agrees that the making of
such Loans shall, in each case, be subject in all respects to the provisions of
this Agreement as if they were Loans covered by a Loan Request including,
without limitation, the limitations set forth in ss.2.1(a) and the requirements
that the applicable provisions of ss.ss.8(a) and 8(b) (in the case of Loans made
on the Closing Date) and ss.8(b) be satisfied. All actions taken by the Bank
pursuant to the provisions of this ss.2.1(d) shall be conclusive and binding on
the Borrowers absent the Bank's gross negligence or wilful misconduct. All Loans
made pursuant to this ss.2.1(d) shall bear interest at the Deutschemark
Overdraft Rate.
(e) Any Borrower may from time to time between the date hereof and
the Maturity Date utilise an overdraft facility on such Borrower's Operating
Account denominated in Dollars (the "Dollar Overdraft Facility") by causing
cheques or other items denominated in Dollars to be presented for payment
against such Operating Account in amounts greater than the then available
balance in such account. Each such presentation shall be deemed to be a request
by such Borrower for an Overdraft Rate Loan denominated in Dollars in an amount
equal to the excess of such cheque or other item over such available balance,
and shall be irrevocable. Each of the Borrowers acknowledges and agrees that the
making of such Loans shall, in each case, be subject in all respects to the
provisions of this Agreement as if they were Loans covered by a Loan Request
including, without limitation, the limitations set forth in ss.2.1(a) and the
requirements that the applicable provisions of ss.ss.8(a) and 8(b) (in the case
of Loans made on the Closing Date) and ss.8(b) be satisfied. All actions taken
by the Bank pursuant to the provisions of this ss.2.1(e) shall be conclusive and
binding on the Borrowers absent the Bank's gross negligence or wilful
misconduct. All Loans made pursuant to this ss.2.1(e) shall bear interest at the
Dollar Overdraft Rate.
ss.2.2. Interest.
(a) So long as no Event of Default has occurred and is continuing,
the Borrowers shall pay interest on the Loans as follows:
(i) Each Overdraft Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at the Overdraft Rate for such
Loan;
(ii) Each Interbank Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at the rate of two and one-half
percent (2.50%) per annum above the Interbank Rate for such Loan (or the
Alternative Interest Rate for such Loan if applicable) determined for such
Interest Period; and
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(iii) The Borrowers severally, and not jointly, promise to pay
interest on each Loan in arrears on each Interest Payment Date with
respect thereto.
(b) While an Event of Default is continuing, all overdue amounts, if
any, whether for principal, interest, fees or costs payable under any of the
Loan Documents, shall be computed on a monthly basis and calculated as a current
account relationship (ss.355 German Commercial Code). All overdue amounts shown
in such monthly computations (including interest due) shall bear interest at a
rate per annum which is equal to the greater of (i) two percent (2.00%) per
annum above (A) the Deutschemark Overdraft Rate for overdue amounts denominated
in Deutschemarks, and (B) the Dollar Overdraft Rate for overdue amounts
denominated in Dollars, and (ii) for overdue amounts consisting of Interbank
Rate Loans, one percent (1.00%) per annum above the rate of interest otherwise
applicable thereto pursuant to the provisions of ss.2.2(a)(ii) hereof, in either
case until such amount is paid in full (after as well as before judgement) or
(as the case may be) such Event of Default has been cured or waived in writing
by the Bank.
ss.2.3. Repayments and Prepayments.
(a) The Borrowers hereby severally, and not jointly, agree to pay
the Bank on the Maturity Date, and there shall become absolutely due and payable
on the Maturity Date, all of the Loans outstanding to such Borrower on such
date, together with any and all accrued and unpaid interest thereon.
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(b) If, at any time:
(i) the Total Outstandings shall exceed the Commitment (as a result
of currency fluctuations or otherwise), each Borrower with a Loan
outstanding to it or a Collateral Instrument outstanding for its account
shall immediately pay an amount which in the aggregate is equal to such
excess for application to such Borrower's Loans or, if no Loans are then
outstanding, to be held by the Bank as cash collateral to secure payment
of such Borrower's Reimbursement Obligations up to the amount of 105% of
the Maximum Drawing Amount of the Collateral Instruments outstanding for
such Borrower's account;
(ii) the Total Dollar Outstandings shall exceed $5,000,000, each
Borrower with a Loan denominated in Dollars outstanding to it or a
Collateral Instrument denominated in Dollars outstanding for its account
shall immediately pay an amount which in the aggregate is equal to such
excess for application to such Borrower's Loans denominated in Dollars or,
if no Loans are then outstanding, to be held by the Bank as cash
collateral to secure payment of such Borrower's Reimbursement Obligations
denominated in Dollars up to the amount of 105% of the Maximum Dollar
Drawing Amount of the Collateral Instruments outstanding for such
Borrower's account; and
(iii) a payment is made to the Bank under this ss.2.3(b), the
Borrower Agent shall provide the Bank with a written statement detailing
the amounts paid by each Borrower at such time.
(c) If, on the last day of each Interest Period related to an
Interbank Rate Loan outstanding to a Borrower, the Deutschemark Equivalent of
the aggregate outstanding credit balances in a Borrower's Dollar and
Deutschemark Operating Accounts exceed DM 200,000, such Borrower shall
immediately pay the amount of such excess to the Bank for application to such
Interbank Rate Loan or, if such excess is greater than the amount of such Loan,
for application to the other Loans outstanding to such Borrower or, if no Loans
are then outstanding to such Borrower, to be held by the Bank as cash collateral
to secure payment of all Reimbursement Obligations for outstanding Collateral
Instruments issued by the Bank for the account of such Borrower up to the amount
of 105% of the Maximum Drawing Amount. The Borrower Agent shall provide the Bank
with a written statement detailing the amounts paid by such Borrower each time a
payment is made to the Bank under this ss.2.3(c).
(d) If, at any time, any U.S. Affiliate makes a direct or indirect
cash investment in a Borrower, such Borrower shall immediately pay the net cash
proceeds therefrom to the Bank for application to the Loans outstanding to such
Borrower or, if no Loans are then outstanding to such Borrower, to be held by
the Bank as cash collateral to secure payment of all Reimbursement Obligations
for outstanding Collateral Instruments issued by the Bank for the account of
such Borrower up to the amount of 105% of the Maximum Drawing Amount unless
payment of the net cash proceeds therefrom would amount to an unpermitted
repayment of registered capital; provided
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that the Borrowers shall not be obligated to make further repayments under this
ss.2.3(d) after such repayments have exceeded in the aggregate, on a cumulative
basis following the Closing Date, the Deutschemark Equivalent of $5,000,000. The
Borrower Agent shall provide the Bank with a written statement detailing the
amounts paid by each Borrower each time a payment is made to the Bank under this
ss.2.3(d).
(e) If, at any time, any Borrower effects a disposition of assets
(including the KERAMED Disposition and the Splitting Agreement) (other than (i)
dispositions of inventory in the ordinary course, (ii) dispositions of obsolete
equipment in the ordinary course, and (iii) dispositions permitted pursuant to
ss.9.2(e)(AA) and ss.9.2(e)(DD)) with the consent of the Bank as required by
ss.9.2(e)(ii) hereof, such Borrower shall immediately pay the net cash proceeds
therefrom to the Bank for application to the Loans outstanding to such Borrower
or, if no Loans are then outstanding to such Borrower, to be held by the Bank as
cash collateral to secure payment of all Reimbursement Obligations for
outstanding Collateral Instruments issued by the Bank for the account of such
Borrower up to the amount of 105% of the Maximum Drawing Amount. The Borrower
Agent shall provide the Bank with a written statement detailing the amounts paid
by each Borrower each time a payment is made to the Bank under this ss.2.3(e).
(f) At or prior to the completion of the KERAMED Disposition,
KERAMED shall pay to the Bank the entire unpaid principal amount of its Loans,
all interest accrued and unpaid thereon, all of its Unpaid Reimbursement
Obligations, and all other amounts payable by KERAMED hereunder and under the
other Loan Documents, and the Bank may require KERAMED to deliver to the Bank
cash in the amount of 105% of the Maximum Drawing Amount of KERAMED's Collateral
Instruments to be held by the Bank as cash collateral for KERAMED's
Reimbursement Obligations.
(g) At or prior to the execution of the Splitting Agreement, GfE G&S
shall pay to the Bank the entire unpaid principal amount of its Loans, all
interest accrued and unpaid thereon, all of its Unpaid Reimbursement
Obligations, and all other amounts payable by GfE G&S hereunder and under the
other Loan Documents, and the Bank may require GfE G&S to deliver to the Bank
cash in the amount of 105% of the Maximum Drawing Amount of GfE G&S's Collateral
Instruments to be held by the Bank as cash collateral for GfE G&S's
Reimbursement Obligations.
(h) Any Borrower shall have the right, at its election, to repay the
outstanding amount of its Loans, as a whole or in part, at any time without
penalty or premium, provided that any full or partial prepayment of the
outstanding amount of any Interbank Rate Loans pursuant to this ss.2.3 which is
made on a day other than the last day of the Interest Period relating thereto
shall be accompanied by payment of all amounts required by ss.4.6 hereof. The
Borrower Agent on behalf of such Borrower shall give the Bank, no later than
10.00 a.m. (Frankfurt time) at least three (3) Interbank Business Days' prior
written notice of any proposed prepayment by such Borrower pursuant to this
ss.2.3 of Interbank Rate Loans, in each case specifying the proposed date
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of prepayment of Loans and the principal amount to be prepaid, provided that
such notice requirements shall not apply to any required prepayments made
pursuant to the provisions of ss.2.3 hereof. Each such partial prepayment of
Interbank Rate Loans denominated in Deutschemarks pursuant to this ss.2.3(g)
shall be in an integral multiple of DM 500,000. Each such partial prepayment of
Interbank Rate Loans denominated in Dollars pursuant to this ss.2.3(g) shall be
in an integral multiple of $300,000. Each such partial prepayment of the Loans
shall be accompanied by the payment of accrued interest on the principal prepaid
to the date of prepayment. Any amounts so repaid may be reborrowed before the
Maturity Date, upon the terms and subject to the conditions of this Agreement.
(i) The obligation of the Borrowers to repay all Obligations shall
be evidenced by this Agreement, it being the intention of the parties hereto
that the Borrowers' Obligations shall be evidenced only as stated herein and in
the other Loan Documents and not by separate promissory notes or other
instruments.
ss.2.4. Reduction of Commitment.
(a) The Borrowers shall have the right at any time and from time to
time upon three (3) Business Days' prior written notice to the Bank to reduce by
DM 500,000 or an integral multiple thereof or terminate entirely the Commitment,
whereupon the Commitment shall be reduced in accordance with the amount
specified in such notice or, as the case may be, terminated.
(b) If, at any time, any Borrower effects a disposition of assets
(including the KERAMED Disposition and the Splitting Agreement) (other than (i)
dispositions of inventory in the ordinary course, (ii) dispositions of obsolete
equipment in the ordinary course, and (iii) dispositions permitted pursuant to
ss.9.2(e)(AA) and ss.9.2(e)(DD)), the Commitment shall automatically be reduced
by the full amount of any such net cash proceeds.
(c) Upon the effective date of any such reduction or termination,
the Borrowers shall pay to the Bank the full amount of any commitment fee then
accrued on the amount of the reduction. No reduction or termination of the
Commitment may be reinstated.
ss.3. Collateral Instruments.
ss.3.1. Issuance of Collateral Instruments.
(a) Subject to the terms and conditions hereof and the execution and
delivery by the Borrower Agent on behalf of the relevant Borrower of the
appropriate application on the Bank's customary form (a "Collateral Instrument
Application"), the Bank in reliance upon the representations and warranties of
the Borrowers contained herein, agrees to issue, extend and renew from time to
time from the date hereof until but not including the date which is thirty (30)
days prior to the then scheduled Maturity
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Date, for the account of one or more Borrowers, one or more Collateral
Instruments, in such form and in Deutschemarks or Dollars as may be requested by
the Borrower Agent and agreed to by the Bank; provided, however, that, after
giving effect to such request, (i) the sum of the aggregate Maximum Drawing
Amount and the Deutschemark Equivalent of all Unpaid Reimbursement Obligations
under all Collateral Instruments shall not exceed DM 1,000,000 at any one time,
(ii) the sum of the Total Outstandings shall not exceed the Commitment. No
Collateral Instrument shall be issued, extended or renewed with an expiration
date occurring after the date which is 180 days following the then scheduled
Maturity Date or which provides for drafts which may be paid after the date
which is 180 days following the then scheduled Maturity Date.
(b) Each Collateral Instrument Application shall be completed to the
satisfaction of the Bank. In the event that any provision of any Collateral
Instrument Application shall be inconsistent with any provision of this
Agreement, then the provisions of this Agreement shall, to the extent of any
such inconsistency, govern.
(c) Each Collateral Instrument issued, extended or renewed hereunder
shall, among other things, provide for the payment of sight drafts for honour
thereunder when presented in accordance with the terms thereof and when
accompanied by the documents described therein. Each Collateral Instrument so
issued, extended or renewed shall be subject to the Uniform Customs.
(d) On or prior to the then scheduled Maturity Date, the Borrowers
shall, with respect to each Collateral Instrument then outstanding (i) pay to
the Bank in cash for deposit into a cash collateral account with the Bank an
amount equal to one hundred and five percent (105%) of the Maximum Drawing
Amount of such Collateral Instrument as of such date, which amount shall be held
by the Bank as cash collateral for any Reimbursement Obligations or other
obligations incurred with respect to such Collateral Instrument, or (ii) deliver
to the Bank a "back-to-back" letter of credit, in form and substance
satisfactory to the Bank, issued by a financial institution satisfactory to the
Bank in its sole discretion and naming the Bank as beneficiary in an amount
equal to one hundred and five percent (105%) of the Maximum Drawing Amount of
such Collateral Instrument as of such date. Any cash sums deposited into a cash
collateral account pursuant to clause (i) shall be reduced or released, and any
back-to-back letter of credit issued pursuant to clause (ii) shall be reduced
in amount or returned, if and to the extent that the Maximum Drawing Amount with
respect to the applicable Collateral Instrument has been reduced or the
Collateral Instrument has expired or been cancelled and all Unpaid Reimbursement
Obligations and other amounts due or to become due and owing with respect
thereto have been paid.
ss.3.2. Reimbursement Obligation of the Borrowers. In order to induce the
Bank to issue, extend and renew each Collateral Instrument, each Borrower on
whose behalf such Collateral Instrument was requested hereby severally, and not
jointly, agrees to reimburse or pay to the Bank with respect to such Collateral
Instrument issued, extended or renewed by the Bank hereunder,
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(a) except as otherwise expressly provided in ss.3.2(b) and (c), on
each date that any draft presented under such Collateral Instrument is honoured
by the Bank, or the Bank otherwise makes a payment with respect thereto, (i) the
amount paid by the Bank under or with respect to such Collateral Instrument, and
(ii) the amount of any fees, charges or other costs and expenses whatsoever
incurred by the Bank in connection with any payment made by the Bank under, or
with respect to, such Collateral Instrument,
(b) upon the reduction (but not termination) of the Commitment to an
amount less than the Maximum Drawing Amount, an amount equal to such difference,
which amount shall be held by the Bank as cash collateral for all Reimbursement
Obligations with respect to such Collateral Instrument, and
(c) upon the termination of the Commitment, or the acceleration of
the Reimbursement Obligations with respect to all Collateral Instruments in
accordance with ss.10, an amount equal to 105% of the Maximum Drawing Amount,
which amount shall be held by the Bank as cash collateral for all Reimbursement
Obligations with respect to such Collateral Instrument.
Each such payment shall be made to the Bank at the address provided in
ss.14(d)(ii) in immediately available funds. Interest on any and all amounts
remaining unpaid by the Borrowers under this ss.3.2 at any time from the date
such amounts become due and payable (whether as stated in this ss.3.2, by
acceleration or otherwise) until payment in full (whether before or after
judgement) shall be payable to the Bank on demand at the rate specified in
ss.2.2(b).
ss.3.3. Collateral Instrument Payments. If any draft shall be presented or
other demand for payment shall be made under any Collateral Instrument, the Bank
shall notify the Borrower Agent of the date and amount of the draft presented or
demand for payment and of the date and time when it expects to pay such draft or
honour such demand for payment. The responsibility of the Bank to the Borrowers
shall be only to determine that the documents (including each draft) delivered
under each Collateral Instrument in connection with such presentment shall be in
conformity in all material respects with such Collateral Instrument.
ss.3.4. Obligations Absolute. The Borrowers' obligations under this ss.3
relating to Collateral Instruments shall be absolute and unconditional under any
and all circumstances and irrespective of the occurrence of any Default or Event
of Default or any condition precedent whatsoever or any setoff, counterclaim or
defence to payment which the Borrowers may have or have had against the Bank or
any beneficiary of a Collateral Instrument. The Borrowers further agree with the
Bank that the Bank shall not be responsible for, and the Reimbursement
Obligations shall not be affected by, among other things, the validity or
genuineness of documents or of any endorsements thereon, even if such documents
should in fact prove to be in any or all respects invalid, fraudulent or forged,
or any dispute between or among the Borrowers, the beneficiary of any Collateral
Instrument or any financing institution or other party to which any
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Collateral Instrument may be transferred or any claims or defences whatsoever of
the Borrowers against the beneficiary of any Collateral Instrument or any such
transferee. The Bank shall not be liable for any error, omission, interruption
or delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Collateral Instrument other than as a result
of the Bank's gross negligence or wilful misconduct. The Borrowers agree that
any action taken or omitted by the Bank under or in connection with each
Collateral Instrument and the related drafts and documents, if done in good
faith, shall be binding upon the Borrowers and shall not result in any liability
on the part of the Bank to the Borrowers.
ss.3.5. Reliance by Bank. To the extent not inconsistent with ss.3.4, the
Bank shall be entitled to rely, and shall be fully protected in relying upon,
any Collateral Instrument, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person and upon
advice and statements of legal counsel, independent accountants and other
experts selected by the Bank.
ss.3.6. Collateral Instrument Fees. Each Borrower on whose behalf a
Collateral Instrument is requested shall pay a fee (in each case, a "Collateral
Instrument Fee") to the Bank in respect of such Collateral Instrument in an
amount equal to one and three-quarters percent (1.75%) per annum of the face
amount of such Collateral Instrument (such amount payable in Deutschemarks or
Dollars, as applicable), plus the Bank's customary issuance, amendment and other
administrative processing fees (such amounts payable in Deutschemarks). Such
Collateral Instrument Fees shall be payable (a) with respect to all such per
annum fees (but not such issuance, amendment and other administrative processing
fees) payable on each standby Collateral Instrument (each such Collateral
Instrument having been agreed to by the Bank and the Borrower) in arrears on the
first day of each calendar quarter for the immediately preceding calendar
quarter, and (b) with respect to all such per annum fees payable on each
documentary Collateral Instrument and with respect to all fees relating to all
other Collateral Instruments on the date of issuance or of any extension or
renewal of any such Collateral Instrument and at such other time or times as
such charges are customarily made by the Bank.
ss.4. Changes in Circumstances.
ss.4.1. Inability to Determine Interbank Rate. In the event, prior to the
commencement of any Interest Period relating to any Interbank Rate Loan, the
Bank shall determine that adequate and reasonable methods do not exist for
ascertaining the Interbank Rate that would otherwise determine the rate of
interest to be applicable to such Interbank Rate Loan during such Interest
Period, the Bank shall forthwith give notice of such determination (which shall
be conclusive and binding on the Borrowers) to the Borrowers. In such event (a)
the Interest Period for the applicable Interbank Rate Loan shall be deemed to be
one month and (b) the Bank shall calculate interest on the principal amount of
such Interbank Rate Loan by substituting for the Interbank Rate the rate per
annum determined by the Bank (with notice to the Borrower Agent) to be that
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which fairly expresses as a percentage per annum the cost to the Bank of funding
such principal amount, from whatever source the Bank may select in good faith,
during such Interest Period (the "Alternative Interest Rate"), as certified by
the Bank to the Borrower Agent.
ss.4.2. Illegality. If there is at any time any change in any present
Requirement of Law or interpretation or application thereof, or any future
Requirement of Law or interpretation or application thereof, that in either case
shall make it unlawful for the Bank to maintain the Commitment hereunder or in
to make or perform any other obligation hereunder in relation to any Loan made
or to be made or any Collateral Instrument, issued, extended or renewed, then
the Bank shall, promptly after becoming aware of the same, deliver to the
Borrower Agent a certificate to that effect and:
(a) the Bank shall not thereafter be obliged to make any Loans or to
issue any Collateral Instrument; and
(b) if the Bank so requires, each Borrower shall within 30 days of
demand by the Bank (or such earlier date as may be required by applicable law
affecting the Bank) repay or provide cash collateral, as the case may be, to the
Bank an amount equal to the outstanding Loans and an amount equal to 105% of the
Maximum Drawing Amount of the outstanding Collateral Instruments, in both cases
together with accrued interest thereon and all other amounts owing to the Bank
hereunder, whereupon the Commitment shall be reduced to zero.
ss.4.3. Additional Costs, etc. If any change in any present applicable
law, or if any future applicable law, which expression, as used herein, includes
statutes, rules and regulations thereunder and interpretations thereof by any
competent court or by any governmental or other regulatory body or official
charged with the administration or the interpretation thereof and requests,
directives, instructions and notices at any time or from time to time hereafter
made upon or otherwise issued to the Bank by any central bank or other fiscal,
monetary or other authority (whether or not having the force of law), shall:
(a) materially change the basis of taxation (other than changes in
respect of any taxes expressly excluded from the definition of the term Taxes,
and without duplication of any changes in respect of (1) any Taxes or (2) any
other taxes for which the Bank is otherwise indemnified pursuant to the
provisions of ss.14(c) hereof) of payments to the Bank of the principal of or
the interest on any Loans or any other amounts payable to the Bank under this
Agreement or any of the other Loan Documents, or
(b) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held by, or
deposits in or for the account of, or loans by, or Collateral Instruments issued
by, the Bank, or
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(c) impose on the Bank any other conditions or requirements with
respect to this Agreement, the other Loan Documents, any Collateral Instruments,
the Loans, the Commitment, or any class of loans, letters of credit or
commitments of which any of the Loans or the Commitment forms a part, and the
result of any of the foregoing is
(i) to increase the cost to the Bank of making, funding, issuing,
renewing, extending or maintaining any of the Loans or the Commitment or
any Collateral Instrument, or
(ii) to reduce the amount of principal, interest, Reimbursement
Obligation or other amount payable to the Bank hereunder on account of the
Commitment, any Collateral Instrument or any of the Loans, or
(iii) to require the Bank to make any payment or to forego any
interest or Reimbursement Obligation or other sum payable hereunder, the
amount of which payment or foregone interest or Reimbursement Obligation
or other sum is calculated by reference to the gross amount of any sum
receivable or deemed received by the Bank from the Borrowers hereunder,
then, and in each such case, the Borrowers will, upon demand made by the Bank at
any time and from time to time and as often as the occasion therefor may arise,
pay to the Bank such additional amounts as determined by the Bank in its sole
discretion (excluding, however, arbitrary decisions) as will be sufficient to
compensate the Bank for such additional cost, reduction, payment or foregone
interest or Reimbursement Obligation or other sum.
ss.4.4. Capital Adequacy. If after the date hereof the Bank determines
that (a) the adoption of or change in any law, governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law)
regarding capital requirements for banks or bank holding companies or any change
in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (b) compliance by the Bank or any
corporation controlling the Bank with any law, governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law) of any
such entity regarding capital adequacy, has the effect of reducing the return on
the Bank's commitment with respect to any Loans to a level below that which the
Bank could have achieved but for such adoption, change or compliance (taking
into consideration the Bank's then existing policies with respect to capital
adequacy and assuming full utilisation of such entity's capital) by any amount
deemed by the Bank to be material, then the Bank may notify the Borrower Agent
of such fact. To the extent that the amount of such reduction in the return on
capital is not reflected in the Overdraft Rate or the Interbank Rate, as the
case may be, the Borrowers severally, and not jointly, agree to pay the Bank for
the amount of such reduction in the return on capital as determined by the Bank
in its sole discretion (excluding, however, arbitrary decisions) as and when
such reduction is determined upon presentation by the
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Bank of a certificate in accordance with ss.4.5 hereof. The Bank shall allocate
such cost increases among its customers in good faith and on an equitable basis.
ss.4.5. Certificate. A certificate setting forth any additional amounts
payable pursuant to ss.ss.4.3, 4.4 or 5(f) and a brief explanation of such
amounts which are due, submitted by the Bank to the Borrower Agent, shall be
conclusive, absent manifest error, that such amounts are due and owing.
ss.4.6. Indemnity. The Borrowers severally, and not jointly, agree to
indemnify the Bank and to hold the Bank harmless from and against any loss, cost
or expense that the Bank may sustain or incur as a consequence of (a) default by
the Borrowers in payment of the principal amount of or any interest on any
Interbank Rate Loans as and when due and payable, including any such loss or
expense arising from interest or fees payable by the Bank to lenders of funds
obtained by it in order to maintain its Interbank Rate Loans, (b) default by the
Borrowers in making a borrowing after the Borrowers have given (or are deemed to
have given) a Loan Request or Continuation Request relating thereto in
accordance with ss.2.1(b) or ss.2.1(c) or (c) the making of any payment of an
Interbank Rate Loan on a day that is not the last day of the applicable Interest
Period with respect thereto, including interest or fees payable by the Bank to
lenders of funds obtained by it in order to maintain any such Loans.
ss.5. Fees and Payments.
(a) The Borrowers agree to pay to the Bank on the Closing Date a
closing fee in accordance with the provisions of the Fee Letter.
(b) The Borrowers agree to pay to the Bank in arrears on the first
day of each calendar quarter, and upon the Maturity Date or any other date upon
which the Commitment shall cease to be any longer in effect, a commitment fee
calculated from the date hereof at a rate per annum which is equal to
three-eighths of one percent (3/8%) per annum of the average daily difference by
which the Commitment amount exceeds the Total Outstandings during the
immediately preceding calendar quarter or portion thereof.
(c) The Borrowers agree to pay to the Bank an administration fee in
accordance with the provisions of the Fee Letter.
(d) All payments of principal, interest, Reimbursement Obligations,
commitment fees, Collateral Instrument Fees, closing fees, administration fees
and any other amounts due hereunder or under any of the other Loan Documents
shall be made to the Bank at the address provided in ss.14(d)(ii) or at such
other location that the Bank may from time to time designate, in each case in
Deutschemarks in immediately available funds. The Bank shall be entitled to
charge the Operating Accounts or any other accounts of the Borrowers with the
Bank or any of the Bank's affiliates for any sum due and payable by the
Borrowers to the Bank hereunder or under any of the other Loan Documents.
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(e) All computations of interest and fees relating to the Interbank
Rate Loans and of commitment fees, Collateral Instrument Fees or other fees
shall, unless otherwise expressly provided herein, be based on a 360-day year
and paid for the actual number of days elapsed. All computations of interest and
fees relating to the Overdraft Rate Loans shall, unless otherwise expressly
provided herein, be based on a 365-day year and paid for the actual number of
days elapsed. Except as otherwise provided in the definition of the term
"Interest Period" with respect to Interbank Rate Loans, whenever a payment
hereunder or under any of the other Loan Documents becomes due on a day that is
not a Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and interest shall accrue during such extension. The
outstanding amount of the Loans as reflected on the records of the Bank from
time to time shall be considered correct and binding on the Borrowers in the
absence of demonstrable error. All payments of the commitment fee, closing fee,
administration fee or Collateral Instrument Fees payable hereunder shall be
non-refundable.
(f) (i) Each and every payment made by or on behalf of the Borrowers
hereunder and under any of the other Loan Documents shall be made, in
accordance with this ss.5, without setoff or counterclaim and free and
clear of and without deduction for any and all current or future taxes,
levies, imposts, duties, charges, fees, deductions or withholdings of any
nature now or hereafter imposed or levied by any jurisdiction or any
political subdivision thereof or taxing or other authority therein, and
all liabilities with respect thereto, excluding (A) taxes based upon or
measured by the net income or overall gross receipts of the Bank and (B)
franchise taxes imposed on the Bank, in each case by the jurisdiction
under the laws of which the Bank is organised, in which the applicable
lending office of the Bank is located or in which the Bank is otherwise
subject to tax other than by reason of the execution and performance of
this Agreement, or any political subdivision of such jurisdiction, (all
such nonexcluded taxes, levies, imposts, duties, charges, fees,
deductions, withholdings and liabilities, collectively or individually,
being called "Taxes"). If the Borrowers shall be required to deduct any
Taxes from or in respect of any sum payable hereunder or under any other
Loan Document to the Bank, (x) the sum payable shall be increased by the
amount necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this ss.5(f)), the
Bank shall receive an amount equal to the sum it would have received had
no such deductions been made, (y) the Borrowers shall make such deductions
and (z) the Borrowers shall pay the full amount deducted to the relevant
governmental authority in accordance with applicable law.
(ii) The Borrowers hereby severally, and not jointly, agree to
indemnify the Bank for the full amount of Taxes paid by the Bank and any
liability (including penalties, interest and expenses (including
reasonable attorney fees and expenses)) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted by
the relevant governmental authority. Such indemnification shall be made
within thirty days after the date
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<PAGE> 30
the Bank makes written demand therefor. If the Bank determines that it has
received a refund in respect of any Taxes as to which indemnification or
payment has been made by the Borrowers pursuant to this ss.5(f) and such
refund is reasonably determinable by the Bank to be allocable to such
indemnification or payment made by the Borrowers, it shall promptly remit
such refund (including any interest actually received by it) to the
Borrowers, less all out-of-pocket expenses of the Bank; provided, however,
that the Borrowers, upon request of the Bank, agree promptly to return
such refund (plus any interest) to the Bank in the event such party is
required to pay the refund to the relevant governmental authorities. The
Bank shall provide the Borrowers with a copy of any notice or assessment
from the relevant governmental authorities (deleting any confidential
information therein) requiring repayment of such refund.
(iii) As soon as practicable after the date of any payment of Taxes
by the Borrowers to the relevant governmental authority, the Borrowers
will promptly deliver to the Bank the original or a certified copy of a
receipt issued by such governmental authority evidencing payment thereof.
(g) Payments of principal or interest with respect to any Loan,
Collateral Instrument, or Unpaid Reimbursement Obligation shall be made in the
currency in which such Loan was advanced or in which such Collateral Instrument
was issued. Any and all fees payable hereunder shall be payable solely in
Deutschemarks.
ss.6. Collateral Security; Holding Guarantee.
ss.6.1. Security of Borrowers. The obligations of each Borrower under this
Agreement and the Loan Documents shall be secured by a perfected first-priority
security interest (subject only to Permitted Liens entitled to priority under
applicable law) in all of the assets of such Borrower (excluding all the fixed
assets and all fee and leasehold interests of such Borrower in any real
property), whether now owned or hereafter acquired, and including the issued
share capital of all direct Subsidiaries of such Borrower, all pursuant to the
terms of, and to the extent provided in, the Security Documents to which such
Borrower is a party.
ss.6.2. Collateral Security Perfection. Each of the Borrowers agrees to
take all action that the Bank may reasonably request to perfect and protect the
Bank's Liens upon the Collateral and for such Liens to obtain the priority
therefor contemplated hereby, including, without limitation, executing and
delivering such financing statements, providing such notices and assents of
third parties, obtaining such
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governmental approvals and providing such other instruments and documents in
recordable form as the Bank may reasonably request.
ss.6.3. Holding Guarantee and Security. GfE Holding Company shall
unconditionally and irrevocably guarantee the obligations of the other Borrowers
under this Agreement and the Loan Documents pursuant to the terms of the
guarantee in form and substance satisfactory to the Bank (the "Holding
Guarantee"). The obligation of GfE Holding Company under the Holding Guarantee
shall be in turn secured by a perfected first-priority security interest
(subject only to Permitted Liens entitled to priority under applicable law) in
all of the assets of GfE Holding Company (excluding all the fixed assets and all
fee and leasehold interests of GfE Holding Company in any real property),
whether now owned or hereafter acquired, and including the issued share capital
of all direct Subsidiaries of GfE Holding Company, all pursuant to the terms of,
and to the extent provided in, the Security Documents to which GfE Holding
Company is a party.
ss.6.4. Borrowers' Waivers of Defences. The obligations of the Borrowers
hereunder are several and not joint. Each of the Borrowers hereby waives any and
all defences relating to any action or omission to act by the Bank with respect
to the other Borrowers.
ss.7. Representations and Warranties. Each of the Borrowers represents and
warrants (as a Zusicherung im Wege eines Garantieversprechens) to the Bank on
the date hereof, on the date of any Loan Request, on the date of each request
for a Collateral Instrument, on each Drawdown Date, and on the date on which
each Collateral Instrument is issued, extended or renewed that:
(a) Such Borrower is duly organised, validly existing, and in good
standing under the laws of its jurisdiction of incorporation or organisation and
is duly qualified and in good standing in every other jurisdiction where it is
doing business and where failure to qualify would have a Materially Adverse
Effect, and the execution, delivery and performance by each of the Borrowers of
each of the Loan Documents to which it is a party (i) are within its corporate
authority, (ii) have been duly authorised by all necessary corporate action, and
(iii) do not conflict with or contravene its Charter Documents.
(b) Upon the execution and delivery of the Loan Documents by the
respective parties thereto, each Loan Document to which such Borrower is a party
shall constitute the legal, valid and binding obligation of such Borrower,
enforceable in
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accordance with its terms, except that the enforceability thereof may be subject
to any applicable bankruptcy, reorganisation, insolvency or other laws affecting
creditors' rights generally.
(c) No U.S. Affiliate is a debtor in any bankruptcy, insolvency,
liquidation, reorganisation, dissolution of similar case or proceeding on the
date hereof or, except where there is not reasonably likely to be a Materially
Adverse Effect relating to the Borrowers taken as a whole, after the date
hereof.
(d) Such Borrower has good and marketable title to all its material
properties, subject only to Permitted Liens, and possesses all assets, including
intellectual properties, franchises and Consents, adequate for the conduct of
its business as now conducted, without known conflict with any rights of others.
Such Borrower maintains insurance from financially responsible insurers, copies
of the policies for which have previously been delivered to the Bank, covering
such risks and in such amounts and with such deductibles as are customary in
such Borrower's businesses and are adequate.
(e) The Borrower Agent has provided to the Bank on such Borrower's
behalf the Borrowers' (i) audited Financials as at December 31, 1996, and for
the fiscal year then ended, and their unaudited quarterly Financials as at the
end of and for each fiscal quarter thereafter through June 30, 1997, in both
cases prepared in accordance with German GAAP, and (ii) audited Financials as at
December 31, 1996, and for the fiscal year then ended, and their unaudited
quarterly Financials as at the end of and for each fiscal quarter thereafter
through June 30, 1997, in both cases prepared in accordance with U.S. GAAP. Such
Financials are complete and correct and fairly present the position of the
Borrowers as at such dates and for such periods in accordance with German GAAP
or U.S. GAAP, as applicable, consistently applied (except that unaudited
Financials are subject to year-end audit adjustments and do not contain footnote
disclosures required by German GAAP or U.S. GAAP, as applicable). The Borrower
Agent on behalf of such Borrower has also provided to the Bank their forecast of
the consolidated and consolidating operations of the Borrowers and their
Subsidiaries for the period from January 1, 1997, through December 31, 1999, and
such forecast has been prepared in good faith based upon reasonable assumptions.
With respect to all Financials prepared in accordance with German GAAP, (1) such
Financials present a view of the assets, finance and results of the Borrowers
which is in accordance with the actual circumstances, (2) no capitalisation has
taken place to the extent that there are capitalisation options
(Aktivierungswahlrechte), (3) to the extent that there are options to include
items in the liabilities (Passivierungswahlrechte) such items have
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been included, (4) all statutorily permitted depreciations have been taken, (5)
all statutorily permitted accruals have been taken, (6) at the relevant balance
sheet date there are no liabilities, with the exception of liabilities resulting
from pending contractual relationships which are not required to be shown on a
balance sheet, that are not shown as liabilities in the relevant balance sheet
or covered by accruals, and (7) to the extent that contingent liabilities have
not been included in the liabilities they have been reflected as
below-the-line-items on the balance sheet (including liabilities resulting from
the issuance of comfort letters).
(f) Since December 31, 1996, there has been no materially adverse
change of any kind in such Borrower which would reasonably be expected to have a
Materially Adverse Effect on the Borrowers taken as a whole.
(g) There are no legal or other proceedings or investigations
pending or threatened against such Borrower before any court, tribunal or
regulatory authority which would, alone or together, be reasonably expected to
have a Materially Adverse Effect on the Borrowers taken as a whole. Such
Borrower has paid all such taxes as are due and payable (except those being
contested in good faith by appropriate proceedings and for which adequate
reserves have been taken) and has funded all employee payrolls (including all
required withholdings) on a periodic basis in the ordinary course of its
businesses consistent with past practices except to the extent that the failure
to pay such taxes or payrolls, singly or in the aggregate, would not reasonably
be expected to have a Materially Adverse Effect on the Borrowers taken as a
whole.
(h) The execution and delivery of, and the performance of its
obligations and the exercise of its rights under, the Loan Documents by such
Borrower, including borrowing under this Agreement and the obtaining of
Collateral Instruments (i) do not require any Consents other than those that
have been obtained or will be obtained prior to the Closing Date and that are in
full force and effect; and (ii) are not and will not be in conflict with or
prohibited or prevented by (A) any Requirement of Law, or (B) any Charter
Document, corporate minute or resolution, instrument, agreement or provision
thereof, in each case binding on it or affecting the property of such Borrower.
(i) Such Borrower is not in violation of (A) any Charter Document,
corporate minute or resolution, (B) any instrument or agreement, in each case
binding on it or affecting its property, which violation could have a Materially
Adverse Effect on the Borrowers taken as a whole, or (C) any Requirement of Law,
in a manner which
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could have a Materially Adverse Effect on the Borrowers taken as a whole. Such
Borrower is not a party to a collective bargaining agreement.
(j) Upon execution and delivery of this Agreement and the other Loan
Documents and the taking of all actions contemplated by the Security Documents,
the Bank shall have first-priority perfected Liens in the Collateral with
respect to such Borrower, subject only to Permitted Liens that are entitled to
priority under applicable law.
(k) There are no Liens on any assets of such Borrower or any of its
Subsidiaries other than Permitted Liens.
(l) All of the Subsidiaries of such Borrower are set forth on
Schedule 7(l). Except as set forth in Schedule 7(l), such Borrower is not a
party to any partnership or joint venture.
(m) Such Borrower has taken all steps reasonably necessary to
investigate the past and present condition and usage of such Borrower's Real
Estate and the operations conducted thereon and, based upon such investigation,
have determined that:
(i) neither such Borrower nor any operator of such Borrower's
Real Estate or any operations thereon is in violation, or alleged
violation, of any Requirement of Law, which violation would be reasonably
likely to have a Materially Adverse Effect on the Borrowers taken as a
whole;
(ii) such Borrower has not received notice from any third
party including, without limitation, any federal, state or local
governmental authority, (A) that any hazardous waste, any hazardous
substances, any pollutant or contaminant and any toxic substances, oil or
hazardous materials or other chemicals or substances regulated by any
Requirement of Law ("Hazardous Substances") which such Borrower has
generated, transported or disposed of has been found at any site at which
a federal, state or local agency or other third party has conducted or has
ordered that such Borrower conduct a remedial investigation, removal or
other response action pursuant to any Requirement of Law; or (C) that it
is or shall be a named party to any claim, action, cause of action,
complaint, or legal or administrative proceeding (in each case, contingent
or otherwise) arising out of any third party's incurrence of costs,
expenses, losses or damages of any kind whatsoever in connection with the
release of
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Hazardous Substances, the result of which, in any such case, would be
reasonably likely to have a Materially Adverse Effect on the Borrowers
taken as a whole;
(iii) (A) there have been no releases (i.e. any past or
present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing or dumping) or
threatened releases of Hazardous Substances on, upon, into or from the
properties of such Borrower, which releases would be reasonably likely to
have a Materially Adverse Effect on the Borrowers taken as a whole; and
(B) to the best of such Borrower's knowledge, there have been no releases
on, upon, from or into any real property in the vicinity of any of such
Borrower's Real Estate which, through soil or groundwater contamination,
may have come to be located on, and which would be reasonably likely to
have a Materially Adverse Effect on the Borrowers taken as a whole; and
(iv) neither such Borrower nor any of such Borrower's Real
Estate is subject to any applicable environmental law requiring the
performance of Hazardous Substances site assessments, or the removal or
remediation of Hazardous Substances, or the giving of notice to any
governmental agency or the recording or delivery to other Persons of an
environmental disclosure document or statement by virtue of the
transactions set forth herein and contemplated hereby, or as a condition
to the effectiveness of any transactions contemplated hereby.
(n) The execution of this Agreement and the Loan Documents by such
Borrower does not constitute a violation of the capital maintenance provisions
set forth in Section 30 of the German GmbH Act.
(o) Schedule 7(o) sets forth the account numbers and location of all
bank accounts of such Borrower and each of its Subsidiaries.
(p) Societe Miniere du Kivu and Columbite Exploration and
Development Company (Ghana) Limited are dormant and have no assets other than
goodwill.
(q) Such Borrower has no place of business in the United Kingdom or
Austria.
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ss.8. Conditions Precedent.
(a) The obligation of the Bank to issue, extend or renew the initial
Collateral Instruments, and the obligation of the Bank to make the initial
Loans, is subject to the satisfaction of the following conditions precedent in
addition to those set forth in ss.8(b):
(i) Each of the Loan Documents shall have been duly executed
and delivered by the respective parties thereto, and all of such Loan
Documents shall be in full force and effect and shall be in form and
substance satisfactory to the Bank and the Borrowers.
(ii) All corporate action, third-party consents and
governmental approvals necessary for the valid execution, delivery and
performance by each of the Borrowers of each of the Loan Documents to
which it is a party shall have been duly and effectively taken or (as the
case may be) obtained and evidence thereof satisfactory to the Bank shall
have been provided to the Bank.
(iii) The Bank shall have received from each of the Borrowers
a copy, certified by a duly authorised officer of such Person to be true
and complete on the Closing Date, of each of its Charter Documents as in
effect on such date of certification.
(iv) The Bank shall have received from each of the Borrowers
an incumbency certificate, dated as of the Closing Date, signed by a duly
authorised officer of such Borrower, and giving the name and bearing a
specimen signature of each individual who shall be authorised: (A) to
sign, in the name and on behalf of such Borrower, each of the Loan
Documents to which such Borrower is or is to become a party; (B) in the
case of the Borrower Agent, to make Loan Requests and Continuation
Requests and to apply for Collateral Instruments on behalf of the
Borrowers; and (C) to give notices and to take other action on its behalf
under the Loan Documents.
(v) All applicable security interest filings shall have been
executed and delivered (in recordable form where applicable) to the Bank,
all relevant insurances shall have been modified to include the Bank as
assignee, additional insured or loss payee as applicable, all Collateral
in which a security interest may be perfected only by the secured party's
possession shall, if so requested by the Bank, have been delivered to the
Bank or its nominee, and all
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other actions necessary or in the reasonable opinion of the Bank desirable
for the perfection and protection and to achieve the priority, as
contemplated hereby, of all Liens in favour of the Bank shall have been
taken to the satisfaction of the Bank and its counsel.
(vi) The Bank shall have received (A) certificates of
insurance from an independent insurance broker dated as of the Closing
Date, identifying insurers, types of insurance, insurance limits, and
policy terms, and otherwise describing the insurance obtained in
accordance with the provisions of the Security Documents and (B) certified
copies of all policies evidencing such insurance.
(vii) The Bank shall have received a favourable opinion from
Mr Dietrich Kessel, counsel to the Borrowers in form and substance
satisfactory to the Bank.
(viii) The Bank shall have received, at least three (3) days
prior to the Drawdown Date of such Loan or the proposed date of the
issuance of such Collateral Instrument, the most recent Borrowing Base
Reports required to be delivered to the Bank in accordance with
ss.9.1(a)(v), together with such supporting details of receivable ageing
and inventory designations as the Bank may reasonably request.
(ix) The closing fee, administration fee and all other fees
and expense reimbursements due and payable to the Bank hereunder shall
have been paid to the Bank, as appropriate.
(x) The Bank shall have received the Financials and the
forecasts described in ss.7(e) hereof, and no event or circumstance shall
have come to the attention of the Bank that would lead any of them to
believe that the financial projections as to the Borrowers contained in
such forecast are inaccurate or incomplete in any material respect.
(xi) The Bank shall have received all of the items listed on
the Closing Agenda dated on or about the date hereof (the "Closing
Agenda"), each such item in form and substance satisfactory to the Bank.
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(xii) The Bank shall have received payoff letters in a form
satisfactory to the Bank with respect to each Borrower's existing credit
facilities (save Indebtedness permitted under ss.9.2(a)), such payoff
letters indicating the amount of the loan obligations of such Borrower as
of the Closing Date, and acknowledging that upon receipt of such funds the
applicable lender will forthwith execute and deliver to the Bank
documentation evidencing the termination of such credit facilities and
take such other actions as may be necessary to discharge all mortgages,
deeds of trust and security interests (other than Permitted Liens) granted
by such Borrower to such lenders, all in form and substance satisfactory
to the Bank.
(xiii) The Borrower Agent shall have received a certificate
from the Bank, in form and substance satisfactory to the Bank and the
Borrower Agent, attesting to the fact that remuneration relating to this
Agreement is subject to German tax.
(xiv) All Loan Documents which have to be executed before a
notary public shall have been notarised.
(b) The obligation of the Bank to issue, extend or renew any
Collateral Instruments, and the obligation of the Bank to make any Loans,
including the initial Loans and Collateral Instruments, is subject to the
satisfaction of the following further conditions precedent:
(i) Each of the representations and warranties of each of the
Borrowers to the Bank herein or in any of the other Loan Documents or any
document, certificate or other paper or notice in connection herewith
shall be true and correct in all material respects as of the time made or
deemed to have been made or repeated and shall also be true and correct in
all material respects at and as of the time of the making of such Loan or
the issuance, extension or renewal of such Collateral Instrument, with the
same effect as if made at and as of that time (except to the extent of
changes resulting from transactions contemplated or permitted by this
Agreement and the other Loan Documents and changes occurring in the
ordinary course of business that singly or in the aggregate are not
materially adverse, and to the extent that such representations and
warranties relate expressly to an earlier date).
(ii) No Default or Event of Default shall have occurred and be
continuing.
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(iii) All documents and certificates in connection with the
transactions contemplated hereby shall be in form and substance
satisfactory to the Bank, and the Bank shall have received all information
as it may have reasonably requested. No change shall have occurred in any
law or regulation or in the interpretation thereof that in the reasonable
opinion of the Bank would make it unlawful for the Bank to make such Loan
or to participate in the issuance, extension or renewal of such Collateral
Instrument or in the reasonable opinion of the Bank to issue, extend or
renew such Collateral Instrument.
ss.9. Covenants.
ss.9.1. Affirmative Covenants. Each of the Borrowers agrees that so long
as there are any Loans, Unpaid Reimbursement Obligations or Collateral
Instruments outstanding or the Bank has any obligation to make Loans or to
issue, extend or renew any Collateral Instruments and until the payment and
satisfaction in full in cash of all of the Obligations, the Borrowers will
comply with their obligations as set forth throughout this Agreement and will
comply, and will cause each of their Subsidiaries to comply with, the following
obligations to:
(a) furnish the Bank:
(i) as soon as available, but in any event (A) within one
hundred twenty (120) days after the close of each fiscal year, audited
consolidated and consolidating Financials prepared in accordance with
German GAAP and (B) within ninety (90) days after the close of each fiscal
year, audited consolidated and consolidating Financials prepared in
accordance with U.S. GAAP, in each case for the Borrowers and their
Subsidiaries for such fiscal year with all required note disclosures, all
certified by the Borrowers' accountants, together with a statement from
such accountants as to the absence, to their knowledge, of any Event of
Default;
(ii) as soon as available, but in any event within (1) sixty
(60) days after the end of the first, second and third fiscal quarters of
each fiscal year, and (2) ninety (90) days after the end of the fourth
fiscal quarter of each fiscal year, the (A) unaudited consolidated and
consolidating Financials prepared in accordance with German GAAP and (B)
unaudited consolidated and consolidating Financials prepared in accordance
with U.S. GAAP, in each case of the Borrowers and their Subsidiaries for
such quarter certified by the
34
<PAGE> 40
Borrowers' chief financial officer or chief accounting officer or
treasurer, and, in the case of each of the above-described consolidated
Financials only, together with comparisons to the most recently delivered
business plan of the Borrowers describing any material variations
therefrom;
(iii) as soon as available, but in any event within forty-five
(45) days after the end of the first and second fiscal months of each
fiscal quarter, the (A) unaudited consolidated and consolidating
Financials prepared in accordance with German GAAP and (B) unaudited
consolidated and consolidating Financials prepared in accordance with U.S.
GAAP, in each case for such month (in the case of such consolidated
Financials with comparisons to the consolidated Financials for the same
fiscal month of the previous fiscal year), certified by the Borrowers'
chief financial officer or chief accounting officer or treasurer, and, in
the case of such consolidated Financials only, together with comparisons
to the most recently delivered business plan of the Borrowers describing
any material variations therefrom;
(iv) together with its monthly, quarterly and annual
Financials, a certificate of the Borrower Agent setting forth computations
demonstrating compliance with the Borrowers' financial covenants set forth
herein, and certifying that no Default or Event of Default has occurred,
or if it has, describing the actions taken by the Borrowers with respect
thereto;
(v) within twenty (20) days following the end of each calendar
month (or at such other interval as the Bank may from time to time
specify), a Borrowing Base Report from the Borrower Agent with respect to
each Borrower updating all components of such Borrower's Borrowing Base
and recalculating such Borrower's Borrowing Base on the basis thereof,
together with a comprehensive receivables ageing report for such Borrower,
accounts payable report and inventory designations of such Borrower as of
the end of such month as the Bank may have reasonably requested, and
together with such other supporting schedules and documentation as set
forth on Exhibit A hereto or as the Bank may have reasonably requested;
(vi) by December 31 of each fiscal year, the Borrowers'
business plan for the immediately following fiscal year;
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<PAGE> 41
(vii) from time to time as and when requested by the Bank such
reconciliations and financial information necessary in order for the Bank
to determine compliance with the financial covenants set forth in ss.9.3;
(viii) as soon as practicable but, in any event, concurrently
with the consummation of the KERAMED Disposition, copies of the material
definitive contracts, agreements and instruments evidencing or relating to
the KERAMED Disposition and a computation in reasonable detail of the net
cash proceeds therefrom;
(ix) as soon as practicable but, in any event, concurrently
with the execution of the MIR Lease, copies of the material definitive
contracts, agreements and instruments evidencing or relating to the MIR
Lease and a computation in reasonable detail of the net cash proceeds
therefrom;
(x) as soon as practicable but, in any event, concurrently
with the execution of the Splitting Agreement, copies of the material
definitive contracts, agreements and instruments evidencing or relating to
the Splitting Agreement and a computation in reasonable detail of the net
cash proceeds therefrom; and
(xi) from time to time such other information concerning the
Borrowers as the Bank may reasonably request;
(b) keep true and accurate books of account in accordance with
German GAAP and permit the Bank or its designated representatives during normal
business hours to inspect the Borrowers' premises and to examine and be advised
as to the Borrowers' business records upon the request of the Bank, and to
permit the Bank's commercial finance examiners to conduct periodic commercial
finance examinations;
(c) maintain its corporate existence, business and assets, keep its
business and assets adequately insured by responsible insurers, maintain its
chief executive office in the Federal Republic of Germany, continue to engage in
the same lines of business, pay all taxes as and when due and payable (except
where contested in good faith by appropriate proceedings and for which adequate
reserves have been taken) and comply with all other Requirements of Law, except
where failure to do so will not have a Materially Adverse Effect;
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<PAGE> 42
(d) notify the Bank promptly in writing of (A) the occurrence of any
Default or Event of Default, (B) any noncompliance with or obligation under any
Requirement of Law or proceeding in respect thereof which would be reasonably
likely to have a Materially Adverse Effect, (C) any change of address, (D) any
pending or, to the knowledge of the Borrowers, threatened litigation or similar
proceeding affecting the Borrowers, or any material change in any such
litigation or proceeding previously reported, where such litigation or
proceeding, if determined adversely to any of the Borrowers, could have a
Materially Adverse Effect, (E) any notice which any of the Borrowers has
received under any material supply or other contract terminating or threatening
to terminate the provisions of supply or the provisions of other goods or
services or otherwise claiming a default thereunder, (F) the occurrence and
details relating to any bankruptcy, insolvency, liquidation, reorganisation,
dissolution or similar case or proceeding relating to any of the Borrowers or
their Subsidiaries, (G) any claims against any material amount of assets or
properties of the Borrowers constituting Collateral, and (H) any testing or
environmental site assessment reports conducted at any Real Estate of any of the
Borrowers and submitted to any federal or state regulatory agency or authority;
(e) use the proceeds of such Borrower's Loans solely to repay all of
such Borrower's existing bank overdraft and revolving credit indebtedness and
for such Borrower's working capital and general corporate purposes, and use
Collateral Instruments issued for the account of such Borrower solely for such
Borrower's working capital and general corporate purposes approved by the Bank
for Collateral Instruments (such approval not to be unreasonably withheld by the
Bank);
(f) co-operate with the Bank, take such action, execute such
documents (including security documents), and provide such information as the
Bank may from time to time reasonably request in order further to effect the
transactions contemplated by and the purposes of the Loan Documents and, if
requested by the Bank for regulatory reasons or following the occurrence of an
Event of Default, deliver to the Bank at the Borrowers' expense appraisals,
title insurance, surveys or environmental assessments relating to the Real
Estate of the Borrowers;
(g) unless directed by the Bank in writing, maintain all Operating
Accounts of each Borrower with the Bank, and none of the Borrowers shall
maintain other deposit or investment accounts, except as permitted by ss.9.2(c);
(h) promptly give notice to the Bank (A) of any violation of any
Requirement of Law that any of the Borrowers reports in writing or is reportable
by
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such Person in writing (or for which any written report supplemental to any oral
report is made) to any environmental agency that is reasonably likely to have a
Materially Adverse Effect and (B) upon becoming aware thereof, of any inquiry,
proceeding, investigation, or other action, including a notice from any agency
of potential environmental liability, of any federal, state or local
environmental agency or board, that is reasonably likely to have a Materially
Adverse Effect;
(i) maintain its current fiscal year;
(j) ensure that Societe Miniere du Kivu and Columbite Exploration
and Development Company (Ghana) Limited remain dormant and have no assets other
than goodwill;
(k) ensure that prior to establishing place of business in the
United Kingdom or Austria, such Borrower obtains the written consent of the
Bank; and
(l) ensure that with respect to all Financials prepared in
accordance with German GAAP, (1) such Financials present a view of the assets,
finance and results of such Borrower which is in accordance with the actual
circumstances, (2) no capitalisation has taken place to the extent that there
are capitalisation options (Aktivierungswahlrechte), (3) to the extent that
there are options to include items in the liabilities (Passivierungswahlrechte)
such items have been included, (4) all statutorily permitted depreciations have
been taken, (5) all statutorily permitted accruals have been taken, (6) at the
relevant balance sheet date there are no liabilities, with the exception of
liabilities resulting from pending contractual relationships which are not
required to be shown on a balance sheet, that are not shown as liabilities in
the relevant balance sheet or covered by accruals, and (7) to the extent that
contingent liabilities have not been included in the liabilities they have been
reflected as below-the-line-items on the balance sheet (including liabilities
resulting from the issuance of comfort letters).
ss.9.2. Negative Covenants. Each of the Borrowers agrees that so long as
there are any Loans, Unpaid Reimbursement Obligations or Collateral Instruments
outstanding or the Bank has any obligation to make Loans or to issue, extend or
renew any Collateral Instruments and until the payment and satisfaction in full
in cash of all of the Obligations, the Borrowers will not, and will cause each
of their Subsidiaries not to:
(a) create, incur or assume any Indebtedness other than (i)
Indebtedness to the Bank arising under the Loan Documents, (ii) current
liabilities of the Borrowers incurred in the ordinary course of business not
incurred through the
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borrowing of money or the obtaining of credit except credit on an open account
basis customarily extended and in fact extended in connection with normal
purchases of goods and services, (iii) Indebtedness in respect of taxes or other
governmental charges contested in good faith and by appropriate proceedings and
for which adequate reserves have been taken; (iv) long-term Indebtedness to
Dresdner Bank which does not exceed DM 3,200,000 in cumulative aggregate amount
and refinancings thereof which do not exceed the amount refinanced provided that
such Indebtedness is secured only by the fixed assets of the Borrowers, (v)
long-term Indebtedness incurred by KERAMED which does not exceed DM 1,000,000 in
cumulative aggregate amount and refinancings thereof which do not exceed the
amount refinanced provided that such Indebtedness is secured only by the fixed
assets of KERAMED, (vi) unsecured Indebtedness incurred by KERAMED with respect
to an overdraft/revolving credit facility which does not exceed DM 450,000 in
cumulative aggregate amount and refinancings thereof which do not exceed the
amount refinanced, (vii) Indebtedness owed by any Borrower to another Borrower,
(viii) unsecured Indebtedness with respect to foreign exchange contracts, (ix)
other Indebtedness that is unsecured or secured only by fixed assets of the
Borrowers in an aggregate amount not to exceed DM 5,000,000, and (x)
Indebtedness not included above and listed on Schedule 9.2(a) hereto;
(b) create or incur any Liens on any of the property or assets of
the Borrowers except (collectively, "Permitted Liens") (i) Liens securing the
Obligations; (ii) Liens securing taxes or other governmental charges not yet
due; (iii) deposits for utilities, reasonable retainers to professionals,
deposits or pledges made in connection with worker's compensation, unemployment
insurance or other social security obligations or to secure the performance of
tenders, bids and other contracts in the ordinary course of business of any of
the Borrowers consistent with past practices; (iv) Liens of carriers,
warehousemen, mechanics and materialmen and similar non-consensual Liens
arising by operation of law, (A) less than 120 days old as to obligations not
yet due or (B) as to obligations being contested in good faith by appropriate
proceedings, for which adequate reserves have been taken, with respect to which
Liens no foreclosure proceedings have been commenced, and which Liens shall not
have priority over the Liens of the Bank in the Collateral; (v) easements,
rights-of-way, zoning restrictions and similar minor Liens which individually
and in the aggregate do not have a Materially Adverse Effect; and (vi) Liens
solely on fixed assets of the Borrowers with respect to Indebtedness permitted
under ss.9.2(a)(iv), ss.9.2(a)(v), and ss.9.2(a)(ix);
(c) purchase securities, make loans, issue guaranties or other
financial accommodations or make any other investments other than investments
(i) in bank
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certificates of deposits, bank eurodollar deposits, bank money market funds,
government securities, commercial paper, repos and other cash equivalent
securities, in each case having maturities of thirty days or less and otherwise
reasonably acceptable to the Bank, (ii) in the Operating Accounts, (iii) by any
Borrower in another Borrower, in the form of loans or other extensions of
credit, pursuant to the terms and conditions of ss.9.2(a)(vii) hereof, (iv) in
bid deposits and similar deposits made in the ordinary course of business, (v)
in the bank accounts listed on Schedule 7(o) provided that if at the end of each
month the aggregate amount of all funds in all of the Borrowers' accounts listed
on Schedule 7(o) (excluding amounts deposited in payroll accounts which are
necessary to cover the Borrowers' payroll) exceeds DM 200,000, the Borrowers
shall deposit such excess amount in their Operating Accounts, (vi) in
Subsidiaries of the Borrowers existing as of the Closing Date; (vii) investments
existing as of the Closing Date in Intervan GmbH and Columbite Exploration and
Development Company (Ghana) Limited, and (viii) consisting of the Holding
Guarantee.
(d) make any distributions on or in respect of its capital of any
nature whatsoever that would result in a violation of the capital maintenance
provisions set forth in Section 30 of the German GmbH Act;
(e) (i) become party to a merger or sale-leaseback transaction, (ii)
effect any disposition of assets (other than (A) dispositions of inventory in
the ordinary course, and (B) dispositions of obsolete equipment in the ordinary
course) without the consent of the Bank (and in the case of any such asset
dispositions consented to by the Bank, unless provided otherwise by the terms of
such consent, (1) the net cash proceeds of any such disposition shall be applied
to the Obligations then outstanding, with the Commitment also being reduced
pursuant to ss.2.4(b), and (2) to the extent that the Loans are reduced to $0,
any net cash proceeds received in connection with any such asset disposition
shall be applied to cash collateralize outstanding Collateral Instruments in an
amount equal to 105% of the Maximum Drawing Amount), or (iii) purchase, lease or
otherwise acquire assets other than (A) in the ordinary course of its business,
or (B) in connection with capital expenditures to the extent permitted to be
made under ss.9.3(b) hereof; provided that notwithstanding anything in this
ss.9.2(e) to the contrary, so long as no Default or Event of Default has
occurred and is continuing and none would result therefrom (or exist after
giving effect thereto), (AA) GfE G&S may lease its assets to MIR GmbH (the "MIR
Lease") for consideration in an amount not to exceed the Deutschemark Equivalent
of $1,800,000 per annum, (BB) GfE G&S may be subject to a transfer/splitting
agreement with Metallurg Holdings Corporation or a Subsidiary of Metallurg
Holdings Corporation (the "Splitting Agreement"), in form and substance
satisfactory the Bank, (CC) as long as the Borrowers timely then comply with the
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applicable provisions of ss.ss.2.3(f), 2.4(b) and 9.1(a)(viii) hereof, the
Borrowers may effect the KERAMED Disposition on arms-length terms for fair
market value received in consideration thereof, and (DD) the Borrowers may
effect one or more dispositions of assets, the aggregate amount of which shall
not exceed DM 200,000 with respect to such dispositions of assets made by the
Borrowers pursuant to this ss.9.2(e)(DD).
(f) (i) use any of the Real Estate or any portion thereof for the
handling, processing, storage or disposal of Hazardous Substances, (ii) cause or
permit to be located on any of the Real Estate any underground tank or other
underground storage receptacle for Hazardous Substances, (iii) generate any
Hazardous Substances on any of the Real Estate, (iv) conduct any activity at any
Real Estate or use any Real Estate in any manner so as to cause a release (i.e.
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping) or threatened release of
Hazardous Substances on, upon or into the Real Estate or (v) otherwise conduct
any activity at any Real Estate or use any Real Estate in any manner that would
violate any Requirement of Law or bring such Real Estate in violation of any
Requirement of Law which, in any such case, would be reasonably likely to have a
Materially Adverse Effect.
ss.9.3. Financial Covenants. Each of the Borrowers agrees that so long as
there are any Loans, Unpaid Reimbursement Obligations or Collateral Instruments
outstanding or the Bank has any obligation to make Loans or to issue, extend or
renew any Collateral Instruments and until the payment and satisfaction in full
in cash of all of the Obligations, the Borrowers will not, and will cause each
of their Subsidiaries not to:
(a) permit the Net Worth of (i) any Borrower (other than GfE Holding
Company) at any time or (ii) GfE Holding Company as of the end of any fiscal
year, to be less than the sum of (A) the applicable amount set forth in the
table below, plus (B) on a cumulative basis fifty percent (50%) of such
Borrower's Retained Income for each fiscal year previously ended beginning with
the fiscal year ended December 31, 1997, plus (C) on a cumulative basis all
investments made by GfE Holding Company or by any of the U.S. Affiliates in such
Borrower during such period:
Borrower Amount
-------- ------
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GfE Holding Company DM 4,250,000
GfE UT DM 3,000,000
GfE G&S DM 6,000,000
GfE M&M DM 17,000,000
KERAMED DM 1,750,000
(b) make capital expenditures in any fiscal year, on an aggregate
basis for all of the Borrowers and their Subsidiaries, that exceed, in the
aggregate, the amount set forth opposite such fiscal year in the table below:
Fiscal Year Amount
----------- ------
1997 DM 3,500,000
1998 DM 10,000,000
1999 DM 8,000,000
2000 DM 7,000,000
;provided, however, that if during any fiscal year the amount of capital
expenditures permitted for that fiscal year is not so utilized, such unutilized
amount may be utilized in the next succeeding fiscal year but not in any
subsequent fiscal year.
ss.10. Events of Default; Acceleration. If any of the following events
("Events of Default") shall occur:
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<PAGE> 48
(a) any Borrower shall fail to pay when due and payable any
principal of the Loans or any Reimbursement Obligations when the same becomes
due and payable hereunder, or any interest or other sum due under any of the
Loan Documents within five (5) days following the date when the same becomes due
and payable thereunder;
(b) any Borrower shall fail to perform any term, covenant or
agreement contained in ss.9.1(d)(A) or (B), ss.9.1(e), ss.9.2 or ss.9.3;
(c) any Borrower shall fail to perform any other term, covenant or
agreement contained in any of the Loan Documents after the Bank has given
written notice of such failure to the Borrowers and a period of thirty (30) days
has passed without such failure having been cured or remedied;
(d) any representation or warranty of any Borrower in any of the
Loan Documents or in any document, certificate or other paper or notice given in
connection therewith shall have been false or misleading in any material respect
at the time made or deemed to have been made or repeated;
(e) any of the Borrowers or any U.S. Affiliate, (i) shall be in
default under (A) any agreement or agreements (other than the Loan Documents)
evidencing Indebtedness owing to the Bank, or any affiliates of the Bank, or (B)
any agreement or agreements evidencing other Indebtedness for or in respect of
borrowed money or capitalised leases in excess of DM 500,000 in aggregate
principal amount, or (ii) shall fail to pay any such Indebtedness specified in
clauses (i)(A) or (B) when due, or within any applicable period of grace;
(f) any of the Loan Documents executed and delivered or any of the
documents listed in Section II of the Closing Agenda shall cease to be in full
force and effect, or the Bank's Liens on substantially all of the Collateral
shall fail to be perfected at any time or shall fail to have the priority
contemplated hereby at any time;
(g) any of the Borrowers or any of its Subsidiaries (i) shall make
an assignment for the benefit of creditors, (ii) shall be adjudicated bankrupt
or insolvent, (iii) shall seek the appointment of, or be the subject of an order
appointing, a trustee, liquidator or receiver as to all or part of its assets,
(iv) shall commence, approve or consent to, any case or proceeding under any
bankruptcy, reorganisation or similar law and, in the case of an involuntary
case or proceeding, such case or proceeding is not dismissed within sixty (60)
days following the commencement thereof, or (v) shall be
43
<PAGE> 49
the subject of an order for relief in an involuntary case under any applicable
bankruptcy law;
(h) any of the Borrowers or any of its Subsidiaries shall be
generally unable to pay its debts as they mature;
(i) there shall remain undischarged for more than thirty (30) days
any final judgement or execution action against any of the Borrowers that,
together with other outstanding claims and execution actions exceeds DM 500,000
in the aggregate;
(j) any of the Borrowers shall be enjoined from conducting any part
of its business, or there shall occur any disruption to such business or loss or
damage to the Borrowers' inventory, in each case where such condition would
reasonably be likely to have a Materially Adverse Effect;
(k) (i) GfE Holding Company shall at any time, legally or
beneficially own less than 100% of the issued share capital of any of the other
Borrowers; or (ii) Metallurg Holdings Corporation shall at any time legally or
beneficially own less than 99.2% of the issued share capital of GfE Holding
Company;
THEN, or at any time thereafter:
(1) In the case of any Event of Default under clause (g) or
(h), the Commitment shall automatically terminate, the Bank shall be relieved of
all further obligations to issue, extend or renew Collateral Instruments or to
make Loans, and the entire unpaid principal amount of the Loans, all interest
accrued and unpaid thereon, all Unpaid Reimbursement Obligations, and all other
amounts payable hereunder and under the other Loan Documents shall automatically
become forthwith due and payable, without presentment, demand, protest or notice
of any kind, all of which are hereby expressly waived by each of the Borrowers,
and the Bank may require that cash be delivered to the Bank in the amount of
105% of the Maximum Drawing Amount to be held by the Bank as cash collateral for
all Reimbursement Obligations; and
(2) In the case of any Event of Default other than (g) and (h)
which shall have occurred and be continuing, the Bank may by written notice to
the Borrowers terminate the Commitment and/or declare the unpaid principal
amount of the Loans, all interest accrued and unpaid thereon, all Unpaid
Reimbursement Obligations, and all other amounts payable hereunder and under the
other Loan Documents to be forthwith due and payable, without presentment,
demand, protest or further notice of
44
<PAGE> 50
any kind, all of which are hereby expressly waived by each of the Borrowers, and
the Bank may require that cash be delivered to the Bank in the amount of 105% of
the Maximum Drawing Amount to be held by the Bank as cash collateral for all
Reimbursement Obligations.
In case any one or more of the Events of Default shall have occurred and
be continuing, and whether or not the Bank shall have accelerated the maturity
of the Loans pursuant to this ss.10, the Bank, if owed any amount with respect
to the Loans or the Reimbursement Obligations, may proceed to protect and
enforce its rights by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Agreement and the other Loan Documents or any instrument
pursuant to which the Obligations to the Bank are evidenced, including as
permitted by applicable law the obtaining of the ex parte appointment of a
receiver, and, if such amount shall have become due, by declaration or
otherwise, proceed to enforce the payment thereof or any other legal or
equitable right of the Bank. No remedy herein conferred upon the Bank is
intended to be exclusive of any other remedy and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or any other provision
of law.
ss.11. Distribution of Collateral Proceeds. In the event that following
the occurrence and during the continuance of an Event of Default, the Bank
receives any monies, whether pursuant to ss.10 or otherwise with respect to the
realisation upon any of the Collateral, such monies shall be distributed for
application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Bank for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Bank in connection with the collection of such monies by
the Bank, for the exercise, protection or enforcement by the Bank of all
or any of the rights, remedies, powers and privileges of the Bank under
this Agreement or any of the other Loan Documents or in respect of the
Collateral or in support of any provision of adequate indemnity to the
Bank against any taxes or liens which by law shall have, or may have,
priority over the rights of the Bank to such monies;
(b) Second, to all other Obligations in such order or
preference as the Bank may determine; provided that the Bank may in its
discretion make proper allowance to take into account any Obligations not
then due and payable (including the retaining, in the Bank's discretion
following two days' prior
45
<PAGE> 51
written notice of the occurrence of an Event of Default given to the
Borrowers by the Bank, of a portion or all of such monies to provide cash
collateral in an amount equal to 105% of the Maximum Drawing Amount to
secure Reimbursement Obligations); and
(c) Third, the excess, if any, shall be returned to the
Borrowers or to such other Persons as are entitled thereto.
ss.12. Setoff. Regardless of the adequacy of any collateral, during the
continuance of any Event of Default, any deposits or other sums credited by or
due from the Bank to the Borrowers and any securities or other property of any
of the Borrowers in the possession of the Bank may be applied to or set off by
the Bank against the payment of Obligations and any and all other liabilities,
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, of any of the Borrowers to the Bank.
ss.13. Amendments, Waivers, Notices, Etc. This Agreement may not be
amended or waived except by a written instrument signed by the Borrowers and the
Bank, and any such amendment or waiver shall be effective only for the specific
purpose given. No waiver shall extend to or affect any obligation not expressly
waived or impair any right consequent thereon. No course of dealing or delay or
omission on the part of the Bank in exercising any right shall operate as a
waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon
the Borrowers shall entitle the Borrowers to other or further notice or demand
in similar or other circumstances.
ss.14. Miscellaneous.
(a) None of the Borrowers shall assign or transfer any of its rights
or obligations under any of the Loan Documents without the prior written consent
of the Bank.
(b) The Borrowers agree to pay (i) the reasonable costs of producing
and reproducing this Agreement, the other Loan Documents and the other
agreements and instruments mentioned herein, (ii) any taxes (including any
interest and penalties in respect thereto) payable by the Bank (other than taxes
expressly excluded from the definition of the term Taxes) on or with respect to
the transactions contemplated by this Agreement (the Borrowers hereby severally,
and not jointly, agreeing to indemnify the Bank with respect thereto), (iii) the
reasonable fees, expenses and disbursements of the Bank's Special Counsel or any
local counsel to the Bank incurred in connection with
46
<PAGE> 52
the preparation, administration or interpretation of the Loan Documents and
other instruments mentioned herein, each closing hereunder, and amendments,
modifications, approvals, consents or waivers hereto or hereunder, (iv) the
fees, expenses and disbursements of the Bank and its affiliates incurred by the
Bank and its affiliates in connection with the preparation, syndication,
administration or interpretation of the Loan Documents and other instruments
mentioned herein, including all title insurance premiums and surveyor,
engineering and appraisal charges, and including all due diligence fees,
expenses and disbursements of the Bank and its affiliates, including without
limitation, the fees and expenses of environmental and other consultants hired
by the Bank in connection with such due diligence, (v) any fees, costs, expenses
and bank charges, including bank charges for returned cheques, incurred by the
Bank in establishing, maintaining or handling the Operating Accounts and other
accounts for the collection of any of the Collateral; (vi) all reasonable
out-of-pocket expenses (including without limitation reasonable attorneys' fees
and costs, which attorneys may be employees of the Bank, and reasonable
consulting, accounting, appraisal, investment banking and similar professional
fees and charges) incurred by the Bank in connection with (A) the enforcement of
or preservation of rights under any of the Loan Documents against the Borrowers
or any of their Subsidiaries or the administration thereof after the occurrence
of a Default or Event of Default and (B) any litigation, proceeding or dispute
whether arising hereunder or otherwise, in any way related to the Bank's
relationship with the Borrowers or any of their Subsidiaries and (vii) all
reasonable fees, expenses and disbursements of the Bank incurred in connection
security interest filings or mortgage recordings. The covenants of this ss.14(b)
shall survive payment or satisfaction of all other Obligations.
(c) The Borrowers severally, and not jointly, agree to indemnify and
hold harmless the Bank and its affiliates from and against any and all claims,
actions and suits whether groundless or otherwise, and from and against any and
all liabilities, losses, damages and expenses of every nature and character
arising out of this Agreement or any of the other Loan Documents or the
transactions contemplated hereby including, without limitation, (i) any actual
or proposed use by the Borrowers or any of their Subsidiaries of the proceeds of
any of the Loans or Collateral Instruments, (ii) the reversal or withdrawal of
any provisional credits granted by the Bank upon the transfer of funds from bank
agency or lock box accounts or in connection with the provisional honouring of
cheques or other items, (iii) any actual or alleged infringement of any patent,
copyright, trademark, service mark or similar right of the Borrowers or any of
their Subsidiaries comprised in the Collateral, (iv) the Borrowers or any of
their Subsidiaries entering into or performing this Agreement or any of the
other Loan Documents or (v) with respect to the Borrowers and their Subsidiaries
and their
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<PAGE> 53
respective properties and assets, the violation of any Requirement of Law, the
presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release or threatened release of any Hazardous Substances or any action, suit,
proceeding or investigation brought or threatened with respect to any Hazardous
Substances (including, but not limited to, claims with respect to wrongful
death, personal injury or damage to property), in each case including, without
limitation, the reasonable fees and disbursements of counsel and allocated costs
of internal counsel incurred in connection with any such investigation,
litigation or other proceeding; provided, however, that the foregoing indemnity
will not, as to any indemnified person, apply to losses, claims, damages,
liabilities or related expenses to the extent that they have been determined by
a court of competent jurisdiction by final order to arise from the bad faith,
wilful misconduct or gross negligence of such indemnified person. In litigation,
or the preparation therefor, the Bank shall be entitled to select its own
counsel and, in addition to the foregoing indemnity, the Borrowers severally,
and not jointly, agree to pay promptly the reasonable fees and expenses of such
counsel. If, and to the extent that the obligations of the Borrowers under this
ss.14(c) are unenforceable for any reason, each of the Borrowers hereby agrees
to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law. The covenants contained
in this ss.14(c) shall survive payment or satisfaction in full of all other
Obligations.
(d) Except as otherwise expressly provided in this Agreement, all
notices and other communications made or required to be given pursuant to this
Agreement or any Collateral Instrument Applications shall be in writing and
shall be delivered in hand, mailed by German registered or certified first class
mail, postage prepaid, sent by overnight courier, or sent by telecopier and
confirmed by delivery via courier or postal service, addressed as follows:
(i) if to the Borrower Agent as representative of all the
Borrowers, at Hofener Stra(beta)e 45, 90431 Nurnberg, Attention: Achim
Buchloh, Managing Director, or at such other address for notice as the
Borrower Agent shall last have furnished in writing to the Person giving
the notice; and
(ii) if to the Bank, at Feuerbachstrasse 26-32, D-60325
Frankfurt/Main, Attention: Monika Spitzer, Assistant Vice President, or
such other address for notice as the Bank shall last have furnished in
writing to the Person giving the notice.
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<PAGE> 54
Any such notice or demand shall be deemed to have been duly given or made and to
have become effective (A) if delivered by hand, overnight courier or facsimile
to a responsible officer of the party to which it is directed, at the time of
the receipt thereof by such officer or the sending of such facsimile and (B) if
sent by registered or certified first-class mail, postage prepaid, on the third
Business Day following the mailing thereof.
(e) This Agreement shall be binding upon and inure to the benefit of
each party hereto and its successors and assigns, but the Borrowers may not
assign their rights or obligations hereunder.
(f) No failure or delay by the Bank to exercise any right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege preclude any other right, power or privilege. The
provisions of this Agreement are severable and if any one provision hereof shall
be held invalid or unenforceable in whole or in part in any jurisdiction, such
invalidity or unenforceability shall affect only such provision in such
jurisdiction. This Agreement, together with all Exhibits and Schedules hereto,
expresses the entire understanding of the parties with respect to the
transactions contemplated hereby. This Agreement and any amendment hereof may be
executed in several counterparts, each of which shall be an original, and all of
which shall constitute one agreement. In proving this Agreement, it shall not be
necessary to produce more than one such counterpart executed by the party to be
charged.
(g) This Agreement is a contract under the laws of the Federal
Republic of Germany and shall be construed in accordance therewith and governed
thereby. For the benefit of the Bank, each of the Borrowers irrevocably agrees:
(i) that this Agreement, the Loan Documents and all matters arising
in connection therewith (including a dispute regarding its validity) shall
be governed by and construed in accordance with the laws of the Federal
Republic of Germany;
(ii) that the ordinary courts in Frankfurt am Main, Federal Republic
of Germany, to which jurisdiction such Borrower hereby irrevocably
submits, shall have jurisdiction with respect to this Agreement and all
matters arising in connection therewith (including disputes regarding its
validity);
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<PAGE> 55
(iii) that this provision shall not limit the rights of the Bank to
take proceedings in any other court of competent jurisdiction; and
(iv) that service of process in any such suit may be made upon the
Borrowers by mail at the address specified in ss.14(d);
ss.15. KERAMED Disposition. If (a) the Borrowers desire to effect the
KERAMED Disposition; (b) at the time of completion of the KERAMED Disposition no
Default or Event of Default has occurred and is continuing and none would result
therefrom (or would exist after giving effect thereto); (c) the Borrowers are in
compliance with ss.9.2(e); and (d) all Loans outstanding to KERAMED have been
repaid in full and there are no Collateral Instruments outstanding for KERAMED's
account, then upon the written request and at the expense of the Borrower Agent,
the Bank and the Borrowers shall enter into documents in form and substance
mutually satisfactory to the Bank and the Borrower Agent to (i) release the
Bank's security interest in the assets of KERAMED and the pledge of the shares
of KERAMED, and (ii) eliminate references to KERAMED as a Borrower under this
Agreement and the other Loan Documents. The Bank and the Borrowers agree to make
such conforming changes to this Agreement and the other Loan Documents as shall
be necessary and appropriate in the good faith judgment of the Bank to give
effect to the intent and purpose of this ss.15. No action taken pursuant to this
ss.15 shall impair or otherwise effect any of the Collateral (other than the
Collateral related to KERAMED) or the Bank's interest therein or impair or
otherwise effect the Obligations of the other Borrowers.
ss.16. Splitting Agreement. If (a) the Borrowers enter into the Splitting
Agreement; (b) at the time of completion of the Splitting Agreement no Default
or Event of Default has occurred and is continuing and none would result
therefrom (or would exist after giving effect thereto); (c) the Borrowers are in
compliance with ss.9.2(e); and (d) all Loans outstanding to GfE G&S have been
repaid in full and there are no Collateral Instruments outstanding for GfE G&S's
account, then upon the written request and at the expense of the Borrower Agent,
the Bank and the Borrowers shall enter into documents in form and substance
mutually satisfactory to the Bank and the Borrower Agent to (i) release the
Bank's security interest in the assets of GfE G&S and the pledge of the shares
of GfE G&S, and (ii) eliminate references to GfE G&S as a Borrower under this
Agreement and the other Loan Documents. The Bank and the Borrowers agree to make
such conforming changes to this Agreement and the other Loan Documents as shall
be necessary and appropriate in the good faith judgment of the Bank to give
effect to the intent and purpose of this ss.16. No action taken pursuant to this
ss.16 shall impair or otherwise effect any of the Collateral (other than the
Collateral
50
<PAGE> 56
related to GfE G&S) or the Bank's interest therein or impair or otherwise effect
the Obligations of the other Borrowers.
51
<PAGE> 57
EXHIBIT A
FORM OF BORROWING BASE REPORT
The undersigned, [(the chief financial officer), (controller), or
(treasurer)] of GfE Gesellschaft fur Elektrometallurgie mit beschrankter Haftung
(the "Borrower Agent"), is delivering this Borrowing Base Report on behalf of
________________ pursuant to Section 9.1(a)(v) of the Loan Agreement (the
"Agreement") dated as of ______________ (as amended and in effect from time to
time) by and among the Borrower Agent, certain Subsidiaries of the Borrower
Agent and BankBoston, N.A., acting through its Frankfurt branch (the "Bank").
Terms not otherwise defined herein shall have the meanings specified therefor in
the Agreement.
Attachment 1 to this Borrowing Base Report correctly sets forth a
calculation of the Borrowing Base.
The undersigned hereby certifies that the information contained herein and
in the attachments hereto is true and accurate in all respects.
The undersigned hereby confirms that (a) all Eligible Inventory and all
Eligible Accounts with respect to such Borrower have been duly pledged and
assigned to the Bank and are subject to a valid, first priority, perfected lien
and security interest in favour of the Bank and (b) such Borrower has not
created, permitted, or has permitted any of its Subsidiaries to create or
permit, any Lien on any of the Eligible Inventory or Eligible Accounts, except
as otherwise permitted by the Agreement.
The undersigned hereby confirms that all of the representations and
warranties of such Borrower contained in the Agreement or any other Loan
Document, except to the extent that any such representation or warranty
expressly relates to an earlier date or has been altered in a manner permitted
or contemplated by the Agreement, are true and correct as of the date hereof.
The undersigned hereby certifies that no Default or Event of Default has
occurred and is continuing.
IN WITNESS WHEREOF, the undersigned hereby sets his/her hand on this
_________ day of ________________, ____.
52
<PAGE> 58
GfE Gesellschaft fur Elektrometallurgie
mit beschrankter Haftung
By:
--------------------------------
Name:
Title:
53
<PAGE> 59
BORROWING BASE WORKSHEET(1)
[________________________________]
As of _______________, ___
1. Accounts (net of any finance charges, late
charges, credits, rebates, contras or other
commissions, counterclaims, offsets or
adjustments) DM__________________
Less: a. Accounts that such Borrower
reasonably and in good faith
determines not to be collectible DM__________________
Less: b. Accounts that are with account
debtors that are reasonably deemed
uncreditworthy by the Bank DM__________________
Less: c. Accounts that are with account
debtors that are debtors in any
bankruptcy, insolvency, liquidation,
reorganisation, dissolution or similar
case or proceeding or assignors for
the benefit of creditors DM__________________
Less: d. Accounts that are with account
debtors that are affiliated with the
Borrowers DM__________________
Less: e. Accounts that are with account
debtors that did not purchase goods
or services giving rise to a relevant
- ----------
(1) Such Borrower has expressed all figures herein in the Deutschemark
Equivalents thereof with the Deutschemark Equivalent of $1.00 being equal
to DM _____________.
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<PAGE> 60
Account for reasonably equivalent
value DM__________________
Less: f. Accounts outstanding for more
than 90 days past the earlier of
the date of invoice and the date
of shipment (as to goods)
or of provision (as to services) DM__________________
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<PAGE> 61
Less: g. Accounts more than 60 days past
due from the due date thereof DM__________________
Less: h. Accounts which are on terms
exceeding 30 days DM__________________
Less: i. Accounts that are subject to a
Lien in favour of any person other
than the Bank DM__________________
Less: j. Accounts in which the Bank does
not have a valid and perfected
first-priority security interest DM__________________
Less: k. Accounts which are not in
payment of fully performed
and undisputed obligations DM__________________
Less: l. Accounts that are due from any
account debtor with respect to
which more than 50% of the
aggregate amount of all Accounts
owing from such account debtor
are not Eligible Accounts pursuant
to items 1(f), 1(g) and 1(h) in this
Borrowing Base Report DM__________________
Less: m. Accounts that are not payable
in Dollars or Deutschemarks DM__________________
Less: n. Accounts that are invoiced to and
payable from an office of an account
debtor that is not located within the
Federal Republic of Germany or within
any of the Specified Countries and such
Accounts are not insured in full by a
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<PAGE> 62
policy or policies of receivables
insurance in form and substance
satisfactory to the Bank DM__________________
Less: o. Accounts that are invoiced to and
payable from an office of an account
debtor outside of the Federal Republic
of Germany and that have been
excluded as Eligible Accounts by
the Bank in its discretion DM__________________
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<PAGE> 63
Less: p. Accounts that are due from an account
debtor listed on Schedule 1 to the Loan
Agreement or any affiliate of any
such account debtor DM__________________
Less: q. Accounts that are secured by a letter of
credit, guarantee, indemnity or other
assurance and the Bank does not have
a prior, perfected security interest in
such letter of credit, guarantee,
indemnity or other assurance DM__________________
Equals: r. Deutschemark Equivalent
of Eligible Accounts DM__________________
s. Multiplied by 0.85 DM__________________
2. Net book value of Inventory(2) (net of reserves
for off grade inventory and intercompany profit,
as such reserves may be adjusted by the Bank in
its reasonable discretion) DM__________________
Less: a. Net book value of Inventory which is
not owned, possessed or held for sale
within the Federal Republic
of Germany DM__________________
Less: b. Net book value of Inventory which has
been shipped (other than Eligible
In-Transit Inventory) DM__________________
- ----------
(2) /Inventory of Keramed deemed to be $0 for all Borrowing Base Reports of
Keramed unless otherwise agreed to by the Bank in accordance with the
provisions of the Loan Agreement.
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<PAGE> 64
Less: c. Net book value of Inventory which is
held on leased premised and for which
the lessor and any sublessor has not
delivered a waiver that is reasonably
satisfactory to the Bank DM__________________
Less: d. Net book value of Inventory over
which there is a Lien in favour of
any person other than the Bank DM__________________
Less: e. Net book value of Inventory over
which the Bank does not have a
valid and perfected first-priority
security interest DM__________________
Less: f. Net book value of Inventory
which is not otherwise in the
possession of one of the Borrowers
(other than Eligible In-Transit Net
Inventory) and the Bank has not
received a waiver from the party in
possession of such inventory that is
reasonably satisfactory to the Bank DM__________________
Less: g. Net book value of Inventory which
is work in process DM__________________
Less: h. Net book value of Inventory which
is production and packing supplies DM__________________
Less: i. Net book value of Inventory which
is spare parts DM__________________
Less: j. Net book value of Inventory which
reflects any capitalised inventory
variances DM__________________
Less: k. Net book value of Inventory which has
been deemed by the Bank to be
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<PAGE> 65
otherwise either obsolete or
unmarketable DM__________________
Less: l. Net book value of Inventory which
is held on consignment or which is
not actually owned DM__________________
Less: m. Net book value of Inventory which
is damaged DM__________________
Equals: n. Net book value of
Eligible Inventory DM__________________
o. Multiplied by 0.60 DM__________________
3. Aggregate amount owed to German trade creditors
that are raw material suppliers DM__________________
4. Aggregate amount owed to non-German trade
creditors that are raw material suppliers and
that have valid title retention claims DM__________________
5. Borrowing Base
(Item 1(s) plus item 2(o) minus items 3 an 4) DM__________________
6. Commitment DM__________________
7. Total Outstandings with respect to such Borrower:
(but in no event to exceed item 6)
a. Interbank Rate Loans outstanding DM__________________
b. Overdraft Rate Loans outstanding DM__________________
c. Maximum Drawing Amount of all
Collateral Instruments outstanding
plus aggregate Unpaid Reimbursement
Obligations DM__________________
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d. Total Outstandings
(Item 7(a) plus Item 7(b) plus item 7(c)) DM__________________
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<PAGE> 67
EXHIBIT B
FORM OF LOAN REQUEST
[Date]
BankBoston, N.A.
Zweigniederlassung Frankfurt/Main
Feuerbachstrasse 26-32
D-60325 Frankfurt/Main
Attn: Monika Spitzer
Re: Request for Interbank Rate Loan Under Loan Agreement,
dated as of ______________
Ladies and Gentlemen:
We refer you to the Loan Agreement, dated as of _______________ (as
amended, supplemented or otherwise modified from time to time, the "Agreement"),
among GfE Gesellschaft fur Elektrometallurgie mit beschrankter Haftung (the
"Borrower Agent"), certain Subsidiaries of the Borrower Agent and BankBoston,
N.A., acting through its Frankfurt branch (the "Bank"). Capitalised terms used
herein without definition have the meanings specified in the Agreement.
Pursuant to ss.2.1(b) of the Agreement, the Borrower Agent, on behalf of
_______________, hereby irrevocably requests the following Interbank Rate Loan:
(a) Principal Amount: [(DM)/($)] ___________
(b) Drawdown Date: ______________
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<PAGE> 68
(c) Interest Period: _________ month(s)
We understand that this request obligates us to accept the requested
Interbank Rate Loan on the specified Drawdown Date.
The Borrower Agent, on behalf of the Borrowers hereby represents and
warrants that all of the conditions set forth in ss.8(a) and ss.8(b) of the
Agreement with respect to the initial Loan, or the conditions set forth in
ss.8(b) of the Agreement with respect to all subsequent Loans, as the case may
be, have been satisfied on the date of this Loan Request.
No Default or Event of Default has occurred and is continuing and no
Default or Event of Default would occur after giving effect to the requested
Interbank Rate Loan.
GfE Gesellschaft fur Elektrometallurgie
mit beschrankter Haftung
By:
--------------------------------
Name:
Title:
63
<PAGE> 69
SCHEDULE 1
EXCLUDED ACCOUNT DEBTORS
================================================================================
Aesculap
Cooper Power Systems
Siemens
Deutsche Titan
IBM
64
<PAGE> 70
SCHEDULE 7(l)
SUBSIDIARIES
Subsidiaries of GfE Holding Company Percent Ownership
----------------------------------- -----------------
GfE M&M 100%
GfE G&S 100%
GfE UT 100%
KERAMED 100%
Societe Miniere du Kivu 70%
Recyclingzentrum Mittelfranken GmbH 75%
Columbite Exploration and Development Company (Ghana) Limited 50%
Subsidiaries of GfE UT Percent Ownership
---------------------- -----------------
Intervan GmbH 50%
65
<PAGE> 71
SCHEDULE 7(o)
BANK ACCOUNTS
66
<PAGE> 72
SCHEDULE 9.2(a)
INDEBTEDNESS
Indebtedness Debtor Creditor
------------ ------ --------
DM 2,000,000 GfE UT GfE Holding Company
67
<PAGE> 73
AS WITNESS the hands of the authorised signatories of the parties hereto the day
and year first above written.
SIGNED by for and on behalf of )
GfE Gesellschaft fur Elektrometallurgie )
mit beschrankter Haftung in the presence of:- )
Witness Signature:
Name:
Address:
Occupation:
SIGNED by for and on behalf of )
GfE Umwelttechnik GmbH )
in the presence of:- )
Witness Signature:
Name:
Address:
Occupation:
SIGNED by for and on behalf of )
GfE Gie(beta)erei- und Stahlwerksbedarf GmbH )
in the presence of:- )
Witness Signature:
Name:
68
<PAGE> 74
Address:
Occupation:
69
<PAGE> 75
SIGNED by for and on behalf of )
GfE Metalle und Materialien GmbH )
in the presence of:- )
Witness Signature:
Name:
Address:
Occupation:
SIGNED by for and on behalf of )
KERAMED Medizintechnik GmbH )
in the presence of:- )
Witness Signature:
Name:
Address:
Occupation:
SIGNED by for and on behalf of )
BankBoston, N.A. )
Zweigniederlassung Frankfurt/Main )
in the presence of:- )
Witness Signature:
Name:
Address:
70
<PAGE> 76
Occupation:
71
<PAGE> 1
Exhibit 10.5
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - -- - - - - - - x
In re : Chapter 11
METALLURG, INC. and :
SHIELDALLOY METALLURGICAL
CORPORATION, : Nos. 93 B 44468 (JLG)
93 B 44469 (JLG)
:
Debtors. (Jointly Administered)
:
- - - - - - - - - - - - - - - - - - x
SETTLEMENT AGREEMENT OF ENVIRONMENTAL CLAIMS
AND ISSUES BY AND BETWEEN THE DEBTORS AND THE
UNITED STATES OF AMERICA AND THE STATE OF NEW JERSEY
WHEREAS Metallurg, Inc., ("Metallurg"), a New York corporation, and
Shieldalloy Metallurgical Corporation ("Shieldalloy"), a New York corporation
(collectively, the "Debtors"), filed with the United States Bankruptcy Court for
the Southern District of New York (the "Court") voluntary petitions for relief
under Title 11 of the United States Code (the "Bankruptcy Code") on September 2,
1993 (the "Petition Date") (collectively, the "Chapter 11 Cases").
WHEREAS the State of New Jersey ("New Jersey"), on behalf of the New
Jersey Department of Environmental Protection ("NJDEP"), filed Proofs of Claims
numbered 91, 96,
<PAGE> 2
357 and 358, respectively (the "New Jersey Proofs of Claim"), in the Chapter 11
Cases on or about August 12, 1994, alleging, inter alia, liability of the
Debtors to New Jersey under the New Jersey Spill Compensation and Control Act,
N.J.S.A. 58:10-23.11 et seq. ("Spill Act"), and the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss. 9601
et seq.
WHEREAS New Jersey alleged in the New Jersey Proofs of Claim, inter
alia, that the Debtors were jointly and severally liable for response costs
incurred and to be incurred by New Jersey in the course of responding to
releases and threatened releases of hazardous substances into the environment.
WHEREAS the United States of America (the "United States"), on
behalf of the United States Environmental Protection Agency ("EPA"), the United
States Department of the Interior ("DOI"), and the United States Nuclear
Regulatory Commission ("NRC"), filed proofs of claim in the Chapter 11 Cases on
or about August 14, 1994 (the "Federal Proofs of Claim"), alleging, inter alia,
liability of the Debtors to the United States under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. ss. 9601 et seq. ("CERCLA"), the Resource Conservation and Recovery Act,
as amended, 42 U.S.C. ss. 6901 et seq. ("RCRA") and the Atomic Energy Act of
1974, as amended, 42 U.S.C. ss. 2011 et seq. (the "Atomic Energy Act").
2
<PAGE> 3
WHEREAS the United States alleged in the Federal Proofs of Claim,
inter alia, that the Debtors were jointly and severally liable for response
costs incurred and to be incurred by the United States in the course of
responding to releases and threatened releases of hazardous substances into the
environment from certain Sites.
WHEREAS on or about February 18, 1994, the United States of America,
through its Department of Treasury, Internal Revenue Service (the "IRS"), filed
a Proof of Claim against Metallurg on account of due and owing, but unpaid,
federal withholding, Federal Insurance Contribution Act ("FICA") and income tax
liabilities, together with prepetition interest and penalties accruing thereon,
in the total amount of $9,742,894.69 (the "IRS Prepetition Claim").
WHEREAS Metallurg is entitled to an income tax refund from the
United States for the 1989 tax year in the total amount of $723,714 (the "Tax
Refund Amount").
WHEREAS the Tax Refund Amount consist of two components: (1)
$594,249 owed to Metallurg for the 1989 Tax Year, and (2) $129,465 owed to
Frankel Metal Co., a non-debtor subsidiary of Metallurg, for the tax period
ending July 31, 1989 which amount shall be paid to Metallurg.
WHEREAS after a review of the IRS Prepetition Claim, the IRS has
determined that Metallurg is indebted to the United States on account of
prepetition federal tax liabilities in the total amount of $105,847.00 (the "Tax
Amount Due").
3
<PAGE> 4
WHEREAS unless the automatic stay imposed by Section 362(a)(7) of
the Bankruptcy Code is modified to permit the Government to offset the Tax
Refund Amount against the Tax Amount Due, the United States may not effectuate
such a setoff.
WHEREAS the United States and Metallurg have agreed that, subject to
the Court's approval, the United States will offset the Tax Refund Amount
against the Tax Amount Due.
WHEREAS as a result of such setoff, the Debtors' prepetition federal
tax liabilities shall be satisfied in full, and the principal amount of the Tax
Refund Amount shall be reduced to $618,367 (the "Net Tax Refund Amount").
WHEREAS Metallurg owns all of the outstanding stock of Shieldalloy.
WHEREAS Shieldalloy owns and operates a metal alloy and specialty
metals manufacturing facility located in Newfield, New Jersey (the "Newfield
site").
WHEREAS on October 5, 1988, Debtors and the NJDEP entered into an
Administrative Consent Order which, as amended in August 1989 and September
1992, requires the cleanup and/or remediation of hazardous substances and
pollutants known or subsequently discovered at the Newfield site.
WHEREAS Shieldalloy owns and operates a metal alloy and specialty
metals manufacturing facility in Cambridge, Ohio (the "Cambridge site").
4
<PAGE> 5
WHEREAS in the absence of this Settlement Agreement, the Debtors
would have objected to the New Jersey Proofs of Claim.
WHEREAS the Debtors and New Jersey desire to resolve the New Jersey
Proofs of Claim including certain alleged environmental liabilities of the
Debtors and the amount of financial assurances to be posted by the Debtors in
connection with the Newfield site.
WHEREAS in the absence of this Settlement Agreement, the Debtors
would have objected to the Federal Proofs of Claim.
WHEREAS the Debtors and the United States desire to resolve the
Federal Proofs of Claim, including certain alleged environmental liabilities of
the Debtors and the amount of financial assurances to be posted by the Debtors
in connection with the Newfield and Cambridge sites.
WHEREAS in exchange for Shieldalloy's agreement to post certain
financial assurance for the cleanup and remediation of the Newfield site, and
the other terms set forth below in this Settlement Agreement, the United States
will withdraw the Federal Proofs of Claim to the extent that they assert claims
for environmental response costs and natural resource damages assessment to be
incurred by the United States in the future at the Newfield site.
WHEREAS in exchange for Shieldalloy's agreement to post certain
financial assurance for the cleanup and remediation of the Cambridge site
pursuant to the entry of a final
5
<PAGE> 6
Consent Order in the action entitled State of Ohio v. Shieldalloy Metallurgical
Co., Guernsey County Court of Common Pleas, Case No. 95-CV-242, and the other
terms set forth in that final Consent Order and below in this Settlement
Agreement, the United States will withdraw the Federal Proofs of Claim to the
extent that they assert claims for environmental response and natural resource
damages assessment costs to be incurred by the United States in the future at
the Cambridge site.
WHEREAS in consideration of, and in exchange for, the promises and
covenants herein, and intending to be legally bound hereby, the Debtors and New
Jersey through their authorized representatives hereby agree to the terms and
provisions of this Settlement Agreement.
WHEREAS in consideration of, and in exchange for, the promises and
covenants herein, and intending to be legally bound hereby, the Debtors and the
United States through their authorized representatives hereby agree to the terms
and provisions of this Settlement Agreement.
WHEREAS settlement of the matters governed by this Settlement
Agreement is in the public interest and an appropriate means of resolving these
matters.
6
<PAGE> 7
NOW THEREFORE, without the admission of liability or any
adjudication on any issue of fact or law, and upon the consent and agreement of
the parties to this Settlement Agreement by their attorneys and authorized
officials, it is hereby agreed as follows:
DEFINITIONS
In this Settlement Agreement, the following terms shall have the
following meanings:
a. "Administrative Expense Claim" has the meaning as defined in the
Second Amended Plan of Reorganization.
b. "Allowed General Unsecured Claim" shall have the meaning as
defined in the Second Amended Plan of Reorganization.
c. "Allowed Claim" shall have the meaning as defined in the Second
Amended Plan of Reorganization.
d. "Atomic Energy Act" shall mean the Atomic Energy Act of 1974, 42
U.S.C. ss. 2011 et seq., as now in effect or hereinafter amended.
e. "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601 et seq., as now in
effect or hereinafter amended.
7
<PAGE> 8
f. "Claims" has the meaning as defined in the Second Amended Plan of
Reorganization.
g. "Disclosure Statement" shall mean the disclosure statement filed
by the Debtors with the Bankruptcy Court on May 15, 1996, as may be amended from
time to time.
h. "DOI" shall mean the United States Department of the Interior and
any legal successor thereto.
i. "Effective Date" shall have the meaning as defined in the Third
Amended Plan of Reorganization.
j. "Environmental Projects" shall mean those projects to be
performed pursuant to the NJ ACO; provided, however, that nothing in this
Settlement Agreement shall affect any additional obligations of the Debtors
under the NJ ACO.
k. "EPA" shall mean the United States Environmental Protection
Agency and any legal successor thereto.
l. "Federal Proofs of Claim" shall mean all of the proofs of claim
filed by the United States on behalf of the EPA, DOI and NRC in the Chapter 11
Cases.
m. "Final Order" shall mean any order of the Court as to which the
time to appeal, petition for certiorari, or move for reargument or a rehearing
has expired and as to which no appeal, petition for certiorari, or other
proceedings for reargument or rehearing shall
8
<PAGE> 9
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 the Debtors. Additionally, in the event that an appeal, writ of
certiorari, or reargument or rehearing thereof has been sought, such order of
the Court shall have been affirmed by the highest court to which such order was
appealed, or certiorari has been denied or from which reargument or rehearing
was sought, and the time to take any further appeal, petition for certiorari or
move for reargument or rehearing shall have expired.
n. "LOC Trust Account" shall mean that certain Mellon Bank, N.A.
account no. 102-71K maintained by Shieldalloy for the benefit of the NJDEP
pursuant to the Administrative Consent Order dated October 5, 1988 as amended in
August 1989 and September 1992, which includes (1) the cash proceeds derived
from the letter of credit no. 693 issued by National Westminster Bank PLC for
the benefit of NJDEP, (2) the letter of credit in the amount of $8.0 million
issued by Deutsche Bank for the benefit of NJDEP, or the cash proceeds (3) the
letter of credit in the amount of $200,000 issued by Midlantic Bank for the
benefit of the NJDEP or the cash proceeds, and (4) all accrued earnings in
respect thereof.
o. "NJ ACO" shall mean the Administrative Consent Order dated
October 5, 1988, as amended in August 1989 and September 1992, entered into by
the Debtors and the NJDEP.
9
<PAGE> 10
p. "NPL" shall mean the National Priorities List, 40 C.F.R., Part
300, Appendix B.
q. "New Jersey" shall mean the State of New Jersey and "NJDEP" shall
mean the New Jersey Department of Environmental Protection.
r. "Plan of Reorganization" or "Plan" shall mean any Plan of
Reorganization that has been confirmed or becomes effective in the Chapter 11
Cases, as it may be amended from time to time.
s . "Preconfirmation" refers to the period of time preceding
confirmation of the Plan.
t. "Postconfirmation" refers to the period of time on or after
confirmation of the Plan.
u. "Prepetition" refers to the time period prior to September 2,
1993.
v. "Postpetition refers to the time period from and after September
2, 1993.
w. "RCRA" shall mean the Resource Conservation and Recovery Act, 42
U.S.C. ss. 6901 et seq., as now in effect or hereinafter amended.
x. "Refund Amount" shall mean the excess, if any, when the Revised
Predetermined Cost is subtracted from the Posted Financial Assurance Fund.
10
<PAGE> 11
y. "Second Amended Plan of Reorganization" refers to the certain
joint plan of reorganization dated May 24, 1996 as filed by the Debtors with the
Bankruptcy Court for the Southern District of New York, as may be amended from
time to time.
z. "Settlement Agreement" shall mean this Settlement Agreement.
aa. "Sites" shall mean the Cambridge and Newfield facilities
described above.
bb. "United States" shall mean the United States of America.
cc. Environmental terms not otherwise defined shall have the same
meaning provided by the governing environmental law at issue.
dd. Bankruptcy terms not otherwise defined shall have the same
meaning provided by the Bankruptcy Code or in the Second Amended Plan of
Reorganization, as may be further amended.
JURISDICTION
1. The Court has jurisdiction over the subject matter hereof
pursuant to 28 U.S.C. ss.ss. 157, 1331, and 1334, and 42 U.S.C. ss.ss. 9607 and
9613(b), and 33 U.S.C. ss. 1319.
PARTIES BOUND; SUCCESSION AND ASSIGNMENT
2. This Settlement Agreement applies to, is binding upon, and shall
inure to the benefit of New Jersey, the United States, the Debtors and, to the
extent provided herein, the Debtors' legal successors and assigns, and any
trustee, examiner or receiver appointed in the
11
<PAGE> 12
Chapter 11 Cases. Nothing contained in this Settlement Agreement, including
without limitation this paragraph 2, shall be used as evidence that any entity
other than the Debtors is a "successor" or "assign" of any of the Debtors.
INTERNAL REVENUE SERVICE PREPETITION CLAIM
3. Subject to the approval of this Court, Metallurg and the United
States agree that the automatic stay imposed by Section 362(a)(7) of the
Bankruptcy Code shall be modified for the limited purpose and to the limited
extent of permitting the United States to offset the Tax Refund Amount against
the Tax Amount Due (the "Setoff").
4. As a result of the Setoff, Metallurg's prepetition federal tax
liabilities shall be satisfied in full.
5. Within a reasonable time after the entry of this Settlement
Agreement, the United States shall refund the Net Tax Refund Amount plus accrued
interest, if any, to Metallurg (the "Total Net Tax Refund").
6. The United States hereby withdraws the IRS Prepetition Claim.
ALLOWANCE OF CLAIMS
7. With respect to the treatment of the Federal Proofs of Claim and
the New Jersey Proofs of Claim, under the Debtors' Plan of Reorganization the
Debtors and the United States and New Jersey agree as follows:
12
<PAGE> 13
A. Allowance of Federal Claims
a. The United States shall have an Allowed General Unsecured
Claim against Shieldalloy in the amount of $178,192.92 for prepetition response
costs incurred by EPA at the Newfield site;
b. The United States shall have an Allowed General Unsecured
Claim against Shieldalloy in the amount of $41,562.35 for prepetition response
costs incurred by EPA at the Cambridge site;
c. The United States shall have an Allowed Administrative
Claim against Shieldalloy relating to the Newfield site (i) in the amount of
$191,177.23 for EPA's postpetition response costs, and (ii) in the amount of
$4,967.00, for DOI's postpetition natural resource damages assessment costs;
d. The United States shall have an Allowed Administrative
Claim against Shieldalloy relating to the Cambridge site (i) in an amount of
$108,046.73 for EPA's postpetition response costs, and (ii) in the amount of
$4,714.67 for DOI's postpetition natural resource damages assessment costs;
e. 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.
13
<PAGE> 14
f. 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.
g. Within six months after substantial consummation of the
Plan of Reorganization, or such other time as the parties may agree, Shieldalloy
shall commence the enhancement, restoration and creation of certain wetlands in
and around the Newfield site as set forth in the attached July 24, 1996 workplan
(Exhibit 1). Shieldalloy shall obtain approval from DOI for the enhancement
project to be performed. Completion of the enhancement, restoration and creation
of such wetlands shall be in full and complete satisfaction of DOI's prepetition
claim for natural resource damages at the Newfield site. New Jersey and DOI
agree to utilize their best efforts to coordinate their approvals of the
implementation and completion of enhancement project to be performed under this
paragraph. Such enhancement shall not be considered complete absent DOI's
certification that the enhancement is complete.
h. Within six months after the earlier of the Effective Date
or the entry of a Consent Order for Permanent Injunction to be filed in Ohio
State Court, Shieldalloy shall purchase and commence enhancement of certain
acreage adjacent to or near the Cambridge site in accordance with the final
Consent Order in the action entitled State of Ohio v. Shieldalloy Metallurgical
Co., Guernsey County Court of Common Pleas, Case No. 95-CV-242.
14
<PAGE> 15
Shieldalloy shall obtain approval from DOI for the property purchased and the
enhancement project to be performed thereon. Completion of the enhancement of
such acreage shall be in full and complete satisfaction of DOI's prepetition
claim for natural resource damages at the Cambridge site. Such enhancement shall
not be considered complete absent DOI's certification that the enhancement is
complete.
B. Allowance of New Jersey Claims
i. New Jersey shall have an Allowed General Unsecured Claim
against Shieldalloy in the amount of $638,508.20 for prepetition response costs
incurred by NJDEP;
j. New Jersey shall have an Allowed General Unsecured Claim
against Shieldalloy in the amount of $1,196,982.84 for prepetition New Spill
Fund Authorization;
k. New Jersey shall have an Allowed Administrative Claim
against Shieldalloy in an amount of 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 response costs at the Newfield site;
l. Within six months after substantial consummation of the
Plan of Reorganization or such other time as the parties may agree, Shieldalloy
shall commence the enhancement, restoration and creation of certain wetlands in
and around the Newfield site as set
15
<PAGE> 16
forth in the attached July 24, 1996 workplan (Exhibit 1). That wetlands project
shall not be considered complete until the NJDEP Office of Natural Resource
Damage has certified the completion of the project. In compensation for the
claim for natural resource damages for interim lost use of groundwater, New
Jersey shall have an allowed general unsecured claim against Shieldalloy in the
amount of $1,311,000 Shieldalloy estimates that the total recovery on account of
this claim under Class 4F of the Plan will result in a cash distribution to New
Jersey on the Effective Date in the amount of $275,000. The completion of these
actions shall constitute full satisfaction of New Jersey's pre-petition claims
for damages to wetlands, and for interim lost use of groundwater.
ALLOWED CLAIMS FOR PENALTIES
A. Allowance of Federal Penalty Claims
8. 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. The Civil Penalty Claim shall be
entitled to the treatment under the Plan described below in paragraph 10 of this
Settlement Agreement.
B. Allowance of New Jersey Penalty Claims
16
<PAGE> 17
9. New Jersey on behalf of NJDEP shall have an Allowed General
Unsecured Claim against Shieldalloy in the amount of $100,000 in full resolution
and satisfaction of penalty amounts claimed by New Jersey under the Solid Waste
Management Act, N.J.S.A. 13:E-1 et seq., and the Water Pollution Control Act,
N.J.S.A. 58:10A-1 et seq. ("WPCA"), and in the amount of $38,000 in full
resolution and satisfaction of penalty amounts claimed under the WPCA. The
Penalty Claim shall be entitled to the treatment under the Plan described below
in paragraph 10 of this Settlement Agreement.
TREATMENT OF ALLOWED CLAIMS
10. All Allowed General Unsecured Claims under or pursuant to the
terms of this Settlement Agreement shall be classified as "Shieldalloy
Environmental Claims" under the Plan, and in the event the Plan is confirmed by
the Bankruptcy Court and the Plan is consummated, the holders of Claims in that
Class shall on the Effective Date, or as soon thereafter practicable, receive a
cash payment on a pro rata basis equal to the sum of:
i) 50% of the total value of New Common Stock (as stated in
the Disclosure Statement) that would have been distributed under the Plan to the
holder of such Allowed General Unsecured Claim had it been, as of the Effective
Date, the holder of an Allowed Claim in "Class 4C-SMC Unsecured Claims" as
defined in the Second Amended Plan of Reorganization; and
17
<PAGE> 18
ii) 66 2/3% of the principal amount of New Secured Notes that
would have been distributed to the holder of such claim on a pro rata basis had
it been, as of the Effective Date, the holder of an Allowed Claim in "Class
4C-SMC Unsecured Claims" as defined in the Second Amended Plan of
Reorganization; and
iii) the pro rata amount of cash that would have been
distributed to the holder of such Allowed General Unsecured Claim had it been,
as of the Effective Date, the holder of an Allowed Claim in "Class 4C-SMC
Unsecured Claims" as defined in the Second Amended Plan of Reorganization.
In consideration of the cash payout on account of the Allowed
General Unsecured Claims as described above in this paragraph, the United States
hereby waives any right to receive any Common Stock, any 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 anytime thereafter. Further, except as
provided for in this Agreement, the United States waives any right to receive
any distribution under the Plan on account of the Federal Proofs of Claim filed
against Metallurg.
In consideration of the cash payout on account of the Allowed
General Unsecured Claims as described above in this paragraph, New Jersey hereby
waives any right to receive any
18
<PAGE> 19
Common Stock, any 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 whether paid upon consummation of the Plan or anytime
thereafter. Further, except as provided for in this Agreement, New Jersey waives
any right to receive any distribution under the Plan on account of the New
Jersey Proofs of Claim filed against Metallurg.
11. In no event shall the general unsecured claims allowed or to be
allowed pursuant to this Settlement Agreement be subordinated to any other
allowed general unsecured claims pursuant to any provision of the Bankruptcy
Code or other applicable law that authorizes or provides for subordination of
allowed claims, including without limitation, Sections 105, 510 and 726(a)(4) of
the Bankruptcy Code.
12. The New Jersey Proofs of Claim shall hereby be deemed amended to
include all matters addressed in this Settlement Agreement but not already
included in the respective Proofs of Claim.
13. The Federal Proofs of Claim shall hereby be deemed amended to
include all matters addressed in this Settlement Agreement but not already
included in the respective Proofs of Claim.
REQUIRED FINANCIAL ASSURANCE WITH RESPECT TO
PERFORMANCE OF THE WORK AT THE NEWFIELD SITE
14. For purposes of determining financial assurance only,
Shieldalloy and
19
<PAGE> 20
New Jersey and the United States have identified the Environmental Projects to
be performed at the Newfield site. Shieldalloy and the United States have agreed
that for purposes of determining financial assurance only, the dollar amounts
assigned to each of the Environmental Projects (the "Predetermined Costs") are
as follows:
The Environmental Dollar Estimate
Projects (in millions)
----------------- ---------------
Phase II Lagoon Closure
Remediation of Chromium
Hydroxide Sludge
(including removal, filter
press, shipment and disposal) $3.3
Removal of Liners, Sampling of
Soils, Any Treatment or Removal
of Contaminated Soil and Final
Grading and Seeding of Area 2.3
Soil Remediation
Capital Costs 1.8
Operation and Maintenance Costs .5
Sediment Remediation
Sediment Capital Costs 1.2
Operation and Maintenance Costs .4
Groundwater Remediation 9.4
Future Oversight Costs .7
NRC Slag Pile Remediation 5.0
Wetlands Restoration .514
Building Decontamination .3
Stormwater Control .2
20
<PAGE> 21
15. The total cost, for financial assurance purposes only, of
completing the Environmental Projects (the "Total Predetermined Cost") is
$25,614,000.
16. Shieldalloy agrees to provide, create or make available the
following fund as financial assurance for the benefit of the United States and
New Jersey with respect to the Environmental Projects required to be performed
at the Newfield site:
A. At or prior to the Effective Date, Shieldalloy shall
establish a cash reserve, letter of credit, or a combination thereof, in the
amount of $4.25 million dollars for the benefit of the United States and New
Jersey.
B. Within five business days of Metallurg's receipt of the
Total Net Tax Refund Amount as provided in paragraph 5 above or the Effective
Date of the Plan, whichever is later, Shieldalloy shall (i) deposit cash into a
trust account for the benefit of the United States and New Jersey in an amount
equal to the Total Net Tax Refund Amount, or (ii) purchase a letter of credit
for the benefit of the United States and New Jersey in an amount equal to the
Total Net Tax Refund Amount. The Total Net Tax Refund Amount shall be above and
beyond the $4.25 million that Shieldalloy shall provide pursuant to paragraph
16A above.
C. The existing letter of credit previously posted for the
benefit of the NRC in connection with the Newfield site in the amount of
$750,000 shall be drawn
21
<PAGE> 22
down by the NRC and the proceeds shall be deposited into a separate trust
account for the benefit of NRC; provided, however, that at Shieldalloy's option
it may obtain a new letter of credit for the benefit of the NRC in the amount of
$750,000 in return for the proceeds of the prior letter of credit (the "NRC
Financial Assurance Fund").
D. The financial assurance posted by Shieldalloy pursuant to
paragraphs 16A-16C above, including any accrued earnings thereon, shall
constitute the "Joint Financial Assurance Fund."
17. Shieldalloy previously established three letters of credit for
the benefit of the State of New Jersey to secure the cleanup of the Newfield
site:
1. Letter of Credit No. 693 issued by National Westminster Bank
PLC (which has been drawn down upon and the proceeds reside in
Mellon Bank Trust Account No. 102-71K);
2. Letter of Credit No. 839-51177 issued by Deutsche Bank; and
3. Letter of Credit No. 701175 issued by Midlantic Bank in the
amount of $200,000.
Neither these letters of credit nor the proceeds derived from these
letters of credit or the accrued earnings thereof are assets of the Debtors'
estates. These letters of credit and the proceeds and accrued earnings derived
from the letters of credit shall not be
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subject to the continuing jurisdiction of the Court pursuant to this Settlement
Agreement but are referred to herein only to describe the parties' agreement
with respect to the Joint Financial Assurance Fund. Nothing in this paragraph
shall affect the dispute resolution procedures set forth in paragraphs 28-36,
including the Bankruptcy Court's jurisdiction, pursuant to paragraph 34, to
adjudicate any dispute between EPA and the Debtors as to whether a refund is to
be made from the LOC Trust Account. These letters of credit and the proceeds and
accrued earnings derived therefrom are referred to herein as the LOC Trust
Account.
18. At any time after the Effective Date, Shieldalloy may request
written confirmation from the United States and New Jersey that any of the
Environmental Projects identified in paragraph 14 of this Settlement Agreement
has been completed, and demand the appropriate Refund Amount in accordance with
paragraph 19 below. Such request by Shieldalloy shall be accompanied by
documentation supporting its claim that the Environmental Project has been
completed. Within sixty (60) days of Shieldalloy's request and demand, EPA and
New Jersey and DOI (as to wetlands remediation only) shall each either (i)
confirm, in writing, completion of the project and approve the Refund Amount, or
(ii) otherwise notify Shieldalloy in writing of their respective positions with
respect to the completion of such project and the Refund Amount. If the position
of the United States or
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New Jersey, in their discretion, is that such project has not been completed,
then that party shall specify in its response the reasons why it believes the
project has not been completed and set forth the remaining Work to be done. EPA
and New Jersey and DOI (as to wetlands remediation only) agree to employ their
best efforts to coordinate their respective reviews of Shieldalloy's request and
demand and expedite their respective responses. If the position of the United
States is that an Environmental Project has not been completed, then the dispute
resolution procedures set forth in paragraphs 28-36 below shall apply.
19. In the event that the United States and New Jersey both confirm
in writing that an Environmental Project described in paragraph 14 above has
been completed, the Predetermined Cost for that project (together with the
Predetermined Costs for all other completed projects) shall be deducted from the
Total Predetermined Cost so as to arrive at a revised Total Predetermined Cost
(the "Revised Predetermined Cost") for the remaining Environmental Projects. If
the Revised Predetermined Cost is less than the sum of the Joint Financial
Assurance Fund and the LOC Trust Account (the sum of the Joint Financial
Assurance Fund and the LOC Trust Account shall hereinafter be referred to as the
"Posted Financial Assurance Fund"), then the United States and New Jersey shall
cause the excess amount, the "Refund Amount," to be refunded to Shieldalloy in a
timely manner such that the Posted Financial Assurance Fund equals the Revised
Predetermined Cost. To the extent
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such refund requires that letters of credit constituting part of the Posted
Financial Assurance Fund be reduced, the United States and New Jersey hereby
agree to the replacement or reduction of the posted letters of credit in
accordance with paragraphs 20-22 with letters of credit in a form and from an
institution reasonably acceptable to New Jersey and the United States and in
compliance with applicable regulations.
Thus, for example, if the Total Predetermined Cost is $25.614
million, the Posted Financial Assurance Fund is $22.614 million, and the United
States and New Jersey certify that Shieldalloy completed the Phase II Lagoon
Closure project (which has been assigned a dollar value of $5.6 million for
financial assurance purposes only), then the Total Predetermined Cost would be
reduced by $5.6 million to arrive at a Revised Predetermined Cost of $20.014
million ($25,614,000 - $5,600,000 = $20,014,000). Because the Posted Financial
Assurance Fund would then exceed the Revised Predetermined Cost by $2.6 million
($22,614,000 - $20,014,000 = $2,600,000), the United States and New Jersey would
be required to either (i) allow $2.6 million to be refunded to Shieldalloy in a
timely manner, or (ii) allow the letters of credit which constitute part of the
Posted Financial Assurance Fund, other than the letter of credit listed in
paragraph 16C, to be reduced or replaced in a total amount of $2.6 million such
that the Posted Financial Assurance Fund equaled the Revised Predetermined Cost.
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20. Except as provided in paragraph 21 below, refunds of the Refund
Amount pursuant to paragraph 19 above upon the completion of any of the
Environmental Projects shall be made first from the proceeds of the LOC Trust
Account. In the event that the LOC Trust Account does not have sufficient funds
to refund the Refund Amount, the United States and New Jersey shall cause the
remainder of the refund to be made from the Joint Financial Assurance Fund first
from those items set forth in paragraph 16A and 16B (as elected by Shieldalloy)
and then, subject to paragraph 22 below, from the NRC Financial Assurance Fund
listed in paragraph 16C.
21. Refunds of the refund amount pursuant to paragraph 19 above upon
the completion of the NRC Slag Piles Remediation Project shall be made first
from the Joint Financial Assurance Fund in the order that the accounts are
listed in paragraph 16, provided, however, that no refund shall be made out of
the NRC Financial Assurance Fund posted pursuant to paragraph 16C unless the
NRC, New Jersey, and the United States certify in writing that the NRC Slag
Piles Environmental Project has been completed. In the event that the Joint
Financial Assurance Fund does not have sufficient funds to refund the Refund
Amount upon completion of the NRC Slag Piles Remediation Project, New Jersey
shall cause the remainder of the refund to be made from the LOC Trust Account;
provided all the
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<PAGE> 27
Environmental Projects listed in paragraph 14 above are completed, or, if they
have not been completed, New Jersey in its discretion agrees to the refund from
the LOC Trust Account.
22. Notwithstanding any provision in this Settlement Agreement,
absent the express written consent of the NRC, the NRC Financial Assurance Fund
posted for the benefit of the NRC in connection with paragraph 16C above may
only be reduced or replaced in the event that (i) the NRC, New Jersey, and the
United States certify in writing that the NRC Slag Piles Environmental Project
has been completed, and (ii) the other conditions set forth in paragraphs 19 and
20 above have been satisfied.
23. To the extent that New Jersey incurs oversight costs recoverable
under New Jersey or federal law, or EPA incurs oversight costs not inconsistent
with the National Contingency Plan in respect of any Environmental Project, the
Debtors shall reimburse the EPA and New Jersey for such costs. To the extent
that DOI incurs oversight, assessment, or restoration planning costs, the
Debtors shall reimburse DOI for such costs. On each occasion that the Debtors
reimburse (i) New Jersey or EPA for oversight costs incurred in respect of any
Work, or (ii) DOI for oversight, assessment, or restoration planning costs, the
dollar value assigned to future oversight costs for financial assurance purposes
only in paragraph 14 shall be reduced dollar for dollar for the amounts
reimbursed (up to a total collective maximum of $700,000) so as to arrive at a
Revised Predetermined Cost. In the
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event that the Revised Predetermined Cost is less than the Posted Financial
Assurance Fund, then the United States and New Jersey shall cause the excess
amount (the "Refund Amount") to be refunded in accordance with paragraphs 19
through 21 above.
24. At any time Shieldalloy may replace any cash deposits in the LOC
Trust Account with a letter of credit in the equivalent dollar amount for the
benefit of New Jersey. At any time Shieldalloy may replace any cash deposits in
any of the accounts comprising the Joint Financial Assurance Fund -- with the
exception of the letter of credit described in paragraph 16C -- with a letter of
credit in the equivalent dollar amount for the benefit of New Jersey and the
United States. Any letter of credit provided pursuant to this paragraph for the
benefit of New Jersey or the United States shall be in a form and from an
institution reasonably acceptable to New Jersey and/or the United States, and
shall comply with applicable regulations. Debtors shall not be permitted to draw
down on, replace, reduce, or withdraw monies from the Posted Financial Assurance
Fund except as specifically authorized in this Settlement Agreement.
25. Shieldalloy shall forego its right of reimbursement for what was
known as the Phase I Lagoon Closure, which has already been completed.
26. In the event that a decommissioning plan relating to the
Newfield site is approved by the NRC and the NRC requires Shieldalloy to provide
additional or separate
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<PAGE> 29
financial assurance for the NRC Slag Piles Remediation Project which is
identified in paragraph 14 of this Settlement Agreement, then for purposes of
calculating the Refund Amount as described in paragraph 19 above, the Posted
Financial Assurance Fund will be increased by the additional financial assurance
actually purchased or acquired by Shieldalloy pursuant to any decommissioning
plan up to a maximum of an additional $4.25 million. In addition, the U.S and
New Jersey agree that any additional financial assurance required by the NRC
may, at Shieldalloy's option, reduce the Joint Financial Assurance Fund required
pursuant to Section 16A and 16B (up to an aggregate of $4.25 million), and the
U.S. and New Jersey agree to release or refund an amount equal to such financial
assurance provided for the benefit of the NRC, to the extent funds are
available, at the time such additional financial assurance is provided to the
NRC.
27. Nothing in this Settlement Agreement is intended to preclude any
decision by the NJDEP or EPA or DOI (as to wetlands remediation only) 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 EPA.
27A. Notwithstanding the foregoing, if, on a semiannual basis, the
Total Predetermined Cost is less than the Posted Financial Assurance Fund by
reason of the accrual
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<PAGE> 30
of earnings on such fund or otherwise, a Refund shall be made to Shieldalloy as
set forth in paragraphs 20, 21, and 22 of this Agreement. Earnings on the Joint
Financial Assurance Fund and the LOC Trust Account that are refundable shall
begin to accrue as of the date of substantial consummation of the Plan. Until
that date, accrued earnings shall remain a part of the Joint Financial Assurance
Fund and the LOC Trust Account.
DISPUTE RESOLUTION
28. Unless otherwise expressly provided for in this Settlement
Agreement, the dispute resolution procedures provided in paragraphs 28-36 herein
shall be the exclusive mechanism to resolve disputes arising between the Debtors
and the EPA under or with respect to this Settlement Agreement. However, the
procedures set forth in paragraphs 28-36 shall not apply to actions by EPA to
enforce obligations of the Debtors that have not been disputed in accordance
with paragraphs 28-36.
29. Any dispute which arises between the Debtors and the EPA under
or with respect to this Settlement Agreement shall in the first instance be the
subject of informal negotiations between the parties to the dispute. The period
for informal negotiations shall not exceed twenty (20) days from the time the
dispute arises, unless it is modified by written agreement of the parties to the
dispute. The dispute shall be considered to have arisen when one party sends the
other party a written Notice of Dispute.
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30. In the event that the parties cannot resolve a dispute by
informal negotiations under paragraph 29, then the position advanced by the EPA
shall be considered binding unless, within fifteen (15) days after the
conclusion of the informal negotiation period, the Debtors invoke the formal
dispute resolution procedures by serving EPA with a written Statement of
Position on the matter in dispute, including, but not limited to, any factual
data, analysis or opinion supporting that position and any supporting
documentation relied upon by the Debtors.
31. Within fifteen (15) days after receipt of the Debtors Statement
of Position, EPA will serve on the Debtors its Statement of Position, including,
but not limited to, any factual data, analysis, or opinion supporting EPA's
position and all supporting documentation relied upon by EPA. Within ten (10)
days after receipt of EPA's Statement of Position, the Debtors may submit a
Reply.
32. EPA shall maintain an administrative record of the dispute which
shall contain all Statements of Position, any Reply, and the supporting
documentation submitted by both parties. Where appropriate, EPA may allow
submission of supplemental Statements of Position by the parties to the dispute.
33. The Director of the Emergency and Remedial Response Division,
EPA Region 2, will issue a final administrative decision (the "Final Decision")
resolving the
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dispute based on the administrative record described in paragraph 32. The Final
Decision shall be binding upon the Debtors, subject only to the Debtors' right
to seek judicial review pursuant to paragraph 34 below.
34. The Final Decision shall be reviewable by the United States
Bankruptcy Court for the Southern District of New York, provided, however, that
the Debtors must file a motion requesting judicial review of the decision with
the Bankruptcy Court and serve it on all parties within fifteen (15) days of
receipt of the Final Decision. The motion shall include a description of the
matter in dispute, the efforts made by the parties to resolve it, the relief
requested, and the schedule, if any, within which the dispute must be resolved
to ensure orderly implementation of this Settlement Agreement. In proceedings on
any dispute governed by this paragraph, the Debtors shall have the burden of
demonstrating that the Final Decision is arbitrary, capricious or otherwise not
in accordance with law. Judicial review of the Final Decision shall be based on
the administrative record.
35. This Settlement Agreement shall not add to or subtract from the
right of the Debtors to dispute the validity of the provisions of the RODs
issued in connection with the Sites.
36. The invocation of the formal dispute resolution procedures under
paragraphs 28-34 of this Settlement Agreement shall not extend, postpone or
affect in any
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way any obligation of the Debtors under this Settlement Agreement that is not
directly in dispute, unless EPA or the Bankruptcy Court provides otherwise.
36A. Any dispute between Debtors and New Jersey concerning issues
regarding the LOC Trust Fund, whether any Environmental Project is complete, and
whether a refund is to be made from the Joint Financial Assurance Fund or the
LOC Trust Fund, shall be resolved as provided in the NJ ACO. The dispute
resolution procedures set forth in paragraphs 28-34 of this Settlement Agreement
and any resolution of a dispute thereunder shall not be binding on New Jersey.
Nothing in this paragraph shall affect the dispute resolution procedures set
forth in paragraphs 28-36, including the Bankruptcy Court's jurisdiction,
pursuant to paragraph 34, to adjudicate any dispute between EPA and the Debtors
as to whether a refund is to be made from the LOC Trust Account.
PROVISIONS IN THE EVENT OF A DEFAULT
37. The Joint Financial Assurance Fund shall be subject to draw down
and/or withdrawal by New Jersey or the United States to be used for the purpose
of remediating and restoring the Newfield site in the event that New Jersey or
the United States certifies in writing that Shieldalloy has failed to perform
its obligations under the NJ ACO, an NRC-approved decommissioning plan for the
Newfield site, and/or any other judicial or administrative order then in effect
with respect to the remediation or restoration of the
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Newfield site, provided, however, that the proceeds of the account listed in
Paragraph 16C above shall not be subject to draw down or withdrawal without the
express written consent of the NRC.
COVENANT NOT TO SUE AND RESERVATION OF
RIGHTS; BANKRUPTCY DISCHARGE
38. Except for those claims specifically settled pursuant to
paragraphs 7, 8 and 9 of this Settlement Agreement, Shieldalloy's environmental
liabilities at the Newfield site, including its liability to the United States
and New Jersey, shall be excepted from discharge and shall pass through
Shieldalloy's Chapter 11 case unaffected. The Plan of Confirmation or the Order
confirming the Plan shall contain a provision identical to this paragraph 38.
The parties agree that the post-confirmation date response costs claims of the
United States and New Jersey against Shieldalloy are not being settled under
this Settlement Agreement.
39. Except for those claims specifically settled pursuant to this
Settlement Agreement, Shieldalloy's environmental liabilities at the Cambridge
site, to the United States, shall be excepted from discharge and shall pass
through Shieldalloy's Chapter 11 case unaffected. The Plan of Reorganization or
the Order confirming the Plan shall contain a provision identical to this
paragraph 39.
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40. It is agreed and understood that the Predetermined Costs as
identified in paragraph 14 of this Settlement Agreement in no way constitute a
cap or limitation on Shieldalloy's continuing obligations to comply with state
and federal environmental laws or with the NJ ACO.
41. Except as specifically provided in paragraphs 7(g) and 7(l) of
this Settlement Agreement, the United States and New Jersey reserves all rights
they may have against the Debtors under existing law or the law as it may be
amended, to compel the Debtors to cleanup and/or remediate any hazardous
substances and pollutants known or subsequently discovered at the Newfield site,
and/or recover the United States' or New Jersey's response costs, oversight
costs and natural resource damages, if any, associated therewith; provided,
however, that nothing contained in this Settlement Agreement shall broaden or
limit the discharge granted to Metallurg pursuant to section 1141(d) of the
Bankruptcy Code.
42. Except as specifically provided in paragraph 7(h) of this
Settlement Agreement, the United States reserves all rights they may have
against the Debtors under existing law or the law as it may be amended, to
compel the Debtors to cleanup and/or remediate any hazardous substances known or
subsequently discovered at the Cambridge site, and/or recover the United States'
response costs, oversight costs, or natural resource
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damages assessment costs, if any, associated therewith; provided, however, that
nothing contained in this Settlement Agreement shall broaden or limit the
discharge granted to Metallurg pursuant to section 1141(d) of the Bankruptcy
Code.
43. Except as otherwise provided for herein, the terms of this
Settlement Agreement do not constitute a release of Shieldalloy or any prior or
subsequent owner or operator of the Newfield or Cambridge sites from any other
liability under any state or federal environmental law, decree, or order, for
the assessment, cleanup, remediation, correction, restoration or other response
to any condition at the Newfield or Cambridge sites that exists now, will exist
in the future, or was created before Shieldalloy took ownership of the Newfield
or Cambridge sites. Nothing in this Settlement Agreement shall release
Shieldalloy or a subsequent owner or operator of the Newfield or Cambridge sites
from complying with applicable state and federal environmental laws.
44. Shieldalloy agrees that all response or natural resource damages
assessment costs claims incurred or to be incurred postconfirmation by the
United States in connection with the Newfield and Cambridge sites shall be
entitled to administrative priority in a subsequent Chapter 7 or 11 bankruptcy
case of Shieldalloy.
45. Shieldalloy agrees that all response costs claims incurred or to
be incurred postconfirmation by New Jersey in connection with the Newfield site
shall be
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entitled to administrative priority in a subsequent Chapter 7 or 11 bankruptcy
case of Shieldalloy.
46. The Joint Financial Assurance Fund shall be held in trust for
the benefit of the United States and New Jersey, and the LOC Trust Account shall
be held in trust for the benefit of the NJDEP and both accounts shall be
excepted from the Debtors' bankruptcy estate or in any subsequent bankruptcy
case, except to the extent the Debtors are entitled to any refunds therefrom
pursuant to paragraphs 18 and 19 above. In the event of a subsequent bankruptcy,
any dispute as to whether a refund is due is to be determined between EPA and
the Debtors pursuant to the dispute resolution provisions herein, and between
New Jersey and the Debtors pursuant to the NJ ACO. In the event the Debtors file
a subsequent bankruptcy case, the Joint Financial Assurance Fund shall be
subject to draw down and/or withdrawal by New Jersey or the United States and
the LOC Trust Account shall be subject to draw down and/or withdrawal by New
Jersey to be used for the purpose of remediating and restoring the Newfield
site, provided, however, that the proceeds of the account listed in Paragraph
16C above shall not be subject to draw down or withdrawal without the express
written consent of the NRC. It is agreed and understood that the Joint Financial
Assurance Fund and the LOC Trust Account are held in trust exclusively for the
purpose of remediation and restoration of the Newfield site.
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47. In the event that this Settlement Agreement is approved by the
Bankruptcy Court and the Plan of Reorganization is confirmed and consummated,
the United States and New Jersey will not object to Metallurg being granted a
discharge pursuant to section 1141(d) of the Bankruptcy Code. Nothing in this
Settlement Agreement shall broaden or limit the scope of that discharge.
48. Nothing in this Settlement Agreement shall constitute a
limitation on Shieldalloy's obligation to comply with the complete terms of the
NJ ACO or any other existing or future state or federal administrative or court
order or decree relating to the Newfield site.
49. The Debtors' and the United States' entry into this Settlement
Agreement is conditioned on the entry of a final Consent Order in the action
entitled State of Ohio v. Shieldalloy Metallurgical Co., Guernsey County Court
of Common Pleas, Case No. 95-CV-242.
50. Nothing in this Settlement Agreement shall be construed to
affect the NRC's regulatory authority over the Newfield site or the Cambridge
site, including, but not limited to, the NRC's authority relating to the
decommissioning of the Sites, and the NRC's authority to require Shieldalloy to
post separate financial assurance, above and beyond the amounts set forth in
this Settlement Agreement.
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51. Debtors agree not to assert any claims or causes of action
against the New Jersey Spill Compensation Fund, or against the United States, or
its contractors or employees, with respect to Prepetition and Postpetition
Claims, including but not limited to:
i) any direct or indirect claim for reimbursement from the EPA
Hazardous Substance Superfund established by 26 U.S.C. ss. 9507, based on
sections 106(b)(2), 107, 111, 112, or 113 of CERCLA, 42 U.S.C. ss.ss.
9606(b)(2), 9607, 9611, 9612, or 9613, or any other provision of law; and
ii) any claims arising out of the response or natural resource
damages assessment actions at the Sites for which the United States' Prepetition
and Postpetition claims were incurred.
52. Nothing in this Settlement Agreement shall be deemed to
constitute approval or preauthorization of a claim within the meaning of Section
111 of CERCLA, 42 U.S.C. ss. 9611, or 40 C.F.R. 300.700(d).
53. In any subsequent administrative or judicial proceeding
initiated by New Jersey, the United States or any agency of the United States,
for injunctive relief, recovery of response or natural resource damages
assessment costs, or other appropriate relief relating to the Sites, Debtors
shall not assert, and may not maintain, any defense or claim based upon the
principles of waiver, res judicata, collateral estoppel, issue preclusion, claim
splitting, or
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other defenses based upon any contention that the claims raised in the
subsequent proceeding were or should have been brought in the instant case;
provided, however, that nothing in this paragraph: (i) affects the settlement of
the Prepetition and Postpetition Claims specifically settled pursuant to
paragraph 7 of this Settlement Agreement; and (ii) affects Metallurg's right to
raise the discharge granted to it pursuant to section 1141(d) of the Bankruptcy
Code as a defense in any subsequent proceeding before an agency or court of
competent jurisdiction.
PAYMENTS MADE PURSUANT TO THIS AGREEMENT
54. Payments to be made under this Settlement Agreement on account
of EPA's and DOI's response and natural resource damages assessment cost claims
pursuant to paragraph 7 and the Civil Penalty Claim pursuant to paragraph 8
shall be made by check made payable to the "United States of America" and sent
to:
Chief, Environmental Protection Unit
United States Attorney's Office
Southern District of New York
100 Church Street, 19th floor
New York, New York 10007
At the time of any payment of EPA's response cost claims relating to
the Newfield site pursuant to paragraph 7, Shieldalloy shall send notice that
such payment has been made to:
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U.S. EPA Region II
Emergency and Remedial Response Division
New Jersey Remediation Branch
Southern New Jersey Remediation Section
Attn: Shieldalloy Superfund Site Remedial Project
Manager
U.S. EPA Region II
Office of Regional Counsel
New Jersey Superfund Branch
New Jersey Superfund Section
Attn: Shieldalloy Superfund Site Attorney At the time of any
payment of EPA's response cost claims relating to the Cambridge site pursuant to
paragraph 7, Shieldalloy shall send notice that such payment has been made to:
U.S. EPA Region V
77 West Jackson Boulevard
Chicago, Illinois 60604-3507
Attn: Shieldalloy Superfund Site Attorney
At the time of any payment of DOI's claims pursuant to paragraph 7,
Shieldalloy shall send notice that such payment has been made to:
Ms. Teresa Tancre
Fish and Wildlife Service
Division of Finance
4401 N. Fairfax Drive, Suite 380
Arlington, VA 22203
55. Payments of the NRC's licensing fees claims pursuant to
paragraph 7 shall be made by check payable to the "Nuclear Regulatory
Commission" and sent to :
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<PAGE> 42
Ms. Diane B. Dandois
U.S. Nuclear Regulatory Commission
Office of the Controller
2 White Flint North
11545 Rockville Pike
Rockville, MD 20852
56. Payments to be made under this Settlement Agreement on account
of EPA's oversight costs pursuant to paragraph 23, shall be made by check made
payable to "EPA Hazardous Substance Superfund." Each check shall reference the
name and address of the party making payment, the Site name, the docket number
for this action, and the United States Attorney's Office Case Number and shall
be sent to:
EPA - Region II
Attn: Superfund Accounting
P.O. Box 360188M
Pittsburgh, PA
At the time of such payment, Shieldalloy shall send notice that such
payment has been made to:
U.S. EPA Region II
Emergency and Remedial Response Division
New Jersey Remediation Branch
Southern New Jersey Remediation Section
Attn: Shieldalloy Superfund Site Remedial Project
Manager
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<PAGE> 43
U.S. EPA Region II
Office of Regional Counsel
New Jersey Superfund Branch
New Jersey Superfund Section
Attn: Shieldalloy Superfund Site Attorney
57. Payments to be made under this Settlement Agreement on account
of DOI's oversight, assessment, or restoration planning costs pursuant to
paragraph 23, shall be made by check made payable to "Department of the
Interior." Each check shall reference the name and address of the party making
payment, the Site name and location, fund account number 14X5198, the docket
number for this action, and shall be sent to:
Fish and Wildlife Service
Division of Finance
4401 North Fairfax Drive
Room 380
Arlington, VA 22203
58. Payments to be made under this Settlement Agreement on account
of New Jersey's
a. Prepetition response cost claims pursuant to paragraph
7i,
b. Prepetition Spill Fund Authorization claim pursuant to
paragraph 7j,
c. Administrative claim pursuant to paragraph 7k for costs
postpetition in the amount of $245,825.88, and
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d. Penalty assessments pursuant to paragraph 9,
shall be made by separate checks each made payable to the "Treasurer, State of
New Jersey" and sent to:
NJDEP, Bureau of Revenue
CN 417
Trenton, NY 08625-0417
Payments to be made under this Settlement Agreement on account of
New Jersey's
a. Administrative claim pursuant to paragraph 7k, in the amount
of not less than $17,086.24 but not more than $24,416.81 as
set forth in paragraph 7k, and
b. Natural resource damage claim for ground water pursuant to
paragraph 7l,
shall be made by separate check payable to the "Treasurer, State of New Jersey"
and sent to:
Martin McHugh, Chief
NJDEP, Office of Natural Resource Damages
CN 404
Trenton, NJ 08625-0417
RETENTION OF RECORDS
59. Until 10 years after the effective date of this Settlement
Agreement, Debtors shall preserve and retain all records and documents now in
their possession, custody
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or control, or which come into their possession, custody or control, that relate
in any manner to response actions taken at the Sites or to the liability of any
person for response actions conducted and to be conducted at the Sites,
regardless of any corporate retention policy to the contrary. This shall not
supersede the document retention requirements in the NJ ACO, and such
requirements shall remain in effect.
60. After the conclusion of the document retention period in the
preceding paragraph, Debtors shall notify the United States and the State of New
Jersey at least 90 days prior to the destruction of any such records or
documents, and, upon request by the United States or the State of New Jersey,
Debtors shall deliver any such records or documents to the United States or the
State of New Jersey. Debtors may assert that certain documents, records, or
other information are privileged under the attorney-client privilege or any
other privilege recognized by federal or state law. If Debtors assert such a
privilege, they shall provide the United States and New Jersey with the
following: 1) the title of the document, record, or information; 2) the date of
the document, record, or information; 3) the name and title of the author of the
document, record, or information; 4) the name and title of each addressee and
recipient; 5) a description of the subject matter of the document, record or
information; and 6) the privilege asserted. If a claim of privilege applies only
to a portion of a document, the document shall be provided to the United States
and the State of New Jersey
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in redacted form to mask only the privileged information. Debtors shall retain
all records and documents that they claim to be privileged until the United
States and the State of New Jersey have had a reasonable opportunity to dispute
the privilege claim.
61. By signing this Settlement Agreement, Shieldalloy and Metallurg
each certifies individually that, to the best of its knowledge and belief, it
has fully complied in all material respects with any and all requests from the
United States and New Jersey for information regarding the Sites.
NOTICES AND SUBMISSIONS
62. Whenever, under the terms of this Settlement Agreement, written
notice is required to be given, or a report or other document is required to be
sent by one party to another, it shall be directed to the individuals at the
addresses specified below via U.S. certified mail, return receipt requested,
unless those individuals or their successors give notice of a change of address
to the other parties in writing. All notices and submissions shall be considered
effective upon receipt, unless otherwise provided. Except as otherwise provided
in this Settlement Agreement, written notice as specified herein shall
constitute complete satisfaction of any written notice requirement in the
Settlement Agreement with respect to the United States, EPA, DOI, New Jersey,
NJDEP, and the Debtors, respectively.
a. As to the State of New Jersey:
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Donna Gaffigan, Case Manager
NJDEP, Bureau of Federal Case Management
CN 028
Trenton, NJ 08625-0028
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Martin McHugh, Chief
NJDEP, Office of Natural Resource Damages
CN 404
Trenton, NJ 08625-0417
Kenneth W. Elwell, Deputy Attorney General
25 Market Street
Justice Complex
CN 093
Trenton, NJ 08625-0093
b. As to the United States of America:
The United States EPA
Office of Regional Counsel
290 Broadway
New York, New York 10007
Attn: Shieldalloy Site Attorney
The United States EPA
Office of Regional Counsel
Emergency and Remedial Response
Division
290 Broadway
New York, New York 10007
Attn: Remedial Project Manager
United States Department of the Interior
Division of Conservation and Wildlife
1849 "C" Street, NW
Washington, D.C. 20240
Attn: Shieldalloy Attorney
United States Attorney's Office
Southern District of New York
100 Church Street
48
<PAGE> 49
New York, New York 10007
Attn: Chief, Environmental Protection Unit
c. As to the Debtors:
Shieldalloy Metallurgical Corporation
P.O. Box 768
12 West Boulevard
Newfield, NJ 08344
Attn: Environmental Manager
Weil, Gotshal & Manges LLP
1615 L Street, N.W. Suite 700
Washington, DC 20036
Attn: David Berz, Esq.
LODGING AND OPPORTUNITY FOR PUBLIC COMMENT
63. The United States agrees that notice of this Settlement
Agreement shall be expeditiously published in the Federal Register in accordance
with CERCLA section 122(i), 42 U.S.C. ss. 922(i), and that public comments, if
any, will be taken and considered during the required 45 day notice and comment
period. The United States reserves the right to withdraw or withhold its consent
to the Settlement Agreement if the public comments disclose facts or
considerations which indicate that the Settlement Agreement is inappropriate,
improper or inadequate.
49
<PAGE> 50
64. The Debtors shall request that this Settlement Agreement be
approved by the Bankruptcy Court pursuant to the order confirming the Debtors'
Plan of Reorganization.
65. If for any reason (i) the Court by Final Order should decline to
approve this Settlement Agreement, (ii) the Settlement Agreement is withdrawn by
the United States as provided in paragraph 63, (iii) the Settlement Agreement is
not approved by a Final Order, or (iv) the Chapter 11 Cases are dismissed or
converted to cases under Chapter 7 of the Bankruptcy Code before the effective
date of a Plan of Reorganization: (a) this Settlement Agreement shall be null
and void and the parties shall not be bound hereunder or under any documents
executed in connection herewith; (b) the parties shall have no liability to one
another arising out of or in connection with this Settlement Agreement or under
any documents executed in connection herewith; (c) the Federal Proofs of Claim
shall not be deemed to be discharged and the Debtors may, unless the Chapter 11
Cases are dismissed or converted to cases under Chapter 7 of the Bankruptcy
Code, file objections and/or file a motion for estimation of such claims (which
the United States may oppose); (d) the New Jersey Proofs of Claim shall not be
deemed to be discharged and the Debtors may, unless the Chapter 11 Cases are
dismissed or converted to cases under Chapter 7 of the Bankruptcy Code, file
objections and/or file a motion for estimation of such claims (which New Jersey
50
<PAGE> 51
may oppose); (e) this Settlement Agreement and any documents prepared in
connection herewith shall have no residual or probative effect or value, and it
shall be as if they had never been executed; and (f) this Settlement Agreement,
any statements made in connection with settlement discussions, and any documents
prepared in connection herewith may not be used as evidence in any litigation
between the parties.
66. The Debtors shall not propose any Plan of Reorganization or take
any other action in the Chapter 11 Cases that is inconsistent with the terms and
provisions of this Settlement Agreement. The United States and New Jersey
reserve all of their rights to object to any Plan of Reorganization filed by the
Debtors, except that the United States and New Jersey agree that they will not
object to any provisions in the Plan of Reorganization that are consistent with
this Settlement Agreement.
INTEGRATION AND COUNTERPARTS
67. This Settlement Agreement and any other documents to be executed
in connection herewith constitutes the sole and complete agreement of the
parties hereto with respect to the matters addressed herein, and supersedes any
prior understandings or oral or written agreements concerning the subject
matters of this Settlement Agreement. Except as otherwise provided herein, it is
understood and agreed that this Settlement Agreement does
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<PAGE> 52
not supersede the NJ ACO. This Settlement Agreement may not be amended except by
a writing signed by the party or parties sought to be bound thereunder.
68. This Settlement Agreement may be executed in counterparts each
of which shall constitute an original and all of which shall constitute one and
the same agreement.
RETENTION OF JURISDICTION
69. Except as provided below with respect to the NJ ACO and the LOC
Trust Account, the United States Bankruptcy Court for the Southern District of
New York shall retain exclusive jurisdiction of the subject matter of this
Settlement Agreement and the parties hereto for the duration of the terms and
provisions of this Settlement Agreement with respect to the (i) dischargeability
of any claims referred to under this Agreement and (ii) any issues with respect
to the Joint Financial Assurance Fund for the purpose of enabling any of the
parties to apply to the Court, in accordance with the dispute resolution
procedures set forth in paragraphs 28-36 for such further order, direction and
relief as may be necessary or appropriate for the construction or interpretation
of the foregoing matters under this Settlement Agreement or to effectuate or
enforce compliance with its terms. The New Jersey Superior Court shall retain
exclusive jurisdiction over any issues that may arise with respect to the NJ ACO
and the LOC Trust Account. With the exception of the dischargeability of
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<PAGE> 53
claims referred to under this Settlement Agreement, this Settlement Agreement
does not confer jurisdiction on the Bankruptcy Court for the Southern District
of New York over the Debtors' obligation to remediate or otherwise address
environmental violations at the Newfield site. Any dispute between the Debtors
and New Jersey concerning the LOC Trust Fund, whether any Environmental Project
is complete, whether a refund is to be made from the Joint Financial Assurance
Fund or the LOC Trust Account, and the nature and extent of the Debtors'
obligations under the NJ ACO, shall be resolved as provided in the NJ ACO.
Nothing in this paragraph shall affect the dispute resolution procedures set
forth in paragraphs 28-36, including the Bankruptcy Court's jurisdiction,
pursuant to
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<PAGE> 54
paragraph 34, to adjudicate any dispute between EPA and the Debtors as to
whether a refund is to be made from the LOC Trust Account.
THE UNDERSIGNED PARTY ENTERS INTO THIS SETTLEMENT AGREEMENT
FOR THE STATE OF NEW JERSEY:
Peter Verniero
Attorney General of New Jersey
Attorney for New Jersey
Department of Environmental
Protection
By:/S/ KENNETH W. ELWELL
--------------------------------------
Kenneth W. Elwell
Deputy Attorney General
THE UNDERSIGNED PARTY ENTERS INTO THIS SETTLEMENT AGREEMENT
FOR THE DEBTORS:
/S/ DAVID R. BERZ
--------------------------------
David R. Berz
DB 4517
A Member of the Firm
Weil, Gotshal & Manges LLP
Attorneys for Debtors in
Possession
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
54
<PAGE> 55
THE UNDERSIGNED PARTIES ON THE ATTACHED PAGES ENTER INTO THIS SETTLEMENT
AGREEMENT FOR THE UNITED STATES OF AMERICA:
SO ORDERED this _____ day
of February, 1997
- ------------------------------
United States Bankruptcy Judge
55
<PAGE> 1
Exhibit 10.6
FINAL PICO
IN THE COURT OF COMMON PLEAS
GUERNSEY COUNTY
STATE OF OHIO, ex rel. :
BETTY D. MONTGOMERY, :
ATTORNEY GENERAL OF OHIO, : CASE NO. 95CV242
:
:
Plaintiff, : JUDGE ELLWOOD
:
:
:
vs. :
: PERMANENT
INJUNCTION
SHIELDALLOY METALLURGICAL : CONSENT ORDER
CORPORATION, :
:
AND :
:
CYPRUS FOOTE MINERAL COMPANY, :
:
Defendants. :
<PAGE> 2
TABLE OF CONTENTS
I. INTRODUCTION 2
II. JURISDICTION 6
III. PARTIES BOUND 6
IV. DEFINITIONS 7
V. COMPUTATION OF TIME 11
VI. DESIGNATION OF SITE COORDINATORS 12
VII. SITE ACCESS RESTRICTIONS 14
VIII. REMEDIAL DESIGN/REMEDIAL ACTION AND OPERATION AND
MAINTENANCE 14
IX. PERIODIC REVIEW TO ASSURE PROTECTION OF HUMAN HEALTH
AND THE ENVIRONMENT 16
X. ADDITIONAL WORK 18
XI. WETLANDS WORK 20
XII. STORMWATER CONTROL 22
XIII. CLOSURE OF SOUTH BAGHOUSE DUST WASTEPILE 22
XIV. REVIEW OF SUBMITTALS 23
i
<PAGE> 3
XV. DOCUMENT SUBMITTAL 25
XVI. DEFENDANTS' PROGRESS REPORTS 27
XVII. ACCESS TO INFORMATION AND RECORDS RETENTION 27
XVIII. SITE ACCESS 29
XIX. DEED RESTRICTION 30
XX. PERMANENT INJUNCTION 31
XXI. FINANCIAL ASSURANCE 32
XXII. REIMBURSEMENT OF COSTS 33
XXIII. POTENTIAL FORCE MAJEURE 35
XXIV. STIPULATED PENALTIES 37
XXV. CIVIL PENALTY 38
XXVI. SUPPLEMENTAL ENVIRONMENTAL PROJECT 39
XXVII. INDEMNITY 40
XXVIII. DISPUTE RESOLUTION 41
XXIX. TERMINATION OF CONSENT ORDER FOR PRELIMINARY
INJUNCTION 43
ii
<PAGE> 4
XXX. SATISFACTION OF LAWSUIT 43
XXXI. COVENANT NOT TO SUE 43
XXXII. RESERVATION OF RIGHTS 44
XXXIII. APPENDICES 47
XXXIV. MODIFICATION 47
XXXV. RETENTION OF JURISDICTION 47
XXXVI. COURT COSTS 47
XXXVII. SIGNATORIES 48
XXXVIII. ENTRY OF CONSENT ORDER AND FINAL JUDGMENT BY
CLERK 48
iii
<PAGE> 5
I. INTRODUCTION
WHEREAS, the State of Ohio by its Attorney General, at the written
request of the Director of the Ohio Environmental Protection Agency, has filed
its Complaint in the above-captioned case against Shieldalloy Metallurgical
Corporation ("Shieldalloy") and Cyprus Foote Mineral Company ("Cyprus Foote")
("Defendants", as defined in Section IV. DEFINITIONS) pursuant to Ohio Revised
Code ("R.C.") Chapters 3734 and 6111, the regulations promulgated thereunder and
other laws;
WHEREAS, the State of Ohio's Complaint seeks an injunction for
Defendants to investigate, to abate and to prevent migration of alleged
pollution and contamination and to take other actions at the facility currently
owned by Shieldalloy on State Route ("S. R.") 209, Guernsey County, Ohio (the
"Site," as defined in Section IV. DEFINITIONS), and alleges violations of Ohio
solid waste, hazardous waste, and water pollution and other laws at the Site;
WHEREAS, Shieldalloy, which is the current owner of the Site, and
Cyprus Foote, which is the successor to the former owner of the Site, entered
into a Consent Order for Preliminary Injunction ("COPI") with the State of Ohio
which the Court issued on July 11, 1995;
WHEREAS, the COPI provided for the Defendants to complete a Remedial
Investigation and Feasibility Study ("RI/FS") for the Site, the objectives of
which were: (1) to complete a remedial investigation of the Site to determine
the nature and extent of alleged contamination at the Site; and (2) to develop
and evaluate an appropriate response to the alleged contamination employing
sound scientific, engineering and construction practices.
WHEREAS, Ohio EPA has approved Defendants' RI/FS report;
2
<PAGE> 6
WHEREAS, Ohio EPA has issued a Preferred Plan that sets forth Ohio
EPA's preferred alternative for remediation at the Site, and issued public
notice of the Preferred Plan to solicit public comments;
WHEREAS, Ohio EPA has planned a public meeting in order to provide
information and answer questions about the Preferred Plan to the general public,
and to receive both oral and written comments from the public about the
Preferred Plan;
WHEREAS, Ohio EPA will issue a Decision Document that selects the
remedy for the Site, which will be based on the analysis presented in the
Preferred Plan and RI/FS report, comments received from the public, and any
other new or significant information received and generated, during and after
the public comment period (once issued, the Decision Document will become
Appendix C to this Consent Order);
WHEREAS, Shieldalloy and Cyprus Foote have agreed to enter into this
Consent Order with the State of Ohio;
WHEREAS, the objectives of this Consent Order include the protection
of human health and the environment by requiring Defendants to abate and to
prevent the migration of alleged pollution and contamination through
implementation of a Remedial Design ("RD") and Remedial Action ("RA")
(collectively "RD/RA"), performance of Operation and Maintenance ("O&M") and
other Work at the Site, and the taking of certain other actions.
WHEREAS, the remediation and other Work to be performed under this
Consent Order apply to alleged pollution and contamination from radioactive
waste and other Waste Material at the Site;
3
<PAGE> 7
WHEREAS, on May 27, 1987, the U.S. Nuclear Regulatory Commission
("NRC") issued License No. SMB-1507 to Shieldalloy concerning the possession of
certain radioactive material at the Site, which license has been amended from
time to time;
WHEREAS, Shieldalloy is preparing to decommission certain
radioactive material at the Site under the Atomic Energy Act, 42 U.S.C. 2014, et
seq., and regulations of NRC promulgated thereunder;
WHEREAS, on July 25, 1996, NRC published in the Federal Register (61
FR 38789) notice of the availability of its Draft Environmental Impact Statement
concerning the decommissioning of certain radioactive material at the Site;
WHEREAS, R.C. Chapter 3748 provides the Ohio Department of Health
with regulatory authority over "radioactive material" within the meaning of R.C.
Section 3748.01;
WHEREAS, R.C. Section 3748.03 directs the Ohio Department of Health
to enter into negotiations with NRC for an agreement for the State of Ohio to
exercise licensing and other regulatory authority in lieu of regulation by NRC
under the Atomic Energy Act, 42 U.S.C. 2014, et seq. (i.e., for the State of
Ohio to become an "Agreement State");
WHEREAS, the Ohio Environmental Protection Agency confers with NRC
and the Ohio Department of Health on matters relating to radioactive waste at
the Site;
WHEREAS, the Ohio Environmental Protection Agency confers with the
Department of the Interior, U.S. Fish and Wildlife Service, on matters relating
to natural resource damages at the Site;
WHEREAS, Defendants do not admit the allegations set forth in the
Complaint and deny any violation of any state or federal statute, regulation or
common law;
4
<PAGE> 8
WHEREAS, on September 2, 1993, Shieldalloy filed a voluntary
petition for relief under chapter 11, title 11, United States Code with the
United States Bankruptcy Court, Southern District of New York, In re:
Shieldalloy Metallurgical Corp., Civ. No. 93 B 44469 (JLG) (the "Bankruptcy
Case");
WHEREAS, Shieldalloy believes that expeditious resolution of the
State of Ohio's enforcement action against Shieldalloy in this Case and claims
in the Bankruptcy Case will facilitate reorganization in its Bankruptcy Case;
NOW, THEREFORE, without adjudication or admission of any issue of
fact or law, and upon consent of the Parties hereto, it is hereby ORDERED,
ADJUDGED AND DECREED as follows:
II. JURISDICTION
1. The Parties agree that the Court has jurisdiction over them and
the subject matter of the Complaint and that venue is proper in this Court for
the purposes and duration of this Consent Order. Solely for purposes of this
Consent Order, and the underlying Complaint, the Complaint states a claim upon
which relief can be granted and Defendants are proper parties to this action.
III. PARTIES BOUND
2. The provisions of this Consent Order shall apply to and be
binding upon Plaintiffs and the Defendants, their successors in interest and
assigns, and others to the extent provided by Ohio Civil Rule 65(D). Nothing
herein is intended to expand or limit the scope of Ohio Civil Rule 65(D).
5
<PAGE> 9
3. No change in corporate ownership or status of Defendants,
including but not limited to any transfer of assets of real or personal
property, shall in any way alter Defendants' rights or obligations under this
Consent Order. Defendants shall provide a copy of this Consent Order to any
subsequent owner(s) or successor(s) prior to the transfer of the company's
ownership rights.
4. Defendants shall provide a copy of this Consent Order to each
general contractor and subcontractor hired by, or who will provide Work or
services on behalf of, Defendants related to this Consent Order.
6
<PAGE> 10
IV. DEFINITIONS
5. As used in this Consent Order, the following terms, words, and
abbreviations shall have the meanings provided below:
A. "CERCLA" shall mean the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, 42
U.S.C. 9601, et seq., as amended.
B. "Certification of Completion" shall mean the approval of
Defendants' construction completion report pursuant to
Section 3.4.3 of the RD/RA SOW.
C. "Consent Order" shall mean this Permanent Injunction
Consent Order.
D. "COPI" shall mean the Consent Order for Preliminary
Injunction issued by this Court on July 11, 1995.
E. "Contractor" shall mean a qualified contractor retained
by the Defendants pursuant to this Consent Order, and
any subcontractor, representative, agent, employee, or
designee thereof.
F. "Days" shall mean calendar days, including weekends and
holidays.
G. "Decision Document" shall mean the document issued by
Ohio EPA setting forth the remedial action requirements
for the Site.
H. "Defendants" shall mean the Shieldalloy Metallurgical
Corporation and Cyprus Foote Mineral Company,
individually and collectively.
I. "Director" shall mean the Director of the Ohio
Environmental Protection Agency and the Director's duly
authorized representatives.
J. "Document" shall mean any record, report, photograph,
videotape, correspondence, computer disk or tape,
recorded or retrievable information of any kind,
including raw data, narrative reports, and
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<PAGE> 11
any and all documentary evidence, relating to the
treatment, storage, or disposal, and concerning the
investigation and remediation of Waste Material at the
Site. "Document" shall be construed broadly to promote
the effective sharing between Defendant(s) and Ohio EPA
of information and views concerning the Work to be
performed pursuant to this Consent Order.
K. "Effective Date" shall mean the date that the Guernsey
County Court of Common Pleas enters this Consent Order.
L. "Feasibility Study" ("FS") shall mean the development,
evaluation, and analysis of remedial alternatives in
accordance with state and federal environmental laws and
with the COPI.
M. "NCP" shall mean the National Oil and Hazardous
Substances Pollution Contingency Plan, referred to in
CERCLA as the National Contingency Plan, and codified at
40 C.F.R. Part 300, as amended.
N. "OEPA" or "Ohio EPA" shall mean the Ohio Environmental
Protection Agency or its Director and his/her designated
representatives as the context or other law or
regulation may require, or successor agencies.
O. "Operation and Maintenance" ("O&M") shall mean all
activities required to maintain the effectiveness of the
Remedial Action as required under the approved Operation
and Maintenance Plan required or contemplated by this
Consent Order and the Statement of Work (SOW).
P. "Oversight Costs" shall mean all direct and indirect
costs of oversight incurred by the State of Ohio in
verifying the work to be performed by Defendants
pursuant to the COPI and this Consent Order, or
otherwise implementing or enforcing the COPI and this
Consent Order, including but not limited to the costs of
payroll, fringe benefits, contractors, travel,
oversight, samples, laboratory analysis, data
management, safety and general equipment, supplies,
general maintenance, reviewing or
8
<PAGE> 12
developing work plans, reports, or other items pursuant
to the COPI and this Consent Order.
Q. "Paragraph" shall mean a portion of the Consent Order
identified by an arabic numeral or an upper case letter.
R. "Parties" shall mean the State of Ohio and the
Defendants.
S. "Performance Standards" shall mean the cleanup standards
and other measures of achievement of the goals of the
Remedial Action, set forth in Section 6 of the Decision
Document and Section 2.0 of the RD/RA SOW.
T. "Preferred Plan" shall mean the document prepared by
Ohio EPA that presents to the public Ohio EPA's
preferred alternative for the pollution
abatement/cleanup of the Site. The Preferred Plan
includes a brief summary of the alternatives evaluated
in the detailed analysis of the Feasibility Study, and
identification of key factors that lead to selection of
the preferred alternative.
U. "Remedial Action" ("RA") shall mean those activities,
except for Operation and Maintenance, to be undertaken
by Defendants to implement the approved Remedial Design,
and other plans approved by Ohio EPA, in accordance with
the RD/RA Statement of Work, the final Remedial Design
and Remedial Action Workplan, the Decision Document and
other plans approved by Ohio EPA.
V. "Remedial Design" ("RD") shall mean the design of, in
accordance with Ohio law and this Consent Order,
detailed engineering plans, specifications, construction
drawings and other plans deemed by Ohio EPA to be
sufficient to implement the remedy selected by Ohio EPA
in the Decision Document, in accordance with the RD/RA
Statement of Work, the final Remedial Design and
Remedial Action Workplan and other plans approved by
Ohio EPA.
9
<PAGE> 13
W. "Remedial Design/Remedial Action" ("RD/RA") shall mean
the Remedial Design and the Remedial Action together.
X. "RD/RA Statement of Work" ("RD/RA SOW") shall mean the
Statement of Work for implementation of the Remedial
Design, Remedial Action, and Operation and Maintenance
at the Site, as set forth in Appendix A to this Consent
Order and any modifications made in accordance with this
Consent Order. The RD/RA Statement of Work is not
specific to this Site, and shall be used as an outline
in developing workplans specific to this Site.
Y. "Remedial Investigation/Feasibility Study" ("RI/FS")
shall mean the Remedial Investigation and Feasibility
Study together.
Z. "Remedial Investigation" ("RI") shall mean the
investigation conducted in accordance with state
environmental laws and the COPI by Defendants to
determine the nature and extent of contamination at the
Site, and includes the gathering of all necessary data
to support the Feasibility Study.
AA. "Response Costs" shall mean all costs incurred by the
State of Ohio pursuant to the COPI and this Consent
Order verifying the Work, doing the Work or otherwise
implementing or enforcing the COPI and this Consent
Order, including, but not limited to, payroll costs,
contractor costs, travel costs, direct costs, indirect
costs, legal and enforcement related costs, Oversight
Costs, laboratory costs, the costs of reviewing or
developing plans, reports, and other items.
BB. "Section" shall mean a portion of this Consent Order
identified by a roman numeral.
CC. "Site" shall mean the property currently owned by
Shieldalloy Metallurgical Corporation on S.R. 209,
Guernsey County, Ohio, as well as any area adjacent to
the property, where the treatment, storage, and/or
disposal of Waste Material have occurred, and/or the
discharge of Waste Material into waters of the State
have occurred, including
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any area inside or outside of the property where Waste
Material from the property have migrated.
DD. "Waste Material" shall mean (1) any "hazardous waste" as
that term is defined under R.C. Section 3734.01(J); (2)
any "solid waste" as that term is defined under R.C.
Section 3734.01(E); (3) any "industrial waste" as that
term is defined under R.C. Section 6111.01(C); (4) any
"other wastes" as that term is defined under R.C.
Section 6111.01(D); (5) any "hazardous substances" as
that term is defined under Section 101(14) of CERCLA, 42
U.S.C. ss.9601(14); (6) any "hazardous waste
constituent" as that term is defined under Rule 3745-50-
10(A)(43) of the Ohio Administrative Code ("OAC"); and
(7) any radioactive waste, including but not limited to
waste containing "source material," "special nuclear
material" or "by product material" as those terms are
defined under the Atomic Energy Act, 42 U.S.C. 2014, et
seq, and R.C. Chapter 3748, and naturally-occurring
radioactive material and accelerator-produced
radioactive material as those terms are defined under
R.C. Chapter 3748.
EE. "Work" shall mean all activities Defendants are required
to perform under this Consent Order.
FF. "Workplans" shall mean those documents which are to be
submitted to Ohio EPA by Defendants pursuant to this
Consent Order detailing the requirements for support of
the RD/RA, O&M, Additional Work, Wetlands Work and other
Work required under this Consent Order. Each required
workplan shall include a detailed description of the
proposed design and/or implementation activities; a time
schedule for conducting those activities; and personnel
and equipment needs.
6. Except as otherwise defined above, the terms used in this Consent
Order shall have the same meaning as used in R.C. Chapters 3734 and 6111 and the
regulations promulgated thereunder.
V. COMPUTATION OF TIME
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<PAGE> 15
7. In computing any period of time under this Consent Order, where
the last day would fall on a Saturday, Sunday or State of Ohio or federal
holiday, the period shall run until the end of the next day that is not a
Saturday, Sunday or State of Ohio or federal holiday.
VI. DESIGNATION OF SITE COORDINATORS
8. The Defendants shall designate a site coordinator and an
alternate site coordinator to oversee and implement all Work required by this
Consent Order and to coordinate with the Ohio EPA site coordinator.
9. Within ten (10) days of the Effective Date of this Consent Order,
Defendants shall notify Ohio EPA in writing of the name, address, and telephone
number of their designated site coordinator and alternate site coordinator. If a
designated site coordinator or alternate site coordinator is changed, the
identity of the successor will be given to the other Party at least five (5)
days before the changes occur, unless impracticable, but in no event later than
the actual day the change is made.
10. To the maximum extent practicable, except as specifically
provided in this Consent Order, communications between the Parties regarding the
implementation of this Consent Order shall be made between the Defendants' site
coordinators and the Ohio EPA site coordinator. Defendants' site coordinator, or
alternate, shall be available, including for communication with Ohio EPA, for
the duration of this Consent Order. Each Party's site coordinator shall be
responsible for assuring that all communications from the other Party are
appropriately disseminated and processed. Defendants' site coordinator or
alternate shall be present on the Site or on call during all hours of Work at
the Site. The absence of the Ohio
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<PAGE> 16
EPA site coordinator shall not be cause for the stoppage of Work unless
otherwise provided by Ohio EPA in writing.
11. Without limitation of any authority conferred by law on Ohio
EPA, the authority of the Ohio EPA site coordinator includes, but is not limited
to:
A. Taking samples and directing the type, quantity and
location of samples to be taken by Defendants pursuant
to an approved Workplan;
B. Observing, taking photographs, or otherwise recording
information related to the implementation of this
Consent Order, including the use of any mechanical or
photographic device;
C. Directing that Work stop whenever the site coordinator
for Ohio EPA determines that the activities at the Site
may create or exacerbate a substantial threat to public
health or safety, or threaten to cause or contribute to
air or water pollution or soil contamination;
D. Conducting investigations and tests related to the
implementation of this Consent Order;
E. Inspecting and copying records, operating logs,
contracts and/or other documents related to the
implementation of this Consent Order subject to Section
XVII. ACCESS TO INFORMATION AND RECORDS RETENTION;
F. Assessing Defendants' compliance with this Consent
Order;
G. Conducting inspections at any time of all areas of the
Site (see Section VII. SITE ACCESS RESTRICTIONS);
H. Directing actions taken at the Site pursuant to this
Consent Order; and,
I. Reviewing and approving or disapproving all Workplans,
reports, studies and other documents that Defendants are
required to submit pursuant to
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this Consent Order, including authorities as provided
under Section XIV. REVIEW OF SUBMITTALS.
VII. SITE ACCESS RESTRICTIONS
12. Defendants shall implement the Site Access Restrictions Workplan
as approved by Ohio EPA under the COPI, until new Site Access Restrictions are
approved and implemented pursuant to the approved RD/RA Workplan. This Section
does not limit the right of the State of Ohio to access the Site under Section
XVIII. SITE ACCESS.
VIII. REMEDIAL DESIGN/REMEDIAL ACTION AND OPERATION AND
MAINTENANCE
13. Defendants shall implement Remedial Design/Remedial Action
("RD/RA") and Operation and Maintenance ("O&M") for the Site pursuant to the
terms of this Consent Order. All Work performed pursuant to this Consent Order
shall be under the direction and supervision of a contractor(s) with expertise
in remediation of the Waste Material at the Site. Defendants shall notify Ohio
EPA in writing of the name of the supervising contractor and any and all
subcontractors to be used in carrying out the terms of this Consent Order. The
RD/RA Workplan and O&M Workplan shall be developed and will be reviewed for
consistency with the NCP, and the most current version of applicable guidance
documents as set forth in Appendix B hereto.
A. Within fourteen (14) days of the Effective Date of this
Consent Order, Defendants shall meet with the Ohio EPA to discuss the
requirements of the RD/RA Workplan, unless otherwise mutually agreed upon by the
Parties.
B. Within sixty (60) days of the Effective Date of this
Consent Order, Defendants shall submit to Ohio EPA for review and approval
pursuant to Section XIV.
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REVIEW OF SUBMITTALS a Workplan for the implementation of the Remedial Design
and Remedial Action for the Site ("Remedial Design and Remedial Action Workplan"
or "RD/RA Workplan"). The RD/RA Workplan shall provide for the design and
implementation of the remedial action as set forth in the Decision Document
issued by Ohio EPA consistent with Section X. SELECTION OF THE REMEDY of the
COPI.
C. By ninety (90) days prior to the scheduled completion date
of the Remedial Action as specified in the approved RD/RA Workplan, Defendants
shall submit to Ohio EPA for review and approval, pursuant to Section XIV.
REVIEW OF SUBMITTALS, a plan for the implementation of Operation and Maintenance
at the Site, including provision for Operation and Maintenance of the East Slag
Pile and West Slag Pile for one thousand (1000) years or such shorter period as
may be approved by Ohio EPA ("O&M Workplan").
D. The RD/RA and O&M Workplans shall be developed in
conformance with this Consent Order, the RD/RA SOW, the guidance documents
listed in Appendix B, attached hereto and incorporated fully herein, the
National Contingency Plan and R.C. Chapters 3734 and 6111. If Ohio EPA
determines that any additional or revised guidance documents affect the Work to
be performed in implementing the RD/RA Workplan and/or the O&M Workplan, Ohio
EPA will notify Defendants, and Defendants shall modify the RD/RA Workplan, O&M
Workplan and other affected documents accordingly.
E. Upon approval of the RD/RA Workplan by Ohio EPA, Defendants
shall implement the Work detailed therein in accordance with the schedule
contained in the approved RD/RA Workplan. Upon approval of the O&M Workplan by
Ohio EPA, Defendants shall implement the Work detailed therein in accordance
with the schedule contained in the approved O&M Workplan. Defendants shall
submit all plans, reports, or other deliverables
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required under the approved RD/RA Workplan and under the approved O&M Workplan,
in accordance with the approved schedule, for review and approval pursuant to
Section XIV. REVIEW OF SUBMITTALS of this Consent Order.
F. The requirements of this Section as to RD/RA Work only (not
O&M Work) shall terminate upon issuance by Ohio EPA of a Certification of
Completion.
IX. PERIODIC REVIEW TO ASSURE PROTECTION OF HUMAN HEALTH AND
THE ENVIRONMENT
14. If the Work performed by the Defendants pursuant to this Consent
Order results in any Waste Material remaining at the Site, the State of Ohio may
review the Work at least once every five (5) years after approval by Ohio EPA of
the Certification of Completion of the Remedial Action to evaluate whether the
Remedial Action continues to be protective of human health and the environment.
15. During the 30-year period following Ohio EPA's approval of the
Certification of Completion, upon written request of Ohio EPA, Defendant shall
conduct and submit to Ohio EPA pursuant to Section XIV. REVIEW OF SUBMITTALS
such studies and investigations as are necessary to evaluate whether the
remedial action continues to be protective of human health and the environment;
provided, Ohio EPA may request not more than six distinct sets of studies and
investigations during the 30-year period pursuant to this paragraph.
16. If Ohio EPA determines that further response action is
appropriate for protection of human health and the environment at the Site, then
Ohio EPA may take any appropriate action, including any of the following
actions: 1) initiate Additional Work under Section X. ADDITIONAL WORK, to the
extent such Section is applicable; 2) exercise any lawful authority under this
Consent Order or in any other proceeding, including issuance of an
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administrative order or initiation of judicial proceedings, to compel Defendants
and/or any other person to perform additional response action to assure
protection of human health and the environment; or 3) institute proceedings
against Defendants to recover the State of Ohio's costs of doing remediation
activities at the Site.
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X. ADDITIONAL WORK
17. Ohio EPA or Defendants may determine that in addition to the
tasks defined in the approved RI/FS Workplan, RD/RA Workplan, and O&M Workplan
and other requirements of this Consent Order, additional Work may be necessary
to achieve and maintain the Performance Standards or to carry out and maintain
the effectiveness of the remedy set forth in the Decision Document.
18. In the event that Ohio EPA determines that additional Work is
necessary to achieve and maintain the Performance Standards or to carry out and
maintain the effectiveness of the remedy set forth in the Decision Document,
Ohio EPA will orally notify Defendants and submit a written request to them
explaining the need for and detailing the nature of the additional Work. Within
thirty (30) days of receipt of written notice from Ohio EPA that additional Work
is necessary, Defendants shall prepare and submit a Workplan for Ohio EPA's
review and approval for the performance of the additional Work ("Additional Work
Workplan"). Defendants shall develop the Additional Work Workplan in conformance
with this Consent Order, the RI/FS SOW or RD/RA SOW as applicable, the National
Contingency Plan, the guidance documents listed in Appendix B, and R.C. Chapters
3734 and 6111. Upon approval of the Workplan by Ohio EPA pursuant to Section
XIV. REVIEW OF SUBMITTALS, Defendants shall implement the Workplan for
additional Work in accordance with the schedules contained therein.
19. In the event that Defendants determine that additional Work is
necessary to achieve and maintain the Performance Standards or to carry out and
maintain the effectiveness of the remedy set forth in the Decision Document.
Defendants shall submit a written request for approval to Ohio EPA explaining
the need for and detailing the nature of the additional Work
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prior to performing the additional Work. Upon agreement by Ohio EPA of
Defendants' request, Defendants shall develop an Additional Work Workplan in
conformance with this Consent Order, the applicable SOW, National Contingency
Plan, the guidance documents listed in Appendix B, and R.C. Chapter 3734 and
6111. Upon approval of the Workplan by Ohio EPA pursuant to Section XIV. REVIEW
OF SUBMITTALS, Defendants shall implement the Workplan for additional Work in
accordance with the schedules contained therein.
20. In the event that additional Work is necessary for any task
described in this Consent Order, the deadline for completing such task(s) shall
be extended by the amount of time required to perform the additional Work
required, including the period for time required to plan and/or obtain approval
from Ohio EPA for the performance of such Work.
21. Any determination(s) that additional Work is necessary pursuant
to this Section X. ADDITIONAL WORK must be made on or before the thirtieth
anniversary of the Certification of Completion.
22. Defendants may invoke the procedures set forth in Section
XXVIII. DISPUTE RESOLUTION to dispute Ohio EPA's determination that Additional
Work is necessary to achieve and maintain the Performance Standards or to carry
out and maintain the effectiveness of the remedy set forth in the Decision
Document.
XI. WETLANDS WORK
23. Within ninety (90) days after approval of the Remedial Design in
accordance with the approved RD/RA Workplan, Defendants shall submit to Ohio EPA
for review and approval pursuant to Section XIV. REVIEW OF SUBMITTALS a Workplan
("Wetlands Workplan") for the enhancement and/or restoration, and preservation,
of
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approximately 40 to 45 acres of wetlands in the vicinity of the Site consistent
with the terms of this Section. Should such acreage not be reasonably available
within the vicinity of the Site, Defendants' Workplan shall provide for the
enhancement and/or restoration, and preservation, of approximately 50 acres of
wetlands in the Cambridge, Ohio area, subject to Ohio EPA approval. Property
priced at a significant cost over reasonable market rates is not "reasonably
available." The Wetlands Workplan shall contain work schedules and shall be
developed in accordance with Appendix D.
24. Upon approval of the Wetlands Workplan by Ohio EPA, Defendants
shall implement the approved Wetlands Workplan in accordance with the schedule
contained in the approved Workplan. Defendants shall submit all plans, reports,
or other deliverables required under the approved Wetlands Workplan, in
accordance with the approved schedule, for review and approval pursuant to
Section XIV. REVIEW OF SUBMITTALS of this Consent Order.
25. Defendants may petition Ohio EPA for approval to cease doing
work otherwise required under the approved Wetlands Workplan to the extent the
cost will exceed the sum of Two Hundred Seventy-Six Thousand Dollars ($276,000).
Defendants must show that they have spent, or will spend, the sum of Two Hundred
Seventy-Six Thousand Dollars ($276,000) pursuant to the approved Wetlands
Workplan. Defendants shall provide details in the Wetlands Workplan of cost
estimates for the Work thereunder. This Section does not require Defendants to
spend more than Two Hundred Seventy-Six Thousand Dollars ($276,000) in actual
costs incurred in performing the Work required under the approved Wetlands
Workplan. The purchase price of any property necessary for the creation and/or
enhancement shall not be included in the actual costs of the wetlands Work.
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26. Defendants shall purchase, or obtain a conservation easement on,
real property that is subject to wetlands creation or enhancement under the
Wetlands Workplan, and shall maintain such property consistent with the Wetlands
Workplan for so long as the Defendants have a real property interest in the
wetlands property.
27. Defendants shall not convey any title, easement or other
interest in the property that is subject to the Wetlands Workplan which could
affect the goals of this Section of the Consent Order without a provision in the
deed requiring compliance with the Wetlands Workplan.
XII. STORMWATER CONTROL
28. Within sixty (60) days from the Effective Date of this Consent
Order, Shieldalloy shall submit to Ohio EPA a complete application for a
stormwater permit under R.C. Chapter 6111 for the Site in accordance with
Section XIV. REVIEW OF SUBMITTALS.
XIII. CLOSURE OF SOUTH BAGHOUSE DUST WASTEPILE
29. Shieldalloy is ordered and enjoined to comply with the closure
plan for the south baghouse dust (D007) wastepile located at the Site, as
approved by Ohio EPA, including schedules specified therein, and with Ohio
Administrative Code ("OAC") Rules 3745-66-10 through 3745-66-20. Nothing in this
paragraph is intended to limit Ohio EPA's authority to approve, or Shieldalloy's
opportunity to request, a modification to the requirements of the approved
closure plan.
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30. Within sixty (60) days of completion of closure of the south
baghouse dust (D007) wastepile, Shieldalloy shall submit certification of
closure to Ohio EPA in accordance with OAC Rule 3745-66-15.
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XIV. REVIEW OF SUBMITTALS
31. Ohio EPA agrees to review any Workplan, report, study, or other
document that Defendants are required under this Consent Order to submit to Ohio
EPA, in accordance with this Consent Order, applicable policies, guidelines and
appropriate state and federal laws. Upon review, Ohio EPA may in writing:
A. Approve the submission in whole or in part;
B. Approve the submission upon specified conditions;
C. Direct Defendants to modify the submission;
D. Disapprove the submission in whole or in part,
notifying Defendants of the deficiencies; or
E. Any combination of the above.
32. In the event of approval or approval upon condition by Ohio EPA,
Defendants shall proceed to take any action required by the submission as
approved or conditionally approved by Ohio EPA. Ohio EPA may approve a
modification to an approved submission, including without limitation, a
modification based on a requirement imposed by the Atomic Energy Act, 42 U.S.C.
2014, et seq., or regulations promulgated thereunder.
33. In the event that Ohio EPA initially disapproves a submission,
in whole or in part, and notifies Defendants of the deficiencies, Defendants
shall within fourteen (14) days, or such longer period of time as specified by
Ohio EPA in writing, correct the deficiencies and resubmit to Ohio EPA for
approval a revised submission. By agreement of the site coordinators, the
Defendants may only resubmit such portions pertaining to the notice of
deficiency. The revised submission shall incorporate all of the changes,
additions, and/or deletions specified by Ohio EPA in its notice of deficiency.
Any Work done by Defendants
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prior to Ohio EPA's approval of a submission of a corresponding deliverable is
subject to being revised.
34. In the event that Ohio EPA disapproves a revised submission, in
whole or in part, Ohio EPA may again require Defendants to correct the
deficiencies and incorporate all changes, additions, and/or deletions within
fourteen (14) days, or such period of time as specified by Ohio EPA in writing.
In the alternative, Ohio EPA retains the right to perform any or all of the Work
required under this Consent Order and recover all costs associated with such
Work not inconsistent with the NCP.
35. Defendants reserve the right to invoke the Dispute Resolution
provisions of this Consent Order with respect to any original or revised
submission that Ohio EPA disapproves, directs Defendants to modify, or approves
upon condition, whether in whole or in part, and with respect to Ohio EPA's
decision on a request to modify an approved submission.
36. All Workplans, reports, or other items required to be submitted
to Ohio EPA under this Consent Order shall, upon approval by Ohio EPA, be deemed
to be incorporated in and made an enforceable part of this Consent Order and,
upon such approval, shall be deemed not inconsistent with the NCP in the opinion
of the Ohio EPA. In the event that Ohio EPA approves a portion of a Workplan,
report, or other item, the approved portion shall be deemed to be incorporated
in and made an enforceable part of this Consent Order.
37. The Defendants' and Ohio EPA's site coordinators may jointly
agree to minor field changes to be made by the Defendants to any document,
workplan, report, or study approved by the Ohio EPA. Defendants shall notify
Ohio EPA's site coordinator of the nature of and reasons for any desired
modification by Defendants. Within five (5) days of agreement by Ohio EPA's and
the Defendants' site coordinators, the Defendants' site coordinator shall
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submit written notification describing the agreed minor field changes to Ohio
EPA's site coordinator for review and approval. Ohio EPA agrees to document such
an agreement by letter to the Defendants' site coordinator setting forth the
nature and extent of the minor field changes to be made.
38. In the event of disapproval of any second or subsequent
submittal under Section XIV. REVIEW OF SUBMITTALS, or any noncompliance with the
terms of or deadlines under this Consent Order, Ohio EPA may conduct any of the
Work required under this Consent Order and recover all costs associated with
such Work.
XV. DOCUMENT SUBMITTAL
39. Unless otherwise provided in this Consent Order, all documents
required to be submitted pursuant to this Consent Order shall be sent by
certified mail return receipt requested, overnight mail, or personal delivery,
or equivalent, to the following addresses:
Ohio Environmental Protection Agency
1800 WaterMark Drive
P.O. Box 1049
Columbus, Ohio 43216-1049
ATTN: Records Officer, DERR
and
Ohio Environmental Protection Agency
Southeast District Office
2195 Front Street
Logan, Ohio 43138
ATTN: Site Coordinator, Shieldalloy Metallurgical Corp. Site
and
Ohio Department of Health
246 North High Street, 7th Floor
Columbus, Ohio 43266
ATTN: Site Contact Shieldalloy Metallurgical Corp. Site
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Defendants shall provide the State of Ohio with additional copies of documents
upon request.
40. All correspondence to be sent to Defendants will be directed to
the
following addresses:
C. Scott Eves
Shieldalloy Metallurgical Corporation
12 West Boulevard
P.O. Box 768
Newfield, NJ 08344
and
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Patrick Lee
Cyprus Foote Mineral Company
9100 East Mineral Circle
Englewood, CO 80112
XVI. DEFENDANTS' PROGRESS REPORTS
41. Unless otherwise directed by Ohio EPA, Defendants shall submit a
written progress report to Ohio EPA by the tenth (10th) day of every month. At a
minimum, each progress report shall:
A. Identify the Site and activity;
B. Describe the status of the Work and actions taken
towards achieving compliance with this Consent Order
during the reporting period and activities which are
scheduled for the next month;
C. Describe difficulties encountered during the reporting
period and actions taken to rectify any deficiencies;
D. Describe activities planned for the next month;
E. Identify changes in key personnel;
F. List target and actual completion dates for each element
of activity, including project completion; and
G. Provide an explanation for any deviation from any
applicable schedules.
XVII. ACCESS TO INFORMATION AND RECORDS RETENTION
42. Upon written request, Defendants shall promptly provide to Ohio
EPA copies of all non-privileged documents and information within their
possession or control, or that of their contractors or agents relating to events
or conditions at the Site including, but not
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limited to, manifests, reports, correspondence, or other documents, photos, or
audiovisual information related to the Work.
43. Unless Defendants claim upon submittal and show that a document
or other information submitted to Ohio EPA pursuant to this Consent Order is
confidential under the provisions of OAC Rule 3745-50-30(A) or R.C. Section
6111.05(A), Ohio EPA may release the document or other information to the public
without notice to Defendants.
44. If Defendants assert that certain documents or other information
are privileged and/or confidential under state law, Defendants shall provide
Ohio EPA with the following:
A. The title of the document or information;
B. The date of the document or information;
C. The name and title of the author of the document or
information;
D. The name and title of each addressee and recipient;
E. A general description of the contents of the document or
information; and,
F. The privilege or basis of confidentiality being asserted
by Defendants and the basis for the assertion.
45. No claim of confidentiality or privilege shall be made with
respect to any data relating to this Consent Order, including but not limited to
all sampling, analytical, monitoring, or laboratory reports.
46. Defendants shall preserve and maintain in a readable format all
documents and other information within its possession or control, or within the
possession of its contractors or agents, which in any way relate to the Work
under this Consent Order, or Work under the
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COPI, notwithstanding any document retention policies to the contrary.
Defendants may preserve such documents by microfiche, or other electronic or
photographic device. Unless otherwise agreed by the parties, on or after the
fifteenth (15th) anniversary of the issuance of the Certification of Completion,
Defendants may discard such documents; provided, that Defendants have given Ohio
EPA six (6) months advance notice of their intent to discard such documents, and
have made the documents available to Ohio EPA for Ohio EPA to review, copy and
retain them.
XVIII. SITE ACCESS
47. The State of Ohio, its employees and agents, shall have full
access to the Site at all reasonable times without the need for a warrant, as
may be necessary for the implementation of this Consent Order. Access under this
Consent Order shall be for the limited purpose of carrying out the following
activities and related activities of this Consent Order:
A. Monitoring the Work;
B. Conducting sampling;
C. Inspecting and copying non-privileged records,
operating logs, contracts, and/or other documents
related to the implementation of this Consent Order;
D. Verifying any data and/or other information submitted to
Ohio EPA; and,
E. Doing Work or other remediation activities at this Site
not inconsistent with the Decision Document or this
Consent Order.
48. To the extent that the Site or any other property to which
access is required for the implementation of this Consent Order is owned or
controlled by persons other than Defendants, Defendants shall use their best
efforts to secure from such persons access for
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Defendants and Ohio EPA as necessary to effectuate this Consent Order. Copies of
all access agreements obtained by Defendants shall be submitted to Ohio EPA
within ten (10) days of receipt by Defendants. If any access required to
effectuate this Consent Order is not obtained within thirty (30) days of the
Effective Date of this Consent Order, or within thirty (30) days of the date
that Ohio EPA notifies Defendants in writing that additional access beyond that
previously secured is necessary, Defendants shall promptly notify Ohio EPA in
writing of the steps Defendants have taken to obtain access. Ohio EPA may, as it
deems appropriate, assist Defendants in obtaining access.
49. This Section shall not be construed to eliminate or restrict any
right of access or right to seek access to the Site which the State may
otherwise have under federal or state law.
XIX. DEED RESTRICTION
50. Within thirty (30) days of approval of the Remedial Design under
Section VIII. REMEDIAL DESIGN/REMEDIAL ACTION AND OPERATION AND MAINTENANCE of
this Consent Order, Shieldalloy shall place a deed restriction on the deed to
property at the Site owned by Shieldalloy with the County Recorders Office for
Guernsey County, Ohio. The deed restriction shall describe this Consent Order
and any monitoring or containment devices and/or development or use restriction
on the Site. The deed restriction shall be developed in accordance with the
RD/RA Workplan and O&M Workplan and approved by Ohio EPA.
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51. Shieldalloy shall not convey any title, easement or other
interest in the property which is part of the Site which could affect the goals
of this Consent Order without a provision in the deed requiring continued
compliance with this Consent Order.
52. Shieldalloy shall not remove, alter or terminate the deed
restriction in the property which is part of the Site without prior approval of
Ohio EPA.
XX. PERMANENT INJUNCTION
53. Shieldalloy is hereby permanently enjoined and ordered to comply
with R.C. Chapters 3734 and 6111 and rules promulgated thereunder, including but
not limited to any terms or conditions of any permits and any renewals or
modifications thereof issued under these statutes. Shieldalloy is further
permanently enjoined from discharging any pollutants, industrial waste or other
wastes into waters of the State without first obtaining an NPDES permit issued
by the Director of Environmental Protection, and any other permit required by
state and/or federal law.
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XXI. FINANCIAL ASSURANCE
54. Within thirty (30) days from the Effective Date of this Consent
Order, Defendants (individually and/or collectively) shall provide financial
assurance for remediation of the West Slag Pile and East Slag Pile in the amount
of $5.6 million in accordance with OAC Rule 3745-66-43. Each year by the
anniversary date of the Effective Date of this Consent Order, Defendants
(individually and/or collectively) shall perform an annual review and adjustment
of such financial assurance in accordance with OAC Rules 3745-66-42 and 3745-66-
43.
55. Within thirty (30) days of approval of the "Derivation of
Cleanup Levels for Wetland Soils" (a document that is part of the Remedial
Design) or within fourteen (14) months from the Effective Date of this Consent
Order, whichever is earlier, Defendants (individually and/or collectively) shall
provide financial responsibility for remediation of the wetlands, sediments,
soils, and other areas surrounding the West Slag Pile and East Slag Pile at the
Site in accordance with OAC Rule 3745-66-43 in an amount up to $3.4 million.
Each year by the anniversary date of the Effective Date of this Consent Order,
Defendants (individually and/or collectively) shall perform an annual review and
adjustment to provide financial assurance in accordance with OAC Rules
3745-66-42 and 3745-66-43
56. Within thirty (30) days from the Effective Date of this Consent
Order, Defendants shall provide financial assurance for Operation and
Maintenance of the Site, including one thousand (1000) years of Operation and
Maintenance of the East Slag Pile and West Slag Pile in accordance with an
annuity/trust option approved by Ohio EPA consistent with Appendix E or with OAC
Rules 3745-66-44 and 3745-66-45. Each year by the anniversary date of the
Effective Date of this Consent Order, Defendants shall perform an annual review
and
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adjustment of such financial assurance in accordance with OAC Rules 3745-66-44
and 3745-66-45.
57. Nothing in this Section XXI. FINANCIAL ASSURANCE prevents the
use of alternative language for financial mechanisms as approved by Ohio EPA.
XXII. REIMBURSEMENT OF COSTS
58. Defendants shall reimburse the State of Ohio for all Response
Costs incurred by the State of Ohio in connection with oversight of remediation
of the Site, including without limitation Response Costs incurred for Oversight
or other activities contemplated by this Consent Order that are not inconsistent
with the NCP. The obligations of Section XXVI of the COPI on reimbursement of
costs shall continue in effect as provided in Section XXIX. TERMINATION OF
CONSENT ORDER FOR PRELIMINARY INJUNCTION of this Consent Order.
59. Within thirty (30) days of the Effective Date of this Consent
Order, or of the confirmation of Shieldalloy's Plan of Reorganization in the
Bankruptcy Case, whichever is later, unless otherwise agreed to by the Parties,
Defendant Shieldalloy shall pay the amounts specified below:
A. An Allowed General Unsecured Claim that Ohio shall have
against Shieldalloy in the Bankruptcy Case in the amount
of (i) Sixteen Thousand Five Hundred Sixty-Two Dollars
and Fifty-Five cents ($16,562.55) for prepetition
response costs incurred by Ohio EPA at the Site; and
(ii) Ten Thousand Three Hundred Dollars ($10,300.00) for
prepetition response costs incurred by the Ohio
Department of Health at the Site;
B. An Allowed Administrative Claim that Ohio shall receive
from Shieldalloy in the Bankruptcy Case in the amount of
One Hundred and Two Thousand Six Hundred Twenty Dollars
and Eighty-Six cents ($102,620.86) for Ohio EPA's
postpetition response costs
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incurred for the Site, including time and analytical lab
charges, for the period from September 3, 1993 through
January 17, 1995.
60. Within thirty (30) days of the Effective Date of this Consent
Order, Defendant Cyprus Foote shall remit payment of One Hundred Twenty-Five
Thousand Eight Hundred Eighty-Three Dollars and Forty-Two Cents ($125,883.42)
for Response Costs incurred by the State of Ohio prior to January 18, 1995.
($119,183.42 for Ohio EPA; $6,700 for ODH).
61. Ohio EPA will submit to Defendants at least annually an itemized
statement of the State of Ohio's Response Costs. Defendants shall pay such
Response Costs, subject to Section XXVIII. DISPUTE RESOLUTION, within thirty
(30) days of receipt of the itemized statement. Failure to include response
costs in an annual statement does not preclude submission of such costs in a
subsequent annual statement. With respect to this Section XXII. REIMBURSEMENT OF
COSTS, Section XXVIII. DISPUTE RESOLUTION of this Consent Order shall apply only
to disputes over the accuracy of the State of Ohio's request for reimbursement
and over whether the costs are not inconsistent with the NCP.
62. Defendants shall remit payments to the State of Ohio under this
Section as follows:
A. For costs incurred by Ohio EPA, payment shall be made by
certified check payable to "Treasurer, State of Ohio",
and shall be forwarded to the Fiscal Officer, Ohio EPA,
P.O. Box 1049, 1800 WaterMark Drive, Columbus, Ohio
43216-1049, ATTN: Edith Long (or successor). A copy of
the transmittal shall be sent to the Fiscal Officer,
DERR, Ohio EPA, P.O. Box 1049, 1800 WaterMark Drive,
Columbus, Ohio 43216-1049, ATTN: Patricia Campbell (or
successor).
B. For costs incurred by the Ohio Department of Health,
payment shall be made by certified check payable to
"Treasurer, State of Ohio" and shall be forwarded to the
Fiscal Officer, Ohio Department
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of Health, 7th Floor, 246 North High Street, Columbus,
Ohio 43215 Attn: Fiscal Officer. A copy of the
transmittal shall be sent to the Fiscal Officer, DERR,
Ohio EPA, P.O. Box 1049, 1800 WaterMark Drive, Columbus,
Ohio 43216-1049, ATTN: Patricia Campbell (or successor).
C. For costs incurred by the Ohio Attorney General's
office, payment shall be made by certified check payable
to "Treasurer, State of Ohio," and shall be delivered to
Matthew A. Sanders, Administrative Assistant, or his
successor, Environmental Enforcement Section, Ohio
Attorney General's Office, 30 East Broad Street, 25th
Floor, Columbus, Ohio 43215-3428.
D. For costs incurred by any other agency of the State of
Ohio in connection with oversight of remediation or Work
at the Site, payment shall be made by certified check
payable to "Treasurer, State of Ohio", and shall be
forwarded as specified in writing by the Ohio Attorney
General's Office.
XXIII. POTENTIAL FORCE MAJEURE
63. If any event occurs which causes or may cause a delay in
Defendants' compliance with any requirement of this Consent Order, Defendants
shall notify Ohio EPA in writing within fourteen (14) days from when a Defendant
knew, or by the exercise of due diligence should have known, of the event,
describing in detail the anticipated length of the delay, the precise cause or
causes of delay, the measures taken and to be taken by Defendants to prevent or
minimize the delay and the timetable by which those measures will be
implemented. Defendants will adopt all reasonable measures to avoid or minimize
any such delay.
64. In any action by the State of Ohio to enforce any of the
provisions of this Consent Order, or in a dispute resolution under Section
XXVIII. DISPUTE RESOLUTION,
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Defendants may raise at that time the question of whether they are entitled to a
defense that their conduct was caused by circumstances beyond their control such
as, by way of example and not limitation, acts of God, strikes, acts of war,
civil disturbances. While the State of Ohio does not agree that such a defense
exists, it is, however, hereby agreed by Defendants and the State of Ohio that
it is premature at this time to raise and adjudicate the existence of such a
defense and that the appropriate point at which to adjudicate the existence of
such a defense is at the time, if ever, that a proceeding to enforce this
Consent Order is commenced by the State or during dispute resolution pursuant to
Section XXVIII. DISPUTE RESOLUTION. At that time the burden of proving that any
delay was or will be caused by circumstances beyond the control of Defendants
shall rest with Defendants. Failure by Defendants to timely comply with the
notice requirements of this Section shall constitute a waiver by Defendants of
any right they may have to raise such a defense. Changes in Defendants'
financial circumstances shall not in any event constitute circumstances beyond
the control of Defendants.
XXIV. STIPULATED PENALTIES
65. In the event that Defendants fail to comply with any requirement
of this Consent Order, Defendants are liable for and shall immediately pay
stipulated penalties in accordance with the following schedule for each failure
to comply:
a. For each day of each failure to comply with a
requirement or deadline of this Consent Order, up to and
including fifteen (15) days -- Two Hundred and Fifty
Dollars ($250) per day for each requirement or deadline
not met.
b. For each day of each failure to comply with a
requirement or deadline of this Consent Order, from
sixteen (16) days to thirty (30) days -- Five Hundred
Dollars ($500) per day for each requirement or deadline
not met.
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c. For each day of each failure to comply with a
requirement or deadline of this Consent Order, from
thirty-one (31) days to sixty (60) days -- One Thousand
Dollars ($1,000) per day for each requirement or
deadline not met.
d. For each day of each failure to comply with a
requirement or deadline of this Consent Order, over
sixty-one (61) days -- One Thousand Five Hundred Dollars
($1,500) per day for each requirement or deadline not
met.
66. Any payment required to be made under the provisions of this
Section of the Consent Order shall be made by delivering to Plaintiff, c/o
Matthew A. Sanders, Administrative Assistant, or his successor, Environmental
Enforcement Section, Ohio Attorney General's Office, 30 East Broad Street, 25th
Floor, Columbus, Ohio 43215-3428, a certified check or checks made payable to
"Treasurer, State of Ohio", for the appropriate amount within forty-five (45)
days from the date of the failure to meet the requirement or deadline of this
Consent Order. The payment of the stipulated penalty shall be accompanied by a
letter briefly describing the type of violation, deadline or requirement not met
and date upon which the violation of this Consent Order occurred. The payment of
stipulated penalties by Defendants and the acceptance of such stipulated
penalties by Plaintiff for specific violations pursuant to this Section shall
not be construed to limit Plaintiff's authority to seek additional relief or to
otherwise seek judicial enforcement of this Consent Order. The check will be
paid pursuant to R.C. 3734.28.
67. On or after the tenth (10th) anniversary of the Certification of
Completion, Defendants may ask the State of Ohio to agree to terminate the
requirements of this Section in whole or in part based upon a showing that
Defendants have been in full compliance with the Consent Order for the most
recent ten (10) years, including having performed all Work and paid all Response
Costs due and owing.
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XXV. CIVIL PENALTY
68. Within thirty (30) days of the Effective Date of this Consent
Order or of confirmation of Defendant Shieldalloy's Plan of Reorganization in
the Bankruptcy Case, whichever is later, Defendant Shieldalloy shall pay to the
State of Ohio a civil penalty of Fifty-Five Thousand Dollars ($55,000).
69. Within thirty (30) days of the Effective Date of this Consent
Order, Defendant Cyprus Foote shall pay to the State of Ohio a civil penalty of
One Hundred Thousand Dollars ($100,000).
70. Payments required by this section shall be paid by delivering a
certified check or checks to c/o Matthew A. Sanders, Administrative Assistant,
or his successor, at the Office of the Attorney General of Ohio, Environmental
Enforcement Section, 30 East Broad Street, 25th Floor, Columbus, Ohio
43215-3428. The checks shall be made payable to "Treasurer, State of Ohio" and
will be paid pursuant to the requirements of R.C. 6111.09(B) for Defendant
Cyprus Foote's civil penalty and pursuant to R.C. 3734.28 for Defendant
Shieldalloy's civil penalty.
XXVI. SUPPLEMENTAL ENVIRONMENTAL PROJECT
71. In lieu of paying additional civil penalties and in furtherance
of the mutual objectives of Ohio EPA and Defendant Cyprus Foote in improving the
environment and reducing impacts to waters of the State of Ohio, and in
furtherance of settlement of natural resource damages under Section 107(a) of
CERCLA, Defendant Cyprus Foote shall: (1) pay to the Ohio EPA Forty-Nine
Thousand Nine Hundred Dollars ($49,900) for a study on cost effective water
pollution prevention, such as a Great Lakes Initiative study, to be performed by
the Ohio EPA
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or its designated contractor; and (2) be required to perform Wetlands Work as
required in Section XI. WETLANDS WORK.
72. Within thirty (30) days from the Effective Date of this Consent
Order, Defendant Cyprus Foote is required to pay and deliver a certified check
in the amount of Forty-Nine Thousand Nine Hundred Dollars ($49,900) as required
in the preceding paragraph to c/o Matthew A. Sanders, Administrative Assistant,
or his successor, at the office of the Attorney General of Ohio, Environmental
Enforcement Section, 30 East Broad Street, Columbus, Ohio 43215-3428. The check
shall be made payable to "Treasurer, State of Ohio" and will be deposited into
the State Account established as "4K4 Line item #715_650, for the Division of
Surface Water-Foster Wheeler Contract" fund of the Ohio EPA or such other fund
as may be specified by Ohio EPA for conducting a study on water pollution
control.
XXVII. INDEMNITY
73. Defendants agree to indemnify, save, and hold harmless the State
of Ohio from any and all claims or causes of action arising from, or on account
of, the State of Ohio's oversight of activities at this Site during the duration
of this Consent Order, and/or acts or omissions of the Defendants, their
officers, employees, receivers, trustees, agents, or assigns, in carrying out
any activities pursuant to this Consent Order. The State of Ohio shall not be
considered a party to and shall not be held liable under any contract entered
into by Defendants in carrying out the activities pursuant to this Consent
Order. Consistent with federal, state and common law, nothing in this Consent
Order shall render Defendants liable to indemnify the State of Ohio for any
negligent or other tortious act or omission of the State of Ohio occurring
outside of the State of Ohio's exercise of its discretionary functions.
Discretionary functions of the State of Ohio include, but are not limited to,
the State of Ohio's review, approval or disapproval of
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Work performed pursuant to this Consent Order. Defendants and the State of Ohio
will cooperate in the defense of any claim or action against the State of Ohio
which may be the subject of this indemnity.
XXVIII. DISPUTE RESOLUTION
74. The site coordinators shall, whenever possible, operate by
consensus. In the event that Defendants have a good faith dispute involving the
implementation of this Consent Order, the site coordinators shall have ten (10)
days from the date the dispute arises to negotiate in good faith in an attempt
to resolve the dispute. This ten (10) day period may be extended by mutual
agreement of the Parties.
75. In the event the site coordinators are unable to reach consensus
on the dispute, each site coordinator shall reduce his/her position to writing
within ten (10) days of the end of the good faith negotiation period described
in the preceding paragraph. Those written positions shall be immediately
exchanged by the site coordinators. Following the exchange of written positions,
the site coordinators shall have an additional ten (10) days to resolve the
dispute.
76. If Ohio EPA does not concur with the position of the Defendants,
the Ohio EPA site coordinator will notify Defendants in writing. Upon receipt of
such written notice, Defendants shall have ten (10) days to forward a request
for resolution of the dispute, along with a written statement of the dispute, to
the Chief of the Division of Emergency Response and Remediation ("DERR") at Ohio
EPA. The statement of dispute shall be limited to a concise presentation of the
Defendants' position on the dispute. The Chief of DERR, or his/her designee,
will resolve the dispute based upon and consistent with this Consent Order,
applicable
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policies and guidance documents, and appropriate state and federal laws, and
notify Defendants of the resolution within fourteen (14) days of the Defendants'
request for dispute resolution.
77. Any Defendant may petition the Court within fourteen (14) days
of receipt of the Chief of DERR's written notification of dispute resolution as
described in the preceding paragraph. The Court shall affirm the Chief of DERR's
resolution of the dispute unless the petitioning Defendant demonstrates that the
resolution was unlawful or unreasonable within the meaning of R.C. Chapter 3745
or inconsistent with the Consent Order.
78. The pendency of dispute resolution set forth in this Section
shall not affect the time period for completion of the Work to be performed
under this Consent Order, unless otherwise agreed by the Parties. Ohio EPA will
agree to a reasonable extension of time for performance of Work required under
this Consent Order to the extent that such Work is directly affected by the
dispute.
79. Within thirty (30) days of resolution of any dispute, Defendants
shall incorporate the resolution and final determination into the appropriate
Workplan, schedule or procedures and proceed to implement this Consent Order
according to the amended Workplans, schedule or procedures as approved.
80. Unless otherwise expressly provided for in this Consent Order,
the Dispute Resolution procedures of this Section shall be the exclusive
mechanism for Defendants to resolve disputes arising under or with respect to
this Consent Order. Nothing herein alters the jurisdiction of the Environmental
Review Appeals Commission under R.C. Chapter 3745.
81. In any dispute subject to dispute resolution, the Parties may,
by written agreement, modify the procedures in the first three paragraphs of
this Section.
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XXIX. TERMINATION OF CONSENT ORDER FOR PRELIMINARY INJUNCTION
82. As of the Effective Date of this Consent Order, the COPI is
terminated except as to Section XVI of the COPI and except as otherwise provided
in Section XXVI of the COPI.
XXX. SATISFACTION OF LAWSUIT
83. Plaintiff alleged in its Complaint that Defendants operated the
facility at the Site in such a manner as to cause violations of R.C. Chapters
3734 and 6111, the rules promulgated thereunder, as well as other state laws.
Except as otherwise provided in Section XXXII. RESERVATIONS OF RIGHTS,
compliance with the terms of this Consent Order shall constitute full
satisfaction of any civil liability by Defendants for all claims alleged in the
Complaint. Nothing in this Section shall apply to new conditions at or new
information about the Site, or to any violations arising out of acts or
omissions first occurring after the Effective Date of this Consent Order.
XXXI. COVENANT NOT TO SUE
84. In consideration of the actions that will be performed and the
payments that will be made by Defendants under this Consent Order, and except as
provided under Section XXXII. RESERVATION OF RIGHTS, the State covenants not to
sue Defendants pursuant to Section 107(a) of CERCLA for (1) recovery of Response
Costs for approved Work performed under this Consent Order; and (2) recovery of
damages to natural resources. These covenants not to sue are conditioned upon
compliance by Defendants with this Consent Order. These
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covenants not to sue do not extend to persons other than Defendants and their
successors and assigns.
XXXII. RESERVATION OF RIGHTS
85. The State of Ohio reserves the right to seek additional relief
from this or any other Court, including, but not limited to, additional
preliminary and/or permanent injunctive relief, civil penalties and cost
recovery for work beyond this Consent Order. Except as specifically provided
otherwise in Section XXXI. COVENANT NOT TO SUE, the State of Ohio reserves any
and all claims it may have against Defendants under CERCLA, except for natural
resource damages and Response Costs incurred prior to issuance of the COPI. This
reservation also explicitly includes any and all claims the State of Ohio may
have concerning any disposal of Waste Material by Defendant(s) at any location
other than the Site. This Consent Order in no way waives any defenses which
Defendants may have as to such additional relief.
86. Except as otherwise specifically provided under Section XXX.
SATISFACTION OF LAWSUIT, the State of Ohio expressly reserves, and this Consent
Order shall be without prejudice to, any civil or criminal claims, demands,
rights, or causes of action, judicial or administrative, the State of Ohio may
have or which may in the future accrue against Defendants or others, regardless
of whether such claim, demand, right or cause of action was asserted in the
Complaint. This Consent Order in no way waives any defenses which Defendants may
have as to such claims, demands, rights or causes of action.
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87. All Workplans, reports or other items required to be submitted
to Ohio EPA under this Consent Order, and approved by Ohio EPA, are deemed not
inconsistent with the National Contingency Plan in the opinion of Ohio EPA.
88. Nothing herein shall limit the authority of the State of Ohio to
undertake any action against any entity, including Defendants, to eliminate or
control conditions which may present a threat to the public health, safety,
welfare or environment, and to seek cost reimbursement for any such action. The
State reserves all rights under R.C. Section 3734.20. This Consent Order in no
way waives any defenses which Defendants may have as to such claims, demands,
rights or causes of action.
89. Nothing herein shall be construed to relieve Defendants of any
obligation to comply with the Atomic Energy Act, 42 U.S.C. 2014, et seq., or
regulations promulgated thereunder, and R.C. Chapters 3734, 3748 and 6111
including, without limitation, any regulation, license or order issued under
these Chapters, and any other applicable federal, state or local statutes,
regulations or ordinances, including but not limited to permit requirements.
90. Entering into this Consent Order, the Consent Order itself, or
the taking of any action in accordance with it do not constitute an admission by
Defendants of any factual or legal matters or opinions set forth herein.
Defendants do not admit liability under any of the counts of the Complaint or
any other law, rule or regulation for any purpose or admit any issues of fact or
law, any wrongdoing, or any responsibility with regard to Waste Material,
releases or threatened releases of hazardous substances at or from the Site,
other pollutants listed in the Complaint, or with regard to any contamination at
or from the Site. Defendants do not admit and reserve their rights to contest or
legally challenge jurisdiction and venue with regard to activities not required
or contemplated by the COPI or this Consent Order. Nothing in this
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Consent Order is intended to limit any settlement that one or more of the
Parties may reach concerning an agreed discharge of a claim and/or
administrative expense against Shieldalloy in the Bankruptcy Case. Nothing
herein absolves Defendants from the duty to comply with this Consent Order and
surviving provisions of the COPI.
91. Defendants reserve all rights that they may have against each
other under all federal, state and local laws, except as may be set forth in a
separate agreement or agreements.
92. The State of Ohio reserves all rights as to any person other
than Defendants.
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XXXIII. APPENDICES
93. All appendices to this Consent Order are incorporated by
reference as if fully restated herein into and are an enforceable part of this
Consent Order. The following appendices are or will be attached to this Consent
Order at the time of signing by the Parties on the Effective Date:
A. "Appendix A" is the RD/RA Statement of Work;
B. "Appendix B" is the List of U.S. EPA and Ohio EPA
Guidance Documents;
C. "Appendix C" is the Decision Document;
D. "Appendix D" is a list of the monitoring requirements
for wetland mitigation.
E. "Appendix E" describes the use of annuities and trusts
to provide financial assurance for Operation and
Maintenance at the Site.
XXXIV. MODIFICATION
94. No modification shall be made to this Consent Order without the
written agreement of the Parties and the Court.
XXXV. RETENTION OF JURISDICTION
95. This Court shall retain jurisdiction of this matter for the
purpose of administering and enforcing Defendants' compliance with this Consent
Order.
XXXVI. COURT COSTS
96. Defendants shall pay the court costs of this action.
XXXVII. SIGNATORIES
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97. Each undersigned representative of each respective Defendant
understands the terms and conditions of this Consent Order and certifies that he
or she is fully authorized to enter into the terms and conditions of this
Consent Order and to execute and legally bind the respective Defendants to this
document.
XXXVIII. ENTRY OF CONSENT ORDER AND FINAL JUDGMENT BY CLERK
98. The Parties recognize that entry of this Consent Order will
avoid the potential of prolonged and complicated litigation between the Parties.
The Parties further recognize, and the Court by entering this Consent Order
finds, that this Consent Order is fair, reasonable and in the public interest.
99. The parties agree and acknowledge that this Consent Order is
being made available for public participation under state requirements and in a
manner consistent with 40 C.F.R. ss.123(d)(1)(iii), by providing for notice of
the lodging of this Consent Order, opportunity for public comment and the
consideration of any public comment. The State of Ohio and each Defendant
reserve the right to withdraw consent to this Consent Order upon filing with
this Court notice of such withdrawal in the event that (1) the remedial
activities selected in the Decision Document issued by Ohio EPA differ in any
material respect from the remedial activities proposed by Ohio EPA in the
Preferred Plan; or (2) the parties cannot agree to changes proposed by the State
of Ohio to this Consent Order as a result of public comment. The right to
withdraw consent as set forth in this paragraph shall only exist for the period
of time between issuance of the Decision Document and the end of the fifteenth
(15) day after issuance of the Decision Document, unless otherwise agreed in a
joint notice filed by the Parties with the Court. After expiration of the time
period for withdrawal of consent as set forth in this
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paragraph, the Parties agree that as of March 31, 1997 this Court may enter this
Consent Order, provided no withdrawal of consent has been timely filed with the
Court.
100. Upon the signing of this Consent Order by the Court, the Clerk
of Courts is hereby directed to enter it upon the journal. Within three (3) days
of entering the judgment upon the journal, the Clerk is hereby directed to serve
upon all parties notice of the judgment and its date of entry upon the journal
in the manner prescribed by Rule 5(B) of the Ohio Rules of Civil Procedure and
note the service in the appearances docket.
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IT IS SO ORDERED:
EFFECTIVE UPON AND ENTERED THIS _______ DAY OF _____________, 1997.
--------------------------------
JUDGE DAVID E. ELLWOOD
COURT OF COMMON PLEAS
GUERNSEY COUNTY
- -------------------------------
BETTY D. MONTGOMERY
ATTORNEY GENERAL OF OHIO
BY:
----------------------------
ROBERT J. KARL (0042292)
JAMES O. PAYNE, JR. (0008129)
LUANN L. HOOVER (0062404)
Assistant Attorneys General
Environmental Enforcement Section
30 East Broad Street - 25th Floor
Columbus, Ohio 43215-3428
Telephone: (614) 644-2766
Attorneys for Plaintiff
State of Ohio
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SHIELDALLOY METALLURGICAL CORP.
BY:
---------------------------------------------
C. SCOTT EVES
Vice President/Environmental Services
SHIELDALLOY METALLURGICAL CORP.
12 West Boulevard
Newfield, NJ 08344
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BY:
---------------------------------------
DAVID R. BERZ
Weil, Gotshal & Manges, LLP
1615 L Street, NW, Suite 700
Washington, D.C. 20036-5610
(202) 682-7000
Attorney for Defendant Shieldalloy
Metallurgical Corporation
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BY:
-------------------------------------------
RICHARD FAHEY (0013131)
Arter & Hadden
10 West Broad Street
Columbus, Ohio 43215
(614) 221-3155
Attorney for Defendant Shieldalloy
Metallurgical Corporation
52
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CYPRUS FOOTE MINERAL COMPANY
BY:
---------------------------------------
Name
----------------------------
Title
---------------------------
Cyprus Foote Mineral Company
9100 East Mineral Circle
Englewood, CO 80112
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BY:
---------------------------------------
DONALD J. PATTERSON, JR.
Beveridge & Diamond, P.C.
1350 I Street NW, Suite 700
Washington, DC 20005-3311
(202) 789-6000
Attorney for Defendant
Cyprus Foote Mineral Company
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APPENDIX E
FINANCIAL ASSURANCE - ANNUITY/TRUST OPTION
This Appendix describes the use of annuities and trusts as an option to
provide financial assurance for Operation and Maintenance (O & M) at the Site
for one thousand (1000) years. This annuity/trust option for financial assurance
has two parts:
1. For financial assurance for years one to one hundred (1 - 100),
Defendants shall establish a trust in accordance with OAC Rule
3745-66-45 (or alternative trust language approved by Ohio EPA) and
an annuity approved by Ohio EPA. The initial schedule of cash
outlays from the annuity to the trust shall be no less than the
amounts set forth in Exhibit 1 to this Appendix E and shall begin
January 1, 1998. The beneficiary or annuitant of the annuity will be
the trust.
2. For financial assurance for years one hundred to one thousand (100 -
1000), Defendants shall establish a Perpetual Care Trust in
accordance with OAC Rule 3745-66-45 (or with alternative trust
language approved by Ohio EPA). The initial trust amount shall be
$113,331.00. All proceeds from the trust shall be reinvested into
the trust during years one to one hundred (1 to 100).
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OHIO ENVIRONMENTAL PROTECTION AGENCY
RESPONSIVENESS SUMMARY
FOR THE
SHIELDALLOY METALLURGICAL CORP. SITE
CAMBRIDGE, OHIO
<PAGE> 60
RESPONSIVENESS SUMMARY
The purpose of this Responsiveness Summary is to summarize and to provide a
brief response to comments made during the public comment period for the
Shieldalloy Metallurgical Corporation Site, Cambridge, Ohio ("the Site"). This
Responsiveness Summary applies to both written and oral comments. This
Responsiveness Summary does not necessarily provide the basis for the Decision
Document. In the event of any variance between this Responsiveness Summary and
the Decision Document, the Decision Document controls.
This Responsiveness Summary is organized in four parts:
I. Comments from Shieldalloy and Cyprus Foote Mineral
II. Comments from U.S. Nuclear Regulatory Commission
III. Comments from Public Meeting
IV. Other Written Comments
In general, for more information on the topics raised in the comments, see the
Decision Document and the RI/FS report.
I. COMMENTS FROM SHIELDALLOY AND CYPRUS FOOTE MINERAL
A. GENERAL COMMENTS
1. A solid waste cap, per OAC Chapter 3745-27, is unnecessary for the West
and East Slag Piles.
Ohio EPA response: Ohio EPA does not agree with the Shieldalloy
Metallurgical Corporation (SMC) and Cyprus Foote Mineral (CFM) position
that a solid waste cap is unnecessary for the Site. Ohio EPA believes that
a solid waste cap is needed to provide long-term protection for the West
Slag Pile and, if necessary, the East Slag Pile.
2. The excavated sediments and soils should be placed adjacent to the West
Slag Pile, rather than on top of the pile.
Ohio EPA response: Disagree. The placement of soils and sediments atop the
West Slag Pile will maximize the area available for placement of offsite
slag returned to the Site, if this is allowed in the future.
3. Reconcile cost provisions projections.
Ohio EPA response: The cost revisions presented in the final Feasibility
Study will be reflected in the Decision Document.
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4. Ohio EPA should affirmatively provide for return of off-site slag onto the
Site and placement of it adjacent to the West Slag Pile. SMC and CFM
continue to note that Ohio EPA's deferral with respect to this matter is
not necessary or appropriate and that issues that do not relate to the
on-site placement of this material are outside the scope of the Preferred
Plan and Decision Document and do not need to be addressed in them.
Ohio EPA response: Disagree. As noted in the Decision Document, Ohio EPA's
selected remedy is to evaluate this issue further if firm plans are
expeditiously developed for removal of the radioactively contaminated slag
from the offsite locations.
5. Revise the description of radioactive slag. Throughout the document, Ohio
EPA refers to ferrocolumbium, ferrovanadium, and Grainal slags as
"radioactive," which is not accurate. The slags should be identified as
containing "elevated levels of naturally occurring radioactivity."
Moreover, the Plan incorrectly refers to all Grainal, ferrovanadium, and
ferrocolumbium slags as radioactive. These materials were at different
times made with ores and raw materials from different sources that
exhibited varying concentrations of radionuclides.
Ohio EPA response: The Decision Document will not be revised; however, the
inclusion of this comment in the comment section serves to clarify SMC/CFM
position on the terminology noted.
B. SPECIFIC COMMENTS
1. Comment: 1.0 Introduction, page 4, line 8: SMC and CFM commented that this
section of the Plan states that the two slag piles cover a combined area
of 14 acres. Area calculations performed during and reported in the RI/FS,
which were based on digitized aerial photographs and confirmed by a land
survey, show the total area of the two slag piles to be less than 11
acres. This acreage should be reflected in the Decision Document.
Ohio EPA response: Concur. The references to 14 acres in the Preferred
Plan will be revised to 11 acres in the Decision Document.
2. Comment: 3.3 Metal Alloy Production, page 10, lines 1 and 2: SMC and CFM
note that this section of the Plan states: "...the facility manufactured
about six other alloy products (e.g., Grainal(R), ferrotitanium, and small
amounts of ferrocolumbium)." While this is generally accurate, it does not
provide context for the reader to determine the relevant quantities of
these alloy products vis-a-vis the various alloys that are discussed in
the preceding sentence. Thus, we suggest that the Decision Document state
that "the facility manufactured lesser quantities of Grainal(R),
Solvan(R), ferrotitanium, ferroboron, and ferrocolumbium alloys."
3
<PAGE> 62
Ohio EPA response: Concur. Ohio EPA will include this language in the
Decision Document.
3. Comment: 3.4 Metal Alloy Production, page 10, lines 3 and 4. SMC and CFM
comment that this section of the Plan states: "The facility used naturally
occurring radioactive ores and other raw materials to produce
ferrovanadium, Grainal(R), and ferrocolumbium alloys." More precisely,
"The facility used ores or other raw materials containing low levels of
naturally occurring radioactivity in the production of some alloys." SMC
and Cyprus Foote suggest that Ohio EPA use this latter more precise
description.
Ohio EPA response: The sentence will be revised.
4. Comment: 3.4 License for Ferrocolumbium Slag under the Atomic Energy Act,
page 10, lines 14 and 15L: SMC and CFM note that the Preferred Plan states
that Shieldalloy received a license from NRC in 1987. This sentence should
be clarified to state that the license was only for possession of the
slag. SMC did not produce ferrocolumbium and did not generate
ferrocolumbium slag.
Ohio EPA response: Concur. The sentence will be revised.
5. Comment: 3.5 Slag and Other Wastes, page 10, lines 20 through 22: SMC and
CFM note that this section states that the facility manufactured three
types of radioactive slag (ferrocolumbium, ferrovanadium, and Grainal(R)).
This statement is misleading; not all ferrovanadium and Grainal(R) slags
are the same because of the various raw material sources used.
Furthermore, not all ferrovanadium and Grainal(R) slags contain elevated
concentrations of radionuclides.
Ohio EPA response: The purpose of the sentence is merely to identify the
slags that are the primary contributors to the radiation in the slag
piles.
6. Comment: 3.5 Slag and Other Wastes, page 10, lines 24 and 25: SMC and CFM
note that this section of the Plan states that the facility disposed of
most of its waste slags and other wastes in various areas across the Site
until the late 1980s. This statement is inaccurate. While slag was placed
in piles on site, only small amounts of other materials may have been
placed on the piles. Further, no evidence has been found during any of the
environmental investigations that chemical or hazardous wastes were placed
in the slag piles.
Ohio EPA response: Disagree. During operation of the facility, slags were
placed on the East and West Slag Piles. Other wastes were stored in
various locations (e.g. Former Baghouse Dust Pile, empty drum accumulation
area, former Grainal Slag Pile). In addition to the slags, solid waste was
placed on the West Slag Pile and East Slag Pile, including baghouse dusts,
scrap barrels, spent carbon anodes, etc.
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<PAGE> 63
7. Comment: 3.5 Slag and Other Wastes, page 10, lines 28 and 29: SMC and CFM
note that this section states that the Grainal(R) Pile contained only
radioactive Grainal(R) slag. This statement is incorrect. Only Grainal(R)
made from zircon sands contained elevated concentrations of radionuclides.
Ohio EPA response: Concur. The Decision Document will be revised.
8. Comment: 3.6.1, Partial Decommissioning under the Atomic Energy Act, page
11, lines 4 and 5: SMC and CFM note that this section of the Preferred
Plan states "Shieldalloy excavated approximately 140,000 tons of soil and
slag, contaminated with chemical and radiological wastes...". The word
"chemical" should be removed. Soil from the operational area was excavated
on the basis of radiological characteristics only.
Ohio EPA response: The word "chemical" is retained because data from the
Remedial Investigation show that soils in operational areas have chemical
levels that are higher than background. However, the Decision Document
will clarify that soil from the operational area was excavated on the
basis of radiological characteristics only.
9. Comment: 3.6.1, Partial Decommissioning under the Atomic Energy Act, page
11, line 17: SMC and CFM note that this section of the Preferred Plan
states that "...after adding baghouse dust, Shieldalloy covered the West
Slag Pile with geotextile cloth and nine inches of sand." This statement
is inaccurate. While the cap material does include baghouse dust, that
dust was treated by a proprietary process to reduce the hexavalent chrome
and to solidify the material. The resultant Chemfix(R) material was placed
on the West Slag Pile and covered with a geotextile cloth and 12 inches of
sand. The Decision Document should be clarified accordingly.
Ohio EPA response: The sentence will be revised to indicate that treated
(Chemfix) and untreated baghouse dusts were placed on the West Slag Pile.
10. Comment: 3.6.1 Partial Decommissioning under the Atomic Energy Act, page
11, line 19:
SMC and CFM note that the Plan states that the total area of the West Slag
Pile after decommissioning was 11.8 acres. Area calculations performed and
reported in the RI/FS, which were based on digitized aerial photographs
and confirmed by land surveys, establish the total area of the West Slag
Pile as approximately 8.2 acres.
Ohio EPA response: Concur. The revision will be reflected in the Decision
Document.
11. Comment: 3.6.1, Partial Decommissioning under the Atomic Energy Act, page
11, lines 21 through 24: SMC and CFM note that this section states that
Shieldalloy installed a fence around the East Slag Pile to limit human
exposure to radiation consistent with NRC requirements. While Shieldalloy
did install a fence around the
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East Slag Pile in 1992, the purpose was to secure licensed material from
unauthorized removal.
Ohio EPA response: The sentence will be revised as follows:
" In 1992, Shieldalloy installed a fence around the East Slag Pile
consistent with NRC requirements. A purpose of the fence is to
secure licensed material from unauthorized removal."
12. Comment: 4.1, Hydrogeology and Groundwater, page 15, lines 25 and 26: SMC
and CFM note that the Plan states that past investigations have "typically
entailed the installation and sampling of monitoring wells to monitor the
shallow groundwater at the Site." The word "shallow" should be removed
from this sentence because it incorrectly implies that only shallow
monitoring wells have been installed at the Site. In fact, deep wells and
piezometer have also been utilized at the Site. (See page 2-3 of the final
Remedial Investigation report.)
Ohio EPA response: Concur. The word "shallow" will be deleted from the
text.
13. Comment: 4.1, Groundwater Quality, page 16, lines 20 and 23: SMC and CFM
note that this section lists the number of groundwater monitoring wells
sampled during each phase of the Remedial Investigation. These sentences
should be corrected to state that 24 (not 23) wells were sampled in the
first round and 7 wells (not 9) were sampled during the second round.
Ohio EPA response: Concur. Text will be revised to reflect the changes.
14. Comment: 4.2, Onsite Soils, page 17, lines 19 through 22: SMC and CFM note
that the Plan states "Soil samples from the perimeter of the slag piles
did not have elevated concentrations of metal contaminants, with the
exception of soils from 0 to 5 foot depth collected next to the slag
piles." In fact, only one sample collected at depths of 0-5 ft. near the
slag piles was found to contain elevated concentrations of metals (see
page ES-12 of the final Remedial Investigation report). Accordingly, the
Plan should be revised to read "...with the exception of a single soil
sample collected from the 0-5 ft. depth interval at MW-20 located next to
the East Slag Pile."
Ohio EPA response: The comment appears to contradict Figure 43 of the
Remedial Investigation which shows elevated vanadium in perimeter soils.
The text in the Decision Document will remain unrevised.
15. Comment: 4.2, Onsite Soils, page 17, line 24: SMC and CFM note that this
Section states that "Samples at the West Slag Pile contained calcium and
magnesium at elevated levels." The words "at the" should be replaced with
"collected from beneath...".
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Ohio EPA response: Concur. The sentence will read as follows:
"Samples collected from beneath West Slag Pile contained calcium and
magnesium at elevated levels."
16. Comment: 4.2, Onsite Soils, page 17, lines 32 through 34: SMC and CFM note
that the plan states "The Remedial Investigation detected above-background
levels of the radionuclides thorium-230, actinium-227, and radium-228 in
samples from the sedimentation delta on the south side of the West Slag
Pile...". This statement is not accurate.
Actinium-227 is not present at elevated concentrations in soil. Further,
it does not appear that radium-228 is present in such concentrations.
The final Remedial Investigation report states that only thorium-230 was
detected in this area. Actinium-227 was discussed in the correspondence in
Appendix R of the RI/FS in order to address the presence of elevated
levels of actinium-227 in certain slag. However, actinium-227 was never
detected in above-background concentrations at the Site. Further, although
statistical testing for radium-228 presented in Appendix R showed positive
results (i.e., significant with respect to background), the most likely
cause was that the background assumed from the thorium decay series (the
average for the state of Ohio was used) was too low.
Ohio EPA response: Disagree. Ohio EPA, the Ohio Department of Health (ODH)
and SMC/CFM discussed the issue of the presence of Actinium-227 and
Radium-228 in soil through several correspondences. In the SMC/CFM's June
26, 1996 letter to ODH, SMC/CFM clearly stated that "For soils, three
radionuclides were identified as being significantly greater than
background in the Wilcoxon Rank Sum test: actinium-227, radium-224, and
radium-228." Although Ra-224 was dropped from the consideration, Ac-227
and Ra-228 were definitely identified as chemicals of potential concern.
The background level of Ra-228 was agreed upon by Ohio EPA, SMC and CFM.
17. Comment: 4.4, Transport and Fate of Contaminants, page 18, line 38: SMC
and CFM note that this heading appears to be a major subject heading, not
a subheading under 4.4 Sediments and Wetland Soil.
Ohio EPA response: Concur. Text will be revised.
18. Comment: 4.7, Atmospheric Transport, page 19, lines 25 and 26: SMC and CFM
note that this section states that modeling was conducted to determine
concentrations of contaminants in air. However, it fails to report the
conclusion of that monitoring. To address this, SMC and Cypress Foote
suggest that the following sentence from the final Remedial Investigation
report should be added to this section: "The conservative modeling, which
included emissions and dispersion calculations, demonstrates that air
quality does not pose a risk at the Site."
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Ohio EPA response: The above passage from the Remedial Investigation will
be revised.
19. Comment: 4.8.1, Human Health Risk Assessment, page 20, lines 7 through 11:
SMC and CFM note that this paragraph presents Ohio EPA's radiological risk
assessment results. This section should be clarified by adding the
following text to the sentence that ends with "October 16, 1996": "...and
using conservative assumptions about the presence of actinium-227 and its
daughter products." This paragraph should also state that EPA's acceptable
risk range is 1x10-4 to 1x10-6.
Ohio EPA response: The text will be revised.
20. Comment: 4.8.2, Phase I Ecological Assessment, page 21, lines 27 through
31: SMC and CFM note that this section states that certain areas were
found to contain metal concentrations in soils which exceed USEPA
benchmark values for plant toxicity. It fails to report, however, that
subsequent study by a regional expert (Dr. Barbara Andreas of Miami
University) found no evidence of phytotoxic effects in vegetation.
See page ES-20 of the Remedial Investigation report.
Ohio EPA response: An examination of the noted report by Dr. Andreas
reveals that an evaluation of phytotoxicity was not an objective of her
study. In addition, significant areas at the Site are devoid of
vegetation. The noted observations of Dr. Andreas do not refute USEPA's
benchmark values for plant toxicity.
21. Comment: 4.8.2, Phase I Ecological Assessment, page 21, line 43 through
page 22, line 5: SMC and CFM note that this paragraph describes the
macroinvertebrate communities as being fair to poor and attributes
marginal habitat conditions downstream of SMC as being the result of
pervasive silt loading. To more accurately describe the conditions
encountered, this paragraph should be replaced with the following text:
"The macroinvertebrate communities at all stations in Chapman Run were in
the fair range, except at river mile 0.9, downstream from the Site, which
fell in the poor range. Habitat conditions were marginal at all locations
with the worst conditions being downstream of the Site where the substrate
is predominantly fine silt. Ohio EPA has concluded that the
macroinvertebrate community at river mile 0.9 is below what would be
expected given the habitat conditions."
Ohio EPA response: The above referenced text, as presented in the
Preferred Plan, summarizes the conclusions of Ohio EPA's evaluation of
Chapman Run and the associated wetlands.
22. Comment: 4.8.3, Phase II Ecological Risk Assessment, page 23, lines 25 and
26: SMC and CFM note that this section of the Plan discusses contaminants
present in Chapman Run and the possible sources of these contaminants. The
corresponding discussion in
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the final Remedial Investigation report includes the following statement
that was omitted from the Plan:
"The specific contribution of Site chemicals of potential concern to
these effects cannot be determined from the available data."
This statement should be added to the Plan.
Ohio EPA response: Regardless of whether of not the Ohio EPA can apportion
harm to individual aquatic species in Chapman Run and adjoining wetlands,
the overall level of chemicals of potential concern pose risk to the
aquatic community in these affected areas.
23. Comment: 5.0, Summary of the Feasibility Study, page 25, line 11, and page
26, line 10: SMC and CFM note that the text "Develop and screen" on page
25, line 11, should be replaced with "Identify and screen."
On page 26, under the heading of Offsite Sediment on line 10,
"recanalization" should be replaced with "rechannelization" (and
throughout the Plan).
Ohio EPA response: Concur. Both corrections will be included in the
Decision Document.
24. Comment: 5.1, West Slag Pile, page 26, lines 29 through 31. SMC and CFM
note that the section states that the total area of the West Slag Pile is
11.8 acres. See comment regarding 3.6.1, above, and conform.
This section also states that the West Slag Pile contains "most types of
radioactive and nonradioactive slag." This statement should be clarified
with the addition of the following language: "that have been historically
produced at the SMC Cambridge facility." The unit "tons" should be
inserted following the estimated weight of the slag (532,150). Also, the
estimated volume should be changed from 222,700 yd-3 to 220,663 yd-3 to be
consistent with the Remedial Investigation report.
Ohio EPA response: The sentence will read as follows:
"The West Slag Pile covers approximately 8.2 acres as shown in
Figure 1. It includes most types of radioactive and nonradioactive
slag that have been generated at the SMC Cambridge facility. The
West Slag Pile has an estimated weight of 532,150 tons, and an
estimated volume of 220, 663 yd-3."
25. Comment: 5.1.2, Capping in Place, page 27, lines 26 through 27 and 30: SMC
and CFM note that the reference to "RC Chapter 3734" on line 30 is
inconsistent with the reference on page 28, line 21.
Ohio EPA response: Concur. The text will be revised.
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26. Comment: 5.1.2, Decommissioning Cap, page 27, lines 39 through 41: SMC and
CFM note that this paragraph inaccurately describes the completion of the
decommissioning cap. First, the words "baghouse dust" should be deleted
from this sentence because this material was converted into Chemfix(R),
which then was used for the existing decommissioning cap. Second, line 41
should be replaced with "the new clay layer that extends from the
Chemfix(R) layer down to ground surface, followed with 12 inches of top
soil placed over the entire pile. (See Figure 8)."
Ohio EPA response: The paragraph will read as follows:
"Completing the decommissioning cap would first require placing clay
around the perimeter of the West Slag Pile. The new clay layer would
have a thickness of 3 feet with a permeability 10-6 to 10-8 cm/sec
and would extend from the edge of the Chemfix/baghouse dust layer
down to ground surface, followed with 12 inches of silty sand and
geotextile fabric. Upon completion of the capping of the perimeter,
9 inches of top soil would be placed over the entire West Slag Pile.
(See Figure 8)"
27. Comment: 5.1.2, Hazardous Waste Cap, page 28, line 29: SMC and CFM note
that the permeability specification for the 1 foot thick drainage layer
should be revised to specify permeability equal to 1x10-2 cm/s or
greater, not less, as specified in the Plan.
Ohio EPA response: Concur. The text will be revised.
28. Comment: 5.1.2, Cost Estimates for Capping, page 28, line 41 through page
29, line 11: SMC and CFM note that the cost estimates presented in the
Plan generally show the difference among the different types of caps but
are not fully consistent with the final Feasibility Study report. These
costs should be revised to be consistent with the final feasibility study
report, or an explanation for the difference should be provided.
Ohio EPA response: The cost estimates presented in the Decision Document
will be revised to be consistent with the final Feasibility Study.
29. Comment: 5.1.4, Removal and Offsite Disposal, page 30, line 37: SMC and
CFM note that the acreage for the West Slag Pile is incorrect. Revise from
11.8 to 8.2.
Ohio EPA response: Concur. The text will be revised.
30. Comment: 5.1.4, Removal and Offsite Disposal, page 31, line 34: this
section states that 5,934 rail cars would be required for offsite
disposal. The number of rail cars specified in the final Feasibility Study
report is 4,865. The Plan should be revised to agree with the final
feasibility study report, or an explanation should be provided for the
difference.
Ohio EPA response: Concur. The text will be revised to reflect the number
of railcars needed as 4,865 which will be consistent with the final
Feasibility Study report.
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31. Comment: 5.2.2, Capping in Place, page 33, item 3, line 20: SMC and CFM
note that this item states that the cap would reduce the flux of radon
from the radioactivity in the matrix. A parenthetical sentence should be
added that states: "(There is no measurable radon flux from the East Slag
Pile, so the cap design includes no consideration of radon flux
reduction.)".
Ohio EPA response: Disagree. The text will not be revised.
32. Comment: 5.2.2, Hazardous Waste Cap, page 35, line 7: SMC and CFM note
that the permeability specification for the 1 foot thick drainage layer
should be revised to specify permeability equal to 1x10-2 cm/s or
greater, not less, as specified in the Plan.
Ohio EPA response: Concur. The text will be revised.
33. Comments: 5.2.4, Removal and Sale of the Slag, page 37, lines 37 and 38:
SMC and CFM note that this section describes the process for crushing and
sorting the slag for sale. The sentence stating that it may be possible to
separate very large chunks of slag exhibiting radioactivity for offsite
disposal should be deleted. There are no plans to segregate any slag from
this option based on radioactivity.
Ohio EPA response: Disagree. Although there are no plans as such, it
remains possible to separate large slag buttons if it is necessary to do
so.
34. Comment: 5.2.4, Cost Estimates, page 38, lines 15 and 16: SMC and CFM note
that this section states that the cost to remediate the East Slag Pile may
result in a profit; thus, cost estimates were not generated for this
alternative. To maintain consistency with the feasibility study report,
these lines should be replaced with the following language: "Because the
feasibility of selling the slag in the East Slag Pile has not yet been
established, there are no means by which to prepare cost data on it. Once
the ongoing evaluation of the feasibility of the sale has been completed,
a cost estimate for the sale will be prepared if the evaluation indicates
that selling the slag is technically, legally, and economically feasible."
Ohio EPA response: The above sentence will be revised in the Decision
Document.
35. Comment: 5.4.3, Recanalization, page 41, line 24: SMC and CFM note that
the subject heading should be revised to read "Rechannelization."
Ohio EPA response: Concur. Decision Document will be revised to be
consistent with the final Feasibility Study.
36. Comment: 6.1, Selection Criteria, page 48, item 2, lines 16 and 17: SMC
and CFM note that the selection criteria listed include "Compliance with
all state, federal and local laws and regulations." By law, the criteria
include only those laws and regulations that are applicable or relevant
and appropriate. The Plan should be revised to reflect this.
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Ohio EPA response: The text will be revised as follows:
"Compliance with all State, Federal and Local laws and regulations -
addresses whether or not a remedy will attain applicable, relevant
and appropriate requirements under federal, state, and local
environmental laws;".
37. Comment: 6.3.1, Excavate to Meet Performance Standards, page 49, lines 27
through 33: SMC and CFM note that the need for wetland soil and sediment
remediation and the areas and volumes to be remediated will be determined
during the Remedial Design phase of the project.
Ohio EPA response: The Decision Document will note that the areas and
volumes for the wetland soils and sediments will be determined during the
Remedial Design phase. However, the Decision Document will note that the
wetland soils and sediment will need to be remediated. Data presented in
the feasibility study and the Remedial Investigation (Ecological Risk
Assessment Phases I and II) shows that risk exists to potential ecological
receptors in these areas. The question of whether or not these areas need
remediation was answered during the Remedial Investigation and Feasibility
Study.
38. Comment: 6.3.2, Performance Standards for Cleanup of Soils and Sediments,
page 50, lines 7 and 11 through 14: SMC and CFM note that this section
specifies that the area and volume estimates for onsite sediment and
offsite sediment are based on a vanadium concentration of 1,280 mg/kg.
This section should be revised to state that the area and
volume estimates used in the Plan, including the figures, is based on a
vanadium concentration of 700 mg/kg.
This section also states that a combination of source control and sediment
remediation is expected to meet the preliminary remediation goal for
surface water (87 ug/L for vanadium). Ohio EPA has not accurately stated
the remediation goals for vanadium in surface water. Vanadium
concentrations outside the mixing zone should be limited to a maximum of
190 ug/L according to the State's report Biological, Sediment and Water
Quality Study of Chapman Run and Associated Wetlands. Furthermore, this
number should not be applied to onsite intermittent drainage ditches.
Ohio EPA response: Section 5.0 of the Decision Document has a table that
sets forth the following preliminary remediation goals (PRGs) for
vanadium: 700 mg/kg for wetland soils; 1280 mg/kg for sediments; and 87
ug/l for surface water. The Feasibility Study used a PRG figure of 700
mg/kg to compute the approximate amount of contaminated wetland soils and
sediments that would be excavated. The Remedial Design work would compute
more precisely the areas and volumes of contaminated soils and sediments
to be excavated.
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39. Comment: 6.3.2, Performance Standards for Cleanup of Soils and Sediments,
page 50, lines 15 and 16. SMC and CFM note that this section refers to a
table in Section 6.11 which outlines the cleanup levels for each medium at
the Site. There is no Section 6.11 in the Plan.
Ohio EPA response: The reference to Section 6.11 will be deleted from the
Decision Document. The sentence will now read: "Please refer to the table
in this section..."
40. Comment: 6.3.2, Performance Standards for Cleanup of Soils and Sediments,
page 50, lines 30 and 31: SMC and CFM note that this section states that
the major radionuclide detected in most media during the Remedial
Investigation was thorium-230 (Th-230). This section should be corrected
to state that thorium-230 was detected only in soils. Thorium-230 was not
detected in surface water or groundwater in concentrations above
background.
Ohio EPA response: For soils, please see the comments on Question 4.2
(Onsite Soils, page 17, line 32 through 34). Th-230 was not the only
radionuclide identified in the RI/FS report. For groundwater, PTI clearly
stated that "The data on radionuclide concentrations in wells MW-09 and
MW-19 were used to define background concentrations. Thorium-230 is the
only radionuclide that occurs above background concentrations in two of
the wells (MW-12 and MW-13)." Therefore, Th-230 was detected in
groundwater in concentrations slightly above background at least at MW-
12.
41. Comment: 6.3.2, Performance Standards for Cleanup of Soils and Sediments,
page 50, lines 33 through 35: SMC and CFM note that this section discusses
the results of Ohio EPA's independent data validation, which identifies
protactinium-231m and actinium-227 as present in Site soils at levels at
least slightly above background. Based on this finding, the Plan presents
the recommendation that samples collected during the Remedial Design phase
be analyzed for protactinium-231m and actinium-227. The statement
regarding the presence of these radionuclides at concentrations above
background is incorrect. The statistical comparisons for soil between
background and site locations indicated that neither protactinium-231m nor
actinium-227 were present in elevated concentrations. (See Appendix R of
the Remedial Investigation report.) At the State's request, these two
radionuclides and their progeny were included in the risk assessment
because they existed in elevated concentrations in the slag.
Ohio EPA response: Please refer to comments on Question 4.2 (Onsite Soils,
page 17, line 32 through 34). Pa-231 with a half-life of 3.2E4 years is
the parent of Ac-227 with a half-life of 21.6 years. The presence of
Ac-227 above background strongly indicates the presence of Pa-231. The
state still intends that future analysis for soils during the RI/FS phase
be analyzed for Pa-231 and Ac-227.
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42. Comment: 6.3.2, Performance Standards for Cleanup of Soils and Sediments,
page 51, lines 3 through 15: SMC and CFM note that this section presents a
table with vanadium cleanup levels for each medium. The vanadium cleanup
level for wetland soils is listed as 700 mg/kg. For consistency with the
Remedial Investigation report, this value should be listed as 1,280 mg/kg
with a footnote explaining that this value will be refined during the
Remedial Design phase.
Ohio EPA response: Please refer to comment 38.
43. Comment: 6.4.1, Capping of the West Slag Pile, page 52, lines 15 through
19: SMC and CFM note that this section states that "Disposal of the solid
and/or chemical waste materials currently found in the West Slag Pile
would require disposal in either solid waste landfills or hazardous waste
facilities." There is no documentation in the Remedial Investigation
report that solid wastes or hazardous wastes are present at the Site that
would require disposal offsite in a solid waste or hazardous waste
facility.
Ohio EPA response: Disagree. The sentence will not be revised.
44. Comment: 6.5, East Slag Pile, page 53, lines 18 through 24 and lines 28
through 32. SMC and CFM note that this section proposes a six-month period
for Shieldalloy to evaluate the marketability of the slag found in the
East Slag Pile. At this point, it is not possible to commit to a schedule
for the evaluation of marketability of the East Slag Pile. In addition,
assessing marketability must be coordinated with the NRC. A more
appropriate approach for this issue would be to request a plan for the
preparation of a marketing study, which could be updated periodically to
report on progress.
Ohio EPA response: Ohio EPA can consider any request to modify the
schedule when it reviews SMC and CFM's work plan for the Remedial Design
and Remedial Action.
45. Comment: 6.7.2 Controls for Former Process Areas, page 55, lines 17
through 22: SMC and CFM note that this section states that levels of
vanadium in the former vanadium pentoxide drum accumulation area would
result in unacceptable risks through inhalation of vanadium. Hence, the
Plan recommends that future use of this area be controlled through
institutional controls and revegetation or removal of contaminated soils.
The assertion of unacceptable risks through inhalation of vanadium is not
supported by the studies that were conducted at the Site. Indeed, the
Remedial Investigation ruled out the inhalation pathways as a potential
risk for vanadium (and for any other nonradiological compound).
Accordingly, the Plan recommendation for controls in this area is
unfounded and unnecessary.
Ohio EPA response: The Decision Document will be revised.
46. Comment: 6.7.2, Controls for Former Process Areas, page 55, lines 24
through 29: SMC and CFM note that this section presents requirements for
the proper disposal of radioactive slag that may be present beneath
buildings at the Site. The Plan should be
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revised to note that the final disposition of this material is addressed
in the previously prepared Decontamination Report (ENSR Jan. 1990) for the
facility.
Ohio EPA response: SMC/CFM comment is noted. No response necessary.
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II. COMMENTS FROM U.S. NUCLEAR REGULATORY COMMISSION
1. Comment: The NRC asked that additional consideration be given to the
potential adverse impacts to the ecosystem that could occur from
excavating the soil and sediments from the wetlands, ditches, and stream
channels. These impacts could include the loss of wetlands, short-term or
long-term impairment of wetlands, or loss of Chapman Run habitats. The
potential impacts of digging up the wetland soils, on-site sediments, and
off-site sediments should be documented, discussed, and considered in the
Preferred Plan.
Ohio EPA response: The potential impacts of soil and sediment removal from
the affected areas are not specifically discussed in the Preferred Plan,
but are documented and discussed in the Feasibility Study, Section 5.3.3,
5.3.4, and 5.3.4. A sentence will be included in the Decision Document
that states the following:
"For a more detailed analysis of all the alternatives please refer
to the Feasibility Study."
2. Comment: The NRC notes that some of the considered alternatives do not
appear to be biologically sound alternatives (e.g., rechannelization,
capping the sediments and soils with gravel or top soil, etc.). A
rationale as to why these were considered and why they were eliminated
would be helpful in the document.
Ohio EPA response: The alternatives were evaluated to provide a broad base
from which to choose. Initially, the alternatives were not eliminated from
further analysis because it appeared that they had some potential for
remediation of the areas of concern. Ohio EPA eliminated these
alternatives from further consideration in the Preferred Plan. When
evaluated against the nine criteria presented in Section 6.1 of the
Preferred Plan, it was determined that they provided only limited
benefits.
3. Comment: Page 41 - "Natural Recovery" is misnamed. This alternative
involves the introduction of sand into the ecosystem. It is recommended
that a true natural recovery alternative be added to the Preferred Plan
for the wetland soils, on-site sediments, and off-site sediments. This
alternative would assume that the sources of contaminants would be
controlled and that the wetland soils, onsite sediments, and offsite
sediments would be allowed to naturally recover over time. Periodic
monitoring of the site would take place to evaluate the success of the
recovery.
Ohio EPA response: The Natural Recovery Alternative for onsite and offsite
sediments is given some consideration in the no action alternative. The no
action alternative presented for both the onsite and offsite sediment
considers taking no action to remove or reduce the contaminants through
treatment or removal from the affected areas. Sources of any future
contaminants would be controlled through engineering controls and a
stormwater
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discharge permit would be issued by Ohio EPA. This alternative is discussed in
Section 6.6 of the Preferred Plan. See, also, Section 5.4.2 of the Preferred
Plan.
4. Comment: The basis of all the costs in the Preferred Plan are not
referenced. Costs that are documented in the FS should be referenced as
such. A basis or a reference to the basis of all costs that are not from
the FS should also be provided.
Ohio EPA response: A new sentence will follow the costs presented in
Section 6.9 to clarify the source of the information. The sentence will
read as follows:
"The costs presented above were obtained from the Feasibility Study.
For a detailed breakdown on the costs, please refer to Appendix C of
the Feasibility Study."
See, also, Section 5.0 of the Preferred Plan.
5. Comment: The NRC notes that it appears that the conclusions of the
Preferred Plan are inconsistent with the Feasibility Study for the
Cambridge facility. The Preferred Plan states on page 49 that, "The
preferred alternative includes the excavation and removal of contaminated
sediments and soils from on-site drainage channels, sedimentation deltas,
wetland soils, and Chapman Run." This is different from the FS, page 602.
The FS states that an alternative for wetlands soils could be a
combination of focused sediment removal and no action for the remaining
areas. Please provide the rationale for these differences.
Ohio EPA response: The Feasibility Study states that a combination of
removal and "no-action" may have potential to meet the remedial action
objectives for some wetlands soils. This matter would be further studied
and addressed during the Remedial Design stage.
6. Comment: The NRC recommends that a different approach be considered for
the Preferred Plan. Why not control the sources of the contaminants (i.e.,
the active slag pile operations) and then allow the natural processes
(i.e., wetland bioattenuation, natural sedimentation, and natural
biodegradation) to restore the area? This is similar to the approach
mentioned on page 6-2 of the FS for wetland soils but would also apply to
the on-site sediments and off-site sediments. The natural processes may
help the site to recover to the point that the risk becomes acceptable to
ecological receptors in the streams and wetlands. If, however (in the
future after the west slag pile was capped, as part of the periodic
monitoring) it was found necessary to dig up soils and/or sediments and
place them on the west slag pile; a new cell could be accommodated easily
on top of the pile. By taking this phased approach to the remediation of
soil and sediment contamination, wetlands may be preserved and unwanted
resuspension of metals could be avoided.
Ohio EPA response: The process of removing contaminated sediments and soil
from affected areas will cause disruption; however, the disruption is
short term. The
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disturbed areas can then be allowed to naturally recover and should no
longer be impacted by contamination.
7. Comment: Page 50, first paragraph - The NRC requests that a map be
included in the Preferred Plan which depicts the expected area of on-site
and off-site sediments that would be removed using the 1280 mg/kg
criteria.
Ohio EPA response: The figures (Figures 6 and 7) which were attached to
the Preferred Plan will be included in the Decision Document. A note will
be included following the first sentence on page 50 which refers to the
Figures 6 and 7 and the clean up criteria of 1280 mg/kg.
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III. COMMENTS FROM PUBLIC MEETING
1. Comment: Mr. Bauman states that the State of Ohio will receive civil
penalties but the local community will get nothing.
Ohio EPA Response: This comment does not apply to the Preferred Plan.
Remediation of the Site is for the benefit of the community and state.
Civil penalties that would be collected under the proposed consent order
would be distributed as required by state law, including Ohio Revised Code
Sections 6111.09(B) and 3734.28. RC Section 6111.09 (B) provides for civil
penalties to go into (1) the environmental education fund, which was
created to develop, implement, and administer a program to enhance public
awareness and understanding of issues affecting environmental quality; and
(2) the water pollution control administration fund, which supplements
other moneys available for the administration and enforcement of Ohio
EPA's water pollution control program. R.C. Section 3734.28 allocates some
civil penalties to the hazardous waste clean-up fund.
In addition, the proposed Consent Order includes a wetlands project that
calls for the enhancement and/or restoration, and preservation, of
approximately 40 to 45 acres of wetlands in the vicinity of the
Shieldalloy facility, if available, or in the Cambridge, Ohio area.
Shieldalloy and Cyprus Foote would expend up to $276,000 on this project.
It is generally recognized that wetlands are one of our most important
ecosystems. They are known to cleanse polluted waters, prevent floods,
recharge ground water aquifers, and provide unique habitats for a variety
of flora and fauna. The community around the Shieldalloy site would
receive environmental benefits from the wetlands
enhancement/restoration/preservation project that would be undertaken by
Cyprus Foote and Shieldalloy.
2. Comment: Mr. Bauman inquired as to lost property values around Shieldalloy.
Ohio EPA Response: Mr. Bauman raises a concern about lost property values
caused by the proposed remedy. No documentation has been submitted that
demonstrates that property values have actually decreased, or will
decrease in the future, due to the preferred remedy. The East and West
Slag Piles have been located at the Shieldalloy facility for several
decades. The remedy is designed to ensure protection of human health and
the environment at the Site and surrounding areas.
3. Comment: Mr. Bauman noted that no health studies on the consumption of
wildlife from Shieldalloy property and Chapman Run has been conducted.
Wildlife includes cray fish.
Ohio EPA Response: As part of the RI/FS process, health studies were
conducted for ingestion of fish caught in Wills Creek/Chapman Run near the
Shieldalloy facility. Although no human health risk assessment was
specifically conducted for the ingestion of crayfish, an equivalent
assessment was conducted for carp, which is a sediment
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feeding fish. As summarized in Table 107 of Remedial Investigation report
of September 1996, none of the carcinogenic chemicals of concern for
off-site water and sediments were detected in fish tissue. The noncancer
hazard index is 0.05, which is far below the USEPA human health protection
criterion of 1.0. Radiological tissue analyses from fish collected by the
Ohio EPA in Wills Creek indicated that thorium and uranium were not
detectable in fish tissue.
4. Comment: Mr. Bauman asked why is the State allowing Shieldalloy to place
contaminated sediments and soils, following excavation, atop the West Slag
Pile, and not requiring disposal in a solid waste facility?
Ohio EPA response: The existing contamination in the onsite/offsite
sediments and wetland soils are the result of historical plant operations.
Placing contaminated soils and sediments atop the West Slag Pile, and
capping both, improves protection of human health and the environment at
the Site. The cap would have to be inspected regularly and repaired if
needed.
5. Comment: Mr. Bauman requested clarification on the risks from inhalation
of dusts during removal of the slag from the Site.
Ohio EPA response: An important pathway for public exposure to radiation
is through inhalation of suspended radioactive particulate in the air. The
mechanical disturbance involved in removing the slag from the Site,
including heavy digging operations, would generate higher emissions of
dust particles. Therefore, higher particulate concentrations in the air
would result. In general, the Particulate Emission Factor with
construction activity can be one thousand times higher than without such
activity.
6. Comment: Mr. Bauman stated that the State has affected the citizens of
Guernsey County's ability to recoup losses by the Covenant Not to Sue in
the Consent Order and the omission of a recitation of violations of Ohio
laws, rules or regulations.
Ohio EPA response: This comment does not address the Preferred Plan. The
proposed Consent Order does not apply to any individual rights of
citizens.
7. Comment: Mr. Bauman asked why the community will not be afforded the
protection of a 450 acre buffer around the slag piles. The buffer will be
a requirement for the proposed low level radioactive waste disposal site
to be sited in Ohio.
Ohio EPA response: A buffer is not a requirement for remediation of
existing contaminated sites. Ohio EPA notes that the proposed Consent
Order would potentially require the purchase of wetlands in the areas
surrounding the Site.
8. Comment: Mr. Bauman asked why the community will not be reimbursed for the
loss of property values as will those who will be affected by the proposed
low level radioactive disposal site.
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Ohio EPA response: Please refer to comments two and six.
9. Comment: Mr. Bauman requested that the comment period be extended 60 days
from the deadline of January 29, 1997.
Ohio EPA response: Upon receiving requests for an extension of the comment
period, Ohio EPA granted a 30-day extension until February 28, 1997 to
stay consistent with the court schedule in SMC's bankruptcy case.
10. Comment: Mr. Bauman states that the risk scenarios presented in the
Preferred Plan are incorrect and improper. Specifically, the farm family
scenario improperly places the family's farm well not atop the east or
west slag pile or even atop the sediments pile, but instead places it in a
safe zone between the two piles away from any and all contaminants and
radioactive materials.
Ohio EPA response: The comment appears to refer the Environmental Impact
Study (EIS) being prepared by the U.S. Nuclear Regulatory Commission. The
farm family risk assessment as described above was unnecessary for RI/FS
Report due to the absence of ground water contamination.
11. Comment: Mr. Bauman stated that the radiological risks to the hypothetical
farm family are incorrect and do not accurately estimate the risks for
this scenario. The exposure to a farm family would be in excess of 6,000
millirems per year.
Ohio EPA response: See comment ten. A dose assessment for the
radionuclides contained in the West Slag Pile was conducted and documented
in the RI/FS report. The calculation modeled the migration of
radionuclides through multiple environmental media, including groundwater,
over time and calculated the impact of this migration on a family living
on the site. The calculated maximum dose occurred 1,000 years after
completion of the remediation. That dose was about 1.196E-5 mrem/year,
which is far below many guidelines. The capped slag pile would be under
institutional control. No wells would be allowed to be installed through
the capped pile.
12. Comment: Mr. Bauman states that Ohio EPA data shows that groundwater
surrounding the East Slag Pile fails to meet state and federal safe
drinking water standards. Mr. Bauman asks how, based on this information,
will the State approve insitu disposal of the slags.
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Ohio EPA response: The parameters of concern at this site (e.g. vanadium,
chromium, radiological parameters) were not found at concentrations that would
indicate that a release to ground water from the East or West Slag Piles had
occurred. This was based upon two separate sampling events of the monitoring
network at the site. The presence of sodium, magnesium and alkalinity in the one
well near the East Pile was used as justification for implementing measures to
protect ground water, even though the ground water monitoring results had
indicated that the site had not impacted ground water for the parameters of
concern.
13. Comment: Mr. Bauman expressed concern that Ohio EPA is prepared to select
the remedy of capping even though the Remedial Investigation/Feasibility
Study shows that the cap will fail in the future.
Ohio EPA response: According to the Remedial Investigation and the
Feasibility Study, the solid waste cap has an estimated life of over 1000
years, provided that long-term maintenance is conducted. Long-term
maintenance and management of the Site would be assured through the use of
a financial assurance mechanism.
Please refer to Appendix E of the Feasibility Study for more information.
14. Comment: Mr. Bauman questioned why Ohio EPA's Preferred Plan does not
evaluate an alternative which includes the removal of the Chemfix
material. The commentor stated that Chemfix contains hazardous wastes
(i.e. chromium, vanadium) which is leaching from this material.
Ohio EPA response: The material would be protected from weathering once
capped with a solid waste cap. Once the Chemfix material is capped onsite,
it would receive a similar degree of protection as if it had been removed
and disposed of in a solid waste landfill.
15. Comment: Mr. Bauman requested that the Ohio EPA require a hazardous waste
cap for the West Slag Pile and East Slag Pile.
Ohio EPA response: The results of the Feasibility Study show that, in this
case, the additional components in a hazardous waste cap would not be
necessary in order to protect human health and the environment. A solid
waste cap provides the needed protection.
16. Comment: Mr. Bauman requested that any and all documents be released to
members of the community.
Ohio EPA response: Under Section 149.43 of the Ohio Revised Code, the
State of Ohio has the responsibility to make available to any person all
public records that pertain to a particular matter of interest. All public
records related to the Shieldalloy site can be made promptly available to
any person desiring to see them by making arrangements with Ohio EPA's
Southeast District Office, (614) 385-8501.
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17. Comment: Mr. Bauman asked why Senate Bill 130 does not apply to the
Shieldalloy site.
Ohio EPA response: Whether or not radioactive waste at the Site may be
classified as "low-level radioactive waste," the acts of disposal and
commingling at the Site took place prior to enactment of Senate Bill 130.
18. Comment: Randi Pokladnik requested an extension of the comment period due
to inaccessibility of the material. All the material is located at the
Byesville Public Library, which limits the number of copies one can make
to twenty.
Ohio EPA response: Please refer to comment number nine above.
19. Comment: Randi Pokladnik asked if abandoned mines below the slag piles
could subside creating a ground and surface water contamination problem.
Ohio EPA response: During the Remedial Investigation, mining maps for the
Shieldalloy site and vicinity were obtained from the Ohio Department of
Natural Resources (ODNR), Division of Reclamation. The maps for this area
show that the area directly below was not deep mined, shallow mined or
stripped mined. Figure 17 of the Remedial Investigation shows the location
of mining activities in and around Shieldalloy.
Additionally, borings were obtained during the installation of monitoring
wells and piezometer. The borings show that no voids were found which
would indicate that abandoned mines exist within close proximity of the
slag piles. Section 5.2.2 of the Remedial Investigation discusses site
geology.
20. Comment: Randi Pokladnik stated that data from the remedial investigation
shows that in addition to radioactive contaminants, PCB is present. She
expressed concern with the onsite incineration of PCB.
Ohio EPA response: During the Remedial Investigation, soil samples were
collected and analyzed for chemical and radiological contaminants. PCB was
a potential chemical of concern, initially, but the data shows no
unacceptable risks. From these results it was determined that remediation
of PCBs is not required.
21. Comment: Randi Pokladnik asked if the human health risk assessment
evaluates risks to children.
Ohio EPA response: Risks to children were evaluated as part of the human
health risk assessment. Risk was calculated for children who could
potentially ingest soil, sediment, and wetland soils from the site.
Hypothetical risk was calculated for children with a dermal exposure to
sediments, wetland soils, and surface water. For more information, please
refer to Section 6 of the Remedial Investigation. The
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calculations and exposure assumptions for each scenario is presented in
Tables 94 - 100.
In addition to the chemical risk assessments noted above, hypothetical
radiological risks to children were calculated. Table 119, Remedial
Investigation, is a summary of exposure estimates for the consumption of
vegetables, meat and milk from the Shieldalloy property. In sum, the
remedy accounts for and addresses risk to children.
22. Comment: The cost of the caps are incorrectly estimated. The cost of the
caps are closer to $20 - $25 million, not $8 million as presented in the
Preferred Plan and public meeting.
Ohio EPA response: The cost estimates presented in the Preferred Plan are
based upon information presented in the Feasibility Study (Appendix C and
E). The cost estimates for a solid waste cap for both the East and West
Slag Piles were evaluated by the Ohio EPA's Division of Solid and
Infectious Waste Management (DSIWM). The DSIWM determined that the costs
presented in the Feasibility Study, and thus the Preferred Plan, are
consistent with municipal solid waste landfills currently operating in the
area.
For a detailed overview of all capping costs please refer to Appendix C
and E of the Feasibility Study.
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IV. OTHER WRITTEN COMMENTS
1. Comment: The commentor noted that a more "immediate action" should be
taken to close the Site, thus protecting the community and environment in
a more timely manner.
Ohio EPA response: The timeframe of 3 to 5 years as presented by Ohio EPA
during the public meeting is a conservative estimate which the Agency
considers realistic to complete remediation activities at the Site.
2. Comment: A commentor noted that an alternative should be evaluated which
looks at excavating on-site slag and moving it to an abandoned strip mine
or other location.
Ohio EPA response: Moving the material to a strip mine would increase
risks compared to onsite containment. Furthermore, there is no provision
in Ohio's coal mining law that would allow for such disposal in this
instance.
3. Comment: One commentor asked if there was any danger of radioactive
contaminants in the air from the Shieldalloy site.
Ohio EPA response: During the investigation of the Shieldalloy site, the
air pathway was evaluated. It was determined that the slag, as it
currently exists in the East and West Slag Piles, is not easily disturbed
with air movement. Due to the hardness of the slag, large amounts of dust
are not released. The remedy includes capping, which would further reduce
dust emissions in the long term. The remaining areas of the Site and
adjacent wetlands are covered by vegetation or water. Currently there is
not appreciable risk from dust from the Site.
4. Comment: One commentor questions the threat to human health the slag poses
and the need to address any of the environmental concerns at the Site.
Additionally, the commentor notes that the State should leave the Site
alone, not hold public meetings to inform the public of the results of the
studies, and not require Shieldalloy and Cyprus Foote Mineral to spend
money to remediate the Site.
Ohio EPA response: The results of the human health risk assessment, as
conducted during the remedial investigation, identified the following
media as presenting potential risks to human health or the environment:
o East and West Slag Piles
o Offsite slag (included for the purpose of evaluating site remedial
alternatives: offsite slag is not otherwise evaluated in the
feasibility study)
o Wetland soil
o Onsite sediment
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o Offsite sediment (Chapman Run)
o Surface water
As demonstrated in the Feasibility Study, the Site poses risks to human
health and the environment. The Decision Document sets out Ohio EPA's
selected remedy to protect human health and the environment in a cost
effective manner.
5. Comment: Several commentors expressed concern regarding slag from past
Shieldalloy/ Cyprus Foote Mineral operations which had been transported
offsite to private properties.
Ohio EPA response: If firm plans are expeditiously developed for the
remediation of this slag, Ohio EPA will evaluate whether to provide for
return of the slag to the Site.
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Amend 1 to Exh. 10.6
OHIO ENVIRONMENTAL PROTECTION AGENCY
DECISION DOCUMENT
FOR THE
SHIELDALLOY METALLURGICAL CORPORATION SITE
CAMBRIDGE, OHIO
April 1, 1997
<PAGE> 86
TABLE OF CONTENTS
Page
1.0 Introduction........................................................4
2.0 Site History........................................................6
2.1 Site Location.................................................6
2.2 Facility Ownership and Operation..............................6
2.3 Metal Alloy Production........................................6
2.4 License for Ferrocolumbium Slag under the Atomic Energy Act...7
2.5 Slag and Other Wastes.........................................7
2.6 NRC Oversight.................................................8
2.6.1 Partial Decommissioning under the Atomic Energy Act...8
2.6.2 Environmental Impact Statement under NEPA.............9
2.7 Ohio EPA Oversight............................................9
2.7.1 Remediation Cleanup Process under CERCLA..............9
2.7.2 Remedial Investigation/Feasibility Study.............10
2.7.3 Preferred Plan.......................................11
2.7.4 Public Participation.................................11
2.7.5 Decision Document....................................11
3.0 Nature and Extent of Contamination.................................13
3.1 Hydrogeology and Groundwater.................................13
3.2 Onsite Soils.................................................15
3.3 Surface Water................................................15
3.4 Sediments and Wetland Soil...................................16
3.5 Transport and Fate of Contaminants...........................16
3.5.1 Surface Water Transport..............................17
3.5.2 Vadose Zone and Groundwater Transport................17
3.5.3 Atmospheric Transport................................17
3.6 Risk Assessment...........................................17
3.6.1 Human Health Risk Assessment.........................17
3.6.2 Phase I Ecological Assessment........................18
3.6.3 Phase II Ecological Risk Assessment..................20
4.0 Description of Remediation Alternatives............................23
4.1 West Slag Pile...............................................24
4.1.1 No Action............................................24
4.1.2 Capping in Place.....................................25
4.1.3 Capping in Place (with soils, sediments, and
offsite slag) .......................................27
4.1.4 Removal and Offsite Disposal.........................28
4.2 East Slag Pile...............................................30
4.2.1 No Action............................................30
4.2.2 Capping in Place.....................................31
4.2.3 Removal and Offsite Disposal.........................34
4.2.4 Removal and Sale of Slag............................35
4.3 Onsite Sediment..............................................36
4.3.1 No Action............................................36
4.3.2 Capping..............................................37
4.3.3 Removal and Onsite Containment (on the
West Slag Pile) .....................................37
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4.3.4 Removal and Offsite Disposal.........................38
4.4 Offsite Sediment.............................................39
4.4.1 No Action............................................39
4.4.2 Natural Recovery.....................................39
4.4.3 Rechannelization.....................................39
4.4.4 Removal and Onsite Containment (on the
West Slag Pile) .....................................40
4.4.5 Removal and Offsite Disposal.........................41
4.5 Description of Alternatives for Wetland Soil.................42
4.5.1 No Action............................................42
4.5.2 Wetland Mitigation...................................42
4.5.3 Capping..............................................42
4.5.4 Removal and Onsite Containment (on the
West Slag Pile) .....................................43
4.5.5 Removal and Offsite Disposal.........................44
5.0 Ohio EPA's Selected Remedy.........................................46
5.1 Selection Criteria...........................................46
5.2 Summary......................................................47
5.3 Contaminated Sediments and Soils at the Site.................47
5.3.1 Excavate to meet Performance Standards...............47
5.3.2 Performance Standards for Sediments and Soils........48
5.3.3 Place Excavated Soils and Sediments on
West Slag Pile ......................................49
5.4 West Slag Pile...............................................49
5.4.1 Capping of the West Slag Pile........................49
5.4.2 Performance Standards for the West Slag Pile Cap.....50
5.4.3 Long Term Care of The West Slag Pile.................50
5.4.4 Other Alternatives Considered........................50
5.5 East Slag Pile...............................................51
5.5.1 Expeditious Sale and Removal of the East Slag Pile...51
5.5.2 Capping and Long Term Care of the East Slag Pile.....51
5.5.3 Performance Standards for the East Slag Pile Cap.....51
5.6 Stormwater Controls..........................................51
5.7 Former Process and Upland Soil Areas.........................52
5.7.1 Revegetation.........................................52
5.7.2 Performance Standards for Former Process Areas.......52
5.8 Offsite Slag.................................................52
5.9 Public Comment...............................................53
5.10 Cost.........................................................53
5.11 Conclusion...................................................53
Attachment A: Responsiveness Summary
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1.0 INTRODUCTION
The Shieldalloy Metallurgical Corporation facility is located near Cambridge,
Ohio on State Route 209, Guernsey County, Ohio ("the Site"). The Shieldalloy
facility has produced vanadium and other metal alloys since the 1950s. The
facility has disposed much of its wastes, including radioactive slags and
vanadium-contaminated soils, at the Site. The Site includes two slag piles,
known as the East Slag Pile and the West Slag Pile, that span 11 acres. The Site
also has contamination in soils, wetlands, and Chapman Run.
Ohio EPA prepared a Preferred Plan to describe its proposed strategy to abate
pollution at, and prevent migration of wastes from, the Site. On or about
December 13, 1996, Ohio EPA publicly announced the availability of the Preferred
Plan and requested comments from interested members of the public. The Byesville
Public Library held for public review copies of the Preferred Plan and other
documents relevant to remediation of the site. On January 6, 1997, Ohio EPA held
a public information session on the Preferred Plan at the Guernsey County Public
Library. On January 22, 1997, Ohio EPA held a public hearing on the Preferred
Plan at the Pritchard Laughlin Center, Cambridge. Ohio EPA extended the public
comment period to February 28, 1997 as a result of a request from an interested
member of the public.
Ohio EPA has considered the public comments. Attached to this document is Ohio
EPA's Responsiveness Summary, which describes the comments Ohio EPA received and
Ohio EPA's responses to them.
This Decision Document describes the remedial action selected by Ohio EPA for
the Shieldalloy Site. This Decision Document has three parts. First, it
describes the history of the Site, including facility operations, waste
generation and disposal, and state and federal oversight. Second, this Decision
document summarizes the remedial investigation and feasibility study report for
the Site. The remedial investigation is a study of the type and extent of the
contamination at the Site. The feasibility study is a description of options for
addressing the contamination.
Ohio EPA oversaw the development of the remedial investigation and feasibility
(RI/FS) study by Shieldalloy Metallurgical Corporation and Cyprus Foote Mineral
Company (former Site owner). These companies prepared the RI/FS report under the
requirements of an agreed court order. On July 11, 1995, the Guernsey County
Court of Common Pleas issued the order (Consent Order for Preliminary
Injunction) in the case of State of Ohio, ex rel Montgomery v. Shieldalloy
Metallurgical Company and Cyprus Foote Mineral Company, Case No. 95CV242.
The third part of this Decision Document is a description of the remedy selected
by Ohio EPA for abating pollution at, and preventing migration of wastes from,
the Site. Ohio EPA's selected remedy for the Shieldalloy Site includes:
1. Excavate and remove contaminated sediments and soils from the Site;
2. Place excavated sediments and soils on top of the West Slag Pile;
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3. Cap the West Slag Pile in accordance with state solid waste rules
under Ohio Administrative Code Chapter 3745-27;
4. Ensure long term care of the West Slag Pile and;
5. For the East Slag Pile:
a.if feasible, sell and legally remove East Slag Pile materials,
expeditiously; and/or
b.if the foregoing is not feasible, then cap the East Slag Pile in
accordance with state solid waste rules under Ohio Administrative
Code Chapter 3745-27 and ensure long term care.
The remedy selected by Ohio EPA is substantially the same as the remedy proposed
by Ohio EPA in the Preferred Plan. The remedy meets applicable, relevant and
appropriate requirements. Treatment of the radioactivity in the slag is not
practicable. According to the RI/FS report, the projected cost of this remedy is
$10.3 million. For a more complete description of Ohio EPA's selected remedy,
see section 5.0 of the Decision Document. Actual or threatened releases of
hazardous substances from the Site, if not addressed by implementing the remedy
selected in this Decision Document, may endanger public health, welfare or the
environment. This Decision Document does not preclude Ohio EPA from seeking
other remediation at the Site in the future in a manner not inconsistent with
the U.S. Environmental Protection Agency's National Contingency Plan (NCP) at
Title 40 of the Code of Federal Regulations, Part 300. Procedures under the NCP
call for periodic review to ensure that the remedy will protect human health and
the environment. This Decision Document does not address remediation of
Cambridge area locations away from the Site where radioactive slag from the
facility was used as fill material.
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2.0 SITE HISTORY
2.1 Site Location
This Decision Document concerns property that is located on Route 209 about 1.5
miles south of Interstate 70 near Cambridge, Ohio in Guernsey County ("the
Site"). The Site features are shown in Figure 1. A detailed topographic map is
presented in Figure 2. The Site is located approximately 1 mile southwest of the
municipal limits of Cambridge, Ohio. The Site is roughly triangular and covers
approximately 130 acres. To the north, between the facility and Cambridge, lies
open land, several residences and an interstate interchange (Interstates 70 and
77), with several hotels and other businesses north of Interstate 70. The
closest residence is approximately one quarter of a mile northeast of the
facility. Route 209, an industrial park, and a country club lie to the
southwest. To the immediate north and south are former strip mines and open
land. Chapman Run, a tributary to Wills Creek, lies to the west of the facility.
A school is located to the south of the facility. To the east are a few
residences, open fields, and Interstate 77. The town of Byesville is
approximately 1 mile southeast of the facility.
2.2 Facility Ownership and Operation
Prior to 1952, the Site had been the location of a racetrack and farmland.
Vanadium Corporation of America constructed the facility in 1952, and began
production operations in 1953. Over the next 15 years, Vanadium Corporation of
America operated the facility, which included a 2.5- megawatt arc furnace for
separating vanadium and other valuable metals from ores and other raw materials.
In 1956, the company added chemical manufacturing operations and a chemical
laboratory, including a Pilot Plant to support research and development.
In 1967, Foote Mineral Corporation, a subsidiary of Newmont Mining Company,
merged with Vanadium Corporation of America. Foote Mineral added a 7.5 megawatt
arc furnace and a baghouse in 1970, and a second baghouse in 1976.
Shieldalloy Metallurgical Corporation ("Shieldalloy") acquired the facility from
Foote Mineral Corporation in May 1987. Shieldalloy is a subsidiary of Metallurg,
Inc. In 1991, Shieldalloy added to the facility a roaster and a new pole barn
for ore storage. For a more detailed history of the Site, see Onsite Slag
Characterization and Distribution at the Shieldalloy Metallurgical Corporation
Site in Cambridge, Ohio (PTI 1995b). This document is available at the Byesville
Public Library, along with other documents relevant to remediation of the Site.
2.3 Metal Alloy Production
Alloy production began at the Site in 1953, and the facility is still in
operation today. The primary products manufactured at the facility are vanadium
alloys (ferrovanadium and Ferovan(R)), which account for approximately 80
percent of the total production. In addition, the facility has manufactured
lesser quantities of Grainal(R), Solvan(R), ferrotitanium, ferroboron, and
ferrocolumbium. The Pilot Plant has produced small quantities of vanadium
chemical compounds.
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The facility used ores or other raw materials containing naturally occurring
radioactivity in the production of some alloys (e.g., ferrocolumbium,
ferrovanadium and Grainal(R)).
2.4 License for Ferrocolumbium Slag under the Atomic Energy Act
In 1953, Vanadium Corporation of America obtained an operating license from the
Atomic Energy Commission (AEC) to possess a raw material known as niobium ore
(formally known as columbium ore) which contained uranium and thorium (Atomic
Energy Commission license SMB-00850). From 1953 to 1973, Vanadium Corporation of
America and Foote Mineral produced ferrocolumbium alloy under the license. In
1975, the operating license expired and was not renewed.
In 1987, when it purchased the facility from Foote Mineral, Shieldalloy applied
for and received a license from the AEC's successor, the Nuclear Regulatory
Agency (NRC), on May 29, 1987 (license SMB-1507). The license is for the
possession of the radioactive slag and not for production. Shieldalloy has not
manufactured ferrocolumbian during its ownership of the site.
2.5 Slag and Other Wastes
For every metal alloy produced, the facility generated a corresponding waste
slag. The facility generated three types of radioactive slag (ferrocolubium,
ferrovanadium, and Grainal(R) slags) and about five types of nonradioactive
slags. The facility also generated baghouse dust and other wastes.
Since it began operation, and continuing until the late 1980s, the facility
disposed of most of its waste slags and other wastes in various areas across the
Site. The facility disposed of waste slag in the West Slag Pile, the East Slag
Pile and the Grainal(R) Slag Pile. The West Slag Pile contains most types of
radioactive and nonradioactive slag. The East Slag Pile contains all types of
radioactive slags and some nonradioactive slags.
The Grainal Slag Pile contained both radioactive and nonradioactive slag.
Grainal slag produced prior to 1987 is radioactive because the zircon sand used
to manufacture the Grainal contains naturally occurring uranium and thorium.
Grainal Slag produced after 1987 does not contain radioactive material. Starting
in 1987, Grainal was manufactured using a non-radioactive feed material
(zircalloy). This resulted in a slag which was non-radioactive. This
non-radioactive slag was placed on the Grainal Slag Pile from 1987 to 1989 when
the slag pile was consolidated with East Slag Pile.
In 1987, when Shieldalloy purchased the facility, the facility had waste stored
at various locations on the Site, including the East and West Slag Piles, the
Grainal(R) Slag Pile and the Baghouse Dust area (Figure 3). The Site also had
soils contaminated with radioactive wastes and nonradioactive hazardous wastes,
as a result of operations such as the handling of raw material and slags.
2.6 NRC Oversight
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NRC is overseeing certain decontamination/decommissioning work at the Site under
the Atomic Energy Act and the National Environmental Policy Act.
2.6.1 Partial Decommissioning Under the Atomic Energy Act
In 1988, Shieldalloy submitted a decommissioning plan to NRC to decommission
(remediate) ferrocolumbium slag at the Site. In 1989, Shieldalloy excavated
approximately 140,000 tons of soil and slag, contaminated with chemical and
radiological wastes, from sixteen operational areas around the Site (Figure 3),
and placed them on top of the West Slag Pile. The soil from the operational
areas was excavated on the basis of radiological characteristics only.
Shieldalloy then reshaped the West Slag Pile for erosion control, and protected
the exposed base from seasonal flooding.
After the placing the soil/slag material on the West Slag Pile, Shieldalloy also
placed treated and untreated baghouse dust on this pile. In particular,
Shieldalloy placed on the pile Ferovan baghouse dust (treated through the
Chemfix treatment process) and 1600 tons of untreated baghouse dust. The
baghouse dust had high concentrations of hexavalent chromium, total chromium,
and lead. The baghouse dust was treated with ferrous sulfate to reduce the
hexavalent chromium to trivalent chromium. This was followed by treatment in the
Chemfix solidification process. The resulting slurry was pumped to containment
cells constructed in a circular arrangement on the West Slag Pile.
Following the placement of the treated (Chemfix) and untreated baghouse dusts,
Shieldalloy covered this material with a geotextile and twelve inches of sand.
These decommissioning activities brought the volume of the West Slag Pile to
548,000 tons of material with a surface area of 8.2 acres.
In 1989, Shieldalloy moved the 14,000 ton Grainal(R) Slag Pile to the top of the
East Slag Pile. This consolidation increased the volume of the East Slag Pile to
approximately 58,000 tons. Following the placement of the treated (Chemfix) and
untreated baghouse dusts, Shieldalloy covered this material with a geotextile
and twelve inches of sand.
In 1990, while performing decommissioning activities, Shieldalloy learned from
NRC that the level of radioactivity in the waste slags, soils, and sediments at
the Site was higher than what NRC had expected, and that NRC would impose
additional requirements. Shieldalloy then stopped the decommissioning
activities, leaving the West Slag Pile partially capped and the East Slag Pile
uncapped.
In 1992, Shieldalloy installed a fence around the East Slag Pile consistent with
NRC requirements. A purpose of the fence is to secure licensed material from
unauthorized removal.
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2.6.2 Environmental Impact Statement under NEPA
In March 1990, NRC listed the Site in its Site Decommissioning Management Plan
(SDMP). On November 26, 1993, NRC published a Notice of Intent to prepare an
Environmental Impact Statement (EIS) for the Site in accordance with the
National Environmental Policy Act (NEPA) of 1969. In May 1994, NRC issued a
report summarizing NRC's EIS scoping process. On July 26, 1996, NRC announced
the availability of its Draft EIS for the Site for public review. 58 Federal
Register 62384. NRC's Draft EIS presents five options for addressing certain
radioactive contamination at the Site: onsite stabilization and containment;
offsite disposal; onsite separation processing with offsite disposal; onsite
dilution processing and disposal; and no action.
NRC prepared its Draft EIS based, in part, on information provided in drafts of
the Remedial Investigation/Feasibility Study report for the Site. Shieldalloy
and Cyprus Foote prepared the Remedial Investigation/ Feasibility Study report
in response to an agreed court order in a court case filed by the State of Ohio.
2.7 Ohio EPA Oversight
The Ohio EPA is overseeing remediation/cleanup of all contaminants at the Site
(including radioactive wastes, nonradioactive hazardous wastes and other wastes)
consistent with Federal and state law as discussed below.
2.7.1 Remediation/Cleanup Process under CERCLA
Federal law establishes a six step process for remediating/cleaning up
contaminated sites. The federal law that establishes these steps is known as the
Comprehensive Environmental Response, Compensation and Liabilities Act (CERCLA),
42 U.S.C. 9601, et seq. The six major steps are(1):
1) Remedial Investigation (RI);
2) Feasibility Study (FS);
3) Remedy Selection;
4) Remedial Design (RD);
5) Remedial Action (RA); and
6) Operation and Maintenance (O&M).
Ohio EPA typically carries out these six steps in the following manner. Persons
or companies that contributed to the contamination carry out the first two steps
under Ohio EPA oversight. The Remedial Investigation (RI) identifies the type of
contaminants present at or near the Site, assesses the degree of contamination,
and characterizes the actual and potential risks to the community and
environment. The Feasibility Study (FS) then evaluates several alternative
remedies to address contaminants at the Site.
- ----------
(1) For more information, see United States Environmental Protection Agency's
National Contingency Plan, 40 CFR 300.
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Upon completion of the Remedial Investigation/Feasibility Study (RI/FS) report,
Ohio EPA prepares a Preferred Plan that summarizes the Remedial
Investigation/Feasibility report and describes Ohio EPA's proposed remedy for
the Site. Ohio EPA then holds a public comment period of at least 30 days. This
period allows the public an opportunity to learn about the remedy proposed for
the Site and offer input.
After considering public comments, Ohio EPA prepares a Decision Document that
selects a long-term remediation/cleanup action ("remedy") to protect human
health and the environment. Ohio EPA also prepares a Responsiveness Summary that
addresses pertinent questions and concerns submitted by the public.
Then, the persons or companies that contributed to the contamination develop
detailed plans to carry out the selected remedy. This is called the Remedial
Design (RD) stage. When the design is complete and approved, the responsible
persons or companies carry out the selected remedy. This step is called the
remedial action (RA) stage. The RA stage implements of the Remedial Design. The
RA stage may involve construction activity.
When the Remedial Action (RA) is complete, Operation and Maintenance (O&M) may
be required if waste materials are left at the Site. O&M may include ongoing
monitoring and maintenance of permanent structures.
2.7.2 Remedial Investigation / Feasibility Study
On July 11, 1995, the State of Ohio filed a Complaint concerning the Site in the
Guernsey County Court of Common Pleas. The Complaint asks the Court to order
Shieldalloy and Cyprus Foote to remediate all contamination at the Site
(including radioactive wastes, nonradioactive hazardous wastes and other
wastes), to reimburse the State of Ohio for its costs in overseeing the
remediation, and to take other actions. The case is docketed as State of Ohio,
ex rel Montgomery v. Shieldalloy Metallurgical Company and Cyprus Foote Mineral
Company, Case No. 95CV242.
On July 11, 1995, the Guernsey County Court of Common Pleas issued in the case a
Consent Order for Preliminary Injunction (COPI). The COPI is an agreed order
that requires Shieldalloy and Cyprus Foote to conduct a remedial
investigation/feasibility study for the Site under Ohio EPA oversight.
The companies performed an Remedial Investigation/Feasibility (RI/FS) for the
Site under Ohio EPA oversight. On January 17, 1997, Ohio EPA conditionally
approved the RI/FS report.
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2.7.3 Preferred Plan
On December 13, 1996, Ohio EPA issued for public comment its Preferred Plan for
the Site. The Preferred Plan set forth Ohio EPA's proposed plan for remediation
of the site. Ohio EPA's proposed plan included excavating and removing
contaminated sediments and soils and capping the West Slag Pile. The proposed
plan also included selling and legally removing the East Slag Pile, if feasible.
If this is not feasible, the proposed plan was to cap the East Slag Pile.
2.7.4 Public Participation
Ohio EPA afforded interested members of the public the following opportunities
to learn more about or comment on Ohio EPA's Preferred Plan for the Site:
1. Document Review - The Byesville Public Library held for public review
copies of the Preferred Plan and other documents relevant to the Site.
Ohio EPA files were open for public review at the agency's Southeast
District Office in Logan, Ohio.
2. Discussion with Ohio EPA officials - On January 6, 1997, Ohio EPA
officials held a public information session at the Guernsey County Public
Library. On January 22, 1997, Ohio EPA officials held a second information
session. Also, Ohio EPA officials were available at their offices to
discuss the Site with interested members of the public.
3. Opportunities to Comment - On January 22, 1997, Ohio EPA officials held a
public hearing to receive comments. Ohio EPA also received written
comments. Ohio EPA extended the period for submitting written comments to
February 28, 1997, as a result of a request from an interested member of
the public.
4. Public Notice - Ohio EPA provided public notice of these events and
opportunities through press releases and newspaper announcements.
2.7.5 Decision Document
This Decision Document is the document in which Ohio EPA selects a remedy for
the Shieldalloy Site. This Decision Document describes the history of the site,
summarizes the RI/FS report, and selects a remedy. The remedy that Ohio EPA
selects for the Site includes:
1. Excavate and remove contaminated sediments and soils from the Site;
2. Place excavated sediments and soils on top of the West Slag Pile;
3. Cap the West Slag Pile in accordance with state solid waste rules
under Ohio Administrative Code Chapter 3745-27;
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4. Ensure long term care of the West Slag Pile and;
5. For the East Slag Pile:
a. if feasible, sell and legally remove East Slag Pile materials,
expeditiously; and/or
b. if the foregoing is not feasible, then cap the East Slag Pile in
accordance with state solid waste rules under Ohio Administrative
Code Chapter 3745-27 and ensure long term care.
The remedy selected by Ohio EPA is substantially the same as the remedy proposed
by Ohio EPA in the Preferred Plan. The remedy meets applicable, relevant and
appropriate requirements. Treatment of the radioactivity in the slag is not
practicable. According to the RI/FS report, the projected cost of this remedy is
$10.3 million. For a more complete description of Ohio EPA's selected remedy,
see section 5.0 of the Decision Document. Actual or threatened releases of
hazardous substances from the Site, if not addressed by implementing the remedy
selected in this Decision Document, may endanger public health, welfare or the
environment. This Decision Document does not preclude Ohio EPA from seeking
other remediation at the Site in the future in a manner not inconsistent with
the U.S. Environmental Protection Agency's National Contingency Plan (NCP) at
Title 40 of the Code of Federal Regulations, Part 300. Procedures under the NCP
call for periodic review to ensure that the remedy will protect human health and
the environment. This Decision Document does not address remediation of
Cambridge area locations away from the Site where radioactive slag from the
facility was used as fill material.
Attached to this Decision Document is Ohio EPA's Responsiveness Summary. The
Responsiveness Summary summarizes the public comments Ohio EPA received on the
Preferred Plan and Ohio EPA's responses to them.
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3.0 NATURE AND EXTENT OF CONTAMINATION
In 1995 and 1996, Shieldalloy and Cyprus Foote conducted a remedial
investigation under an agreed court order in a case brought by the State of Ohio
in the Guernsey County Court of Common Pleas. Ohio EPA reviewed and commented on
drafts of the remedial investigation report. The remedial investigation has the
following objectives:
o Identify any chemicals (contaminants) that have been released to the
environment
o Determine the extent of contaminants that have been released to the
environment
o Determine the location of contaminants
o Determine potential migration pathways of contaminants
o Identify the environmental impacts, risks to human health and risks to
ecological receptors potentially associated with any exposure to
contaminants
o Develop the information necessary to support the feasibility study and
subsequent remedial design.
3.1 Hydrogeology and Groundwater
Several phases of environmental investigation have been conducted at the
Shieldalloy facility since the early 1980's. These investigations typically
entailed the installation and sampling of monitoring wells to monitor the
groundwater at the Site. During the remedial investigation eleven monitoring
wells and four piezometers were installed at the Site. Piezometers are
groundwater wells used to provide groundwater elevation data but not water
quality data. Four additional monitoring wells were installed on the
southeastern portion of the Site for purposes of monitoring the recent baghouse
dust storage area. Currently, thirty-four wells are present at the Site for
groundwater monitoring purposes (Figure 4). Information from these monitoring
wells were used to characterize the geology, groundwater and the extent of
contamination.
The geology below the Site consists of two distinct geological formations. The
first geological formation is a bedrock formation, consisting of alternating
sandstones, shales, coal and limestone, and is present at depths ranging between
25 and 60 feet beneath the Site. The private well survey conducted during this
investigation found that practically all private wells in the area surrounding
the Site were installed into the bedrock.
The second geological formation at the Site is a formation of unconsolidated
deposits consisting of sand, silts and clays. The unconsolidated deposits lie
above, or on top of, the bedrock geology and range in thickness of 25 to 60
feet. The unconsolidated deposits can be classified into three general groups:
the lower unit consisting of 15 to 20 feet of silty clay; an intermediate zone
of 15 to 20 feet of silty sand; and, an upper zone consisting of brown, silty
clay with a thickness
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of 15 feet. The intermediate silty sand was the primary geological unit that was
investigated and monitored during the remedial investigation.
The direction of groundwater flow is generally from east to west, toward Chapman
Run. The rate of groundwater flow was estimated to be 0.0968 feet per day or 35
feet per year. The time of travel from the West Slag Pile to Chapman Run is
estimated as ten years.
The water level data was also used to evaluate vertical flow directions of
groundwater. The water level data indicated that there was a small upward flow
of groundwater in the silty sand unit. This is important in determining that the
groundwater system is connected to Chapman Run, the wetlands, and other surface
water bodies. An upward groundwater flow inhibits the downward migration of
contaminants. This upward flow of groundwater reduces the likelihood of
groundwater contamination at the Site.
Groundwater Quality
Groundwater sampling conducted during the remedial investigation indicated that
groundwater is not currently contaminated at the Site (other than the
maintenance shop area). In April and May of 1995, two rounds of groundwater
sampling were conducted. In the first round, twenty-four wells were sampled for
metals, while selected wells were sampled for radionuclides and organic
compounds. In the second round, seven wells were sampled for metals and
radionuclides.
Of the contaminants analyzed, none exceeded background concentrations except
zinc (in the bedrock monitoring well). Manganese and iron were detected at
elevated levels in several wells. The distribution of manganese and iron in
groundwater at the Site indicates that the elevated concentrations of these
metals are due to regional influences, such as acid mine drainage, and not
attributable to the Site. In addition, magnesium and sodium were detected at
elevated concentrations in one well downgradient of the East Slag Pile; however,
groundwater from other wells downgradient of both the East and West Slag piles
did not contain elevated levels of magnesium or sodium.
Radionuclide analyses of groundwater confirmed the findings of previous
investigations that radionuclides are not found in groundwater above background
levels.
No volatile organic compounds were detected in groundwater with the exception of
organics found in the vicinity of the maintenance shop area. Samples from this
process area show that trace amounts of the solvents tetrachloroethylene (PCE)
and trichloroethylene (TCE) exist in groundwater. It is believed that the source
of the solvent was removed from the area during the decommissioning of
1988/1989. The remaining solvents detected are believed to be residual amounts
from the source.
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From the results of groundwater sampling conducted during the remedial
investigation, groundwater is not currently contaminated at the Site (excluding
the maintenance shop area).
3.2 Onsite Soils
Soil samples were collected and analyzed to determine migration of the
contaminants. Vanadium and chromium were the metal contaminants most often
detected in onsite soils at concentrations exceeding background levels.
The former Grainal(R) Slag Pile and baghouse dust areas had metal contaminants
at or above background levels. Elevated metal concentrations were also observed
in the empty drum accumulation area and the field southeast of the Roaster
Building. Vanadium and chromium were detected in soil from these areas at
concentrations of up to 2,050 and 521 mg/kg, respectively.
Fill from the empty drum accumulation area was identified as a mixture of
ferrovanadium and Grainal(R) slags. Fill from the field southeast of the Roaster
Building is elevated in metal contaminants, the origin of this fill was not
determined. Soil samples collected near the Pilot Plant had elevated
concentrations of copper, lead, zinc, and vanadium.
Soil samples from the perimeter of the slag piles did not have elevated
concentrations of metal contaminants, with the exception of soil from the 0 to 5
foot depth collected next to the Slag Piles. Samples collected during the
installation of MW-20 had elevated concentrations of metals possibly due to slag
or coal fragments observed in the upper 18 inches of soil .
Samples collected from beneath the West Slag Pile contained calcium and
magnesium at elevated levels. The high levels of calcium and magnesium are
probably the result of historical runoff from fresh slag when the piles were
originally being amassed.
Soils from the perimeter of the West Slag Pile were analyzed for PCBs to help
determine if these compounds were present in the soil layer of the pile. PCBs
were not detected in the perimeter soil samples.
The remedial investigation detected above background levels of the radionuclides
thorium-230, actinium-227, and radium-228 in samples from the sedimentation
delta of the south side of the West Slag Pile and in the area southeast of the
Roaster Building where fill had been found.
3.3 Surface Water
Sampling of surface waters in onsite wetlands and ditches and Chapman Run showed
elevated levels of contaminants at various locations. Existing surface water
data was supplemented by the collection of additional samples. Eighteen
additional areas were sampled during the remedial investigation. Eight areas
were located in onsite ditches and tributaries. Metal contaminants detected
above background concentrations included arsenic, chromium, copper, lead,
selenium, vanadium, and zinc. Vanadium was the only contaminant to consistently
exceed background levels. Samples from the west Mill Building ditch, which lies
downstream of the active slag pile, yielded the highest concentrations of
arsenic, copper, selenium, and vanadium.
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Surface water samples were also collected from the wetland areas north of the
East Slag Pile. Vanadium was detected at concentrations exceeding three times
background in the wetland water samples. One sample collected from Chapman Run
exceeded background levels for most contaminants. Vanadium concentrations in
offsite surface water (Chapman Run) were highest in the samples collected from
the northern property boundary.
Radionuclides were not elevated in either onsite or offsite surface water with
the exception of thorium-230. Thorium-230 was slightly elevated downstream of
the West Slag Pile when compared to concentrations at areas upstream of the
pile, but not when compared to background concentrations in Wills Creek.
3.4 Sediments and Wetland Soil
Sampling of sediments in drainage ditches and wetlands showed elevated levels of
metals and other contaminants at various locations. Sediment sampling was
conducted during the remedial investigation to supplement data from previous
investigations. Six onsite and three downstream offsite sediment samples
collected during the remedial investigation were analyzed for metal
contaminants. Selected samples were analyzed for radionuclides. In addition,
soil samples were collected from wetland areas located north and west of the
East Slag Pile to supplement wetland soil data collected by Ohio EPA.
The elements most frequently observed exceeding background levels in onsite
sediments were arsenic, beryllium, cobalt, manganese, nickel, vanadium, and
zinc. The highest metals concentrations in sediment were in drainage downstream
of the active slag pile and the East and West Slag Piles. Elevated
concentrations of metals downgradient of the active slag pile suggests the
contamination is the result of both current runoff from the active pile and
historical runoff from the East and West Slag piles. Concentrations of
contaminants, in particular vanadium, exceeded background levels in sediment
samples from Chapman Run that were collected immediately downstream of outlets
of drainage from the Site. However, concentrations of contaminants were lower in
samples collected a short distance downstream of these outlets. Concentrations
of arsenic, beryllium, chromium, manganese, nickel, thallium, vanadium, and zinc
consistently exceeded background levels in wetland soils.
3.5 Transport and Fate of Contaminants
Past and present contaminant sources were evaluated to determine potential
present and future contamination of soils, surface water, sediments, and
groundwater. This evaluation included soil erosion, sediment resuspension and
sedimentation, weathering, dissolved phase transport, and infiltration to
groundwater.
3.5.1 Surface Water Transport
Redistribution of particles by over-bank, high-water events is probably the most
significant process in contaminant transport at the Site. Elevated
concentrations of contaminants in soils and sediments at the Site indicate
redistribution from source areas by soil erosion and sediment transport.
Migration of contamination is influenced by surface water pH. Surface water pH
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ranges from approximately three, where acid mine drainage enters the Site, to
approximately twelve in a ditch that drains the Active Slag Pile. Concentrations
and loading rates of contaminants in water from onsite indicate that the Site is
a source of vanadium to Chapman Run, but is a negligible source of arsenic,
barium, beryllium, copper, lead, selenium, and zinc to Chapman Run. Vanadium is
relatively mobile and is transported in surface water primarily in the dissolved
phase, even at neutral pH and high suspended solids concentrations.
3.5.2 Vadose Zone and Groundwater Transport
The remedial investigation concludes that, based on the groundwater model, the
contaminants are not expected to contribute to groundwater contamination.
Groundwater sampling and analysis conducted during the remedial investigation
found that groundwater had not been significantly impacted by the source areas,
other than the maintenance shop area. Given the results of the remedial
investigation and some of the limitations of the groundwater model, future
groundwater monitoring will be necessary to ensure no future impact to
groundwater.
3.5.3 Atmospheric Transport
Ambient concentrations were determined for fugitive emissions by modeling onsite
areas. Onsite areas that contributed to fugitive emissions were limited to areas
with vehicular traffic. The conservative modeling, which included emissions and
dispersion calculations, demonstrates that air quality at the Site does not pose
unacceptable risk.
3.6 Risk Assessments
3.6.1 Human Health Risk Assessment
The Remedial Investigation contains a human health risk assessment that
evaluates the potential for adverse human health effects from exposures to
Site-related radiological and chemical contaminants under current and potential
future Site conditions, if no remedial action is taken. Several potential
scenarios of human exposure were evaluated, including an onsite occupational
(industrial) scenario, an offsite recreational scenario, and a hypothetical
future onsite residential scenario. Environmental media that were examined
include soil, sediments, groundwater, and surface water. Exposures to direct
radiation from slag are also considered.
The incremental (above background) lifetime cancer risk as calculated by
Shieldalloy and Cyprus Foote for the Site is 2 x 10-5 for the current onsite
occupational scenario, including workers who hunt and trap at the Site. The
primary contributor to potential exposures is external radiation emanating from
the East Slag Pile. The primary contributor to cancer risks estimated by
Shieldalloy and Cyprus Foote for the hypothetical future onsite residential
scenario (i.e., 3x10-5 (if bioavailability adjustment factors are included in
the calculations, or 7x10-5 if they are omitted)) is exposure to contaminants
(i.e., arsenic, beryllium, and thorium-230) in soil. Risk estimated for the
offsite recreational scenario is approximately one order of magnitude less
(i.e., 3x10-6).
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Site wide risk from radionuclides were also evaluated by Ohio EPA using standard
USEPA Superfund methods based on concentrations reported by Shieldalloy and
Cyprus Foote on October 16, 1996 and using assumptions about the presence of
actinium-227 and its daughter products. Incremental carcinogenic risk was
1.7x10-4 for a hypothetical residential scenario, and 3.84x10-5 for an
industrial scenario. See Appendix R of the remedial investigation for discussion
on these calculations. USEPA's accumulative risk range (from all contaminants
and all media) is 10-4 to 10-6, with a goal of 1x10-6.
The primary contributor to hazards other than cancer is vanadium in the soil. In
assessing the potential non-cancer health effects at the Site, the hazard index
calculated for the offsite recreational exposure scenario (0.5) is less than
USEPA's safe target level of 1. For the occupational scenario, a hazard index of
2 is estimated regardless of whether bioavailability adjustment factors are
included in the calculations and whether additional exposures associated with
hunting and trapping activities at the Site are included in the analyses. Thus,
the hazard index for the onsite occupational scenario exceeds USEPA's target
level. The hazard index calculated for the hypothetical onsite residential
scenario is 9 (or 20, if the bioavailability adjustment factors are omitted from
the calculations). A hazard index of 20 is also associated with dermal contact
with certain vanadium concentrations found in onsite surface water in several
localized areas. For an overview of the human health risk assessment, please
refer to Remedial Investigation/ Feasibility Study at the Shieldalloy
Metallurgical Corporation Site in Cambridge, Volume I, Section 6 and appendix R
(September 1996).
3.6.2 Phase I Ecological Assessment
Data from several sampling events was used in the Phase I Ecological Risk
Assessment. Fish tissue, fish community, and benthic macroinvertebrate community
data from existing documents as well as more recent sampling data was used in
the Phase I Ecological Risk Assessment. Onsite surface soil, wetland soil,
sediment, and surface water and offsite sediment and surface water were analyzed
for selected metals and radionuclides.
Several ecological receptor species and aquatic and terrestrial exposure
pathways were evaluated in this assessment. In accordance with Ohio EPA's
generic statement of work for a remedial investigation / feasibility study, the
Phase I ecological assessment included the four components outlined below:
o Site Characterization: Physical characteristics of the Site and
associated ecological habitats and vegetation community types were
described, Contaminants were selected, and ecological receptors
likely to come into contact with contaminants were identified.
o Initial Toxicity Assessment: A literature-based toxicity assessment
and benchmark screening analysis were used to evaluate the effects
of contaminants on wildlife and terrestrial plants; Site-specific
toxicity tests using Chironomus tentans and Hyalella azteca were
used to evaluate the
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toxicity of Site sediments to aquatic invertebrates; and surveys of
the fish community and comparison of measured concentrations of
contaminants in water to water quality criteria were used to assess
the toxicity of surface waters.
o Preliminary Ecological Assessment: Results of the initial toxicity
assessment were used to evaluate the probability of adverse effects
on ecological receptors.
o Evaluation of Uncertainties and Limitations: The degree of
confidence in the risk estimates was determined; the most important
limitations and sources of uncertainty were described.
Using conservative assumptions, the results of the wildlife toxicological
benchmark screening analysis show that arsenic, barium, chromium, copper,
selenium, vanadium, and zinc could potentially cause environmental impacts to
several receptors and should be further evaluated. A bioconcentration factor for
estimating the concentration of lead in invertebrates is not available.
Exposures of belted kingfishers and red-winged blackbirds were estimated in the
Phase II Ecological Risk Assessment using measured concentrations of lead in
invertebrates.
Concentrations of contaminants in soils from the former Grainal(R) Slag Pile
area, the former baghouse dust area, the empty drum accumulation area, and the
field southeast of the Roaster Building were compared to concentrations in soils
that caused reduced growth expressed as relatively low root, shoot, or leaf
weight in agricultural plants. These areas were found to contain metal
concentrations in soils which exceed USEPA benchmark values for plant toxicity.
The lack of vegetation on the sedimentation delta located on the north side of
the West Slag Pile is due to the chemical and physical characteristics of the
deposited sediment.
Survival and growth of Chironomus tentans exposed in the laboratory to sediments
from the Site were not reduced relative to survival and growth of this species
exposed to sediments from reference areas. Results of the amphipod survival
bioassay showed significant sediment toxicity at station SB-04, which was also
impacted by untreated industrial sewage overflow from the Cambridge sewer lift
station. Survival of amphipods exposed to the onsite beaver pond sediments
(station SB-03) was 66 percent.
The macroinvertebrate communities in Chapman Run were in the fair to poor range.
All Sites sampled were in the fair range except at river mile 0.9, downstream
from the Shieldalloy Site, which fell in the poor range. Marginal habitat
conditions existed at all locations with worst conditions being downstream from
the Shieldalloy Site, due largely to the pervasive silt load originating from
Shieldalloy property. The poor macroinvertebrate community performance at river
mile 0.9 is below what would be expected given the habitat conditions, based on
a comparison of the data results with other data with similar habitat
conditions.
The results of the wildlife toxicological benchmark screening analysis and the
sediment toxicity tests indicated that a focused Phase II Ecological Risk
Assessment was needed. During the Phase
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II Ecological Risk Assessment, Site-specific data were collected to address data
gaps and uncertainties identified in the Phase I Ecological Risk Assessment.
3.6.3 Phase II Ecological Risk Assessment
The Phase II Ecological Risk Assessment assesses the impact of specific
contaminants associated with activities at the Site on selected ecological
receptor species. The Phase II Ecological Risk Assessment was designed to meet
three specific objectives:
o Identify contaminants from the initial analyte list
o Characterize risk to selected ecological receptors
o Identify areas of concern to be addressed in the feasibility study.
The analyses conducted to achieve these objectives included additional sediment
toxicity bioassays, an assessment of surface water quality relative to water
quality criteria for the protection of aquatic life, a survey of amphibian
communities onsite, and an assessment of contaminants risk to birds and mammals
based on food web exposure modeling. The following contaminants from Phase I
Ecological Risk Assessment were considered in the Phase II Ecological Risk
Assessment: arsenic, barium, chromium, copper, lead, selenium, silver, vanadium,
and zinc.
The Phase I Ecological Risk Assessment shows that terrestrial receptors are at
risk due to exposure to arsenic and vanadium. The remaining contaminants do not
demonstrate risk to terrestrial receptors and therefore, these contaminants were
evaluated for aquatic pathways only. Exposure of receptors to arsenic and
vanadium was evaluated for both aquatic and terrestrial pathways. In addition,
nine metals detected during surface water sampling were sampled in the Phase II
Ecological Risk Assessment. These metals were aluminum, antimony, cadmium,
cobalt, magnesium, manganese, mercury, nickel, and thallium. Exposure of
receptors to these nine additional contaminants through both aquatic and
terrestrial pathways was evaluated in the Phase II Ecological Risk Assessment.
The same ecological receptors considered in the Phase I Ecological Risk
Assessment were considered in the Phase II Ecological Risk Assessment. Exposure
of receptors to contamination onsite was estimated from contaminant
concentrations in surface water, sediment, and soils reported in the Phase I
Ecological Risk Assessment. In addition, as part of the Phase II Ecological Risk
Assessment, sediment samples were collected and tested for toxicity to
amphipods, and sediment and biological tissue samples were collected and
analyzed for contaminants. Concentrations of chemicals in fish from Chapman Run
as reported by Ohio EPA were also used in the exposure assessment.
In Site-specific tests, sediment toxicity to amphipods correlated with vanadium
concentrations in sediment. The survival of amphipods did not significantly
decrease relative to survival of amphipods exposed to sediments from reference
areas until vanadium concentrations in sediment
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reached 1,280 mg/kg (dry weight). This concentration of vanadium in sediments is
considered the apparent effects threshold for aquatic macroinvertebrates.
In the surface water assessment, vanadium was the only contaminant with
concentrations in Chapman Run that exceeded Ohio chemical water quality
criteria. Exceedances of the vanadium criterion occurred at all stations, except
for Chapman Run stations CHRN-02 and CHRN-03 and station UTEF-01 in the south
ditch. One water sample collected in the north ditch exceeded the chemical water
quality criterion for mercury.
Vanadium concentrations in Chapman Run exceed Ohio's Water Quality Criteria. The
analysis of fish tissue conducted by Ohio EPA provides additional evidence that
Chapman Run fish are exposed to vanadium as well as other chemicals from
upstream sources. Lead and mercury were detected in fish tissue sampled in
Chapman Run upstream of the Site and in Wills Creek. Other factors potentially
influencing Chapman Run fish communities include non-point source pollution
upstream of the Site, degradation of habitat quality resulting from development
of the watershed, and influences of a malfunctioning sewer lift station. Impacts
on the fish community per the fish community studies of Ohio EPA reflect the
cumulative effects of multiple stressors throughout Chapman Run.
Results of the exposure modeling indicate that the exposure of mink and muskrat
to vanadium accounts for potentially significant risk related to Site
contaminants identified in the Phase II Ecological Risk Assessment. Qualitative
evaluation of cumulative impacts from exposures to aluminum and vanadium in the
context of trapping, habitat loss, and chemicals offsite suggest that the rate
of population increase of mink and muskrats that use the Site could decline.
Results of the food web model indicate that there is a low risk to terrestrial
mammals (as represented by white- tailed deer) from exposure to vanadium.
Uncertainties affecting the interpretation of the risk characterization include
the extent to which wildlife use the Site, the quality of habitat throughout the
year, the specific toxicity of each chemical to each receptor, and the precise
distribution of chemicals in relation to the foraging and breeding habitats of
receptors.
Under the no-action alternative, the use of onsite aquatic habitats by fish and
wildlife is likely to vary as a result of physical modifications of habitat
unrelated to contamination. Wetlands onsite are maintained by beaver; if beaver
remain absent or are removed through trapping, there will be a reduction in
available aquatic habitat and a loss of wildlife associated with beaver ponds.
Return of beaver from offsite areas will result in reestablishment of beaver
dams and open water. Loading of vanadium to Chapman Run via sediment transport
would be expected to continue. Under the no- action alternative, the wetland
soils and the area in Chapman Run at the confluence with the north ditch will
continue to contain sediments that are toxic to amphipods.
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4.0 DESCRIPTION OF REMEDIATION ALTERNATIVES
Shieldalloy and Cyprus Foote developed a feasibility study under an agreed court
order. Ohio EPA reviewed and commented on drafts of the feasibility study
report. The feasibility study identifies and screens technologies and
alternatives for all areas requiring remedial action. The feasibility study
evaluates methods to meet the remedial action objectives, which are to:
o Develop remedial action objectives and preliminary remediation goals for
media of concern developed in the investigation
o Identify and screen remedial technologies applicable to the Site based on
the remedial action objectives and preliminary remediation goals
o Develop remedial action alternatives from the remedial technologies
retained after screening
o Conduct a detailed analysis of the alternatives, including cost estimates
for implementation of the alternatives and relative rankings of the
alternatives.
The remedial investigation for the Site identified the following chemicals
(including radiological isotopes) of potential concern:
arsenic, barium, beryllium, chromium, copper, lead, selenium, silver,
thorium-232 and progeny, uranium-235 and progeny, uranium-238 and progeny,
vanadium, and zinc.
The remedial investigation for this Site identified the following areas of
potential concern:
o East and West Slag Piles
o Offsite slag (included for the purpose of evaluating onsite remedial
alternatives; offsite slag is not otherwise evaluated in the feasibility
study)
o Wetland soil
o Onsite sediment (drainage ditches)
o Offsite sediment (Chapman Run)
o Surface water
The feasibility study for this Site evaluated the following alternatives for
remediating the areas of potential concern:
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o West Slag Pile
--------------
no action
capping in place (without offsite
slag)
capping in place (with offsite slag)
removal and offsite disposal
o Onsite Sediment
---------------
no action
capping
removal and onsite containment
removal and offsite disposal
o Wetland Soil
------------
no action
wetlands mitigation
capping
removal and onsite containment
removal and offsite disposal
o East Slag Pile
--------------
no action
capping in place
removal and offsite disposal
removal and sale of the slag
o Offsite Sediment
----------------
no action
natural recovery
rechannelization
removal and onsite containment
removal and offsite disposal
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This section describes the remedial alternatives for the West and East Slag
Piles, onsite/offsite sediment and wetland soil that were selected for detailed
analysis. This section also includes cost estimates for the remediation
alternatives provided. Cost estimates for this section are taken from Appendix C
and E of the Feasibility Study and are used for comparison purposed only. This
section proceeds in the following order: West Slag Pile, East Slag Pile, onsite
sediment, offsite sediment, and wetland soil. For a more detailed analysis of
all the alternatives, please refer to the Feasibility Study.
4.1 West Slag Pile
The West Slag Pile covers approximately 8.2 acres as shown in Figure 1. It
includes most types of radioactive and nonradioactive slag that have been
generated at the SMC Cambridge facility. The West Slag Pile has an estimated
weight of 532,150 tons, and an estimated volume of 220, 663 yd3.
4.1.1 No Action
The no-action alternative is the baseline to which all other alternatives must
be compared. No- action consists of the current conditions at the Site. It
assumes that no future remedial actions will be conducted at the Site.
Some decontamination/decommissioning activities that have already occurred on
the West Slag Pile include placing stabilized baghouse dust on the pile,
resloping the edges of the piles, installing silt fencing around the pile, and
restricting access. The 1989 partial "decommissioning cap" was constructed using
the stabilized baghouse dust (Chemfix material). The Chemfix material was pumped
into cells constructed of clay and allowed to harden. Then, the pile was covered
with a geotextile cloth and twelve inches of sand. The geotextile cloth was
intended to function as a barrier layer for plants. The growth of plants into
the Chemfix would break the material apart, creating fractures that would allow
migration of water through this unit. Migration of water through this unit would
increase the leachate generated and the potential for surface water
contamination or groundwater contamination.
The only active component of this alternative is the incomplete "decommissioning
cap" that provides a partial barrier for the decommissioning soils that were
disposed of in the pile during the decontamination/decommissioning activities of
1989/1990. However, the incomplete decommissioning cap does not adequately
protect human health and the environment.
Cost Estimates
The cost of work needed to implement this alternative would be zero dollars.
This alternative assumes that no additional work will be conducted and no monies
spent.
4.1.2 Capping in Place
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This alternative would contain the slag in the existing West Slag Pile by
constructing one of the following caps:
o Completing the cap that Shieldalloy began to construct in 1989 and 1990
(Decommissioning Cap)
o Constructing a solid waste cap over the entire slag pile in accordance
with solid waste rules under Ohio Administrative Code Chapter 3745-27
(solid waste cap)
o Constructing a cap over the entire slag pile in accordance with hazardous
waste rules under Ohio Administrative Code Rule 3745-57-10 and the
guidelines presented in U.S. EPA's Technical Guidance Document: Final
Covers on Hazardous Waste Landfills and Surface Impoundments (U.S. EPA
1989).
Measures to protect wetlands during remediation and restoration efforts would be
implemented. Institutional controls, including deed restrictions, survey
markers, monitoring, and financial assurance, would also be implemented.
Decommissioning Cap
Completing the decommissioning cap would first require placing clay around the
perimeter of the West Slag Pile. The new clay layer would have a thickness of 3
feet with a permeability 10-6 to 10-8 cm/sec and would extend from the edge of
the Chemfix/baghouse dust layer down to ground surface, followed with 12 inches
of silty sand and geotextile fabric. Upon the completion of the capping of the
perimeter, 9 inches of top soil would be placed over the entire West Slag Pile.
(See Figure 8)Erosion control measures would be included in completing
construction of this cap. A portion of the West Slag Pile is in the 100 year
floodplain. Therefore, in addition to the vegetative growth, these measures
would include approximately seven rip rap drainage channels placed along the
side slopes of the pile and rip rap placed at the base of the pile.
Solid Waste Cap
The development of the solid waste cap is based on the Ohio Administrative Code,
Rule 3745- 27- 11. This alternative would contain the slag in the West Slag Pile
by constructing a new cap over the entire pile. The cap would consist of a 2
foot thick recompacted soil barrier (e.g. clay with a permeability of 1x10-7
cm/s) placed on top of the entire slag pile, followed by a 1 foot thick granular
drainage layer, a geotextile fabric, and a 9 inch topsoil layer that is seeded
to provide vegetation. The topsoil would be seeded with a grass compatible with
the local climate and conducive to long-term growth and minimum maintenance.
Erosion control measures and institutional controls, including monitoring, would
be similar to the preceding alternative. All materials for the cap would be
imported from offsite sources. The conceptual design of this cap is shown in
Figure 8. The solid waste cap would further reduce the leaching of contaminants.
Hazardous Waste Cap
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The development of the hazardous waste cap is based on the requirements
presented in state hazardous waste rules, including Ohio Administrative Code
Rule 3745-57-10 and the guidelines presented in U.S. EPA's Technical Guidance
Document: Final Covers on Hazardous Waste Landfills and Surface Impoundments
(U.S. EPA 1989). This alternative includes many of the elements that are part of
the decommissioning cap.
This alternative would contain the slag in the West Slag Pile by constructing a
new cap over the entire pile. The cap would consist of 2 foot thick layer of
clay ( compacted to a permeability equal to 1x10-7 cm/s), a flexible membrane
liner (with a thickness of 40 mil), a 1 foot thick drainage layer (permeability
equal to 1 x 10-2 cm/s or greater) placed on top of the entire Slag Pile,
followed by geotextile fabric, and a 2 foot thick topsoil layer that is seeded
to provide vegetation. All materials for the cap would be imported from offsite
sources. The conceptual design of this cap is shown in Figure 8. The topsoil
would be seeded with a grass compatible with the local climate and conducive to
long-term growth and minimum maintenance. Erosion control measures and
institutional controls, including monitoring, would be the same as the
decommissioning cap alternative. The Hazardous Waste Cap would further reduce
any leaching of contaminants.
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Cost Estimates for Capping
Decommissioning Cap:
Capital Costs $1,636,300
Operation and Maintenance (O&M) $ 629,138
----------
Total Present Worth $2,265,000
Solid Waste Cap:
Capital Costs $3,216,600
Operation and Maintenance (O&M) $ 629,138
----------
Total Present Worth $3,846,000
Hazardous Waste Cap
Capital Costs $4,020,800
Operation and Maintenance (O&M) $ 629,138
----------
Total Present Worth $4,650,000
4.1.3 Capping in Place (with soils, sediments and offsite slag)
The Site has contaminated soils and sediments at various locations. The RI/FS
report evaluated the possibility of excavating these soils and sediments and
containing them under a cap for the West Slag Pile. For more information on this
alternative, see discussions under this section 4.0 for onsite sediments,
offsite sediments and soils.
Offsite Slag
For this alternative, slag located offsite displaying radiological and
metallurgical characteristics similar to slag produced by the Cambridge facility
would be excavated and returned to the Site. An estimated 10,000 yd3 of slag
and soil has been used to analyze this alternative. This alternative is similar
to the capping alternative discussed above, but also includes hauling the
offsite slag back onsite, placing it directly on top of the West Slag Pile to
the extent feasible (or to the extent this is not feasible, then placing it
adjacent to the pile), and capping it. Only slag that is substantially similar
to the slag in the West Slag Pile, and that originated on the Site, would be
brought back onsite. The offsite slag would be placed on the West Slag Pile
instead of the East Slag Pile for the following reasons:
o The West Slag Pile already contains slag and a soil/slag mixture that is
more likely to be representative of the offsite slag,
o The West Slag Pile offers better access,
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o The slag in the East Slag Pile is more likely to be used in the future,
therefore, adding offsite slag and excavated soils would only make future
excavation and use of the slag more difficult.
As with the previous alternative, this alternative would contain the slag by
constructing one of the following caps:
o Completing the existing decommissioning cap, including capping the offsite
slag consolidated with the Pile,
o Constructing a solid waste cap over the entire Slag Pile, including the
offsite slag consolidated with the Pile,
o Constructing a hazardous waste cap over the entire Slag Pile, including
the offsite slag consolidated the Pile.
Cost Estimates for Capping with Offsite Slag
Decommissioning Cap:
Capital Costs $2,318,400
Operation and Maintenance (O&M) $ 657,650
----------
Total Present Worth $2,976,000
Solid Waste Cap:
Capital Costs $3,319,700
Operation and Maintenance (O&M) $ 657,650
----------
Total Present Worth $3,977,000
Hazardous Waste Cap
Capital Costs $5,717,600
Operation and Maintenance (O&M) $ 657,650
----------
Total Present Worth $6,375,000
4.1.4 Removal and Offsite Disposal
This alternative involves removing all of the material in the West Slag Pile and
disposing of it in an offsite licensed disposal facility. For the purpose of
this report, it is assumed that the slag would be loaded into rail cars and
transported to the Envirocare facility in Clive, Utah for disposal. The
estimated volume of material (including slag, soil, and Chemfix(R) ) in the West
Slag Pile (including
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<PAGE> 113
the Chemfix(R)) is 220,663 yd3. The estimated weight of the material is 532,150
tons. The pile covers 8.2 acres.
Prior to loading the rail cars, a staging area would be established in the
vicinity of the East Slag Pile to serve as a temporary stockpile and loading
area for the slag. If both the East Slag Pile and the West Slag Pile were to be
removed, the slag in the East Slag Pile would be removed first and then the
footprint of that pile would serve as the staging area for stockpiling and
loading the slag from the West Slag Pile. Construction of an additional railroad
spur may also be needed to accommodate temporary storage and loading of the cars
and is included. Additional Site preparation activities would include adding
onto the existing facility road network, as needed, to accommodate the truck
traffic between the West Slag Pile and the staging area. It is assumed that the
existing roads could accommodate trucks for most of the distance, but that
another 500 linear feet of gravel road would be constructed to modify the
existing system to reduce the impact on plant traffic.
Removal of the material from the West Slag Pile would include five main phases
that to some degree would be conducted concurrently. The five phases are:
o Removing the decommissioning cap (i.e. cover) material
(approximately 45,500 yd3) and transporting it to a licensed solid
waste landfill for disposal
o Moving the slag and soil (approximately 175,300 yd3) from the West
Slag Pile to the staging area located near the East Slag Pile
o Crushing the slag to meet the size requirements of the offsite
facility
o Loading the slag and soil from the staging area into the rail cars
o Transporting the slag and soil to the offsite facility and disposing
of it.
A front-end loader would be used to load the slag into trucks at the West Slag
Pile. A wheel- mounted 5 yd3 capacity loader or comparable equipment would be
used. The estimated production rate is 185 yd3 per hour. The slag would be
hauled to the staging area in 20 yd3 dump trucks. Approximately three trucks
would be used. A bulldozer would be used on the West Slag Pile to loosen the
material and move it toward the loader. A grader and water truck would be used
for the haul road and as otherwise needed. Slightly larger front-end loader and
haul trucks could be used if available to increase productivity.
The stockpiled slag would be crushed to meet sizing requirements and then loaded
into rail cars using a front-end loader similar to that used at the West Slag
Pile. Instead of having two loaders, another option would be to operate in two
shifts and load the rail cars at night as well. A small locomotive would be
required to shift the rail cars around as they are loaded. The railcar capacity
is 90 tons of slag. Using this capacity, a total of 4,865 rail cars would be
needed assuming that all of the rail cars are loaded to capacity. Exclusive-use
closed transport rail cars would be used.
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The same type of measures to protect wetlands during remediation and wetlands
restoration efforts that were included in the capping alternatives would also be
implemented as part of this alternative. After the slag is removed from the West
Slag Pile, the area would be graded. Topsoil would then be placed onto the area,
if needed, and seeded to provide vegetation. It is assumed that 1 foot of
topsoil would be placed over the entire area. This results in an estimated
quantity of topsoil of 13,300 yd3.
The estimated time to complete the actions for this alternative is approximately
4 years from the date that a contractor is retained and given authorization to
proceed based on the facility being able to receive 15 rail cars per day and a
construction season of 5 months each year. This assumes that a sufficient number
of rail cars will be available.
Cost Estimates for Removal and Disposal
Capital Costs $147,090,100
Operation and Maintenance (O&M) $ NA
------------
Total Present Worth $147,090,100
4.2 East Slag Pile
The East Slag Pile covers approximately 3 acres as shown in figure 1. The
estimated volume of the pile is 37,000 yd3. The estimated weight of the pile is
58,405 tons.
4.2.1 No Action
The no-action alternative is the baseline to which all other alternatives must
be compared. No action consists of the current conditions at the Pile. It
assumes that no future remedial actions will be conducted on the Pile.
The current conditions of the Pile include the following
decontamination/decommissioning actions:
o Resloping the edges of the pile: The pile was extensively graded
during the decontamination project carried out by Shieldalloy in
1989. The north, south, and east sides of the pile have steep cuts;
the west side is curved with a shallow slope.
o Excavating and placing all of the slag from the Grainal(R) Slag Pile
onto the East Slag Pile: Approximately 9,600 yd3 of slag or soil
was excavated from the Grainal(R) Slag Pile and added to the top of
the East Slag Pile during the 1989/1990 decontamination project.
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o Constructing a chain link fence with controlled access around the
perimeter of the pile: The pile has a chain link fence around the
perimeter of the pile. Access is controlled through a locked gate.
o Posting signs that state there is a radioactive hazard: The pile is
currently posted with radiation hazard signs and the property
boundaries are posted with No Trespassing signs.
Cost Estimates
The cost of implementing of this alternative would be zero dollars. Because this
alternative assumes that no additional work will be conducted, no monies would
be spent.
4.2.2 Capping in Place
This alternative would contain the slag in the existing East Slag Pile by
capping the entire pile. Prior to placement of the cap, grading would be
conducted. Conventional heavy construction equipment would be used for
constructing the cap. A water truck would be used, as needed, to minimize dust
emissions.
An evaluation of different capping alternatives is presented in Appendix E of
the feasibility study. A soil cap would address only the radioactive materials
in the pile. Small quantities of spent carbon anodes, scrap steel and crushed
drums have also been placed in the pile, however.
Installation of a cap over radioactive materials typically serves four purposes:
1. Containment of the material from environmental pathways, such as rain
water intrusion and wind erosion
2. Erection of a barrier to potential intruders (plant, animal, and human)
that might be exposed to the waste matrix
3. Reduction in the flux of radon from the radioactivity in the matrix.
4. Shielding potentially exposed persons from the direct radiation being
given off by the material.
For the shielding criterion, a 2 foot thick layer of soil will reduce the
exposure rate from the East Slag Pile by a factor of 200. This reduction is
expected to bring exposure rates around the East Slag Pile to levels below
background. This soil layer will also act as an effective intruder barrier, so
long as the soil is not lost through interstitial spaces between the pieces of
slag or eroded away by wind and water. The loss of soil through the slag will be
addressed by grading and reworking the slag on the pile prior to capping to
minimize the interstitial spaces between the pieces of slag, and by providing
additional soil to serve as a transition layer between the slag and the cap. The
supplemental soil will be spread onto the slag and compacted in lifts in order
to work the soil
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into the interstitial spaces. A vegetative cover will be placed on top of the
final cap to prevent the loss of soil to erosion.
Decommissioning Cap
The decommissioning cap for the East Slag Pile would be made up of the
following:
o Twelve inches of soil that will serve as a transition layer to
separate the slag and overlying soil
o Eighteen inches of soil to cover the pile
o Six inches of topsoil.
The top layer will be provided with a vegetative cover to ensure long-term
stability. All materials for the cap would be imported from offsite sources. The
conceptual design of the proposed cap is shown in Figure 9.
The soil portion of the cap would be keyed into the ground surface. The key
would be constructed around the perimeter of the pile and would have an
estimated width of 3 feet and depth of 5 feet. The quantity of soil for the cap,
including the transition layer and key, but excluding the topsoil, is an
estimated 12,300 yd3. The soil layer would be constructed and compacted in
lifts to achieve uniform compaction. The topsoil would be seeded with a grass
compatible with the local climate and conducive to long-term growth and minimum
maintenance.
Erosion control measures would be included in construction of the cap. In
addition to the vegetative growth, these measures would include approximately
four rip rap drainage channels placed along the side slopes of the pile and rip
rap placed at the base of the pile.
Institutional controls including Site access restrictions, monitoring, financial
assurance, and deed restrictions would be implemented as part of this
alternative. The East Slag Pile is currently completely enclosed by 1,540 linear
feet of chain link fence with controlled access. Signs are posted stating that
there is a radioactive hazard. The same type of deed restrictions, survey
markers, financial assurance, and monitoring that were included in the capping
alternative for the West Slag Pile would also be implemented as part of this
alternative. In addition, the same type of wetlands restoration measures that
were included in the capping alternative for the West Slag Pile would also be
implemented as part of this alternative.
Solid Waste Cap
The development of the solid waste cap is based on the Ohio Administrative Code,
Section 3745- 27-11. This alternative would contain the slag in the East Slag
Pile by constructing a new cap over the entire pile. The cap would consist of a
2 foot thick recompacted soil barrier (e.g. clay with a permeability of 1x10-7
cm/s) placed on top of the entire slag pile, followed by a 1 foot thick granular
drainage layer, a geotextile fabric, and a 9 inch topsoil layer that is seeded
to provide vegetation (see Figure 8). The topsoil would be seeded with a grass
compatible with the local climate and conducive to long-term growth and minimum
maintenance. Erosion control
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<PAGE> 117
measures and institutional controls, including monitoring, would be the same as
the preceding alternative. All materials for the cap would be imported from
offsite sources. The solid waste cap would reduce the leaching of all
contaminants.
Hazardous Waste Cap
The development of the hazardous waste cap is based on the requirements
presented in Ohio Administrative Code 3745-57-10 and the guidelines presented in
U.S. EPA's Technical Guidance Document: Final Covers on Hazardous Waste
Landfills and Surface Impoundments (U.S. EPA 1989).
This alternative would contain the slag in the East Slag Pile by constructing a
new cap over the entire pile. The cap would consist of 2 foot thick layer of
clay ( compacted to a permeability equal to 1x10-7 cm/s), a flexible membrane
liner ( with a thickness of 40 mil), a 1 foot thick drainage layer (permeability
equal to 1 x 10-2 cm/s or greater), geotextile fabric, and a 2 foot thick
topsoil layer that is seeded to provide vegetation (see Figure 8). All materials
for the cap would be imported from offsite sources. The topsoil would be seeded
with a grass compatible with the local climate and conducive to long-term growth
and minimum maintenance. Erosion control measures and institutional controls,
including monitoring, would be the same as the decommissioning cap alternative.
The Hazardous Waste Cap would further reduce the leaching of all contaminants.
All capping alternatives for the East Slag Pile would need to address, during
the remedial design/ remedial action phase, any and all setbacks from the
railroad spur, underground utilities, and the access road to the plant.
Cost Estimates for Capping
Decommissioning Cap:
Capital Costs $798,100
Operation and Maintenance (O&M) $ 91,553
--------
Total Present Worth $890,000
Solid Waste Cap:
Capital Costs $1,339,200
Operation and Maintenance (O&M) $ 91,553
----------
Total Present Worth $1,431,000
Hazardous Waste Cap:
Capital Costs $1,679,400
Operation and Maintenance (O&M) $ 91,553
----------
Total Present Worth $1,771,000
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4.2.3 Removal and Offsite Disposal
This alternative would involve removing all of the material in the East Slag
Pile and disposing of it in an offsite licensed disposal facility. For the
purpose of this report, it is assumed that the slag would be loaded into rail
cars and transported to the Envirocare facility in Clive, Utah for disposal.
The estimated volume of material in the East Slag Pile is 37,000 yd3. The
estimated weight of the material is 58,405 tons.
Removal of the material from the East Slag Pile would include three main phases
that would be conducted concurrently. The three phases are:
o Crushing the slag to meet the size requirements of the offsite
facility
o Loading the slag from the East Slag Pile into the rail cars
o Transporting of the slag to the offsite facility and disposing of
it.
Crushing and loading of the slag into the rail cars would take place at the East
Slag Pile. Construction of an additional railroad spur may be needed to
accommodate temporary storage and loading of the cars and is included. A
front-end loader would be used to load the slag into rail cars. A wheel-mounted
5 yd3 capacity loader or comparable equipment would be used. The estimated
production rate is 185 yd3 per hour. A slightly larger front-end loader could
be used if available to increase productivity. A bulldozer would be used on the
pile to loosen the material. A water truck would be used to minimize dust
emissions, as needed.
The railcar capacity is 90 tons of slag. Using this capacity, a total of 672
rail cars would be needed assuming that all of the rail cars are loaded to
capacity. Exclusive-use closed transport rail cars would be used.
The same type of wetlands restoration measures that were included in the capping
alternative for the West Slag Pile would also be implemented as part of this
alternative. After the slag is removed from the East Slag Pile, the area would
be graded. Topsoil would then be placed onto the area, if needed, and seeded to
provide vegetation. It is assumed that 1 foot of topsoil would be placed over
the entire area. This results in an estimated quantity of topsoil of 3,900 yd3.
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Cost Estimates for Removal and Disposal
Capital Costs $21,889,400
Operation and Maintenance (O&M) $ NA
-----------
Total Present Worth $21,889,400
4.2.4 Removal and Sale of Slag
This alternative would involve removing slag from the East Slag Pile, processing
it to generate a consistent product, and selling it in batches to either steel
companies or material distributors. For the purpose of this evaluation, it will
be assumed that the slag product will be shipped in bulk form using
tractor-trailer trucks.
A number of uncertainties concerning the sale of slag from the East Slag Pile
are still being evaluated. Prior to the sale of this material, all regulatory
and licensure requirements of the State of Ohio, NRC and other regulators must
be satisfied for both the generator and the buyer of the material. Assuming that
it is viable, the processing required to convert slag from the East Slag Pile to
a product would require a series of steps. Conceptually, these steps could
involve the following:
o A portion of the slag pile would be collected (e.g. using a front end
loader) and moved to a staging area
o The slag would be spread out in the staging area and foreign matter would
be removed
o The slag would be crushed to achieve a uniform size
o Different batches of crushed slag would be blended to ensure homogeneous
consistency of the product
o The product material would be staged for shipment
o Periodically the product would be loaded onto trucks for shipment to
customer companies.
It is assumed that the area to the north and east of the Roaster Building would
be used for slag staging , sorting, crushing, and blending. Road improvements
and some modifications to boundary fencing may be needed to allow movement of
the East Slag Pile into the area and movement of product out of the plant.
Front-end loaders or a track-mounted backhoe would be used to load the slag into
dump trucks. The trucks would move the slag to the staging area and deposit the
load as flat as possible.
Once in the staging area, front-end loaders would be used to spread out any
piled material. Sorting operations would be performed manually. A separate waste
container would be utilized to collect non-slag materials, if any, found in each
load. Upon completion of the sorting
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operation, the slag would be loaded into a crusher, which reduces the slag to a
predetermined maximum size.
Upon completion of the crushing operation, the material would be sampled to
determine its radioactivity content and metallurgical composition. Material
meeting the required specifications for sale would be transferred to a stockpile
area, from which the product would be drawn. Material not meeting specifications
would be mixed with other slags being delivered from the East Pile and sent back
though the crusher. This process would continue until the desired composition
was achieved. (It may be also be possible to separate very large chunks of slag
exhibiting elevated radioactivity for offsite disposal.)
Crushing campaigns would be managed based on the demand for the product. If the
entire inventory of the East Pile could be sold in a discrete time period the
entire pile would be processed. If demand was not high enough to warrant
processing the pile in one operation, processing would be done on a campaign
basis. (Currently Shieldalloy is selling slag from the Newfield, New Jersey
facility. The slag is not contaminated with radiological material and is used in
steelmaking processes. The slag removes sulfur from the steel and minimizes
sulfur air pollution.)
Once removal of all of the East Pile Slag was accomplished, a survey of the pile
area would be conducted. If the concentrations of contaminants in the soil met
remedial action objectives and preliminary remediation goals, there would be a
combination of direct radiation readings and samples collected for radiological
and metals analysis. The data collected would be compiled into a report to be
submitted for regulatory review.
Upon regulatory concurrence that residual concentrations of contaminants met
remedial action objectives and preliminary remediation goals, all fencing and
signs would be removed from the area.
Cost Estimates
The feasibility of selling the slag in the East Slag Pile has yet to be
determined. Once evaluation of the sale of the slag has been completed, a cost
estimate will be prepared.
4.3 Onsite Sediment
Onsite sediments include sediments in drainage ditches.
4.3.1 No Action
The no-action alternative is the baseline to which all other alternatives must
be compared. No action consists of the current conditions at the Site. It
assumes that no present or future remedial actions will be conducted at the
Site. Note, however, that a stormwater permit is required to control rainwater
discharges at the Site independent of the remedial investigation / feasibility
study.
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4.3.2 Capping
This alternative would involve containing the sediment with elevated levels of
contaminants in the onsite drainage ditches by capping them. The cap would
consist of a 1-foot thick layer of coarse gravel. Minor grading and some
clearing and removal of debris may be conducted prior to placing the cap.
Conventional construction equipment would be used to construct the cap; however,
the equipment may have to be modified (e.g., have large balloon tires mounted)
to be able to work in wet, soft soils.
The estimated area of onsite sediment that may have elevated levels of
contaminants is approximately 13,560 ft2. The quantity of coarse material
needed for capping this area is an estimated 500 yd3.
This alternative also assumes that the drainage ditches would be stabilized with
check dams and vegetation. It is estimated that 16 check dams would be installed
throughout the onsite drainage ditch network. The check dams would be
constructed of rock or comparable material, would be approximately 2 feet high,
and would have a slope of 2:1 (horizontal to vertical). The estimated quantity
of rock needed for all of the check dams is 19 yd3.
The same type of wetlands protective measures used during remediation that were
included in the capping alternative for the West Slag Pile would also be
implemented as part of this alternative. In addition, institutional controls
including Site access restrictions, regular inspection of the grounds,
monitoring, and deed restrictions would be implemented as part of this
alternative. The Site has controlled vehicle access and signs that state no
trespassing is allowed. The same type of deed restrictions, survey markers,
financial assurance, and monitoring that were included in the capping
alternative for the West Slag Pile would also be implemented as part of this
alternative. Source control measures would be implemented in the operational
portion of the Site to prevent the migration of material from that area.
The estimated time to complete the actions for this alternative, other than
long-term monitoring and maintenance, is approximately 3 months from the date
that a contractor is retained and given authorization to proceed.
Cost Estimates for Capping
Capital Costs $304,600
Operation and Maintenance (O&M) $ 50,000
--------
Total Present Worth $355,000
4.3.3 Removal and Onsite Containment (on the West Slag Pile)
This alternative would contain the onsite sediment by removing the onsite
sediment with elevated contaminants, placing the sediment on the West Slag Pile,
and capping it with a low-permeability cap. Conventional heavy construction
equipment would be used for excavating the sediment and capping it; however, the
equipment may have to be modified (e.g., have large balloon tires mounted) to be
able to work in wet, soft soils. The estimated area of onsite sediment that may
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have elevated levels of contaminants is approximately 13,560 ft2. The sediment
would be temporarily stockpiled by the ditch and drained, as needed, prior to
hauling and placing it on the West Slag Pile.
The location for placement of the excavated sediment on the West Slag Pile was
assumed to be the same area that was previously designated for the offsite slag.
Assuming an average depth of 5 feet for placement of the sediment, the resulting
area is 1,900 ft2.
The sediment would be placed on top of the West Slag Pile and one of the three
previously discussed cap options would then be implemented for the Pile.
Institutional controls, including monitoring and financial assurance, would be
implemented as discussed for capping the West Slag Pile. Constructing check
dams, vegetating the drainage ditch banks, and implementing source control
measures are also included in this alternative. It is assumed that replacement
sediment would not be needed for the area where sediment is removed from the
ditches.
During remediation, protective measures for wetlands would be implemented. The
estimated time to complete the actions for this alternative, other than
long-term monitoring and maintenance, is approximately 3 months from the date
that a contractor is retained and given authorization to proceed.
Cost Estimates for Removal and Onsite Containment (on the West Slag Pile)
Capital Costs $256,300
Operation and Maintenance (O&M) $ 50,000
--------
Total Present Worth $306,000
4.3.4 Removal and Offsite Disposal
This alternative would involve removing the onsite sediment with elevated levels
of contaminants and disposing of it in a regulated offsite landfill. The area
and volume of sediment that would be removed are approximately 13,560 ft2 and
350 yd3. The sediment would be temporarily stockpiled by the ditch and drained,
as needed, prior to loading it into trucks for disposal. It would then be loaded
into 20 yd3 watertight dump trucks and hauled to a appropriate permitted
facility.
Mitigation measures to protect wetlands during remediation, as previously
discussed, would be implemented. After the sediment is removed, check dams would
be constructed, drainage ditch banks would be vegetated, and source control
measures would be implemented. The estimated time to complete the actions for
this alternative is approximately 3 months from the date that a contractor is
retained and given authorization to proceed.
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Cost Estimates for Removal and Offsite Disposal
Capital Costs $269,000
Operation and Maintenance (O&M) $ 50,000
--------
Total Present Worth $319,000
4.4 Offsite Sediment
Offsite sediments constitute sediments located in Chapman Run adjacent to and
downstream of the Site.
4.4.1 No Action
The no-action alternative is the baseline to which all other alternatives must
be compared. No action consists of the current conditions at the Site. It
assumes that no present or future remedial actions will be conducted at the
Site.
4.4.2 Natural Recovery
This alternative would allow natural sedimentation processes to contain (i.e.,
bury) the sediment with elevated levels of contaminants. Natural recovery may be
enhanced by introducing additional sediment material such as sand into the
stream and allowing it to settle out. The surface area of the sediments in
Chapman Run is estimated to be 231,320 ft2. Allowing for 3 inches of sand for
this area, the quantity of sand needed would be 2,100 yd3. The sand would
consist of varied-density grains to allow for differential settling. It would be
sprayed into the stream at various locations along the 1.3-mile-length stream
segment. Sampling of the sediment would be conducted annually for ten years to
determine whether the remedial action objectives are met. Five samples would be
collected each year and analyzed for vanadium and gross alpha and beta. The
estimated time to complete the actions for this alternative, other than
long-term monitoring, is approximately three months from the date that a
contractor is retained and given authorization to proceed. An analysis to
estimate the time for natural recovery to meet the remedial action objectives
has not been conducted. For the purpose of this report it is assumed that
remedial action objectives would be met in ten years.
Cost Estimates for Natural Recovery
Capital Costs $250,300
Operation and Maintenance (O&M) $ 50,000
--------
Total Present Worth $300,000
4.4.3 Rechannelization
This alternative would involve creating a new stream channel and using the
excavated soil to fill the existing channel of Chapman Run. Conventional
construction equipment would be used to construct the new channel; however, the
equipment may have to be modified (e.g., have large balloon tires mounted) to be
able to work in wet, soft soils.
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The newly constructed channel would be similar in size to the existing channel.
It would have a width that ranges from approximately 26 feet upstream to 54 feet
downstream. The channel length would be 1.3 miles including meanders. The
average channel depth is assumed to be 10 feet. These dimensions would result in
a volume of excavated soil of 85,700 yd3 that would be placed in the existing
channel.
The new channel would be constructed first. The soil would be scraped off and
temporarily stockpiled separately during construction of the channel. After
construction of the new channel the water would be diverted to it and the
existing channel would be blocked. The existing channel would then be filled and
the stockpiled topsoil would be placed as the final layer. The filled existing
channel would then be seeded to establish vegetation.
The banks of the new channel and areas that were disturbed during construction
would be seeded to stabilize them. Habitat enhancement measures such as the
addition of wood debris to create a favorable environment for aquatic life would
also be implemented.
Protective measures to protect wetlands, including Chapman Run, during
remediation would be implemented as previously discussed . Institutional
controls that include deed restrictions would be included as part of this
alternative. The estimated time to complete the actions for this alternative,
other than long-term monitoring, is approximately six months from the date that
a contractor is retained and given authorization to proceed. This assumes that
the acquisition of the property or property easements needed to implement this
alternative has already been completed prior to procurement of a remedial
contractor.
Cost Estimates for Rechannelization
Capital Costs $2,299,000
Operation and Maintenance (O&M) $ N/A
----------
Total Present Worth $2,299,000
4.4.4 Removal and Onsite Containment (on the West Slag Pile)
This alternative would contain the offsite sediment by removing the offsite
sediments with elevated contaminants, placing the sediment on the West Slag
Pile, and capping it with a low- permeability cap. Conventional heavy
construction equipment would be used for removing the sediment and capping it;
however, the equipment may have to be modified (e.g., have large balloon tires
mounted) to be able to work in wet, soft soils. The estimated area of offsite
sediment that may have elevated levels of contaminants is approximately 231,320
ft2. Assuming a removal depth of 0.75 feet to 1 foot, the estimated volume of
sediment that would be removed is 7,400 yd3. Removal of the sediment would be
conducted during low stream flow, and silt curtains or comparable measures would
be used to limit turbidity during removal. The sediment would be placed in
temporary lined basins to allow for drainage prior to hauling and placing it on
the West Slag Pile.
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The location for placement of the excavated sediment on the West Slag Pile was
assumed to be the same area that was previously designated for the offsite slag.
Assuming an average depth of five feet for placement of the sediment, the
resulting area is 46,300 ft2.
The sediment will be placed on top of the West Slag Pile and one of the three
previously discussed cap options would then be implemented for the Pile.
Institutional controls, including monitoring and financial assurance, would be
implemented as discussed for capping the West Slag Pile. It is assumed that
replacement sediment would not be needed for the area where sediment is removed
from the stream.
The quantity of clay for capping the onsite sediment portion of the West Slag
Pile, including the key, is an estimated 5,500 yd3. The estimated quantities
for the geotextile and silty sand are 5,100 yd2 and 1,700 yd3, respectively.
The estimated quantity of topsoil is 1,300 yd3. The estimated quantity of rip
rap is 400 yd3.
Protective measures for wetlands during remediation, as previously discussed,
would be implemented. The estimated time to complete the actions for this
alternative, other than long-term monitoring and maintenance, is approximately
six months from the date that a contractor is retained and given authorization
to proceed.
Cost Estimates for Removal and Onsite Containment (on the West Slag Pile)
Capital Costs $1,283,300
Operation and Maintenance (O&M) $ 50,000
----------
Total Present Worth $1,333,000
4.4.5 Removal and Offsite Disposal
This alternative would involve removing the offsite sediment with elevated
levels of contaminants and disposing of it in a regulated offsite landfill in
accordance with applicable regulations. The area and volume of sediment that
would be removed are approximately 231,320 ft2 and 7,400 yd3, respectively,
assuming a 0.75 ft to 1 ft removal depth. Removal of the sediment would be
conducted during low stream flow, and silt curtains or comparable measures would
be used to limit turbidity during removal. The sediment would be placed in
temporary basins to allow for drainage prior to loading it into trucks for
disposal. It would then be loaded into 20 yd3 watertight dump trucks and hauled
to an appropriate permitted facility. Using this capacity for the dump trucks, a
total of 370 trips would be needed assuming that all of the trucks are loaded to
capacity.
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Protective measures as previously discussed to protect wetlands during
remediation would be implemented. The estimated time to complete the actions for
this alternative is approximately six months from the date that a contractor is
retained and given authorization to proceed.
Cost Estimates for Removal and Offsite Disposal
Capital Costs $2,934,200
Operation and Maintenance (O&M) $ N/A
----------
Total Present Worth $2,934,200
4.5 Wetland Soil
4.5.1 No Action
The no-action alternative is the baseline to which all other alternatives must
be compared. No action consists of the current conditions at the Site. It
assumes that no present or future remedial actions will be conducted at the
Site.
4.5.2 Wetland Mitigation
This alternative includes wetland mitigation for onsite wetland areas that may
have been affected by siltation (i.e., the two deltas adjacent to the West Slag
Pile). The estimated area of the deltas is 85,300 ft2.
Wetland mitigation would consist of restoration or enhancement of degraded
wetlands in the Cambridge area. The function and value of the onsite wetland
that will be mitigated are assumed to be equivalent to the new wetland. It is
estimated that it would take approximately 6 months to acquire and enhance the
new mitigated wetland acreage.
4.5.3 Capping
This alternative would involve containing wetland soil with elevated levels of
contaminants by capping them. The cap would consist of a 1-ft thick layer of
topsoil that is seeded to provide vegetation. Minor grading and some clearing
and removal of large objects may be conducted prior to placing the cap.
Conventional construction equipment would be used to construct the cap; however,
the equipment may have to be modified (e.g., have large balloon tires mounted)
to be able to work in wet, soft soils.
The estimated area of wetland that may have elevated levels of contaminants is
approximately 465,900 ft2. The quantity of topsoil for capping this area is an
estimated 19,000 yd3. This quantity allows for some overlap and sloping onto
adjacent soils. It is assumed that drainage ditches would be installed around a
portion of the delta areas to divert runoff and thereby prevent it from eroding
the cap on the deltas. It is estimated that 1,200 linear feet of drainage
ditches may be needed. Rip rap, coarse gravel material, and/or vegetation would
be used to stabilize the drainage ditches. If rip rap or coarse material is
used, it is estimated that approximately 1,800 yd3 would be needed.
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If this alternative is implemented, wetland mitigation must also be included and
may consist of the measures described in the preceding alternative except the
total area potentially requiring mitigation may be about 10.7 acres. In
addition, the same type of wetlands protective measures during remediation that
were included in the capping alternative for the West Slag Pile would also be
implemented as part of this alternative.
Institutional controls including Site access restrictions, regular inspection
tours, monitoring, and deed restrictions would be implemented as part of this
alternative. The Site has controlled access and signs that state no trespassing
is allowed. The same type of deed restrictions, survey markers, financial
assurance, and monitoring that were included in the capping alternative for the
West Slag Pile would also be implemented as part of this alternative.
The estimated time to complete the actions for this alternative, other than
long-term monitoring and maintenance, is approximately six months from the date
that a contractor is retained and given authorization to proceed.
Cost Estimates for Capping
Capital Costs $1,857,600
Operation and Maintenance (O&M) $ 73,844
----------
Total Present Worth $1,931,000
4.5.4 Removal and Onsite Containment (on the West Slag Pile)
This alternative would contain the wetland soil by removing wetland soil with
elevated contaminants, placing the soil on the West Slag Pile, and capping it
with a low-permeability cap. The West Slag Pile instead of the East Slag Pile
would be used for consolidation of the soil for the reasons that were presented
for the capping alternatives (with offsite slag) for the West Slag Pile.
Conventional heavy construction equipment would be used for excavating the soil
and capping it; however, the equipment may have to be modified (e.g., have large
balloon tires mounted) to be able to work in wet, soft soils. The estimated area
of wetland that may have elevated levels of contaminants is approximately
465,900 ft2. Assuming a removal depth of 1.5 feet, the estimated volume of
wetland soil that would be removed would be 25,900 yd3.
The location for placement of the excavated sediment on the West Slag Pile was
assumed to be the same area that was previously designated for the offsite slag.
Assuming an average depth of 5 ft for placement of the wetland soil, the
resulting area is 139,800 ft2.
The excavated wetland soils would be placed on top of the West Slag Pile and one
of the three previously discussed cap options would be implemented for the pile.
Institutional controls, including monitoring and financial assurance, would be
implemented as discussed for capping the West Slag Pile.
The quantity of clay for capping the wetland soil portion of the West Slag Pile
only, including the key, is an estimated 16,100 yd3. The estimated quantities
for the geotextile and silty sand are
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15,500 yd2 and 5,200 yd3, respectively. The estimated quantity of topsoil is
3,900 yd3. The estimated quantity of rip rap is 630 yd3. (Note: only the
quantities of material related directly to the portion of the cap that includes
the wetland soil are included here in order to provide an equivalent basis for
comparing costs among the wetland soil alternatives).
The same type of wetlands protective measures used during remediation that were
included in the capping alternative for the West Slag Pile would also be
implemented as part of this alternative. In addition, it is estimated that
replacement soil would be needed for approximately one-half of the area where
wetland soil is removed. This results in an estimated quantity of replacement
soil of 12,900 yd3. The replaced soil and the remaining area would be seeded or
otherwise restored to pre-existing conditions.
The estimated time to complete the actions for this alternative, other than
long-term monitoring and maintenance, is approximately three to six months from
the date that a contractor is retained and given authorization to proceed.
Cost Estimates for Removal and Onsite Containment (on the West Slag Pile)
Solid Waste Cap
Capital Costs $3,256,900
Operation and Maintenance (O&M) $ 73,844
----------
Total Present Worth $3,331,000
Hazardous Waste Cap
Capital Costs $3,777,200
Operation and Maintenance (O&M) $ 73,844
----------
Total Present Worth $3,851,000
4.5.5 Removal and Offsite Disposal
This alternative would involve removing the wetland soil with elevated levels of
contaminants and disposing of it in a regulated offsite landfill. The area and
volume of wetland soil that would be removed are approximately 465,900 ft2 and
25,900 yd3, respectively, assuming a 1.5 foot removal depth. The soil would be
loaded into 20 yd3 dump trucks and hauled to an appropriate permitted facility.
Using this capacity for the dump trucks, a total of 1,296 trips would be needed
assuming that all of the trucks are loaded to capacity.
Protective measures for wetlands during remediation, as previously discussed,
would be implemented. After the soil is removed, the area would be restored as
discussed for the preceding alternative. The estimated time to complete the
actions for this alternative is approximately 3 months from the date that a
contractor is retained and given authorization to proceed.
Cost Estimates for Removal and Offsite Disposal
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Capital Costs $6,241,100
Operation and Maintenance (O&M) $ N/A
----------
Total Present Worth $6,241,100
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5.0 OHIO EPA'S SELECTED REMEDY
This chapter sets out Ohio EPA's selected remedy and includes performance
standards for remediation of the Shieldalloy Site.
5.1 Selection Criteria
In selecting a remedy for a contaminated site, Ohio EPA considers the following
eight criteria as outlined under USEPA's National Contingency Plan (NCP)
promulgated under CERCLA (40 CFR 300):
1. Overall protection of human health and the environment - addresses whether
or not a remedy provides adequate protection, and describes how risks are
eliminated, reduced or controlled through treatment, engineering controls,
and/or institutional controls;
2. Compliance with all State, Federal and Local laws and regulations -
addresses whether or not a remedy will attain applicable, relevant and
appropriate requirements under federal, state, and local environmental
laws;
3. Long-term effectiveness and permanence - refers to the ability of a remedy
to maintain reliable protection of human health and the environment over
time once pollution has been abated and clean-up goals have been met;
4. Reduction of toxicity, mobility, or volume through treatment - is the
anticipated performance of the treatment technologies to yield a permanent
solution. This includes the ability of the selected alternative to reduce
the toxic characteristics of the chemicals of concern or remove the
quantities of those chemicals to an acceptable risk concentration or
regulatory limit and/or decrease the ability of the contaminants to
migrate through the environment;
5. Short-term effectiveness - involves the period of time needed to achieve
protection and any adverse impacts on human health and the environment
that may be posed during the construction and implementation period until
pollution has been abated and clean-up goals are achieved;
6. Implementability - is the technical and administrative feasibility of a
remedy, including the availability of goods and services needed to
implement the chosen solution;
7. Cost - includes capital and operation and maintenance costs;
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8. Community acceptance - will be assessed in the Decision Document following
review of the public comments received on the Remedial Investigation and
Feasibility Study (RI/FS) report and the Preferred Plan.
5.2 Summary
The major components of Ohio EPA's selected remedy for the Shieldalloy Site
include:
1. Excavate and remove contaminated sediments and soils from the Site;
2. Place excavated sediments and soils on top of the West Slag Pile;
3. Cap the West Slag Pile in accordance with state solid waste rules
under Ohio Administrative Code Chapter 3745-27;
4. Ensure long term care of the West Slag Pile and;
5. For the East Slag Pile:
a. if feasible, sell and remove East Slag Pile materials,
expeditiously; and
b. if the foregoing is not feasible, then cap the East Slag Pile in
accordance with state solid waste rules under Ohio Administrative
Code Chapter 3745-27 and ensure long term care.
Ohio EPA would periodically review the remedy at the Site to ensure that the
remedy will protect human health and the environment.
5.3 Contaminated Sediments and Soils at the Site
5.3.1 Excavate to meet Performance Standards
The selected remedy includes excavating and removing contaminated sediments and
soils from onsite drainage channels, sedimentation deltas, wetland soils, and
Chapman Run. The sedimentation deltas lay to the north and south of the West
Slag Pile. Removal of contaminated soils and sediments from these impacted areas
would reduce the contaminants found in this media to levels that are protective
of the residents, plants and animals. Removal of the sedimentation deltas would
remedy the physical effects caused by erosion and sedimentation from the process
areas and slag piles. The precise areas and volumes for the wetland soils and
sediments will be determined during the remedial design phase.
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5.3.2 Performance Standards for Cleanup of Soils and Sediments
This section discusses performance standards for excavation of contaminated
soils and sediments. The results of the human health risk assessment prepared by
Shieldalloy and Cyprus Foote indicate that remedial action is not required to
address human health concerns for wetland soil, onsite sediment, or offsite
sediment. At this time, the remedial action needed for those areas is based on
protection of the environment. However, further radiological sampling of the
wetland soils will be required to in order to confirm that no remedial action is
required in this area for protection of human health. In any event, the selected
remedy must remain protective of human health and the environment.
For purposes of this report, area and volume estimates for wetland soil removal
are based on a conservative vanadium concentration of 700 mg/kg (USEPA's
screening value for human ingestion of vanadium pentoxide for a residential soil
ingestion scenario). The area and volume estimates for onsite sediment and
offsite sediment are based on a vanadium concentration of 1280 mg/kg per the
Phase II Ecological Risk Assessment. Further sampling will be required in the
remedial design phase in conjunction with the use of medium-specific remediation
goals and consideration of other factors (e.g., short-term environmental
effects) to refine cleanup concentrations and volumes for wetland soil. Specific
volumes and areas were not calculated for surface water because the combination
of source control (i.e., implementation of the storm water pollution prevention
plan) and sediment remediation is expected to meet the preliminary remediation
goal for surface water (87 ug/L for vanadium). For areas of concern for wetland
soil, onsite sediment, and offsite sediment see Figures 5, 6, and 7. Please
refer to table this section which outlines the clean up levels for each
environmental media at the Site. The risk assessment performed by Shieldalloy
and Cyprus Foote indicates that upland (process area) soils did not pose a risk
to workers or modeled fauna.
The goal of the excavation and removal of contaminated soils and sediments is to
protect human health and the environment. Cleanup levels for vanadium (the most
common heavy metal contaminant found at the Site) are listed below. The cleanup
level for wetland soils will be refined during the remedial design phase. Final
cleanup levels for vanadium in wetland soils must be protective of ecological
receptors expected to occur at the site, including birds, mammals, amphibians,
and benthic communities (risk assessment to benthic communities will include
amphipod bioassay techniques).
Consistent with USEPA's National Contingency Plan, an acceptable cleanup goal
for radionuclides in soils, sediment, groundwater, and surface water achieves a
risk range of 1x 10-6 - 1x10-4 excess lifetime cancer risk, with 1x10-6 as
the point of departure (i.e. goal). During the remedial investigation, the major
radionuclide detected in most media above background was Th-230. In order to
ensure accuracy during the remedial investigation, the State of Ohio retained an
independent consultant to evaluate and validate radiological data collected at
the Site. The results of the data validation indicated that the radionuclides
Pa-231m and Ac-227 are present in soils at levels at least slightly above
background. Thus, the State intends that future analysis for soils during the
remedial design/remedial action phase be analyzed for Pa-231m and Ac-227.
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MEDIA VANADIUM CLEAN-UP LEVEL
SOILS
Wetland Soils * 700 mg/kg
SEDIMENTS
Onsite 1280 mg/kg
Offsite 1280 mg/kg
SURFACE WATER
Onsite 87 ug/l
Offsite 87 ug/l
* During the remedial design, additional studies will be conducted to
further derive an exact clean-up number for wetland soil. For the purposes
of the decision document, the clean-up level is shown above.
5.3.3 Place Excavated Sediments and Soils on the West Slag Pile
Ohio EPA's selected remedy is to place the excavated sediments and soils on top
of the West Slag Pile prior to capping of this pile. This pile already received
excavated sediments and soils in the partial decommissioning of 1989-1990.
5.4 West Slag Pile
5.4.1 Capping of the West Slag Pile
Ohio EPA's selected remedy for the West Slag Pile consists of a cap system
designed in accordance with Ohio's solid waste regulations under Ohio
Administrative Code Chapter 3745- 27. The objective of a cap is to contain the
waste and minimize infiltration of water into the waste. Ohio EPA considers the
solid waste cap alternative to be the most suitable alternative for remediating
the West Slag Pile. This alternative best meets the eight selection criteria
described above.
The cap is a recompacted low permeability cap. The cap, commonly referred to as
a solid waste cap, is currently used to cap landfills in the State of Ohio. The
cap would cover not only the West Slag Pile, but also contaminated soils from
the wetland soils, and onsite/offsite sediment. The remedy also controls
stormwater discharges to levels that are protective of human health and the
environment.
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The cap system would apply to contaminated sediments, sediment/soil from
sedimentation deltas, wetland soils and Chapman Run sediments that would be
placed on the West Slag Pile prior to capping (refer to Figures 5, 6, 7 for
onsite/offsite sediments and wetland soil areas of concern). The material would
be placed on top of the West Slag Pile so as to minimize the footprint of the
pile wherever feasible. Should it be impractical to place all such material on
the West Slag Pile, the remaining material would be placed against the side of
the West Slag Pile prior to capping. The cap system would guard against any
additional surface water contamination from the Site in the future. Capping the
slag piles guards against chemical and radiological releases from the piles.
An important consideration during evaluation of remediation alternatives is
identification of "Applicable or Relevant and Appropriate Requirements"
("ARAR"s). Disposal of the solid and/or chemical waste materials currently found
in the West Slag Pile would require disposal in either solid waste landfills or
hazardous waste facilities. A permitted landfill operated today would be
required to install a cap per solid or hazardous waste regulations. (These and
other ARARs are set forth in the Complaint filed by the State of Ohio in State
of Ohio, ex rel Montgomery v. Shieldalloy Metallurgical Company and Cyprus Foote
Mineral Company, Case No. 95CV242, Guernsey County Court of Common Pleas.)
5.4.2 Performance Standards for the Cap
The goal of the cap system is to protect human health and the environment. The
performance standards for the cap should meet the standards described in this
Decision Document, including applicable requirements for solid waste caps under
Ohio Administrative Code Chapter 3745-27. Further, the cap should provide
sufficient shielding such that any external radiation exposure from the pile
does not exceed background levels.
5.4.3 Long Term Care
There is a need for long term care of any radioactive material left at the Site.
The design of the cap for the West Slag Pile would include long term care and an
Operation and Maintenance (O&M) program of 1000 years. To better ensure that a
cap would meet performance standards for this time period, Shieldalloy and
Cyprus Foote would need to evaluate and present a mechanism for long term care
of the Site (referred to as operation and maintenance).
Conceptually, Shieldalloy and Cyprus Foote would need to provide financial
instruments that would pay out funds over time to pay for the long term
operation and maintenance of the Site. There would need to be sufficient funds
to address any failure of the cap system. Moneys would need to be available for
cap repairs and other operation and maintenance for a period of 1000 years.
5.4.4 Alternatives Considered
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Ohio EPA evaluated the remediation alternatives using the above eight criteria.
Ohio EPA considered the "decommissioning cap" alternative, but this alternative
does not adequately protect human health and the environment. For example, the
Chemfix material, which would purportedly serve as the "impermeable layer,"
would not provide a proven long-term barrier to weathering and infiltration, and
would not meet solid waste capping criteria under Ohio Administrative Code Rule
3745-27-11. The Chemfix material itself also contains heavy metal contaminants.
Ohio EPA also considered removal of all slag material from the Site and disposal
of it elsewhere. Disposal of this waste following removal from the Site would
require transportation and disposal at the Envirocare facility in Utah. This
alternative was determined to be cost prohibitive, in that it would cost $169
million. Another factor was that excavation and removal of slag may increase
exposure risks to workers and the public during field work and transportation.
5.5 East Slag Pile
5.5.1 Sale and Removal
The selected remedy includes a six-month period for Shieldalloy to evaluate and
submit a report on the marketability of the slag found in the East Slag Pile.
The slag is potentially usable as a "slag conditioner" in the manufacture of
steel, and may be marketable as such. If it is feasible to market and remove
this slag material, Shieldalloy would need to submit an acceptable plan and
schedule to Ohio EPA for accomplishing this option. Shieldalloy would need to
ensure that all license requirements for both generators and users of the
material would be met and that worker protection methods would be employed.
5.5.2 Capping and Long Term Care
If the East Slag Pile material may not be expeditiously sold and removed, then
Ohio EPA's selected remedy is to cap the East Slag Pile and ensure long term
care in the manner discussed for the West Slag Pile. The cap for the East Slag
Pile would be required to meet the same design criteria as the West Slag Pile
(i.e., a low permeability cap designed in accordance with Ohio solid waste
rules).
5.5.3 Performance Standards for the East Slag Pile Cap
The goal of the cap system is to protect human health and the environment. The
performance standards for the cap should meet the standards described in this
plan, including applicable requirements for solid waste caps under Ohio
Administrative Code Chapter 3745-27. Further, the cap should provide sufficient
shielding such that any external radiation exposure from the pile does not
exceed background levels.
5.6 Stormwater Controls for the Site
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Shieldalloy has applied for a Stormwater Discharge Permit from Ohio EPA under RC
Chapter 6111. The permit would establish limits on discharges of stormwater
runoff from the Site. The permit would control discharges to wetlands, thus
further guarding against the impacts to adjoining wetlands.
5.7 Former Process and Upland Soil Areas
5.7.1 Revegetation
The former Grainal Slag Pile area, former baghouse dust area, empty drum
accumulation area, and the field southeast of the Roaster Building have metal
concentrations in soils that exceed the USEPA benchmark values for plant
toxicity. The cause of the plant toxicity was not evaluated further in the
remedial investigation. The field southeast of the Roaster Building, former
empty V2O5 (vanadium pentoxide) drum accumulation area, and sediment deltas are
lacking in vegetation. Ohio's selected remedy is for these former process areas
to be revegetated and engineering controls implemented to control erosion. The
sedimentation from the North and South sedimentation deltas would also be
removed and the areas revegetated.
The manufacturing building has radioactive slag under a portion of the
foundation. The slag was apparently used as fill material. Upon closure of the
plant and demolition, this slag material needs to be properly disposed of in a
facility designed and properly licensed to accommodate such material. It is
expected that onsite remediation activities will be complete prior to retrieval
of the slag beneath foundations. Ohio EPA's selected remedy is that the
foundation slag and any additional radioactive material generated after
remediation activities would be disposed in a properly licensed facility.
5.7.2 Performance Standards for the Former Process Areas
The goal of the selected remedy is the protection of human health and the
environment. The performance standards for the former process areas include the
following: to control erosion and plant toxicity through revegetation; to meet
the radiological risk criteria of 1x10-4 to 1x10-6; to meet the hazard index
goal of 1.0; to implement such institutional controls as may be appropriate for
the residual risk; and to perform confirmatory radiological sampling.
5.8 Offsite Slag
In the past, slag generated at the facility (including radioactive slag) was
used as fill material in the Cambridge area. Shieldalloy and Cyprus Foote
Mineral have proposed that up to 10,000 ft3 of radioactive slag from offsite
locations be returned to the Site and disposed of on top of the West Slag Pile.
This offsite slag would be excavated at the offsite locations. This proposal is
referenced in the Remedial Investigation/Feasibility report. Ohio EPA's selected
remedy is to evaluate this issue further if firm plans are expeditiously
developed for removal of the radioactively contaminated slag from the offsite
locations.
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5.9 Public Participation
Ohio EPA afforded interested members of the public opportunities to learn more
about and comment on Ohio EPA's Preferred Plan. Members of the public could
review the Preferred Plan and related documents at the Byesville Public Library
and Ohio EPA's offices in Logan, Ohio. Ohio EPA officials held local information
sessions on January 6 and 22, 1997, and were available at their offices in Logan
and Columbus to discuss the Site. Ohio EPA received comments at the public
hearing on January 22,1997. Ohio EPA extended the period for submitting written
comments to February 28, 1997, as a result of a request from an interested
person. Ohio EPA gave public notice of these events and opportunities through
press releases and newspaper announcements.
5.10 Cost
According to the RI/FS report, the projected cost of Ohio EPA's selected remedy
is about $10.3 million. The cost breakdown is as follows:
West Slag Pile $ 3,846,000
East Slag Pile (if capping in place) 1,431,000
Onsite Sediment 309,000
Offsite Sediment 1,410,000
Wetland Soil 3,331,000
-----------
$10,327,000
More detailed costs for remedial design / remedial action, and operation and
maintenance would be developed during the remedial design phase.
The costs presented above were obtained from the Feasibility Study. For a
detailed breakdown on the costs, please refer to Appendix C and E of the
Feasibility Study.
5.11 Conclusion
The selected remedy must remain protective of human health and the environment.
Ohio EPA expects that implementation of the selected remedies discussed above
would protect human health and environment. It is not feasible to treat the slag
to remove or eliminate its radioactivity. Installation of solid waste caps, with
long-term care, would prevent infiltration of water, thus reducing or
eliminating leachate. Stormwater discharges from the Site would be controlled.
Removal and containment of contaminated onsite/offsite sediments and wetland
soils would address health and ecological risks. Revegetation of former process
areas would address plant toxicity and erosion. Confirmatory radiological
sampling would ensure that no unacceptable risks from radioactive contaminants
remain at the Site. Deed restrictions and institutional controls would also be
implemented to prevent unapproved residential development and excavation of the
piles and wetland areas. According to the RI/FS report, the projected cost of
the remedy is $10.3 million.
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Actual or threatened releases of hazardous substances from the Site, if not
addressed by implementing the remedy selected in this Decision Document, may
endanger public health, welfare or the environment. This Decision Document does
not preclude Ohio EPA from seeking other remediation at the Site in the future
in a manner not inconsistent with the U.S. Environmental Protection Agency's
National Contingency Plan (NCP) at Title 40 of the Code of Federal Regulations,
Part 300. Procedures under the NCP call for periodic review to ensure that the
remedy will protect human health and the environment. This Decision Document
does not address remediation of Cambridge area locations away from the Site
where radioactive slag from the facility was used as fill material.
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DECLARATION FOR THE DECISION DOCUMENT
Shieldalloy Metallurgical Corporation Site
Cambridge, Ohio
The Shieldalloy Metallurgical Corporation facility is located near Cambridge,
Ohio on State Route 209, Guernsey County, Ohio ("the Site"). The Shieldalloy
facility has produced vanadium and other metal alloys since the 1950s. The
facility has disposed much of its wastes, including radioactive slags and
vanadium-contaminated soils, at the Site. The Site includes two slag piles,
known as the East Slag Pile and the West Slag Pile, that span 11 acres. The Site
also has contamination in soils, wetlands, and Chapman Run.
Ohio EPA prepared a Preferred Plan to describe its proposed strategy to abate
pollution at, and prevent migration of wastes from, the Site. On or about
December 13, 1996, Ohio EPA publicly announced the availability of the Preferred
Plan and requested comments from interested members of the public. The Byesville
Public Library held for public review copies of the Preferred Plan and other
documents relevant to remediation of the site. On January 6, 1997, Ohio EPA held
a public information session on the Preferred Plan at the Guernsey County Public
Library. On January 22, 1997, Ohio EPA held a public hearing on the Preferred
Plan at the Pritchard Laughlin Center, Cambridge. Ohio EPA extended the public
comment period to February 28, 1997 as a result of a request from an interested
member of the public.
Ohio EPA has considered the public comments. Attached to this document is Ohio
EPA's Responsiveness Summary, which describes the comments Ohio EPA received and
Ohio EPA's responses to them.
This Decision Document describes the remedial action selected by Ohio EPA for
the Shieldalloy Site. This Decision Document has three parts. First, it
describes the history of the Site, including facility operations, waste
generation and disposal, and state and federal oversight. Second, this Decision
document summarizes the remedial investigation and feasibility study report for
the Site. The remedial investigation is a study of the type and extent of the
contamination at the Site. The feasibility study is a description of options for
addressing the contamination.
Ohio EPA oversaw the development of the remedial investigation and feasibility
(RI/FS) study by Shieldalloy Metallurgical Corporation and Cyprus Foote Mineral
Company (former Site owner). These companies prepared the RI/FS report under the
requirements of an agreed court order. On July 11, 1995, the Guernsey County
Court of Common Pleas issued the order (Consent Order for Preliminary
Injunction) in the case of State of Ohio, ex rel Montgomery v. Shieldalloy
Metallurgical Company and Cyprus Foote Mineral Company, Case No. 95CV242.
<PAGE> 140
The third part of this Decision Document is a description of the remedy selected
by Ohio EPA for abating pollution at, and preventing migration of wastes from,
the Site. Ohio EPA's selected remedy for the Shieldalloy Site includes:
1. Excavate and remove contaminated sediments and soils from the Site;
2. Place excavated sediments and soils on top of the West Slag Pile;
3. Cap the West Slag Pile in accordance with state solid waste rules
under Ohio Administrative Code Chapter 3745-27;
4. Ensure long term care of the West Slag Pile and;
5. For the East Slag Pile:
a. if feasible, sell and legally remove East Slag Pile materials,
expeditiously; and/or
b. if the foregoing is not feasible, then cap the East Slag Pile
in accordance with state solid waste rules under Ohio
Administrative Code Chapter 3745-27 and ensure long term care.
The remedy selected by Ohio EPA is substantially the same as the remedy proposed
by Ohio EPA in the Preferred Plan. The remedy meets applicable, relevant and
appropriate requirements. Treatment of the radioactivity in the slag is not
practicable. According to the RI/FS report, the projected cost of this remedy is
$10.3 million. For a more complete description of Ohio EPA's selected remedy,
see section 5.0 of the Decision Document. Actual or threatened releases of
hazardous substances from the Site, if not addressed by implementing the remedy
selected in this Decision Document, may endanger public health, welfare or the
environment. This Decision Document does not preclude Ohio EPA from seeking
other remediation at the Site in the future in a manner not inconsistent with
the U.S. Environmental Protection Agency's National Contingency Plan (NCP) at
Title 40 of the Code of Federal Regulations, Part 300. Procedures under the NCP
call for periodic review to ensure that the remedy will protect human health and
the environment. This Decision Document does not address remediation of
Cambridge area locations away from the Site where radioactive slag from the
facility was used as fill material.
- ------------------------------------- --------------------------
Jan Carlson, Chief Date
Division of Emergency & Remedial Response
Ohio Environmental Protection Agency
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Amend 2 to Exhibit 10.6
OHIO ENVIRONMENTAL PROTECTION AGENCY
RESPONSIVENESS SUMMARY
FOR THE
SHIELDALLOY METALLURGICAL CORP. SITE
CAMBRIDGE, OHIO
<PAGE> 142
RESPONSIVENESS SUMMARY
The purpose of this Responsiveness Summary is to summarize and to provide a
brief response to comments made during the public comment period for the
Shieldalloy Metallurgical Corporation Site, Cambridge, Ohio ("the Site"). This
Responsiveness Summary applies to both written and oral comments. This
Responsiveness Summary does not necessarily provide the basis for the Decision
Document. In the event of any variance between this Responsiveness Summary and
the Decision Document, the Decision Document controls.
This Responsiveness Summary is organized in four parts:
I. Comments from Shieldalloy and Cyprus Foote Mineral
II. Comments from U.S. Nuclear Regulatory Commission
III. Comments from Public Meeting
IV. Other Written Comments
In general, for more information on the topics raised in the comments, see the
Decision Document and the RI/FS report.
I. COMMENTS FROM SHIELDALLOY AND CYPRUS FOOTE MINERAL
A. GENERAL COMMENTS
1. A solid waste cap, per OAC Chapter 3745-27, is unnecessary for the West
and East Slag Piles.
Ohio EPA response: Ohio EPA does not agree with the Shieldalloy
Metallurgical Corporation (SMC) and Cyprus Foote Mineral (CFM) position
that a solid waste cap is unnecessary for the Site. Ohio EPA believes that
a solid waste cap is needed to provide long-term protection for the West
Slag Pile and, if necessary, the East Slag Pile.
2. The excavated sediments and soils should be placed adjacent to the West
Slag Pile, rather than on top of the pile.
Ohio EPA response: Disagree. The placement of soils and sediments atop the
West Slag Pile will maximize the area available for placement of offsite
slag returned to the Site, if this is allowed in the future.
3. Reconcile cost provisions projections.
Ohio EPA response: The cost revisions presented in the final Feasibility
Study will be reflected in the Decision Document.
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4. Ohio EPA should affirmatively provide for return of off-site slag onto the
Site and placement of it adjacent to the West Slag Pile. SMC and CFM
continue to note that Ohio EPA's deferral with respect to this matter is
not necessary or appropriate and that issues that do not relate to the
on-site placement of this material are outside the scope of the Preferred
Plan and Decision Document and do not need to be addressed in them.
Ohio EPA response: Disagree. As noted in the Decision Document, Ohio EPA's
selected remedy is to evaluate this issue further if firm plans are
expeditiously developed for removal of the radioactively contaminated slag
from the offsite locations.
5. Revise the description of radioactive slag. Throughout the document, Ohio
EPA refers to ferrocolumbium, ferrovanadium, and Grainal slags as
"radioactive," which is not accurate. The slags should be identified as
containing "elevated levels of naturally occurring radioactivity."
Moreover, the Plan incorrectly refers to all Grainal, ferrovanadium, and
ferrocolumbium slags as radioactive. These materials were at different
times made with ores and raw materials from different sources that
exhibited varying concentrations of radionuclides.
Ohio EPA response: The Decision Document will not be revised; however, the
inclusion of this comment in the comment section serves to clarify SMC/CFM
position on the terminology noted.
B. SPECIFIC COMMENTS
1. Comment: 1.0 Introduction, page 4, line 8: SMC and CFM commented that this
section of the Plan states that the two slag piles cover a combined area
of 14 acres. Area calculations performed during and reported in the RI/FS,
which were based on digitized aerial photographs and confirmed by a land
survey, show the total area of the two slag piles to be less than 11
acres. This acreage should be reflected in the Decision Document.
Ohio EPA response: Concur. The references to 14 acres in the Preferred
Plan will be revised to 11 acres in the Decision Document.
2. Comment: 3.3 Metal Alloy Production, page 10, lines 1 and 2: SMC and CFM
note that this section of the Plan states: "...the facility manufactured
about six other alloy products (e.g., Grainal(R), ferrotitanium, and small
amounts of ferrocolumbium)." While this is generally accurate, it does not
provide context for the reader to determine the relevant quantities of
these alloy products vis-a-vis the various alloys that are discussed in
the preceding sentence. Thus, we suggest that the Decision Document state
that "the facility manufactured lesser quantities of Grainal(R),
Solvan(R), ferrotitanium, ferroboron, and ferrocolumbium alloys."
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Ohio EPA response: Concur. Ohio EPA will include this language in the
Decision Document.
3. Comment: 3.4 Metal Alloy Production, page 10, lines 3 and 4. SMC and CFM
comment that this section of the Plan states: "The facility used naturally
occurring radioactive ores and other raw materials to produce
ferrovanadium, Grainal(R), and ferrocolumbium alloys." More precisely,
"The facility used ores or other raw materials containing low levels of
naturally occurring radioactivity in the production of some alloys." SMC
and Cyprus Foote suggest that Ohio EPA use this latter more precise
description.
Ohio EPA response: The sentence will be revised.
4. Comment: 3.4 License for Ferrocolumbium Slag under the Atomic Energy Act,
page 10, lines 14 and 15L: SMC and CFM note that the Preferred Plan states
that Shieldalloy received a license from NRC in 1987. This sentence should
be clarified to state that the license was only for possession of the
slag. SMC did not produce ferrocolumbium and did not generate
ferrocolumbium slag.
Ohio EPA response: Concur. The sentence will be revised.
5. Comment: 3.5 Slag and Other Wastes, page 10, lines 20 through 22: SMC and
CFM note that this section states that the facility manufactured three
types of radioactive slag (ferrocolumbium, ferrovanadium, and Grainal(R)).
This statement is misleading; not all ferrovanadium and Grainal(R) slags
are the same because of the various raw material sources used.
Furthermore, not all ferrovanadium and Grainal(R) slags contain elevated
concentrations of radionuclides.
Ohio EPA response: The purpose of the sentence is merely to identify the
slags that are the primary contributors to the radiation in the slag
piles.
6. Comment: 3.5 Slag and Other Wastes, page 10, lines 24 and 25: SMC and CFM
note that this section of the Plan states that the facility disposed of
most of its waste slags and other wastes in various areas across the Site
until the late 1980s. This statement is inaccurate. While slag was placed
in piles on site, only small amounts of other materials may have been
placed on the piles. Further, no evidence has been found during any of the
environmental investigations that chemical or hazardous wastes were placed
in the slag piles.
Ohio EPA response: Disagree. During operation of the facility, slags were
placed on the East and West Slag Piles. Other wastes were stored in
various locations (e.g. Former Baghouse Dust Pile, empty drum accumulation
area, former Grainal Slag Pile). In addition to the slags, solid waste was
placed on the West Slag Pile and East Slag Pile, including baghouse dusts,
scrap barrels, spent carbon anodes, etc.
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7. Comment: 3.5 Slag and Other Wastes, page 10, lines 28 and 29: SMC and CFM
note that this section states that the Grainal(R) Pile contained only
radioactive Grainal(R) slag. This statement is incorrect. Only Grainal(R)
made from zircon sands contained elevated concentrations of radionuclides.
Ohio EPA response: Concur. The Decision Document will be revised.
8. Comment: 3.6.1, Partial Decommissioning under the Atomic Energy Act, page
11, lines 4 and 5: SMC and CFM note that this section of the Preferred
Plan states "Shieldalloy excavated approximately 140,000 tons of soil and
slag, contaminated with chemical and radiological wastes...". The word
"chemical" should be removed. Soil from the operational area was excavated
on the basis of radiological characteristics only.
Ohio EPA response: The word "chemical" is retained because data from the
Remedial Investigation show that soils in operational areas have chemical
levels that are higher than background. However, the Decision Document
will clarify that soil from the operational area was excavated on the
basis of radiological characteristics only.
9. Comment: 3.6.1, Partial Decommissioning under the Atomic Energy Act, page
11, line 17: SMC and CFM note that this section of the Preferred Plan
states that "...after adding baghouse dust, Shieldalloy covered the West
Slag Pile with geotextile cloth and nine inches of sand." This statement
is inaccurate. While the cap material does include baghouse dust, that
dust was treated by a proprietary process to reduce the hexavalent chrome
and to solidify the material. The resultant Chemfix(R) material was placed
on the West Slag Pile and covered with a geotextile cloth and 12 inches of
sand. The Decision Document should be clarified accordingly.
Ohio EPA response: The sentence will be revised to indicate that treated
(Chemfix) and untreated baghouse dusts were placed on the West Slag Pile.
10. Comment: 3.6.1 Partial Decommissioning under the Atomic Energy Act, page
11, line 19:
SMC and CFM note that the Plan states that the total area of the West Slag
Pile after decommissioning was 11.8 acres. Area calculations performed and
reported in the RI/FS, which were based on digitized aerial photographs
and confirmed by land surveys, establish the total area of the West Slag
Pile as approximately 8.2 acres.
Ohio EPA response: Concur. The revision will be reflected in the Decision
Document.
11. Comment: 3.6.1, Partial Decommissioning under the Atomic Energy Act, page
11, lines 21 through 24: SMC and CFM note that this section states that
Shieldalloy installed a fence around the East Slag Pile to limit human
exposure to radiation consistent with NRC requirements. While Shieldalloy
did install a fence around the
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East Slag Pile in 1992, the purpose was to secure licensed material from
unauthorized removal.
Ohio EPA response: The sentence will be revised as follows:
" In 1992, Shieldalloy installed a fence around the East Slag Pile
consistent with NRC requirements. A purpose of the fence is to
secure licensed material from unauthorized removal."
12. Comment: 4.1, Hydrogeology and Groundwater, page 15, lines 25 and 26: SMC
and CFM note that the Plan states that past investigations have "typically
entailed the installation and sampling of monitoring wells to monitor the
shallow groundwater at the Site." The word "shallow" should be removed
from this sentence because it incorrectly implies that only shallow
monitoring wells have been installed at the Site. In fact, deep wells and
piezometer have also been utilized at the Site. (See page 2-3 of the final
Remedial Investigation report.)
Ohio EPA response: Concur. The word "shallow" will be deleted from the
text.
13. Comment: 4.1, Groundwater Quality, page 16, lines 20 and 23: SMC and CFM
note that this section lists the number of groundwater monitoring wells
sampled during each phase of the Remedial Investigation. These sentences
should be corrected to state that 24 (not 23) wells were sampled in the
first round and 7 wells (not 9) were sampled during the second round.
Ohio EPA response: Concur. Text will be revised to reflect the changes.
14. Comment: 4.2, Onsite Soils, page 17, lines 19 through 22: SMC and CFM note
that the Plan states "Soil samples from the perimeter of the slag piles
did not have elevated concentrations of metal contaminants, with the
exception of soils from 0 to 5 foot depth collected next to the slag
piles." In fact, only one sample collected at depths of 0-5 ft. near the
slag piles was found to contain elevated concentrations of metals (see
page ES-12 of the final Remedial Investigation report). Accordingly, the
Plan should be revised to read "...with the exception of a single soil
sample collected from the 0-5 ft. depth interval at MW-20 located next to
the East Slag Pile."
Ohio EPA response: The comment appears to contradict Figure 43 of the
Remedial Investigation which shows elevated vanadium in perimeter soils.
The text in the Decision Document will remain unrevised.
15. Comment: 4.2, Onsite Soils, page 17, line 24: SMC and CFM note that this
Section states that "Samples at the West Slag Pile contained calcium and
magnesium at elevated levels." The words "at the" should be replaced with
"collected from beneath...".
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Ohio EPA response: Concur. The sentence will read as follows:
"Samples collected from beneath West Slag Pile contained calcium and
magnesium at elevated levels."
16. Comment: 4.2, Onsite Soils, page 17, lines 32 through 34: SMC and CFM note
that the plan states "The Remedial Investigation detected above-background
levels of the radionuclides thorium-230, actinium-227, and radium-228 in
samples from the sedimentation delta on the south side of the West Slag
Pile...". This statement is not accurate.
Actinium-227 is not present at elevated concentrations in soil. Further,
it does not appear that radium-228 is present in such concentrations.
The final Remedial Investigation report states that only thorium-230 was
detected in this area. Actinium-227 was discussed in the correspondence in
Appendix R of the RI/FS in order to address the presence of elevated
levels of actinium-227 in certain slag. However, actinium-227 was never
detected in above-background concentrations at the Site. Further, although
statistical testing for radium-228 presented in Appendix R showed positive
results (i.e., significant with respect to background), the most likely
cause was that the background assumed from the thorium decay series (the
average for the state of Ohio was used) was too low.
Ohio EPA response: Disagree. Ohio EPA, the Ohio Department of Health (ODH)
and SMC/CFM discussed the issue of the presence of Actinium-227 and
Radium-228 in soil through several correspondences. In the SMC/CFM's June
26, 1996 letter to ODH, SMC/CFM clearly stated that "For soils, three
radionuclides were identified as being significantly greater than
background in the Wilcoxon Rank Sum test: actinium-227, radium-224, and
radium-228." Although Ra-224 was dropped from the consideration, Ac-227
and Ra-228 were definitely identified as chemicals of potential concern.
The background level of Ra-228 was agreed upon by Ohio EPA, SMC and CFM.
17. Comment: 4.4, Transport and Fate of Contaminants, page 18, line 38: SMC
and CFM note that this heading appears to be a major subject heading, not
a subheading under 4.4 Sediments and Wetland Soil.
Ohio EPA response: Concur. Text will be revised.
18. Comment: 4.7, Atmospheric Transport, page 19, lines 25 and 26: SMC and CFM
note that this section states that modeling was conducted to determine
concentrations of contaminants in air. However, it fails to report the
conclusion of that monitoring. To address this, SMC and Cypress Foote
suggest that the following sentence from the final Remedial Investigation
report should be added to this section: "The conservative modeling, which
included emissions and dispersion calculations, demonstrates that air
quality does not pose a risk at the Site."
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Ohio EPA response: The above passage from the Remedial Investigation will
be revised.
19. Comment: 4.8.1, Human Health Risk Assessment, page 20, lines 7 through 11:
SMC and CFM note that this paragraph presents Ohio EPA's radiological risk
assessment results. This section should be clarified by adding the
following text to the sentence that ends with "October 16, 1996": "...and
using conservative assumptions about the presence of actinium-227 and its
daughter products." This paragraph should also state that EPA's acceptable
risk range is 1x10-4 to 1x10-6.
Ohio EPA response: The text will be revised.
20. Comment: 4.8.2, Phase I Ecological Assessment, page 21, lines 27 through
31: SMC and CFM note that this section states that certain areas were
found to contain metal concentrations in soils which exceed USEPA
benchmark values for plant toxicity. It fails to report, however, that
subsequent study by a regional expert (Dr. Barbara Andreas of Miami
University) found no evidence of phytotoxic effects in vegetation.
See page ES-20 of the Remedial Investigation report.
Ohio EPA response: An examination of the noted report by Dr. Andreas
reveals that an evaluation of phytotoxicity was not an objective of her
study. In addition, significant areas at the Site are devoid of
vegetation. The noted observations of Dr. Andreas do not refute USEPA's
benchmark values for plant toxicity.
21. Comment: 4.8.2, Phase I Ecological Assessment, page 21, line 43 through
page 22, line 5: SMC and CFM note that this paragraph describes the
macroinvertebrate communities as being fair to poor and attributes
marginal habitat conditions downstream of SMC as being the result of
pervasive silt loading. To more accurately describe the conditions
encountered, this paragraph should be replaced with the following text:
"The macroinvertebrate communities at all stations in Chapman Run were in
the fair range, except at river mile 0.9, downstream from the Site, which
fell in the poor range. Habitat conditions were marginal at all locations
with the worst conditions being downstream of the Site where the substrate
is predominantly fine silt. Ohio EPA has concluded that the
macroinvertebrate community at river mile 0.9 is below what would be
expected given the habitat conditions."
Ohio EPA response: The above referenced text, as presented in the
Preferred Plan, summarizes the conclusions of Ohio EPA's evaluation of
Chapman Run and the associated wetlands.
22. Comment: 4.8.3, Phase II Ecological Risk Assessment, page 23, lines 25 and
26: SMC and CFM note that this section of the Plan discusses contaminants
present in Chapman Run and the possible sources of these contaminants. The
corresponding discussion in
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the final Remedial Investigation report includes the following statement
that was omitted from the Plan:
"The specific contribution of Site chemicals of potential concern to
these effects cannot be determined from the available data."
This statement should be added to the Plan.
Ohio EPA response: Regardless of whether of not the Ohio EPA can apportion
harm to individual aquatic species in Chapman Run and adjoining wetlands,
the overall level of chemicals of potential concern pose risk to the
aquatic community in these affected areas.
23. Comment: 5.0, Summary of the Feasibility Study, page 25, line 11, and page
26, line 10: SMC and CFM note that the text "Develop and screen" on page
25, line 11, should be replaced with "Identify and screen."
On page 26, under the heading of Offsite Sediment on line 10,
"recanalization" should be replaced with "rechannelization" (and
throughout the Plan).
Ohio EPA response: Concur. Both corrections will be included in the
Decision Document.
24. Comment: 5.1, West Slag Pile, page 26, lines 29 through 31. SMC and CFM
note that the section states that the total area of the West Slag Pile is
11.8 acres. See comment regarding 3.6.1, above, and conform.
This section also states that the West Slag Pile contains "most types of
radioactive and nonradioactive slag." This statement should be clarified
with the addition of the following language: "that have been historically
produced at the SMC Cambridge facility." The unit "tons" should be
inserted following the estimated weight of the slag (532,150). Also, the
estimated volume should be changed from 222,700 yd3 to 220,663 yd3 to be
consistent with the Remedial Investigation report.
Ohio EPA response: The sentence will read as follows:
"The West Slag Pile covers approximately 8.2 acres as shown in
Figure 1. It includes most types of radioactive and nonradioactive
slag that have been generated at the SMC Cambridge facility. The
West Slag Pile has an estimated weight of 532,150 tons, and an
estimated volume of 220, 663 yd3."
25. Comment: 5.1.2, Capping in Place, page 27, lines 26 through 27 and 30: SMC
and CFM note that the reference to "RC Chapter 3734" on line 30 is
inconsistent with the reference on page 28, line 21.
Ohio EPA response: Concur. The text will be revised.
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26. Comment: 5.1.2, Decommissioning Cap, page 27, lines 39 through 41: SMC and
CFM note that this paragraph inaccurately describes the completion of the
decommissioning cap. First, the words "baghouse dust" should be deleted
from this sentence because this material was converted into Chemfix(R),
which then was used for the existing decommissioning cap. Second, line 41
should be replaced with "the new clay layer that extends from the
Chemfix(R) layer down to ground surface, followed with 12 inches of top
soil placed over the entire pile. (See Figure 8)."
Ohio EPA response: The paragraph will read as follows:
"Completing the decommissioning cap would first require placing clay
around the perimeter of the West Slag Pile. The new clay layer would
have a thickness of 3 feet with a permeability 10-6 to 10-8 cm/sec
and would extend from the edge of the Chemfix/baghouse dust layer
down to ground surface, followed with 12 inches of silty sand and
geotextile fabric. Upon completion of the capping of the perimeter,
9 inches of top soil would be placed over the entire West Slag Pile.
(See Figure 8)"
27. Comment: 5.1.2, Hazardous Waste Cap, page 28, line 29: SMC and CFM note
that the permeability specification for the 1 foot thick drainage layer
should be revised to specify permeability equal to 1x10-2 cm/s or
greater, not less, as specified in the Plan.
Ohio EPA response: Concur. The text will be revised.
28. Comment: 5.1.2, Cost Estimates for Capping, page 28, line 41 through page
29, line 11: SMC and CFM note that the cost estimates presented in the
Plan generally show the difference among the different types of caps but
are not fully consistent with the final Feasibility Study report. These
costs should be revised to be consistent with the final feasibility study
report, or an explanation for the difference should be provided.
Ohio EPA response: The cost estimates presented in the Decision Document
will be revised to be consistent with the final Feasibility Study.
29. Comment: 5.1.4, Removal and Offsite Disposal, page 30, line 37: SMC and
CFM note that the acreage for the West Slag Pile is incorrect. Revise from
11.8 to 8.2.
Ohio EPA response: Concur. The text will be revised.
30. Comment: 5.1.4, Removal and Offsite Disposal, page 31, line 34: this
section states that 5,934 rail cars would be required for offsite
disposal. The number of rail cars specified in the final Feasibility Study
report is 4,865. The Plan should be revised to agree with the final
feasibility study report, or an explanation should be provided for the
difference.
Ohio EPA response: Concur. The text will be revised to reflect the number
of railcars needed as 4,865 which will be consistent with the final
Feasibility Study report.
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31. Comment: 5.2.2, Capping in Place, page 33, item 3, line 20: SMC and CFM
note that this item states that the cap would reduce the flux of radon
from the radioactivity in the matrix. A parenthetical sentence should be
added that states: "(There is no measurable radon flux from the East Slag
Pile, so the cap design includes no consideration of radon flux
reduction.)".
Ohio EPA response: Disagree. The text will not be revised.
32. Comment: 5.2.2, Hazardous Waste Cap, page 35, line 7: SMC and CFM note
that the permeability specification for the 1 foot thick drainage layer
should be revised to specify permeability equal to 1x10-2 cm/s or
greater, not less, as specified in the Plan.
Ohio EPA response: Concur. The text will be revised.
33. Comments: 5.2.4, Removal and Sale of the Slag, page 37, lines 37 and 38:
SMC and CFM note that this section describes the process for crushing and
sorting the slag for sale. The sentence stating that it may be possible to
separate very large chunks of slag exhibiting radioactivity for offsite
disposal should be deleted. There are no plans to segregate any slag from
this option based on radioactivity.
Ohio EPA response: Disagree. Although there are no plans as such, it
remains possible to separate large slag buttons if it is necessary to do
so.
34. Comment: 5.2.4, Cost Estimates, page 38, lines 15 and 16: SMC and CFM note
that this section states that the cost to remediate the East Slag Pile may
result in a profit; thus, cost estimates were not generated for this
alternative. To maintain consistency with the feasibility study report,
these lines should be replaced with the following language: "Because the
feasibility of selling the slag in the East Slag Pile has not yet been
established, there are no means by which to prepare cost data on it. Once
the ongoing evaluation of the feasibility of the sale has been completed,
a cost estimate for the sale will be prepared if the evaluation indicates
that selling the slag is technically, legally, and economically feasible."
Ohio EPA response: The above sentence will be revised in the Decision
Document.
35. Comment: 5.4.3, Recanalization, page 41, line 24: SMC and CFM note that
the subject heading should be revised to read "Rechannelization."
Ohio EPA response: Concur. Decision Document will be revised to be
consistent with the final Feasibility Study.
36. Comment: 6.1, Selection Criteria, page 48, item 2, lines 16 and 17: SMC
and CFM note that the selection criteria listed include "Compliance with
all state, federal and local laws and regulations." By law, the criteria
include only those laws and regulations that are applicable or relevant
and appropriate. The Plan should be revised to reflect this.
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Ohio EPA response: The text will be revised as follows:
"Compliance with all State, Federal and Local laws and regulations -
addresses whether or not a remedy will attain applicable, relevant
and appropriate requirements under federal, state, and local
environmental laws;".
37. Comment: 6.3.1, Excavate to Meet Performance Standards, page 49, lines 27
through 33: SMC and CFM note that the need for wetland soil and sediment
remediation and the areas and volumes to be remediated will be determined
during the Remedial Design phase of the project.
Ohio EPA response: The Decision Document will note that the areas and
volumes for the wetland soils and sediments will be determined during the
Remedial Design phase. However, the Decision Document will note that the
wetland soils and sediment will need to be remediated. Data presented in
the feasibility study and the Remedial Investigation (Ecological Risk
Assessment Phases I and II) shows that risk exists to potential ecological
receptors in these areas. The question of whether or not these areas need
remediation was answered during the Remedial Investigation and Feasibility
Study.
38. Comment: 6.3.2, Performance Standards for Cleanup of Soils and Sediments,
page 50, lines 7 and 11 through 14: SMC and CFM note that this section
specifies that the area and volume estimates for onsite sediment and
offsite sediment are based on a vanadium concentration of 1,280 mg/kg.
This section should be revised to state that the area and
volume estimates used in the Plan, including the figures, is based on a
vanadium concentration of 700 mg/kg.
This section also states that a combination of source control and sediment
remediation is expected to meet the preliminary remediation goal for
surface water (87 ug/L for vanadium). Ohio EPA has not accurately stated
the remediation goals for vanadium in surface water. Vanadium
concentrations outside the mixing zone should be limited to a maximum of
190 ug/L according to the State's report Biological, Sediment and Water
Quality Study of Chapman Run and Associated Wetlands. Furthermore, this
number should not be applied to onsite intermittent drainage ditches.
Ohio EPA response: Section 5.0 of the Decision Document has a table that
sets forth the following preliminary remediation goals (PRGs) for
vanadium: 700 mg/kg for wetland soils; 1280 mg/kg for sediments; and 87
ug/l for surface water. The Feasibility Study used a PRG figure of 700
mg/kg to compute the approximate amount of contaminated wetland soils and
sediments that would be excavated. The Remedial Design work would compute
more precisely the areas and volumes of contaminated soils and sediments
to be excavated.
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39. Comment: 6.3.2, Performance Standards for Cleanup of Soils and Sediments,
page 50, lines 15 and 16. SMC and CFM note that this section refers to a
table in Section 6.11 which outlines the cleanup levels for each medium at
the Site. There is no Section 6.11 in the Plan.
Ohio EPA response: The reference to Section 6.11 will be deleted from the
Decision Document. The sentence will now read: "Please refer to the table
in this section..."
40. Comment: 6.3.2, Performance Standards for Cleanup of Soils and Sediments,
page 50, lines 30 and 31: SMC and CFM note that this section states that
the major radionuclide detected in most media during the Remedial
Investigation was thorium-230 (Th-230). This section should be corrected
to state that thorium-230 was detected only in soils. Thorium-230 was not
detected in surface water or groundwater in concentrations above
background.
Ohio EPA response: For soils, please see the comments on Question 4.2
(Onsite Soils, page 17, line 32 through 34). Th-230 was not the only
radionuclide identified in the RI/FS report. For groundwater, PTI clearly
stated that "The data on radionuclide concentrations in wells MW-09 and
MW-19 were used to define background concentrations. Thorium-230 is the
only radionuclide that occurs above background concentrations in two of
the wells (MW-12 and MW-13)." Therefore, Th-230 was detected in
groundwater in concentrations slightly above background at least at MW-
12.
41. Comment: 6.3.2, Performance Standards for Cleanup of Soils and Sediments,
page 50, lines 33 through 35: SMC and CFM note that this section discusses
the results of Ohio EPA's independent data validation, which identifies
protactinium-231m and actinium-227 as present in Site soils at levels at
least slightly above background. Based on this finding, the Plan presents
the recommendation that samples collected during the Remedial Design phase
be analyzed for protactinium-231m and actinium-227. The statement
regarding the presence of these radionuclides at concentrations above
background is incorrect. The statistical comparisons for soil between
background and site locations indicated that neither protactinium-231m nor
actinium-227 were present in elevated concentrations. (See Appendix R of
the Remedial Investigation report.) At the State's request, these two
radionuclides and their progeny were included in the risk assessment
because they existed in elevated concentrations in the slag.
Ohio EPA response: Please refer to comments on Question 4.2 (Onsite Soils,
page 17, line 32 through 34). Pa-231 with a half-life of 3.2E4 years is
the parent of Ac-227 with a half-life of 21.6 years. The presence of
Ac-227 above background strongly indicates the presence of Pa-231. The
state still intends that future analysis for soils during the RI/FS phase
be analyzed for Pa-231 and Ac-227.
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42. Comment: 6.3.2, Performance Standards for Cleanup of Soils and Sediments,
page 51, lines 3 through 15: SMC and CFM note that this section presents a
table with vanadium cleanup levels for each medium. The vanadium cleanup
level for wetland soils is listed as 700 mg/kg. For consistency with the
Remedial Investigation report, this value should be listed as 1,280 mg/kg
with a footnote explaining that this value will be refined during the
Remedial Design phase.
Ohio EPA response: Please refer to comment 38.
43. Comment: 6.4.1, Capping of the West Slag Pile, page 52, lines 15 through
19: SMC and CFM note that this section states that "Disposal of the solid
and/or chemical waste materials currently found in the West Slag Pile
would require disposal in either solid waste landfills or hazardous waste
facilities." There is no documentation in the Remedial Investigation
report that solid wastes or hazardous wastes are present at the Site that
would require disposal offsite in a solid waste or hazardous waste
facility.
Ohio EPA response: Disagree. The sentence will not be revised.
44. Comment: 6.5, East Slag Pile, page 53, lines 18 through 24 and lines 28
through 32. SMC and CFM note that this section proposes a six-month period
for Shieldalloy to evaluate the marketability of the slag found in the
East Slag Pile. At this point, it is not possible to commit to a schedule
for the evaluation of marketability of the East Slag Pile. In addition,
assessing marketability must be coordinated with the NRC. A more
appropriate approach for this issue would be to request a plan for the
preparation of a marketing study, which could be updated periodically to
report on progress.
Ohio EPA response: Ohio EPA can consider any request to modify the
schedule when it reviews SMC and CFM's work plan for the Remedial Design
and Remedial Action.
45. Comment: 6.7.2 Controls for Former Process Areas, page 55, lines 17
through 22: SMC and CFM note that this section states that levels of
vanadium in the former vanadium pentoxide drum accumulation area would
result in unacceptable risks through inhalation of vanadium. Hence, the
Plan recommends that future use of this area be controlled through
institutional controls and revegetation or removal of contaminated soils.
The assertion of unacceptable risks through inhalation of vanadium is not
supported by the studies that were conducted at the Site. Indeed, the
Remedial Investigation ruled out the inhalation pathways as a potential
risk for vanadium (and for any other nonradiological compound).
Accordingly, the Plan recommendation for controls in this area is
unfounded and unnecessary.
Ohio EPA response: The Decision Document will be revised.
46. Comment: 6.7.2, Controls for Former Process Areas, page 55, lines 24
through 29: SMC and CFM note that this section presents requirements for
the proper disposal of radioactive slag that may be present beneath
buildings at the Site. The Plan should be
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revised to note that the final disposition of this material is addressed
in the previously prepared Decontamination Report (ENSR Jan. 1990) for the
facility.
Ohio EPA response: SMC/CFM comment is noted. No response necessary.
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II. COMMENTS FROM U.S. NUCLEAR REGULATORY COMMISSION
1. Comment: The NRC asked that additional consideration be given to the
potential adverse impacts to the ecosystem that could occur from
excavating the soil and sediments from the wetlands, ditches, and stream
channels. These impacts could include the loss of wetlands, short-term or
long-term impairment of wetlands, or loss of Chapman Run habitats. The
potential impacts of digging up the wetland soils, on-site sediments, and
off-site sediments should be documented, discussed, and considered in the
Preferred Plan.
Ohio EPA response: The potential impacts of soil and sediment removal from
the affected areas are not specifically discussed in the Preferred Plan,
but are documented and discussed in the Feasibility Study, Section 5.3.3,
5.3.4, and 5.3.4. A sentence will be included in the Decision Document
that states the following:
"For a more detailed analysis of all the alternatives please refer
to the Feasibility Study."
2. Comment: The NRC notes that some of the considered alternatives do not
appear to be biologically sound alternatives (e.g., rechannelization,
capping the sediments and soils with gravel or top soil, etc.). A
rationale as to why these were considered and why they were eliminated
would be helpful in the document.
Ohio EPA response: The alternatives were evaluated to provide a broad base
from which to choose. Initially, the alternatives were not eliminated from
further analysis because it appeared that they had some potential for
remediation of the areas of concern. Ohio EPA eliminated these
alternatives from further consideration in the Preferred Plan. When
evaluated against the nine criteria presented in Section 6.1 of the
Preferred Plan, it was determined that they provided only limited
benefits.
3. Comment: Page 41 - "Natural Recovery" is misnamed. This alternative
involves the introduction of sand into the ecosystem. It is recommended
that a true natural recovery alternative be added to the Preferred Plan
for the wetland soils, on-site sediments, and off-site sediments. This
alternative would assume that the sources of contaminants would be
controlled and that the wetland soils, onsite sediments, and offsite
sediments would be allowed to naturally recover over time. Periodic
monitoring of the site would take place to evaluate the success of the
recovery.
Ohio EPA response: The Natural Recovery Alternative for onsite and offsite
sediments is given some consideration in the no action alternative. The no
action alternative presented for both the onsite and offsite sediment
considers taking no action to remove or reduce the contaminants through
treatment or removal from the affected areas. Sources of any future
contaminants would be controlled through engineering controls and a
stormwater
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discharge permit would be issued by Ohio EPA. This alternative is discussed in
Section 6.6 of the Preferred Plan. See, also, Section 5.4.2 of the Preferred
Plan.
4. Comment: The basis of all the costs in the Preferred Plan are not
referenced. Costs that are documented in the FS should be referenced as
such. A basis or a reference to the basis of all costs that are not from
the FS should also be provided.
Ohio EPA response: A new sentence will follow the costs presented in
Section 6.9 to clarify the source of the information. The sentence will
read as follows:
"The costs presented above were obtained from the Feasibility Study.
For a detailed breakdown on the costs, please refer to Appendix C of
the Feasibility Study."
See, also, Section 5.0 of the Preferred Plan.
5. Comment: The NRC notes that it appears that the conclusions of the
Preferred Plan are inconsistent with the Feasibility Study for the
Cambridge facility. The Preferred Plan states on page 49 that, "The
preferred alternative includes the excavation and removal of contaminated
sediments and soils from on-site drainage channels, sedimentation deltas,
wetland soils, and Chapman Run." This is different from the FS, page 602.
The FS states that an alternative for wetlands soils could be a
combination of focused sediment removal and no action for the remaining
areas. Please provide the rationale for these differences.
Ohio EPA response: The Feasibility Study states that a combination of
removal and "no-action" may have potential to meet the remedial action
objectives for some wetlands soils. This matter would be further studied
and addressed during the Remedial Design stage.
6. Comment: The NRC recommends that a different approach be considered for
the Preferred Plan. Why not control the sources of the contaminants (i.e.,
the active slag pile operations) and then allow the natural processes
(i.e., wetland bioattenuation, natural sedimentation, and natural
biodegradation) to restore the area? This is similar to the approach
mentioned on page 6-2 of the FS for wetland soils but would also apply to
the on-site sediments and off-site sediments. The natural processes may
help the site to recover to the point that the risk becomes acceptable to
ecological receptors in the streams and wetlands. If, however (in the
future after the west slag pile was capped, as part of the periodic
monitoring) it was found necessary to dig up soils and/or sediments and
place them on the west slag pile; a new cell could be accommodated easily
on top of the pile. By taking this phased approach to the remediation of
soil and sediment contamination, wetlands may be preserved and unwanted
resuspension of metals could be avoided.
Ohio EPA response: The process of removing contaminated sediments and soil
from affected areas will cause disruption; however, the disruption is
short term. The
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disturbed areas can then be allowed to naturally recover and should no
longer be impacted by contamination.
7. Comment: Page 50, first paragraph - The NRC requests that a map be
included in the Preferred Plan which depicts the expected area of on-site
and off-site sediments that would be removed using the 1280 mg/kg
criteria.
Ohio EPA response: The figures (Figures 6 and 7) which were attached to
the Preferred Plan will be included in the Decision Document. A note will
be included following the first sentence on page 50 which refers to the
Figures 6 and 7 and the clean up criteria of 1280 mg/kg.
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III. COMMENTS FROM PUBLIC MEETING
1. Comment: Mr. Bauman states that the State of Ohio will receive civil
penalties but the local community will get nothing.
Ohio EPA Response: This comment does not apply to the Preferred Plan.
Remediation of the Site is for the benefit of the community and state.
Civil penalties that would be collected under the proposed consent order
would be distributed as required by state law, including Ohio Revised Code
Sections 6111.09(B) and 3734.28. RC Section 6111.09 (B) provides for civil
penalties to go into (1) the environmental education fund, which was
created to develop, implement, and administer a program to enhance public
awareness and understanding of issues affecting environmental quality; and
(2) the water pollution control administration fund, which supplements
other moneys available for the administration and enforcement of Ohio
EPA's water pollution control program. R.C. Section 3734.28 allocates some
civil penalties to the hazardous waste clean-up fund.
In addition, the proposed Consent Order includes a wetlands project that
calls for the enhancement and/or restoration, and preservation, of
approximately 40 to 45 acres of wetlands in the vicinity of the
Shieldalloy facility, if available, or in the Cambridge, Ohio area.
Shieldalloy and Cyprus Foote would expend up to $276,000 on this project.
It is generally recognized that wetlands are one of our most important
ecosystems. They are known to cleanse polluted waters, prevent floods,
recharge ground water aquifers, and provide unique habitats for a variety
of flora and fauna. The community around the Shieldalloy site would
receive environmental benefits from the wetlands
enhancement/restoration/preservation project that would be undertaken by
Cyprus Foote and Shieldalloy.
2. Comment: Mr. Bauman inquired as to lost property values around Shieldalloy.
Ohio EPA Response: Mr. Bauman raises a concern about lost property values
caused by the proposed remedy. No documentation has been submitted that
demonstrates that property values have actually decreased, or will
decrease in the future, due to the preferred remedy. The East and West
Slag Piles have been located at the Shieldalloy facility for several
decades. The remedy is designed to ensure protection of human health and
the environment at the Site and surrounding areas.
3. Comment: Mr. Bauman noted that no health studies on the consumption of
wildlife from Shieldalloy property and Chapman Run has been conducted.
Wildlife includes cray fish.
Ohio EPA Response: As part of the RI/FS process, health studies were
conducted for ingestion of fish caught in Wills Creek/Chapman Run near the
Shieldalloy facility. Although no human health risk assessment was
specifically conducted for the ingestion of crayfish, an equivalent
assessment was conducted for carp, which is a sediment
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feeding fish. As summarized in Table 107 of Remedial Investigation report
of September 1996, none of the carcinogenic chemicals of concern for
off-site water and sediments were detected in fish tissue. The noncancer
hazard index is 0.05, which is far below the USEPA human health protection
criterion of 1.0. Radiological tissue analyses from fish collected by the
Ohio EPA in Wills Creek indicated that thorium and uranium were not
detectable in fish tissue.
4. Comment: Mr. Bauman asked why is the State allowing Shieldalloy to place
contaminated sediments and soils, following excavation, atop the West Slag
Pile, and not requiring disposal in a solid waste facility?
Ohio EPA response: The existing contamination in the onsite/offsite
sediments and wetland soils are the result of historical plant operations.
Placing contaminated soils and sediments atop the West Slag Pile, and
capping both, improves protection of human health and the environment at
the Site. The cap would have to be inspected regularly and repaired if
needed.
5. Comment: Mr. Bauman requested clarification on the risks from inhalation
of dusts during removal of the slag from the Site.
Ohio EPA response: An important pathway for public exposure to radiation
is through inhalation of suspended radioactive particulate in the air. The
mechanical disturbance involved in removing the slag from the Site,
including heavy digging operations, would generate higher emissions of
dust particles. Therefore, higher particulate concentrations in the air
would result. In general, the Particulate Emission Factor with
construction activity can be one thousand times higher than without such
activity.
6. Comment: Mr. Bauman stated that the State has affected the citizens of
Guernsey County's ability to recoup losses by the Covenant Not to Sue in
the Consent Order and the omission of a recitation of violations of Ohio
laws, rules or regulations.
Ohio EPA response: This comment does not address the Preferred Plan. The
proposed Consent Order does not apply to any individual rights of
citizens.
7. Comment: Mr. Bauman asked why the community will not be afforded the
protection of a 450 acre buffer around the slag piles. The buffer will be
a requirement for the proposed low level radioactive waste disposal site
to be sited in Ohio.
Ohio EPA response: A buffer is not a requirement for remediation of
existing contaminated sites. Ohio EPA notes that the proposed Consent
Order would potentially require the purchase of wetlands in the areas
surrounding the Site.
8. Comment: Mr. Bauman asked why the community will not be reimbursed for the
loss of property values as will those who will be affected by the proposed
low level radioactive disposal site.
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Ohio EPA response: Please refer to comments two and six.
9. Comment: Mr. Bauman requested that the comment period be extended 60 days
from the deadline of January 29, 1997.
Ohio EPA response: Upon receiving requests for an extension of the comment
period, Ohio EPA granted a 30-day extension until February 28, 1997 to
stay consistent with the court schedule in SMC's bankruptcy case.
10. Comment: Mr. Bauman states that the risk scenarios presented in the
Preferred Plan are incorrect and improper. Specifically, the farm family
scenario improperly places the family's farm well not atop the east or
west slag pile or even atop the sediments pile, but instead places it in a
safe zone between the two piles away from any and all contaminants and
radioactive materials.
Ohio EPA response: The comment appears to refer the Environmental Impact
Study (EIS) being prepared by the U.S. Nuclear Regulatory Commission. The
farm family risk assessment as described above was unnecessary for RI/FS
Report due to the absence of ground water contamination.
11. Comment: Mr. Bauman stated that the radiological risks to the hypothetical
farm family are incorrect and do not accurately estimate the risks for
this scenario. The exposure to a farm family would be in excess of 6,000
millirems per year.
Ohio EPA response: See comment ten. A dose assessment for the
radionuclides contained in the West Slag Pile was conducted and documented
in the RI/FS report. The calculation modeled the migration of
radionuclides through multiple environmental media, including groundwater,
over time and calculated the impact of this migration on a family living
on the site. The calculated maximum dose occurred 1,000 years after
completion of the remediation. That dose was about 1.196E-5 mrem/year,
which is far below many guidelines. The capped slag pile would be under
institutional control. No wells would be allowed to be installed through
the capped pile.
12. Comment: Mr. Bauman states that Ohio EPA data shows that groundwater
surrounding the East Slag Pile fails to meet state and federal safe
drinking water standards. Mr. Bauman asks how, based on this information,
will the State approve insitu disposal of the slags.
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Ohio EPA response: The parameters of concern at this site (e.g. vanadium,
chromium, radiological parameters) were not found at concentrations that would
indicate that a release to ground water from the East or West Slag Piles had
occurred. This was based upon two separate sampling events of the monitoring
network at the site. The presence of sodium, magnesium and alkalinity in the one
well near the East Pile was used as justification for implementing measures to
protect ground water, even though the ground water monitoring results had
indicated that the site had not impacted ground water for the parameters of
concern.
13. Comment: Mr. Bauman expressed concern that Ohio EPA is prepared to select
the remedy of capping even though the Remedial Investigation/Feasibility
Study shows that the cap will fail in the future.
Ohio EPA response: According to the Remedial Investigation and the
Feasibility Study, the solid waste cap has an estimated life of over 1000
years, provided that long-term maintenance is conducted. Long-term
maintenance and management of the Site would be assured through the use of
a financial assurance mechanism.
Please refer to Appendix E of the Feasibility Study for more information.
14. Comment: Mr. Bauman questioned why Ohio EPA's Preferred Plan does not
evaluate an alternative which includes the removal of the Chemfix
material. The commentor stated that Chemfix contains hazardous wastes
(i.e. chromium, vanadium) which is leaching from this material.
Ohio EPA response: The material would be protected from weathering once
capped with a solid waste cap. Once the Chemfix material is capped onsite,
it would receive a similar degree of protection as if it had been removed
and disposed of in a solid waste landfill.
15. Comment: Mr. Bauman requested that the Ohio EPA require a hazardous waste
cap for the West Slag Pile and East Slag Pile.
Ohio EPA response: The results of the Feasibility Study show that, in this
case, the additional components in a hazardous waste cap would not be
necessary in order to protect human health and the environment. A solid
waste cap provides the needed protection.
16. Comment: Mr. Bauman requested that any and all documents be released to
members of the community.
Ohio EPA response: Under Section 149.43 of the Ohio Revised Code, the
State of Ohio has the responsibility to make available to any person all
public records that pertain to a particular matter of interest. All public
records related to the Shieldalloy site can be made promptly available to
any person desiring to see them by making arrangements with Ohio EPA's
Southeast District Office, (614) 385-8501.
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<PAGE> 163
17. Comment: Mr. Bauman asked why Senate Bill 130 does not apply to the
Shieldalloy site.
Ohio EPA response: Whether or not radioactive waste at the Site may be
classified as "low-level radioactive waste," the acts of disposal and
commingling at the Site took place prior to enactment of Senate Bill 130.
18. Comment: Randi Pokladnik requested an extension of the comment period due
to inaccessibility of the material. All the material is located at the
Byesville Public Library, which limits the number of copies one can make
to twenty.
Ohio EPA response: Please refer to comment number nine above.
19. Comment: Randi Pokladnik asked if abandoned mines below the slag piles
could subside creating a ground and surface water contamination problem.
Ohio EPA response: During the Remedial Investigation, mining maps for the
Shieldalloy site and vicinity were obtained from the Ohio Department of
Natural Resources (ODNR), Division of Reclamation. The maps for this area
show that the area directly below was not deep mined, shallow mined or
stripped mined. Figure 17 of the Remedial Investigation shows the location
of mining activities in and around Shieldalloy.
Additionally, borings were obtained during the installation of monitoring
wells and piezometer. The borings show that no voids were found which
would indicate that abandoned mines exist within close proximity of the
slag piles. Section 5.2.2 of the Remedial Investigation discusses site
geology.
20. Comment: Randi Pokladnik stated that data from the remedial investigation
shows that in addition to radioactive contaminants, PCB is present. She
expressed concern with the onsite incineration of PCB.
Ohio EPA response: During the Remedial Investigation, soil samples were
collected and analyzed for chemical and radiological contaminants. PCB was
a potential chemical of concern, initially, but the data shows no
unacceptable risks. From these results it was determined that remediation
of PCBs is not required.
21. Comment: Randi Pokladnik asked if the human health risk assessment
evaluates risks to children.
Ohio EPA response: Risks to children were evaluated as part of the human
health risk assessment. Risk was calculated for children who could
potentially ingest soil, sediment, and wetland soils from the site.
Hypothetical risk was calculated for children with a dermal exposure to
sediments, wetland soils, and surface water. For more information, please
refer to Section 6 of the Remedial Investigation. The
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<PAGE> 164
calculations and exposure assumptions for each scenario is presented in
Tables 94 - 100.
In addition to the chemical risk assessments noted above, hypothetical
radiological risks to children were calculated. Table 119, Remedial
Investigation, is a summary of exposure estimates for the consumption of
vegetables, meat and milk from the Shieldalloy property. In sum, the
remedy accounts for and addresses risk to children.
22. Comment: The cost of the caps are incorrectly estimated. The cost of the
caps are closer to $20 - $25 million, not $8 million as presented in the
Preferred Plan and public meeting.
Ohio EPA response: The cost estimates presented in the Preferred Plan are
based upon information presented in the Feasibility Study (Appendix C and
E). The cost estimates for a solid waste cap for both the East and West
Slag Piles were evaluated by the Ohio EPA's Division of Solid and
Infectious Waste Management (DSIWM). The DSIWM determined that the costs
presented in the Feasibility Study, and thus the Preferred Plan, are
consistent with municipal solid waste landfills currently operating in the
area.
For a detailed overview of all capping costs please refer to Appendix C
and E of the Feasibility Study.
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IV. OTHER WRITTEN COMMENTS
1. Comment: The commentor noted that a more "immediate action" should be
taken to close the Site, thus protecting the community and environment in
a more timely manner.
Ohio EPA response: The timeframe of 3 to 5 years as presented by Ohio EPA
during the public meeting is a conservative estimate which the Agency
considers realistic to complete remediation activities at the Site.
2. Comment: A commentor noted that an alternative should be evaluated which
looks at excavating on-site slag and moving it to an abandoned strip mine
or other location.
Ohio EPA response: Moving the material to a strip mine would increase
risks compared to onsite containment. Furthermore, there is no provision
in Ohio's coal mining law that would allow for such disposal in this
instance.
3. Comment: One commentor asked if there was any danger of radioactive
contaminants in the air from the Shieldalloy site.
Ohio EPA response: During the investigation of the Shieldalloy site, the
air pathway was evaluated. It was determined that the slag, as it
currently exists in the East and West Slag Piles, is not easily disturbed
with air movement. Due to the hardness of the slag, large amounts of dust
are not released. The remedy includes capping, which would further reduce
dust emissions in the long term. The remaining areas of the Site and
adjacent wetlands are covered by vegetation or water. Currently there is
not appreciable risk from dust from the Site.
4. Comment: One commentor questions the threat to human health the slag poses
and the need to address any of the environmental concerns at the Site.
Additionally, the commentor notes that the State should leave the Site
alone, not hold public meetings to inform the public of the results of the
studies, and not require Shieldalloy and Cyprus Foote Mineral to spend
money to remediate the Site.
Ohio EPA response: The results of the human health risk assessment, as
conducted during the remedial investigation, identified the following
media as presenting potential risks to human health or the environment:
o East and West Slag Piles
o Offsite slag (included for the purpose of evaluating site remedial
alternatives: offsite slag is not otherwise evaluated in the
feasibility study)
o Wetland soil
o Onsite sediment
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<PAGE> 166
o Offsite sediment (Chapman Run)
o Surface water
As demonstrated in the Feasibility Study, the Site poses risks to human
health and the environment. The Decision Document sets out Ohio EPA's
selected remedy to protect human health and the environment in a cost
effective manner.
5. Comment: Several commentors expressed concern regarding slag from past
Shieldalloy/ Cyprus Foote Mineral operations which had been transported
offsite to private properties.
Ohio EPA response: If firm plans are expeditiously developed for the
remediation of this slag, Ohio EPA will evaluate whether to provide for
return of the slag to the Site.
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Amend 3 to Exh 10.6
DECLARATION FOR THE DECISION DOCUMENT
Shieldalloy Metallurgical Corporation Site
Cambridge, Ohio
The Shieldalloy Metallurgical Corporation facility is located near Cambridge,
Ohio on State Route 209, Guernsey County, Ohio ("the Site"). The Shieldalloy
facility has produced vanadium and other metal alloys since the 1950s. The
facility has disposed much of its wastes, including radioactive slags and
vanadium-contaminated soils, at the Site. The Site includes two slag piles,
known as the East Slag Pile and the West Slag Pile, that span 11 acres. The Site
also has contamination in soils, wetlands, and Chapman Run.
Ohio EPA prepared a Preferred Plan to describe its proposed strategy to abate
pollution at, and prevent migration of wastes from, the Site. On or about
December 13, 1996, Ohio EPA publicly announced the availability of the Preferred
Plan and requested comments from interested members of the public. The Byesville
Public Library held for public review copies of the Preferred Plan and other
documents relevant to remediation of the site. On January 6, 1997, Ohio EPA held
a public information session on the Preferred Plan at the Guernsey County Public
Library. On January 22, 1997, Ohio EPA held a public hearing on the Preferred
Plan at the Pritchard Laughlin Center, Cambridge. Ohio EPA extended the public
comment period to February 28, 1997 as a result of a request from an interested
member of the public.
Ohio EPA has considered the public comments. Attached to this document is Ohio
EPA's Responsiveness Summary, which describes the comments Ohio EPA received and
Ohio EPA's responses to them.
This Decision Document describes the remedial action selected by Ohio EPA for
the Shieldalloy Site. This Decision Document has three parts. First, it
describes the history of the Site, including facility operations, waste
generation and disposal, and state and federal oversight. Second, this Decision
document summarizes the remedial investigation and feasibility study report for
the Site. The remedial investigation is a study of the type and extent of the
contamination at the Site. The feasibility study is a description of options for
addressing the contamination.
Ohio EPA oversaw the development of the remedial investigation and feasibility
(RI/FS) study by Shieldalloy Metallurgical Corporation and Cyprus Foote Mineral
Company (former Site owner). These companies prepared the RI/FS report under the
requirements of an agreed court order. On July 11, 1995, the Guernsey County
Court of Common Pleas issued the order (Consent Order for Preliminary
Injunction) in the case of State of Ohio, ex rel Montgomery v. Shieldalloy
Metallurgical Company and Cyprus Foote Mineral Company, Case No. 95CV242.
<PAGE> 168
The third part of this Decision Document is a description of the remedy selected
by Ohio EPA for abating pollution at, and preventing migration of wastes from,
the Site. Ohio EPA's selected remedy for the Shieldalloy Site includes:
1. Excavate and remove contaminated sediments and soils from the Site;
2. Place excavated sediments and soils on top of the West Slag Pile;
3. Cap the West Slag Pile in accordance with state solid waste rules
under Ohio Administrative Code Chapter 3745-27;
4. Ensure long term care of the West Slag Pile and;
5. For the East Slag Pile:
a. if feasible, sell and legally remove East Slag Pile materials,
expeditiously; and/or
b. if the foregoing is not feasible, then cap the East Slag Pile
in accordance with state solid waste rules under Ohio
Administrative Code Chapter 3745-27 and ensure long term
care.
The remedy selected by Ohio EPA is substantially the same as the remedy proposed
by Ohio EPA in the Preferred Plan. The remedy meets applicable, relevant and
appropriate requirements. Treatment of the radioactivity in the slag is not
practicable. According to the RI/FS report, the projected cost of this remedy is
$10.3 million. For a more complete description of Ohio EPA's selected remedy,
see section 5.0 of the Decision Document. Actual or threatened releases of
hazardous substances from the Site, if not addressed by implementing the remedy
selected in this Decision Document, may endanger public health, welfare or the
environment. This Decision Document does not preclude Ohio EPA from seeking
other remediation at the Site in the future in a manner not inconsistent with
the U.S. Environmental Protection Agency's National Contingency Plan (NCP) at
Title 40 of the Code of Federal Regulations, Part 300. Procedures under the NCP
call for periodic review to ensure that the remedy will protect human health and
the environment. This Decision Document does not address remediation of
Cambridge area locations away from the Site where radioactive slag from the
facility was used as fill material.
- ------------------------------------- --------------------------
Jan Carlson, Chief Date
Division of Emergency & Remedial Response
Ohio Environmental Protection Agency
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<PAGE> 169
Amend 4 to Exh 10.6
DRAFT
SUBMITTED FOR SETTLEMENT
PURPOSES ONLY
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
X
In re ) Jointly Administered
) Chapter 11 Case Nos.
METALLURG, INC. and ) 93 B 44468 (JLG)
SHIELDALLOY METALLURGICAL ) 93 B 44469 (JLG)
CORPORATION, )
)
Debtors. )
)
X
SETTLEMENT AGREEMENT OF ENVIRONMENTAL CLAIMS
AND ISSUES BY AND BETWEEN THE DEBTORS
AND THE STATE OF OHIO
WHEREAS Metallurg, Inc., ("Metallurg"), a New York corporation, and
Shieldalloy Metallurgical Corporation, ("Shieldalloy"), a New York corporation
(collectively, the "Debtors"), filed with the United States Bankruptcy Court for
the Southern District of New York (the "Court") voluntary petitions for relief
under Title 11 of the United States Code (the "Bankruptcy Code") on September 2,
1993 (the "Petition Date") (the "Chapter 11 Cases").
WHEREAS the State of Ohio ("Ohio"), on behalf of the Ohio Environmental
Protection Agency ("OEPA") and the Ohio Department of Health ("ODH"), filed
Proofs of Claims numbered 298.01, 298.02, 299.01, 299.02, 300.01, and 300.02
(respectively, the "Ohio Proofs of Claim") in the Chapter 11 Cases on or about
April 11, 1994, respectively, alleging inter alia liability of the Debtors to
Ohio under the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. ss. 9601 et seq. ("CERCLA"), and the Ohio
Revised Code, Chapters 3734 and 6111.
WHEREAS Metallurg owns all of the outstanding stock of Shieldalloy.
<PAGE> 170
WHEREAS Shieldalloy owns and operates a metal alloy and specialty metals
manufacturing facility located in Cambridge, Ohio (the "Cambridge Site").
WHEREAS in the absence of this Settlement Agreement, the Debtors would
have objected to certain allegations in the Ohio Proofs of Claims filed in the
Chapter 11 Cases and commenced additional litigation to determine the extent and
necessity of financial assurances to be posted by the Debtors in favor of Ohio
upon consummation of the Plan of Reorganization.
WHEREAS the Debtors and Ohio desire to resolve the Ohio Proofs of Claim
including certain alleged environmental liabilities of the Debtors and the
amount of financial assurances to be posted by the Debtors in connection with
the Cambridge Site.
WHEREAS the Debtors seek, to the maximum extent permitted by law, to
obtain protection, through the resolution of environmental liabilities for the
Cambridge Site as set forth herein, from and against all claims that have been,
or may in the future be, asserted for response costs and natural resource
damages.
WHEREAS the Debtors have filed a Second Amended and Restated Joint Plan of
Reorganization Pursuant to Chapter 11 of the Bankruptcy Code dated May 24, 1996
(the "Bankruptcy Code") and a Disclosure Statement dated May 15, 1996.
WHEREAS the parties have completed negotiations and agreed to a Consent
Order for Permanent Injunction ("COPI") to be filed in the Court of Common Pleas
for Guernsey County annexed hereto substantially in the form of Exhibit A, that
will, among other things, set forth Shieldalloy's obligation to remediate and
restore property on or near the Cambridge site.
WHEREAS in consideration of, and in exchange for, the promises and
covenants herein, and intending to be legally bound hereby, the Debtors and Ohio
through their authorized representatives hereby agree to the terms and
provisions of this Settlement Agreement.
WHEREAS settlement of the matters governed by this Settlement Agreement is
in the public interest and an appropriate means of resolving these matters.
NOW, THEREFORE, without the admission of liability or any adjudication on
any issue of fact or law, and upon the consent and agreement of the parties to
this Settlement Agreement by their attorneys and authorized officials, it is
hereby agreed as follows:
2
<PAGE> 171
DEFINITIONS
The definitions set forth in this Agreement shall have the meaning
as defined in the form of COPI attached as Exhibit A (or, if not in the COPI, in
the Plan), unless otherwise defined herein following terms shall have the
following meanings:
a. "COPI" shall mean Consent Order for Permanent Injunction to be
entered in the Court of Common Pleas, Guernsey County, Ohio substantially in the
form of Exhibit A.
b. "Disclosure Statement" shall mean the disclosure statement filed
by the Debtors with the Bankruptcy Court, as may be amended from time to time.
c. "Effective Date" shall have the meaning as defined in the Second
Amended Plan of Reorganization.
d. "Final Order" shall mean any order of the Court as to which the
time to appeal, petition for certiorari, or move for reargument or a 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 the Debtors.
Additionally, in the event that an appeal, writ of certiorari, or reargument or
rehearing thereof has been sought, such order of the Court shall have been
affirmed by the highest court to which such order was appealed, or certiorari
has been denied or from which reargument or rehearing was sought, and the time
to take any further appeal, petition for certiorari or move for reargument or
rehearing shall have expired.
e. "Ohio" shall mean the State of Ohio, "OEPA" shall mean the Ohio
Environmental Protection Agency and "ODH" shall mean the Ohio Department of
Health.
f. "Plan of Reorganization" or "Plan" shall mean any Plan of
Reorganization that has been confirmed or becomes effective in the Chapter 11
cases, as it may be amended from time to time.
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<PAGE> 172
g. "Preconfirmation" refers to the period of time preceding
confirmation of the Plan.
h. "Postconfirmation" refers to the period of time on or after
confirmation of the Plan.
i. "Prepetition" refers to the time period prior to September 2,
1993.
j. "Postpetition" refers to the time period from and after September
2, 1993.
k. "Second Amended Plan of Reorganization" refers to that certain
joint plan of reorganization dated May 24, 1996 as filed by the Debtors with the
Bankruptcy Court for the Southern District of New York.
l. "Settlement Agreement" means this Settlement Agreement.
m. "Site" shall mean the Cambridge facility described above.
n. "United States" means the United States of America.
o. Environmental terms not otherwise defined shall have the same
meaning provided by the governing environmental law at issue. Bankruptcy terms
not otherwise defined shall have the same meaning provided by the Bankruptcy
Code or in the Second Amended Plan of Reorganization.
JURISDICTION
1. The Court has jurisdiction over the subject matter hereof pursuant to
28 U.S.C. ss.ss. 157, 1331, and 1334, and 42 U.S.C. ss.ss. 9607 and 9613(b), and
33 U.S.C.ss. 1319.
PARTIES BOUND; SUCCESSION AND ASSIGNMENT
4
<PAGE> 173
2. This Settlement Agreement applies to, is binding upon, and shall inure
to the benefit of Ohio, the Debtors and, to the extent provided herein, the
Debtors' legal successors and assigns, and any trustee, examiner or receiver
appointed in the Bankruptcy Cases. Nothing contained in this Settlement
Agreement, including without limitation, this Paragraph 2, shall be used as
evidence that any entity other than the Debtors is a "successor" or "assign" of
any of the Debtors.
ALLOWANCE OF CLAIMS
3. In settlement and full satisfaction of all Claims asserted in the Ohio
Proofs of Claims, the Debtors consent that Ohio shall have Claims against
Shieldalloy, as indicated in the amounts and classification as indicated in
Paragraphs __ of the COPI:
TREATMENT OF ALLOWED CLAIMS
4. All Allowed General Unsecured Claims as described in the COPI will be
classified as "Shieldalloy Environmental Claims" under the Plan, and in the
event such Class accepts the Plan, and the Plan is confirmed by the Bankruptcy
Court, the holders of Claims in that Class will on the Effective Date, or as
soon thereafter practicable, receive a cash payment on a pro rata basis equal to
the sum of:
i) 50% of the total value of new common stock (as stated in the
Disclosure Statement) that would have been distributed under the Plan to the
holder of such Allowed General Unsecured Claim had it been, as of the Effective
Date, the holder of an Allowed Claim in "Class 4C--SMC Unsecured Claims" as
defined in the Second Amended Plan of Reorganization;
ii) 66 2/3% of the principal amount of New Secured Notes that would
have been distributed to the holder of such claim on a pro rata basis had it
been, as of the Effective Date, the holder of an Allowed Claim in "Class 4C--SMC
Unsecured Claims" as defined in the Second Amended Plan of Reorganization;
iii) the pro rata amount of cash that would have been distributed to
the holder of such Allowed General Unsecured Claim had it been, as of the
Effective Date, the holder of
5
<PAGE> 174
an Allowed Claim in "Class 4C--SMC Unsecured Claims" as defined in the Second
Amended Plan of Reorganization.
5. In consideration of the cash payout described above in Paragraph 6,
Ohio hereby waives any right to receive any Common Stock, any 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 whether paid upon
consummation of the Plan or thereafter. Further, except as provided for in this
Agreement, Ohio waives any right to receive any distribution under the Plan or
account of the Ohio Proofs of Claim against Metallurg.
6. In no event shall the general unsecured claims allowed or to be allowed
pursuant to this Settlement Agreement be subordinated to any other allowed
general unsecured claims pursuant to any provision of the Bankruptcy Code or
other applicable law that authorizes or provides for subordination of allowed
claims, including without limitation, Sections 105, 510 and 726(a)(4) of the
Bankruptcy Code.
7. With the exception of the claim identified in Paragraph __ of the COPI,
the claims allowed in this Settlement Agreement do not constitute, nor shall
they be construed as, forfeitures, fines or penalties (or payments in lieu
thereof). Nor shall any such payments be construed as any admission by Debtors
of any violation of law.
8. The Ohio Proofs of Claim shall hereby be deemed amended to include all
matters addressed in this Settlement Agreement but not already included in the
respective Proofs of Claim.
COVENANT NOT TO SUE AND RESERVATION OF
RIGHTS; BANKRUPTCY DISCHARGE
9. Except for those Prepetition and Postpetition Claims specifically
settled pursuant to Paragraphs __ of the COPI, Shieldalloy's environmental
liabilities at the Cambridge site, arising Preconfirmation, shall be excepted
from discharge and shall pass through its chapter 11 case unaffected. This
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
6
<PAGE> 175
environmental laws. Except as otherwise provided for herein, the terms of this
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
under any state or United States environmental laws, including the terms of a
COPI to be entered in State Court, 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 this Settlement Agreement shall
release Shieldalloy or subsequent owner or operator of the Cambridge site from
complying with applicable state and federal environmental laws.
10. 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.
NOTICES AND SUBMISSIONS
11. Whenever, under the terms of this Settlement Agreement, written notice
is required to be given, or a report or other document is required to be sent by
one party to another, it shall be directed to the individuals at the addresses
specified below via U.S. certified mail, return receipt requested, unless those
individuals or their successors give notice of a change of address to the other
parties in writing. All notices and submissions shall be considered effective
upon receipt, unless otherwise provided. Except as otherwise provided in this
Settlement Agreement, written notice as specified herein shall constitute
complete satisfaction of any written notice requirement in the Settlement
Agreement with respect to Ohio, OEPA, ODH and the Debtors, respectively.
a. As to Ohio:
b. As to the Debtors:
7
<PAGE> 176
LODGING AND OPPORTUNITY FOR PUBLIC COMMENT
12. The Debtors will request that as part of the confirmation of the Plan
that this Settlement Agreement be approved by the Bankruptcy Court pursuant to
the order confirming the Plan of Reorganization.
13. If for any reason (i) the Court by Final Order should decline to
approve this Settlement Agreement, (ii) the Settlement Agreement is withdrawn by
Ohio as provided in Paragraph 24, (iii) the Settlement Agreement is not approved
by a Final Order or (iv) the Chapter 11 Cases are dismissed or converted to
cases under Chapter 7 of the Bankruptcy Code before the effective date of a Plan
of Reorganization: (a) this Settlement Agreement shall be null and void and the
parties shall not be bound hereunder or under any documents executed in
connection herewith; (b) the parties shall have no liability to one another
arising out of or in connection with this Settlement Agreement or under any
documents executed in connection herewith; (c) the Ohio Proofs of Claim shall
not be deemed to be discharged and the Debtors may file objections and/or file a
motion for estimation of such claims (which Ohio may oppose); (d) this
Settlement Agreement and any documents prepared in connection herewith shall
have no residual or probative effect or value, and it shall be as if they had
never been executed; and (e) this Settlement Agreement, any statements made in
connection with settlement discussions, and any documents prepared in connection
herewith may not be used as evidence in any litigation between the parties.
14. The Debtors shall not propose any Plan of Reorganization or take any
other action in the Chapter 11 Cases that is inconsistent with the terms and
provisions of this Settlement Agreement. Ohio, on behalf of OEPA and ODH, will
vote in favor of the Plan of Reorganization filed by the Debtors that is
consistent with the provisions of this Settlement Agreement and Ohio shall not
oppose any amendment to the Second Amended Plan of Reorganization or of any Plan
which does not materially affect its rights under this Agreement. The parties
reserve all other rights and defenses they may have with respect to any Plan of
Reorganization filed by the Debtors.
8
<PAGE> 177
INTEGRATION AND COUNTERPARTS
15. This Settlement Agreement, the COPI, and any other documents to be
executed in connection herewith shall constitute the sole and complete agreement
of the parties hereto with respect to the matters addressed herein. This
Settlement Agreement may not be amended except by a writing signed by the party
sought to be bound thereunder.
16. This Settlement Agreement may be executed in counterparts each of
which shall constitute an original and all of which shall constitute one and the
same agreement.
9
<PAGE> 178
THE UNDERSIGNED PARTIES ENTER INTO THIS SETTLEMENT AGREEMENT
FOR THE STATE OF OHIO:
10
<PAGE> 1
Exhibit 10.7
REGISTRATION RIGHTS AGREEMENT
AGREEMENT made and entered into this 14th day of April, 1997 (this
"Agreement"), among METALLURG, INC., a corporation organized and existing under
the laws of the State of Delaware (the "Company"), and the shareholders named on
the signature pages hereto (the "Stockholders").
W I T N E S S E T H :
WHEREAS, pursuant to the terms of the Fourth Amended and Restated
Joint Plan of Reorganization of the Company and Shieldalloy Metallurgical
Corporation, dated December 18, 1996, as amended, supplemented or modified from
time to time (the "Plan"), the Company has agreed to issue shares (the "Shares")
of common stock, par value $.01 per share (the "Common Stock"), of the Company
to the Stockholders; and
WHEREAS, pursuant to the Plan, each Stockholder will receive the
number of Shares set opposite such Stockholder's name on Annex I hereto; and
WHEREAS, the Shares will be issued to the Stockholders pursuant to
the Plan without registration under the Securities Act of 1933, as amended (the
"Securities Act"), and the Company and the Stockholders desire to provide for
the registration under the Securities Act of the resale by the Stockholders of
Registrable Securities (as hereinafter defined), upon the terms and subject to
the conditions set forth below;
WHEREAS, it is intended by the Company and the Stockholders that
this Agreement shall become effective immediately upon the issuance to the
Stockholders of the Shares pursuant to the Plan; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each of the Company
and the Stockholders, intending to be legally bound, hereby agrees as follows:
<PAGE> 2
1. DEFINITIONS. Capitalized terms used but not defined in this Agreement
shall have the respective meanings ascribed to such terms in the Plan.
2. RESTRICTIONS ON TRANSFER.
(a) Legend. Each certificate representing the Registrable Securities
shall have endorsed thereon a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW, AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION UNLESS PURSUANT TO AN AVAILABLE EXEMPTION THEREFROM. IN
ALL CASES, SUCH SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE
CONDITIONS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT DATED , 1997,
AMONG THE COMPANY AND THE STOCKHOLDERS PARTY THERETO, A COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY
AND WILL BE FURNISHED TO THE HOLDER HEREOF WITHOUT CHARGE, UPON WRITTEN
REQUEST TO METALLURG, INC., 6 EAST 43RD STREET, 12TH FLOOR, NEW YORK, NEW
YORK 10005, ATTENTION: GENERAL COUNSEL."
(b) Additional Restrictions. No holder of Registrable Securities
shall transfer, and the Company and/or the registrar and transfer agent for such
Shares will not be required to accept for registration of transfer, any Shares
other than pursuant to Section 3 hereof, except upon presentation of evidence
reasonably satisfactory to the Company and the transfer agent that the transfer
is in compliance with the Securities Act and any applicable state securities or
"blue sky" law, which evidence may include an opinion of counsel and
representations of the transferee to the effect that (i) the Shares are being
acquired for such holder's own account for investment purposes only and not with
a view to any resale in violation of the Securities Act or any state securities
or "blue sky" law; (ii) to the knowledge of such holder, the Shares have not
been registered under the Securities Act or any state securities or "blue sky"
law and (iii) such
2
<PAGE> 3
holder will not offer for sale, sell or otherwise transfer any of the Shares (or
any interest therein) except upon the terms and subject to the conditions
specified herein, and otherwise not in violation of the Securities Act or any
state securities or "blue sky" laws, and provided, that such holder, prior to
effecting any transfer of Shares permitted hereunder, will cause the intended
transferee of the Shares to agree to take and hold such Shares subject to the
terms and conditions of this Agreement (and, in that connection, to execute and
deliver to the Company such agreements and instruments as the Company reasonably
may request to evidence the same), and further acknowledges that the
certificates evidencing such Shares are required to have endorsed thereon a
legend to the effect set forth in Subsection 2(a) hereof.
3. REGISTRATION RIGHTS.
(a) Registration Upon Request. (i) At any time, and from time to
time, commencing with the earlier to occur of (i) the first anniversary of the
Effective Date and (ii) the consummation of an initial public offering of the
Company ("IPO") and ending on the earlier to occur of (i) the first date there
are no Qualified Holders (as hereinafter defined) and (ii) the fifth anniversary
of the Effective Date (the "Effective Period"), upon the written request of one
or more Qualified Holders that the Company effect the registration under the
Securities Act of Registrable Securities, which, in the aggregate, constitute at
least 20% of the outstanding Common Stock on the date of such request for
registration hereunder, the Company shall use its best efforts to register under
the Securities Act (a "Demand Registration"), as expeditiously as may be
practicable, the Registrable Securities which the Company has been requested to
register, all to the extent required to permit the disposition of such
Registrable Securities in accordance with the methods intended by the sellers
thereof; provided, that no Qualified Holder(s) shall be permitted to exercise a
Demand Registration within 120 days after the effective date of any registration
statement for equity securities of the Company (other than on Form S-4 or Form
S-8 or any successor or similar form) or such longer time as is specified in
paragraph (i) of Subsection 3(b) hereof.
(ii) The Company shall not be required to comply with any
Demand Registration if less than 1,000,000 Shares which are Registrable
Securities are proposed to be registered and the Company shall not in any event
be required to effect more than two Demand Registrations pursuant to this
Subsection 3(a) during the Effective Period. An exercise of a Demand
Registration right will not count as the use of such right unless the
registration statement to which it relates is declared effective under the
Securities Act and remains effective
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for a period (not less than 30 days) sufficient to allow for the orderly sale of
the Registrable Securities covered thereby, except that such exercise shall
count if such registration statement is withdrawn because (A) the Majority
Qualified Holder(s), for any reason whatsoever, determine not to proceed with
such registration and (B) the Qualified Holder(s) do not reimburse the Company
for any expenses paid by the Company that are not Registration Expenses (as
hereinafter defined) incurred in connection with the preparation and filing of
such registration statement.
(iii) As used in this Agreement, the term "Registrable
Securities" means any and all (A) Shares received by the Qualified Holders
pursuant to the Plan and (B) any other securities issued or issuable with
respect to any shares of Common Stock described in clause (A) above by way of a
stock dividend or stock split or in connection with a combination, exchange,
reorganization, recapitalization or reclassification of the Company's securities
or pursuant to a merger, consolidation or other similar business combination
transaction involving the Company. Reference in this Subsection 3(a) to
specified numbers of shares shall be equitably adjusted to reflect any
occurrence referred to in the preceding sentence.
(iv) As to any particular Registrable Securities, such
securities shall cease to constitute Registrable Securities when (A) a
registration statement with respect to the sale of such securities shall have
been declared effective under the Securities Act and such securities shall have
been disposed of in accordance with the methods contemplated by the registration
statement, (B) such securities shall have been sold in satisfaction of all
applicable conditions to the resale provisions of Rule 144 under the Securities
Act (or any successor provision thereto), (C) such securities shall have been
transferred, new certificates evidencing such securities without legends
restricting further transfer shall have been delivered by the Company, and
subsequent public distribution of such securities shall neither require
registration under the Securities Act nor qualification (or any similar filing)
under any state securities or "blue sky" law then in effect, or (D) such
securities shall have ceased to be issued and outstanding.
(v) The term "Qualified Holder" means any Stockholder or any
Affiliate (as such term is defined in Rule 144 under the Securities Act) of a
Stockholder owning at least 5% of the issued and outstanding Shares of the
Company on the Effective Date. The term "Majority Qualified Holder" means those
Qualified Holders holding a majority in interest of the Registrable Securities
included in a registration statement pursuant hereto.
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(vi) The Company may defer the filing or effectiveness of any
registration statement with respect to any Demand Registration requested
pursuant to this Subsection 3(a) for a reasonable period of time not to exceed
120 days after such request if (A) the Company is, at such time, working on an
underwritten public offering of Common Stock ("Primary Common Stock Offering")
and is advised in writing by its managing underwriter(s) that such offering
would in its or their opinion be adversely affected by such filing or (B) the
Board of Directors of the Company determines, in its good faith and reasonable
judgment, that any such filing or the offering of any Registrable Securities
would materially impede, delay or interfere with any material proposed
financing, offer or sale of securities, acquisition, corporate reorganization or
other significant transaction involving the Company; provided, with respect to
clause (B), the Company gives the Qualified Holders written notice of such
determination. The Effective Period shall be extended by a period which is not
less than the aggregate number of days included in the periods during which the
Company deferred the filing or effectiveness of a registration statement as
provided above (each, a "Suspension Period"). A Suspension Period shall commence
on and include the date on which the Company provides such written notice and
shall end on the date when the affected registration statement is filed or
declared effective.
(vii) In the case of a Demand Registration pursuant to this
Subsection 3(a), if the holders of securities initially requesting such Demand
Registration have determined to enter into one or more underwriting agreements
in connection therewith, all shares constituting Registrable Securities to be
included in such Demand Registration shall be subject to such underwriting
agreements and no person may participate in such Demand Registration unless such
person agrees to sell his or its securities on the basis provided in the
underwriting arrangements and completes all questionnaires, powers of attorney,
indemnities, underwriting agreements, "lock up" letters and other documents
which are reasonable and customary under the circumstances.
(b) Piggyback Registration.
(i) If at any time the Company proposes to register shares of
the Company's Common Stock under the Securities Act for its own account (other
than a registration on Form S-4 or Form S-8, or any successor or similar forms),
in a manner that would permit registration of Registrable Securities for sale to
the public under the Securities Act, it will promptly give written notice to all
Qualified Holders of (A) its intention to do so, (B) the
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registration form of the Securities and Exchange Commission (the "Commission")
that has been selected by the Company and (C) rights of Qualified Holders under
this Subsection 3(b) (the "Subsection 3(b) Notice"). The Company will use
reasonable commercial efforts to include in the proposed registration all
Registrable Securities that the Company is requested in writing, within 15 days
after the Subsection 3(b) Notice is given, to register by the Qualified Holders
thereof; provided, that (A) if, at any time after giving written notice of its
intention to register shares of the Company's Common Stock and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register such
equity securities, the Company may, at its election, give written notice of such
determination to all Qualified Holders and, thereupon, shall be relieved of its
obligation to register any Registrable Securities in connection with such
abandoned registration, without prejudice, however, to the rights of Qualified
Holders under Subsection 3(a) hereof and (B) in case of a determination by the
Company to delay registration of the Company's Common Stock, the Company shall
be permitted to delay the registration of such Registrable Securities for the
same period as the delay in registering such Common Stock for the Company's own
account. No registration effected under this Subsection 3(b) shall relieve the
Company of its obligations to effect a Demand Registration under Subsection 3(a)
hereof and, notwithstanding anything to the contrary in Subsection 3(a) hereof,
no Qualified Holder shall have the right to require the Company to register any
Registrable Securities pursuant to Subsection 3(a) hereof until the later of (A)
the completion of the distribution of the securities offered and registered
pursuant to the Subsection 3(b) Notice and (B) 120 days after the date each
registration statement effected under this Subsection 3(b) is declared
effective.
(ii) If the Managing Underwriter (as such term is defined in
Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) for a registration pursuant to this Subsection 3(b) that involves an
underwritten offering shall advise the Company (the Company hereby agreeing to
request that such advice be written) that, in its opinion, the inclusion of the
amount and kind of Registrable Securities to be sold for the account of
Qualified Holders would materially adversely affect the price per unit the
Company will derive from the offering or otherwise materially and adversely
affect the success of the offering for the Company, then the number and kind of
Registrable Securities to be sold for the account of such Qualified Holders
shall be reduced (and may be reduced to zero) in accordance with the Managing
Underwriter's recommendation to the minimum extent necessary to eliminate such
adverse effect. If the number of Registrable Securities to be included in any
registration is reduced (but not to zero), the number of such Registrable
Securities included in such registration
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shall be allocated pro rata among all requesting Qualified Holders and any other
shareholders of the Company who may hold registration rights ("Other Holders")
with respect to shares of the Company's Common Stock ("Other Shares"), on the
basis of the relative number of shares of such Registrable Securities or Other
Shares each such Qualified Holder or Other Holder has requested to be included
in such registration. If, as a result of the proration provisions of this
Subsection 3(b), any Qualified Holder shall not be entitled to include all
Registrable Securities in a registration pursuant to this Subsection 3(b) that
such Qualified Holder has requested be included, such Qualified Holder may elect
to withdraw its Registrable Securities from the registration; provided, that
such withdrawal election shall be irrevocable and, after making a withdrawal
election, a Qualified Holder shall no longer have any right to include
Registrable Securities in the registration as to which such withdrawal election
was made.
(iii) Notwithstanding anything in this Subsection 3(b) to the
contrary, Qualified Holders shall not have any right to include their
Registrable Securities in any distribution or registration of the Company's
Common Stock in connection with a merger, consolidation, acquisition, exchange
offer (or other offering of securities solely to the Company's existing
stockholders), recapitalization, other reorganization, dividend reinvestment
plan, stock option plan or other employee benefit plan.
(c) Registration Procedures. If and whenever the Company is required
by the provisions of this Agreement to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Agreement,
the Company shall, as expeditiously as practicable:
(i) prepare and file with the Commission, a registration
statement on a form which is available for the sale of Registrable Securities by
the holders thereof in accordance with the intended methods of distribution
thereof (including such audited financial statements as the Board of Directors
of the Company may, in good faith, deem appropriate) and reasonably acceptable
to the holders of Registrable Securities participating therein, and use
reasonable commercial efforts to cause such registration statement to become and
remain effective under the Securities Act for not less than a period of 30 days
(unless the Registrable Securities registered thereunder have been sold or
disposed of prior to the expiration of such 30-day period); provided, that (A)
with respect to any request for registration pursuant to Subsection 3(a) hereof
made within the period commencing 60 days next preceding the end of the
Company's fiscal year and ending 90 days after the end of the Company's fiscal
year, if the
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<PAGE> 8
Company is not a reporting company subject to Section 13 or 15(d) of the
Exchange Act, the Company shall be entitled to delay such registration until ten
days after the Company receives audited financial statements for such fiscal
year and (B) in no event shall the Company be required in connection with any
request for registration pursuant to Subsection 3(a) hereof to cause to be
prepared or to release, other than in the ordinary course of business consistent
with past practice, audited financial statements of the Company;
(ii) prepare and file with the Commission such amendments,
post-effective amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective for such period of time as is necessary to
complete the offering and the distribution of the securities covered thereby
(but, in no event, longer than 30 days after such registration statement becomes
effective) in each case exclusive of any period during which the prospectus used
in connection with such registration statement shall not comply with the
requirements of Section 10 of the Securities Act, and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during said 30-day period;
(iii) furnish to each seller of Registrable Securities and
each underwriter of the securities being sold by such seller, such number of
copies (including manually executed and conformed copies) of such registration
statement and of each such amendment thereof and supplement thereto (including
all annexes, appendices, schedules and exhibits), the prospectus used in
connection with such registration statement (including each preliminary
prospectus and any summary prospectus and the final prospectus filed pursuant to
Rule 424(b) under the Securities Act), and other documents, as such seller and
underwriter may reasonably request in order to facilitate the disposition of
Registrable Securities in accordance with the methods intended by the sellers
thereof;
(iv) use reasonable commercial efforts to register or qualify
the Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as any seller and each
underwriter of the Registrable Securities shall reasonably request, and do any
and all other acts and things which may be necessary or desirable to enable such
seller and underwriter to consummate the offering and disposition of Registrable
Securities in such jurisdictions; provided, that the Company shall not, by
virtue of this Agreement, be required to qualify generally to do business as a
foreign corporation, subject itself
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<PAGE> 9
to taxation or consent to general service of process in any jurisdiction wherein
it would not, but for the requirements of this Subsection 3(c), be obligated to
be qualified;
(v) use reasonable commercial efforts to cause the Registrable
Securities covered by such registration statement to be registered with, or
approved by, such other public, governmental or regulatory authorities as may be
necessary to facilitate the disposition of such Registrable Securities in
accordance with the methods of disposition intended by the sellers thereof;
(vi) notify each seller of any Registrable Securities covered
by such registration statement and the Managing Underwriter, if any, promptly
and, if requested by any such person, confirm such notification in writing, (A)
when a prospectus or any prospectus supplement has been filed with the
Commission and, with respect to a registration statement or any post-effective
amendment thereto, when the same has been declared effective by the Commission,
(B) of any request by the Commission for an amendment or supplement to a
registration statement or related prospectus or for additional information, (C)
of the issuance by the Commission of any stop order or the initiation of any
proceedings for such or a similar purpose (and the Company shall make every
reasonable effort to obtain the withdrawal of any such order at the earliest
practicable moment), (D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose (and the Company shall make every reasonable effort
to obtain the withdrawal of any such suspension at the earliest practicable
moment), (E) of the occurrence of any event which requires the making of any
change to a registration statement or related prospectus so that such documents
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (and the Company shall promptly prepare and furnish to such seller
and Managing Underwriter a reasonable number of copies of a supplemented or
amended prospectus such that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading), and (F) of the Company's determination
that the filing of a post-effective amendment to the Registration Statement
shall be necessary or appropriate; provided, that, in the event the Company
shall provide any notice pursuant to clause (E), the 30-day period referred to
in
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paragraphs 3(c)(i) and 3(c)(ii) shall be extended by the number of days from and
including the date such notice is provided, to and including the date when each
seller of any Registrable Securities covered by such registration statement
shall have received copies of the corrected prospectus contemplated by clause
(E) of this paragraph (vi), plus an additional seven days;
(vii) otherwise use reasonable commercial efforts to comply
with all applicable rules and regulations of the Commission, as the same may
hereafter be amended, and make available to its security holders, as soon as
reasonably practicable, an earning statement covering the period of twelve
months beginning with the first day of the Company's first fiscal quarter next
succeeding the effective date of the registration statement, which earning
statement shall satisfy the provisions of Section 11(a) of the Securities Act;
(viii) engage and provide a transfer agent for all Registrable
Securities covered by such registration statement not later than the effective
date of such registration statement;
(ix) in the case of a Demand Registration effected pursuant to
Section 3(a) hereof and at the request of the Majority Qualified Holders, enter
into one or more underwriting agreements (in customary form and substance and
including customary representations and warranties of the Company, indemnities
and contribution) and take all such other actions as the holders shall
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities in accordance with the methods of disposition intended by
the sellers thereof, including to use reasonable efforts to obtain an opinion
from counsel to the Company, and a "cold comfort" letter from an independent
certified public accounting firm of national recognition and standing who have
certified the Company's financial statements included in the registration
statement or any amendment thereto, in each case in form and substance
reasonably satisfactory to the Managing Underwriter(s), and covering such
matters of the type customarily covered by such opinions and "cold comfort"
letters as the Managing Underwriter(s) shall reasonably request; it being hereby
acknowledged and agreed that the selection of any Managing Underwriter(s) shall
be made by the Majority Qualified Holders with the consent of the Company and
the Company shall be entitled to withhold consent in its sole discretion to any
Managing Underwriter(s); and
(x) permit any holder of Registrable Securities, which holder,
in its reasonable judgment, might be deemed to be a "control person" of the
Company (within the
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meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
to participate in the preparation of such registration statement and include
therein material, furnished to the Company in writing which, in the reasonable
judgment of such holder and its counsel, is required to be included therein.
(d) Agreement of Holders. Each holder of Registrable Securities
agrees that such holder will, as expeditiously as possible, notify the Company
at any time when a prospectus relating to a registration statement covering such
seller's Registrable Securities is required to be delivered under the Securities
Act, of the happening of any event of the kind described in paragraph 3(c)(vi)
hereof as a result of any information provided by such seller for inclusion in
such prospectus included in such registration statement and, at the request of
the Company, promptly prepare and furnish to it such information as may be
necessary so that, after incorporation into a supplement or amendment of such
prospectus as thereafter delivered to the purchasers of such securities, the
information provided by such seller shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each holder of Registrable
Securities shall be deemed to have agreed by acquisition of such Registrable
Securities that upon the receipt of any notice from the Company of the
occurrence of any event of the kind described in clause (E) of paragraph
3(c)(vi) hereof, such holder shall forthwith discontinue such holder's offer and
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such holder shall have received
copies of a supplemented or amended prospectus which is no longer defective as
contemplated by clause (E) of paragraph 3(c)(vi) hereof and, if so directed by
the Company, shall deliver to the Company, at the Company's expense, all copies
(other than permanent file copies) of the defective prospectus covering such
Registrable Securities which are then in such holder's possession.
(e) Registration Expenses. Except as otherwise provided in this
Subsection 3(e), whether or not any registration statement prepared and filed
pursuant to this Section 3 is declared effective by the Commission (except where
a Demand Registration is terminated, withdrawn or abandoned at the written
request of the Majority Qualified Holders), the Company shall pay all expenses
incident to the Company's performance of or compliance with the registration
requirements of this Agreement, including, without limitation, the following:
(A) all Commission and any registration and filing fees and expenses; (B) any
and all expenses incident to its performance of, or compliance with, this
Agreement, including, without limitation, any
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allocation of salaries and expenses of the Company's personnel or other general
overhead expenses of the Company, or other expenses for the preparation of
historical and pro forma financial statements or other data normally prepared by
the Company in the ordinary course of its business; (C) all listing, transfer
and/or exchange agent and registrar fees; (D) fees and expenses in connection
with the qualification of the Registrable Securities under securities or "blue
sky" laws including reasonable fees and disbursements of counsel for the
underwriters in connection therewith; (E) printing expenses; (F) messenger and
delivery expenses; and (G) fees and out-of-pocket expenses of counsel for the
Company and its independent certified public accountants (including the expenses
of any audit, review and/or "cold comfort" letters) and other persons, including
special experts, retained by the Company (collectively, clause (A) through (G),
"Registration Expenses"); provided, that the Company shall not be required to
pay, and the Qualified Holders shall pay, all fees and out-of-pocket expenses of
counsel selected by the Qualified Holders, any fees or disbursements of Managing
Underwriters and their counsel, participating underwriters and brokers-dealers
or any discounts, commissions or fees of underwriters, selling brokers and
dealers relating to the distribution of the Registrable Securities.
(f) Indemnification; Contribution.
(i) The Company hereby agrees to indemnify and hold harmless
to the fullest extent permitted by law each holder of Registrable Securities
registered pursuant to Subsection 3(a) or Subsection 3(b) hereof (a
"Participating Holder"), its officers, directors, employees and agents if any,
and each person, if any, who controls such holder within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act, against all losses,
claims, damages, liabilities and expenses (under the Securities Act, common law
and otherwise) (collectively, "Claims"), joint or several, which arise out of or
are based upon (A) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement, amendment or supplement
thereto or document incorporated by reference or in any filing made in
connection with the registration or qualification of the offering under "blue
sky" or other securities laws of jurisdictions in which the Participating
Holder's Registrable Securities are offered (collectively, "Security Filings"),
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (B) any untrue
statement or alleged untrue statement of a material fact contained in (1) any
preliminary prospectus, if used prior to the effective date of such registration
statement (unless such statement is corrected in the final prospectus and the
Company has previously furnished
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copies thereof to any Participating Holder seeking such indemnification and to
the underwriters of the registration in question and the Participating Holder
and/or the underwriters shall have failed to deliver such final prospectus to
the purchaser of securities) or (2) the final prospectus (as amended or
supplemented if the Company shall have filed with the Commission any amendment
thereof or supplement thereto) if used within the period during which the
Company is required to keep the registration statement to which such prospectus
relates current, or the omission or alleged omission in the case of (1) or (2)
to state therein a material fact necessary in order to make the statements
therein in light of the circumstances under which they were made, not
misleading; and the Company shall, and it hereby agrees to, reimburse such
holders for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such Claim; provided, that such
indemnification shall not extend to any Claims which are caused by any untrue
statement or alleged untrue statement contained in, or by any omission or
alleged omission from, information furnished in writing to the Company by such
Participating Holder specifically for use in any such Security Filing.
(ii) Each Participating Holder shall furnish to the Company in
writing such information regarding such holder and the intended method of
distribution as shall be reasonably requested by the Company and as required by
law or the Commission for use in any Security Filing (and the Company may
exclude from registration the Registrable Securities of any such Participating
Holder if such holder fails to furnish such information within a reasonable time
after receiving such request) and hereby indemnifies severally and not jointly,
to the fullest extent permitted by law, the Company, its officers, directors,
employees and agents and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act, against any Claims resulting from any untrue statement or alleged untrue
statement of a material fact or any omission or alleged omission of a material
fact required to be stated or necessary to make the statements in the
registration statement or prospectus, or any amendment thereof or supplement
thereto, not misleading; provided, that each such holder shall be liable
hereunder if and only to the extent that any such Claim arises out of or is
based upon an untrue statement, or alleged untrue statement or omission or
alleged omission, made in reliance upon and in conformity with information
pertaining to such holder, which is requested by the Company and furnished in
writing to the Company by such holder specifically for use in any such Security
Filing.
(iii) Any person seeking indemnification under the provisions
of this Subsection 3(f) shall, promptly after receipt by such person of notice
of the commencement of
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any action, suit, claim or proceeding, notify each party against whom
indemnification is to be sought in writing of the commencement thereof;
provided, that the failure so to notify an indemnifying party shall not relieve
the indemnifying party from any liability which it may have under this
Subsection 3(f) (except to the extent that it has been prejudiced in any
material respect by such failure) or from any liability which the indemnifying
party may otherwise have. In case any such action, suit, claim or proceeding is
brought against any indemnified party, and it notifies an indemnifying party of
the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent it may elect by written notice delivered
to the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party shall have the right to employ its own counsel in any such
case but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (A) the employment of such counsel shall have been
authorized in writing by the indemnifying party in connection with the defense
of such suit, action, claim or proceeding, (B) the indemnifying party shall not
have employed counsel (reasonably satisfactory to the indemnified party) to take
charge of the defense of such action, suit, claim or proceeding within a
reasonable time after notice of commencement of the action, suit, claim or
proceeding, or (C) such indemnified party shall have reasonably concluded that
there may be defenses available to it which are different from or additional to
those available to the indemnifying party which, if the indemnifying party and
the indemnified party were to be represented by the same counsel, could result
in a conflict of interest for such counsel or materially prejudice the
prosecution of the defenses available to such indemnified party. If any of the
events specified in clause (B) or (C) of the preceding sentence shall have
occurred or shall otherwise be applicable, then the fees and expenses of one
counsel or firm of counsel selected by a majority in interest (based on the
number of shares included in such offering) of the indemnified parties shall be
borne by the indemnifying party. If, in any case, the indemnified party employs
separate counsel, the indemnifying party shall not have the right to direct the
defense of such action, suit, claim or proceeding on behalf of the indemnified
party. Anything in this paragraph to the contrary notwithstanding, an
indemnifying party shall not be liable for the settlement of any action, suit,
claim or proceeding effected without its prior written consent (which consent in
the case of an action, suit, claim or proceeding exclusively seeking monetary
relief shall not be unreasonably withheld). Such indemnification shall remain in
full force and effect irrespective of any investigation made by or on behalf of
an indemnified party.
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(iv) If the indemnification from the indemnifying party as
provided in this Subsection 3(f) is unavailable or is otherwise insufficient to
hold harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative benefits received by and the relative
fault of the indemnifying party and indemnified parties in connection with the
actions which resulted in such losses, claims, damages, liabilities or expenses.
The relative fault of such indemnifying party shall be determined by reference
to, among other things, whether any action in question, including any untrue (or
alleged untrue) statement of a material fact or omission (or alleged omission)
to state a material fact, has been made, or relates to information supplied by
such indemnifying party or such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Subsection 3(f)(iii) hereof,
any legal or other fees or expenses reasonably incurred by such party in
connection with any such investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Subsection 3(f) were determined by pro rata
allocation or by any other method of allocation other than as described above.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
If, however, indemnification is available under this Subsection
3(f), the indemnifying parties shall indemnify each indemnified party to the
fullest extent provided in paragraphs 3(f)(i) through 3(f)(iii) hereof without
regard to the relative fault of said indemnifying party or indemnified party or
any other equitable consideration.
4. RULE 144.
From and after the date the Company has a class of securities
registered under Section 12 of the Exchange Act, the Company shall comply with
the requirements of Rule 144(c) under the Securities Act, as such Rule may be
amended from time to time (or any similar rule or regulation hereafter adopted
by the Commission), regarding the availability of current public
15
<PAGE> 16
information to the extent required to enable any Qualified Holder to sell
Registrable Securities without registration under the Securities Act pursuant to
Rule 144 (or any similar rule or regulation).
5. NOTICES.
Except as otherwise provided below, whenever it is provided in this
Agreement that any notice, demand, request, consent, approval, declaration or
other communication shall or may be given to or served upon any of the parties
hereto, or whenever any of the parties hereto, desires to provide to or serve
upon any person any other communication with respect to this Agreement, each
such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in person with
receipt acknowledged or sent by registered or certified mail (return receipt
requested, postage prepaid), by overnight or express mail, courier, or delivery
service, or telecopy with transmission confirmed and addressed as follows:
(a) If to the Company:
Metallurg, Inc.
6 East 43rd Street
New York, New York 10005
Telephone: (212) 687-9470
Facsimile: (212) 687-9621
Attention: Eric L. Schondorf, Esq.
- With a copy to -
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Facsimile: (212) 310-8007
Attention: Ronald F. Daitz, Esq.
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<PAGE> 17
(b) If to the Stockholders:
At their respective addresses set forth
on Annex I hereto.
- With a copy to -
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Telephone: (212) 806-5400
Facsimile: (212) 806-6006
Attention: Lawrence M. Handelsman, Esq.
or at such other address as may be substituted by notice delivered as provided
herein. The furnishing of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly furnished or served on (i) the date on which personally
delivered, with receipt acknowledged, (ii) the date on which telecopied with
transmission confirmed, (iii) the next business day if delivered by overnight or
express mail, courier or delivery service, or (iv) three business days after the
same shall have been deposited in the United States mail, as the case may be.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
6. ENTIRE AGREEMENT.
This Agreement represents the entire agreement and understanding
among the parties hereto with respect to the subject matter hereof and
supersedes any and all prior oral and written agreements, arrangements and
understandings among the parties hereto with respect to such subject matter; and
can be amended, supplemented or changed, and any provision hereof can be waived,
only by a written instrument making specific reference to this Agreement signed
by the Company on the one hand, and the holders of a majority of the Registrable
Securities on the other hand.
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<PAGE> 18
7. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors. The rights of any
Qualified Holder under this Agreement may only be assigned and transferred to
Affiliates of such holder and any assignee of any Qualified Holder provided such
assignee owns at least 5% of the issued and outstanding Shares of the Company at
such date after giving effect to such transfer.
8. SECTION HEADINGS.
The paragraph headings contained in this Agreement are for general
reference purposes only and shall not affect in any manner the meaning,
interpretation or construction of the terms or other provisions of this
Agreement.
9. APPLICABLE LAW.
This Agreement shall be governed by, construed and enforced in
accordance with the law of the State of New York.
10. SEVERABILITY.
If at any time subsequent to the date hereof, any provision of this
Agreement shall be held by any court of competent jurisdiction to be illegal,
void or unenforceable, such provision shall be of no force and effect, but the
illegality or unenforceability of such provision shall have no effect upon and
shall not impair the enforceability of any other provision of this Agreement.
11. SPECIFIC PERFORMANCE.
The Company acknowledges that it would be impossible to determine the
amount of damages that would result from any breach by it of any of the
provisions of this Agreement and that the remedy at law for any breach, or
threatened breach, of any of such provisions would likely be inadequate and,
accordingly, agrees that each Stockholder shall, in addition to any other rights
or remedies which it may have, be entitled to seek such equitable and injunctive
relief as may be available from any court of competent jurisdiction to compel
specific
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<PAGE> 19
performance of, or restrain the Company from violating any of, such provisions.
In connection with any action or proceeding for injunctive relief, the Company
hereby waives the claim or defense that a remedy at law alone is adequate and
agrees, to the maximum extent permitted by law, to have such provision of this
Agreement specifically enforced against it, without the necessity of posting
bond or other security against it, and consents to the entry of injunctive
relief against it enjoining or restraining any breach or threatened breach of
this Agreement.
12. NO WAIVER.
The failure of any party at any time or times to require performance
of any provision hereof shall not affect the right at a later time to enforce
the same. No waiver by any party of any condition, and no breach of any
provision, term, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
13. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
but one and the same original instrument.
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<PAGE> 20
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
METALLURG, INC.
By:
-----------------------------------
Name:
Title:
MUTUAL SERIES FUND, INC.
By:
-----------------------------------
Name:
Title:
MORGENS WATERFALL, OVERSEAS
PARTNERS
By:
-----------------------------------
Name:
Title:
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<PAGE> 21
CERBERUS PARTNERS, L.P.
By:
-----------------------------------
Name:
Title:
SBC CAPITAL MARKETS, INC.
By:
-----------------------------------
Name:
Title:
CONTRARIAN CAPITAL
By:
-----------------------------------
Name:
Title:
OPPENHEIMER & COMPANY, INC.
By:
-----------------------------------
Name:
Title:
21
<PAGE> 22
ANNEX I
Number
of
Stockholders Shares
- ------------ ------
Franklin Mutual Fund, Inc. (and related entities) 1,338,057
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Morgans, Waterfall, Vintiadis & Company, Inc. 704,116
10 East 50th Street
26th Floor
New York, New York 10022
Cerberus Partners, L.P. 709,271
950 Third Avenue
New York, New York 10022
SBC Capital Markets, Inc. 544,870
45 Broadway Atrium
New York, New York 10006
Contrarian Capital 362,501
411 West Putnam Avenue
Suite 225
Greenwich, Connecticut 06830
Oppenheimer & Company, Inc. 502,362
Oppenheimer Tower
World Financial Center
New York, New York 10281
22
<PAGE> 23
- ------------------------------------
Each entity includes related funds
23
<PAGE> 1
EXHIBIT 10.8
METALLURG, INC.
1997 STOCK AWARD AND STOCK OPTION PLAN
1. DEFINITIONS
The following terms shall have the following meanings unless the
context indicates otherwise:
1.1 "Bankruptcy Code" shall mean title 11 of the United States Code, as
amended from time to time, as applicable to the Chapter 11 Cases.
1.2 "Bankruptcy Court" shall mean 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.
1.3 "Board" shall mean the Board of Directors of the Company.
1.4 "Business Day" shall mean 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.
1.5 "CEO" shall mean the chief executive officer of the Company.
1.6 "Chapter 11 Cases" shall mean the cases under chapter 11 of the
Bankruptcy Code commenced by the Company and Shieldalloy Metallurgical
Corporation, 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 Company
and Shieldalloy Metallurgical Corporation are the debtors in possession pursuant
to sections 1107 and 1108 of the Bankruptcy Code.
1.7 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, including applicable regulations thereunder.
1.8 "Committee" shall mean the Compensation Committee of the Board, or
such other Board committee as may be designated by the Board to administer the
Plan, provided however, that such committee shall be comprised solely of two or
more directors each of whom qualifies as (i) a "Non-Employee Director" (as such
term is used in Rule 16b-3 under the Exchange Act) and (ii) an "outside
director" (as such term is used in Treasury Regulation Section 1.162-27(e)(3)).
1.9 "Common Stock" shall mean the common stock, $.01 par value per share,
of the Company.
1.10 "Company" shall mean Metallurg, Inc., a Delaware corporation.
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1.11 "Confirmation Date" shall mean the date on which the Clerk of the
Bankruptcy Court enters the Confirmation Order.
1.12 "Confirmation Order" shall mean the order of the Bankruptcy Court
confirming the Plan of Reorganization pursuant to section 1129 of the Bankruptcy
Code.
1.13 "Effective Date" shall mean the first Business Day on which all of
the conditions specified in Article XIII of the Plan of Reorganization have been
satisfied or waived.
1.14 "Eligible Executive" shall mean each of the individuals listed on
Schedule A.
1.15 "Employee" shall mean a salaried employee of the Company or any
Subsidiary as described in Treasury Regulation Section 1.421-7(h).
1.16 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, including applicable regulations thereunder.
1.17 "Fair Market Value" shall mean:
(a) the last bid price of the Common Stock on the date of
calculation, if the Common Stock is readily tradeable on a
national securities exchange or other market system, or
(b) the book value of a share of Common Stock as of the last day
of the last completed fiscal quarter preceding the date of
calculation and as determined in good faith by the Committee,
if the Common Stock is not readily tradeable on a national
securities exchange or other market system.
1.18 "Initial Stock Awards" shall mean the Stock Awards granted to the
Eligible Executives under Section 6.5 below.
1.19 "ISO" shall mean an "incentive stock option" as such term is used in
Code Section 422.
1.20 "Key Worldwide Managers" shall mean certain Employees who have been
selected by the Committee to receive Key Worldwide Managers Initial Stock Option
Grants under Section 7.7 below.
1.21 "Nonqualified Stock Option" shall mean a Stock Option that does not
qualify as an ISO.
1.22 "Participant" shall mean any Employee to whom a Stock Award or Stock
Option has been granted by the Committee under the Plan.
1.23 "Plan" shall mean the Metallurg, Inc. 1997 Stock Award and Stock
Option Plan.
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<PAGE> 3
1.24 "Plan of Reorganization" shall mean the joint chapter 11 plan of
reorganization for the Company and Shieldalloy Metallurgical Corporation under
the Chapter 11 Cases (including all exhibits and schedules annexed thereto),
either in its present form or as it may be altered, amended, or modified from
time to time.
1.25 "Stock Award" shall mean the grant by the Company to a Participant of
Common Stock pursuant to Section 6 below.
1.26 "Stock Award Agreement" shall mean a written agreement between the
Company and the Participant that establishes the terms, conditions, restrictions
and/or limitations applicable to a Stock Award in addition to those established
by this Plan and by the Committee's exercise of its administrative powers.
1.27 "Stock Option" shall mean the grant by the Company to a Participant
of an option to purchase Common Stock pursuant to Section 7 below.
1.28 "Stock Option Agreement" shall mean a written agreement between the
Company and the Participant that establishes the terms, conditions, restrictions
and/or limitations applicable to a Stock Option in addition to those established
by this Plan and by the Committee's exercise of its administrative powers.
1.29 "Subsidiary" shall mean a corporation of which the Company directly
or indirectly owns more than 50 percent of the Voting Stock or any other
business entity in which the Company directly or indirectly has an ownership
interest of more than 50 percent.
1.30 "Treasury Regulations" shall mean the regulations promulgated under
the Code by the United States Department of the Treasury, as amended from time
to time.
1.31 "Voting Stock" shall mean capital stock of any class or classes
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. PURPOSE AND TERM OF PLAN
2.1 Purpose. The purpose of the Plan is to provide motivation to certain
Employees to put forth maximum efforts toward the growth, profitability, and
success of the Company and its Subsidiaries by providing incentives to such
Employees through the ownership and performance of the Common Stock. Toward this
objective, the Committee may grant Stock Awards or Stock Options to Employees
subject to the terms and conditions set forth in the Plan.
2.2 Term. The Plan shall become effective as of the Confirmation Date. The
Plan shall terminate on the day which precedes the 10th anniversary of the
Confirmation Date, unless terminated earlier by the Board pursuant to Section
10.7 below.
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<PAGE> 4
3. ELIGIBILITY
3.1 Eligibility. All Eligible Executives shall participate in the Plan and
receive Initial Stock Awards as described in Section 6 below. All other
Employees shall be eligible to participate in the Plan, subject to selection by
the Committee.
4. ADMINISTRATION
4.1 Responsibility. The Committee shall have the responsibility to
control, operate, manage and administer the Plan in accordance with its terms.
4.2 Authority of the Committee. The Committee shall have all the
discretionary authority that may be necessary or helpful to enable it to
discharge its responsibilities with respect to the Plan, including but not
limited to:
(a) to determine eligibility for participation in the Plan;
(b) to determine eligibility for and the number of Stock Awards
and Stock Options granted under the Plan;
(c) to supply any omission;
(d) to issue administrative guidelines as an aid to administer the
Plan and make changes in such guidelines as it from time to
time deems proper;
(e) to make rules for carrying out and administering the Plan and
make changes in such rules as it from time to time deems
proper;
(f) to the extent permitted under the Plan, grant waivers of Plan
terms, conditions, restrictions, and limitations;
(g) to accelerate the transferability of any Stock Award or the
exercisability of any Stock Option when such action or actions
would be in the best interest of the Company;
(h) to grant Stock Options in replacement of Stock Options
previously granted under this Plan or any other executive
compensation plan of the Company; and
(i) to take any and all other actions it deems necessary or
advisable for the proper operation or administration of the
Plan.
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<PAGE> 5
4.3 Action by the Committee. The Committee may act only by a majority of
its members. Any determination of the Committee may be made, without a meeting,
by a writing or writings signed by all of the members of the Committee. In
addition, the Committee may authorize any one or more of its members to execute
and deliver documents on behalf of the Committee.
4.4 Delegation of Authority. The Committee may delegate some or all of its
authority under the Plan to any person or persons; provided, however, that any
such delegation shall be in writing.
5. SHARES SUBJECT TO PLAN
5.1 Available Shares. The aggregate number of shares of Common Stock which
shall be available for grants of Stock Awards and Stock Options under the Plan
during its term shall be 500,000. Such shares of Common Stock available for
issuance under the Plan may be either authorized but unissued shares, shares of
issued stock held in the Company's treasury, or both, at the discretion of the
Company, and subject to any adjustments made in accordance with Section 5.3
below. Any Stock Awards or shares of Common Stock underlying Stock Options which
terminate by expiration, forfeiture, cancellation or otherwise without the
issuance of such shares shall again be available for grants of Stock Awards and
Stock Options under the Plan, to the extent permitted by Rule 16b-3 under the
Exchange Act. The number of shares of Common Stock available for issuance under
the Plan shall not be reduced to reflect any dividends or dividend equivalents
that are reinvested into additional shares of Common Stock.
5.2 Maximum Aggregate Number of Shares Underlying Stock Awards and Stock
Options Granted Under the Plan to Any Single Participant.
(a) The maximum aggregate number of shares of Common Stock
underlying Stock Awards that may be granted to any single Participant during the
life of the Plan shall be 200,000, subject to adjustment as provided in Section
5.3 below.
(b) The maximum aggregate number of shares of Common Stock
underlying Stock Options that may be granted to any single Participant during
the life of the Plan shall be 100,000, subject to adjustment as provided in
Section 5.3 below. For purposes of the preceding sentence, Stock Options that
are cancelled or repriced shall continue to be counted in determining the
maximum aggregate number of shares.
5.3 Adjustment to Shares. If there is any change in the number of
outstanding shares of Common Stock through the declaration of stock dividends,
stock splits or the like, the number of shares of Common Stock (i) available for
grants of Stock Awards and/or Stock Options under Sections 5.1, 5.2(a) and
5.2(b) above, (ii) underlying outstanding grants of Stock Awards and (iii)
underlying Stock Options, and the exercise prices of such outstanding Stock
Options, shall be automatically adjusted. If there is any change in the number
of outstanding shares of Common Stock through any change in the capital account
of the Company, or through a merger, consolidation, separation (including a
spinoff or other distribution of stock or property), reorganization (whether or
not such reorganization comes within the meaning of such term in Code Section
5
<PAGE> 6
368(a)) or partial or complete liquidation, the Committee shall make (i)
appropriate adjustments in the number of shares of Common Stock which may be
issued under the Plan and to any single Participant pursuant to Sections 5.1,
5.2(a) and 5.2(b) above and (ii) any other adjustments and/or modifications to
outstanding Stock Awards and Stock Options as it deems appropriate. In the event
of any other change in the capital structure or in the Common Stock, the
Committee shall also be authorized to make such appropriate adjustments in the
number of shares of Common Stock available for issuance under the Plan and to
any single Participant pursuant to Sections 5.1, 5.2(a) and 5.2(b) above, and
any other adjustments and/or modifications to outstanding Stock Awards and Stock
Options as it deems appropriate. Notwithstanding anything herein to the
contrary, (i) any adjustment made pursuant to this Section 5.3 that is with
respect to an ISO shall comply with the rules of Code Section 424(a) and (ii) in
no event shall any adjustment be made which would render any ISO granted
hereunder other than an ISO. In addition, the number of shares of Common Stock
available for issuance under the Plan shall be automatically adjusted to the
extent necessary to reflect any dividend equivalents paid in the form of Common
Stock.
6. STOCK AWARDS
6.1 In General. The Committee is authorized to grant Stock Awards to
Eligible Executives and to other Employees on or after the Effective Date.
6.2 Terms and Conditions of Stock Awards. Except as provided in Section
6.3 below, Stock Awards shall be subject to such terms, conditions, restrictions
and/or limitations, if any, as the Committee deems appropriate, including, but
not limited to, restrictions on transferability and continued employment;
provided, however, that such terms, conditions, restrictions and/or limitations
are not inconsistent with the Plan. The Committee may accelerate the date a
Stock Award becomes transferable under such circumstances as it deems
appropriate.
6.3 Rights as Shareholders. During the period in which any shares of
Common Stock are subject to the restrictions imposed under Section 6.2 above,
the 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, pursuant to Section 9 below, the right to receive dividends.
6.4 Stock Award Agreement. Any Stock Award granted under the Plan shall be
evidenced by a Stock Award Agreement which shall be signed by the Committee and
the Participant. In addition, a Stock Award may be evidenced in such other
manner as the Committee may deem appropriate, including, but not limited to,
book-entry registration or issuance of a stock certificate or certificates.
6.5 Initial Stock Awards. Notwithstanding any provision contained in the
Plan to the contrary, the Committee shall grant to the Eligible Executives
listed on Schedule A on the Effective Date an aggregate number of shares of
Common Stock which equals 50 percent of the Common Stock subject to the Plan
(the
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<PAGE> 7
"Initial Stock Awards"). Each of these Initial Stock Awards shall be subject to
restrictions on transferability, and such restrictions shall lapse according to
the vesting schedule set forth below:
20 percent of each Initial Stock Award shall become transferable on
and remain transferable after the date of grant;
40 percent of each Initial Stock Award shall become transferable on
and remain transferable after the day which precedes the first
anniversary of the date of grant; and
40 percent of each Initial Stock Award shall become transferable on
and remain transferable after the day which precedes the second
anniversary of the date of grant.
7. STOCK OPTIONS
7.1 In General. The Committee is authorized to grant Stock Options to
Employees on or after the Effective Date. Stock Options may be ISOs or
Nonqualified Stock Options, or a combination of both.
7.2 Terms and Conditions of Stock Options
(a) Recipients and Size of Stock Option Grant. The Committee shall,
in its sole discretion but after having considered the recommendations of the
CEO, determine the recipients of Stock Option grants and the number of shares of
Common Stock underlying each Stock Option grant.
(b) Exercise Price. The Committee shall set the exercise price of
the Stock Option; provided, however, that the exercise price of an ISO shall not
be less than 100 percent of Fair Market Value on the date of grant.
(c) Term of Stock Option. The Committee shall set the term of the
Stock Option; provided, however, that no Stock Option shall be exercised after
the tenth anniversary of the date of grant.
(d) Exercisability of Stock Options. Stock Options granted under
this Section 7 shall become exercisable according to the vesting schedule set
forth below:
33-1/3 percent of the Stock Option grant shall become exercisable on
the date of grant and remain exercisable until the Stock Option
expires;
33-1/3 percent of the Stock Option grant shall become exercisable on
the first anniversary of the date of grant and remain exercisable
until the Stock Option expires; and
33-1/3 percent of the Stock Option grant shall become exercisable on
the second anniversary of the date of grant and remain exercisable
until the Stock Option expires.
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<PAGE> 8
7.3 Restrictions Relating to ISOs. In addition to being subject to the
terms and conditions of Section 7.2 above, ISOs shall comply with all other
requirements under Code Section 422. Accordingly, ISOs may be granted only to
Participants who are Employees of the Company or of any "parent corporation" (as
defined in Code Section 424(e)) or of any "subsidiary corporation" (as defined
in Code Section 424(f)) at the date of grant. The aggregate market value
(determined as of the time the option is granted) of the Common Stock with
respect to which ISOs are exercisable for the first time by a Participant during
any calendar year (under all option plans of the Company and of any "parent
corporation" (as defined in Code Section 424(e)) and of any "subsidiary
corporation" (as defined in Code Section 424(f))) shall not exceed $100,000. For
purposes of the preceding sentence, (i) ISOs shall be taken into account in the
order in which they are granted and (ii) ISOs granted before 1987 shall not be
taken into account. ISOs shall not be transferable by the Participant otherwise
than by will or the laws of descent and distribution and shall be exercisable,
during the Participant's lifetime, only by such Participant. The Committee shall
not grant ISOs to any Employee who, at the time the ISO is granted, owns stock
possessing (after the application of the attribution rules of Code Section
424(d)) more than 10 percent of the total combined voting power of all classes
of stock of the Company or of any "parent corporation" (as defined in Code
Section 424(e)) or of any "subsidiary corporation" (as defined in Code Section
424(f)) unless the exercise price of the ISO is fixed at not less than 110
percent of the Fair Market Value of the Common Stock on the date of grant and
the exercise of such ISO is prohibited by its terms after the fifth anniversary
of the ISO's date of grant. In addition, no ISO shall be issued to a Participant
in tandem with a Nonqualified Stock Option issued to such Participant.
7.4 Stock Option Agreement. Any Stock Option granted under the Plan shall
be evidenced by a Stock Option Agreement which shall be signed by the Committee
and the Participant.
7.5 Additional Terms and Conditions. The Committee may, by way of the
Stock Option Agreements or otherwise, establish such other terms, conditions,
restrictions and/or limitations, if any, of any Stock Option, provided they are
not inconsistent with the Plan.
7.6 Exercise. Upon exercise, the exercise price of a Stock Option may be
paid in cash, shares of Common Stock, a combination of the foregoing, or such
other consideration as the Committee may deem appropriate. The Committee shall
establish appropriate methods for accepting Common Stock, whether restricted or
unrestricted, and may impose such conditions as it deems appropriate on the use
of such Common Stock to exercise a Stock Option. The 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 the Company withhold a portion of the shares of Common Stock to be
delivered for the payment of such taxes.
7.7 Initial Stock Option Grants to Key Worldwide Managers. Notwithstanding
any provision contained in the Plan to the contrary, the Committee shall grant
Stock Options to the Company's Key Worldwide Managers on or about the Effective
Date with respect to 25 percent of the Common Stock subject to the Plan (the
"Key Worldwide Managers Initial Stock Option Grants"). The Committee, after
having considered the recommendations of the CEO, shall (i) select the Employees
who shall be Key Worldwide Managers, provided, however, that no Eligible
Executive shall be selected as a Key Worldwide Manager and (ii) determine
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<PAGE> 9
the number of shares of 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 shall be established by the Committee pursuant to Sections 7.2, 7.3, 7.4,
7.5 and 7.6 above.
8. TERMINATION OF EMPLOYMENT
8.1 Forfeiture. Subject to any written agreement between the Company and a
Participant, if a Participant's employment is terminated due to death,
disability, retirement or for any other reason, all nontransferable shares
underlying Stock Awards and/or all unexercisable Stock Options held by such
Participant on the date of termination of employment shall immediately be
forfeited by the Participant.
8.2 Committee Discretion. Notwithstanding anything contained in the Plan
to the contrary, the Committee may, in its sole discretion, provide that:
(a) any or all nontransferable Stock Awards held by the
Participant on the date of termination of employment shall
become immediately transferable as of such date and to remain
transferable after such date;
(b) any or all unexercisable Stock Options held by the Participant
on the date of termination of employment shall become
immediately exercisable and remain exercisable until a date
that occurs on or prior to the date the Stock Option expires;
and
(c) any or all exercisable Stock Options held by the Participant
on the date of termination of employment shall remain
exercisable until a date that occurs on or prior to the date
the Stock Option expires.
8.3 ISOs. Notwithstanding anything contained in the Plan to the contrary,
(i) the provisions contained in Section 8.2(c) above shall be applied to an ISO
only if the application of such provision maintains the treatment of such ISO as
an ISO and (ii) for purposes of extending the exercise period of an ISO in the
event of a termination due to disability pursuant to Section 8.2(c) above, the
Participant's disability shall satisfy the requirement of "permanent and total
disability" as defined in Code Section 22(e)(3).
9. DIVIDEND AND DIVIDEND EQUIVALENTS
9.1 Payment of Dividend and Dividend Equivalents. The Committee may
choose, at the time of the grant of a Stock Award or any time thereafter up to
the time the Stock Award becomes transferable, to include as part of such Stock
Award an entitlement to receive dividends, subject to such terms, conditions,
restrictions and/or limitations, if any, as the Committee may establish. In
addition, the Committee may choose, at the time of the grant of a Stock Options
or any time thereafter up to the time of the exercise of the Stock
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<PAGE> 10
Option, to include as part of such Stock Option an entitlement to receive
dividend equivalents, subject to such terms, conditions, restrictions and/or
limitations, if any, as the Committee may establish. Dividends and dividend
equivalents shall be paid in such form and manner (i.e., lump sum or
installments), and at such time(s) as the Committee shall determine. All
dividends or dividend equivalents which are not paid currently may, at the
Committee's discretion, accrue interest.
10. MISCELLANEOUS
10.1 Nonassignability. Stock Options and unvested Stock Awards granted
under the Plan shall not be subject in any manner to alienation, anticipation,
sale, assignment, pledge, or encumbrance, or transfer provided, however, that
(i) a Stock Option or unvested Stock Award may be transferred by will or the
laws of descent and distribution and (ii) a Nonqualified Stock Option or
unvested Stock Award may be transferred to (a) a member of the Participant's
"immediate family" (as such term is used in Instruction 2 to Item 404(a) of
Regulation S-K under the Exchange Act) or (b) a trust created by the
Participant.
10.2 Withholding Taxes. The Company, or the applicable Subsidiary, may
require a Participant who vests in a Stock Award or who exercises a Nonqualified
Stock Option granted hereunder, or disposes of shares acquired pursuant to the
exercise of an ISO in a disqualifying disposition (within the meaning of Code
Section 421(b)), to reimburse the corporation which employs such Participant for
any taxes required by any governmental regulatory authority to be withheld or
otherwise deducted and paid by such corporation in respect of the issuance or
disposition of such shares. In lieu thereof, the corporation which employs such
Participant shall have the right to withhold the amount of such taxes from any
other sums due or to become due from such corporation to the Participant upon
such terms and conditions as the Committee shall prescribe. The corporation that
employs such Participant may, in its discretion, hold the stock certificate to
which such Participant is entitled upon the vesting of a Stock Award or the
exercise of a Nonqualified Stock Option as security for the payment of such
withholding tax liability, until cash sufficient to pay that liability has been
accumulated. In addition, at any time that the Company becomes subject to a
withholding obligation under applicable law with respect to the vesting of a
Stock Award or the exercise of a Nonqualified Stock Option (the "Tax Date"),
except as set forth below, a holder of a Stock Award or Nonqualified Stock
Option may elect to satisfy, in whole or in part, the holder's related personal
tax liabilities (an "Election") by (a) directing the Company to withhold from
shares issuable in the related vesting or exercise either a specified number of
shares or shares of Common Stock having a specified value (in each case not in
excess of the related personal tax liabilities), (b) tendering shares of Common
Stock previously issued pursuant to the exercise of a Nonqualified Stock Option
or other shares of the Common Stock owned by the holder or (c) combining any or
all of the foregoing Elections in any fashion. An Election shall be irrevocable.
The withheld shares and other shares of Common Stock tendered in payment shall
be valued at their Fair Market Value on the Tax Date. The Committee may
disapprove of any Election, suspend or terminate the right to make Elections or
provide that the right to make Elections shall not apply to particular shares or
exercises. The Committee may impose any additional conditions or restrictions on
the right to make an Election as it shall deem appropriate. The Committee may
prescribe such rules as it determines with respect to Participants subject to
the reporting requirements of Section 16(a) of the Exchange Act to effect such
tax withholding in compliance with the rules
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established by the Securities and Exchange Commission (the "Commission") under
Section 16 of the Exchange Act and the positions of the staff of the Commission
thereunder expressed in no-action letters exempting such tax withholding from
liability under Section 16(b) of the Exchange Act.
10.3 Amendments to Stock Award Agreement and Stock Option Agreement. The
Committee may at any time amend in writing any Stock Award Agreement and/or
Stock Option Agreement by mutual agreement between the Committee and the
Participant or such other persons as may then have an interest therein.
10.4 Listing of Shares and Related Matters. If at any time the Committee
shall determine that the listing, registration or qualification of the shares of
Common Stock subject to any Stock Award or Stock Option on any securities
exchange or under any applicable law, or the consent or approval of any
governmental regulatory authority, is necessary or desirable as a condition of,
or in connection with, the granting of a Stock Award or Stock Option, or the
issuance of shares of Common Stock thereunder, such Stock Award or Stock Options
may not be granted, or such Stock Option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
10.5 No Right to Continued Employment or Grants. Participation in the Plan
shall not give any Employee any right to remain in the employ of the Company or
any Subsidiary. The Company or the applicable Subsidiary, reserves the right to
terminate any Employee at any time. In addition, other than as provided in
Section 3 or Section 6 above, the adoption of this Plan shall not be deemed to
give any Employee or any other individual any right to be selected as a
Participant or to be granted a Stock Award or Stock Option.
10.6 Awards Subject to Foreign Laws. The Committee may grant Stock Awards
and/or Stock Options to individual Participants who are subject to the tax laws
of nations other than the United States, and such Stock Awards and/or Stock
Options may have terms and conditions as determined by the Committee as
necessary to comply with applicable foreign laws. The Committee may take any
action which it deems advisable to obtain approval of such Stock Awards and/or
Stock Options by the appropriate foreign governmental entity; provided, however,
that no such Stock Awards and/or Stock Options may be granted pursuant to this
Section 10.6 and no action may be taken which would result in a violation of the
Exchange Act, the Code or any other applicable law.
10.7 Amendment and Termination. The Board may suspend or terminate the
Plan at any time with or without prior notice. In addition, the Board may, from
time to time and with or without prior notice, amend the Plan in any manner;
provided, however, that no amendment of the Plan shall, without approval of the
shareholders of the Company (i) materially increase the benefits accruing to
Participants under the Plan, (ii) increase the number of securities which may be
issued under the Plan, (iii) materially modify the requirements as to
eligibility for participation in the Plan, (iv) modify the specified employees
or class of employees eligible to receive Stock Options, or (v) increase the
maximum aggregate number of shares of Common Stock underlying Stock Awards
and/or Stock Options that may be granted to any single Participant during the
life of
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the Plan. Termination or amendment of the Plan by the Board shall not adversely
affect any Stock Award Agreement and/or Stock Option Agreement without the
Participant's prior written consent. Notwithstanding anything contained in the
Plan to the contrary, the Board may amend the Plan without shareholder approval
in order to comply with the amendments to Rule 16b-3 under the Exchange Act
published on June 14, 1996 by the SEC in volume 61 of the Federal Register on
page 30376.
10.8 Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of New York without reference to
principles of conflict of laws, except as superseded by applicable federal law.
10.9 No Right, Title, or Interest in Company Assets. A Participant shall
not have any rights as a shareholder as a result of participation in the Plan
until the date of issuance of a stock certificate in his or her name; provided,
however, that such rights are not granted to the Participant under the Plan. To
the extent any person acquires a right to receive payments from the Company or
any Subsidiary under the Plan, such rights shall be no greater than the rights
of an unsecured creditor of the Company and the Participant shall not have any
rights in or against any specific assets of the Company. All Stock Awards and
Stock Options granted under the Plan shall be unfunded.
10.10 No Guarantee of Tax Consequences. No person connected with the Plan
in any capacity, including, but not limited to, the Company and any Subsidiary
and their directors, officers, agents and employees makes any representation,
commitment, or guarantee that any tax treatment, including, but not limited to,
federal, state and local income, estate and gift tax treatment, will be
applicable with respect to amounts deferred under the Plan, or paid to or for
the benefit of a Participant under the Plan, or that such tax treatment will
apply to or be available to a Participant on account of participation in the
Plan.
10.11 Other Benefits. No Stock Award or Stock Option granted under the
Plan shall be considered compensation for purposes of computing benefits under
any retirement plan of the Company or any Subsidiary nor affect any benefits or
compensation under any other benefit or compensation plan of the Company or any
Subsidiary now or subsequently in effect.
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SCHEDULE A
1. Michael A. Standen
2. Michael A. Banks
3. Robert I. Brocklehurst
4. Robin A. Brumwell
5. J. Richard Budd, III
6. Alan D. Ewart
7. Gerd Nassauer
8. Barry C. Nuss
9. James Pearson
10. Eric L. Schondorf
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EXHIBIT 10.9
METALLURG, INC.
MANAGEMENT INCENTIVE COMPENSATION PLAN
1. DEFINITIONS
The following terms shall have the following meanings unless the context
indicates otherwise:
1.1 "Bankruptcy Code" shall mean title 11 of the United States Code, as
amended from time to time, as applicable to the Chapter 11 Cases.
1.2 "Bankruptcy Court" shall mean 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.
1.3 "Board" shall mean the Board of Directors of the Company.
1.4 "Bonus Pool" shall mean an amount equal to the sum of (i) 40 percent
multiplied by the CEO's actual base salary paid by the Company during a specific
Performance Period and (ii) 30 percent multiplied by the sum of all
Participants' (other than the CEO) 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, shall be increased by the percentage of
increase that the actual EBITDA exceeds the Target Worldwide EBITDA.
1.5 "Bonus Pool Cash Award" shall mean an award of cash compensation with
respect to a specific Performance Period, as granted by the Committee to a
Participant in accordance with Section 7.1 below.
1.6 "Cash Award" shall mean an award of cash compensation with respect to
a specific Performance Period, as granted by the Committee to a Participant in
accordance with Section 7.2 below.
1.7 "CEO" shall mean the chief executive officer of the Company.
1.8 "Certification Date" shall mean the date on which the Committee
certifies that the Performance Goal for a specific Performance Period has been
achieved in accordance with Section 6.1 below.
1.9 "Chapter 11 Cases" shall mean the cases under chapter 11 of the
Bankruptcy Code commenced by the Company and Shieldalloy Metallurgical
Corporation, styled In re METALLURG, INC. and SHIELDALLOY METALLURGICAL
CORPORATION, Jointly Administered Chapter 11 Case Nos. 93 B
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44468 (JLG) and 93 B 44469 (JLG), currently pending in the Bankruptcy Court,
under which the Company and Shieldalloy Metallurgical Corporation are the
debtors in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.
1.10 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, including applicable regulations thereunder.
1.11 "Committee" shall mean the Compensation Committee of the Board, and,
if none, the entire Board or such other Board committee as may be designated by
the Board to administer the Plan.
1.12 "Company" shall mean Metallurg, Inc., a Delaware corporation.
1.13 "Confirmation Date" shall mean the date on which the Clerk of the
Bankruptcy Court enters the Confirmation Order.
1.14 "Confirmation Order" shall mean the order of the Bankruptcy Court
confirming the Plan of Reorganization pursuant to section 1129 of the Bankruptcy
Code.
1.15 "EBITDA" shall mean, with respect to any period, the Company's annual
net income (loss) for such period plus all amounts representing interest, taxes,
depreciation and amortization expenses for such period, in each case, as
reported in the Company's consolidated financial statements.
1.16 "Participant" shall mean an employee of the Company who has been
selected to participate in accordance with Section 3 below.
1.17 "Performance Goal" shall mean, with respect to a Performance Period,
the Target Worldwide EBITDA established for such Performance Period.
1.18 "Performance Period" shall mean a period corresponding to the
Company's fiscal year or to any other period designated by the Committee with
respect to which a Bonus Pool Cash Award may be granted.
1.19 "Plan" shall mean the Metallurg, Inc. Management Incentive
Compensation Plan.
1.20 "Plan of Reorganization" shall mean the joint chapter 11 plan of
reorganization for the Company and Shieldalloy Metallurgical Corporation under
the Chapter 11 Cases (including all exhibits and schedules annexed thereto),
either in its present form or as it may be altered, amended, or modified from
time to time.
1.21 "Subsidiary" shall mean a corporation of which the Company owns more
than 50 percent of the Voting Stock or any other business entity in which the
Company directly or indirectly has an ownership interest of more than 50
percent.
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1.22 "Target Worldwide EBITDA" shall mean:
(a) with respect to the Performance Period corresponding to the
Company's fiscal year ending December 31, 1997, the amount
specified in Section 5.1 below; and
(b) with respect to any Performance Periods beginning after
December 31, 1997, the EBITDA established by the Board as the
target for such Performance Period in accordance with Section
5.2 below.
1.23 "Voting Stock" shall mean capital stock of any class or classes
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. PURPOSE AND TERM OF PLAN
2.1 Purpose. The purpose of the Plan is to provide an annual cash
incentive to certain executives of the Company and its Subsidiaries to put forth
maximum efforts toward the growth, profitability and success of the Company and
its Subsidiaries and to encourage such executives to remain in the employ of the
Company or the applicable Subsidiary.
2.2 Term. The Plan shall become effective as of the Confirmation Date.
3. PARTICIPATION
3.1 Participation. The executives listed on Schedule A shall participate
in the Plan. In addition, the Committee may select other employees of the
Company or its Subsidiaries to participate in the Plan. The fact that a person
(other than the CEO) is a Participant for a specific Performance Period shall
not in any manner entitle such Participant to receive a Bonus Pool Cash Award or
Cash Award for such Performance Period. The determination as to whether or not
such Participant shall be paid a Bonus Pool Cash Award or Cash Award for such
Performance Period shall be decided solely in accordance with the provisions of
Section 7 below.
4. ADMINISTRATION
4.1 Responsibility. The Committee shall have the responsibility to
control, operate, manage and administer the Plan in accordance with its terms.
4.2 Authority of the Committee. The Committee shall have all the
discretionary authority that may be necessary or helpful to enable it to
discharge its responsibilities with respect to the Plan, including but not
limited to:
(a) to determine eligibility for participation in the Plan;
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(b) to determine eligibility for and the amount of Bonus Pool Cash
Awards payable under the Plan;
(c) to administer the Performance Goals and certify whether, and
to what extent, they are attained;
(d) to supply any omission;
(e) to make rules for carrying out and administering the Plan and
to make changes in such rules as they from time to time deem
proper; and
(f) to decide questions arising in the administration,
interpretation, and application of the Plan.
In addition, in order to enable employees who are foreign nationals or are
employed outside the United States or both to receive Bonus Pool Cash Awards or
Cash Awards under the Plan, the Committee may adopt such amendments, procedures,
rules, subplans and the like as are necessary or advisable, in the opinion of
the Committee, to effectuate the purposes of the Plan.
4.3 Action by the Committee. The Committee may act only by a majority of
its members. Any determination of the Committee may be made, without a meeting,
by a writing or writings signed by all of the members of the Committee. In
addition, the Committee may authorize any one or more of its members to execute
and deliver documents on behalf of the Committee.
4.4 Delegation of Authority. Except to the extent prohibited by law, the
Committee may delegate some or all of its authority under the Plan to any person
or persons; provided, however, that any such delegation be in writing.
5 ESTABLISHMENT OF PERFORMANCE GOAL
5.1 Performance Goal for the 1997 Performance Period. The Performance Goal
with respect to the Performance Period corresponding to the calendar year ending
December 31, 1997 shall be the achievement of operating margin before
depreciation and amortization of $35,480,000.
5.2 Performance Goal for Performance Periods After 1997. For the
Performance Periods corresponding to the Company's fiscal years beginning after
December 31, 1997, the Target Worldwide EBITDA shall be established by the Board
in writing within the first 90 days of the Performance Period. 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:
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(a) in the event of any unusual or extraordinary corporate item,
transaction, event or development;
(b) in recognition of any other unusual or nonrecurring events
affecting the Company, or the financial statements of the
Company, or in response to, or in anticipation of, changes in
applicable laws, regulations, accounting principles, or
business conditions; and
(c) in view of the Board's assessment of the business strategy of
the Company, performance of comparable organizations, economic
and business conditions, and any other circumstances deemed
relevant.
6. CERTIFICATION OF ACHIEVEMENT OF PERFORMANCE GOAL
6.1 Certification by Committee. Prior to the earlier of (i) the end of the
100-day period following the end of each Performance Period or (ii) the end of
the 10-day period following the date on which the Company's audited financial
statements are delivered to the Committee, the Committee shall meet to review
and certify in writing whether, and to what extent, the Performance Goal for
that specific Performance Period has been achieved. The date that the Committee
certifies that such Performance Goal has been achieved is the Certification
Date.
7. DETERMINATION AND PAYMENT OF BONUS POOL CASH AWARDS AND CASH AWARDS
7.1 Achievement of Performance Goal. Provided that the Committee certifies
that the Performance Goal for a specific Performance Period has been achieved,
the Company shall, within the 10-day period following the Certification Date:
(a) pay the CEO a Bonus Pool Cash Award in an amount equal to (i)
40 percent of the CEO's actual base salary paid by the Company
during the applicable Performance Period plus (ii) 40 percent
of the CEO's actual base salary paid by the Company during the
applicable Performance Period multiplied by the percentage of
increase that the actual EBITDA exceeds the Target Worldwide
EBITDA (if the actual EBITDA does exceed the Target Worldwide
EBITDA); and
(b) pay all or some of the Participants (other than the CEO) a
Bonus Pool Cash Award in an amount as determined by the
Committee in its sole discretion; provided, however, that the
Committee shall, in making its determination, take into
account the recommendations of the CEO as to the determination
of such Bonus Pool Cash Award for each Participant.
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The Committee may, in its sole discretion, distribute less than 100 percent of
the Bonus Pool allocable under Section 7.1(b) above with respect to a specific
Performance Period, and such undistributed amounts shall be reserved for, and
applied to, future Bonus Pool Cash Awards, as the Committee may determine in its
sole discretion.
7.2 Performance Goal Not Achieved. In the event that the Performance Goal
with respect to a specific Performance Period is not achieved, the Committee
shall, in its sole discretion, determine and pay Cash Awards (if any) to the CEO
and each other Participant; provided, however, that:
(a) the Committee shall take into account the recommendations of
the CEO as to the determination of such Cash Awards for each
Participant (other than the CEO), and
(b) the aggregate of all Cash Awards paid to all Participants with
respect to a specific Performance Period shall be less than
the Bonus Pool with respect to such Performance Period.
8. DEFERRAL OF BONUS POOL CASH AWARDS AND CASH AWARDS
8.1 Deferral. At the discretion of the Committee, a Participant may,
subject to such terms and conditions as the Committee may determine, elect to
defer payment of all or any part of any Bonus Pool Cash Award or Cash Award
which the Participant might earn with respect to a Performance Period by
complying with such procedures as the Committee may prescribe. Any Bonus Pool
Cash Award or Cash Award, or portion thereof, upon which such an election is
made shall be deferred into, and subject to the terms, conditions and
requirements of any deferred compensation plan, program or arrangement of the
Company.
9. TERMINATION OF EMPLOYMENT
9.1 Termination of Participant's Employment. Subject to any written
agreement between the Company and a Participant, if the Participant's employment
is terminated, either by the Company or by the Participant, during or after the
end of a Performance Period, the Committee, in its sole discretion, may pay such
Participant a Bonus Pool Cash Award or a Cash Award with respect to such
Performance Period; provided, however, that with respect to a Participant who is
not the CEO, the Committee shall take into account the recommendations of the
CEO as to whether such award should be paid, and if so, then as to the amount of
such payment.
10. MISCELLANEOUS
10.1 Nonassignability. Bonus Pool Cash Awards and/or Cash Awards under the
Plan shall not be subject in any manner to alienation, anticipation, sale,
transfer (except by will or the laws of descent and distribution), assignment,
pledge, or encumbrance, nor shall any Bonus Pool Cash Award or Cash Award be
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payable to anyone other than the Participant to whom it was granted, or in the
case of death, to the Participant's legal representative.
10.2 Withholding Taxes. The Company shall be entitled to deduct from any
payment of Bonus Pool Cash Awards and Cash Awards under the Plan the amount of
all applicable taxes required by law to be withheld with respect to such
payment.
10.3 Amendment or Termination of Plan. The Board may suspend or terminate
the Plan at any time with or without prior notice; provided, however, that such
suspension or termination shall not become effective until after the end of the
120-day period following the completion of the Performance Period in which the
action to suspend or terminate the Plan is taken. In addition, the Board may,
from time to time and with or without prior notice, amend the Plan in any
manner; provided, however, that such amendment shall not adversely affect any
Participant with respect to the Performance Periods commencing prior to the date
such action is taken without his or her prior written consent.
10.4 Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of New York without reference to
principles of conflict of laws, except as superseded by applicable federal law.
10.5 No Right, Title, or Interest in Company Assets. To the extent a
Participant acquires a right to receive payments from the Company under this
Plan, such rights shall be no greater than the rights of an unsecured creditor
of the Company and the Participant shall not have any rights in or against any
specific assets of the Company.
10.6 No Guarantee of Tax Consequences. No person connected with the Plan
in any capacity, including, but not limited to, the Company and its Subsidiaries
and their directors, officers, agents and employees makes any representation,
commitment, or guarantee that any tax treatment, including, but not limited to,
federal, state and local income, estate and gift tax treatment, will be
applicable with respect to amounts deferred under the Plan, or paid to or for
the benefit of a Participant under the Plan, or that such tax treatment will
apply to or be available to a Participant on account of participation in the
Plan.
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SCHEDULE A
1. Michael A. Standen
2. Michael A. Banks
3. Robin A. Brumwell
4. J. Richard Budd, III
5. Alan D. Ewart
6. Barry C. Nuss
7. Eric L. Schondorf
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EXHIBIT 10.10
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the 14th day of April, 1997 by and
between Metallurg, Inc., a Delaware corporation (together with its successors
and assigns permitted under this Agreement, the "Company"), and Michael Alan
Standen (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is the President and Chief Executive Officer of
the Company; and
WHEREAS, the Company and the Executive have entered into an employment
agreement, dated January 1, 1984, which has been renewed and extended and which
is currently in effect (the "Existing Employment Agreement"); and
WHEREAS, the Company desires to continue the employment of the Executive
and to enter into a new employment agreement embodying the terms of such
employment (the "Agreement"); and
WHEREAS, the Executive desires to enter into the Agreement and to accept
such employment, subject to the terms and provisions of the Agreement; and
WHEREAS, the Company and the Executive desire to cancel the Existing
Employment Agreement as of the Effective Date (as defined below);
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. Definitions.
(a) "Bankruptcy Code" shall mean title 11 of the United States Code,
as amended from time to time, as applicable to the Chapter 11 Cases.
(b) "Bankruptcy Court" shall mean 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.
(c) "Base Salary" shall mean the Executive's base salary in
accordance with Section 4 below.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Business Day" shall mean 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.
(f) "Cause" shall mean:
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(1) the Executive is convicted of a felony; or
(2) the Executive engages in conduct that constitutes gross
neglect or willful misconduct in carrying out his duties
under the Agreement, resulting, in either case, in
material economic harm to the Company, unless the
Executive believed in good faith that such act or nonact
was in the best interests of the Company.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, including applicable regulations thereunder.
(h) A "Change in Control" shall mean the first to occur of the
following events:
(1) any "person" (as such term is used in Sections 3(a)(9)
and 13(d) of the Exchange Act) or group of persons
becomes a "beneficial owner" (as such term is used in
Rule 13d-3 under the Exchange Act) of more than 50
percent of the Voting Stock of the Company;
(2) the majority of the Board consists of individuals other
than Incumbent Directors;
(3) the Company adopts any plan of liquidation providing for
the distribution of all or substantially all of its
assets;
(4) the sale or other disposition of all or substantially
all of the assets or business of the Company and its
Subsidiaries taken as a whole; or
(5) the merger, consolidation or combination of the Company
with or into another company (the "Other Company");
provided, however, that immediately after the merger,
consolidation or combination, the shareholders of the
Company immediately prior to the merger, consolidation
or combination hold, directly or indirectly, 50 percent
or less of the Voting Stock of the surviving company
(there being excluded from the number of shares held by
such shareholders, but not from the Voting Stock of the
surviving company, any shares received by any
"affiliate" (as such term is defined in Rule 12b-2 under
the Exchange Act) of the Other Company in exchange for
stock of the Other Company).
(i) "Chapter 11 Cases" shall mean the cases under chapter 11 of the
Bankruptcy Code commenced by the Company and Shieldalloy Metallurgical
Corporation, 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 Company
and Shieldalloy Metallurgical Corporation are the debtors in possession pursuant
to sections 1107 and 1108 of the Bankruptcy Code.
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(j) "Competitive Activity" shall mean any activity engaged in by the
Executive, whether as an employee, principal, sole proprietor, consultant,
agent, officer, director, partner or shareholder (except as a less than one-
percent shareholder of a publicly traded company or a less than five-percent
shareholder of a privately held company), which directly competes with the
Company or any Subsidiary. For this purpose, an activity which directly competes
with the Company or any Subsidiary shall mean a business that was being
conducted by the Company or any Subsidiary during the Term of Employment.
Notwithstanding anything to the contrary in this Section 1(j), an activity shall
not be deemed to be a Competitive Activity (x) solely as a result of the
Executive's being employed by or otherwise associated with a business of which a
unit is in competition with the Company or any Subsidiary but as to which unit
the Executive does not have direct or indirect responsibilities for the products
or product lines involved or (y) if the activity contributes less than 5 percent
of the revenues for the fiscal year in question of the business by which the
Executive is employed or with which he is otherwise associated.
(k) "Confirmation Date" shall mean the date on which the Clerk of
the Bankruptcy Court enters the Confirmation Order.
(l) "Confirmation Order" shall mean the order of the Bankruptcy
Court confirming the Plan of Reorganization pursuant to section 1129 of the
Bankruptcy Code.
(m) "Consumer Price Index" shall mean the Consumer Price Index for
Urban Wage Earners and Clerical Workers, all items, for New York City as
determined by the Bureau of Labor Statistics, United States Department of Labor,
or successor or comparable successor index should such index be discontinued.
(n) "Disability" shall mean a disability as determined under the
Company's long-term disability plans, programs and/or arrangements in effect on
the date such disability first occurs.
(o) "Effective Date" shall mean the first Business Day on which all
of the conditions specified in Article XIII of the Plan of Reorganization have
been satisfied or waived.
(p) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time, including applicable regulations thereunder.
(q) "Good Reason" shall mean the occurrence of any of the following
events:
(1) a reduction in the Executive's Base Salary;
(2) a material change in the Executive's position, duties or
responsibilities with respect to his employment by the
Company under the Agreement without the Executive's
prior written consent;
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(3) the failure of the Executive to be elected or reelected
to the positions described in Section 3(a) or 3(b) below
or the removal of him from any such position;
(4) a reduction in the Executive's annual target award as
specified in Section 5 below;
(5) an actual change in the Executive's principal work
location by more than 50 miles and more than 50 miles
from the Executive's principal place of abode as of the
date of such change in job location without the
Executive's prior written consent; or
(6) a Change in Control.
(r) "Incumbent Directors" shall mean the members of the Board as of
the Effective Date; provided, however, that any person becoming a director
subsequent to such date whose election or nomination for election was supported
by a majority of the directors who then comprised the Incumbent Directors shall
be considered to be an Incumbent Director.
(s) "Plan of Reorganization" shall mean the joint chapter 11 plan of
reorganization for the Company and Shieldalloy Metallurgical Corporation under
the Chapter 11 Cases (including all exhibits and schedules annexed thereto),
either in its present form or as it may be altered, amended, or modified from
time to time.
(t) "Subsidiary" of the Company shall mean any corporation of which
the Company owns, directly or indirectly, more than 50 percent of the Voting
Stock or any other business entity in which the Company directly or indirectly
has an ownership interest of more than 50 percent.
(u) "Term of Employment" shall mean the period specified in Section
2 below.
(v) "Voting Stock" shall mean capital stock of any class or classes
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. Term of Employment.
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, for the period commencing on the Effective Date and
ending on the third anniversary of the Effective Date, subject to earlier
termination of the Term of Employment in accordance with the terms of the
Agreement. The Term of Employment shall be automatically renewed for a one-year
period on the third anniversary of the Effective Date and on each anniversary of
the Effective Date thereafter, unless either Party has notified the other Party
in writing in accordance with Section 25 below at least 365 days prior to the
expiration of the then Term of Employment that he or it does not want the Term
of Employment to so renew.
3. Position, Duties and Responsibilities.
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(a) On the Effective Date and continuing for the remainder of the
Term of Employment, the Executive shall be employed as the President and Chief
Executive Officer of the Company and be responsible for the general management
of the affairs of the Company. The Executive, in carrying out his duties under
this Agreement, shall report to the Board.
(b) It is the intention of the Parties that effective as of the
Effective Date and continuing for the remainder of the Term of Employment, the
Executive shall be elected and serve as a member of the Board.
(c) Notwithstanding anything herein to the contrary, nothing shall
preclude the Executive from:
(1) serving on the boards of directors of a reasonable
number of other corporations or the boards of a
reasonable number of trade associations and/or
charitable organizations;
(2) engaging in charitable activities and community affairs;
and
(3) managing his personal investments and affairs;
provided, however, that such activities do not materially interfere with the
proper performance of his duties and responsibilities as the Company's President
and Chief Executive Officer.
4. Base Salary.
The Executive shall be paid an annualized Base Salary of $606,000,
payable in accordance with the regular payroll practices of the Company. The
Base Salary shall be reviewed no less frequently than annually for increase in
the discretion of the Board's Compensation Committee. Notwithstanding anything
herein to the contrary, the Base Salary shall be increased on each January 1st
after the Effective Date (the "Base Salary Increase Date") by a percentage which
is equal to the percentage of increase in the Consumer Price Index with respect
to the 12-month period ending on the November 30th which immediately precedes
the relevant Base Salary Increase Date.
5. Annual Incentive Compensation Programs.
The Executive shall participate in the Company's Management
Incentive Compensation Plan ("MICP") or such other successor plan applicable to
senior-level executives. He shall have an annual target award under the MICP of
at least 40 percent of the Base Salary paid during the relevant performance
period, with such percentage subject to increase in accordance with the terms of
the MICP if the performance results exceed the performance goals with respect to
the relevant performance period. Payment of annual incentive compensation awards
shall be made at the same time that other senior-level executives receive their
annual incentive compensation awards. Notwithstanding anything herein to the
contrary, the Company shall not amend the MICP if such amendment would adversely
affect the Executive.
6. Long-Term Incentive Compensation Programs.
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(a) The Executive shall be eligible to participate in the Company's
1997 Stock Award and Stock Option Plan (the "1997 Plan") or such other successor
plan applicable to senior-level executives.
(b) On the Effective Date, the Company shall grant the Executive an
award of 70,000 shares of Common Stock of the Company under the 1997 Plan (the
"1997 Stock Award"). Subject to the terms and conditions of the 1997 Plan, the
1997 Stock Award shall vest as set forth below:
(1) 20 percent of the 1997 Stock Award shall be transferable
on, and remain transferable after, the date of grant;
(2) 40 percent of the 1997 Stock Award shall become
transferable on, and remain transferable after, the day
which precedes the first anniversary of the date of
grant; and
(3) 40 percent of the 1997 Stock Award shall become
transferable on, and remain transferable after, the day
which precedes the second anniversary of the date of
grant.
(c) The Company shall loan the Executive an amount equal to the
aggregate federal, state and local income taxes (based on the highest marginal
tax rates in effect on the date of the loan) incurred by the Executive due to
(i) a portion of the 1997 Stock Award becoming transferable or (ii) the
Executive making an election under Code Section 83(b) with respect to the 1997
Stock Award. The loan shall be made at or, at the Executive's election, prior to
the date the Executive is obligated to pay any federal, state or local income
tax due to such portion of the 1997 Stock Award becoming transferable or the
Executive making such election under Code Section 83(b). The loan's interest
rate shall be equal to the short-term applicable federal rate compounded
annually in effect on the date of the loan as published by the Internal Revenue
Service. The Executive shall pay to the Company in a lump sum the principal and
all accrued interest with respect to such loan on the day which precedes the
third anniversary of the date of the loan, or, at the Executives's election, on
any date which precedes the third anniversary of the date of the loan.
7. Employee Benefit Programs.
(a) During the Term of Employment, the Executive shall be entitled
to participate in those employee pension and welfare benefit plans, programs
and/or arrangements applicable to the Executive and made available to the
Company's senior-level executives or to its employees generally, as such plans,
programs and/or arrangements may be in effect from time to time, including,
without limitation, pension, profit-sharing, savings, medical, dental,
hospitalization, short-term disability, long-term disability, life insurance,
accidental death and dismemberment protection, travel accident insurance, and
other employee pension and welfare benefit plans, programs and/or arrangements
that may be sponsored by the Company from time to time.
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(b) During the Term of Employment, the Company shall provide the
Executive with term life insurance with a death benefit of at least two times
Base Salary. The Company shall pay all premiums with respect to such life
insurance. Such life insurance may be provided either through the Company's
group life insurance programs, by an individual policy, or by a combination of
both group and individual policies.
8. Reimbursement of Business Expenses.
The Executive is authorized to incur reasonable business expenses in
carrying out his duties and responsibilities under the Agreement, and the
Company shall promptly reimburse him for all such reasonable business expenses
incurred in connection with carrying out the business of the Company, subject to
documentation in accordance with the Company's policy.
9. Perquisites.
(a) During the Term of Employment, the Executive shall be entitled
to participate in the Company's executive fringe benefits applicable to the
Company's senior-level executive in accordance with the terms and conditions of
such arrangements as are in effect from time to time.
(b) Notwithstanding anything herein to the contrary, the Company
shall pay for the membership fees (including any bond requirement) and dues at
two clubs as the Executive determines are appropriate.
10. Vacation.
The Executive shall be entitled to paid vacation in accordance with
the Company's vacation policy; provided, however, that the Executive shall be
entitled to not less than five weeks of vacation each year.
11. Termination of Employment.
(a) Termination of Employment Due to Death. In the event of the
Executive's death during the Term of Employment, the Term of Employment shall
end as of the date of the Executive's death and his estate and/or beneficiaries,
as the case may be, shall be entitled to the following:
(1) Base Salary earned but not paid prior to the date of
his death;
(2) all annual incentive awards with respect to any year
prior to the year of his death which have been earned
but not paid;
(3) a pro rata annual incentive award under the MICP for the
year in which the Executive's death occurs; provided,
however, that the performance goals established under
the MICP with respect to the year in which the
Executive's death occurs are met;
(4) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested
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shares underlying any other restricted stock award
held by the Executive on the date of his death;
(5) immediate vesting of all stock options held by the
Executive on the date of his death, with all
nonqualified stock options remaining exercisable until
the end of their original terms and all incentive stock
options remaining exercisable until the earlier of (i)
the end of the one-year period following the date of
death or (ii) the date the incentive stock option would
otherwise expire;
(6) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above; and
(7) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
(b) Termination of Employment Due to Disability. If the Executive's
employment is terminated due to Disability during the Term of Employment, either
by the Company or by the Executive, the Term of Employment shall end as of the
date of the Executive's termination of employment and the Executive shall be
entitled to the following (but in no event less than the benefits due him under
the then current disability program of the Company):
(1) Base Salary earned but not paid prior to the date of the
termination of the Executive's employment;
(2) all annual incentive awards with respect to any year
prior to the year of the termination of the Executive's
employment which have been earned but not paid;
(3) an amount equal to the sum of 50 percent of Base Salary,
at the annual rate in effect on the date of the
termination of the Executive's employment, payable
monthly for a period ending on the first day of the
month following the month in which the Executive attains
age 65 or recovers from his Disability, whichever occurs
earlier, less the amount of any disability benefits
provided to the Executive under the Company's disability
program;
(4) a pro rata annual incentive award under the MICP for the
year in which the termination of the Executive's
employment occurs; provided, however, that the
performance goals established under the MICP with
respect to the year in which the termination of the
Executive's employment occurs are met;
(5) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested
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shares underlying any other restricted stock award
held by the Executive on the date of the termination
of his employment;
(6) immediate vesting of all stock options held by the
Executive on the date of the termination of his
employment, with all nonqualified stock options
remaining exercisable until the end of their original
terms and all incentive stock options remaining
exercisable until the earlier of (i) the end of the
one-year period following the date of the termination of
his employment or (ii) the date the incentive stock
option would otherwise expire;
(7) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above;
(8) continued participation, as if the Executive were still
an employee, in the Company's medical, dental,
hospitalization and life insurance plans, programs
and/or arrangements and in those other employee plans,
programs and/or arrangements in which he was
participating on the date of the termination of his
employment until he attains age 65 or recovers from his
Disability, whichever occurs earlier; and
(9) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
If the Executive is precluded from continuing his participation in
any employee benefit plan, program or arrangement as provided in Section
11(b)(8) above, he shall be provided the after-tax economic equivalent of the
benefits provided under the plan, program or arrangement in which he is unable
to participate. The economic equivalent of any benefit foregone shall be deemed
to be the lowest cost that would be incurred by the Executive in obtaining such
benefit himself on an individual basis.
In no event shall a termination of the Executive's employment for
Disability occur unless the Party terminating his employment gives written
notice to the other Party in accordance with Section 25 below.
(c) Termination of Employment by the Company for Cause. A
termination of the Executive's employment by the Company for Cause shall not
take effect unless the provisions of this Section 11(c) are complied with and
the Board issues a written determination that the Executive's employment should
be terminated for Cause (a "Determination").
(1) In accordance with Section 25 below, the Board shall
give the Executive a written notice stating the Board's
intention to terminate his employment for Cause (the
"Cause Notice"). The Cause Notice shall:
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(A) state in detail the particular act or acts or
failure or failures to act that constitute the
grounds on which the proposed termination of
employment for Cause is based; and
(B) be given within four months of the Board learning
of such act or acts or failure or failures to act.
(2) The Board may temporarily relieve the Executive of his
duties and responsibilities described in Section 3(a)
above during the period commencing on the date the Cause
Notice is issued by the Board and ending on the date the
Determination is issued by the Board (the "Determination
Period").
(3) The Executive shall have 20 days after the date the
Cause Notice is actually received by him in which to
cure his conduct on which the termination of employment
for Cause is based, to the extent such cure is possible.
If the Executive fails to cure such conduct, he shall
then be entitled to a hearing before the Board. Such
hearing shall be held during the 20-day period
following the date the Executive receives the Cause
Notice; provided, however, that the Executive requests
such hearing during the 10-day period following the date
the Executive receives the Cause Notice. Within five
days following the completion of such hearing, the Board
shall issue a Determination stating whether, in its
judgment, grounds for Cause as detailed in the Cause
Notice exist. If the Determination states that such
grounds exist, the Executive's employment shall be
immediately terminated for Cause and the Term of
Employment shall end as of the date of the termination
of the Executive's employment.
(4) If the Company terminates the Executive's employment for
Cause, the Executive shall be entitled to the following:
(A) Base Salary earned but not paid prior to the date
of the termination of his employment;
(B) any amounts earned, accrued or owing to the
Executive but not yet paid under Section 7, 8, 9
or 10 above; and
(C) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of
the Company.
(5) Notwithstanding anything herein to the contrary, if,
following a termination of the Executive's employment
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by the Company for Cause based upon the conviction of
the Executive for a felony, such conviction is
overturned in a final determination on appeal, the
Executive shall be entitled to the payments and the
economic equivalent of the benefits the Executive would
have received if his employment had been terminated by
the Company without Cause.
(d) Termination of Employment by the Company Without Cause. If the
Executive's employment is terminated by the Company without Cause, other than
due to death or Disability, the Executive shall be entitled to the following:
(1) Base Salary earned but not paid prior to the date of
the termination of his employment;
(2) all annual incentive awards with respect to any year
prior to the year of the termination of the Executive's
employment which have been earned but not paid;
(3) an amount equal to the aggregate Base Salary (based on
the Base Salary in effect on the date of the
termination of the Executive's employment) with
respect to a period equal to the longer of (i) 12
months or (ii) the remainder of the Term of
Employment, payable in a lump sum without discount
(the "Salary Continuation Benefits");
(4) full annual incentive award under the MICP for the year
in which the termination of the Executive's employment
occurs; provided, however, that the performance goals
established under the MICP with respect to the year in
which the termination of the Executive's employment
occurs are met;
(5) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested shares
underlying any other restricted stock award held by the
Executive on the date of the termination of his
employment;
(6) immediate vesting of all stock options held by the
Executive on the date of the termination of his
employment, with all nonqualified stock options
remaining exercisable until the end of their original
terms and all incentive stock options remaining
exercisable until the earlier of (i) the end of the
one-year period following the date of the termination of
his employment or (ii) the date the incentive stock
option would otherwise expire;
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(7) continued accrual of credited service through the end of
the Term of Employment for the purpose of any Company
pension plan, program or arrangement;
(8) the right to purchase, at fair market value, the
Executive's automobile (if any) provided to him by the
Company under the Company's automobile perquisite
program for senior-level executives;
(9) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above;
(10) continued participation, as if he were still an
employee, in the Company's medical, dental,
hospitalization and life insurance plans, programs
and/or arrangements and in other employee benefit plans,
programs and/or arrangements in which he was
participating on the date of the termination of his
employment until the earlier of:
(A) the end of the period used to determine the
Salary Continuation Benefits; or
(B) the date, or dates, he receives equivalent
coverage and benefits under the plans, programs
and/or arrangements of a subsequent employer (such
coverage and benefits to be determined on a
coverage-by-coverage or benefit-by-benefit basis);
provided, however, that:
(X) if the Executive is precluded from continuing
his participation in any employee benefit plan,
program or arrangement as provided in Section
11(d)(10)(A) above, he shall be provided with
the after-tax economic equivalent of the
benefits provided under the plan, program or
arrangement in which he is unable to participate
for the period specified in this Section
11(d)(10);
(Y) the economic equivalent of any benefit foregone
shall be deemed to be the lowest cost that would
be incurred by the Executive in obtaining such
benefit himself on an individual basis; and
(Z) payment of such after-tax economic equivalent
shall be made quarterly in advance; and
(11) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
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(e) Termination of Employment by the Executive for Good Reason. The
Executive may terminate his employment for Good Reason, but only if:
(1) the Executive notifies the Board during the 60-day
period following the date of the first occurrence of an
event which constitutes Good Reason (the "Good Reason
Event Date") of his intention to terminate his
employment for Good Reason;
(2) the Executive terminates his employment for Good Reason
during the 120-day period following the Good Reason
Event Date;
(3) the termination of employment for Good Reason does not
occur during a Determination Period described in Section
11(c)(2) above; and
(4) the Good Reason first occurs before or after a
Determination Period, or, if the Good Reason first
occurs during a Determination Period, such event
constituting Good Reason continues to occur after the
Determination Period.
Upon a termination by the Executive of his employment for Good Reason, the
Executive shall be entitled to the same payments and benefits as provided in
Section 11(d) above; provided, however, that if the Executive terminates his
employment for Good Reason based on a reduction in Base Salary under Section
1(q)(1) above, then the Base Salary to be used in determining the Salary
Continuation Benefits in accordance with Section 11(d)(2) above shall be the
Base Salary in effect immediately prior to such reduction.
(f) Termination of Employment Following a Change in Control. On the
date of a Change in Control, all stock options and all unvested shares under the
1997 Stock Award and other restricted stock awards held by the Executive on such
date shall immediately and fully vest, and all such stock options shall be
exercisable from such date until the date they would otherwise expire (but in
the case of incentive stock options, for not more than one year following a
termination of employment). If, following a Change in Control, the Executive's
employment is terminated by the Company without Cause or the Executive
terminates his employment for Good Reason, the Executive shall be entitled to
the same payments and benefits as provided in Section 11(d) above, except that
the Salary Continuation Benefits under Section 11(d)(3) above shall be
determined with respect to a period equal to the longer of (i) two years or (ii)
the remainder of the Term of Employment. A failure by the Executive to exercise
his rights with respect to a Change in Control shall not be deemed a waiver of
any rights under this Agreement.
(g) Termination of Employment by the Executive Without Good Reason.
If the Executive terminates his employment without Good Reason, other than a
termination of employment due to death or Disability, the Executive shall have
the same entitlements as provided in Section 11(c)(4) above. A termination of
the Executive's employment under this Section 11(g) shall be effective upon 30
days prior written notice to the Company and shall not be deemed a breach of
this Agreement.
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(h) Nonrenewal of Agreement by the Company. If (i) the Company does
not renew the Term of Employment in accordance with Section 2 above and (ii) the
Executive remains employed by the Company on a continuous basis until the end of
the Term of Employment, the Executive shall have the same entitlements as
provided in Section 11(d) above, and the date on which the Term of Employment
ends shall be deemed to be the date of the termination of the Executive's
employment by the Company without Cause.
(i) Nonrenewal of Agreement by the Executive. In the event that the
Executive does not renew the Term of Employment in accordance with Section 2
above, the Executive shall have the same entitlements as provided in Section
11(c)(4) above, and the date on which the Term of Employment ends shall be
deemed to be the date of the termination of the Executive's employment by the
Company for Cause.
(j) Payment Following a Change in Control. If the termination of the
Executive's employment is pursuant to Section 11(f) above, and the aggregate of
all payments or benefits made or provided to the Executive under Section 11(f)
above and under all other plans, programs and/or arrangements of the Company
(the "Aggregate Payment") is determined to constitute a "parachute payment" (as
such term is defined in Code Section 280G(b)(2)), the Company shall pay to the
Executive, prior to the time any excise tax imposed by Code Section 4999
("Excise Tax") is payable with respect to such Aggregate Payment, an additional
amount which, after the imposition of all income and excise taxes thereon, is
equal to the Excise Tax on the Aggregate Payment. The determination of whether
the Aggregate Payment constitutes a parachute payment and, if so, the amount to
be paid to the Executive and the time of payment pursuant to this Section 11(j)
shall be made by an independent auditor (the "Auditor") jointly selected by the
Company and the Executive and paid by the Company. The Auditor shall be a
nationally recognized United States public accounting firm which has not, during
the two years preceding the date of its selection, acted in any way on behalf of
the Company or any affiliate thereof. If the Executive and the Company cannot
agree on the firm to serve as the Auditor, then the Executive and the Company
shall each select one accounting firm and those two firms shall jointly select
the accounting firm to serve as the Auditor.
(k) No Mitigation; No Offset. If the Executive's employment
terminates under this Section 11, the Executive shall be under no obligation to
seek other employment and there shall be no offset against amounts due the
Executive under this Agreement on account of any remuneration attributable to
any subsequent employment that he may obtain except as specifically provided in
this Section 11.
(l) Nature of Payments. Any amounts due under this Section 11 are in
the nature of severance payments considered to be reasonable by the Company and
are not in the nature of a penalty.
12. Confidentiality: Assignment of Rights.
(a) During the Term of Employment and thereafter, the Executive
shall not disclose to anyone or make use of any trade secret or proprietary or
confidential information of the Company, including such trade secret or
proprietary or confidential information of any customer or other entity to
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which the Company owes an obligation not to disclose such information, which he
acquires during the Term of Employment, including but not limited to records
kept in the ordinary course of business, except (i) as such disclosure or use
may be required or appropriate in connection with his work as an employee of the
Company, (ii) when required to do so by a court of law, by any governmental
agency having supervisory authority over the business of the Company or by any
administrative or legislative body (including a committee thereof) with apparent
jurisdiction to order him to divulge, disclose or make accessible such
information, or (iii) as to such confidential information that becomes generally
known to the public or trade without violation of this Section 12(a).
(b) The Executive hereby sells, assigns and transfers to the Company
all of his right, title and interest in and to all inventions, discoveries,
improvements and copyrightable subject matter (the "rights") which during the
Term of Employment are made or conceived by him, alone or with others, and which
are within or arise out of any general field of the Company's business or arise
out of any work he performs or information he receives regarding the business of
the Company while employed by the Company. The Executive shall fully disclose to
the Company as promptly as available all information known or possessed by him
concerning the rights referred to in the preceding sentence, and upon request by
the Company and without any further remuneration in any form to him by the
Company, but at the expense of the Company, execute all applications for patents
and for copyright registration, assignments thereof and other instruments and do
all things which the Company may deem necessary to vest and maintain in it the
entire right, title and interest in and to all such rights.
13. Noncompetition.
(a) The Executive covenants and agrees that during the Term of
Employment and during the six-month period following the end of the Term of
Employment, he shall not at any time, without the prior written consent of the
Company, directly or indirectly, engage in a Competitive Activity.
(b) The Parties acknowledge that in the event of a breach or
threatened breach of Section 13(a) above, the Company shall not have an adequate
remedy at law. Accordingly, in the event of any breach or threatened breach of
Section 13(a) above, the Company shall be entitled to such equitable and
injunctive relief as may be available to restrain the Executive and any
business, firm, partnership, individual, corporation or entity participating in
the breach or threatened breach from the violation of the provisions of Section
13(a) above. Nothing in this Agreement shall be construed as prohibiting the
Company from pursuing any other remedies available at law or in equity for
breach or threatened breach of Section 13(a) above, including the recovery of
damages.
14. Indemnification.
(a) The Company agrees that if the Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the request of the Company as a director, officer,
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member, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether or not the basis of such Proceeding is the Executive's alleged
action in an official capacity while serving as a director, officer, member,
employee or agent, the Executive shall be indemnified and held harmless by the
Company to the fullest extent legally permitted or authorized by the Company's
certificate of incorporation or bylaws or resolutions of the Company's Board of
Directors or, if greater, by the laws of the State of Delaware, against all
cost, expense, liability and loss (including, without limitation, attorney's
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to
be paid in settlement) reasonably incurred or suffered by the Executive in
connection therewith, and such indemnification shall continue as to the
Executive even if he has ceased to be a director, member, employee or agent of
the Company or other entity and shall inure to the benefit of the Executive's
heirs, executors and administrators. The Company shall advance to the Executive
all reasonable costs and expenses incurred by him in connection with a
Proceeding within 20 days after receipt by the Company of a written request for
such advance. Such request shall include an undertaking by the Executive to
repay the amount of such advance if it shall ultimately be determined that he is
not entitled to be indemnified against such costs and expenses.
(b) Neither the failure of the Company (including the Board,
independent legal counsel or stockholders) to have made a determination prior to
the commencement of any Proceeding concerning payment of amounts claimed by the
Executive under Section 14(a) above that indemnification of the Executive is
proper because he has met the applicable standard of conduct, nor a
determination by the Company (including the Board, independent legal counsel or
stockholders) that the Executive has not met such applicable standard of
conduct, shall create a presumption that the Executive has not met the
applicable standard of conduct.
(c) The Company agrees to continue and maintain a directors and
officers' liability insurance policy covering the Executive to the extent the
Company provides such coverage for its other executive officers.
15. Effect of Agreement on Other Benefits.
Except as specifically provided in this Agreement, the existence of
this Agreement shall not prohibit or restrict the Executive's entitlement to
full participation in the Company's employee benefit plans, programs and
arrangements applicable to the Company's senior-level executives.
16. Assignability; Binding Nature.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of the Executive)
and assigns. No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company; provided, however, that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained
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in this Agreement, either contractually or as a matter of law. The Company
further agrees that, in the event of a sale of assets or liquidation as
described in the preceding sentence, it shall take whatever action it legally
can in order to cause such assignee or transferee to expressly assume the
liabilities, obligations and duties of the Company hereunder and under any other
plan or benefit program referred to herein. No rights or obligations of the
Executive under this Agreement may be assigned or transferred by the Executive
other than his rights to compensation and benefits, which may be transferred
only by will or operation of law, except as provided in Section 22 below.
17. Representation.
The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement between it and
any other person, firm or organization. The Executive represents that he knows
of no agreement between him and any other person, firm or organization that
would be violated by the performance of his obligations under this Agreement.
18. Entire Agreement.
This Agreement contains the entire understanding and agreement
between the Parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, between the Parties with respect thereto.
19. Amendment or Waiver.
No provision in this Agreement may be amended unless such amendment
is agreed to in writing and signed by the Executive and an authorized officer of
the Company. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Executive or an authorized officer of the Company, as the case may
be.
20. Severability.
In the event that any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, in whole or in
part, the remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect to the fullest extent permitted by law.
21. Survivorship.
The respective rights and obligations of the Parties hereunder shall
survive any termination of the Executive's employment to the extent necessary to
the intended preservation of such rights and obligations.
22. Beneficiaries/References.
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The Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following the Executive's death by
giving the Company written notice thereof. In the event of the Executive's death
or a judicial determination of his incompetence, reference in this Agreement to
the Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.
23. Governing Law/Jurisdiction.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of New York without reference to principles of conflict
of laws.
24. Resolution of Disputes.
Any disputes arising under or in connection with the Agreement may,
at the election of the Executive or the Company, be resolved by binding
arbitration, to be held in New York City in accordance with the rules and
procedures of the American Arbitration Association. If arbitration is elected,
the Executive and the Company shall mutually select the arbitrator. If the
Executive and the Company cannot agree on the selection of an arbitrator, each
Party shall select an arbitrator and the two arbitrators shall select a third
arbitrator, and the three arbitrators shall form an arbitration panel which
shall resolve the dispute by majority vote. Judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof. Costs
of the arbitration or litigation, including, without limitation, reasonable
attorneys' fees of both Parties, shall be borne by the Company. Pending the
resolution of any arbitration or court proceeding, the Company shall continue
payment of all amounts due the Executive under this Agreement and all benefits
to which the Executive is entitled at the time the dispute arises.
25. Notices.
Any notice given to a Party shall be in writing and shall be deemed
to have been given when delivered personally or sent by certified or registered
mail, postage prepaid, return receipt requested, duly addressed to the Party
concerned at the address indicated below or to such changed address as such
Party may subsequently give such notice of:
If to the Company: Metallurg, Inc.
6 East 43rd Street, 12th Floor
New York, New York 10017
Attention: General Counsel
With a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Marcia L. Goldstein
If to the Executive: Mr. Michael A. Standen
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81 Oakland Beach Avenue
Rye, New York 10580
With a copy to: Duane Morris & Heckscher
One Liberty Place
Philadelphia, Pennsylvania 19103-7396
Attention: John F. Horstmann
26. Headings.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
27. Counterparts.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
METALLURG, INC.
By:
------------------------
Secretary
------------------------
Michael Alan Standen
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EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the 14th day of April, 1997 by and
between Metallurg Inc., a Delaware corporation (together with its successors and
assigns permitted under this Agreement, the "Company"), and Michael A.
Banks (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is the Vice President, Administration of the
Company; and
WHEREAS, the Company desires to continue the employment of the Executive
and to enter into an employment agreement embodying the terms of such employment
(the "Agreement"); and
WHEREAS, the Executive desires to enter into the Agreement and to accept
such employment, subject to the terms and provisions of the Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. Definitions.
(a) "Bankruptcy Code" shall mean title 11 of the United States Code,
as amended from time to time, as applicable to the Chapter 11 Cases.
(b) "Bankruptcy Court" shall mean 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.
(c) "Base Salary" shall mean the Executive's base salary in
accordance with Section 4 below.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Business Day" shall mean 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.
(f) "Cause" shall mean:
(1) the Executive is convicted of a felony; or
(2) the Executive engages in conduct that constitutes gross
neglect or willful misconduct in carrying out his duties
under the Agreement, resulting, in either case, in
material economic harm to the Company, unless the
Executive believed in good faith that such act or nonact
was in the best interests of the Company.
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(g) "CEO" shall mean the chief executive officer of the Company.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, including applicable regulations thereunder.
(i) A "Change in Control" shall mean the first to occur of the
following events:
(1) any "person" (as such term is used in Sections 3(a)(9)
and 13(d) of the Exchange Act) or group of persons
becomes a "beneficial owner" (as such term is used in
Rule 13d-3 under the Exchange Act) of more than 50
percent of the Voting Stock of the Company;
(2) the majority of the Board consists of individuals other
than Incumbent Directors;
(3) the Company adopts any plan of liquidation providing for
the distribution of all or substantially all of its
assets;
(4) the sale or other disposition of all or substantially
all of the assets or business of the Company and its
Subsidiaries taken as a whole; or
(5) the merger, consolidation or combination of the Company
with or into another company (the "Other Company");
provided, however, that immediately after the merger,
consolidation or combination, the shareholders of the
Company immediately prior to the merger, consolidation
or combination hold, directly or indirectly, 50 percent
or less of the Voting Stock of the surviving company
(there being excluded from the number of shares held by
such shareholders, but not from the Voting Stock of the
surviving company, any shares received by any
"affiliate" (as such term is defined in Rule 12b-2 under
the Exchange Act) of the Other Company in exchange for
stock of the Other Company).
(j) "Chapter 11 Cases" shall mean the cases under chapter 11 of the
Bankruptcy Code commenced by the Company and Shieldalloy Metallurgical
Corporation, 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 Company
and Shieldalloy Metallurgical Corporation are the debtors in possession pursuant
to sections 1107 and 1108 of the Bankruptcy Code.
(k) "Competitive Activity" shall mean any activity engaged in by the
Executive, whether as an employee, principal, sole proprietor, consultant,
agent, officer, director, partner or shareholder (except as a less than one-
percent shareholder of a publicly traded company or a less than five-percent
shareholder of a privately held company), which directly competes with the
Company or any Subsidiary. For this purpose, an activity which directly competes
with the Company or any Subsidiary shall mean a business that was
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being conducted by the Company or any Subsidiary during the Term of Employment.
Notwithstanding anything to the contrary in this Section 1(k), an activity shall
not be deemed to be a Competitive Activity (x) solely as a result of the
Executive's being employed by or otherwise associated with a business of which a
unit is in competition with the Company or any Subsidiary but as to which unit
the Executive does not have direct or indirect responsibilities for the products
or product lines involved or (y) if the activity contributes less than 5 percent
of the revenues for the fiscal year in question of the business by which the
Executive is employed or with which he is otherwise associated.
(l) "Confirmation Date" shall mean the date on which the Clerk of
the Bankruptcy Court enters the Confirmation Order.
(m) "Confirmation Order" shall mean the order of the Bankruptcy
Court confirming the Plan of Reorganization pursuant to section 1129 of the
Bankruptcy Code.
(n) "Consumer Price Index" shall mean the Consumer Price Index for
Urban Wage Earners and Clerical Workers, all items, for New York City as
determined by the Bureau of Labor Statistics, United States Department of Labor,
or successor or comparable successor index should such index be discontinued.
(o) "Disability" shall mean a disability as determined under the
Company's long-term disability plans, programs and/or arrangements in effect on
the date such disability first occurs.
(p) "Effective Date" shall mean the first Business Day on which all
of the conditions specified in Article XIII of the Plan of Reorganization have
been satisfied or waived.
(q) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time, including applicable regulations thereunder.
(r) "Good Reason" shall mean the occurrence of any of the following
events:
(1) a reduction in the Executive's Base Salary;
(2) a material change in the Executive's position, duties or
responsibilities with respect to his employment by the
Company under the Agreement without the Executive's
prior written consent;
(3) the removal of the Executive from the positions
described in Section 3 below;
(4) a reduction in the Executive's annual bonus opportunity
as specified in Section 5 below;
(5) an actual change in the Executive's principal work
location by more than 50 miles and more than 50 miles
from the Executive's principal place of abode as of
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the date of such change in job location without the
Executive's prior written consent; or
(6) the failure of the Company to obtain the assumption in
writing of its obligation to perform this Agreement by
any successor to the Company, or purchaser of all or
substantially all of the business or assets of the
Company and its Subsidiaries taken as a whole, on or
prior to the date on which the relevant merger,
consolidation, sale or similar transaction is completed.
(s) "Incumbent Directors" shall mean the members of the Board as of
the Effective Date; provided, however, that any person becoming a director
subsequent to such date whose election or nomination for election was supported
by a majority of the directors who then comprised the Incumbent Directors shall
be considered to be an Incumbent Director.
(t) "Plan of Reorganization" shall mean the joint chapter 11 plan of
reorganization for the Company and Shieldalloy Metallurgical Corporation under
the Chapter 11 Cases (including all exhibits and schedules annexed thereto),
either in its present form or as it may be altered, amended, or modified from
time to time.
(u) "Subsidiary" of the Company shall mean any corporation of which
the Company owns, directly or indirectly, more than 50 percent of the Voting
Stock or any other business entity in which the Company directly or indirectly
has an ownership interest of more than 50 percent.
(v) "Term of Employment" shall mean the period specified in Section
2 below.
(w) "Voting Stock" shall mean capital stock of any class or classes
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. Term of Employment.
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, for the period commencing on the Effective Date and
ending on the second anniversary of the Effective Date, subject to earlier
termination of the Term of Employment in accordance with the terms of the
Agreement. The Term of Employment shall be automatically renewed for a one-year
period on the second anniversary of the Effective Date and on each anniversary
of the Effective Date thereafter, unless either Party has notified the other
Party in writing in accordance with Section 25 below at least 365 days prior to
the expiration of the then Term of Employment that he or it does not want the
Term of Employment to so renew.
3. Position, Duties and Responsibilities.
On the Effective Date and continuing for the remainder of the Term
of Employment, the Executive shall be employed as the Vice President,
Administration of the Company, and he shall have the duties and responsibilities
associated with such position. The Executive, in carrying
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out his duties under this Agreement, shall report to the CEO. Notwithstanding
anything herein to the contrary, nothing shall preclude the Executive from:
(1) serving on the boards of directors of a reasonable
number of other corporations or the boards of a
reasonable number of trade associations and/or
charitable organizations;
(2) engaging in charitable activities and community affairs;
and
(3) managing his personal investments and affairs;
provided, however, that such activities do not materially interfere with the
proper performance of his duties and responsibilities hereunder.
4. Base Salary.
The Executive shall be paid an annualized Base Salary, payable in
accordance with the regular payroll practices of the Company, of $210,000, which
is the Executive's current base salary in effect as of the Effective Date. The
Base Salary shall be reviewed no less frequently than annually for increase in
the discretion of the Board's Compensation Committee. Notwithstanding anything
herein to the contrary, the Base Salary shall be increased on each January 1st
after the Effective Date (the "Base Salary Increase Date") by a percentage which
is equal to the percentage of increase in the Consumer Price Index with respect
to the 12-month period ending on the November 30th which immediately precedes
the relevant Base Salary Increase Date.
5. Annual Incentive Compensation Programs.
The Executive shall participate in the Company's Management
Incentive Compensation Plan ("MICP") or such other successor plan applicable to
senior-level executives. He shall have an annual bonus opportunity under the
MICP of 30 percent of Base Salary. Payment of annual incentive compensation
awards shall be made at the same time that other senior-level executives receive
their annual incentive compensation awards.
6. Long-Term Incentive Compensation Programs.
(a) The Executive shall be eligible to participate in the Company's
1997 Stock Award and Stock Option Plan (the "1997 Plan") or such other successor
plan applicable to senior-level executives.
(b) On the Effective Date, the Company shall grant the Executive an
award of 27,500 shares of common stock of the Company under the 1997 Plan (the
"1997 Stock Award"). Subject to the terms and conditions of the 1997 Plan, the
1997 Stock Award shall vest as set forth below:
(1) 20 percent of the 1997 Stock Award shall be transferable
on, and remain transferable after, the date of grant;
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(2) 40 percent of the 1997 Stock Award shall become
transferable on, and remain transferable after, the day
which precedes the first anniversary of the date of
grant; and
(3) 40 percent of the 1997 Stock Award shall become
transferable on, and remain transferable after, the day
which precedes the second anniversary of the date of
grant.
(c) The Company shall loan the Executive an amount equal to the
aggregate federal, state and local income taxes (based on the highest marginal
tax rates in effect on the date of the loan) incurred by the Executive due to
(i) a portion of the 1997 Stock Award becoming transferable or (ii) the
Executive making an election under Code Section 83(b) with respect to the 1997
Stock Award. The loan shall be made at or, at the Executive's election, prior to
the date the Executive is obligated to pay any federal, state or local income
tax due to such portion of the 1997 Stock Award becoming transferable or the
Executive making such election under Code Section 83(b). The loan's interest
rate shall be equal to the short-term applicable federal rate compounded
annually in effect on the date of the loan as published by the Internal Revenue
Service. The Executive shall pay to the Company in a lump sum the principal and
all accrued interest with respect to such loan on the day which precedes the
third anniversary of the date of the loan, or, at the Executives's election, on
any date which precedes the third anniversary of the date of the loan.
7. Employee Benefit Programs.
(a) During the Term of Employment, the Executive shall be entitled
to participate in those employee pension and welfare benefit plans, programs
and/or arrangements applicable to the Executive and made available to the
Company's senior-level executives or to its employees generally, as such plans,
programs and/or arrangements may be in effect from time to time, including,
without limitation, pension, profit-sharing, savings, medical, dental,
hospitalization, short-term disability, long-term disability, life insurance,
accidental death and dismemberment protection, travel accident insurance, and
other employee pension and welfare benefit plans, programs and/or arrangements
that may be sponsored by the Company from time to time.
(b) During the Term of Employment, the Company shall provide the
Executive with term life insurance with a death benefit of at least two times
Base Salary. The Company shall pay all premiums with respect to such life
insurance. Such life insurance may be provided either through the Company's
group life insurance programs, by an individual policy, or by a combination of
both group and individual policies.
8. Reimbursement of Business Expenses.
The Executive is authorized to incur reasonable business expenses in
carrying out his duties and responsibilities under the Agreement, and the
Company shall promptly reimburse him for all such reasonable business expenses
incurred in connection with carrying out the business of the Company, subject to
documentation in accordance with the Company's policy.
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9. Perquisites.
During the Term of Employment, the Executive shall be entitled to
participate in the Company's executive fringe benefits applicable to the
Company's senior-level executive in accordance with the terms and conditions of
such arrangements as are in effect from time to time.
10. Vacation.
The Executive shall be entitled to paid vacation in accordance with
the Company's vacation policy; provided, however, that the Executive shall be
entitled to not less than four weeks of vacation each year.
11. Termination of Employment.
(a) Termination of Employment Due to Death. In the event of the
Executive's death during the Term of Employment, the Term of Employment shall
end as of the date of the Executive's death and his estate and/or beneficiaries,
as the case may be, shall be entitled to the following:
(1) Base Salary earned but not paid prior to the date of
his death;
(2) all annual incentive awards with respect to any year
prior to the year of his death which have been earned
but not paid;
(3) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested shares
underlying any other restricted stock award held by the
Executive on the date of his death;
(4) immediate vesting of all stock options held by the
Executive on the date of his death, with all
nonqualified stock options remaining exercisable until
the end of their original terms and all incentive stock
options remaining exercisable until the earlier of (i)
the end of the one-year period following the date of
death or (ii) the date the incentive stock option would
otherwise expire;
(5) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above; and
(6) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
(b) Termination of Employment Due to Disability. If the Executive's
employment is terminated due to Disability during the Term of Employment, either
by the Company or by the Executive, the Term of Employment shall end as of the
date of the Executive's termination of employment and the Executive shall be
entitled to the following (but in no event less than the benefits due him under
the then current disability program of the Company):
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(1) Base Salary earned but not paid prior to the date of the
termination of the Executive's employment;
(2) all annual incentive awards with respect to any year
prior to the year of the termination of the Executive's
employment which have been earned but not paid;
(3) an amount equal to the sum of 50 percent of Base Salary,
at the annual rate in effect on the date of the
termination of the Executive's employment, payable
monthly for a period ending on the first day of the
month following the month in which the Executive attains
age 65 or recovers from his Disability, whichever occurs
earlier, less the amount of any disability benefits
provided to the Executive under the Company's disability
program;
(4) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested shares
underlying any other restricted stock award held by the
Executive on the date of the termination of his
employment;
(5) immediate vesting of all stock options held by the
Executive on the date of the termination of his
employment, with all nonqualified stock options
remaining exercisable until the end of their original
terms and all incentive stock options remaining
exercisable until the earlier of (i) the end of the
one-year period following the date of the termination of
his employment or (ii) the date the incentive stock
option would otherwise expire;
(6) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above;
(7) continued participation, as if the Executive were still
an employee, in the Company's medical, dental,
hospitalization and life insurance plans, programs
and/or arrangements and in those other employee plans,
programs and/or arrangements in which he was
participating on the date of the termination of his
employment until he attains age 65 or recovers from his
Disability, whichever occurs earlier; and
(8) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
If the Executive is precluded from continuing his participation in
any employee benefit plan, program or arrangement as provided in Section
11(b)(7) above, he shall be provided the after-tax economic equivalent of the
benefits provided under the plan, program or arrangement in which he is unable
to participate. The economic equivalent of any benefit foregone shall be
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deemed to be the lowest cost that would be incurred by the Executive in
obtaining such benefit himself on an individual basis.
In no event shall a termination of the Executive's employment for
Disability occur unless the Party terminating his employment gives written
notice to the other Party in accordance with Section 25 below.
(c) Termination of Employment by the Company for Cause. A
termination of the Executive's employment by the Company for Cause shall not
take effect unless the provisions of this Section 11(c) are complied with and
the Board issues a written determination that the Executive's employment should
be terminated for Cause (a "Determination").
(1) In accordance with Section 25 below, the CEO shall give
the Executive a written notice stating his intention to
terminate the Executive's employment for Cause (the
"Cause Notice"). The Cause Notice shall:
(A) state in detail the particular act or acts or
failure or failures to act that constitute the
grounds on which the proposed termination of
employment for Cause is based; and
(B) be given within four months of the CEO learning of
such act or acts or failure or failures to act.
(2) The CEO may temporarily relieve the Executive of his
duties and responsibilities described in Section 3 above
during the period commencing on the date the Cause
Notice is issued by the CEO and ending on the date the
Determination is issued by the Board (the "Determination
Period").
(3) The Executive shall have 20 days after the date the
Cause Notice is actually received by him in which to
cure his conduct on which the termination of employment
for Cause is based, to the extent such cure is possible.
If the Executive fails to cure such conduct, he shall
then be entitled to a hearing before the Board. Such
hearing shall be held during the 20-day period
following the date the Executive receives the Cause
Notice; provided, however, that the Executive requests
such hearing during the 10-day period following the date
the Executive receives the Cause Notice. Within five
days following the completion of such hearing, the Board
shall issue a Determination stating whether, in its
judgment, grounds for Cause as detailed in the Cause
Notice exist. If the Determination states that such
grounds exist, the Executive's employment shall be
immediately terminated for Cause and the Term of
Employment shall end as of the date of the termination
of the Executive's employment.
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(4) If the Company terminates the Executive's employment for
Cause, the Executive shall be entitled to the following:
(A) Base Salary earned but not paid prior to the date
of the termination of his employment;
(B) any amounts earned, accrued or owing to the
Executive but not yet paid under Section 7, 8, 9
or 10 above; and
(C) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of
the Company.
(5) Notwithstanding anything herein to the contrary, if,
following a termination of the Executive's employment by
the Company for Cause based upon the conviction of the
Executive for a felony, such conviction is overturned in
a final determination on appeal, the Executive shall be
entitled to the payments and the economic equivalent of
the benefits the Executive would have received if his
employment had been terminated by the Company without
Cause.
(d) Termination of Employment by the Company Without Cause. If the
Executive's employment is terminated by the Company without Cause, other than
due to death or Disability, the Executive shall be entitled to the following:
(1) Base Salary earned but not paid prior to the date of
the termination of his employment;
(2) all annual incentive awards with respect to any year
prior to the year of the termination of the Executive's
employment which have been earned but not paid;
(3) an amount equal to the aggregate Base Salary (based on
the Base Salary in effect on the date of the termination
of the Executive's employment) with respect to a period
equal to the longer of (i) the remainder of the Term of
Employment or (ii) the corresponding severance period
listed on Schedule A, payable in a lump sum without
discount (the "Salary Continuation Benefits");
(4) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested shares
underlying any other restricted stock award held by the
Executive on the date of the termination of his
employment;
(5) immediate vesting of all stock options held by the
Executive on the date of the termination of his
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employment, with all nonqualified stock options
remaining exercisable until the end of their original
terms and all incentive stock options remaining
exercisable until the earlier of (i) the end of the
one-year period following the date of the termination of
his employment or (ii) the date the incentive stock
option would otherwise expire;
(6) continued accrual of credited service through the end of
the Term of Employment for the purpose of any Company
pension plan, program or arrangement;
(7) the right to purchase, at fair market value, the
Executive's automobile (if any) provided to him by the
Company under the Company's automobile perquisite
program for senior-level executives;
(8) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above;
(9) continued participation, as if he were still an
employee, in the Company's medical, dental,
hospitalization and life insurance plans, programs
and/or arrangements and in other employee benefit plans,
programs and/or arrangements in which he was
participating on the date of the termination of his
employment until the earlier of:
(A) the end of the period used to determine the
Salary Continuation Benefits; or
(B) the date, or dates, he receives equivalent
coverage and benefits under the plans, programs
and/or arrangements of a subsequent employer (such
coverage and benefits to be determined on a
coverage-by-coverage or benefit-by-benefit basis);
provided, however, that:
(X) if the Executive is precluded from continuing
his participation in any employee benefit plan,
program or arrangement as provided in Section
11(d)(9)(A) above, he shall be provided with the
after-tax economic equivalent of the benefits
provided under the plan, program or arrangement
in which he is unable to participate for the
period specified in this Section 11(d)(9);
(Y) the economic equivalent of any benefit foregone
shall be deemed to be the lowest cost that would
be incurred by the Executive in obtaining such
benefit himself on an individual basis; and
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(Z) payment of such after-tax economic equivalent
shall be made quarterly in advance; and
(10) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
(e) Termination of Employment by the Executive for Good Reason. The
Executive may terminate his employment for Good Reason, but only if:
(1) the Executive notifies the Board during the 60-day
period following the date of the first occurrence of an
event which constitutes Good Reason (the "Good Reason
Event Date") of his intention to terminate his
employment for Good Reason;
(2) the Executive terminates his employment for Good Reason
during the 120-day period following the Good Reason
Event Date;
(3) the termination of employment for Good Reason does not
occur during a Determination Period described in Section
11(c)(2) above; and
(4) the Good Reason first occurs before or after a
Determination Period, or, if the Good Reason first
occurs during a Determination Period, such event
constituting Good Reason continues to occur after the
Determination Period.
Upon a termination by the Executive of his employment for Good Reason, the
Executive shall be entitled to the same payments and benefits as provided in
Section 11(d) above; provided, however, that if the Executive terminates his
employment for Good Reason based on a reduction in Base Salary under Section
1(r)(1) above, then the Base Salary to be used in determining the Salary
Continuation Benefits in accordance with Section 11(d)(2) above shall be the
Base Salary in effect immediately prior to such reduction.
(f) Termination of Employment Following a Change in Control. On the
date of a Change in Control, all stock options and all unvested shares under the
1997 Stock Award and other restricted stock awards held by the Executive on such
date shall immediately and fully vest, and all such stock options shall be
exercisable from such date until the date they would otherwise expire (but in
the case of incentive stock options, for not more than one year following a
termination of employment). If, following a Change in Control, (i) the
Executive's employment is terminated by the Company without Cause, (ii) the
Executive terminates his employment for Good Reason, or (iii) upon 30 days prior
written notice to the Company, the Executive terminates his employment for any
reason during the 120-day period following the 90th day after the date of the
Change in Control, the Executive shall be entitled to the same payments and
benefits as provided in Section 11(d) above, except that the Salary Continuation
Benefits under Section 11(d)(3) above shall be determined with respect to a
period equal to the longer of (a) 18 months or (b) the remainder of the Term of
Employment. A failure by the
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Executive to exercise his rights with respect to a Change in Control shall not
be deemed a waiver of any rights under this Agreement.
(g) Termination of Employment by the Executive Without Good Reason.
If the Executive terminates his employment without Good Reason, other than a
termination of employment (i) due to death or retirement or Disability or (ii)
by the Executive during the 120-day period following the 90th day after the date
of a Change in Control, the Executive shall have the same entitlements as
provided in Section 11(c)(4) above. A termination of the Executive's employment
under this Section 11(g) shall be effective upon 30 days prior written notice to
the Company and shall not be deemed a breach of this Agreement.
(h) Nonrenewal of Agreement by the Company. If (i) the Company does
not renew the Term of Employment in accordance with Section 2 above and (ii) the
Executive remains employed by the Company on a continuous basis until the end of
the Term of Employment, the Executive shall have the same entitlements as
provided in Section 11(d) above, and the date on which the Term of Employment
ends shall be deemed to be the date of the termination of the Executive's
employment by the Company without Cause.
(i) Nonrenewal of Agreement by the Executive. In the event that the
Executive does not renew the Term of Employment in accordance with Section 2
above, the Executive shall have the same entitlements as provided in Section
11(c)(4) above, and the date on which the Term of Employment ends shall be
deemed to be the date of the termination of the Executive's employment by the
Company for Cause.
(j) Payment Following a Change in Control. If the termination of the
Executive's employment is pursuant to Section 11(f) above, and the aggregate of
all payments or benefits made or provided to the Executive under Section 11(f)
above and under all other plans, programs and/or arrangements of the Company
(the "Aggregate Payment") is determined to constitute a "parachute payment" (as
such term is defined in Code Section 280G(b)(2)), the Company shall pay to the
Executive, prior to the time any excise tax imposed by Code Section 4999
("Excise Tax") is payable with respect to such Aggregate Payment, an additional
amount which, after the imposition of all income and excise taxes thereon, is
equal to the Excise Tax on the Aggregate Payment. The determination of whether
the Aggregate Payment constitutes a parachute payment and, if so, the amount to
be paid to the Executive and the time of payment pursuant to this Section 11(j)
shall be made by an independent auditor (the "Auditor") jointly selected by the
Company and the Executive and paid by the Company. The Auditor shall be a
nationally recognized United States public accounting firm which has not, during
the two years preceding the date of its selection, acted in any way on behalf of
the Company or any affiliate thereof. If the Executive and the Company cannot
agree on the firm to serve as the Auditor, then the Executive and the Company
shall each select one accounting firm and those two firms shall jointly select
the accounting firm to serve as the Auditor.
(k) No Mitigation; No Offset. If the Executive's employment
terminates under this Section 11, the Executive shall be under no obligation to
seek other employment and there shall be no offset against amounts due the
Executive under this Agreement on account of any remuneration attributable to
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any subsequent employment that he may obtain except as specifically provided in
this Section 11.
(l) Nature of Payments. Any amounts due under this Section 11 are in
the nature of severance payments considered to be reasonable by the Company and
are not in the nature of a penalty.
12. Confidentiality: Assignment of Rights.
(a) During the Term of Employment and thereafter, the Executive
shall not disclose to anyone or make use of any trade secret or proprietary or
confidential information of the Company, including such trade secret or
proprietary or confidential information of any customer or other entity to which
the Company owes an obligation not to disclose such information, which he
acquires during the Term of Employment, including but not limited to records
kept in the ordinary course of business, except (i) as such disclosure or use
may be required or appropriate in connection with his work as an employee of the
Company, (ii) when required to do so by a court of law, by any governmental
agency having supervisory authority over the business of the Company or by any
administrative or legislative body (including a committee thereof) with apparent
jurisdiction to order him to divulge, disclose or make accessible such
information, or (iii) as to such confidential information that becomes generally
known to the public or trade without violation of this Section 12(a).
(b) The Executive hereby sells, assigns and transfers to the Company
all of his right, title and interest in and to all inventions, discoveries,
improvements and copyrightable subject matter (the "rights") which during the
Term of Employment are made or conceived by him, alone or with others, and which
are within or arise out of any general field of the Company's business or arise
out of any work he performs or information he receives regarding the business of
the Company while employed by the Company. The Executive shall fully disclose to
the Company as promptly as available all information known or possessed by him
concerning the rights referred to in the preceding sentence, and upon request by
the Company and without any further remuneration in any form to him by the
Company, but at the expense of the Company, execute all applications for patents
and for copyright registration, assignments thereof and other instruments and do
all things which the Company may deem necessary to vest and maintain in it the
entire right, title and interest in and to all such rights.
13. Noncompetition.
(a) The Executive covenants and agrees that during the Term of
Employment and during the six-month period following the end of the Term of
Employment, he shall not at any time, without the prior written consent of the
Company, directly or indirectly, engage in a Competitive Activity.
(b) The Parties acknowledge that in the event of a breach or
threatened breach of Section 13(a) above, the Company shall not have an adequate
remedy at law. Accordingly, in the event of any breach or threatened breach of
Section 13(a) above, the Company shall be entitled to such equitable and
injunctive relief as may be available to restrain the Executive and any
business, firm, partnership, individual, corporation or entity participating
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<PAGE> 34
in the breach or threatened breach from the violation of the provisions of
Section 13(a) above. Nothing in this Agreement shall be construed as prohibiting
the Company from pursuing any other remedies available at law or in equity for
breach or threatened breach of Section 13(a) above, including the recovery of
damages.
14. Indemnification.
(a) The Company agrees that if the Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is the Executive's alleged action in
an official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Company to
the fullest extent legally permitted or authorized by the Company's certificate
of incorporation or bylaws or resolutions of the Company's Board of Directors
or, if greater, by the laws of the State of Delaware, against all cost, expense,
liability and loss (including, without limitation, attorney's fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by the Executive in connection
therewith, and such indemnification shall continue as to the Executive even if
he has ceased to be a director, member, employee or agent of the Company or
other entity and shall inure to the benefit of the Executive's heirs, executors
and administrators. The Company shall advance to the Executive all reasonable
costs and expenses incurred by him in connection with a Proceeding within 20
days after receipt by the Company of a written request for such advance. Such
request shall include an undertaking by the Executive to repay the amount of
such advance if it shall ultimately be determined that he is not entitled to be
indemnified against such costs and expenses.
(b) Neither the failure of the Company (including the Board,
independent legal counsel or stockholders) to have made a determination prior to
the commencement of any Proceeding concerning payment of amounts claimed by the
Executive under Section 14(a) above that indemnification of the Executive is
proper because he has met the applicable standard of conduct, nor a
determination by the Company (including the Board, independent legal counsel or
stockholders) that the Executive has not met such applicable standard of
conduct, shall create a presumption that the Executive has not met the
applicable standard of conduct.
(c) The Company agrees to continue and maintain a directors and
officers' liability insurance policy covering the Executive to the extent the
Company provides such coverage for its other executive officers.
15. Effect of Agreement on Other Benefits.
Except as specifically provided in this Agreement, the existence of
this Agreement shall not prohibit or restrict the Executive's entitlement to
full participation in the Company's employee benefit plans, programs and
arrangements applicable to the Company's senior-level executives.
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16. Assignability; Binding Nature.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of the Executive)
and assigns. No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company; provided, however, that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law. The Company further agrees that, in the
event of a sale of assets or liquidation as described in the preceding sentence,
it shall take whatever action it legally can in order to cause such assignee or
transferee to expressly assume the liabilities, obligations and duties of the
Company hereunder or under any other plan or benefit program referred to herein.
No rights or obligations of the Executive under this Agreement may be assigned
or transferred by the Executive other than his rights to compensation and
benefits, which may be transferred only by will or operation of law, except as
provided in Section 22 below.
17. Representation.
The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement between it and
any other person, firm or organization. The Executive represents that he knows
of no agreement between him and any other person, firm or organization that
would be violated by the performance of his obligations under this Agreement.
18. Entire Agreement.
This Agreement contains the entire understanding and agreement
between the Parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, between the Parties with respect thereto.
19. Amendment or Waiver.
No provision in this Agreement may be amended unless such amendment
is agreed to in writing and signed by the Executive and an authorized officer of
the Company. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Executive or an authorized officer of the Company, as the case may
be.
20. Severability.
In the event that any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, in whole or in
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<PAGE> 36
part, the remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect to the fullest extent permitted by law.
21. Survivorship.
The respective rights and obligations of the Parties hereunder shall
survive any termination of the Executive's employment to the extent necessary to
the intended preservation of such rights and obligations.
22. Beneficiaries/References.
The Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following the Executive's death by
giving the Company written notice thereof. In the event of the Executive's death
or a judicial determination of his incompetence, reference in this Agreement to
the Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.
23. Governing Law/Jurisdiction.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of New York without reference to principles of conflict
of laws.
24. Resolution of Disputes.
Any disputes arising under or in connection with the Agreement may,
at the election of the Executive or the Company, be resolved by binding
arbitration, to be held in New York City in accordance with the rules and
procedures of the American Arbitration Association. If arbitration is elected,
the Executive and the Company shall mutually select the arbitrator. If the
Executive and the Company cannot agree on the selection of an arbitrator, each
Party shall select an arbitrator and the two arbitrators shall select a third
arbitrator, and the three arbitrators shall form an arbitration panel which
shall resolve the dispute by majority vote. Judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof. Costs
of the arbitration or litigation, including, without limitation, reasonable
attorneys' fees of both Parties, shall be borne by the Company. Pending the
resolution of any arbitration or court proceeding, the Company shall continue
payment of all amounts due the Executive under this Agreement and all benefits
to which the Executive is entitled at the time the dispute arises.
25. Notices.
Any notice given to a Party shall be in writing and shall be deemed
to have been given when delivered personally or sent by certified or registered
mail, postage prepaid, return receipt requested, duly addressed to the Party
concerned at the address indicated below or to such changed address as such
Party may subsequently give such notice of:
If to the Company: Metallurg, Inc.
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6 East 43rd Street, 12th floor
New York, New York 10017
Attention: General Counsel
With a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: John J. Rapisardi
If to the Executive: Michael A. Banks
232 Byram Lake Road
Mt. Kisco, NY 10549
26. Headings.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
27. Counterparts.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
METALLURG, INC.
By:
------------------------
Secretary
------------------------
Michael A. Banks
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SCHEDULE A
Years of Service Severance Period
---------------- ----------------
Up to 15 6 months
More Than 15 9 months
More Than 20 12 months
<PAGE> 39
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the 14th day of April, 1997 by and
between Metallurg Inc., a Delaware corporation (together with its successors
and assigns permitted under this Agreement, the "Company"), and Barry C. Nuss
(the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is the Vice President, Finance of the Company;
and
WHEREAS, the Company desires to continue the employment of the Executive
and to enter into an employment agreement embodying the terms of such employment
(the "Agreement"); and
WHEREAS, the Executive desires to enter into the Agreement and to accept
such employment, subject to the terms and provisions of the Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. Definitions.
(a) "Bankruptcy Code" shall mean title 11 of the United States Code,
as amended from time to time, as applicable to the Chapter 11 Cases.
(b) "Bankruptcy Court" shall mean 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.
(c) "Base Salary" shall mean the Executive's base salary in
accordance with Section 4 below.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Business Day" shall mean 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.
(f) "Cause" shall mean:
(1) the Executive is convicted of a felony; or
(2) the Executive engages in conduct that constitutes gross
neglect or willful misconduct in carrying out his duties
under the Agreement, resulting, in either case, in
material economic harm to the Company, unless
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the Executive believed in good faith that such act or
nonact was in the best interests of the Company.
(g) "CEO" shall mean the chief executive officer of the Company.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, including applicable regulations thereunder.
(i) A "Change in Control" shall mean the first to occur of the
following events:
(1) any "person" (as such term is used in Sections 3(a)(9)
and 13(d) of the Exchange Act) or group of persons
becomes a "beneficial owner" (as such term is used in
Rule 13d-3 under the Exchange Act) of more than 50
percent of the Voting Stock of the Company;
(2) the majority of the Board consists of individuals other
than Incumbent Directors;
(3) the Company adopts any plan of liquidation providing for
the distribution of all or substantially all of its
assets;
(4) the sale or other disposition of all or substantially
all of the assets or business of the Company and its
Subsidiaries taken as a whole; or
(5) the merger, consolidation or combination of the Company
with or into another company (the "Other Company");
provided, however, that immediately after the merger,
consolidation or combination, the shareholders of the
Company immediately prior to the merger, consolidation
or combination hold, directly or indirectly, 50 percent
or less of the Voting Stock of the surviving company
(there being excluded from the number of shares held by
such shareholders, but not from the Voting Stock of the
surviving company, any shares received by any
"affiliate" (as such term is defined in Rule 12b-2 under
the Exchange Act) of the Other Company in exchange for
stock of the Other Company).
(j) "Chapter 11 Cases" shall mean the cases under chapter 11 of the
Bankruptcy Code commenced by the Company and Shieldalloy Metallurgical
Corporation, 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 Company
and Shieldalloy Metallurgical Corporation are the debtors in possession pursuant
to sections 1107 and 1108 of the Bankruptcy Code.
(k) "Competitive Activity" shall mean any activity engaged in by the
Executive, whether as an employee, principal, sole proprietor, consultant,
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agent, officer, director, partner or shareholder (except as a less than one-
percent shareholder of a publicly traded company or a less than five-percent
shareholder of a privately held company), which directly competes with the
Company or any Subsidiary. For this purpose, an activity which directly competes
with the Company or any Subsidiary shall mean a business that was being
conducted by the Company or any Subsidiary during the Term of Employment.
Notwithstanding anything to the contrary in this Section 1(k), an activity shall
not be deemed to be a Competitive Activity (x) solely as a result of the
Executive's being employed by or otherwise associated with a business of which a
unit is in competition with the Company or any Subsidiary but as to which unit
the Executive does not have direct or indirect responsibilities for the products
or product lines involved or (y) if the activity contributes less than 5 percent
of the revenues for the fiscal year in question of the business by which the
Executive is employed or with which he is otherwise associated.
(l) "Confirmation Date" shall mean the date on which the Clerk of
the Bankruptcy Court enters the Confirmation Order.
(m) "Confirmation Order" shall mean the order of the Bankruptcy
Court confirming the Plan of Reorganization pursuant to section 1129 of the
Bankruptcy Code.
(n) "Consumer Price Index" shall mean the Consumer Price Index for
Urban Wage Earners and Clerical Workers, all items, for New York City as
determined by the Bureau of Labor Statistics, United States Department of Labor,
or successor or comparable successor index should such index be discontinued.
(o) "Disability" shall mean a disability as determined under the
Company's long-term disability plans, programs and/or arrangements in effect on
the date such disability first occurs.
(p) "Effective Date" shall mean the first Business Day on which all
of the conditions specified in Article XIII of the Plan of Reorganization have
been satisfied or waived.
(q) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time, including applicable regulations thereunder.
(r) "Good Reason" shall mean the occurrence of any of the following
events:
(1) a reduction in the Executive's Base Salary;
(2) a material change in the Executive's position, duties or
responsibilities with respect to his employment by the
Company under the Agreement without the Executive's
prior written consent;
(3) the removal of the Executive from the positions
described in Section 3 below;
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(4) a reduction in the Executive's annual bonus opportunity
as specified in Section 5 below;
(5) an actual change in the Executive's principal work
location by more than 50 miles and more than 50 miles
from the Executive's principal place of abode as of the
date of such change in job location without the
Executive's prior written consent; or
(6) the failure of the Company to obtain the assumption in
writing of its obligation to perform this Agreement by
any successor to the Company, or purchaser of all or
substantially all of the business or assets of the
Company and its Subsidiaries taken as a whole, on or
prior to the date on which the relevant merger,
consolidation, sale or similar transaction is completed.
(s) "Incumbent Directors" shall mean the members of the Board as of
the Effective Date; provided, however, that any person becoming a director
subsequent to such date whose election or nomination for election was supported
by a majority of the directors who then comprised the Incumbent Directors shall
be considered to be an Incumbent Director.
(t) "Plan of Reorganization" shall mean the joint chapter 11 plan of
reorganization for the Company and Shieldalloy Metallurgical Corporation under
the Chapter 11 Cases (including all exhibits and schedules annexed thereto),
either in its present form or as it may be altered, amended, or modified from
time to time.
(u) "Subsidiary" of the Company shall mean any corporation of which
the Company owns, directly or indirectly, more than 50 percent of the Voting
Stock or any other business entity in which the Company directly or indirectly
has an ownership interest of more than 50 percent.
(v) "Term of Employment" shall mean the period specified in Section
2 below.
(w) "Voting Stock" shall mean capital stock of any class or classes
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. Term of Employment.
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, for the period commencing on the Effective Date and
ending on the second anniversary of the Effective Date, subject to earlier
termination of the Term of Employment in accordance with the terms of the
Agreement. The Term of Employment shall be automatically renewed for a one-year
period on the second anniversary of the Effective Date and on each anniversary
of the Effective Date thereafter, unless either Party has notified the other
Party in writing in accordance with Section 25 below at least 365
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<PAGE> 43
days prior to the expiration of the then Term of Employment that he or it does
not want the Term of Employment to so renew.
3. Position, Duties and Responsibilities.
On the Effective Date and continuing for the remainder of the Term
of Employment, the Executive shall be employed as the Vice President, Finance of
the Company, and he shall have the duties and responsibilities associated with
such position. The Executive, in carrying out his duties under this Agreement,
shall report to the CEO. Notwithstanding anything herein to the contrary,
nothing shall preclude the Executive from:
(1) serving on the boards of directors of a reasonable
number of other corporations or the boards of a
reasonable number of trade associations and/or
charitable organizations;
(2) engaging in charitable activities and community affairs;
and
(3) managing his personal investments and affairs;
provided, however, that such activities do not materially interfere with the
proper performance of his duties and responsibilities hereunder.
4. Base Salary.
The Executive shall be paid an annualized Base Salary, payable in
accordance with the regular payroll practices of the Company, of $210,000, which
is the Executive's current base salary in effect as of the Effective Date. The
Base Salary shall be reviewed no less frequently than annually for increase in
the discretion of the Board's Compensation Committee. Notwithstanding anything
herein to the contrary, the Base Salary shall be increased on each January 1st
after the Effective Date (the "Base Salary Increase Date") by a percentage which
is equal to the percentage of increase in the Consumer Price Index with respect
to the 12-month period ending on the November 30th which immediately precedes
the relevant Base Salary Increase Date.
5. Annual Incentive Compensation Programs.
The Executive shall participate in the Company's Management
Incentive Compensation Plan ("MICP") or such other successor plan applicable to
senior-level executives. He shall have an annual bonus opportunity under the
MICP of 30 percent of Base Salary. Payment of annual incentive compensation
awards shall be made at the same time that other senior-level executives receive
their annual incentive compensation awards.
6. Long-Term Incentive Compensation Programs.
(a) The Executive shall be eligible to participate in the Company's
1997 Stock Award and Stock Option Plan (the "1997 Plan") or such other successor
plan applicable to senior-level executives.
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(b) On the Effective Date, the Company shall grant the Executive an
award of 32,500 shares of common stock of the Company under the 1997 Plan (the
"1997 Stock Award"). Subject to the terms and conditions of the 1997 Plan, the
1997 Stock Award shall vest as set forth below:
(1) 20 percent of the 1997 Stock Award shall be transferable
on, and remain transferable after, the date of grant;
(2) 40 percent of the 1997 Stock Award shall become
transferable on, and remain transferable after, the day
which precedes the first anniversary of the date of
grant; and
(3) 40 percent of the 1997 Stock Award shall become
transferable on, and remain transferable after, the day
which precedes the second anniversary of the date of
grant.
(c) The Company shall loan the Executive an amount equal to the
aggregate federal, state and local income taxes (based on the highest marginal
tax rates in effect on the date of the loan) incurred by the Executive due to
(i) a portion of the 1997 Stock Award becoming transferable or (ii) the
Executive making an election under Code Section 83(b) with respect to the 1997
Stock Award. The loan shall be made at or, at the Executive's election, prior to
the date the Executive is obligated to pay any federal, state or local income
tax due to such portion of the 1997 Stock Award becoming transferable or the
Executive making such election under Code Section 83(b). The loan's interest
rate shall be equal to the short-term applicable federal rate compounded
annually in effect on the date of the loan as published by the Internal Revenue
Service. The Executive shall pay to the Company in a lump sum the principal and
all accrued interest with respect to such loan on the day which precedes the
third anniversary of the date of the loan, or, at the Executives's election, on
any date which precedes the third anniversary of the date of the loan.
7. Employee Benefit Programs.
(a) During the Term of Employment, the Executive shall be entitled
to participate in those employee pension and welfare benefit plans, programs
and/or arrangements applicable to the Executive and made available to the
Company's senior-level executives or to its employees generally, as such plans,
programs and/or arrangements may be in effect from time to time, including,
without limitation, pension, profit-sharing, savings, medical, dental,
hospitalization, short-term disability, long-term disability, life insurance,
accidental death and dismemberment protection, travel accident insurance, and
other employee pension and welfare benefit plans, programs and/or arrangements
that may be sponsored by the Company from time to time.
(b) During the Term of Employment, the Company shall provide the
Executive with term life insurance with a death benefit of at least two times
Base Salary. The Company shall pay all premiums with respect to such life
insurance. Such life insurance may be provided either through the Company's
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group life insurance programs, by an individual policy, or by a combination of
both group and individual policies.
8. Reimbursement of Business Expenses.
The Executive is authorized to incur reasonable business expenses in
carrying out his duties and responsibilities under the Agreement, and the
Company shall promptly reimburse him for all such reasonable business expenses
incurred in connection with carrying out the business of the Company, subject to
documentation in accordance with the Company's policy.
9. Perquisites.
During the Term of Employment, the Executive shall be entitled to
participate in the Company's executive fringe benefits applicable to the
Company's senior-level executive in accordance with the terms and conditions of
such arrangements as are in effect from time to time.
10. Vacation.
The Executive shall be entitled to paid vacation in accordance with
the Company's vacation policy; provided, however, that the Executive shall be
entitled to not less than four weeks of vacation each year.
11. Termination of Employment.
(a) Termination of Employment Due to Death. In the event of the
Executive's death during the Term of Employment, the Term of Employment shall
end as of the date of the Executive's death and his estate and/or beneficiaries,
as the case may be, shall be entitled to the following:
(1) Base Salary earned but not paid prior to the date of
his death;
(2) all annual incentive awards with respect to any year
prior to the year of his death which have been earned
but not paid;
(3) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested shares
underlying any other restricted stock award held by the
Executive on the date of his death;
(4) immediate vesting of all stock options held by the
Executive on the date of his death, with all
nonqualified stock options remaining exercisable until
the end of their original terms and all incentive stock
options remaining exercisable until the earlier of (i)
the end of the one-year period following the date of
death or (ii) the date the incentive stock option would
otherwise expire;
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<PAGE> 46
(5) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above; and
(6) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
(b) Termination of Employment Due to Disability. If the Executive's
employment is terminated due to Disability during the Term of Employment, either
by the Company or by the Executive, the Term of Employment shall end as of the
date of the Executive's termination of employment and the Executive shall be
entitled to the following (but in no event less than the benefits due him under
the then current disability program of the Company):
(1) Base Salary earned but not paid prior to the date of the
termination of the Executive's employment;
(2) all annual incentive awards with respect to any year
prior to the year of the termination of the Executive's
employment which have been earned but not paid;
(3) an amount equal to the sum of 50 percent of Base Salary,
at the annual rate in effect on the date of the
termination of the Executive's employment, payable
monthly for a period ending on the first day of the
month following the month in which the Executive attains
age 65 or recovers from his Disability, whichever occurs
earlier, less the amount of any disability benefits
provided to the Executive under the Company's disability
program;
(4) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested shares
underlying any other restricted stock award held by the
Executive on the date of the termination of his
employment;
(5) immediate vesting of all stock options held by the
Executive on the date of the termination of his
employment, with all nonqualified stock options
remaining exercisable until the end of their original
terms and all incentive stock options remaining
exercisable until the earlier of (i) the end of the
one-year period following the date of the termination of
his employment or (ii) the date the incentive stock
option would otherwise expire;
(6) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above;
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<PAGE> 47
(7) continued participation, as if the Executive were still
an employee, in the Company's medical, dental,
hospitalization and life insurance plans, programs
and/or arrangements and in those other employee plans,
programs and/or arrangements in which he was
participating on the date of the termination of his
employment until he attains age 65 or recovers from his
Disability, whichever occurs earlier; and
(8) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
If the Executive is precluded from continuing his participation in
any employee benefit plan, program or arrangement as provided in Section
11(b)(7) above, he shall be provided the after-tax economic equivalent of the
benefits provided under the plan, program or arrangement in which he is unable
to participate. The economic equivalent of any benefit foregone shall be deemed
to be the lowest cost that would be incurred by the Executive in obtaining such
benefit himself on an individual basis.
In no event shall a termination of the Executive's employment for
Disability occur unless the Party terminating his employment gives written
notice to the other Party in accordance with Section 25 below.
(c) Termination of Employment by the Company for Cause. A
termination of the Executive's employment by the Company for Cause shall not
take effect unless the provisions of this Section 11(c) are complied with and
the Board issues a written determination that the Executive's employment should
be terminated for Cause (a "Determination").
(1) In accordance with Section 25 below, the CEO shall give
the Executive a written notice stating his intention to
terminate the Executive's employment for Cause (the
"Cause Notice"). The Cause Notice shall:
(A) state in detail the particular act or acts or
failure or failures to act that constitute the
grounds on which the proposed termination of
employment for Cause is based; and
(B) be given within four months of the CEO learning of
such act or acts or failure or failures to act.
(2) The CEO may temporarily relieve the Executive of his
duties and responsibilities described in Section 3 above
during the period commencing on the date the Cause
Notice is issued by the CEO and ending on the date the
Determination is issued by the Board (the "Determination
Period").
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(3) The Executive shall have 20 days after the date the
Cause Notice is actually received by him in which to
cure his conduct on which the termination of employment
for Cause is based, to the extent such cure is possible.
If the Executive fails to cure such conduct, he shall
then be entitled to a hearing before the Board. Such
hearing shall be held during the 20-day period
following the date the Executive receives the Cause
Notice; provided, however, that the Executive requests
such hearing during the 10-day period following the date
the Executive receives the Cause Notice. Within five
days following the completion of such hearing, the Board
shall issue a Determination stating whether, in its
judgment, grounds for Cause as detailed in the Cause
Notice exist. If the Determination states that such
grounds exist, the Executive's employment shall be
immediately terminated for Cause and the Term of
Employment shall end as of the date of the termination
of the Executive's employment.
(4) If the Company terminates the Executive's employment for
Cause, the Executive shall be entitled to the following:
(A) Base Salary earned but not paid prior to the date
of the termination of his employment;
(B) any amounts earned, accrued or owing to the
Executive but not yet paid under Section 7, 8, 9
or 10 above; and
(C) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of
the Company.
(5) Notwithstanding anything herein to the contrary, if,
following a termination of the Executive's employment by
the Company for Cause based upon the conviction of the
Executive for a felony, such conviction is overturned in
a final determination on appeal, the Executive shall be
entitled to the payments and the economic equivalent of
the benefits the Executive would have received if his
employment had been terminated by the Company without
Cause.
(d) Termination of Employment by the Company Without Cause. If the
Executive's employment is terminated by the Company without Cause, other than
due to death or Disability, the Executive shall be entitled to the following:
(1) Base Salary earned but not paid prior to the date of
the termination of his employment;
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<PAGE> 49
(2) all annual incentive awards with respect to any year
prior to the year of the termination of the Executive's
employment which have been earned but not paid;
(3) an amount equal to the aggregate Base Salary (based on
the Base Salary in effect on the date of the termination
of the Executive's employment) with respect to a period
equal to the longer of (i) the remainder of the Term of
Employment or (ii) the corresponding severance period
listed on Schedule A, payable in a lump sum without
discount (the "Salary Continuation Benefits");
(4) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested shares
underlying any other restricted stock award held by the
Executive on the date of the termination of his
employment;
(5) immediate vesting of all stock options held by the
Executive on the date of the termination of his
employment, with all nonqualified stock options
remaining exercisable until the end of their original
terms and all incentive stock options remaining
exercisable until the earlier of (i) the end of the
one-year period following the date of the termination of
his employment or (ii) the date the incentive stock
option would otherwise expire;
(6) continued accrual of credited service through the end of
the Term of Employment for the purpose of any Company
pension plan, program or arrangement;
(7) the right to purchase, at fair market value, the
Executive's automobile (if any) provided to him by the
Company under the Company's automobile perquisite
program for senior-level executives;
(8) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above;
(9) continued participation, as if he were still an
employee, in the Company's medical, dental,
hospitalization and life insurance plans, programs
and/or arrangements and in other employee benefit plans,
programs and/or arrangements in which he was
participating on the date of the termination of his
employment until the earlier of:
(A) the end of the period used to determine the
Salary Continuation Benefits; or
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<PAGE> 50
(B) the date, or dates, he receives equivalent
coverage and benefits under the plans, programs
and/or arrangements of a subsequent employer (such
coverage and benefits to be determined on a
coverage-by-coverage or benefit-by-benefit basis);
provided, however, that:
(X) if the Executive is precluded from continuing
his participation in any employee benefit plan,
program or arrangement as provided in Section
11(d)(9)(A) above, he shall be provided with the
after-tax economic equivalent of the benefits
provided under the plan, program or arrangement
in which he is unable to participate for the
period specified in this Section 11(d)(9);
(Y) the economic equivalent of any benefit foregone
shall be deemed to be the lowest cost that would
be incurred by the Executive in obtaining such
benefit himself on an individual basis; and
(Z) payment of such after-tax economic equivalent
shall be made quarterly in advance; and
(10) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
(e) Termination of Employment by the Executive for Good Reason. The
Executive may terminate his employment for Good Reason, but only if:
(1) the Executive notifies the Board during the 60-day
period following the date of the first occurrence of an
event which constitutes Good Reason (the "Good Reason
Event Date") of his intention to terminate his
employment for Good Reason;
(2) the Executive terminates his employment for Good Reason
during the 120-day period following the Good Reason
Event Date;
(3) the termination of employment for Good Reason does not
occur during a Determination Period described in Section
11(c)(2) above; and
(4) the Good Reason first occurs before or after a
Determination Period, or, if the Good Reason first
occurs during a Determination Period, such event
constituting Good Reason continues to occur after the
Determination Period.
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Upon a termination by the Executive of his employment for Good Reason, the
Executive shall be entitled to the same payments and benefits as provided in
Section 11(d) above; provided, however, that if the Executive terminates his
employment for Good Reason based on a reduction in Base Salary under Section
1(r)(1) above, then the Base Salary to be used in determining the Salary
Continuation Benefits in accordance with Section 11(d)(2) above shall be the
Base Salary in effect immediately prior to such reduction.
(f) Termination of Employment Following a Change in Control. On the
date of a Change in Control, all stock options and all unvested shares under the
1997 Stock Award and other restricted stock awards held by the Executive on such
date shall immediately and fully vest, and all such stock options shall be
exercisable from such date until the date they would otherwise expire (but in
the case of incentive stock options, for not more than one year following a
termination of employment). If, following a Change in Control, (i) the
Executive's employment is terminated by the Company without Cause, (ii) the
Executive terminates his employment for Good Reason, or (iii) upon 30 days prior
written notice to the Company, the Executive terminates his employment for any
reason during the 120-day period following the 90th day after the date of the
Change in Control, the Executive shall be entitled to the same payments and
benefits as provided in Section 11(d) above, except that the Salary Continuation
Benefits under Section 11(d)(3) above shall be determined with respect to a
period equal to the longer of (a) 18 months or (b) the remainder of the Term of
Employment. A failure by the Executive to exercise his rights with respect to a
Change in Control shall not be deemed a waiver of any rights under this
Agreement.
(g) Termination of Employment by the Executive Without Good Reason.
If the Executive terminates his employment without Good Reason, other than a
termination of employment (i) due to death or retirement or Disability or (ii)
by the Executive during the 120-day period following the 90th day after the date
of a Change in Control, the Executive shall have the same entitlements as
provided in Section 11(c)(4) above. A termination of the Executive's employment
under this Section 11(g) shall be effective upon 30 days prior written notice to
the Company and shall not be deemed a breach of this Agreement.
(h) Nonrenewal of Agreement by the Company. If (i) the Company does
not renew the Term of Employment in accordance with Section 2 above and (ii) the
Executive remains employed by the Company on a continuous basis until the end of
the Term of Employment, the Executive shall have the same entitlements as
provided in Section 11(d) above, and the date on which the Term of Employment
ends shall be deemed to be the date of the termination of the Executive's
employment by the Company without Cause.
(i) Nonrenewal of Agreement by the Executive. In the event that the
Executive does not renew the Term of Employment in accordance with Section 2
above, the Executive shall have the same entitlements as provided in Section
11(c)(4) above, and the date on which the Term of Employment ends shall be
deemed to be the date of the termination of the Executive's employment by the
Company for Cause.
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(j) Payment Following a Change in Control. If the termination of the
Executive's employment is pursuant to Section 11(f) above, and the aggregate of
all payments or benefits made or provided to the Executive under Section 11(f)
above and under all other plans, programs and/or arrangements of the Company
(the "Aggregate Payment") is determined to constitute a "parachute payment" (as
such term is defined in Code Section 280G(b)(2)), the Company shall pay to the
Executive, prior to the time any excise tax imposed by Code Section 4999
("Excise Tax") is payable with respect to such Aggregate Payment, an additional
amount which, after the imposition of all income and excise taxes thereon, is
equal to the Excise Tax on the Aggregate Payment. The determination of whether
the Aggregate Payment constitutes a parachute payment and, if so, the amount to
be paid to the Executive and the time of payment pursuant to this Section 11(j)
shall be made by an independent auditor (the "Auditor") jointly selected by the
Company and the Executive and paid by the Company. The Auditor shall be a
nationally recognized United States public accounting firm which has not, during
the two years preceding the date of its selection, acted in any way on behalf of
the Company or any affiliate thereof. If the Executive and the Company cannot
agree on the firm to serve as the Auditor, then the Executive and the Company
shall each select one accounting firm and those two firms shall jointly select
the accounting firm to serve as the Auditor.
(k) No Mitigation; No Offset. If the Executive's employment
terminates under this Section 11, the Executive shall be under no obligation to
seek other employment and there shall be no offset against amounts due the
Executive under this Agreement on account of any remuneration attributable to
any subsequent employment that he may obtain except as specifically provided in
this Section 11.
(l) Nature of Payments. Any amounts due under this Section 11 are in
the nature of severance payments considered to be reasonable by the Company and
are not in the nature of a penalty.
12. Confidentiality: Assignment of Rights.
(a) During the Term of Employment and thereafter, the Executive
shall not disclose to anyone or make use of any trade secret or proprietary or
confidential information of the Company, including such trade secret or
proprietary or confidential information of any customer or other entity to which
the Company owes an obligation not to disclose such information, which he
acquires during the Term of Employment, including but not limited to records
kept in the ordinary course of business, except (i) as such disclosure or use
may be required or appropriate in connection with his work as an employee of the
Company, (ii) when required to do so by a court of law, by any governmental
agency having supervisory authority over the business of the Company or by any
administrative or legislative body (including a committee thereof) with apparent
jurisdiction to order him to divulge, disclose or make accessible such
information, or (iii) as to such confidential information that becomes generally
known to the public or trade without violation of this Section 12(a).
(b) The Executive hereby sells, assigns and transfers to the Company
all of his right, title and interest in and to all inventions,
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discoveries, improvements and copyrightable subject matter (the "rights") which
during the Term of Employment are made or conceived by him, alone or with
others, and which are within or arise out of any general field of the Company's
business or arise out of any work he performs or information he receives
regarding the business of the Company while employed by the Company. The
Executive shall fully disclose to the Company as promptly as available all
information known or possessed by him concerning the rights referred to in the
preceding sentence, and upon request by the Company and without any further
remuneration in any form to him by the Company, but at the expense of the
Company, execute all applications for patents and for copyright registration,
assignments thereof and other instruments and do all things which the Company
may deem necessary to vest and maintain in it the entire right, title and
interest in and to all such rights.
13. Noncompetition.
(a) The Executive covenants and agrees that during the Term of
Employment and during the six-month period following the end of the Term of
Employment, he shall not at any time, without the prior written consent of the
Company, directly or indirectly, engage in a Competitive Activity.
(b) The Parties acknowledge that in the event of a breach or
threatened breach of Section 13(a) above, the Company shall not have an adequate
remedy at law. Accordingly, in the event of any breach or threatened breach of
Section 13(a) above, the Company shall be entitled to such equitable and
injunctive relief as may be available to restrain the Executive and any
business, firm, partnership, individual, corporation or entity participating in
the breach or threatened breach from the violation of the provisions of Section
13(a) above. Nothing in this Agreement shall be construed as prohibiting the
Company from pursuing any other remedies available at law or in equity for
breach or threatened breach of Section 13(a) above, including the recovery of
damages.
14. Indemnification.
(a) The Company agrees that if the Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is the Executive's alleged action in
an official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Company to
the fullest extent legally permitted or authorized by the Company's certificate
of incorporation or bylaws or resolutions of the Company's Board of Directors
or, if greater, by the laws of the State of Delaware, against all cost, expense,
liability and loss (including, without limitation, attorney's fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by the Executive in connection
therewith, and such indemnification shall continue as to the Executive even if
he has ceased to be a director, member, employee or agent of
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the Company or other entity and shall inure to the benefit of the Executive's
heirs, executors and administrators. The Company shall advance to the Executive
all reasonable costs and expenses incurred by him in connection with a
Proceeding within 20 days after receipt by the Company of a written request for
such advance. Such request shall include an undertaking by the Executive to
repay the amount of such advance if it shall ultimately be determined that he is
not entitled to be indemnified against such costs and expenses.
(b) Neither the failure of the Company (including the Board,
independent legal counsel or stockholders) to have made a determination prior to
the commencement of any Proceeding concerning payment of amounts claimed by the
Executive under Section 14(a) above that indemnification of the Executive is
proper because he has met the applicable standard of conduct, nor a
determination by the Company (including the Board, independent legal counsel or
stockholders) that the Executive has not met such applicable standard of
conduct, shall create a presumption that the Executive has not met the
applicable standard of conduct.
(c) The Company agrees to continue and maintain a directors and
officers' liability insurance policy covering the Executive to the extent the
Company provides such coverage for its other executive officers.
15. Effect of Agreement on Other Benefits.
Except as specifically provided in this Agreement, the existence of
this Agreement shall not prohibit or restrict the Executive's entitlement to
full participation in the Company's employee benefit plans, programs and
arrangements applicable to the Company's senior-level executives.
16. Assignability; Binding Nature.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of the Executive)
and assigns. No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company; provided, however, that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law. The Company further agrees that, in the
event of a sale of assets or liquidation as described in the preceding sentence,
it shall take whatever action it legally can in order to cause such assignee or
transferee to expressly assume the liabilities, obligations and duties of the
Company hereunder or under any other plan or benefit program referred to herein.
No rights or obligations of the Executive under this Agreement may be assigned
or transferred by the Executive other than his rights to compensation and
benefits, which may be transferred only by will or operation of law, except as
provided in Section 22 below.
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17. Representation.
The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement between it and
any other person, firm or organization. The Executive represents that he knows
of no agreement between him and any other person, firm or organization that
would be violated by the performance of his obligations under this Agreement.
18. Entire Agreement.
This Agreement contains the entire understanding and agreement
between the Parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, between the Parties with respect thereto.
19. Amendment or Waiver.
No provision in this Agreement may be amended unless such amendment
is agreed to in writing and signed by the Executive and an authorized officer of
the Company. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Executive or an authorized officer of the Company, as the case may
be.
20. Severability.
In the event that any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, in whole or in
part, the remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect to the fullest extent permitted by law.
21. Survivorship.
The respective rights and obligations of the Parties hereunder shall
survive any termination of the Executive's employment to the extent necessary to
the intended preservation of such rights and obligations.
22. Beneficiaries/References.
The Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following the Executive's death by
giving the Company written notice thereof. In the event of the Executive's death
or a judicial determination of his incompetence, reference in this Agreement to
the Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.
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23. Governing Law/Jurisdiction.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of New York without reference to principles of conflict
of laws.
24. Resolution of Disputes.
Any disputes arising under or in connection with the Agreement may,
at the election of the Executive or the Company, be resolved by binding
arbitration, to be held in New York City in accordance with the rules and
procedures of the American Arbitration Association. If arbitration is elected,
the Executive and the Company shall mutually select the arbitrator. If the
Executive and the Company cannot agree on the selection of an arbitrator, each
Party shall select an arbitrator and the two arbitrators shall select a third
arbitrator, and the three arbitrators shall form an arbitration panel which
shall resolve the dispute by majority vote. Judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof. Costs
of the arbitration or litigation, including, without limitation, reasonable
attorneys' fees of both Parties, shall be borne by the Company. Pending the
resolution of any arbitration or court proceeding, the Company shall continue
payment of all amounts due the Executive under this Agreement and all benefits
to which the Executive is entitled at the time the dispute arises.
25. Notices.
Any notice given to a Party shall be in writing and shall be deemed
to have been given when delivered personally or sent by certified or registered
mail, postage prepaid, return receipt requested, duly addressed to the Party
concerned at the address indicated below or to such changed address as such
Party may subsequently give such notice of:
If to the Company: Metallurg, Inc.
6 East 43rd Street, 12th floor
New York, New York 10017
Attention: General Counsel
With a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: John J. Rapisardi
If to the Executive: Barry C. Nuss
9 Norman Place
Tenafly, NJ 07670
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26. Headings.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
27. Counterparts.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
METALLURG, INC.
By:
------------------------
Secretary
------------------------
Barry C. Nuss
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SCHEDULE A
Years of Service Severance Period
---------------- ----------------
Up to 15 6 months
More Than 15 9 months
More Than 20 12 months
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EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the 14th day of April, 1997 by and
between Metallurg Inc., a Delaware corporation (together with its successors and
assigns permitted under this Agreement, the "Company"), and Eric L. Schondorf
(the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is the Vice President, General Counsel of the
Company; and
WHEREAS, the Company desires to continue the employment of the Executive
and to enter into an employment agreement embodying the terms of such employment
(the "Agreement"); and
WHEREAS, the Executive desires to enter into the Agreement and to accept
such employment, subject to the terms and provisions of the Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. Definitions.
(a) "Bankruptcy Code" shall mean title 11 of the United States Code,
as amended from time to time, as applicable to the Chapter 11 Cases.
(b) "Bankruptcy Court" shall mean 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.
(c) "Base Salary" shall mean the Executive's base salary in
accordance with Section 4 below.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Business Day" shall mean 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.
(f) "Cause" shall mean:
(1) the Executive is convicted of a felony; or
(2) the Executive engages in conduct that constitutes gross
neglect or willful misconduct in carrying out his duties
under the Agreement, resulting, in either case, in
material economic harm to the Company, unless the
Executive believed in good faith that such act or nonact
was in the best interests of the Company.
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(g) "CEO" shall mean the chief executive officer of the Company.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, including applicable regulations thereunder.
(i) A "Change in Control" shall mean the first to occur of the
following events:
(1) any "person" (as such term is used in Sections 3(a)(9)
and 13(d) of the Exchange Act) or group of persons
becomes a "beneficial owner" (as such term is used in
Rule 13d-3 under the Exchange Act) of more than 50
percent of the Voting Stock of the Company;
(2) the majority of the Board consists of individuals other
than Incumbent Directors;
(3) the Company adopts any plan of liquidation providing for
the distribution of all or substantially all of its
assets;
(4) the sale or other disposition of all or substantially
all of the assets or business of the Company and its
Subsidiaries taken as a whole; or
(5) the merger, consolidation or combination of the Company
with or into another company (the "Other Company");
provided, however, that immediately after the merger,
consolidation or combination, the shareholders of the
Company immediately prior to the merger, consolidation
or combination hold, directly or indirectly, 50 percent
or less of the Voting Stock of the surviving company
(there being excluded from the number of shares held by
such shareholders, but not from the Voting Stock of the
surviving company, any shares received by any
"affiliate" (as such term is defined in Rule 12b-2 under
the Exchange Act) of the Other Company in exchange for
stock of the Other Company).
(j) "Chapter 11 Cases" shall mean the cases under chapter 11 of the
Bankruptcy Code commenced by the Company and Shieldalloy Metallurgical
Corporation, 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 Company
and Shieldalloy Metallurgical Corporation are the debtors in possession pursuant
to sections 1107 and 1108 of the Bankruptcy Code.
(k) "Competitive Activity" shall mean any activity engaged in by the
Executive, whether as an employee, principal, sole proprietor, consultant,
agent, officer, director, partner or shareholder (except as a less than one-
percent shareholder of a publicly traded company or a less than five-percent
shareholder of a privately held company), which directly competes with the
Company or any Subsidiary. For this purpose, an activity which directly competes
with the Company or any Subsidiary shall mean a business that was
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being conducted by the Company or any Subsidiary during the Term of Employment.
Notwithstanding anything to the contrary in this Section 1(k), an activity shall
not be deemed to be a Competitive Activity (x) solely as a result of the
Executive's being employed by or otherwise associated with a business of which a
unit is in competition with the Company or any Subsidiary but as to which unit
the Executive does not have direct or indirect responsibilities for the products
or product lines involved or (y) if the activity contributes less than 5 percent
of the revenues for the fiscal year in question of the business by which the
Executive is employed or with which he is otherwise associated.
(l) "Confirmation Date" shall mean the date on which the Clerk of
the Bankruptcy Court enters the Confirmation Order.
(m) "Confirmation Order" shall mean the order of the Bankruptcy
Court confirming the Plan of Reorganization pursuant to section 1129 of the
Bankruptcy Code.
(n) "Consumer Price Index" shall mean the Consumer Price Index for
Urban Wage Earners and Clerical Workers, all items, for New York City as
determined by the Bureau of Labor Statistics, United States Department of Labor,
or successor or comparable successor index should such index be discontinued.
(o) "Disability" shall mean a disability as determined under the
Company's long-term disability plans, programs and/or arrangements in effect on
the date such disability first occurs.
(p) "Effective Date" shall mean the first Business Day on which all
of the conditions specified in Article XIII of the Plan of Reorganization have
been satisfied or waived.
(q) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time, including applicable regulations thereunder.
(r) "Good Reason" shall mean the occurrence of any of the following
events:
(1) a reduction in the Executive's Base Salary;
(2) a material change in the Executive's position, duties or
responsibilities with respect to his employment by the
Company under the Agreement without the Executive's
prior written consent;
(3) the removal of the Executive from the positions
described in Section 3 below;
(4) a reduction in the Executive's annual bonus opportunity
as specified in Section 5 below;
(5) an actual change in the Executive's principal work
location by more than 50 miles and more than 50 miles
from the Executive's principal place of abode as of
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the date of such change in job location without the
Executive's prior written consent; or
(6) the failure of the Company to obtain the assumption in
writing of its obligation to perform this Agreement by
any successor to the Company, or purchaser of all or
substantially all of the business or assets of the
Company and its Subsidiaries taken as a whole, on or
prior to the date on which the relevant merger,
consolidation, sale or similar transaction is completed.
(s) "Incumbent Directors" shall mean the members of the Board as of
the Effective Date; provided, however, that any person becoming a director
subsequent to such date whose election or nomination for election was supported
by a majority of the directors who then comprised the Incumbent Directors shall
be considered to be an Incumbent Director.
(t) "Plan of Reorganization" shall mean the joint chapter 11 plan of
reorganization for the Company and Shieldalloy Metallurgical Corporation under
the Chapter 11 Cases (including all exhibits and schedules annexed thereto),
either in its present form or as it may be altered, amended, or modified from
time to time.
(u) "Subsidiary" of the Company shall mean any corporation of which
the Company owns, directly or indirectly, more than 50 percent of the Voting
Stock or any other business entity in which the Company directly or indirectly
has an ownership interest of more than 50 percent.
(v) "Term of Employment" shall mean the period specified in Section
2 below.
(w) "Voting Stock" shall mean capital stock of any class or classes
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. Term of Employment.
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, for the period commencing on the Effective Date and
ending on the second anniversary of the Effective Date, subject to earlier
termination of the Term of Employment in accordance with the terms of the
Agreement. The Term of Employment shall be automatically renewed for a one-year
period on the second anniversary of the Effective Date and on each anniversary
of the Effective Date thereafter, unless either Party has notified the other
Party in writing in accordance with Section 25 below at least 365 days prior to
the expiration of the then Term of Employment that he or it does not want the
Term of Employment to so renew.
3. Position, Duties and Responsibilities.
On the Effective Date and continuing for the remainder of the Term
of Employment, the Executive shall be employed as the Vice President, General
Counsel of the Company, and he shall have the duties and responsibilities
associated with such position. The Executive, in carrying out his duties
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under this Agreement, shall report to the CEO. Notwithstanding anything herein
to the contrary, nothing shall preclude the Executive from:
(1) serving on the boards of directors of a reasonable
number of other corporations or the boards of a
reasonable number of trade associations and/or
charitable organizations;
(2) engaging in charitable activities and community affairs;
and
(3) managing his personal investments and affairs;
provided, however, that such activities do not materially interfere with the
proper performance of his duties and responsibilities hereunder.
4. Base Salary.
The Executive shall be paid an annualized Base Salary, payable in
accordance with the regular payroll practices of the Company, of $205,000, which
is the Executive's current base salary in effect as of the Effective Date. The
Base Salary shall be reviewed no less frequently than annually for increase in
the discretion of the Board's Compensation Committee. Notwithstanding anything
herein to the contrary, the Base Salary shall be increased on each January 1st
after the Effective Date (the "Base Salary Increase Date") by a percentage which
is equal to the percentage of increase in the Consumer Price Index with respect
to the 12-month period ending on the November 30th which immediately precedes
the relevant Base Salary Increase Date.
5. Annual Incentive Compensation Programs.
The Executive shall participate in the Company's Management
Incentive Compensation Plan ("MICP") or such other successor plan applicable to
senior-level executives. He shall have an annual bonus opportunity under the
MICP of 30 percent of Base Salary. Payment of annual incentive compensation
awards shall be made at the same time that other senior-level executives receive
their annual incentive compensation awards.
6. Long-Term Incentive Compensation Programs.
(a) The Executive shall be eligible to participate in the Company's
1997 Stock Award and Stock Option Plan (the "1997 Plan") or such other successor
plan applicable to senior-level executives.
(b) On the Effective Date, the Company shall grant the Executive an
award of 15,000 shares of common stock of the Company under the 1997 Plan (the
"1997 Stock Award"). Subject to the terms and conditions of the 1997 Plan, the
1997 Stock Award shall vest as set forth below:
(1) 20 percent of the 1997 Stock Award shall be transferable
on, and remain transferable after, the date of grant;
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(2) 40 percent of the 1997 Stock Award shall become
transferable on, and remain transferable after, the day
which precedes the first anniversary of the date of
grant; and
(3) 40 percent of the 1997 Stock Award shall become
transferable on, and remain transferable after, the day
which precedes the second anniversary of the date of
grant.
(c) The Company shall loan the Executive an amount equal to the
aggregate federal, state and local income taxes (based on the highest marginal
tax rates in effect on the date of the loan) incurred by the Executive due to
(i) a portion of the 1997 Stock Award becoming transferable or (ii) the
Executive making an election under Code Section 83(b) with respect to the 1997
Stock Award. The loan shall be made at or, at the Executive's election, prior to
the date the Executive is obligated to pay any federal, state or local income
tax due to such portion of the 1997 Stock Award becoming transferable or the
Executive making such election under Code Section 83(b). The loan's interest
rate shall be equal to the short-term applicable federal rate compounded
annually in effect on the date of the loan as published by the Internal Revenue
Service. The Executive shall pay to the Company in a lump sum the principal and
all accrued interest with respect to such loan on the day which precedes the
third anniversary of the date of the loan, or, at the Executives's election, on
any date which precedes the third anniversary of the date of the loan.
7. Employee Benefit Programs.
(a) During the Term of Employment, the Executive shall be entitled
to participate in those employee pension and welfare benefit plans, programs
and/or arrangements applicable to the Executive and made available to the
Company's senior-level executives or to its employees generally, as such plans,
programs and/or arrangements may be in effect from time to time, including,
without limitation, pension, profit-sharing, savings, medical, dental,
hospitalization, short-term disability, long-term disability, life insurance,
accidental death and dismemberment protection, travel accident insurance, and
other employee pension and welfare benefit plans, programs and/or arrangements
that may be sponsored by the Company from time to time.
(b) During the Term of Employment, the Company shall provide the
Executive with term life insurance with a death benefit of at least two times
Base Salary. The Company shall pay all premiums with respect to such life
insurance. Such life insurance may be provided either through the Company's
group life insurance programs, by an individual policy, or by a combination of
both group and individual policies.
8. Reimbursement of Business Expenses.
The Executive is authorized to incur reasonable business expenses in
carrying out his duties and responsibilities under the Agreement, and the
Company shall promptly reimburse him for all such reasonable business expenses
incurred in connection with carrying out the business of the Company, subject to
documentation in accordance with the Company's policy.
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9. Perquisites.
During the Term of Employment, the Executive shall be entitled to
participate in the Company's executive fringe benefits applicable to the
Company's senior-level executive in accordance with the terms and conditions of
such arrangements as are in effect from time to time.
10. Vacation.
The Executive shall be entitled to paid vacation in accordance with
the Company's vacation policy; provided, however, that the Executive shall be
entitled to not less than four weeks of vacation each year.
11. Termination of Employment.
(a) Termination of Employment Due to Death. In the event of the
Executive's death during the Term of Employment, the Term of Employment shall
end as of the date of the Executive's death and his estate and/or beneficiaries,
as the case may be, shall be entitled to the following:
(1) Base Salary earned but not paid prior to the date of
his death;
(2) all annual incentive awards with respect to any year
prior to the year of his death which have been earned
but not paid;
(3) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested shares
underlying any other restricted stock award held by the
Executive on the date of his death;
(4) immediate vesting of all stock options held by the
Executive on the date of his death, with all
nonqualified stock options remaining exercisable until
the end of their original terms and all incentive stock
options remaining exercisable until the earlier of (i)
the end of the one-year period following the date of
death or (ii) the date the incentive stock option would
otherwise expire;
(5) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above; and
(6) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
(b) Termination of Employment Due to Disability. If the Executive's
employment is terminated due to Disability during the Term of Employment, either
by the Company or by the Executive, the Term of Employment shall end as of the
date of the Executive's termination of employment and the Executive shall be
entitled to the following (but in no event less than the benefits due him under
the then current disability program of the Company):
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(1) Base Salary earned but not paid prior to the date of the
termination of the Executive's employment;
(2) all annual incentive awards with respect to any year
prior to the year of the termination of the Executive's
employment which have been earned but not paid;
(3) an amount equal to the sum of 50 percent of Base Salary,
at the annual rate in effect on the date of the
termination of the Executive's employment, payable
monthly for a period ending on the first day of the
month following the month in which the Executive attains
age 65 or recovers from his Disability, whichever occurs
earlier, less the amount of any disability benefits
provided to the Executive under the Company's disability
program;
(4) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested shares
underlying any other restricted stock award held by the
Executive on the date of the termination of his
employment;
(5) immediate vesting of all stock options held by the
Executive on the date of the termination of his
employment, with all nonqualified stock options
remaining exercisable until the end of their original
terms and all incentive stock options remaining
exercisable until the earlier of (i) the end of the
one-year period following the date of the termination of
his employment or (ii) the date the incentive stock
option would otherwise expire;
(6) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above;
(7) continued participation, as if the Executive were still
an employee, in the Company's medical, dental,
hospitalization and life insurance plans, programs
and/or arrangements and in those other employee plans,
programs and/or arrangements in which he was
participating on the date of the termination of his
employment until he attains age 65 or recovers from his
Disability, whichever occurs earlier; and
(8) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
If the Executive is precluded from continuing his participation in
any employee benefit plan, program or arrangement as provided in Section
11(b)(7) above, he shall be provided the after-tax economic equivalent of the
benefits provided under the plan, program or arrangement in which he is unable
to participate. The economic equivalent of any benefit foregone shall be
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deemed to be the lowest cost that would be incurred by the Executive in
obtaining such benefit himself on an individual basis.
In no event shall a termination of the Executive's employment for
Disability occur unless the Party terminating his employment gives written
notice to the other Party in accordance with Section 25 below.
(c) Termination of Employment by the Company for Cause. A
termination of the Executive's employment by the Company for Cause shall not
take effect unless the provisions of this Section 11(c) are complied with and
the Board issues a written determination that the Executive's employment should
be terminated for Cause (a "Determination").
(1) In accordance with Section 25 below, the CEO shall give
the Executive a written notice stating his intention to
terminate the Executive's employment for Cause (the
"Cause Notice"). The Cause Notice shall:
(A) state in detail the particular act or acts or
failure or failures to act that constitute the
grounds on which the proposed termination of
employment for Cause is based; and
(B) be given within four months of the CEO learning of
such act or acts or failure or failures to act.
(2) The CEO may temporarily relieve the Executive of his
duties and responsibilities described in Section 3 above
during the period commencing on the date the Cause
Notice is issued by the CEO and ending on the date the
Determination is issued by the Board (the "Determination
Period").
(3) The Executive shall have 20 days after the date the
Cause Notice is actually received by him in which to
cure his conduct on which the termination of employment
for Cause is based, to the extent such cure is possible.
If the Executive fails to cure such conduct, he shall
then be entitled to a hearing before the Board. Such
hearing shall be held during the 20-day period
following the date the Executive receives the Cause
Notice; provided, however, that the Executive requests
such hearing during the 10-day period following the date
the Executive receives the Cause Notice. Within five
days following the completion of such hearing, the Board
shall issue a Determination stating whether, in its
judgment, grounds for Cause as detailed in the Cause
Notice exist. If the Determination states that such
grounds exist, the Executive's employment shall be
immediately terminated for Cause and the Term of
Employment shall end as of the date of the termination
of the Executive's employment.
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(4) If the Company terminates the Executive's employment for
Cause, the Executive shall be entitled to the following:
(A) Base Salary earned but not paid prior to the date
of the termination of his employment;
(B) any amounts earned, accrued or owing to the
Executive but not yet paid under Section 7, 8, 9
or 10 above; and
(C) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of
the Company.
(5) Notwithstanding anything herein to the contrary, if,
following a termination of the Executive's employment by
the Company for Cause based upon the conviction of the
Executive for a felony, such conviction is overturned in
a final determination on appeal, the Executive shall be
entitled to the payments and the economic equivalent of
the benefits the Executive would have received if his
employment had been terminated by the Company without
Cause.
(d) Termination of Employment by the Company Without Cause. If the
Executive's employment is terminated by the Company without Cause, other than
due to death or Disability, the Executive shall be entitled to the following:
(1) Base Salary earned but not paid prior to the date of
the termination of his employment;
(2) all annual incentive awards with respect to any year
prior to the year of the termination of the Executive's
employment which have been earned but not paid;
(3) an amount equal to the aggregate Base Salary (based on
the Base Salary in effect on the date of the termination
of the Executive's employment) with respect to a period
equal to the longer of (i) the remainder of the Term of
Employment or (ii) the corresponding severance period
listed on Schedule A, payable in a lump sum without
discount (the "Salary Continuation Benefits");
(4) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested shares
underlying any other restricted stock award held by the
Executive on the date of the termination of his
employment;
(5) immediate vesting of all stock options held by the
Executive on the date of the termination of his
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employment, with all nonqualified stock options
remaining exercisable until the end of their original
terms and all incentive stock options remaining
exercisable until the earlier of (i) the end of the
one-year period following the date of the termination of
his employment or (ii) the date the incentive stock
option would otherwise expire;
(6) continued accrual of credited service through the end of
the Term of Employment for the purpose of any Company
pension plan, program or arrangement;
(7) the right to purchase, at fair market value, the
Executive's automobile (if any) provided to him by the
Company under the Company's automobile perquisite
program for senior-level executives;
(8) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above;
(9) continued participation, as if he were still an
employee, in the Company's medical, dental,
hospitalization and life insurance plans, programs
and/or arrangements and in other employee benefit plans,
programs and/or arrangements in which he was
participating on the date of the termination of his
employment until the earlier of:
(A) the end of the period used to determine the
Salary Continuation Benefits; or
(B) the date, or dates, he receives equivalent
coverage and benefits under the plans, programs
and/or arrangements of a subsequent employer (such
coverage and benefits to be determined on a
coverage-by-coverage or benefit-by-benefit basis);
provided, however, that:
(X) if the Executive is precluded from continuing
his participation in any employee benefit plan,
program or arrangement as provided in Section
11(d)(9)(A) above, he shall be provided with the
after-tax economic equivalent of the benefits
provided under the plan, program or arrangement
in which he is unable to participate for the
period specified in this Section 11(d)(9);
(Y) the economic equivalent of any benefit foregone
shall be deemed to be the lowest cost that would
be incurred by the Executive in obtaining such
benefit himself on an individual basis; and
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(Z) payment of such after-tax economic equivalent
shall be made quarterly in advance; and
(10) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
(e) Termination of Employment by the Executive for Good Reason. The
Executive may terminate his employment for Good Reason, but only if:
(1) the Executive notifies the Board during the 60-day
period following the date of the first occurrence of an
event which constitutes Good Reason (the "Good Reason
Event Date") of his intention to terminate his
employment for Good Reason;
(2) the Executive terminates his employment for Good Reason
during the 120-day period following the Good Reason
Event Date;
(3) the termination of employment for Good Reason does not
occur during a Determination Period described in Section
11(c)(2) above; and
(4) the Good Reason first occurs before or after a
Determination Period, or, if the Good Reason first
occurs during a Determination Period, such event
constituting Good Reason continues to occur after the
Determination Period.
Upon a termination by the Executive of his employment for Good Reason, the
Executive shall be entitled to the same payments and benefits as provided in
Section 11(d) above; provided, however, that if the Executive terminates his
employment for Good Reason based on a reduction in Base Salary under Section
1(r)(1) above, then the Base Salary to be used in determining the Salary
Continuation Benefits in accordance with Section 11(d)(2) above shall be the
Base Salary in effect immediately prior to such reduction.
(f) Termination of Employment Following a Change in Control. On the
date of a Change in Control, all stock options and all unvested shares under the
1997 Stock Award and other restricted stock awards held by the Executive on such
date shall immediately and fully vest, and all such stock options shall be
exercisable from such date until the date they would otherwise expire (but in
the case of incentive stock options, for not more than one year following a
termination of employment). If, following a Change in Control, (i) the
Executive's employment is terminated by the Company without Cause, (ii) the
Executive terminates his employment for Good Reason, or (iii) upon 30 days prior
written notice to the Company, the Executive terminates his employment for any
reason during the 120-day period following the 90th day after the date of the
Change in Control, the Executive shall be entitled to the same payments and
benefits as provided in Section 11(d) above, except that the Salary Continuation
Benefits under Section 11(d)(3) above shall be determined with respect to a
period equal to the longer of (a) 18 months or (b) the remainder of the Term of
Employment. A failure by the
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Executive to exercise his rights with respect to a Change in Control shall not
be deemed a waiver of any rights under this Agreement.
(g) Termination of Employment by the Executive Without Good Reason.
If the Executive terminates his employment without Good Reason, other than a
termination of employment (i) due to death or retirement or Disability or (ii)
by the Executive during the 120-day period following the 90th day after the date
of a Change in Control, the Executive shall have the same entitlements as
provided in Section 11(c)(4) above. A termination of the Executive's employment
under this Section 11(g) shall be effective upon 30 days prior written notice to
the Company and shall not be deemed a breach of this Agreement.
(h) Nonrenewal of Agreement by the Company. If (i) the Company does
not renew the Term of Employment in accordance with Section 2 above and (ii) the
Executive remains employed by the Company on a continuous basis until the end of
the Term of Employment, the Executive shall have the same entitlements as
provided in Section 11(d) above, and the date on which the Term of Employment
ends shall be deemed to be the date of the termination of the Executive's
employment by the Company without Cause.
(i) Nonrenewal of Agreement by the Executive. In the event that the
Executive does not renew the Term of Employment in accordance with Section 2
above, the Executive shall have the same entitlements as provided in Section
11(c)(4) above, and the date on which the Term of Employment ends shall be
deemed to be the date of the termination of the Executive's employment by the
Company for Cause.
(j) Payment Following a Change in Control. If the termination of the
Executive's employment is pursuant to Section 11(f) above, and the aggregate of
all payments or benefits made or provided to the Executive under Section 11(f)
above and under all other plans, programs and/or arrangements of the Company
(the "Aggregate Payment") is determined to constitute a "parachute payment" (as
such term is defined in Code Section 280G(b)(2)), the Company shall pay to the
Executive, prior to the time any excise tax imposed by Code Section 4999
("Excise Tax") is payable with respect to such Aggregate Payment, an additional
amount which, after the imposition of all income and excise taxes thereon, is
equal to the Excise Tax on the Aggregate Payment. The determination of whether
the Aggregate Payment constitutes a parachute payment and, if so, the amount to
be paid to the Executive and the time of payment pursuant to this Section 11(j)
shall be made by an independent auditor (the "Auditor") jointly selected by the
Company and the Executive and paid by the Company. The Auditor shall be a
nationally recognized United States public accounting firm which has not, during
the two years preceding the date of its selection, acted in any way on behalf of
the Company or any affiliate thereof. If the Executive and the Company cannot
agree on the firm to serve as the Auditor, then the Executive and the Company
shall each select one accounting firm and those two firms shall jointly select
the accounting firm to serve as the Auditor.
(k) No Mitigation; No Offset. If the Executive's employment
terminates under this Section 11, the Executive shall be under no obligation to
seek other employment and there shall be no offset against amounts due the
Executive under this Agreement on account of any remuneration attributable to
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any subsequent employment that he may obtain except as specifically provided in
this Section 11.
(l) Nature of Payments. Any amounts due under this Section 11 are in
the nature of severance payments considered to be reasonable by the Company and
are not in the nature of a penalty.
12. Confidentiality: Assignment of Rights.
(a) During the Term of Employment and thereafter, the Executive
shall not disclose to anyone or make use of any trade secret or proprietary or
confidential information of the Company, including such trade secret or
proprietary or confidential information of any customer or other entity to which
the Company owes an obligation not to disclose such information, which he
acquires during the Term of Employment, including but not limited to records
kept in the ordinary course of business, except (i) as such disclosure or use
may be required or appropriate in connection with his work as an employee of the
Company, (ii) when required to do so by a court of law, by any governmental
agency having supervisory authority over the business of the Company or by any
administrative or legislative body (including a committee thereof) with apparent
jurisdiction to order him to divulge, disclose or make accessible such
information, or (iii) as to such confidential information that becomes generally
known to the public or trade without violation of this Section 12(a).
(b) The Executive hereby sells, assigns and transfers to the Company
all of his right, title and interest in and to all inventions, discoveries,
improvements and copyrightable subject matter (the "rights") which during the
Term of Employment are made or conceived by him, alone or with others, and which
are within or arise out of any general field of the Company's business or arise
out of any work he performs or information he receives regarding the business of
the Company while employed by the Company. The Executive shall fully disclose to
the Company as promptly as available all information known or possessed by him
concerning the rights referred to in the preceding sentence, and upon request by
the Company and without any further remuneration in any form to him by the
Company, but at the expense of the Company, execute all applications for patents
and for copyright registration, assignments thereof and other instruments and do
all things which the Company may deem necessary to vest and maintain in it the
entire right, title and interest in and to all such rights.
13. Noncompetition.
(a) The Executive covenants and agrees that during the Term of
Employment and during the six-month period following the end of the Term of
Employment, he shall not at any time, without the prior written consent of the
Company, directly or indirectly, engage in a Competitive Activity.
(b) The Parties acknowledge that in the event of a breach or
threatened breach of Section 13(a) above, the Company shall not have an adequate
remedy at law. Accordingly, in the event of any breach or threatened breach of
Section 13(a) above, the Company shall be entitled to such equitable and
injunctive relief as may be available to restrain the Executive and any
business, firm, partnership, individual, corporation or entity participating in
the breach or threatened breach from the violation of the provisions of
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Section 13(a) above. Nothing in this Agreement shall be construed as prohibiting
the Company from pursuing any other remedies available at law or in equity for
breach or threatened breach of Section 13(a) above, including the recovery of
damages.
14. Indemnification.
(a) The Company agrees that if the Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is the Executive's alleged action in
an official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Company to
the fullest extent legally permitted or authorized by the Company's certificate
of incorporation or bylaws or resolutions of the Company's Board of Directors
or, if greater, by the laws of the State of Delaware, against all cost, expense,
liability and loss (including, without limitation, attorney's fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by the Executive in connection
therewith, and such indemnification shall continue as to the Executive even if
he has ceased to be a director, member, employee or agent of the Company or
other entity and shall inure to the benefit of the Executive's heirs, executors
and administrators. The Company shall advance to the Executive all reasonable
costs and expenses incurred by him in connection with a Proceeding within 20
days after receipt by the Company of a written request for such advance. Such
request shall include an undertaking by the Executive to repay the amount of
such advance if it shall ultimately be determined that he is not entitled to be
indemnified against such costs and expenses.
(b) Neither the failure of the Company (including the Board,
independent legal counsel or stockholders) to have made a determination prior to
the commencement of any Proceeding concerning payment of amounts claimed by the
Executive under Section 14(a) above that indemnification of the Executive is
proper because he has met the applicable standard of conduct, nor a
determination by the Company (including the Board, independent legal counsel or
stockholders) that the Executive has not met such applicable standard of
conduct, shall create a presumption that the Executive has not met the
applicable standard of conduct.
(c) The Company agrees to continue and maintain a directors and
officers' liability insurance policy covering the Executive to the extent the
Company provides such coverage for its other executive officers.
15. Effect of Agreement on Other Benefits.
Except as specifically provided in this Agreement, the existence of
this Agreement shall not prohibit or restrict the Executive's entitlement to
full participation in the Company's employee benefit plans, programs and
arrangements applicable to the Company's senior-level executives.
16. Assignability; Binding Nature.
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This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of the Executive)
and assigns. No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company; provided, however, that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law. The Company further agrees that, in the
event of a sale of assets or liquidation as described in the preceding sentence,
it shall take whatever action it legally can in order to cause such assignee or
transferee to expressly assume the liabilities, obligations and duties of the
Company hereunder or under any other plan or benefit program referred to herein.
No rights or obligations of the Executive under this Agreement may be assigned
or transferred by the Executive other than his rights to compensation and
benefits, which may be transferred only by will or operation of law, except as
provided in Section 22 below.
17. Representation.
The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement between it and
any other person, firm or organization. The Executive represents that he knows
of no agreement between him and any other person, firm or organization that
would be violated by the performance of his obligations under this Agreement.
18. Entire Agreement.
This Agreement contains the entire understanding and agreement
between the Parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, between the Parties with respect thereto.
19. Amendment or Waiver.
No provision in this Agreement may be amended unless such amendment
is agreed to in writing and signed by the Executive and an authorized officer of
the Company. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Executive or an authorized officer of the Company, as the case may
be.
20. Severability.
In the event that any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, in whole or in
part, the remaining provisions of this Agreement shall be unaffected thereby
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and shall remain in full force and effect to the fullest extent permitted by
law.
21. Survivorship.
The respective rights and obligations of the Parties hereunder shall
survive any termination of the Executive's employment to the extent necessary to
the intended preservation of such rights and obligations.
22. Beneficiaries/References.
The Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following the Executive's death by
giving the Company written notice thereof. In the event of the Executive's death
or a judicial determination of his incompetence, reference in this Agreement to
the Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.
23. Governing Law/Jurisdiction.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of New York without reference to principles of conflict
of laws.
24. Resolution of Disputes.
Any disputes arising under or in connection with the Agreement may,
at the election of the Executive or the Company, be resolved by binding
arbitration, to be held in New York City in accordance with the rules and
procedures of the American Arbitration Association. If arbitration is elected,
the Executive and the Company shall mutually select the arbitrator. If the
Executive and the Company cannot agree on the selection of an arbitrator, each
Party shall select an arbitrator and the two arbitrators shall select a third
arbitrator, and the three arbitrators shall form an arbitration panel which
shall resolve the dispute by majority vote. Judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof. Costs
of the arbitration or litigation, including, without limitation, reasonable
attorneys' fees of both Parties, shall be borne by the Company. Pending the
resolution of any arbitration or court proceeding, the Company shall continue
payment of all amounts due the Executive under this Agreement and all benefits
to which the Executive is entitled at the time the dispute arises.
25. Notices.
Any notice given to a Party shall be in writing and shall be deemed
to have been given when delivered personally or sent by certified or registered
mail, postage prepaid, return receipt requested, duly addressed to the Party
concerned at the address indicated below or to such changed address as such
Party may subsequently give such notice of:
If to the Company: Metallurg, Inc.
6 East 43rd Street, 12th floor
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New York, New York 10017
Attention: General Counsel
With a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: John J. Rapisardi
If to the Executive: Eric L. Schondorf
233 East 70th Street, #4P
New York, NY 10021
26. Headings.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
27. Counterparts.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
METALLURG, INC.
By:
------------------------
Secretary
------------------------
Eric L. Schorndorf
SCHEDULE A
Years of Service Severance Period
---------------- ----------------
Up to 15 6 months
More Than 15 9 months
More Than 20 12 months
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EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the 14th day of April, 1997 by and
between Metallurg Inc., a Delaware corporation (together with its successors
and assigns permitted under this Agreement, the "Company"), and J. Richard
Budd, III (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is the Senior Vice President of the Company; and
WHEREAS, the Company desires to continue the employment of the Executive
and to enter into an employment agreement embodying the terms of such employment
(the "Agreement"); and
WHEREAS, the Executive desires to enter into the Agreement and to accept
such employment, subject to the terms and provisions of the Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. Definitions.
(a) "Bankruptcy Code" shall mean title 11 of the United States Code,
as amended from time to time, as applicable to the Chapter 11 Cases.
(b) "Bankruptcy Court" shall mean 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.
(c) "Base Salary" shall mean the Executive's base salary in
accordance with Section 4 below.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Business Day" shall mean 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.
(f) "Cause" shall mean:
(1) the Executive is convicted of a felony; or
(2) the Executive engages in conduct that constitutes gross
neglect or willful misconduct in carrying out his duties
under the Agreement, resulting, in either case, in
material economic harm to the Company, unless the
Executive believed in good faith that such act or nonact
was in the best interests of the Company.
(g) "CEO" shall mean the chief executive officer of the Company.
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(h) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, including applicable regulations thereunder.
(i) A "Change in Control" shall mean the first to occur of the
following events:
(1) any "person" (as such term is used in Sections 3(a)(9)
and 13(d) of the Exchange Act) or group of persons
becomes a "beneficial owner" (as such term is used in
Rule 13d-3 under the Exchange Act) of more than 50
percent of the Voting Stock of the Company;
(2) the majority of the Board consists of individuals other
than Incumbent Directors;
(3) the Company adopts any plan of liquidation providing for
the distribution of all or substantially all of its
assets;
(4) the sale or other disposition of all or substantially
all of the assets or business of the Company and its
Subsidiaries taken as a whole; or
(5) the merger, consolidation or combination of the Company
with or into another company (the "Other Company");
provided, however, that immediately after the merger,
consolidation or combination, the shareholders of the
Company immediately prior to the merger, consolidation
or combination hold, directly or indirectly, 50 percent
or less of the Voting Stock of the surviving company
(there being excluded from the number of shares held by
such shareholders, but not from the Voting Stock of the
surviving company, any shares received by any
"affiliate" (as such term is defined in Rule 12b-2 under
the Exchange Act) of the Other Company in exchange for
stock of the Other Company).
(j) "Chapter 11 Cases" shall mean the cases under chapter 11 of the
Bankruptcy Code commenced by the Company and Shieldalloy Metallurgical
Corporation, 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 Company
and Shieldalloy Metallurgical Corporation are the debtors in possession pursuant
to sections 1107 and 1108 of the Bankruptcy Code.
(k) "Competitive Activity" shall mean any activity engaged in by the
Executive, whether as an employee, principal, sole proprietor, consultant,
agent, officer, director, partner or shareholder (except as a less than one-
percent shareholder of a publicly traded company or a less than five-percent
shareholder of a privately held company), which directly competes with the
Company or any Subsidiary. For this purpose, an activity which directly competes
with the Company or any Subsidiary shall mean a business that was being
conducted by the Company or any Subsidiary during the Term of Employment.
Notwithstanding anything to the contrary in this Section 1(k), an
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activity shall not be deemed to be a Competitive Activity (x) solely as a result
of the Executive's being employed by or otherwise associated with a business of
which a unit is in competition with the Company or any Subsidiary but as to
which unit the Executive does not have direct or indirect responsibilities for
the products or product lines involved or (y) if the activity contributes less
than 5 percent of the revenues for the fiscal year in question of the business
by which the Executive is employed or with which he is otherwise associated.
(l) "Confirmation Date" shall mean the date on which the Clerk of
the Bankruptcy Court enters the Confirmation Order.
(m) "Confirmation Order" shall mean the order of the Bankruptcy
Court confirming the Plan of Reorganization pursuant to section 1129 of the
Bankruptcy Code.
(n) "Consumer Price Index" shall mean the Consumer Price Index for
Urban Wage Earners and Clerical Workers, all items, for New York City as
determined by the Bureau of Labor Statistics, United States Department of Labor,
or successor or comparable successor index should such index be discontinued.
(o) "Disability" shall mean a disability as determined under the
Company's long-term disability plans, programs and/or arrangements in effect on
the date such disability first occurs.
(p) "Effective Date" shall mean the first Business Day on which all
of the conditions specified in Article XIII of the Plan of Reorganization have
been satisfied or waived.
(q) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time, including applicable regulations thereunder.
(r) "Good Reason" shall mean the occurrence of any of the following
events:
(1) a reduction in the Executive's Base Salary;
(2) a material change in the Executive's position, duties or
responsibilities with respect to his employment by the
Company under the Agreement without the Executive's
prior written consent;
(3) the removal of the Executive from the positions
described in Section 3 below;
(4) a reduction in the Executive's annual bonus opportunity
as specified in Section 5 below;
(5) an actual change in the Executive's principal work
location by more than 50 miles and more than 50 miles
from the Executive's principal place of abode as of the
date of such change in job location without the
Executive's prior written consent; or
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(6) the failure of the Company to obtain the assumption in
writing of its obligation to perform this Agreement by
any successor to the Company, or purchaser of all or
substantially all of the business or assets of the
Company and its Subsidiaries taken as a whole, on or
prior to the date on which the relevant merger,
consolidation, sale or similar transaction is completed.
(s) "Incumbent Directors" shall mean the members of the Board as of
the Effective Date; provided, however, that any person becoming a director
subsequent to such date whose election or nomination for election was supported
by a majority of the directors who then comprised the Incumbent Directors shall
be considered to be an Incumbent Director.
(t) "Plan of Reorganization" shall mean the joint chapter 11 plan of
reorganization for the Company and Shieldalloy Metallurgical Corporation under
the Chapter 11 Cases (including all exhibits and schedules annexed thereto),
either in its present form or as it may be altered, amended, or modified from
time to time.
(u) "Subsidiary" of the Company shall mean any corporation of which
the Company owns, directly or indirectly, more than 50 percent of the Voting
Stock or any other business entity in which the Company directly or indirectly
has an ownership interest of more than 50 percent.
(v) "Term of Employment" shall mean the period specified in Section
2 below.
(w) "Voting Stock" shall mean capital stock of any class or classes
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. Term of Employment.
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, for the period commencing on the Effective Date and
ending on the second anniversary of the Effective Date, subject to earlier
termination of the Term of Employment in accordance with the terms of the
Agreement. The Term of Employment shall be automatically renewed for a one-year
period on the second anniversary of the Effective Date and on each anniversary
of the Effective Date thereafter, unless either Party has notified the other
Party in writing in accordance with Section 25 below at least 365 days prior to
the expiration of the then Term of Employment that he or it does not want the
Term of Employment to so renew.
3. Position, Duties and Responsibilities.
On the Effective Date and continuing for the remainder of the Term
of Employment, the Executive shall be employed as the Senior Vice President of
the Company, and he shall have the duties and responsibilities associated with
such position. The Executive, in carrying out his duties under this Agreement,
shall report to the CEO. Notwithstanding anything herein to the contrary,
nothing shall preclude the Executive from:
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(1) serving on the boards of directors of a reasonable
number of other corporations or the boards of a
reasonable number of trade associations and/or
charitable organizations;
(2) engaging in charitable activities and community affairs;
and
(3) managing his personal investments and affairs;
provided, however, that such activities do not materially interfere with the
proper performance of his duties and responsibilities hereunder.
4. Base Salary.
The Executive shall be paid an annualized Base Salary, payable in
accordance with the regular payroll practices of the Company, of $310,000, which
is the Executive's current base salary in effect as of the Effective Date. The
Base Salary shall be reviewed no less frequently than annually for increase in
the discretion of the Board's Compensation Committee. Notwithstanding anything
herein to the contrary, the Base Salary shall be increased on each January 1st
after the Effective Date (the "Base Salary Increase Date") by a percentage which
is equal to the percentage of increase in the Consumer Price Index with respect
to the 12-month period ending on the November 30th which immediately precedes
the relevant Base Salary Increase Date.
5. Annual Incentive Compensation Programs.
The Executive shall participate in the Company's Management
Incentive Compensation Plan ("MICP") or such other successor plan applicable to
senior-level executives. He shall have an annual bonus opportunity under the
MICP of 30 percent of Base Salary. Payment of annual incentive compensation
awards shall be made at the same time that other senior-level executives receive
their annual incentive compensation awards.
6. Long-Term Incentive Compensation Programs.
(a) The Executive shall be eligible to participate in the Company's
1997 Stock Award and Stock Option Plan (the "1997 Plan") or such other successor
plan applicable to senior-level executives.
(b) On the Effective Date, the Company shall grant the Executive an
award of 25,000 shares of common stock of the Company under the 1997 Plan (the
"1997 Stock Award"). Subject to the terms and conditions of the 1997 Plan, the
1997 Stock Award shall vest as set forth below:
(1) 20 percent of the 1997 Stock Award shall be transferable
on, and remain transferable after, the date of grant;
(2) 40 percent of the 1997 Stock Award shall become
transferable on, and remain transferable after, the day
which precedes the first anniversary of the date of
grant; and
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(3) 40 percent of the 1997 Stock Award shall become
transferable on, and remain transferable after, the day
which precedes the second anniversary of the date of
grant.
(c) The Company shall loan the Executive an amount equal to the
aggregate federal, state and local income taxes (based on the highest marginal
tax rates in effect on the date of the loan) incurred by the Executive due to
(i) a portion of the 1997 Stock Award becoming transferable or (ii) the
Executive making an election under Code Section 83(b) with respect to the 1997
Stock Award. The loan shall be made at or, at the Executive's election, prior to
the date the Executive is obligated to pay any federal, state or local income
tax due to such portion of the 1997 Stock Award becoming transferable or the
Executive making such election under Code Section 83(b). The loan's interest
rate shall be equal to the short-term applicable federal rate compounded
annually in effect on the date of the loan as published by the Internal Revenue
Service. The Executive shall pay to the Company in a lump sum the principal and
all accrued interest with respect to such loan on the day which precedes the
third anniversary of the date of the loan, or, at the Executives's election, on
any date which precedes the third anniversary of the date of the loan.
7. Employee Benefit Programs.
(a) During the Term of Employment, the Executive shall be entitled
to participate in those employee pension and welfare benefit plans, programs
and/or arrangements applicable to the Executive and made available to the
Company's senior-level executives or to its employees generally, as such plans,
programs and/or arrangements may be in effect from time to time, including,
without limitation, pension, profit-sharing, savings, medical, dental,
hospitalization, short-term disability, long-term disability, life insurance,
accidental death and dismemberment protection, travel accident insurance, and
other employee pension and welfare benefit plans, programs and/or arrangements
that may be sponsored by the Company from time to time.
(b) During the Term of Employment, the Company shall provide the
Executive with term life insurance with a death benefit of at least two times
Base Salary. The Company shall pay all premiums with respect to such life
insurance. Such life insurance may be provided either through the Company's
group life insurance programs, by an individual policy, or by a combination of
both group and individual policies.
8. Reimbursement of Business Expenses.
The Executive is authorized to incur reasonable business expenses in
carrying out his duties and responsibilities under the Agreement, and the
Company shall promptly reimburse him for all such reasonable business expenses
incurred in connection with carrying out the business of the Company, subject to
documentation in accordance with the Company's policy.
9. Perquisites.
During the Term of Employment, the Executive shall be entitled to
participate in the Company's executive fringe benefits applicable to the
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Company's senior-level executive in accordance with the terms and conditions of
such arrangements as are in effect from time to time.
10. Vacation.
The Executive shall be entitled to paid vacation in accordance with
the Company's vacation policy; provided, however, that the Executive shall be
entitled to not less than four weeks of vacation each year.
11. Termination of Employment.
(a) Termination of Employment Due to Death. In the event of the
Executive's death during the Term of Employment, the Term of Employment shall
end as of the date of the Executive's death and his estate and/or beneficiaries,
as the case may be, shall be entitled to the following:
(1) Base Salary earned but not paid prior to the date of
his death;
(2) all annual incentive awards with respect to any year
prior to the year of his death which have been earned
but not paid;
(3) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested shares
underlying any other restricted stock award held by the
Executive on the date of his death;
(4) immediate vesting of all stock options held by the
Executive on the date of his death, with all
nonqualified stock options remaining exercisable until
the end of their original terms and all incentive stock
options remaining exercisable until the earlier of (i)
the end of the one-year period following the date of
death or (ii) the date the incentive stock option would
otherwise expire;
(5) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above; and
(6) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
(b) Termination of Employment Due to Disability. If the Executive's
employment is terminated due to Disability during the Term of Employment, either
by the Company or by the Executive, the Term of Employment shall end as of the
date of the Executive's termination of employment and the Executive shall be
entitled to the following (but in no event less than the benefits due him under
the then current disability program of the Company):
(1) Base Salary earned but not paid prior to the date of the
termination of the Executive's employment;
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(2) all annual incentive awards with respect to any year
prior to the year of the termination of the Executive's
employment which have been earned but not paid;
(3) an amount equal to the sum of 50 percent of Base Salary,
at the annual rate in effect on the date of the
termination of the Executive's employment, payable
monthly for a period ending on the first day of the
month following the month in which the Executive attains
age 65 or recovers from his Disability, whichever occurs
earlier, less the amount of any disability benefits
provided to the Executive under the Company's disability
program;
(4) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested shares
underlying any other restricted stock award held by the
Executive on the date of the termination of his
employment;
(5) immediate vesting of all stock options held by the
Executive on the date of the termination of his
employment, with all nonqualified stock options
remaining exercisable until the end of their original
terms and all incentive stock options remaining
exercisable until the earlier of (i) the end of the
one-year period following the date of the termination of
his employment or (ii) the date the incentive stock
option would otherwise expire;
(6) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above;
(7) continued participation, as if the Executive were still
an employee, in the Company's medical, dental,
hospitalization and life insurance plans, programs
and/or arrangements and in those other employee plans,
programs and/or arrangements in which he was
participating on the date of the termination of his
employment until he attains age 65 or recovers from his
Disability, whichever occurs earlier; and
(8) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
If the Executive is precluded from continuing his participation in
any employee benefit plan, program or arrangement as provided in Section
11(b)(7) above, he shall be provided the after-tax economic equivalent of the
benefits provided under the plan, program or arrangement in which he is unable
to participate. The economic equivalent of any benefit foregone shall be deemed
to be the lowest cost that would be incurred by the Executive in obtaining such
benefit himself on an individual basis.
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In no event shall a termination of the Executive's employment for
Disability occur unless the Party terminating his employment gives written
notice to the other Party in accordance with Section 25 below.
(c) Termination of Employment by the Company for Cause. A
termination of the Executive's employment by the Company for Cause shall not
take effect unless the provisions of this Section 11(c) are complied with and
the Board issues a written determination that the Executive's employment should
be terminated for Cause (a "Determination").
(1) In accordance with Section 25 below, the CEO shall give
the Executive a written notice stating his intention to
terminate the Executive's employment for Cause (the
"Cause Notice"). The Cause Notice shall:
(A) state in detail the particular act or acts or
failure or failures to act that constitute the
grounds on which the proposed termination of
employment for Cause is based; and
(B) be given within four months of the CEO learning of
such act or acts or failure or failures to act.
(2) The CEO may temporarily relieve the Executive of his
duties and responsibilities described in Section 3 above
during the period commencing on the date the Cause
Notice is issued by the CEO and ending on the date the
Determination is issued by the Board (the "Determination
Period").
(3) The Executive shall have 20 days after the date the
Cause Notice is actually received by him in which to
cure his conduct on which the termination of employment
for Cause is based, to the extent such cure is possible.
If the Executive fails to cure such conduct, he shall
then be entitled to a hearing before the Board. Such
hearing shall be held during the 20-day period
following the date the Executive receives the Cause
Notice; provided, however, that the Executive requests
such hearing during the 10-day period following the date
the Executive receives the Cause Notice. Within five
days following the completion of such hearing, the Board
shall issue a Determination stating whether, in its
judgment, grounds for Cause as detailed in the Cause
Notice exist. If the Determination states that such
grounds exist, the Executive's employment shall be
immediately terminated for Cause and the Term of
Employment shall end as of the date of the termination
of the Executive's employment.
(4) If the Company terminates the Executive's employment for
Cause, the Executive shall be entitled to the following:
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(A) Base Salary earned but not paid prior to the date
of the termination of his employment;
(B) any amounts earned, accrued or owing to the
Executive but not yet paid under Section 7, 8, 9
or 10 above; and
(C) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of
the Company.
(5) Notwithstanding anything herein to the contrary, if,
following a termination of the Executive's employment by
the Company for Cause based upon the conviction of the
Executive for a felony, such conviction is overturned in
a final determination on appeal, the Executive shall be
entitled to the payments and the economic equivalent of
the benefits the Executive would have received if his
employment had been terminated by the Company without
Cause.
(d) Termination of Employment by the Company Without Cause. If the
Executive's employment is terminated by the Company without Cause, other than
due to death or Disability, the Executive shall be entitled to the following:
(1) Base Salary earned but not paid prior to the date of
the termination of his employment;
(2) all annual incentive awards with respect to any year
prior to the year of the termination of the Executive's
employment which have been earned but not paid;
(3) an amount equal to the aggregate Base Salary (based on
the Base Salary in effect on the date of the termination
of the Executive's employment) with respect to a period
equal to the longer of (i) the remainder of the Term of
Employment or (ii) the corresponding severance period
listed on Schedule A, payable in a lump sum without
discount (the "Salary Continuation Benefits");
(4) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested shares
underlying any other restricted stock award held by the
Executive on the date of the termination of his
employment;
(5) immediate vesting of all stock options held by the
Executive on the date of the termination of his
employment, with all nonqualified stock options
remaining exercisable until the end of their original
terms and all incentive stock options remaining
exercisable until the earlier of (i) the end of the
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one-year period following the date of the termination of
his employment or (ii) the date the incentive stock
option would otherwise expire;
(6) continued accrual of credited service through the end of
the Term of Employment for the purpose of any Company
pension plan, program or arrangement;
(7) the right to purchase, at fair market value, the
Executive's automobile (if any) provided to him by the
Company under the Company's automobile perquisite
program for senior-level executives;
(8) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above;
(9) continued participation, as if he were still an
employee, in the Company's medical, dental,
hospitalization and life insurance plans, programs
and/or arrangements and in other employee benefit plans,
programs and/or arrangements in which he was
participating on the date of the termination of his
employment until the earlier of:
(A) the end of the period used to determine the
Salary Continuation Benefits; or
(B) the date, or dates, he receives equivalent
coverage and benefits under the plans, programs
and/or arrangements of a subsequent employer (such
coverage and benefits to be determined on a
coverage-by-coverage or benefit-by-benefit basis);
provided, however, that:
(X) if the Executive is precluded from continuing
his participation in any employee benefit plan,
program or arrangement as provided in Section
11(d)(9)(A) above, he shall be provided with the
after-tax economic equivalent of the benefits
provided under the plan, program or arrangement
in which he is unable to participate for the
period specified in this Section 11(d)(9);
(Y) the economic equivalent of any benefit foregone
shall be deemed to be the lowest cost that would
be incurred by the Executive in obtaining such
benefit himself on an individual basis; and
(Z) payment of such after-tax economic equivalent
shall be made quarterly in advance; and
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(10) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
(e) Termination of Employment by the Executive for Good Reason. The
Executive may terminate his employment for Good Reason, but only if:
(1) the Executive notifies the Board during the 60-day
period following the date of the first occurrence of an
event which constitutes Good Reason (the "Good Reason
Event Date") of his intention to terminate his
employment for Good Reason;
(2) the Executive terminates his employment for Good Reason
during the 120-day period following the Good Reason
Event Date;
(3) the termination of employment for Good Reason does not
occur during a Determination Period described in Section
11(c)(2) above; and
(4) the Good Reason first occurs before or after a
Determination Period, or, if the Good Reason first
occurs during a Determination Period, such event
constituting Good Reason continues to occur after the
Determination Period.
Upon a termination by the Executive of his employment for Good Reason, the
Executive shall be entitled to the same payments and benefits as provided in
Section 11(d) above; provided, however, that if the Executive terminates his
employment for Good Reason based on a reduction in Base Salary under Section
1(r)(1) above, then the Base Salary to be used in determining the Salary
Continuation Benefits in accordance with Section 11(d)(2) above shall be the
Base Salary in effect immediately prior to such reduction.
(f) Termination of Employment Following a Change in Control. On the
date of a Change in Control, all stock options and all unvested shares under the
1997 Stock Award and other restricted stock awards held by the Executive on such
date shall immediately and fully vest, and all such stock options shall be
exercisable from such date until the date they would otherwise expire (but in
the case of incentive stock options, for not more than one year following a
termination of employment). If, following a Change in Control, (i) the
Executive's employment is terminated by the Company without Cause, (ii) the
Executive terminates his employment for Good Reason, or (iii) upon 30 days prior
written notice to the Company, the Executive terminates his employment for any
reason during the 120-day period following the 90th day after the date of the
Change in Control, the Executive shall be entitled to the same payments and
benefits as provided in Section 11(d) above, except that the Salary Continuation
Benefits under Section 11(d)(3) above shall be determined with respect to a
period equal to the longer of (a) 18 months or (b) the remainder of the Term of
Employment. A failure by the Executive to exercise his rights with respect to a
Change in Control shall not be deemed a waiver of any rights under this
Agreement.
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(g) Termination of Employment by the Executive Without Good Reason.
If the Executive terminates his employment without Good Reason, other than a
termination of employment (i) due to death or retirement or Disability or (ii)
by the Executive during the 120-day period following the 90th day after the date
of a Change in Control, the Executive shall have the same entitlements as
provided in Section 11(c)(4) above. A termination of the Executive's employment
under this Section 11(g) shall be effective upon 30 days prior written notice to
the Company and shall not be deemed a breach of this Agreement.
(h) Nonrenewal of Agreement by the Company. If (i) the Company does
not renew the Term of Employment in accordance with Section 2 above and (ii) the
Executive remains employed by the Company on a continuous basis until the end of
the Term of Employment, the Executive shall have the same entitlements as
provided in Section 11(d) above, and the date on which the Term of Employment
ends shall be deemed to be the date of the termination of the Executive's
employment by the Company without Cause.
(i) Nonrenewal of Agreement by the Executive. In the event that the
Executive does not renew the Term of Employment in accordance with Section 2
above, the Executive shall have the same entitlements as provided in Section
11(c)(4) above, and the date on which the Term of Employment ends shall be
deemed to be the date of the termination of the Executive's employment by the
Company for Cause.
(j) Payment Following a Change in Control. If the termination of the
Executive's employment is pursuant to Section 11(f) above, and the aggregate of
all payments or benefits made or provided to the Executive under Section 11(f)
above and under all other plans, programs and/or arrangements of the Company
(the "Aggregate Payment") is determined to constitute a "parachute payment" (as
such term is defined in Code Section 280G(b)(2)), the Company shall pay to the
Executive, prior to the time any excise tax imposed by Code Section 4999
("Excise Tax") is payable with respect to such Aggregate Payment, an additional
amount which, after the imposition of all income and excise taxes thereon, is
equal to the Excise Tax on the Aggregate Payment. The determination of whether
the Aggregate Payment constitutes a parachute payment and, if so, the amount to
be paid to the Executive and the time of payment pursuant to this Section 11(j)
shall be made by an independent auditor (the "Auditor") jointly selected by the
Company and the Executive and paid by the Company. The Auditor shall be a
nationally recognized United States public accounting firm which has not, during
the two years preceding the date of its selection, acted in any way on behalf of
the Company or any affiliate thereof. If the Executive and the Company cannot
agree on the firm to serve as the Auditor, then the Executive and the Company
shall each select one accounting firm and those two firms shall jointly select
the accounting firm to serve as the Auditor.
(k) No Mitigation; No Offset. If the Executive's employment
terminates under this Section 11, the Executive shall be under no obligation to
seek other employment and there shall be no offset against amounts due the
Executive under this Agreement on account of any remuneration attributable to
any subsequent employment that he may obtain except as specifically provided in
this Section 11.
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(l) Nature of Payments. Any amounts due under this Section 11 are in
the nature of severance payments considered to be reasonable by the Company and
are not in the nature of a penalty.
12. Confidentiality: Assignment of Rights.
(a) During the Term of Employment and thereafter, the Executive
shall not disclose to anyone or make use of any trade secret or proprietary or
confidential information of the Company, including such trade secret or
proprietary or confidential information of any customer or other entity to which
the Company owes an obligation not to disclose such information, which he
acquires during the Term of Employment, including but not limited to records
kept in the ordinary course of business, except (i) as such disclosure or use
may be required or appropriate in connection with his work as an employee of the
Company, (ii) when required to do so by a court of law, by any governmental
agency having supervisory authority over the business of the Company or by any
administrative or legislative body (including a committee thereof) with apparent
jurisdiction to order him to divulge, disclose or make accessible such
information, or (iii) as to such confidential information that becomes generally
known to the public or trade without violation of this Section 12(a).
(b) The Executive hereby sells, assigns and transfers to the Company
all of his right, title and interest in and to all inventions, discoveries,
improvements and copyrightable subject matter (the "rights") which during the
Term of Employment are made or conceived by him, alone or with others, and which
are within or arise out of any general field of the Company's business or arise
out of any work he performs or information he receives regarding the business of
the Company while employed by the Company. The Executive shall fully disclose to
the Company as promptly as available all information known or possessed by him
concerning the rights referred to in the preceding sentence, and upon request by
the Company and without any further remuneration in any form to him by the
Company, but at the expense of the Company, execute all applications for patents
and for copyright registration, assignments thereof and other instruments and do
all things which the Company may deem necessary to vest and maintain in it the
entire right, title and interest in and to all such rights.
13. Noncompetition.
(a) The Executive covenants and agrees that during the Term of
Employment and during the six-month period following the end of the Term of
Employment, he shall not at any time, without the prior written consent of the
Company, directly or indirectly, engage in a Competitive Activity.
(b) The Parties acknowledge that in the event of a breach or
threatened breach of Section 13(a) above, the Company shall not have an adequate
remedy at law. Accordingly, in the event of any breach or threatened breach of
Section 13(a) above, the Company shall be entitled to such equitable and
injunctive relief as may be available to restrain the Executive and any
business, firm, partnership, individual, corporation or entity participating in
the breach or threatened breach from the violation of the provisions of Section
13(a) above. Nothing in this Agreement shall be construed as prohibiting the
Company from pursuing any other remedies available at law or
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in equity for breach or threatened breach of Section 13(a) above, including the
recovery of damages.
14. Indemnification.
(a) The Company agrees that if the Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is the Executive's alleged action in
an official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Company to
the fullest extent legally permitted or authorized by the Company's certificate
of incorporation or bylaws or resolutions of the Company's Board of Directors
or, if greater, by the laws of the State of Delaware, against all cost, expense,
liability and loss (including, without limitation, attorney's fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by the Executive in connection
therewith, and such indemnification shall continue as to the Executive even if
he has ceased to be a director, member, employee or agent of the Company or
other entity and shall inure to the benefit of the Executive's heirs, executors
and administrators. The Company shall advance to the Executive all reasonable
costs and expenses incurred by him in connection with a Proceeding within 20
days after receipt by the Company of a written request for such advance. Such
request shall include an undertaking by the Executive to repay the amount of
such advance if it shall ultimately be determined that he is not entitled to be
indemnified against such costs and expenses.
(b) Neither the failure of the Company (including the Board,
independent legal counsel or stockholders) to have made a determination prior to
the commencement of any Proceeding concerning payment of amounts claimed by the
Executive under Section 14(a) above that indemnification of the Executive is
proper because he has met the applicable standard of conduct, nor a
determination by the Company (including the Board, independent legal counsel or
stockholders) that the Executive has not met such applicable standard of
conduct, shall create a presumption that the Executive has not met the
applicable standard of conduct.
(c) The Company agrees to continue and maintain a directors and
officers' liability insurance policy covering the Executive to the extent the
Company provides such coverage for its other executive officers.
15. Effect of Agreement on Other Benefits.
Except as specifically provided in this Agreement, the existence of
this Agreement shall not prohibit or restrict the Executive's entitlement to
full participation in the Company's employee benefit plans, programs and
arrangements applicable to the Company's senior-level executives.
16. Assignability; Binding Nature.
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This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of the Executive)
and assigns. No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company; provided, however, that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law. The Company further agrees that, in the
event of a sale of assets or liquidation as described in the preceding sentence,
it shall take whatever action it legally can in order to cause such assignee or
transferee to expressly assume the liabilities, obligations and duties of the
Company hereunder or under any other plan or benefit program referred to herein.
No rights or obligations of the Executive under this Agreement may be assigned
or transferred by the Executive other than his rights to compensation and
benefits, which may be transferred only by will or operation of law, except as
provided in Section 22 below.
17. Representation.
The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement between it and
any other person, firm or organization. The Executive represents that he knows
of no agreement between him and any other person, firm or organization that
would be violated by the performance of his obligations under this Agreement.
18. Entire Agreement.
This Agreement contains the entire understanding and agreement
between the Parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, between the Parties with respect thereto.
19. Amendment or Waiver.
No provision in this Agreement may be amended unless such amendment
is agreed to in writing and signed by the Executive and an authorized officer of
the Company. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Executive or an authorized officer of the Company, as the case may
be.
20. Severability.
In the event that any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, in whole or in
part, the remaining provisions of this Agreement shall be unaffected thereby
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and shall remain in full force and effect to the fullest extent permitted by
law.
21. Survivorship.
The respective rights and obligations of the Parties hereunder shall
survive any termination of the Executive's employment to the extent necessary to
the intended preservation of such rights and obligations.
22. Beneficiaries/References.
The Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following the Executive's death by
giving the Company written notice thereof. In the event of the Executive's death
or a judicial determination of his incompetence, reference in this Agreement to
the Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.
23. Governing Law/Jurisdiction.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of New York without reference to principles of conflict
of laws.
24. Resolution of Disputes.
Any disputes arising under or in connection with the Agreement may,
at the election of the Executive or the Company, be resolved by binding
arbitration, to be held in New York City in accordance with the rules and
procedures of the American Arbitration Association. If arbitration is elected,
the Executive and the Company shall mutually select the arbitrator. If the
Executive and the Company cannot agree on the selection of an arbitrator, each
Party shall select an arbitrator and the two arbitrators shall select a third
arbitrator, and the three arbitrators shall form an arbitration panel which
shall resolve the dispute by majority vote. Judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof. Costs
of the arbitration or litigation, including, without limitation, reasonable
attorneys' fees of both Parties, shall be borne by the Company. Pending the
resolution of any arbitration or court proceeding, the Company shall continue
payment of all amounts due the Executive under this Agreement and all benefits
to which the Executive is entitled at the time the dispute arises.
25. Notices.
Any notice given to a Party shall be in writing and shall be deemed
to have been given when delivered personally or sent by certified or registered
mail, postage prepaid, return receipt requested, duly addressed to the Party
concerned at the address indicated below or to such changed address as such
Party may subsequently give such notice of:
If to the Company: Metallurg, Inc.
6 East 43rd Street, 12th floor
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New York, New York 10017
Attention: General Counsel
With a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: John J. Rapisardi
If to the Executive: J. Richard Budd, III
332 National Court
North Hills, NY 11576
26. Headings.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
27. Counterparts.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
METALLURG, INC.
By:
------------------------
Secretary
------------------------
J. Richard Budd, III
SCHEDULE A
Years of Service Severance Period
---------------- ----------------
Up to 15 6 months
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More Than 15 9 months
More Than 20 12 months
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EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the 14th day of April, 1997 by and
between Metallurg Inc., a Delaware corporation (together with its successors and
assigns permitted under this Agreement, the "Company"), and Robin Brumwell (the
"Executive").
W I T N E S S E T H :
WHEREAS, the Executive is the President of Metallurg International
Resources ("MIR"), a division of the Company; and
WHEREAS, the Company desires to continue the employment of the Executive
and to enter into an employment agreement embodying the terms of such employment
(the "Agreement"); and
WHEREAS, the Executive desires to enter into the Agreement and to accept
such employment, subject to the terms and provisions of the Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. Definitions.
(a) "Bankruptcy Code" shall mean title 11 of the United States Code,
as amended from time to time, as applicable to the Chapter 11 Cases.
(b) "Bankruptcy Court" shall mean 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.
(c) "Base Salary" shall mean the Executive's base salary in
accordance with Section 4 below.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Business Day" shall mean 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.
(f) "Cause" shall mean:
(1) the Executive is convicted of a felony; or
(2) the Executive engages in conduct that constitutes gross
neglect or willful misconduct in carrying out his duties
under the Agreement, resulting, in either case, in
material economic harm to the Company, unless the
Executive believed in good faith that such act or nonact
was in the best interests of the Company.
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(g) "CEO" shall mean the chief executive officer of the Company.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, including applicable regulations thereunder.
(i) A "Change in Control" shall mean the first to occur of the
following events:
(1) any "person" (as such term is used in Sections 3(a)(9)
and 13(d) of the Exchange Act) or group of persons
becomes a "beneficial owner" (as such term is used in
Rule 13d-3 under the Exchange Act) of more than 50
percent of the Voting Stock of the Company;
(2) the majority of the Board consists of individuals other
than Incumbent Directors;
(3) the Company adopts any plan of liquidation providing for
the distribution of all or substantially all of its
assets;
(4) the sale or other disposition of all or substantially
all of the assets or business of the Company and its
Subsidiaries taken as a whole; or
(5) the merger, consolidation or combination of the Company
with or into another company (the "Other Company");
provided, however, that immediately after the merger,
consolidation or combination, the shareholders of the
Company immediately prior to the merger, consolidation
or combination hold, directly or indirectly, 50 percent
or less of the Voting Stock of the surviving company
(there being excluded from the number of shares held by
such shareholders, but not from the Voting Stock of the
surviving company, any shares received by any
"affiliate" (as such term is defined in Rule 12b-2 under
the Exchange Act) of the Other Company in exchange for
stock of the Other Company).
(j) "Chapter 11 Cases" shall mean the cases under chapter 11 of the
Bankruptcy Code commenced by the Company and Shieldalloy Metallurgical
Corporation, 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 Company
and Shieldalloy Metallurgical Corporation are the debtors in possession pursuant
to sections 1107 and 1108 of the Bankruptcy Code.
(k) "Competitive Activity" shall mean any activity engaged in by the
Executive, whether as an employee, principal, sole proprietor, consultant,
agent, officer, director, partner or shareholder (except as a less than one-
percent shareholder of a publicly traded company or a less than five-percent
shareholder of a privately held company), which directly competes with the
Company or any Subsidiary. For this purpose, an activity which directly competes
with the Company or any Subsidiary shall mean a business that was
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being conducted by the Company or any Subsidiary during the Term of Employment.
Notwithstanding anything to the contrary in this Section 1(k), an activity shall
not be deemed to be a Competitive Activity (x) solely as a result of the
Executive's being employed by or otherwise associated with a business of which a
unit is in competition with the Company or any Subsidiary but as to which unit
the Executive does not have direct or indirect responsibilities for the products
or product lines involved or (y) if the activity contributes less than 5 percent
of the revenues for the fiscal year in question of the business by which the
Executive is employed or with which he is otherwise associated.
(l) "Confirmation Date" shall mean the date on which the Clerk of
the Bankruptcy Court enters the Confirmation Order.
(m) "Confirmation Order" shall mean the order of the Bankruptcy
Court confirming the Plan of Reorganization pursuant to section 1129 of the
Bankruptcy Code.
(n) "Consumer Price Index" shall mean the Consumer Price Index for
Urban Wage Earners and Clerical Workers, all items, for New York City as
determined by the Bureau of Labor Statistics, United States Department of Labor,
or successor or comparable successor index should such index be discontinued.
(o) "Disability" shall mean a disability as determined under the
Company's long-term disability plans, programs and/or arrangements in effect on
the date such disability first occurs.
(p) "Effective Date" shall mean the first Business Day on which all
of the conditions specified in Article XIII of the Plan of Reorganization have
been satisfied or waived.
(q) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time, including applicable regulations thereunder.
(r) "Good Reason" shall mean the occurrence of any of the following
events:
(1) a reduction in the Executive's Base Salary;
(2) a material change in the Executive's position, duties or
responsibilities with respect to his employment by the
Company under the Agreement without the Executive's
prior written consent;
(3) the removal of the Executive from the positions
described in Section 3 below;
(4) a reduction in the Executive's annual bonus opportunity
as specified in Section 5 below;
(5) an actual change in the Executive's principal work
location by more than 50 miles and more than 50 miles
from the Executive's principal place of abode as of
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the date of such change in job location without the
Executive's prior written consent; or
(6) the failure of the Company to obtain the assumption in
writing of its obligation to perform this Agreement by
any successor to the Company, or purchaser of all or
substantially all of the business or assets of the
Company and its Subsidiaries taken as a whole, on or
prior to the date on which the relevant merger,
consolidation, sale or similar transaction is completed.
(s) "Incumbent Directors" shall mean the members of the Board as of
the Effective Date; provided, however, that any person becoming a director
subsequent to such date whose election or nomination for election was supported
by a majority of the directors who then comprised the Incumbent Directors shall
be considered to be an Incumbent Director.
(t) "Plan of Reorganization" shall mean the joint chapter 11 plan of
reorganization for the Company and Shieldalloy Metallurgical Corporation under
the Chapter 11 Cases (including all exhibits and schedules annexed thereto),
either in its present form or as it may be altered, amended, or modified from
time to time.
(u) "Subsidiary" of the Company shall mean any corporation of which
the Company owns, directly or indirectly, more than 50 percent of the Voting
Stock or any other business entity in which the Company directly or indirectly
has an ownership interest of more than 50 percent.
(v) "Term of Employment" shall mean the period specified in Section
2 below.
(w) "Voting Stock" shall mean capital stock of any class or classes
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. Term of Employment.
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, for the period commencing on the Effective Date and
ending on the second anniversary of the Effective Date, subject to earlier
termination of the Term of Employment in accordance with the terms of the
Agreement. The Term of Employment shall be automatically renewed for a one-year
period on the second anniversary of the Effective Date and on each anniversary
of the Effective Date thereafter, unless either Party has notified the other
Party in writing in accordance with Section 25 below at least 365 days prior to
the expiration of the then Term of Employment that he or it does not want the
Term of Employment to so renew.
3. Position, Duties and Responsibilities.
On the Effective Date and continuing for the remainder of the Term
of Employment, the Executive shall be employed as the President of Metallurg
International Resources ("MIR"), a division of the Company, and he shall have
the duties and responsibilities associated with such position. The Executive,
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in carrying out his duties under this Agreement, shall report to the CEO.
Notwithstanding anything herein to the contrary, nothing shall preclude the
Executive from:
(1) serving on the boards of directors of a reasonable
number of other corporations or the boards of a
reasonable number of trade associations and/or
charitable organizations;
(2) engaging in charitable activities and community affairs;
and
(3) managing his personal investments and affairs;
provided, however, that such activities do not materially interfere with the
proper performance of his duties and responsibilities hereunder.
4. Base Salary.
The Executive shall be paid an annualized Base Salary, payable in
accordance with the regular payroll practices of the Company, of $220,000, which
is the Executive's current base salary in effect as of the Effective Date. The
Base Salary shall be reviewed no less frequently than annually for increase in
the discretion of the Board's Compensation Committee. Notwithstanding anything
herein to the contrary, the Base Salary shall be increased on each January 1st
after the Effective Date (the "Base Salary Increase Date") by a percentage which
is equal to the percentage of increase in the Consumer Price Index with respect
to the 12-month period ending on the November 30th which immediately precedes
the relevant Base Salary Increase Date.
5. Annual Incentive Compensation Programs.
The Executive shall participate in the Company's Management
Incentive Compensation Plan ("MICP") or such other successor plan applicable to
senior-level executives. He shall have an annual bonus opportunity under the
MICP of 30 percent of Base Salary. Payment of annual incentive compensation
awards shall be made at the same time that other senior-level executives receive
their annual incentive compensation awards.
6. Long-Term Incentive Compensation Programs.
(a) The Executive shall be eligible to participate in the Company's
1997 Stock Award and Stock Option Plan (the "1997 Plan") or such other successor
plan applicable to senior-level executives.
(b) On the Effective Date, the Company shall grant the Executive an
award of 17,500 shares of common stock of the Company under the 1997 Plan (the
"1997 Stock Award"). Subject to the terms and conditions of the 1997 Plan, the
1997 Stock Award shall vest as set forth below:
(1) 20 percent of the 1997 Stock Award shall be transferable
on, and remain transferable after, the date of grant;
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(2) 40 percent of the 1997 Stock Award shall become
transferable on, and remain transferable after, the day
which precedes the first anniversary of the date of
grant; and
(3) 40 percent of the 1997 Stock Award shall become
transferable on, and remain transferable after, the day
which precedes the second anniversary of the date of
grant.
(c) The Company shall loan the Executive an amount equal to the
aggregate federal, state and local income taxes (based on the highest marginal
tax rates in effect on the date of the loan) incurred by the Executive due to
(i) a portion of the 1997 Stock Award becoming transferable or (ii) the
Executive making an election under Code Section 83(b) with respect to the 1997
Stock Award. The loan shall be made at or, at the Executive's election, prior to
the date the Executive is obligated to pay any federal, state or local income
tax due to such portion of the 1997 Stock Award becoming transferable or the
Executive making such election under Code Section 83(b). The loan's interest
rate shall be equal to the short-term applicable federal rate compounded
annually in effect on the date of the loan as published by the Internal Revenue
Service. The Executive shall pay to the Company in a lump sum the principal and
all accrued interest with respect to such loan on the day which precedes the
third anniversary of the date of the loan, or, at the Executives's election, on
any date which precedes the third anniversary of the date of the loan.
7. Employee Benefit Programs.
(a) During the Term of Employment, the Executive shall be entitled
to participate in those employee pension and welfare benefit plans, programs
and/or arrangements applicable to the Executive and made available to the
Company's senior-level executives or to its employees generally, as such plans,
programs and/or arrangements may be in effect from time to time, including,
without limitation, pension, profit-sharing, savings, medical, dental,
hospitalization, short-term disability, long-term disability, life insurance,
accidental death and dismemberment protection, travel accident insurance, and
other employee pension and welfare benefit plans, programs and/or arrangements
that may be sponsored by the Company from time to time.
(b) During the Term of Employment, the Company shall provide the
Executive with term life insurance with a death benefit of at least two times
Base Salary. The Company shall pay all premiums with respect to such life
insurance. Such life insurance may be provided either through the Company's
group life insurance programs, by an individual policy, or by a combination of
both group and individual policies.
8. Reimbursement of Business Expenses.
The Executive is authorized to incur reasonable business expenses in
carrying out his duties and responsibilities under the Agreement, and the
Company shall promptly reimburse him for all such reasonable business expenses
incurred in connection with carrying out the business of the Company, subject to
documentation in accordance with the Company's policy.
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9. Perquisites.
During the Term of Employment, the Executive shall be entitled to
participate in the Company's executive fringe benefits applicable to the
Company's senior-level executive in accordance with the terms and conditions of
such arrangements as are in effect from time to time.
10. Vacation.
The Executive shall be entitled to paid vacation in accordance with
the Company's vacation policy; provided, however, that the Executive shall be
entitled to not less than four weeks of vacation each year.
11. Termination of Employment.
(a) Termination of Employment Due to Death. In the event of the
Executive's death during the Term of Employment, the Term of Employment shall
end as of the date of the Executive's death and his estate and/or beneficiaries,
as the case may be, shall be entitled to the following:
(1) Base Salary earned but not paid prior to the date of
his death;
(2) all annual incentive awards with respect to any year
prior to the year of his death which have been earned
but not paid;
(3) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested shares
underlying any other restricted stock award held by the
Executive on the date of his death;
(4) immediate vesting of all stock options held by the
Executive on the date of his death, with all
nonqualified stock options remaining exercisable until
the end of their original terms and all incentive stock
options remaining exercisable until the earlier of (i)
the end of the one-year period following the date of
death or (ii) the date the incentive stock option would
otherwise expire;
(5) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above; and
(6) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
(b) Termination of Employment Due to Disability. If the Executive's
employment is terminated due to Disability during the Term of Employment, either
by the Company or by the Executive, the Term of Employment shall end as of the
date of the Executive's termination of employment and the Executive shall be
entitled to the following (but in no event less than the benefits due him under
the then current disability program of the Company):
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(1) Base Salary earned but not paid prior to the date of the
termination of the Executive's employment;
(2) all annual incentive awards with respect to any year
prior to the year of the termination of the Executive's
employment which have been earned but not paid;
(3) an amount equal to the sum of 50 percent of Base Salary,
at the annual rate in effect on the date of the
termination of the Executive's employment, payable
monthly for a period ending on the first day of the
month following the month in which the Executive attains
age 65 or recovers from his Disability, whichever occurs
earlier, less the amount of any disability benefits
provided to the Executive under the Company's disability
program;
(4) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested shares
underlying any other restricted stock award held by the
Executive on the date of the termination of his
employment;
(5) immediate vesting of all stock options held by the
Executive on the date of the termination of his
employment, with all nonqualified stock options
remaining exercisable until the end of their original
terms and all incentive stock options remaining
exercisable until the earlier of (i) the end of the
one-year period following the date of the termination of
his employment or (ii) the date the incentive stock
option would otherwise expire;
(6) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above;
(7) continued participation, as if the Executive were still
an employee, in the Company's medical, dental,
hospitalization and life insurance plans, programs
and/or arrangements and in those other employee plans,
programs and/or arrangements in which he was
participating on the date of the termination of his
employment until he attains age 65 or recovers from his
Disability, whichever occurs earlier; and
(8) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
If the Executive is precluded from continuing his participation in
any employee benefit plan, program or arrangement as provided in Section
11(b)(7) above, he shall be provided the after-tax economic equivalent of the
benefits provided under the plan, program or arrangement in which he is unable
to participate. The economic equivalent of any benefit foregone shall be
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deemed to be the lowest cost that would be incurred by the Executive in
obtaining such benefit himself on an individual basis.
In no event shall a termination of the Executive's employment for
Disability occur unless the Party terminating his employment gives written
notice to the other Party in accordance with Section 25 below.
(c) Termination of Employment by the Company for Cause. A
termination of the Executive's employment by the Company for Cause shall not
take effect unless the provisions of this Section 11(c) are complied with and
the Board issues a written determination that the Executive's employment should
be terminated for Cause (a "Determination").
(1) In accordance with Section 25 below, the CEO shall give
the Executive a written notice stating his intention to
terminate the Executive's employment for Cause (the
"Cause Notice"). The Cause Notice shall:
(A) state in detail the particular act or acts or
failure or failures to act that constitute the
grounds on which the proposed termination of
employment for Cause is based; and
(B) be given within four months of the CEO learning of
such act or acts or failure or failures to act.
(2) The CEO may temporarily relieve the Executive of his
duties and responsibilities described in Section 3 above
during the period commencing on the date the Cause
Notice is issued by the CEO and ending on the date the
Determination is issued by the Board (the "Determination
Period").
(3) The Executive shall have 20 days after the date the
Cause Notice is actually received by him in which to
cure his conduct on which the termination of employment
for Cause is based, to the extent such cure is possible.
If the Executive fails to cure such conduct, he shall
then be entitled to a hearing before the Board. Such
hearing shall be held during the 20-day period
following the date the Executive receives the Cause
Notice; provided, however, that the Executive requests
such hearing during the 10-day period following the date
the Executive receives the Cause Notice. Within five
days following the completion of such hearing, the Board
shall issue a Determination stating whether, in its
judgment, grounds for Cause as detailed in the Cause
Notice exist. If the Determination states that such
grounds exist, the Executive's employment shall be
immediately terminated for Cause and the Term of
Employment shall end as of the date of the termination
of the Executive's employment.
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(4) If the Company terminates the Executive's employment for
Cause, the Executive shall be entitled to the following:
(A) Base Salary earned but not paid prior to the date
of the termination of his employment;
(B) any amounts earned, accrued or owing to the
Executive but not yet paid under Section 7, 8, 9
or 10 above; and
(C) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of
the Company.
(5) Notwithstanding anything herein to the contrary, if,
following a termination of the Executive's employment by
the Company for Cause based upon the conviction of the
Executive for a felony, such conviction is overturned in
a final determination on appeal, the Executive shall be
entitled to the payments and the economic equivalent of
the benefits the Executive would have received if his
employment had been terminated by the Company without
Cause.
(d) Termination of Employment by the Company Without Cause. If the
Executive's employment is terminated by the Company without Cause, other than
due to death or Disability, the Executive shall be entitled to the following:
(1) Base Salary earned but not paid prior to the date of
the termination of his employment;
(2) all annual incentive awards with respect to any year
prior to the year of the termination of the Executive's
employment which have been earned but not paid;
(3) an amount equal to the aggregate Base Salary (based on
the Base Salary in effect on the date of the termination
of the Executive's employment) with respect to a period
equal to the longer of (i) the remainder of the Term of
Employment or (ii) the corresponding severance period
listed on Schedule A, payable in a lump sum without
discount (the "Salary Continuation Benefits");
(4) immediate vesting of (i) all unvested shares underlying
the 1997 Stock Award and (ii) all unvested shares
underlying any other restricted stock award held by the
Executive on the date of the termination of his
employment;
(5) immediate vesting of all stock options held by the
Executive on the date of the termination of his
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employment, with all nonqualified stock options
remaining exercisable until the end of their original
terms and all incentive stock options remaining
exercisable until the earlier of (i) the end of the
one-year period following the date of the termination of
his employment or (ii) the date the incentive stock
option would otherwise expire;
(6) continued accrual of credited service through the end of
the Term of Employment for the purpose of any Company
pension plan, program or arrangement;
(7) the right to purchase, at fair market value, the
Executive's automobile (if any) provided to him by the
Company under the Company's automobile perquisite
program for senior-level executives;
(8) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7, 8, 9 or 10 above;
(9) continued participation, as if he were still an
employee, in the Company's medical, dental,
hospitalization and life insurance plans, programs
and/or arrangements and in other employee benefit plans,
programs and/or arrangements in which he was
participating on the date of the termination of his
employment until the earlier of:
(A) the end of the period used to determine the
Salary Continuation Benefits; or
(B) the date, or dates, he receives equivalent
coverage and benefits under the plans, programs
and/or arrangements of a subsequent employer (such
coverage and benefits to be determined on a
coverage-by-coverage or benefit-by-benefit basis);
provided, however, that:
(X) if the Executive is precluded from continuing
his participation in any employee benefit plan,
program or arrangement as provided in Section
11(d)(9)(A) above, he shall be provided with the
after-tax economic equivalent of the benefits
provided under the plan, program or arrangement
in which he is unable to participate for the
period specified in this Section 11(d)(9);
(Y) the economic equivalent of any benefit foregone
shall be deemed to be the lowest cost that would
be incurred by the Executive in obtaining such
benefit himself on an individual basis; and
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(Z) payment of such after-tax economic equivalent
shall be made quarterly in advance; and
(10) other or additional benefits in accordance with
applicable plans, programs and/or arrangements of the
Company.
(e) Termination of Employment by the Executive for Good Reason. The
Executive may terminate his employment for Good Reason, but only if:
(1) the Executive notifies the Board during the 60-day
period following the date of the first occurrence of an
event which constitutes Good Reason (the "Good Reason
Event Date") of his intention to terminate his
employment for Good Reason;
(2) the Executive terminates his employment for Good Reason
during the 120-day period following the Good Reason
Event Date;
(3) the termination of employment for Good Reason does not
occur during a Determination Period described in Section
11(c)(2) above; and
(4) the Good Reason first occurs before or after a
Determination Period, or, if the Good Reason first
occurs during a Determination Period, such event
constituting Good Reason continues to occur after the
Determination Period.
Upon a termination by the Executive of his employment for Good Reason, the
Executive shall be entitled to the same payments and benefits as provided in
Section 11(d) above; provided, however, that if the Executive terminates his
employment for Good Reason based on a reduction in Base Salary under Section
1(r)(1) above, then the Base Salary to be used in determining the Salary
Continuation Benefits in accordance with Section 11(d)(2) above shall be the
Base Salary in effect immediately prior to such reduction.
(f) Termination of Employment Following a Change in Control. On the
date of a Change in Control, all stock options and all unvested shares under the
1997 Stock Award and other restricted stock awards held by the Executive on such
date shall immediately and fully vest, and all such stock options shall be
exercisable from such date until the date they would otherwise expire (but in
the case of incentive stock options, for not more than one year following a
termination of employment). If, following a Change in Control, (i) the
Executive's employment is terminated by the Company without Cause, (ii) the
Executive terminates his employment for Good Reason, or (iii) upon 30 days prior
written notice to the Company, the Executive terminates his employment for any
reason during the 120-day period following the 90th day after the date of the
Change in Control, the Executive shall be entitled to the same payments and
benefits as provided in Section 11(d) above, except that the Salary Continuation
Benefits under Section 11(d)(3) above shall be determined with respect to a
period equal to the longer of (a) 18 months or (b) the remainder of the Term of
Employment. A failure by the
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Executive to exercise his rights with respect to a Change in Control shall not
be deemed a waiver of any rights under this Agreement.
(g) Termination of Employment by the Executive Without Good Reason.
If the Executive terminates his employment without Good Reason, other than a
termination of employment (i) due to death or retirement or Disability or (ii)
by the Executive during the 120-day period following the 90th day after the date
of a Change in Control, the Executive shall have the same entitlements as
provided in Section 11(c)(4) above. A termination of the Executive's employment
under this Section 11(g) shall be effective upon 30 days prior written notice to
the Company and shall not be deemed a breach of this Agreement.
(h) Nonrenewal of Agreement by the Company. If (i) the Company does
not renew the Term of Employment in accordance with Section 2 above and (ii) the
Executive remains employed by the Company on a continuous basis until the end of
the Term of Employment, the Executive shall have the same entitlements as
provided in Section 11(d) above, and the date on which the Term of Employment
ends shall be deemed to be the date of the termination of the Executive's
employment by the Company without Cause.
(i) Nonrenewal of Agreement by the Executive. In the event that the
Executive does not renew the Term of Employment in accordance with Section 2
above, the Executive shall have the same entitlements as provided in Section
11(c)(4) above, and the date on which the Term of Employment ends shall be
deemed to be the date of the termination of the Executive's employment by the
Company for Cause.
(j) Payment Following a Change in Control. If the termination of the
Executive's employment is pursuant to Section 11(f) above, and the aggregate of
all payments or benefits made or provided to the Executive under Section 11(f)
above and under all other plans, programs and/or arrangements of the Company
(the "Aggregate Payment") is determined to constitute a "parachute payment" (as
such term is defined in Code Section 280G(b)(2)), the Company shall pay to the
Executive, prior to the time any excise tax imposed by Code Section 4999
("Excise Tax") is payable with respect to such Aggregate Payment, an additional
amount which, after the imposition of all income and excise taxes thereon, is
equal to the Excise Tax on the Aggregate Payment. The determination of whether
the Aggregate Payment constitutes a parachute payment and, if so, the amount to
be paid to the Executive and the time of payment pursuant to this Section 11(j)
shall be made by an independent auditor (the "Auditor") jointly selected by the
Company and the Executive and paid by the Company. The Auditor shall be a
nationally recognized United States public accounting firm which has not, during
the two years preceding the date of its selection, acted in any way on behalf of
the Company or any affiliate thereof. If the Executive and the Company cannot
agree on the firm to serve as the Auditor, then the Executive and the Company
shall each select one accounting firm and those two firms shall jointly select
the accounting firm to serve as the Auditor.
(k) No Mitigation; No Offset. If the Executive's employment
terminates under this Section 11, the Executive shall be under no obligation to
seek other employment and there shall be no offset against amounts due the
Executive under this Agreement on account of any remuneration attributable to
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any subsequent employment that he may obtain except as specifically provided in
this Section 11.
(l) Nature of Payments. Any amounts due under this Section 11 are in
the nature of severance payments considered to be reasonable by the Company and
are not in the nature of a penalty.
12. Confidentiality: Assignment of Rights.
(a) During the Term of Employment and thereafter, the Executive
shall not disclose to anyone or make use of any trade secret or proprietary or
confidential information of the Company, including such trade secret or
proprietary or confidential information of any customer or other entity to which
the Company owes an obligation not to disclose such information, which he
acquires during the Term of Employment, including but not limited to records
kept in the ordinary course of business, except (i) as such disclosure or use
may be required or appropriate in connection with his work as an employee of the
Company, (ii) when required to do so by a court of law, by any governmental
agency having supervisory authority over the business of the Company or by any
administrative or legislative body (including a committee thereof) with apparent
jurisdiction to order him to divulge, disclose or make accessible such
information, or (iii) as to such confidential information that becomes generally
known to the public or trade without violation of this Section 12(a).
(b) The Executive hereby sells, assigns and transfers to the Company
all of his right, title and interest in and to all inventions, discoveries,
improvements and copyrightable subject matter (the "rights") which during the
Term of Employment are made or conceived by him, alone or with others, and which
are within or arise out of any general field of the Company's business or arise
out of any work he performs or information he receives regarding the business of
the Company while employed by the Company. The Executive shall fully disclose to
the Company as promptly as available all information known or possessed by him
concerning the rights referred to in the preceding sentence, and upon request by
the Company and without any further remuneration in any form to him by the
Company, but at the expense of the Company, execute all applications for patents
and for copyright registration, assignments thereof and other instruments and do
all things which the Company may deem necessary to vest and maintain in it the
entire right, title and interest in and to all such rights.
13. Noncompetition.
(a) The Executive covenants and agrees that during the Term of
Employment and during the six-month period following the end of the Term of
Employment, he shall not at any time, without the prior written consent of the
Company, directly or indirectly, engage in a Competitive Activity.
(b) The Parties acknowledge that in the event of a breach or
threatened breach of Section 13(a) above, the Company shall not have an adequate
remedy at law. Accordingly, in the event of any breach or threatened breach of
Section 13(a) above, the Company shall be entitled to such equitable and
injunctive relief as may be available to restrain the Executive and any
business, firm, partnership, individual, corporation or entity participating in
the breach or threatened breach from the violation of the provisions of
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Section 13(a) above. Nothing in this Agreement shall be construed as prohibiting
the Company from pursuing any other remedies available at law or in equity for
breach or threatened breach of Section 13(a) above, including the recovery of
damages.
14. Indemnification.
(a) The Company agrees that if the Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is the Executive's alleged action in
an official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Company to
the fullest extent legally permitted or authorized by the Company's certificate
of incorporation or bylaws or resolutions of the Company's Board of Directors
or, if greater, by the laws of the State of Delaware, against all cost, expense,
liability and loss (including, without limitation, attorney's fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by the Executive in connection
therewith, and such indemnification shall continue as to the Executive even if
he has ceased to be a director, member, employee or agent of the Company or
other entity and shall inure to the benefit of the Executive's heirs, executors
and administrators. The Company shall advance to the Executive all reasonable
costs and expenses incurred by him in connection with a Proceeding within 20
days after receipt by the Company of a written request for such advance. Such
request shall include an undertaking by the Executive to repay the amount of
such advance if it shall ultimately be determined that he is not entitled to be
indemnified against such costs and expenses.
(b) Neither the failure of the Company (including the Board,
independent legal counsel or stockholders) to have made a determination prior to
the commencement of any Proceeding concerning payment of amounts claimed by the
Executive under Section 14(a) above that indemnification of the Executive is
proper because he has met the applicable standard of conduct, nor a
determination by the Company (including the Board, independent legal counsel or
stockholders) that the Executive has not met such applicable standard of
conduct, shall create a presumption that the Executive has not met the
applicable standard of conduct.
(c) The Company agrees to continue and maintain a directors and
officers' liability insurance policy covering the Executive to the extent the
Company provides such coverage for its other executive officers.
15. Effect of Agreement on Other Benefits.
Except as specifically provided in this Agreement, the existence of
this Agreement shall not prohibit or restrict the Executive's entitlement to
full participation in the Company's employee benefit plans, programs and
arrangements applicable to the Company's senior-level executives.
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16. Assignability; Binding Nature.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of the Executive)
and assigns. No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company; provided, however, that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law. The Company further agrees that, in the
event of a sale of assets or liquidation as described in the preceding sentence,
it shall take whatever action it legally can in order to cause such assignee or
transferee to expressly assume the liabilities, obligations and duties of the
Company hereunder or under any other plan or benefit program referred to herein.
No rights or obligations of the Executive under this Agreement may be assigned
or transferred by the Executive other than his rights to compensation and
benefits, which may be transferred only by will or operation of law, except as
provided in Section 22 below.
17. Representation.
The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement between it and
any other person, firm or organization. The Executive represents that he knows
of no agreement between him and any other person, firm or organization that
would be violated by the performance of his obligations under this Agreement.
18. Entire Agreement.
This Agreement contains the entire understanding and agreement
between the Parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, between the Parties with respect thereto.
19. Amendment or Waiver.
No provision in this Agreement may be amended unless such amendment
is agreed to in writing and signed by the Executive and an authorized officer of
the Company. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Executive or an authorized officer of the Company, as the case may
be.
20. Severability.
In the event that any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, in whole or in
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part, the remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect to the fullest extent permitted by law.
21. Survivorship.
The respective rights and obligations of the Parties hereunder shall
survive any termination of the Executive's employment to the extent necessary to
the intended preservation of such rights and obligations.
22. Beneficiaries/References.
The Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following the Executive's death by
giving the Company written notice thereof. In the event of the Executive's death
or a judicial determination of his incompetence, reference in this Agreement to
the Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.
23. Governing Law/Jurisdiction.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of New York without reference to principles of conflict
of laws.
24. Resolution of Disputes.
Any disputes arising under or in connection with the Agreement may,
at the election of the Executive or the Company, be resolved by binding
arbitration, to be held in New York City in accordance with the rules and
procedures of the American Arbitration Association. If arbitration is elected,
the Executive and the Company shall mutually select the arbitrator. If the
Executive and the Company cannot agree on the selection of an arbitrator, each
Party shall select an arbitrator and the two arbitrators shall select a third
arbitrator, and the three arbitrators shall form an arbitration panel which
shall resolve the dispute by majority vote. Judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof. Costs
of the arbitration or litigation, including, without limitation, reasonable
attorneys' fees of both Parties, shall be borne by the Company. Pending the
resolution of any arbitration or court proceeding, the Company shall continue
payment of all amounts due the Executive under this Agreement and all benefits
to which the Executive is entitled at the time the dispute arises.
25. Notices.
Any notice given to a Party shall be in writing and shall be deemed
to have been given when delivered personally or sent by certified or registered
mail, postage prepaid, return receipt requested, duly addressed to the Party
concerned at the address indicated below or to such changed address as such
Party may subsequently give such notice of:
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If to the Company: Metallurg, Inc.
6 East 43rd Street, 12th floor
New York, New York 10017
Attention: General Counsel
With a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: John J. Rapisardi
If to the Executive: Robin Brumwell
c/o Metallurg, Inc.
6 East 43rd Street, 12th floor
New York, New York 10017
26. Headings.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
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27. Counterparts.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
METALLURG, INC.
By:
------------------------
Secretary
------------------------
Robin Brumwell
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SCHEDULE A
Years of Service Severance Period
---------------- ----------------
Up to 15 6 months
More Than 15 9 months
More Than 20 12 months
20
<PAGE> 1
EXHIBIT 10.11
THIS AGREEMENT is made the twentieth day of December 1983 BETWEEN LONDON &
SCANDINAVIAN METALLURGICAL CO LIMITED whose registered office is at 45 Wimbledon
Hill Road London SW19 (hereinafter called "the Company") of the one part and
ALAN DAVID EWART
of 58 Boundary Road, Carshalton, Surrey SM5 41W (hereinafter called "the
Executive") of the other part
NOW IT IS HEREBY AGREED as follows:-
1. This Agreement shall govern relations between the parties in substitution
for all other existing Agreements which are hereby declared superseded
2. The Company shall employ the Executive and the Executive shall serve the
Company as a Director of the Company for the period and upon the terms and
conditions hereinafter set forth and in such employment he shall perform
the duties and exercise the powers which from time to time may be assigned
to or vested in him by the Board of Directors of the Company
3. The Executive shall be employed by the Company subject as hereinafter
provided until the sixty-fifth birthday of the Executive or the expiry of
not less than two years' notice terminating the employment served by the
Company upon the Executive or the expiry of not less than six months'
notice terminating the employment served by the Executive upon the
Company, whichever earlier. It is agreed between the parties that this is
a continuation of existing employment of the Executive with the Company
and his employment with the Company commenced on 29th September, 1969
<PAGE> 2
- 2 -
If the Executive shall for any reason cease to be a Director of the
Company his employment under this Agreement shall continue in effect and
the Company shall be obliged to continue his remuneration hereunder
4. The Executive shall throughout his employment hereunder unless prevented
by ill health devote substantially the whole of his time and abilities to
the business of the Company during normal working hours and shall obey
instructions from time to time given to him on behalf of the Company by
the Board of Directors and in all respects shall conform to and comply
with any directions and regulations made on behalf of the Company and
shall well and faithfully serve the Company and use his utmost endeavours
to promote the interests of the Company
5. (a) There shall be paid to the Executive by the Company a salary at the
rate of (pounds) 26,475 per annum payable monthly in arrears on the last
day of each calendar month. This salary shall be deemed to accrue from day
to day
(b) The said salary of the Executive shall be reviewed (but upwards only)
on or about the 1st day of July in each year during his employment
hereunder and may be reviewed (but upwards only) at any time
(c) In addition to the said salary the Executive may be paid bonuses from
time to time within the discretion of the Board of Directors
(d) In addition to the said salary the Executive will be reimbursed all
expenses properly incurred by him in discharge of his duties hereunder
(e) The Executive shall be entitled to the use of a company car
appropriate to his position in the Company for the performance of his
Company duties and all expenses involved thereby will be paid by the
Company. Such car shall be available to the Executive for private use
<PAGE> 3
- 3 -
5. (Continued)
(f) The Executive shall be a member of the Company's Retirement Benefits
Plan No. 1
6. The Executive shall be entitled to an annual holiday aggregating four
weeks and one day at such time or times as shall be approved by the Board
of Directors of the Company in addition to the usual Public Holidays
7. The normal working hours of the Executive will be the normal hours of
business of the Company but the Executive shall be expected to work such
other or additional hours as may be requisite or appropriate to enable him
properly to discharge his duties hereunder.
8. The Executive shall be entitled to be paid his salary in periods of
absence from work due to sickness or injury but the Company shall be
entitled to deduct from the salary of the Executive any amount of National
Insurance benefits (including any Earnings Related supplement) which shall
be received by the Executive in respect to such absence
9. The Executive shall give to the Company without payment the benefits of
any inventions improvements or any processes directly or indirectly
connected with the business of the Company which he may discover or invent
during the period of his employment and shall disclose to and afford to
the Company every facility for making such use of such inventions
improvements or processes and shall at the request and cost of the Company
apply for all patents or other similar rights in respect thereto in any
part of the World as the Company may require and shall assign to the
Company at the like request and cost all such patents or other rights when
granted
10. The Executive shall not without the express consent of the Company in
writing either during the continuance of his employment with the Company
or at any time thereafter make use of or disclose to any other person or
company any information relating to confidential matters or processes of
manufacture of the Company otherwise than in the proper
<PAGE> 4
- 4 -
10. (Continued)
execution of his duties for the Company but will treat all such matters as
confidential
11. The Executive shall not at any time during his employment with the Company
or at any time thereafter either on his own account or for any person or
company solicit or endeavour to entice away from the Company any employee
of the Company or any consultant of the Company
12. The Executive shall not at any time during the continuance of his
employment with the Company or for a period of twelve months after its
termination solicit interfere with or endeavour to entice away from the
Company any person or company who at any time during his said employment
were customers of or in the habit of dealing with the Company and with
whom the Executive in the course of his employment was accustomed to speak
or transact business on behalf of the Company
13. The Executive shall not at any time during the continuance of his
employment hereunder and for a period of six months after its termination
directly or indirectly engage or be concerned or interested in (except as
the owner for investment purposes of securities dealt in on a stock
exchange and not exceeding 5% in nominal value of the securities of that
class) in any other business competing or likely to compete with any
business now or at any time during the employment carried on by the
Company or any subsidiary or associated company of the Company within the
United Kingdom
14. If the Executive shall have any grievance or matter of discipline which he
wishes to raise he is entitled in the first instance to raise the matter
with the Managing Director of the Company or the Board of Directors of the
Company
<PAGE> 5
- 5 -
15. The Company shall be entitled by notice in writing served upon the
Executive to terminate the employment of the Executive forthwith if:
(a) The Executive shall become bankrupt or shall have a receiving order
made against him or shall suffer execution to be levied upon any of
his goods and not release the same within fourteen days; or
(b) If the Executive shall be guilty of any serious breach of
non-observance of any of the conditions of this Agreement or shall
be found guilty of dishonesty or shall after reasonable warning fail
to perform any of his obligations hereunder; or
(c) The Executive shall become unable by reason of sickness or injury or
otherwise howsoever properly to perform his duties for an aggregate
period of periods of 26 weeks in any period of twelve months
16. Any notice to be given under the provisions of this Agreement may be
served by being handed to the Executive personally or being sent by
pre-paid first class post to his last known address in the United Kingdom
and may be served by the Executive on the Company by leaving it at the
registered office of the Company or sending it by pre-paid first class
post to the said registered office. Any notice served
<PAGE> 6
- 6 -
16. Continued
by pre-paid first class post shall be deemed to have been served on the
day following the date of posting (excluding Sundays and Public Holidays)
I N W I T N E S S whereof the Company caused its Common Seal to be hereunto
affixed and ALAN DAVID EWART has set his hand and seal the day and year first
above written
( THE COMMON SEAL of
[SEAL OMITTED] ( LONDON & SCANDINAVIAN
( METALLURGICAL CO LIMITED
( was hereunto affixed in
( the presence of
Director /s/ [ILLEGIBLE]
Secretary /s/ [ILLEGIBLE]
( SIGNED SEALED and
( DELIVERED by the said
(
( in the presence of:-
/s/ [ILLEGIBLE] L.H. Gillespie
2 Parkers Lane
Ashtead
Surrey KT21 2AX
Secretary.
<PAGE> 1
EXHIBIT 12.1
<TABLE>
<CAPTION>
Calculation of Earnings to Fixed
Charges
($ in thousands)
Pro Forma
--------------------------------
Post- Post-
Pre-Confirmation Confirmation Pre-Confirmation Confirmation
--------------------------------------------------------- ------------ ------------------ ------------
Six
Months Quarter Quarter Year Quarter Quarter
Years Ended December 31, Ended Ended Ended Ended Ended Ended
------------------------------------ June 30, March 31, July 31, Dec. 31, March 31, July 31,
Earnings: 1992 1993 1994 1995 1996 1996 1997 1997 1996 1997 1997
- -------- ---- ---- ---- ---- ---- -------- --------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pre-tax income: (41,572) (62,757) 516 9,836 (20,042) 16,782 11,859 8,762 17,046 4,978 7,108
Add: interest expense 11,455 9,434 4,815 4,851 3,043 1,772 1,706 2,426 8,600 2,045 2,627
Add: 1/3 rental expense 270 270 271 272 289 145 170 181 289 170 181
------- ------- ------ ------ ------- ------ ------ ------ ------ ----- -----
Adjusted earnings (29,847) (53,053) 5,602 14,959 (16,710) 18,699 13,735 11,369 25,935 7,193 9,916
Fixed Charges:
- --------------
Interest:
---------
Interest expense 11,455 9,434 4,815 4,851 3,043 1,772 1,706 2,426 8,600 2,045 2,627
Contractual interest(1) 2,600 8,300 9,200 8,600 4,300 2,136
1/3 rental expense 270 270 271 272 289 145 170 181 289 170 181
------- ------- ------ ------ ------- ------ ------ ------ ------ ----- -----
Total fixed charges 11,725 12,304 13,386 14,323 11,932 6,217 4,012 2,607 8,889 2,215 2,808
------- ------- ------ ------ ------- ------ ------ ------ ------ ----- -----
Ratio of earning to
fixed charges NM NM NM 1.0 NM 3.0 3.4 4.4 2.9 3.2 3.5
======= ======= ====== ====== ======= ====== ====== ====== ====== ===== =====
Deficiency of earning to
fixed charges 41,572 65,357 7,784 28,642
======= ======= ====== ====== ======= ====== ====== ====== ====== ===== =====
</TABLE>
- -----------------------
(1) Contractual interest relates to interest on prepetition debt that was not
accrued while the Company was in Chapter 11 proceedings.
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
(As of May 1, 1997)
Percentage of
Voting Power
Jurisdiction of Qwned by
Name of Subsidiary Incorporation Direct Parent
- ------------------ ------------- ------------
Shieldalloy Metallurgical Delaware 100(1)
Corporation
Elektrowerk Weisweiler GmbH Germany 98(1)
Metallurg (Canada) Limited Quebec 100(1)
MIR (China), Inc. Delaware 100(1)
Metallurg Holdings Corporation New Jersey 100(1)
Metallurg Services, Inc. New York 100(1)
London & Scandinavian England 100(2)
Metallurgical Co. Limited
The Aluminum Powder Company England 100(3)
Limited
Metallurg South Africa (Pty.) South Africa 100(2)
Limited
Turk Maadin Sirketi Turkey 100(2)
GfE Gesellschaft fur Germany 99.19(2)
Elektometallurgie mbH
GfE Umwelttechnik GmbH Germany 100(4)
Keramed Medizintechnik Gmbh Germany 100(4)
GfE Metalle und Materialien Germany 100(4)
GmbH
GfE Giesserei-und Germany 100(4)
Stahlwerksbedarf
RZM-Recyclingzentrum Germany 75(4)
Mittelfranken GmbH
Companhia Industrial Brazil 100(2)(5)
Fluminense
Metallurg S.P. Ind. Com. de Brazil 100(2)(5)
Metais Ltda.
Ferrolegeringar Zurich, 100(2)(5)
Aktiengesellschaft Switzerland
Metalchimica S. r.l. Italy 95(6)
Ferrolegeringar Metallurg Serbia 100(6)
Yugoslavia
FAG Poland Sp. z.o.o. Poland 100(6)
Metallurg Rijeka Slovenia 100(6)
(1) Owned by Metallurg, Inc.
(2) Owned by Metallurg, Holdings Corporation
(3) Owned by London & Scandinavian Metallurgical Co. Limited
(4) Owned by GfE Gesellschaft fur Elektometallurgie mbH
(5) Owned by 100% by Metallurg Holdings Corporation, other than directors'
qualifying shares
(6) Owned by Ferrolegeringar Aktiengesellschaft
<PAGE> 2
Country of Percentage of
Name of Subsidiary Incorporation Voting Power
- ------------------ ------------- ------------
Aktiebolaget Ferrolegeringar Sweden 100(2)
Metallurg International Germany 100(2)
Resources GmbH
Metallurg (Far East) Limited Japan 100(2)
Montanistica S.A. Zug, 100(2)
Switzerland
Metallurg Mexico S.A. de C.V. Mexico 100(2)
(1) Owned by Metallurg, Inc.
(2) Owned by Metallurg, Holdings Corporation
(3) Owned by London & Scandinavian Metallurgical Co. Limited
(4) Owned by GfE Gesellschaft fur Elektometallurgie mbH
(5) Owned by 100% by Metallurg Holdings Corporation, other than directors'
qualifying shares
(6) Owned by Ferrolegeringar Aktiengesellschaft
2
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
----------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(Jurisdiction of incorporation (I.R.S. employer
or organization if not a U.S. national bank) identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
LUIS PEREZ, ASSISTANT 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 names of obligor as specified in its charter)
Delaware 13-1661467
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
6 East 43rd Street
New York, New York
10017
(Address of principal executive offices) (Zip code)
11% Senior Notes Due 2007
----------
(Title of indenture securities)
<PAGE> 2
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
New York State Banking Department
Two Rector Street
New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York
Second District,
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
The obligor is not an affiliate of the trustee.
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with respect to
the securities under this indenture. Explain the nature of any
such default.
None
2
<PAGE> 3
(b) If the trustee is a trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the obligors 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.
None
Item 16. List of exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee to
Commence Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise
corporate trust powers, as amended to date (See Exhibit 4 to
Form T-1, Securities and Exchange Commission File No.
22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended to
date (See Exhibit 4 to Form T-1, Securities and Exchange
Commission File No. 22- 19146).
5. Not Applicable
6. The consent of United States institutional trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and
Exchange Commission, to which there have been no amendments or changes.
3
<PAGE> 4
NOTE
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor and its directors
or officers, the trustee has relied upon information furnished to it by
the obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the
answer to said Item is 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.
4
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility & 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 16th day of December 1997.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Luis Perez
-------------------------------------
Luis Perez
Assistant Vice President
<PAGE> 6
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust
Indenture Act of 1939, as amended, in connection with the issuance by Metallurg,
Inc., of its $100,000,000 11% Senior 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/ Luis Perez
-------------------------------------
Luis Perez
Assistant Vice President
Dated: December 16, 1997
<PAGE> 7
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
of New York, New York
And Foreign and Domestic Subsidiaries
Report as of September 30, 1997
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
--------------
ASSETS
<S> <C> <C>
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin ........................... $ 41,358
Interest-bearing balances .................................................... $ 314,171
Securities: Held-to-maturity securities ........................................ $ 196,749
Available-for-sale securities ...................................... $ 63,064
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries and in IBFs:
Federal Funds sold and Securities purchased under agreements to resell ..... $ 10,151
Loans and lease financing receivables:
Loans and leases, net of unearned income ...................... $ 1,920,916
LESS: Allowance for loan and lease losses ..................... $ 59,498
LESS: Allocated transfer risk reserve ......................... $ -0-
Loans and leases, net of unearned income, allowance, and reserve ........... $1,861,418
Trading assets held in trading accounts......................................... $ 452
Premises and fixed assets (including capitalized leases)........................ $ 3,381
Other real estate owned......................................................... $ 202
Investments in unconsolidated subsidiaries and associated companies............. $ -0-
Customers' liability to this bank on acceptances outstanding.................... $ 122
Intangible assets............................................................... $ -0-
Other assets.................................................................... $ 65,280
TOTAL ASSETS.................................................................... $2,556,348
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C>
Deposits:
In domestic offices........................................................... $ 787,592
Noninterest-bearing ........................................... $ 239,126
Interest-bearing .............................................. $ 548,466
In foreign offices, Edge and Agreement subsidiaries, and IBFs................. $1,125,802
Noninterest-bearing ........................................... $ 18,827
Interest-bearing .............................................. $ 1,106,975
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal Funds purchased and Securities sold under agreements to repurchase.. $ 225,000
Demand notes issued to the U.S. Treasury........................................ $ 50,000
Trading Liabilities............................................................. $ 61
Other borrowed money:
a) With a remaining maturity of one year or less............................ $ 57,291
b) With a remaining maturity of more than one year.......................... $ 1,763
c) With a remaining maturity of more than three years....................... $ 2,242
Bank's liability on acceptances executed and outstanding........................ $ 122
Subordinated notes and debentures............................................... $ -0-
Other liabilities............................................................... $ 72,909
TOTAL LIABILITIES............................................................... $2,322,782
Limited-life preferred stock and related surplus................................ $ -0-
EQUITY CAPITAL
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.......................................... $ (13,211)
Net unrealized gains (losses) on available-for-sale securities.................. $ 120
Cumulative foreign currency translation adjustments............................. $ -0-
TOTAL EQUITY CAPITAL............................................................ $ 233,566
TOTAL LIABILITIES AND EQUITY CAPITAL............................................ $2,556,348
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
AS OF APRIL 1, 1997, THE COMPANY CHANGED ITS FISCAL YEAR TO JANUARY 31.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 4-MOS 3-MOS YEAR
<FISCAL-YEAR-END> JAN-31-1998 DEC-31-1997 DEC-31-1996
<PERIOD-START> APR-01-1997 JAN-01-1997 JAN-01-1996
<PERIOD-END> JUL-31-1997 MAR-31-1997 DEC-31-1996
<CASH> 29163 30340 63274
<SECURITIES> 0 0 0
<RECEIVABLES> 85383 94150 92898
<ALLOWANCES> 106 0 4303
<INVENTORY> 117002 109258 106363
<CURRENT-ASSETS> 245913 251240 274390
<PP&E> 42446 38907 246248
<DEPRECIATION> 2236 0 198363
<TOTAL-ASSETS> 299816 305704 331626
<CURRENT-LIABILITIES> 97361 107924 100656
<BONDS> 51822 51711 5049
0 0 0
0 0 0
<COMMON> 50 50 20
<OTHER-SE> 56331 49950 (42199)
<TOTAL-LIABILITY-AND-EQUITY> 299816 305704 331626
<SALES> 166718 155427 648816
<TOTAL-REVENUES> 166879 155587 650002
<CGS> 142135 134060 566538
<TOTAL-COSTS> 156562 149106 661223
<OTHER-EXPENSES> 76 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 2426 1706 3043
<INCOME-PRETAX> 8762 11859 (20042)
<INCOME-TAX> 5111 (3063) 8453
<INCOME-CONTINUING> 3651 14922 (28495)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 43032 0
<CHANGES> 0 0 0
<NET-INCOME> 3651 57954 (28495)
<EPS-PRIMARY> .74 11.69 (5.75)
<EPS-DILUTED> .74 11.69 (5.75)
</TABLE>
<PAGE> 1
Exhibit 99.1
LETTER OF TRANSMITTAL
Offer to Exchange
11% Series B Senior Notes Due 2007
(Registered Under The Securities Act of 1933)
For Any and All Outstanding
11% Series A Senior Notes Due 2007
($100,000,000 principal amount outstanding
of
METALLURG, INC.
Unconditionally Guaranteed By
SHIELDALLOY METALLURGICAL CORPORATION,
METALLURG HOLDINGS CORPORATION,
METALLURG SERVICES, INC.
AND MIR (CHINA), INC.
Pursuant to the Prospectus
Dated [________], 1997
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON [_______], 1998, UNLESS THE OFFER IS EXTENDED.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
IBJ SCHRODER BANK & TRUST COMPANY
By Registered or Certified Mail:
P.O. Box 84
Bowling Green Station
New York, New York 10274-0084
Attn: Reorganization Operations
Department
To Confirm by Telephone
or for Information:
(212) 858-2103
By Overnight Delivery or Hand:
IBJ Schroder Bank & Trust
Company
Corporate Trust Department
One State Street
New York, New York 10004
Attn: Securities Processing
Window, SC-1
Facsimile Transmissions:
(212) 858-2611
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS CONTAINED HEREIN MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
<PAGE> 2
The undersigned acknowledges receipt of the Prospectus dated
____________, 1997 (the "Prospectus") of Metallurg, Inc. (the "Company") which,
together with this letter of transmittal (the "Letter of Transmittal") describes
the Company's offer (the "Exchange Offer") to exchange $1,000 in principal
amount of 11% Series B Senior Notes due 2007 (the "New Notes") for each $1,000
in principal amount of outstanding 11% Series A Senior Notes due 2007 (the "Old
Notes"). The terms of the New Notes are identical in all material respects
(including principal amount, interest rate and maturity) to the terms of the Old
Notes for which they may be exchanged pursuant to the Exchange Offer, except
that the offering of the New Notes will have been registered under the
Securities Act of 1933, as amended and, therefore, the New Notes will not bear
legends restricting the transfer thereof.
This Letter of Transmittal is to be completed by holders of Old
Notes (as defined below) either if Old Notes are to be forwarded herewith or if
tenders of Old Notes are to be made by book-entry transfer to an account
maintained by IBJ Schroder Bank & Trust Company (the "Exchange Agent") at The
Depository Trust Company ("DTC") pursuant to the procedures set forth in "The
Exchange Offer -- Procedures for Tendering" in the Prospectus, unless tenders
are being made in accordance with the Automated Tender Offer Program ("ATOP")
established by DTC, in which case a tendering holder will become bound by the
terms and conditions hereof in accordance with the procedures established under
ATOP.
Holders of Old Notes whose certificates (the "Certificates") for
such Old Notes are not immediately available or who cannot deliver their
Certificates and all other required documents to the Exchange Agent on or prior
to the Expiration Date (as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" in the Prospectus. SEE INSTRUCTION 1.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX:
DESCRIPTION OF OLD NOTES TENDERED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) OLD NOTES TENDERED
(PLEASE CORRECT ANY ERRORS) (ATTACH ADDITIONAL SHEETS IF NECESSARY)
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
CERTIFICATE PRINCIPAL AMOUNT OF OLD NOTES
NUMBER(S)* OF OLD NOTES* TENDERED
(IF LESS THAN ALL)**
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
Total
Amount
Tendered
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
2
<PAGE> 3
** Old Notes may be tendered in whole or in part in denominations of $1,000
and integral multiples thereof. All Old Notes held shall be deemed
tendered unless a lesser number is specified in this column.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ____________________________________________
DTC Account Number _______________________________________________________
Transaction Code Number __________________________________________________
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name of Registered Holder(s) _____________________________________________
Window Ticket Number (if any) ____________________________________________
Date of Execution of Notice of Guaranteed Delivery _______________________
Name of institution which Guaranteed _____________________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution ____________________________________________
DTC Account Number _______________________________________________________
Transaction Code Number __________________________________________________
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD
NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH
ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: ____________________________________________________________________
Address: _________________________________________________________________
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer,
the undersigned hereby tenders to the Company the above described principal
amount of Old Notes. Subject to, and effective upon, the acceptance for exchange
of the Old Notes tendered herewith, the undersigned hereby exchanges, assigns
and transfers to, or upon the order of, the Company all right, title and
interest in and to such Old Notes. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as the true and lawful agent and
attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent
is also acting as agent of the Company in connection with the Exchange Offer) to
cause the Old Notes to be assigned, transferred and exchanged. The
3
<PAGE> 4
undersigned represents and warrants that it has full authority to tender,
exchange, assign and transfer the Old Notes and acquire New Notes issuable upon
the exchange of such tendered Old Notes, and that, when the same are accepted
for exchange the undersigned will acquire good and unencumbered title to the
tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The undersigned also warrants
that it will, upon request, execute and deliver any additional documents deemed
by the Exchange Agent or the Company to be necessary or desirable to complete
the exchange, assignment and transfer of tendered Old Notes or transfer
ownership of such Old Notes on the account books maintained by The Depository
Trust Company.
The Exchange Offer is subject to certain conditions as set forth in
the Prospectus under the caption "The Exchange Offer." The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, by the Company), as more particularly set forth in the Prospectus,
the Company may not be required to exchange any of the Old Notes tendered hereby
and, in such event, the Old Notes not exchanged will be returned to the
undersigned at the address shown below the signature of the undersigned.
BY TENDERING OLD NOTES AND EXECUTING, OR OTHERWISE BECOMING BOUND
BY, THIS LETTER OF TRANSMITTAL, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES
THAT (I) THE NEW NOTES ACQUIRED PURSUANT TO THE EXCHANGE OFFER ARE BEING
ACQUIRED IN THE ORDINARY COURSE OF BUSINESS OF THE PERSON RECEIVING SUCH NEW
NOTES, WHETHER OR NOT SUCH PERSON IS THE HOLDER, (II) NEITHER THE HOLDER NOR ANY
SUCH OTHER PERSON HAS AN ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO
PARTICIPATE IN THE DISTRIBUTION OF SUCH NEW NOTES, (III) IF THE HOLDER IS NOT A
BROKER-DEALER, OR IS A BROKER-DEALER BUT WILL NOT RECEIVE NEW NOTES FOR ITS OWN
ACCOUNT IN EXCHANGE FOR OLD NOTES, NEITHER THE HOLDER NOR ANY SUCH OTHER PERSON
IS ENGAGED IN OR INTENDS TO PARTICIPATE IN THE DISTRIBUTION OF SUCH NEW NOTES
AND (IV) NEITHER THE HOLDER NOR ANY SUCH OTHER PERSON IS AN "AFFILIATE" OF THE
UNDERSIGNED WITHIN THE MEANING OF RULE 405 OF THE SECURITIES ACT. BY TENDERING
OLD NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING, OR OTHERWISE BECOMING
BOUND BY, THIS LETTER OF TRANSMITTAL, A HOLDER OF OLD NOTES WHICH IS A
BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE
LETTERS ISSUED BY THE STAFF OF THE DIVISION OF CORPORATION FINANCE OF THE
SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES, THAT (A) SUCH OLD NOTES
HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR (B) SUCH OLD NOTES WERE
ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING
ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL DELIVER THE PROSPECTUS (AS
AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING THE REQUIREMENTS OF THE
SECURITIES ACT IN CONNECTION WITH ANY RESALE OR SUCH NEW NOTES (PROVIDED THAT,
BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT
BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE
SECURITIES ACT).
All authority herein conferred or agreed to be conferred in this
Letter of Transmittal shall survive the death, bankruptcy or incapacity of the
undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, executors, administrators, personal representatives, trustees in
bankruptcy, legal representatives, successors and assigns of the undersigned.
Tendered Old Notes may be withdrawn at any time prior to the Expiration Date.
Certificates for all New Notes delivered in exchange for tendered
Old Notes and any Old Notes delivered herewith but not exchanged, in each case
registered in the name of the undersigned, shall be delivered to the undersigned
at the address shown below the signature of the undersigned.
HOLDER(S) SIGN HERE
(Note: Signature(s) Must be Guaranteed if Required by Instruction 3)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) for Old Notes hereby tendered or by any person(s) authorized to
become the registered holder(s) by endorsements and documents transmitted
4
<PAGE> 5
herewith or, if the Old Notes are held of record by DTC, the person in whose
name such Old Notes are registered on the books of DTC. If signature is by an
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary or representative capacity, please
set forth the signer's full title. See Instruction 3.
________________________________________________________________________________
(Signature(s) of Holder(s))
Date ___________________________________________________________________________
Name(s) ________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity: ______________________________________________________________________
(Include Full Title)
Address ________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and telephone Number _________________________________________________
________________________________________________________________________________
(Tax Identification or Social Security Number(s))
GUARANTEE OF SIGNATURE(S)
(If Required -- See Instructions 3)
Authorized Signature ___________________________________________________________
Name ___________________________________________________________________________
________________________________________________________________________________
(Please Print)
Date ___________________________________________________________________________
Capacity or Title ______________________________________________________________
Name of Firm ___________________________________________________________________
Address ________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _________________________________________________
5
<PAGE> 6
<TABLE>
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 1, 5 and 6) (See Instructions 1, 5 and 6)
To be completed ONLY if the New Notes To be completed ONLY if the New Notes
are to be issued in the name of are to be issued in the name of someone
someone other than the registered other than the registered holder of the
holder of the Old Notes whose name(s) Old Notes whose name(s) appear(s) above.
appear(s) above.
Issue New Notes to: Mail New Notes to:
Name ____________________________ Name ____________________________
(Please Print) (Please Print)
_________________________________ _________________________________
Address _________________________ Address _________________________
_________________________________ _________________________________
_________________________________ _________________________________
(Include Zip Code) (Include Zip Code)
_________________________________ _________________________________
(Taxpayer Identification or (Taxpayer Identification or
Social Security Number) Social Security Number)
</TABLE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. Certificates
for all physically delivered Old Notes or confirmation of any book-entry
transfer to the Exchange Agent's account at DTC of Old Notes tendered by
book-entry transfer, as well as this Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees or an Agent's Message in lieu thereof and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at one of its addresses set forth herein on or prior to the Expiration Date.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES
AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING
HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL,
IT IS RECOMMENDED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, BE USED.
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other required documents to the Exchange Agent
on or prior to the Expiration Date or comply with the procedures for delivery by
book-entry transfer on a timely basis may tender their Old Notes by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed
Delivery Procedures" in the Prospectus. Pursuant to such procedures: (i) such
tender must be made by or through an Eligible Institution (as defined therein);
(ii) on or prior to the Expiration Date the Exchange Agent must have received
from such Eligible Institution a letter, telegram or facsimile transmission
setting forth the name and address of the tendering holder, the names in which
such Old Notes are registered, and, if possible, the certificate numbers of the
Old Notes to be tendered; and (iii) all tendered Old Notes (or a confirmation of
any book-entry transfer of such Old Notes into the Exchange Agent's account at
the DTC) as well as this Letter of Transmittal or an Agent's Message in lieu
thereof and all other documents required by this Letter of Transmittal, must be
received by the Exchange Agent within five New York Stock Exchange trading
6
<PAGE> 7
days after the date of execution of such Notice of Guaranteed Delivery, all as
provided in "The Exchange Offer--Guaranteed Delivery Procedure" in the
Prospectus.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of a Letter of Transmittal (or
facsimile thereof), or any Agent's Message in lieu thereof, shall waive any
right to receive any notice of the acceptance of the Old Notes or exchange.
2. PARTIAL TENDERS AND WITHDRAWALS. Tenders of Old Notes will be
accepted in all denominations of $1,000 and integral multiples thereof. If less
than all the Old Notes evidenced by any Certificate submitted are to be
tendered, fill in the principal amount of Old Notes which are to be tendered in
the box entitled "Principal Amount of Old Notes Tendered (if less than all)." In
such case, new Certificate(s) for the remainder of the Old Notes that were
evidenced by your old Certificate(s) will be sent to the holder of the Old Note,
promptly after the Expiration Date. All Old Notes represented by Certificates
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
Tenders of Old Notes pursuant to the Exchange Offer are irrevocable,
except that Old Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time on or prior to the Expiration Date. In order for a withdrawal to be
effective on or prior to that time, a written notice of withdrawal must be
timely received by the Exchange Agent at one of its addresses set forth above or
on the Prospectus on or prior to the Expiration Date. Any such notice of
withdrawal must specify the name of the person who tendered the Old Notes to be
withdrawn, identify the Old Notes to be withdrawn (including the principal
amount of such Old Notes) and (where Certificates for Old Notes have been
transmitted) specify the name in which such Old Notes are registered, if
different from that of the withdrawing holder, a statement that such holder is
withdrawing its election to have such Old Notes exchanged, and must be signed by
the holder in the same manner as the original signature on the Letter of
Transmittal (including any required signature guarantees) or be accompanied by
evidence satisfactory to the Company that the person withdrawing the tender has
succeeded to the beneficial ownership of the Old Notes being withdrawn. The
Exchange Agent will return the properly withdrawn Old Notes promptly following
receipt of notice of withdrawal. If Old Notes have been tendered pursuant to the
procedures for book-entry transfer set forth in the Prospectus, any notice of
withdrawal must specify the name and number of the account at DTC to be credited
with the withdrawal of Old Notes or otherwise comply with DTC's procedures.
3. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the Old Notes tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered,
it will be necessary to complete, sign and submit as many separate copies of
this Letter of Transmittal as there are different registrations of Old Notes.
When this Letter of Transmittal is signed by the registered
holder(s) of the Old Notes listed and transmitted hereby, no endorsement(s) of
Certificate(s) or written instrument or written instrument or instruments of
transfer or exchange are required unless New Notes are issued in the name of a
person other than the registered holder(s). Signature(s) on such Certificate(s)
or written instrument or instruments of transfer or exchange must be guaranteed
by an Eligible Institution.
7
<PAGE> 8
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Old Notes listed, the Certificates must be endorsed
or accompanied by a written instrument or instruments of transfer or exchange,
in a form satisfactory to the Company and duly executed by the registered
holder, in either case signed exactly as the name or names of the registered
holder(s) appear(s) on the Certificates.
If this Letter of Transmittal, any Certificates or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing and,
unless waived by the Company, proper evidence satisfactory to the Company of
such persons' authority to so act must be submitted.
Endorsements on Certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
Signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed unless the Old Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the Old
Notes who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined below). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantees must be by a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Old Notes are registered in the name of a person other than
the person signing the Letter of Transmittal, the Old Notes surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by the registered holder with the
signature thereon guaranteed by an Eligible Institution.
4. TRANSFER TAXES. The Company shall pay all transfer taxes, if any,
applicable to the transfer and exchange of Old Notes to it or its order pursuant
to the Exchange Offer. If, however, New Notes are to be delivered to, or are to
be registered or issued in the name of, any person other than the registered
holder of the Old Notes tendered hereby, the amount of any such transfer taxes
(whether imposed on the registered holder or any other person) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exception therefrom is not submitted herewith the amount of such transfer taxes
will be billed directly to such tendering holder.
Except as provided in this Instruction 4, it will not be necessary
for transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
5. WAIVER OF CONDITIONS. The Company reserves the absolute right to
waive, in whole or in part, any of the conditions to the Exchange Offer set
forth in the Prospectus.
6. MUTILATED, LOST, DESTROYED OR STOLEN CERTIFICATES. Any holder
whose Old Notes have been mutilated, lost, destroyed or stolen should contact
the Exchange Agent at the address indicated below for further instructions.
7. REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions relating
to the procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter of Transmittal may be directed to the Exchange Agent
at the address and telephone number set forth below. In addition, all questions
relating to the Offer, as well as requests for
8
<PAGE> 9
assistance and additional copies of the Prospectus and this Letter of
Transmittal, may be directed to the Company at 6 East 43rd Street, New York, New
York 10017, Attention: Eric L. Schondorf, (212) 687-9470.
8. IRREGULARITIES. All questions as to the form, validity,
eligibility (including time of receipt) and acceptance of Letters of Transmittal
or Old Notes will be resolved by the Company, whose determination shall be final
and binding. The Company reserves the absolute right to reject any and all
Letters of Transmittal or tenders that are not in proper form or the acceptance
of which would, in the judgment of the Company or its counsel be unlawful. The
Company also reserves the right to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular Old Notes covered by any
Letter of Transmittal or tendered pursuant to such letter. None of the Company,
the Exchange Agent or any other person shall be under any duty to give
notification of any defect or irregularity with respect to any tender of Old
Notes for exchange, nor shall any of them incur any liability for failure to
give such notification. The Company's interpretation of the terms and conditions
of the Exchange Offer shall be final and binding.
9. DEFINITIONS. Capitalized terms used in this Letter of Transmittal
and not otherwise defined have the meanings given in the Prospectus.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF),
OR AN AGENT'S MESSAGE IN LIEU THEREOF, AND ALL OTHER REQUIRED
DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT
ON OR PRIOR TO THE EXPIRATION DATE.
9
<PAGE> 1
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
METALLURG, INC.
OFFER TO EXCHANGE
ALL OF ITS
11% SERIES B SENIOR NOTES DUE 2007
FOR ALL OF ITS OUTSTANDING
11% SERIES A SENIOR NOTES DUE 2007
This Notice of Guaranteed Delivery, or one substantially equivalent to
this form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the Company's (as defined below) 11% Series A Senior Notes due
2007 (the "Old Notes") are not immediately available, (ii) Old Notes, the Letter
of Transmittal and all other required documents cannot be delivered to IBJ
Schroder Bank and Trust Company (the "Exchange Agent") on or prior to 5:00 P.M.
New York City time, on the Expiration Date (as defined in the Prospectus
referred to below) or (iii) the procedures for delivery by book-entry transfer
cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand, overnight courier or mail, or transmitted by facsimile
transmission, to the Exchange Agent. See "The Exchange Offer--Guaranteed
Delivery Procedures" in the Prospectus. In addition, in order to utilize the
guaranteed delivery procedure to tender Old Notes pursuant to the Exchange
Offer, a completed, signed and dated Letter of Transmittal relating to the Old
Notes (or facsimile thereof) must also be received by the Exchange Agent prior
to 5:00 P.M. New York City time, on the Expiration Date. Capitalized terms not
defined herein have the meanings assigned to them in the Prospectus.
The Exchange Agent For The Exchange Offer Is:
IBJ Schroder Bank & Trust Company
<TABLE>
<S> <C> <C>
By Overnight Courier: Facsimile By Registered or
Transactions: Certified Mail:
(Eligible
IBJ Schroder Bank & Trust Institutions Only) P.O. Box 84
Company Bowling Green Station
Corporate Trust Department (212) 858-2611 New York, New York
Attn: Securities Processing Corporate Trust 10274-0084
Window, SC-l Department Attn: Reorganization
One State Street Attn: Operations Department
New York, New York 10004 Reorganization
Operations
Department
To Confirm by
Telephone
or for Information
Call:
(212) 858-2103
</TABLE>
Delivery of this Notice of Guaranteed Delivery to an address other than as set
forth above or transmission of this Notice of Guaranteed Delivery via facsimile
to a number other than as set forth above will not constitute a valid delivery.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF
A SIGNATURE ON A LETTER OF TRANSMITTAL IS NOT REQUIRED TO BE GUARANTEED BY AN
"ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE
MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER
OF TRANSMITTAL.
Ladies and Gentlemen:
The undersigned hereby tenders to Metallurg, Inc., a Delaware corporation (the
"Company"), upon the terms and subject to the conditions set forth in the
Prospectus dated _____________________, 1998 (as the same may be amended or
<PAGE> 2
supplemented from time to time, the "Prospectus"), and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate principal amount of Old Notes set forth
below pursuant to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures."
Principal Amount of Old Notes Name(s) of Registered Holder(s):
Tendered for Exchange: $________________ ___________________________________
Old Note Certificate No.(s)
(if available):_______________________________
If Old Notes will be tendered by book-entry transfer, provide the following
information:
DTC Account Number:________________________________________
Date:___________________________
________________________________________________________________________________
All authority herein conferred or agreed to be conferred shall survive the death
or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs personal representatives, successors
and assigns of the undersigned.
________________________________________________________________________________
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON ______________, 1998
UNLESS THE EXCHANGE OFFER IS EXTENDED.
2
<PAGE> 3
PLEASE SIGN HERE
X_________________________________________________________
X_________________________________________________________
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number:___________________________
Must be signed by the holder(s) of the Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
Please print name(s) and address(es)
Name(s): _________________________________________________________________
_________________________________________________________________
Capacity: _________________________________________________________________
Address(es) _________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
3
<PAGE> 4
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer municipal securities broker, municipal securities dealer,
government securities broker, or government securities dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
loaning agency; or (v) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, either the Old Notes
tendered hereby in proper form for transfer, or confirmation of the book-entry
transfer of such Old Notes to the Exchange Agent's account at The Depositary
Trust Company ("DTC"), pursuant to the procedures for book-entry transfer set
forth in the Prospectus, in either case together with one or more properly
completed and duly executed Letter(s) of Transmittal (or facsimile thereof and
any other required documents within five business days after the date of
execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of Transmittal
and the Old Notes tendered hereby to the Exchange Agent within the time period
set forth above and that failure to do so could result in a financial loss to
the undersigned.
_________________________________ ___________________________________
Name of Firm Authorized Signature
_________________________________ ___________________________________
Address Title
_________________________________ ___________________________________
Zip Code (Please Type or Print)
Area Code and Telephone No._______________ Dated:_____________________________
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
4
<PAGE> 1
Exhibit 99.3
, 1998
EXCHANGE AGENT AGREEMENT
IBJ Schroder Bank & Trust Company
Corporate Trust Administration
One State Street
New York, New York 10004
Attention: Luis Perez
Assistant Vice President
Dear Mr. Perez:
Metallurg, Inc., a Delaware corporation (the "Company"), proposes to
make an offer (the "Exchange Offer") to exchange up to $100,000,000 aggregate
principal amount of its 11% Series B Senior Notes due 2007 (the "Exchange
Notes"), for a like principal amount of its outstanding 11% Series A Senior
Notes due 2007 (the "Private Notes"). The terms and conditions of the Exchange
Offer are set forth in a prospectus (the "Prospectus") included in the Company's
registration statement on form S-4 (File No. 333-42141) (the "Registration
Statement"), filed with the Securities and Exchange Commission (the "SEC"),
proposed to be distributed to all record holders of the Private Notes. The
Private Notes and the Exchange Notes are collectively referred to herein as the
"Notes." Capitalized terms used herein and not defined shall have the respective
meanings ascribed to them in the Prospectus.
The Company hereby appoints IBJ Schroder Bank & Trust Company to act as
exchange agent (the "Exchange Agent") in connection with the Exchange Offer.
References hereinafter to "you" shall refer to IBJ Schroder Bank & Trust
Company.
The Exchange Offer is expected to be commenced by the Company on or
about _______________, 1998. The Letter of Transmittal accompanying the
Prospectus is to be used by the holders of the Private Notes to accept the
Exchange Offer and contains instructions with respect to the delivery of
certificates for Private Notes tendered.
The Exchange Offer shall expire at 5:00 P.M., New York City time, on
________________________, 1998, or on such later date or time to which the
Company may extend the Exchange Offer (the "Expiration Date"). Subject to the
terms and conditions set forth in the Prospectus, the Company expressly reserves
the right to extend the Exchange Offer from time to time and may extend the
Exchange Offer by giving oral (confirmed in writing) or written notice to you
before 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date.
The Company expressly reserves the right, in its sole discretion, to
amend or terminate the Exchange Offer, and not to accept for exchange any
Private Notes not theretofore accepted for exchange. The Company will give oral
(confirmed in writing) or written notice of any amendment, termination or
nonacceptance to you as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act in
accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The Exchange
Offer," in the Letter of Transmittal accompanying the Prospectus or as
<PAGE> 2
specifically set forth herein; provided, however, that in no way will your
general duty to act in good faith and without gross negligence or willful
misconduct be limited by the foregoing.
2. You will establish an account with respect to the Private Notes at
The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes
of the Exchange Offer within two business days after the date of the Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of the Private Notes by causing
the Book-Entry Transfer Facility to transfer such Private Notes into your
account in accordance with the Book-Entry Transfer Facility's procedures for
such transfer.
3. You are to examine each of the Letters of Transmittal and
certificates for Private Notes (and confirmation of book-entry transfers of
Private Notes into your account at the Book-Entry Transfer Facility) and any
other documents delivered or mailed to you by or for holders of the Private
Notes, to ascertain whether: (i) the Letters of Transmittal, certificates and
any such other documents are duly executed and properly completed in accordance
with instructions set forth therein and that such book-entry confirmations are
in due and proper form and contain the information required to be set forth
therein, and (ii) the Private Notes have otherwise been properly tendered. In
each case where the Letter of Transmittal or any other document has been
improperly completed or executed, or where book-entry confirmations are not in
due and proper form or omit certain information, or any of the certificates for
Private Notes are not in proper form for transfer or some other irregularity in
connection with the acceptance of the Exchange Offer exists, you will endeavor
to inform the presenters of the need for fulfillment of all requirements and to
take any other action as may be necessary or advisable to cause such
irregularity to be corrected.
4. With the approval of the Chairman, the President and Chief Executive
Officer, any of the Executive Vice Presidents or the General Counsel (such
approval, if given orally, to be confirmed in writing) or any other person
designated by such an officer in writing, you are authorized to waive any
irregularities in connection with any tendency of Private Notes pursuant to the
Exchange Offer.
5. Tenders of Private Notes may be made only as set forth in the Letter
of Transmittal and in the section of the Prospectus captioned "The Exchange
Offer -- Procedures for Tendering," and Private Notes shall be considered
properly tendered to you only when tendered in accordance with the procedures
set forth therein. Notwithstanding the provisions of this paragraph 5, Private
Notes which the Chairman, the President and Chief Executive Officer, any of the
Executive Vice Presidents or the General Counsel or any other officer of the
Company designated by any such person shall approve as having been properly
tendered shall be considered to be properly tendered (such approval, if given
orally, shall be confirmed in writing).
6. You shall advise the Company with respect to any Private Notes
received subsequent to the Expiration Date and accept its instructions with
respect to disposition of such Private Notes.
7. You shall accept tenders:
(a) in cases where the Private Notes are registered in two or
more names only if signed by all named holders:
(b) in cases where the signing person (as indicated on the
Letter of Transmittal) is acting in a fiduciary or a representative capacity
only when proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Private
Notes provided that customary transfer requirements, including those regarding
any applicable transfer taxes, are fulfilled.
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<PAGE> 3
You shall accept partial tenders of Private Notes when so indicated and
as permitted in the Letter of Transmittal and deliver certificates for Private
Notes to the transfer agent for split-up and return any untendered Private Notes
to the holder (or such other person as may be designated in the Letter of
Transmittal) as promptly as practicable after expiration or termination of the
Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will notify you (such notice if given orally, to be confirmed
in writing) of its acceptance, promptly after the Expiration Date, of all
Private Notes properly tendered and you, on behalf of the Company, will exchange
such Private Notes for Exchange Notes and cause such Private Notes to be
canceled. Delivery of Exchange Notes will be made on behalf of the Company by
you at the rate of $1,000 principal amount of Exchange Notes for each $1,000
principal amount of the Private Notes tendered promptly after notice (such
notice if given orally, to be confirmed in writing) of acceptance of said
Private Notes by the Company; provided, however, that in all cases, Private
Notes tendered pursuant to the Exchange Offer will be exchanged only after
timely receipt by you of certificates for such Private Notes (or confirmation of
book-entry transfer into your account at the Book-Entry Transfer Facility), a
properly completed and, except as described in the section of the prospectus
captioned "The Exchange Offer -- Procedures for Tendering," duly executed Letter
of Transmittal (or facsimile thereof) with any required signature guarantees and
any other required documents. Unless otherwise instructed by the Company, you
shall issue Exchange Notes only in denominations of $1,000 or any integral
multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except that,
subject to the terms and upon the conditions set forth in the Prospectus and the
Letter of Transmittal, Private Notes tendered pursuant to the Exchange Offer may
be withdrawn at any time on or prior to the Expiration Date in accordance with
the terms of the Exchange Offer.
10. The Company shall not be required to exchange any Private Notes
tendered if any of the conditions set forth in the Exchange Offer are not met.
Notice of any decision by the Company not to exchange any Private Notes tendered
shall be given (and confirmed in writing) by the Company to you.
11. If, pursuant to the Exchange Offer, the Company does not accept for
exchange all or part of the Private Notes tendered because of an invalid tender,
the occurrence of certain other events set forth in the Prospectus or otherwise,
you shall as soon as practicable after the expiration or termination of the
Exchange Offer return those certificates for unaccepted Private Notes (or effect
appropriate book-entry transfer), together with any related required documents
and the Letters of Transmittal relating thereto that are in your possession, to
the persons who deposited them (or effected such book-entry transfer).
12. All certificates for reissued Private Notes, unaccepted Private
Notes or for Exchange Notes (other than those effected by book-entry transfer)
shall be forwarded by (a) first-class certified mail, return receipt requested,
under a blanket surety bond obtained by you protecting you and the Company from
loss or liability arising out of the nonreceipt or nondelivery of such
certificates or (b) by registered mail insured by you separately for the
replacement value of each of such certificates.
13. You are not authorized to pay or offer to pay any concessions,
commissions or other solicitation fees to any broker, dealer, commercial bank,
trust company or other nominee or to engage or use any person to solicit
tenders.
14. As Exchange Agent hereunder, you:
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<PAGE> 4
(a) shall have no duties or obligations other than those
specifically set forth in the Prospectus, the Letter of Transmittal or herein or
as may be subsequently agreed to in writing by you and the Company;
(b) will be regarded as making no representations and having
no responsibilities as to the validity, sufficiency, value or genuineness of any
of the certificates for the Private Notes deposited with you pursuant to the
Exchange Offer, and will not be required to and will make no representation as
to the validity, value or genuineness of the Exchange Offer;
(c) will not be obligated to take any legal action hereunder
which might in your reasonable judgment involve any expense or liability, unless
you will have been furnished with reasonable indemnity;
(d) may rely on and will be protected in acting in reliance
upon any certificate, instrument, opinion, notice, letter, telegram or other
document or security delivered to you and reasonably believed by you to be
genuine and to have been signed by the proper party or parties;
(e) may act upon any tender, statement, request, comment,
agreement or other instrument whatsoever not only as to its due execution and
validity and effectiveness of its provisions, but also as to the truth and
accuracy of any information contained therein, which you shall in good faith
believe to be genuine or to have been signed or represented by a proper person
or persons;
(f) may rely on and shall be protected in acting upon written
or oral instructions from any officer of the Company;
(g) may consult with your counsel with respect to any
questions relating to your duties and responsibilities, and the written opinion
of such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by you hereunder in
good faith and in accordance with the written opinion of such counsel; and
(h) will not advise any person tendering Private Notes
pursuant to the Exchange Offer as to whether to tender or refrain from tendering
all or any portion of Private Notes or as to the market value, decline or
appreciation in market value of any Private Notes that may or may not occur as a
result of the Exchange Offer or as to the market value of the Exchange Notes;
provided, however, that in no way will your general duty to act in good faith
and without gross negligence or willful misconduct be limited by the foregoing.
15. You will take such action as may from time to time be requested by
the Company or its counsel (and such other action as you may reasonably deem
appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the
Notice of Guaranteed Delivery (as defined in the Prospectus) or such other forms
as may be approved from time to time by the Company, to all persons requesting
such documents and to accept and comply with telephone requests for information
relating to the Exchange Offer, provided that such information shall relate only
to the procedures for accepting (or withdrawing from) the Exchange Offer. The
Company will furnish you with copies of such documents at your request.
16. You will advise by facsimile transmission or telephone, and
promptly thereafter confirm in writing to Eric L. Schondorf of the Company
(telephone number (212) 835-0216, facsimile number (212) 687-9261, and such
other person or persons as the Company may request, daily up to and including
the Expiration Date as to the aggregate principal amount of Private Notes which
have been duly tendered pursuant to the Exchange Offer and the items received by
you pursuant to the Exchange Offer and this Agreement, separately reporting and
giving cumulative totals as to items properly received and items improperly
received. In addition, you will also inform, and cooperate in making available
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<PAGE> 5
to, the Company or any such other person or persons upon oral request made from
time to time prior to the Expiration Date of such other information as it or he
or she reasonably requests. Such cooperation shall include, without limitation,
the granting by you to the Company and such person as the Company may request of
access to those persons on your staff who are responsible for receiving tenders,
in order to ensure that immediately prior to the Expiration Date the Company
shall have received information in sufficient detail to enable it to decide
whether to extend the Exchange Offer. You shall prepare a final list of all
persons whose tenders were accepted, the aggregate principal amount of Private
Notes tendered, the aggregate principal amount of Private Notes accepted and the
identity of any Participating Broker-Dealers and the aggregate principal amount
of Exchange Notes delivered to each, and deliver said list to the Company.
17. Letters of Transmittal, book-entry confirmations and Notices of
Guaranteed Delivery received by you shall be preserved by you for a period of
time at least equal to the period of time you preserve other records pertaining
to the transfer of securities, or one year, whichever is longer, and thereafter
shall be delivered by you to the Company. You shall dispose of unused Letters of
Transmittal and other surplus materials as instructed by the Company.
18. You hereby expressly waive any lien, encumbrance or right of
set-off whatsoever that you may have with respect to funds deposited with you
for the payment of transfer taxes by reasons of amounts, if any, borrowed by the
Company, or any of its subsidiaries or affiliates pursuant to any loan or credit
agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you shall be
entitled to such compensation as set forth on Schedule I attached hereto.
20. You hereby acknowledge receipt of the Prospectus and the Letter of
Transmittal and further acknowledge that you have examined each of them. Any
inconsistency between this Agreement, on the one hand, and the Prospectus and
the Letter of Transmittal (as they may be amended from time to time), on the
other hand, shall be resolved in favor of the latter two documents, except with
respect to the duties, liabilities and indemnification of you as Exchange Agent,
which shall be controlled by this Agreement.
21. The Company covenants and agrees to indemnify and hold you harmless
in your capacity as Exchange Agent hereunder against any loss, liability, cost
or expense, including attorneys' fees and expenses arising out of or in
connection with any act, omission, delay or refusal made by you in reliance upon
any signature, endorsement, assignment, certificate, order, request, notice,
instruction or other instrument or document reasonably believed by you to be
valid, genuine and sufficient and in accepting any tender or effecting any
transfer of Private Notes reasonably believed by you in good faith to be
authorized, and in delaying or refusing in good faith to accept any tenders or
effect any transfer of Private Notes; provided, however, that anything in this
Agreement to the contrary notwithstanding, the Company shall not be liable for
indemnification or otherwise for any loss, liability, cost or expense to the
extent arising out of your gross negligence or willful misconduct. In no case
shall the Company be liable under this indemnity with respect to any claim
against you unless the Company shall be notified by you, by letter or cable or
by facsimile which is confirmed by letter, of the written assertion of a claim
against you or of any other action commenced against you, promptly after you
shall have received any such written assertion or notice of commencement of
action. The Company shall be entitled to participate, at its own expense, in the
defense of any such claim or other action, and, if the Company so elects, the
Company may assume the defense of any pending or threatened action against you
in respect of which indemnification may be sought hereunder, in which case the
Company shall not thereafter be responsible for the subsequently-incurred fees
and disbursements of legal counsel for you under this paragraph so long as the
Company shall retain counsel reasonably satisfactory to you to defend such suit;
provided, that the Company shall not
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<PAGE> 6
be entitled to assume the defense of any such action if the named parties to
such action include both you and the Company and representation of both parties
by the same legal counsel would, in the written opinion of your counsel, be
inappropriate due to actual or potential conflicting interests between you and
the Company. You understand and agree that the Company shall not be liable under
this paragraph for the fees and expenses of more than one legal counsel for you.
22. You shall arrange to comply with all requirements under the tax
laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that you are required, in certain
instances, to deduct thirty-one percent (31%) with respect to interest paid on
the Exchange Notes and proceeds from the sale, exchange, redemption or
retirement of the Exchange Notes from holders who have not supplied their
correct Taxpayer Identification Number or required certification. Such funds
will be turned over to the Internal Revenue Service in accordance with
applicable regulations.
23. You shall notify the Company of the amount of any transfer taxes
payable in respect of the exchange of Private Notes and, upon receipt of a
written approval from the Company, shall deliver or cause to be delivered, in a
timely manner to each governmental authority to which any transfer taxes are
payable in respect of the exchange of Private Notes, your check in the amount of
all transfer taxes so payable, and the Company shall reimburse you for the
amount of any and all transfer taxes payable in respect of the exchange of
Private Notes; provided, however, that you shall reimburse the Company for
amounts refunded to you in respect of your payment of any such transfer taxes,
at such time as such refund is received by you.
24. This Agreement and your appointment as Exchange Agent hereunder
shall be construed and enforced in accordance with the laws of the State of New
York applicable to agreements made and to be performed entirely within such
state, and without regard to conflicts of law principles.
25. This Agreement shall be binding upon and inure solely to the
benefit of each party hereto and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement. Without
limitation of the foregoing, the parties hereto expressly agree that no holder
of Private Notes or Exchange Notes shall have any right, benefit or remedy of
any nature whatsoever under, or by reason of, this Agreement.
26. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, and all of which taken together shall
constitute one and the same agreement.
27. In case any provision of this Agreement 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.
28. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part except by a written
instrument signed by a duly authorized representative of the party to be
charged.
29. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party, addressed to it, at its
address or telecopy number set forth below:
if to the Company, to:
Metallurg, Inc.
6 East 43rd Street
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<PAGE> 7
New York, New York 10017
Telephone: (212) 835-0200
Telecopy: (212) 687-9621
Attention: Eric L. Schondorf
with a copy to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Telephone: (212) 878-8000
Telecopy: (212) 878-8375
Attention: Samuel M. Feder, Esq.
If to the Exchange Agent, to:
IBJ Schroder Bank & Trust Company
Corporate Trust Administration
One State Street
New York, New York 10004
Telephone: 858-2815
Telecopy: 858-2952
Attention: Lou Perez
30. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, paragraphs 17, 19, 21 and 23 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly deliver to
the Company any certificates for Notes, funds or property then held by you as
Exchange Agent under this Agreement.
31. This Agreement shall be binding and effective as of the date
hereof.
Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
METALLURG, INC.
By:_____________________________________
Name:
Title:
Accepted as of the date first above written:
IBJ SCHRODER BANK & TRUST COMPANY,
as Exchange Agent
By:_____________________________________
Name:
Title:
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