<PAGE> 1
1998
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-K
<TABLE>
<S> <C> <C>
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
</TABLE>
Commission File No. 1-2438
ISPAT INLAND INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-1262880
(State of Incorporation) (I.R.S. Employer Identification No.)
3210 WATLING STREET, EAST CHICAGO, INDIANA (ZIP CODE)
(Address of principal executive offices) 46312
</TABLE>
Registrant's telephone number, including area code: (219) 399-1200
Registrant meets the conditions set forth in general instruction J(1)(a)
and (b) of Form 10-K and is therefore filing this form with the reduced
disclosure format.
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ------------------- -----------------------------------------
<S> <C>
First Mortgage Bonds:
Series R, 7.90% Due January 15, 2007............ New York Stock Exchange, Inc.
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]. No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in any amendment to this Form 10-K. [X]
The number of shares of Common Stock ($.01 par value) of the registrant
outstanding as of February 26, 1999 was 100, all of which shares were owned by
Ispat Inland Holdings, Inc.
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<PAGE> 2
PART I
ITEM 1. BUSINESS.
Ispat Inland Inc. (the "Company" or the "Successor Company"), a Delaware
corporation and an indirect wholly owned subsidiary of Ispat International N.V.
("Ispat"), is an integrated domestic steel company. The Company produces and
sells a wide range of steels, of which approximately 99% consists of carbon and
high-strength low-alloy steel grades. It is also a participant in certain iron
ore production and steel-finishing joint ventures.
The Company has a single business segment, which comprises the operating
companies and divisions involved in the manufacturing of basic steel products
and in related raw materials operations.
On July 16, 1998, Ispat acquired Inland Steel Company (the "Predecessor
Company") from Inland Steel Industries, Inc. ("Industries") in accordance with
an Agreement and Plan of Merger ("Agreement"), dated as of May 27, 1998, amended
as of July 16, 1998 (the "Acquisition"). The Predecessor Company was renamed
Ispat Inland Inc. on September 1, 1998. Ispat paid $1,143.1 million, plus an
assumption of certain liabilities or obligations, to acquire the Predecessor
Company.
OPERATIONS
GENERAL
The Company is directly engaged in the production and sale of steel and
related products. Certain Company subsidiaries and affiliates are engaged in the
mining and pelletizing of iron ore and in the operation of a cold-rolling mill
and steel galvanizing lines. All raw steel made by the Company is produced at
its Indiana Harbor Works located in East Chicago, Indiana, which also has
facilities for converting the steel produced into semi-finished and finished
steel products.
The Company has two divisions--the Flat Products division and the Bar
division. The Flat Products division manages the Company's iron ore operations,
conducts its ironmaking operations, and produces the major portion of its raw
steel. This division also manufactures and sells steel sheet, strip and certain
related semi-finished products for the automotive, steel service center,
appliance, office furniture and electrical motor markets. The Bar division
manufactures and sells special quality bars and certain related semi-finished
products to the automotive industry directly as well as through forgers and cold
finishers, and also sells to steel service centers and heavy equipment
manufacturers.
The Company and Nippon Steel Corporation ("NSC") are in joint ventures that
operate steel-finishing facilities near New Carlisle, Indiana. The total cost of
these two facilities, I/N Tek and I/N Kote, was approximately $1.1 billion. I/N
Tek, owned 60% by a wholly owned subsidiary of the Company and 40% by an
indirect wholly owned subsidiary of NSC, operates a cold-rolling mill. I/N Kote,
owned equally by a wholly owned subsidiary of the Company and by an indirect
wholly owned subsidiary of NSC, operates two galvanizing lines.
RAW STEEL PRODUCTION AND MILL SHIPMENTS
The following table shows, for the three years indicated, the Company's
production of raw steel and, based upon American Iron and Steel Institute data,
its share by percentage of total domestic raw steel production:
<TABLE>
<CAPTION>
RAW STEEL PRODUCTION
-----------------------------
% OF U.S.
(000 TONS*) STEEL INDUSTRY
----------- --------------
<S> <C> <C>
1998........................................................ 5,669 5.3%**
1997........................................................ 5,814 5.4
1996........................................................ 5,519 5.3
</TABLE>
- ---------------
* Net tons of 2,000 pounds.
** Based on preliminary data from the American Iron and Steel Institute.
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The annual raw steelmaking capacity of the Company is 6.0 million net tons.
The basic oxygen process accounted for 92% of raw steel production of the
Company in both 1998 and 1997. The remainder of such production was accounted
for by the electric furnace process.
The total tonnage of steel mill products shipped by the Company for each of
the five years 1994 through 1998 was 5.2 million tons in 1998; 5.3 million tons
in 1997; 5.1 million tons in each of 1996 and 1995, and 5.2 million tons in
1994. In 1998, sheet, strip and certain related semi-finished products accounted
for 84% of the total tonnage of steel mill products shipped from the Indiana
Harbor Works, and bar and certain related semi-finished products accounted for
16%.
In each of 1998 and 1997, approximately 92% and 94% of the shipments of the
Flat Products division and 96% and 98%, respectively, of the shipments of the
Bar division were to customers in 20 mid-American states. Approximately 74% of
the shipments of the Flat Products division and 89% of the shipments of the Bar
division in 1998 were to customers in a five-state area comprised of Illinois,
Indiana, Ohio, Michigan and Wisconsin, compared to 76% and 92% in 1997. Both
divisions compete in these geographical areas, principally on the basis of
price, service and quality, with the nation's largest producers of raw steel as
well as with foreign producers and with many smaller domestic mills.
The steel market is highly competitive with major integrated producers,
including the Company, facing competition from a variety of sources. Many steel
products compete with alternative materials such as plastics, aluminum,
ceramics, glass and concrete. Domestic steel producers have also been adversely
impacted by imports from foreign steel producers. Imports of steel mill products
accounted for 30.1% of the domestic market in 1998, up from 24.1% in 1997 and
26.4% in 1984. Many foreign producers are owned, controlled, or subsidized by
their governments, allowing them to ship steel products into the domestic market
despite decreased profit margins or losses on such sales.
Mini-mills provide significant competition in various product lines.
Mini-mills are relatively efficient, low-cost producers that manufacture steel
principally from scrap in electric furnaces and, at this time, generally have
lower capital, overhead, employment and environmental costs than the integrated
steel producers, including the Company. Mini-mills have been adding capacity and
expanding their product lines in recent years to produce larger structural
products and certain flat rolled products. Thin-slab casting technologies have
allowed mini-mills to enter certain sheet markets traditionally supplied by
integrated producers. Several mini-mills using this advanced technology are in
operation in the United States and a significant increase in modern mini-mill
capacity is underway in the United States.
For the three years indicated, shipments by market classification of steel
mill products produced by the Company at its Indiana Harbor Works are set forth
below. As shown in the table, a substantial portion of shipments by the Flat
Products division was to steel service centers and transportation-related
markets.
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL TONNAGE
OF STEEL SHIPMENTS
------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Steel Service Centers....................................... 34%(1) 34%(1) 35%(1)
Automotive.................................................. 32 29 27
Steel Converters/Processors................................. 13 17 14
Appliance................................................... 10 9 9
Industrial, Electrical and Farm Machinery................... 7 7 8
Construction and Contractors' Products...................... 2 2 2
Other....................................................... 2 2 5
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
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(1) The service center percentages above include shipments to prior affiliates
of the Company of 6% in 1998, 9% in 1997, and 10% in 1996. The reduced
amount in 1998 reflects the change in status of Ryerson Tull, Inc. to a
non-affiliate due to the Ispat acquisition of the Company on July 16, 1998.
3
<PAGE> 4
Some value-added steel processing operations for which the Company does not
have facilities are performed by outside processors, including joint ventures,
prior to shipment of certain products to the Company's customers. In 1998,
approximately 42% of the products produced by the Company were processed further
through value-added services such as electrogalvanizing, painting and slitting.
Approximately 74% of the finished steel shipped to customers during 1998
was transported by truck, with the remainder transported primarily by rail. A
wholly owned truck transport subsidiary of the Company was responsible for
shipment of approximately 12% of the total tonnage of products transported by
truck in 1998.
Substantially all of the steel mill products produced by the Flat Products
division are marketed through its own selling organization, with offices located
in Chicago, Illinois; Southfield, Michigan; and Nashville, Tennessee.
Substantially all of the steel mill products produced by the Bar division are
marketed through its sales office in East Chicago, Indiana.
See "Product Classes" below for information relating to the percentage of
consolidated net sales accounted for by certain classes of similar products of
steel manufacturing operations.
RAW MATERIALS
The Company obtains iron ore pellets primarily from two iron ore
properties, in which subsidiaries of the Company have varying interests--the
Empire Mine in Michigan and the Minorca Mine in Minnesota.
During the second quarter of 1997, the Company completed the sale of its
interest in the Wabush Mines located in Labrador and Quebec, Canada. The Company
entered into a contract with the purchaser of such interest, effective January
1, 1997 and expiring December 31, 2006, to sell to the Company, at prices
approximating market, any of the Company's iron ore pellet requirements up to
one million gross tons annually not met by pellet sources in which the Company
owns an equity interest. See "Properties Relating to Operations--Raw Materials
Properties and Interests" in Item 2 below for further information relating to
such iron ore properties.
The following table shows (1) the iron ore pellets available to the
Company, as of December 31, 1998, from properties of its subsidiary and through
interests in raw materials ventures; (2) 1998 and 1997 iron ore pellet
production or purchases from such sources; and (3) the percentage of the
Company's iron ore requirements represented by production or purchases from such
sources in 1998 and 1997.
<TABLE>
<CAPTION>
IRON ORE
TONNAGES IN THOUSANDS
(GROSS TONS OF PELLETS)
-------------------------------------- % OF
PRODUCTION REQUIREMENTS(1)
AVAILABLE AS OF -------------- ---------------
DECEMBER 31, 1998(2) 1998 1997 1998 1997
-------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
ISPAT INLAND MINING COMPANY
Minorca--Virginia, MN................... 54,378 2,756 2,583 39% 35%
IRON ORE VENTURE
Empire (40% owned)--Palmer, MI.......... 63,200 3,360 3,389 46 45
------- ----- ----- -- --
Total Iron Ore........................ 117,578 6,116 5,972 85% 80%
======= ===== ===== == ==
</TABLE>
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(1) Requirements in excess of production are purchased or taken from stockpile.
(2) Net interest in proven reserves.
All of the Company's coal requirements are satisfied from independent
sources. In April 1996, the Company entered into a contract to purchase one
million tons of steam coal for the period of April 1, 1996 to December 31, 1997.
The Company purchased 39% of its 1997 coal requirements under such contract,
representing 74% of its steam coal requirements. The balance of steam coal
requirements for 1997 and all of the requirements for 1998 were met through
short-term contracts. In connection with commencement of operations of the heat
recovery coke battery and associated energy facility discussed below (which are
not
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assets of the Company), the Company's coal fired generating station was
temporarily idled in the second quarter of 1998, thereby eliminating steam coal
requirements for such period.
The Company's other coal requirements are for the PCI Associates joint
venture, in which a subsidiary of the Company holds a 50% interest. The PCI
facility pulverizes coal for injection into the Company's blast furnaces. During
1998, the PCI facility's coal needs were satisfied under a requirements contract
subject to a force majeure provision.
The Company, Sun Coal and Coke Company ("Sun") and a unit of NIPSCO
Industries have jointly developed a heat recovery coke battery and an associated
energy recovery and flue-gas desulphurization facility, located on land leased
from the Company at its Indiana Harbor Works. Sun designed, built, financed, and
operates the cokemaking portion of the project. A unit of NIPSCO Industries
designed, built, financed, and operates the portion of the project which cleans
the coke plant's flue gas and converts the heat into steam and electricity. Sun,
the NIPSCO unit and other third parties invested approximately $350 million in
the project which commenced operations in the first quarter of 1998. The Company
has committed to purchase, for approximately 15 years, 1.2 million tons of coke
annually on a take-or-pay basis at prices determined by certain cost factors, as
well as energy produced by the facility, through a tolling arrangement. During
1998, the Company satisfied 36% of its total coke needs under such arrangement.
The Company advanced $30 million during construction of the project, which is
recorded as a deferred asset on the balance sheet and will be credited against
required cash payments during the second half of the energy tolling arrangement.
The remainder of the Company's coke needs are supplied through third party
purchases. One of the Company's two purchase contracts requires the purchase of
approximately 300,000 tons of coke during its final year, 1999, at a price
approximating market price. The Company's other contract requires the purchase
of 350,000 tons of coke annually through the year 2000, on a take-or-pay basis,
with a provision allowing the Company to sell the coke to others. The price is
determined annually based on certain market determinants.
The Company sold all of its limestone and dolomite properties in September
1990. The Company entered into a long-term contract with the buyer of the
properties to purchase, subject to certain exceptions and at prices which
approximate market, the full amount of the annual limestone needs of the Indiana
Harbor Works through 2002.
Approximately 83% of the iron ore pellets and all of the limestone received
by the Company at its Indiana Harbor Works in 1998 were transported by Inland's
one leased and three formerly owned ore carriers. Inland's leased ore carrier
was returned on March 12, 1999. Inland's three formerly owned ore carriers were
sold to a third party during 1998. These ore carriers will be managed by the new
owner, but their shipping services will be retained by Inland under a
time-charter. Agreements are in effect for the transportation on the Great Lakes
of the remainder of Inland's iron ore pellet requirements. Approximately 9% of
the Company's coal requirements were transported in its hopper cars by unit
train in 1998. The remainder of the Company's coal requirements was transported
in independent carrier-owned equipment or leased equipment. Approximately 22% of
the Company's coke requirements in 1998 were transported in its own hopper cars,
53% in leased hopper cars, 11% in independent carrier-owned hopper cars, and 14%
in independent carrier-owned river barges.
See "Energy" below for further information relating to the use of coal in
the operations of the Company.
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<PAGE> 6
PRODUCT CLASSES
The following table sets forth the percentage of consolidated net sales,
for the three years indicated, contributed by each class of similar products of
the Company that accounted for 10% or more of consolidated net sales in such
time period. The data includes sales to affiliates of the Company.
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Sheet and Strip............................................. 82% 81% 81%
Bar......................................................... 18 19 19
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
Sales to Ryerson Tull, Inc. approximated 11% of consolidated net sales in
the period from July 17, 1998 through December 31, 1998. No other customer,
except I/N Kote, accounted for more than 10% of the consolidated net sales of
the Company during the period.
CAPITAL EXPENDITURES AND INVESTMENTS IN JOINT VENTURES
In recent years, the Company and its subsidiaries have made substantial
capital expenditures, principally at the Indiana Harbor Works, to improve
quality and reduce costs, and for pollution control. Additions by the Company
and its subsidiaries to property, plant and equipment, together with retirements
and adjustments, for the five years ended December 31, 1998, are set forth
below. Net capital additions during such period aggregated $538.4 million.
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS
---------------------------------------
RETIREMENTS NET CAPITAL
ADDITIONS OR SALES ADJUSTMENTS ADDITIONS
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1998................................ $ 65.4 $ 3.1 $2.9 $ 65.2(1)
1997................................ 98.4 40.8 6.1 63.7
1996................................ 155.8 8.5 5.6 152.9
1995................................ 113.9 36.7 1.5 78.7
1994................................ 223.7 47.8 2.0 177.9
</TABLE>
- ---------------
(1) 1998 results do not reflect the revaluation of property, plant and equipment
performed as a result of the acquisition of the Company on July 16, 1998.
In July 1987, a wholly owned subsidiary of the Company formed a
partnership, I/N Tek, with an indirect wholly owned subsidiary of NSC to
construct, own, finance and operate a cold-rolling facility with an annual
capacity of 1,500,000 tons, of which approximately 40% is cold-rolled substrate
for I/N Kote (described below). The I/N Tek facility is located near New
Carlisle, Indiana. The Company, which owns, through its subsidiary, a 60%
interest in the I/N Tek partnership is, with certain limited exceptions, the
sole supplier of hot band to be processed by the I/N Tek facility and generally
has exclusive rights to the production capacity of the facility.
In September 1989, a wholly owned subsidiary of the Company formed a second
partnership, I/N Kote, with an indirect wholly owned subsidiary of NSC to
construct, own, finance and operate two sheet steel galvanizing lines adjacent
to the I/N Tek facility. The subsidiary of the Company owns a 50% interest in
I/N Kote. The I/N Kote facility consists of a hot-dip galvanizing line and an
electrogalvanizing line with a combined annual capacity of 900,000 tons. The
Company has guaranteed 50% of I/N Kote's permanent financing. I/N Kote has
contracted to acquire its cold-rolled steel substrate from the Company, which
supplies the substrate from the I/N Tek facility and the Company's Indiana
Harbor Works.
The amount budgeted for 1999 capital expenditures by the Company and its
subsidiaries is approximately $84 million. It is anticipated that capital
expenditures will be funded from cash generated by operations and borrowings
under financing arrangements. (See "Environment" below for a discussion of
capital expenditures for pollution control purposes.)
6
<PAGE> 7
EMPLOYEES
The monthly average number of active employees of the Company and its
subsidiaries receiving pay during 1998 was approximately 8,800. At year-end,
approximately 6,600 employees were represented by the United Steelworkers of
America, of whom approximately 190 were on furlough or indefinite layoff. Total
employment costs increased from $642 million in 1997 to $649 million in 1998 as
the reduction in salaries and wages was more than offset by an increase in
postretirement health care expense. Under workforce reduction programs, the
Company reduced the salaried workforce by 24% during 1997 and 1998.
The current labor agreement between the Company and the United Steelworkers
of America, effective August 1, 1993, covers wages and benefits through July 31,
1999. Among other things, the agreement provided a wage increase of $.50 per
hour in 1995 and a $500 bonus in each of 1993 and 1994 (totaling in each case
approximately $4 million). All active employees received an additional week of
vacation in 1994 and in 1996. The agreement provided for a reopener on wages and
certain benefits in 1996 with an arbitration provision to resolve unsettled
issues, thereby precluding a work stoppage over the six-year term of the
contract. On September 17, 1996 an arbitrator issued a decision selecting the
Company's final offer of terms covering the second half of the six year
agreement. The terms provided a wage increase of $.50 per hour retroactive to
August 1, 1996 with increases of $.25 an hour in 1997 and 1998. A $1,000 lump
sum was paid to active employees in each of the three remaining years of the
contract (totaling approximately $19 million). One additional holiday was
provided and retirement benefits were increased for active employees. The 1993
agreement also provided for election of a union designee acceptable to the Board
of Directors (Dr. Robert B. McKersie is such union designee), restrictions on
the ability of the Company to reduce the union workforce (generally limited to
attrition and major facilities shutdowns) while allowing greater flexibility to
institute work rule changes, quarterly rather than annual payment of profit
sharing amounts, significant improvements in pension benefits for active
employees, and the securing of retiree health care obligations through certain
trust and second mortgage arrangements. "First dollar" health care coverage is
eliminated under the agreement through the institution of co-payments and
increased deductibles on medical benefit. The Company currently expects to begin
negotiations with the union for a new labor agreement well in advance of the
contract termination date.
ENVIRONMENT
The Company is subject to environmental laws and regulations concerning
emissions into the air, discharges into ground water and waterways, and the
generation, handling, labeling, storage, transportation, treatment and disposal
of waste material. These include various federal statutes regulating the
discharge or release of pollutants to the environment, including the Clean Air
Act, Clean Water Act, Resource Conservation and Recovery Act ("RCRA"),
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA," also known as "Superfund"), Safe Drinking Water Act, and Toxic
Substances Control Act, as well as state and local requirements. Violations of
these laws and regulations can give rise to a variety of civil, administrative,
and, in some cases, criminal actions and could also result in substantial
liabilities or require substantial capital expenditures. In addition, under
CERCLA the United States Environmental Protection Agency (the "EPA") has
authority to impose liability for site remediation on waste generators, past and
present site owners and operators, and transporters, regardless of fault or the
legality of the original disposal activity. Liability under CERCLA is strict,
joint and several.
Capital spending for pollution control projects totaled $2 million in 1998
versus $6 million in 1997. Another $44 million was spent in 1998 to operate and
maintain such equipment, versus $46 million a year earlier. During the five
years ended December 31, 1998, the Company has spent $277 million to construct,
operate and maintain environmental control equipment at its various locations.
Environmental projects previously authorized and presently under
consideration, will require capital expenditures of approximately $4 million in
1999. It is anticipated that the Company will make annual capital expenditures
of $2 million to $5 million in each of the four years thereafter. In addition,
the Company will have ongoing annual expenditures of $40 million to $50 million
for the operation of air and water pollution control facilities to comply with
current federal, state and local laws and regulations. Due to the inability to
7
<PAGE> 8
predict the costs of corrective action that may be required under the Resource
Conservation and Recovery Act and the consent decree in the 1990 EPA lawsuit,
the Company cannot predict the amount of additional environmental expenditures
that will be required. Such additional environmental expenditures, excluding
amounts that may be required in connection with the consent decree in the 1990
EPA lawsuit, however, are not expected to be material to the financial position
or results of operations of the Company.
See Item 3 below for information concerning certain proceedings pertaining
to environmental matters in which the Company is involved.
ENERGY
Coal, together with coke, all of which are purchased from independent
sources, accounted for approximately 68% of the energy consumed by the Company
at the Indiana Harbor Works in 1998.
Natural gas and fuel oil supplied approximately 28% of the energy
requirements of the Indiana Harbor Works in 1998 and are used extensively by the
Company at other facilities that it owns or in which it has an interest.
Utilization of the pulverized coal injection facility has reduced natural gas
and fuel oil consumption at the Indiana Harbor Works.
The Company both purchases and generates electricity to satisfy electrical
energy requirements at the Indiana Harbor Works. In 1998, the Company produced
approximately 31% of its electrical energy requirements at the Indiana Harbor
Works. The purchase of electricity at the Indiana Harbor Works is subject to
curtailment under rules of the local utility when necessary to maintain
appropriate service for various classes of its customers.
A subsidiary of NIPSCO Industries also leased land at the Indiana Harbor
Works where it built a 90 megawatt turbine generating facility. Pursuant to a
15-year toll-charge between the Company and the NIPSCO Industries subsidiary,
the facility converts coke plant flue gas into electricity and plant steam for
use by the Company. The facility became operational in 1998.
A subsidiary of NIPSCO has leased land at the Indiana Harbor Works and
built a 75 megawatt steam turbine generating facility on such land. Pursuant to
a 15-year-toll-charge contract between the Company and the NIPSCO subsidiary,
the turbine facility generates electricity for use by the Company utilizing
steam produced by burning waste blast furnace gas. The facility became
operational in the first half of 1996. During 1998, this facility produced 21%
of the purchased electricity requirements of the Indiana Harbor Works.
ITEM 2. PROPERTIES.
PROPERTIES RELATING TO OPERATIONS
STEEL PRODUCTION
All raw steel made by the Company is produced at its Indiana Harbor Works
located in East Chicago, Indiana. The property on which this plant is located,
consisting of approximately 1,900 acres, is held by the Company in fee. The
basic production facilities of the Company at its Indiana Harbor Works consist
of furnaces for making iron; basic oxygen and electric furnaces for making
steel; a continuous billet caster, a continuous combination slab/bloom caster
and two continuous slab casters; and a variety of rolling mills and processing
lines which turn out finished steel mill products. Certain of these production
facilities, including a continuous anneal line, are held by the Company under
leasing arrangements. The Company purchased the equity interest of the lessor of
the No. 2 BOF Shop Caster Facility in March 1994 and assumed caster-related
debt, which was repaid by year-end 1994. The Company has granted the Pension
Benefit Guaranty Corporation ("PBGC") a lien upon the Caster Facility to secure
the payment of future pension funding obligations. Substantially all of the
remaining property, plant and equipment at the Indiana Harbor Works, other than
the Caster Facility and leased equipment, is subject to the lien of the First
Mortgage of the Company dated April 1, 1928, as amended and supplemented. The
Indiana Harbor Works is also subject to a second lien in favor of the United
Steelworkers of America to secure a post retirement health benefit. See
"Operations--Raw Steel Production and Mill Shipments" in Item 1 above for
further information relating to
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<PAGE> 9
capacity and utilization of the Company's properties. The Company's properties
are adequate to serve its present and anticipated needs, taking into account
those issues discussed in "Capital Expenditures and Investments in Joint
Ventures" in Item 1 above.
I/N Tek, a partnership in which a subsidiary of the Company owns a 60%
interest, has constructed a 1,500,000-ton annual capacity cold-rolling mill on
approximately 200 acres of land, which it owns in fee, located near New
Carlisle, Indiana. Substantially all the property, plant and equipment owned by
I/N Tek is subject to a lien securing related indebtedness. The I/N Tek facility
is adequate to serve the present and anticipated needs of the Company planned
for such facility.
I/N Kote, a partnership in which a subsidiary of the Company owns a 50%
interest, has constructed a 900,000-ton annual capacity steel galvanizing
facility on approximately 25 acres of land, which it owns in fee, located
adjacent to the I/N Tek site. Substantially all the property, plant and
equipment owned by I/N Kote is subject to a lien securing related indebtedness.
The I/N Kote facility is adequate to serve the present and anticipated needs of
the Company planned for such facility.
During 1998, the Company sold its remaining interest in Walbridge Coatings,
but retained the right to use the facility, on a tolling basis, for certain of
its electrogalvanizing and other processing needs through the year 2001.
PCI Associates, a partnership in which a subsidiary of the Company owns a
50% interest, has constructed a pulverized coal injection facility on land
located within the Indiana Harbor Works. The Company leases PCI Associates the
land upon which the facility is located. Substantially all the property, plant
and equipment owned by PCI Associates is subject to a lien securing related
indebtedness. The PCI Associates facility is adequate to serve the present and
anticipated needs of the Company planned for such facility.
See "Operations--Raw Materials" in Item 1 above for information relating to
the Sun and NIPSCO projects.
A subsidiary of the Company owns a fleet of 402 coal hopper cars (100-ton
capacity each) used in unit trains to move coal and coke to the Indiana Harbor
Works. The Company time-charters three vessels for the transportation of iron
ore and limestone on the Great Lakes. During 1998, the Company transferred
ownership of such vessels to a third party subject to a lien in favor of the
PBGC on the vessels to secure the payment of future pension funding obligations.
See "Operations--Raw Materials" in Item 1 above for further information relating
to utilization of the Company's transportation equipment. Such equipment is
adequate, when combined with purchases of transportation services from
independent sources, to meet the Company's present and anticipated
transportation needs.
The Company also owns and maintains research and development laboratories
in East Chicago, Indiana, which facilities are adequate to serve its present and
anticipated needs.
RAW MATERIALS PROPERTIES AND INTERESTS
Certain information relating to raw materials properties and interests of
the Company and its subsidiaries is set forth below. See "Operations--Raw
Materials" in Item 1 above for further information relating to capacity and
utilization of such properties and interests.
Iron Ore
The operating iron ore properties of the Company's subsidiaries and of the
iron ore ventures in which the Company has an interest are as follows:
<TABLE>
<CAPTION>
ANNUAL
PRODUCTION CAPACITY
(IN THOUSANDS OF
PROPERTY LOCATION GROSS TONS OF PELLETS)
-------- -------- ----------------------
<S> <C> <C>
Empire Mine................................. Palmer, Michigan 8,400
Minorca Mine................................ Virginia, Minnesota 2,700
</TABLE>
9
<PAGE> 10
The Empire Mine is operated by the Empire Iron Mining Partnership, in which
the Company has a 40% interest. The Company, through a subsidiary, is the sole
owner and operator of the Minorca Mine. The Company has granted the PBGC a lien
on the Minorca Mine property to secure the payment of future pension funding
obligations. The Company also owns a 38% interest in the Butler Taconite project
(permanently closed in 1985) in Nashwauk, Minnesota.
The reserves at the Empire Mine and Minorca Mine are held under leases
expiring, or expected at current production rates to expire, between 2012 and
2040. Substantially all of the reserves at Butler Taconite are held under
leases. The Company's share of the production capacity of its interests in such
iron ore properties is sufficient to provide the majority of its present and
anticipated iron ore pellet requirements. Any remaining requirements have been
and are expected to continue to be readily available from independent sources.
Coal
All Company coal requirements for the past several years have been and are
expected to continue to be met through contract purchases and other purchases
from independent sources.
OTHER PROPERTIES
The Company and one of its subsidiaries lease, under an arrangement,
approximately 20% of the space in the Inland Steel Building located at 30 West
Monroe Street, Chicago, Illinois. The Company's property lease agreement
terminates December 31, 2001.
A subsidiary of the Company holds in fee at various locations an aggregate
of approximately 20 acres of land, all of which is for sale. The Company also
holds in fee approximately 300 acres of land adjacent to the I/N Tek and I/N
Kote sites, which land is available for future development. Approximately 1,060
acres of rural land, which are held in fee at various locations in the
north-central United States by various raw materials ventures, are also for
sale.
ITEM 3. LEGAL PROCEEDINGS.
On June 10, 1993, the U.S. District Court for the Northern District of
Indiana entered a consent decree that resolved all matters raised by a lawsuit
filed by the EPA in 1990. The consent decree included a $3.5 million cash fine,
environmentally beneficial projects at the Indiana Harbor Works through 1997
costing approximately $7 million, and sediment remediation of portions of the
Indiana Harbor Ship Canal and Indiana Harbor Turning Basin estimated to cost
approximately $19 million over the next several years. The fine and estimated
remediation costs were provided for in 1991 and 1992. The Company's reserve for
environmental liabilities in connection with the consent decree totaled $27
million at year-end 1998. The consent decree also defines procedures for
corrective action at the Company's Indiana Harbor Works. The procedures defined
establish essentially a three-step process, each step of which requires
agreement of the EPA before progressing to the next step in the process,
consisting of: assessment of the site (including stabilization measures),
evaluation of corrective measures for remediating the site, and implementation
of the remediation plan according to the agreed-upon procedures. The Company is
presently assessing the extent of environmental contamination. The Company
anticipates that this assessment will cost approximately $2 million to $4
million per year over the next several years. Because neither the nature and
extent of the contamination nor the corrective actions can be determined until
the assessment of environmental contamination and evaluation of corrective
measures is completed, the Company cannot presently reasonably estimate the
costs of or the time required to complete such corrective actions. Such
corrective actions may, however, require significant expenditures over the next
several years that may be material to the financial position and results of
operations of the Company. Insurance coverage with respect to such corrective
actions is not significant.
On March 22, 1985, the EPA issued an administrative order to the Company's
former Inland Steel Container Company Division ("Division") naming the former
Division and various other unrelated companies as responsible parties under
CERCLA in connection with the cleanup of a waste disposal facility operated by
Duane Marine Salvage Corporation at Perth Amboy, New Jersey. The administrative
order alleged that
10
<PAGE> 11
certain of the former Division's wastes were transported to, and disposed of at,
that facility and required the Company to join with other named parties in
taking certain actions relating to the facility. The Company and the other
administrative order recipients have completed the work required by the order.
In unrelated matters, the EPA also advised the former Division and various other
unrelated parties of other sites located in New Jersey at which the EPA expects
to spend public funds on any investigative and corrective measures that may be
necessary to control any releases or threatened releases of hazardous
substances, pollutants and contaminants pursuant to the applicable provisions of
CERCLA. The notice also indicated that the EPA believes the Company may be a
responsible party under CERCLA. The extent of the Company's involvement and
participation in these matters has not yet been determined. While it is not
possible at this time to predict the amount of the Company's potential
liability, none of these matters is expected to materially affect the Company's
financial position. Results of operations could be materially affected for the
particular reporting periods in which expenses are incurred.
The Company received a Special Notice of Potential Liability ("Special
Notice") from the Indiana Department of Environmental Management ("IDEM") on
February 18, 1992 relating to the Four County Landfill Site, Fulton County,
Indiana (the "Facility"). The Special Notice stated that IDEM has documented the
release of hazardous substances, pollutants and contaminants at the Facility and
was planning to spend public funds to undertake an investigation and control the
release or threatened release at the Facility unless IDEM determined that a
potentially responsible party ("PRP") will properly and promptly perform such
action. The Special Notice further stated that the Company may be a PRP and that
the Company, as a PRP, may have potential liability with respect to the
Facility. In August 1993, the Company, along with other PRPs, entered into an
Agreed Order with IDEM pursuant to which the PRPs agreed to perform a Remedial
Investigation/Feasibility Study ("RI/FS") for the Facility and pay certain past
and future IDEM costs. In addition, the PRPs agreed to provide funds for
operation and maintenance necessary for stabilization of the Facility. The costs
which the Company has agreed to assume under the Agreed Order are not currently
anticipated to exceed $700,000. The cost of the final remedies which will be
determined to be required with respect to the Facility cannot be reasonably
estimated until, at a minimum, the RI/FS is completed. The Company is therefore
unable to determine the extent of its potential liability, if any, relating to
the Facility or whether this matter could materially affect the Company's
financial position or results of operations.
In October 1996, the Company received a notification from IDEM, as lead
administrative trustee, that the natural resource trustees (which also include
the Indiana Department of Natural Resources, the U.S. Department of the
Interior, Fish and Wildlife Service and the National Park Service) intend to
perform a natural resource damage assessment on the Grand Calumet River and
Indiana Harbor Canal system. The notification further states that the Company
has been identified as a PRP in connection with the release of hazardous
substances and oil and the subsequent damages resulting from natural resource
injury. Because of the preliminary nature of this matter, it is not possible at
this time to predict the amount of the Company's potential liability or whether
such potential liability could materially affect the Company's financial
position.
On September 1, 1998, the EPA served the Company with a Complaint,
Compliance Order and Notice of Opportunity for Hearing, alleging violations of
the RCRA arising out of an October 1997 inspection of the Company's No. 1
Electric Furnace Shop. This matter was resolved with the entry of a Consent
Agreement and Consent Order in December 1998, under which the Company paid a
civil penalty in the amount of $248,171 and agreed to undertake a plan for the
enclosure of its electric furnace dust unloading operation.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
The Company meets the conditions set forth in General Instruction J(1)(a)
and (b) of Form 10-K and is therefore omitting, pursuant to General Instruction
J(2), the information called for by this Item.
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
The Company is an indirect wholly owned subsidiary of Ispat. No common
stock dividends have been declared during the past two years. In connection with
Ispat's acquisition of the Company, an affiliate of the Company entered into a
credit agreement dated July 16, 1998 (the "Credit Agreement") for a $860 million
senior secured term credit facility. The terms of the Credit Agreement restrict
the payment of dividends and other Restricted Payments (as defined in the Credit
Agreement). At December 31, 1998, $10 million of dividends or other Restricted
Payments could have been paid.
ITEM 6. SELECTED FINANCIAL DATA.
The Company meets the conditions set forth in General Instruction J(2)(a)
and (b) of Form 10-K and is therefore omitting, pursuant to General Instruction
J(2), the information called for by this Item.
ITEM 7. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS.
On July 16, 1998, Ispat acquired the Predecessor Company from Industries in
accordance with the Acquisition Agreement. The Predecessor Company was renamed
Ispat Inland Inc. on September 1, 1998. Ispat paid $1,143.1 million, plus an
assumption of certain liabilities or obligations, to acquire the Predecessor
Company.
As a result of the Acquisition, the capital structure and accounting basis
of the assets and liabilities of the Company after July 16, 1998 differ from
those of the Predecessor Company in prior periods. Financial data of the
Predecessor Company for periods prior to and through July 16, 1998 are presented
on a historical cost basis. Financial data of the Company thereafter reflects
the Acquisition under the purchase method of accounting, under which the
purchase price has been allocated to assets and liabilities based upon their
estimated fair values. The allocation of the purchase price may be adjusted upon
the final results of gathering certain necessary information primarily related
to the finalization of liabilities assumed.
To facilitate the discussion below of the year ended December 31, 1998
against the results of operations for the same period of 1997, the historical
operations of the Successor Company and Predecessor Company have been combined.
The following table summarizes selected earnings and other data:
<TABLE>
<CAPTION>
1998 1997
-------- --------
DOLLARS AND TONS IN
MILLIONS
<S> <C> <C>
Net sales................................................... $2,385.4 $2,467.5
Operating profit............................................ 113.1 143.8
Net income.................................................. 26.1 54.8
Net tons shipped............................................ 5.2 5.3
</TABLE>
Reported net income declined from $54.8 million in 1997 to $26.1 million in
1998. In part, the decline in net income was attributable to the Acquisition,
more specifically due to the write-up of inventory, valuation of assets and
increased interest expense discussed below.
Net sales declined $82.1 million in 1998 from 1997. Approximately half of
this decline was due to reduced shipments and the remainder was the result of
lower average realizing prices. The reduction in shipments and prices resulted
mainly from the increase in imports, partially offset by the improved mix of
products sold.
Cost of goods sold (excluding depreciation) for 1998 was negatively
impacted by a $20.7 million one-time charge related to the write-up of inventory
for purchase accounting under Accounting Principles Board
12
<PAGE> 13
Opinion No. 16, "Business Combinations." Excluding this one-time charge, cost of
goods sold decreased $66.8 million, in part due to the reduction in shipments,
but more significantly due to the savings achieved from a purchasing cost
reduction program as well as a salaried workforce reduction that occurred at the
beginning of the fourth quarter. Depreciation expense decreased in 1998 by $11.4
million from the prior year due to the change in depreciable value and remaining
useful lives resulting from the valuation of property, plant and equipment as of
the July 16, 1998 acquisition date.
Both years benefited from gains on the sale of assets. A $2.7 million gain
in 1998 resulted from the sale of the Company's interest in the Walbridge
coating line joint venture and a gain of $9.0 million was recorded in 1997 from
the sale of the Company's interest in the Wabush iron ore property.
Interest expense increased by $22.5 million in 1998 due to the $700.0
million of debt incurred as a result of the Acquisition.
YEAR 2000
In mid-1995 the Company initiated a formal program to analyze potential
Year 2000 problems in business and process systems, to remediate and test all
non-compliant systems needed in the new millennium, and to evaluate the Year
2000 status of critical suppliers and service providers.
In order to coordinate the Year 2000 efforts throughout the Company, a Year
2000 Steering Committee was created to review progress to plan and to address
any major issues that may be encountered. The committee meets on a regular basis
and representatives from sixteen key areas of the Company report on the status
of their respective areas.
Information Technology has identified all business systems, and all
components of the hardware infrastructure. At this time, the three major most
critical business systems (Order Fulfillment System, Manufacturing Automation
System, and the Manix System) and the major mainframe IBM operating systems and
ancillary support systems have been remediated and validated as Year 2000
compliant. All other critical business systems are in the final testing or
validation phases with planned completion dates by the end of March 1999.
Non-critical business systems are in the remediation or final testing phases
with planned completion dates by the end of June 1999. The PC/LAN and Client
Server environments are in the validation phase with planned completion dates by
the end of June 1999. The Information Technology teams are also working with end
users in departments across the Company to ensure critical management reporting,
spreadsheets, personal computers, and equipment with imbedded microprocessors
are Year 2000 compliant. Planned completion of this activity is June 1999.
Process Automation has identified over 16,000 pieces of equipment
throughout the Company's manufacturing complex and is on schedule with its
remediation and testing plan. Remediation and testing of all Process Automation
equipment will be completed by March 31, 1999 with the exception of I/N Tek and
I/N Kote Automated Storage & Retrieval System (ASRS) and Automated Guided
Vehicle System (AGV) and seven non-critical other systems. Planned completion of
the ASRS is the end of April 1999 and of the AGV is the end of June 1999.
Planned completion of the seven non-critical other systems ranges from April 15
to the end of June 1999.
The Company's personnel are also working with key customers, critical
suppliers and service providers to assure that potential Year 2000 issues are
remediated and tested in systems interfaces with these business partners. In
addition, all Company suppliers have been notified of the Year 2000 issue and
the Company's Year 2000 position. Critical suppliers have been identified and
the Purchasing Department is in the process of further assessment of these
selected vendors as to their Year 2000 readiness and the risk they may impose on
the Company.
A Company team is working with all outside processors to assure all
communications and business procedures are Year 2000 tested and compliant. The
customer communications Information Technology team is working to assure all
customer-required communication protocols, formats, and business procedures are
Year 2000 tested and compliant. The work of these two teams is to reduce the
risk of any type of business disruption to our customers or outside processors.
13
<PAGE> 14
The Sales Department is communicating with our customers to assure them
that the Company is being proactive in addressing the Year 2000 problem. The
Sales Department is also doing a risk assessment of the Company's key customers
to understand the ramifications of customer problems due to Year 2000 issues.
Planned completion of this activity is June 1999.
All critical business systems will again be tested in late 1999 for
assurance that nothing has changed since the 1998 remediation and testing
phases.
The costs of becoming Year 2000 compliant include providing awareness of
Year 2000 issues, inventory of systems and equipment, impact analysis of systems
and equipment, remediation of software and hardware, testing and validation of
all systems and hardware, risk assessment of suppliers and customers, and
contingency planning. The Company has spent $5.5 million to date and anticipates
that the remaining costs will be $3.0 million. Impact analysis and cost
estimates are updated monthly. At this time, there are no other projects being
delayed that will affect operations or estimated costs due to Year 2000
projects.
The Company is doing everything reasonably possible to reduce the risk of
disruptions to the Company due to the Year 2000 problem. Although the Company
considers it unlikely, the failure by major customers or suppliers, or any delay
or oversight in the Company's efforts to address Year 2000 compliance issues
could result in an adverse impact on the Company, which could be material to its
result of operations or financial position.
Contingency plans are in the development phase with scheduled completion in
the third quarter of 1999. The plans will be constantly reviewed through the
actual millennium rollover. A Year 2000 command center will be assembled to
address any Year 2000 issues as they may occur. The command center will have
plans for emergencies such as power outages, communication failures, police,
fire, and emergency services requests; have on hand certain types of spare
equipment for rapid deployment to departments; have access to programmers and
process automation engineers; and have available other service equipment that
appears to be appropriate in case of failures.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company had $982.4 million of long-term debt (including debt due within
one year) outstanding at December 31, 1998. Of this amount, $696.5 million is
floating rate debt of which $450.0 million is hedged by a 5 year interest rate
collar. The remaining $285.9 million of fixed rate debt had a fair value of
$267.3 million. Assuming a hypothetical 10% decrease in interest rates at
December 31, 1998, the fair value of this fixed rate debt would be estimated to
be $281.6 million. Fair market values are based upon market prices or current
borrowing rates with similar rates and maturities.
The Company utilizes derivative commodity instruments not for trading
purposes but to hedge exposure to fluctuations in the costs of natural gas and
certain nonferrous metal commodities. A hypothetical 10% decrease in commodity
prices for open derivative commodity instruments as of December 31, 1998 would
reduce pre-tax income by $7.0 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements (including the financial statement
schedules listed under Item 14(a)1 of this report) of the Successor Company
called for by this Item, together with the Independent Auditors' Report dated
January 15, 1999, are set forth on pages F-2 to F-22 inclusive, of this Report
on Form 10-K, and are hereby incorporated by reference into this Item.
Consolidated financial statements (including the financial statement schedules
listed under Item 14(a)1 of this report) of the Predecessor Company called for
by this Item, together with the Report of Independent Accountants dated January
8, 1999, are set forth on pages F-23 to F-40 inclusive, of this Report on Form
10-K, and are hereby incorporated by reference into this Item. Financial
statement schedules not included in this Report on Form 10-K have been omitted
because they are not applicable or because the information called for is shown
in the consolidated financial statements or notes thereto.
14
<PAGE> 15
Consolidated quarterly sales and earnings information of the Successor
Company for the period from July 17, 1998 through December 31, 1998 is set forth
in Note 16 of Notes to Consolidated Financial Statements (see F-19), which is
hereby incorporated by reference into this Item. Consolidated quarterly sales
and earnings information of the Predecessor Company for the period from January
1, 1998 through July 16, 1998 and the year 1997 is set forth in Note 16 of Notes
to Consolidated Financial Statements (see F-39), which is hereby incorporated by
reference into this Item.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Company meets the conditions set forth in General Instruction J(1)(a)
and (b) of Form 10-K and is therefore omitting, pursuant to General Instruction
J(2), the information called for by this Item.
ITEM 11. EXECUTIVE COMPENSATION.
The Company meets the conditions set forth in General Instruction J(1)(a)
and (b) of Form 10-K and is therefore omitting, pursuant to General Instruction
J(2), the information called for by this Item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Company meets the conditions set forth in General Instruction J(1)(a)
and (b) of Form 10-K and is therefore omitting, pursuant to General Instruction
J(2), the information called for by this Item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company meets the conditions set forth in General Instruction J(1)(a)
and (b) of Form 10-K and is therefore omitting, pursuant to General Instruction
J(2), the information called for by this Item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) DOCUMENTS FILED AS A PART OF THIS REPORT.
1. CONSOLIDATED FINANCIAL STATEMENTS. The consolidated financial
statements listed below are set forth on pages F-2 to F-40 inclusive, of
this Report and are incorporated by reference in Item 8 of this Annual
Report on Form 10-K.
Independent Auditors' Report dated January 15, 1999
Consolidated Statement of Operations and Consolidated Statement of
Comprehensive Income for the period from July 17, 1998 through December
31, 1998--Successor Company
Consolidated Statement of Cash Flows for the period from July 17,
1998 through December 31, 1998--Successor Company
Consolidated Balance Sheet at December 31, 1998--Successor Company
Consolidated Statement of Stockholders' Equity for the period from
July 17, 1998 through December 31, 1998--Successor Company
Notes to Consolidated Financial Statements--Successor Company
15
<PAGE> 16
Financial Statement Schedule II (Reserves) for the period from July
17, 1998 through December 31, 1998--Successor Company
Report of Independent Accountants dated January 8, 1999
Consolidated Statements of Operations and Reinvested Earnings for
the two years ended December 31, 1997 and for the period from January 1,
1998 through July 16, 1998--Predecessor Company
Consolidated Statements of Cash Flows for the two years ended
December 31, 1997 and for the period from January 1, 1998 through July
16, 1998--Predecessor Company
Consolidated Balance Sheet at December 31, 1997--Predecessor
Company
Schedules to Consolidated Financial Statements at December 31,
1997, relating to:
Property, Plant and Equipment--Predecessor Company
Long-Term Debt--Predecessor Company
Statement of Accounting and Financial Policies--Predecessor Company
Notes to Consolidated Financial Statements--Predecessor Company
Financial Statement Schedule II (Reserves) for the two years ended
December 31, 1997 and for the period from January 1, 1998 through July
16, 1998--Predecessor Company
2. EXHIBITS. The exhibits required to be filed by Item 601 of
Regulation S-K are listed in the "Exhibit Index," which is attached hereto
and incorporated by reference herein.
(B) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by the Company during the quarter
ended December 31, 1998.
16
<PAGE> 17
INDEX
TO
CONSOLIDATED FINANCIAL STATEMENTS
OF
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES
(SUCCESSOR COMPANY)
AND
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES
(PREDECESSOR COMPANY)
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Statement of Operations and Consolidated
Statement of Comprehensive Income for the period from July
17, 1998 through December 31, 1998--Successor Company..... F-3
Consolidated Statement of Cash Flows for the period from
July 17, 1998 through December 31, 1998--Successor
Company................................................... F-4
Consolidated Balance Sheet at December 31, 1998--Successor
Company................................................... F-5
Consolidated Statement of Stockholders' Equity for the
period from July 17, 1998 through December 31,
1998--Successor Company................................... F-6
Notes to Consolidated Financial Statements--Successor
Company................................................... F-7
Financial Statement Schedule II (Reserves) for the period
from July 17, 1998 through December 31, 1998--Successor
Company................................................... F-22
Report of Independent Accountants........................... F-23
Consolidated Statements of Operations and Reinvested
Earnings for the two years ended December 31, 1997 and for
the period from January 1, 1998 through July 16,1998
Predecessor Company....................................... F-24
Consolidated Statements of Cash Flows for the two years
ended December 31, 1997 and for the period from January 1,
1998 through July 16, 1998-- Predecessor Company.......... F-25
Consolidated Balance Sheet at December 31, 1998--Predecessor
Company................................................... F-26
Schedules to Consolidated Financial Statements at December
31, 1997, relating to Property, Plant, and Equipment, and
Long-Term Debt--Predecessor Company....................... F-27
Statement of Accounting and Financial Policies--Predecessor
Company................................................... F-28
Notes to Consolidated Financial Statements--Predecessor
Company................................................... F-29
Financial Statement Schedule II (Reserves) for the two years
ended December 31, 1997 and for the period from January 1,
1998 through July 16, 1998--Predecessor Company........... F-39
</TABLE>
F-1
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of ISPAT INLAND INC.:
We have audited the accompanying consolidated balance sheet of Ispat Inland
Inc. and its subsidiaries (the "Successor Company") as of December 31, 1998, and
the related consolidated statements of operations, comprehensive income,
stockholders' equity and cash flows for the period July 17, 1998 through
December 31, 1998. Our audit also included the financial statement schedule II
as of December 31, 1998 and for the period July 17, 1998 through December 31,
1998 listed at Item 14a. These financial statements and schedule are the
responsibility of the Successor Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Successor Company at
December 31, 1998, and the consolidated results of their operations and their
cash flows for the period July 17, 1998 through December 31, 1998 in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedule as of December 31, 1998 and for the period July 17,
1998 through December 31, 1998, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
Deloitte & Touche LLP
Chicago, Illinois
January 15, 1999
F-2
<PAGE> 19
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
JULY 17, 1998 THROUGH
DECEMBER 31, 1998
---------------------
DOLLARS IN MILLIONS
<S> <C>
Net sales................................................... $ 1,075.4
Operating costs and expenses:
Cost of goods sold (excluding depreciation)............... 946.9
Selling, general and administrative expenses.............. 19.2
Depreciation.............................................. 46.8
----------
Total.................................................. 1,012.9
----------
Operating profit............................................ 62.5
Other expense:
General corporate expense, net of income items............ 4.6
Interest and other expense on debt........................ 41.1
----------
Income before income taxes.................................. 16.8
Provision for income taxes (Note 9)......................... 4.5
----------
Net income............................................. $ 12.3
==========
</TABLE>
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
PERIOD FROM
JULY 17, 1998 THROUGH
DECEMBER 31, 1998
---------------------
DOLLARS IN MILLIONS
<S> <C>
Net Income.................................................. $ 12.3
Other comprehensive loss, net of tax:
Unrealized loss on securities............................. (0.1)
Minimum pension liability adjustment related to joint
ventures............................................... (0.7)
-------
Total.................................................. (0.8)
-------
Comprehensive Income................................... $ 11.5
=======
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 20
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
JULY 17, 1998 THROUGH
DECEMBER 31, 1998
---------------------
DOLLARS IN MILLIONS
<S> <C>
OPERATING ACTIVITIES
Net income................................................ $ 12.3
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation........................................... 46.8
Deferred employee benefit cost......................... (19.5)
Amortization of debt premium........................... (0.7)
Deferred income taxes.................................. (2.5)
Change in:
Receivables.......................................... (25.1)
Inventories.......................................... (47.6)
Accounts payable..................................... 12.2
Bank overdrafts...................................... 17.8
Payables to/receivables from related companies....... 29.6
Accrued salaries and wages........................... 2.9
Other accrued liabilities............................ (4.7)
Other items............................................ (36.2)
---------
Net adjustments...................................... (27.0)
---------
Net cash from operating activities................... (14.7)
---------
INVESTING ACTIVITIES
Capital expenditures...................................... (24.7)
Investments in and advances to joint ventures, net........ 10.8
Payments for acquisition.................................. (1,143.1)
---------
Net cash from investing activities..................... (1,157.0)
---------
FINANCING ACTIVITIES
Proceeds from sale of common stock........................ 320.0
Proceeds from sale of preferred stock..................... 90.0
Long-term debt issued..................................... 707.7
Long-term debt retired.................................... (8.5)
Proceeds from note receivable from related company........ 0.3
Short-term borrowings..................................... 50.0
---------
Net cash from financing activities..................... 1,159.5
---------
Net change in cash and cash equivalents................... (12.2)
Cash and cash equivalents--beginning of period............ 27.9
---------
Cash and cash equivalents--end of period.................. $ 15.7
=========
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest (net of amount capitalized)................... $ 29.5
Income taxes, net...................................... --
Noncash activity:
Deferred tax asset related to comprehensive loss
items................................................. $ 0.4
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 21
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------
DOLLARS IN MILLIONS
(EXCEPT PER SHARE DATA)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 15.7
Receivables less provision for allowances, claims and
doubtful accounts of $17.1............................. 241.4
Inventories (Note 3)...................................... 585.5
--------
Total current assets................................... 842.6
Investments in and advances to joint ventures............... 227.7
Property, plant and equipment (Note 4)...................... 1,968.7
Receivables from related companies.......................... 11.9
Deferred income taxes (Note 9).............................. 2.9
Deferred charges and other assets........................... 55.7
--------
Total assets........................................... $3,109.5
========
LIABILITIES
Current liabilities:
Accounts payable.......................................... $ 185.0
Bank overdrafts........................................... 17.8
Borrowings under revolving credit facility (Note 5)....... 100.0
Payables to related companies............................. 30.7
Accrued liabilities:
Salaries, wages and commissions........................ 57.2
Taxes.................................................. 90.9
Interest on debt....................................... 4.7
Other.................................................. 18.7
Long-term debt due within one year (Note 6)
Related companies...................................... 7.0
Other.................................................. 4.0
--------
Total current liabilities............................ 516.0
Long-term debt (Note 6)
Related companies......................................... 689.5
Other..................................................... 281.9
Deferred employee benefits (Note 8)......................... 1,135.5
Other credits............................................... 65.1
Commitments and contingencies (Note 11)
--------
Total liabilities...................................... 2,688.0
--------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 100 shares authorized, 100
shares issued and outstanding, liquidation value $90 (Note
7)........................................................ 90.0
Common stock, $.01 par value, 1,000 shares authorized, 100
shares issued and outstanding (Note 7).................... 320.0
Reinvested earnings......................................... 12.3
Accumulated other comprehensive loss........................ (0.8)
--------
Total stockholders' equity........................... 421.5
--------
Total liabilities and stockholders' equity........... $3,109.5
========
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE> 22
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 17, 1998 THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE TOTAL
PREFERRED COMMON REINVESTED INCOME STOCKHOLDERS'
STOCK STOCK EARNINGS (LOSS) EQUITY
--------- ------ ---------- ------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Initial capitalization at July
17, 1998...................... $90.0 $320.0 $ -- $ -- $410.0
Net income...................... -- -- 12.3 -- 12.3
Other comprehensive loss........ -- -- -- (0.8) (0.8)
----- ------ ----- ----- ------
Balance at December 31, 1998.... $90.0 $320.0 $12.3 $(0.8) $421.5
===== ====== ===== ===== ======
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE> 23
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 1--THE ACQUISITION
On July 16, 1998, Ispat International N.V. ("Ispat") acquired Inland Steel
Company ("Predecessor Company") from Inland Steel Industries, Inc.
("Industries") in accordance with an Agreement and Plan of Merger ("Agreement"),
dated as of May 27, 1998, amended as of July 16, 1998 (the "Acquisition").
Inland Steel Company was renamed Ispat Inland Inc. ("Successor Company" or the
"Company") on September 1, 1998. The Predecessor Company was acquired for
$1,143.1, plus the assumption of certain liabilities or obligations.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The capital structure and accounting basis of the assets and liabilities of
the Company as of July 17, 1998 and thereafter differ from those of the
Predecessor Company in prior periods as a result of the Acquisition. The
Acquisition is being accounted for under the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16, "Accounting for
Business Combinations." The total purchase price has been allocated to assets
and liabilities of the Company based on preliminary estimates of their
respective fair values. Accordingly, the allocation of the purchase price
reflected in the accompanying consolidated balance sheet may be adjusted upon
the final results of gathering certain necessary information primarily related
to the finalization of liabilities assumed. The final asset and liability values
may differ from those set forth in such balance sheet; however, changes, if any,
are not expected to have a material effect on the results of operations and
financial position of the Company.
Accounting for Equity Investments
The Company's investments in less than majority-owned companies, joint
ventures and partnerships, and the Company's majority interest in the I/N Tek
partnership are accounted for under the equity method.
Inventory Valuation
Inventories are carried at the lower of cost or market. Cost is principally
determined on a first-in, first-out ("FIFO") method. Costs include the purchase
costs of raw materials, conversion costs, and an allocation of fixed and
variable production overhead.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated using the
straight line method over their useful lives. Major improvements which add to
productive capacity or extend the life of an asset are capitalized while repairs
and maintenance are charged to expense as incurred. The carrying amount for
long-lived assets is reviewed whenever events or changes in circumstances
indicate that an impairment may have occurred.
Cash Equivalents
Cash equivalents are highly liquid, short-term investments purchased with
maturities of three months or less when acquired.
Deferred Financing Costs
Deferred financing costs are amortized over the expected terms of the
related debt.
F-7
<PAGE> 24
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)--(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Income Taxes
Income tax expense is based upon reported results of operations and
reflects the impact of temporary differences between the amount of assets and
liabilities recognized for financial reporting purposes and such amounts
recognized for tax purposes.
DERIVATIVES
Derivative financial instruments are utilized to manage exposure to
fluctuations in cost of natural gas and specific nonferrous metals used in the
production process. The use of these financial instruments is intended for
hedging purposes. Gains or losses are recognized as part of the cost of the
underlying product or service when the contracts are closed. Additionally,
derivatives are used to hedge exposure to interest rate fluctuations for
floating rate debt for which the gains or losses are recognized in interest
expense.
COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 130, "Reporting Comprehensive Income." In accordance with SFAS No. 130, the
Company changed its reporting to display comprehensive income and its components
in the Company's Consolidated Statement of Comprehensive Income. As of December
31, 1998, the components of comprehensive income include unrealized loss on
securities and minimum pension liability adjustment related to joint ventures.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and related notes to financial statements. Actual results may differ
from such estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which requires
recognition of all derivative instruments in the statement of financial position
as either assets or liabilities, measured at fair value, and is effective for
fiscal years beginning after June 15, 1999. This statement additionally requires
changes in the fair value of derivatives to be recorded each period in current
earnings or comprehensive income depending on the intended use of the
derivatives. The Company is currently assessing the impact of this statement on
its results of operations and financial position.
F-8
<PAGE> 25
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)--(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 3--INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
In-process and finished steel............................... $398.8
Raw materials and supplies:
Iron ore.................................................. 104.5
Scrap and other raw materials............................. 69.2
Supplies.................................................. 13.0
------
186.7
------
Total.................................................. $585.5
======
</TABLE>
As a result of the Acquisition, inventories were recorded at their fair
values at July 17, 1998. Such fair value for finished goods and work in process
represented selling price less estimated costs of completion, selling costs and
a reasonable profit allowance for the selling and completion effort. Raw
materials were valued at replacement cost. The fair value of inventories was in
excess of their inventoriable cost which resulted in a one-time charge to cost
of goods sold during the period of $20.7.
NOTE 4--PROPERTY, PLANT AND EQUIPMENT
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
Land........................................................ $ 46.5
Buildings and improvements.................................. 182.5
Machinery and equipment..................................... 1,780.6
Construction in process..................................... 5.9
--------
2,015.5
Accumulated depreciation.................................... 46.8
--------
Property, plant and equipment, net.......................... $1,968.7
========
</TABLE>
As a result of the Acquisition, property, plant and equipment was recorded
at its estimated fair value at July 17, 1998.
NOTE 5--BORROWING ARRANGEMENTS
Inland Steel Administrative Service Company ("ISAS"), a wholly owned
subsidiary of the Company established to provide a supplemental source of
short-term funds to the Company, has a $125 revolving credit facility with a
group of banks. In July 1998, ISAS entered into an agreement with a bank to
provide another $25 revolving credit facility with terms essentially identical
to those of the existing facility. Both the facilities extend to November 30,
2000. The Company has agreed to sell substantially all of its receivables to
ISAS to secure these facilities. The facilities require the maintenance of
various financial ratios, including minimum net worth and leverage ratios. At
December 31, 1998, $100 was borrowed under the facilities, leaving $50
available.
F-9
<PAGE> 26
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)--(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 6--LONG-TERM DEBT
Long-term debt (excluding current portion) consists of the following at
December 31, 1998:
<TABLE>
<CAPTION>
<S> <C>
First Mortgage Bonds:
Series U, Tranche B, due July 16, 2005.................... $ 344.7
Series U, Tranche C, due July 16, 2006.................... 344.7
Series R, 7.9% due January 15, 2007....................... 62.9
Pollution Control Series 1977, 5 3/4% due February 1,
2007................................................... 24.9
Pollution Control Series 1993, 6.8% due June 1, 2013...... 44.4
Pollution Control Series 1995, 6.85% due December 1, 2012... 18.9
--------
Total First Mortgage Bonds............................. 840.5
Obligations for Industrial Development Revenue Bonds:
Pollution Control Project No. 11, 7 1/8% due June 1, 2007... 22.2
Pollution Control Project No. 13, 7 1/4% due November 1,
2011...................................................... 43.1
Exempt Facilities Project No. 14, 6.7% due November 1,
2012...................................................... 5.6
Exempt Facilities Project No. 15, 5 3/4% due October 1,
2011...................................................... 52.3
Exempt Facilities Project No. 16, 7% due January 1, 2014.... 7.7
--------
Total long-term debt........................................ $ 971.4
========
</TABLE>
In connection with the financing of the Acquisition, an affiliate of the
Company, Ispat Inland, L.P. (the "Borrower"), entered into a Credit Agreement
dated July 16, 1998 (the "Credit Agreement") for a senior secured term credit
facility and letter of credit with a syndicate of financial institutions for
whom Credit Suisse First Boston is the agent (the "Agent"). The Credit Agreement
consists of a $350 Tranche B Term Loan due July 16, 2005 (the "Tranche B Loan"),
a $350 Tranche C Term Loan due July 16, 2006 (the "Tranche C Loan" and together
with the Tranche B Loan, the "Term Loans") and a $160 letter of credit extending
to July 16, 2003, (the "LC" and together with the Term Loans, the "Facilities").
The LC has not been drawn upon.
Each of the Tranche B Loan and Tranche C Loan has scheduled principal
repayments of $.875 per quarter until maturity. The lenders are committed to
renewing the LC annually for five years, so long as the Company and Borrower can
make certain representations and warranties.
On July 16, 1998, the Company issued $875 of First Mortgage Bonds as
security both for the Facilities and for an interest rate hedge required under
the Credit Agreement (the "Hedge"). Series U, in a principal amount of $700, was
issued to an indirect subsidiary of the Borrower which, in turn, pledged the
Bonds to the Agent for the benefit of the Term Loan lenders. Series V, in a
principal amount of $160, was issued to the Agent for the benefit of the LC
lenders. Series W, in a principal amount of $15, was issued to the Agent for the
benefit of the counterparty to the Hedge.
As a further credit enhancement under the Credit Agreement, the Facilities
and the Hedge are fully and unconditionally guaranteed by the Company, certain
subsidiaries of the Company and Ispat.
Borrowings under the Term Loans bear interest at a rate per annum equal to,
at the Borrower's option: (1) the higher of (a) the Agent's prime rate or (b)
the rate which is 1/2 of 1% in excess of the Federal Funds effective rate
(together the "Base Rate"), plus 1.25% for Tranche B Loans and 1.75% for Tranche
C Loans or (2) the LIBO Rate (as defined in the Credit Agreement) plus 2.25% for
Tranche B Loans and 2.75% for Tranche C Loans. The fee for the LC is 2.25% of
the LC amount per annum (the "LC Fee"). The spread
F-10
<PAGE> 27
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)--(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 6--LONG-TERM DEBT--(CONTINUED)
over the LIBO Rate and Base Rate and the LC Fee will be reduced if the Company's
Consolidated Leverage Ratio (as defined in the Credit Agreement) falls to
specified levels.
In October 1998, the Borrower entered into the Hedge required under the
Credit Agreement. The Hedge consists of a five-year interest rate collar. The
Hedge is based on LIBOR with a floor of 4.50% and a ceiling of 6.26% on a
notional amount of $450.
The Company is obligated to pay interest on the Series U First Mortgage
Bonds at the rate paid by the Borrower to the Term Loan lenders, plus 1/2 of 1%
per annum and on the Series V First Mortgage Bonds at a rate equal to the LC
Fee.
With the exception of Series U, V and W, the First Mortgage Bonds are the
obligation solely of the Company and have not been guaranteed or assumed by or,
otherwise, become the obligation of Ispat or any of its other subsidiaries. Each
series of First Mortgage Bonds issued by the Company is limited to the principal
amount outstanding, with the Pollution Control Series 1977 Bonds and the Series
R First Mortgage Bonds subject to a sinking fund. A substantial portion of the
property, plant and equipment owned by the Company at its Indiana Harbor Works
is subject to the lien of the First Mortgage. This property had a book value of
approximately $1,600 on December 31, 1998.
In December 1998, the Company issued $7.7 of exempt facility revenue bonds
(Project No. 16).
The Credit Agreement restricts the payment of dividends and other
Restricted Payments (as defined in the Credit Agreement) to 50% of Consolidated
Net Income (as defined in the Credit Agreement) plus certain specifically
allowed types of Restricted Payments. At December 31, 1998, $10 million of
dividends or other Restricted Payments, in addition to those specifically
allowed, could have been paid.
The Credit Agreement contains other covenants that, among other things,
limit or prohibit the ability of the Company or the Borrower to incur
indebtedness, create liens, engage in transactions with affiliates, sell assets
and engage in mergers and consolidations. Additionally, the Company must
maintain a minimum Consolidated EBITDA (as defined in the Credit Agreement).
In conjunction with the Acquisition of the Company by Ispat on July 16,
1998, the Company repaid $228.9 owed to Industries, its parent company prior to
the Acquisition. The remaining long-term debt at the Acquisition date was
restated to its fair value which resulted in the debt increasing by $16.9.
Maturities of long-term debt obligations are: $11.0 in 1999, $13.3 in 2000,
$13.3 in 2001, $13.3 in 2002, $13.8 in 2003 and $917.7 thereafter.
NOTE 7--EQUITY
COMMON STOCK
On December 31, 1998, the Company had 1,000 shares authorized of common
stock, $.01 par value ("Common Stock"), of which 100 shares were issued,
outstanding and owned by a wholly owned subsidiary of Ispat.
PREFERRED STOCK
On December 31, 1998, the Company had 100 shares issued and outstanding of
Series A 8% Preferred Stock, $.01 par value ("Preferred Stock"), which is owned
by a wholly owned subsidiary of Ispat. The Preferred Stock has liquidation
preference over the Common Stock.
F-11
<PAGE> 28
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)--(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 8--RETIREMENT BENEFITS
Effective December 31, 1998, the Company adopted SFAS No. 132, "Employers'
Disclosures About Pensions and Other Postretirement Benefits." The provisions of
SFAS No. 132 revise employers' disclosures about pensions and other
postretirement benefit plans. This statement does not change the measurement or
recognition of these plans.
PENSIONS
The Company Pension Plan and Pension Trust, which covers certain employees
of the Company, is a noncontributory defined benefit plan with pensions based on
final pay and years of service for all salaried employees and certain wage
employees, and years of service and a fixed rate (in most instances based on
frozen pay or on job class) for all other wage employees, including members of
the United Steelworkers of America.
Reconciliation of the pension benefit obligation and plan assets from July
17, 1998 through the measurement date of November 30, 1998 was as follows:
<TABLE>
<S> <C>
Change in benefit obligation --
Benefit obligation at July 17, 1998....................... $2,148.2
Service cost.............................................. 11.7
Interest cost............................................. 64.9
Plan amendments gain...................................... (65.4)
Actuarial gain............................................ (20.8)
Benefits paid............................................. (50.7)
--------
Benefit obligation at November 30, 1998................... $2,087.9
========
Change in plan assets --
Fair value at July 17, 1998............................... $2,018.5
Actual return............................................. (29.5)
Employer contribution..................................... 25.0
Benefits paid............................................. (50.7)
--------
Fair value at November 30, 1998........................... $1,963.3
========
</TABLE>
The plan amendments gain reflects the plan change announced during the
fourth quarter that became effective January 1, 1999. The amendment provides
that pension benefits for most of the Company's non-represented salaried
employees will be determined in a "cash balance" arrangement. For each covered
employee, a notional account is credited each quarter with a percentage of pay
and interest. At termination, the account balance is available to the employee
as either a lump-sum payment or an annuity.
The funded status of the pension plan at December 31, 1998 is as follows:
<TABLE>
<S> <C>
Benefit obligation.......................................... $2,087.9
Fair value of assets........................................ 1,963.3
--------
Funded status of plan....................................... (124.6)
Unrecognized net loss....................................... 94.4
Unrecognized prior service cost............................. (65.4)
--------
Accrued pension liability at December 31, 1998.............. ($ 95.6)
========
</TABLE>
F-12
<PAGE> 29
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)--(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 8--RETIREMENT BENEFITS--(CONTINUED)
The following weighted average assumptions were used at July 17, 1998 and
November 30, 1998 in accounting for the pension plan:
<TABLE>
<S> <C>
Discount rate............................................... 6.75%
Expected return on plan assets.............................. 9.50%
Rate of compensation increase............................... 4.00%
</TABLE>
The net periodic benefit cost (credit) for the period from July 17, 1998
through December 31, 1998 was as follows:
<TABLE>
<S> <C>
Service cost................................................ $ 11.7
Interest cost............................................... 64.9
Expected return on plan assets.............................. (85.7)
--------
Net periodic benefit credit................................. ($ 9.1)
========
</TABLE>
The Company also sponsors a savings plan through which eligible salaried
employees may elect to save a portion of their salary, and the Company matches
the first five percent of each participant's salary contributed, subject to
certain IRS limitations. Compensation expense related to this plan amounted to
$2.3 for the period from July 17, 1998 through December 31, 1998.
BENEFITS OTHER THAN PENSION
Substantially all of the Company's employees are covered under
postretirement life insurance and medical benefit plans that require deductible
and co-insurance payments from retirees. The postretirement life insurance
benefit formula used in the determination of postretirement benefit cost is
primarily based on applicable annual earnings at retirement for salaried
employees and specific amounts for hourly employees. The Company does not
prefund any of these postretirement benefits. Effective January 1, 1994, a
Voluntary Employee Benefit Association Trust was established for payment of
health care benefits made to United Steelworkers of America retirees. Funding of
the Trust is made as claims are submitted for payment.
Reconciliation of the postretirement benefit obligation from July 17, 1998
through the November 30, 1998 measurement date was as follows:
<TABLE>
<S> <C>
Benefit obligation at July 17, 1998......................... $ 1,010.1
Service cost................................................ 6.9
Interest cost............................................... 30.8
Plan amendments gain........................................ (104.1)
Actuarial loss.............................................. 31.3
Benefits paid............................................... (21.6)
---------
Benefit obligation at November 30, 1998..................... $ 953.4
=========
</TABLE>
The plan amendments gain results from a plan amendment effective January 1,
1999 requiring increased contributions from salaried retirees for health care
coverage, as well as increases in deductibles and copays. In addition, life
insurance coverage for salaried retirees has been reduced, effective at the same
date.
F-13
<PAGE> 30
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)--(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 8--RETIREMENT BENEFITS--(CONTINUED)
The funded status of the postretirement benefit obligation at December 31,
1998 is as follows:
<TABLE>
<S> <C>
Benefit obligation.......................................... $ 953.4
Fair value of assets........................................ --
---------
Funded status of plan....................................... (953.4)
Unrecognized net gain....................................... 31.2
Unrecognized prior service cost............................. (104.1)
---------
Accrued postretirement benefit obligation at December 31,
1998...................................................... $(1,026.3)
=========
</TABLE>
The following weighted average assumptions were used at July 17, 1998 and
November 30, 1998 in accounting for the postretirement benefit plan:
<TABLE>
<S> <C>
Discount rate............................................... 6.75%
Rate of compensation increase............................... 4.00%
Health care cost trend rate................................. 4.50%
</TABLE>
The net periodic benefit cost for the period from July 17, 1998 through
December 31, 1998 was as follows:
<TABLE>
<S> <C>
Service cost................................................ $ 6.9
Interest cost............................................... 30.8
-----
Net periodic benefit cost................................... $37.7
=====
</TABLE>
An increase of 1% in the trend rate would increase the benefit obligation
by $131.8 and the annual net periodic cost by $5.7. A 1% decrease would reduce
the benefit obligation by $108.0 and the periodic cost by $4.6.
For purposes of measuring the expected cost of benefits covered by the plan
for next year, a weighted average health care trend rate of 4.50% was assumed
for 1999 and the years thereafter.
NOTE 9--INCOME TAXES
The provision for income taxes for the period from July 17, 1998 through
December 31, 1998 consists of the following:
<TABLE>
<S> <C>
Current federal............................................. $ 7.0
Deferred federal............................................ (3.1)
Deferred state.............................................. 0.6
-----
Total....................................................... $ 4.5
=====
</TABLE>
F-14
<PAGE> 31
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)--(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 9--INCOME TAXES--(CONTINUED)
Total income taxes reflected in the Consolidated Statement of Operations
differ from the amounts computed by applying the statutory federal corporate tax
rate as follows:
<TABLE>
<S> <C>
Federal income tax expense computed at statutory tax rate... $ 5.9
Additional taxes or (credit) from:
State and local income taxes.............................. 0.6
Percentage depletion...................................... (1.9)
All other, net............................................ (0.1)
-----
Total.................................................. $ 4.5
=====
</TABLE>
Deferred tax assets and liabilities arise from the impact of temporary
differences between the amount of assets and liabilities recognized for
financial reporting purposes and such amounts recognized for tax purposes and
resulted from the following:
<TABLE>
<S> <C>
Noncurrent deferred tax assets:
Operating loss carryforwards.............................. $ 2.1
Alternative minimum tax credit carryforward............... 7.0
Retirement benefit obligations............................ 446.9
Shutdown accruals......................................... 9.6
Environmental accruals.................................... 9.1
Tax effect of comprehensive income items.................. 0.4
Other..................................................... 23.0
------
Total noncurrent deferred tax assets................... 498.1
Noncurrent deferred tax liabilities:
Property, plant and equipment............................. 495.2
------
Net noncurrent deferred tax asset...................... $ 2.9
======
</TABLE>
Based on estimates of projected future taxable income, the Company believes
that it is more likely than not that the tax benefits currently generated will
be realized in future periods. Accordingly, no valuation allowance has been
established as of December 31, 1998.
NOTE 10--RELATED PARTY TRANSACTIONS
The Company was charged $3.4 by Ispat for the period from July 17, 1998
through December 31, 1998 for professional services provided to the Company.
The Company purchased $56.7 of materials from subsidiaries of Ispat during
the period.
The Company's long-term debt due to a related company of $696.5 as of
December 31, 1998 is payable to Ispat Inland Finance LLC, a wholly owned
subsidiary of Ispat. Interest expense related to this debt was $29.5 for the
period from July 17, 1998 to December 31, 1998. This debt arose in connection
with the financing of the Acquisition (see Note 6). The Company's receivable
from a related company of $10.8 at December 31, 1998 is due from Ispat Inland,
L.P., a wholly owned subsidiary of Ispat. Interest income on this receivable was
$.4. This receivable also arose in connection with the financing of the
Acquisition and payment is due on July 16, 2006 unless Ispat Inland, L.P.
chooses to prepay.
F-15
<PAGE> 32
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)--(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 11--COMMITMENTS AND CONTINGENCIES
At December 31, 1998, the Company guarantees $14 and $167 of long-term debt
attributable to PCI Associates and I/N Kote, two of its equity investments,
respectively. The Company owns a 50% interest in the PCI Associates joint
venture which is a pulverized coal injection facility located at the Indiana
Harbor Works.
The Company has an agreement with the Pension Benefit Guaranty Corporation
("PBGC") to provide certain financial assurances with respect to the Company's
Pension Plan. In accordance with this agreement, the Company provided the PBGC a
letter of credit in the amount of $160, made a cash contribution of $25 to the
Pension Trust and committed to certain minimum funding requirements, including
to fund normal cost of the Pension Plan plus, for the next five years, an
additional $5 per year. In addition, the Company granted to the PBGC a first
priority lien on selected assets. The agreement has a term of at least five
years or until certain financial tests are met, whichever is later; however, the
agreement could terminate within five years if the Pension Plan is terminated or
the Company is sold and the purchaser meets certain tests.
The Company has an agreement with a third party to purchase 1.2 million
tons of coke annually for approximately 15 years on a take-or-pay basis at
prices determined by certain cost factors from a heat recovery coke battery
facility located on land leased from the Company. Under a separate tolling
agreement with another third party, the Company has committed to pay tolling
charges over approximately 15 years to desulphurize flue gas from the coke
battery and to convert the heat output from the coke battery to electrical power
and steam. As of December 31, 1998, the estimated minimum tolling charges
remaining over the life of this agreement were approximately $270.0.
As part of the agreement covering the 1990 sale of the Inland Lime & Stone
Company division assets, the Company agreed, subject to certain exceptions, to
purchase, at prices which approximate market, the annual limestone needs of the
Indiana Harbor Works through 2002.
It is anticipated that the Company will make capital expenditures of $2 to
$5 annually in each of the next five years for the construction and have ongoing
annual expenditures of $40 to $50 for the operation of air and water pollution
control facilities to comply with current federal, state and local laws and
regulations.
The Company is involved in various environmental and other administrative
or judicial actions initiated by governmental agencies. While it is not possible
to predict the results of these matters, the Company does not expect
environmental expenditures, excluding amounts that may be required in connection
with the 1993 consent decree in the 1990 EPA lawsuit, to materially affect the
Company's results of operations or financial position. Corrective actions
relating to the EPA consent decree may require significant expenditures over the
next several years that may be material to the results of operations or
financial position of the Company. At December 31, 1998, the Company's reserves
for environmental liabilities totaled $27, of which $21 is related to the
sediment remediation under the 1993 EPA consent decree.
The Company and its subsidiaries have various operating leases for which
the minimum lease payments are $15.6 in 1999, $14.8 in 2000, $13.9 in 2001, $9.5
in 2002, $8.0 in 2003 and $17.6 thereafter. Rental expense for the period from
July 17, 1998 through December 31, 1998 was $13.8.
The total amount of firm commitments of the Company and its subsidiaries to
contractors and suppliers in connection with construction projects primarily
related to additions to property, plant and equipment, was $7 at December 31,
1998.
The Company is involved in certain litigation arising in the ordinary
course of business. None of these matters is expected to have a material adverse
effect on the Company's financial position or results of operations. However,
the ultimate resolution of these matters could result in a change in the
Company's estimate of its liability for these matters.
F-16
<PAGE> 33
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)--(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 12--DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
DERIVATIVES
The Company uses futures and swap contracts to manage fluctuations in the
cost of natural gas and certain nonferrous metals, primarily zinc which is used
in the coating of steel. Timing of these transactions corresponds to the
expected need for the underlying physical commodity and is intended as a hedge
against the cost volatility of these commodities. The counterparties to these
contracts are internationally recognized companies which are not considered a
credit risk by the Company. Contracts generally do not extend out beyond one
year. The Company had contracts for these commodities that amounted to $68.9 as
of December 31, 1998, the fair value of which was $62.5.
A portion of the floating rate debt used in connection with the financing
of the Acquisition was hedged through the use of an interest collar (see Note
6).
LONG-TERM DEBT
The estimated fair value of the Company's long-term debt (including current
portions thereof), using quoted market prices of Company debt securities
recently traded and market-based prices of similar securities for those
securities not recently traded, was $908 at December 31, 1998 as compared with
the carrying value of $982 in the balance sheet at year-end 1998.
NOTE 13--I/N TEK AND I/N KOTE JOINT VENTURES
I/N Tek, a general partnership formed for a joint venture between the
Company and Nippon Steel Corporation ("NSC"), owns and operates a cold-rolling
facility. I/N Tek is 60% owned by a wholly owned subsidiary of the Company and
40% owned by an indirect wholly owned subsidiary of NSC. The Company has
exclusive rights to the productive capacity of the facility, except in certain
limited circumstances and, under a tolling arrangement with I/N Tek, has an
obligation to use the facility for the production of cold rolled steel. Under
the tolling arrangement, the Company was charged $68.8 for such tolling services
for the period from July 17, 1998 through December 31, 1998 and owed $3.9 to I/N
Tek at year-end 1998 related to such tolling services.
The Company and NSC also own and operate another joint venture which
consists of a 400,000 ton electrogalvanizing line and a 500,000 ton hot-dip
galvanizing line adjacent to the I/N Tek facility. I/N Kote, the general
partnership formed for this joint venture, is owned 50% by a wholly owned
subsidiary of the Company and 50% by an indirect wholly owned subsidiary of NSC.
The Company and NSC each has guaranteed the share of long-term financing
attributable to their respective subsidiary's interest in the partnership. I/N
Kote had $333 outstanding under its long-term financing agreement at December
31, 1998. I/N Kote is required to buy all of its cold rolled steel from the
Company, which is required to furnish such cold rolled steel at a price that
results in an annual return on equity to the partners of I/N Kote, depending
upon operating levels, of up to 10% after operating and financing costs; this
price may be subject to an adjustment if the Company's return on sales differs
from I/N Kote's return on sales. Purchases of Company cold rolled steel by I/N
Kote aggregated $157.6 for the period from July 17,1998 through December 31,
1998. At year-end 1998, I/N Kote owed the Company $16.0 related to these
purchases. Prices of cold rolled steel sold by the Company to I/N Kote are
determined pursuant to the terms of the joint venture agreement and are based,
in part, on operating costs of the partnership. In 1998, the Company sold cold
rolled steel to I/N Kote at prices that exceeded the Company's production costs
but were less than the market prices for cold rolled steel products. I/N Kote
also provides tolling services to the Company for which it was charged $4.7 for
F-17
<PAGE> 34
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)--(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 13--I/N TEK AND I/N KOTE JOINT VENTURES--(CONTINUED)
the period from July 17, 1998 through December 31, 1998. The Company sells all
I/N Kote products that are distributed in North America.
Related to the I/N Tek and I/N Kote joint ventures, the Company owns common
stock of NSC. At year-end 1998, this stock had a fair value of $4.4, which
approximated its recorded value. Fair value was determined based on quoted
market price and after-tax gains or losses are recorded to stockholders' equity.
The investment is included in "Investments in and advances to joint ventures" in
the balance sheet.
NOTE 14--INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
The Company's investments in unconsolidated joint ventures accounted for by
the equity method consist primarily of its 60% interest in I/N Tek, 50% interest
in I/N Kote, 50% interest in PCI Associates and 40% interest in the Empire Iron
Mining Partnership ("Empire"). I/N Tek and I/N Kote are joint ventures with NSC
(see Note 13). The Company does not exercise control over I/N Tek, as all
significant management decisions of the joint venture require agreement by both
of the partners. Due to this lack of control by the Company, the Company
accounts for its investment in I/N Tek under the equity method. PCI Associates
is a joint venture which operates a pulverized coal injection facility at the
Indiana Harbor Works. Empire is an iron ore mining and pelletizing venture owned
in various percentages primarily by U.S. steel companies. Following is a summary
of combined financial information of the Company's unconsolidated joint
ventures:
<TABLE>
<CAPTION>
1998
--------
<S> <C>
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31:
Gross revenue............................................. $1,066.0
Costs and expenses........................................ 965.8
--------
Net income................................................ $ 100.2
========
FINANCIAL POSITION AT DECEMBER 31:
Current assets............................................ $ 249.7
Total assets.............................................. 1,336.1
Current liabilities....................................... 242.2
Total liabilities......................................... 966.8
Net assets................................................ 369.3
</TABLE>
NOTE 15--BUSINESS SEGMENTS AND CONCENTRATION OF RISKS
The Company has adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." The Company and its subsidiaries operate in
a single business segment, which comprises the operating companies and divisions
involved in the manufacturing of basic steel products and related raw material
operations.
The Company produces and sells a wide range of steels, of which
approximately 99% consists of carbon and high-strength low-alloy steel grades.
For the period from July 17, 1998 through December 31, 1998, approximately 79%
of the sales was to customers in five mid-American states, and 93% were to
customers in 20 mid-American states. Over half the sales are to the steel
service center and transportation (including automotive) markets.
Sales to Ryerson Tull, Inc. approximated 11% of consolidated net sales in
the period from July 17, 1998 through December 31, 1998. No other customer,
except I/N Kote (see Note 13), accounted for more than 10% of the consolidated
net sales of the Company during the period.
F-18
<PAGE> 35
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)--(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 15--BUSINESS SEGMENTS AND CONCENTRATION OF RISKS--(CONTINUED)
As of December 31, 1998, approximately 78% of the active workforce was
represented by the United Steelworkers of America (the "USWA"). The existing
labor contract between the USWA and the Company expires July 31, 1999.
NOTE 16--CONSOLIDATED QUARTERLY SALES AND EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
1998
-----------------------------
PERIOD FROM
JULY 17, 1998
THROUGH FOURTH
SEPTEMBER 30, 1998 QUARTER
------------------ -------
<S> <C> <C>
Net sales................................................ $483.0 $592.4
Gross profit............................................. 21.7 60.3
Net income (loss)........................................ (4.4) 16.7
</TABLE>
NOTE 17--SUBSEQUENT EVENT (UNAUDITED)
On January 22, 1999, the Company established a five-year $120 revolving
credit facility with a group of banks. The Company has agreed to sell
substantially all of its raw material, in-process and finished goods inventory
to Ispat Inland Inventory, LLC, a wholly owned subsidiary of the Company, to
secure this facility.
NOTE 18--PRO FORMA COMBINED STATEMENTS OF OPERATIONS DATA (UNAUDITED)
The following pro forma combined statements of operations of the Company
for the years ended December 31, 1998 and 1997 have been presented to give
effect to the Acquisition, described in Note 1, as if it had occurred on January
1, 1997. The pro forma operating results for the years ended December 31, 1998
and 1997 include the historical results of the Predecessor Company shown herein
adjusted for interest cost on borrowings to finance the Acquisition and purchase
accounting adjustments.
F-19
<PAGE> 36
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)--(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 18--PRO FORMA COMBINED STATEMENTS OF OPERATIONS DATA (UNAUDITED)--
(CONTINUED)
The pro forma results presented below are not necessarily indicative of
what actually would have occurred if the acquisition had been completed as of
the beginning of each of the periods presented, nor are they necessarily
indicative of future results.
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------------------------------
DECEMBER 31, 1998
------------------------------------------------------------
PREDECESSOR SUCCESSOR
COMPANY COMPANY
JANUARY 1, JULY 17,
1998 THROUGH 1998 THROUGH PRO FORMA PRO FORMA
JULY 16, DEC. 31, ADJUSTMENTS TOTAL
1998 1998 (UNAUDITED) (UNAUDITED)
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
NET SALES.......................... $1,310.0 $1,075.4 $2,385.4
-------- -------- --------
OPERATING COSTS AND EXPENSES
Cost of goods sold................ 1,163.9 946.9 $(20.7)(a) 2,087.8
(2.3)(b)
Selling, general and
administrative expenses......... 23.5 19.2 42.7
Depreciation...................... 74.7 46.8 (19.2)(c) 102.3
Gain from sale of assets.......... (2.7) (2.7)
-------- -------- ------ --------
Total........................... 1,259.4 1,012.9 (42.2) 2,230.1
-------- -------- ------ --------
OPERATING PROFIT................... 50.6 62.5 42.2 155.3
GENERAL CORPORATE EXPENSE, NET OF
INCOME ITEMS...................... 6.9 4.6 11.5
INTEREST AND OTHER EXPENSE ON
DEBT.............................. 22.0 41.1 24.8(d) 87.9
-------- -------- ------ --------
INCOME(LOSS) BEFORE INCOME TAXES... 21.7 16.8 17.4 55.9
PROVISION FOR INCOME TAXES......... 7.9 4.5 5.6(e) 18.0
-------- -------- ------ --------
NET INCOME (LOSS).................. $ 13.8 $ 12.3 $ 11.8 $ 37.9
======== ======== ====== ========
<CAPTION>
YEARS ENDED
-------------------------------------------------
DECEMBER 31, 1997
-------------------------------------------------
PREDECESSOR
PRO FORMA COMPANY
PREDECESSOR ADJUSTMENTS PRO FORMA
COMPANY (UNAUDITED) (UNAUDITED)
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES.......................... $2,467.5 $2,467.5
-------- --------
OPERATING COSTS AND EXPENSES
Cost of goods sold................ 2,156.9 $ (1.7)(b) 2,155.2
Selling, general and
administrative expenses......... 42.8 42.8
Depreciation...................... 133.0 (34.5)(c) 98.5
Gain from sale of assets.......... (9.0) (9.0)
-------- ------ --------
Total........................... 2,323.7 (36.2) 2,287.5
-------- ------ --------
OPERATING PROFIT................... 143.8 36.2 180.0
GENERAL CORPORATE EXPENSE, NET OF
INCOME ITEMS...................... 14.7 14.7
INTEREST AND OTHER EXPENSE ON
DEBT.............................. 40.6 45.4(d) 86.0
-------- ------ --------
INCOME(LOSS) BEFORE INCOME TAXES... 88.5 (9.2) 79.3
PROVISION FOR INCOME TAXES......... 33.7 3.5Cr.(e) 30.2
-------- ------ --------
NET INCOME (LOSS).................. $ 54.8 $ (5.7) $ 49.1
======== ====== ========
</TABLE>
(a) Reflects the elimination of the one-time charge to cost of goods
sold of $20.7 for the period of July 17 through December 31, 1998 related
to the inventory write-up as a result of the Acquisition.
(b) Reflects the change in pension and retiree health and life
insurance expense as a result of the actuarial valuation.
(c) Reflects change in depreciation based upon the revaluation of the
property, plant and equipment.
(d) Reflects the net adjustments to interest expense as a result of
the transaction as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED DECEMBER 31,
------------------
1998 1997
------ ------
<S> <C> <C>
Revolving Credit Facility and commitment fees............... $ 1.5 $ 2.9
Tranche B and C Term Loans.................................. 30.9 57.8
Other bank charges.......................................... 3.8 7.1
Elimination of historical interest expense.................. (11.4) (22.4)
----- -----
Total interest expense adjustments........................ $24.8 $45.4
===== =====
</TABLE>
F-20
<PAGE> 37
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)--(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 18--PRO FORMA COMBINED STATEMENTS OF OPERATIONS DATA (UNAUDITED)--
(CONTINUED)
(e) Reflects the tax effects of the pro forma adjustments to income
(loss) before income taxes based on the estimated applicable statutory tax
rates.
F-21
<PAGE> 38
ISPAT INLAND INC. AND SUBSIDIARY COMPANIES (SUCCESSOR COMPANY)
SCHEDULE II -- RESERVES
FOR THE PERIOD FROM JULY 17, 1998 THROUGH DECEMBER 31, 1998
(Dollars in Millions except per share data)
<TABLE>
<CAPTION>
PROVISION FOR ALLOWANCES,
CLAIMS AND DOUBTFUL ACCOUNTS
---------------------------------------------------
BALANCE AT ADDITIONS DEDUCTIONS BALANCE AT
JULY 17, CHARGED FROM END OF
1998 TO INCOME RESERVES YEAR
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
July 17, 1998 through December 31, 1998........ $16.9 $0.2 $-- $17.1
</TABLE>
<TABLE>
<CAPTION>
ACQUISITION RESERVE
---------------------------------------------------
BALANCE AT ADDITIONS DEDUCTIONS BALANCE AT
JULY 17, CHARGED FROM END OF
1998 TO INCOME RESERVES YEAR
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
July 17, 1998 through December 31, 1998........ $17.3 $-- $8.6(A) $7.7
$0.9(B)
$0.1(C)
</TABLE>
- ---------------
NOTES:
(A) Workforce reduction costs.
(B) Acquisition costs.
(C) Other costs.
<TABLE>
<CAPTION>
SHUTDOWN RESERVES
---------------------------------------------------
BALANCE AT ADDITIONS DEDUCTIONS BALANCE AT
JULY 17, CHARGED FROM END OF
1998 TO INCOME RESERVES YEAR
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
July 17, 1998 through December 31, 1998........ $29.9 $-- $0.9 $29.0
</TABLE>
F-22
<PAGE> 39
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
INLAND STEEL COMPANY
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of cash flows and of reinvested earnings
present fairly, in all material respects, the financial position of Inland Steel
Company and Subsidiary Companies at December 31, 1997, and the results of
operations and cash flows for the period January 1, 1998 through July 16, 1998
and the years ended December 31, 1997 and 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
January 8, 1999
F-23
<PAGE> 40
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS
<TABLE>
<CAPTION>
PERIOD FROM YEARS ENDED
JANUARY 1, 1998 DECEMBER 31
THROUGH --------------------
JULY 16, 1998 1997 1996
--------------- -------- --------
DOLLARS IN MILLIONS
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
Net sales............................................ $1,310.0 $2,467.5 $2,397.3
-------- -------- --------
Operating costs and expenses:
Cost of goods sold (excluding depreciation)....... 1,127.8 2,089.7 2,105.3
Selling, general and administrative expenses...... 22.3 40.5 42.3
Depreciation...................................... 74.7 133.0 124.6
State, local and miscellaneous taxes.............. 34.6 60.5 50.8
Workforce reduction provision (Note 8)............ -- -- 26.3
-------- -------- --------
Total........................................... 1,259.4 2,323.7 2,349.3
-------- -------- --------
Operating profit..................................... 50.6 143.8 48.0
Other expense:
General corporate expense, net of income items.... 6.9 14.7 12.4
Interest and other expense on debt................ 22.0 40.6 48.2
-------- -------- --------
Income (loss) before income taxes and extraordinary
loss.............................................. 21.7 88.5 (12.6)
Provision for income taxes (Note 10)................. 7.9 33.7 3.5Cr.
-------- -------- --------
Income (loss) before extraordinary loss.............. 13.8 54.8 (9.1)
Extraordinary loss on early retirement of debt......... -- -- (8.8)
-------- -------- --------
Net income (loss)............................... $ 13.8 $ 54.8 $ (17.9)
======== ======== ========
</TABLE>
- ---------------
Cr. = Credit
<TABLE>
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF REINVESTED EARNINGS
Accumulated deficit at beginning of year............. $ (954.8) $ (983.7) $ (949.5)
Net income (loss) for the year....................... 13.8 54.8 (17.9)
Impact of pension plan split (Note 9)................ -- -- 9.5
Preferred dividends declared......................... (12.9) (25.9) (25.8)
-------- -------- --------
Accumulated deficit at end of year................... $ (953.9) $ (954.8) $ (983.7)
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-24
<PAGE> 41
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
PERIOD FROM DECEMBER 31
JANUARY 1, 1998 ----------------
THROUGH JULY 16, 1998 1997 1996
--------------------- ------ ------
DOLLARS IN MILLIONS
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................................... $13.8 $ 54.8 $(17.9)
Adjustments to reconcile net loss to net cash from
operating activities:
Depreciation..................................... 74.7 133.0 124.6
Deferred employee benefit cost................... 6.1 (15.8) 18.1
Deferred income taxes............................ (3.3) 47.2 19.3
Workforce reduction provision.................... -- -- 26.3
Cokemaking project advance....................... -- (30.0) --
Gain on sale of assets........................... (2.7) (9.0) --
Change in: Receivables........................... 13.8 6.4 15.7
Inventories.......................... 3.0 (18.5) 16.6
Accounts payable..................... (79.9) 21.2 (5.7)
Payables to related companies........ 3.1 (9.7) (0.4)
Accrued salaries and wages........... 1.1 0.5 (11.7)
Other accrued liabilities............ 14.4 (0.7) (22.7)
Other items...................................... (0.4) (44.3) (40.7)
----- ------ ------
Net adjustments................................ 29.9 80.3 139.4
----- ------ ------
Net cash from operating activities............. 43.7 135.1 121.5
----- ------ ------
INVESTING ACTIVITIES
Capital expenditures................................ (40.8) (98.4) (155.8)
Investments in and advances to joint ventures,
net.............................................. 25.4 23.4 23.4
Proceeds from sale of assets........................ 5.2 16.1 3.9
----- ------ ------
Net cash from investing activities............... (10.2) (58.9) (128.5)
----- ------ ------
FINANCING ACTIVITIES
Long term debt issued............................... -- 51.3 42.2
Long term debt retired.............................. (40.9) (59.8) (144.5)
Change in notes payable to related companies........ (1.8) (41.8) 135.1
Dividends paid...................................... (12.9) (25.9) (25.8)
Short-term borrowings............................... 50.0 -- --
----- ------ ------
Net cash from financing activities............... (5.6) (76.2) 7.0
----- ------ ------
Net change in cash and cash equivalents............. 27.9 -- --
Cash and cash equivalents--beginning of period...... -- -- --
----- ------ ------
Cash and cash equivalents--end of period............ $27.9 $ -- $ --
===== ====== ======
SUPPLEMENTAL DISCLOSURES
Cash paid (received) during the period for:
Interest (net of amount capitalized)............. $25.1 $ 40.3 $ 47.3
Income taxes, net................................ 7.6 (11.7) (30.3)
</TABLE>
See Notes to Consolidated Financial Statements.
F-25
<PAGE> 42
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------
DOLLARS IN MILLIONS
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ --
Receivables less provision for allowances, claims and
doubtful account of $16.1.............................. 219.2
Receivables from related companies........................ 5.8
Inventories (Note 2)...................................... 200.5
Deferred income taxes (Note 10)........................... 24.9
--------
Total current assets................................... 450.4
Investments in and advances to joint ventures............... 234.0
Property, plant and equipment, at cost, less accumulated
depreciation (see details page F-27)...................... 1,340.4
Prepaid pension cost (Note 9)............................... 60.5
Deferred income taxes (Note 10)............................. 194.9
Deferred charges and other assets........................... 52.9
--------
Total assets................................................ $2,333.1
========
LIABILITIES
Current liabilities:
Accounts payable.......................................... $ 238.9
Payables to related companies--Notes...................... 230.7
Accrued liabilities:
Salaries, wages and commissions........................ 53.2
Taxes.................................................. 74.3
Interest on debt....................................... 5.2
Terminated facilities costs and other (Note 8)......... 9.6
Long-term debt due within one year........................ 45.9
--------
Total current liabilities............................ 657.8
Long-Term debt (see details page F-27 and Note 4)........... 262.0
Allowance for terminated facilities costs and other (Note
8)........................................................ 49.6
Deferred employee benefits (Note 9)......................... 1,116.3
Deferred income and other................................... 7.7
--------
Total liabilities.................................... 2,093.4
--------
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value, 500 shares authorized for
all series, 110 shares issued and outstanding, aggregate
liquidation value $238.2 (Note 5)......................... --
Common stock, 2,000 shares, $1.00 par value, authorized, 980
shares issued and outstanding............................. --
Additional paid-in capital.................................. 1,194.5
Accumulated deficit......................................... (954.8)
--------
Total stockholders' equity........................... 239.7
--------
Total liabilities and stockholders' equity........... $2,333.1
========
</TABLE>
See Notes to Consolidated Financial Statements.
F-26
<PAGE> 43
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY)
SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------
DOLLARS IN MILLIONS
<S> <C>
PROPERTY, PLANT AND EQUIPMENT:
Land, land improvements and mineral properties............ $ 123.9
Buildings, machinery and equipment........................ 3,776.3
Transportation equipment.................................. 138.2
Property under capital leases--primarily machinery and
equipment.............................................. 36.7
--------
Total.................................................. 4,075.1
Less--
Accumulated depreciation.................................. 2,598.6
Accumulated depreciation--capital leases.................. 35.4
Allowance for retirements and terminated facilities....... 100.7
--------
Net.................................................... $1,340.4
========
LONG-TERM DEBT:
First Mortgage Bonds:
Series R, 7.9% due January 15, 2007.................... $ 61.4
Pollution Control Series 1977, 5 3/4% due February 1,
2007.................................................. 25.5
Pollution Control Series 1993, 6.8% due June 1, 2013... 40.0
Pollution Control Series 1995, 6.85% due December 1,
2012.................................................. 17.0
--------
Total First Mortgage Bonds........................... 143.9
Obligations for Industrial Development Revenue Bonds:
Pollution Control Project No. 3, 6 1/4% due April 1,
1999.................................................. 3.0
Pollution Control Project No. 11, 7 1/8% due June 1,
2007.................................................. 20.0
Pollution Control Project No. 13, 7 1/4% due November
1, 2011............................................... 38.0
Exempt Facilities Project No. 14, 6.7% due November 1,
2012.................................................. 5.1
Exempt Facilities Project No. 15, 5 3/4% due October 1,
2011.................................................. 52.0
--------
Total long-term debt................................. $ 262.0
========
</TABLE>
See Notes to Consolidated Financial Statements.
F-27
<PAGE> 44
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY)
STATEMENT OF ACCOUNTING AND FINANCIAL POLICIES
(Dollars in Millions except per share data)
The following briefly describes the Company's principal accounting and
financial policies.
ACCOUNTING FOR EQUITY INVESTMENTS
The Company's investments in less than majority-owned companies, joint
ventures and partnerships, and the Company's majority interest in the I/N Tek
partnership, are accounted for under the equity method.
INVENTORY VALUATION
Inventories are valued at cost which is not in excess of market. Cost is
determined by the last-in, first-out method except for supply inventories, which
are determined by the average cost or first-in, first-out methods.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is depreciated for financial reporting
purposes over the estimated useful lives of the assets. Steelmaking machinery
and equipment, a significant class of assets, is depreciated on a
production-variable method, which adjusts straight-line depreciation to reflect
production levels at the steel plant. The adjustment is limited to not more than
a 25% increase or decrease from straight-line depreciation. Blast furnace
relining expenditures are capitalized and amortized on a unit-of-production
method over the life of the lining. All other assets are depreciated on a
straight-line method.
Expenditures for normal repairs and maintenance are charged to income as
incurred.
Gains or losses from significant abnormal disposals or retirements of
properties are credited or charged to income. The cost of other retired assets
less any sales proceeds is charged to accumulated depreciation.
CASH EQUIVALENTS
Cash equivalents reflected in the Statement of Cash Flows are highly
liquid, short-term investments with maturities of three months or less. Cash
management activities are performed by the Company's parent, Inland Steel
Industries, Inc. ("Industries"), and periodic cash transfers are made, thereby
minimizing the level of cash maintained by the Company.
STOCK BASED COMPENSATION
Financial Accounting Standards Board ("FASB") Statement No. 123,
"Accounting for Stock-Based Compensation" encourages, but does not require
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company, which participates in Industries' stock
compensation plans, has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related Interpretations. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of Industries' stock
at the date of the grant over the amount an employee must pay to acquire the
stock. Compensation cost for stock appreciation rights and performance equity
units is recorded annually based on the quoted market price of Industries' stock
at the end of the period.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and related notes to financial statements. Changes in such estimates
may affect amounts reported in future periods.
F-28
<PAGE> 45
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 1--THE ACQUISITION
On July 16, 1998, Ispat International N.V. ("Ispat") acquired Inland Steel
Company ("Predecessor Company") from Inland Steel Industries, Inc.
("Industries") in accordance with an Agreement and Plan of Merger ("Agreement"),
dated as of May 27, 1998, amended as of July 16, 1998 (the "Acquisition").
Inland Steel Company was renamed Ispat Inland Inc. ("Successor Company") or (the
"Company") on September 1, 1998. The Predecessor Company was acquired for
$1,143.1.
NOTE 2--INVENTORIES
Inventories were classified on December 31,1997 as follows:
<TABLE>
<S> <C>
In process and finished steel............................... $120.9
Raw materials and supplies:
Iron ore.................................................. 39.7
Scrap and other raw materials............................. 23.7
Supplies.................................................. 16.2
------
79.6
------
Total.................................................. $200.5
======
</TABLE>
Replacement costs for the LIFO inventories exceeded the LIFO values by
approximately $274 on December 31, 1997. The effect on cost of goods sold of
LIFO liquidations in each of the two years ended December 31, 1997 was not
material.
NOTE 3--BORROWING ARRANGEMENTS
Inland Steel Administrative Service Company ("ISAS"), a wholly owned
subsidiary of the Company established to provide a supplemental source of
short-term funds to the Company, has a $125 revolving credit facility with a
group of banks. In July 1998, ISAS entered into an agreement with a bank to
provide another $25 revolving credit facility with terms essentially identical
to those of the existing facility. Both the facilities extend to November 30,
2000. Under this arrangement the Company has agreed to sell substantially all of
its receivables to ISAS to secure these facilities. The facilities require the
maintenance of various financial ratios including minimum net worth and leverage
ratios.
NOTE 4--LONG-TERM DEBT
The outstanding First Mortgage Bonds of Inland Steel Company are the
obligation solely of the Company and have not been guaranteed or assumed by, or
otherwise become the obligation of Industries or any of its other subsidiaries.
Each series of First Mortgage Bonds issued by the Company is limited to the
principal amount outstanding, with the Pollution Control Series 1977 Bonds and
the Series R First Mortgage Bonds subject to a sinking fund. A substantial
portion of the property, plant and equipment owned by the Company at its Indiana
Harbor Works is subject to the lien of the First Mortgage. This property had a
net book value of approximately $1,000 on December 31, 1997.
In July 1998, the Company defeased the remaining $26 of Series T First
Mortgage Bonds, due December 1, 1998.
During the 1997 fourth quarter, the Company refinanced $52 of 6.5%
pollution control revenue bonds with 5.75% tax-exempt refunding bonds.
F-29
<PAGE> 46
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY) --
(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 4--LONG-TERM DEBT--(CONTINUED)
During 1996, the Company tendered for the repurchase of all outstanding
Series T 12% First Mortgage Bonds. Of the $125 principal amount of Series T
Bonds outstanding, $98.7 was tendered. The Company also called $38 of 10%
Pollution Control Project No. 9 Bonds for early redemption, which were
refinanced at an interest rate of 7.25%. As a result of the tenders and early
redemption, the Company recognized an extraordinary after-tax loss of $8.8,
$13.6 before income taxes.
Maturities of long-term debt and capitalized lease obligations due within
five years are: $45.9 in 1998, $4.0 in 1999, $6.3 in 2000, $6.3 in 2001, and
$6.3 in 2002. See Note 13 regarding commitments and contingencies for other
scheduled payments.
Interest cost incurred by the Company totaled $22.4 for the period from
January 1, 1998 through July 16, 1998, $42.3 in 1997 and $50.7 in 1996. Included
in these totals is capitalized interest of $.4 for the period from January 1,
1998 through July 16, 1998, $1.7 in 1997 and $2.5 in 1996.
NOTE 5--CAPITAL STOCK
Cash dividends on Series A Preferred Stock, 10 shares issued and
outstanding, are cumulative and payable quarterly at an annual rate of $72,000
per share. The shares are convertible into common stock at the rate of one share
of common stock for each preferred share, and have a liquidation value of
$1,320,000 per share plus any accrued and unpaid dividend. The shares are
redeemable, at the Company's option, for $1,320,000 per share plus any accrued
and unpaid dividends.
Cash dividends on Series B Preferred Stock, 50 shares issued and
outstanding, are cumulative and payable quarterly at an annual rate of $142,500
per share. The shares are convertible into common stock at a conversion price of
$1,128,750 per share, or 1.33 common shares for each preferred share, and have a
liquidation value of $1,500,000 per share plus any accrued and unpaid dividends.
The shares are redeemable at the Company's option, for $1,500,000 per share plus
any accrued and unpaid dividends.
Cash dividends on Series C Preferred Stock, 50 shares issued and
outstanding, are cumulative and payable quarterly at an annual rate of $360,000
per share. The shares have a liquidation value of $3,000,000 per share plus any
accrued and unpaid dividends. The shares are redeemable at the Company's option
at a price (plus accrued and unpaid dividends) declining from $3,252,000 for the
one-year period commencing December 1, 1997 to $3,000,000 beginning December 1,
2011. The Series C Preferred Stock is also exchangeable at the Company's option
on any dividend payment date for the Company's 12% subordinated debentures due
December 1, 2016, at a rate of $3,000,000 principal amount of debentures for
each share of Series C Preferred Stock.
NOTE 6--STOCK OPTION PLANS
The Company has adopted the disclosure-only provisions of FASB Statement
No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation
cost has been recognized for the stock option plans. Had compensation cost for
the option plan been determined based on the fair value at the grant date for
awards in 1997, 1996 and 1995 consistent with the provisions of FASB Statement
No. 123, the Company's net income would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
1997 1996
----- ------
<S> <C> <C>
Net income (loss)--as reported.............................. $54.8 $(17.9)
Net income (loss)-- pro forma............................... 52.9 (20.0)
</TABLE>
F-30
<PAGE> 47
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY) --
(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 6--STOCK OPTION PLANS--(CONTINUED)
The fair value of each option grant of Industries stock is estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1997: dividend yield of 1.00%;
expected volatility of 32.67%; risk-free interest rate of 6.63%; and expected
term of 5 years.
Company employees participate in the Industries employee stock purchase
plan where employees have the opportunity to sign up twice a year to purchase
stock at the end of each six month period at a price that is 90 percent of the
fair market value price on the last day of the period. In 1997 and 1996, Company
employees received Industries stock with a total value that was approximately
$.08 and $.09, respectively, greater than the price paid for the stock issued.
NOTE 7-- DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
DERIVATIVES
The Company has only limited involvement with derivative financial
instruments, none of which are used for trading purposes. Derivatives are used
to hedge exposure to fluctuations in costs caused by the price volatility of
certain metal commodities and natural gas supplies. Gains and losses associated
with these hedging transactions become part of the cost of the item being
hedged. At no time during 1997 or 1996 were such hedging transactions material.
LONG-TERM DEBT
The estimated fair value of the Company's long-term debt (including current
portions thereof), using quoted market prices of Company debt securities
recently traded and market-based prices of similar securities for those
securities not recently traded, was $328 at December 31, 1997 as compared with
the carrying value of $308 included in the balance sheet at year-end 1997.
NOTE 8--PROVISIONS FOR RESTRUCTURING
In the fourth quarter of 1997, the Company recorded a charge of $10
relating to additional restructuring provisions for previously discontinued raw
material operations primarily related to retiree health care and other benefit
costs.
At year-end 1996, the Company recorded a charge of $26 for provisions
related to pensions, health care, and severance costs resulting from a salaried
workforce reduction plan.
The Company has taken initiatives to reduce its production costs by
shutdown of certain Indiana Harbor Works facilities and raw materials
operations. Reserve balances related to provisions for these shutdowns, which
include long-term liabilities for mine reclamation costs and employee benefits,
totaled $129.5 and $131.6 at December 31, 1997 and 1996, respectively.
F-31
<PAGE> 48
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY) --
(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 9--RETIREMENT BENEFITS
PENSIONS
The Inland Steel Industries Pension Plan and Pension Trust, which covers
certain employees of the Company, also covers certain employees of Industries
and of certain of Industries' other subsidiaries. The plan is a non-contributory
defined benefit plan with pensions based on final pay and years of service for
all salaried employees and certain wage employees, and years of service and a
fixed rate (in most instances based on frozen pay or on job class) for all other
wage employees, including members of the United Steelworkers of America. Because
the fair value of pension plan assets pertains to all participants in the plan,
no separate determination of the fair value of such assets is made solely with
respect to the Company.
Effective April 30, 1996, that portion of the Industries pension plan
covering current and former employees of Ryerson Tull, Inc., a majority owned
subsidiary of Industries, was separated and became the Ryerson Tull Pension
Plan. Due to this separation, Industries remeasured each subsidiary's benefit
obligation using plan data and actuarial assumptions as of the date of
separation. An amount of assets proportional to the liabilities assumed by the
Ryerson Tull Pension Plan was allocated to such plan.
The funded status of the Industries pension plan (excluding Ryerson Tull,
Inc.) as of September 30, 1997 was as follows:
<TABLE>
<S> <C>
Fair value of plan assets................................... $1,991
------
Actuarial present value of benefits for service rendered to
date:
Accumulated Benefit Obligation based on compensation to
date................................................... 1,894
Additional benefits based on estimated future compensation
levels................................................. 73
------
Projected Benefit Obligation.............................. 1,967
------
Plan assets in excess of Projected Benefit Obligation....... $ 24
======
</TABLE>
The calculation of benefit obligations was based on a discount (settlement)
rate of 7.5%; a rate of compensation increase of 4.0%; and a rate of return on
plan assets of 9.5%.
Pension cost for the Company for 1997 and 1996 was $7.3, and $4.1,
respectively. In 1997, the Company paid $29.3 to Industries for its share of a
contribution to the Industries Pension Trust.
BENEFITS OTHER THAN PENSION
Substantially all of the Company's employees are covered under
postretirement life insurance and medical benefit plans that involve deductible
and co-insurance requirements. The postretirement life insurance benefit formula
used in the determination of postretirement benefit cost is primarily based on
applicable annual earnings at retirement for salaried employees and specific
amounts for hourly employees. The Company does not prefund any of these
postretirement benefits. Effective January 1, 1994, a Voluntary Employee Benefit
Association Trust was established for payment of health care benefits to United
Steelworkers of America retirees. Funding of the Trust is made as claims are
submitted for payment.
F-32
<PAGE> 49
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY) --
(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 9--RETIREMENT BENEFITS--(CONTINUED)
The amount of net periodic postretirement benefit cost for 1997 and 1996 is
composed of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Service cost................................................ $ 10 $ 10
Interest cost............................................... 62 66
Net amortization and deferral............................... (15) (11)
---- ----
Total net periodic postretirement benefit cost.............. $ 57 $ 65
==== ====
</TABLE>
The following table sets forth components of the accumulated postretirement
benefit obligation:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
Accumulated postretirement benefit obligation attributable
to:
Retirees.................................................. $ 538
Fully eligible plan participants.......................... 87
Other active plan participants............................ 265
------
Accumulated postretirement benefit obligation............... 890
Unrecognized net gain..................................... 179
Unrecognized prior service credit......................... 35
------
Accrued postretirement benefit obligation................... 1,104
Expense, net of benefits provided, October through
December.................................................. 4
------
Accrued postretirement benefit obligations at December 31... $1,108
======
</TABLE>
Any net gain or loss in excess of 10 percent of the accumulated
postretirement benefit obligation is amortized over the remaining service period
of active plan participants.
The assumptions used to determine the plan's accumulated postretirement
benefit obligation are as follows:
<TABLE>
<S> <C>
Discount rate............................................... 7.5%
Rate of compensation increase............................... 4.0%
Medical cost trend rate..................................... 4.5%
</TABLE>
A one percentage point increase in the assumed health care cost trend rates
for each future year increases the sum of the service cost and interest cost
components of the annual net periodic postretirement benefit cost and the
accumulated postretirement benefit obligation as of September 30, 1997 by $9 and
$106, respectively.
NOTE 10--INCOME TAXES
The Company participates in a tax-sharing agreement under which current and
deferred income tax provisions are determined for each company in the Industries
group on a stand-alone basis. Any current liability is paid to Industries. If
the Company is unable to use all of its allocated tax attributes (net operating
F-33
<PAGE> 50
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY) --
(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 10--INCOME TAXES--(CONTINUED)
loss and tax credit carryforwards) in a given year but other companies in the
consolidated group are able to utilize them, then the Company will be paid for
the use of its attributes. NOL and tax credit carryforwards are allocated to
each company in accordance with applicable tax regulations as if a company were
to leave the consolidated group. Companies with taxable losses record current
income tax credits not to exceed current income tax charges recorded by
profitable companies. If Industries uses NOL carryforwards, the Company will use
the appropriate portion of that year's carryforward previously allocated to it,
if any.
A state tax sharing agreement, similar to the federal agreement, also
exists with Industries for those states in which the consolidated group is
charged state taxes on a unitary or combined basis.
The elements of the provisions for income taxes for each of the periods
indicated below were as follows:
<TABLE>
<CAPTION>
PERIOD FROM YEARS ENDED
JANUARY 1, 1998 DECEMBER 31
THROUGH --------------
JULY 16, 1998 1997 1996
--------------- ----- -----
<S> <C> <C> <C>
Current income taxes:
Federal................................................. $ 6.1 $13.8Cr. $27.8Cr.
State and foreign....................................... 1.2 0.3 0.2
----- ----- -----
7.3 13.5Cr. 27.6Cr.
Deferred income taxes..................................... 0.6 47.2 24.1
----- ----- -----
Total tax expense or benefit............................ $ 7.9 $33.7 $ 3.5Cr.
===== ===== =====
</TABLE>
- ---------------
Cr. = Credit
The components of the deferred income tax assets and liabilities arising
under FASB Statement No. 109 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Deferred tax assets (excluding postretirement benefits other
than pensions):
Net operating loss and tax credit carryforwards........... $274
Restructuring and termination reserves.................... 29
Other deductible temporary differences.................... 43
Less: Valuation allowances................................ (3)
----
343
----
Deferred tax liabilities:
Fixed asset basis difference.............................. 458
Other taxable temporary differences....................... 61
----
519
----
Net deferred liability excluding postretirement
benefits other than pensions.......................... (176)
FASB Statement No. 106 impact (postretirement benefits other
than pensions)............................................ 396
----
Net deferred asset..................................... $220
====
</TABLE>
F-34
<PAGE> 51
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY) --
(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 10--INCOME TAXES--(CONTINUED)
For tax purposes, the Company had available, at December 31, 1997, net
operating loss ("NOL") carryforwards for regular federal income tax purposes of
approximately $651 which will expire as follows: $214 in 2006, $265 in 2007,
$109 in 2008, $6 in 2009 and $57 in 2011. The Company also had investment tax
credit and other general business credit carryforwards for tax purposes of
approximately $6, which expire during the years 1998 through 2006. A valuation
allowance has been established for those tax credits which are not expected to
be realized. Additionally, in conjunction with the Alternative Minimum Tax
("AMT") rules, the Company had available AMT credit carryforwards for tax
purposes of approximately $41, which may be used indefinitely to reduce regular
federal income taxes.
The Company believes that it is more likely than not that all of the NOL
carryforwards will be utilized prior to their expiration. This belief is based
upon the factors discussed below.
The NOL carryforwards and existing deductible temporary differences
(excluding those relating to FASB Statement No. 106) are substantially offset by
existing taxable temporary differences reversing within the carryforward period.
Furthermore, any such recorded tax benefits which would not be so offset are
expected to be realized by continuing to achieve future profitable operations.
Subsequent to the adoption of FASB Statement No. 109, the Company adopted
FASB Statement No. 106 and recognized the entire transition obligation at
January 1, 1992 as a cumulative effect charge in 1992. At December 31, 1997, the
deferred tax asset related to the Company's FASB Statement No. 106 obligation
was $396. To the extent that future annual charges under FASB Statement No. 106
continue to exceed deductible amounts, this deferred tax asset will continue to
grow. Thereafter, even if the Company should have a tax loss in any year in
which the deductible amount would exceed the financial statement expense, the
tax law provides for a 20-year carryforward period of that loss. Because of the
extremely long period that is available to realize these future tax benefits, a
valuation allowance for this deferred tax asset is not necessary.
The Industries group operates in a highly cyclical industry and
consequently has had a history of generating and then fully utilizing
significant amounts of NOL carryforwards. During the years 1986 through 1989,
the Industries group utilized approximately $600 of NOL carry forwards and for
the years 1995 and 1997 in total utilized approximately $283 of NOL
carryforwards.
Total income taxes reflected in the Consolidated Statement of Operations
differ from the amounts computed by applying the federal corporate tax rate as
follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
--------------
1997 1996
----- -----
<S> <C> <C>
Federal income tax expense or benefit computed at statutory
tax rate of 35%........................................... $31.0 $ 4.4Cr.
Additional taxes or credits from:
State and local income taxes, net of federal income tax
effect................................................. 5.6 1.3
Percentage depletion...................................... 3.0Cr. 2.8Cr.
All other, net............................................ 0.1 2.4
----- -----
Total income tax expense or benefit.................... $33.7 $ 3.5Cr.
===== =====
</TABLE>
Cr. = Credit
F-35
<PAGE> 52
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY) --
(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 11--I/N TEK AND I/N KOTE JOINT VENTURES
I/N Tek, a general partnership formed for a joint venture between the
Company and Nippon Steel Corporation ("NSC"), owns and operates a cold-rolling
facility. I/N Tek is 60% owned by a wholly owned subsidiary of the Company and
40% owned by an indirect wholly owned subsidiary of NSC. The Company has
exclusive rights to the productive capacity of the facility, except in certain
limited circumstances, and, under a tolling arrangement with I/N Tek, has an
obligation to use the facility for the production of cold rolled steel. Under
the tolling arrangement, the Company was charged $149.2 and $144.8 in 1997 and
1996, respectively, for such tolling services. Industries and NSC each have
guaranteed a portion of long-term financing of I/N Tek. At December 31, 1997,
Industries' share of such guaranty amounted to $116.
The Company and NSC also own and operate another joint venture which
consists of a 400,000 ton electrogalvanizing line and a 500,000 ton hot-dip
galvanizing line adjacent to the I/N Tek facility. I/N Kote, the general
partnership formed for this joint venture, is owned 50% by a wholly owned
subsidiary of the Company and 50% by an indirect wholly owned subsidiary of NSC.
The Company and NSC each have guaranteed the share of long-term financing
attributable to their respective subsidiary's interest in the partnership. I/N
Kote had $376 outstanding under its long-term financing agreement at December
31, 1997. I/N Kote is required to buy all of its cold rolled steel from the
Company, which is required to furnish such cold rolled steel at a price that
results in an annual return on equity to the partners of I/N Kote, depending
upon operating levels, of up to 10% after operating and financing costs; this
price may be subject to an adjustment if the Company's return on sales differs
from I/N Kote's return on sales. Purchases of Company cold rolled steel by I/N
Kote aggregated $194.5 for the period from January 1, 1998 through July 16,
1998, $320.6 in 1997 and $314.9 in 1996. At year-end 1997, I/N Kote owed the
Company $12.8 related to these purchases. Prices of cold rolled steel sold by
the Company to I/N Kote are determined pursuant to the terms of the joint
venture agreement and are based, in part, on operating costs of the partnership.
In 1997 and 1996, the Company sold cold rolled steel to I/N Kote at prices that
exceeded the Company's production costs but were less than the market prices for
cold rolled steel products. I/N Kote also provides tolling services to the
Company for which it was charged $2.4 for the period from January 1, 1998
through July 16, 1998, $22.1 in 1997 and $24.5 in 1996. The Company sells all
I/N Kote products that are distributed in North America.
NOTE 12--INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
The Company's investments in unconsolidated joint ventures accounted for by
the equity method consist primarily of its 60% interest in I/N Tek, 50% interest
in I/N Kote, 50% interest in PCI Associates, 40% interest in the Empire Iron
Mining Partnership, 15% interest in Wabush Mines in 1996 and 1995 and 12 1/2%
interest in Walbridge Electrogalvanizing Company. I/N Tek and I/N Kote are joint
ventures with NSC (see Note 11). The Company does not exercise control over I/N
Tek, as all significant management decisions of the joint venture require
agreement by both of the partners. Due to this lack of control by the Company,
the Company accounts for its investment in I/N Tek under the equity method. PCI
Associates is a joint venture which operates a pulverized coal injection
facility at the Indiana Harbor Works. Empire is an iron ore mining and
pelletizing ventures owned in various percentages primarily by U.S. steel
companies. In 1997, the Company sold its interest in Wabush Mines, resulting in
a $9 pretax gain. Walbridge is a venture that coats cold-rolled steel in which
Inland has the right to 25% of the productive capacity. The Company sold its
F-36
<PAGE> 53
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY) --
(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 12--INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES--(CONTINUED)
interest in Walbridge on June 30, 1998 and recognized a gain on the sale of
$2.7. Following is a summary of combined financial information of the Company's
unconsolidated joint ventures:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31:
Gross revenue............................................. $1,112.9 $1,207.7
Costs and expenses........................................ 998.7 1,131.7
-------- --------
Net income................................................ $ 114.2 $ 76.0
======== ========
FINANCIAL POSITION AT DECEMBER 31:
Current assets............................................ $ 229.9 $ 264.0
Total assets.............................................. 1,385.8 1,789.7
Current liabilities....................................... 211.6 229.2
Total liabilities......................................... 1,000.3 1,401.2
Net assets................................................ 385.5 388.5
</TABLE>
NOTE 13--COMMITMENTS AND CONTINGENCIES
At year-end 1997, the Company guaranteed $18.3 of long-term debt
attributable to a subsidiary's interest in PCI Associates.
As part of the agreement covering the 1990 sale of the Inland Lime & Stone
Company division assets, the Company agreed, subject to certain exceptions, to
purchase, at prices which approximate market, the annual limestone needs of the
Indiana Harbor Works through 2002.
The Company and its subsidiaries have various operating leases for which
future minimum lease payments are estimated to total $80.1 through 2022,
including approximately $16.1 in 1998, $12.6 in 1999, $10.1 in 2000, $9.1 in
2001, and $8.7 in 2002.
It is anticipated that the Company will make capital expenditures of $2 to
$5 annually in each of the next five years for the construction, and have
ongoing annual expenditures of $40 to $50 for the operation, of air and water
pollution control facilities to comply with current federal, state and local
laws and regulations. The Company is involved in various environmental and other
administrative or judicial actions initiated by government agencies. While it is
not possible to predict the results of these matters, the Company does not
expect environmental expenditures, excluding amounts that may be required in
connection with the consent decree in the 1990 EPA lawsuit, to materially affect
the Company's results of operations or financial position. Corrective actions
relating to the EPA consent decree may require significant expenditures over the
next several years that may be material to the results of operations or
financial position of the Company. At December 31, 1997, the Company's reserves
for environmental liabilities totaled $25, $19 of which related to the sediment
remediation under the 1993 EPA consent decree.
The total amount of firm commitments of the Company and its subsidiaries to
contractors and suppliers, primarily in connection with additions to property,
plant and equipment, approximated $22 at year-end 1997.
F-37
<PAGE> 54
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY) --
(CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions except per share data)
NOTE 14--RELATED PARTY TRANSACTIONS
Industries has established procedures for charging its actual
administrative expenses to the operating companies owned by it. These charges
are for management, financial and legal services provided to those companies.
Charges from Industries for the period from January 1, 1998 through July 16,
1998 totaled $7.1, and for 1997 and 1996 totaled $13.7 and $16.4, respectively.
There are also established procedures to charge interest on all
intercompany loans within the Industries group of companies. Such loans
currently bear interest at the prime rate. For the period from January 1, 1998
through July 16, 1998, for 1997 and for 1996, the Company's net interest expense
to companies within the Industries group totaled $10.3, $18.4 and $17.6,
respectively.
The Company sells to and purchases products from related companies at
prevailing market prices. These transactions for the indicated years, except
those with I/N Kote (see Note 11), are summarized as follows:
<TABLE>
<CAPTION>
PERIOD FROM YEARS ENDED
JANUARY 1, 1998 DECEMBER 31
THROUGH JULY 16, ----------------
1998 1997 1996
---------------- ------ ------
<S> <C> <C> <C>
Net product sales........................................ $103.6 $208.4 $204.3
Net product purchases.................................... 9.0 16.2 19.0
</TABLE>
NOTE 15--CONCENTRATION OF CREDIT RISK
The Company produces and sells a wide range of steels, of which
approximately 99% consists of carbon and high-strength low-alloy steel grades.
For the period from January 1, 1998 through July 16, 1998 approximately 77% of
the sales were to customers in five mid-American states, and 93% were to
customers in 20 mid-American states. Over half the sales are to the steel
service center and transportation (including automotive) markets.
No customer, except I/N Kote (see Note 11), accounted for more than 10% of
the consolidated net sales of the Company during the period from January 1, 1998
through July 16, 1998 and the two years ended December 31, 1997.
NOTE 16--CONSOLIDATED QUARTERLY SALES AND EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
1998
-----------------------------------
PERIOD FROM
JULY 1, 1998
FIRST SECOND THROUGH
QUARTER QUARTER JULY 16, 1998
------- ------- -------------
<S> <C> <C> <C>
Net sales................................................... $606.1 $619.9 $84.0
Gross profit................................................ 32.8 46.4 (3.1)
Net income (loss)........................................... 5.3 12.9 (4.4)
</TABLE>
<TABLE>
<CAPTION>
1997
-----------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER*
------- ------- ------- --------
<S> <C> <C> <C> <C>
Net sales............................................ $606.1 $643.8 $615.7 $601.4
Gross profit......................................... 50.5 51.6 50.1 28.7
Net income........................................... 13.7 21.0 18.2 1.9
</TABLE>
*Includes $9.6 additional restructuring provisions, $6.7 after tax.
F-38
<PAGE> 55
INLAND STEEL COMPANY AND SUBSIDIARY COMPANIES (PREDECESSOR COMPANY)
SCHEDULE II -- RESERVES
FOR THE PERIOD FROM JANUARY 1, 1998 THROUGH JULY 16, 1998 AND
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
(Dollars in Millions except per share data)
<TABLE>
<CAPTION>
PROVISION FOR ALLOWANCES,
CLAIMS AND DOUBTFUL ACCOUNTS
---------------------------------------------------
BALANCE AT ADDITIONS DEDUCTIONS BALANCE AT
BEGINNING CHARGED FROM END OF
OF YEAR TO INCOME RESERVES PERIOD
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
January 1, 1998 through July 16, 1998.......... $16.1 $0.8 $ -- $16.9
Years Ended December 31
1997......................................... $17.9 $4.5 $ 6.1(A) $16.1
$ 0.2(B)
1996......................................... $24.3 $1.1 $ 6.4(A) $17.9
$ 1.1(B)
</TABLE>
- ---------------
NOTES:
(A) Allowances granted during year.
(B) Bad debts written off during year.
F-39
<PAGE> 56
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ISPAT INLAND INC.
By:
--------------------------------------
Dale E. Wiersbe
President and Chief Operating
Officer
(Principal Executive Officer)
Date: March 19, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President and Chief Operating March 19, 1999
- --------------------------------------------- Officer and Director (Principal
Dale E. Wiersbe Executive Officer)
Vice President--Finance and Chief March 19, 1999
- --------------------------------------------- Financial Officer
Michael G. Rippey (Principal Financial Officer)
(Principal Accounting Officer)
Robert B. McKersie ) Director
Lakshmi N. Mittal ) Director
Johannes Sittard ) Director
</TABLE>
By:
--------------------------------------
Michael G. Rippey
Attorney-in-fact
March 19, 1999
F-40
<PAGE> 57
EXHIBIT INDEX FOR ISPAT INLAND INC. 1998 FORM 10-K
<TABLE>
<S> <C> <C>
2.(i) Agreement and Plan of Merger, dated May 27, 1998, among
Ispat International N.V., Inland Merger Sub, Inc., Inland
Steel Industries, Inc. and Inland Steel Company. (Filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K
filed on June 9, 1998, and incorporated by reference
herein.)....................................................
2.(ii) Amendment to Agreement and Plan of Merger, dated July 16,
1998, between Ispat International N.V., Inland Steel
Industries, Inc., Inland Merger Sub, Inc. and Inland Steel
Company. (Filed as Exhibit 2.2 to the Inland Steel
Industries, Inc. Current Report on Form 8-K filed on July
20, 1998, and incorporated by reference herein.)............
3.(i) Copy of Restated Certificate of Incorporation of the
Company. (Filed as Exhibit 3.(i) to the Company's Quarterly
Report for the quarter ended September 30, 1998, and
incorporated by reference herein.)..........................
3.(ii) Copy of By-Laws, as amended, of the Company. (Filed as
Exhibit 3.(ii) to the Company's Quarterly Report for the
quarter ended June 30, 1998, and incorporated by reference
herein.)....................................................
4.A Copy of First Mortgage Indenture, dated April 1, 1928,
between the Company (the "Steel Company") and First Trust
and Savings Bank and Melvin A. Traylor, as Trustees, and of
supplemental indentures thereto, to and including the
Thirty-Fifth Supplemental Indenture, incorporated by
reference from the following Exhibits: (i) Exhibits B-1(a),
B-1(b), B-1(c), B-1(d) and B-1(e), filed with Steel
Company's Registration Statement on Form A-2 (No. 2-1855);
(ii) Exhibits D-1(f) and D-1(g), filed with Steel Company's
Registration Statement on Form E-1 (No. 2-2182); (iii)
Exhibit B-1(h), filed with Steel Company's Current Report on
Form 8-K dated January 18, 1937; (iv) Exhibit B-1(i), filed
with Steel Company's Current Report on Form 8-K, dated
February 8, 1937; (v) Exhibits B-1(j) and B-1(k), filed with
Steel Company's Current Report on Form 8-K for the month of
April, 1940; (vi) Exhibit B-2, filed with Steel Company's
Registration Statement on Form A-2 (No. 2-4357); (vii)
Exhibit B-1(l), filed with Steel Company's Current Report on
Form 8-K for the month of January, 1945; (viii) Exhibit 1,
filed with Steel Company's Current Report on Form 8-K for
the month of November, 1946; (ix) Exhibit 1, filed with
Steel Company's Current Report on Form 8-K for the months of
July and August, 1948; (x) Exhibits B and C, filed with
Steel Company's Current Report on Form 8-K for the month of
March, 1952; (xi) Exhibit A, filed with Steel Company's
Current Report on Form 8-K for the month of July, 1956;
(xii) Exhibit A, filed with Steel Company's Current Report
on Form 8-K for the month of July, 1957; (xiii) Exhibit B,
filed with Steel Company's Current Report on Form 8-K for
the month of January, 1959; (xiv) the Exhibit filed with
Steel Company's Current Report on Form 8-K for the month of
December, 1967; (xv) the Exhibit filed with Steel Company's
Current Report on Form 8-K for the month of April, 1969;
(xvi) the Exhibit filed with Steel Company's Current Report
on Form 8-K for the month of July, 1970; (xvii) the Exhibit
filed with the amendment on Form 8 to Steel Company's
Current Report on Form 8-K for the month of April, 1974;
(xviii) Exhibit B, filed with Steel Company's Current Report
on Form 8-K for the month of September, 1975; (xix) Exhibit
B, filed with Steel Company's Current Report on Form 8-K for
the month of January, 1977; (xx) Exhibit C, filed with Steel
Company's Current Report on Form 8-K for the month of
February, 1977; (xxi) Exhibit B, filed with Steel Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1978; (xxii) Exhibit B, filed with Steel Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1980;
(xxiii) Exhibit 4-D, filed with Steel Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1980; (xxiv) Exhibit 4-D, filed with Steel Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
</TABLE>
F-41
<PAGE> 58
<TABLE>
<S> <C> <C>
1982; (xxv) Exhibit 4-E, filed with Steel Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1983; (xxvi) Exhibit 4(i) filed with the Steel Company's
Registration Statement on Form S-2 (No. 33-43393); (xxvii)
Exhibit 4 filed with Steel Company's Current Report on Form
8-K dated June 23, 1993; (xxviii) Exhibit 4.C filed with
Steel Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995; (xxix) Exhibit 4.C filed with
Steel Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, and (xxx) Exhibit 4.C
filed with Steel Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996.............................
4.B Copy of consolidated reprint of First Mortgage Indenture,
dated April 1, 1928, between the Company and First Trust and
Savings Bank and Melvin A. Traylor, as Trustees, as amended
and supplemented by all supplemental indentures thereto, to
and including the Thirteenth Supplemental Indenture. (Filed
as Exhibit 4-E to Form S-1 Registration Statement No.
2-9443, and incorporated by reference herein.)..............
4.C Copy of Thirty-Sixth Supplemental Indenture dated as of July
16, 1998 from Inland Steel Company to First National Bank
and John G. Finley as Trustees to the First Mortgage
Indenture dated April 1, 1928 between Inland Steel Company
and First Trust and Savings Bank and Melvin A. Traylor, as
Trustees....................................................
10 Credit Agreement dated as of July 16, 1998, among Ispat
Inland, L.P., Inland Steel Company, Burnham Trucking
Company, Inc., Incoal Company and Credit Suisse First
Boston......................................................
16 Letter dated August 25, 1998 from PricewaterhouseCoopers LLP
regarding change in certifying accountant. (Filed as Exhibit
16.1 to the Company's Current Report on Form 8-K filed on
August 28, 1998, and incorporated by reference herein.......
24 Powers of Attorney..........................................
27 Financial Data Schedule.....................................
</TABLE>
F-42
<PAGE> 1
EXHIBIT 4.6
EXECUTION COPY
------------------------------------------------------------
INLAND STEEL COMPANY
TO
THE FIRST NATIONAL BANK OF CHICAGO
AND
JOHN G. FINLEY
As Trustees
----------
Thirty-Sixth Supplemental
Indenture
----------
DATED AS OF JULY 16, 1998
-------------------------------------------------------------
<PAGE> 2
Thirty-Sixth Supplemental Indenture dated as of July 16, 1998 made by
Inland Steel Company, a corporation organized and existing under the laws of the
State of Delaware (hereinafter sometimes called the "Company" ), party of the
first part, to The First National Bank of Chicago, a national banking
association having its office in the City of Chicago, State of Illinois
(hereinafter sometimes called the "Corporate Trustee" ), and John G. Finley, of
the City of Naperville, State of Illinois (hereinafter sometimes called the
"Individual Trustee" ), as successor trustees under the First Mortgage from the
Company to First Trust and Savings Bank and Melvin A. Traylor, as Trustees,
dated April 1, 1928, parties of the second part (the Corporate Trustee and the
Individual Trustee being hereinafter collectively sometimes called the
"Trustees" ):
Whereas, the Company heretofore executed and delivered to First Trust
and Savings Bank and Melvin A. Traylor, as Trustees (the Corporate Trustee being
the successor corporate trustee to said First Trust and Savings Bank and the
Individual Trustee being the successor individual trustee to said Melvin A.
Traylor), its First Mortgage Indenture, dated April 1, 1928 (the term "First
Mortgage" wherever used herein meaning and including, unless the context shall
otherwise require, said First Mortgage Indenture, dated April 1, 1928, as
amended, and all indentures supplemental thereto), to secure the payment of the
principal of and interest on bonds of the Company to be known as the "First
Mortgage Bonds" of the Company (hereinafter sometimes called the "Bonds" ); and
Whereas, there have heretofore been authenticated and delivered by the
Corporate Trustee (or its predecessor) under the First Mortgage (a) $30,000,000
aggregate principal amount of First Mortgage Sinking Fund Four and One-Half Per
Cent. Gold Bonds, Series A, dated April 1, 1928 and maturing April 1, 1978, and
(b) $15,000,000 aggregate principal amount of First Mortgage Sinking Fund Four
and One-Half Per Cent. Gold Bonds, Series B, dated February 1, 1931 and maturing
February 1, 1981, and (c) $10,000,000 aggregate principal amount of First
Mortgage Three Per Cent. Serial Bonds, Series C, dated January 1, 1936 and
maturing serially in the principal amount of $1,000,000 on January 1 of each
year from 1937 to 1946 (inclusive), and (d) $35,000,000 aggregate principal
amount of First Mortgage 3-3/4% Bonds, Series D, dated February 1, 1936 and
maturing February 1, 1961, and (e) $10,000,000 aggregate principal amount of
First Mortgage 3% Bonds, Series E, dated January 15, 1937 and maturing January
15, 1952, and (f) $36,000,000 aggregate principal amount of First Mortgage 3%
Bonds, Series F, dated April 1, 1940 and maturing April 1, 1961, and (g)
$50,000,000 aggregate principal amount of First Mortgage 2.65% Bonds, Series G,
dated November 1, 1946 and maturing November 1, 1976, and (h) $20,000,000
aggregate principal amount of First Mortgage 3% Bonds, Series H, dated August 1,
1948 and maturing August 1, 1978, and (i) $25,000,000 aggregate principal amount
of
<PAGE> 3
2
First Mortgage 3.20% Bonds, Series I, dated March 1, 1952 and maturing March 1,
1982, and (j) $50,000,000 aggregate principal amount of First Mortgage 3-1/2%
Bonds, Series J, dated July 1, 1956 and maturing July 1, 1981, and (k)
$50,000,000 aggregate principal amount of First Mortgage 4-3/8% Bonds, Series K,
dated July 1, 1957 and maturing July 1, 1987, and (l) $50,000,000 aggregate
principal amount of First Mortgage 4-1/2% Bonds, Series L, dated February 1,
1959 and maturing February 1, 1989, and (m) $50,000,000 aggregate principal
amount of First Mortgage 6-1/2% Bonds, Series M, dated December 1, 1967 and
maturing December 1, 1992, and (n) $50,000,000 aggregate principal amount of
First Mortgage 7% Bonds, Series N, dated April 15, 1969 and maturing April 15,
1974, and (o) $100,000,000 aggregate principal amount of First Mortgage 8-3/4%
Bonds, Series O, dated July 15, 1970 and maturing July 15, 1995, and (p)
$75,000,000 aggregate principal amount of First Mortgage 8-7/8% Bonds, Series P,
dated April 15, 1974 and maturing April 15, 1999, and (q) $100,000,000 aggregate
principal amount of First Mortgage 9-1/2% Bonds, Series Q, dated September 1,
1975 and maturing September 1, 2000, and (r) $125,000,000 aggregate principal
amount of First Mortgage 7.90% Bonds, Series R, dated January 15, 1977 and
maturing January 15, 2007, and (s) $26,500,000 aggregate principal amount of
First Mortgage 5-3/4% Bonds, Pollution Control Series 1977, dated February 1,
1977 and maturing February 1, 2007, and (t) $52,000,000 aggregate principal
amount of First Mortgage 6-1/2% Bonds, Pollution Control Series 1978, dated May
15, 1978 and maturing May 15, 2008, and (u) $150,000,000 aggregate principal
amount of First Mortgage 11-1/4% Bonds, Series S, dated June 1, 1980 and
maturing June 1, 1990, and (v) $20,000,000 aggregate principal amount of First
Mortgage 7-3/8% Bonds, Pollution Control Series 1980 A, dated October 15, 1980
and maturing October 1, 1983, and (w) $25,000,000 aggregate principal amount of
First Mortgage 9-3/4% Bonds, Pollution Control Series 1980 B, dated October 15,
1980 and maturing October 1, 2000, and (x) $5,000,000 aggregate principal amount
of First Mortgage 10% Bonds, Pollution Control Series 1980 C, dated October 15,
1980 and maturing October 1, 2010, and (y) $10,000,000 aggregate principal
amount of First Mortgage 10% Bonds, Pollution Control Series 1982 A, dated
December 1, 1982 and maturing December 1, 2012, and (z) $17,000,000 aggregate
principal amount of First Mortgage Adjustable Rate Bonds, Pollution Control
Series 1982 B, dated December 1, 1982 and maturing December 1, 2012, and (aa)
$125,000,000 aggregate principal amount of First Mortgage 12% Bonds Series T,
dated
<PAGE> 4
3
December 1, 1991 and maturing December 1, 1998; and (bb) $40,000,000
aggregate principal amount of First Mortgage 6.80% Bonds, Pollution Control
Series 1993, dated June 1, 1993 and maturing June 1, 2013; and (cc) $17,000,000
aggregate principal amount of First Mortgage 6.85% Term Bonds, Pollution Control
Series 1995, dated June 1, 1995 and maturing December 1, 2012; and
Whereas, (a) all of said Series A Bonds, Series B Bonds, Series C
Bonds, Series D Bonds, Series E Bonds, Series F Bonds, Series G Bonds, Series H
Bonds, Series I Bonds, Series J Bonds, Series K Bonds, Series L Bonds, Series M
Bonds, Series N Bonds, Series O Bonds, Series P Bonds, Series Q Bonds, Series S
Bonds, Series 1978 Bonds, Series 1980 A Bonds, Series 1980 B Bonds, Series 1980
C Bonds, Series 1982 A Bonds and Series 1982 B Bonds were duly purchased and
retired or were duly called for redemption and funds sufficient to redeem the
same were, prior to the respective redemption dates, duly deposited with the
Corporate Trustee under the First Mortgage, and (b) on or prior to July 16,
1998, Bonds of other outstanding series in respective aggregate principal
amounts as follows have been duly purchased and duly retired or defeased and
funds sufficient to defease the same duly deposited with the Corporate Trustee
under the First Mortgage: Series T Bonds-$98,992,000-purchased July 29, 1996 and
subsequently; and Series T Bonds- $26,008,000-defeased July 15, 1998; and
Whereas, (a) under date of February 1, 1931, the Company executed,
acknowledged and delivered a Supplemental Indenture to provide for the creation
of its First Mortgage Sinking Fund Four and One-Half Per Cent. Gold Bonds,
Series B, and (b) under date of February 20, 1931, the Company executed,
acknowledged and delivered a Second Supplemental Indenture to subject to the
lien of the First Mortgage certain additional property, and (c) under date of
February 18, 1933, the Company executed, acknowledged and delivered a Third
Supplemental Indenture to effect the exchange of certain mortgaged property, and
(d) under date of December 16, 1935, the Company executed, acknowledged and
delivered a Fourth Supplemental Indenture to provide for the creation of its
First Mortgage Three Per Cent. Serial Bonds, Series C, and for certain
amendments to the First Mortgage, and (e) under date of January 15, 1936, the
Company executed, acknowledged and delivered a Fifth Supplemental Indenture to
subject to the lien of the First Mortgage certain additional property and to
provide for the creation of its First
<PAGE> 5
4
Mortgage 3-3/4% Bonds, Series D, and for a further amendment to the First
Mortgage (which such amendment to the First Mortgage was superseded by
amendments to the First Mortgage made by the Sixteenth Supplemental Indenture
and the Seventeenth Supplemental Indenture hereinafter referred to), and (f)
under date of June 2, 1936, the Company executed, acknowledged and delivered a
Sixth Supplemental Indenture to effect the exchange of certain mortgaged
property, and (g) under date of October 19, 1936, the Company executed,
acknowledged and delivered a Seventh Supplemental Indenture to effect the
exchange of certain mortgaged property, and (h) under date of January 15, 1937,
the Company executed, acknowledged and delivered an Eighth Supplemental
Indenture to provide for the creation of its First Mortgage 3% Bonds, Series E,
and for a further amendment to the First Mortgage (which such amendment to the
First Mortgage was superseded by an amendment to the First Mortgage made by the
Twelfth Supplemental Indenture hereinafter referred to), and (i) under date of
March 1, 1940, the Company executed, acknowledged and delivered a Ninth
Supplemental Indenture to provide for further amendments to the First Mortgage,
and (j) under date of March 15, 1940, the Company executed, acknowledged and
delivered a Tenth Supplemental Indenture to subject to the lien of the First
Mortgage certain additional property and to provide for the creation of its
First Mortgage 3% Bonds, Series F, and for a further amendment to the First
Mortgage and an amendment to said Eighth Supplemental Indenture (which such
amendment to the First Mortgage was superseded by an amendment to the First
Mortgage made by the Twelfth Supplemental Indenture hereinafter referred to),
and (k) under date of January 15, 1945, the Company executed, acknowledged and
delivered an Eleventh Supplemental Indenture to subject to the lien of the First
Mortgage certain additional property, and (l) under date of November 1, 1946,
the Company executed, acknowledged and delivered a Twelfth Supplemental
Indenture to subject to the lien of the First Mortgage certain additional
property and to provide for the creation of its First Mortgage 2.65% Bonds,
Series G, and for further amendments to the First Mortgage, and (m) under date
of July 1, 1948, the Company executed, acknowledged and delivered a Thirteenth
Supplemental Indenture to provide for the creation of its First Mortgage 3%
Bonds, Series H, and (n) under date of February 1, 1952, the Company executed,
acknowledged and delivered a Fourteenth Supplemental Indenture to effect the
exchange of certain mortgaged property, and (o) under date of March 1, 1952, the
Company
<PAGE> 6
5
executed, acknowledged and delivered a Fifteenth Supplemental Indenture to
provide for the creation of its First Mortgage 3.20% Bonds, Series I, and for
further amendments to the First Mortgage, and (p) under date of July 1, 1956,
the Company executed, acknowledged and delivered a Sixteenth Supplemental
Indenture to subject to the lien of the First Mortgage certain additional
property and to provide for the creation of its First Mortgage 3-1/2% Bonds,
Series J, and for further amendments to the First Mortgage, and (q) under date
of July 1, 1957, the Company executed, acknowledged and delivered a Seventeenth
Supplemental Indenture to subject to the lien of the First Mortgage certain
additional property and to provide for the creation of its First Mortgage 4-3/8%
Bonds, Series K, and for a further amendment to the First Mortgage, and (r)
under date of January 15, 1959, the Company executed, acknowledged and delivered
an Eighteenth Supplemental Indenture to subject to the lien of the First
Mortgage certain additional property and to provide for the creation of its
First Mortgage 4-1/2% Bonds, Series L, and for further amendments to the First
Mortgage, and (s) under date of December 1, 1967, the Company executed,
acknowledged and delivered a Nineteenth Supplemental Indenture to subject to the
lien of the First Mortgage certain additional property and to provide for the
creation of its First Mortgage 6-1/2% Bonds, Series M, and for further
amendments to the First Mortgage, and (t) under date of April 15, 1969, the
Company executed, acknowledged and delivered a Twentieth Supplemental Indenture
to subject to the lien of the First Mortgage certain additional property and to
provide for the creation of its First Mortgage 7% Bonds, Series N, and (u) under
date of July 15, 1970, the Company executed, acknowledged and delivered a
Twenty-First Supplemental Indenture to provide for the creation of its First
Mortgage 8-3/4% Bonds, Series O, and for a further amendment to the First
Mortgage, and (v) under date of April 15, 1974, the Company executed,
acknowledged and delivered a Twenty-Second Supplemental Indenture to subject to
the lien of the First Mortgage certain additional property and to provide for
the creation of its First Mortgage 8-7/8% Bond, Series P, and for a further
amendment to the First Mortgage, and (w) under date of September 1, 1975, the
Company executed, acknowledged and delivered a Twenty-Third Supplemental
Indenture to subject to the lien of the First Mortgage certain additional
properties and to provide for the creation of its First Mortgage 9-1/2% Bonds,
Series Q, and (x) under date of January 15, 1977, the Company executed,
acknowledged and delivered
<PAGE> 7
6
a Twenty-Fourth Supplemental Indenture to subject to the lien of the First
Mortgage certain additional property and to provide for the creation of its
First Mortgage 7.90% Bonds, Series R, and to provide for the future modification
of certain provisions of the First Mortgage, and (y) under date of February 1,
1977, the Company executed, acknowledged and delivered a Twenty-Fifth
Supplemental Indenture to subject to the lien of the First Mortgage certain
additional property and to provide for the creation of the First Mortgage 5-3/4%
Bonds, Pollution Control Series 1977, and to provide for the future modification
of certain provisions of the First Mortgage, and (z) under date of February 1,
1977, the Company executed, acknowledged and delivered a Restated Twenty-Fifth
Supplemental Indenture amending and restating said Twenty-Fifth Supplemental
Indenture, and (aa) under date of May 15, 1978, the Company executed,
acknowledged and delivered a Twenty-Sixth Supplemental Indenture to subject to
the lien of the First Mortgage certain additional property and to provide for
the creation of the First Mortgage 6-1/2% Bonds, Pollution Control Series 1978
and to provide for the future modification of certain provisions of the First
Mortgage, and (bb) under date of June 1, 1980, the Company executed,
acknowledged and delivered a Twenty-Seventh Supplemental Indenture to subject to
the lien of the First Mortgage certain additional property and to provide for
the creation of its First Mortgage 11-1/4% Bonds, Series S, and to provide for
the future modification of certain provisions of the First Mortgage, and (cc)
under date of October 15, 1980, the Company executed, acknowledged and delivered
a Twenty-Eighth Supplemental Indenture to subject to the lien of the First
Mortgage certain additional property and to provide for the creation of its
First Mortgage 7-3/8% Bonds, Pollution Control Series 1980 A, its First Mortgage
9-3/4% Bonds, Pollution Control Series 1980 B, and its First Mortgage 10% Bonds,
Pollution Control Series 1980 C, and to provide for the future modification of
certain provisions of the First Mortgage, and (dd) under date of December 1,
1982, the Company executed, acknowledged and delivered a Twenty-Ninth
Supplemental Indenture to subject to the lien of the First Mortgage certain
additional property and to provide for the creation of its First Mortgage 10%
Bonds, Pollution Control Series 1982 A and its First Mortgage Adjustable Rate
Bonds, Pollution Control Series 1982 B and to provide for the future
modification of certain provisions of the First Mortgage, and (ee) under date of
November 30, 1983, the Company executed, acknowledged and delivered a Thirtieth
Supplemental Indenture to subject to the
<PAGE> 8
7
lien of the First Mortgage certain additional property, and (ff) under date of
December 1, 1991, the Company executed, acknowledged and delivered a
Thirty-First Supplemental Indenture to subject to the lien of the First Mortgage
certain additional property and to provide for the creation of its First
Mortgage 12% Bonds, Series T and to provide for the future modification of
certain provisions of the First Mortgage, and (gg) under date of June 1, 1993,
the Company executed, acknowledged, and delivered a Thirty-Second Supplemental
Indenture to provide for the creation of its First Mortgage 6.80% Bonds,
Pollution Control Series 1993 and to provide for the future modification of
certain provisions of the First Mortgage, and (hh) under date of June 1, 1995,
the Company executed, acknowledged, and delivered a Thirty-Third Supplemental
Indenture to provide for the creation of its First Mortgage 6.85% Term Bonds,
Pollution Control Series 1995 and to provide for the future modification of
certain provisions of the First Mortgage, and (ii) under date of August 1, 1995,
the Company executed, acknowledged and delivered a Thirty-Fourth Supplemental
Indenture to provide for the modification of certain provisions of the First
Mortgage, and (jj) under date of July 29, 1996, the Company executed,
acknowledged and delivered a Thirty-Fifth Supplemental Indenture to modify the
First Mortgage to delete certain covenants applicable to the Company's Series T
Bonds; and
Whereas, (a) said First Mortgage Indenture, dated April 1, 1928, has
been duly recorded or registered in the offices of the proper public officials
of Cook County, Illinois, Jefferson County, Illinois, Lake County, Indiana,
Porter County, Indiana, Floyd County, Kentucky, Pike County, Kentucky, Knott
County, Kentucky, Letcher County, Kentucky, Iron County, Michigan, Marquette
County, Michigan, Crow Wing County, Minnesota, St. Louis County, Minnesota, and
Raleigh County, West Virginia, and (b) said Supplemental Indenture, dated
February 1, 1931, has been duly recorded or registered in the offices of the
proper public officials of Cook County, Illinois, Jefferson County, Illinois,
Lake County, Indiana, Porter County, Indiana, Crow Wing County, Minnesota, and
St. Louis County, Minnesota, and (c) said Second Supplemental Indenture has been
duly recorded or registered in the offices of the proper public officials of
Lake County, Indiana, Floyd County, Kentucky, Pike County, Kentucky, Knott
County, Kentucky, Marquette County, Michigan and St. Louis County, Minnesota,
and (d) said Third Supplemental Indenture has been duly recorded or registered
in the
<PAGE> 9
8
office of the proper public official of Floyd County, Kentucky and (e) said
Fourth Supplemental Indenture has been duly recorded or registered in the office
of the proper public official of each of said counties in which said First
Mortgage Indenture has been recorded or registered, and (f) said Fifth
Supplemental Indenture has been duly recorded or registered in the office of the
proper public official of each of said counties in which said First Mortgage
Indenture has been recorded or registered, and (g) said Sixth Supplemental
Indenture and said Seventh Supplemental Indenture have been duly recorded or
registered in the offices of the proper public officials of Floyd County,
Kentucky and Knott County, Kentucky, and (h) said Eighth Supplemental Indenture
has been duly recorded or registered in the office of the proper public official
of each of said counties (except Letcher County, Kentucky and Iron County,
Michigan) in which said First Mortgage Indenture has been duly recorded or
registered, and (i) said Ninth Supplemental Indenture has been duly recorded or
registered in the office of the proper public official of each of said counties
in which said First Mortgage Indenture has been recorded or registered, and (j)
said Tenth Supplemental Indenture has been duly recorded or registered in the
office of the proper public official of each of said counties (except Letcher
County, Kentucky and Iron County, Michigan) in which said First Mortgage
Indenture has been recorded or registered, and (k) said Eleventh Supplemental
Indenture has been duly recorded or registered in the office of the proper
public official of Lake County, Indiana, and (l) said Twelfth Supplemental
Indenture and said Thirteenth Supplemental Indenture have been duly recorded or
registered in the office of the proper public official of each of said counties
in which said First Mortgage Indenture has been recorded or registered, and (m)
said Fourteenth Supplemental Indenture has been duly recorded or registered in
the office of the proper public official of Raleigh County, West Virginia, and
(n) said Fifteenth Supplemental Indenture, said Sixteenth Supplemental
Indenture, said Seventeenth Supplemental Indenture, and said Eighteenth
Supplemental Indenture have been duly recorded or registered in the office of
the proper public official of each of said counties in which said First Mortgage
Indenture has been recorded or registered, and (o) said Nineteenth Supplemental
Indenture has been duly recorded or registered in the office of the proper
public official of each of said counties (except Floyd County, Kentucky, Pike
County, Kentucky, Knott County, Kentucky, Letcher County, Kentucky and
<PAGE> 10
9
Raleigh County, West Virginia) in which said First Mortgage Indenture has been
recorded or registered, and (p) said Twentieth Supplemental Indenture, said
Twenty-First Supplemental Indenture, and said Twenty-Second Supplemental
Indenture have been duly recorded or registered in the office of the proper
public official of each of said counties (except Cook County, Illinois, Floyd
County, Kentucky, Pike County, Kentucky, Knott County, Kentucky, Letcher County,
Kentucky, and Raleigh County, West Virginia) in which said First Mortgage
Indenture has been recorded or registered, and (q) said Twenty-Third
Supplemental Indenture, said Twenty-Fourth Supplemental Indenture, said
Twenty-Fifth Supplemental Indenture, said Restated Twenty-Fifth Supplemental
Indenture, said Twenty-Sixth Supplemental Indenture, said Twenty-Seventh
Supplemental Indenture, and said Twenty-Eighth Supplemental Indenture have been
duly recorded or registered in the office of the proper public official of each
of said counties (except Cook County, Illinois, Floyd County, Kentucky, Pike
County, Kentucky, Knott County, Kentucky, Letcher County, Kentucky, Iron County,
Michigan, Marquette County, Michigan, Crow Wing County, Minnesota, St. Louis
County, Minnesota and Raleigh County, West Virginia) in which said First
Mortgage Indenture has been recorded or registered, and (r) said Twenty-Ninth
Supplemental Indenture and said Thirtieth Supplemental Indenture have been duly
recorded or registered in the office of the proper public official of each of
said counties (except Cook County, Illinois, Jefferson County, Illinois, Porter
County, Indiana, Floyd County, Kentucky, Pike County, Kentucky, Knott County,
Kentucky, Letcher County, Kentucky, Iron County, Michigan, Marquette County,
Michigan, Crow Wing County, Minnesota, St. Louis County, Minnesota and Raleigh
County, West Virginia) in which said First Mortgage Indenture has been recorded
or registered, and (s) said Thirty-First Supplemental Indenture has been duly
recorded or registered in the office of the proper public official of Lake
County, Indiana in which said First Mortgage Indenture has been recorded, and
(t) said Thirty- Second Supplemental Indenture has been duly recorded or
registered in the office of the proper public official of Lake County, Indiana
in which said First Mortgage Indenture has been recorded, and (u) said
Thirty-Third Supplemental Indenture has been duly recorded or registered in the
office of the proper public official of Lake County, Indiana in which said First
Mortgage Indenture has been recorded, and (v) said Thirty-Fourth Supplemental
Indenture has been duly recorded or registered in the office of the proper
public
<PAGE> 11
10
official of Lake County, Indiana in which said First Mortgage Indenture has been
recorded, and (w) said Thirty-Fifth Supplemental Indenture has been duly
recorded or registered in the office of the proper public official of Lake
County, Indiana in which said First Mortgage Indenture has been recorded; and
WHEREAS, in Article One of the First Mortgage it is provided in
substance, among other things, that the Bonds may be issued in series, that all
Bonds of any one series shall be identical, except as in said Article One
otherwise provided, that the Bonds of each series may differ as to terms and
provisions thereof as in said Article One permitted, and that the maximum
principal amount of the Bonds issuable of any series may or may not be limited
as the board of directors of the Company shall determine; and
WHEREAS, under that certain Credit Agreement dated as of July 16, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Ispat Inland, L.P., a Delaware limited partnership (the
"Borrower"), the Company, as a guarantor and as an account party in respect of
the Letter of Credit referred to below, the other guarantors referred to
therein, the financial institutions from time to time party thereto as lenders
(the "Lenders") and Credit Suisse First Boston, a bank organized under the laws
of Switzerland, acting through its New York branch, as issuing bank (in such
capacity, together with its successors and assigns in such capacity, the
"Issuing Bank"), administrative agent and collateral agent (in such capacity,
together with its successors and assigns in such capacity, the "Collateral
Agent"), (a) the Lenders have made or will make loans to the Borrower in an
aggregate principal amount of $700,000,000 (the "Loans") and (b) the Issuing
Bank will issue to the Pension Benefit Guaranty Corporation, for the account of
the Borrower and the Company and for the purpose of supporting certain potential
pension obligations of the Company, an irrevocable standby letter of credit (the
"Letter of Credit") in the aggregate face amount of $160,000,000; and
WHEREAS, the proceeds of the Loans will be contributed by the Borrower
to its wholly owned subsidiary Ispat Inland Finance, LLC, a Delaware limited
liability company ("Finco"), and loaned by Finco to the Company (the "Finco
Loan"); and
<PAGE> 12
11
WHEREAS, pursuant to the Credit Agreement, the Borrower is required to
enter into interest rate swap agreements, interest rate cap agreements, interest
rate collar agreements or similar agreements or arrangements designed to protect
the Borrower against fluctuations in interest rates with respect to indebtedness
of the Borrower and the Company ("Interest Rate Protection Agreements"); and
WHEREAS, the Company desires, in order to evidence the Finco Loan, to
create and issue under and in accordance with the provisions of the First
Mortgage, $700,000,000 aggregate principal amount of Bonds to be known as its
"Series U First Mortgage Bonds" (hereinafter sometimes called "Series U Bonds"
or "Bonds of Series U"), which Bonds are to be issued to Finco, and assigned by
Finco to, and registered in the name of, the Collateral Agent pursuant to a
pledge agreement (as amended, supplemented or otherwise modified from time to
time, the "Pledge Agreement") dated as of the date hereof among the Borrower,
the subsidiary pledgors listed therein, and Credit Suisse First Boston, as
Collateral Agent; and
WHEREAS, the Company desires, in order to secure its obligations as an
account party and a guarantor with respect to the Letter of Credit, to create
and issue under and in accordance with the provisions of the First Mortgage,
Bonds to be known as its "Series V First Mortgage Bonds" (hereinafter sometimes
called "Series V Bonds" or "Bonds of Series V") in an aggregate principal amount
equal to $160,000,000, which Bonds are to be issued to, and registered in the
name of, the Collateral Agent; and
WHEREAS, the Company desires, in order to secure its obligations as a
counterparty or a guarantor in respect of each Interest Rate Protection
Agreement, to create and issue under and in accordance with the First Mortgage,
Bonds to be known as its "Series W First Mortgage Bonds" (hereinafter sometimes
called "Series W Bonds" or "Bonds of Series W", and the Series W Bonds, together
with the Series U and the Series V Bonds, are hereinafter called the "Series
Bonds") in an aggregate principal amount equal to $15,000,000, which Bonds are
to be issued to, and registered in the name of, the Collateral Agent; and
<PAGE> 13
12
WHEREAS, the form, terms and provisions of this Indenture and the
execution thereof by the Company have been duly authorized; and
WHEREAS, the Series Bonds and the certificate of authentication of the
Corporate Trustee to be endorsed upon all Series Bonds are to be substantially
in the following forms, with appropriate omissions, insertions and variations as
in the First Mortgage and in this Indenture provided or permitted:
[FORM OF SERIES U BOND]
EXCEPT AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT
(AS DEFINED IN THE CREDIT AGREEMENT REFERRED TO BELOW), THIS BOND IS NOT
TRANSFERABLE TO ANY PERSON OTHER THAN A SUCCESSOR COLLATERAL AGENT UNDER THE
CREDIT AGREEMENT DATED AS OF JULY 16, 1998, AMONG THE COMPANY, ISPAT INLAND,
L.P., A DELAWARE LIMITED PARTNERSHIP (THE "BORROWER"), THE OTHER GUARANTORS
NAMED THEREIN, THE LENDERS NAMED THEREIN, AND CREDIT SUISSE FIRST BOSTON, AS
ISSUING BANK, AS ADMINISTRATIVE AGENT, AND AS COLLATERAL AGENT (TOGETHER WITH
ANY SUCCESSORS UNDER SUCH CREDIT AGREEMENT, THE "COLLATERAL AGENT") (SUCH CREDIT
AGREEMENT, AS AMENDED, MODIFIED OR SUPPLEMENTED FROM TIME TO TIME, THE "CREDIT
AGREEMENT").
INLAND STEEL COMPANY
No._____________ $700,000,000
SERIES U FIRST MORTGAGE BONDS
INLAND STEEL COMPANY, a Delaware corporation (herein, together with its
successors and assigns, the "Company"), for value received promises to pay to
Credit Suisse First Boston, as Collateral Agent and assignee of Ispat Inland
Finance, LLC, a Delaware limited liability company ("Finco"), pursuant to a
pledge agreement (as amended, supplemented or otherwise modified from time to
time, the "Pledge Agreement") dated as of July 16, 1998, among the Borrower, the
subsidiary pledgors listed therein, and Credit Suisse First
<PAGE> 14
13
Boston, as Collateral Agent, or designees the principal sum of Seven Hundred
Million Dollars ($700,000,000) or such lesser principal amount as is equal to
the aggregate principal amount of the outstanding Loans (as defined in the
Credit Agreement) in whole or installments on such date or dates as the Borrower
has any obligation to make payments with respect to the Loans under the Credit
Agreement, but not later than, with respect to Tranche B Loans (as defined in
the Credit Agreement), the Tranche B Maturity Date (as defined in the Credit
Agreement) or, with respect to Tranche C Loans (as defined in the Credit
Agreement), the Tranche C Maturity Date (as defined in the Credit Agreement), at
the same place or places as such payments are required to be made by the
Borrower under the Credit Agreement, in any coin or currency of the United
States of America which at the time of such payment shall be legal tender for
the payment of public and private debts, and to pay interest on the unpaid
principal amount hereof in like coin or currency to the registered owner hereof
or its designees at said place or places at such rate or rates per annum on each
interest payment date (as hereinafter defined) as shall cause the amount of
interest payable on such interest payment date on this Series U Bond to equal
(i) the amount of interest, fees, charges and expenses payable on such interest
payment date with respect to the Loans under the Credit Agreement plus (ii)
additional interest on the Loans under the Credit Agreement in the amount of 1/2
of 1% per annum ("Additional Interest"). Such interest shall be payable to the
Collateral Agent or its designees (provided, however, that Additional Interest
shall be payable directly to Finco) on the same dates as interest with respect
to the Loans is payable from time to time pursuant to the Credit Agreement (each
such date hereinafter called an "interest payment date"), until maturity of this
Series U Bond, or if the Collateral Agent shall demand redemption of this Series
U Bond, until the redemption date, or, if the Company shall default in the
payment of principal due on this Series U Bond, until such principal and
interest shall have been paid in full and the Company's obligations with respect
thereto discharged as provided in the First Mortgage (as hereinafter defined).
The amount of interest and fees and types of charges and expenses payable from
time to time with respect to the Loans under the Credit Agreement, the basis on
which such amounts are computed and the dates on which such amounts are payable
are set forth in the Credit Agreement.
<PAGE> 15
14
This bond is one of the Bonds of Series U of an issue of registered
bonds of the Company, known as its First Mortgage Bonds and herein termed the
"Bonds", all issued and to be issued under, and equally secured by, an indenture
of mortgage and deed of trust, dated April 1, 1928, made by the Company to First
Trust and Savings Bank and Melvin A. Traylor, as Trustees (The First National
Bank of Chicago and John G. Finley, Successor Trustees), herein sometimes termed
the "First Mortgage". The term "First Mortgage" wherever used herein shall,
unless the context shall otherwise require, be deemed to include the First
Mortgage as amended and all indentures supplemental to the First Mortgage,
including the Thirty-Sixth Supplemental Indenture dated as of July 16, 1998
(herein called the "Thirty-Sixth Supplemental Indenture"). The Fourth
Supplemental Indenture dated December 16, 1935, the Fifth Supplemental Indenture
dated January 15, 1936, the Eighth Supplemental Indenture dated as of January
15, 1937, the Ninth Supplemental Indenture dated as of March 1, 1940, the Tenth
Supplemental Indenture dated as of March 15, 1940, the Twelfth Supplemental
Indenture dated as of November 1, 1946, the Fifteenth Supplemental Indenture
dated as of March 1, 1952, the Sixteenth Supplemental Indenture dated as of July
1, 1956, the Seventeenth Supplemental Indenture dated as of July 1, 1957, the
Eighteenth Supplemental Indenture dated as of January 15, 1959, the Nineteenth
Supplemental Indenture dated as of December 1, 1967, the Twenty-First
Supplemental Indenture dated as of July 15, 1970, the Twenty-Second Supplemental
Indenture dated as of April 15, 1974, the Thirty-Fourth Supplemental Indenture,
dated as of August 1, 1995, and the Thirty-Fifth Supplemental Indenture, dated
as of July 29, 1996, made by the Company to the Trustees under the First
Mortgage, provide, among other things, for certain amendments of the First
Mortgage or indentures supplemental thereto. The Twenty-Fourth Supplemental
Indenture dated as of January 15, 1977, the Restated Twenty-Fifth Supplemental
Indenture dated as of February 1, 1977, the Twenty-Sixth Supplemental Indenture
dated as of May 15, 1978, the Twenty-Seventh Supplemental Indenture dated as of
June 1, 1980, the Twenty-Eighth Supplemental Indenture dated as of October 15,
1980, the Twenty-Ninth Supplemental Indenture dated as of December 1, 1982, the
Thirty-First Supplemental Indenture, made by the Company to the Trustees under
the First Mortgage, dated as of December 1, 1991, the Thirty-Second Supplemental
Indenture, dated as of June 1, 1993, and the Thirty-Third Supplemental
Indenture, dated as of June 1, 1995, provide, among other things, for the future
modification of certain provisions of the First
<PAGE> 16
15
Mortgage without any further vote or consent on the part of the holders of the
respective series of Bonds, including this Series U Bond, created by such
supplemental indentures. For a description of the properties mortgaged and
pledged, the nature and extent of the security, and the terms and conditions
upon which the Bonds are secured, reference is made to the First Mortgage. The
aggregate principal amount of the Bonds which may be issued under the First
Mortgage is not limited.
Any payment made by or on behalf of the Borrower in respect of the
Borrower's obligations with respect to the Loans under the Credit Agreement
shall be deemed a payment in respect of this Series U Bond, but such payment
shall not reduce the principal amount of this Series U Bond unless, and then
only to the extent, the aggregate principal amount of the outstanding Loans is
irrevocably reduced concurrently with such payment. In the event that all of the
Borrower's obligations with respect to the Loans under the Credit Agreement have
been paid in full and discharged, this Series U Bond shall be deemed paid in
full and the Collateral Agent shall surrender this Series U Bond to the
Corporate Trustee for cancellation.
This Series U Bond shall be redeemed by the Company at a redemption
price of 100% (expressed as a percentage of principal amount) plus accrued
interest thereon to the redemption date, in cash, following receipt by the
Company and the Corporate Trustee of a written demand for redemption of this
Series U Bond from the Collateral Agent (the "Series U Redemption Demand"). This
Series U Bond shall be redeemed by the Company in the amount specified in the
Series U Redemption Demand, which amount shall be equal to the outstanding
principal, interest and other amounts then due and owing with respect to the
Loans under the Credit Agreement. The Series U Redemption Demand shall also
state (i) that an "Event of Default" has occurred and is continuing under the
terms of the Credit Agreement, (ii) that payment of the principal amount
outstanding under the Credit Agreement, all interest thereon and all other
amounts payable thereunder are immediately due and payable, and (iii) that the
Collateral Agent has demanded payment thereof from the Borrower. This Series U
Bond shall be redeemed on the fifth Business Day (as defined in the Credit
Agreement) following receipt by the Company and the Corporate Trustee of the
Series U Redemption Demand upon its surrender to the Company, as
<PAGE> 17
16
paying agent for the Series U Bonds pursuant to the Indenture. Any payment made
to the Collateral Agent pursuant to a Series U Redemption Demand shall
constitute a payment by the Borrower in respect of its obligations with respect
to the Loans under the Credit Agreement. The Series U Redemption Demand shall be
rescinded and shall be null and void for all purposes of the First Mortgage upon
receipt by the Company and the Corporate Trustee, no later than the Business Day
prior to the date fixed for redemption, of a certificate of the Collateral Agent
(a) stating that there has been a waiver of such Event of Default, or (b)
withdrawing said Series U Redemption Demand.
In case an event of default as defined in the First Mortgage shall
occur, the principal of the Bonds (including the Series U Bonds) may become or
be declared due and payable, in the manner and with the effect provided in the
First Mortgage.
Series U Bonds are issuable only in fully registered form without
coupons in the denominations of $1,000 and any integral multiples thereof.
No recourse shall be had for the payment of the principal of or
interest or other amounts on this Series U Bond or any part hereof or for any
claim based hereon or otherwise in respect hereof or of the indebtedness
represented hereby or of the First Mortgage, against the Trustees, any
subscriber, incorporator, stockholder, officer or director, as such, past,
present or future, of the Trustees or the Company or of any successor
corporation, either directly or indirectly through the Company or any successor
corporation, whether by virtue of any statute or constitutional provision or by
the enforcement of any assessment or otherwise, all such liability being by the
acceptance hereof and as part of the consideration for the issue hereof
expressly waived and released and being likewise waived and released by the
terms of the First Mortgage.
Except after the occurrence and during the continuance of an Event of
Default (as defined in the Credit Agreement), this Series U Bond is
nontransferable except to effect transfer to any successor to the Collateral
Agent under the Credit Agreement, but is exchangeable by the registered holder
hereof, in person or by attorney duly authorized, at the office or agency of the
Company in
<PAGE> 18
17
the Borough of Manhattan, The City of New York, State of New York, or at the
office or agency of the Company, in the City of Chicago, State of Illinois, upon
surrender and cancellation of this Series U Bond, and upon any such transfer or
exchange one or more new registered Series U Bonds, without coupons, of
authorized denominations, will be issued to the authorized transferee, or the
registered holder, as the case may be, as provided in the First Mortgage. A
service charge will not be made for any transfer or exchange of Series U Bonds,
but the Company may require payment of a sum sufficient to cover any stamp tax
or other governmental charge payable in connection therewith.
The person in whose name this bond is registered shall be deemed and be
regarded as the owner hereof for all purposes.
This bond shall not be entitled to any benefit under the First
Mortgage, and shall not become valid or obligatory for any purpose,
<PAGE> 19
18
until it shall have been authenticated by the execution by the Corporate Trustee
under the First Mortgage of the certificate hereon endorsed.
IN WITNESS WHEREOF, Inland Steel Company has caused this Series U Bond
to be signed by its President or one of its Vice-Presidents, and its corporate
seal to be hereunto affixed and attested by its Secretary or one of its
Assistant Secretaries.
Dated:
INLAND STEEL COMPANY
by________________________
Title:
(Form of Corporate Trustee's Certificate of Authentication)
This bond is one of the bonds described in the within-mentioned First
Mortgage.
Dated:
THE FIRST NATIONAL BANK OF CHICAGO,
Corporate Trustee
by_______________________________
Authorized Officer
[END OF FORM OF SERIES U BOND]
[FORM OF SERIES V BOND]
EXCEPT AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT
(AS DEFINED IN THE CREDIT AGREEMENT REFERRED TO BELOW), THIS BOND IS NOT
TRANSFERABLE TO ANY PERSON OTHER THAN A SUCCESSOR COLLATERAL AGENT UNDER THE
CREDIT AGREEMENT DATED AS OF JULY 16, 1998, AMONG THE COMPANY, ISPAT INLAND,
L.P., A DELAWARE LIMITED PARTNERSHIP (THE "BORROWER"), THE OTHER GUARANTORS
NAMED THEREIN, THE LENDERS NAMED THEREIN, AND CREDIT SUISSE FIRST BOSTON, AS
<PAGE> 20
19
ISSUING BANK, AS ADMINISTRATIVE AGENT, AND AS COLLATERAL AGENT (TOGETHER WITH
ANY SUCCESSORS UNDER SUCH CREDIT AGREEMENT, THE "COLLATERAL AGENT") (SUCH CREDIT
AGREEMENT, AS AMENDED, MODIFIED OR SUPPLEMENTED FROM TIME TO TIME, THE "CREDIT
AGREEMENT").
INLAND STEEL COMPANY
No._____________ $160,000,000
SERIES V FIRST MORTGAGE BONDS
INLAND STEEL COMPANY, a Delaware corporation (herein, together with its
successors and assigns, the "Company"), for value received promises to pay to
Credit Suisse First Boston, as Collateral Agent, or registered assigns the
principal sum of (i) One Hundred Sixty Million Dollars ($160,000,000) or (ii)
such lesser principal amount as is equal to the aggregate outstanding principal
amount from time to time of all unreimbursed L/C Disbursements (as defined in
the Credit Agreement) in respect of the Letter of Credit (as defined in the
Thirty-Sixth Supplemental Indenture referred to below), and to pay interest from
time to time in an aggregate amount as shall equal the amount of all interest
payable in respect of unreimbursed L/C Disbursements, all L/C Participation Fees
(as defined in the Credit Agreement) and all Issuing Bank Fees (as defined in
the Credit Agreement, and, together with L/C Participation Fees, the "L/C Fees")
set forth in the Credit Agreement which have become due thereunder, on such date
or dates and in the same place or places as such payments are required to be
made by the Borrower and the Company under the Credit Agreement, in any coin or
currency of the United States of America which at the time of such payment shall
be legal tender for the payment of public and private debts. The amount of
interest and fees and types of charges and expenses payable from time to time
with respect to the outstanding unreimbursed L/C Disbursements and the L/C Fees
under the Credit Agreement, the basis on which such amounts are computed and the
dates on which such amounts are payable are set forth in the Credit Agreement.
<PAGE> 21
20
This bond is one of the Bonds of Series V of an issue of registered
bonds of the Company, known as its First Mortgage Bonds and herein termed the
"Bonds", all issued and to be issued under, and equally secured by, an indenture
of mortgage and deed of trust, dated April 1, 1928, made by the Company to First
Trust and Savings Bank and Melvin A. Traylor, as Trustees (The First National
Bank of Chicago and John G. Finley, Successor Trustees), herein sometimes termed
the "First Mortgage". The term "First Mortgage" wherever used herein shall,
unless the context shall otherwise require, be deemed to include the First
Mortgage as amended and all indentures supplemental to the First Mortgage,
including the Thirty-Sixth Supplemental Indenture dated as of July 16, 1998
(herein called the "Thirty-Sixth Supplemental Indenture"). The Fourth
Supplemental Indenture dated December 16, 1935, the Fifth Supplemental Indenture
dated January 15, 1936, the Eighth Supplemental Indenture dated as of January
15, 1937, the Ninth Supplemental Indenture dated as of March 1, 1940, the Tenth
Supplemental Indenture dated as of March 15, 1940, the Twelfth Supplemental
Indenture dated as of November 1, 1946, the Fifteenth Supplemental Indenture
dated as of March 1, 1952, the Sixteenth Supplemental Indenture dated as of July
1, 1956, the Seventeenth Supplemental Indenture dated as of July 1, 1957, the
Eighteenth Supplemental Indenture dated as of January 15, 1959, the Nineteenth
Supplemental Indenture dated as of December 1, 1967, the Twenty-First
Supplemental Indenture dated as of July 15, 1970, the Twenty-Second Supplemental
Indenture dated as of April 15, 1974, the Thirty-Fourth Supplemental Indenture,
dated as of August 1, 1995, and the Thirty-Fifth Supplemental Indenture, dated
as of July 29, 1996, made by the Company to the Trustees under the First
Mortgage, provide, among other things, for certain amendments of the First
Mortgage or indentures supplemental thereto. The Twenty-Fourth Supplemental
Indenture dated as of January 15, 1977, the Restated Twenty-Fifth Supplemental
Indenture dated as of February 1, 1977, the Twenty-Sixth Supplemental Indenture
dated as of May 15, 1978, the Twenty-Seventh Supplemental Indenture dated as of
June 1, 1980, the Twenty-Eighth Supplemental Indenture dated as of October 15,
1980, the Twenty-Ninth Supplemental Indenture dated as of December 1, 1982, the
Thirty-First Supplemental Indenture, made by the Company to the Trustees under
the First Mortgage, dated as of December 1, 1991, the Thirty-Second Supplemental
Indenture, dated as of June 1, 1993, and the Thirty-Third Supplemental
<PAGE> 22
21
Indenture, dated as of June 1, 1995, provide, among other things, for the future
modification of certain provisions of the First Mortgage without any further
vote or consent on the part of the holders of the respective series of Bonds,
including this Series V Bond, created by such supplemental indentures. For a
description of the properties mortgaged and pledged, the nature and extent of
the security, and the terms and conditions upon which the Bonds are secured,
reference is made to the First Mortgage. The aggregate principal amount of the
Bonds which may be issued under the First Mortgage is not limited.
Any payment made by or on behalf of the Borrower or the Company in
respect of their obligations (including, without limitation, L/C Fees) with
respect to the Letter of Credit shall be deemed a payment in respect of this
Series V Bond, but such payment shall not reduce the principal amount of this
Series V Bond unless, and then only to the extent, that the Maximum Credit
Amount (as defined in the Letter of Credit) is also reduced. In the event that
all of the Company's and the Borrower's obligations with respect to the Letter
of Credit under the Credit Agreement have been paid in full and discharged, and
the Letter of Credit shall have expired or terminated or been surrendered for
cancellation, this Series V Bond shall be deemed paid in full and the Collateral
Agent shall surrender this Series V Bond to the Corporate Trustee for
cancellation.
This Series V Bond shall be redeemed by the Company at a redemption
price of 100% (expressed as a percentage of principal amount) plus accrued
interest thereon to the redemption date, in cash, following receipt by the
Company and the Corporate Trustee of a written demand for redemption of this
Series V Bond from the Collateral Agent (the "Series V Redemption Demand"). This
Series V Bond shall be redeemed by the Company in the amount specified in the
Series V Redemption Demand, which amount shall be equal to all outstanding L/C
Disbursements, L/C Fees which have become due under the Credit Agreement and are
unpaid and interest on the preceding and other amounts then due and owing with
respect to the Letter of Credit under the Credit Agreement. This Series V Bond
shall be redeemed on the fifth Business Day (as defined in the Credit Agreement)
following receipt by the Company and the Corporate Trustee of the Series V
Redemption Demand upon its surrender to the Company, as paying agent for the
<PAGE> 23
22
Series V Bonds pursuant to the Indenture. Any payment made to the Collateral
Agent pursuant to a Series V Redemption Demand shall constitute a payment by the
Company and the Borrower in respect of their obligations with respect to the
Letter of Credit under the Credit Agreement. The Series V Redemption Demand
shall be rescinded and shall be null and void for all purposes of the First
Mortgage upon receipt by the Company and the Corporate Trustee, no later than
the Business Day prior to the date fixed for redemption, of a certificate of the
Collateral Agent (a) stating that all amounts that would then be due and payable
hereunder have been paid in full, or (b) withdrawing said Series V Redemption
Demand.
In case an event of default as defined in the First Mortgage shall
occur, the principal of the Bonds (including the Series V Bonds) may become or
be declared due and payable, in the manner and with the effect provided in the
First Mortgage.
Series V Bonds are issuable only in fully registered form without
coupons in the denominations of $1,000 and any integral multiples thereof.
No recourse shall be had for the payment of the principal of or
interest or other amounts on this Series V Bond or any part hereof or for any
claim based hereon or otherwise in respect hereof or of the indebtedness
represented hereby or of the First Mortgage, against the Trustees or any
subscriber, incorporator, stockholder, officer or director, as such, past,
present or future, of the the Trustees or Company or of any successor
corporation, either directly or indirectly through the Company or any successor
corporation, whether by virtue of any statute or constitutional provision or by
the enforcement of any assessment or otherwise, all such liability being by the
acceptance hereof and as part of the consideration for the issue hereof
expressly waived and released and being likewise waived and released by the
terms of the First Mortgage.
Except after the occurrence and during the continuance of an Event of
Default (as defined in the Credit Agreement), this Series V Bond is
nontransferable except to effect transfer to any successor to the Collateral
Agent under the Credit Agreement, but is exchangeable by the registered holder
hereof, in person or by
<PAGE> 24
23
attorney duly authorized, at the office or agency of the Company in the Borough
of Manhattan, The City of New York, State of New York, or at the office or
agency of the Company, in the City of Chicago, State of Illinois, upon surrender
and cancellation of this Series V Bond, and upon any such transfer or exchange
one or more new registered Series V Bonds, without coupons, of authorized
denominations, will be issued to the authorized transferee, or the registered
holder, as the case may be, as provided in the First Mortgage. A service charge
will not be made for any transfer or exchange of Series V Bonds, but the Company
may require payment of a sum sufficient to cover any stamp tax or other
governmental charge payable in connection therewith.
The person in whose name this bond is registered shall be deemed and be
regarded as the owner hereof for all purposes.
This bond shall not be entitled to any benefit under the First
Mortgage, and shall not become valid or obligatory for any purpose, until it
shall have been authenticated by the execution
<PAGE> 25
24
by the Corporate Trustee under the First Mortgage of the certificate hereon
endorsed.
IN WITNESS WHEREOF, Inland Steel Company has caused this Series V Bond
to be signed in its name by its President or one of its Vice-Presidents, and its
corporate seal to be hereunto affixed and attested by its Secretary or one of
its Assistant Secretaries.
Dated:
INLAND STEEL COMPANY
by________________________
Title:
(Form of Corporate Trustee's Certificate of Authentication)
This bond is one of the bonds described in the within-mentioned First
Mortgage.
Dated:
THE FIRST NATIONAL BANK OF CHICAGO,
Corporate Trustee
by_______________________________
Authorized Officer
[END OF FORM OF SERIES V BOND]
<PAGE> 26
25
[FORM OF SERIES W BOND]
EXCEPT AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT
(AS DEFINED IN THE CREDIT AGREEMENT REFERRED TO BELOW), THIS BOND IS NOT
TRANSFERABLE TO ANY PERSON OTHER THAN A SUCCESSOR COLLATERAL AGENT UNDER THE
CREDIT AGREEMENT DATED AS OF JULY 16, 1998, AMONG THE COMPANY, ISPAT INLAND,
L.P., A DELAWARE LIMITED PARTNERSHIP (THE "BORROWER"), THE OTHER GUARANTORS
NAMED THEREIN, THE LENDERS NAMED THEREIN, AND CREDIT SUISSE FIRST BOSTON, AS
ISSUING BANK, AS ADMINISTRATIVE AGENT, AND AS COLLATERAL AGENT (TOGETHER WITH
ANY SUCCESSORS UNDER SUCH CREDIT AGREEMENT, THE "COLLATERAL AGENT") (SUCH CREDIT
AGREEMENT, AS AMENDED, MODIFIED OR SUPPLEMENTED FROM TIME TO TIME, THE "CREDIT
AGREEMENT").
INLAND STEEL COMPANY
No.______________ $15,000,000
SERIES W FIRST MORTGAGE BONDS
INLAND STEEL COMPANY, a Delaware corporation (herein, together with its
successors and assigns, the "Company"), for value received promises to pay to
Credit Suisse First Boston, as Collateral Agent, or registered assigns the
principal sum of (i) Fifteen Million Dollars ($15,000,000) or (ii) such lesser
amount as is equal to the aggregate sum of all amounts that from time to time
may be due and owing by the Company or the Borrower under each Interest Rate
Protection Agreement (as defined in the Thirty-Sixth Supplemental Indenture
referred to below), including principal, interest, fees, charges and expenses
payable thereunder, to each counterparty to such Interest Rate Protection
Agreement that was a Lender (as defined in the Credit Agreement) or an Affiliate
(as defined in the Credit Agreement) of a Lender at the time such Interest Rate
Protection Agreement was entered into (each such Interest Rate Protection
Agreement, an "Applicable Interest Rate Protection Agreement", each such
<PAGE> 27
26
counterparty, a "Hedging Counterparty", and all such amounts due, including
principal, interest, fees, charges and expenses, under Applicable Interest Rate
Protection Agreements, the "Covered Amounts") on such date or dates and in such
amounts as the Company or the Borrower has any obligation to make payments for
Covered Amounts under any Applicable Interest Rate Protection Agreement, but not
later than July 16, 2006, at the same place or places as such payments are
required to be made by the Company or the Borrower under the Applicable Interest
Rate Protection Agreement, in any coin or currency of the United States of
America which at the time of such payment shall be legal tender for the payment
of public and private debts. Covered Amounts shall be payable to the applicable
Hedging Counterparty until maturity of this Series W Bond, or if the Collateral
Agent shall demand redemption of this Series W Bond, Covered Amounts shall be
payable to the Collateral Agent until the redemption date, or, if the Company
shall default in the payment of principal due on this Series W Bond, until such
principal shall have been paid in full and the Company's obligations with
respect thereto discharged as provided in the First Mortgage (as hereinafter
defined). Covered Amounts payable to Hedging Counterparties from time to time,
the basis on which Covered Amounts are computed and the dates on which Covered
Amounts are payable are as are set forth in the Applicable Interest Rate
Protection Agreements.
This bond is one of the Bonds of Series W of an issue of registered
bonds of the Company, known as its First Mortgage Bonds and herein termed the
"Bonds", all issued and to be issued under, and equally secured by, an indenture
of mortgage and deed of trust, dated April 1, 1928, made by the Company to First
Trust and Savings Bank and Melvin A. Traylor, as Trustees (The First National
Bank of Chicago and John G. Finley, Successor Trustees), herein sometimes termed
the "First Mortgage". The term "First Mortgage" wherever used herein shall,
unless the context shall otherwise require, be deemed to include the First
Mortgage as amended and all indentures supplemental to the First Mortgage,
including the Thirty-Sixth Supplemental Indenture dated as of July 16, 1998
(herein called the "Thirty-Sixth Supplemental Indenture"). The Fourth
Supplemental Indenture dated December 16, 1935, the Fifth Supplemental Indenture
dated January 15, 1936, the Eighth Supplemental Indenture dated as of January
15, 1937, the Ninth Supplemental Indenture dated as of March 1, 1940,
<PAGE> 28
27
the Tenth Supplemental Indenture dated as of March 15, 1940, the Twelfth
Supplemental Indenture dated as of November 1, 1946, the Fifteenth Supplemental
Indenture dated as of March 1, 1952, the Sixteenth Supplemental Indenture dated
as of July 1, 1956, the Seventeenth Supplemental Indenture dated as of July 1,
1957, the Eighteenth Supplemental Indenture dated as of January 15, 1959, the
Nineteenth Supplemental Indenture dated as of December 1, 1967, the Twenty-First
Supplemental Indenture dated as of July 15, 1970, the Twenty-Second Supplemental
Indenture dated as of April 15, 1974, the Thirty-Fourth Supplemental Indenture,
dated as of August 1, 1995, and the Thirty-Fifth Supplemental Indenture, dated
as of July 29, 1996, made by the Company to the Trustees under the First
Mortgage, provide, among other things, for certain amendments of the First
Mortgage or indentures supplemental thereto. The Twenty-Fourth Supplemental
Indenture dated as of January 15, 1977, the Restated Twenty-Fifth Supplemental
Indenture dated as of February 1, 1977, the Twenty-Sixth Supplemental Indenture
dated as of May 15, 1978, the Twenty-Seventh Supplemental Indenture dated as of
June 1, 1980, the Twenty-Eighth Supplemental Indenture dated as of October 15,
1980, the Twenty-Ninth Supplemental Indenture dated as of December 1, 1982, the
Thirty-Sixth Supplemental Indenture, made by the Company to the Trustees under
the First Mortgage, dated as of December 1, 1991, the Thirty-Second Supplemental
Indenture, dated as of June 1, 1993, and the Thirty-Third Supplemental
Indenture, dated as of June 1, 1995, provide, among other things, for the future
modification of certain provisions of the First Mortgage without any further
vote or consent on the part of the holders of the respective series of Bonds,
including this Series W Bond, created by such supplemental indentures. For a
description of the properties mortgaged and pledged, the nature and extent of
the security, and the terms and conditions upon which the Bonds are secured,
reference is made to the First Mortgage. The aggregate principal amount of the
Bonds which may be issued under the First Mortgage is not limited.
Any payments made by or on behalf of the Company or the Borrower of
Covered Amounts made to Hedging Counterparties shall be deemed a payment in
respect of this Series W Bond, but such payment shall not reduce the principal
amount of this Series W Bond. In the event that all of the Company's and the
Borrower's obligations with respect to the payment of Covered Amounts have
<PAGE> 29
28
been paid in full and all Applicable Interest Rate Protection Agreements have
expired or been terminated, the Company may request that this Series W Bond be
deemed paid in full and that the Collateral Agent surrender this Series W Bond
to the Corporate Trustee for cancellation.
This Series W Bond shall be redeemed by the Company at a redemption
price of 100% (expressed as a percentage of principal amount), in cash,
following receipt by the Corporate Trustee of a written demand for redemption of
this Series W Bond from the Collateral Agent (the "Series W Redemption Demand").
This Series W Bond shall be redeemed in the amount specified in the Series W
Redemption Demand, which amount shall be equal to the Covered Amounts then due
and owing. This Series W Bond shall be redeemed on the fifth Business Day (as
defined in the Credit Agreement) following receipt by the Company and the
Corporate Trustee of the Series W Redemption Demand upon its surrender to the
Company, as paying agent for the Series W Bonds pursuant to the Indenture. Any
payment made to the Collateral Agent pursuant to a Series W Redemption Demand
shall constitute a payment by the Company or the Borrower, as applicable, of
Covered Amounts. The Series W Redemption Demand shall be rescinded and shall be
null and void for all purposes of the First Mortgage upon receipt by the Company
and the Corporate Trustee, no later than the Business Day prior to the date
fixed for redemption, of a certificate of the Collateral Agent (a) stating that
all amounts that would be due and payable hereunder have been paid in full, or
(b) withdrawing said Series W Redemption Demand.
In case an event of default as defined in the First Mortgage shall
occur, the principal of the Bonds (including the Series W Bonds) may become or
be declared due and payable, in the manner and with the effect provided in the
First Mortgage.
Series W Bonds are issuable only in fully registered form without
coupons in the denominations of $1,000 and any integral multiples thereof.
No recourse shall be had for the payment of the principal of or
interest or other amounts on this Series W Bond or any part hereof or for any
claim based hereon or otherwise in respect hereof or of the indebtedness
represented hereby or of the First
<PAGE> 30
29
Mortgage, against the Trustees or any subscriber, incorporator, stockholder,
officer or director, as such, past, present or future, of the Trustees or the
Company or of any successor corporation, either directly or indirectly through
the Company or any successor corporation, whether by virtue of any statute or
constitutional provision or by the enforcement of any assessment or otherwise,
all such liability being by the acceptance hereof and as part of the
consideration for the issue hereof expressly waived and released and being
likewise waived and released by the terms of the First Mortgage.
Except after the occurrence and during the continuance of an Event of
Default (as defined in the Credit Agreement), this Series W Bond is
nontransferable except to effect transfer to any successor to the Collateral
Agent under the Credit Agreement, but is exchangeable by the registered holder
hereof, in person or by attorney duly authorized, at the office or agency of the
Company in the Borough of Manhattan, The City of New York, State of New York, or
at the office or agency of the Company, in the City of Chicago, State of
Illinois, upon surrender and cancellation of this Series W Bond, and upon any
such transfer or exchange one or more new registered Series W Bonds, without
coupons, of authorized denominations, will be issued to the authorized
transferee, or the registered holder, as the case may be, as provided in the
First Mortgage. A service charge will not be made for any transfer or exchange
of Series W Bonds, but the Company may require payment of a sum sufficient to
cover any stamp tax or other governmental charge payable in connection
therewith.
The person in whose name this bond is registered shall be deemed and be
regarded as the owner hereof for all purposes.
This bond shall not be entitled to any benefit under the First
Mortgage, and shall not become valid or obligatory for any purpose, until it
shall have been authenticated by the execution
<PAGE> 31
30
by the Corporate Trustee under the First Mortgage of the certificate hereon
endorsed.
IN WITNESS WHEREOF, Inland Steel Company has caused this Series W Bond
to be signed in its name by its President or one of its Vice-Presidents, and its
corporate seal to be hereunto affixed and attested by its Secretary or one of
its Assistant Secretaries.
Dated:
INLAND STEEL COMPANY
by________________________
Title:
(Form of Corporate Trustee's Certificate of Authentication)
This bond is one of the bonds described in the within-mentioned First Mortgage.
Dated:
THE FIRST NATIONAL BANK OF CHICAGO,
Corporate Trustee
by_______________________________
Authorized Officer
[END OF FORM OF SERIES W BOND]
WHEREAS, all acts and things prescribed by law and by the certificate
of incorporation and by-laws of the Company and by the First Mortgage have been
duly complied with and the Company has executed this Indenture in the exercise
of the legal rights and powers vested in it, and all things necessary to make
this Indenture the valid and binding obligation of the Company and a valid and
binding agreement supplemental to the First Mortgage, and all things necessary
to make the Series Bonds, when authenticated by the Corporate Trustee and
delivered, the valid
<PAGE> 32
31
and binding obligation of the Company, have been done and performed;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That, in order to secure the payment of all the Bonds at any time
issued and outstanding under the First Mortgage, regardless of the date of issue
thereof, according to their tenor, purport and effect, as well as the interest
and premium, if any, thereon and the principal thereof, and to secure the
performance and observance of all the covenants and conditions in the First
Mortgage and said Bonds contained, and in consideration of the premises and of
the acceptance or purchase of the Series Bonds by the holders thereof, and the
sum of $100.00 lawful money of the United States of America to the Company duly
paid by the Trustees at or before the sealing and delivery of this Indenture
(the receipt whereof is hereby acknowledged), the Company has executed and
delivered this Indenture, and hereby creates the Series Bonds and hereby agrees
with the Trustees as hereinafter provided:
ARTICLE ONE
AMOUNT, FORM, ISSUE, REGISTRATION AND EXCHANGE,
AND OTHER PROVISIONS OF SERIES BONDS
SECTION I. The Series U Bonds shall be known as the "Series U First
Mortgage Bonds" of the Company, and shall be limited to an aggregate principal
amount of $700,000,000, but the aggregate principal amount thereof outstanding
at any time shall not exceed the aggregate outstanding principal amount of the
Loans (as defined in the Credit Agreement). Series U Bonds shall be issued as
registered Bonds without coupons in the denominations of $1,000 and any integral
multiples thereof, and, pursuant to an assignment of the Series U Bonds by Finco
to the Collateral Agent under the Pledge Agreement, registered in the name of
the Collateral Agent. The principal of the Series U Bonds shall be payable in
whole or installments on such date or dates as the Borrower has any obligation
to make payments with respect to the Loans under the Credit Agreement, but not
later than, with respect to Tranche B Loans (as defined in the Credit
Agreement), the Tranche B Maturity Date (as defined in the Credit Agreement) or,
with respect to Tranche C Loans (as defined in the
<PAGE> 33
32
Credit Agreement), the Tranche C Maturity Date (as defined in the Credit
Agreement). The Series U Bonds shall bear (i) interest at a rate per annum on
each date as interest or fees are payable from time to time with respect to the
Loans pursuant to the Credit Agreement as shall cause the amount of interest
payable on such date on the Series U Bonds to equal the amount of interest,
fees, charges and expenses payable with respect to the Loans on such date under
the Credit Agreement, plus (ii) additional interest on the Loans under the
Credit Agreement in the amount of 1/2 of 1% per annum ("Additional Interest")
until maturity of the Series U Bonds, or if the Collateral Agent shall demand
redemption of the Series U Bonds, pursuant to Section VII hereof, until the
redemption date, or, if the Company shall default in the payment of principal
due on the Series U Bonds, until such principal and interest shall have been
paid in full and the Company's obligations with respect thereto discharged as
provided in the First Mortgage. Such interest shall be payable to the Collateral
Agent or its designees, except that Additional Interest shall be payable
directly to Finco. The amount of interest and fees and types of charges and
expenses payable from time to time with respect to the Loans under the Credit
Agreement, the basis on which such amounts are computed and the dates on which
such amounts are payable are set forth in the Credit Agreement. Any payment made
by or on behalf of the Borrower in respect of the Borrower's obligations with
respect to the Loans under the Credit Agreement shall be deemed a payment in
respect of the Series U Bonds, but such payment shall not reduce the principal
amount of the Series U Bonds unless, and then only to the extent, the aggregate
principal amount of the outstanding Loans is irrevocably reduced concurrently
with such payment. Bonds of Series U shall be payable, as to principal and
interest, in any coin or currency of the United States of America which at the
time of such payment shall be legal tender for the payment of public and private
debts, and at the same place or places as such payments are required to be made
by the Borrower under the Credit Agreement.
The Series U Bonds shall be dated the date of authentication. Bonds of
Series U shall be substantially of the tenor and purport above recited, with
appropriate additions, insertions, omissions, substitutions and variations as
herein and in Article One of the First Mortgage provided or permitted.
<PAGE> 34
33
Except after the occurrence and during the continuance of an Event of
Default (as defined in the Credit Agreement), the Series U Bonds are
nontransferable except to effect transfer to any successor to the Collateral
Agent under the Credit Agreement, but are exchangeable by the registered holder
hereof, in person or by attorney duly authorized, at the office or agency of the
Company in the Borough of Manhattan, The City of New York, State of New York, or
at the office or agency of the Company, in the City of Chicago, State of
Illinois, upon surrender and cancellation of this Series U Bond, and upon any
such transfer or exchange one or more new registered Series U Bonds, without
coupons, of authorized denominations, will be issued to the authorized
transferee, or the registered holder, as the case may be, as provided in Article
One of the First Mortgage.
A service charge will not be made for any registration of transfer or
exchange of Series U Bonds, but the Company may require payment of a sum
sufficient to cover any stamp tax or other governmental charge payable in
connection therewith.
SECTION II. After $700,000,000 aggregate principal amount of Bonds of
Series U shall have been authenticated and delivered, no additional Bonds of
Series U shall be issued, except upon transfers or exchanges of Bonds of Series
U or in lieu of Bonds of Series U mutilated, destroyed, lost or stolen.
SECTION III. The Series V Bonds shall be known as the "Series V First
Mortgage Bonds" of the Company, and shall be limited to an aggregate principal
amount of $160,000,000, but the aggregate principal amount thereof outstanding
at any time shall not exceed the aggregate outstanding principal amount of all
unreimbursed L/C Disbursements in respect of the Letter of Credit. Series V
Bonds shall be issued as registered Bonds without coupons in the denominations
of $1,000 and any integral multiples thereof, and registered in the name of the
Collateral Agent. The principal of the Series V Bonds shall be payable on such
date or dates as the Borrower or the Company has any obligation to make payments
with respect to the L/C Disbursements under the Credit Agreement. The Series V
Bonds shall bear interest at a rate per annum on each date and in such amounts
as shall cause the amount of interest payable on such date on the Series V Bonds
to equal the amount of interest, fees, charges and
<PAGE> 35
34
expenses payable with respect to the outstanding unreimbursed L/C Disbursements,
L/C Participation Fees (as defined in the Credit Agreement), and Issuing Bank
Fees (as defined in the Credit Agreement, and, together with L/C Participation
Fees, the "L/C Fees") on such date under the Credit Agreement. The amount of
interest and fees and types of charges and expenses payable from time to time
with respect to the outstanding unreimbursed L/C Disbursements and the L/C Fees
under the Credit Agreement, the basis on which such amounts are computed and the
dates on which such amounts are payable are set forth in the Credit Agreement.
Any payment made by or on behalf of the Company or the Borrower in respect to
the Company's or the Borrower's obligations (including, without limitation, L/C
Fees) with respect to the Letter of Credit shall be deemed a payment in respect
of the Series V Bonds, but such payment shall not reduce the principal amount of
the Series V Bonds unless, and then only to the extent, that the Maximum Credit
Amount (as defined in the Letter of Credit) is also reduced. Bonds of Series V
shall be payable, as to principal and interest, in any coin or currency of the
United States of America which at the time of such payment shall be legal tender
for the payment of public and private debts, and at the same place or places as
such payments are required to be made by the Borrower or the Company under the
Credit Agreement.
The Series V Bonds shall be dated the date of authentication. Bonds of
Series V shall be substantially of the tenor and purport above recited, with
appropriate additions, insertions, omissions, substitutions and variations as
herein and in Article One of the First Mortgage provided or permitted.
Except after the occurrence and during the continuance of an Event of
Default, the Series V Bonds are nontransferable except to effect transfer to any
successor to the Collateral Agent under the Credit Agreement, but are
exchangeable by the registered holder hereof, in person or by attorney duly
authorized, at the office or agency of the Company in the Borough of Manhattan,
The City of New York, State of New York, or at the office or agency of the
Company, in the City of Chicago, State of Illinois, upon surrender and
cancellation of this Series V Bond, and upon any such transfer or exchange one
or more new registered Series V Bonds, without coupons, of authorized
denominations, will be issued to the authorized transferee, or the registered
holder, as
<PAGE> 36
35
the case may be, as provided in Article One of the First Mortgage.
A service charge will not be made for any registration of transfer or
exchange of Series V Bonds, but the Company may require payment of a sum
sufficient to cover any stamp tax or other governmental charge payable in
connection therewith.
SECTION IV. After Bonds of Series V in an aggregate principal amount
equal to $160,000,000 shall have been authenticated and delivered, no additional
Bonds of Series V shall be issued, except upon transfers or exchanges of Bonds
of Series V or in lieu of Bonds of Series V mutilated, destroyed, lost or
stolen.
SECTION V. The Series W Bonds shall be known as the "Series W First
Mortgage Bonds" of the Company, and shall be limited to an aggregate principal
amount of $15,000,000. Series W Bonds shall be issued as registered Bonds
without coupons in the denominations of $1,000 and any integral multiples
thereof, and registered in the name of the Collateral Agent. The principal of
the Series W Bonds shall be payable on such date or dates and in such amounts as
the Company or the Borrower has any obligation to make payments, including
payments of principal, interest, fees, charges and expenses, under each Interest
Rate Protection Agreement entered into with a Lender or an Affiliate (as defined
in the Credit Agreement) of a Lender at the time such Interest Rate Protection
Agreement was entered into (each such Interest Rate Protection Agreement, an
"Applicable Interest Rate Protection Agreement", all such amounts being referred
to as the "Covered Amounts" and any such counterparty being referred to as a
"Hedging Counterparty"). Covered Amounts shall be payable to the applicable
Hedging Counterparty until maturity of the Series W Bonds, or if the Collateral
Agent shall demand redemption of the Series W Bonds pursuant to Section IX
hereof, Covered Amounts shall be payable to the Collateral Agent until the
redemption date, or, if the Company shall default in the payment of principal
due on the Series W Bonds, until such principal shall have been paid in full and
the Company's obligations with respect thereto discharged as provided in the
First Mortgage. Covered Amounts payable to Hedging Counterparties from time to
time, the basis on which Covered Amounts are computed and the dates on
<PAGE> 37
36
which Covered Amounts are payable are as are set forth in the Applicable
Interest Rate Protection Agreements. Any payments made by or on behalf of the
Company or the Borrower of Covered Amounts made to Hedging Counterparties shall
be deemed a payment in respect of the Series W Bonds, but such payment shall not
reduce the principal amount of the Series W Bonds. In the event that all of the
Company's and the Borrower's obligations with respect to the payment of Covered
Amounts have been paid in full and all Applicable Interest Rate Protection
Agreements have expired or been terminated, the Company may request that the
Series W Bonds be deemed paid in full and that the Collateral Agent surrender
the Series W Bonds to the Corporate Trustee for cancellation. Bonds of Series W
shall be payable, as to principal and interest, in any coin or currency of the
United States of America which at the time of such payment shall be legal tender
for the payment of public and private debts, and at the same place or places as
such payments are required to be made by the Company or the Borrower under the
Applicable Interest Rate Protection Agreements.
The Series W Bonds shall be dated the date of authentication. Bonds of
Series W shall be substantially of the tenor and purport above recited, with
appropriate additions, insertions, omissions, substitutions and variations as
herein and in Article One of the First Mortgage provided or permitted.
Except after the occurrence and during the continuance of an Event of
Default, the Series W Bonds are nontransferable except to effect transfer to any
successor to the Collateral Agent under the Credit Agreement, but are
exchangeable by the registered holder hereof, in person or by attorney duly
authorized, at the office or agency of the Company in the Borough of Manhattan,
The City of New York, State of New York, or at the office or agency of the
Company, in the City of Chicago, State of Illinois, upon surrender and
cancellation of this Series W Bond, and upon any such transfer or exchange one
or more new registered Series W Bonds, without coupons, of authorized
denominations, will be issued to the authorized transferee, or the registered
holder, as the case may be, as provided in Article One of the First Mortgage.
<PAGE> 38
37
A service charge will not be made for any registration of transfer or
exchange of Series W Bonds, but the Company may require payment of a sum
sufficient to cover any stamp tax or other governmental charge payable in
connection therewith.
SECTION VI. After Bonds of Series W in an aggregate principal amount
equal to $15,000,000 shall have been authenticated and delivered, no additional
Bonds of Series W shall be issued, except upon transfers or exchange of Bonds of
Series W or in lieu of Bonds of Series W mutilated, destroyed, lost or stolen.
SECTION VII. Following receipt by the Company and the Corporate Trustee
of a written demand for redemption of the Series U Bonds from the Collateral
Agent (a "Series U Redemption Demand"), the Series U Bonds shall be redeemed by
the Company at a redemption price of 100% (expressed as a percentage of
principal amount) plus accrued interest thereon through the redemption date, in
cash. The Series U Bonds shall be redeemed by the Company in the amount
specified in the Series U Redemption Demand, which amount shall be equal to all
outstanding principal, interest, fees, charges, expenses and other amounts then
due and owing with respect to the Loans under the Credit Agreement. The Series U
Redemption Demand shall also state (i) that an "Event of Default" has occurred
and is continuing under the terms of the Credit Agreement, (ii) that payment of
the principal amount outstanding under the Credit Agreement, all interest
thereon and all other amounts payable thereunder are immediately due and
payable, and (iii) that the Agent has demanded payment thereof from the
Borrower. The Series U Bonds shall be redeemed on the fifth Business Day (as
defined in the Credit Agreement) following receipt by the Company and the
Corporate Trustee of such Series U Redemption Demand upon their surrender to the
Company, as paying agent for the Series U Bonds pursuant to Article Two hereof.
Any payment made to the Collateral Agent pursuant to a Series U Redemption
Demand shall constitute a payment by the Borrower in respect of its obligations
with respect to the Loans under the Credit Agreement. The Series U Redemption
Demand shall be rescinded and shall be null and void for all purposes of the
First Mortgage upon receipt by the Corporate Trustee, no later than the Business
Day prior to the date fixed for redemption, of a certificate of the Collateral
Agent (a) stating that there has
<PAGE> 39
38
been a waiver of such Event of Default, or (b) withdrawing said Series U
Redemption Demand.
SECTION VIII. Following receipt by the Company and the Corporate
Trustee of a written demand for redemption of the Series V Bonds from the
Collateral Agent (a "Series V Redemption Demand"), the Series V Bonds shall be
redeemed at a redemption price of 100% (expressed as a percentage of principal
amount) plus accrued interest thereon through the redemption date, in cash. The
Series V Bonds shall be redeemed by the Company in the amount specified in the
Series V Redemption Demand, which amount shall be equal to all outstanding L/C
Disbursements, L/C Fees which have become due under the Credit Agreement and are
unpaid and interest on the preceding and other amounts then due and owing with
respect to the Letter of Credit under the Credit Agreement. The Series V Bonds
shall be redeemed on the fifth Business Day following receipt by the Company and
the Corporate Trustee of the Series V Redemption Demand upon their surrender to
the Company, as paying agent for the Series V Bonds pursuant to Article Two
hereof. Any payment made to the Collateral Agent pursuant to a Series V
Redemption Demand shall constitute a payment by the Company and the Borrower in
respect of their obligations with respect to the Letter of Credit under the
Credit Agreement. The Series V Redemption Demand shall be rescinded and shall be
null and void for all purposes of the First Mortgage upon receipt by the Company
and the Corporate Trustee, no later than the Business Day prior to the date
fixed for redemption, of a certificate of the Collateral Agent (a) stating that
all amounts that would then be due and payable hereunder have been paid in full,
or (b) withdrawing said Collateral Series V Redemption Demand.
SECTION IX. Following receipt by the Company and the Corporate Trustee
of a written demand for redemption of the Series W Bonds from the Collateral
Agent (a "Series W Redemption Demand"), the Series W Bonds shall be redeemed by
the Company at a redemption price of 100% (expressed as a percentage of
principal amount) in cash. The Series W Bonds shall be redeemed in the amount
specified in the Series W Redemption Demand, which amount shall be equal to the
Covered Amounts then due and owing. The Series W Bonds shall be redeemed on the
fifth Business Day following receipt by the Company and the Corporate Trustee of
<PAGE> 40
39
such Series W Redemption Demand upon their surrender to the Company, as paying
agent for the Series W Bonds pursuant to Article Two hereof. Any payment made to
the Collateral Agent pursuant to a Series W Redemption Demand shall constitute a
payment by the Company or the Borrower, as applicable, of Covered Amounts. The
Series W Redemption Demand shall be rescinded and shall be null and void for all
purposes of the First Mortgage upon receipt by the Corporate Trustee, no later
than the Business Day prior to the date fixed for redemption, of a certificate
of the Collateral Agent (a) stating that all amounts that would then be due and
payable hereunder have been paid in full, or (b) withdrawing said Series W
Redemption Demand.
ARTICLE TWO
PAYING AGENT
The Company shall act as paying agent for the Series Bonds at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, State of New York, and at the office or agency of the Company, in the City
of Chicago, State of Illinois.
ARTICLE THREE
THE TRUSTEES
SECTION 1. The Trustees hereby accept and enter into this Indenture and
the trusts hereby created.
SECTION 2. The Trustees shall be entitled, in connection with this
Indenture, to all of the exemptions and immunities granted to them, or either of
them, by the terms of the First Mortgage.
ARTICLE FOUR
EFFECT OF THIS SUPPLEMENTAL INDENTURE ON THE FIRST MORTGAGE
The provisions of this Supplemental Indenture shall become effective
immediately upon the execution and delivery of this Supplemental Indenture and
the First Mortgage shall thereupon be
<PAGE> 41
40
deemed to be amended as set forth in this Indenture, as fully and with the same
effect as if the respective provisions of the First Mortgage, as amended by this
Supplemental Indenture, had been set forth in said First Mortgage Indenture,
dated April 1, 1928, as originally executed.
Except as specifically amended or supplemented by this Indenture, all
of the provisions of the First Mortgage shall remain and continue in full force
and effect and unaffected by the execution of this Supplemental Indenture.
This Supplemental Indenture shall be construed in connection with, and
as a part of, the First Mortgage, and the covenants hereof shall be deemed, as
to the subject matter of such covenants, covenants of the First Mortgage.
This Supplemental Indenture may be executed in two or more
counterparts, each of which shall be and shall be taken to be an original, and
all collectively but one instrument.
<PAGE> 42
41
ARTICLE FIVE
MODIFICATION OF CERTAIN PROVISIONS OF
THE FIRST MORTGAGE
Anything in the First Mortgage to the contrary notwithstanding, the
Series Bonds shall not be entitled to the benefit of, nor shall the holders of
the Series Bonds have any rights with respect to, (i) the provisions in Group
Four of the Granting Clause of the First Mortgage which provide, upon the
occurrence of certain events, that the First Mortgage covers certain personal
property of the Company (including, without limitation, tools, rolling stock,
ships, vessels, boats, motor or other vehicles, raw materials, supplies,
store-room contents, work in process, manufactured products, and other personal
property, cash, notes, bills and accounts receivable and other choses in
action), or (ii) the provisions of Article Six, Section 4, of the First Mortgage
insofar as the term "physical property" is used therein could be interpreted to
include inventory of the Company (i.e., goods which are held by the Company for
sale or lease or to be furnished under contracts of service, or raw materials,
work in process or materials used or consumed in the business of the Company).
IN WITNESS WHEREOF, said Inland Steel Company, the party of the first
part, has caused this Indenture to be signed in its corporate name by its
President or one of its Vice Presidents and its corporate seal to be hereunto
affixed and attested by its Secretary or one of its Assistant Secretaries, and
said The First National Bank of Chicago, one of the parties of the second part,
has caused this Supplemental Indenture to be signed in its corporate name by one
of its Vice Presidents and its corporate seal to be hereunto affixed and
attested by one of its Trust Officers, and said John G. Finley, the other of the
parties of the second part, has hereunto set his hand and seal, all as of the
day and year first above written.
INLAND STEEL COMPANY
by_________________________
<PAGE> 43
42
ATTEST:
by_______________________
Title:
Signed, sealed and delivered
by Inland Steel Company
in the presence of:
_________________________
_________________________
THE FIRST NATIONAL BANK OF CHICAGO
by____________________________________
Vice President
ATTEST:
by_______________________
Title:
<PAGE> 44
43
Signed, sealed and delivered
by The First National Bank of Chicago
in the presence of:
__________________________
__________________________
___________________________(Seal)
John G. Finley
Signed, sealed and delivered
by John G. Finley in the
presence of:
__________________________
__________________________
<PAGE> 45
44
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
I, ________________, a Notary Public in and for the county and State
aforesaid, DO HEREBY CERTIFY that on this ___ day of July, 1998, before me
personally came and appeared in person, [Name], [Title], and [Name], [Title],
respectively, of Inland Steel Company, one of the corporations described in the
within, annexed and foregoing indenture, each to me personally known and
personally known to me to be a [Title] and [Title], respectively, of said Inland
Steel Company, and personally known to me to be the same persons whose names are
subscribed to said indenture, who subscribed the same in my presence and who
severally acknowledged, and, being by me severally duly sworn, deposed and said:
That said [Name] resides in [Location], in the State of Illinois, and that he is
a [Title] of said Inland Steel Company, one of the corporations described in and
which executed the foregoing indenture; that said [Name] resides in [Location],
in the State of Illinois, and that he is [Title] of said Inland Steel Company,
one of the corporations described in and which executed the foregoing indenture;
that they know the seal of said corporation; that the seal affixed said
indenture is such corporate seal; that said indenture was executed in behalf of
said corporation by authority of its board of directors; that said seal was so
affixed by authority of the board of directors of said corporation; that they
did sign their respective names thereto by like authority; and they further
severally acknowledged to me the signing, sealing and delivering of said
indenture, and said indenture itself, to be the free and voluntary act and deed
of said Inland Steel Company, and of themselves as such officers thereof, for
the uses and purposes therein set forth.
GIVEN under my hand and official seal this ___ day of July, A.D. 1998.
_____________________________
_________________, a resident
of Cook County, Illinois
Notary Public
<PAGE> 46
45
My commission expires ___________________.
<PAGE> 47
46
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
I, ___________, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that on this ____ day of July, 1998, before me
personally came and appeared in person, _________________, a Vice President, and
___________, a Trust Officer, respectively, of The First National Bank of
Chicago, one of the corporations described in the within, annexed and foregoing
indenture, each to me personally known and personally known to me to be a Vice
President and a Trust Officer, respectively, of said The First National Bank of
Chicago, and personally known to me to be the same persons whose names are
subscribed to said indenture, who subscribed the same in my presence and who
severally acknowledged, and, being by me severally duly sworn, deposed and said:
That said ___________ resides in ___________ in the State of Illinois, and that
(s)he is a Vice President of said The First National Bank of Chicago, one of the
corporations described in and which executed the foregoing indenture; that said
___________ resides in ___________ in the State of Illinois, and that (s)he is a
Trust Officer of said The First National Bank of Chicago, one of the
corporations described in and which executed the foregoing indenture; that they
know the seal of said corporation; that the seal affixed to said indenture is
such corporate seal; that said indenture was executed in behalf of said
corporation by authority of its By-Laws; that said seal was so affixed by
authority of the By-Laws of said corporation; that they did sign their
respective names thereto by like authority; and they further severally
acknowledged to me the signing, sealing and delivering of said indenture, and
said indenture itself, to be the free and voluntary act and deed of said The
First National Bank of Chicago, and of themselves as such officers thereof, for
the uses and purposes therein set forth.
GIVEN under my hand and official seal this ____ day of July, A.D. 1998.
__________________________________
________________________, a resident
of Cook County, Illinois
<PAGE> 48
47
Notary Public
My commission expires __________________________.
<PAGE> 49
48
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
I, ___________, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that on this ____ day of July, 1998 before me
personally came and appeared in person John G. Finley, to me personally known
and personally known to me to be the person described in, and who executed, and
the same person whose name is subscribed to, the within, annexed and foregoing
indenture, and acknowledged the execution of, and that he signed, sealed,
executed and delivered said indenture as his free and voluntary act and deed for
the uses and purposes therein set forth.
GIVEN under my hand and official seal this ____ day of July, A.D. 1998.
_________________________________
_____________________, a resident
of Cook County, Illinois
Notary Public
My commission expires ______________________.
<PAGE> 1
EXHIBIT 10
CONFORMED COPY
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
dated as of July 16, 1998,
among
ISPAT INLAND, L.P.,
INLAND STEEL COMPANY,
BURNHAM TRUCKING COMPANY, INC.,
INCOAL COMPANY,
THE LENDERS NAMED HEREIN
and
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent
---------------
CREDIT SUISSE FIRST BOSTON,
as Arranger
DONALDSON, LUFKIN & JENRETTE,
as Syndication Agent
- --------------------------------------------------------------------------------
[CS&M Ref No. 5865-029]
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I
Definitions
<S> <C> <C>
SECTION 1.01. Defined Terms.....................................................................1
SECTION 1.02. Terms Generally..................................................................20
ARTICLE II
The Credits
SECTION 2.01. Commitments......................................................................20
SECTION 2.02. Loans............................................................................20
SECTION 2.03. Borrowing Procedure..............................................................21
SECTION 2.04. Evidence of Debt; Repayment of Loans.............................................22
SECTION 2.05. Fees.............................................................................22
SECTION 2.06. Interest on Loans................................................................23
SECTION 2.07. Default Interest.................................................................23
SECTION 2.08. Alternate Rate of Interest.......................................................23
SECTION 2.09. Termination and Reduction of Commitments.........................................23
SECTION 2.10. Conversion and Continuation of Borrowings.......................................24
SECTION 2.11. Repayment of Borrowings..........................................................25
SECTION 2.12. Optional Prepayment..............................................................27
SECTION 2.13. Prepayment Offers................................................................28
SECTION 2.14. Reserve Requirements; Change in Circumstances....................................28
SECTION 2.15. Change in Legality...............................................................30
SECTION 2.16. Indemnity........................................................................30
SECTION 2.17. Pro Rata Treatment...............................................................31
SECTION 2.18. Sharing of Setoffs...............................................................31
SECTION 2.19. Payments.........................................................................32
SECTION 2.20. Taxes............................................................................32
SECTION 2.21. Assignment of Commitments Under Certain Circumstances;
Duty to Mitigate.................................................................33
SECTION 2.22. Letter of Credit.................................................................34
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers.............................................................37
SECTION 3.02. Authorization....................................................................37
SECTION 3.03. Enforceability...................................................................38
SECTION 3.04. Governmental Approvals...........................................................38
SECTION 3.05. Financial Statements.............................................................38
SECTION 3.06. No Material Adverse Change.......................................................38
SECTION 3.07. Title to Properties; Possession Under Leases.....................................39
SECTION 3.08. Subsidiaries.....................................................................39
SECTION 3.09. Litigation; Compliance with Laws.................................................39
SECTION 3.10. Agreements.......................................................................39
SECTION 3.11. Federal Reserve Regulations......................................................40
</TABLE>
<PAGE> 3
3
<TABLE>
<S> <C> <C>
SECTION 3.12. Investment Company Act; Public Utility Holding Company
Act.............................................................40
SECTION 3.13. Use of Proceeds.................................................40
SECTION 3.14. Tax Returns.....................................................40
SECTION 3.15. No Material Misstatements.......................................40
SECTION 3.16. Employee Benefit Plans..........................................40
SECTION 3.17. Environmental Matters...........................................41
SECTION 3.18. Insurance.......................................................41
SECTION 3.19. Security Documents..............................................41
SECTION 3.20. Location of Real Property and Leased Premises...................42
SECTION 3.21. Labor Matters...................................................42
SECTION 3.22. Solvency........................................................42
SECTION 3.23. Year 2000.......................................................42
ARTICLE IV
Conditions of Lending
SECTION 4.01. All Credit Events...............................................43
SECTION 4.02. First Credit Event..............................................43
ARTICLE V
Affirmative Covenants
SECTION 5.01. Existence; Businesses and Properties............................45
SECTION 5.02. Insurance.......................................................46
SECTION 5.03. Obligations and Taxes...........................................46
SECTION 5.04. Financial Statements, Reports, etc..............................47
SECTION 5.05. Litigation and Other Notices....................................48
SECTION 5.06. Employee Benefits...............................................48
SECTION 5.07. Maintaining Records; Access to Properties and Inspections.......48
SECTION 5.08. Use of Proceeds.................................................48
SECTION 5.09. Compliance with Environmental Laws..............................48
SECTION 5.10. Preparation of Environmental Reports............................49
SECTION 5.11. Further Assurances..............................................49
SECTION 5.12. Interest Rate Protection Agreements.............................49
ARTICLE VI
Negative Covenants
SECTION 6.01. Liens...........................................................49
SECTION 6.02. Limitation on Indebtedness......................................51
SECTION 6.03. Limitation on Restricted Payments...............................53
</TABLE>
<PAGE> 4
4
<TABLE>
<S> <C> <C>
SECTION 6.04. Limitation on Sales of Assets and Subsidiary Stock..............54
SECTION 6.05. Mergers, Consolidations, Sales of Assets........................55
SECTION 6.06. Transactions with Affiliates....................................55
SECTION 6.07. Business of Borrower and Subsidiaries...........................55
SECTION 6.08. Restrictions on Ability of Restricted Subsidiaries to
Pay Dividends...................................................55
SECTION 6.09. Consolidated EBITDA.............................................56
SECTION 6.10. Amendment of Indenture..........................................56
ARTICLE VII
Events of Default
ARTICLE VIII
The Administrative Agent and the Collateral Agent
ARTICLE IX
Guarantee
SECTION 9.01. Guarantee.......................................................60
SECTION 9.02. Limitation on Liability.........................................62
SECTION 9.03. Successors and Assigns..........................................62
ARTICLE X
Miscellaneous
SECTION 10.01. Notices........................................................62
SECTION 10.02. Survival of Agreement..........................................63
SECTION 10.03. Binding Effect.................................................63
SECTION 10.04. Successors and Assigns.........................................63
SECTION 10.05. Expenses; Indemnity............................................65
SECTION 10.06. Right of Setoff................................................66
SECTION 10.07. Applicable Law.................................................67
SECTION 10.08. Waivers; Amendment.............................................67
SECTION 10.09. Interest Rate Limitation.......................................67
SECTION 10.10. Entire Agreement...............................................68
SECTION 10.11. WAIVER OF JURY TRIAL...........................................68
SECTION 10.12. Severability...................................................68
SECTION 10.13. Counterparts...................................................68
SECTION 10.14. Headings.......................................................68
SECTION 10.15. Jurisdiction; Consent to Service of Process....................68
SECTION 10.16. Judgment Currency..............................................69
</TABLE>
<PAGE> 5
5
<TABLE>
<S> <C> <C>
SECTION 10.17. Confidentiality................................................70
</TABLE>
SCHEDULES:
Schedule 1.01(a) -- Guarantors
Schedule 1.01(b) -- Unrestricted Subsidiaries
Schedule 1.01(c) -- Mortgaged Properties
Schedule 2.01 -- Commitments and L/C Participation Commitments
Section 3.07(c) -- Proceedings Affecting Mortgaged Property
Schedule 3.08 -- Subsidiaries
Schedule 3.09 -- Litigation
Schedule 3.17 -- Environmental Matters
Schedule 3.18 -- Insurance
Schedule 3.20 -- Real Property
Schedule 3.20(b) -- Leased Property
Schedule 6.01 -- Existing Liens
Schedule 6.02 -- Existing Indebtedness
EXHIBITS:
Exhibit A -- Form of Administrative Questionnaire
Exhibit B -- Form of Assignment and Acceptance
Exhibit C -- Form of Borrowing Request
Exhibit D -- Form of Guarantee
Exhibit E -- Form of Letter of Credit
Exhibit F -- Form of Pledge Agreement
Exhibit G-1 -- Form of Opinion of Borrower's Counsel
Exhibit G-2 -- Form of Opinion of General Counsel
<PAGE> 6
6
CREDIT AGREEMENT dated as of July 16, 1998, among ISPAT
INLAND, L.P., a Delaware limited partnership (the
"Borrower"), INLAND STEEL COMPANY, a Delaware corporation
("Inland"), BURNHAM TRUCKING COMPANY, INC., a Delaware
corporation, INCOAL COMPANY, a Delaware corporation, the
Lenders (as defined in Article I), and CREDIT SUISSE FIRST
BOSTON, a bank organized under the laws of Switzerland,
acting through its New York branch, as issuing bank (in such
capacity, the "Issuing Bank"), and as administrative agent
(in such capacity, the "Administrative Agent") and
collateral agent (in such capacity, the "Collateral Agent")
for the Lenders.
Pursuant to the Merger Agreement (such term and each other
capitalized term used but not defined herein having the meaning given it in
Article I), (a) Merger Sub will merge (the "Merger") with and into Inland with
Inland being the surviving corporation in the Merger and (b) the then
outstanding capital stock of Inland will be converted into the right to receive
aggregate cash consideration of $888,200,000 (the "Merger Consideration"),
subject to adjustment as set forth in the Merger Agreement.
The Borrower has requested the Lenders to extend credit in the
form of (a) Tranche B Loans on the Closing Date, in an aggregate principal
amount not in excess of $350,000,000, (b) Tranche C Loans on the Closing Date,
in an aggregate principal amount not in excess of $350,000,000 and (c) a Letter
of Credit for the benefit of PBGC in an aggregate face amount at any time
outstanding not in excess of $160,000,000. The proceeds of the Loans are to be
used solely (a) to make cash capital contributions to finance an indirect
intercompany loan (the "Inland Loan") to Inland, which will use the proceeds
thereof (i) to pay a portion of the Merger Consideration, (ii) to repay all
outstanding intercompany Indebtedness to ISI and (iii) to repay or defease the
Series T Bonds (such Indebtedness of Inland, together with the Indebtedness
referred to in clause (ii) above, being referred to herein as the "Existing
Inland Debt") and (b) to pay related fees and expenses. The Letter of Credit
will be issued for the benefit of PBGC to support certain potential pension
obligations of Inland.
The Lenders are willing to extend such credit to the Borrower and
the Issuing Bank is willing to issue the Letter of Credit for the account of the
Borrower and Inland on the terms and subject to the conditions set forth herein.
Accordingly, the parties hereto agree as follows:
<PAGE> 7
7
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Administrative Agent Fees" shall have the meaning assigned to
such term in Section 2.05(a).
"Administrative Questionnaire" shall mean an Administrative
Questionnaire in the form of Exhibit A or such other form as shall be specified
by the Administrative Agent from time to time.
"Affiliate" shall mean, when used with respect to a specified
person, another person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with the
person specified; provided, however, that for purposes of Section 6.06 only,
beneficial ownership of 10% or more of the voting securities of a person shall
be deemed to be Control for purposes of the definition of the term "Affiliate".
"Alternate Base Rate" shall mean, for any day, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of
(a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. If for any reason the Administrative
Agent shall have determined (which determination shall be conclusive absent
manifest error) that it is unable to ascertain the Federal Funds Effective Rate
for any reason, including the inability or failure of the Administrative Agent
to obtain sufficient quotations in accordance with the terms of the definition
thereof, the Alternate Base Rate shall be determined without regard to clause
(b) of the preceding sentence until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a change
in the Prime Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate or the Federal Funds Effective
Rate, respectively. The term "Prime
<PAGE> 8
8
Rate" shall mean the rate of interest per annum publicly announced from time to
time by the Administrative Agent as its prime rate in effect at its principal
office in New York City; each change in the Prime Rate shall be effective on the
date such change is publicly announced as being effective. The term "Federal
Funds Effective Rate" shall mean, for any day, 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 on the next succeeding
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
the day for such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.
"Applicable Percentage" shall mean, for any day, with respect to
any Eurodollar Loan, ABR Loan or any L/C Participation Fees, as the case may be,
the applicable percentage set forth below under the caption "Eurodollar
Spread-Tranche B Loans", "Eurodollar Spread-Tranche C Loans", "ABR
Spread-Tranche B Loans", "ABR Spread-Tranche C Loans" or "L/C Participation
Fees", as the case may be, based upon the Consolidated Leverage Ratio as of the
relevant date of determination:
<TABLE>
<CAPTION>
Eurodollar Eurodollar ABR
Spread- Spread- ABR Spread- Spread- L/C
Tranche B Tranche C Tranche B Tranche C Participation
Consolidated Leverage Ratio Loans Loans Loans Loans Fees
- --------------------------- ---------- ---------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
Category 1
- ----------
Greater than or equal to 2.50
to 1.00 2.25% 2.75% 1.25% 1.75% 2.00%
Category 2
- ----------
Greater than or equal to 1.75
to 1.00 but less than 2.50 to
1.00 2.00% 2.50% 1.00% 1.50% 2.00%
Category 3
- ----------
Less than 1.75 to 1.00 1.75% 2.25% .75% 1.25% 1.75%
</TABLE>
Each change in the Applicable Percentage resulting from a change in the
Consolidated Leverage Ratio shall be effective with respect to all Loans and the
Letter of Credit outstanding on and after the date of delivery to the
Administrative Agent of the
<PAGE> 9
9
financial statements and certificates required by Section 5.04(a) or (b)
indicating such change until the date immediately preceding the next date of
delivery of such financial statements and certificates indicating another such
change. Notwithstanding the foregoing, (a) at any time during which the Borrower
has failed to deliver the financial statements and certificates required by
Section 5.04(a) or (b) and until such statements and certificates are delivered,
or (b) at any time after the occurrence and during the continuance of an Event
of Default, the Consolidated Leverage Ratio shall be deemed to be in Category 1
for purposes of determining the Applicable Percentage. Notwithstanding the
foregoing, until receipt of the financial statements with respect to the fiscal
year ending December 31, 1998, the Consolidated Leverage Ratio shall be deemed
to be in Category 1 for purposes of determining the Applicable Percentage.
"Approved Fund" shall mean, with respect to any Lender that is a fund
that invests in commercial loans, any other fund that invests in commercial
loans and is managed or advised by the same investment advisor as such Lender or
by an Affiliate of such investment advisor.
"Asset Sale" shall mean the sale, transfer or other disposition (by way
of merger or otherwise and including by way of casualty, condemnation or Sale
and Leaseback) by the Borrower, Inland or any Restricted Subsidiary to any
person other than the Borrower, Inland or any Guarantor (and other than sales,
transfers and dispositions between or among Restricted Subsidiaries that are not
Guarantors) of (a) any capital stock of any Restricted Subsidiary (other than
directors' qualifying shares) or (b) any other assets of the Borrower, Inland or
any Restricted Subsidiary (other than inventory, excess, damaged, obsolete or
worn out assets, scrap, Permitted Investments and accounts receivable, in each
case disposed of in the ordinary course of business (or, in the case of accounts
receivable or inventory, to a Securitization Subsidiary in accordance with this
Agreement); provided that, for purposes of this Agreement, any asset sale or
series of related asset sales described in clause (b) above having a value not
in excess of $2,000,000 and, for purposes of Section 6.04 only, any sale of the
4 AC Power Station, a power generating facility located in Inland's principal
plant in Indiana, shall be deemed not to be an "Asset Sale".
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the Administrative
Agent, in the form of Exhibit B or such other form as shall be approved by the
Administrative Agent.
"Board" shall mean the Board of Governors of the Federal Reserve System
of the United States of America.
<PAGE> 10
10
"Borrowing" shall mean a group of Loans of a single Type made by the
Lenders on a single date and as to which a single Interest Period is in effect.
"Borrowing Request" shall mean a request by the Borrower in accordance
with the terms of Section 2.03 and substantially in the form of Exhibit C or
such other form as shall be approved by the Administrative Agent.
"Business Day" shall mean any day other than a Saturday, Sunday or day
on which banks in New York City are authorized or required by law to close;
provided, however, that when used in connection with a Eurodollar Loan, the term
"Business Day" shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
"Capital Lease Obligations" of any person shall mean the obligations of
such person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Capital Stock" of any person shall mean any and all shares, interests,
rights to purchase, warrants, options, participation or other equivalents of or
interests in (however designated) the equity of such person, including any
Preferred Stock, but excluding any debt securities convertible into such equity.
A "Change in Control" shall be deemed to have occurred if (a) the
Permitted Holders shall cease to own directly or indirectly, beneficially or of
record, shares representing at least 35% of the aggregate ordinary voting power
represented by the issued and outstanding Capital Stock of IINV; (b) any person
or group (within the meaning of Rule 13d-3 of the Securities Exchange Act of
1934 as in effect on the date hereof) other than one or more Permitted Holders
shall own directly or indirectly, beneficially or of record, shares of Capital
Stock of IINV representing a greater percentage of the aggregate ordinary voting
power than the shares owned directly or indirectly, beneficially or of record,
by the Permitted Holders; (c) a majority of the seats (other than vacant seats)
on the board of directors of IINV shall at any time be occupied by persons who
were neither (i) nominated by the board of directors of IINV, nor
<PAGE> 11
11
(ii) appointed by directors so nominated; or (d) IINV shall cease to own,
directly or indirectly, 100% of the issued and outstanding capital stock of the
Borrower and Inland.
"Closing Date" shall mean July 16, 1998.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall mean all the property in which a security interest
has been purported to be granted pursuant to any Security Document, and shall
include the Mortgaged Properties.
"Commitment" shall mean, with respect to any Lender, such Lender's
Tranche B Commitment or Tranche C Commitment.
"Confidential Information Memorandum" shall mean the Confidential
Information Memorandum of the Borrower dated June 1998.
"Consolidated Coverage Ratio" as of any date of determination shall
mean the ratio of (a) the aggregate amount of Consolidated EBITDA for the period
of the most recent four consecutive fiscal quarters ending at least 45 days
prior to the date of such determination to (b) Consolidated Interest Expense for
such four fiscal quarters; provided, however, that (i) if the Borrower, Inland
or any Restricted Subsidiary has Incurred any Indebtedness 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
Indebtedness, or both, Consolidated EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, (ii) if the Borrower,
Inland or any Restricted Subsidiary has repaid, repurchased, defeased or
otherwise discharged any Indebtedness since the beginning of such period or if
any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged
(in each case other than Indebtedness Incurred under any revolving credit
facility unless such Indebtedness has been permanently repaid and has not been
replaced) on the date of the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio, Consolidated EBITDA and Consolidated Interest
Expense for such period shall be calculated on a pro forma basis as if such
discharge had occurred on the first day of such period and as if the Borrower,
Inland or such Restricted
<PAGE> 12
12
Subsidiary has not earned the interest income actually earned during such period
in respect of cash or Permitted Investments used to repay, repurchase, defease
or otherwise discharge such Indebtedness, (iii) if since the beginning of such
period the Borrower, Inland or any Restricted Subsidiary shall have made any
Asset Sale, the Consolidated EBITDA for such period shall be reduced by an
amount equal to the Consolidated EBITDA (if positive) directly attributable to
the assets which are the subject of such Asset Sale for such period, or
increased by an amount equal to the Consolidated EBITDA (if negative), directly
attributable thereto for such period and Consolidated Interest Expense for such
period shall be reduced by an amount equal to the Consolidated Interest Expense
directly attributable to any Indebtedness of the Borrower, Inland or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Borrower, Inland and their respective continuing Restricted
Subsidiaries in connection with such Asset Sale for such period (or, if the
Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest
Expense for such period directly attributable to the Indebtedness of such
Restricted Subsidiary to the extent the Borrower, Inland and their respective
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (iv) if since the beginning of such period the Borrower,
Inland 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 assets, including any acquisition of
assets occurring in connection with a transaction requiring a calculation to be
made hereunder, which constitutes all or substantially all of an operating unit
of a business, Consolidated EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Investment or acquisition occurred on
the first day of such period and (v) if since the beginning of such period any
person (that subsequently became a Restricted Subsidiary or was merged with or
into the Borrower, Inland or any Restricted Subsidiary since the beginning of
such period) shall have made any Asset Sale, any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (iii) or (iv)
above if made by the Borrower, Inland or a Restricted Subsidiary during such
period, Consolidated EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto as if such Asset Sale,
Investment or acquisition occurred on the first day of such period. For purposes
of this definition, whenever pro forma effect is to be given to an acquisition
of assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a Financial Officer of the Borrower or Inland. If any
<PAGE> 13
13
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest on such Indebtedness 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 Protection Agreement applicable to
such Indebtedness if such Interest Rate Protection Agreement has a remaining
term in excess of 12 months).
"Consolidated EBITDA" shall mean, for any period, Consolidated Net
Income for such period, plus, without duplication and to the extent deducted
from revenues in determining Consolidated Net Income for such period, the sum of
(a) the aggregate amount of Consolidated Interest Expense for such period, (b)
the aggregate amount of income tax expense for such period, (c) all amounts
attributable to depreciation and amortization for such period and (d) all
non-recurring non-cash charges during such period and minus, without duplication
and to the extent added to revenues in determining Consolidated Net Income for
such period, all non-recurring non-cash gains during such period, all as
determined on a consolidated basis with respect to Inland and the Restricted
Subsidiaries in accordance with GAAP.
"Consolidated Interest Expense" of Inland and the Restricted
Subsidiaries shall mean, for any period, the gross interest expense of Inland
and the Restricted Subsidiaries for such period, net of interest income. For
purposes of the foregoing, interest expense shall be determined after giving
effect to any net payments made or received by Inland and the Restricted
Subsidiaries under Interest Rate Protection Agreements.
"Consolidated Leverage Ratio" shall mean, on any date, the ratio of (a)
Total Debt as of such date to (b) the sum of (i) Consolidated EBITDA and (ii)
interest income of Inland and the Restricted Subsidiaries, in each case for the
period of four consecutive fiscal quarters of Inland and the Restricted
Subsidiaries most recently ended as of such date, all determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" shall mean, for any period, the sum of net
income or loss for such period of Inland and the Restricted Subsidiaries on a
consolidated basis determined in accordance with GAAP, but excluding: (a) the
net income of any person in which any other person (other than Inland or a
Wholly Owned Subsidiary or a director holding qualifying shares in compliance
with applicable law) has an interest, except to the extent of the amount of
dividends or distributions actually paid to Inland or a Wholly Owned Subsidiary
by such person, (b) the net income of any person accrued prior to the date it
became a Restricted Subsidiary or is merged into or consolidated with Inland or
<PAGE> 14
14
such person's assets are acquired by Inland or any of the Restricted
Subsidiaries; (c) non-cash unusual, non-cash non-recurring or non-cash
extraordinary gains (or losses), as defined under GAAP during such period; and
(d) the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by the Restricted
Subsidiary of that income is prohibited by operation of the terms of its charter
or any agreement, instrument, judgment, decree, statute, rule or governmental
regulation applicable to the Restricted Subsidiary.
"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and the terms "Controlling" and "Controlled" shall have meanings
correlative thereto.
"Default" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.
"Disqualified Stock" shall mean, with respect to any person, any
Capital Stock which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
Tranche C Maturity Date.
"dollars" or "$" shall mean lawful money of the United States of
America.
"Domestic Subsidiaries" shall mean all Restricted Subsidiaries
incorporated or organized under the laws of the United States of America, any
State thereof or the District of Columbia.
"Empire" shall mean Empire Iron Mining Partnership, a general
partnership in which Inland has a 40% interest.
"environment" shall mean ambient air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata, the workplace or as otherwise defined in any Environmental
Law.
"Environmental Claim" shall mean any written accusation, allegation,
notice of violation, claim, demand, order, directive, cost recovery action or
other cause of action
<PAGE> 15
15
by, or on behalf of, any Governmental Authority or any person for damages,
injunctive or equitable relief, personal injury (including sickness, disease or
death), Remedial Action costs, tangible or intangible property damage, natural
resource damages, nuisance, pollution, any adverse effect on the environment
caused by any Hazardous Material, or for fines, penalties or restrictions,
resulting from or based upon (a) the existence, or the continuation of the
existence, of a Release (including sudden or non-sudden, accidental or
non-accidental Releases), (b) exposure to any Hazardous Material, (c) the
presence, use, handling, transportation, storage, treatment or disposal of any
Hazardous Material or (d) the violation or alleged violation of any
Environmental Law or Environmental Permit.
"Environmental Law" shall mean any and all applicable treaties, laws,
rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions,
notices or binding agreements issued, promulgated or entered into by any
Governmental Authority, relating in any way to the environment, preservation or
reclamation of natural resources, the management, Release or threatened Release
of any Hazardous Material or to health and safety matters, including the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. ss 9601 et seq. (collectively "CERCLA"), the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976 and Hazardous and
Solid Waste Amendments of 1984, 42 U.S.C. ss 6901 et seq., the Federal Water
Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. ss
1251 et seq., the Clean Air Act of 1970, as amended 42 U.S.C. ss 7401 et seq.,
the Toxic Substances Control Act of 1976, 15 U.S.C. ss 2601 et seq., the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. ss 651 et
seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
ss 11001 et seq., the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. ss
300(f) et seq., the Hazardous Materials Transportation Act, 49 U.S.C. ss 5101 et
seq., and any similar or implementing state or local law, and all amendments or
regulations promulgated under any of the foregoing.
"Environmental Permit" shall mean any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environmental Law.
"Equity Contribution" shall mean (a) the cash equity investment in an
aggregate amount of $90,000,000 made by Ispat Sidbec Inc. and 9064-0861 Quebec
Inc. to the Borrower and (b) the cash equity investment in an aggregate amount
of $320,000,000 made by IINV and Ispat Sidbec Inc. to Ispat Inland Holding, Inc.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as
<PAGE> 16
16
the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with the Borrower and Inland, is treated as a
single employer under Section 414(b) or (c) of the Code, or solely for purposes
of Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder, with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower, Inland or any of their
respective ERISA Affiliates of any liability under Title IV of ERISA with
respect to the termination of any Plan; (e) the receipt by the Borrower, Inland
or any of their respective ERISA Affiliates from the PBGC or a plan
administrator of any notice relating to the intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Borrower, Inland or any of their respective ERISA Affiliates of any liability
with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower, Inland or any of their
respective ERISA Affiliates of any notice, or the receipt by any Multiemployer
Plan from the Borrower, Inland or any of their respective ERISA Affiliates of
any notice, concerning the imposition of Withdrawal Liability or a determination
that a Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA.
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Loan" shall mean any Loan bearing interest at a rate
determined by reference to the LIBO Rate in accordance with the provisions of
Article II.
"Event of Default" shall have the meaning assigned to such term in
Article VII.
"Excluded Taxes" shall mean, with respect to the Administrative Agent,
any Lender or any other recipient of any payment to be made by or on account of
any obligation of the Borrower hereunder, (a) income or franchise taxes imposed
on (or
<PAGE> 17
17
measured by) its net income by the United States of America or Canada, or by the
jurisdiction under the laws of which such recipient is organized or in which its
principal office is located or, in the case of any Lender, in which its
applicable lending office is located, (b) any branch profits taxes imposed by
the United States of America or any similar tax imposed by Canada or any other
jurisdiction in which the Borrower is located and (c) any withholding tax that
is imposed on amounts payable to a Lender (other than an assignee pursuant to a
request by the Borrower under Section 2.21) at the time such Lender becomes a
party to this Agreement (or designates a new lending office) or is attributable
to such Lender's failure to comply with Section 2.20(e), except to the extent
that such Lender (or its assignor, if any) was entitled, at the time of
designation of a new lending office (or assignment), to receive additional
amounts from the Borrower with respect to such withholding tax pursuant to
Section 2.20(a).
"Existing Joint Ventures" shall mean I/N Kote, I/N TEK, PCI and Empire.
"Existing Inland Debt" shall have the meaning assigned to such term in
the preamble.
"Fee Letter" shall mean the Fee Letter dated June 3, 1998, between IINV
and the Administrative Agent.
"Fees" shall mean the L/C Participation Fees, the Issuing Bank Fees and
the Administrative Agent Fees.
"Financial Officer" of any person shall mean the chief financial
officer, principal accounting officer, Treasurer or Controller of such person.
"Finco" shall mean Ispat Inland Finance, LLC, a Delaware limited
liability company.
"First Mortgage Bonds" shall mean (a) the Series U First Mortgage Bonds
issued pursuant to the Indenture to evidence the Inland Loan, (b) the Series V
First Mortgage Bonds issued pursuant to the Indenture to evidence Inland's
obligations in respect of the Letter of Credit and (c) the Series W First
Mortgage Bonds issued pursuant to the Indenture to evidence Inland's obligations
to the Borrower in respect of each Interest Rate Protection Agreement entered
into by Inland or the Borrower with any counterparty that was a Lender or an
Affiliate of a Lender at the time such Interest Rate Protection Agreement was
entered into, in each case pledged to the Collateral Agent for the benefit of
the Secured Parties.
<PAGE> 18
18
"Foreign Lender" shall mean, with respect to any Relevant Jurisdiction,
any Lender that is not organized under the laws of such Relevant Jurisdiction.
For purposes of this definition, (a) the United States of America, each State
thereof and the District of Columbia shall be deemed to constitute a single
jurisdiction and (b) Canada and each Province thereof shall be deemed to
constitute a single jurisdiction.
"Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic
Subsidiary.
"GAAP" shall mean generally accepted accounting principles in the
United States applied on a consistent basis.
"Governmental Authority" shall mean any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or legislative
or regulatory body.
"Guarantee" of or by any person shall mean any obligation, contingent
or otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or any other obligation of any other person (the
"primary obligor") in any manner, whether directly or indirectly, and including
any obligation of such person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation or to purchase (or to advance or supply funds for the purchase
of) any security for the payment of such Indebtedness or other obligation, (b)
to purchase or lease property, securities or services for the purpose of
assuring the owner of such Indebtedness or other obligation of the payment of
such Indebtedness or other obligation or (c) to maintain working capital, equity
capital or any other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such Indebtedness or other
obligation; provided, however, that the term "Guarantee" shall not include (i)
endorsements for collection or deposit in the ordinary course of business and
(ii) contracts made in the ordinary course of business of Inland or its
Restricted Subsidiaries for the purchase of utilities, services or raw materials
that require payment to be made to the provider of utilities, services or raw
materials regardless whether delivery is ever made of such utilities, services
or raw materials so long as the quantities of utilities, services or raw
materials purchased under each such contract do not exceed Inland's or the
contracting Restricted Subsidiary's reasonably anticipated consumption thereof
on the date of the contract.
<PAGE> 19
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"Guarantee Agreements" shall mean the IINV Guarantee, the Inland
Guarantee and any Subsidiary Guarantee.
"Guarantors" shall mean each person listed on Schedule 1.01(a) and each
other person that becomes party to a Guarantee Agreement as a Guarantor, and the
permitted successors and assigns of each such person.
"Hazardous Materials" shall mean all explosive or radioactive
substances or wastes, hazardous or toxic substances or wastes, pollutants,
solid, liquid or gaseous wastes, including petroleum or petroleum distillates,
asbestos or asbestos containing materials, polychlorinated biphenyls ("PCBs") or
PCB-containing materials or equipment, radon gas, infectious or medical wastes
and all other substances or wastes regulated pursuant to any Environmental Law.
"IINV" shall mean Ispat International N.V., a company organized under
the laws of The Netherlands.
"IINV Guarantee" shall mean the Guarantee Agreement, substantially in
the form of Exhibit D, made by IINV in favor of the Collateral Agent for the
benefit of the Secured Parties.
"Incur" shall mean issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
person existing at the time such person becomes a subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
subsidiary at the time it becomes a subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property or assets purchased by such person, (e) all obligations of such person
issued or assumed as the deferred purchase price of property or services
(excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured
<PAGE> 20
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by) any Lien on property owned or acquired by such person, whether or not the
obligations secured thereby have been assumed, (g) all Guarantees by such person
of Indebtedness of others, (h) all Capital Lease Obligations of such person, (i)
all obligations of such person in respect of interest rate protection
agreements, foreign currency exchange agreements or other interest or exchange
rate hedging arrangements and (j) all obligations of such person as an account
party in respect of letters of credit and bankers' acceptances, except to the
extent such instruments are issued in respect of trade accounts payable and
accrued obligations incurred in the ordinary course of business. The
Indebtedness of any person shall include the Indebtedness of any partnership in
which such person is a general partner, except to the extent that, by its terms,
such Indebtedness is nonrecourse to such person.
"Indemnified Taxes" shall mean Taxes other than Excluded Taxes.
"Indenture" shall mean the Indenture dated April 1, 1928, made by
Inland to the Trustees, as amended, supplemented or otherwise modified from time
to time in accordance with the provisions hereof and thereof.
"I/N Kote" shall mean I/N Kote, an Indiana general partnership in which
a subsidiary of Inland owns a 50% interest.
"I/N Kote Guarantee" shall mean the guarantee made by Inland of
Indebtedness of I/N Kote, as in effect (and, for purposes of the definition of
the term "Total Debt", in respect of a maximum principal amount not in excess of
the amount outstanding) on the Closing Date.
"I/N TEK" shall mean I/N TEK, an Indiana general partnership in which a
subsidiary of Inland owns a 60% interest.
"Inland" shall mean Inland Steel Company, a Delaware corporation.
"Inland Guarantee" shall mean the Guarantee by Inland of the Borrower's
obligations with respect to the Loans, provided for in Article IX.
"Inland Loan" shall have the meaning set forth in the preamble to this
Agreement.
<PAGE> 21
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"Insolvency Law" shall mean Title 11 of the United States Code and any
similar Federal, local or foreign bankruptcy or insolvency law, in each case as
now constituted or hereafter amended or enacted.
"Interest Payment Date" shall mean, with respect to any Loan, the last
day of the Interest Period applicable to the Borrowing of which such Loan is a
part and, in the case of a Eurodollar Borrowing with an Interest Period of more
than three months' duration, each day that would have been an Interest Payment
Date had successive Interest Periods of three months' duration been applicable
to such Borrowing, and, in addition, the date of any prepayment of a Eurodollar
Borrowing or conversion of a Eurodollar Borrowing to an ABR Borrowing.
"Interest Period" shall mean (a) as to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the
Borrower may elect and (b) as to any ABR Borrowing, the period commencing on the
date of such Borrowing and ending on the earliest of (i) the next succeeding
March 31, June 30, September 30 or December 31 and (ii) the Tranche B Maturity
Date or Tranche C Maturity Date, as applicable, provided, however, that if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day. Interest
shall accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.
"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or
similar agreement or arrangement designed to protect any Borrower or any
Subsidiary against fluctuations in interest rates, and not entered into for
speculation.
"Inventory Subsidiary" shall mean a subsidiary of Inland formed for the
purpose of purchasing, in a "true sale" transaction, inventory from Inland or
any of its subsidiaries.
"Investment" in any person shall mean any direct or indirect advance,
loan (other than advances to customers or suppliers in the ordinary course of
business that are recorded as accounts receivable or advances against supplies
on the balance sheet of the lender) or other extensions of credit (including by
way of Guarantee or similar arrangement) or capital contribution to (by means of
any transfer of cash or other
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property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition of Capital Stock, Indebtedness or
other similar instruments issued by such person. For purposes of the definition
of "Unrestricted Subsidiary", the definition of "Restricted Payment" and Section
6.03, (i) "Investment" shall include the portion (proportionate to the
Borrower's or Inland's equity interest in such subsidiary) of the fair market
value of the net assets of any subsidiary of the Borrower and Inland 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 Borrower or Inland, as applicable shall be deemed to continue to
have a permanent "Investment" in an Unrestricted Subsidiary equal to an amount
(if positive) equal to (x) the Borrower's or Inland's "Investment" in such
subsidiary at the time of such redesignation less (y) the portion (proportionate
to the Borrower's or Inland's equity interest in such subsidiary) of the fair
market value of the net assets of such subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"ISI" shall mean Inland Steel Industries, Inc., a Delaware corporation.
"Issuing Bank Fees" shall have the meaning assigned to such term in
Section 2.05(b).
"L/C Disbursement" shall mean a payment or disbursement made by the
Issuing Bank pursuant to the Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the aggregate
undrawn amount of the outstanding Letter of Credit at such time plus (b) the
aggregate principal amount of all L/C Disbursements that have not yet been
reimbursed at such time. The L/C Exposure of any L/C Lender at any time shall
mean its Pro Rata Percentage of the aggregate L/C Exposure at such time.
"L/C Lender" shall mean a Lender with an L/C Participation Commitment.
"L/C Maturity Date" shall mean the fifth Business Day prior to the
fifth anniversary of the Closing Date.
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"L/C Participation Commitment" of any Lender shall mean the commitment
of such Lender to acquire a participation in the Letter of Credit and in any L/C
Disbursement as set forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender assumed its L/C Participation Commitment, as
applicable, as the same may be reduced or increased from time to time pursuant
to assignments by or to such Lender pursuant to Section 9.03.
"L/C Participation Fee" shall have the meaning assigned to such term in
Section 2.05(b).
"Lenders" shall mean (a) the financial institutions listed on Schedule
2.01 (other than any such financial institution that has ceased to be a party
hereto pursuant to an Assignment and Acceptance) and (b) any financial
institution that has become a party hereto pursuant to an Assignment and
Acceptance.
"Letter of Credit" shall mean the letter of credit issued pursuant to
Section 2.22, substantially in the form of Exhibit E.
"LIBO Rate" shall mean, with respect to any Eurodollar Borrowing, the
rate per annum determined by the Administrative Agent at approximately 11:00
a.m. (London time) on the date that is two Business Days prior to the beginning
of the relevant Interest Period by reference to the British Bankers' Association
Interest Settlement Rates for deposits in dollars (as set forth by the Bloomberg
Information Service or any successor thereto or any other service selected by
the Administrative Agent which has been nominated by the British Bankers'
Association as an authorized information vendor for the purpose of displaying
such rates) for a period equal to such Interest Period; provided that, to the
extent that an interest rate is not ascertainable pursuant to the foregoing
provisions of this definition, the "LIBO Rate" shall be the interest rate per
annum determined by the Administrative Agent to be the average of the rates per
annum at which deposits in dollars are offered for such relevant Interest Period
to major banks in the London interbank market in London, England by the
Administrative Agent at approximately 11:00 a.m. (London time) on the date that
is two Business Days prior to the beginning of such Interest Period.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (but not under any
operating lease) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
<PAGE> 24
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securities.
"Loan Documents" shall mean this Agreement, the Guarantee Agreements
and the Security Documents.
"Loan Parties" shall mean the Borrower, Inland and the Guarantors.
"Loan Repayment Dates" shall mean the Tranche B Loan Repayment Dates
and the Tranche C Loan Repayment Dates.
"Loans" shall mean the Tranche B Loans and the Tranche C Loans.
"Margin Stock" shall have the meaning assigned to such term in
Regulation U.
"Material Adverse Effect" shall mean (a) a materially adverse effect on
the business, assets, liabilities, results of operations or financial condition
of the Borrower, Inland and the Restricted Subsidiaries, taken as a whole, (b)
material impairment of the ability of the Borrower or any other Loan Party to
perform any of its obligations under any Loan Document to which it is or will be
a party or (c) material impairment of the rights of or benefits available to the
Lenders under any Loan Document.
"Merger" shall have the meaning set forth in the preamble to this
Agreement.
"Merger Agreement" shall mean the Agreement and Plan of Merger dated as
of May 27, 1998, among IINV, Merger Sub, ISI and Inland.
"Merger Consideration" shall have the meaning set forth in the preamble
to this Agreement.
"Merger Sub" shall mean Inland Merger Sub, Inc., a Delaware corporation
and an indirect wholly owned subsidiary of IINV.
"Mortgaged Property" shall mean the real properties of the Loan Parties
specified on Schedule 1.01(c) granted pursuant to the Indenture.
"Moody's" shall mean Moody's Investors Service, Inc.
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"Multiemployer Plan" shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" shall mean, with respect to any Asset Sale, the
cash proceeds (including cash proceeds subsequently received (as and when
received) in respect of non-cash consideration initially received), net of (a)
transaction expenses (including reasonable broker's fees or commissions, legal
fees, accounting fees, investment banking fees and other professional fees,
transfer and similar taxes and the Borrower's good faith estimate of income
taxes paid or payable in connection with the receipt of such cash proceeds), (b)
amounts provided as a reserve, in accordance with GAAP, including pursuant to
any escrow arrangement, against any liabilities under any indemnification
obligations associated with such Asset Sale (provided that, to the extent and at
the time any such amounts are released from such reserve, such amounts shall
constitute Net Cash Proceeds) and (c) the principal amount, premium or penalty,
if any, interest and other amounts on any Indebtedness for borrowed money which
is secured by the asset sold in such Asset Sale and is required to be repaid
with such proceeds (other than any such Indebtedness assumed by the purchaser of
such asset); provided, however, that, if (i) Inland shall deliver a certificate
of a Financial Officer to the Administrative Agent at the time of receipt
thereof setting forth Inland's intent to reinvest such proceeds in productive
assets of a kind then used or usable in the business of Inland and its
Restricted Subsidiaries within 360 days of receipt of such proceeds and (ii) no
Default or Event of Default shall have occurred and shall be continuing at the
time of such certificate or at the proposed time of the application of such
proceeds, such proceeds shall not constitute Net Cash Proceeds except to the
extent not so used at the end of such 360-day period, at which time such
proceeds shall be deemed to be Net Cash Proceeds.
"Obligations" shall have the meaning assigned to such term in Section
9.01.
"Other Taxes" shall mean any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made under any Loan Document or from the
execution, delivery or enforcement of, or otherwise with respect to, any Loan
Document.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA.
"PBGC Agreement" shall mean the binding Term Sheet dated July 15, 1998,
by and among PBGC, IINV, ISI, Inland and Ryerson Tull, Inc. regarding certain
potential pension liabilities of Inland.
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"PCI" shall mean PCI Associates, a general partnership in which Inland
has a 50% interest.
"PCI Guarantee" shall mean the guarantee made by Inland of Indebtedness
of PCI, as in effect (and, for purposes of the definition of the term "Total
Debt", in respect of a maximum principal amount not in excess of the amount
outstanding) on the Closing Date.
"Permitted Holders" shall mean (i) Mr. Lakshmi N. Mittal and his spouse
or lineal descendants, (ii) any trust, corporation or partnership 100% in
interest of the beneficiaries, stockholders or partners of which consists of any
person described in clause (i) above or (iii) any combination of the foregoing.
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States
of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America),
in each case maturing within one year from the date of acquisition
thereof;
(b) investments in commercial paper maturing within 270 days
from the date of acquisition thereof and having, at such date of
acquisition, a credit rating of at least A1 from S&P or at least P1
from Moody's;
(c) investments denominated in U.S. dollars in certificates of
deposit, banker's acceptances and time deposits maturing within one
year from the date of acquisition thereof issued or guaranteed by or
placed with, and money market deposit accounts denominated in U.S.
dollars issued or offered by, any Lender or any United States or
Canadian office of any commercial bank organized under the laws of the
United States of America or any State thereof or Canada that has a
combined capital and surplus and undivided profits of not less than
$500,000,000;
(d) fully collateralized repurchase agreements with a term of
not more than 30 days for securities described in clause (a) above and
entered into with a financial institution satisfying the criteria
described in clause (c); and
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(e) shares of funds registered under the Investment Company
Act of 1940, as amended, that have assets of at least $500,000,000 and
invest substantially all their assets in obligations described in
subsections (a) through (d) above, to the extent that such shares are
rated by S&P or Moody's in one of the two highest rating categories
assigned by such agency for shares of such nature.
"person" shall mean any natural person, corporation, business trust,
joint venture, association, company, partnership or government, or any agency or
political subdivision thereof.
"Plan" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 307 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreement" shall mean the Pledge Agreement, substantially in
the form of Exhibit F, between the Borrower, the subsidiaries party thereto and
the Collateral Agent for the benefit of the Secured Parties.
"Preferred Stock", as applied to the Capital Stock of any person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
person, over shares of Capital Stock of any other class of such person.
"Project Finance Indebtedness" of any person shall mean Indebtedness of
such person that is secured by a Lien in or upon one or more assets of such
person that are acquired, constructed, developed or exploited with the proceeds
of such Indebtedness and where the rights and remedies of the holders of such
Indebtedness do not extend to any other assets of such person (whether on a
secured or unsecured basis). Notwithstanding the foregoing, Indebtedness of any
person shall not fail to constitute Project Finance Indebtedness by reason of
the inclusion in any document evidencing, governing, securing or otherwise
relating to such Indebtedness of provisions to the effect that such person shall
be liable, beyond the assets securing such Indebtedness, for (a) misapplied
moneys, (b) indemnification by such person in favor of holders of such
Indebtedness in respect of liabilities to third parties and (c) such other
similar obligations as are customarily excluded from the provisions that
otherwise limit the recourse of commercial lenders
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making so-called "non-recourse" loans to institutional borrowers.
"Pro Rata Percentage" of any L/C Lender at any time shall mean the
percentage of the aggregate L/C Participation Commitments represented by such
L/C Lender's L/C Participation Commitment.
"Receivables Subsidiary" shall mean Inland Steel Administrative Service
Company or any successor thereto or any subsidiary of Inland formed for the
purpose of purchasing, in a "true sale" transaction, accounts receivable from
Inland or any of its subsidiaries.
"Refinance" shall mean, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Register" shall have the meaning given such term in Section 10.04(d).
"Regulation U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Related Business" shall mean any business related, ancillary or
complementary to the businesses of Inland and the Restricted Subsidiaries on the
Closing Date.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the environment.
"Relevant Jurisdiction" shall mean (a) with respect to any Tax imposed
by the United States of America, any political subdivision thereof or taxing
authority therein, the United States of America, such political subdivision or
taxing authority, as the case may be, and (b) with respect to Canada, any
political subdivision thereof or taxing authority therein, Canada, such
political subdivision or taxing authority, as the case may be.
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"Remedial Action" shall mean (a) "remedial action" as such term is
defined in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions
required by any Governmental Authority or voluntarily undertaken to: (i)
cleanup, remove, treat, abate or in any other way address any Hazardous Material
in the environment; (ii) prevent the Release or threat of Release, or minimize
the further Release of any Hazardous Material so it does not migrate or endanger
or threaten to endanger public health, welfare or the environment; or (iii)
perform studies and investigations in connection with, or as a precondition to,
(i) or (ii) above.
"Required Lenders" shall mean, at any time, Lenders having Loans and
L/C Exposure representing a majority of the sum of all Loans outstanding and L/C
Exposure at such time.
"Responsible Officer" of any person shall mean any executive officer or
Financial Officer of such person and any other officer or similar official
thereof responsible for the administration of the obligations of such
corporation in respect of this Agreement.
"Restricted Payment" with respect to any person shall mean (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such person) or similar payment to the direct
or indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Borrower, Inland or a
Restricted Subsidiary, and other than pro rata dividends or other distributions
made by a subsidiary that is not a Wholly Owned Subsidiary to minority
stockholders (or owners of an equivalent interest in the case of a subsidiary
that is an entity other than a corporation)), (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock of the Borrower
or Inland held by any person or of any Capital Stock of a Restricted Subsidiary
held by any Affiliate of the Borrower or Inland (other than a Restricted
Subsidiary), including the exercise of any option to exchange any Capital Stock
(other than into Capital Stock of the Borrower or Inland that is not
Disqualified Stock), (iii) the purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment of any Subordinated
Obligations (other than the purchase, repurchase, or other acquisition of
Subordinated Obligations purchased (a) 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 (b) in order to refinance such
Subordinated Obligations with the proceeds of new Subordinated Obligations
incurred
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under and in accordance with the provisions of Section 6.02(b)(vi) and 6.02(c))
or (iv) the making of any Investment (other than a Permitted Investment) in any
person (other than the Borrower, Inland or any Restricted Subsidiary).
"Restricted Subsidiary" shall mean any subsidiary of the Borrower or
Inland that is not an Unrestricted Subsidiary.
"S&P" shall mean Standard & Poor's Ratings Services.
"Secured Parties" shall have the meaning assigned to such term in the
Pledge Agreement.
"Securitization Subsidiary" shall mean any Inventory Subsidiary or
Receivables Subsidiary.
"Security Documents" shall mean the Pledge Agreement, the Indenture,
the First Mortgage Bonds and each of the security agreements, mortgages and
other instruments and documents executed and delivered pursuant to any of the
foregoing or pursuant to Section 5.11.
"Series T Bonds" shall mean the Series T First Mortgage Bonds issued
pursuant to the Indenture.
"Subordinated Obligation" shall mean any Indebtedness of the Borrower,
Inland or any Restricted Subsidiary (whether outstanding on the Closing Date or
thereafter Incurred) which is subordinate or junior in right of payment to the
Loans and other extensions of credit under the Loan Documents pursuant to a
written agreement to that effect.
"subsidiary" shall mean, with respect to any person (herein referred to
as the "parent"), any corporation, partnership, association or other business
entity of which securities or other ownership interests representing more than
50% of the equity or more than 50% of the ordinary voting power or more than 50%
of the general partnership interests are, at the time any determination is being
made, owned, controlled or held, but shall exclude I/N TEK.
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"Subsidiary Guarantee" shall mean a Guarantee by a Subsidiary Guarantor
of the Obligations, whether pursuant to this Agreement or a Guarantee Agreement.
"Supplemental Indenture" shall mean the 36th Supplemental Indenture,
dated as of July 16, 1998, to the Indenture, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
provisions hereof and thereof.
"Taxes" shall mean any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Total Debt" shall mean, as of any date of determination, without
duplication, the aggregate principal amount of Indebtedness of Inland and the
Restricted Subsidiaries outstanding as of such date, determined on a
consolidated basis (other than (i) Indebtedness of the type referred to in
clause (i) or (j) of the definition of the term "Indebtedness", except to the
extent of any unreimbursed drawings thereunder, (ii) Indebtedness of the general
partners of each Existing Joint Venture in respect of the Indebtedness of such
partnerships, but only to the extent such Indebtedness (or commitments in
respect thereof) is set forth on Schedule 6.02, and (iii) Indebtedness
consisting of the I/N Kote Guarantee and the PCI Guarantee).
"Tranche B Borrowing" shall mean a Borrowing comprised of Tranche B
Loans.
"Tranche B Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Tranche B Loans hereunder as set forth on
Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender
assumed its Commitment, as applicable, as the same may be (a) reduced from time
to time pursuant to Section 2.09 and (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 10.04.
"Tranche B Loan Repayment Date" shall have the meaning assigned to such
term in Section 2.11(a)(i).
"Tranche B Loans" shall mean the term loans made by the Lenders to the
Borrower pursuant to clause (a) of Section 2.01. Each Tranche B Loan shall be
either a Eurodollar Loan or an ABR Loan.
"Tranche B Maturity Date" shall mean July 16, 2005.
"Tranche C Borrowing" shall mean a Borrowing comprised of Tranche C
Loans.
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"Tranche C Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Tranche C Loans hereunder as set forth on
Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender
assumed its Commitment, as applicable, as the same may be (a) reduced from time
to time pursuant to Section 2.09 and (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 10.04.
"Tranche C Loan Repayment Date" shall have the meaning assigned to such
term in Section 2.11(a)(ii).
"Tranche C Loans" shall mean the term loans made by the Lenders to the
Borrower pursuant to clause (b) of Section 2.01. Each Tranche C Loan shall be
either a Eurodollar Loan or an ABR Loan.
"Tranche C Maturity Date" shall mean July 16, 2006.
"Transactions" shall have the meaning assigned to such term in Section
3.02.
"Trustee" shall mean The First National Bank of Chicago and John G.
Finley, as successors to the original trustees under the Indenture and any
successor thereto.
"Type", when used in respect of any Loan or Borrowing, shall refer to
the Rate by reference to which interest on such Loan or on the Loans comprising
such Borrowing is determined. For purposes hereof, the term "Rate" shall include
the LIBO Rate and the Alternate Base Rate.
"Unrestricted Subsidiary" shall mean (a) the subsidiaries set forth on
Schedule 1.01(b), (b) any subsidiary of Inland that at the time of determination
shall be designated an Unrestricted Subsidiary by the Board of Directors of
Inland in the manner provided below and (c) any subsidiary of an Unrestricted
Subsidiary. The Board of Directors of Inland may designate any subsidiary of
Inland (including any newly acquired or newly formed subsidiary) to be an
Unrestricted Subsidiary unless such subsidiary or any of its subsidiaries (x)
owns any Capital Stock or Indebtedness of, (y) holds any Lien on any property
of, the Borrower or Inland or any other subsidiary of the Borrower or Inland
that is not a subsidiary of the subsidiary to be so designated or (z) owns any
of the Collateral; provided, however, that either (A) the subsidiary to be so
designated has total assets of $10,000 or less or (B) if such Subsidiary has
assets greater than $10,000, such
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designation would be permitted under Section 6.03. The Board of Directors of
Inland may designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided, however, that immediately after giving effect of such designation (x)
Inland could Incur $1.00 of additional Indebtedness under Section 6.02(a) and
(y) no Default shall have occurred and be continuing. Any such designation by
the Board of Directors of Inland shall be evidenced to the Administrative Agent
by promptly filing with the Administrative Agent a copy of the resolution of
such Board of Directors giving effect to such designation and a certificate of a
Responsible Officer certifying that such designation complied with the foregoing
provisions.
"Wholly Owned Subsidiary" shall mean a Restricted Subsidiary all the
Capital Stock (or, in the case of a Foreign Subsidiary, at least 95% of the
Capital Stock) of which (other than directors' qualifying shares) is owned by
the Borrower, Inland or one or more Wholly Owned Subsidiaries.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, (a) any reference in this Agreement to any Loan
Document shall mean such document as amended, restated, supplemented or
otherwise modified from time to time and (b) all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time; provided, however, that if the Borrower notifies the
Administrative Agent that the Borrower wishes to amend any covenant in Article
VI or any related definition to eliminate the effect of any change in GAAP
occurring after the date of this Agreement on the operation of such covenant (or
if the Administrative Agent notifies the Borrower that the Required Lenders wish
to amend Article VI or any related definition for such purpose), then the
Borrower's compliance with such covenant shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Lenders.
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ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly, (a) to make a Tranche B Loan to the Borrower
on the Closing Date in a principal amount not to exceed its Tranche B Commitment
and (b) to make a Tranche C Loan to the Borrower on the Closing Date in a
principal amount not to exceed its Tranche C Commitment.
Amounts paid or prepaid in respect of Loans may not be reborrowed.
SECTION 2.02. Loans. (a) Each Loan shall be made as part of a Borrowing
consisting of Loans made by the Lenders ratably in accordance with their Tranche
B Commitments or Tranche C Commitments, as applicable; provided, however, that
the failure of any Lender to make any Loan shall not in itself relieve any other
Lender of its obligation to lend hereunder (it being understood, however, that
no Lender shall be responsible for the failure of any other Lender to make any
Loan required to be made by such other Lender).
(b) Subject to Sections 2.08 and 2.15, each Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request
pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan
by causing any domestic or foreign branch or Affiliate of such Lender to make
such Loan; provided that any exercise of such option shall not affect the
obligation of the Borrower to repay such Loan in accordance with the terms of
this Agreement. Borrowings of more than one Type may be outstanding at the same
time; provided, however, that the Borrower shall not be entitled to request any
Borrowing that, if made, would result in more than eight Eurodollar Borrowings
outstanding hereunder at any time. For purposes of the foregoing, Borrowings
having different Interest Periods, regardless of whether they commence on the
same date, shall be considered separate Borrowings.
(c) Each Lender shall make each Loan to be made by it hereunder on the
proposed date thereof by wire transfer of immediately available funds to such
account in New York City as the Administrative Agent may designate not later
than 12:00 (noon), New York City time, and the Administrative Agent shall
promptly credit the amounts so received to an account designated by the Borrower
or Inland in the applicable Borrowing Request or, if a Borrowing shall not occur
on such date because any condition precedent herein specified shall not have
been met, return the amounts so received to the respective Lenders.
<PAGE> 35
35
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) above and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If the Administrative Agent shall have so made funds
available then, to the extent that such Lender shall not have made such portion
available to the Administrative Agent, such Lender and the Borrower agree to
repay to the Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the
Administrative Agent at (i) in the case of the Borrower, the interest rate
applicable at the time to the Loans comprising such Borrowing and (ii) in the
case of such Lender, a rate determined by the Administrative Agent to represent
its cost of overnight or short-term funds (which determination shall be
conclusive absent manifest error). If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount shall constitute
such Lender's Loan as part of such Borrowing for purposes of this Agreement.
SECTION 2.03. Borrowing Procedure. In order to request a Borrowing the
Borrower shall hand deliver or telecopy to the Administrative Agent a duly
completed Borrowing Request (a) in the case of a Eurodollar Borrowing, not later
than 11:00 a.m., New York City time, three Business Days before a proposed
Borrowing, and (b) in the case of an ABR Borrowing, not later than 12:00 noon,
New York City time, one Business Day before a proposed Borrowing. Each Borrowing
Request shall be irrevocable (except for the initial Borrowing intended for the
Closing Date, when the Borrower may revoke without penalty a Borrowing Request
for an ABR Borrowing should the closing of the Transactions not occur on such
date), shall be signed by or on behalf of the Borrower and shall specify the
following information: (i) whether such borrowing is to be a Tranche B Borrowing
or a Tranche C Borrowing, (ii) whether such Borrowing is to be a Eurodollar
Borrowing or an ABR Borrowing; (iii) the date of such Borrowing (which shall be
a Business Day), (iv) the number and location of the account to which funds are
to be disbursed (which shall be an account that complies with the requirements
of Section 2.02(c)); (v) the amount of such Borrowing; and (vi) if such
Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect
thereto; provided, however, that, notwithstanding any contrary specification in
any Borrowing Request, each requested Borrowing shall comply with the
requirements set forth in Section 2.02. If no election as to the Type of
Borrowing is specified in any such notice, then the requested Borrowing shall be
an ABR Borrowing. If no Interest Period with respect to any Eurodollar
<PAGE> 36
36
Borrowing is specified in any such notice, then the Borrower shall be deemed to
have selected an Interest Period of one month's duration. The Administrative
Agent shall promptly advise the applicable Lenders of any notice given pursuant
to this Section 2.03 (and the contents thereof), and of each Lender's portion of
the requested Borrowing.
SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The Borrower
hereby unconditionally promises to pay to the Administrative Agent for the
account of each Lender the principal amount of each Loan of such Lender as
provided in Section 2.11.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender from time to time, including the
amounts of principal and interest payable and paid such Lender from time to time
under this Agreement.
(c) The Administrative Agent shall maintain accounts in which it will
record (i) the amount of each Loan made hereunder, the Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder from the Borrower or any Guarantor and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraphs
(b) and (c) above shall be prima facie evidence of the existence and amounts of
the obligations therein recorded; provided, however, that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligations of the Borrower to repay
the Loans in accordance with their terms.
(e) Notwithstanding any other provision of this Agreement, in the event
any Lender shall request and receive a promissory note payable to such Lender
and its registered assigns, the interests represented by such note shall at all
times (including after any assignment of all or part of such interests pursuant
to Section 10.04) be represented by one or more promissory notes payable to the
payee named therein or its registered assigns.
SECTION 2.05. Fees. (a) The Borrower agrees to pay to the
Administrative Agent, for its own account, the administrative and other fees set
forth in the Fee Letter at
<PAGE> 37
37
the times and in the amounts specified therein (the "Administrative Agent
Fees").
(b) The Borrower agrees to pay (i) to each L/C Lender, through the
Administrative Agent, on the last Business Day of March, June, September and
December of each year and on the date on which the L/C Participation Commitment
of such Lender shall be terminated as provided herein, a fee (an "L/C
Participation Fee") calculated on such Lender's Pro Rata Percentage of the L/C
Exposure (excluding the portion thereof attributable to unreimbursed L/C
Disbursements) during the preceding quarter (or shorter period commencing with
the date hereof or ending with the L/C Maturity Date or the date on which the
Letter of Credit has been canceled or has expired) at a rate per annum equal to
the Applicable Percentage from time to time for L/C Participation Fees, and (ii)
to the Issuing Bank with respect to the Letter of Credit, on the last Business
Day of March, June, September and December of each year and on the L/C Maturity
Date, a fronting fee equal to 0.25% per annum on the aggregate outstanding face
amount of the Letter of Credit (the "Issuing Bank Fees"). All L/C Participation
Fees and Issuing Bank Fees shall be computed on the basis of the actual number
of days elapsed in a year of 360 days.
(c) All Fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, if and as appropriate,
among the Lenders, except that the Issuing Bank Fees shall be paid directly to
the Issuing Bank. Once paid, none of the Fees shall be refundable under any
circumstances.
SECTION 2.06. Interest on Loans. (a) Subject to the provisions of
Section 2.07, the Loans comprising each ABR Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over a year of 365
or 366 days, as the case may be, when the Alternate Base Rate is determined by
reference to the Prime Rate and over a year of 360 days at all other times) at a
rate per annum equal to the Alternate Base Rate plus the Applicable Percentage
in effect from time to time.
(b) Subject to the provisions of Section 2.07, the Loans comprising
each Eurodollar Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 360 days) at a rate per annum equal
to the LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Percentage in effect from time to time.
(c) Interest on each Loan shall be payable on the Interest Payment
Dates applicable to such Loan except as otherwise provided in this Agreement.
The applicable Alternate Base Rate or LIBO Rate for each Interest Period or day
within an Interest
<PAGE> 38
38
Period, as the case may be, shall be determined by the Administrative Agent, and
such determination shall be conclusive absent manifest error.
SECTION 2.07. Default Interest. If the Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder (including any L/C Disbursement), by acceleration or otherwise, or
under any other Loan Document, the Borrower shall on demand from time to time
pay interest, to the extent permitted by law, on such defaulted amount to but
excluding the date of actual payment (after as well as before judgment) (a) in
the case of overdue principal, at the rate otherwise applicable to such Loan
pursuant to Section 2.06 plus 2.00% per annum and (b) in all other cases, at a
rate per annum (computed on the basis of the actual number of days elapsed over
a year of 365 or 366 days, as the case may be, when determined by reference to
the Prime Rate and over a year of 360 days at all other times) equal to the sum
of the Alternate Base Rate plus 2.00%.
SECTION 2.08. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent shall have
determined that dollar deposits in the principal amounts of the Loans comprising
such Borrowing are not generally available in the London interbank market, or
that the rates at which such dollar deposits are being offered will not
adequately and fairly reflect the cost to any Lender of making or maintaining
its Eurodollar Loan during such Interest Period, or that reasonable means do not
exist for ascertaining the LIBO Rate, the Administrative Agent shall, as soon as
practicable thereafter, give written or telecopy notice of such determination to
the Borrower and the Lenders. In the event of any such determination, until the
Administrative Agent shall have advised the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, any request by the
Borrower to convert an ABR Borrowing to a Eurodollar Borrowing or to continue a
Eurodollar Borrowing for another Interest Period as a Eurodollar Borrowing
pursuant to Section 2.10 shall be deemed to be a request for an ABR Borrowing.
Each determination by the Administrative Agent hereunder shall be conclusive
absent manifest error.
SECTION 2.09. Termination and Reduction of Commitments. (a) The
Commitments shall automatically terminate at 5:00 p.m., New York City time, on
August 31, 1998, if the initial Borrowing shall not have occurred by such time.
The Commitment of each Lender shall also terminate upon the making by such
Lender of the Loans to be made by it on the Closing Date.
(b) Upon at least three Business Days' prior irrevocable written or
telecopy notice to the Administrative Agent, the Borrower may at any time in
whole permanently
<PAGE> 39
39
terminate, or from time to time in part permanently reduce, the Commitments;
provided, however, that each partial reduction of the Commitments shall be in an
integral multiple of $1,000,000 and in a minimum amount of $10,000,000.
(c) Each reduction in the Tranche B Commitments or the Tranche C
Commitments hereunder shall be made ratably among the Lenders in accordance with
their respective Tranche B Commitments or Tranche C Commitments.
SECTION 2.10. Conversion and Continuation of Borrowings. The Borrower
shall have the right at any time upon prior irrevocable notice to the
Administrative Agent (a) not later than 12:00 (noon), New York City time, one
Business Day prior to conversion, to convert any Eurodollar Borrowing into an
ABR Borrowing, (b) not later than 11:00 a.m., New York City time, three Business
Days prior to conversion or continuation, to convert any ABR Borrowing into a
Eurodollar Borrowing or to continue any Eurodollar Borrowing as a Eurodollar
Borrowing for an additional Interest Period, and (c) not later than 11:00 a.m.,
New York City time, three Business Days prior to conversion, to convert the
Interest Period with respect to any Eurodollar Borrowing to another permissible
Interest Period, subject in each case to the following:
(i) each conversion or continuation shall be made pro rata
among the Lenders in accordance with the respective principal amounts
of the Loans comprising the converted or continued Borrowing;
(ii) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, then each resulting
Borrowing shall satisfy the limitations specified in Sections 2.02(a)
and 2.02(b) regarding the principal amount and maximum number of
Borrowings of the relevant Type;
(iii) each conversion shall be effected by each Lender and the
Administrative Agent by recording for the account of such Lender the
new Loan of such Lender resulting from such conversion and reducing the
Loan (or portion thereof) of such Lender being converted by an
equivalent principal amount; accrued interest on any Eurodollar Loan
(or portion thereof) being converted shall be paid by the Borrower at
the time of conversion;
(iv) if any Eurodollar Borrowing is converted at a time other
than the end of the Interest Period applicable thereto, the Borrower
shall pay, upon demand,
<PAGE> 40
40
any amounts due to the Lenders pursuant to Section 2.16;
(v) any portion of a Borrowing maturing or required to be
repaid in less than one month may not be converted into or continued as
a Eurodollar Borrowing;
(vi) any portion of a Eurodollar Borrowing that cannot be
converted into or continued as a Eurodollar Borrowing by reason of the
immediately preceding clause shall be automatically converted at the
end of the Interest Period in effect for such Borrowing into an ABR
Borrowing;
(vii) no Interest Period may be selected for any Eurodollar
Borrowing that would end later than a Loan Repayment Date occurring on
or after the first day of such Interest Period if, after giving effect
to such selection, the aggregate outstanding amount of (A) the
Eurodollar Borrowings with Interest Periods ending on or prior to such
Loan Repayment Date and (B) the ABR Borrowings would not be at least
equal to the principal amount of Borrowings to be paid on such Loan
Repayment Date;
(viii) until the seventh day following the Closing Date (or
such earlier date on which the Administrative Agent shall have informed
the Borrower that the syndication of the Loans has been completed), no
Borrowing may be converted into a Eurodollar Borrowing; and
(ix) upon notice to the Borrower from the Administrative Agent
given at the request of the Required Lenders, after the occurrence and
during the continuance of a Default or Event of Default, no outstanding
Loan may be converted into, or continued as, a Eurodollar Loan.
Each notice pursuant to this Section 2.10 shall be irrevocable and
shall refer to this Agreement and specify (i) the identity and amount of the
Borrowing that the Borrower requests be converted or continued, (ii) whether
such Borrowing is to be converted to or continued as a Eurodollar Borrowing or
an ABR Borrowing, (iii) if such notice requests a conversion, the date of such
conversion (which shall be a Business Day) and (iv) if such Borrowing is to be
converted to or continued as a Eurodollar Borrowing, the Interest Period with
respect thereto. If no Interest Period is specified in any such notice with
respect to any conversion to or continuation as a Eurodollar Borrowing, the
Borrower shall be deemed to have selected an Interest Period of one month's
duration. The Administrative Agent shall advise the Lenders of any notice given
pursuant to this Section 2.10 and of each Lender's portion of any converted or
continued Borrowing. If
<PAGE> 41
41
the Borrower shall not have given notice in accordance with this Section 2.10 to
continue any Borrowing into a subsequent Interest Period (and shall not
otherwise have given notice in accordance with this Section 2.10 to convert such
Borrowing), such Borrowing shall, at the end of the Interest Period applicable
thereto (unless repaid pursuant to the terms hereof), automatically be continued
into a new Interest Period as an ABR Borrowing.
SECTION 2.11. Repayment of Borrowings. (a) (i) The Borrower shall pay
to the Administrative Agent, for the account of the Lenders, on the dates set
forth below, or if any such date is not a Business Day, on the next preceding
Business Day (each such date being a "Tranche B Loan Repayment Date"), a
principal amount of the Tranche B Loans (as adjusted from time to time pursuant
to Sections 2.11(b), 2.12 and 2.13(c)) equal to the amount set forth below for
such date, together in each case with accrued and unpaid interest on the
principal amount to be paid to but excluding the date of such payment:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
September 30, 1998 $875,000
December 31, 1998 875,000
March 31, 1999 875,000
June 30, 1999 875,000
September 30, 1999 875,000
December 31, 1999 875,000
March 31, 2000 875,000
June 30, 2000 875,000
September 30, 2000 875,000
December 31, 2000 875,000
March 31, 2001 875,000
June 30, 2001 875,000
September 30, 2001 875,000
December 31, 2001 875,000
March 31, 2002 875,000
June 30, 2002 875,000
September 30, 2002 875,000
December 31, 2002 875,000
March 31, 2003 875,000
June 30, 2003 875,000
</TABLE>
<PAGE> 42
42
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
September 30, 2003 875,000
December 31, 2003 875,000
March 31, 2004 875,000
June 30, 2004 875,000
September 30, 2004 875,000
December 31, 2004 875,000
March 31, 2005 875,000
Tranche B Maturity Date $326,375,000
</TABLE>
(ii) The Borrower shall pay to the Administrative Agent, for the
account of the Lenders, on the dates set forth below or, if any such date is not
a Business Day, on the next preceding Business Day (each such date being a
"Tranche C Loan Repayment Date"), a principal amount of the Tranche C Loans (as
adjusted from time to time pursuant to Sections 2.11(b), 2.12 and 2.13(c)) equal
to the amount set forth below for such date, together in each case with accrued
and unpaid interest on the principal amount to be paid to but excluding the date
of such payment:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
September 30, 1998 $875,000
December 31, 1998 875,000
March 31, 1999 875,000
June 30, 1999 875,000
September 30, 1999 875,000
December 31, 1999 875,000
March 31, 2000 875,000
June 30, 2000 875,000
September 30, 2000 875,000
December 31, 2000 875,000
March 31, 2001 875,000
June 30, 2001 875,000
September 30, 2001 875,000
December 31, 2001 875,000
March 31, 2002 875,000
June 30, 2002 875,000
September 30, 2002 875,000
December 31, 2002 875,000
March 31, 2003 875,000
June 30, 2003 875,000
September 30, 2003 875,000
</TABLE>
<PAGE> 43
43
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
December 31, 2003 875,000
March 31, 2004 875,000
June 30, 2004 875,000
September 30, 2004 875,000
December 31, 2004 875,000
March 31, 2005 875,000
June 30, 2005 875,000
September 30, 2005 875,000
December 31, 2005 875,000
March 31, 2006 875,000
Tranche C Maturity Date $322,875,000
</TABLE>
(b) In the event and on each occasion that any Commitments shall be
reduced or shall expire or terminate other than as a result of the making of a
Loan, the installments payable on each Loan Repayment Date shall be reduced pro
rata by an aggregate amount equal to the amount of such reduction, expiration or
termination.
(c) To the extent not previously paid, all Tranche B Loans and
Tranche C Loans shall be due and payable on the Tranche B Maturity Date and
Tranche C Maturity Date, respectively, together with accrued and unpaid interest
on the principal amount to be paid to but excluding the date of payment.
SECTION 2.12. Optional Prepayment. (a) The Borrower shall have the
right at any time and from time to time to prepay any Borrowing in whole or in
part upon at least three Business Days prior written or telecopy notice (or
telephone notice promptly confirmed by written or telecopy notice) to the
Administrative Agent before 11:00 a.m., New York City time; provided that any
such prepayment shall be in an amount equal to the percentage of the principal
amount of the Loans prepaid set forth below opposite the period in which such
prepayment is made:
<TABLE>
<CAPTION>
Period Percentage
- ------ ----------
<S> <C>
Closing Date to but excluding July 16, 1999 103%
July 16, 1999 to but excluding July 16, 2000 102%
July 16, 2000 to but excluding July 16, 2001 101%
Thereafter 100%
</TABLE>
(b) Each partial prepayment of a Borrowing shall be in increments of
$1,000,000
<PAGE> 44
44
and a minimum amount of $10,000,000. Prepayments shall be accompanied by accrued
interest to but excluding the date of prepayment. All prepayments shall be
subject to Section 2.16.
(c) Optional prepayments of Loans shall be allocated pro rata between
the then-outstanding Tranche B Loans and Tranche C Loans and applied as
specified by the Borrower against the remaining scheduled installments of
principal due in respect of the Tranche B Loans and Tranche C Loans under
Sections 2.11(a)(i) and (ii), respectively.
SECTION 2.13. Prepayment Offers. (a) In the event of any Asset Sale by
the Borrower, Inland or any Restricted Subsidiary, the Borrower shall offer to
apply 100% of the Net Cash Proceeds received by the Borrower, Inland or such
Restricted Subsidiary with respect thereto to prepay outstanding Loans at a
prepayment amount equal to 101% of the Loans prepaid in accordance with Section
2.13(c). Notwithstanding the foregoing provisions of this paragraph (a), the
Borrower shall not be required to offer to prepay the Loans in accordance with
this paragraph (a) except to the extent that the aggregate Net Cash Proceeds
from all Asset Sales which are not applied in accordance with this paragraph (a)
exceeds $25,000,000. Pending application of Net Cash Proceeds pursuant to this
paragraph (a), such Net Cash Proceeds shall be invested in Permitted Investments
or used to repay revolving credit loans of Inland or the Restricted
Subsidiaries.
(b) Upon the occurrence of a Change in Control, the Borrower shall
offer to prepay all outstanding Loans in accordance with Section 2.13(c) at a
prepayment amount equal to 101% of the principal amount thereof, plus all
accrued and unpaid interest to the date of prepayment.
(c) Promptly, and in any event within 10 days after the occurrence of
an event (an "Offer Event") requiring the Borrower to make an offer to prepay
Loans under this Section 2.13, the Borrower shall mail a notice to each Lender
with a copy to the Administrative Agent stating: (i) that an Offer Event has
occurred and that the Borrower is offering to prepay Loans at the applicable
purchase price in cash; (ii) the circumstances and relevant facts regarding such
Offer Event (including information with respect to pro forma historical income,
cash flow, capitalization and Collateral after giving effect to such Offer
Event); (iii) the prepayment date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and (iv) the
instructions determined by the Borrower, consistent with the other provisions of
this Section 2.13, that a Lender must follow in order to have its Loans prepaid
(which shall include
<PAGE> 45
45
providing written notice to the Borrower and the Administrative Agent of a
Lender's request to have its Loans prepaid). Unless otherwise expressly stated,
in the case of an Offer Event as a result of an Asset Sale, if the aggregate
amount of Loans tendered pursuant to the Borrower's offer to prepay Loans
exceeds the amount of Loans offered to be prepaid, Loans shall be prepaid in
proportion to the respective principal amounts of the Loans of each Tranche so
tendered. Prepayments of outstanding Loans under this Section 2.13 shall be
applied as specified by the Borrower against the remaining scheduled
installments of principal due in respect of Tranche B Loans and Tranche C Loans
under Sections 2.11(a)(i) and (ii), respectively, and allocated among the
Lenders pursuant to Section 2.17 hereof. All prepayments of Borrowings under
this Section 2.13 shall be subject to Section 2.16.
SECTION 2.14. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision of this Agreement, if after the date of this
Agreement any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of or
credit extended by any Lender or the Issuing Bank or shall impose on such Lender
or the Issuing Bank or the London interbank market any other condition affecting
this Agreement or Eurodollar Loans made by such Lender or the Letter of Credit
or participations therein, and the result of any of the foregoing shall be to
increase the cost to such Lender or the Issuing Bank of making or maintaining
any Eurodollar Loan or increase the cost to any Lender of issuing or maintaining
the Letter of Credit or purchasing or maintaining a participation therein or to
reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise) by an
amount deemed by such Lender or the Issuing Bank to be material, then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, upon
demand such additional amount or amounts as will compensate such Lender or the
Issuing Bank, as the case may be, for such additional costs incurred or
reduction suffered.
(b) If any Lender or the Issuing Bank shall have determined that the
adoption after the date hereof of any law, rule, regulation, agreement or
guideline regarding capital adequacy, or any change after the date hereof in any
such law, rule, regulation, agreement or guideline (whether such law, rule,
regulation, agreement or guideline has been adopted) or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender) or the Issuing Bank or any Lender's or the
Issuing Bank's holding company with any request or directive regarding capital
adequacy
<PAGE> 46
46
(whether or not having the force of law) of any Governmental Authority has or
would have the effect of reducing the rate of return on such Lender's or the
Issuing Bank's capital or on the capital of such Lender's or the Issuing Bank's
holding company, if any, as a consequence of this Agreement or the Loans made or
participations in the Letter of Credit purchased by such Lender pursuant hereto
or the Letter of Credit issued by the Issuing Bank pursuant hereto to a level
below that which such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's holding company could have achieved but for such applicability, adoption,
change or compliance (taking into consideration such Lender's or the Issuing
Bank's policies and the policies of such Lender's or the Issuing Bank's holding
company with respect to capital adequacy) by an amount deemed by such Lender or
the Issuing Bank to be material, then from time to time the Borrower shall pay
to such Lender or the Issuing Bank, as the case may be, such additional amount
or amounts as will compensate such Lender or the Issuing Bank or such Lender's
or the Issuing Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as applicable, as specified in paragraph (a) or (b) above shall
be delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender or the Issuing Bank the amount shown as due on
any such certificate delivered by it within 10 days after its receipt of the
same.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation with
respect to such period or any other period, except that none of any Lender or
the Issuing Bank shall be entitled to compensation under this Section 2.14 for
any costs incurred or reductions suffered with respect to any date unless such
Lender or the Issuing Bank, as applicable, shall have notified the Borrower that
it will demand compensation for such costs or reductions under subsection (c)
above, not later than 180 days after such date. The protection of this Section
shall be available to each Lender and the Issuing Bank regardless of any
possible contention of the invalidity or inapplicability of the law, rule,
regulation, agreement, guideline or other change or condition that shall have
occurred or been imposed.
SECTION 2.15. Change in Legality. (a) Notwithstanding any other
provision of this Agreement, if, after the date hereof, any change in any law or
regulation or in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof shall make it unlawful
for any Lender to maintain any Eurodollar
<PAGE> 47
47
Loan or to give effect to its obligations as contemplated hereby with respect to
any Eurodollar Loan, then, by written notice to the Borrower and to the
Administrative Agent:
(i) such Lender may declare that Eurodollar Loans will not
thereafter (for the duration of such unlawfulness) be made by such
Lender hereunder (or be continued for additional Interest Periods or
have their Interest Periods converted to another Interest Period and
ABR Loans will not thereafter (for such duration) be converted into
Eurodollar Loans), whereupon any request for a Eurodollar Borrowing (or
to convert an ABR Borrowing to a Eurodollar Borrowing or to continue a
Eurodollar Borrowing for an additional Interest Period or to convert
the Interest Period with respect to any Eurodollar Borrowing to another
Interest Period) shall, as to such Lender only, be deemed a request to
continue an ABR Loan as such for an additional Interest Period or to
convert a Eurodollar Loan into an ABR Loan, as the case may be, unless
such declaration shall be subsequently withdrawn; and
(ii) such Lender may require that all outstanding Eurodollar
Loans made by it be converted to ABR Loans, in which event all such
Eurodollar Loans shall be automatically converted to ABR Loans as of
the effective date of such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender resulting from the conversion of such Eurodollar
Loans.
(b) For purposes of this Section 2.15, a notice to the Borrower by any
Lender shall be effective as to each Eurodollar Loan made by such Lender, if
lawful, on the last day of the Interest Period currently applicable to such
Eurodollar Loan; in all other cases such notice shall be effective on the date
of receipt by the Borrower.
SECTION 2.16. Indemnity. The Borrower shall indemnify each Lender
against any loss or expense that such Lender may sustain or incur as a
consequence of (a) any event, other than a default by such Lender in the
performance of its obligations hereunder, which results in (i) such Lender
receiving or being deemed to receive any
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amount on account of the principal of any Eurodollar Loan prior to the end of
the Interest Period in effect therefor, (ii) the conversion of any Eurodollar
Loan to an ABR Loan, or the conversion of the Interest Period with respect to
any Eurodollar Loan, in each case other than on the last day of the Interest
Period in effect therefor, or (iii) any Eurodollar Loan to be made by such
Lender (including any Eurodollar Loan to be made pursuant to a conversion or
continuation under Section 2.10) not being made after notice of such Loan shall
have been given by the Borrower hereunder (any of the events referred to in this
clause (a), other than the failure to convert an ABR Loan to, or to continue a
Eurodollar Loan as, a Eurodollar Loan after notice thereof as a result of a
Lender exercising its rights under Section 2.15(a)(i), being called a "Breakage
Event") or (b) any default in the making of any payment or prepayment required
to be made hereunder. In the case of any Breakage Event, such loss shall include
an amount equal to the excess, as reasonably determined by such Lender, of (i)
its cost of obtaining funds for the Eurodollar Loan that is the subject of such
Breakage Event for the period from the date of such Breakage Event to the last
day of the Interest Period in effect (or that would have been in effect) for
such Loan over (ii) the amount of interest likely to be realized by such Lender
in redeploying the funds released or not utilized by reason of such Breakage
Event for such period. A certificate of any Lender setting forth any amount or
amounts which such Lender is entitled to receive pursuant to this Section 2.16
shall be delivered to the Borrower and shall be conclusive absent manifest
error, except that no Lender shall be entitled to indemnity under this Section
2.16 for any losses incurred with respect to any Breakage Event unless such
Lender shall have notified the Borrower that it will demand indemnity for such
losses pursuant to this Section 2.16 not later than 180 days after such Breakage
Event.
SECTION 2.17. Pro Rata Treatment. Except as required under Sections
2.13 and 2.15, each Borrowing, each payment or prepayment of principal of any
Borrowing, each payment of interest on the Loans, each reduction of the
Commitments and each conversion of any Borrowing to or continuation of any
Borrowing as a Borrowing of any Type shall be allocated pro rata among the
Lenders in accordance with their respective applicable Commitments (or, if such
Commitments shall have expired or been terminated, in accordance with the
respective principal amounts of their outstanding Loans). Each Lender agrees
that in computing such Lender's portion of any Borrowing to be made hereunder,
the Administrative Agent may, in its discretion, round each Lender's percentage
of such Borrowing to the next higher or lower whole dollar amount.
SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrower or any other Loan Party, or pursuant to a secured claim under
Section 506 of Title 11 of the
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49
United States Code or other security or interest arising from, or in lieu of,
such secured claim, received by such Lender under any applicable Insolvency Law
or otherwise, or by any other means, obtain payment (voluntary or involuntary)
in respect of any Loan or Loans or L/C Disbursement as a result of which the
unpaid principal portion of its participations in L/C Disbursements and Tranche
B Loans and Tranche C Loans shall be proportionately less than the unpaid
principal portion of the participations in L/C Disbursements and Tranche B Loans
and Tranche C Loans of any other Lender, it shall be deemed simultaneously to
have purchased from such other Lender at face value, and shall promptly pay to
such other Lender the purchase price for, a participation in the Tranche B Loans
and Tranche C Loans and L/C Exposure, as the case may be, of such other Lender,
so that the aggregate unpaid principal amount of the Tranche B Loans and Tranche
C Loans and L/C Exposure and participations in Tranche B Loans and Tranche C
Loans and L/C Exposure held by each Lender shall be in the same proportion to
the aggregate unpaid principal amount of all Tranche B Loans and Tranche C Loans
and L/C Exposure then outstanding as the principal amount of its Tranche B Loans
and Tranche C Loans and L/C Exposure prior to such exercise of banker's lien,
setoff or counterclaim or other event was to the principal amount of all Tranche
B Loans and Tranche C Loans and L/C Exposure outstanding prior to such exercise
of banker's lien, setoff or counterclaim or other event; provided, however, that
if any such purchase or purchases or adjustments shall be made pursuant to this
Section 2.18 and the payment giving rise thereto shall thereafter be recovered,
such purchase or purchases or adjustments shall be rescinded to the extent of
such recovery and the purchase price or prices or adjustment restored without
interest. The Borrower and Inland expressly consent to the foregoing
arrangements and agree that any Lender holding a participation in L/C
Disbursement or Loan deemed to have been so purchased may, to the extent
permitted by law, exercise any and all rights of banker's lien, setoff or
counterclaim with respect to any and all moneys owing by the Borrower or Inland
to such Lender by reason thereof as fully as if such Lender had made a Loan
directly to the Borrower in the amount of such participation.
SECTION 2.19. Payments. (a) The Borrower shall make each payment
(including principal of or interest on any L/C Disbursement or any Borrowing or
any Fees or other amounts) hereunder and under any other Loan Document not later
than 12:00 (noon), New York City time, on the date when due in immediately
available dollars, without setoff, defense or counterclaim. Each such payment
(other than Issuing Bank Fees, which shall be paid directly to the Issuing Bank)
shall be made to the Administrative Agent at its offices at 11 Madison Avenue,
New York, New York.
(b) Whenever any payment (including principal of or interest on any
Borrowing
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50
or any Fees or other amounts) hereunder or under any other Loan Document shall
become due, or otherwise would occur, on a day that is not a Business Day, such
payment may be made on the next succeeding Business Day, unless such next
succeeding Business Day would fall in the following month, in which case such
payment will be made on the immediately preceding Business Day, and any such
extension of time shall in such case be included in the computation of interest
or Fees, if applicable.
SECTION 2.20. Taxes. (a) Any and all payments by or on account of any
obligation of the Borrower hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower shall be required to deduct any Indemnified
Taxes or Other Taxes from such payments, then (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section) the
Administrative Agent or Lender (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions and (iii) the Borrower shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent and each
Lender, within 10 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes paid by the Administrative Agent or such
Lender, as the case may be, on or with respect to any payment by or on account
of any obligation of the Borrower hereunder or under any other Loan Document
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to the Borrower by a Lender, or by the
Administrative Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the
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51
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the laws of the United States of America or
Canada, or any treaty to which either such jurisdiction is a party, with respect
to payments under this Agreement shall deliver to the Borrower (with a copy to
the Administrative Agent), at the time or times prescribed by applicable law,
such properly completed and executed documentation prescribed by applicable law
or reasonably requested by the Borrower as will permit such payments to be made
without withholding or at a reduced rate. For any period with respect to which a
Foreign Lender has failed to provide the Borrower with the appropriate form or
forms described in the previous sentence, such Foreign Lender shall not be
entitled to indemnification or payment of additional amounts under this Section
2.20 with respect to Taxes imposed by the Relevant Jurisdiction, but only to the
extent such Taxes would not have been imposed had such form or forms been so
provided; provided, however, that should a Foreign Lender be subject to Taxes
because of its failure to deliver a form required hereunder, the Borrower shall
take such steps as the Foreign Lender shall reasonably request to assist the
Foreign Lender to recover such Taxes.
SECTION 2.21. Assignment of Commitments Under Certain Circumstances;
Duty to Mitigate. (a) In the event (i) any Lender or the Issuing Bank delivers a
certificate requesting compensation pursuant to Section 2.14, (ii) any Lender or
the Issuing Bank delivers a notice described in Section 2.15 or (iii) the
Borrower is required to pay any additional amount to any Lender or the Issuing
Bank or any Governmental Authority on account of any Lender or the Issuing Bank
pursuant to Section 2.20, the Borrower may, at its sole expense and effort
(including with respect to the processing and recordation fee referred to in
Section 10.04(b)), upon notice to such Lender or the Issuing Bank and the
Administrative Agent, require such Lender or the Issuing Bank to transfer and
assign, without recourse (in accordance with and subject to the restrictions
contained in Section 10.04), all of its interests, rights and obligations under
this Agreement to an assignee that shall assume such assigned obligations (which
assignee may be another Lender, if a Lender accepts such assignment); provided
that (x) such assignment shall not conflict with any law, rule or regulation or
order of any court or other Governmental Authority having jurisdiction, (y) the
Borrower shall have received the prior written consent of the Administrative
Agent, which consent shall not unreasonably be withheld, and (z) the Borrower or
such assignee shall have paid to the affected Lender or the Issuing Bank in
immediately available funds an amount equal to the sum of the principal
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of and interest accrued to the date of such payment on the outstanding Loans or
L/C Disbursements of such Lender or the Issuing Bank, respectively, plus all
Fees and other amounts accrued for the account of such Lender or the Issuing
Bank hereunder (including any amounts under Section 2.14, Section 2.16 and
Section 2.20); provided further that, if prior to any such transfer and
assignment the circumstances or event that resulted in such Lender's or the
Issuing Bank's claim for compensation under Section 2.14 or notice under Section
2.15 or the amounts paid pursuant to Section 2.20, as the case may be, cease to
cause such Lender or the Issuing Bank to suffer increased costs or reductions in
amounts received or receivable or reduction in return on capital, or cease to
have the consequences specified in Section 2.15, or cease to result in amounts
being payable under Section 2.20, as the case may be (including as a result of
any action taken by such Lender or the Issuing Bank pursuant to paragraph (b)
below), or if such Lender or the Issuing Bank shall waive its right to claim
further compensation under Section 2.14 in respect of such circumstances or
event or shall withdraw its notice under Section 2.15 or shall waive its right
to further payments under Section 2.20 in respect of such circumstances or
event, as the case may be, then such Lender or the Issuing Bank shall not
thereafter be required to make any such transfer and assignment hereunder.
(b) If (i) any Lender or the Issuing Bank shall request compensation
under Section 2.14, (ii) any Lender or the Issuing Bank delivers a notice
described in Section 2.15 or (iii) the Borrower is required to pay any
additional amount to any Lender or the Issuing Bank or any Governmental
Authority on account of any Lender or the Issuing Bank, pursuant to Section
2.20, then such Lender or the Issuing Bank shall use reasonable efforts (which
shall not require such Lender or the Issuing Bank to incur an unreimbursed loss
or unreimbursed cost or expense or otherwise take any action inconsistent with
its internal policies or legal or regulatory restrictions or suffer any
disadvantage or burden deemed by it to be significant) (x) to file any
certificate or document reasonably requested in writing by the Borrower or (y)
to assign its rights and delegate and transfer its obligations hereunder to
another of its offices, branches or affiliates, if such filing or assignment
would reduce its claims for compensation under Section 2.14 or enable it to
withdraw its notice pursuant to Section 2.15 or would reduce amounts payable
pursuant to Section 2.20, as the case may be, in the future. The Borrower hereby
agrees to pay all reasonable costs and expenses incurred by any Lender or the
Issuing Bank in connection with any such filing or assignment, delegation and
transfer.
SECTION 2.22. Letter of Credit. (a) General. Subject to the terms and
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conditions and relying upon the representations and warranties herein set forth,
the Issuing Bank agrees to issue the Letter of Credit on the Closing Date for
the account of the Borrower and Inland (the "Account Parties") for the benefit
of the PBGC and in an aggregate face amount of $160,000,000.
(b) Expiration Date. The Letter of Credit shall expire at the close of
business on the earlier of (i) the date one year after the date of the issuance
of the Letter of Credit (unless renewed for one or more subsequent one-year
periods pursuant to paragraph (c) below) and (ii) the L/C Maturity Date.
(c) Renewal and Extension; Notices thereof. The Issuing Bank shall
notify (the "L/C Renewal Notice") Inland, the Borrower and the Administrative
Agent in writing (delivered by hand or telecopy) no less than 60 days prior to
the then current expiration date of the Letter of Credit as to whether it
intends to renew the Letter of Credit for another year. The Issuing Bank shall
so renew the Letter of Credit unless (i) prior to the delivery of the L/C
Renewal Notice the Borrower or Inland shall have instructed the Issuing Bank not
to renew the Letter of Credit or (ii) at the time of the L/C Renewal Notice, the
conditions to renewal set forth in Section 4.01 shall not have been satisfied.
Not less than 90 nor more than 120 days (or such other notice as may be agreed
to by the Account Parties, the Issuing Bank and the Administrative Agent) prior
to the then current expiration of the Letter of Credit, Inland or the Borrower
shall provide written notice to the Issuing Bank and the Administrative Agent as
to whether it requests that the Letter of Credit be renewed for another year (or
shorter period as may be specified in such request) from such then current
expiration date and, if the Account Parties request such renewal, a certificate
of a Responsible Officer confirming that the conditions precedent to renewal of
the Letter of Credit set forth in Section 4.01 are satisfied.
(d) Participations. By the issuance of the Letter of Credit and without
any further action on the part of the Issuing Bank or the Lenders, the Issuing
Bank hereby grants to each L/C Lender, and each L/C Lender hereby acquires from
the Issuing Bank, a participation in the Letter of Credit equal to such Lender's
Pro Rata Percentage of the aggregate amount available to be drawn under the
Letter of Credit, effective upon the issuance of the Letter of Credit. In
consideration and in furtherance of the foregoing, each L/C Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of the Issuing Bank, such Lender's Pro Rata Percentage of each L/C
Disbursement made by the Issuing Bank and not reimbursed by the Account Parties
(or, if applicable, another party pursuant to its obligations under any other
Loan Document) forthwith on the date due as provided in paragraph (e) below.
Each L/C Lender acknowledges and agrees that its obligation to acquire
participations
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pursuant to this paragraph in respect of the Letter of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or an Event of Default,
and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any L/C Disbursement
in respect of the Letter of Credit, the Account Parties shall, jointly and
severally, pay to the Administrative Agent an amount equal to such L/C
Disbursement not later than two hours after the Account Parties shall have
received notice from the Issuing Bank that payment of such draft will be made,
or, if the Account Parties shall have received such notice later than 10:00
a.m., New York City time, on any Business Day, not later than 10:00 a.m., New
York City time, on the immediately following Business Day. If the Issuing Bank
shall not have received such payment from the Account Parties within the time
specified above, the Issuing Bank will promptly notify the Administrative Agent
of the L/C Disbursement and the Administrative Agent will promptly notify each
L/C Lender of such L/C Disbursement and its Pro Rata Percentage thereof. Each
Lender shall pay by wire transfer of immediately available funds to the
Administrative Agent not later than 2:00 p.m., New York City time, on such date
(or, if such L/C Lender shall have received such notice later than 12:00 (noon),
New York City time, on any day, not later than 10:00 a.m., New York City time,
on the immediately following Business Day), an amount equal to such Lender's Pro
Rata Percentage of such L/C Disbursement, and the Administrative Agent will
promptly pay to the Issuing Bank amounts so received by it from the L/C Lenders.
The Administrative Agent will promptly pay to the Issuing Bank any amounts
received by it from the Account Parties pursuant to this paragraph prior to the
time that any L/C Lender makes any payment pursuant to this paragraph; any such
amounts received by the Administrative Agent thereafter will be promptly
remitted by the Administrative Agent to the L/C Lenders that shall have made
such payments and to the Issuing Bank, as their interests may appear. If any L/C
Lender shall not have made its Pro Rata Percentage of such L/C Disbursement
available to the Administrative Agent as provided above, such Lender agrees to
pay interest on such amount, for each day from and including the date such
amount is required to be paid in accordance with this paragraph to but excluding
the date such amount is paid, to the Administrative Agent for the account of the
Issuing Bank at, for the first such day, the Federal Funds Effective Rate, and
for each day thereafter, the Alternate Base Rate.
(f) Obligations Absolute. The Account Parties' obligations to reimburse
L/C Disbursements as provided in paragraph (e) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this
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Agreement, under any and all circumstances whatsoever, and irrespective of:
(i) any lack of validity or enforceability of the Letter of
Credit or any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure
from all or any of the provisions of the Letter of Credit or any Loan
Document;
(iii) the existence of any claim, setoff, defense or other
right that either Account Party, any other party guaranteeing, or
otherwise obligated with, either Account Party, any of their respective
subsidiaries or other Affiliate thereof or any other person may at any
time have against the beneficiary under the Letter of Credit, the
Issuing Bank, the Administrative Agent or any Lender or any other
person, whether in connection with this Agreement, any other Loan
Document or any other related or unrelated agreement or transaction;
(iv) any draft or other document presented under the Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
(v) payment by the Issuing Bank under the Letter of Credit
against presentation of a draft or other document that does not comply
with the terms of the Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of
the Issuing Bank, the Lenders, the Administrative Agent or any other
person or any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of
this Section, constitute a legal or equitable discharge of an Account
Party's obligations hereunder.
Without limiting the generality of the foregoing, it is expressly
understood and agreed that the absolute and unconditional obligation of the
Account Parties hereunder to reimburse L/C Disbursements will not be excused by
the gross negligence or wilful misconduct of the Issuing Bank. However, the
foregoing shall not be construed to excuse the Issuing Bank from liability to
the Account Parties to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the
Account Parties to the extent permitted by applicable law) suffered by the
Account Parties that are caused by the Issuing Bank's gross negligence or wilful
misconduct in determining whether drafts and other documents presented under the
Letter of Credit comply with the terms thereof; it is understood that the
Issuing Bank may accept
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documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary
and, in making any payment under the Letter of Credit (i) the Issuing Bank's
exclusive reliance on the documents presented to it under the Letter of Credit
as to any and all matters set forth therein, including reliance on the amount of
any draft presented under the Letter of Credit, whether or not the amount due to
the beneficiary thereunder equals the amount of such draft and whether or not
any document presented pursuant to the Letter of Credit proves to be
insufficient in any respect, if such document on its face appears to be in
order, and whether or not any other statement or any other document presented
pursuant to the Letter of Credit proves to be forged or invalid or any statement
therein proves to be inaccurate or untrue in any respect whatsoever and (ii) any
noncompliance in any immaterial respect of the documents presented under the
Letter of Credit with the terms thereof shall, in each case, be deemed not to
constitute wilful misconduct or gross negligence of the Issuing Bank.
(g) Disbursement Procedures. The Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under the Letter of Credit. The Issuing Bank shall as promptly as
possible give telephonic notification, confirmed by telecopy, to the
Administrative Agent and the Account Parties of such demand for payment and
whether the Issuing Bank has made or will make an L/C Disbursement thereunder;
provided that any failure to give or delay in giving such notice shall not
relieve the Account Parties of their joint and several obligation to reimburse
the Issuing Bank and the L/C Lenders with respect to any such L/C Disbursement.
The Administrative Agent shall promptly give each L/C Lender notice thereof.
(h) Interest. If the Issuing Bank shall make any L/C Disbursement in
respect of the Letter of Credit, then, unless the Account Parties shall
reimburse such L/C Disbursement in full on such date, the unpaid amount thereof
shall bear interest for the account of the Issuing Bank and the L/C Lenders that
shall have funded their Pro Rata Percentage of the L/C Disbursement as provided
in subsection (e) of this Section 2.22, for each day from and including the date
of such L/C Disbursement, to but excluding the date of reimbursement by the
Account Parties, from time to time on demand, at a rate per annum equal to (i)
for the first such day, the interest rate per annum then applicable to Tranche B
ABR Loans and (ii), thereafter, the default interest rate per annum then
applicable to Tranche B ABR Loans as specified in Section 2.07(a).
(i) Cash Collateralization. If any Event of Default shall occur and be
continuing, the Account Parties shall, on the Business Day they receive notice
from the Administrative Agent or L/C Lenders holding participations in the
outstanding Letter of Credit representing greater than 50% of the aggregate
undrawn amount of the outstanding
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Letter of Credit thereof and of the amount to be deposited, deposit in an
account with the Collateral Agent, for the benefit of the L/C Lenders, an amount
in cash equal to the L/C Exposure as of such date. Such deposit shall be held by
the Collateral Agent as collateral for the payment and performance of the
Obligations. The Collateral Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account. Other than any
interest earned on the investment of such deposits in Permitted Investments,
which investments shall be made at the option and sole discretion of the
Collateral Agent, such deposits shall not bear interest. Interest or profits, if
any, on such investments shall accumulate in such account. Moneys in such
account shall (i) automatically be applied by the Administrative Agent to
reimburse the Issuing Bank for L/C Disbursements for which it has not been
reimbursed, (ii) be held for the satisfaction of the reimbursement obligations
of the Borrower for the L/C Exposure at such time and (iii) if the maturity of
the Loans has been accelerated and either (a) Lenders holding a majority of the
L/C Exposure consent or (b) the Letter of Credit has been drawn in full and not
fully reimbursed or has terminated, be applied to satisfy the Obligations. If
the Account Parties are required to provide an amount of cash collateral
hereunder as a result of the occurrence of an Event of Default, such amount (to
the extent not applied as aforesaid) shall be returned to the Account Parties
within three Business Days after all Events of Default have been cured or
waived.
ARTICLE III
Representations and Warranties
Each of the Borrower, Inland and each other Guarantor represents and
warrants to the Administrative Agent, the Collateral Agent and each of the
Lenders that:
SECTION 3.01. Organization; Powers. Each of the Borrower, Inland and
their respective subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
all requisite power and authority to own its property and assets and to carry on
its business as now conducted and as proposed to be conducted, (c) is qualified
to do business in, and is in good standing in, every jurisdiction where such
qualification is required, except where the failure so to qualify could not
reasonably be expected to result in a Material Adverse Effect, and (d) has the
power and authority to execute, deliver and perform its obligations under each
of the Loan Documents and each other agreement or instrument contemplated hereby
to which
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it is or will be a party and, in the case of the Borrower, to borrow hereunder.
SECTION 3.02. Authorization. The execution, delivery and performance by
each Loan Party of each of the Loan Documents and the borrowings hereunder, the
refinancing of the Existing Inland Debt, the making and borrowing of the Inland
Loan, the consummation of the Merger, the financing therefor and the other
transactions contemplated hereby and by the Merger Agreement (collectively, the
"Transactions") (a) have been duly authorized by all requisite corporate or
partnership and, if required, stockholder or partner action and (b) will not (i)
violate (A) any provision of law, statute, rule or regulation, or of the
certificate or articles of incorporation, partnership agreement or other
constitutive documents or by-laws of the Borrower, Inland or any of their
respective subsidiaries, (B) any order of any Governmental Authority or (C) any
provision of any indenture, material agreement or other material instrument to
which the Borrower, Inland or any of their respective subsidiaries is a party or
by which any of them or any of their property is or may be bound, (ii) be in
conflict with, result in a breach of or constitute (alone or with notice or
lapse of time or both) a default under, or give rise to any right to accelerate
or to require the prepayment, repurchase or redemption of any obligation under
any such indenture, agreement or other instrument or (iii) result in the
creation or imposition of any Lien upon or with respect to any property or
assets now owned or hereafter acquired by the Borrower, Inland or any of their
respective subsidiaries (other than any Lien created hereunder or under the
Security Documents).
SECTION 3.03. Enforceability. This Agreement has been duly executed and
delivered by the Borrower, Inland and each other Loan Party hereto, and each
other Loan Document when executed and delivered by each Loan Party thereto will
constitute, a legal, valid and binding obligation of such Loan Party enforceable
against such Loan Party in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and subject to equitable principles.
SECTION 3.04. Governmental Approvals. No action, consent or approval
of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except for
(a) the filing with the Secretary of State of the State of Delaware of the
certificate of merger as contemplated under the Merger Agreement, which filing
shall have been made prior to or substantially simultaneously with the Borrowing
to be made on the Closing Date, and (b) such as have been made or obtained and
are in full force and effect.
SECTION 3.05. Financial Statements. (a) Inland has heretofore furnished
to the
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Lenders its consolidated balance sheets and related statements of income,
stockholder's equity and cash flows (i) as of and for the three-year period
ended December 31, 1997, audited by and accompanied by the opinion of Price
Waterhouse LLP, independent public accountants, and (ii) as of the fiscal
quarter ended March 31, 1998, certified by its chief financial officer. Such
financial statements present fairly the financial condition and results of
operations and cash flows of Inland and its consolidated subsidiaries, as of
such dates and for such periods. Such balance sheets and the notes thereto
disclose all material liabilities, direct or contingent, of Inland and its
consolidated subsidiaries as of the dates thereof. Such financial statements
were prepared in accordance with GAAP applied on a consistent basis.
(b) Inland has heretofore delivered to the Lenders its unaudited pro
forma consolidated balance sheet and certain statements of income, stockholder's
equity and cash flows data as of and for the twelve-month period ending on March
31, 1998, prepared giving effect to the Transactions as if they had occurred on
such date (or, in the case of such other data, on the first day of such period).
Such pro forma financial statements and other data have been prepared in good
faith by Inland, based on the assumptions used to prepare the pro forma
financial information contained in the Confidential Information Memorandum
(which assumptions are believed by Inland on the date hereof and on the Closing
Date to be reasonable), are based on the best information available to Inland as
of the date of delivery thereof, accurately reflect all adjustments required to
be made to give effect to the Transactions and present fairly on a pro forma
basis the estimated consolidated financial position of Inland and its
consolidated subsidiaries as of such date, assuming that the Transactions had
actually occurred at such date.
SECTION 3.06. No Material Adverse Change. There has been no material
adverse change in the business, assets, operations or financial condition of the
Borrower and its Restricted Subsidiaries, taken as a whole, or Inland and its
Restricted Subsidiaries, taken as a whole, in each case since December 31, 1997.
SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each of
the Borrower, Inland and their respective subsidiaries has good and marketable
title to, or valid leasehold interests in, all its material properties and
assets (including all Mortgaged Property), except for minor defects in title
that do not interfere with its ability to conduct its business as currently
conducted or to utilize such properties and assets for their intended purposes.
All such material properties and assets are free and clear of Liens,
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other than Liens expressly permitted by Section 6.01.
(b) Each of the Borrower, Inland and their respective subsidiaries has
complied with all obligations under all material leases to which it is a party
and all such leases are in full force and effect. Each of the Borrower, Inland
and their respective subsidiaries enjoys peaceful and undisturbed possession
under all such material leases.
(c) Except as set forth on Schedule 3.07(c), on the Closing Date,
neither Inland nor the Borrower has received any notice of, or has any knowledge
of, any pending or contemplated condemnation proceeding affecting the Mortgaged
Property or any sale or disposition thereof in lieu of condemnation.
(d) Neither the Borrower, Inland nor any of their respective
subsidiaries is obligated under any right of first refusal, option or other
contractual right to sell, assign or otherwise dispose of any Mortgaged Property
or any interest therein.
SECTION 3.08. Subsidiaries. Schedule 3.08 sets forth as of the Closing
Date a list of all subsidiaries of each of the Borrower and Inland and the
percentage ownership interest of the Borrower or Inland therein. On the Closing
Date, the shares of capital stock or other ownership interests so indicated on
Schedule 3.08 are fully paid and non-assessable and are owned by the Borrower or
Inland, directly or indirectly, free and clear of all Liens.
SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set forth
on Schedule 3.09, there are not any actions, suits or proceedings at law or in
equity or by or before any Governmental Authority now pending or, to the
knowledge of the Borrower or Inland, threatened against or affecting the
Borrower, Inland or any of their respective subsidiaries or any business,
property or rights of any such person (i) that involve any Loan Document or the
Transactions or (ii) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect.
(b) None of the Borrower, Inland or any of their respective
subsidiaries or any of their respective material properties or assets is in
violation of, nor will the continued operation of their material properties and
assets as currently conducted violate, any law, rule or regulation (including
any zoning, building, Environmental Law, ordinance, code or approval or any
building permits) or any restrictions of record or agreements affecting the
Mortgaged Property, or is in default with respect to any judgment, writ,
injunction, decree or order of any Governmental Authority, where such violation
or default could reasonably be expected to result in a Material Adverse Effect.
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(c) Certificates of occupancy and permits are in effect for each
Mortgaged Property as currently constructed, except where the failure to have
the same could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.10. Agreements. Neither the Borrower, Inland nor any of their
respective subsidiaries is in default in any manner under any provision of any
indenture or other agreement or instrument evidencing Indebtedness, or any other
material agreement or instrument to which it is a party or by which it or any of
its properties or assets are or may be bound, where such default could
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.11. Federal Reserve Regulations. (a) Neither the Borrower,
Inland nor any of their respective subsidiaries is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of buying or carrying Margin Stock.
(b) No part of the proceeds of any Loan or the Letter of Credit will be
used, whether directly or indirectly, and whether immediately, incidentally or
ultimately, for any purpose that entails a violation of, or that is inconsistent
with, the provisions of the Regulations of the Board, including Regulations U or
X.
SECTION 3.12. Investment Company Act; Public Utility Holding Company
Act. Neither the Borrower, Inland nor any of their respective subsidiaries is
(a) an "investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940 or (b) a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.
SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of
the Loans and will request the issuance of the Letter of Credit only for the
purposes specified in the preamble to this Agreement.
SECTION 3.14. Tax Returns. Each of the Borrower, Inland and their
respective subsidiaries has filed or caused to be filed all Federal, state,
local and foreign Tax returns or materials required to have been filed by it and
has paid or caused to be paid all Taxes due and payable by it and all
assessments received by it, except Taxes that are being contested in good faith
by appropriate proceedings and for which the Borrower, Inland or such
subsidiary, as applicable, shall have set aside on its books adequate reserves.
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SECTION 3.15. No Material Misstatements. None of (a) the Confidential
Information Memorandum or (b) any other information, report, financial
statement, exhibit or schedule furnished by or on behalf of the Borrower or
Inland to the Administrative Agent or any Lender in connection with the
negotiation of any Loan Document or included therein or delivered pursuant
thereto contained, contains or will contain any material misstatement of fact or
omitted, omits or will omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were, are
or will be made, not misleading; provided that to the extent any such
information, report, financial statement, exhibit or schedule was based upon or
constitutes a forecast or projection, each of the Borrower and Inland represents
only that it acted in good faith and utilized reasonable assumptions and due
care in the preparation of such information, report, financial statement,
exhibit or schedule.
SECTION 3.16. Employee Benefit Plans. Each of the Borrower, Inland and
their respective ERISA Affiliates is in compliance in all material respects with
the applicable provisions of ERISA and the Code and the regulations and
published interpretations thereunder. No ERISA Event has occurred or is
reasonably expected to occur that, when taken together with all other such ERISA
Events, could reasonably be expected to result in a Material Adverse Effect.
SECTION 3.17. Environmental Matters. Except as set forth in Schedule
3.17 and as could not reasonably be expected to have a Material Adverse Effect:
(a) Inland and its Subsidiaries are in compliance with, and for the
past three years have been in compliance in all material respects with, all
applicable Environmental Laws and all Environmental Permits. All past
noncompliance with Environmental Laws or Environmental Permits has been resolved
without any pending, on-going or future obligation, cost or liability, and there
is no requirement proposed for adoption or implementation under any
Environmental Law or Environmental Permit that is reasonably expected to have a
Material Adverse Effect;
(b) there are no underground or aboveground storage tanks or any
surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous
Materials are being or have been treated, stored or disposed on any of the real
property by Inland and its Subsidiaries, or to the knowledge of Inland, on any
property formerly owned, leased or occupied by Inland and its Subsidiaries;
(c) Inland and its Subsidiaries have not, and to the knowledge of
Inland no other person has, Released Hazardous Materials on any of the real
property currently or formerly owned, leased or occupied by Inland and its
Subsidiaries;
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(d) Inland and its Subsidiaries are not conducting, and have not
undertaken or completed, any Remedial Action relating to any Release or
threatened Release at the real property or at any other site, location or
operation, either voluntarily or pursuant to the order of any Governmental
Authority or the requirements of any Environmental Law or Environmental Permit;
(e) none of the real property is listed or proposed for listing on the
National Priorities List under CERCLA, or, to the knowledge of Inland, any
analogous federal, state or local list;
(f) there are no Environmental Claims pending or, to the knowledge of
Inland, threatened against Inland and its Subsidiaries or the real property, and
there are no circumstances that can reasonably be expected to form the basis of
any such Environmental Claim, including without limitation with respect to any
off-site disposal location currently or formerly used by Inland and its
Subsidiaries or any of their predecessors or with respect to any currently or
formerly owned or operated facilities; and
(g) Inland and its Subsidiaries can reasonably be expected to maintain
present production levels in compliance with applicable Environmental Laws
without material capital or operating expenditures and without modifying their
Environmental Permits or obtaining any additional Environmental Permits.
SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete and
correct description of all insurance maintained by the Borrower or Inland or by
the Borrower or Inland for their respective subsidiaries as of the Closing Date.
As of the Closing Date, such insurance is in full force and effect and all
premiums have been duly paid. The Borrower, Inland and their respective
subsidiaries have insurance in such amounts and covering such risks and
liabilities as are in accordance with normal industry practice.
SECTION 3.19. Security Documents. (a) The Pledge Agreement is effective
to create in favor of the Collateral Agent, for the ratable benefit of the
Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Pledge Agreement) and, when the Collateral is
delivered to the Collateral Agent, the Pledge Agreement shall constitute a fully
perfected first priority Lien on, and security interest in, all right, title and
interest of the pledgors thereunder in such Collateral, in each case prior and
superior in right to any other person.
(b) The Indenture is effective to create in favor of the Trustee, for
the ratable benefit of the bondholders from time to time under the Indenture, a
legal, valid and
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enforceable Lien on all Inland's right, title and interest in and to the
Mortgaged Property and the other Collateral in which a Lien is purported to be
granted thereunder and the proceeds thereof, and the Indenture constitutes a
fully perfected Lien on, and security interest in, all right, title and interest
of Inland in such Mortgaged Property and Collateral and the proceeds thereof, in
each case prior and superior in right to any other person, other than with
respect to the rights of persons pursuant to Liens expressly permitted by
Section 6.01.
SECTION 3.20. Location of Real Property and Leased Premises. (a)
Schedule 3.20 lists completely and correctly as of the Closing Date all real
property owned by the Borrower, Inland and their respective subsidiaries and the
addresses thereof. On the Closing Date, the Borrower, Inland and their
respective subsidiaries own in fee all the real property set forth on Schedule
3.20.
(b) Schedule 3.20(b) lists completely and correctly as of the Closing
Date all real property leased by the Borrower, Inland and their respective
subsidiaries and the addresses thereof. On the Closing Date, the Borrower,
Inland and their respective subsidiaries have valid leasehold interests in all
the real property set forth on Schedule 3.20(b).
SECTION 3.21. Labor Matters. As of the Closing Date, there are no
strikes, lockouts or slowdowns against the Borrower, Inland or any of their
respective subsidiaries pending or, to the knowledge of the Borrower or Inland,
threatened. The hours worked by and payments made to employees of the Borrower,
Inland and their respective subsidiaries have not been in violation of the Fair
Labor Standards Act or any other applicable Federal, state, local or foreign law
dealing with such matters. All payments due from the Borrower, Inland or any of
their respective subsidiaries, or for which any claim may be made against the
Borrower, Inland or any of their respective subsidiaries, on account of wages
and employee health and welfare insurance and other benefits, have been paid or
accrued as a liability on the books of the Borrower, Inland or such subsidiary.
The consummation of the Transactions will not give rise to any right of
termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which the Borrower, Inland or any of their
respective subsidiaries is bound.
SECTION 3.22. Solvency. Immediately after the consummation of the
Transactions to occur on the Closing Date and immediately following the making
of each
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Loan made on the Closing Date and after giving effect to the application of the
proceeds of such Loans, (i) the fair value of the assets of each Loan Party, at
a fair valuation, will exceed its debts and liabilities, subordinated,
contingent or otherwise; (ii) the present fair saleable value of the property of
each Loan Party will be greater than the amount that will be required to pay the
probable liability of its debts and other liabilities, subordinated, contingent
or otherwise, as such debts and other liabilities become absolute and matured;
(iii) each Loan Party will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (iv) each Loan Party will not have unreasonably small
capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted following the Closing
Date.
SECTION 3.23. Year 2000. Each of the Borrower and Inland has (i)
initiated a review and assessment of all areas within its and each of its
subsidiaries' business and operations (including those affected by suppliers,
vendors and customers) that could be adversely affected by the "Year 2000
Problem" (that is, the risk that computer applications used by either or any of
their subsidiaries (or suppliers, vendors and customers) may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (ii) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to
date, implemented that plan in accordance with that timetable. Based on the
foregoing, each of the Borrower and Inland believes that all of its computer
applications that are material to its or any of its subsidiaries' business and
operations are reasonably expected on a timely basis to be able to perform
properly date-sensitive functions for all dates before and after January 1, 2000
(that is, be "Year 2000 compliant"), except to the extent that a failure to do
so could not reasonably be expected to have Material Adverse Effect.
ARTICLE IV
Conditions of Lending
The obligations of the Lenders to make Loans and of the Issuing Bank to
issue and renew the Letter of Credit hereunder are subject to the satisfaction
of the following conditions:
SECTION 4.01. All Credit Events. On the date of the making of the
Loans, the date of the issuance of the Letter of Credit and the date of each
renewal or extension of the Letter of Credit (each such event being called a
"Credit Event"):
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(a) The representations and warranties set forth in Article III hereof
shall be true and correct in all material respects on and as of the date of such
Credit Event with the same effect as though made on and as of such date, except
to the extent such representations and warranties expressly relate to an earlier
date.
(b) At the time of and immediately after such Credit Event, no Event of
Default or Default shall have occurred and be continuing.
Each Credit Event shall be deemed to constitute a representation and
warranty by the Borrower on the date of such Credit Event as to the matters
specified in paragraphs (a) and (b) of this Section 4.01.
SECTION 4.02. First Credit Event. On the Closing Date:
(a) The Administrative Agent shall have received a Borrowing Request,
as required by Section 2.03.
(b) The Administrative Agent shall have received, on behalf of itself,
the Lenders and the Issuing Bank, a favorable written opinion of (i) Shearman &
Sterling, counsel for the Borrower, Inland and their respective subsidiaries,
substantially to the effect set forth in Exhibit G-1, and (ii) George A. Rauney,
Jr., Vice-President, General Counsel of ISI, substantially to the effect set
forth in Exhibit G-2, in each case (A) dated the Closing Date, (B) addressed to
the Issuing Bank, the Administrative Agent and the Lenders, and (C) covering
such other matters relating to the Loan Documents and the Transactions as the
Administrative Agent shall reasonably request, and the Borrower and Inland
hereby request such counsel to deliver such opinions.
(c) The Administrative Agent shall have received (i) a copy of the
certificate or articles of incorporation or certificate of limited partnership,
as the case may be, including all amendments thereto, of each Loan Party,
certified as of a recent date by the Secretary of State of the state of its
organization, and a certificate as to the good standing of each Loan Party as of
a recent date, from such Secretary of State; (ii) a certificate of the Secretary
or Assistant Secretary of each Loan Party dated the Closing Date and certifying
(A) that attached thereto is a true and complete copy of the by-laws or limited
partnership agreement, as the case may be, of such Loan Party as in effect on
the Closing Date and at all times since a date prior to the date of the
resolutions described in clause (B) below, (B) that attached thereto is a true
and complete copy of resolutions duly adopted by the Board of Directors of such
Loan Party authorizing the execution, delivery and performance of the Loan
Documents to which such person is a party and, in the case
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of the Borrower, the borrowings hereunder, and that such resolutions have not
been modified, rescinded or amended and are in full force and effect, (C) that
the certificate or articles of incorporation of such Loan Party have not been
amended since the date of the last amendment thereto shown on the certificate of
good standing furnished pursuant to clause (i) above, and (D) as to the
incumbency and specimen signature of each officer executing any Loan Document or
any other document delivered in connection herewith on behalf of such Loan
Party; (iii) a certificate of another officer as to the incumbency and specimen
signature of the Secretary or Assistant Secretary executing the certificate
pursuant to (ii) above; and (iv) such other documents as the Lenders, the
Issuing Bank or the Administrative Agent may reasonably request.
(e) The Administrative Agent shall have received a certificate, dated
the Closing Date and signed by a Financial Officer of the Borrower, (i)
confirming compliance with the conditions precedent set forth in paragraphs (a)
and (b) of Section 4.01 and (ii) as to the solvency of the Borrower and Inland
after giving effect to the Transactions.
(f) The Administrative Agent shall have received all Fees and other
amounts due and payable on or prior to the Closing Date, including, to the
extent previously invoiced, reimbursement or payment of all out-of-pocket
expenses required to be reimbursed or paid by the Borrower hereunder or under
any other Loan Document.
(g) The Pledge Agreement and the Supplemental Indenture shall have been
duly executed by the parties thereto and delivered to the Collateral Agent and
shall be in full force and effect, and (i) all the outstanding Capital Stock of
each Guarantor (other than Inland) and (ii) the First Mortgage Bonds shall have
been duly and validly pledged thereunder to the Collateral Agent for the ratable
benefit of the Secured Parties. Certificates representing such pledged shares or
First Mortgage Bonds, accompanied by instruments of transfer and stock powers
endorsed in blank (or, in the case of the First Mortgage Bonds, duly executed on
behalf of Inland, authenticated by the Trustee and registered in the name of the
Collateral Agent) shall be in the actual possession of the Collateral Agent;
provided that to the extent to do so would cause adverse tax consequences to the
Borrower or Inland, (i) neither the Borrower nor any Domestic Subsidiary shall
be required to pledge more than 65% of the voting stock of any Foreign
Subsidiary and (ii) no Foreign Subsidiary shall be required to pledge the
capital stock of any of its Foreign Subsidiaries.
(h) The IINV Guarantee shall have been duly executed by the parties
thereto, shall have been delivered to the Collateral Agent and shall be in full
force and effect.
(i) The Administrative Agent shall have received a copy of, or a
certificate as to
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coverage under, the insurance policies required by Section 5.02 and the
applicable provisions of the Security Documents, each of which shall be endorsed
or otherwise amended to include a lender's loss payable endorsement and to name
the Trustees as additional insured, in form and substance satisfactory to the
Administrative Agent.
(j) All requisite Governmental Authorities and third parties shall have
approved or consented to the Transactions to the extent required, and there
shall be no governmental or judicial action, actual or threatened, that could
reasonably be expected to have a Material Adverse Effect or restrain, prevent or
impose materially burdensome conditions on the Transactions.
(k) The Merger shall have been consummated, or shall be consummated
simultaneously with the initial Credit Event, in accordance with applicable law
and the Merger Agreement, without giving effect to any material waiver or
amendment of the Merger Agreement not approved in writing by the Lenders.
(l) The Equity Contribution shall have been made simultaneously with
the initial Credit Event.
(m) After giving effect to the Transactions, the Borrower, Inland and
their respective Restricted Subsidiaries shall have outstanding no Indebtedness
other than (A) the extensions of credit under this Agreement and (B) the
Indebtedness listed on Schedule 6.02.
(n) The Lenders shall be reasonably satisfied in all respects with the
amount and nature of any actual or asserted unfunded benefit or other pension
liabilities of the Borrower, Inland and their respective subsidiaries and any of
their ERISA Affiliates and the plans of each such person with respect thereto,
after giving effect to the Transactions and the consummation of the other
transactions contemplated hereby.
(o) The Lenders shall be satisfied that all Existing Inland Debt shall
have been repaid in full, the commitments (if any) thereunder canceled and all
security and guarantees (if any) therefor released and discharged.
ARTICLE V
Affirmative Covenants
Each of the Borrower and Inland covenants and agrees with each Lender
that, so
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long as this Agreement shall remain in effect and until the Commitments have
been terminated and the principal of and interest on each Loan, all Fees and all
other expenses or amounts payable under any Loan Document shall have been paid
in full and the Letter of Credit shall have been canceled or shall have expired
and all amounts drawn thereunder shall have been reimbursed in full, unless the
Required Lenders shall otherwise consent in writing, each of the Borrower and
Inland will, and will cause each of their respective Restricted Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause to
be done all things necessary to preserve, renew and keep in full force and
effect its legal existence, except as otherwise expressly permitted under
Section 6.05.
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; maintain and operate such business in
substantially the manner in which it is presently conducted and operated; comply
in all material respects with all applicable laws, rules, regulations (including
any zoning, building, Environmental Law, ordinance, code or approval or any
building permits or any restrictions of record or agreements affecting the
Mortgaged Property) and decrees and orders of any Governmental Authority,
whether now in effect or hereafter enacted; and at all times maintain and
preserve all property material to the conduct of such business and keep such
property in good repair, working order and condition and from time to time make,
or cause to be made, all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the business
carried on in connection therewith may be properly conducted at all times.
SECTION 5.02. Insurance. (a) Keep its insurable properties adequately
insured at all times by financially sound and reputable insurers; maintain such
other insurance, to such extent and against such risks, including fire and other
risks insured against by extended coverage, as is customary with companies in
the same or similar businesses operating in the same or similar locations,
including public liability insurance against claims for personal injury or death
or property damage occurring upon, in, about or in connection with the use of
any properties owned, occupied or controlled by it; and maintain such other
insurance as may be required by law.
(b) With respect to any Mortgaged Property, carry and maintain
comprehensive
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general liability insurance including the "broad form CGL endorsement" and
coverage on an occurrence basis against claims made for personal injury
(including bodily injury, death and property damage) and umbrella liability
insurance against any and all claims, in no event for a combined single limit of
less than $150,000,000, naming the Trustee as an additional insured, on forms
satisfactory to the Collateral Agent.
(c) Cause all such policies to be endorsed or otherwise amended to
include a "standard" or "New York" lender's loss payable endorsement, in form
and substance satisfactory to the Administrative Agent and the Collateral Agent,
which endorsement shall provide that, from and after the Closing Date, if the
insurance carrier shall have received written notice from the Administrative
Agent or the Trustee of the occurrence of an Event of Default, the insurance
carrier shall, during the continuance of such Event of Default pay all proceeds
otherwise payable to the Borrower or the Loan Parties under such policies
directly to the Trustee; cause each such policy to provide that it shall not be
canceled, modified or not renewed (i) by reason of nonpayment of premium upon
not less than 10 days' prior written notice thereof by the insurer to the
Administrative Agent and the Trustee (giving the Administrative Agent and the
Trustee the right to cure defaults in the payment of premiums) or (ii) for any
other reason upon not less than 30 days' prior written notice thereof by the
insurer to the Administrative Agent and the Trustee; deliver to the
Administrative Agent and the Trustee, prior to the cancelation, modification or
nonrenewal of any such policy of insurance, a copy of a renewal or replacement
policy (or other evidence of renewal of a policy previously delivered to the
Administrative Agent and the Trustee) together with evidence satisfactory to the
Administrative Agent and the Trustee of payment of the premium therefor.
SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other
obligations promptly and in accordance with their terms and pay and discharge
promptly when due all Taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its property,
before the same shall become delinquent or in default, as well as all lawful
claims for labor, materials and supplies or otherwise that, if unpaid, might
give rise to a Lien upon such properties or any part thereof; provided, however,
that such payment and discharge shall not be required with respect to any such
Tax, assessment, charge, levy or claim so long as the validity or amount thereof
shall be contested in good faith by appropriate proceedings and the Borrower or
Inland, as applicable, shall have set aside on its books adequate reserves with
respect thereto in accordance with GAAP and such contest operates to suspend
collection of the contested obligation, Tax, assessment or charge and
enforcement of a Lien and, in the case of a Mortgaged Property, there is no risk
of forfeiture of such property.
SECTION 5.04. Financial Statements, Reports, etc. In the case of the
Borrower
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and Inland, furnish to the Administrative Agent and each Lender:
(a) within 100 days after the end of each fiscal year, its
consolidated balance sheet and related statements of income,
stockholder's equity and cash flows showing the financial condition of
the Borrower and its consolidated subsidiaries or Inland and its
consolidated subsidiaries, as applicable, as of the close of such
fiscal year and the results of its operations and the operations of
such subsidiaries during such year, all audited by Deloitte & Touche
LLP or other independent public accountants of recognized national
standing and accompanied by an opinion of such accountants (which shall
not be qualified in any material respect) to the effect that such
consolidated financial statements fairly present the financial
condition and results of operations of the Borrower and its
consolidated subsidiaries or Inland and its consolidated subsidiaries,
as applicable, on a consolidated basis in accordance with GAAP
consistently applied;
(b) within 55 days after the end of each of the first three
fiscal quarters of each fiscal year, its consolidated balance sheet and
related statements of income, stockholder's equity and cash flows
showing the financial condition of the Borrower and its consolidated
subsidiaries or Inland and its consolidated subsidiaries as of the
close of such fiscal quarter and the results of its operations and the
operations of such Restricted Subsidiaries during such fiscal quarter
and the then elapsed portion of the fiscal year, all certified by one
of its Financial Officers as fairly presenting the financial condition
and results of operations of the Borrower and its consolidated
subsidiaries or Inland and its consolidated subsidiaries, as
applicable, on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments;
(c) concurrently with any delivery of financial statements
under subsection (a) or (b) above, a letter of the accounting firm (in
the case of clause (a) above) and certificate of the Financial Officer
reporting on or certifying such statements (which letter, when
furnished by an accounting firm, may be limited to accounting matters
and disclaim responsibility for legal interpretations) (i) reporting
that they are unaware that any Event of Default has occurred, in the
case of the accounting firm, or certifying that no Event of Default or,
to the best of his knowledge after due inquiry, Default has occurred,
in the case of the Financial Officer or, if such an Event of Default or
Default has occurred, specifying the nature and extent thereof and any
corrective action taken or proposed to be taken with respect thereto
and (ii) setting forth computations in reasonable detail satisfactory
to the Administrative Agent demonstrating compliance with the covenant
contained in Section 6.09;
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(d) promptly after the same become publicly available, copies
of each registration statement, proxy statement, annual report, Form
10-K, Form 10-Q and Form 8-K filed by the Borrower, Inland or any of
their respective Restricted Subsidiaries with the Securities and
Exchange Commission, or any Governmental Authority succeeding to any or
all of the functions of said Commission, or with any national
securities exchange, or distributed to its shareholders, as the case
may be; and
(e) promptly, from time to time, such other information
regarding the operations, business affairs and financial condition of
the Borrower, Inland or any of their respective Restricted
Subsidiaries, or compliance with the terms of any Loan Document, as the
Administrative Agent or any Lender (through the Administrative Agent)
may reasonably request.
SECTION 5.05. Litigation and Other Notices. Furnish to the
Administrative Agent, the Issuing Bank and each Lender prompt written notice of
the following:
(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) taken or proposed to
be taken with respect thereto;
(b) the filing or commencement of, or any threat or notice of
intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any
Governmental Authority, against the Borrower, Inland or any subsidiary
thereof that could reasonably be expected to result in a Material
Adverse Effect; and
(c) any development that has resulted in, or could reasonably
be expected to result in, a Material Adverse Effect.
SECTION 5.06. Employee Benefits. (a) Comply in all material respects
with the applicable provisions of ERISA and the Code and (b) furnish to the
Administrative Agent (i) as soon as possible after, and in any event within 10
days after any Responsible Officer of the Borrower, Inland or any ERISA
Affiliate knows or has reason to know that, any ERISA Event has occurred that,
alone or together with any other ERISA Event could reasonably be expected to
result in liability of the Borrower or Inland in an aggregate
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amount exceeding $1,000,000 a statement of a Financial Officer of the Borrower
or Inland setting forth details as to such ERISA Event and the action, if any,
that the Borrower or Inland proposes to take with respect thereto.
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections. Keep proper books of record and account in which full, true and
correct entries in conformity with all requirements of law are made of all
dealings and transactions in relation to its business and activities. Each Loan
Party will, and will cause each of its Restricted Subsidiaries to, permit any
representatives designated by the Administrative Agent or any Lender (through
the Administrative Agent) to visit and inspect the financial records and the
properties of the Borrower, Inland or any of their respective Restricted
Subsidiaries at reasonable times and as often as reasonably requested and to
make extracts from and copies of such financial records, and permit any
representatives designated by the Administrative Agent or any Lender (through
the Administrative Agent) to discuss the affairs, finances and condition of the
Borrower, Inland or any of their respective Restricted Subsidiaries with the
officers thereof and independent accountants therefor.
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and
request the issuance, extension or renewal of the Letter of Credit only for the
purposes set forth in the preamble to this Agreement.
SECTION 5.09. Compliance with Environmental Laws. Comply, and cause all
lessees and other persons occupying its Properties to comply, in all material
respects with all Environmental Laws and Environmental Permits applicable to its
operations and Properties; obtain and renew all material Environmental Permits
necessary for its operations and Properties; and conduct any Remedial Action in
material compliance with Environmental Laws; provided, however, that neither the
Borrower, Inland nor any of their Restricted Subsidiaries shall be required to
undertake any Remedial Action to the extent that its obligation to do so is
being contested in good faith and by proper proceedings and appropriate reserves
are being maintained with respect to such circumstances.
SECTION 5.10. Preparation of Environmental Reports. If a Default or an
Event of Default caused by reason of a breach of Section 3.17 or 5.09 shall have
occurred and be continuing, at the request of the Required Lenders through the
Administrative Agent, provide to the Lenders within 45 days after such request,
at the expense of the Borrower or Inland, as applicable, an environmental site
assessment report for the Properties which are the subject of such default
prepared by an environmental consulting firm acceptable to the Administrative
Agent and indicating the presence or absence of Hazardous Materials and the
estimated cost of any compliance or Remedial Action in connection with such
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Properties.
SECTION 5.11. Further Assurances. Execute any and all further
documents, financing statements, agreements and instruments, and take all
further action (including filing Uniform Commercial Code and other financing
statements, mortgages and deeds of trust) that may be required under applicable
law, or that the Required Lenders, the Administrative Agent or the Collateral
Agent may reasonably request, in order to effectuate the transactions
contemplated by the Loan Documents and in order to grant, preserve, protect and
perfect the validity and first priority of the security interests created or
intended to be created by the Security Documents. The Borrower and Inland will
cause any subsequently acquired or organized Restricted Domestic Subsidiary
(other than a Securitization Subsidiary) to execute a Guarantee Agreement and
each applicable Security Document in favor of the Collateral Agent.
SECTION 5.12. Interest Rate Protection Agreements. In the case of the
Borrower, within 90 days following the Closing Date, enter into Interest Rate
Protection Agreements, with counterparties and on terms and conditions
reasonably satisfactory to the Administrative Agent, pursuant to which the
interest rate with respect to a notional amount equal to at least 50% of its
Indebtedness under this Agreement, is fixed for a period of at least three
years.
ARTICLE VI
Negative Covenants
Each of the Borrower and Inland covenants and agrees with each Lender
that, so long as this Agreement shall remain in effect and until the Commitments
have been terminated and the principal of and interest on each Loan, all Fees
and all other expenses or amounts payable under any Loan Document have been paid
in full and the Letter of Credit shall have been canceled or shall have expired
and all amounts drawn thereunder shall have been reimbursed in full, unless the
Required Lenders shall otherwise consent in writing, the Borrower and Inland
will not, and will not cause or permit any of the Restricted Subsidiaries to:
SECTION 6.01. Liens. Create, incur, assume or permit to exist any Lien
on any
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property or assets (including stock or other securities of any person, including
any Restricted Subsidiary) now owned or hereafter acquired by them or on any
income or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of Inland, the Borrower and
the Restricted Subsidiaries existing on the date hereof and set forth
in Schedule 6.01; provided that such Liens shall secure only those
obligations which they secure on the date hereof;
(b) any Lien created under the Loan Documents;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by Inland or any of its Restricted Subsidiaries;
provided that (i) such Lien is not created in contemplation of or in
connection with such acquisition, (ii) such Lien does not apply to any
other property or assets of Inland or any of its Restricted
Subsidiaries and (iii) such Lien does not (A) materially interfere with
the use, occupancy and operation of any other property of Inland or its
Restricted Subsidiaries, (B) materially reduce the fair market value of
such property but for such Lien or (C) result in any material increase
in the cost of operating, occupying or owning or leasing such property;
(d) Liens for taxes not yet due or which are being contested
in compliance with Section 5.03;
(e) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business of Inland or any of its Restricted Subsidiaries and securing
obligations that are not due and payable or which are being contested
in compliance with Section 5.03;
(f) pledges and deposits made in the ordinary course of
business of Inland or any of its Restricted Subsidiaries in compliance
with workmen's compensation, unemployment insurance and other social
security laws or regulations or to support obligations to insurance
companies in respect of deductibles, co-insurance claims or
self-insured retentions (and letter of credit reimbursement obligations
in respect thereof);
(g) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases (other than Capital
Lease Obligations), statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in
the ordinary course of business of Inland or any of its
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Restricted Subsidiaries;
(h) zoning restrictions, easements, rights-of-way,
restrictions on use of real property and other similar encumbrances
incurred in the ordinary course of business of Inland or any of its
Restricted Subsidiaries which, in the aggregate, are not substantial in
amount and do not materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of the business
of the Borrower, Inland or any of their respective subsidiaries;
(i) Liens on inventory and accounts receivable (and the
proceeds thereof and the related books and records) of Securitization
Subsidiaries securing Indebtedness permitted by Section 6.02(b)(viii)
or 6.02(b)(ix)(A);
(j) Liens on inventory (and the proceeds thereof and the
related books and records) of Inland and the Restricted Subsidiaries,
but only to the extent such Liens secure Indebtedness Incurred under
Section 6.02(b)(ix)(B) and there is no outstanding Indebtedness under
Section 6.02(b)(ix)(A);
(k) additional Liens on property or assets securing
obligations of Inland or any of its Restricted Subsidiaries (other than
Indebtedness for borrowed money) not exceeding $500,000 at any time,
provided that, to the extent any such Lien applies to any Collateral
(as defined in any such Security Documents), such Lien does not have
priority over the Liens created under the Security Documents;
(l) purchase money security interests (including in respect of
industrial revenue or development bonds and Capital Lease Obligations)
in real property, improvements thereto or equipment hereafter acquired
(or, in the case of improvements, constructed) by Inland or any of its
Restricted Subsidiaries; provided that (i) such security interests
secure Indebtedness permitted by Section 6.02, (ii) such security
interests are incurred, and the Indebtedness secured thereby is
created, within 180 days after such acquisition (or construction),
(iii) the Indebtedness secured thereby does not exceed the lesser of
the cost or the fair market value of such real property, improvements
or equipment at the time of such acquisition (or construction) and (iv)
such security interests do not apply to any other property or assets of
Inland or any of its Restricted Subsidiaries;
(m) Liens securing Project Finance Indebtedness; provided that
such Liens
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apply only to the assets acquired, constructed, developed or exploited
with the proceeds of such Project Finance Indebtedness;
(n) additional Liens on property or assets (other than
Collateral) of Inland and the Restricted Subsidiaries securing
obligations of Inland or any of its Restricted Subsidiaries not
exceeding $10,000,000 at any time; and
(o) Liens to secure any extension, renewal or refinancing of
any Indebtedness secured by Liens permitted under subsections (a)
through (n) above and permitted under Section 6.02(b)(vi); provided
that such Liens do not apply to any additional property or assets of
Inland or the Restricted Subsidiaries (other than additional property
or assets covered by the Indenture).
SECTION 6.02. Limitation on Indebtedness. (a) Incur, directly or
indirectly, any Indebtedness; provided, however, that Inland and its Restricted
Subsidiaries may Incur Indebtedness if, on the date of such Incurrence and after
giving effect thereto, the Consolidated Coverage Ratio exceeds 2.0 to 1.0.
(b) Notwithstanding the foregoing paragraph (a), the Borrower and
Inland and the Restricted Subsidiaries may Incur any or all of the following
Indebtedness:
(i) Indebtedness of the Borrower, Inland and the Restricted
Subsidiaries Incurred pursuant to this Agreement and the other Loan
Documents;
(ii) Indebtedness of, or commitments to lend to, the Borrower,
Inland and the Restricted Subsidiaries existing on the date hereof and
set forth in Schedule 6.02;
(iii) Indebtedness of Inland or any of its Restricted
Subsidiaries consisting of purchase money Indebtedness or Capital Lease
Obligations incurred in the ordinary course of business after the
Closing Date to finance capital expenditures; provided that the
aggregate principal amount of any Indebtedness or Capital Lease
Obligations incurred pursuant to this paragraph (b)(iii) outstanding at
any time shall not exceed $50,000,000;
(iv) loans or advances made by any Loan Party or Restricted
Subsidiary to any other Loan Party or Restricted Subsidiary, provided
that any such loans or advances (other than loans or advances to a
Securitization Subsidiary or a Guarantor) are evidenced by an
intercompany note pledged to the Collateral Agent pursuant to the
Pledge Agreement for the benefit of the Secured Parties;
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(v) ordinary course Interest Rate Protection Agreements and
ordinary course, non-speculative foreign exchange and commodity
protection agreements;
(vi) in the case of Inland, Indebtedness the net proceeds of
which are used substantially concurrently with the incurrence thereof
to refinance, extend or renew the Letter of Credit or Indebtedness
described in paragraph (b)(ii) above so long as (A) such refinancing,
extension or renewal of Indebtedness is in an aggregate principal
amount, or, if issued at a discount, the issue price is, not greater
than the aggregate principal amount of the Indebtedness being
refinanced, extended or renewed plus the amount of any premiums
required to be paid thereon, the amount of accrued and unpaid interest
thereon and the fees and expenses incurred in connection with such
refinancing, extension or renewal, (B) such Indebtedness has a final
maturity no earlier than and a weighted average life no shorter than
the Indebtedness being refinanced, extended or renewed and (C) each of
the covenants, events of default and other provisions thereof
(including any Guarantees thereof and any restriction contemplated by
Section 6.08) shall be no less favorable to the Lenders than those
contained in the Indebtedness being refinanced, extended or renewed;
(vii) Indebtedness of a subsidiary of Inland Incurred and
outstanding on or prior to the date on which such subsidiary was
acquired by Inland (other than Indebtedness Incurred in connection
with, or to provide all or any portion of the funds or credit support
utilized to consummate, the transaction or series of related
transactions pursuant to which such subsidiary became a subsidiary or
was acquired by Inland); provided, however, that on the date of such
acquisition and after giving effect thereto, Inland would have been
able to Incur at least $1.00 of Indebtedness pursuant to paragraph (a)
of this Section 6.02;
(viii) Indebtedness of a Receivables Subsidiary, the proceeds
of which are used solely to purchase inventory or accounts receivable
of Inland or any of its subsidiaries and to pay related fees and
expenses; provided that such Indebtedness shall be nonrecourse to the
Borrower, Inland and their respective Restricted Subsidiaries (other
than such Receivables Subsidiary);
(ix) either (A) Indebtedness of an Inventory Subsidiary, the
proceeds of which are used solely to purchase inventory of Inland or
any of its subsidiaries
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and to pay related fees and expenses; provided that such Indebtedness
shall be nonrecourse to the Borrower, Inland and their respective
Restricted Subsidiaries (other than such Inventory Subsidiary) or (B)
Indebtedness of Inland and its Restricted Subsidiaries incurred for
working capital purposes and in an aggregate principal amount
outstanding at any time not to exceed $100,000,000; provided that such
Indebtedness is secured solely by Liens permitted by Section 6.01(j).
(x) In the case of Restricted Subsidiaries of Inland, Project
Finance Indebtedness; and
(xi) additional Indebtedness of Inland or any of its
Restricted Subsidiaries in an aggregate principal amount outstanding at
any time not to exceed $50,000,000.
(c) Notwithstanding the foregoing, Inland, the Borrower and the
Restricted Subsidiaries shall not Incur any Indebtedness pursuant to Section
6.02(b) if the proceeds thereof are used, directly or indirectly, to Refinance
any Subordinated Obligations unless such Indebtedness shall be subordinated to
the Loans to at least the same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with this Section 6.02, (i)
in the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described herein, the Borrower and Inland, in their
sole discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses and
(ii) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness described herein.
(e) Notwithstanding the foregoing, Inland, the Borrower and the
Restricted Subsidiaries shall not Incur any Indebtedness pursuant to this
Section 6.02 (other than Section 6.02(b)(i)) under the Indenture, except that
existing Indebtedness under the Indenture (other than Loans) may be refinanced
thereunder with Indebtedness complying with the provisions of Section
6.02(b)(vi).
SECTION 6.03. Limitation on Restricted Payments. (a) Make, directly or
indirectly, a Restricted Payment if at the time the Borrower, Inland or such
Restricted Subsidiary makes such Restricted Payment:
(i) a Default shall have occurred and be continuing (or would
result therefrom);
(ii) Inland is not able to Incur an additional $1.00 of
Indebtedness under
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Section 6.02(a); or
(iii) the aggregate amount of such Restricted Payment and all
other Restricted Payments since the Closing Date (less the amount of
all such Restricted Payments in the form of loans or advances that have
been repaid in cash during such period) would exceed the sum of (a) 50%
of the Consolidated Net Income accrued during the period (treated as
one accounting period) from the beginning of the fiscal quarter
immediately following the fiscal quarter during which the Closing Date
occurred to the end of the most recent fiscal quarter ending at least
45 days prior to the date of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit), (b) the aggregate net cash proceeds received from capital
contributions made to Inland since the Closing Date, (c) the amount by
which Indebtedness is reduced on Inland's balance sheet upon the
conversion or exchange since the Closing Date of any Indebtedness
convertible or exchangeable for Capital Stock (other than Disqualified
Stock) and (d) the amount of dividends received from Unrestricted
Subsidiaries and not otherwise included in Consolidated Net Income.
(b) The provisions of Section 6.03(a) shall not prohibit:
(i) any acquisition of any Capital Stock of the Borrower or
Inland made out of the proceeds of the substantially concurrent sale
of, or made by exchange for Capital Stock of the Borrower or Inland
(other than Disqualified Stock and other than Capital Stock issued or
sold to a subsidiary of Inland, the Borrower or an employee stock
ownership plan or to a trust established by Inland, the Borrower or any
of their respective subsidiaries for the benefit of their employees);
provided, however, that such acquisition of Capital Stock shall be
excluded in the calculation of the amount of Restricted Payments;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent
sale of, Indebtedness of the Borrower or Inland which is permitted to
be Incurred pursuant to Section 6.02; provided, however, that such
purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded in the calculation of the amount
of Restricted Payments;
(iii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with this Section 6.03; provided, however, that at the
time of payment of such dividend, no other Default
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shall have occurred and be continuing (or result therefrom); provided
further, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments;
(iv) the repurchase or other acquisition of shares of, or
options to purchase shares of, common stock of the Borrower, Inland or
any of their respective subsidiaries from employees, former employees,
directors or former directors of the Borrower, Inland or any of their
respective subsidiaries (or permitted transferees of such employees,
former employees, directors or former directors), pursuant to the terms
of the 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 and other acquisitions shall not
exceed $1,000,000 in any calendar year; provided further, however, that
such repurchases and other acquisitions shall be excluded in the
calculation of the amount of Restricted Payments;
(v) additional Restricted Payments by Inland, the Borrower or
the Restricted Subsidiaries in an aggregate cumulative amount since the
Closing Date not to exceed $10,000,000; provided, however, that such
Restricted Payments shall be excluded in the calculation of the amount
of Restricted Payments;
(vi) Investments in the Existing Joint Ventures in an
aggregate amount not exceeding $15,000,000 per calendar year on a
cumulating basis since the Closing Date; provided, however, that such
Investments shall be excluded in the calculation of the amount of
Restricted Payments;
(vii) advances to the Existing Joint Ventures to fund working
capital requirements in the ordinary course of business in an aggregate
principal amount outstanding at any time not to exceed $10,000,000;
provided, however, that such advances shall be excluded in the
calculation of the amount of Restricted Payments; or
(viii) advances to employees of Inland, the Borrower or the
Restricted Subsidiaries in the ordinary course of business in an
aggregate principal amount outstanding at any time not to exceed
$1,000,000; provided, however, that such advances shall be excluded in
the calculation of the amount of Restricted Payments.
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SECTION 6.04. Limitation on Sales of Assets and Subsidiary Stock.
Directly or indirectly, consummate any Asset Sale, except Inland and its
Restricted Subsidiaries may consummate any Asset Sale if (a) Inland or such
Restricted Subsidiary receives consideration at the time of such Asset Sale at
least equal to the fair market value (including as to the value of all non-cash
consideration), as determined in good faith by the Board of Directors, of the
shares and assets subject to such Asset Sale and at least 75% of the
consideration thereof received by Inland or such Restricted Subsidiary is in the
form of cash or cash equivalents and (ii) an amount equal to 100% of the Net
Cash Proceeds from such Asset Sale is applied by Inland or such Restricted
Subsidiary, as the case may be to offer to prepay the Loans pursuant to Section
2.13(a), to the extent required thereby.
SECTION 6.05. Mergers, Consolidations, and Sales of Assets. Merge into
or consolidate with any other person, or permit any other person to merge into
or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one
transaction or in a series of transactions) all or substantially all its assets
(whether now owned or hereafter acquired), except that, if at the time thereof
and immediately after giving effect thereto no Event of Default or Default shall
have occurred and be continuing (a) any Wholly Owned Subsidiary of the Borrower
or Inland may merge into the Borrower or Inland, respectively, in a transaction
in which the Borrower or Inland, respectively, is the surviving person and (b)
any Wholly Owned Subsidiary of the Borrower or Inland may merge into or
consolidate with any other Wholly Owned Subsidiary of the Borrower or Inland, as
applicable, in a transaction in which the surviving entity is a Wholly Owned
Subsidiary, and no person other than the Borrower or Inland, respectively, or a
Wholly Owned Subsidiary of the Borrower or Inland, respectively, receives any
consideration (provided that if one of the Wholly Owned Subsidiaries party to
such merger or consolidation was a Guarantor, the surviving person shall be a
Guarantor).
SECTION 6.06. Transactions with Affiliates. Sell or transfer any
property or assets to, or purchase or acquire any property or assets from, or
otherwise engage in any other transactions with, any of its Affiliates, except
that (a) the Borrower, Inland or any Restricted Subsidiary may engage in any of
the foregoing transactions in the ordinary course of business at prices and on
terms and conditions not less favorable to the Borrower, Inland or such
Restricted Subsidiary than could be obtained on an arm's-length basis from
unrelated third parties; provided that, except in the case of purchases and
sales of raw materials, steel and steel-related products and services, (i) if
any such transaction involves an amount in excess of $5,000,000 (A) the terms
thereof are set forth in writing and (B) such terms have been approved by a
majority of the members of the Board of Directors of the Borrower, Inland or
such Restricted Subsidiary, as applicable, having no personal stake in such
transaction and (ii) if any such transaction involves as amount in
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excess of $25,000,000, the terms thereof have been determined by a nationally
recognized U.S. investment banking firm to be fair, from a financial standpoint,
to the Borrower, Inland or such Restricted Subsidiary, (b) Inland and its
Restricted Subsidiaries may enter into commercial transactions for goods and
services with the Existing Joint Ventures in the ordinary course of business
consistent with past practice and (c) Inland may pay management fees to IINV or
its subsidiaries in an aggregate amount not exceeding $5,000,000 in any fiscal
year.
SECTION 6.07. Business of Borrower and Subsidiaries. (a) In the case of
Inland and its Restricted Subsidiaries, engage at any time in any business or
business activity other than the business currently conducted by it and business
activities reasonably incidental thereto.
(b) In the case of the Borrower and its Restricted Subsidiaries (i)
incur any Indebtedness other than pursuant to Sections 6.02(b)(i) or (b)(ii) or
(ii) engage in any business or business activity other than (w) acting as the
holding company for its subsidiaries, if any, (x) making or receiving the
proceeds of the Inland Loan and repayments thereof, (y) entering into and
performing their respective obligations under the Loan Documents and (z)
activities reasonably incidental thereto.
SECTION 6.08. Restrictions on Ability of Restricted Subsidiaries to Pay
Dividends. Permit the Restricted Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any such subsidiary to (i) pay any dividends or
make any other distributions on its Capital Stock or any other interest or (ii)
make or repay any loans or advances to the Borrower or the parent of such
Restricted Subsidiary, except for any such encumbrance or restriction that (x)
is in existence on the Closing Date under Indebtedness permitted under Section
6.02(b)(ii) or (y) is contained in Indebtedness permitted pursuant to Section
6.02(b)(vi) or (b)(vii).
SECTION 6.09. Consolidated EBITDA. Permit Consolidated EBITDA for any
period of four consecutive fiscal quarters to be less than $140,000,000;
provided that in calculating Consolidated EBITDA for any period for purposes of
this Section 6.09, there shall also be excluded, without duplication and to the
extent otherwise included therein, all unusual, non-recurring, or extraordinary
charges or credits during such period, all as determined in accordance with
GAAP.
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SECTION 6.10. Amendment of Indenture. Enter into any amendment of,
supplement to or modification of the Indenture without the prior written consent
of the Required Lenders (or such greater percentage as may be required by the
Indenture or the Loan Documents).
ARTICLE VII
Events of Default
In case of the happening of any of the following events
("Events of Default"):
(a) any representation or warranty made or deemed made in or
in connection with any Loan Document or the borrowings or the issuance,
amendment, renewal or extension of the Letter of Credit hereunder, or
any representation, warranty, statement or information contained in any
report, certificate, financial statement or other instrument furnished
in connection with or pursuant to any Loan Document, shall prove to
have been false or misleading in any material respect when so made,
deemed made or furnished;
(b) default shall be made in the payment of any principal of
any Loan or the reimbursement with respect to any L/C Disbursement when
and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise;
(c) default shall be made in the payment of any interest on
any Loan or any Fee or L/C Disbursement or any other amount (other than
an amount referred to in (b) above) due under any Loan Document, when
and as the same shall become due and payable, and such default shall
continue unremedied for a period of five Business Days;
(d) default shall be made in the due observance or performance
by the Borrower, Inland or any of the Restricted Subsidiaries of any
covenant, condition or agreement contained in Section 5.01(a), 5.05 or
5.08 or in Article VI;
(e) default shall be made in the due observance or performance
by the Borrower, Inland or any of the Restricted Subsidiaries of any
covenant, condition or agreement contained in any Loan Document (other
than those specified in (b), (c) or (d) above) and such default shall
continue unremedied for a period of 20 days after notice thereof from
the Administrative Agent or any Lender to the
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Borrower;
(f) the Borrower, Inland, IINV or any of their respective
subsidiaries shall (i) fail to pay any principal or interest,
regardless of amount, due in respect of any Indebtedness issued under
the Indenture or any other Indebtedness in a principal amount in excess
of $10,000,000, when and as the same shall become due and payable after
any applicable grace period, or (ii) fail to observe or perform any
other term, covenant, condition or agreement contained in any agreement
or instrument evidencing or governing any such Indebtedness if the
effect of any failure referred to in this clause (ii) is to cause, or
to permit the holder or holders of such Indebtedness or a trustee on
its or their behalf (but only after any required giving of notice,
lapse of time or both) to cause, such Indebtedness to become due prior
to its stated maturity;
(g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of the Borrower, Inland,
IINV or any of their respective Restricted Subsidiaries, or of a
substantial part of the property or assets of the Borrower, Inland,
IINV or any of their respective Restricted Subsidiaries, under any
Insolvency Law, (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower, Inland,
IINV or any of their respective subsidiaries or for a substantial part
of the property or assets of the Borrower, Inland, IINV or any of their
respective Restricted Subsidiaries or (iii) the winding-up or
liquidation of the Borrower, Inland, IINV or any of their respective
Restricted Subsidiaries; and such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any
of the foregoing shall be entered;
(h) the Borrower, Inland, IINV or any of their respective
Restricted Subsidiaries shall (i) voluntarily commence any proceeding
or file any petition seeking relief under any Insolvency Law, (ii)
consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition
described in (g) above, (iii) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar
official for the Borrower, Inland or any of their respective Restricted
Subsidiaries or for a substantial part of the property or assets of the
Borrower, Inland, IINV or any of their respective Restricted
Subsidiaries, (iv) file an answer admitting the material
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allegations of a petition filed against it in any such proceeding, (v)
make a general assignment for the benefit of creditors, (vi) become
unable, admit in writing its inability or fail generally to pay its
debts as they become due or (vii) take any action for the purpose of
effecting any of the foregoing;
(i) one or more judgments for the payment of money in an
aggregate amount in excess of $10,000,000 shall be rendered against the
Borrower, Inland, IINV or any of their respective Restricted
Subsidiaries or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken
by a judgment creditor to levy upon assets or properties of the
Borrower, Inland, IINV or any of their respective Restricted
Subsidiaries to enforce any such judgment;
(j) an ERISA Event shall have occurred that, in the reasonable
opinion of the Required Lenders, when taken together with all other
such ERISA Events, could reasonably be expected to result in a Material
Adverse Effect; or
(k) any security interest purported to be created by any
Security Document shall cease to be, or shall be asserted by the
Borrower or any other Loan Party not to be, a valid, perfected, first
priority (except as otherwise expressly provided in this Agreement or
such Security Document) security interest in the securities, assets or
properties covered thereby, except to the extent that any such loss of
perfection or priority results from the failure of the Collateral Agent
to maintain possession of certificates representing securities pledged
under the Pledge Agreement and except to the extent that such loss is
covered by a lender's title insurance policy and the related insurer
promptly after such loss shall have acknowledged in writing that such
loss is covered by such title insurance policy; or
(l) with respect to the Letter of Credit and the rights and
remedies of the Issuing Bank and the L/C Lenders hereunder and
thereunder, a Change in Control shall occur;
then, and in every such event (other than an event described in paragraph (l)
above or an event with respect to the Borrower or Inland described in paragraph
(g) or (h) above), and at any time thereafter during the continuance of such
event, the Administrative Agent may, and at the request of the Required Lenders
shall, by notice to the Borrower, take either or both of the following actions,
at the same or different times: (i) terminate forthwith the Commitments and (ii)
declare the Loans then outstanding to be forthwith
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due and payable in whole or in part, whereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and any
unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder
and under any other Loan Document, shall become forthwith due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived by the Borrower, anything contained herein or
in any other Loan Document to the contrary notwithstanding; and in any event
with respect to the Borrower or Inland described in paragraph (g) or (h) above,
the Commitments shall automatically terminate and the principal of the Loans
then outstanding, together with accrued interest thereon and any unpaid accrued
Fees and all other liabilities of the Borrower and Inland accrued hereunder and
under any other Loan Document, shall automatically become due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived by the Borrower, anything contained herein or
in any other Loan Document to the contrary notwithstanding.
ARTICLE VIII
The Administrative Agent and the Collateral Agent
In order to expedite the transactions contemplated by this Agreement,
Credit Suisse First Boston is hereby appointed to act as Administrative Agent
and Collateral Agent on behalf of the Lenders and the Issuing Bank (for purposes
of this Article VIII, the Administrative Agent and the Collateral Agent are
referred to collectively as the "Agents"). Each of the Lenders and each assignee
of any such Lender, hereby irrevocably authorizes the Agents to take such
actions on behalf of such Lender or assignee or the Issuing Bank and to exercise
such powers as are specifically delegated to the Agents by the terms and
provisions hereof and of the other Loan Documents, together with such actions
and powers as are reasonably incidental thereto. The Administrative Agent is
hereby expressly authorized by the Lenders and the Issuing Bank, without hereby
limiting any implied authority, (a) to receive on behalf of the Lenders and the
Issuing Bank all payments of principal of and interest on the Loans, all
payments in respect of L/C Disbursements and all other amounts due to the
Lenders hereunder, and promptly to distribute to each Lender or the Issuing Bank
its proper share of each payment so received; (b) to give notice on behalf of
each of the Lenders to the Borrower of any Event of Default specified in this
Agreement of which the Administrative Agent has actual knowledge acquired in
connection with its agency hereunder; and (c) to distribute to each Lender
copies of all notices, financial statements and other materials delivered by the
Borrower or any other Loan Party pursuant to this Agreement or the other Loan
Documents as received by the Administrative Agent. In no event shall Inland or
the
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Borrower be liable for any failure of the Administrative Agent to remit payments
or notices to the Lenders and, with respect to any payment required to be made
by Inland or the Borrower hereunder, such payment shall be deemed made when
received by the Administrative Agent. Without limiting the generality of the
foregoing, the Agents are hereby expressly authorized to execute any and all
documents (including releases) with respect to the Collateral and the rights of
the Secured Parties with respect thereto, as contemplated by and in accordance
with the provisions of this Agreement and the Security Documents.
Neither the Agents nor any of their respective directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them except for its or his own gross negligence or wilful misconduct, or
be responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or observance by the
Borrower or any other Loan Party of any of the terms, conditions, covenants or
agreements contained in any Loan Document. The Agents shall not be responsible
to the Lenders for the due execution, genuineness, validity, enforceability or
effectiveness of this Agreement or any other Loan Documents, instruments or
agreements. The Agents shall in all cases be fully protected in acting, or
refraining from acting, in accordance with written instructions signed by the
Required Lenders and, except as otherwise specifically provided herein, such
instructions and any action or inaction pursuant thereto shall be binding on all
the Lenders. Each Agent shall, in the absence of knowledge to the contrary, be
entitled to rely on any instrument or document believed by it in good faith to
be genuine and correct and to have been signed or sent by the proper person or
persons. Neither the Agents nor any of their respective directors, officers,
employees or agents shall have any responsibility to the Borrower or any other
Loan Party on account of the failure of or delay in performance or breach by any
Lender or the Issuing Bank of any of its obligations hereunder or to any Lender
or the Issuing Bank on account of the failure of or delay in performance or
breach by any other Lender or the Issuing Bank or the Borrower or any other Loan
Party of any of their respective obligations hereunder or under any other Loan
Document or in connection herewith or therewith. Each of the Agents may execute
any and all duties hereunder by or through agents or employees and shall be
entitled to rely upon the advice of legal counsel selected by it with respect to
all matters arising hereunder and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice of such counsel.
The Lenders hereby acknowledge that neither Agent shall be under any
duty to
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take any discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement unless it shall be requested in writing to do so by
the Required Lenders.
Subject to the appointment and acceptance of a successor Agent as
provided below, either Agent may resign at any time by notifying the Lenders and
the Borrower. Upon any such resignation, the Required Lenders shall have the
right to appoint a successor. If no successor shall have been so appointed by
the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Agent gives notice of its resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a
bank with an office in New York, New York, having a combined capital and surplus
of at least $500,000,000 or an Affiliate of any such bank. Upon the acceptance
of any appointment as Agent hereunder by a successor bank, such successor shall
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 the Agent's resignation hereunder, the
provisions of this Article and Section 9.05 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.
With respect to the Loans made by it hereunder, each Agent in its
individual capacity and not as Agent shall have the same rights and powers as
any other Lender and may exercise the same as though it were not an Agent, and
the Agents and their Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not an Agent.
Each Lender agrees (a) to reimburse the Agents, on demand, in the
amount of its pro rata share (based on its outstanding Loans and L/C Exposure
hereunder) of any expenses incurred for the benefit of the Lenders by the
Agents, including counsel fees and compensation of agents and employees paid for
services rendered on behalf of the Lenders, that shall not have been reimbursed
by the Borrower and (b) to indemnify and hold harmless each Agent and any of its
directors, officers, employees or agents, on demand, in the amount of such pro
rata share, from and against any and all liabilities, Taxes, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be imposed on, incurred
by or asserted against it in its capacity as Agent or any of them in any way
relating to or arising out of this Agreement or any other Loan Document or any
action taken or omitted by it or any of them under this Agreement or any other
Loan Document, to the extent the same shall not have been reimbursed by the
Borrower or any other Loan Party, provided that no Lender shall be liable to an
Agent or any such other indemnified person for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements are determined by a court of competent
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jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Agent or any of its directors, officers,
employees or agents. Each Lender agrees to reimburse each the Issuing Bank and
its directors, employees and agents, in each case, to the same extent and
subject to the same limitations as provided above for the Agents.
Each Lender acknowledges that it has, independently and without
reliance upon the Agents or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agents or any other Lender and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement or any other Loan Document, any related
agreement or any document furnished hereunder or thereunder.
ARTICLE IX
Guarantee
SECTION 9.01. Guarantee. The Guarantors hereby unconditionally and
irrevocably guarantee, jointly and severally, to each Secured Party (a) the full
and punctual (x) payment of principal of and interest on the Loans when due,
whether at maturity, by acceleration, by prepayment, or otherwise, (y)
reimbursement to the Issuing Bank of all L/C Disbursements and (z) all other
monetary obligations of the Borrower and the other Guarantors under the Loan
Documents, (b) the full and punctual performance of all other obligations of the
Borrower and the other Guarantors under the Loan Documents and (c) all
obligations of the Borrower, monetary or otherwise, under each Interest Rate
Protection Agreement entered into with a counterparty that was a Lender or an
Affiliate of a Lender at the time such Interest Rate Protection Agreement was
entered into (all the foregoing being hereinafter collectively called the
"Obligations"). The Guarantors further agree that the Obligations may be
extended or renewed, in whole or in part, without notice or further assent from
any Guarantor and that the Guarantors will remain bound under this Article IX
notwithstanding any extension or renewal of any Obligation.
Each Guarantor waives presentation to, demand of, payment from and
protest to the Borrower of any of the Obligations and also waives notice of
protest for nonpayment. Each Guarantor waives notice of any default under the
Obligations. The Obligations of
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the Guarantors hereunder shall not be affected by (a) the failure of any Secured
Party to assert any claim or demand or to enforce any right or remedy against
the Borrower or any other person under any Loan Document, any Interest Rate
Protection Agreement, 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 any Loan Document, any Interest Rate Protection
Agreement or any other agreement; (d) the release of any security held by any
Secured Party for the Obligations or any of them; or (e) the failure of any
Secured Party to exercise any right or remedy against any other guarantor of the
Obligations.
Each Guarantor further agrees that its Guarantee 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 had by any
Secured Party to any security held for payment of the Obligations, including any
of the Collateral.
Except as expressly set forth in Section 9.02, 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 set off, counterclaim, recoupment or termination whatsoever or by
reason of the invalidity, illegality or unenforceability of the Obligations or
otherwise. Without limiting the generality of the foregoing, the Obligations of
a Guarantor herein shall not be discharged or impaired or otherwise affected by
the failure of any Secured Party to assert any claim or demand or to enforce any
remedy under any Loan Document, any Interest Rate Protection Agreement 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 any such
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
a Guarantor or would otherwise operate as a discharge of a Guarantor as a matter
of law or equity.
Each Guarantor further agrees that its Guarantee 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 Secured Party upon the insolvency, bankruptcy
or reorganization of the Borrower or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any
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Secured Party has at law or in equity against any Guarantor by virtue hereof,
upon the failure of the Borrower to pay 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,
jointly and severally, hereby promises to and will, upon receipt of written
demand by the Administrative Agent, forthwith pay, or cause to be paid, in cash,
to the Secured Parties 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 Borrower or the Guarantors to the Secured Parties.
Each Guarantor agrees that, as between it, on the one hand, and the
Secured Parties, on the other hand, (x) the maturity of the Obligations
guaranteed hereby may be accelerated as provided in Article VII for the purposes
of such Guarantor's Guarantee herein, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby (y) in the event of any declaration of acceleration of such
obligations as provided in Article VII, such obligations (whether or not due and
payable) shall forthwith become due and payable by such Guarantor for the
purposes of this Article IX, and (z) upon payment by such Guarantor under this
Article IX, all rights of such Guarantor against the Borrower or any other
Guarantor as a result of subrogation or otherwise shall be subordinate in right
of payment to the prior payment in full in cash of the obligations owing by the
Borrower or the other Guarantors to the Lenders.
Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees) incurred by any Secured Party in
enforcing any rights under this Article IX.
SECTION 9.02. Limitation on Liability. Any term or provision of this
Agreement to the contrary notwithstanding, the maximum aggregate amount of the
Obligations guaranteed hereunder by any Guarantor shall not exceed the maximum
amount that can be hereby guaranteed without rendering this Article IX, as it
relates to such Guarantor, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar law affecting the rights of
creditors generally.
SECTION 9.03. Successors and Assigns. This Article IX shall be binding
upon each Guarantor (other than IINV, which is separately executing the IINV
Guarantee) and its successors and assigns and shall inure to the benefit of the
successors and assigns of the Secured Parties.
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ARTICLE X
Miscellaneous
SECTION 10.01. Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it c/o Inland Steel Industries,
Inc., 3210 Watling Street, East Chicago, Indiana 46312, Attention of
Tom McCue (Telecopy No. 312-899-3562);
(b) if to Inland or its subsidiaries, including those that are
Guarantors, to them at 3210 Watling Street, East Chicago, Indiana
46312, Attention of Treasurer (Telecopy No. (219) 399-1080);
(c) if to the Administrative Agent, to Credit Suisse First
Boston, Loan and Agency Services Group, 11 Madison Avenue, New York,
New York 10010, Attention of Jodi Fatto (Telecopy No. (212) 325-8304);
and
(d) if to a Lender, to it at its address (or telecopy number)
set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant
to which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 10.01 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 10.01.
SECTION 10.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrower herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and the Issuing Bank and shall survive the
making by the Lenders of the Loans and the issuance of the Letter of Credit by
the Issuing Bank, regardless of any investigation made by the Lenders or the
Issuing Bank or on their behalf, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any Fee or any
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other amount payable under this Agreement or any other Loan Document is
outstanding and unpaid or the Letter of Credit is outstanding and so long as the
Commitments have not been terminated. The provisions of Sections 2.14, 2.16,
2.20 and 10.05 shall remain operative and in full force and effect regardless of
the expiration of the term of this Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the Loans, the
expiration of the Commitments, the expiration of the Letter of Credit, the
invalidity or unenforceability of any term or provision of this Agreement or any
other Loan Document, or any investigation made by or on behalf of the
Administrative Agent, the Collateral Agent or any Lender or the Issuing Bank.
SECTION 10.03. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and the Administrative Agent
and when the Administrative Agent shall have received counterparts hereof which,
when taken together, bear the signatures of each of the other parties hereto,
and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
SECTION 10.04. Successors and Assigns. (a) Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the permitted successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Borrower, the Administrative
Agent , the Issuing Bank or the Lenders that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of
its interests, rights and obligations under this Agreement (including all or a
portion of its Commitment or the Loans at the time owing to it or L/C Exposure);
provided, however, that (i) except in the case of an assignment to a Lender or
an Affiliate of such Lender or to an Approved Fund of any Lender, (x) (A) the
Administrative Agent must give its prior written consent to such assignment
(which consent shall not be unreasonably withheld or delayed) and (B) in the
case of the assignment of a Commitment, the Borrower must also give its prior
written consent to such assignment (which consent shall not be unreasonably
withheld) and (y) the amount of the Commitment or Loan or L/C Exposure of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 (or, if less, the entire
remaining amount of such Lender's Commitment or Loans or L/C Exposure) unless
otherwise
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agreed by the Administrative Agent, (ii) the parties to each such assignment
shall, unless otherwise agreed by the Administrative Agent, execute and deliver
to the Administrative Agent an Assignment and Acceptance, together with a
processing and recordation fee of $3,500 and (iii) the assignee, if it shall not
be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire. Upon acceptance and recording pursuant to paragraph (e) of this
Section 10.04, from and after the effective date specified in each Assignment
and Acceptance, (A) the assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Acceptance, have the
rights and obligations of a Lender under this Agreement and (B) the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto but shall continue to be entitled
to the benefits of Sections 2.14, 2.16, 2.20 and 10.05, as well as to any Fees
accrued for its account and not yet paid).
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Commitment, or the outstanding balances of its Loans, or L/C Exposure, in
each case without giving effect to assignments thereof which have not become
effective, are as set forth in such Assignment and Acceptance, (ii) except as
set forth in (i) above, such assigning Lender makes no representation or
warranty 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, any other Loan Document or any other instrument or
document furnished pursuant hereto, or the financial condition of the Borrower
or any Subsidiary or the performance or observance by the Borrower or any
Subsidiary of any of its obligations under this Agreement, any other Loan
Document or any other instrument or document furnished pursuant hereto; (iii)
such assignee represents and warrants that it is legally authorized to enter
into such Assignment and Acceptance; (iv) such assignee confirms that it has
received a copy of this Agreement, together with copies of the most recent
financial statements referred to in Section 3.05(a) or delivered pursuant to
Section 5.04 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; (v) such assignee will independently and without
reliance upon the Administrative Agent, the Collateral Agent, such assigning
Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not
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taking action under this Agreement; (vi) such assignee appoints and authorizes
the Administrative Agent and the Collateral Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement as are delegated
to the Administrative Agent and the Collateral Agent, respectively, by the terms
hereof, together with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their terms
all the obligations which by the terms of this Agreement are required to be
performed by it as a Lender.
(d) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, or principal amount of the
Loans owing to, or L/C Exposure of, each Lender pursuant to the terms hereof
from time to time (the "Register"). The entries in the Register shall be
conclusive absent manifest error and the Borrower, the Administrative Agent, the
Issuing Bank, the Collateral Agent and the Lenders may treat each person whose
name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrower, the
Issuing Bank, the Collateral Agent and any Lender, at any reasonable time and
from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) above and, if required, the written consent of the Borrower and the
Administrative Agent to such assignment, the Administrative Agent shall (i)
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Lenders and
the Issuing Bank. No assignment shall be effective unless and until it has been
recorded in the Register as provided in this paragraph (e).
(f) Each Lender may without the consent of the Borrower, the Issuing
Bank or the Administrative Agent sell participations to one or more banks or
other entities in all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment or the Loans owing to it
or L/C Exposure); provided, however, that (i) such Lender's obligations under
this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
<PAGE> 97
97
obligations, (iii) the participating banks or other entities shall be entitled
to the benefit of the cost protection provisions contained in Sections 2.14,
2.16 and 2.20 to the same extent as if they were Lenders and (iv) the Borrower,
the Administrative Agent, the Issuing Bank and the Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement, and such Lender shall retain the
sole right to enforce the obligations of the Borrower relating to the Loans or
L/C Disbursements and to approve any amendment, modification or waiver of any
provision of this Agreement (other than amendments, modifications or waivers
decreasing any fees payable hereunder or the amount of principal of or the rate
at which interest is payable on the Loans, extending any scheduled principal
payment date or date fixed for the payment of interest on the Loans, increasing
or extending the Commitments or releasing any Guarantor or all or any
substantial part of the Collateral).
(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
10.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender by
or on behalf of the Borrower; provided that, prior to any such disclosure of
information designated by the Borrower as confidential, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information on
terms no less restrictive than those applicable to the Lenders pursuant to
Section 10.17.
(h) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure extensions of
credit to such Lender, including any pledge or assignment to secure obligations
to a Federal Reserve Bank; provided that no such assignment shall release a
Lender from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto. In order to facilitate such an
assignment, the Borrower shall, at the request of the assigning Lender, duly
execute and deliver to the assigning Lender a promissory note or notes
evidencing the Loans made to the Borrower by the assigning Lender hereunder.
(i) The Borrower shall not assign or delegate any of its rights or
duties hereunder without the prior written consent of the Administrative Agent,
the Issuing Bank and each Lender, and any attempted assignment without such
consent shall be null and void.
SECTION 10.05. Expenses; Indemnity. (a) The Borrower agrees to pay all
reasonable out-of-pocket expenses incurred by the Administrative Agent and the
Collateral Agent and the Issuing Bank in connection with the syndication of the
credit facilities provided for herein and the preparation and administration of
this Agreement
<PAGE> 98
98
and the other Loan Documents or in connection with any amendments, modifications
or waivers of the provisions hereof or thereof (whether or not the transactions
hereby or thereby contemplated shall be consummated) or incurred by the
Administrative Agent, the Collateral Agent or any Lender in connection with the
enforcement or protection of its rights in connection with this Agreement and
the other Loan Documents or in connection with the Loans made or the Letter of
Credit issued hereunder, including the reasonable fees, charges and
disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent
and the Collateral Agent, and, in connection with any such enforcement or
protection, the reasonable fees, charges and disbursements of any other counsel
for the Administrative Agent, the Collateral Agent or any Lender.
(b) The Borrower agrees to indemnify the Administrative Agent, the
Collateral Agent, each Lender, and the Issuing Bank, each Affiliate of any of
the foregoing persons and each of their respective directors, trustees,
officers, employees and agents (each such person being called an "Indemnitee")
against, and to hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including reasonable counsel fees,
charges and disbursements, incurred by or asserted against any Indemnitee
arising out of, in any way connected with, or as a result of (i) the execution
or delivery of this Agreement or any other Loan Document or any agreement or
instrument contemplated thereby, the performance by the parties thereto of their
respective obligations thereunder or the consummation of the Transactions and
the other transactions contemplated thereby, (ii) the use of the proceeds of the
Loans or issuance of the Letter of Credit, (iii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto, or (iv) any actual or alleged presence or Release
of Hazardous Materials on any property owned or operated by the Borrower or any
of the Subsidiaries, or any Environmental Claim related in any way to the
Borrower or the Subsidiaries; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Indemnitee.
(c) The provisions of this Section 10.05 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the expiration of the Commitments, the expiration
of the Letter of Credit, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of the Administrative Agent, the Collateral Agent; any
Lender or the Issuing Bank. All amounts due under this Section 10.05 shall be
payable on written demand therefor.
<PAGE> 99
99
SECTION 10.06. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender is hereby authorized at any time and
from time to time, except to the extent prohibited by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender to or
for the credit or the account of the Borrower against any of and all the
obligations of the Borrower now or hereafter existing under this Agreement and
other Loan Documents held by such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement or such other Loan
Document and although such obligations may be unmatured. The rights of each
Lender under this Section 10.06 are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
SECTION 10.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (OTHER THAN THE LETTER OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER
LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK.
SECTION 10.08. Waivers; Amendment. (a) No failure or delay of the
Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank in
exercising any power or right hereunder or under any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the
Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or any other Loan Document or consent to any
departure by the Borrower or any other Loan Party therefrom shall in any event
be effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the
<PAGE> 100
100
Borrower and the Required Lenders; provided, however, that no such agreement
shall (i) decrease the principal amount of, or extend the maturity of or any
scheduled principal payment date or date for the payment of any interest on any
Loan, or any date for reimbursement of an L/C Disbursement or waive or excuse
any such payment or any part thereof or any Fee, or decrease the rate of
interest or prepayment premium on any Loan or L/C Disbursement, without the
prior written consent of each Lender affected thereby, (ii) change or extend the
Commitment of any Lender without the prior written consent of such Lender, (iii)
amend or modify the pro rata requirements of Section 2.17, the provisions of
Section 10.04(i), the provisions of this Section, the definition of the term
"Required Lenders" or release any Guarantor or all or any substantial part of
the Collateral, without the prior written consent of each Lender or (iv) change
the allocation between Tranche B Loans and Tranche C Loans of any prepayment
pursuant to Section 2.12 or 2.13 without the prior written consent of (A)
Lenders holding a majority of the aggregate outstanding principal amount of the
Tranche B Loans and (B) Lenders holding a majority of the aggregate outstanding
principal amount of the Tranche C Loans; provided further that no such agreement
shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent, the Collateral Agent or the Issuing Bank hereunder or
under any other Loan Document without the prior written consent of the
Administrative Agent, the Collateral Agent or the Issuing Bank.
SECTION 10.09. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any Loan
or participation in any L/C Disbursement, together with all fees, charges and
other amounts which are treated as interest on such Loan or participation in
such L/C Disbursement under applicable law (collectively the "Charges"), shall
exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan or
participation in accordance with applicable law, the rate of interest payable in
respect of such Loan or participation hereunder, together with all Charges
payable in respect thereof, shall be limited to the Maximum Rate and, to the
extent lawful, the interest and Charges that would have been payable in respect
of such Loan or participation but were not payable as a result of the operation
of this Section 10.09 shall be cumulated and the interest and Charges payable to
such Lender in respect of other Loans or participations or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon at the Federal Funds Effective Rate to the date
of repayment, shall have been received by such Lender.
SECTION 10.10. Entire Agreement. This Agreement, the Fee Letter and the
other Loan Documents constitute the entire contract between the parties relative
to the subject matter hereof. Any other previous agreement among the parties
with respect to the
<PAGE> 101
101
subject matter hereof is superseded by this Agreement and the other Loan
Documents. Nothing in this Agreement or in the other Loan Documents, expressed
or implied, is intended to confer upon any party other than the parties hereto
and thereto any rights, remedies, obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.
SECTION 10.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 10.11.
SECTION 10.12. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby (it being understood that
the invalidity of a particular provision in a particular jurisdiction shall not
in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 10.13. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original but all of which when taken together shall
constitute a single contract, and shall become effective as provided in Section
10.03. Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.
SECTION 10.14. Headings. Article and Section headings and the Table of
<PAGE> 102
102
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 10.15. Jurisdiction; Consent to Service of Process. (a) The
Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Administrative Agent, the Collateral Agent or any Lender may otherwise have to
bring any action or proceeding relating to this Agreement or the other Loan
Documents against the Borrower or its properties in the courts of any
jurisdiction.
(b) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 10.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 10.16. Judgment Currency. (a) The obligations of the Borrower
and the other Loan Parties hereunder and under the other Loan Documents to make
payments in dollars (the "Obligation Currency") shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any currency other
<PAGE> 103
103
than the Obligation Currency, except to the extent that such tender or recovery
results in the effective receipt by the Administrative Agent or a Lender or the
Issuing Bank of the full amount of the Obligation Currency expressed to be
payable to the Administrative Agent or such Lender or the Issuing Bank under
this Agreement or the other Loan Documents. If, for the purpose of obtaining or
enforcing judgment against the Borrower or any other Loan Party or in any court
or in any jurisdiction, it becomes necessary to convert into or from any
currency other than the Obligation Currency (such other currency being
hereinafter referred to as the "Judgment Currency") an amount due in the
Obligation Currency, the conversion shall be made at the rate of exchange (as
quoted by the Administrative Agent or if the Administrative Agent does not quote
a rate of exchange on such currency, by a known dealer in such currency
designated by the Administrative Agent) determined, in each case, as of the date
immediately preceding the day on which the judgment is given (such Business Day
being hereinafter referred to as the "Judgment Currency Conversion Date").
(b) If there is a change in the rate of exchange prevailing between the
Judgment Currency Conversion Date and the date of actual payment of the amount
due, the Borrower covenants and agrees to pay, or cause to be paid, as a
separate obligation and notwithstanding any judgment, such additional amounts,
if any (but in any event not a lesser amount), as may be necessary to ensure
that the amount paid in the Judgment Currency, when converted at the rate of
exchange prevailing on the date of payment, will produce the amount of the
Obligation Currency which could have been purchased with the amount of Judgment
Currency stipulated in the judgment or judicial award at the rate of exchange
prevailing on the Judgment Currency Conversion Date.
(c) For purposes of determining the rate of exchange for this Section,
such amounts shall include any premium and costs payable in connection with the
purchase of the Obligation Currency.
SECTION 10.17. Confidentiality. The Administrative Agent, the
Collateral Agent, the Issuing Bank and each of the Lenders agrees to keep
confidential (and to use its best efforts to cause its respective agents and
representatives to keep confidential) the Information (as defined below) and all
copies thereof, extracts therefrom and analyses or other materials based
thereon, except that the Administrative Agent, the Collateral Agent, the Issuing
Bank or any Lender shall be permitted to disclose Information (a) to such of its
respective officers, directors, employees, agents, affiliates and
representatives as need to know such Information, (b) to the extent requested by
any regulatory authority, (c) to the extent otherwise required by applicable
laws and regulations or by any subpoena or similar legal process, (d) in
connection with any suit, action or proceeding relating to the enforcement of
its rights hereunder or under the other Loan Documents, (e) subject to an
agreement containing provisions substantially the same as the provisions of this
Section
<PAGE> 104
104
10.17 entered into by such party, to any assignee or participant in any of its
rights or obligations under this Agreement or (f) to the extent such Information
(i) becomes publicly available other than as a result of a breach of this
Section 10.17 or (ii) becomes available to the Administrative Agent, the Issuing
Bank, any Lender or the Collateral Agent on a nonconfidential basis from a
source other than the Borrower, Inland or any of the Restricted Subsidiaries.
For the purposes of this Section, "Information" shall mean all financial
statements, certificates, reports, agreements and information (including all
analyses, compilations and studies prepared by the Administrative Agent, the
Collateral Agent, the Issuing Bank or any Lender based on any of the foregoing)
that are received from the Borrower, Inland or any of the Restricted
Subsidiaries and related to the Borrower, Inland or any of the Subsidiaries, any
of their shareholders or any of their employees, customers or suppliers, other
than any of the foregoing that were available to the Administrative Agent, the
Collateral Agent, the Issuing Bank or any Lender on a nonconfidential basis
prior to its disclosure thereto by the Borrower, Inland or any of the Restricted
Subsidiaries, and which are in the case of Information provided after the date
hereof, clearly identified at the time of delivery as confidential. The
provisions of this Section 10.17 shall remain operative and in full force and
effect regardless of the expiration and term of this Agreement.
<PAGE> 105
105
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
ISPAT INLAND, L.P.,
by 9064-4816 Quebec, Inc., its general
partner,
by /s/ Richard Leblanc
--------------------------------------------
Name: Richard Leblanc
Title: Secretary
INLAND STEEL COMPANY,
by /s/ Vicki L. Avril
--------------------------------------------
Name: Vicki L. Avril
Title: Treasurer
BURNHAM TRUCKING COMPANY, INC.,
by /s/ Vicki L. Avril
--------------------------------------------
Name: Vicki L. Avril
Title: Treasurer
INCOAL COMPANY,
by /s/ Vicki L. Avril
--------------------------------------------
Name: Vicki L. Avril
Title: Treasurer
CREDIT SUISSE FIRST BOSTON, individually
and as Administrative Agent, Collateral
Agent and Issuing Bank,
<PAGE> 106
106
by /s/ Julia Kingsbury
--------------------------------------------
Name: Julia Kingsbury
Title: Vice President
/s/ Robert Hetu
--------------------------------------------
Name: Robert Hetu
Title: Vice President
<PAGE> 107
107
Bank Polska Kasa Opieki SA, Pekao SA
Group, New York Branch
by /s/ Harvey Winter
-----------------------------------------
Name: Harvey Winter
Title: Vice President
Bank of America National Trust &
Savings Association,
by /s/ William F. Sweeney
-----------------------------------------
Name: William F. Sweeney
Title: Vice President
BankBoston NA,
by /s/ Todd Dahlstrom
-----------------------------------------
Name: Todd Dahlstrom
Title: Director
Paribas Corporation as Agent for
Paribas,
by /s/ Teresa Knuth
-----------------------------------------
Name: Teresa Knuth
Title: Associate
by /s/ Marion Patterson
-----------------------------------------
Name: Marion Patterson
Title: Vice President - Loan Trading
Boeing Capital Corporation,
<PAGE> 108
108
by /s/ James C. Hammersmith
------------------------------------
Name: James C. Hammersmith
Title: Senior Documentation Officer
GCB Investment Portfolio,
by Citibank, N.A.,
by /s/ Steven Kaufman
------------------------------------
Name: Steven Kaufman
Title: Vice President
<PAGE> 109
109
Osprey Investments Portfolio,
by Citibank, N.A., as Manager,
by /s/ Hans L. Christensen
-----------------------------------------
Name: Hans L. Christensen
Title: Vice President
Comerica Bank,
by /s/ Aurora Battiglia
-----------------------------------------
Name: Aurora Battiglia
Title: International Banking Officer
by /s/ Walter Wegmueller
-----------------------------------------
Name: Walter Wegmueller
Title: First Vice President
CypressTree Institutional Fund, LLC,
by CypressTree Investment
Management Company, Inc., its
Managing Member,
by /s/ Timothy M. Barns
-----------------------------------------
Name: Timothy M. Barns
Title: Managing Director
KZH - CypressTree-1 Corporation,
by /s/ Virginia Conway
-----------------------------------------
Name: Virginia Conway
Title: Authorized Signatory
<PAGE> 110
110
CypressTree Investment Fund, LLC,
by CypressTree Investment
Management Company, Inc., its
Managing Member,
by /s/ Timothy M. Barns
-----------------------------------------
Name: Timothy M. Barns
Title: Managing Director
<PAGE> 111
111
CypressTree Investment Management
Company, Inc., as Attorney-in-Fact
and on behalf of First Allmerica
Financial Life Insurance
Company as Portfolio Manager,
by /s/ Timothy M. Barns
-----------------------------------------
Name: Timothy M. Barns
Title: Managing Director
DLJ Capital Funding, Inc.,
by /s/ Stephen P. Hickey
-----------------------------------------
Name: Stephen P. Hickey
Title: Managing Director
Fremont Financial Corporation,
by /s/ Richard C. Pugh
-----------------------------------------
Name: Richard C. Pugh
Title: Senior Vice President
KZH Holding Corporation III,
by /s/ Virginia Conway
-----------------------------------------
Name: Virginia Conway
Title: Authorized Signatory
Mercantile Bank,
by /s/ Edward A. Cheney
-----------------------------------------
Name: Edward A. Cheney
Title: Group Manager & Vice President
<PAGE> 112
112
Morgan Stanley Dean Witter Prime
Income Trust,
by /s/ Peter Gewirtz
-----------------------------------------
Name: Peter Gewirtz
Title: Authorized Signatory
NationsBank, N.A.,
by /s/ Mary Carol Daly
-----------------------------------------
Name: Mary Carol Daly
Title: Vice President
The Prudential Insurance Company of America,
by /s/ Thomas J. Cecka
-----------------------------------------
Name: Thomas J. Cecka
Title: Vice President
Royal Bank of Canada,
by /s/ Colleen Roux
-----------------------------------------
Name: Colleen Roux
Title: Senior Manager
SKANDINAVISKA ENSKILDA BANKEN
NEW YORK BRANCH,
by /s/ Sverker Johansson
-----------------------------------------
Name: Sverker Johansson
<PAGE> 113
113
Title: Vice President
by /s/ Philip Montemurro
-----------------------------------------
Name: Philip Montemurro
Title: Vice President
Van Kampen American Capital Senior
Income Trust,
by /s/ Jeffrey W. Maillet
-----------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President & Director
ML CLO XIX Sterling (Cayman) Ltd.,
by Sterling Asset Manager, L.L.C.,
as its Investment Advisor,
by /s/ Louis Pistecchia
-----------------------------------------
Name: Louis Pistecchia
Title: E. Vice President
Merrill Lynch Senior Floating Rate Fund, Inc.,
by /s/ Gilles Marchand
-----------------------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
Senior High Income Portfolio, Inc.,
by /s/ Gilles Marchand
-----------------------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
<PAGE> 114
114
Debt Strategies Fund, Inc.,
by /s/ Gilles Marchand
-----------------------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
Pacific Select High Yield,
by /s/ Raymond J. Lee
-----------------------------------------
Name: Raymond J. Lee
Title: Senior Vice President
<PAGE> 1
ISPAT INLAND INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Ispat Inland Inc., a Delaware corporation, do hereby
nominate, constitute and appoint John M. Hanak, Marc R. Jeske, Michael G. Rippey
and Dale E. Wiersbe, or any one or more of them, my true and lawful attorneys
and agents to do any and all acts and things and execute any and all instruments
which said attorneys and agents, or any of them, may deem necessary or advisable
to enable said Ispat Inland Inc. to comply with the Securities Exchange Act of
1934, as amended, and any requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Annual
Report on Form 10-K of said Ispat Inland Inc. for the fiscal year ended December
31, 1998, including specifically, but without limitation thereof, full power and
authority to sign my name as a director and(or) officer of said Ispat Inland
Inc. to said Annual Report on Form 10-K and any amendment thereto, hereby
ratifying and confirming all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of January,
1999.
/s/ JOHANNES SITTARD
--------------------
Johannes Sittard
<PAGE> 2
ISPAT INLAND INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and (or) officer of Ispat Inland Inc., a Delaware corporation, do hereby
nominate, constitute and appoint John M. Hanak, Marc R. Jeske, Michael G. Rippey
and Dale E. Wiersbe, or any one or more of them, my true and lawful attorneys
and agents to do any and all acts and things and execute any and all instruments
which said attorneys and agents, or any of them, may deem necessary or advisable
to enable said Ispat Inland Inc. to comply with the Securities Exchange Act of
1934, as amended, and any requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Annual
Report on Form 10-K of said Ispat Inland Inc. for the fiscal year ended December
31, 1998, including specifically, but without limitation thereof, full power and
authority to sign my name as a director and (or) officer of said Ispat Inland
Inc. to said Annual Report on Form 10-K and any amendment thereto, hereby
ratifying and confirming all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of January,
1999.
/s/ ROBERT B. McKERSIE
______________________
Robert B. McKersie
<PAGE> 3
ISPAT INLAND INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and (or) officer of Ispat Inland Inc., a Delaware corporation, do hereby
nominate, constitute and appoint John M. Hanak, Marc R. Jeske, and Michael G.
Rippey, or any one or more of them, my true and lawful attorneys and agents to
do any and all acts and things and execute any and all instruments which said
attorneys and agents, or any of them, may deem necessary or advisable to enable
said Ispat Inland Inc. to comply with the Securities Exchange Act of 1934, as
amended, and any requirements of the Securities and Exchange Commission in
respect thereof, in connection with the preparation and filing of the Annual
Report on Form 10-K of said Ispat Inland Inc. for the fiscal year ended December
31, 1998, including specifically, but without limitation thereof, full power and
authority to sign my name as a director and (or) officer of said Ispat Inland
Inc. to said Annual Report on Form 10-K and any amendment thereto, hereby
ratifying and confirming all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of January,
1999.
/s/ Dale E. Wiersbe
---------------------------------
Dale E. Wiersbe
<PAGE> 4
ISPAT INLAND INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and(or) officer of Ispat Inland Inc., a Delaware corporation, do hereby
nominate, constitute and appoint John M. Hanak, Marc R. Jeske, Michael G. Rippey
and Dale E. Wiersbe, or any one or more of them, my true and lawful attorneys
and agents to do any and all acts and things and execute any and all instruments
which said attorneys and agents, or any of them, may deem necessary or
advisable to enable said Ispat Inland Inc. to comply with the Securities
Exchange Act of 1934, as amended, and any requirements of the Securities and
Exchange Commission in respect thereof, in connection with the preparation and
filing of the Annual Report on Form 10-K of said Ispat Inland Inc. for the
fiscal year ended December 31, 1998, including specifically, but without
limitation thereof, full power and authority to sign my name as a director
and(or) officer of said Ispat Inland Inc. to said Annual Report on Form 10-K and
any amendment thereto, hereby ratifying and confirming all that said attorneys
and agents, or any of them, shall do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of
January, 1999.
/s/ LAKSHMI N. MITTAL
---------------------------
Lakshmi N. Mittal
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS, THE CONSOLIDATED BALANCE SHEET, AND THE
SUMMARY OF STOCKHOLDERS' EQUITY CONTAINED IN THE ANNUAL REPORT ON FORM 10-K TO
WHICH THIS EXHIBIT IS ATTACHED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL SCHEDULES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 258,500
<ALLOWANCES> 17,100
<INVENTORY> 585,500
<CURRENT-ASSETS> 842,600
<PP&E> 2,015,500
<DEPRECIATION> 46,800
<TOTAL-ASSETS> 3,109,500
<CURRENT-LIABILITIES> 516,000
<BONDS> 971,400
<COMMON> 320,000
0
90,000
<OTHER-SE> (800)
<TOTAL-LIABILITY-AND-EQUITY> 3,109,500
<SALES> 2,382,500
<TOTAL-REVENUES> 2,385,400
<CGS> 2,227,300
<TOTAL-COSTS> 2,229,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,100
<INCOME-PRETAX> 38,500
<INCOME-TAX> 12,400
<INCOME-CONTINUING> 26,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,100
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
