<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 9, 1994
REGISTRATION NO. 33-50097
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
TO
FORM S-3 ON FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
KAISER ALUMINUM & CHEMICAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3334 94-0928288
(State of Incorporation) Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification Number)
</TABLE>
<TABLE>
<S> <C>
6177 SUNOL BOULEVARD ANTHONY R. PIERNO
PLEASANTON, CALIFORNIA 94566-7769 VICE PRESIDENT AND GENERAL COUNSEL
(510) 462-1122 KAISER ALUMINUM & CHEMICAL CORPORATION
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, 5847 SAN FELIPE, SUITE 2600
INCLUDING HOUSTON, TEXAS 77057-3010
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) (713) 267-3777
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
------------------------
Copies of all communications to:
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<S> <C>
HOWARD A. SOBEL, ESQ. BETH R. NECKMAN, ESQ.
KRAMER, LEVIN, NAFTALIS, NESSEN, KAMIN & FRANKEL LATHAM & WATKINS
919 THIRD AVENUE 885 THIRD AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10022
(212) 715-9100 (212) 906-1200
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. { }
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. { }
------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT MAXIMUM MAXIMUM AMOUNT OF
OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SECURITY(1) OFFERING PRICE(1) FEE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% Senior Notes due 2002....................... $225,000,000 100% $225,000,000 $77,587
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Senior Guarantees of Kaiser Alumina Australia
Corporation, Kaiser Finance Corporation,
Alpart Jamaica Inc. and Kaiser Jamaica
Corporation................................... -- -- -- -- (2)
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Total........................................... $225,000,000 100% $225,000,000 $77,587(3)
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Pursuant to Rule 457, no separate filing fee is required for such
guarantees.
(3) An amount of $60,345 was previously paid. An additional fee of $17,242 is
being paid herewith in connection with the filing of Amendment No. 4 to the
Registration Statement.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
PRIMARY ADDRESS, INCLUDING ZIP CODE,
EXACT NAME STANDARD AND TELEPHONE NUMBER,
OF REGISTRANT INDUSTRIAL IRS EMPLOYER INCLUDING AREA CODE,
AS SPECIFIED IN STATE OR OTHER JURISDICTION OF CLASSIFICATION IDENTIFICATION OF REGISTRANT'S PRINCIPAL
ITS CHARTER CORPORATION OR ORGANIZATION CODE NUMBER NUMBER EXECUTIVE OFFICES
- --------------- ------------------------------ ----------- ------------ ----------------------------
<S> <C> <C> <C> <C>
Kaiser Delaware 3334 94-61022690 6177 Sunol Boulevard
Alumina Pleasanton, CA 94566-7769
Australia (510) 462-1122
Corporation
Kaiser Delaware 3334 94-3115934 6177 Sunol Boulevard
Finance Pleasanton, CA 94566-7769
Corporation (510) 462-1122
Alpart Delaware 3334 13-2569683 6177 Sunol Boulevard
Jamaica Pleasanton, CA 94566-7769
Inc. (510) 462-1122
Kaiser Delaware 3334 94-1631721 6177 Sunol Boulevard
Jamaica Pleasanton, CA 94566-7769
Corporation (510) 462-1122
</TABLE>
<PAGE> 3
KAISER ALUMINUM & CHEMICAL CORPORATION
KAISER ALUMINA AUSTRALIA CORPORATION
KAISER FINANCE CORPORATION
ALPART JAMAICA INC.
KAISER JAMAICA CORPORATION
------------------------------
CROSS-REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-2
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEMS OF FORM S-2 CAPTION OR LOCATION
--------------------------------------------------- -----------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front and Outside Back Cover
Pages; Available Information
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................ Summary; Risk Factors; Selected
Historical and Pro Forma
Consolidated Financial Data
4. Use of Proceeds.................................... Summary; Use of Proceeds
5. Determination of Offering Price.................... Outside Front Cover Page;
Underwriting
6. Dilution........................................... Not Applicable
7. Selling Security Holders........................... Not Applicable
8. Plan of Distribution............................... Outside Front Cover Page;
Underwriting
9. Description of Securities to be Registered......... Outside Front Cover Page; Summary;
Description of Notes; Certain
Federal Income Tax Consequences
10. Interests of Named Experts and Counsel............. Legal Matters; Experts
11. Information with Respect to the Registrant......... Incorporation of Certain Documents
by Reference; Summary; The Company;
Management's Discussion and
Analysis of Financial Condition
and Results of Operations;
Business
12. Incorporation of Certain Information by
Reference........................................ Incorporation of Certain Documents
by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Not Applicable
</TABLE>
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY
NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED FEBRUARY 9, 1994
PROSPECTUS
$225,000,000
KAISER ALUMINUM &
CHEMICAL CORPORATION
% SENIOR NOTES DUE 2002
-----------------------
Kaiser Aluminum & Chemical Corporation, a Delaware corporation (the
"Company"), is hereby offering $225.0 million of its % Senior Notes due 2002
(the "Notes"). Interest on the Notes is payable semi-annually on February 15 and
August 15 of each year, commencing August 15, 1994, at the rate of % per
annum.
The Notes are redeemable at any time on or after February 15, 1998, at the
option of the Company, at the redemption prices set forth herein, plus accrued
and unpaid interest, if any, to the redemption date. The indenture governing the
Notes (the "Indenture") limits the amount of additional Indebtedness (as
defined) that the Company and its subsidiaries may incur. In the event of a
Change of Control (as defined) of the Company, the Company is required to make
an offer to purchase all or any part of a holders' Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest thereon to the date
of purchase. See "Description of Notes."
The Notes will represent senior, unsecured obligations of the Company,
ranking senior in right and priority of payment to all Indebtedness of the
Company that by its terms is expressly subordinated to the Notes. The Notes will
also be guaranteed on a senior, unsecured basis by certain subsidiaries of the
Company. The Notes, however, will be effectively subordinated to secured
Indebtedness of the Company and its subsidiaries that are guarantors of the
Notes with respect to the assets securing such Indebtedness. The Notes will also
be effectively subordinated to claims of creditors of the Company's
subsidiaries, except to the extent that the holders of Notes may be creditors of
such subsidiaries pursuant to a subsidiary guarantee. See "Risk Factors." On a
pro forma basis, after giving effect to the Refinancing Transactions (as
defined), as of December 31, 1993, the Company's aggregate consolidated
indebtedness would have been approximately $827.8 million (of which $461.9
million would have been expressly subordinated by its terms in right and
priority of payment to the Notes). The foregoing does not give effect to $73.6
million of guaranteed unconsolidated joint venture indebtedness of the Company
and $37.6 million of other guarantees and letters of credit outstanding as of
December 31, 1993.
In connection with the offering of Notes hereby, Kaiser Aluminum
Corporation, the Company's parent, is concurrently offering, pursuant to a
separate prospectus, 8,000,000 shares (subject to increase if the underwriters'
15% overallotment option is exercised) of its Preferred Redeemable Increased
Dividend Equity SecuritiesSM, % PRIDES(SM), Convertible Preferred Stock (the
"PRIDES"). For a detailed description of the PRIDES, see "Description of the
PRIDES." The Company is also replacing its existing Credit Agreement (as
defined) with a new five-year, secured revolving line of credit in the amount of
$250.0 million (the "New Credit Agreement"). The offering of the Notes, the
offering of the PRIDES and the effectiveness of the New Credit Agreement will be
conditioned upon the simultaneous closing of all such transactions.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
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<S> <C> <C> <C>
Per Note...................................... % % %
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Total......................................... $ $ $
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</TABLE>
(1) Plus accrued interest, if any, from February , 1994.
(2) The Company has agreed to indemnify the several Underwriters against certain
liabilities under the Securities Act of 1933. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $750,000.
------------------------
The Notes are being offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by them, subject to approval of
certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Notes will be made in New York, New York, on or about February
, 1994.
(SM) Service mark of Merrill Lynch & Co., Inc.
------------------------
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
PAINEWEBBER INCORPORATED
SALOMON BROTHERS INC
------------------------
The date of this Prospectus is February , 1994.
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, information statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements, information statements and other information filed by
the Company can be inspected and copied at the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Regional Offices of the Commission at 7 World Trade Center, New York, New York,
10048 and at Northwestern Atrium Center, 500 W. Madison Street, Suite 1400,
Chicago, Illinois 60661-2511.
This Prospectus constitutes a part of a Registration Statement on Form S-2
filed by the Company and certain of the Company's subsidiaries with the
Commission under the Securities Act of 1933, as amended (the "Securities Act").
This Prospectus omits certain of the information contained in the Registration
Statement, and reference is hereby made to the Registration Statement and
related exhibits for further information with respect to the Company and certain
of the Company's subsidiaries and this offering. Statements contained herein
concerning the provisions of any document are not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
The Company will distribute to holders of the Notes annual reports
containing audited financial statements and an opinion thereon by the Company's
independent public accountants, and quarterly reports containing unaudited
summary financial information for each of the first three fiscal quarters of
each fiscal year.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. Copies of any such documents are available upon
request and without charge from Mr. Byron Wade, Vice President, Secretary and
Deputy General Counsel, Kaiser Aluminum & Chemical Corporation, 5847 San Felipe,
Suite 2600, Houston, Texas 77057-3010, telephone (713) 975-7600.
The following documents filed by the Company with the Commission are hereby
incorporated by reference into this Prospectus:
(1) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992,
(2) the Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1993, June 30, 1993, and September 30, 1993, and
(3) the Company's Proxy Statement, dated May 13, 1993.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or replaced for
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or replaces such statement. Any such
statement so modified or replaced shall not be deemed, except as so modified or
replaced, to constitute a part of this Prospectus.
---------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AND THE
12 3/4% NOTES (AS DEFINED) AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER
MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
2
<PAGE> 6
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements (including the Notes thereto)
appearing elsewhere in this Prospectus. All references to tons in this
Prospectus refer to metric tons of 2,204.6 pounds.
THE COMPANY
Kaiser Aluminum & Chemical Corporation, a Delaware corporation (the
"Company"), is one of the world's leading producers of alumina, primary aluminum
and fabricated (including semi-fabricated) aluminum products. The Company is a
wholly owned subsidiary of Kaiser Aluminum Corporation, a Delaware corporation
("KAC"), and operates in all principal aspects of the aluminum industry -- the
mining of bauxite, the refining of bauxite into alumina, the production of
primary aluminum and the manufacture of fabricated aluminum products. In 1993,
the Company produced 2,826,600 tons of alumina, of which approximately 71% was
sold to third parties, produced 436,200 tons of primary aluminum, of which
approximately 56% was sold to third parties, and shipped approximately 373,200
tons of fabricated aluminum products to third parties, which accounted for
approximately 6% of the total tonnage of United States domestic fabricated
aluminum products shipments in 1993. The Company's share of total Western world
alumina capacity and total Western world primary aluminum capacity was 8% and
3%, respectively, in 1993.
The Company's strategy is to enhance its position as a leading producer of
alumina, primary aluminum and fabricated aluminum products by:
Increasing alumina production capacity. The Company has increased the
capacity of its 65%-owned Alumina Partners of Jamaica ("Alpart") alumina
refinery from 1,000,000 tons per year as of December 31, 1990, to 1,450,000 tons
per year as of December 31, 1992. In addition, during the past several years the
Company has increased production at its Gramercy, Louisiana alumina refinery and
its 28.3%-owned Queensland Alumina Limited ("QAL") alumina refinery located in
Australia. The percentage of the Company's alumina production sold to third
parties increased to approximately 71% in 1993 from approximately 35% in 1987.
Among alumina producers, the Company believes it is now the world's second
largest seller of alumina to third parties. In light of the previously
announced, and possible future, curtailments or permanent shutdowns of
world-wide primary aluminum production, the Company anticipates that its alumina
production and alumina sales to third parties will decline in 1994 from 1993
levels. See "-- Recent Trends and Developments."
Improving the efficiency of its operations. From 1980 to 1993, on a per
employee basis, alumina production increased by approximately 54% at the
Company's Gramercy, Louisiana alumina refinery; fabricated products shipments
increased by approximately 128% at the Company's Trentwood, Washington
fabricating facility; and sales volume for aluminum operations as a whole
increased by over 250%. Primary aluminum production at the Company's Mead and
Tacoma smelters was curtailed in 1993 because of a power reduction imposed by
the Bonneville Power Administration ("BPA") which reduced the operating rates
for such smelters. From 1980 to 1992, prior to the BPA power reductions, on a
per employee basis, primary aluminum production increased by approximately 72%
and 39%, respectively, at the Mead and Tacoma smelters, and from 1980 to 1993,
subsequent to the BPA power reductions, such primary aluminum production
increased by approximately 36% and 15%, respectively, at such smelters. See
"Risk Factors -- Recent Developments in Power Supply for Pacific Northwest
Operations and Resultant Production Curtailments." The Company has also
streamlined and decentralized its management structure to reduce corporate
overhead and shift decision-making and accountability to its business units. The
Company announced in October 1993 that it is restructuring its flat-rolled
products operation at its Trentwood plant in the state of Washington, which is
expected to result in annual cost savings of approximately $50.0 million after
the restructuring has been fully implemented. See "-- Recent Trends and
Developments."
The Company has developed and installed proprietary retrofit technology in
all of its smelters, which has contributed to increased and more efficient
production of primary aluminum. The Company is actively engaged in efforts to
license this technology and sell technical and managerial assistance to other
producers
3
<PAGE> 7
worldwide, and may participate in joint ventures or similar business
partnerships which employ the Company's technical and managerial knowledge.
Through continuing technological improvements, the Company's smelters have
achieved improved energy efficiency and longer average life of reduction cells.
From 1980 to 1993, the Company's average kilowatt hours of electricity utilized
per ton of primary aluminum production was reduced by approximately 13% and the
average life of reduction cells was increased by approximately 102%.
Concentrating its fabricated aluminum products operations on the beverage
container market and on high value-added transportation products. The Company
operates a high-speed, wide-coil coating line which has reduced costs, improved
quality and increased sales of aluminum to the beverage container industry. The
Company believes that it is one of the highest quality producers of aluminum
beverage can stock in the world. Over the past several years, the Company has
also constructed four new fabrication facilities and modernized and expanded
others to produce high value-added automotive (including air bag cannisters),
truck (including truck wheels and hubs), trailer and aerospace products.
Implementing a refinancing plan. The offering of the Notes, the concurrent
offering by KAC of 8,000,000 shares of PRIDES and the replacement of the
Company's existing Credit Agreement (the "Credit Agreement") are the final steps
of a comprehensive refinancing plan which KAC began in January 1993. The plan is
intended to extend the maturities of KAC's outstanding indebtedness, to enhance
its liquidity and to raise new equity capital.
As of December 31, 1992, the Company's long-term indebtedness consisted
principally of $321.7 million aggregate amount of its 14 1/4% Senior
Subordinated Notes due 1995 (the "14 1/4% Notes") and the Credit Agreement,
which matures in November 1994. The Company refinanced the 14 1/4% Notes through
the issuance in February 1993 of $400.0 million aggregate principal amount of
its 12 3/4% Senior Subordinated Notes due 2003 (the "12 3/4% Notes"). In
addition, the Company has received a commitment (the "Commitment Letter") to
replace the Credit Agreement ($262.2 million outstanding as of February 7, 1994,
including $37.2 million in outstanding letters of credit) with a $250.0 million
secured, revolving line of credit, scheduled to mature in 1999 (the "New Credit
Agreement"). Bank of America National Trust and Savings Association ("Bank of
America") and BankAmerica Business Credit, Inc. ("BA") have committed, subject
to certain terms and conditions, to provide the full $250.0 million of the New
Credit Agreement.
As of December 31, 1993, the Company's total consolidated indebtedness was
$760.9 million, and $113.6 million of borrowing capacity was unused under the
revolving credit facility of the Credit Agreement. On a pro forma basis, after
giving effect to the sale of the Notes, the sale of the shares of PRIDES and the
effectiveness of the New Credit Agreement (collectively, the "Refinancing
Transactions"), as of December 31, 1993, the Company's total consolidated
indebtedness would have been $827.8 million, $182.5 million of borrowing
capacity would have been available for use under the New Credit Agreement and
the Company would have had additional cash available of $106.1 million. See
"Capitalization." The foregoing does not give effect to $73.6 million of
guaranteed unconsolidated joint venture indebtedness of the Company and $37.6
million of other guarantees and letters of credit outstanding as of December 31,
1993.
To increase its equity capital, KAC consummated a public offering of its
$.65 Depositary Shares in June 1993 pursuant to which KAC realized net proceeds
of approximately $119.3 million (a portion of which was used to make a capital
contribution to the Company and a portion of which was loaned to the Company,
see "Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Financial Condition and Capital Spending"). KAC will realize
additional net proceeds of approximately $88.6 million as a result of the sale
of the PRIDES, a portion of which will be used to make a capital contribution to
the Company and a portion of which will be used to make a loan or loans to the
Company. See "Use of Proceeds."
After giving effect to the Refinancing Transactions, the scheduled
amortization of the Company's long-term indebtedness through 1998 will be
substantially reduced, and the Company expects that it will be able to satisfy
its debt service and capital expenditure requirements through at least December
31, 1995, from cash flows generated by operations and, to the extent necessary,
from borrowings under the New Credit Agreement. See "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition and Capital Spending."
4
<PAGE> 8
RECENT TRENDS AND DEVELOPMENTS
Exports from the Commonwealth of Independent States, additions to smelter
capacities during the past several years, continued high operating rates and
other factors have contributed to a significant increase in primary aluminum
inventories in the Western world. If Western world production and exports from
the Commonwealth of Independent States continue at current levels, primary
aluminum inventory levels will increase further in 1994. The foregoing factors,
among others, have contributed to a significant reduction in the market price of
primary aluminum, and may continue to adversely affect the market price of
primary aluminum in the future.
Government officials from the European Union, the United States of America,
Canada, Norway, Australia and the Russian Federation met in a multilateral
conference in January 1994, to discuss the current excess global supply of
primary aluminum. All six participating governments have ratified as a trade
agreement the resulting Memorandum of Understanding (the "Memorandum") which
provides, in part, for (i) a reduction in Russian Federation primary aluminum
production by 300,000 tons per year within three months of the date of
ratification of the Memorandum and an additional 200,000 tons within the
following three months, (ii) improved availability of comprehensive data on
Russian aluminum production and (iii) certain assistance to the Russian aluminum
industry. A Russian Federation Trade Ministry official has publicly stated that
the output reduction would remain in effect for 18 months to two years, provided
that other worldwide production cutbacks occur, existing trade restrictions on
aluminum are eliminated and no new trade restrictions on aluminum are imposed.
The Memorandum does not require specific levels of production cutbacks by other
producing nations. A further meeting of the participants is scheduled for the
end of February 1994. There can be no assurance that the implementation of the
Memorandum will adequately address the current oversupply of primary aluminum.
See "-- Sensitivity to Prices and Hedging Programs -- Alumina and Primary
Aluminum." The Company will continue to assess its production levels in light of
market prices, industry inventory levels, production costs and user demand and,
based on these and other factors, could determine to curtail production at
certain of its facilities in the future.
If the Company's average realized sales prices in 1994 for substantial
quantities of its primary aluminum and alumina were based on the current market
price of primary aluminum (the average Midwest U.S. transaction price (the "AMT
Price") was 61.14c per pound for the week ended February 4, 1994, see
"Business -- Sensitivity to Prices"), the Company would continue to sustain net
losses in 1994, which would be expected to approximate the loss in 1993 ($76.0
million) before (a) extraordinary loss and cumulative effect of changes in
accounting principles,(b) the charges related to the restructuring of the
Trentwood plant and certain other facilities (the "1993 Facilities Charges") and
(c) certain other charges principally related to a reduction in the carrying
value of the Company's inventories ($19.4 million, which is included in cost of
goods sold) and the establishment of additional litigation and environmental
reserves (the "Other 1993 Charges"). See "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Business -- Industry
Overview -- Recent Industry Trends" and "Business -- Sensitivity to Prices and
Hedging Programs -- Alumina and Primary Aluminum."
The Company announced in October 1993 that it is restructuring its
flat-rolled products operation at its Trentwood plant in the state of
Washington, to reduce that facility's annual operating costs. This effort is in
response to over-capacity in the aluminum rolling industry, flat demand in can
stock markets, and declining demand for aluminum products sold to customers in
the commercial aerospace industry, all of which have resulted in declining
prices in Trentwood's key markets. The Trentwood restructuring is expected to
result in annual cost savings of approximately $50.0 million after it has been
fully implemented (which is expected to occur during the next two years). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Business -- Production Operations -- Fabricated Products."
FOURTH QUARTER AND YEAR END RESULTS
The Company's net sales totaled $415.9 million in the fourth quarter of
1993, compared with $496.0 million in the fourth quarter of 1992, and $1,719.1
million for the full year of 1993, compared with $1,909.1 million for the full
year of 1992. Revenues decreased in the fourth quarter of 1993 as compared to
the
5
<PAGE> 9
fourth quarter of 1992 due principally to lower average realized prices and
shipments of primary aluminum and alumina and lower average realized prices of
most fabricated products, partially offset by increased shipments of fabricated
products during the 1993 period compared with the 1992 period. Revenues
decreased for the full year of 1993 as compared to the full year of 1992 due
principally to lower shipments of primary aluminum and lower average realized
prices of primary aluminum and alumina and, to a lesser extent, of fabricated
products, partially offset by increased shipments of most fabricated products
during 1993 as compared to 1992.
The Company will report a net loss before extraordinary loss and cumulative
effect of changes in accounting principles of $117.6 million (including the 1993
Facilities Charges and the Other 1993 Charges) for the full year of 1993,
compared with net income of $29.6 million for the full year of 1992. The Company
will report a net loss of $64.5 million (including the 1993 Facilities Charges
and the Other 1993 Charges) for the fourth quarter of 1993, compared with net
income of $3.1 million for the fourth quarter of 1992. The Company recognized an
after-tax loss relating to the cumulative effect of changes in accounting
principles of $507.9 million and an after-tax extraordinary loss on early
extinguishment of debt of $21.8 million in the first quarter of 1993. See Note
(1) of "Summary Historical and Pro Forma Consolidated Financial Data."
The fourth quarter results include a pre-tax charge of $35.8 million ($22.6
million after-tax) related to the 1993 Facilities Charges and pre-tax charges of
$30.2 million ($19.0 million after-tax) principally related to the Other 1993
Charges. The Company will also recognize an after-tax reduction of stockholders'
equity of $14.9 million in the fourth quarter of 1993 to reflect the lowering of
the discount rate used to calculate the Company's minimum pension liability. The
Company recognized a pre-tax charge of $29.0 million ($24.2 million after-tax)
related to a reduction in the carrying value of the Company's inventory, pre-tax
income of $14.0 million ($11.7 million after-tax) for non-recurring adjustments
to previously recorded liabilities and reserves and an after-tax reduction of
stockholders' equity of $6.7 million in the fourth quarter of 1992.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered....... $225,000,000 aggregate principal amount of % Senior Notes due
2002 (the "Notes"). See "Description of Notes."
Maturity Date............ February , 2002.
Interest Payment Dates... February 15 and August 15, commencing August 15, 1994.
Optional Redemption...... The Notes are redeemable at the option of the Company, in whole
or in part, at any time on or after February 15, 1998, at the
redemption prices set forth herein, plus accrued and unpaid
interest to the redemption date.
Change of Control........ Upon a Change of Control (as defined), the Company is required to
make an offer to purchase all or any part of a holder's Notes at
101% of the principal amount thereof, plus accrued and unpaid
interest to the date of purchase. Any Change of Control would
constitute an event of default under the New Credit Agreement.
Guarantee................ The obligations of the Company with respect to the Notes will be
guaranteed, jointly and severally, on a senior, unsecured basis
by certain subsidiaries of the Company. Any indebtedness that is
incurred by the Company's subsidiaries will be effectively senior
to the claims of the holders of the Notes with respect to the
assets of such subsidiaries, except to the extent that the
holders of the Notes may be creditors of a subsidiary pursuant to
a subsidiary guarantee. Any such claim by the holders of the
Notes with respect to the assets of any subsidiary that is a
guarantor of the Notes will be effectively subordinated to
secured indebtedness of such subsidiary guarantor with respect to
the assets securing such indebtedness.
Ranking.................. The Notes will represent senior, unsecured obligations of the
Company, ranking senior in right and priority of payment to all
Indebtedness of the
</TABLE>
6
<PAGE> 10
<TABLE>
<S> <C>
Company that by its terms is expressly subordinated to the Notes.
On a pro forma basis, after giving effect to the Refinancing
Transactions, as of December 31, 1993, the Company's total
consolidated indebtedness would have been $827.8 million (of
which $461.9 million would have been expressly subordinated in
right and priority of payment to the Notes) and $182.5 million of
borrowing capacity would have been available for use under the
New Credit Agreement. See "Capitalization." The Notes, however,
will be effectively subordinated to secured Indebtedness of the
Company with respect to the assets securing such Indebtedness.
Certain Covenants........ The Indenture governing the Notes (the "Indenture") will contain
certain covenants, including, but not limited to, covenants
imposing limitations on: (i) Asset Sales, (ii) transactions with
Affiliates, (iii) Restricted Payments and Restricted Investments,
(iv) the Incurrence of Indebtedness and preferred stock, (v) the
granting of Liens on U.S. Fixed Assets to secure Indebtedness,
(vi) the transfer of assets to entities that are not Subsidiary
Guarantors, (vii) mergers and consolidations and (viii) dividend
and other payment restrictions affecting Subsidiaries. Each of
the foregoing capitalized terms has the meaning assigned to it in
the Indenture. See "Description of Notes."
Use of Proceeds.......... The net proceeds of this offering will be used to reduce
outstanding borrowings under the revolving credit facility of the
Credit Agreement immediately prior to the effectiveness of the
New Credit Agreement and for working capital and general
corporate purposes. As of February 7, 1994, there was $262.2
million of outstanding borrowings under the Credit Agreement,
including $37.2 million in outstanding letters of credit. In
connection with this offering, KAC is concurrently offering
8,000,000 shares of its PRIDES (subject to increase if the
underwriters' 15% overallotment option is exercised). Borrowings
and reborrowings under the New Credit Agreement will be used for
working capital and general corporate purposes, including capital
projects. See "Use of Proceeds."
Risk Factors............. Prospective purchasers of the Notes should consider carefully the
factors set forth under the section entitled "Risk Factors,"
including the factors discussed under "Ranking of the Notes;
Subordination," "Ability to Service Debt; Failure of Earnings to
Cover Fixed Charges; Anticipated 1994 Net Loss," "Sensitivity to
Prices; Current Primary Aluminum Prices Adversely Affect Net
Sales and Operating Income," "Recent Developments in Power Supply
for Pacific Northwest Operations and Resultant Production
Curtailments," "Increasing Worldwide Aluminum Inventories and
Adverse Effects on Market Prices," "Highly Leveraged
Transactions," "Environmental Litigation," "Controlling
Stockholder and Possible Effects; Change of Control" and "Absence
of Public Market."
</TABLE>
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<PAGE> 11
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following summary historical and pro forma consolidated financial data
are derived from the Selected Consolidated Financial Data appearing elsewhere in
this Prospectus, and should be read in conjunction with the Consolidated
Financial Statements of the Company and the Notes thereto and the information
contained in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------- ---------------------------------------
1993 1992 1992 1991 1990
----------- ----------- ----------- ----------- -----------
(IN MILLIONS OF DOLLARS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
Operating Data
Net sales................... $ 1,303.2 $ 1,413.1 $ 1,909.1 $ 2,000.8 $ 2,095.0
Cost of products sold....... 1,181.0 1,178.1 1,619.3 1,594.2 1,525.2
Gross profit................ 122.2 235.0 289.8 406.6 569.8
Depreciation................ 72.9 60.4 80.3 73.2 70.5
Selling, administrative,
research and development,
and general............... 90.5 88.7 119.3 117.6 122.9
Operating income (loss)..... (41.2) 85.9 90.2 215.8 376.4
Interest expense............ 63.8 58.4 78.7 82.7 96.6
Income (loss) before income
taxes, minority interests,
extraordinary loss and
cumulative effect of
changes in accounting
principles................ (95.8) 29.5 28.4 149.5 290.8
Income (loss) before
extraordinary loss and
cumulative effect of
changes in accounting
principles................ (53.1) 26.5 29.6 124.7 220.7
Net income (loss)........... (582.8)(1) 26.5 29.6 124.7 220.7
Ratio of earnings to fixed
charges(2)................ -- (3) 1.4x 1.3x 2.7x 3.6x
Pro Forma(4):
Interest expense............ $ 65.8 $ 82.4
Income (loss) before
extraordinary loss and
cumulative effect of
changes in accounting
principles................ (54.4) 27.2
Net income (loss)(5)........ (599.3) 7.1
Ratio of EBITDA to interest
expense................... .6x 2.3x
Other Data:
Capital expenditures........ $ 36.4 $ 79.8 $ 114.4 $ 118.1 $ 115.1
EBITDA(6)................... 40.9 148.3 187.4 305.4 457.9
Ratio of EBITDA to interest
expense................... .6x 2.5x 2.4x 3.7x 4.7x
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
------------------- DECEMBER 31,
PRO --------------------------------
FORMA(4) ACTUAL 1992 1991 1990
-------- -------- -------- -------- --------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital................................................. $ 439.5 $ 313.1 $ 320.8 $ 242.4 $ 280.9
Total assets.................................................... 2,601.0 2,483.1 2,100.0 2,138.7 2,127.0
Long-term liabilities........................................... 1,141.4 1,141.4 217.9 212.9 314.6
Long-term debt, less current portion............................ 752.8 692.8 765.1 681.5 631.5
Notes payable to parent, less current portion................... 44.8 22.0 -- -- --
Minority interests.............................................. 69.5 69.5 70.1 71.9 73.0
Redeemable preference stock..................................... 32.3 32.3 32.8 34.8 47.8
Total stockholders' equity...................................... 128.0 77.5 568.4 562.9 517.1
</TABLE>
- ---------------
(1) Includes extraordinary loss on early extinguishment of debt of $21.8, net of
tax benefit of $11.2, and cumulative effect of changes in accounting
principles of $507.9, net of tax benefit of $237.7. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Results of Operations."
(2) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of the sum of (i) income (loss) before extraordinary loss
and cumulative effect of changes in accounting principles of the Company and
its consolidated subsidiaries, (ii) undistributed (earnings) losses of
less-than-fifty-percent-owned companies, (iii) minority interest share of
income (losses) of majority-owned subsidiaries that have fixed charges, (iv)
consolidated provision for income taxes, (v) minority interest share of tax
provision (credit) of majority-owned subsidiaries that have fixed charges,
(vi) fixed charges, (vii) equity in losses of less-than-fifty-percent-owned
companies where the Company has guaranteed the debt of such companies, and
(viii) previously capitalized interest amortized during the period. Fixed
charges consist of the sum of interest expense, amortization of deferred
financing costs, the portion of rents representative of the interest factor,
and interest expense related to the guaranteed debt of
less-than-fifty-percent-owned companies incurring a loss.
(3) For the nine months ended September 30, 1993, earnings were inadequate to
cover fixed charges by $94.5.
(4) The pro forma information assumes (a) the sale of $225.0 aggregate principal
amount of the Notes, (b) the issuance and sale of 8,000,000 shares of
PRIDES, (c) a capital contribution by KAC to the Company in the amount of
$58.2, (d) a non-interest bearing loan from KAC to the Company in the
principal amount of $30.4 evidenced by the Intercompany Note (as defined)
and (e) the effectiveness of the New Credit Agreement (collectively, the
"Pro Forma Adjustments"), as if such Pro Forma Adjustments had occurred at
the beginning of the respective periods for operating data and on September
30, 1993, for the balance sheet data.
(5) Includes a pro forma extraordinary loss of $15.2 and $20.1 for the nine
months ended September 30, 1993, and the year ended December 31, 1992,
respectively, representing the deferred financing costs written off upon the
refinancing of the Credit Agreement.
(6) "EBITDA" represents income from continuing operations before extraordinary
loss and cumulative effect of changes in accounting principles, before
giving effect to income tax expense, minority interests, interest expense
(including amortization of deferred financing costs and original issue
discount) and depreciation. EBITDA is not intended to represent cash flow,
an alternative to net income, or any other measure of performance in
accordance with generally accepted accounting principles. It is included
because management believes that certain investors find such information
useful for measuring the Company's ability to service debt.
8
<PAGE> 12
THE COMPANY
The Company is one of the world's leading producers of alumina, primary
aluminum and fabricated (including semi-fabricated) aluminum products, and is a
major supplier of alumina and primary aluminum in the domestic and international
markets. The Company operates in all principal aspects of the aluminum
industry -- the mining of bauxite (the major aluminum-bearing ore), the refining
of bauxite into alumina (the intermediate material), the production of primary
aluminum, the manufacture of fabricated aluminum products, and the sale of
bauxite, alumina, primary aluminum and fabricated aluminum products. In 1993,
the Company produced 2,826,600 tons of alumina, of which approximately 71% was
sold to third parties, produced 436,200 tons of primary aluminum, of which
approximately 56% was sold to third parties, and shipped approximately 373,200
tons of fabricated aluminum products to third parties.
The Company was organized in 1940 and maintains its principal executive
offices at 6177 Sunol Boulevard, Pleasanton, California 94566-7769. Its
telephone number is (510) 462-1122.
RISK FACTORS
Prospective investors should carefully consider the factors set forth below
as well as the other information contained in this Prospectus.
RANKING OF THE NOTES; SUBORDINATION
Ranking of the Notes. The Notes will represent senior, unsecured
obligations of the Company, ranking senior in right and priority of payment to
all Indebtedness of the Company that by its terms is expressly subordinated to
the Notes. The Notes will, however, be effectively subordinated to secured
Indebtedness of the Company with respect to the assets pledged as collateral
therefor. The New Credit Agreement will be secured by, among other things, a
pledge of the Company's stock by KAC and the stock of the Company's material
subsidiaries and the grant of a lien on substantially all of the domestic assets
of the Company and its subsidiaries (other than the Company's Gramercy alumina
refinery). As of December 31, 1993, the Company's total consolidated
indebtedness was $760.9 million (of which $431.5 million was expressly
subordinated in right and priority of payment to the Notes). As of such date,
$113.6 million of borrowing capacity was unused under the revolving credit
facility of the Credit Agreement, and the Company had available to it, subject
to certain restrictions, up to $15.0 million of uncommitted credit lines (of
which $0.5 million was used). On a pro forma basis, after giving effect to the
Refinancing Transactions, as of December 31, 1993, the Company's total
consolidated indebtedness would have been $827.8 million (of which $461.9
million would have been expressly subordinated in right and priority of payment
to the Notes), $182.5 million of borrowing capacity would have been available
for use under the New Credit Agreement and the Company would have had additional
cash available of $106.1 million. See "Capitalization." The foregoing does not
give effect to $73.6 million of guaranteed unconsolidated joint venture
indebtedness of the Company and $37.6 million of other guarantees and letters of
credit outstanding as of December 31, 1993. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Financial Condition
and Capital Spending." For a description of the Company's long term debt, see
"Description of Principal Indebtedness" and Note 4 of the Notes to the
Consolidated Financial Statements. Although the Notes will not be secured by any
assets of the Company, in the event the Company or any of its subsidiaries
incurs Indebtedness that is secured by the Company's Gramercy alumina refinery
or certain other domestic real property, plant or equipment that is acquired
subsequent to the issuance of the Notes, the Company may be required by the
Indenture, subject to certain exceptions (including for the New Credit
Agreement, which will be secured by, among other things, substantially all of
the domestic real property, plant and equipment of the Company and its
subsidiaries other than the Gramercy alumina refinery), to equally and ratably
secure the Notes. See "Description of Notes -- Limitations on Liens."
Subordination. The obligations of the Company with respect to the Notes
will be guaranteed, jointly and severally, on a senior, unsecured basis by
certain Subsidiaries (as defined) of the Company. Any obligations of the
Company's Subsidiaries will be effectively senior to the claims of the holders
of the Notes with respect to the assets of such Subsidiaries, except to the
extent that the holders of the Notes may be creditors of a Subsidiary pursuant
to a subsidiary guarantee. Any such claim by the holders of the Notes with
respect to the
9
<PAGE> 13
assets of any Subsidiary that is a guarantor of the Notes will be effectively
subordinated to secured Indebtedness (including indebtedness under the New
Credit Agreement) of such Subsidiary with respect to the assets securing such
Indebtedness. The rights of the Company and its creditors, including holders of
the Notes, to realize upon the assets of any Subsidiary upon such Subsidiary's
liquidation or reorganization (and the consequent rights of holders of the Notes
to participate in those assets) will be subject to the prior claims of such
Subsidiary's creditors, except to the extent that the Company may itself be a
creditor with recognized claims against such Subsidiary or to the extent that
the holders of the Notes may be creditors with recognized claims against such
Subsidiary pursuant to the terms of a subsidiary guarantee (subject, however, to
the prior claims of creditors holding secured Indebtedness of any such
Subsidiary with respect to the assets securing such indebtedness). The New
Credit Agreement will be secured by, among other things, the grant of a lien on
all now existing and hereafter acquired receivables, inventory, intangibles and
the existing principal domestic plants of the Company and its subsidiaries
(other than the Company's Gramercy alumina refinery). See "Description of
Principal Indebtedness -- The New Credit Agreement." In addition, the Indenture
will restrict the amount of Indebtedness (as defined) that Subsidiaries are
permitted to Incur (as defined). See "Description of Notes -- Covenants --
Limitation on Indebtedness and Preferred Stock."
ABILITY TO SERVICE DEBT; FAILURE OF EARNINGS TO COVER FIXED CHARGES; ANTICIPATED
1994 NET LOSS
Debt Service. On January 24, 1994, the Company entered into the Commitment
Letter with Bank of America and BA which contains the principal terms and
conditions with respect to the New Credit Agreement. After giving effect to the
Refinancing Transactions, the Company expects that it will be able to satisfy
its debt service and capital expenditure requirements through at least December
31, 1995, from cash flows generated by operations and, to the extent necessary,
from borrowings under the New Credit Agreement. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Financial Condition
and Capital Spending -- Capital Structure" and "Description of Principal
Indebtedness -- The New Credit Agreement."
Failure of Earnings to Cover Fixed Charges; Anticipated Net Losses in
1994. The Company suffered a loss before extraordinary loss and cumulative
effect of changes in accounting principles of $53.1 million in the first nine
months of 1993, compared with income of $26.5 million in the first nine months
of 1992. For the first nine months of 1993, the Company's earnings were
inadequate to cover combined fixed charges and preferred stock dividends by
$94.5 million. See Notes 4 and 5 of "Summary Historical and Pro Forma
Consolidated Financial Data."
If the Company's average realized sales prices in 1994 for substantial
quantities of its primary aluminum and alumina were based on the current market
price of primary aluminum (AMT Price of 61.14c per pound for the week ended
February 4, 1994), the Company would continue to sustain net losses in 1994,
which would be expected to approximate the loss in 1993 ($76.0 million) before
(a) extraordinary loss and cumulative effect of changes in accounting
principles, (b) the 1993 Facilities Charges and (c) the Other 1993 Charges. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Recent Trends." The Company has attempted to lessen the adverse
effect of declines in the price of primary aluminum. See "Sensitivity to Prices;
Current Primary Aluminum Prices Adversely Affect Net Sales and Operating Income"
below.
SENSITIVITY TO PRICES; CURRENT PRIMARY ALUMINUM PRICES ADVERSELY AFFECT
NET SALES AND OPERATING INCOME
The Company's earnings are sensitive to changes in the prices of alumina,
primary aluminum and fabricated aluminum products and also depend to a
significant degree upon the volume and mix of all products sold. The Company's
average realized prices from sales of alumina and primary aluminum declined
substantially in 1993, 1992, 1991 and 1990 from their high levels of 1989 and
1988.
Although the Company has attempted to lessen the effect of the decline of
primary aluminum and alumina prices through a variety of forward sales
transactions and hedging programs, earnings have been, and are expected to
remain, highly sensitive to changes in primary aluminum prices and revenues
derived from the
10
<PAGE> 14
sale of alumina to third parties. Revenues from alumina sales to third parties
declined in 1993 as a result of lower average realized prices for alumina.
Revenues from primary aluminum sales declined as a result of reduced shipments
and lower average realized prices for primary aluminum in 1993 than in 1992. In
1993, the Company's average realized price from sales of primary aluminum was
approximately $0.56 per pound compared to the average Midwest U.S. transaction
price of approximately $0.54 per pound for such year. Increased revenues from
sales of fabricated aluminum products (as a result of higher shipments,
partially offset by lower unit prices for some fabricated products) partially
offset these decreases in 1993. See -- "Management's Discussion and Analysis of
Results of Operation -- Fourth Quarter and Preliminary Year End Results."
The Company has sold forward substantially all of the alumina available to
it in excess of its projected internal smelting requirements for 1994, and a
substantial portion of such excess alumina for 1995. Approximately 95% of 1994
sales and virtually all of 1995 sales were made at prices indexed to future
prices of primary aluminum. Approximately 75% of 1994 sales were made at prices
indexed to future prices of primary aluminum, but with minimum prices that
exceed the Company's estimated cash production costs. The remainder of 1994
sales were made either at fixed prices that exceed the Company's estimated cash
production costs, or are subject to prices indexed to future prices of primary
aluminum but without minimum prices. Approximately 85% of 1995 sales were made
at prices indexed to future prices of primary aluminum, but with minimum prices
that exceed the Company's estimated cash production costs.
As of the date of this Prospectus, the Company has sold forward
approximately 75% of its primary aluminum in excess of its projected internal
fabrication requirements in 1994 and approximately 55% of such surplus in 1995
at fixed prices that approximate the current market price of primary aluminum.
Hedging programs already in place would allow the Company to participate in
certain higher market prices, should they materialize, for approximately 40% of
the Company's excess primary aluminum sold forward in 1994, and 100% of the
Company's excess primary aluminum sold forward in 1995.
Fabricated aluminum prices, which vary considerably among products, are
heavily influenced by changes in the price of primary aluminum and generally lag
behind primary aluminum prices for periods of up to six months. A significant
portion of the Company's fabricated product shipments consist of body, lid, and
tab stock for the beverage container market. The Company may not be able to
receive increases in primary aluminum prices from its can stock customers as
promptly as in the recent past because of competition from other aluminum
producers and because of excess supply in the industry. Changes in the market
price of primary aluminum also affect the Company's production costs of
fabricated products because they influence the price of aluminum scrap purchased
by the Company and the Company's labor costs, to the extent such costs are
indexed to primary aluminum prices.
While the Company continues to attempt to lessen the adverse effect of
declines in the price of primary aluminum through its variable cost structures,
forward sales and hedging programs, possible future declines in the market price
of primary aluminum would have an adverse effect on the Company's financial
performance. If the Company's average realized sales prices in 1994 for
substantial quantities of its primary aluminum and alumina were based on the
current market price of primary aluminum (AMT Price of 61.14c per pound for the
week ended February 4, 1994), the Company would continue to sustain net losses
in 1994, which would be expected to approximate the expected loss in 1993 ($76.0
million) before (a) extraordinary loss and cumulative effect of changes in
accounting principles, (b) the 1993 Facilities Charges and (c) the Other 1993
Charges. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business -- Industry Overview" and
"Business -- Sensitivity to Prices and Hedging Programs."
RECENT DEVELOPMENTS IN POWER SUPPLY FOR PACIFIC NORTHWEST OPERATIONS
AND RESULTANT PRODUCTION CURTAILMENTS
Electrical power represents an important production cost for the Company at
its domestic smelters in Mead and Tacoma, Washington, and a much smaller portion
of the Company's production costs at its fabricating plant in Trentwood,
Washington (collectively, the "Facilities"). The electricity supply contracts
between the BPA and its direct service industry customers (which consist of 15
energy intensive companies,
11
<PAGE> 15
principally aluminum producers, including the Company) permit the BPA to
interrupt up to 25% of the amount of power which it normally supplies to such
customers.
As a result of drought conditions, in January 1993 the BPA reduced the
amount of power it normally supplies to its direct service industry customers,
including the Company, with respect to the Facilities. In response to such
reduction, the Company removed three reduction potlines from production (two at
the Mead smelter and one at the Tacoma smelter), and purchased substitute power
in the first quarter of 1993 at increased costs. The BPA has notified its direct
service industry customers that it intends to maintain the interruption of 25%
of the amount of power it normally provides to such customers through February
28, 1994. As a result of the BPA power reductions, the Company has operated its
Mead and Tacoma smelters at the reduced operating rates introduced in January
1993, and has operated its Trentwood fabrication facility without any
curtailment of its production. The Company currently anticipates that in 1994 it
will operate the Mead and Tacoma smelters at rates which do not exceed the
current operating rates of 75% of full capacity for such smelters. The Company
cannot predict whether full power will be available from the BPA after February
28, 1994, or whether power will otherwise become available at a price acceptable
to the Company. The Company will continue to assess its production levels at the
Mead and Tacoma smelters in light of the availability and cost of such power and
other production costs, the market price of primary aluminum, industry inventory
levels and other industry-related and Company-related factors.
Effective October 1, 1993, an increase in the base rate BPA charges to its
direct service industry customers for electricity was adopted, which will
increase the Company's production costs at the Mead and Tacoma smelters by
approximately $15.0 million per year (approximately $11.3 million per year based
on the Company's current operating rate of approximately 75% of full capacity).
The rate increase generally is expected to remain in effect for two years.
In the event that the BPA's revenues fall below certain levels prior to
April 1994, the BPA may impose up to a 10% surcharge on the base rate it charges
to its direct service industry customers, effective during the period from
October 1994 through October 1995 (which would increase the Company's production
costs at the Mead and Tacoma smelters by approximately $9.1 million per year
based on the Company's current operating rate of approximately 75% of full
capacity). In addition, in order to comply with certain federal laws and
regulations applicable to endangered fish species, the BPA may be required in
the future to reduce its power generation and to purchase substitute power (at
greater expense) from other sources. The foregoing factors would increase the
Company's operating expenses.
INCREASING WORLDWIDE ALUMINUM INVENTORIES AND ADVERSE EFFECTS ON MARKET PRICES
Exports from the Commonwealth of Independent States, additions to smelter
capacities during the past several years, continued high operating rates and
other factors have contributed to a significant increase in primary aluminum
inventories in the Western world. If Western world production and exports from
the Commonwealth of Independent States continue at current levels, primary
aluminum inventory levels will increase further in 1994. The foregoing factors,
among others, have contributed to a significant reduction in the market price of
primary aluminum, and may continue to adversely affect the market price of
primary aluminum in the future. The average price of primary aluminum was at
historic lows in real terms for the year ended 1993, which significantly and
adversely affected the Company's net sales and operating income for such period.
See "Sensitivity to Prices; Current Primary Aluminum Prices Adversely Affect Net
Sales and Operating Income" and "Business -- Industry Overview -- Recent
Industry Trends".
HIGHLY LEVERAGED TRANSACTIONS
The Indenture does not contain any provisions specifically intended to
protect the holders of the Notes in the event of a future highly leveraged
transaction involving the Company. The Indenture will limit the Company's
ability to incur additional Indebtedness and to grant Liens on U.S. Fixed Assets
to secure Indebtedness, restrict transactions with Affiliates and require the
Company to repurchase Notes upon a Change of Control or in the event of certain
Asset Sales. These provisions could limit the ability of the Company to engage
in a highly leveraged transaction (including a leveraged buy out initiated or
supported by
12
<PAGE> 16
the Company, the management of the Company or an affiliate of the Company or its
management). These provisions may not be waived or amended without the consent
of holders of not less than a majority in aggregate principal amount of the
Notes. See "Description of Notes -- Offer to Purchase the Notes" and
"-- Covenants."
ENVIRONMENTAL LITIGATION
The Company is subject to a wide variety of international, state and local
environmental laws and regulations (the "Environmental Laws"). From time to
time, the Company is subject, with respect to its current and former operations,
to fines or penalties assessed for alleged breaches of the Environmental Laws
and to claims and litigation based upon such laws. The Company is currently
subject to a number of lawsuits under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986 ("CERCLA").
Under CERCLA and other related laws, past disposal of wastes, whether
on-site or at other locations, may result in the imposition of clean-up
obligations by federal or state regulatory authorities. The Company, along with
certain other entities has been named as a potentially responsible party for
remedial costs at certain third-party sites listed on the National Priorities
List under CERCLA. In certain instances, the Company may be exposed to joint and
several liability for remedial action or damages to natural resources, which
could effectively expose the Company to liability for all costs associated with
any such remedial actions irrespective of its degree of culpability for the
environmental damages related thereto. While the ultimate extent of the
Company's liability for pending or potential fines, penalties, remedial costs,
claims and litigation with respect to environmental and other related laws
cannot be determined at this time, management currently believes that the
resolution of the environmental and related litigation to which the Company is a
party (even without giving effect to potential insurance recovery) should not
have a material adverse effect on the Company's consolidated financial position
or results of operations. For a discussion of the Company's environmental
litigation, see "Business -- Environmental Matters" and "-- Legal Proceedings."
CONTROLLING STOCKHOLDER AND POSSIBLE EFFECTS; CHANGE OF CONTROL
The Company is a wholly owned subsidiary of KAC. KAC became an indirect,
wholly owned subsidiary of MAXXAM Inc. ("MAXXAM") on October 28, 1988, through
the merger of a subsidiary of MAXXAM with and into KAC (the "Merger"). As of the
date of this Prospectus, MAXXAM directly owns approximately 67% of KAC's common
stock, par value $.01 per share (the "KAC Common Stock"), assuming the
conversion of each outstanding $.65 Depositary Share into one share of KAC
Common Stock (and after giving effect to the PRIDES Offering, MAXXAM will
directly own approximately 61% of the KAC Common Stock, assuming the conversion
of each share of PRIDES into one share of KAC Common Stock, and approximately
60% if the underwriters' over-allotment option is exercised in full), with
public stockholders owning the balance. In the event that MAXXAM sells all of
the 2,132,950 $.65 Depositary Shares which it owns to nonaffiliates, MAXXAM
would own approximately 65% of the KAC Common Stock, assuming the conversion of
each outstanding $.65 Depositary Share into one share of the KAC Common Stock
(and after giving effect to the PRIDES Offering, MAXXAM would directly own
approximately 58% of the KAC Common Stock assuming the conversion of each share
of PRIDES into one share of KAC Common Stock, and approximately 58% if the
Underwriters' over-allotment option is exercised in full), with public
stockholders owning the balance. Accordingly, MAXXAM is able to determine the
outcome of all matters required to be submitted to KAC's stockholders for
approval, including decisions relating to the election of the directors of KAC,
the determination of day-to-day corporate and management policies of KAC, the
merger or acquisition of KAC, the sale of substantially all of the assets of KAC
and other significant corporate transactions. MAXXAM's significant ownership
interest in KAC may discourage third parties from seeking to acquire control of
KAC which may adversely affect the market price of KAC's equity securities. Mr.
Charles E. Hurwitz, Chairman of the Board, President and Chief Executive Officer
of MAXXAM, together with Federated Development Company ("Federated"), a New York
business trust that is wholly owned by Mr. Hurwitz, members of his immediate
family and trusts for the benefit thereof, collectively own approximately 60.0%
of the aggregate voting power of MAXXAM.
13
<PAGE> 17
The Indenture will provide that, upon the occurrence of any Change of
Control (as defined), the Company will be required to make an offer (a "Change
of Control Offer") to purchase all or any part of a holder's Notes at 101% of
the principal amount thereof plus accrued and unpaid interest thereon, if any,
to the date of purchase. Any Change of Control, and any repurchase of the Notes
required under the Indenture upon a Change of Control, would constitute an event
of default under the New Credit Agreement, with the result that the obligations
of the Company thereunder could be declared due and payable. Any acceleration of
the Company's obligations under the New Credit Agreement would make it unlikely
that the Company would be able to purchase the Notes pursuant to the Change of
Control Offer.
ABSENCE OF PUBLIC MARKET
At the time of issuance, there will be no existing market for the Notes and
there can be no assurance as to the liquidity of any markets that may develop
for the Notes, the ability of the holders of the Notes to sell their Notes or
the price at which any such sales may be effected. Trading prices of the Notes
will depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results and the market for similar securities.
The Notes will not be listed on any securities exchange or authorized for
trading on The Nasdaq Stock Market.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Notes
offered hereby are estimated to be approximately $218.6 million. The Company
intends to use the net proceeds from the offering to reduce outstanding
borrowings under the revolving credit facility of the Credit Agreement and for
working capital and general corporate purposes. As of February 7, 1994, there
was $262.2 million of outstanding borrowings under the Credit Agreement,
including $37.2 million in outstanding letters of credit. The Credit Agreement
currently bears interest at the rate of 6.2% per annum. In connection with this
offering, KAC is concurrently offering 8,000,000 shares of PRIDES (subject to
increase if the underwriters' 15% overallotment option is exercised). KAC
intends to use a portion of the net proceeds from the offering of PRIDES to make
a capital contribution to the Company and a portion of such net proceeds to make
a loan or loans to the Company which will be evidenced by an intercompany note.
Borrowings and reborrowings under the New Credit Agreement will be used for
working capital and general corporate purposes, including capital projects. From
time to time, the Company undertakes discussions with various parties relating
to the creation of joint ventures or other business combinations, the
acquisition of other businesses and other strategic matters which management
believes may enhance the Company's competitive position. As of the date of this
Prospectus, the Company has not entered into any material agreements relating to
any of the foregoing.
For information with respect to the New Credit Agreement and the Credit
Agreement (including applicable interest rates and the maturity date thereof),
see "Description of Principal Indebtedness."
14
<PAGE> 18
CAPITALIZATION
The following table summarizes the historical consolidated capitalization
of the Company at September 30, 1993, and as adjusted to give effect to the Pro
Forma Adjustments (as defined in Note (4) of "Summary -- Summary Historical and
Pro Forma Consolidated Financial Data"). This table should be read in
conjunction with the Consolidated Financial Statements of the Company and the
Notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
---------------------------
AS
ACTUAL ADJUSTED
--------- ----------
(IN MILLIONS OF DOLLARS)
<S> <C> <C>
Short-term debt (1)............................................... $ 39.6 $ 28.7 (2)
--------- ----------
Long-term debt (1):
Revolving Credit Facility....................................... 165.0 (3) --
New Credit Agreement............................................ -- 0.0 (4)
% Senior Notes................................................ -- 225.0
Pollution Control and Solid Waste Disposal Obligations (less
current portion of $1.1)..................................... 38.1 38.1
Alpart CARIFA Loan.............................................. 60.0 60.0
Alpart Term Loan (less current portion of $6.2)................. 18.8 18.8
12 3/4% Senior Subordinated Notes............................... 400.0 400.0
Other borrowings (less current portion of $1.2)................. 10.9 10.9
--------- ----------
Total long-term debt......................................... 692.8 752.8 (5)
--------- ----------
Note payable to parent (less current portion of $12.6, $20.2 as
adjusted)....................................................... 22.0 44.8
--------- ----------
Minority interests................................................ 69.5 69.5
--------- ----------
Redeemable preference stock....................................... 32.3 32.3
--------- ----------
Stockholders' equity.............................................. 77.5 128.0
--------- ----------
Total capitalization....................................... $ 933.7 $1,056.1
--------- ----------
--------- ----------
Total long-term debt as a percentage of total
capitalization............................................ 74.2 % 71.3 %
</TABLE>
- ------------
(1) Does not give effect to $72.7 million of guaranteed unconsolidated joint
venture indebtedness of the Company and $36.5 million of other guarantees
and letters of credit. For a description of the Company's long-term debt,
see "Description of Principal Indebtedness" and Note 3 of the Notes to the
Interim Consolidated Financial Statements.
(2) Includes current portion of intercompany notes payable to KAC ($20.2
million).
(3) As of September 30, 1993, $148.9 million of borrowing capacity was unused
under the revolving credit facility of the Credit Agreement. As of February
7, 1994, $262.2 million was outstanding under the Credit Agreement,
including $37.2 million in outstanding letters of credit.
(4) After giving effect to the Refinancing Transactions, $183.6 million of
borrowing capacity would have been available for use under the New Credit
Agreement ($66.4 million in letters of credit would have been outstanding)
and the Company would have had additional cash available of $111.2 million
($58.9 million of additional cash would have been available as of February
7, 1993).
(5) The scheduled maturity of the Company's long-term debt (including notes
payable to KAC) through 1998 is as follows: 1994 - $28.7 million;
1995 - $28.3 million; 1996 - $22.7 million; 1997 - $14.5 million; and
1998 - $8.9 million.
15
<PAGE> 19
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following selected historical and pro forma consolidated financial data
should be read in conjunction with the Consolidated Financial Statements of the
Company and the Notes thereto, appearing elsewhere in this Prospectus, and the
information contained in "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The selected historical consolidated
financial data as of and for the years ended December 31, 1992, 1991, 1990 and
1989, as of and for the two months ended December 31, 1988, and for the ten
months ended October 31, 1988 are derived from the Company's Consolidated
Financial Statements which have been audited by independent public accountants.
The selected historical consolidated financial data as of and for the nine
months ended September 30, 1993, and for the nine months ended September 30,
1992, have not been audited, but in the opinion of management contain all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly the financial position and results of operations of the Company as of
such date and for such periods. The financial statements of Predecessor and
Successor are not directly comparable for the reasons set forth in footnote (1)
to the table below.
<TABLE>
<CAPTION>
SUCCESSOR(1)
--------------------------------------------------------------------------------
PREDECESSOR(1)
NINE MONTHS --------------
ENDED TWO MONTHS TEN MONTHS
SEPTEMBER 30, YEAR ENDED DECEMBER 31, ENDED ENDED
------------------- ----------------------------------------- DECEMBER 31, OCTOBER 31,
1993 1992 1992 1991 1990 1989 1988 1988
-------- -------- -------- -------- -------- -------- --------------- --------------
(IN MILLIONS OF DOLLARS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Net sales..................... $1,303.2 $1,413.1 $1,909.1 $2,000.8 $2,095.0 $2,192.7 $ 298.1 $1,921.4
Cost of products sold......... 1,181.0 1,178.1 1,619.3 1,594.2 1,525.2 1,545.6 226.7 1,462.4
Gross profit.................. 122.2 235.0 289.8 406.6 569.8 647.1 71.4 459.0
Depreciation.................. 72.9 60.4 80.3 73.2 70.5 62.3 7.7 69.6
Selling, administrative,
research and development,
and general................. 90.5 88.7 119.3 117.6 122.9 115.1 18.2 107.9
Operating income (loss)....... (41.2) 85.9 90.2 215.8 376.4 469.7 45.5 281.5
Interest expense.............. 63.8 58.4 78.7 82.7 96.6 32.6 8.3 70.2
Income (loss)before income
taxes, minority interests,
extraordinary loss and
cumulative effect of changes
in accounting principles.... (95.8) 29.5 28.4 149.5 290.8 483.7 47.5 252.7
Income (loss) before
extraordinary loss and
cumulative effect of changes
in accounting principles.... (53.1) 26.5 29.6 124.7 220.7 384.6 28.1 144.7
Net income (loss)............. (582.8)(2) 26.5 29.6 124.7 220.7 384.6 28.1 175.7(3)
Ratio of earnings to fixed
charges(4).................. --(5) 1.4x 1.3x 2.7x 3.6x 11.6x 6.1x 3.6x
Pro Forma(6):
Interest expense.............. $ 65.8 $ 82.4
Income (loss) before
extraordinary loss and
cumulative effect of changes
in accounting principles.... (54.4) 27.2
Net income (loss)(7).......... (599.3) 7.1
Ratio of EBITDA to interest
expense..................... .6x 2.3x
Other Data:
Capital expenditures.......... $ 36.4 $ 79.8 $ 114.4 $ 118.1 $ 115.1 $ 116.6 $ 13.5 $ 82.1
EBITDA(8)..................... 40.9 148.3 187.4 305.4 457.9 578.6 63.5 392.5
Ratio of EBITDA to interest
expense..................... .6x 2.5x 2.4x 3.7x 4.7x 17.7x 7.7x 5.6x
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993 DECEMBER 31,
---------------------- -------------------------------------------------------------
PRO
FORMA(6) ACTUAL 1992 1991 1990 1989 1988
--------- --------- --------- --------- --------- --------- ---------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital....................... $ 439.5 $ 313.1 $ 320.8 $ 242.4 $ 280.9 $ 200.2 $ 617.6
Total assets.......................... 2,601.0 2,483.1 2,100.0 2,138.7 2,127.0 2,146.2 2,404.2
Long-term liabilities................. 1,141.4 1,141.4 217.9 212.9 314.6 321.1 188.2
Long-term debt, less current
portion............................. 752.8 692.8 765.1 681.5 631.5 655.8 489.2
Notes payable to parent, less current
portion............................. 44.8 22.0 -- -- -- -- --
Minority interests.................... 69.5 69.5 70.1 71.9 73.0 71.4 12.0
Redeemable preference stock........... 32.3 32.3 32.8 34.8 47.8 60.8 62.1
Total stockholders' equity............ 128.0 77.5 568.4 562.9 517.1 310.5 947.2
</TABLE>
- ------------
(1) The acquisition of the Company in the Merger has been recorded as a
purchase, with the Company's financial results reported through October 31,
1988 (Predecessor), and for periods subsequent thereto (Successor). In
accounting for the acquisition, Successor recorded the assets and
liabilities of Predecessor based upon estimated fair values. At the same
time, Successor adopted the last-in, first-out (LIFO) method for financial
reporting purposes for valuing substantially all product inventories.
Operations of the Company's aluminum smelter and rolling mill at Ravenswood,
West Virginia, its aluminum recycling facility at Bedford, Indiana, and its
regional data center at Columbus, Ohio, are not included in the reported
results of operations of Successor as they were accounted for as assets held
for sale beginning November 1, 1988.
(2) See Note (1) of "Summary -- Summary Historical Consolidated Financial Data."
(3) Includes extraordinary tax benefits of $36.0 million from utilization of net
operating loss carryforwards by domestic operations.
(4) See Note (2) of "Summary -- Summary Historical and Pro Forma Consolidated
Financial Data."
(5) See Note (3) of "Summary -- Summary Historical and Pro Forma Consolidated
Financial Data."
(6) See Note (4) of "Summary -- Summary Historical and Pro Forma Consolidated
Financial Data."
(7) See Note (5) of "Summary -- Summary Historical and Pro Forma Consolidated
Financial Data."
(8) See Note (6) of "Summary -- Summary Historical and Pro Forma Consolidated
Financial Data."
16
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company operates in two business segments: bauxite and alumina, and
aluminum processing. The Company's operating results are sensitive to changes in
prices of alumina, primary aluminum, and fabricated aluminum products, and also
depend to a significant degree upon the volume and mix of all products sold. The
following table provides selected operational and financial information on a
consolidated basis with respect to the Company for the years ended December 31,
1992, 1991, and 1990, and for the nine months ended September 30, 1993 and 1992.
As an integrated aluminum producer, the Company uses a portion of its bauxite,
alumina, and primary aluminum production for additional processing at certain of
its other facilities. Intracompany shipments and sales are excluded from the
information set forth below.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -------------------------------
1993 1992 1992 1991 1990
------- ------- ------- ------- -------
(IN MILLIONS OF DOLLARS, EXCEPT SHIPMENTS AND PRICES)
<S> <C> <C> <C> <C> <C>
Shipments: (000 tons)
Alumina.............................. 1,508.5 1,436.2 2,001.3 1,945.9 1,758.2
Aluminum products:
Primary aluminum.................. 183.4 261.0 355.4 340.6 344.2
Fabricated products............... 280.0 257.5 343.6 314.2 307.5
-------- -------- -------- -------- --------
Total aluminum products...... 463.4 518.5 699.0 654.8 651.7
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Average realized sales price:
Alumina (per ton).................... $ 169 $ 195 $ 195 $ 240 $ 301
Primary aluminum (per pound)......... .57 .66 .66 .72 .72
Net sales:
Bauxite and alumina:
Alumina........................... $ 255.5 $ 280.7 $ 390.8 $ 466.5 $ 529.2
Other(1)(2)....................... 64.1 56.9 75.7 84.3 80.2
-------- -------- -------- -------- --------
Total bauxite and alumina.... 319.6 337.6 466.5 550.8 609.4
-------- -------- -------- -------- --------
Aluminum processing:
Primary aluminum.................. 229.3 381.3 515.0 538.5 549.2
Fabricated products............... 744.6 683.9 913.7 898.9 917.0
Other(2).......................... 9.7 10.3 13.9 12.6 19.4
-------- -------- -------- -------- --------
Total aluminum processing.... 983.6 1,075.5 1,442.6 1,450.0 1,485.6
-------- -------- -------- -------- --------
Total net sales......... $1,303.2 $1,413.1 $1,909.1 $2,000.8 $2,095.0
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Operating income (loss):
Bauxite and alumina.................. $ (1.8) $ 46.2 $ 62.6 $ 150.0 $ 241.4
Aluminum processing.................. 12.6 104.2 104.9 150.2 222.6
Corporate............................ (52.0) (64.5) (77.3) (84.4) (87.6)
-------- -------- -------- -------- --------
Total operating income
(loss)..................... $ (41.2) $ 85.9 $ 90.2 $ 215.8 $ 376.4
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Income (loss) before income taxes,
minority interests, extraordinary
loss and cumulative effect of changes
in accounting principles............. $ (95.8) $ 29.5 $ 28.4 $ 149.5 $ 290.8
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Income (loss) before extraordinary loss
and cumulative effect of changes in
accounting principles................ $ (53.1) $ 26.5 $ 29.6 $ 124.7 $ 220.7
Extraordinary loss on early
extinguishment of debt, net of tax
benefit of $11.2..................... (21.8) -- -- -- --
Cumulative effect of changes in
accounting principles, net of tax
benefit of $237.7.................... (507.9) -- -- -- --
-------- -------- -------- -------- --------
Net income (loss)...................... $ (582.8) $ 26.5 $ 29.6 $ 124.7 $ 220.7
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Capital expenditures................... $ 36.4 $ 79.8 $ 114.4 $ 118.1 $ 115.1
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
- ---------------
(1) Includes net sales of bauxite.
(2) Includes the portion of net sales attributable to minority interests in
consolidated subsidiaries.
17
<PAGE> 21
RECENT TRENDS
Exports from the Commonwealth of Independent States, additions to smelter
capacities during the past several years, continued high operating rates and
other factors have contributed to a significant increase in primary aluminum
inventories in the Western world. If Western world production and exports from
the Commonwealth of Independent States continue at current levels, primary
aluminum inventory levels will increase further in 1994. The foregoing factors,
among others, have contributed to a significant reduction in the market price of
primary aluminum, and may continue to adversely affect the market price of
primary aluminum in the future.
Government officials from the European Union, the United States of America,
Canada, Norway, Australia and the Russian Federation met in a multilateral
conference in January 1994, to discuss the current excess global supply of
primary aluminum. All six participating governments have ratified as a trade
agreement the resulting Memorandum which provides, in part, for (i) a reduction
in Russian Federation primary aluminum production by 300,000 tons per year
within three months of the date of ratification of the Memorandum and an
additional 200,000 tons within the following three months, (ii) improved
availability of comprehensive data on Russian aluminum production and (iii)
certain assistance to the Russian aluminum industry. A Russian Federation Trade
Ministry official has publicly stated that the output reduction would remain in
effect for 18 months to two years, provided that other worldwide production
cutbacks occur, existing trade restrictions on aluminum are eliminated and no
new trade restrictions on aluminum are imposed. The Memorandum does not require
specific levels of production cutbacks by other producing nations. A further
meeting of the participants is scheduled for the end of February 1994. There can
be no assurance that the implementation of the Memorandum will adequately
address the current oversupply of primary aluminum. The Company will continue to
assess its production levels in light of market prices, industry inventory
levels, production costs and user demand and, based on these and other factors,
could determine to curtail production at certain of its facilities in the
future.
If the Company's average realized sales prices in 1994 for substantial
quantities of its primary aluminum and alumina were based on the current market
price of primary aluminum (AMT Price of 61.14c per pound for the week ended
February 4, 1994) the Company would continue to sustain net losses in 1994,
which would be expected to approximate the loss in 1993 ($76.0 million) before
(a) extraordinary loss and cumulative effect of changes in accounting
principles, (b) the 1993 Facilities Charges and (c) the Other 1993 Charges.
The Company announced in October 1993 that it is restructuring its
flat-rolled products operation at its Trentwood plant in the state of
Washington, to reduce that facility's annual operating costs. This effort is in
response to over-capacity in the aluminum rolling industry, flat demand in can
stock markets, and declining demand for aluminum products sold to customers in
the commercial aerospace industry, all of which have resulted in declining
prices in Trentwood's key markets. The Trentwood restructuring is expected to
result in annual cost savings of approximately $50.0 million after it has been
fully implemented (which is expected to occur during the next two years).
Effective October 1, 1993, an increase in the base rate BPA charges to its
direct service industry customers for electricity was adopted, which will
increase the Company's production costs at the Mead and Tacoma smelters by
approximately $15.0 million per year (approximately $11.3 million per year,
based on the current operating rate of approximately 75% of full capacity). The
rate increase is generally expected to remain in effect for two years.
FOURTH QUARTER AND YEAR END RESULTS
The Company's net sales totaled $415.9 million in the fourth quarter of
1993, compared with $496.0 million in the fourth quarter of 1992, and $1,719.1
million for the full year of 1993, compared with $1,909.1 million for the full
year of 1992. Revenues decreased in the fourth quarter of 1993 as compared to
the fourth quarter of 1992 due principally to lower average realized prices and
shipments of primary aluminum and alumina and lower average realized prices of
most fabricated products, partially offset by increased shipments of fabricated
products during the 1993 period compared with the 1992 period. Revenues
decreased for the full year of 1993 as compared to the full year of 1992 due
principally to lower shipments of primary
18
<PAGE> 22
aluminum and lower average realized prices of primary aluminum and alumina and,
to a lesser extent, of fabricated products, partially offset by increased
shipments of most fabricated products during 1993 as compared to 1992.
The Company will report a net loss before extraordinary loss and cumulative
effect of changes in accounting principles of $117.6 million (including the 1993
Facilities Charges and the Other 1993 Charges) for the full year of 1993,
compared with net income of $29.6 million for the full year of 1992. The Company
will report a net loss of $64.5 million (including the 1993 Facilities Charges
and the Other 1993 Charges) for the fourth quarter of 1993, compared with net
income of $3.1 million for the fourth quarter of 1992. The Company recognized an
after-tax loss relating to the cumulative effect of changes in accounting
principles of $507.9 million and an after-tax extraordinary loss on early
extinguishment of debt of $21.8 million in the first quarter of 1993. See Note
(1) of "Summary Historical and Pro Forma Consolidated Financial Data."
The fourth quarter results include a pre-tax charge of $35.8 million ($22.6
million after-tax) related to the 1993 Facilities Charges and pre-tax charges of
$30.2 million ($19.0 million after-tax) principally related to the Other 1993
Charges. The Company will also recognize an after-tax reduction of stockholders'
equity of $14.9 million in the fourth quarter of 1993 to reflect the lowering of
the discount rate used to calculate the Company's minimum pension liability. The
Company recognized a pre-tax charge of $29.0 million ($24.2 million after-tax)
related to a reduction in the carrying value of the Company's inventory, pre-tax
income of $14.0 million ($11.7 million after-tax) for non-recurring adjustments
to previously recorded liabilities and reserves, and an after-tax reduction of
stockholders' equity of $6.7 million in the fourth quarter of 1992.
NINE MONTHS ENDED SEPTEMBER 30, 1993 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1992
Net Sales
Bauxite and Alumina -- Revenue from net sales of bauxite and alumina to
third parties was $319.6 million in the first nine months of 1993, compared with
$337.6 million in the first nine months of 1992. Revenue from alumina decreased
9% to $255.5 million in the first nine months of 1993 from $280.7 million in the
first nine months of 1992 because lower average realized prices more than offset
increased shipments.
Aluminum Processing -- Revenue from net sales to third parties for the
aluminum processing segment was $983.6 million in the first nine months of 1993,
compared with $1,075.5 million in the first nine months of 1992. Revenue from
primary aluminum decreased 40% to $229.3 million in the first nine months of
1993 from $381.3 million in the same period of 1992 because of lower shipments
and lower average realized prices. Shipments of primary aluminum to third
parties constituted approximately 40% of total aluminum products shipments in
the first nine months of 1993, compared with approximately 50% in the first nine
months of 1992. Revenue from fabricated aluminum products increased 9% to $744.6
million in the first nine months of 1993 from $683.9 million in the same period
of 1992, principally due to an increase in shipments.
Operating Income (Loss)
The Company had an operating loss of $41.2 million in the first nine months
of 1993, compared with operating income of $85.9 million in the first nine
months of 1992.
Bauxite and Alumina -- This segment's operating loss in the first nine
months of 1993 was $1.8 million, compared with income of $46.2 million in the
first nine months of 1992. The decline in earnings is principally due to a
decrease in average realized prices for alumina, partially offset by increased
shipments of alumina. In the first nine months of 1992, the Company realized
above-market prices for significant quantities of alumina sold forward at fixed
prices in prior periods under long-term contracts.
Aluminum Processing -- This segment's operating income was $12.6 million in
the first nine months of 1993, compared with $104.2 million in the same period
of 1992. This decrease was caused principally by reduced shipments and lower
average realized prices of primary aluminum. Other contributing factors were
lower production at the Company's smelters in the Pacific Northwest in the first
nine months of 1993 as a result of the removal of three reduction potlines from
production at those smelters in January 1993 in response to the BPA's reduction
in January 1993 of the amount of power it normally provides to the Company, and
the increased cost of substitute power in the first quarter of 1993. In the
first nine months of 1993, the Company's
19
<PAGE> 23
average realized price from sales of primary aluminum was approximately $.57 per
pound, compared to the average Midwest U.S. transaction price of approximately
$.55 per pound during such period. In both the 1993 and 1992 periods, the
Company realized above-market prices for significant quantities of primary
aluminum sold forward in prior periods under long-term contracts.
Corporate -- Corporate operating expenses of $52.0 million and $64.5
million in the first nine months of 1993 and 1992, respectively, represented
corporate general and administrative expenses, which are not allocated to the
Company's segments.
Income (Loss) Before Extraordinary Loss and Cumulative Effect of
Changes in Accounting Principles
Loss before extraordinary loss and cumulative effect of changes in
accounting principles was $53.1 million in the first nine months of 1993,
compared with income of $26.5 million in the first nine months of 1992. This
decrease resulted from the lower operating income previously described,
partially offset by a higher credit for income taxes. See Note 5 of the Notes to
Interim Consolidated Financial Statements.
Extraordinary Loss on Early Extinguishment of Debt
On February 1, 1993, the Company issued $400.0 million aggregate principal
amount of its 12 3/4% Notes. The net proceeds from the sale of the 12 3/4% Notes
were used to retire $321.7 million aggregate principal amount of, and pay
premiums on, the 14 1/4% Notes, to prepay $18.0 million of the term loan under
the Credit Agreement, and to reduce outstanding borrowings under the revolving
credit facility of the Credit Agreement. These transactions resulted in a
pre-tax extraordinary loss of $33.0 million in the first quarter of 1993 ($21.8
million after taxes), consisting primarily of the write-off of unamortized
discount and deferred financing costs related to the 14 1/4% Notes and the
payment of premiums on the 14 1/4% Notes.
Cumulative Effect of Changes in Accounting Principles
As of January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions ("SFAS 106"), Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes ("SFAS 109"), and Statement of Financial
Accounting Standards No. 112, Employers' Accounting for Postemployment Benefits
("SFAS 112").
The cumulative effect of the change in accounting principle for the
adoption of SFAS 106 reduced results of operations by $497.7 million, net of a
related income tax benefit of $234.2 million. The cumulative effect of the
change in accounting principle for the adoption of SFAS 112 reduced results of
operations by $7.3 million, net of a related income tax benefit of $3.5 million.
The new accounting methods have no effect on the Company's cash outlays for
postretirement and postemployment benefits nor will the one-time charges affect
the Company's compliance with its existing debt covenants. The Company reserves
the right, subject to applicable collective bargaining agreements, to amend or
terminate these benefits.
The cumulative effect of the change in accounting principle for the
adoption of SFAS 109 reduced results of operations by $2.9 million. The
implementation of SFAS 109 required the Company to restate certain assets and
liabilities to pre-tax amounts from net-of-tax amounts originally recorded in
connection with the acquisition of the Company by MAXXAM.
Net Income (Loss)
The Company recorded a net loss of $582.8 million for the first nine months
of 1993, compared with net income of $26.5 million in the same period of 1992.
The principal reasons for the earnings decline were the cumulative effect of
changes in accounting principles of $507.9 million, the extraordinary loss of
$21.8 million, and the operating losses described above.
20
<PAGE> 24
THREE YEARS ENDED DECEMBER 31, 1992
Net Sales
Bauxite and Alumina -- This segment's revenue from net sales of bauxite and
alumina to third parties was $466.5 million in 1992 compared with $550.8 million
in 1991 and $609.4 million in 1990. Revenue from alumina decreased 16% to $390.8
million in 1992 from $466.5 million in 1991, as significantly lower average
realized prices more than offset a 3% increase in alumina shipments.
Revenue from alumina decreased 12% to $466.5 million in 1991 from $529.2
million in 1990 as significantly lower average realized prices more than offset
an 11% increase in alumina shipments, which was principally attributable to
increased production at all three of the Company's alumina refineries. The
remainder of the segment's sales revenues were from sales of bauxite, which
remained about the same throughout the three years, and the portion of sales of
alumina attributable to the minority interest in Alpart.
Aluminum Processing -- Revenue from net sales to third parties for the
aluminum processing segment was $1,442.6 million in 1992 compared with $1,450.0
million in 1991 and $1,485.6 million in 1990. The bulk of the segment's sales
represents the Company's primary aluminum and fabricated aluminum products, with
the remainder attributable to the portion of sales of primary aluminum
attributable to the minority interest in Volta Aluminium Company Limited
("Valco").
Revenue from primary aluminum decreased 4% to $515.0 million in 1992 from
$538.5 million in 1991, as an 8% decrease in average realized prices more than
offset a 4% increase in primary aluminum shipments. Shipments of primary
aluminum to third parties were approximately 51% of total aluminum products
shipments in 1992 compared with approximately 52% in 1991. Revenue from primary
aluminum decreased 2% to $538.5 million in 1991 from $549.2 million in 1990,
primarily because of a 1% decline in shipments. Shipments of primary aluminum to
third parties were approximately 52% of total aluminum products shipments in
1991 compared with approximately 53% in 1990.
Revenue from fabricated aluminum products increased 2% to $913.7 million in
1992 compared with $898.9 million in 1991, primarily because lower average
realized prices were more than offset by a 9% increase in shipments of
fabricated aluminum products. Revenue from fabricated aluminum products
decreased by 2% to $898.9 million in 1991 from $917.0 million in 1990 because of
lower average realized prices.
Operating Income
The Company's operating income in 1992 was $90.2 million, compared with
$215.8 million in 1991 and $376.4 million in 1990. The Company recorded a
pre-tax charge of approximately $29.0 million in the fourth quarter of 1992
because of a reduction in the carrying value of its inventories caused
principally by prevailing lower prices for alumina, primary aluminum, and
fabricated products of $18.8 million and a LIFO inventory liquidation of $10.2
million.
Bauxite and Alumina -- This segment's operating income in 1992 was $62.6
million, a decrease of 58% from $150.0 million in 1991. Operating income in 1991
was $150.0 million, a decrease of 38% from $241.4 million in 1990. In both 1992
compared to 1991, and 1991 compared to 1990, operating income was adversely
affected by a decrease in average realized prices for alumina which more than
offset higher alumina shipments and above-market prices for significant
quantities of alumina sold forward in prior periods under long-term contracts.
Aluminum Processing -- Operating income for the aluminum processing segment
was $104.9 million in 1992, a decrease of 30% from $150.2 million in 1991.
Operating income in 1992 was adversely affected by a decrease in average
realized prices for primary aluminum and most fabricated aluminum products,
partially offset by increased shipments. In both 1992 and 1991, the Company
realized above-market prices for significant quantities of primary aluminum sold
forward in prior periods under long-term contracts. Operating income for the
aluminum processing segment was $150.2 million in 1991, a decrease of 33% from
$222.6 million in 1990. Operating income in 1991 was adversely affected by a
decrease in average realized prices for fabricated aluminum products and, to a
lesser extent, by higher unit production costs for labor and
21
<PAGE> 25
raw materials. These decreases in operating income more than offset above-market
prices for significant quantities of primary aluminum sold forward in prior
periods under long-term contracts.
Corporate -- Corporate operating expenses of $77.3 million, $84.4 million,
and $87.6 million in 1992, 1991, and 1990, respectively, represented corporate
general and administrative expenses which were not allocated to segments.
Income Before Income Taxes and Minority Interests
Income before income taxes and minority interests in 1992 was $28.4
million, a decrease of 81% from $149.5 million in 1991. This decrease resulted
from the lower operating income previously described, partially offset by a
decrease in interest expense. Other income remained about the same in 1992 and
1991 as approximately $14.0 million of income for non-recurring adjustments to
previously recorded liabilities and reserves in the fourth quarter of 1992
approximately equaled the receipt of a $12.0 million fee in the first quarter of
1991 from the Company's minority partner in Alpart in consideration for the
execution of an expansion agreement for the Alpart alumina refinery.
Income before income taxes and minority interests in 1991 was $149.5
million, a decrease of 49% from $290.8 million in 1990. This decrease resulted
from the lower operating income previously described, partially offset by an
increase in other income principally due to the receipt of a $12.0 million fee
in the first quarter of 1991 from the Company's minority partner in Alpart as
explained above.
Net Income
The Company earned $29.6 million in 1992, compared with $124.7 million in
1991 and $220.7 million in 1990. The principal reason for the earnings decline
in 1992 compared with 1991 was the decrease in average realized prices for
alumina, primary aluminum, and most fabricated products, partially offset by an
increase in shipments of such products.
The principal reason for the earnings decline in 1991 compared with 1990
was the decrease in price realizations for alumina, primary aluminum, and
fabricated products, partially offset by a significant increase in shipments of
alumina and the Company's forward sales strategy for substantial quantities of
alumina and primary aluminum which yielded better-than-market prices for these
products.
FINANCIAL CONDITION AND CAPITAL SPENDING
Cash Provided by Operations
Cash used for operations was $2.0 million in the first nine months of 1993,
compared with cash provided by operations of $22.4 million in the first nine
months of 1992. Cash flow from operations was $28.0 million in 1992, compared
with $143.7 million in 1991 and $194.1 million in 1990. The decrease in 1992
compared with 1991 was primarily because of the decline in net income and a
$66.3 million decrease in previously withdrawn equity resulting from the excess
of current market value over the premiums paid in certain option contracts. The
decrease in 1991 compared with 1990 was mostly due to a lower level of net
income in 1991, partially offset by the withdrawal of equity in certain option
contracts. The equity withdrawal from these option contracts during 1991
increased by $52.9 million over 1990.
Capital Expenditures
The Company's capital expenditures of approximately $300.2 million (of
which $42.6 million was funded by the Company's minority partners in certain
joint ventures) during the three years ended December 31, 1993, were made
primarily to improve production efficiency, reduce operating costs, expand
capacity at existing facilities, and construct new facilities. Total
consolidated capital expenditures were $67.7 million in 1993 compared with
$114.4 million in 1992 and $118.1 million in 1991 (of which $9.4 million, $17.1
million and $16.1 million were funded by the minority partners in certain
foreign joint ventures in 1993, 1992 and 1991, respectively). Total consolidated
capital expenditures (of which approximately up to 5% is expected to
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<PAGE> 26
be funded by the minority partners in certain foreign joint ventures) are
expected to be in the range of $50 million to $75 million per year in the years
1994-1996.
Capital Structure
The offering of the Notes, the concurrent offering by KAC of 8,000,000
shares of PRIDES and the replacement of the Credit Agreement are the final steps
of a comprehensive refinancing plan which KAC began in January 1993. The plan is
intended to extend the maturities of KAC's outstanding indebtedness, to enhance
its liquidity and to raise new equity capital.
As of December 31, 1992, the Company's long-term indebtedness consisted
principally of $321.7 million aggregate amount of the 14 1/4% Notes and the
Credit Agreement. The Company refinanced the 14 1/4% Notes through the issuance
in February 1993 of $400.0 million aggregate principal amount of the 12 3/4%
Notes. In addition, on January 24, 1994, the Company entered into the Commitment
Letter to replace the Credit Agreement ($262.2 million outstanding as of
February 7, 1994, including $37.2 million in outstanding letters of credit) with
the New Credit Agreement. Bank of America and BA have committed, subject to
certain terms and conditions, to provide the full $250.0 million of the New
Credit Agreement.
As of December 31, 1993, the Company's total consolidated indebtedness was
$760.9 million, and $113.6 million of borrowing capacity was unused under the
revolving credit facility of the Credit Agreement. On a pro forma basis, after
giving effect to the Refinancing Transactions, as of December 31, 1993, the
Company's total consolidated indebtedness would have been $827.8 million, $182.5
million of borrowing capacity would have been unused under the New Credit
Agreement and the Company would have had additional cash available of $106.1
million. See "Capitalization."
To increase its equity capital, KAC consummated a public offering of its
$.65 Depositary Shares in June 1993 pursuant to which KAC realized net proceeds
of approximately $119.3 million. KAC will realize additional net proceeds of
approximately $88.6 million as a result of the sale of the PRIDES. See "-- Debt
Service and Capital Expenditure Requirements" below.
After giving effect to the Refinancing Transactions, the scheduled maturity
of the Company's long-term indebtedness through 1998 will be substantially
reduced.
Debt Service and Capital Expenditure Requirements. Under the terms of
the Company's existing Credit Agreement ($262.2 million outstanding as of
February 7, 1994, including $37.2 million in outstanding letters of credit),
which is expected to be replaced by the New Credit Agreement, the Company
expects to be able to satisfy its debt service and capital expenditures
requirements through at least June 30, 1994, from cash flows generated by
operations and, to the extent necessary, from borrowings under the revolving
credit facility of the Credit Agreement. In the event the Credit Agreement is
not replaced by the New Credit Agreement, there can be no assurance that the
Company will be able to satisfy the covenants under the existing Credit
Agreement on or after June 30, 1994. After giving effect to the Refinancing
Transactions, the Company expects that it will be able to satisfy its debt
service and capital expenditure requirements through at least December 31, 1995,
from cash flows generated by operations and, to the extent necessary, from
borrowings under the New Credit Agreement. See "Description of Principal
Indebtedness -- The New Credit Agreement." The offering of the Notes, the
offering of PRIDES and the effectiveness of the New Credit Agreement will be
conditioned upon the simultaneous closing of all such transactions.
In connection with the offering of the $.65 Depositary Shares in June 1993,
KAC made a non-interest bearing loan to the Company in the principal amount of
$37,796,753 (an amount equal to the aggregate dividends scheduled to accrue on
the Series A Shares from the issuance date until the date on which the Series A
Shares mandatorily convert into shares of KAC Common Stock). The loan is
evidenced by an intercompany note which matures on June 29, 1996, and is payable
in quarterly installments. As of December 31, 1993, the aggregate principal
amount of such intercompany note was $31,497,294.
In connection with the PRIDES Offering, KAC intends to use a portion of the
net proceeds therefrom to make a capital contribution to the Company and a
portion of such net proceeds to make a loan or loans to the Company. The loan or
loans will be evidenced by an intercompany note in a principal amount equal to
the
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<PAGE> 27
aggregate dividends scheduled to accrue on the shares of PRIDES from the
issuance date until the date on which the shares of PRIDES mandatorily convert
into shares of KAC Common Stock.
Dividends and Distributions. The declaration and payment of dividends
by the Company on its shares of common stock will be subject to certain
covenants contained in the Indenture and the 12 3/4% Note Indenture. The New
Credit Agreement will not permit the Company or KAC to pay any dividends on
their common stock. See "Description of Principal Indebtedness."
Other Obligations. On February 1, 1993, the Company issued $400.0
million aggregate principal amount of its 12 3/4% Notes. The net proceeds from
the sale of the 12 3/4% Notes were used to retire $321.7 million aggregate
principal amount of, and pay premiums on, the 14 1/4% Notes, to prepay $18.0
million of the term loan under the Credit Agreement, and to reduce outstanding
borrowings under the revolving credit facility of the Credit Agreement. These
transactions resulted in a pre-tax extraordinary loss of approximately $33.0
million in the first quarter of 1993 ($21.8 million after taxes), consisting
primarily of the write-off of unamortized discount and deferred financing costs
related to the 14 1/4% Notes and the payment of premiums on the 14 1/4% Notes.
The obligations of the Company with respect to the 12 3/4% Notes are guaranteed,
jointly and severally, by certain subsidiaries of the Company. The 12 3/4% Note
Indenture contains, among other things, restrictions on the ability of the
Company and its subsidiaries to incur debt, undertake transactions with
affiliates, and pay dividends. See "Description of Principal Indebtedness."
In December 1992, the Company entered into an installment sale agreement
(the "Sale Agreement") with the Parish of St. James, Louisiana (the "Louisiana
Parish"), in connection with which the Louisiana Parish issued $20.0 million
aggregate principal amount of its 7 3/4% Bonds due August 1, 2022 (the "Gramercy
Bonds"), to finance the construction of certain solid waste disposal facilities
at the Company's Gramercy plant. The proceeds from the sale of the Gramercy
Bonds were deposited into a construction fund and may be withdrawn, from time to
time, pursuant to the terms of the Sale Agreement and the indenture related
thereto. At December 31, 1993, $10.8 million remained in the construction fund.
The Sale Agreement requires the Company to make payments to the Louisiana Parish
in installments due on the dates and in the amounts required to permit the
Louisiana Parish to satisfy all of its payment obligations under the Gramercy
Bonds.
The Company has historically participated in various raw material joint
ventures outside the United States. At December 31, 1993, the Company was
unconditionally obligated for $73.6 million of indebtedness of one such joint
venture affiliate.
ENVIRONMENTAL MATTERS
For a discussion of certain environmental matters involving the Company,
see "Business -- Environmental Matters" and "-- Legal Proceedings."
TAX ATTRIBUTE CARRYFORWARDS AND CARRYBACKS
At December 31, 1992, the Company had certain tax attribute carryforwards.
See Note 5 of the Notes to the Consolidated Financial Statements. For a
discussion of the KACC Tax Allocation Agreement (as defined), the New Tax
Allocation Agreement (as defined) and certain effects upon the Company's tax
attribute carryforwards and carrybacks resulting from KAC's offering of $.65
Depositary Shares in June 1993, see "Certain Transactions."
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<PAGE> 28
BUSINESS
INDUSTRY OVERVIEW
Primary aluminum is produced by the refining of bauxite (the major
aluminum-bearing ore) into alumina (the intermediate material) and the reduction
of alumina into primary aluminum. Approximately two pounds of bauxite are
required to produce one pound of alumina, and approximately two pounds of
alumina are required to produce one pound of primary aluminum. Aluminum's
valuable physical properties include its light weight, corrosion resistance,
thermal and electrical conductivity and high tensile strength.
Demand
The packaging and transportation industries are the principal consumers of
aluminum in the United States, Japan and Western Europe. In the packaging
industry, which accounted for approximately 22% of consumption in 1992,
aluminum's recyclability and weight advantages have enabled it to gain market
share from steel and glass, primarily in the beverage container area. The
aluminum packaging market in the United States, Japan and Western Europe grew at
a rate of approximately 4.0% per year during the period 1982-1992, and total
United States aluminum beverage can shipments increased at a rate of
approximately 2.5% in 1993, 1.5% in 1992, 3.9% in 1991 and 6.0% in 1990. Nearly
all beer cans and approximately 95% of the soft drink cans manufactured for the
United States market are made of aluminum. Despite the flat demand currently
being experienced in the can stock market, growth in the packaging area is
generally expected to continue in the 1990s due to general population increase
and to further penetration of the beverage can market in Western Europe and
Japan, where aluminum cans are a substantially lower percentage of the total
beverage container market than in the United States.
In the transportation industry, which accounted for approximately 28% of
aluminum consumption in the United States, Japan and Western Europe in 1992,
automotive manufacturers use aluminum instead of steel or copper for an
increasing number of components, including radiators, wheels and engines, in
order to meet more stringent environmental and fuel efficiency requirements
through vehicle weight reduction. Management believes that sales of aluminum to
the transportation industry have considerable growth potential due to projected
increases in the use of aluminum in automobiles. According to industry sources,
aluminum content in United States automobiles nearly doubled in the last fifteen
years to an average of 191 pounds per vehicle and the amount of aluminum
consumed in the manufacture of Japanese automobiles more than doubled from 1983
to 1990. Management believes that the use of aluminum in automobiles in the
United States and Japan will approximately double between 1991 and 2006.
Supply
As of year-end 1993, Western world aluminum capacity from 109 smelting
facilities was approximately 16.4 million tons per year. Net exports of aluminum
from the Commonwealth of Independent States to the West increased substantially
from 1990 levels during the period from 1991 through 1993, and have contributed
to a significant increase in London Metal Exchange stocks of primary aluminum.
Based upon information currently available, the Company believes that only
moderate additions will be made during 1994-1995 to Western world alumina and
primary aluminum production capacity; however, due to the decline of primary
aluminum prices from January 1, 1991, through the date of this Prospectus, and
other factors, curtailments or permanent shutdowns have been announced, to
management's knowledge, with respect to approximately 2.6 million tons of
primary aluminum production capacity. New alumina and primary aluminum
facilities generally require a four to five year design, engineering and
construction period.
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<PAGE> 29
Historic Levels
Certain data concerning the Western world aluminum industry are set forth
in the following table:
<TABLE>
<CAPTION>
PRIMARY PRIMARY AVERAGE ANNUAL
ALUMINA ALUMINUM ALUMINUM MIDWEST INGOT
PRODUCTION(1) PRODUCTION(1) INVENTORY(2) PRICES(3)
-------------- -------------- -------------- --------------
(000 TONS) (000 TONS) (000 TONS) (C/LB)
<S> <C> <C> <C> <C>
1980............................... 29,315.6 12,771.7 2,078.0 76.1
1981............................... 27,893.3 12,456.3 3,275.0 59.8
1982............................... 23,515.6 10,759.8 3,655.7 46.8
1983............................... 24,600.7 11,097.5 2,583.7 68.3
1984............................... 27,860.8 12,765.6 3,138.5 61.1
1985............................... 27,240.1 12,308.1 2,827.9 49.0
1986............................... 27,808.9 12,234.5 2,171.5 56.5
1987............................... 29,390.3 12,919.3 1,728.9 73.3
1988............................... 31,342.2 13,909.5 1,858.7 112.3
1989............................... 33,202.5 14,462.8 1,860.1 88.9
1990............................... 34,529.2 14,623.9 2,067.4 75.0
1991............................... 35,417.7 15,180.4 3,091.6 60.0
1992............................... 34,455.1 14,923.5 3,551.3 58.0
1993............................... -- -- -- 53.8
</TABLE>
- ------------
(1) Source: American Bureau of Metal Statistics.
(2) Source: World Bureau of Metal Statistics, England.
(3) Source: Metals Week. From 1980 through 1984, Midwest U.S. Market Price; from
1985 through 1993, Midwest U.S. Transaction Price.
Recent Industry Trends
The aluminum industry has been cyclical and the market prices of alumina
and primary aluminum have been volatile from time to time. During 1989, tight
supply conditions for alumina and strong demand for primary aluminum resulted in
unusually high spot prices for alumina. During 1990, a moderate surplus of
alumina supply developed due to new alumina production from two facilities that
had been restarted in prior years (including the Company's Alpart refinery) and
increased production at other refineries. Furthermore, recent curtailments of
primary aluminum production in response to declining ingot prices have increased
the surplus of alumina supply. Since 1990, spot prices of alumina have declined
substantially due to these factors and slow economic growth in major aluminum
consuming countries. Contract prices for deliveries of alumina in 1993 were in a
lower range than the ranges applicable during the past several years. As a
result of expansions of alumina refineries during 1992-1993, the current surplus
of alumina is expected to continue.
During 1989 and 1990, primary aluminum smelters throughout the world
operated at near capacity levels. This factor, combined with increased
production from smelter capacity additions during 1989 and 1990, resulted in a
reduction of the market price of primary aluminum from 1988 peak prices.
Additions to smelter capacity in 1991, 1992 and 1993, continued high operating
rates in the Western world and slow economic growth in major aluminum consuming
countries as well as exports from the Commonwealth of Independent States have
contributed to an oversupply of primary aluminum and a significant increase in
primary aluminum inventories in the Western world. If Western world production
and exports from the Commonwealth of Independent States continue at current
levels, primary aluminum inventory levels are expected to increase further in
1994. The foregoing factors have contributed to a significant reduction in the
market price of primary aluminum, and may continue to adversely affect the
market price of primary aluminum in the future. The average price of primary
aluminum was at historic lows in real terms for the year ended 1993. See
"-- Sensitivity to Prices and Hedging Programs -- Alumina and Primary Aluminum."
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<PAGE> 30
Government officials from the European Union, the United States of America,
Canada, Norway, Australia and the Russian Federation met in a multilateral
conference in January 1994, to discuss the current excess global supply of
primary aluminum. All six participating governments have ratified as a trade
agreement the resulting Memorandum which provides, in part, for (i) a reduction
in Russian Federation primary aluminum production by 300,000 tons per year
within three months of the date of ratification of the Memorandum and an
additional 200,000 tons within the following three months, (ii) improved
availability of comprehensive data on Russian aluminum production and (iii)
certain assistance to the Russian aluminum industry. A Russian Federation Trade
Ministry official has publicly stated that the output reduction would remain in
effect for 18 months to two years, provided that other worldwide production
cutbacks occur, existing trade restrictions on aluminum are eliminated and no
new trade restrictions on aluminum are imposed. The Memorandum does not require
specific levels of production cutbacks by other producing nations. A further
meeting of the participants is scheduled for the end of February 1994. There can
be no assurance that the implementation of the Memorandum will adequately
address the current oversupply of primary alumimum. See "-- Sensitivity to
Prices and Hedging Programs -- Alumina and Primary Aluminum." The Company will
continue to assess its production levels in light of market prices, industry
inventory levels, production costs and user demand and, based on these and other
factors, could determine to curtail production at certain of its facilities in
the future.
BUSINESS STRATEGY
The Company has made significant changes in the mix of products sold to
customers by disposing of selected assets, restarting and increasing its
percentage ownership interest in the Alpart alumina refinery, and increasing
production of alumina at Gramercy, Louisiana, and QAL in Australia. The
percentage of the Company's alumina production sold to third parties increased
from approximately 35% in 1987 to approximately 71% in 1993, and the percentage
of its primary aluminum production sold to third parties increased from
approximately 20% in 1987 to approximately 56% in 1993.
The Company has concentrated its fabricated products operations on the
beverage container market (which historically has been recession-resistant);
high value-added, heat-treated sheet and plate products for the aerospace
industry; hubs, wheels and other products for the truck, trailer and shipping
container industry; parts for air bag canisters and other automotive components;
and distributor markets for a variety of semi-fabricated aluminum products.
Since January 1, 1989, the Company has constructed four new fabrication
facilities and has modernized and expanded others, with the objective of
reducing manufacturing costs and expanding sales in selected product markets in
which the Company has production expertise, high quality capability, and
geographic and other competitive advantages.
The Company has taken steps to control and reduce costs, improved the
efficiency and increased the capacity of its alumina and primary aluminum
production and fabricating operations, modernized its facilities, and
streamlined and decentralized its management structure to reduce corporate
overhead and shift decision-making and accountability to its business units. In
October 1993, the Company announced that it is restructuring its flat-rolled
products operation at its Trentwood plant in Spokane, Washington, to reduce that
facility's annual operating costs. This effort is in response to over-capacity
in the aluminum rolling industry, flat demand in can stock markets, and
declining demand for aluminum products sold to customers in the commercial
aerospace industry, all of which have resulted in declining prices in
Trentwood's key markets. The Trentwood restructuring is expected to result in
annual cost savings of approximately $50.0 million after it has been fully
implemented (which is expected to occur during the next two years).
From 1980 to 1993, on a per employee basis, alumina production increased by
approximately 54% at the Company's Gramercy alumina refinery; fabricated product
shipments increased by approximately 128% at the Trentwood fabricating facility;
sales volume for aluminum operations as a whole increased by over 300% and the
average life of reduction cells used to produce aluminum at the Company's
smelters improved by approximately 102%. Primary aluminum production at the
Company's Mead and Tacoma smelters was curtailed in 1993 because of a power
reduction imposed by the BPA which reduced the operating rates for such
smelters. From 1980 to 1992, prior to the BPA power reductions, on a per
employee basis, primary aluminum production increased by approximately 72% and
39%, respectively, at the Mead and Tacoma
27
<PAGE> 31
smelters, and from 1980 to 1993, subsequent to the BPA power reductions, such
primary aluminum production increased by approximately 36% and 15%,
respectively, at such smelters. In addition, from 1985 to 1992, the Trentwood
facility's recovery rate (the relative amount of fabricated product manufactured
from a quantity of primary aluminum) improved by approximately 30% and its
promise performance rate (a measure of ability to meet delivery dates) improved
by approximately 23%. The Company's average kilowatt hours of electricity
utilized per ton of primary aluminum production was also reduced by
approximately 13% from 1980 to 1993 through process improvements.
The Company has also attempted to lessen its exposure to possible future
declines in the market prices of alumina and primary aluminum by entering into
fixed and variable rate power and fuel supply contracts, and a labor contract
with the United Steelworkers of America which provides for semi-variable
compensation with respect to approximately 73% of the Company's domestic hourly
work force. See "-- Production Operations" and "-- Employees."
SENSITIVITY TO PRICES AND HEDGING PROGRAMS
The Company's earnings are sensitive to changes in the prices of alumina,
primary aluminum and fabricated aluminum products, and also depend to a
significant degree upon the volume and mix of all products sold. Consequently,
the Company has developed strategies to mitigate its exposure to possible
further declines in the market prices of alumina and primary aluminum while
retaining the ability to participate in favorable pricing environments that may
materialize. See "Risk Factors -- Sensitivity to Prices; Current Primary
Aluminum Prices Adversely Affect Net Sales and Operating Income."
Alumina and Primary Aluminum
The Company's production capacity for alumina significantly exceeds the
requirements of its aluminum smelters. As a result of the restart of, an
increased percentage ownership interest in, and the increased capacity of, the
Alpart refinery in Jamaica, increased production at the Company's other alumina
refineries and the sale of its Ravenswood aluminum smelter, alumina production
and sales to third parties increased further in 1992, 1991 and 1990 following a
significant increase in 1989. These sales, combined with favorable contract
sales prices during 1992, 1991 and 1990, and strong spot alumina prices during
1989, made a significant contribution to operating results during 1992, 1991,
1990 and 1989.
The tight supply conditions and consequent high prices for alumina which
existed in 1989 have been alleviated as a result of increased production and
other factors, including reduced demand due to the economic recession. Average
realized alumina prices for each of 1993, 1992, 1991 and 1990 declined
significantly from the previous year and were significantly below their 1989
high levels. Although the Company has attempted to lessen the effect of such
declines through forward sales transactions and hedging programs described
below, earnings have been, and are expected to remain, significantly more
sensitive to changes in primary aluminum prices and revenues derived from the
sale of alumina to third parties. Revenues from alumina sales to third parties
declined in 1993 as a result of lower average realized prices for alumina. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Recent Trends."
The Company has also sold forward substantially all of the alumina
available to it in excess of its projected internal smelting requirements for
1994, and a substantial portion of such excess alumina for 1995. Approximately
95% of 1994 sales and virtually all of 1995 sales were made at prices indexed to
future prices of primary aluminum. Approximately 75% of 1994 sales were made at
prices indexed to future prices of primary aluminum, but with minimum prices
that exceed the Company's estimated cash production costs. The remainder of 1994
sales were made either at fixed prices that exceed the Company's estimated cash
production costs, or are subject to prices indexed to future prices of primary
aluminum but without minimum prices. Approximately 85% of 1995 sales were made
at prices indexed to future prices of primary aluminum, but with minimum prices
that exceed the Company's estimated cash production costs.
As of the date of this Prospectus, the Company has sold forward at fixed
prices approximately 75% of its primary aluminum in excess of its projected
internal fabrication requirements in 1994 and approximately 55% of such surplus
in 1995 at fixed prices that approximate the current market price of primary
aluminum.
28
<PAGE> 32
Hedging programs already in place would allow the Company to participate in
certain higher market prices, should they materialize, for approximately 40% of
the Company's excess primary aluminum sold forward in 1994, and 100% of the
Company's excess primary aluminum sold forward in 1995.
Primary aluminum prices have historically been cyclical and, from time to
time, volatile. During 1991, average realized prices from sales of primary
aluminum remained about the same as in 1990, even though market prices declined
significantly, as a result of the Company's forward sales and hedging programs
that enabled the Company to sell significant quantities of primary aluminum at
above market prices. In 1992, the Company realized an average price of $0.66 per
pound while the average Midwest U.S. transaction price was approximately $0.58
per pound, as a result of the Company's forward sales and hedging programs that
enabled the Company to sell significant quantities of primary aluminum at above
market prices. In 1993, the Company's average realized price from sales of
primary aluminum was approximately $0.56 per pound compared to the average
Midwest U.S. transaction price of approximately $0.54 per pound during such
period.
In 1991 and 1990, the Company sold to third parties approximately
two-thirds of the primary aluminum it produced, with the balance of the primary
aluminum production used in the Company's fabrication operations. Approximately
70% of the Company's primary aluminum was sold to third parties in 1992, and
approximately 56% in 1993 (primarily because of the curtailment of its
production of primary aluminum in the Pacific Northwest caused by the BPA power
reduction and increased use of the Company's primary aluminum in its fabrication
operations).
While the Company continues to attempt to lessen the adverse effect of
declines in the price of primary aluminum through its variable cost structures,
forward sales and hedging programs, possible future declines in the market price
of primary aluminum would have an adverse effect on the Company's financial
performance. If the Company's average realized sales prices in 1994 for
substantial quantities of its primary aluminum and alumina were based on the
current market price of primary aluminum (AMT Price of 61.14c per pound for the
week ended February 4, 1994), the Company would continue to sustain net losses
in 1994, which would be expected to approximate the loss from continuing
operations in 1993 ($76.0 million) before (a) extraordinary loss and cumulative
effect of changes in accounting principles, (b) the 1993 Facilities Charges and
(c) the Other 1993 Charges.
The following table indicates the monthly average Midwest U.S. transaction
price for primary aluminum (the "AMT Price") for each of the months from January
1989 through January 1994 as reported by Metals Week. The AMT Price for the week
ended February 4, 1994, as reported by Metals Week, was 61.14 cents per pound.
<TABLE>
<CAPTION>
AVERAGE TRANSACTION PRICES (CENTS/POUND)
---------------------------------------------------------------
1994 1993 1992 1991 1990 1989
------ ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
January................... 57.019 56.479 54.387 69.376 69.862 108.894
February.................. 55.993 58.831 68.886 66.392 100.950
March..................... 53.794 60.041 68.983 72.111 97.534
April..................... 52.345 61.542 64.410 72.707 97.610
May....................... 52.694 60.398 59.562 73.288 99.175
June...................... 54.673 58.875 58.555 73.727 89.297
July...................... 56.829 60.423 59.682 73.709 81.448
August.................... 55.516 60.076 57.825 81.203 82.340
September................. 52.905 58.383 56.020 89.621 79.051
October................... 51.660 54.066 53.230 83.422 80.301
November.................. 50.365 53.414 52.490 73.261 76.253
December.................. 53.902 55.846 50.613 70.654 74.223
------ ------ ------ ------ ------- -------
Average......... 57.019 53.846 58.024 59.969 74.996 88.923
------ ------ ------ ------ ------- -------
------ ------ ------ ------ ------- -------
</TABLE>
In response to the low price of primary aluminum caused by the current
surplus, a number of companies have closed smelting facilities. In addition, in
response to certain power reductions undertaken by the BPA in
29
<PAGE> 33
the Pacific Northwest, a number of companies (including the Company) have
curtailed or shutdown production capacities at their smelter facilities in the
Pacific Northwest. The Company will continue to assess its production levels in
light of market prices, industry inventory levels, production costs and user
demand and, based on these and other factors, could determine to curtail
production at certain of its facilities in the future. See also
"Business -- Industry Overview -- Recent Industry Trends."
Fabricated Products
Fabricated aluminum prices, which vary considerably among products, are
heavily influenced by changes in the price of primary aluminum and generally lag
behind primary aluminum prices for periods of up to six months. A significant
portion of the Company's fabricated product shipments consist of body, lid and
tab stock for the beverage container market. The Company may not be able to
receive increases in primary aluminum prices to its can stock customers as
promptly as in the recent past because of competition from other aluminum
producers and because of excess supply in the industry. The Company also ships
fabricated products to customers in the aerospace market. Aluminum demand in the
aerospace market is decreasing as a result of the structural contraction of the
defense industry caused by the end of the cold war. In addition, the commercial
aerospace market is experiencing a cyclical downturn in business due to the
recent economic recessions in the United States, Canada, Australia and the
United Kingdom, and slow economic growth in other countries.
Changes in the market price of primary aluminum also affect the Company's
production costs of fabricated products because they influence the price of
aluminum scrap purchased by the Company and the Company's labor costs, to the
extent such costs are indexed to primary aluminum prices. Following significant
increases in the price of primary aluminum, the prices realized for fabricated
aluminum products were at relatively high levels throughout 1990, 1989 and 1988.
The average realized prices for fabricated aluminum products declined during
1991, reflecting the lower primary aluminum prices prevailing during such year,
and continued to decline during 1992 and 1993. Revenue from fabricated aluminum
products increased 7% to $981.4 million in 1993 compared with $913.7 million in
1992, primarily because of an 8% increase in shipments of fabricated aluminum
products.
PRODUCTION OPERATIONS
The following table sets forth total shipments and intracompany transfers
of the Company's alumina, primary aluminum and fabricated aluminum operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1992 1991
------ ------- -------
(IN THOUSANDS OF TONS)
<S> <C> <C> <C>
ALUMINA:
Shipments to Third Parties................................ 1,997.5 2,001.3 1,945.9
Intracompany Transfers.................................... 807.5 878.2 884.2
PRIMARY ALUMINUM:
Shipments to Third Parties................................ 242.5 355.4 340.6
Intracompany Transfers.................................... 233.6 224.4 199.6
FABRICATED ALUMINUM PRODUCTS:
Shipments to Third Parties................................ 373.2 343.6 314.2
</TABLE>
The Company's operations are conducted through decentralized business units
which compete throughout the aluminum industry:
- The Alumina Business Unit, which mines bauxite and obtains additional
bauxite tonnage under long-term contracts, produced approximately 9% of
Western world alumina in 1992. During 1993, the Company utilized
approximately 82% of its bauxite production at its alumina refineries and
the remainder was either sold to third parties or tolled into alumina by
a third party. In addition, during 1993 the Company utilized
approximately 29% of its alumina for internal purposes and sold the
30
<PAGE> 34
remainder to third parties. The Company's share of total Western world
alumina capacity was 8% in 1993.
- The Primary Aluminum Products Business Unit operates two domestic
smelters wholly owned by the Company and two foreign smelters in which
the Company holds significant ownership interests. In 1993, the Company
utilized approximately 44% of its primary aluminum for internal purposes
and sold the remainder to third parties. The Company's share of total
Western world primary aluminum capacity was 3% in 1993.
- Fabricated products are manufactured by three Business
Units -- Flat-Rolled Products, Extruded Products (including rod and bar),
and Forgings and Castings -- which manufacture a variety of fabricated
products (including body, lid and tab stock for beverage containers,
sheet and plate products, screw machine stock, redraw rod, forging stock,
truck wheels and hubs, air bag canisters and other forgings and castings
and extruded products) and which operate plants located in principal
marketing areas of the United States and Canada. Substantially all of the
primary aluminum utilized in the Company's fabricated products operations
is obtained through the Company, with the balance of the metal utilized
in its fabricated products operations obtained from scrap metal
purchases. In 1993, the Company shipped approximately 373,200 tons of
fabricated aluminum products to third parties, which accounted for
approximately 6% of the total tonnage of United States domestic
fabricated shipments for such year.
Alumina
The following table lists the Company's bauxite mining and alumina refining
facilities as of December 31, 1993:
<TABLE>
<CAPTION>
ANNUAL
PRODUCTION TOTAL
CAPACITY ANNUAL
COMPANY AVAILABLE TO PRODUCTION
ACTIVITY FACILITY LOCATION OWNERSHIP THE COMPANY CAPACITY
- ------------------------------- ------------- ---------- ---------- ------------ ------------
(TONS) (TONS)
<S> <C> <C> <C> <C> <C>
Bauxite Mining................. KJBC(1) Jamaica 49% 4,500,000 4,500,000
Alpart(2) Jamaica 65% 2,275,000 3,500,000
------------ ------------
6,775,000 8,000,000
------------ ------------
------------ ------------
Alumina Refining............... Gramercy Louisiana 100% 1,000,000 1,000,000
Alpart Jamaica 65% 943,000 1,450,000
QAL Australia 28.3% 934,000 3,300,000
------------ ------------
2,877,000 5,750,000
------------ ------------
------------ ------------
</TABLE>
- ------------
(1) Although the Company owns 49% of Kaiser Jamaica Bauxite Company, it has the
right to receive all of such entity's output.
(2) Alpart bauxite is refined into alumina at the Alpart refinery.
Bauxite mined in Jamaica by Kaiser Jamaica Bauxite Company ("KJBC") is
refined into alumina at the Company's plant at Gramercy, Louisiana, or is sold
to third parties. In 1979, the Government of Jamaica granted the Company a
mining lease for the mining of bauxite sufficient to supply the Company's then-
existing Louisiana alumina refineries at their annual capacities of 1,656,000
tons per year until January 31, 2020 (KJBC has announced that it intends to
curtail production of bauxite by 500,000 tons per year). Alumina from the
Gramercy plant is sold to third parties. The Company has entered into a series
of medium-term contracts for the supply of natural gas to the Gramercy plant.
The price of such gas varies based upon certain spot natural gas prices, with
floor and ceiling prices applicable to approximately one-half of the delivered
gas. The Company has, however, established a fixed price for a portion of the
delivered gas through a hedging program.
31
<PAGE> 35
Alpart holds bauxite reserves and owns an alumina plant located in Jamaica.
The Company has a 65% interest in Alpart and Hydro Aluminium a.s ("Hydro") owns
the remaining 35% interest. The Company has management responsibility for the
facility on a fee basis. The Company and Hydro have agreed to be responsible for
their proportionate shares of Alpart's costs and expenses. Alpart is engaged in
a program of modernization and expansion of its facilities. As a part of that
program, the capacity of the Alpart alumina refinery has been increased to
1,450,000 tons per year as of December 31, 1992. In 1981, the Government of
Jamaica granted Alpart a mining lease covering bauxite reserves sufficient to
operate the Alpart plant until December 31, 2019. In connection with the
expansion program, the Alpart partners have entered into an agreement with the
Government of Jamaica designed to assure that sufficient reserves of bauxite
will be available to Alpart to operate its refinery, as it has been expanded and
as it may be expanded through the year 2024 (to a capacity of 2,000,000 tons per
year).
In mid-1990, Alpart entered into a five-year agreement for the supply of
substantially all of its fuel oil, the refinery's primary energy source. In
February 1992, this agreement was extended for one year and the quantity of fuel
oil to be supplied was increased. The price for 80% of the initial quantity
remains fixed at a price which prevailed in the fourth quarter of 1989; the
price for 80% of the increased quantity is fixed at a negotiated price; and the
price for the balance of the initial and increased quantities was based upon
certain spot fuel oil prices plus transportation costs. Alpart has purchased all
of the quantities of fuel oil which could be purchased based upon certain spot
fuel oil prices under both the initial and extended agreements.
The Company holds a 28.3% interest in QAL, which owns the largest and one
of the most efficient alumina refineries in the world, located in Queensland,
Australia. QAL refines bauxite into alumina, essentially on a cost basis, for
the account of its stockholders pursuant to long-term tolling contracts. The
stockholders, including the Company, purchase bauxite from another QAL
stockholder pursuant to long-term supply contracts. The Company has contracted
to take approximately 751,000 tons per year of capacity or pay standby charges.
The Company is unconditionally obligated to pay amounts calculated to service
its share ($73.6 million at December 31, 1993) of certain debt of QAL, as well
as other QAL costs and expenses, including bauxite shipping costs. An expansion
project, completed at the end of 1990, increased QAL's annual production
capacity to approximately 3,300,000 tons, of which approximately 934,000 tons
are available to the Company.
The Company's principal customers for bauxite and alumina consist of large
and small domestic and international aluminum producers that purchase bauxite
and reduction-grade alumina for use in their internal refining and smelting
operations and trading intermediaries who resell raw materials to end-users. In
1993, the Company sold all of its bauxite to one customer, and sold alumina to
thirteen customers, the largest and top five of which accounted for
approximately 22% and 79% of such sales, respectively. Among alumina producers,
the Company believes it is now the world's second largest seller of alumina to
third parties. The Company's strategy is to sell a substantial portion of the
bauxite and alumina available to it in excess of its internal refining and
smelting requirements pursuant to forward sales contracts. See " -- Sensitivity
to Prices and Hedging Programs." Marketing and sales efforts are conducted by
senior executives of the Alumina Business Unit and the Company.
32
<PAGE> 36
Primary Aluminum Products
The following table lists the Company's primary aluminum smelting
facilities as of December 31, 1993:
<TABLE>
<CAPTION>
ANNUAL
RATED TOTAL
CAPACITY ANNUAL 1993
COMPANY AVAILABLE TO RATED OPERATING
LOCATION FACILITY OWNERSHIP THE COMPANY CAPACITY RATE
- ------------------------------------- ---------- ---------- ------------ --------- ----------
(TONS) (TONS)
<S> <C> <C> <C> <C> <C>
Domestic
Washington......................... Mead 100% 200,000 200,000 80%(1)
Washington......................... Tacoma 100% 73,000 73,000 77%(1)
------------ ---------
Subtotal................... 273,000 273,000
------------ ---------
International
Ghana.............................. Valco 90% 180,000 200,000 88%
Wales, U.K......................... Anglesey 49% 55,000 112,000 112%
------------ ---------
Subtotal................... 235,000 312,000
------------ ---------
Total...................... 508,000 585,000
------------ ---------
------------ ---------
</TABLE>
- ------------
(1) See "Risk Factors -- Recent Developments in Power Supply for Pacific
Northwest Operations and Resultant Production Curtailments."
The Company owns two smelters located at Mead and Tacoma, Washington, where
alumina is processed into primary aluminum. The Mead facility uses pre-bake
technology; the Tacoma plant uses Soderberg technology. Both smelters have
achieved significant production efficiencies in recent years through retrofit
technology, cost controls and semi-variable wage and power contracts, leading to
increases in production volume and enhancing their ability to compete with newer
smelters. At the Mead plant, the Company has converted to welded anode
assemblies to increase energy efficiency, has reduced the number of anodes used
in the smelting process, has changed from pencil to liquid pitch to produce
carbon anodes which achieved environmental and operating savings, and is engaged
in efforts to increase production through the use of improved, higher-efficiency
reduction cells. In 1992, improved performance was achieved at Mead and Tacoma
in the areas of energy efficiency and hot metal production. Both the Mead and
Tacoma plants operated at approximately full rated capacity during 1991-1992,
but operated at less than rated capacity throughout 1993, as a result of a power
reduction imposed by the BPA, which is discussed below. The electricity supply
contracts between the BPA and the Company expire in 2001. Through June 1996, the
Company pays for power on a basis which varies, within certain limits, with the
market price of primary aluminum, and thereafter the Company will pay for power
at variable rates to be negotiated. During 1993, the Company paid for power
under its power supply contract with the BPA at the floor rate. The Tacoma
facility produces high grade, continuous cast, redraw rod, which currently
commands a premium price in excess of primary aluminum prices. The Mead facility
produces primary aluminum, almost all of which is used at the Company's
Trentwood fabricating facility and the balance of which is sold to third
parties.
The Company manages, and holds a 90% interest in, the Valco aluminum
smelter in Ghana. The Valco smelter uses pre-bake technology. The smelter
processes alumina supplied by the Company and the other participant into primary
aluminum under long-term tolling contracts which provide for proportionate
payments by the participants in amounts intended to pay not less than all of
Valco's operating and financing costs. The Company's share of the primary
aluminum is sold to third parties.
Power for the Valco smelter is supplied under an agreement which expires in
1997, subject to Valco's right to extend the agreement for 20 years. The
agreement indexes the price of two-thirds of the contract quantity to the market
price of primary aluminum and fixes the price for the remainder, and provides
for a review and adjustment of the base power rate and the price index every
five years. The Valco smelter restarted production early in 1985 after being
closed for more than two years due to lack of rainfall and the resultant
hydroelectricity shortage. The Company believes that there has been sufficient
rainfall and water storage such
33
<PAGE> 37
that an adequate supply of electricity for the Valco plant at its current
operating rate is probable for at least one year.
The Company has a 49% interest in the Anglesey Aluminium Limited
("Anglesey") aluminum smelter and port facility at Holyhead, Wales. The Anglesey
smelter uses pre-bake technology. The Company supplies 49% of Anglesey's alumina
requirements and purchases 49% of Anglesey's aluminum output. The Company sells
its share of Anglesey's output to third parties. Power for the Anglesey alumina
smelter is supplied under an agreement which expires in 2001.
Electrical power represents an important production cost for the Company at
the Facilities. The electricity supply contracts between the BPA and its direct
service industry customers (which consist of 15 energy intensive companies,
principally aluminum producers, including the Company) permit the BPA to
interrupt up to 25% of the amount of power which it normally supplies to such
customers. As a result of drought conditions, in January 1993 the BPA reduced
the amount of power it normally supplies to its direct service industry
customers, including the Company with respect to the Facilities. In response to
such reduction, the Company removed three reduction potlines from production
(two at the Mead smelter and one at the Tacoma smelter) and purchased substitute
power in the first quarter of 1993 at increased costs. The BPA has notified its
direct service industry customers that it intends to maintain the interruption
of 25% of the amount of power it normally provides to such customers through
February 28, 1994. Despite the temporary availability of such power through July
1993, the Company has operated its Mead and Tacoma smelters at the reduced
operating rates introduced in January 1993, and has operated its Trentwood
fabrication facility without any curtailment of its production. The Company
currently anticipates that in 1994 it will operate the Mead and Tacoma smelters
at rates which do not exceed the current operating rates of 75% of full capacity
for such smelters. The Company cannot predict whether full power will be
provided by the BPA after February 28, 1994, or whether power will otherwise
become available at a price acceptable to the Company. The Company will continue
to assess its production levels at the Mead and Tacoma smelters in light of the
availability and cost of such power and other production costs, the market price
of primary aluminum, industry inventory levels and other industry-related and
Company-related factors.
Effective October 1, 1993, an increase in the base rate BPA charges to its
direct service industry customers for electricity was adopted, which will
increase the Company's production costs at the Mead and Tacoma smelters by
approximately $15.0 million per year (approximately $9.1 million per year based
on the Company's current operating rate of approximately 75% of full capacity).
The rate increase generally is expected to remain in effect for two years.
In the event that the BPA's revenues fall below certain levels prior to
April 1994, the BPA may impose up to a 10% surcharge on the base rate it charges
to its direct service industry customers, effective during the period from
October 1994 through October 1995 (which would increase the Company's production
costs at the Mead and Tacoma smelters by approximately $9.1 million per year
based on the Company's current operating rate of approximately 75% of full
capacity). In addition, in order to comply with certain federal laws and
regulations applicable to endangered fish species, the BPA may be required in
the future to reduce its power generation and to purchase substitute power (at
greater expense) from other sources. The foregoing factors would increase the
Company's operating expenses.
The Company has developed and installed proprietary retrofit technology in
all of its smelters. This technology -- which includes the redesign of the
cathodes and anodes that conduct electricity through reduction cells, improved
"feed" systems that add alumina to the cells, and a computerized system that
controls energy flow in the cells -- enhances the Company's ability to compete
more effectively with the industry's newer smelters. The Company is actively
engaged in efforts to license this technology and sell technical and managerial
assistance to other producers worldwide, and may participate in joint ventures
or similar business partnerships which employ the Company's technical and
managerial knowledge. Pursuant to various arrangements, the Company's technology
has been installed in aluminum smelters located in West Virginia, Ohio,
Missouri, Kentucky, Sweden, Germany, India, Australia, New Zealand, Ghana, the
Commonwealth of Independent States and the United Kingdom. See "-- Research and
Development."
34
<PAGE> 38
The Company's principal primary aluminum customers consist of large trading
intermediaries and metal brokers, who resell primary aluminum to fabricated
product manufacturers, and large and small international aluminum fabricators.
In 1993, the Company sold approximately 56% of its primary aluminum production
not utilized for internal purposes to approximately 50 customers, the largest
and top five of which accounted for approximately 44% and 64% of such sales,
respectively. Marketing and sales efforts are conducted by a small staff located
at the business unit's headquarters in Pleasanton, California, and by senior
executives of the Company who often participate in the structuring of major
sales transactions. A majority of the business unit's sales are based upon
long-term relationships with metal merchants and end-users.
Fabricated Products
Flat-Rolled Products
The Flat-Rolled Products Business Unit, the largest of the Company's
fabricated products businesses, operates the Trentwood sheet and plate mill at
Trentwood, Washington. The Trentwood facility is the Company's largest
fabricating plant and accounted for substantially more than one-half of the
Company's 1993 fabricated products shipments. The business unit supplies the
beverage container market (producing body, lid and tab stock), the aerospace
market, and the tooling plate, heat-treated alloy and common alloy coil markets,
both directly and through distributors. The Company announced in October 1993
that it is restructuring its flat-rolled products operation at its Trentwood
plant to reduce that facility's annual operating costs. This effort is in
response to over-capacity in the aluminum rolling industry, flat demand in can
stock markets, and declining demand for aluminum products sold to customers in
the commercial aerospace industry, all of which have resulted in declining
prices in Trentwood's key markets. The Trentwood restructuring is expected to
result in annual cost savings of approximately $50.0 million after it has been
fully implemented (which is expected to occur during the next two years).
The Company's flat-rolled products are sold primarily to beverage container
manufacturers located in the western United States where the Company has a
transportation advantage. Quality of products for the beverage container
industry, timeliness of delivery and price are the primary bases on which the
Company competes. The Company believes that its capital improvements at
Trentwood have enhanced the quality of its products for the beverage container
industry and the capacity and efficiency of its manufacturing operations. The
Company believes that it is one of the highest quality producers of aluminum
beverage can stock in the world.
In 1993, the Flat-Rolled Products Business Unit had twenty-two foreign and
domestic can stock customers, the majority of which were beverage can
manufacturers (including seven of the eight major domestic beverage can
manufacturers) and the balance of which were brewers. The largest and top five
of such customers accounted for approximately 25% and 56%, respectively, of the
business unit's sales revenue. In 1993, the business unit shipped products to
over 200 customers in the aerospace, transportation and industrial ("ATI")
markets, most of which were distributors who sell to a variety of industrial
end-users. The top five customers in the ATI markets for flat-rolled products
accounted for approximately 10% of the business unit's sales revenue. The
marketing staff for the Flat-Rolled Products Business Unit is headquartered in
Pleasanton, California, and is also located at the Trentwood facility, and sales
are made directly to customers (including distributors) from ten sales offices
located throughout the United States. International customers are served by a
sales office in the Netherlands and by independent sales agents in Asia and
Latin America. See also "-- Sensitivity to Prices and Hedging
Programs -- Fabricated Products" for a discussion of demand for fabricated
products in the aerospace market.
Extruded Products
The Extruded Products Business Unit is headquartered in Dallas, Texas, and
operates soft alloy extrusion facilities in Los Angeles, California; Sherman,
Texas; and London, Ontario, Canada; a cathodic protection business located in
Tulsa, Oklahoma, that also extrudes both aluminum and magnesium; and rod and bar
facilities in Newark, Ohio, and Jackson, Tennessee, which produces screw machine
stock, redraw rod, forging stock and billet. Each of the soft alloy extrusion
facilities has fabricating capabilities and provides finishing
35
<PAGE> 39
services. The Company began commercial operation of its London, Ontario, Canada
facility in the second quarter of 1992, which is designed to produce more than
50 million pounds of extruded products annually.
The Extruded Products Business Unit's major markets are in the
transportation industry, to which it provides extruded shapes for automobiles,
trucks, trailers, cabs and shipping containers, and distribution, durable goods,
defense, building and construction, ordnance, and electrical markets. In 1993,
the Extruded Products Business Unit had over 900 customers for its products, the
largest and top five of which accounted for approximately 6% and 19%,
respectively, of its sales revenue. Sales are made directly from plants as well
as marketing locations across the United States.
Forgings and Castings
The Forgings and Castings Business Unit operates forging facilities at
Erie, Pennsylvania; Oxnard, California; and Greenwood, South Carolina; and a
machine shop at Greenwood, South Carolina. The Forgings and Castings Business
Unit is one of the largest producers of aluminum forgings in the United States,
and is a major supplier of high quality forged parts to customers in the
automotive, commercial vehicle and ordinance markets. The high
strength-to-weight properties of forged aluminum make it particularly well
suited for automotive applications. During 1991, the Forgings and Castings
Business Unit entered the castings business by purchasing the assets of Winters
Industries, which supplies cast aluminum engine manifolds to the automobile,
truck and marine markets. The casting production facilities include two
foundries and a machining facility in Ohio.
In 1993, the Forgings and Castings Business Unit had over 500 customers for
its products, the largest and top five of which accounted for approximately 20%
and 57%, respectively, of the Forgings and Casting Business Unit's sales
revenue. The Forgings and Castings Business Unit's headquarters is located in
Erie, Pennsylvania, and additional sales, marketing and engineering groups are
located in the midwestern and western United States.
COMPETITION
Aluminum products compete in many markets with steel, copper, glass,
plastic and numerous other materials. Within the aluminum business, the Company
competes with both domestic and foreign producers of bauxite, alumina and
primary aluminum, and with domestic and foreign fabricators. The Company's
principal competitors in the sale of alumina include Alcoa of Australia, Ltd.,
Billiton International Metals B.V., Clarendon Ltd. and Pechiney S.A. In addition
to the foregoing, the Company competes with most aluminum producers in the
production of primary aluminum. Many of the Company's competitors have greater
financial resources than the Company. In addition, the Commonwealth of
Independent States has been supplying large quantities of primary aluminum to
the Western world.
Primary aluminum and, to some degree, alumina are commodities with
generally standard qualities, and competition in the sale of these commodities
is based primarily upon price, quality and availability. The Company believes
that, assuming the current relationship between worldwide supply and demand for
alumina and primary aluminum does not change materially, the loss of any one of
its customers, including intermediaries, would not have a material adverse
effect on its business or operations.
The Company also competes with a wide range of domestic and international
fabricators in the sale of fabricated aluminum products. Competition in the sale
of fabricated products is based upon quality, availability, price and service,
including delivery performance. The Company concentrates its fabricating
operations on selected products in which the Company has production expertise,
high quality capability, and geographic and other competitive advantages.
RESEARCH AND DEVELOPMENT
The Company conducts research and development activities principally at
three facilities dedicated to that purpose -- the Center for Technology ("CFT")
in Pleasanton, California; the Primary Aluminum Products Division Technology
Center ("DTC") adjacent to the Mead smelter in Spokane, Washington; and
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the Alumina Development Laboratory ("ADL") at the Gramercy, Louisiana refinery.
Net expenditures for Company-sponsored research and development activities were
$18.5 million in 1993, $13.5 million in 1992, and $11.4 million in 1991. The
Company's research staff totaled 160 at December 31, 1993. The Company estimates
that research and development net expenditures will be in the range of
approximately $17-$19 million per year in the 1994 period.
CFT concentrates its research and development efforts on flat-rolled
products while providing specialized services to the Company's other business
units. Its activities include development of can stock products and aircraft
sheet and plate products, and process improvements directed at efficiency and
quality. In can stock, CFT works to optimize the product's metallurgy, surface
characteristics, coatings and lubrication. CFT also offers research and
development, technical services and selected proprietary technology for license
or sale to third parties. CFT is currently providing technology and technical
assistance to Samyang Metal Co. Ltd. in building an aluminum rolling mill in
Yongju, Korea. CFT also is engaged in cooperative research and development
projects with Furukawa Electric Co., Ltd., Pechiney Rhenalu and Kawasaki Steel
Corporation of Japan, with respect to the ground transportation market.
DTC maintains specialized laboratories and a miniature carbon plant where
experiments with new anode and cathode technology are performed. DTC supports
the Company's primary aluminum smelters, concentrating on the development of
cost-effective technical innovations and equipment and process improvements.
Energy savings of approximately 10% have been achieved at smelters utilizing
proprietary DTC-developed technologies (which are employed in both retrofit and
new construction applications), such as improved cathode and anode design and
insulation, modified electrolyte chemistry, distributive microprocessor control
and modified cell magnetics. Other proprietary DTC retrofit technologies, such
as redesigned reduction cells, have helped the Company's older smelters achieve
competitiveness with more recently constructed facilities. The Company is
actively engaged in efforts to license this technology and sell technical and
managerial assistance to other producers worldwide. Pursuant to various
arrangements, the Company's technology has been installed in aluminum smelters
located in West Virginia, Ohio, Missouri, Kentucky, Sweden, Germany, India,
Australia, New Zealand, Ghana and the United Kingdom.
The Company has entered into agreements with respect to the Krasnoyarsk
smelter located in the Commonwealth of Independent States pursuant to which the
Company has licensed certain of its technology for use in such facility and has
agreed to provide purchasing services in obtaining western-sourced technology
and equipment to be used in such facility. These agreements were entered into in
November 1990, and the services under them are expected to be completed in 1994.
In addition, the Company has entered into agreements with respect to the
Nadvoitsky smelter located in the Commonwealth of Independent States and the
Korba smelter of the Bharat Aluminum Co. Ltd. located in India pursuant to which
the Company has licensed certain of its technology for use in such facilities.
The agreements relating to the Nadvoitsky and Korba smelters were entered into
in 1993, and the services under such agreements are expected to be completed in
1995 and 1994, respectively.
ADL has developed technologies which have improved alumina refinery
efficiency. These include a high-capacity thickener process used in the
separation of alumina from bauxite slurry, plant conversion designs that enable
alumina refineries to convert from the production of fine alumina to the
preferred coarser "sandy" alumina, technology that enables refineries to process
different qualities of bauxite, and computer-aided instrumentation systems to
improve process efficiencies and energy use in alumina refineries. The Company
is actively pursuing the licensing of alumina refinery technology worldwide. The
Company's technology is in use in alumina refineries in the Americas, Australia,
India and Europe.
The Company's technology sales and revenue from technical assistance to
third parties were $12.8 million in 1993, $14.1 million in 1992 and $10.9
million in 1991.
EMPLOYEES
During 1993, the Company employed an average of 10,223 persons, compared
with an average of 10,129 employees in 1992, and 9,967 employees in 1991. At
December 31, 1993, the Company's workforce was approximately 10,029, including a
domestic workforce of 5,930, of whom 4,146 were paid at an hourly rate. Most
hourly paid domestic employees are covered by collective bargaining agreements
with various labor
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unions. Approximately 73% of such employees are covered by a master agreement
(the "Labor Contract") with the United Steelworkers of America (the "USWA")
which expires on October 31, 1994. The Labor Contract covers the Company's
plants in Spokane (Trentwood and Mead), Washington; Tacoma, Washington;
Gramercy, Louisiana; and Newark, Ohio.
The Labor Contract provides for floor level wages at all covered plants. In
addition, for workers covered by the Labor Contract at the Mead and Newark
plants, for any quarterly period when the average Midwest U.S. transaction price
of primary aluminum is $.54 per pound or above, a bonus payment is made. The
amount of the quarterly bonus payment changes incrementally with each full cent
change in the price of primary aluminum between $.54 per pound and $.61 per
pound, remains constant when the price is $.61 or more per pound but is below
$.74 per pound, changes incrementally again with each full cent change in the
price between $.74 per pound and $.81 per pound, and remains at the ceiling when
the price is $.81 per pound or more. Workers covered by the Labor Contract at
the Trentwood, Tacoma and Gramercy plants may receive quarterly bonus payments
based on various indices of productivity, efficiency and other aspects of
specific plant performance, as well as, in certain cases, the price of alumina
or primary aluminum. The particular quarterly bonus variable compensation
formula currently applicable at each plant will remain applicable for the
remainder of the contract term.
Pursuant to the Labor Contract, base wage rates were raised $.50 per hour
in 1990 and were raised an additional $.50 per hour effective November 1, 1993.
Each of the employees covered by the Labor Contract has received $2,000 in
lump-sum signing and special bonuses. In addition, the Company acquired in the
first quarter of 1991 up to $4,000 of preference stock held for the benefit of
approximately 80% of the employees covered by the Labor Contract, and agreed to
acquire in 1994 an additional $2,000 of such preference stock held for the
benefit of substantially the same employees. The Company also acquired in the
first quarter of 1991 up to $4,000 of preference stock which had been held for
the benefit of each of certain salaried employees. The Company considers its
employee relations to be satisfactory.
ENVIRONMENTAL MATTERS
The Company is subject to a wide variety of Environmental Laws which
continue to be adopted and amended. The Environmental Laws regulate, among other
things, air and water emissions and discharges; the generation, storage,
treatment, transportation and disposal of solid and hazardous waste; the release
of hazardous or toxic substances, pollutants and contaminants into the
environment; and, in certain instances, the environmental condition of
industrial property prior to transfer or sale. In addition, the Company is
subject to various federal, state and local workplace health and safety laws and
regulations ("Health Laws").
From time to time, the Company is subject, with respect to its current and
former operations, to fines or penalties assessed for alleged breaches of the
Environmental and Health Laws and to claims and litigation brought by federal,
state or local agencies and by private parties seeking remedial or other
enforcement action under the Environmental and Health Laws or damages related to
alleged injuries to health or to the environment, including claims with respect
to certain waste disposal sites and the remediation of sites presently or
formerly operated by the Company. See "-- Legal Proceedings." The Company's
Mead, Washington facility has been listed on the National Priorities List under
CERCLA. In connection with certain of its asset sales, the Company has
indemnified the purchasers of assets with respect to certain liabilities (and
associated expenses) resulting from acts or omissions arising prior to such
dispositions, including environmental liabilities.
In certain instances, the Company may be exposed to joint and several
liability for remedial action or damages to natural resources. The Company,
along with several other entities, has been named as a Potentially Responsible
Party ("PRP") for remedial costs at certain third-party sites listed on the
National Priorities List under CERCLA.
While the ultimate extent of the Company's liability for pending or
potential fines, penalties, remedial costs, claims and litigation relating to
environmental and health and safety matters cannot be determined at this time
and, in light of evolving case law relating to insurance coverage for
environmental claims, management is unable to determine definitively the extent
of such coverage, management currently believes
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<PAGE> 42
that the resolution of these matters (even without giving effect to potential
insurance recovery) should not have a material adverse effect on the Company's
consolidated financial position or results of operations.
Environmental capital spending was $12.6 million in 1993, $13.1 million in
1992 and $11.2 million in 1991. Annual operating costs for pollution control,
not including corporate overhead or depreciation, were approximately $22.4
million in 1993, $21.6 million in 1992, and $17.8 million in 1991. Legislative,
regulatory and economic uncertainties make it difficult to project future
spending for these purposes. However, the Company currently anticipates that in
the 1994-1995 period, environmental capital spending will be within the range of
approximately $7.0-$20.0 million per year, and operating costs for pollution
control will be within the range of $20.0-$22.0 million per year. These
expenditures will be made to assure compliance with applicable Environmental
Laws and are expected to include, among other things, additional "red mud"
disposal facilities and improved levees at the Gramercy, Louisiana refinery
(which are being financed by the Gramercy Bonds), bath crushing improvements,
baking furnace modernization, and improved calcining controls at the Mead,
Washington facility; new and continuing environmental projects at the Trentwood,
Washington facility; and environmental projects required under the Clean Air Act
Amendments of 1990. In addition, $7.2 million in cash expenditures in 1993, $9.6
million in 1992 and $14.0 million in 1991 were charged to previously established
reserves relating to environmental cost. Approximately $7.0 million is expected
to be charged to such reserves in 1994.
LEGAL PROCEEDINGS
Aberdeen Pesticide Dumps Site Matter
The Aberdeen Pesticide Dumps Site, listed on the Superfund National
Priorities List, is composed of five separate sites around the town of Aberdeen,
North Carolina. These sites (in the aggregate, the "Sites") include the Farm
Chemicals Site, Twin Sites, Fairway Six Site, McIver Dump Site and the Route 211
Site. The Sites are of concern to the United States Environmental Protection
Agency (the "EPA") because of their past use as either pesticide formulation
facilities or pesticide disposal areas from approximately the mid-1930's through
the late 1980's.
The United States originally filed a cost recovery complaint (as amended,
the "Complaint") in the United States District Court for the Middle District of
North Carolina, Rockingham Division, No. C-89-231-R, against five defendants on
March 31, 1989, and subsequently amended its complaint to add another ten
defendants on February 6, 1991, and another four defendants on August 1, 1991.
The Company and KAC were not defendants named in the Complaint. The Complaint
seeks reimbursement for past and future response costs and a determination of
liability of the defendants under Section 107 of CERCLA.
On or about October 2, 1991, the Company, along with approximately
seventeen other parties, was served with third party complaints from four of the
defendants named in the Complaint (the "Third Party Plaintiffs") alleging claims
arising under various theories of contribution and indemnity. On October 22,
1992, the United States filed a motion for leave to file an amended complaint
naming the Company as a first party defendant in its cost recovery action. On
February 16, 1993, the court granted that motion.
The EPA has performed a Remedial Investigation/Feasibility Study and issued
a Record of Decision ("ROD") dated September 30, 1991, for the Sites. The major
remedy selected for the five Sites in the ROD consisted of excavation of
contaminated soil, treatment of the contaminated soil at a single location
utilizing thermal treatment, and placement of the treated material back into the
areas of excavation. The estimated cost of such remedy for the five Sites is
approximately $32 million. Other possible remedies described in the ROD included
on-site incineration and on-site ash disposal at an estimated cost of
approximately $53 million, and off-site incineration and disposal at an
estimated cost of approximately $222 million. The Company understands that the
EPA is also investigating contamination of groundwater at the Sites. The EPA has
stated that it has incurred past costs at the Sites in the range of $7.5-$8
million as of February 9, 1993, and alleges that response costs will continue to
be incurred in the future.
On May 20, 1993, the EPA issued three unilateral Administrative Orders
under Section 106(a) of CERCLA ordering the Respondents, including the Company,
to perform the remedial design and remedial action described in the ROD for the
Farm Chemicals Site (EPA Docket No. 93-13-C), Twin Sites (EPA
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Docket No. 93-14-C) and Fairway Six Site (EPA Docket No. 93-15-C). The estimated
cost as set forth in the ROD for the remedial action at the three sites is
approximately $27 million. In addition to the Company, Respondents named in the
Administrative Orders for all three sites include J. M. Taylor, Grower Service
Corporation, E. I. DuPont de Nemours & Co., Olin Corporation, UCI Holdings,
Inc., PPG Industries, Inc., and Union Carbide Corporation. Ciba-Geigy
Corporation, Hercules, Inc., Mobil Oil Corporation, Shell Oil Company, The Boots
Company (USA), Inc., Nor-Am Chemical Co., George D. Anderson, Farm Chemicals,
Inc., Partners In The Pits, Ltd., Dan F. Maples, Pits Management Corp., Maples
Golf Construction, Inc., Yadco of Pinehurst, Inc. and Robert Trent Jones are
named as Respondents for one or two of the Sites.
KAC has entered into an Agreement in Principle with certain of the
respondents to participate jointly in responding to the Administrative Orders,
to share costs incurred on an interim basis, and to seek to reach a final
allocation of costs through agreement or to allow such final allocation and
determination of liability to be made by the United States District Court. A
definitive PRP Participation Agreement is currently awaiting execution by the
group. By letter dated July 6, 1993, KAC has notified the EPA of its ongoing
participation with such group of respondents which, as a group, are intending to
comply with the Administrative Orders to the extent consistent with applicable
law.
By letters dated December 30, 1993, the EPA notified the Company of its
potential liability for, and requested that the Company, along with certain
other companies, undertake or agree to finance, groundwater remediation at
certain of the sites. With respect to the Farm Chemicals and Twin Sites, in
addition to the Company, the EPA issued such letters to J.M. Taylor, Grower
Services Corporation, Farm Chemicals, Inc., E.I. DuPont de Nemours and Company,
Olin Corporation, UCI Holdings, Inc., Union Carbide Corporation, Miles, Inc.,
Mobil Oil Corporation, Shell Oil Company, Hercules, Inc., The Boots Company
(USA), Inc., Nor-Am Chemical Company, and Ciba-Geigy Corporation. With respect
to the Fairway Six Site, in addition to the Company, the EPA issued such letters
to J.M. Taylor, G.D. Anderson, Grower Service Corporation, Partners in Pits, Dan
Maples, Pits Management Corporation, Maples Golf Construction, Inc., Yadco of
Pinehurst, Inc., Robert Trent Jones, E.I. DuPont de Nemours and Company, Olin
Corporation, UCI Holdings, Inc., Union Carbide Corporation, Miles, Inc.,
Ciba-Geigy Corporation and Hercules, Inc. The ROD-selected remedy for the
groundwater remediation selected by EPA includes extraction, on-site treatment
by coagulation/flocculation/precipitation, air stripping, GAC absorption, and
discharge on site for the Farm Chemicals/Twin Sites and extraction, on-site
treatment by GAC absorption and discharge on-site for the Fairway Six Site. The
EPA has estimated the total present worth cost, including thirty years of
operation and maintenance, at $11,849,757.
The Company, along with other notified parties, plans to meet with
representatives of the EPA to discuss whether an agreement to perform this
remediation is possible.
Based upon the information presently available to it, the Company is unable
to determine whether it has any liability with respect to any of the Sites or,
if there is any liability, the amount thereof. Two Government witnesses have
testified that the Company acquired pesticide products from the operator of the
formulation site over a two to three year period. The Company has been unable to
confirm the accuracy of this testimony.
United States of America v. Kaiser Aluminum & Chemical Corporation
On February 8, 1989, a civil action was filed by the United States
Department of Justice at the request of the EPA against the Company in the
United States District Court for the Eastern District of Washington, Case Number
C-89-106-CLQ. The complaint alleged that emissions from certain stacks at the
Company's Trentwood facility in Spokane, Washington intermittently violated the
opacity standard contained in the Washington State Implementation Plan ("SIP"),
approved by the EPA under the federal Clean Air Act. The complaint sought
injunctive relief, including an order that the Company take all necessary action
to achieve compliance with the Washington SIP opacity limit and the assessment
of civil penalties of not more than $25,000 per day.
In the course of the litigation, questions arose as to whether the
observers who recorded the alleged exceedances were qualified under the
Washington SIP to read opacity. In July 1990, the Company and the Department of
Justice agreed to a voluntary dismissal of the action. At that time, however,
the EPA had
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arranged for increased surveillance of the Trentwood facility by consultants and
the EPA's personnel. From May 1990 through May 1991, these observers recorded
approximately 130 alleged exceedances of the SIP opacity rule. Justice
Department representatives have stated their intent to file a second lawsuit
against the Company based on the opacity observations recorded during that
period.
The second lawsuit has not yet been filed. Instead, the Company has entered
into negotiations with the EPA to resolve the claims against the Company through
a consent decree. Although the EPA and the Company have made substantial
progress in negotiating the terms of the consent decree, key issues remain to be
resolved. Anticipated elements of any settlement would include a commitment by
the Company to improve the emission control equipment at the Trentwood facility
and a civil penalty assessment against the Company, in an amount to be
determined.
As of the date of this Prospectus, the Company cannot predict the
likelihood that the EPA and the Company will reach agreement upon the terms of a
consent decree. In the event that the negotiations are not successful, the
matter likely would be resolved in federal court.
Catellus Development Corporation v. Kaiser Aluminum & Chemical Corporation
and James L. Ferry & Son, Inc.
On January 7, 1991, the City of Richmond, et al. (the "Plaintiffs") filed a
Second Amended Complaint for Damages and Declaratory Relief against the United
States of America, the United States Maritime Administration and Santa Fe Land
Corporation (now known as Catellus Development Corporation ("Catellus"))
(collectively, the "Defendants") alleging, among other things, that the
Defendants caused or allowed hazardous substances, pollutants, contaminants,
debris and other solid wastes to be discharged, deposited, disposed of or
released on certain property located in Richmond, California (the "Property")
formerly owned by Catellus and leased to (i) the Company for the purpose of
shipbuilding activities conducted by the Company on behalf of the United States
during World War II, and (ii) subsequent tenants thereafter. Plaintiffs allege,
among other things, that (i) the Defendants are jointly and severally liable for
response costs and natural resources damages under CERCLA, (ii) Defendant United
States of America is liable on grounds of negligence for damages under the
Federal Tort Claims Act, and (iii) Defendant Catellus is strictly liable and on
grounds of negligence for such discharge, deposit, disposal or release. Certain
of the Plaintiffs have alleged that they had incurred or expect to incur costs
and damages in the amount of approximately $49 million, in the aggregate.
On or about September 23, 1992, the Plaintiffs filed a Third Amended
Complaint, alleging, among other things, that (i) the Defendants are jointly and
severally liable for response costs, declaratory relief and natural resources
damages under CERCLA; (ii) Defendant United States of America is liable on
grounds of negligence, continuing trespass and continuing nuisance for damages
under the Federal Tort Claims Act; (iii) Defendant Catellus is strictly liable
on grounds of continuing nuisance, continuing trespass and negligence for such
discharge, deposit, disposal or release; (iv) Catellus is liable to indemnify
Plaintiffs; and (v) Catellus is liable for fraudulent concealment of the alleged
contamination.
On February 20, 1991, Catellus filed a third party complaint (the "Third
Party Complaint") against the Company and James L. Ferry & Son, Inc. ("Ferry")
in the United States District Court for the Northern District of California,
Case No. C-89-2935 DLJ. The Third Party Complaint was served on the Company as
of April 12, 1991. The Third Party Complaint alleges that, if the allegations of
the Plaintiffs are true, then the Company and Ferry (which is alleged to have
performed certain excavation activities on the Property and, as a result
thereof, to have released contaminants on the Property and to have arranged for
the transportation, treatment and disposal of such contaminants) are liable for
Catellus' response costs and damages under CERCLA and damages under other
theories of negligence and nuisance and, in the case of the Company, waste.
Catellus seeks (i) contribution from the Company and Ferry, jointly and
severally, for its costs and damages pursuant to CERCLA, (ii) indemnity from the
Company and Ferry for any liability or judgment imposed upon it, (iii) indemnity
from the Company and Ferry for reasonable attorneys' fees and costs incurred by
it, (iv) damages for the injury to its interest in the Property, and (v) treble
damages from the Company pursuant to California Code of Civil Procedure Section
732. On June 4, 1991, Catellus served on
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the Company a first amended third party complaint which alleges, in addition to
the allegations of the Third Party Complaint, that the Company and/or a
predecessor in interest to the Company is also liable for Catellus' damages, if
any, on the basis of alleged contractual indemnities contained in certain former
leases of the Property.
The Third Party Complaint was amended on or about October 26, 1992. The
amended Third Party Complaint alleges that, if the allegations of the Plaintiffs
are true, then the Company and Ferry (which is alleged to have performed certain
excavation activities on the Property and, as a result thereof, to have released
contaminants on the Property and to have arranged for the transportation,
treatment and disposal of such contaminants) are liable for (i) Catellus'
response costs and natural resources damage under CERCLA; (ii) damages under
theories of negligence, trespass and nuisance; (iii) indemnity (equitable and
contractual); and (iv) attorneys fees under California Code of Civil Procedure
Section 1021.6.
By letter dated October 26, 1992, counsel for certain underwriters at
Lloyd's London and certain London Market insurance companies ("London Insurers")
advised that the London Insurers agreed to reimburse the Company for defense
expenses in the third party action filed by Catellus, subject to a full
reservation of rights.
The Plaintiffs filed a motion for leave to file a Third Amended Complaint
which would have added the Company as a first party defendant. This motion was
denied. On October 26, 1992, the Plaintiffs served a separate Complaint against
the Company for damages and declaratory relief. The claims asserted by the
Plaintiffs are for (i) recovery of costs, natural resources damages and
declaratory relief under CERCLA; (ii) damages for injury to the Property arising
from negligence; (iii) damages under a theory of strict liability; (iv)
continuing nuisance and continuing trespass; (v) equitable indemnity; (vi)
response costs incurred by the Richmond Redevelopment Agency under California
Health & Safety Code Section 33459.4; and (vii) declaratory relief on the state
claims. This matter has been tendered to the London Insurers.
Picketville Road Landfill Matter
On July 1, 1991, the EPA served on the Company and thirteen other PRPs a
Unilateral Administrative Order For Remedial Design and Remedial Action (the
"Order") at the Picketville Road Landfill site in Jacksonville, Florida. The EPA
seeks remedial design and remedial action pursuant to CERCLA from some, but
apparently not all, PRPs based upon a Record of Decision outlining remedial
cleanup measures to be undertaken at the site adopted by the EPA on September
28, 1990. The site was operated as a municipal and industrial waste landfill
from 1968 to 1977 by the City of Jacksonville. The Company was first notified by
the EPA on January 17, 1991, that wastes from one of the Company's plants may
have been transported to and deposited in the site. In its Record of Decision,
the EPA estimated that the total capital, operations and maintenance costs of
its elected remedy for the site would be approximately $9.9 million. There can
be no assurance that such costs will not exceed such estimated amount. In
addition, the EPA has reserved the right to seek recovery of its costs incurred
relating to the Order, including, but not limited to, reimbursement of the EPA's
cost of response. Through negotiations with the EPA and other PRPs, the Company
has reached an agreement with such PRPs under which the Company will fund
$146,700 of the cost of the remedial action (unless remedial costs exceed $19
million in which event the settlement agreement will be re-opened). The
implementation of the foregoing agreement is subject to continuing discussions
among the EPA, the other PRPs and the Company.
Asbestos-related Litigation
The Company is a defendant in a number of lawsuits in which the plaintiffs
allege that certain of their injuries were caused by exposure to asbestos
during, and as a result of, their employment with the Company or to products
containing asbestos produced or sold by the Company. The number of such lawsuits
instituted against the Company increased substantially in 1993 and management
believes the number of such lawsuits will continue to increase at a greater
annualized rate than in prior years. In connection with such litigation, the
Company made cash payments (for settlement and other related costs) during 1993,
1992 and 1991, in the amounts of $7.0 million, $7.1 million and $6.1 million,
respectively. Based upon prior experience, the Company estimates future cash
payments in connection with such litigation of approximately $8.0 million to
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$12.0 million per year for the years 1994 through 1998, and an aggregate of
approximately $85.0 million thereafter (through 2007). While the ultimate extent
of the Company's liability for asbestos-related claims cannot be determined at
this time, management currently believes that potential insurance recoveries
should be adequate to pay substantially all of such claims, and that, as a
result thereof, the resolution of these matters should not have a material
adverse effect on the Company's consolidated financial position or results of
operations.
Various other lawsuits and claims are pending against the Company.
Management believes that resolution of the lawsuits and claims made against the
Company, including the matters discussed above, will not have a material adverse
effect on the Company's consolidated financial position.
PROPERTIES
The Company owns in fee or leases all the real estate and facilities used
in connection with its business. Plants and equipment and other facilities are
generally in good condition and suitable for their intended uses, subject to
changing environmental requirements. Although the Company's domestic aluminum
smelters and alumina facility were initially designed early in the Company's
history, they have been modified frequently over the years to incorporate
technological advances in order to improve efficiency, increase capacity and
achieve energy savings. The Company believes that its domestic plants are cost
competitive on an international basis. Due to the Company's variable cost
structure, the plants' operating costs are relatively lower in periods of low
primary aluminum prices and relatively higher in periods of high primary
aluminum prices.
Obligations under the Credit Agreement are secured by, among other things,
mortgages on the Company's plants located in Spokane (the Trentwood and Mead
plants) and Tacoma, Washington; Gramercy, Louisiana; Erie, Pennsylvania; Newark,
Ohio; and Sherman, Texas. The New Credit Agreement will not be secured by the
Company's Gramercy, Louisiana Plant.
OTHER MATTERS
On February 7, 1989, the Company sold aluminum production facilities at
Ravenswood, West Virginia (the "Ravenswood Works") and Bedford, Indiana and a
data center at Columbus, Ohio. The sales price for the three facilities was
approximately $256 million, including approximately $168 million in cash and the
assumption by the buyer of certain liabilities. Among the liabilities the buyer
and its pension plan assumed were pension liabilities relating to former
employees of the Company represented by the USWA who were employed by the buyer
at the Ravenswood Works and the Bedford facility at the sale date (the "Former
Employees"). The projected benefit obligation relating to such assumed pension
liabilities was calculated at such time to be approximately $77.6 million. The
buyer agreed to certain restrictions on its activities designed to help assure
that it would meet its assumed obligations. The Company retained liability for
pension, retiree health and life insurance coverage with respect to Ravenswood
Works employees who retired from the Company prior to the sale date.
The Company agreed with the USWA that in the event of a permanent shutdown
of the Ravenswood Works prior to February 7, 1994, the Former Employees would
receive from the owner of the Ravenswood Works, the Pension Benefit Guaranty
Corporation, the Company and/or a pension plan maintained by the Company, the
pension benefits accrued as of the sale date subject to certain limited
exceptions. The Company also agreed with the USWA that in the event of such a
shutdown, such Former Employees, if otherwise eligible, would receive retiree
health coverage, subject to a monthly premium, and a portion of their life
insurance coverage. The Company has not calculated the costs which would be
necessary to provide the retiree health and life insurance coverage, but such
costs are believed to be smaller than the amount of the pension liabilities
assumed by the buyer.
The Department of Labor ("DOL"), which has enforcement powers under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), in
October 1991, initiated a review of the transfer of the pension liabilities and
the related assets from the Company plan to the buyer and its pension plan. The
Company has assisted the DOL with its review and believes that its agreements
and actions in connection with the sale and the actions of the Company plan
fiduciaries were in full compliance with ERISA.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The table below sets forth certain information, as of February 4, 1994,
with respect to the executive officers and directors of the Company, and certain
officers of KAC who perform services for the Company. All officers and directors
hold office until their respective successors are elected and qualified or until
their earlier resignation or removal.
<TABLE>
<CAPTION>
NAMES POSITIONS AND OFFICES WITH THE COMPANY
--------------------------------- ------------------------------------------------
<S> <C>
George T. Haymaker, Jr........... Chairman of the Board, Chief Executive Officer
and Director
Joseph A. Bonn................... Vice President -- Planning and Administration
John T. La Duc................... Vice President and Chief Financial Officer
Anthony R. Pierno................ Vice President and General Counsel
Byron L. Wade.................... Vice President, Secretary and Deputy General
Counsel
Charlie Alongi................... Controller
Kris S. Vasan.................... Treasurer
Robert E. Cole................... Vice President, Government Affairs
John E. Daniel................... Vice President, Primary Aluminum
Richard B. Evans................. Vice President, Flat-Rolled Products
Robert W. Irelan................. Vice President, Public Relations
Geoffrey W. Smith................ Vice President, Alumina
Lawrence L. Watts................ Vice President, Alumina
Robert J. Cruikshank............. Director
Charles E. Hurwitz............... Director
Ezra G. Levin.................... Director
Robert Marcus.................... Director
Paul D. Rusen.................... Director
</TABLE>
George T. Haymaker, Jr. Mr. Haymaker, age 56, assumed the positions of
Chairman of the Board and Chief Executive Officer of the Company and KAC
effective January 1, 1994. From May 1993 to December 1993 Mr. Haymaker served as
President and Chief Operating Officer of the Company and KAC. Mr. Haymaker was
elected as a director of KAC at KAC's Annual Meeting of Stockholders on May 19,
1993, and was also elected as a director of the Company at the Company's Annual
Meeting of Stockholders held on June 15, 1993. From 1987 to April 1993, Mr.
Haymaker had been a partner in a partnership which acquires, redirects and
operates small to medium sized companies in the metals industry. He served as
President from February 1992 to March 30, 1993, and has been a director since
July 1987 of Metalmark Corporation, which is in the business of semi-fabrication
of aluminum specialty foils and extrusions. From May 1986 until February 1993,
he also served as President of West Coast Sales Corp., which provides management
and acquisition services. Mr. Haymaker also served as Chief Executive Officer
and a director of Amarlite Architectural Products, Inc. ("Amarlite"), a producer
of architectural curtain wall and entrance products, from August 1990 to April
1992 and from April 1989 to February 1993, respectively. He was a director of
American Powdered Metals Company, engaged in the manufacture of powdered metal
components, from August 1988 to March 1993, and Hayken Metals Asia Limited,
which represents manufacturers of aluminum and metal products, from January 1988
to April 10, 1993. During 1984 to 1986, Mr. Haymaker served as Executive Vice
President -- Aluminum Operations of Alumax Incorporated, responsible for all
primary aluminum and semi-fabricating activities. Mr. Haymaker has extensive
experience in the management of businesses engaged in the
44
<PAGE> 48
production and sale of aluminum and aluminum products, including 25 years of
experience in a variety of executive and managerial positions with Aluminum
Company of America and its subsidiaries.
Joseph A. Bonn. Mr. Bonn, age 50, has been Vice President -- Planning and
Administration of the Company and KAC since July 1989 and February 1992,
respectively. Mr. Bonn has served as a Vice President of the Company since April
1987, and served as Senior Vice President -- Administration of MAXXAM from
September 1991 through December 31, 1992. He was also the Company's Director of
Strategic Planning from April 1987 until July 1989.
John T. La Duc. Mr. La Duc, age 50, has been Chief Financial Officer of the
Company since January 1990 and a Vice President of the Company since June 1989.
He has been Vice President and Chief Financial Officer of KAC since June 1989
and May 1990, respectively. From January 1, 1993 until April 5, 1993, Mr. La Duc
served as Treasurer of the Company and KAC, having previously served as
Treasurer of KAC from September 1987 to May 1990 and Assistant Treasurer of KAC
from February 1987 to September 1987. Mr. La Duc also previously served as
Treasurer of the Company from September 1987 until January 1990. He was an
Assistant Treasurer and Treasurer, International Operations of the Company from
1981 until 1987. In September 1990, Mr. La Duc was elected Senior Vice President
and Chief Financial Officer of MAXXAM. Mr. La Duc also serves as a Vice
President and Chief Financial Officer of MAXXAM Group Inc. ("MGI"), a wholly
owned subsidiary of MAXXAM engaged through its subsidiaries in forest products
operations, The Pacific Lumber Company ("Pacific Lumber"), an indirect
subsidiary of MAXXAM engaged in forest products operations, and Pacific Lumber's
subsidiary, Scotia Pacific Holding Company ("Scotia Pacific"). He also serves as
a director of Pacific Lumber and Scotia Pacific.
Anthony R. Pierno. Mr. Pierno, age 61, has served as Vice President and
General Counsel of the Company and KAC since January 1992. He also serves as
Senior Vice President and General Counsel of MAXXAM, positions he has held since
February 1989. Mr. Pierno also serves as Vice President and General Counsel of
MAXXAM Group, Pacific Lumber and Scotia Pacific. Immediately prior to joining
MAXXAM, Mr. Pierno served as partner in charge of the business practice group in
the Los Angeles office of the law firm of Pillsbury, Madison & Sutro. He has
served as the Commissioner of Corporations of the State of California and as
Chair of several committees of the State Bar of California. Mr. Pierno is Vice
Chairman of the Board of Trustees of Whittier College, and a member and past
Chairman of the Board of Trustees of Marymount College.
Byron L. Wade. Mr. Wade, age 46, has served as Vice President and Secretary
of the Company and KAC since January 1992, and Deputy General Counsel of the
Company and KAC since June 1992 and May 1992, respectively. Mr. Wade has also
served as Vice President and Deputy General Counsel of MAXXAM since May 1990,
and Secretary of MAXXAM since October 1988. He previously served as Assistant
Secretary and Assistant General Counsel of MAXXAM from November 1987 to October
1988 and May 1990, respectively. Mr. Wade has served as Vice President,
Secretary and Deputy General Counsel of Pacific Lumber and Scotia Pacific since
June 1990 and November 1992, respectively, and as a Vice President of MAXXAM
Group since July 1990. He had previously served since 1983 as Vice President,
Secretary and General Counsel of MCO Resources, Inc., a publicly-traded oil and
gas company, which was majority owned by MAXXAM. Since July 1993, Mr. Wade has
served as a director, Vice President and Secretary of SHRP, Inc. ("SHRP"), the
sole general partner of Sam Houston Race Park, Ltd., a Texas limited
partnership, which has been granted a license to operate a horse racing facility
in Houston, Texas.
Charlie Alongi. Mr. Alongi, age 63, has been the Controller of the Company
and KAC since July 1989, and was the Assistant Controller of the Company from
February 1982 until July 1989.
Kris S. Vasan. Mr. Vasan, age 44, became Treasurer of the Company and KAC
on April 6, 1993. Mr. Vasan previously served the Company and KAC as Corporate
Director of Financial Planning and Analysis from June 1990 until April 1993.
From October 1987 until June 1990, he served as Associate Director of Financial
Planning and Analysis. He was Associate Director of Energy Planning of the
Company from 1980 until 1987, and prior thereto, Manager of Energy Planning from
1978. Mr. Vasan joined the Company in 1974 as Senior Operations Research
Analyst, a position he held until 1978.
45
<PAGE> 49
Robert E. Cole. Mr. Cole, age 47, has been a Vice President of the Company
since March 1981. Mr. Cole also has served as Vice President -- Federal
Government Affairs of MAXXAM, MGI and Pacific Lumber since September 1990.
John E. Daniel. Mr. Daniel, age 58, has been a Vice President of the
Company since January 1992, and has been the General Manager of the Company's
primary aluminum products business unit since November 1990. From November 1990
to January 1992, he was Divisional Vice President of the Company's primary
aluminum products business unit. From December 1989 to November 1990, Mr. Daniel
was Reduction Plant Manager of the Tacoma smelter plant. From July 1986 to
December 1989, he was Reduction Plant Manager of the Company's formerly owned
Ravenswood, West Virginia plant.
Richard B. Evans. Mr. Evans, age 46, has been a Vice President of the
Company since January 1992, and has been the General Manager of the Company's
flat-rolled products business unit since January 1989. From July 1986 to January
1992, he was Divisional Vice President of the Company's flat-rolled products
business unit. From March 1985 to June 1986, Mr. Evans was Divisional Vice
President and manager of the Company's formerly-owned Ravenswood, West Virginia
plant. From July 1982 to February 1985, he was General Manager for Die Formed
Products.
Robert W. Irelan. Mr. Irelan, age 56, has been Vice President -- Public
Relations of the Company since February 1988. From June 1985 to February 1988,
Mr. Irelan served as Divisional Vice President -- Corporate Public Relations of
the Company, and from 1968 to June 1985, he served the Company and certain
affiliated companies in a variety of positions. Mr. Irelan also has served as
Vice President -- Public Relations of MAXXAM, MGI and Pacific Lumber since
September 1990.
Geoffrey W. Smith. Mr. Smith, age 47, has been a Vice President of the
Company since January 1992, and has been Co-General Manager of the Company's
alumina business unit since September 1991. From September 1990 to January 1992,
Mr. Smith was Divisional Vice President of the Company's alumina business unit.
From August 1988 to August 1990, Mr. Smith was Director of Business Development
for the alumina business unit, and from 1982 to August 1988 was
Operations/Technical Manager for the Gramercy refinery.
Lawrence L. Watts. Mr. Watts, age 47, has been a Vice President of the
Company since January 1992, and has been Co-General Manager of the Company's
alumina business unit since September 1991. From June 1989 to January 1992, Mr.
Watts was Divisional Vice President, Governmental Affairs and Human Resources
for the alumina business unit, and from July 1988 to June 1989, he was
Divisional Vice President, Public Relations and Governmental Relations for the
same business unit. From September 1984 to July 1988, Mr. Watts was Manager,
Human Resources for the alumina business unit.
Robert J. Cruikshank. Mr. Cruikshank, age 63, was appointed as a director
of the Company and KAC on January 26, 1994. In addition, he has been a director
of MAXXAM since May 1993. Mr. Cruikshank was a Senior Partner in the
international public accounting firm of Deloitte & Touche from December 1989
until his retirement in March 1993. Prior to its merger with Touche Ross & Co.
in December 1989, Mr. Cruikshank served as Managing Partner of Deloitte Haskins
& Sells from June 1974 until the merger, and served on such firm's board of
directors from 1981 to 1985. Mr. Cruikshank also serves as a director of Houston
Industries Incorporated, a public utility holding company with interests in
electric utilities, cable television, coal and transportation businesses.
Charles E. Hurwitz. Mr. Hurwitz, age 53, has served as a director of the
Company since November 1988 and of KAC since October 1988. Mr. Hurwitz has also
served as a member of the Board of Directors and the Executive Committee of
MAXXAM since August 1978 and was elected as Chairman of the Board and Chief
Executive Officer of MAXXAM in March 1980. Since May 1982, Mr. Hurwitz has been
Chairman of the Board and Chief Executive Officer of MAXXAM Group. Since January
1, 1993, Mr. Hurwitz has also served MAXXAM and MGI as President. Mr. Hurwitz
has also served as a director and Chairman of the Board of SHRP since July 1993.
From May 1986 until February 1993, Mr. Hurwitz served as a director of Pacific
Lumber, and from December 31, 1992 until February 1993, he served as Chairman of
the Board of Pacific Lumber. Mr. Hurwitz has been, since January 1974, Chairman
of the Board and Chief Executive
46
<PAGE> 50
Officer of Federated Development Company ("Federated"), a New York business
trust primarily engaged in the management of real estate investments.
Ezra G. Levin. Mr. Levin, age 59, has been a director of the Company since
November 1988. He has been a director of KAC since July 1991, and a director of
MAXXAM since May 1978. Mr. Levin also served as a director of the Company from
April 1988 to May 1990. Mr. Levin is a partner in the law firm of Kramer, Levin,
Naftalis, Nessen, Kamin & Frankel. He serves as a trustee of Federated and as a
director of MGI, Pacific Lumber, Scotia Pacific and UMB Bank and Trust Company.
Robert Marcus. Mr. Marcus, age 68, has been a director of the Company and
KAC since September 1991. From 1987 to January 1992, Mr. Marcus was a partner in
American Industrial Partners, a San Francisco and New York based firm
specializing in private equity investments in industrial companies. From 1983 to
1991, Mr. Marcus was a director of Domtar Inc., a Canadian resource-based
multi-business corporation. From 1982 to 1987, Mr. Marcus served as President
and Chief Executive Officer of Alumax Inc., an integrated aluminum company.
Paul D. Rusen. Mr. Rusen, age 58, has been a director of the Company since
April 1986. Mr. Rusen has served as a director of KAC since July 1991. Mr. Rusen
previously served as a director of KAC from May 1987 to May 1990. He is
President of Employee Ownership, Inc., an investment banking firm, Chairman of
Bliss/Salem Corporation, a rolling mill manufacturing company, former Chairman
and Chief Executive Officer of Pittsburgh Forgings Company, a former director of
Wheeling-Pittsburgh Steel Corporation and a former principal of Working Equity,
Inc., an investment banking firm.
In February 1992, Pittsburgh Forgings Company filed a voluntary corporate
petition under Chapter 11, Title 11, of the United States Code in the United
States Bankruptcy Court for the Western District of Pennsylvania. Mr. Rusen was
the Chairman, President and Chief Executive Officer of Pittsburgh Forgings
Company at such time.
In October 1990, Amarlite filed a voluntary corporate petition under
Chapter 11, Title 11, of the United States Code in the United States Bankruptcy
Court for the Northern District of Georgia. In December 1991, Amarlite obtained
approval of its reorganization plan, which was funded and substantially
consummated on January 14, 1992. Mr. Haymaker was Chief Executive Officer and a
director of Amarlite during such period.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company has several standing committees,
including Executive, Audit and Compensation Committees.
The Executive Committee, which currently consists of two members, meets on
call and has authority to act on most matters during the intervals between
meetings of the entire Board of Directors. Its current members are Messrs.
Hurwitz (Chairman) and Haymaker.
The Audit Committee presently consists of Messrs. Levin, Marcus (Chairman)
and Rusen. The Audit Committee meets with appropriate Company financial and
legal personnel, internal auditors and independent public accountants and
reviews the internal controls of the Company and the objectivity of its
financial reporting. This Committee recommends to the Board the appointment of
the independent public accountants to serve as auditors in examining the
corporate accounts of the Company. The independent public accountants
periodically meet privately with the Audit Committee and have access to the
Committee at any time.
The Compensation Committee reviews and advises management, makes
recommendations to the Board, and reviews and approves proposals regarding the
establishment or change of benefit plans, salaries or compensation afforded the
executive officers and other employees of the Company. Messrs. Levin (Chairman)
and Marcus currently serve as members of this Committee.
The Board of Directors of the Company does not have a standing nominating
committee nor does it have any committee performing a similar function.
47
<PAGE> 51
DIRECTOR COMPENSATION
Directors who were not employees of the Company received a retainer of
$30,000 for the 1992 calendar year. During 1992, directors of the Company who
were also directors of MAXXAM did not receive any additional director or
committee fees for serving as a director of the Company. Directors could also be
paid additional ad hoc fees for extraordinary services. Mr. Marcus was paid an
additional fee of $10,000 for extraordinary services performed in 1992.
Directors were reimbursed for travel and other disbursements relating to Board
and Committee meetings. Fees to directors who were also employees of the Company
were deemed to be included in their salary. Directors of the Company were also
directors of KAC and received the foregoing compensation for acting in both
capacities. In addition to the compensation payable as a director for 1992, the
Chairman of each of the Executive, Audit and Compensation Committees was paid a
fee of $1,500 per committee meeting held on a date other than a Board of
Directors meeting date. Other members of such Committees received no additional
compensation for attending such Committee meetings.
In November 1988, MGI entered into a one-year consulting agreement with one
of the Company's former directors, John B. Connally, under which Mr. Connally
received $250,000. The agreement was subsequently renewed each year on the same
terms and was effective until June 1993.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables contain information with respect to persons known to
the Company to be the beneficial owners of more than 5% of the Common Stock, the
1985 Series A Stock and the 1985 Series B Stock as of December 31, 1993. For the
purposes of these disclosures and the disclosure of ownership of shares by
officers and directors below, shares are considered to be "beneficially" owned
if the person has or shares the power to vote or direct the voting for the
securities, the power to dispose of or direct the disposition of the securities,
or the right to acquire beneficial ownership within 60 days.
Ownership of Certain Beneficial Owners Common Stock
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
------------------------------------------------------- -------------------- ----------
<S> <C> <C>
Kaiser Aluminum Corporation 46,171,365 shares 100%
5847 San Felipe, Suite 2600
Houston, Texas 77057
</TABLE>
Ownership of Certain Beneficial Owners Cumulative (1985 Series A) Preference
Stock
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
------------------------------------------------------- -------------------- ----------
<S> <C> <C>
Kaiser Aluminum USWA 869,693 shares 93.9%
Employee Stock Ownership Plan(2)
c/o Mellon Bank, N.A.
Pittsburgh, Pennsylvania
</TABLE>
Ownership of Certain Beneficial Owners Cumulative (1985 Series B) Preference
Stock
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
------------------------------------------------------- -------------------- ----------
<S> <C> <C>
Kaiser Aluminum Salaried 87,006 shares 56.0%
Employee Stock Ownership Plan(2)
c/o Mellon Bank, N.A.
Pittsburgh, Pennsylvania
</TABLE>
- ---------------
(1) The "Percent of Class" is computed using the shares outstanding on December
31, 1993.
(2) Individual participants in the Plan may direct the Plan's Trustee how to
vote their shares; undirected shares are voted by the Trustee in the same
proportion as shares voted upon participant direction.
48
<PAGE> 52
Ownership of Management Cumulative (1985 Series B) Preference Stock
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
------------------------------------------------------- -------------------- ----------
<S> <C> <C>
All directors and officers of the Company 157.1135 shares *
</TABLE>
- ---------------
* Less than 1%
(1) The "Percent of Class" is computed using the shares outstanding on April 21,
1993.
Ownership of KAC Parent
MAXXAM owns approximately 67% of the Common Stock of KAC. The following
table sets forth, as of December 31, 1993, the beneficial ownership of the
Common Stock and Class A $.05 Non-Cumulative Participating Convertible Preferred
Stock ("Class A Preferred Stock") of MAXXAM by the directors and nominees for
director of the Company, and by the Company's directors and officers as a group:
<TABLE>
<CAPTION>
PERCENT
OF
PERCENT COMBINED
AMOUNT AND NATURE OF OF VOTING
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS POWER(2)
- ---------------------------------- ---------------------------------- ----- -----
<S> <C> <C> <C>
Charles E. Hurwitz................ Common Stock -- 2,746,642(3)(4) 31.2%
Class A Preferred Stock -- 59.9%
(3)(4) 97.0%
Ezra G. Levin..................... Common Stock -- 1,000(3)(5) * *
All directors and officers of KAC
as a group (18)................. Common Stock -- 2,771,792 31.6%
Class A Preferred Stock --
657,917 96.6% 60.0%
</TABLE>
- ---------------
* Less than 1%.
(1) Except as may otherwise be indicated, beneficial owners have sole voting and
investment power with respect to the shares listed in the table.
(2) MAXXAM's Class A Preferred Stock is generally entitled to ten votes per
share on matters presented to a vote of that company's stockholders.
(3) Messrs. Hurwitz and Levin serve as trustees of Federated, and Mr. Hurwitz,
together with members of his immediate family and trusts for the benefit
thereof, owns all of the shares of beneficial interest in Federated. In
addition, Federated, Messrs. Hurwitz and Levin, and Mr. James H. Paulin,
Jr., Secretary and Treasurer of Federated, are a "group" (the "Stockholder
Group") within the meaning of Section 13(d) of the Exchange Act. As of
December 31, 1993, in the aggregate, the Stockholder Group beneficially
owned 2,762,994 shares of MAXXAM's Common Stock and 658,050 shares of
MAXXAM's Class A Preferred Stock, aggregating approximately 59.9% of the
total voting power of MAXXAM. By reason of the foregoing and their
relationship with the members of the Stockholder Group, Messrs. Hurwitz and
Levin may be deemed to possess shared voting and investment power with
respect to the shares held by the Stockholder Group.
(4) Includes as of December 31, 1993 (a) 1,669,451 shares of MAXXAM's Common
Stock and 656,853 shares of MAXXAM's Class A Preferred Stock, respectively,
owned by Federated as to which Mr. Hurwitz possesses voting and investment
power, (b) 1,526 shares of MAXXAM's Common Stock is owned by Mr. Hurwitz's
spouse as separate property, (c) 46,500 shares of MAXXAM's Common Stock
owned by a limited partnership controlled by Mr. Hurwitz and his spouse,
23,250 of which shares were separately owned by Mr. Hurwitz's spouse prior
to their transfer to such limited partnership and as to which Mr. Hurwitz
disclaims beneficial ownership, (d) 158,564 shares of MAXXAM's Common Stock
owned by 1992 Hurwitz Investment Partnership, L.P., of which 79,282 shares
are owned by Mr. Hurwitz's spouse as separate property, and (e) 71,175
shares of MAXXAM's Common Stock which
49
<PAGE> 53
could be acquired upon exchange of 7% Cumulative Exchangeable Preferred
Stock of MCOP owned by Federated. Does not include shares owned by other
members of the Stockholder Group.
(5) Does not include shares owned by other members of the Stockholder Group.
At December 31, 1993, 28,000,000 shares of KAC's Common Stock owned by
MAXXAM were pledged as security for two MGI debt issues consisting of $100.0
million aggregate principal amount of 11 1/4% Senior Secured Notes due 2003 and
$126.7 million aggregate principal amount of 12 1/4% Senior Discount Notes due
2003.
EXECUTIVE COMPENSATION
The Kaiser 1993 Omnibus Stock Incentive Plan
On April 2, 1993, the Compensation Committee recommended to the Board of
Directors the adoption of the Kaiser 1993 Omnibus Stock Incentive Plan (the
"Plan"). On April 6, 1993, the Board of Directors adopted the Plan, subject to
approval by the stockholders of the Company and KAC. The stockholders of both
the Company and KAC approved the Plan at their 1993 Annual Meetings.
The Company and KAC currently have identical Boards of Directors and
identical Compensation Committee memberships. Accordingly, their respective
Compensation Committees are referred to jointly in this section as the
"Committee." The Plan is the Company's first stock-based incentive plan since
the Company's 1979 Stock Option Plan, which expired on December 31, 1988. The
Plan is jointly sponsored by the Company and KAC.
The description of the Plan herein is qualified in its entirety by the
provisions of the Plan, a copy of which has been filed with the Commission.
Long-Term Incentive Compensation Background
Effective as of January 1, 1989, the Company and KAC adopted an unfunded
long-term incentive plan (as amended, the "LTIP"). Effective as of January 1,
1990, the Company adopted an unfunded middle management long-term incentive plan
(the "Mid-Management Plan"). No employee participates in both plans. Both plans
are linked to certain measurements of corporate net income.
During 1992, the senior managements of the Company and KAC and the
Committee determined that the continued utilization of the LTIP and
Mid-Management Plan might not be in the best interest of the corporations. They
observed that virtually all benefits under the LTIP had been earned and that the
Mid-Management Plan was being viewed as an annual, rather than longer term,
incentive. Moreover, they observed that KAC's stock had become publicly traded
since those plans were adopted. For these and other reasons the Committee
determined that it would be appropriate to design a new stock-based long-term
incentive plan.
Compensation Committee Initiation of the Plan and Initial Grants
At its meeting held on December 2, 1992, the Committee directed the
preparation of a flexible but stock-based incentive plan for joint sponsorship
by the Company and KAC. The Committee determined not to make year-end 1992
grants to participants under either the LTIP or the Mid-Management Plan and
indicated that, although such plans were not being terminated, they expected to
make future long-term incentive grants to certain employees under a stock-based
plan.
In addition, the Committee determined to provide a one-time opportunity for
participants in the LTIP to elect to receive payment of their LTIP account
balances, as of December 31, 1992, as follows:
(i) Amounts earned and vested would be paid half in cash and half in
restricted shares of common stock of KAC. Ninety-five percent of the earned
and vested amounts would be paid on or prior to December 31, 1992, with the
remainder to be paid on or about April 10, 1993. The portion payable in
restricted shares of common stock of KAC would be divided by the average
closing price for the stock for December 1992 through the latest practical
date to determine the number of shares granted. As
50
<PAGE> 54
implemented, the average December price of $8.539 per share (through
December 28, 1992) was utilized. The portion payable in cash would be
reduced by 1992 bonuses paid to recipients and by appropriate tax
withholdings.
(ii) Amounts earned and unvested as of December 31, 1992 under the
LTIP would be paid in options or shares of restricted stock under the Plan
following its implementation. Restrictions would be removed or options
would vest at the rate of 25% each December for four (4) years.
(iii) Amounts unearned and unvested as of December 31, 1992 under the
LTIP would be paid in options or shares of restricted stock under the Plan
following its implementation. Restrictions would be removed or options
would vest as to 50% thereof in each of December 1995 and December 1996.
The payments made in accordance with item (i) above were separate and apart
from the Plan and are reflected in column (h) of the Summary Compensation Table.
The grants made in accordance with items (ii) and (iii) above are referred to in
the Plan as the Initial Grants and are reflected in column (f) of the Summary
Compensation Table.
Six participants in the LTIP, constituting all of the participants in the
LTIP then employed by the Company other than Messrs. John M. Seidl (former
Chairman of the Board of Directors and Chief Executive Officer of the Company
until December 31, 1992) and Hutchcraft (former Chairman of the Board of
Directors and Chief Executive Officers of the Company until December 31, 1993),
timely made elections to receive the December 1992 restricted stock and cash
distribution and the Initial Grants under the Plan in lieu of the LTIP benefits
attributable to their accounts at year end 1992. As a result of their elections,
Messrs. La Duc and Bonn each received as to their 95% payment described in item
(i) above, 13,145 shares of restricted common stock of KAC. Mr. La Duc received
cash in the amount of $13,159, and Mr. Bonn's cash account was a negative $1,489
which he paid to KAC. The remaining in lieu distributions were made to these
individuals on or about April 10, 1993 and amounted to $1,384 and 772 shares to
Mr. La Duc and $690 and 772 shares to Mr. Bonn. The Initial Grants relating to
items (ii) and (iii) above are an integral part of the Plan. The information
shown below in the New Plan Benefits Table, except with respect to Mr. Haymaker,
represents the Initial Grants. An aggregate of 764,096 shares of KAC restricted
common stock were awarded as the Initial Grants, including 167,346 shares each
to Messrs. La Duc and Bonn.
51
<PAGE> 55
New Plan Benefits Table
The following table sets out the determinable number of shares of KAC
Common Stock that were issued or allocated during 1993 to each of the named
executive officers and the following groups under the Plan:
<TABLE>
<CAPTION>
1993 KAISER OMNIBUS STOCK
INCENTIVE PLAN
--------------------------
DOLLAR VALUE NUMBER
NAME AND POSITION ($)(1) OF SHARES
-------------------------------------------------------------- ------------ ---------
<S> <C> <C>
John M. Seidl,
former Chairman of the Board and Chief Executive Officer.... $ -0- -0-
A. Stephens Hutchcraft, Jr.,
former Chairman of the Board, Chief Executive Officer and
President................................................... -0- -0-
George T. Haymaker, Jr.,
Chairman of the Board and Chief Executive Officer........... 712,500 100,000
Anthony R. Pierno,
Vice President and General Counsel.......................... -0- -0-
John T. La Duc,
Vice President and Chief Financial Officer.................. 1,428,967 167,346
Joseph A. Bonn,
Vice President, Planning and Administration................. 1,428,967 167,346
Executive Group............................................... 6,127,333 749,195
Non-Executive Director Group.................................. -0- -0-
Non-Executive Officer Employee Group.......................... 5,345,957 699,201
</TABLE>
- ---------------
(1) Valuation based on the average price per share during the month such awards
were granted.
General Provisions
The Plan is administered by the Committee. It is the intention of the Board
of Directors that the Plan be formulated, adopted and administered in a manner
which allows for transactions under it to be exempt employee benefit
transactions under Rule 16b-3 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Accordingly, no person shall serve on the Committee who
has received any grant or award under the Plan within one year prior to his or
her appointment nor shall any person receive a grant or award under the Plan
while a member of the Committee. The Committee may select participants for
awards, in addition to the Initial Grants under the Plan, from among those
employees of the Company recommended by the Chief Executive Officer of the
Company who are, in the opinion of the Committee, key employees in a position to
contribute materially to the Company's continued growth and development and to
its long-term success. It is expected that approximately 80 employees will
participate in the Plan within the first two (2) years of its duration, but such
participation has not been determined and is subject to the discretion of the
Committee.
The Committee will have discretion to make awards under the Plan. In making
awards, the Committee has flexibility in choosing from a variety of stock-based
incentive alternatives. The Plan allows for the grant of incentive stock options
("ISOs"), nonstatutory stock options, stock appreciation rights ("SARs"),
performance units, performance shares, restricted stock and unrestricted stock;
however, it is not contemplated that any participant will receive awards from
all categories available under the Plan. Up to 2,500,000 shares of Common Stock
of KAC (hereafter "KAC Common Stock") are reserved for awards or for payment of
rights granted under the Plan (subject to adjustment in the event of certain
changes in the capitalization of KAC). Of that amount, the Initial Grants
comprise 764,096 shares. Payments under the Plan for other than direct awards of
stock may be made in cash, in stock or partly in each, at the discretion of the
Committee. If any award terminates or lapses prior to the expiration or earlier
termination of the Plan, the shares of KAC Common Stock subject to the award
will be available again for award under the Plan (except in the case of a stock
option as to which a related SAR has been exercised).
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<PAGE> 56
The Plan became effective as of December 1992 upon stockholder approval and
will expire on December 31, 2002. Awards made under the Plan prior to its
termination shall remain in effect until they shall have been exercised,
satisfied or terminated as set forth in the Plan. The Board of Directors may
suspend or terminate the Plan at any time prior to its expiration. Any amendment
increasing the aggregate number of shares of stock which may be issued pursuant
to ISOs or making certain other material changes shall require stockholder
approval. However, no plan amendment may adversely impact a previously granted
award made under the Plan without consent of the grantee.
Awards under the Plan (other than direct grants of stock or stock obtained
as payment through exercise of a Plan award) may not be transferred except by
will or the laws of descent and distribution. Stock obtained under the Plan may
be subject to restrictions and recipients will be subject to reporting and
disposition restrictions under Section 16 of the Exchange Act and related
insider trading laws.
Stock Options
The Committee may grant options to purchase shares of KAC Common Stock.
Such options may be nonstatutory or nonqualified stock options and ISOs pursuant
to Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
The option price for any option may not be less than the par value of KAC
Common Stock and ISOs granted under the Plan may not utilize an exercise price
which is less than the fair market value of KAC Common Stock on the date of the
grant. The option price may be paid in cash, in previously acquired KAC Common
Stock held for at least six (6) months and with a fair market value on the date
of exercise equal to the option price, or by a combination of cash and KAC
Common Stock. The Committee may also approve other forms of payment. Options may
not be exercised sooner than one year or more than ten years from the date of
grant.
Stock Appreciation Rights
The Committee may grant stock appreciation rights in conjunction with, or
apart from, stock options. An SAR entitles the grantee to receive a payment from
KAC equal to the excess of the fair market value of a share of KAC Common Stock
at the date of exercise over a specified price fixed by the Committee. The
Committee may establish a maximum appreciation value when granting SARs. Payment
for SARs may be made in cash, KAC Common Stock, or a combination of both, at the
discretion of the Committee. SARs may not be exercised sooner than one year or
more than ten years from the date of grant.
Restricted Stock
The Committee may grant shares of restricted KAC Common Stock under the
Plan. The Committee may make the grant of restricted stock subject to various
conditions including the participant remaining employed by the Company for a
number of years. Participants holding shares of restricted stock may exercise
full voting rights with respect to those shares but shall not be entitled to
receive dividends and other distributions paid, if any, with respect to those
shares during the period of restriction. A holder of restricted stock may not
sell or otherwise transfer the KAC Common Stock until the restrictions have
lapsed or have been removed.
Performance Units and Performance Shares
The Committee may grant performance units and performance shares under the
Plan. In such event, the Committee will establish a performance period over
which corporate, business unit, or individual performance goals set by the
Committee will be measured. At the end of the performance period, the
performance units or performance shares will be paid out at their initial
established values, increased or decreased, as the case may be, based upon
performance above or below target levels. Payment may be made in cash, KAC
Common Stock or a combination thereof as determined by the Committee. Payment
may be made in a lump sum or in installments at the Committee's discretion. In
the event payment is deferred, interest or dividend equivalents may be paid to
participants.
53
<PAGE> 57
Unrestricted Stock
Unrestricted shares of KAC Common Stock also may be awarded under the Plan
as well as upon the exercise of stock options, in connection with distributions
due on the exercise of stock appreciation rights or as payment on performance
units or performance shares.
Rights to Grants Upon Termination of Employment
In the event a participant's employment is terminated by reason of death,
disability, or retirement, vested options or other vested rights under the Plan
may be exercised within twelve months of termination (three years in the event
of retirement), or the remaining term of the option or right, whichever is
shorter. If employment is terminated for any other reason, options or rights may
be exercised for three months, or the remaining term of the option or right,
whichever is shorter, except that participants who are terminated for cause
immediately forfeit all exercise rights. In the event a participant dies,
becomes disabled or retires after having reached normal retirement age for
pension purposes, a portion of such person's granted shares of restricted stock
will become free of restrictions, and a portion of such person's granted stock
options, SARs, performance units or performance shares shall vest. Such portion
shall be equal to the number of shares subject to such grants multiplied by the
number of full months elapsed between the date of grant and the date of death,
disability or retirement, divided by the number of full months of the period for
which such grants were to have been restricted or to have remained unvested. The
remaining portion of such grants shall be forfeited. In the event of retirement
before normal retirement age, all such grants shall continue to be subject to
their respective conditions, vesting schedules and restrictions, including any
requiring continued employment. In the event a participant's employment is
terminated involuntarily, other than for cause, the Committee may, in its
discretion, waive any applicable forfeiture, vesting requirements or
restrictions as it deems appropriate.
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<PAGE> 58
Summary Compensation Table
The following table sets forth compensation information, cash and non-cash,
for each of the Company's last three completed fiscal years with respect to the
Chief Executive Officer and the four most highly compensated executive officers
of the Company (collectively referred to as the "named executive officers") for
the fiscal year ended December 31, 1992:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------- --------------------------- ----------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER RESTRICTED
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1)(2) ($) (#) ($) ($)(1)
- -------------------- ----- --------- -------- ------------ ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John M. Seidl, 1992 $533,077(3) $ 99,000 $ -0- $ -0- -0- $1,653,385 $ 35,822(4)(5)
former Chairman and 1991 450,000 90,000
Chief -- -0- -0- 4,877,648(6) --
Executive Officer 1990 450,000 90,000 -- -0- -0- -0- --
A. Stephens 1992 400,000 -0-
Hutchcraft, Jr., -0- -0- -0- 1,376,874 11,423(5)
former President 1991 365,000 73,000
and Chief -- -0- -0- 3,832,437(6) --
Operating Officer 1990 365,000 133,000 -- -0- -0- -0- --
Anthony R. Pierno, 1992 302,275 265,000(8) -0- -0- -0- -0- 50,123(9)
Vice President and 1991 -- -- -- -- -- -- --
General Counsel(7) 1990 -- -- -- -- -- -- --
John T. La Duc, 1992 225,000 45,000 -0- 1,428,967 (10)(11) 10,000(12) 192,698(13) 8,469(4)(5)
Vice President and 1991 195,000 53,500 -- -0- -0- 1,000,000(6) --
Chief Financial 1990 186,250 38,000
Officer -- -0- -0- -0- --
Joseph A. Bonn, 1992 210,000 42,000 -0- 1,428,967 (10)(11) -0- 195,697(13) 96,248(4)(5)
Vice President, 1991 197,500 47,000
Planning -- -0- -0- 1,000,000(6) --
and Administration 1990 185,000 37,000 -- -0- -0- -0- --
</TABLE>
- ---------------
(1) Pursuant to the transition rules effective October 21, 1992, these amounts
are excluded for the Company's 1991 and 1990 fiscal years.
(2) Excludes perquisites and other personal benefits because the aggregate
amount of such compensation is the lesser of either $50,000 or 10% of the
total of annual salary and bonus reported for the named executive officer.
(3) Includes payment of $38,077 representing accrued vacation not taken upon
his resignation on December 31, 1992 in addition to his base salary of
$495,000.
(4) Includes moving related items of $30,111, $3,969 and $76,684 for Messrs.
Seidl, La Duc and Bonn, respectively.
(5) Includes $5,711, $8,000, $4,500 and $4,200 under the Kaiser Savings Plan
(as defined below) to Messrs. Seidl, Hutchcraft, La Duc and Bonn,
respectively. Also includes $3,423 credited to Mr. Hutchcraft under the
Kaiser Supplemental Benefits Plan described below. Includes $15,364 loan
forgiveness granted to Mr. Bonn in March 1992.
(6) Pursuant to 1991 amendments, LTIP participants were permitted to elect an
accelerated payment option pursuant to which they could receive in December
1991 and April 1992 amounts approximating 95% and 5%, respectively, of the
vested portion of their LTIP account balances (excluding bonuses previously
paid), subject to certain maximum dollar limitations. Without such
accelerated payment option and subject to certain reductions and
limitations, participants were generally entitled to receive the vested
portion of their LTIP account balances on the earlier to occur of (a)
termination of their employment, (b) termination of the LTIP if prior to
December 31, 1993, or (c) April 10, 1994.
(7) Mr. Pierno receives his compensation from MAXXAM; however the Company
reimburses MAXXAM for certain allocable costs associated with the
performance of services for the Company by such executive officer. The
table reflects such officer's total compensation rather than an allocated
part of such compensation. Mr. Pierno's compensation for 1991 and 1990 is
not included since he was not an executive officer of the Company at any
time during such years.
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<PAGE> 59
(8) Pursuant to Mr. Pierno's employment agreement, his personal loans from
MAXXAM outstanding on the date of such agreement are forgiven at the rate
of $15,000 per year. This amount is included as part of his bonus
compensation. See "Certain Transactions" for a discussion of such personal
loans.
(9) Represent matching contributions by MAXXAM under the MAXXAM 401-K savings
plan of $4,782, and $45,341 accrued in respect of MAXXAM's revised capital
accumulation plan pursuant to which, in general, benefits vesting 10%
annually are payable upon termination of employment with MAXXAM.
(10) Represents restricted stock granted under the Plan effective December 1992.
The Plan was approved by the stockholders of the Company and KACC in May
and June 1993, respectively. See "-- New Plan Benefits Table."
(11) At the end of fiscal year 1992, Messrs. Bonn and La Duc each owned 13,145
shares of restricted common stock of the Company valued at approximately
$112,245.
(12) Represents SARs Mr. La Duc received from MAXXAM with respect to MAXXAM's
common stock.
(13) See, "-- The Kaiser 1993 Omnibus Stock Incentive Plan" regarding the
election by LTIP participants to receive payment of their LTIP account
balances. Without such election opportunity and subject to certain
reductions and limitations, participants were generally entitled to receive
the vested portion of their LTIP account balances on the earlier to occur
of (a) termination of their employment, (b) termination of the LTIP if
prior to December 31, 1996, or (c) April 10, 1997. Pursuant to such
election, these amounts were paid half in cash and half in restricted
shares of Common Stock of the Company.
Option/SAR Grants Table
The following table sets forth certain information concerning options to
purchase Common Stock granted in fiscal year 1992 to any of the named executive
officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- --------------------------------------------------------------------------------- ---------------------
(A) (B) (C) (D) (E) (F) (G)
% OF TOTAL
OPTIONS/
OPTIONS/ SARS
SARS GRANTED TO EXERCISE OR
GRANTS EMPLOYEES BASE PRICE EXPIRATION 5% 10%
NAME (#) IN 1992 ($/SHARE) DATE ($) ($)
- -------------------------- -------- ------------ ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
John T. La Duc............ 10,000 12.5% $ 28.00 12/02/02 $ 176,090 $ 446,248
</TABLE>
The SARs set forth in the above table were granted on December 2, 1992 to
Mr. La Duc under MAXXAM's 1984 Phantom Share Plan. The SARs are exercisable for
cash only and vest with respect to 20% on the anniversary date of the grant and
an additional 20% on each anniversary date thereafter until fully vested.
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<PAGE> 60
Option/SAR Exercises and Fiscal Year End Value Table
The table below provides information on an aggregated basis concerning each
exercise of stock options (or tandem SARs) and freestanding SARs during the
fiscal year ended December 31, 1992 by each of the named executive officers, of
which there was only one, and the 1992 fiscal year-end value of unexercised
options and SARs.
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
VALUE OF UNEXERCISED IN-
NUMBER OF UNEXERCISED THE-MONEY OPTIONS/SARS AT
SHARES OPTIONS/SARS AT YEAR END FISCAL YEAR-END
ACQUIRED ON VALUE (#) ($)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#)(1) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John T. La Duc................ -- -- -- 10,000 -0- -0-
Anthony R. Pierno............. -- -- 14,000 19,000 -0- -0-
</TABLE>
- ---------------
(1) If no shares received, the number of securities with respect to which
options/SARs were exercised is reflected.
Pension Plan Table
The Company maintains a qualified, defined-benefit Retirement Plan (the
"Kaiser Retirement Plan") for salaried employees of the Company and
co-sponsoring subsidiaries who meet certain eligibility requirements.
<TABLE>
<CAPTION>
YEARS OF SERVICE
ANNUAL -------------------------------------------------------------
REMUNERATION 15 20 25 30 35
--------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$125,000.................. $ 28,125 $ 37,500 $ 46,875 $ 56,250 $ 65,625
150,000.................. 33,750 45,000 56,250 67,500 78,750
175,000.................. 39,375 52,500 65,625 78,750 91,875
200,000.................. 45,000 60,000 75,000 90,000 105,000
225,000.................. 50,625 67,500 84,375 101,250 118,125
250,000.................. 56,250 75,000 93,750 112,500 131,250
300,000.................. 67,500 90,000 112,500 135,000 157,500
400,000.................. 90,000 120,000 150,000 180,000 210,000
450,000.................. 101,250 135,000 168,750 202,500 236,250
500,000.................. 112,500 150,000 187,500 225,000 262,500
600,000.................. 135,000 180,000 225,000 270,000 315,000
720,000.................. 162,000 216,000 270,000 324,000 378,000
</TABLE>
The foregoing table shows estimated annual retirement benefits payable
under the terms of the Kaiser Retirement Plan to participants with the indicated
years of credited service without reduction for the limitations imposed by the
Internal Revenue Code on qualified plans and before adjustment for the Social
Security offset. The Company has adopted a Supplemental Benefits Plan under
which certain participants in the Kaiser Retirement Plan will receive the
benefits described in the summary of the Supplemental Benefits Plan set forth
below. The estimated annual retirement benefits shown are based upon the
assumptions that current Kaiser Retirement Plan provisions remain in effect,
that the participant retires at age 65, and that the retiree receives payments
based on a straight life annuity for his lifetime.
Messrs. Seidl, Hutchcraft, La Duc and Bonn had 3.9, 36.8, 23.3 and 25.5
years of credited service, respectively, on December 31, 1992. Monthly
retirement benefits, except for certain minimum benefits, are determined by
multiplying years of credited service (not in excess of 40) by the difference
between 1.50% of average monthly compensation for the highest base period (of
36, 48 or 60 consecutive months, depending upon compensation level) in the last
10 years of employment and 1.25% of monthly primary Social Security benefits.
57
<PAGE> 61
The compensation covered by the Kaiser Retirement Plan includes base salary
and bonus payments. No named executive officer had compensation covered by the
Kaiser Retirement Plan which differed by more than 10% from that set forth in
the Summary Compensation Table (column (c) plus column (d) thereof).
Participants are entitled to retire and receive pension benefits, unreduced
for age, upon reaching age 62 or after 30 years of credited service. Full early
pension benefits (without adjustment for Social Security offset prior to age 62)
are payable to participants who are at least 55 years of age and have completed
10 or more years of pension service (or whose age and years of pension service
total 70) and who have been terminated by the Company or an affiliate for
reasons of job elimination or partial disability. Participants electing to
retire prior to age 62 who are at least 55 years of age and have completed 10 or
more years of pension service (or whose age and years of pension service total
at least 70) may receive pension benefits, unreduced for age, payable at age 62
or reduced benefits payable earlier. Participants who terminate their employment
after five years or more of pension service, or after age 55 but prior to age
62, are entitled to pension benefits, unreduced for age, commencing at age 62 or
actuarially reduced benefits payable earlier. For participants with five or more
years of pension service or who have reached age 55 and who die, the Kaiser
Retirement Plan provides a pension to their eligible surviving spouses. Upon
retirement, participants may elect among several payment alternatives including,
for most types of retirement, a lump-sum payment.
Kaiser Supplemental Benefits Plan
The Company maintains an unfunded, non-qualified Supplemental Benefits Plan
(the "Kaiser Supplemental Benefits Plan"), the purpose of which is to restore
benefits which would otherwise be paid from the Kaiser Retirement Plan or the
Supplemental Savings and Retirement Plan, a qualified Section 401(k) plan (the
"Kaiser Savings Plan"), were it not for the limitations imposed by the Internal
Revenue Code. Participation in the Kaiser Supplemental Benefits Plan includes
all employees of the Company and its subsidiaries whose benefits under the
Kaiser Retirement Plan and Kaiser Savings Plan are likely to exceed the maximum
dollar limitations imposed by the Internal Revenue Code. Eligible participants
are entitled to receive the equivalent of the Kaiser Retirement Plan and Kaiser
Savings Plan benefits which they may be prevented from receiving under those
plans because of Internal Revenue Code limitations.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Until his resignation on December 31, 1992, Mr. Seidl held the positions of
Chairman and Chief Executive Officer of the Company and KAC. He was employed
pursuant to an employment agreement which commenced February 1, 1989 and
provided for an annual salary of $450,000, or such higher rate as might be
mutually agreed to by Mr. Seidl, the Company and KAC. Mr. Seidl was eligible to
participate in the employee benefit plans and fringe benefit programs maintained
by the Company and KAC as from time to time in effect applicable to senior
executives of the Company and KAC; provided that Mr. Seidl was eligible to
participate in any bonus program maintained by the Company or KAC only to the
extent participants in the LTIP were also eligible for such bonus program
participation. In general, Mr. Seidl was entitled to participate in the LTIP in
accordance with the terms of the LTIP. In light of his resignation, Mr. Seidl
and the Company entered into an agreement on December 23, 1992, pursuant to
which, Mr. Seidl received $1,000,000 on or before December 31, 1992 (the
"December Payment") in payment of benefits otherwise due him on or before April
10, 1993. In consideration thereof, Mr. Seidl agreed that the payment of
benefits otherwise due him on or before April 10, 1993 would be reduced by
$1,000,000 plus an amount equal to interest on $1,000,000 from the date of the
December Payment to April 10, 1993 at the greater of (i) 6.125% or (ii) the rate
of interest applicable on April 1, 1992 to borrowings under the Credit Agreement
(as defined below under "Certain Transactions").
In June 1990, Mr. Seidl also entered into an agreement with MAXXAM related
to his move to Houston, Texas, which was amended as of February 1991 and May
1991, and subsequently assigned to the Company. The agreement provided for
reimbursement to Mr. Seidl for certain expenses incurred in connection with such
move. This reimbursement amount for 1992 is reflected in the Summary
Compensation Table.
58
<PAGE> 62
Mr. Hutchcraft retired from the Company effective December 31, 1993. Mr.
Hutchcraft's prior employment agreement provided for a 1993 base salary of
$450,000 and for termination of his participation in the LTIP as of December 31,
1992, with payment of his estimated account balance thereunder as of December
31, 1992, with any adjustment from estimated to actual balance determined after
preparation of audited financial statements for 1992, to be made on or about
April 10, 1993. Pursuant to this agreement, Mr. Hutchcraft was paid $1,358,000
on December 31, 1992 and $18,874 on April 8, 1993, on account of his LTIP
account balance. In light of other compensation provisions in his agreement, Mr.
Hutchcraft received no bonus in 1992. Prior to the time of his election as
Chairman of the Board and Chief Executive Officer of the Company, Mr. Hutchcraft
served as Chief Operating Officer in addition to President of the Company and
his compensation was established pursuant to the base salary program and bonus
plan for executives and managers of the Company generally and based on those
same performance factors. The compensation set forth in Mr. Hutchcraft's
agreement was also established in recognition of his previous compensation
history, in anticipation of his additional responsibilities as Chairman of the
Board, and his personal leadership qualities and industry expertise widely
recognized in the Company and in the aluminum industry and also as an incentive
to Mr. Hutchcraft to continue in the employ of the Company.
On April 1, 1993 the Company and KAC entered into an employment agreement
with Mr. George T. Haymaker, Jr. pursuant to which Mr. Haymaker joined the
Company and KAC in May 1993 as President and Chief Operating Officer. Mr.
Haymaker's agreement has a term of five (5) years. Pursuant to the agreement,
Mr. Haymaker was named Chairman of the Board of Directors and Chief Executive
Officer of the Company and KAC upon Mr. Hutchcraft's retirement on December 31,
1993. Mr. Haymaker's employment agreement provides for a base salary of $450,000
per annum commencing upon his joining the Company and KAC, and a bonus target of
50% of his salary beginning fiscal year 1994. The agreement further provides
that Mr. Haymaker will not be paid a bonus for calendar year 1993. Any bonus
actually awarded for 1994 or thereafter could be less or greater than the target
level, depending upon corporate performance as compared to corporate plan
objectives usually established in January of each year, as well as individual
performance. Under the agreement, Mr. Haymaker received an initial award under
the Plan of options to purchase up to 100,000 shares of KAC Common Stock at its
fair market value on the date of the award. Such options are to vest 20% per
year for a period of five (5) years. See "-- New Plan Benefits Table" above.
In the event of a change of control of the Company or KAC which within one
year thereafter adversely affects Mr. Haymaker's title, position, duties,
responsibilities or compensation, Mr. Haymaker's employment agreement provides
that he may elect to be deemed terminated without cause, and therefore, entitled
to a severance payment equal to two times his base annual salary. Additionally,
in the event of such termination, Mr. Haymaker's options for 100,000 shares of
KAC Common Stock shall fully vest.
Mr. Pierno and MAXXAM entered into a five-year employment agreement
effective as of March 8, 1990. Pursuant to the terms of the agreement, Mr.
Pierno was entitled during the first six months of 1993 to a base salary of
$321,232 per year, which amount is increased each July by an amount not less
than the increase in the Consumer Price Index for that year. The agreement
provided for a bonus for the year 1992 in an amount not less than 75% and not
more than 125% of Mr. Pierno's then base salary. Although the agreement
specifies no bonus percentage for the years 1993 and 1994, in the agreement
MAXXAM expresses an intent to pay a bonus in the same percentage range. The
agreement also entitles Mr. Pierno to participate in employee benefit plans and
programs applicable to senior executives of MAXXAM.
Mr. La Duc held the positions of Vice President and Chief Financial Officer
of KAC and the Company and Senior Vice President and Chief Financial Officer of
MAXXAM pursuant to an employment agreement among MAXXAM, the Company and Mr. La
Duc, which commenced September 26, 1990, and expired December 31, 1993. The
employment agreement provides for a base salary of $225,000 with any increases
at the discretion of the Company and MAXXAM. Currently, Mr. La Duc continues in
his employment in such positions with MAXXAM, KAC and the Company. Subject to
limitations pursuant to the LTIP, an annual bonus may be paid under the terms of
KACC's bonus plan. Mr. La Duc is eligible to participate in the employee benefit
plans and programs maintained by the Company, as from time to time in effect,
applicable to senior executives of the Company, including, but not limited to,
the LTIP and, if approved by the stockholders, the Plan.
59
<PAGE> 63
Mr. La Duc is entitled to reimbursement by the Company of certain moving
expenses incurred in connection with his relocation to Houston, Texas, and to
other benefits under the Company's executive relocation policy. The amount
reimbursed during 1992 pursuant to this arrangement is related in the Summary
Compensation Table.
The Company and MAXXAM entered into an employment agreement with Mr. Joseph
A. Bonn, Vice President, Planning and Administration of KAC and a Vice President
of the Company. The employment agreement has a term of three years ending June
30, 1994, and provides for a base salary of $210,000, which may increase at the
discretion of the Company and MAXXAM. Subject to limitations pursuant to the
LTIP, an annual bonus may be paid under the terms of the KACC bonus plan. Any
annual bonus amounts payable under the employment agreement will be reduced by
the amount of any directorship fees (during the year for which the annual bonus
is paid) received by Mr. Bonn in respect of board memberships held at the
request of the Company or MAXXAM. Mr. Bonn is eligible to participate in the
employee benefit plans and programs maintained by the Company, as from time to
time in effect, applicable to senior executives of the Company, including, but
not limited to, the LTIP and, if approved by stockholders, the Plan.
Mr. Bonn subsequently relocated to Oakland, California. Pursuant to an
agreement dated December 20, 1991, KAC agreed to reimburse Mr. Bonn for
reasonable and necessary moving expenses from Texas to California (including the
expense of moving property, travel costs, and temporary living expenses) in
accordance with KAC's relocation policy; to reimburse Mr. Bonn for the
reasonable amount of net out-of-pocket loss, if any, incurred in the termination
of construction work in process in connection with Mr. Bonn's Texas residence
and incurred in the resale of the land upon which the residence was being
constructed (including reasonable transaction costs and expenses in connection
with the purchase and sale of the land and improvements, construction
termination fees, architectural, engineering and drafting fees and expenses, lot
clearing costs, and the like); and to reimburse Mr. Bonn for the reasonable
amount of the net out-of-pocket loss, if any, incurred on the sale, cancellation
or forfeiture of a country club membership acquired in Texas. This reimbursement
amount for 1992 is reflected in the Summary Compensation Table.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee of the Board of Directors of the
Company was, during the 1992 fiscal year, an officer or employee of the Company
or any of its subsidiaries, or was formerly an officer of the Company or any of
its subsidiaries or, other than Mr. Levin, had any relationships requiring
disclosure by the Company under Item 404 of Regulation S-K. Mr. Levin served on
the Compensation Committee and Board of both the Company and KAC during 1992.
Mr. Levin is also a partner in the law firm of Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel, which provided legal services for the Company and its
subsidiaries during 1992.
During the Company's 1992 fiscal year, no executive officer of the Company
served as (i) a member of the Committee (or other board committee performing
equivalent functions) of another entity, one of whose executive officers served
on the Company's Compensation Committee, (ii) a director of another entity, one
of whose executive officers served on the Company's Compensation Committee, or
(iii) a member of the compensation committee (or other board committee
performing equivalent functions) of another entity, one of whose executive
officers served as a director of the Company.
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<PAGE> 64
CERTAIN TRANSACTIONS
For periods through June 30, 1993, KAC, the Company and its subsidiaries
were members of an affiliated group of corporations (an "Affiliated Group")
within the meaning of Section 1504 of the Internal Revenue Code of 1986, as
amended (the "Code"), of which MAXXAM is the common parent corporation (the
"MAXXAM Tax Group"). As a result, KAC, the Company and its subsidiaries were
included in the consolidated Federal income tax return filed for the MAXXAM Tax
Group. Effective July 1, 1993, KAC and its subsidiaries, including the Company
and its subsidiaries, are no longer members of the MAXXAM Tax Group (the
"Deconsolidation") but are members of a new Affiliated Group of which KAC is the
common parent corporation (the "New Kaiser Tax Group"). The taxable income and
loss and tax credits for KAC, the Company and its subsidiaries for the period
January 1, 1993 through June 30, 1993, will be included in the 1993 MAXXAM Tax
Group consolidated Federal income tax return (the "MAXXAM 1993 Tax Return"). For
periods beginning on and after July 1, 1993 (the "Post Deconsolidation
Periods"), the taxable income and loss and tax credits for KAC, the Company and
its subsidiaries will be included in the consolidated Federal income tax returns
to be filed for the New Kaiser Tax Group. KAC obtained the approval of the
Secretary of the Treasury in order to file a consolidated Federal income tax
return for the New Kaiser Tax Group for the period ended December 31, 1993.
As a consequence of the Deconsolidation, the KACC Tax Allocation Agreement
(as defined) terminated pursuant to its terms, effective with respect to Post
Deconsolidation Periods. The provisions of the KACC Tax Allocation Agreement
will continue to govern periods ending before the date of the Deconsolidation
(the "Pre Deconsolidation Periods"). Therefore, payments or refunds may still be
required by or payable to the Company under the KACC Tax Allocation Agreement
for Pre Deconsolidation Periods due to the final resolution of audits, amended
returns and related matters with respect to such Pre Deconsolidation Periods. To
the extent the Company and its subsidiaries generate unused tax losses or tax
credits in Post Deconsolidation Periods, such amounts will not be available to
obtain refunds of amounts paid by the Company to MAXXAM for Pre Deconsolidation
Periods pursuant to the KACC Tax Allocation Agreement. It is anticipated that
such losses and credits will be carried forward to offset future Federal income
taxes payable by the Company under the New Tax Allocation Agreement (as
defined).
Any unused tax attribute carryforwards existing as of the date of the
Deconsolidation under the terms of the KACC Tax Allocation Agreement will be
eliminated and will not be available to offset Federal income tax liabilities of
the Company and its subsidiaries for Post Deconsolidation Periods. Upon the
filing of the MAXXAM 1993 Tax Return, the tax attribute carryforwards of the
MAXXAM Tax Group as of December 31, 1993 will be apportioned in part to the
Company and its subsidiaries, based upon the provisions of the relevant
consolidated return regulations. It is anticipated that the amounts of such tax
attribute carryforwards apportioned to the Company and its subsidiaries will
approximate or exceed the amounts of tax attribute carryforwards eliminated
under the KACC Tax Allocation Agreement. Although the amounts of tax attribute
carryforwards apportioned to the Company and its subsidiaries will be determined
as of December 31, 1993, they will be available as of the date of the
Deconsolidation, subject to certain limitations, to reduce Federal income taxes
payable by the Company and its subsidiaries for Post Deconsolidation Periods
under the terms of the New Tax Allocation Agreement.
In 1989, the Company and MAXXAM entered into a tax allocation agreement
(the "KACC Tax Allocation Agreement"). Pursuant to the terms of the KACC Tax
Allocation Agreement, MAXXAM pays any consolidated Federal income tax liability
for the MAXXAM Tax Group. The Company is liable to MAXXAM for the Federal income
tax liability of the Company and its subsidiaries (collectively, the "KACC
Subgroup") computed as if the KACC Subgroup were a separate Affiliated Group
which was never affiliated with the MAXXAM Tax Group (taking into account all
limitations under the Code and regulations applicable to the KACC Subgroup),
except that the KACC Subgroup excludes interest income received or accrued on an
intercompany note issued by KAC in connection with a financing consummated in
December 1989 (the "KACC Subgroup's Separate Income Tax Liability"). To the
extent such calculation resulted in a net operating loss or a net capital loss
or credit which the KACC Subgroup could have carried back to a prior taxable
period under the principles of Sections 172 and 1502 of the Code, MAXXAM pays to
the Company an amount equal to the tax refund to which the Company would have
been entitled (but not in excess of the
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aggregate net amount previously paid by the Company to MAXXAM for the current
year and the three prior years). If such separately calculated net operating
loss or net capital loss or credit of the KACC Subgroup can not be carried back
to a prior taxable year of the KACC Subgroup for which the KACC Subgroup paid
its separate tax liability to MAXXAM, the net operating loss or net capital loss
or credit becomes a loss or credit carryover of the KACC Subgroup to be used in
computing the KACC Subgroup's Separate Income Tax Liability for future taxable
years. The same principles were applied to any consolidated or combined state or
local income tax returns filed by the MAXXAM Tax Group with respect to the
Company and its subsidiaries. Although, under Treasury regulations, all members
of the MAXXAM Tax Group, including the members of the KACC Subgroup, are
severally liable for the MAXXAM Tax Group's Federal income tax liability for all
of 1993 and applicable prior periods, under the KACC Tax Allocation Agreement,
MAXXAM indemnifies each KACC Subgroup member for all Federal income tax
liabilities relating to taxable years during which such KACC Subgroup member was
a member of the MAXXAM Tax Group, except for payments required under the KACC
Tax Allocation Agreement.
During 1992, under the KACC Tax Allocation Agreement, the Company made a
payment to MAXXAM of $28.0 million in respect of the year ended December 31,
1991. The eighth amendment to the Credit Agreement, dated as of January 7, 1993
(the "Eighth Amendment") prohibits the payment by the Company to MAXXAM of any
additional amounts due under the KACC Tax Allocation Agreement until December
15, 1994. The Company estimates that it owes MAXXAM approximately $8.7 million
in respect of the year ended December 31, 1992. Inasmuch as it is anticipated
that the Company will record tax losses in the period January 1, 1993 through
June 30, 1993, and that such losses will be carried back to prior taxable
periods under the terms of the KACC Tax Allocation Agreement, it is estimated
that MAXXAM owes the Company approximately $20.0 million with respect to such
losses.
Under the current consolidated return regulations, the Deconsolidation
caused certain tax basis adjustments and the recognition of certain types of
taxable income (including amounts that were previously deferred), none of which
the Company believes to be material.
On June 30, 1993, the Company and KAC entered into a tax allocation
agreement (the "New Tax Allocation Agreement") effective for Post
Deconsolidation Periods. The terms of the New Tax Allocation Agreement are
similar, in all material respects, to those of the KACC Tax Allocation Agreement
except that the Company is liable to KAC.
The Company and MAXXAM have an arrangement pursuant to which they reimburse
each other for certain allocable costs associated with the performance of
services by their respective employees, and the Company also pays to MAXXAM
amounts in respect of directors' fees for directors of the Company who are not
employees of the Company and who are directors of MAXXAM. During 1992 and during
the first nine months of 1993, the Company paid a total of approximately $2.0
million and $1.5 million, respectively, to MAXXAM pursuant to such arrangements,
and MAXXAM paid approximately $1.4 million and $0.6 million, respectively, to
the Company pursuant to such arrangements.
As a condition to the effectiveness of the Eighth Amendment, the Company
issued the MAXXAM Note in the principal amount of $15.0 million, which evidenced
a cash loan in the amount of $15.0 million made to the Company. On June 30,
1993, the MAXXAM Note was exchanged for 2,132,950 $.65 Depositary Shares. KAC
made a capital contribution of the MAXXAM Note to the Company, which resulted in
the extinguishment of the MAXXAM Note.
KAC paid cash dividends on its common stock in the amount of $2.9 million
in each quarter of 1992. In the event KAC pays any distributions to holders of
its common stock (including the payment of regular quarterly cash dividends),
the Eighth Amendment to the Credit Agreement requires MAXXAM and any subsidiary
of MAXXAM to use the entire proceeds of any such distributions received by
MAXXAM or any subsidiary of MAXXAM to purchase a PIK Note from the Company. On
December 15, 1992, the Company issued a PIK Note to a subsidiary of MAXXAM in
the principal amount of $2.5 million, representing the entire amount of the
dividend received by such subsidiary in respect of the shares of KAC's common
stock which it owned. The PIK Note bears interest, compounded semiannually, at a
rate equal to 12% per annum, and is due and payable, together with accrued
interest thereon, on June 30, 1995. The Company is not
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required to make any payment of principal of or interest on the PIK Note prior
to June 30, 1995. However, to the extent not prohibited by the Credit Agreement,
the Company may be required to prepay the PIK Note upon demand. The Credit
Agreement currently prohibits the payment of principal and interest on the PIK
Note. Additional PIK Notes issued by the Company, if any, will have terms
substantially similar to the terms of the PIK Note described herein.
In February 1993, MAXXAM entered into a commercial guaranty of payment (the
"Guaranty") of a promissory note dated January 28, 1993 in the original
principal amount of $150,000 issued by Mr. Anthony R. Pierno, Vice President and
General Counsel of the Company, to Charter National Bank -- Houston. The
Guaranty is subject to an agreement between MAXXAM and Mr. Pierno that any
payment by MAXXAM under the Guaranty shall be offset in like amount plus
interest at 12% per annum from the date of payment on the Guaranty to the date
of payment to MAXXAM by Mr. Pierno. Such offset may be made from any payments
due Mr. Pierno from MAXXAM which lawfully may be the subject of such offset,
including any payment under any compensation arrangement or employee benefit
plan. The Guaranty was entered into by MAXXAM for the convenience of Mr. Pierno.
Pursuant to the terms of Mr. Pierno's employment agreement, Mr. Pierno's
personal loans, which were outstanding on the date of the employment agreement
are forgiven at the rate of $15,000 per year beginning March 8, 1991, with any
remaining balance being due and payable upon Mr. Pierno's termination of
employment. At the time of the agreement, MAXXAM had loaned an aggregate of
$150,000 at 6% interest to Mr. Pierno. The principal balance on such loans as of
November 30, 1993 was $105,000. Such loans are payable on demand, require
monthly interest payments and are secured by real estate owned by Mr. Pierno.
The employment agreement also provided for up to an additional $200,000 in loans
to Mr. Pierno bearing interest at 6% per annum, with interest being payable
monthly and principal being due December 15, 1994 (with prepayments due upon the
exercise by Mr. Pierno of any stock appreciation rights granted pursuant to the
employment agreement). All of such amount has been borrowed by Mr. Pierno.
Mr. Levin, a director of the Company and KAC, is a partner of the law firm
of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, which provides legal
services for KAC, the Company and their subsidiaries. See "Legal Matters."
DESCRIPTION OF PRINCIPAL INDEBTEDNESS
The New Credit Agreement. On January 24, 1994, the Company entered into the
Commitment Letter with Bank of America and BA which contains the principal terms
and conditions with respect to the New Credit Agreement. The expected terms and
conditions of the New Credit Agreement are summarized below. A form of the New
Credit Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. Bank of America and BA have committed,
subject to the terms and conditions of the Commitment Letter, to provide the
full $250.0 million of the New Credit Agreement.
- Facility. The New Credit Agreement will consist of a $250.0 million
five-year secured, revolving line of credit. The Company will be able to borrow
under the facility by means of revolving credit advances, swingline advances (up
to $25.0 million) and letters of credit in an aggregate amount equal to the
lesser of $250.0 million or a borrowing base consisting of 85% of eligible
accounts receivable (as defined) plus 65% of eligible inventory (as defined)
(with availability against such eligible inventory not to exceed $175.0 million
at any one time).
- Interest Rates. Loans under the New Credit Agreement will bear interest
at a rate per annum, at the Company's election, equal to (i) a Reference Rate
(as defined) plus 1.50% or (ii) LIBOR (as defined) plus 3.25%. After June 30,
1995, the interest rate margins applicable to borrowings under the New Credit
Agreement may be reduced (non-cumulatively), based upon the Company's Interest
Coverage Ratio (as defined) ("ICR"), as follows: ICR 1.25, reduction of 0%, 1.25
ICR 1.50, reduction of 0.50%; 1.50 ICR 2.00, reduction of 1.00%; and ICR 2.00,
reduction of 1.50%. ICR will be defined as the ratio of (i) EBITDA (as defined),
less Adjusted Capital Expenditures (as defined), to (ii) adjusted interest
expense.
- Guaranties. The New Credit Agreement will be unconditionally guaranteed
by KAC and by all significant subsidiaries of the Company which are subsidiary
guarantors under the Credit Agreement.
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- Security. The New Credit Agreement will be secured by substantially the
same assets securing the Credit Agreement, and will include a pledge of the
stock of the Company and its material subsidiaries and the grant of a lien on
all now existing and hereafter acquired receivables, inventory, intangibles and
certain other assets of KAC, the Company and its subsidiaries. However, the New
Credit Agreement will not be secured by the Company's Gramercy alumina refinery.
- Payments and Fees. The New Credit Agreement will permit repayments of
base rate advances in minimum amounts of $1.0 million and prepayment of LIBOR
advances in minimum amounts of $5.0 million. Lenders will be entitled to receive
a risk participation fee equal to 3% per annum on their respective share of the
total amount of letters of credit outstanding, subject to reduction under
certain circumstances. A commitment fee equal to 0.50% per annum will be
payable, quarterly in arrears, on the unutilized portion of the New Credit
Agreement.
- Covenants. The New Credit Agreement will contain certain affirmative and
negative covenants, including, but not limited to, covenants relating to (i) the
incurrence of liens and additional indebtedness, (ii) the making of restricted
payments and the payment of fees to MAXXAM, (iii) Asset Dispositions (as
defined), (iv) the sale of accounts receivable, (v) the maximum permitted amount
of capital expenditures each year, (vi) mergers, acquisitions and investments,
(vii) leases and sale-leasebacks, (viii) transactions with affiliates and (ix)
the maintenance of a minimum net worth and ICR. The covenant relating to the
maintenance of the ICR will not become applicable under the New Credit Agreement
until March 31, 1996. In addition, the New Credit Agreement will not permit the
Company or KAC to pay any dividends on their common stock.
The New Credit Agreement will (i) prohibit redemptions or repurchases of
the Notes, including, without limitation, purchases of Notes that might
otherwise be required pursuant to the provisions of the Indenture, (ii)
prohibit, without the written consent of the Required Lenders (as defined in the
New Credit Agreement), amendments or supplements to the Indenture and (iii)
prohibit, with certain exceptions, the taking of action or permitting to exist
any condition, which would require (a) any subsidiary of the Company (other than
the initial Subsidiary Guarantors under the Indenture) to guarantee the Notes or
(b) the Company or any of its Subsidiaries to provide collateral in respect of
the Notes.
- Events of Default. The New Credit Agreement will contain certain events
of default substantially similar to the events of default contained in the
Credit Agreement, including, but not limited to, payment defaults, cross
defaults to other indebtedness, covenant defaults, breach of representation,
bankruptcy and similar events, ERISA violations, any requirement to repurchase
the Notes and breaches of collateral documents.
- Conditions to Initial Funding. The obligations of Bank of America and BA
under the New Credit Agreement will be subject to certain conditions, including,
but not limited to, the requirement that the Company and KAC shall have raised
not less than $250.0 million aggregate gross proceeds of new capital pursuant to
the offering of the Notes and the shares of PRIDES.
Existing Indebtedness. In December 1989, the Company and KAC entered into
the Credit Agreement, and the Company issued $350.0 million of its 14 1/4% Notes
(collectively, the "Financing"). The net proceeds of the Financing, together
with the $180.0 million initial payment received by the Company in respect of a
forward alumina sales transaction ("FAST") and other available funds, were used
to retire $925.0 million principal amount of Increasing Rate Notes of KAC, to
prepay certain indebtedness of the Company, to pay related fees and expenses,
and to pay a $50.0 million dividend to a subsidiary of MAXXAM.
The Credit Agreement consisted of a $350.0 million five-year revolving
credit facility, a $125 million five-year term loan, a $75.0 million two-year
bridge loan, and a $172.0 million three and one-half year standby letter of
credit which secured the advance payment on the FAST. As of September 30, 1993,
the bridge loan and the term loan under the Credit Agreement were fully repaid,
the letter of credit issued in connection with the FAST had been fully
amortized, $165.0 million of borrowings and $36.1 million of letters of credit
were outstanding under the revolving credit facility and $148.9 million of
borrowing capacity was unused under the revolving credit facility.
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The Credit Agreement contains a number of affirmative and negative
covenants, which among other things (a) prohibit the Company from engaging in
business significantly different from that currently conducted by it, (b) limit
the incurrence of additional indebtedness and liens, (c) limit Investments (as
defined), (d) limit capital expenditures, (e) limit mergers and consolidations,
(f) restrict Asset Dispositions (as defined), (g) limit transactions with
Affiliates (as defined), (h) restrict the Company's ability to pay dividends and
make other distributions to its stockholders and (i) require the maintenance of
a (1) minimum Current Ratio (as defined), (2) minimum Net Worth (as defined),
(3) maximum Leverage Ratio (as defined) and (4) a minimum Interest Coverage
Ratio (as defined).
The Company's obligations under the Credit Agreement are guaranteed by KAC
and certain of the Company's subsidiaries. In addition, the Credit Agreement is
secured by, among other things, (i) mortgages on the Company's facilities in
Trentwood, Mead and Tacoma, Washington; Gramercy, Louisiana (which will not
constitute part of the security under the New Credit Agreement); Erie,
Pennsylvania; Newark, Ohio; and Sherman, Texas, (ii) subject to certain
exceptions, liens on accounts receivable, inventory, equipment, domestic patents
and trademarks and substantially all other personal property of the Company and
certain of its subsidiaries, (iii) a pledge of all of the stock of the Company
owned by KAC and (iv) pledges of all of the stock of certain of the Company's
wholly owned domestic subsidiaries, pledges of a portion of the stock of certain
foreign subsidiaries and pledges of a portion of the stock of certain partially
owned foreign affiliates.
Loans under the Credit Agreement bear an annual interest rate, at the
Company's election from time to time, equal to (i) the Reference Rate plus a
margin of 1 1/2%, (ii) the CD Rate (Reserve Adjusted) plus a margin of 2 5/8%,
or (iii) the LIBO Rate (Reserve Adjusted) plus a margin of 2 1/2%. The Company
is currently required to pay fees equal to 2 1/2% per annum on the average
aggregate amount outstanding of letters of credit under the Credit Agreement.
The Credit Agreement contains provisions for the reduction or increase of the
base interest rates and letter of credit fees, based upon the Interest Coverage
Ratio, determined quarterly, under which the base interest rates could be
reduced or increased by 1/2 of 1% per annum, on a non-cumulative basis (based
upon the Interest Coverage Ratio, the Company's base interest rates and letter
of credit fees have been increased by 1/2 of 1% per annum). In addition to the
above fees, there is a commitment fee equal to 1/2% per annum on any unused
portion of the revolving credit facility.
On February 1, 1993, the Company extended a portion of its debt maturities
by refinancing the 14 1/4% Notes with $400.0 million aggregate principal amount
of the 12 3/4% Notes. Subject to certain exceptions, the 12 3/4% Note Indenture
requires the Company to satisfy certain financial tests and other conditions
(including the satisfaction of a consolidated fixed charge coverage ratio) in
order to pay dividends and limits the amount of cash dividends payable by the
Company to (i) the sum of (A) 50% of the Consolidated Net Income (as defined;
such definition, among other things, excludes the one time charge of $497.7
million incurred as a result of the cumulative effect of the adoption of SFAS
106) of the Company accrued (or, if the aggregate Consolidated Net Income of the
Company for any such period shall be a deficit, minus 100% of such deficit) for
the period (taken as one accounting period) from January 1, 1993 to the end of
the Company's most recently ended fiscal quarter for which financial statements
are available at the time such dividends are declared or paid, plus (B) the
aggregate net proceeds received by the Company after December 31, 1992, as
capital contributions or from the issuance or sale (other than to a
Non-Affiliate Joint Venture (as defined) or to a Subsidiary (as defined) of the
Company) of Capital Stock (as defined) other than Redeemable Stock (as defined)
or from the issuance or sale of any debt or other security of the Company
convertible or exercisable into such Capital Stock that has been so converted or
exercised minus (ii) the aggregate amount of Restricted Investments (as defined)
then outstanding, subject to certain adjustments.
The declaration and payment of dividends by the Company and KAC on their
shares of common stock are currently subject to certain covenants contained in
the Credit Agreement and, in the case of the Company, the 12 3/4% Note
Indenture. Under the most restrictive of these covenants, neither the Company
nor KAC is currently permitted to pay dividends on its common stock.
The 12 3/4% Note Indenture contains a number of affirmative and negative
covenants applicable to the Company which, among other things, (a) limit the
incurrence of additional indebtedness and liens, (b) limit Restricted Payments
(as defined), (c) limit Restricted Investments (as defined), (d) limit mergers,
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consolidations and sales of all or substantially all of the Company's assets,
(e) impose certain requirements with respect to Asset Sales (as defined), (f)
limit transactions with Affiliates (as defined), (g) prohibit, with certain
exceptions, restrictions on the ability of any Subsidiary to pay dividends, make
certain other distributions, pay indebtedness owed to the Company or another
Subsidiary, make loans or advances to the Company or another Subsidiary or
transfer any of its assets to the Company, (h) require the Company to repurchase
12 3/4% Notes at a premium upon the occurrence of a Change of Control (as
defined) if so requested by the holder thereof, and (i) prohibit, with certain
exceptions, the incurrence of indebtedness that is both subordinated to Senior
Indebtedness (as defined) and senior to the 12 3/4% Notes.
In December 1991, Alpart entered into a $60 million loan agreement with
CARIFA under which CARIFA loaned Alpart the proceeds from the issuance of
CARIFA's Industrial Revenue bonds. Proceeds from the sale of the bonds were used
by Alpart to refinance the interim loans from the partners in Alpart, to pay
eligible project costs for expansion and modernization of its refinery and to
pay certain costs of issuance. Alpart's obligations under the loan agreement are
secured by a $64.2 million letter of credit severally guaranteed by the partners
in Alpart (of which $22.5 million is guaranteed by the minority partner in
Alpart). See Note 7 of the Notes to the Consolidated Financial Statements and
Note 3 of the Notes to the Interim Financial Statements.
In December 1992, the Company entered into the Sale Agreement with the
Louisiana Parish. To fund the acquisition of the facilities, the Louisiana
Parish issued $20.0 million aggregate principal amount of the Gramercy Bonds,
the proceeds of which were deposited into a construction fund established under
the related indenture and which may be withdrawn from the construction fund,
from time to time, pursuant to the terms of such indenture and the related Sale
Agreement. The Sale Agreement requires the Company to pay the purchase price of
the facilities in installments due on the dates and in the amounts required to
permit the Louisiana Parish to satisfy all of its payment obligations under the
related indenture.
In connection with the offering of the $.65 Depositary Shares in June 1993,
KAC made a non-interest bearing loan to the Company in the principal amount of
$37,796,753 (an amount equal to the aggregate dividends scheduled to accrue on
the Series A Shares issued in June 1993 from the issuance date until the date on
which the Series A Shares mandatorily convert into shares of KAC Common Stock).
The loan is evidenced by an intercompany note which matures on June 29, 1996,
and is payable in quarterly installments. As of December 31, 1993, the aggregate
principal amount of such intercompany note was $31,497,294.
In connection with the PRIDES Offering, KAC intends to use a portion of the
net proceeds therefrom to make a capital contribution to the Company and a
portion of such net proceeds to make a loan or loans to the Company. The loan or
loans will be evidenced by an intercompany note in a principal amount equal to
the aggregate dividends scheduled to accrue on the shares of PRIDES from the
issuance date until the date on which the shares of PRIDES mandatorily convert
into shares of KAC Common Stock.
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DESCRIPTION OF NOTES
GENERAL
The Notes will be issued under an Indenture, among the Company, as Issuer,
Kaiser Alumina Australia Corporation ("KAAC"), Kaiser Finance Corp. ("KFC"),
Alpart Jamaica Inc. ("AJI") and Kaiser Jamaica Corporation ("KJC"), as
Subsidiary Guarantors, and First Trust National Association, as Trustee (the
"Trustee"). A copy of the form of such Indenture is filed as an exhibit to the
registration statement of which this Prospectus is a part. The Trustee will also
act as the initial transfer agent and registrar for the Notes.
The following statements relating to the Notes and the Indenture are
summaries of certain provisions thereof and are subject to the detailed
provisions of the Indenture, to which reference is hereby made for a complete
statement of such provisions. Wherever particular provisions of the Indenture or
terms defined therein are referred to herein, such provisions or definitions are
incorporated by reference and the summaries are qualified in their entirety by
such reference. Capitalized terms used without definition have the respective
meanings ascribed to them in the Indenture, certain of which are described below
under "Certain Definitions." All parenthetical section references are to
sections of the Indenture.
The maximum aggregate principal amount of the Notes which may be issued
under the Indenture is limited to $225,000,000. The Notes will mature on
February , 2002, and will bear interest at the rate set forth on the cover
page hereof from February , 1994, payable semi-annually on February 15 and
August 15 of each year to the persons in whose names the Notes are registered at
the close of business on the February 1 immediately preceding each February 15,
or the August 1 immediately preceding each August 15. Principal of, premium, if
any, Change of Control Purchase Price, Asset Sale Purchase Price and interest on
the Notes will be payable at the office or agency of the Company maintained for
such purpose within the City and State of New York, except that, at the option
of the Company, payment of interest on the Notes may be made by check, mailed by
first-class mail to the address of the person entitled thereto at such address
as shall appear on the registry books of the Company, and the Notes may be
presented for registration of transfer or exchange, redemption or purchase at
any such office or agency, as provided in the Indenture. The Notes will be
issued only in fully registered form in denominations of $1,000 and integral
multiples thereof.
The Notes will rank senior in right and priority of payment to all
Indebtedness of the Company that by its terms is expressly subordinated to the
Notes, including the 12 3/4% Notes. The Notes will rank pari passu in right of
payment with all senior Indebtedness, including Indebtedness under the New
Credit Agreement. The Company and the Subsidiary Guarantors may incur additional
senior Indebtedness to the extent permitted by the Indenture. Holders of secured
indebtedness of the Company and the Subsidiary Guarantors, including the
financial institutions party to the New Credit Agreement, will, however, have
claims which are prior to the claims of the holders of the Notes with respect to
the assets, if any, securing such other indebtedness.
The Company will treat the Notes as debt for Federal income tax purposes.
The obligations of the Company under the Notes will be guaranteed, jointly
and severally, by each Subsidiary Guarantor. See "-- The Guarantee."
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OPTIONAL REDEMPTION
The Company may not redeem the Notes before February 15, 1998. On or after
February 15, 1998, the Notes will be redeemable on at least 15 and not more than
60 days notice, at the option of the Company, in whole at any time or in part
from time to time, at the following redemption prices (expressed as a percentage
of principal amount) together with accrued and unpaid interest to but excluding
the date fixed for redemption, if redeemed during the 12-month period beginning
February 15, of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
------------------------------------------------------------------- -------
<S> <C>
1998............................................................... %
1999............................................................... %
2000............................................................... %
2001 and thereafter................................................ 100.000%
</TABLE>
(Sections 3.01 and 3.02).
OFFER TO PURCHASE THE NOTES
If any Change of Control of the Company occurs on or prior to maturity, the
Company shall make an offer to purchase from each holder, subject to the terms
and conditions of the Indenture, all or any part (equal to $1,000 or an integral
multiple thereof) of the holder's Notes on the date that is 30 Business Days
after the occurrence of such Change of Control (the "Change of Control Purchase
Date") at a purchase price in cash equal to 101% of the principal amount thereof
plus accrued interest to (but not including) the Change of Control Purchase Date
(the "Change of Control Purchase Price"). (Section 3.05). The Change of Control
purchase feature of the Notes may in certain circumstances make more difficult
or discourage a takeover of the Company and, thus, the removal of incumbent
management.
In addition, the Indenture requires the Company to make an offer to
purchase specified portions of the Notes, under certain circumstances, if the
Company has available Net Cash Proceeds as a result of Asset Sales. See
"-- Covenants -- Limitation on Asset Sales."
Neither the Board of Directors of the Company nor the Trustee may waive the
covenants providing each holder of Notes the right to require the Company to
purchase such holder's Notes upon a Change of Control or in the event of certain
Asset Sales, without, in each case, the consent of such holder.
The Company will comply with all applicable federal securities laws
(including Rule 14e-1 promulgated under the Exchange Act) in connection with any
repurchase of Notes upon a Change of Control or in the event of certain Asset
Sales.
The New Credit Agreement will (i) prohibit redemptions or repurchases of
the Notes, including, without limitation, purchases of Notes that might
otherwise be required pursuant to the provisions of the Indenture, (ii)
prohibit, without the written consent of the Required Lenders (as defined in the
New Credit Agreement), amendments or supplements to the Indenture and (iii)
prohibit, with certain exceptions, the taking of action, or permitting to exist
any condition, which would require (a) any subsidiary of the Company (other than
the initial Subsidiary Guarantors under the Indenture) to guarantee the Notes or
(b) the Company or any of its Subsidiaries to provide collateral in respect of
the Notes. Any repurchase of the Notes required under the Indenture upon a
Change of Control or Asset Sale would constitute an event of default under the
New Credit Agreement, with the result that the obligations of the Company
thereunder could be declared due and payable. See "Risk Factors -- Ranking of
the Notes; Subordination." Finally, the Company's ability to pay cash to the
holders of Notes upon a Change of Control or Asset Sale may be limited by the
Company's then existing financial resources.
THE GUARANTEE
The obligations of the Company under the Notes are guaranteed, jointly and
severally, by each of the Subsidiary Guarantors, who will be KAAC, KFC, AJI and
KJC and such other persons that become
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Subsidiary Guarantors as described under "-- Covenants -- Subsidiary Guarantees,
Etc." and each of their respective successors (Section 15.01). Each of the
initial Subsidiary Guarantors is a guarantor under the Subordinated Note
Indenture and, together with certain other Subsidiaries of the Company and KAC,
a guarantor of the Company's obligations under the New Credit Agreement. See
"Risk Factors -- Ranking of the Notes; Subordination."
The Guarantee issued by each Subsidiary Guarantor will rank senior in right
and priority of payment to all Indebtedness of such Subsidiary Guarantor that by
its terms is expressly subordinated to the Notes, including the guarantee of the
12 3/4% Notes issued by such Subsidiary Guarantor, and will rank pari passu in
right and priority of payment with all senior Indebtedness of such Subsidiary
Guarantor, including the guarantee of the New Credit Agreement by such
Subsidiary Guarantor.
If, at any time, any Subsidiary Guarantor ceases to be a guarantor of the
Indebtedness with respect to the New Credit Agreement and the 12 3/4% Notes and
no Event of Default (or event or condition which with the giving of notice or
the passage of time would be an Event of Default) then exists and is continuing,
and either (x) such Subsidiary Guarantor has not Incurred any Indebtedness or
preferred stock (including preference stock) after the date of the Indenture
that is then outstanding, other than Indebtedness Incurred pursuant to the first
full paragraph under "-- Covenants -- Limitation on Indebtedness and Preferred
Stock" (but only to the extent such Indebtedness is also Indebtedness of
Alpart), clauses (iii) and (iv) of the second full paragraph under
"-- Covenants -- Limitation on Indebtedness and Preferred Stock" and, in each
case, permitted refinancings thereof or (y) the Notes are then rated Baa3 (or
the equivalent) or better by Moody's Investor Services, Inc. (or a successor
corporation) or BBB-(or the equivalent) or better by Standard & Poor's
Corporation (or a successor corporation), then such Person shall cease to be a
Subsidiary Guarantor under the Indenture upon the delivery of an Officers'
Certificate and Opinion of Counsel to such effect. Thereafter, the Guarantee
given by such Subsidiary Guarantor shall no longer have any force or effect and
such Person shall be relieved of all of its obligations and duties under the
Indenture and the Notes.
Upon the sale or disposition (by merger or otherwise) of a Subsidiary
Guarantor (or the Company's or a Subsidiary's interest therein) by the Company
or a Subsidiary of the Company to a Person that is not a Subsidiary of the
Company and which sale or disposition is otherwise in compliance with the terms
of the Indenture, the obligations of such Subsidiary Guarantor under its
Guarantee shall be deemed released without any further action required on the
part of the Trustee, such Subsidiary Guarantor, the Company or any holder of the
Notes, provided that any guarantee of such Guarantor with respect to the New
Credit Agreement and the 12 3/4% Notes, and any renewals, extensions,
refundings, replacements, restructurings or refinancings, amendments and
modifications thereof, if any, has been or is simultaneously released. At the
request of the Company, the Trustee shall execute and deliver an appropriate
instrument evidencing such release. Upon the release of any Subsidiary Guarantor
from its Guarantee pursuant to the provisions of the Indenture, each other
Subsidiary Guarantor not so released shall remain liable for the full amount of
principal of, and interest on, the Notes as and to the extent provided in the
Indenture.
COVENANTS
Limitation on Indebtedness and Preferred Stock
The Indenture provides that the Company shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or become liable with respect to, or extend the maturity of or become
liable for the payment of, contingently or otherwise (collectively, "Incur"),
any preferred stock (including preference stock) or Indebtedness, except that,
without duplication, the Company, the Subsidiary Guarantors and Alpart may Incur
preferred stock (including preference stock) or Indebtedness (including, without
duplication, guarantees of Indebtedness of the Company and its Subsidiaries
otherwise permitted by the Indenture) if after giving effect thereto and the
receipt and application of the proceeds therefrom, and assuming that the full
amount of Indebtedness permitted to be Incurred under clause (ii) of the next
succeeding paragraph (after taking into account any reduction in such amount as
set forth in such clause (ii)) has been Incurred (assuming, for purposes of this
calculation, an interest rate on such additional Indebtedness equal to the
weighted average interest rate on the Indebtedness then outstanding under such
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clause (ii)), the Consolidated Fixed Charge Coverage Ratio of the Company is
greater than 2.0 to 1; provided, however, that Indebtedness of Alpart Incurred
pursuant to this paragraph shall not exceed an aggregate of $150,000,000 at any
one time outstanding, plus an amount equal to the reasonable fees and expenses
in connection with the Incurrence of such Indebtedness. (Section 4.10(a)).
Notwithstanding the foregoing, the following shall be permitted:
(i) the Company and the Subsidiary Guarantors may Incur Indebtedness
in respect of the Notes;
(ii) the Company and the Subsidiary Guarantors may Incur Indebtedness
(without duplication), and the Bank Guarantors may guarantee such
indebtednesses, under the New Credit Agreement, in connection with
Refinancing Sale and Leaseback Transactions or otherwise, in an aggregate
amount at any one time outstanding not to exceed $325,000,000, as reduced
from time to time by any permanent reduction in such amount as set forth in
a Board Resolution;
(iii)(A) Alpart may Incur Indebtedness in an aggregate amount not to
exceed $150,000,000 at any one time outstanding and (B) the Company, KJC
and AJI (without duplication) may Incur Indebtedness in an aggregate amount
not to exceed at any one time outstanding the product of (I) $150,000,000
multiplied by (II) the Company's then percentage ownership interest in
Alpart; provided, however, that the aggregate Indebtedness (without
duplication) Incurred pursuant to clauses (A) and (B) of this clause (iii)
may not exceed $150,000,000 at any one time outstanding; and provided,
further, that in each case the proceeds of such Indebtedness are used
solely for capital improvements and expenditures, expansion and working
capital with respect to Alpart and/or to reimburse the partners of Alpart
for advances to Alpart used solely for capital improvements and
expenditures, expansion and working capital with respect to Alpart, plus in
each case an amount equal to the reasonable fees and expenses in connection
with the Incurrence of such Indebtedness;
(iv) the Company and/or KAAC may Incur Indebtedness in an amount not
to exceed $75,000,000 at any one time outstanding, the proceeds of which
are used solely for capital improvements and expenditures, expansion and
working capital with respect to QAL and/or to reimburse the stockholders of
QAL for advances to QAL used solely for capital improvements and
expenditures, expansion and working capital with respect to QAL, plus an
amount equal to the reasonable fees and expenses in connection with the
Incurrence of such Indebtedness;
(v) VALCO may Incur Indebtedness, and the Company may guarantee such
Indebtedness, in an aggregate amount (without duplication) not to exceed
$25,000,000 at any one time outstanding, the proceeds of which are used
solely for capital improvements and expenditures, expansion and working
capital with respect to VALCO and/or to reimburse the shareholders of VALCO
for advances to VALCO used solely for capital improvements and
expenditures, expansion and working capital, plus an amount equal to the
reasonable fees and expenses in connection with the Incurrence of such
Indebtedness;
(vi) the Company and its Subsidiaries may Incur Indebtedness
("Refinancing Indebtedness") that serves to Refinance, in whole or in part,
the Indebtedness permitted by this paragraph and the immediately preceding
full paragraph (the "Refinanced Indebtedness"), or any one or more
successive Refinancings of any thereof; provided, however, that:
(A) such Refinancing Indebtedness is in an aggregate amount not to
exceed the aggregate amount of such Refinanced Indebtedness (including
accrued interest thereon and undrawn amounts under credit arrangements
otherwise permitted to be Incurred pursuant to the Indenture), the
amount of any premium required to be paid in connection with such
Refinancing pursuant to the terms of such Refinanced Indebtedness or the
amount of any reasonable and customary premium determined by the Company
to be necessary to accomplish such Refinancing by means of a redemption,
tender offer, privately negotiated transaction, defeasance or other
similar transaction, and an amount equal to the reasonable fees and
expenses in connection with the Incurrence of such Refinancing
Indebtedness;
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(B) neither the Company nor any of its Subsidiaries is an obligor
of such Refinancing Indebtedness, except to the extent that such Person
(I) was an obligor of such Refinanced Indebtedness or (II) is otherwise
permitted, at the time such Refinancing Indebtedness is Incurred, to be
an obligor of such Refinancing Indebtedness; and
(C) in the case of any Refinanced Indebtedness that is subordinated
(pursuant to its terms) in right and priority of payment to the Notes or
any Subsidiary Guarantor's obligation under its Guarantee, as the case
may be, such Refinancing Indebtedness (I) has a final maturity and
weighted average maturity at least as long as such Refinanced
Indebtedness and (II) is subordinated (pursuant to its terms) in right
and priority of payment to the Notes or such Subsidiary Guarantor's
obligation under its Guarantee, as the case may be, at least to the same
extent as such Refinanced Indebtedness;
(vii) the Company may Incur Capitalized Lease Obligations not
exceeding $50,000,000 at any one time outstanding in connection with the
sale and leaseback of all or a portion of the Company's interest in the
Center for Technology, provided that the Net Cash Proceeds therefrom are
applied as described under "-- Limitation on Asset Sales";
(viii) the Company and its Subsidiaries may Incur Indebtedness, the
proceeds of which are used solely to finance the construction, acquisition
or the acquisition and retrofitting of an aluminum smelter or smelters or
related facilities (or interests therein) and the reasonable fees and
expenses in connection with the Incurrence of such Indebtedness, in an
amount not to exceed $150,000,000 in any fiscal year (without cumulation of
unused amounts to successive years);
(ix) the Company and its Subsidiaries may Incur Indebtedness, the
proceeds of which are used solely to finance the construction or
acquisition of a fabrication plant or plants or related facilities and the
reasonable fees and expenses in connection with the Incurrence of such
Indebtedness, in an aggregate amount not to exceed $25,000,000 in any
fiscal year (without cumulation of unused amounts to successive years);
(x) the Company and its Subsidiaries may Incur preferred stock
(including preference stock) that is not Redeemable Stock; provided,
however, that in the case of preferred stock (including preference stock)
Incurred by any Subsidiary of the Company that is not a Subsidiary
Guarantor, such preferred stock shall be issued pro rata to the holders of
Capital Stock of such Subsidiary;
(xi) the Company and its Subsidiaries may Incur preferred stock and
preference stock (including preferred stock and preference stock that is
Redeemable Stock), provided that such preferred stock or preference stock
is issued to the Company, any of its Subsidiaries or pro rata to the
holders of Capital Stock of any such Subsidiary;
(xii) the Company and its Subsidiaries may Incur Permitted
Indebtedness; and
(xiii) the Company and its Subsidiaries may Incur Indebtedness in an
amount at any one time outstanding not to exceed $75,000,000, provided that
the amount of such Indebtedness that may be Incurred by Subsidiaries of the
Company (other than Subsidiary Guarantors that are not Permitted Entities)
shall not exceed $25,000,000 at any one time outstanding, and provided,
further, that, to the extent any such Indebtedness is Incurred from a Bank
or an affiliate thereof, the Bank Guarantors may guarantee such
Indebtedness. (Section 4.10(b)).
Notwithstanding the foregoing, no Subsidiary of the Company shall assume,
guarantee or in any other manner become liable with respect to any Indebtedness
of the Company or a Subsidiary Guarantor (other than such Subsidiary) ("Other
Indebtedness") which is subordinated (pursuant to its terms) in right and
priority of payment to any other Indebtedness of the Company or such Subsidiary
Guarantor, unless such Subsidiary also assumes, guarantees or otherwise becomes
liable with respect to the Notes on a substantially similar basis for so long as
such Subsidiary is liable with respect to such Other Indebtedness; provided,
however, that if such Other Indebtedness is subordinated (pursuant to its terms)
in right and priority of payment to the Notes or any Subsidiary Guarantor's
obligation under its Guarantee, as the case may be, any
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such assumption, guarantee or other liability of such Subsidiary with respect to
such Other Indebtedness shall be subordinated to such Subsidiary's assumption,
guarantee or other liability with respect to the Notes to the same extent as
such subordinated Indebtedness is subordinated to the Notes or such Subsidiary
Guarantor's obligation under its Guarantee, as the case may be; and provided,
further, that this paragraph shall not be applicable to any assumption,
guarantee or other liability of any Subsidiary of the Company which existed at
the time such Person became a Subsidiary of the Company and was not Incurred in
connection with, or in contemplation of, such Person becoming a Subsidiary of
the Company, or any Refinancing Indebtedness in connection therewith complying
with clause (vi) of the immediately preceding full paragraph (provided, that the
guarantee of such Refinancing Indebtedness is on substantially the same terms as
the guarantee of the Refinanced Indebtedness). (Section 4.10(c)).
Limitations on Restricted Payments and Restricted Investments
The Indenture provides that the Company shall not, directly or indirectly,
(i) declare or pay any dividend or make any distribution in respect of its
Capital Stock (other than dividends payable in Capital Stock of the Company
other than Redeemable Stock), (ii) make or permit any of its Subsidiaries to
make any payment on account of the purchase, redemption or other acquisition or
retirement of any Capital Stock of the Company other than through the issuance
solely of Capital Stock of the Company (other than Redeemable Stock) or rights
thereto, provided that any Subsidiary of the Company may purchase Capital Stock
of the Company from the Company or from any other Subsidiary of the Company
(which purchase shall not be a Restricted Payment or a Restricted Investment),
(iii) make or permit any of its Subsidiaries to make any voluntary purchase,
redemption or other acquisition or retirement for value of any Indebtedness that
is subordinated (pursuant to its terms) in right and priority of payment to the
Notes or any Subsidiary Guarantor's obligations under its Guarantee, as the case
may be, other than purchases, redemptions or other acquisitions or retirements
of Permitted Indebtedness described in clause (b) of the definition thereof or
purchases, redemptions or other acquisitions otherwise permitted by the terms of
the Indenture (each of the foregoing in clauses (i), (ii) and (iii), a
"Restricted Payment"), (iv) to the extent the Company or its Subsidiaries
exercise actual control over a Non-Affiliate Joint Venture existing on the date
of the Indenture or formed or acquired after the date of the Indenture (each a
"Controlled Non-Affiliate Joint Venture"), permit such Controlled Non-Affiliate
Joint Venture to make any Restricted Investment or (v) make or permit any of its
Subsidiaries to make any Restricted Investment, unless at the time of, and after
giving effect to, each such Restricted Payment or Restricted Investment:
(A) no Event of Default (and no event that, after notice or lapse of time
or both, would become an Event of Default) shall have occurred and be continuing
(or would occur and be continuing after giving effect thereto); and
(B) the Consolidated Fixed Charge Coverage Ratio of the Company is greater
than 2.0 to 1; and
(C) the sum of:
(x) the aggregate amount expended for all Restricted Payments after
December 31, 1992, and
(y) the aggregate amount of Restricted Investments (less the amount of
(1) such Restricted Investments returned in cash, or in property if made in
property, (2) any guarantee that constitutes a Restricted Investment, to
the extent it has been released, and (3) any direct liabilities or
obligations to be assumed or discharged in connection with such Restricted
Investments (in either case without recourse to the Company, any of its
Subsidiaries or any Controlled Non-Affiliate Joint Venture) if such
liability or obligation had been a liability or obligation of the Company,
any of its Subsidiaries or any Controlled Non-Affiliate Joint Venture)
(in each case, the amount expended for such Restricted Payments and Restricted
Investments or the amount of any Restricted Investments returned, if paid or
returned in property other than in cash or a sum certain guaranteed, to be the
Fair Market Value of such property), would not exceed the sum of:
(I) 50% of the Consolidated Net Income of the Company (or, if the
aggregate Consolidated Net Income of the Company for any such period shall
be a deficit, minus 100% of such deficit) accrued on a
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cumulative basis for the period (taken as one accounting period) from
January 1, 1993 to the end of the Company's most recently ended fiscal
quarter for which financial statements are available at the time such
Restricted Payment or Restricted Investment is being made, and
(II) the aggregate net proceeds, including the Fair Market Value of
property other than cash received by the Company as capital contributions
to the Company after December 31, 1992, or from the issue or sale (other
than to a Non-Affiliate Joint Venture or to a Subsidiary of the Company),
after December 31, 1992, of Capital Stock other than Redeemable Stock
(including Capital Stock, other than Redeemable Stock, issued upon the
conversion of, or in exchange for, indebtedness or Redeemable Stock, and
including upon exercise of warrants or options or other rights to purchase
such Capital Stock, issued after December 31, 1992), or from the issue or
sale, after December 31, 1992 of any debt or other security of the Company
convertible or exercisable into such Capital Stock that has been so
converted or exercised;
provided, however, that in no event shall the Company make, or permit any
of its Subsidiaries to make, a Restricted Payment or Restricted Investment
pursuant to this paragraph to or in MAXXAM or any Affiliate of MAXXAM if,
after giving effect thereto, (A) the aggregate amount of all Restricted
Payments and Restricted Investments (less the amount of (1) such Restricted
Investments returned in cash, or in property if made in property, (2) any
guarantee that constitutes a Restricted Investment, to the extent it has
been released, and (3) any direct liabilities or obligations to be assumed
or discharged in connection with such Restricted Investments (in either
case without recourse to the Company, any of its Subsidiaries or any
Controlled Non-Affiliate Joint Venture) if such liability or obligation had
been a liability or obligation of the Company, any of its Subsidiaries or
any Controlled Non-Affiliate Joint Venture) made pursuant to this paragraph
in any calendar year to or in MAXXAM or any Affiliate of MAXXAM, less (B)
the aggregate amount of such Restricted Payments and Restricted Investments
made to or in KAC in such calendar year which are distributed or paid
within thirty days thereafter by KAC to its holders of common stock other
than MAXXAM and any Affiliate of MAXXAM, would exceed (C) $75,000,000; and
provided, further, that notwithstanding the foregoing, the Company may make
any such Restricted Payment or Restricted Investment to or in MAXXAM or any
Affiliate of MAXXAM if, after giving pro forma effect thereto, the
Company's senior debt rating would be Baa3 (or the equivalent) or better by
Moody's Investor Services, Inc. (or a successor rating agency) or BBB- (or
the equivalent) or better by Standard & Poor's Corporation (or a successor
rating agency). (Section 4.09(a)).
The foregoing provisions shall not be violated by reason of the
following Restricted Payments:
(I) the payment of any dividend or distribution or the redemption of
any securities within 60 days after the date of declaration of such
dividend or distribution or the giving of the formal notice by the Company
of such redemption, if at said date of declaration of such dividend or
distribution or the giving of the formal notice of such redemption, such
dividend, distribution or redemption would have complied with the preceding
full paragraph;
(II) the retirement of any shares of the Company's Capital Stock by
exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to a Non-Affiliate Joint Venture or to a Subsidiary of the
Company) of other shares of its Capital Stock other than Redeemable Stock
or out of the proceeds of a substantially concurrent capital contribution
to the Company, provided, however, that, to the extent the proceeds are so
used, a sale of Capital Stock or capital contribution permitted by this
clause (II) shall be excluded in determining the aggregate net proceeds
received by the Company referred to under clause (II) of the preceding full
paragraph;
(III) the payments provided for by clauses (ii), (iii), (iv) and (v)
and the transactions described in clauses (vi), (vii), (viii) and (ix) (so
long as, in the case of clause (ix), immediately following such
transaction, the Consolidated Net Worth of the entity that survives such
transaction is not materially lower than the Consolidated Net Worth of the
Company immediately prior to such transaction) of the second paragraph
under " -- Restrictions on Transactions with Affiliates";
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(IV) the voluntary purchase, redemption or other acquisition or
retirement for value of Indebtedness that is subordinated (pursuant to its
terms) in right and priority of payment to the Notes or any Subsidiary
Guarantor's obligation under its Guarantee, as the case may be, to the
extent that the aggregate amount expended (exclusive of amounts expended
pursuant to clauses (V) and (VIII) of this paragraph) for all such
voluntary purchases, redemptions or other acquisitions or retirements after
the date of the Indenture (the amount expended for such purchases,
redemptions or other acquisitions or retirements, if paid in property other
than in cash or a sum certain guaranteed, to be the Fair Market Value of
such property) does not exceed the aggregate net proceeds, including the
Fair Market Value of property other than cash received by the Company or
any Subsidiary Guarantor from the issue or sale (other than an issuance or
sale to the Company or a Non-Affiliate Joint Venture or Subsidiary of the
Company), after the date of the Indenture, of Indebtedness that is
subordinated (pursuant to its terms) in right and priority of payment to
the Notes or such Subsidiary Guarantor's obligation under its Guarantee, as
the case may be, and that is otherwise permitted to be incurred pursuant to
the Indenture, provided, that, to the extent the proceeds of Indebtedness
so subordinated to the Notes or any Subsidiary Guarantor's obligation under
its Guarantee, as the case may be, are so used, the net proceeds of
issuance of any such Indebtedness upon conversion into Capital Stock shall
not be included in determining the aggregate net proceeds received by the
Company referred to under clause (II) of the preceding full paragraph;
(V) the voluntary purchase, redemption or other acquisition or
retirement for value of any Indebtedness that is subordinated (pursuant to
its terms) in right and priority of payment to the Notes or any Subsidiary
Guarantor's obligation under its Guarantee, as the case may be, by exchange
for, or out of the proceeds of, the substantially concurrent sale (other
than to a Non-Affiliate Joint Venture or to a Subsidiary of the Company) of
Capital Stock (other than Redeemable Stock) of the Company, provided,
however, that, to the extent the proceeds are so used, the issuance of
Capital Stock as permitted by this clause (V) shall not be included in
determining the aggregate net proceeds received by the Company referred to
under clause (II) of the preceding full paragraph;
(VI) the payment of dividends on, and the purchase, redemption,
retirement or other acquisition of, USWA Preferred Stock or Preferred Stock
($100), provided that no such payment is made, directly or indirectly, to
an Affiliate of the Company;
(VII) the payment to KAC of an amount not to exceed $300,000 in any
fiscal year for the payment of KAC's reasonable out-of-pocket expenses,
provided that no part of such amount is paid directly or indirectly to any
other Affiliate of the Company and that, at the time of each such payment,
the Company is in compliance with clause (A) of the preceding full
paragraph;
(VIII) Restricted Payments and Restricted Investments after February
1, 1993, other than Restricted Payments and Restricted Investments
permitted by the preceding full paragraph or clauses (I) through (VII) of
this paragraph, in an aggregate amount such that the sum of:
(x) the aggregate amount expended for all such Restricted Payments
after February 1, 1993 made pursuant to this clause (VIII); and
(y) the aggregate amount of all Restricted Investments made after
February 1, 1993 pursuant to this clause (VIII) (less the amount of (1)
such Restricted Investments returned in cash, or in property if made in
property, (2) any guarantee that constitutes a Restricted Investment, to
the extent it has been released, and (3) any direct liabilities or
obligations to be assumed or discharged in connection with such
Restricted Investments (in either case without recourse to the Company,
any of its Subsidiaries or any Controlled Non-Affiliate Joint Venture)
if such liability or obligation had been a liability or obligation of
the Company, any of its Subsidiaries or any Controlled Non-Affiliate
Joint Venture)
(in each case, the amount expended for such Restricted Payments and
Restricted Investments or the amount of any Restricted Investments
returned, if paid or returned in property other than in cash or a sum
certain guaranteed, to be the Fair Market Value of such property) would not
exceed $50,000,000,
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provided that at the time of each such Restricted Payment or Restricted
Investment made pursuant to this clause (VIII), no Event of Default (and no
event that, after notice or lapse of time or both, would become an Event of
Default) shall have occurred and be continuing (or would occur and be
continuing after giving effect thereto); and provided, further, that in no
event shall the Company make, or permit any of its Subsidiaries to make, a
Restricted Payment or Restricted Investment pursuant to this clause (VIII)
to or in MAXXAM or any Affiliate of MAXXAM if, after giving effect thereto,
(A) the aggregate amount of all Restricted Payments and Restricted
Investments (less the amount of (1) such Restricted Investments returned in
cash, or in property if made in property, (2) any guarantee that
constitutes a Restricted Investment, to the extent it has been released,
and (3) any direct liabilities or obligations to be assumed or discharged
in connection with such Restricted Investments (in either case without
recourse to the Company, any of its Subsidiaries or any Controlled
Non-Affiliate Joint Venture) if such liability or obligation had been a
liability or obligation of the Company, any of its Subsidiaries or any
Controlled Non-Affiliate Joint Venture) made pursuant to this clause (VIII)
to or in MAXXAM or any Affiliate of MAXXAM, less (B) the aggregate amount
of such Restricted Payments and Restricted Investments made to or in KAC
which are distributed or paid within thirty days thereafter by KAC to its
holders of common stock other than MAXXAM and Affiliates of MAXXAM, would
exceed (C) $20,000,000; and
(IX) in the event that the Company merges with or into KAC and the
Preferred Dividend Intercompany Notes are extinguished, the payment of
dividends on shares of PRIDES, the Series A Shares and any other preferred
stock of KAC the proceeds of which gave rise to a Preferred Dividend
Intercompany Note, in an aggregate amount not to exceed the outstanding
principal amount of such Preferred Dividend Intercompany Notes at the time
of such merger.
No payments and other transfers made under clauses (II) through (VII) and (IX)
of this paragraph shall reduce the amount available for Restricted Payments and
Restricted Investments under the first full paragraph of this Section entitled
"Limitations on Restricted Payments and Restricted Investments"; payments and
other transfers made under clauses (I) and (VIII) of this paragraph shall reduce
the amount available for Restricted Payments and Restricted Investments under
the first full paragraph of this Section entitled "Limitations on Restricted
Payments and Restricted Investments." (Section 4.09(b)).
Restrictions on Transactions with Affiliates
The Indenture provides that the Company shall not, and shall not permit any
of its Subsidiaries or its Non-Affiliate Joint Ventures to, enter into any
transaction or series of related transactions with any Affiliate of the Company,
unless (i) the terms thereof are no less favorable to the Company, such
Subsidiary or such Non-Affiliate Joint Venture, as the case may be, than those
that could reasonably be expected to be obtained in a comparable transaction
with an unrelated Person, (ii) such transaction or series of related
transactions shall have been approved as meeting such standard, in good faith,
by a majority of the independent members of the Board of Directors of the
Company evidenced by a Board Resolution and (iii) if the amount of such
transaction or the aggregate amount of such series of related transactions is
greater than $10,000,000, the Company, such Subsidiary and/or such Non-Affiliate
Joint Venture, as the case may be, shall have received an opinion that such
transaction or series of related transactions is fair to the Company, such
Subsidiary and/or such Non-Affiliate Joint Venture, as the case may be, from a
financial point of view, from an independent investment banking firm of national
standing selected by the Company. (Section 4.08(a)).
The provisions contained in the preceding paragraph shall not apply to (i)
the making of any Restricted Payments and Restricted Investments otherwise
permitted under the caption "Limitations on Restricted Payments and Restricted
Investments" (other than clause (IV) of the second paragraph thereunder), (ii)
the making of payments permitted by the Tax Sharing Agreements, (iii) the making
of payments to MAXXAM for reimbursement for actual services provided thereby to
the Company or its Subsidiaries or Non-Affiliate Joint Ventures based on actual
costs and an allocable share of overhead expenses, (iv) compensation (in the
form of reasonable director's fees and reimbursement or advancement of
reasonable out-of-pocket expenses) paid to any director of the Company or its
Subsidiaries or Non-Affiliate Joint Ventures for services rendered in
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such person's capacity as a director and indemnification and directors' and
officers' liability insurance in connection therewith, (v) compensation,
indemnification and other benefits paid or made available to officers and
employees of the Company or its Subsidiaries or Non-Affiliate Joint Ventures for
services actually rendered, comparable to those generally paid or made available
by entities engaged in the same or similar businesses (including reimbursement
or advancement of reasonable out-of-pocket expenses and directors' and officers'
liability insurance), (vi) loans to officers, directors and employees of the
Company or its Subsidiaries for business or personal purposes and other loans
and advances to such officers, directors and employees for travel,
entertainment, moving and other relocation expenses, in each case made in the
ordinary course of business and consistent with past practices of the Company
and its Subsidiaries, (vii) any amendment to the Existing Intercompany Note that
extends the maturity thereof or reduces the interest rate thereon, or any other
amendment thereto that does not materially adversely affect the holders of the
Notes, (viii) the dividend by the Company of all or any portion of the Existing
Intercompany Note and accrued interest thereon, (ix) certain mergers,
consolidations, transfers or sales permitted by the provisions of the Indenture
described under "-- Merger or Consolidation" and (x) any amendment to the Tax
Sharing Agreements, provided that a majority of the independent members of the
Board of Directors of the Company evidenced by a Board Resolution determines
that such amendment would not materially adversely affect the holders of the
Notes. (Section 4.08(b)).
Limitation on Liens
The Indenture provides that the Company shall not, and shall not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon
any of their respective U.S. Fixed Assets to secure, directly or indirectly, any
Indebtedness, unless the Notes are equally and ratably secured on a senior basis
for so long as such secured Indebtedness is so secured.
The Indenture provides that the foregoing provision shall not prohibit:
(i) Liens on the Permitted Collateral securing outstanding
Indebtedness permitted by the Indenture in an aggregate principal amount
not to exceed the Maximum Secured Amount at the time such Indebtedness is
Incurred;
(ii) Liens in existence on the date of the issuance of the Notes after
giving effect thereto which Liens, if such Liens secure a single or related
items Indebtedness in a principal amount in excess of $5,000,000, are set
forth in a schedule to the Indenture;
(iii) Liens in favor of the Company or any Subsidiary Guarantor;
(iv) Liens on U.S. Fixed Assets of a person existing at the time such
person is merged into or consolidated with the Company or any Subsidiary of
the Company, provided, that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any
other U.S. Fixed Assets (other than Improvements thereto or thereon and any
proceeds thereof) of the Company or any Subsidiary of the Company;
(v) Liens on U.S. Fixed Assets existing at the time of acquisition
thereof by the Company or any Subsidiary of the Company, provided, that
such Liens were in existence prior to the contemplation of such acquisition
and do not extend to any other U.S. Fixed Assets (other than Improvements
thereto or thereon and any proceeds thereof) of the Company or any
Subsidiary of the Company;
(vi) Liens securing Indebtedness permitted by clauses (vii), (viii)
and (ix) of the second paragraph under "-- Limitation on Indebtedness and
Preferred Stock", provided, that such Liens do not extend to any U.S. Fixed
Assets other than the Center for Technology in the case of clause (vii),
the applicable aluminum smelter or smelters and related facilities in the
case of clause (viii) and the applicable fabrication plant or plants and
related facilities in the case of clause (ix), and, in each case, together
with any Improvements thereto or thereon and any proceeds thereof;
(vii) Liens securing Indebtedness permitted by clause (e) of the
definition of Permitted Indebtedness;
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(viii) Liens securing the Indebtedness permitted by clauses (iii),
(iv) or (v) of the second paragraph under "-- Limitation on Indebtedness
and Preferred Stock", provided that such Liens do not extend to any U.S.
Fixed Assets other than (a) Permitted Collateral (in which case the
principal amount of such Indebtedness shall be included in the calculation
of the Maximum Secured Amount for purposes of clause (i) of this paragraph
and such Liens shall only be permitted if the requirements of clause (i)
are satisfied) and (b) the Capital Stock and assets of Alpart, KJC and AJI
in the case of clause (iii), the Capital Stock and assets of KAAC in the
case of clause (iv), and the Capital Stock and assets of VALCO in the case
of clause (v), plus, in each case, the proceeds thereof;
(ix) Liens securing Indebtedness consisting of Capitalized Lease
Obligations, mortgage financings, industrial revenue bonds or other
monetary obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or
installation of U.S. Fixed Assets used in the business of the Company and
its Subsidiaries, or repairs, additions or Improvements to such U.S. Fixed
Assets, provided, that such Liens (a) secure Indebtedness in an amount not
in excess of the original purchase price or the original cost of any such
U.S. Fixed Assets or repair, addition or Improvement thereto (plus an
amount equal to the reasonable fees and expenses in connection with the
Incurrence of such Indebtedness), (b) do not extend to any other U.S. Fixed
Assets (other than Improvements thereto or thereon and any proceeds
thereof) of the Company or any Subsidiary of the Company (and, in the case
of a repair, addition or Improvement, such Lien extends only to the U.S.
Fixed Assets (and Improvements thereto or thereon) repaired, added to or
improved), and (c) secure Indebtedness incurred no later than 180 days
after the acquisition or final completion of such construction, repair,
addition or Improvement;
(x) Liens securing Refinancings (in whole or in part) of any
Indebtedness secured by the Liens described in clauses (ii), (iv), (v),
(vi), (viii) or (ix) of this paragraph, and any successive Refinancings of
any thereof (together with any increased amount of such Indebtedness
specifically permitted pursuant to the second paragraph under
"-- Limitation on Indebtedness and Preferred Stock" (to cover the
reasonable fees and expenses incurred in connection with a Refinancing)),
provided that each such Lien (unless otherwise permitted by this paragraph)
does not extend to any additional U.S. Fixed Assets (other than
Improvements thereto or thereon and any proceeds thereof);
(xi) Liens on U.S. Fixed Assets securing Indebtedness in an aggregate
principal amount not to exceed $10,000,000; and
(xii) Liens on any U.S. Fixed Assets consisting of easements,
covenants, restrictions, exceptions, reservations and similar matters which
do not materially impair the use of such U.S. Fixed Assets for the uses for
which it is held and which Liens are granted to secure Indebtedness secured
by Liens permitted by the foregoing clauses (i) through (xi).
The Notes will be considered equally and ratably secured on a senior basis
with any other Lien if the Lien securing the Notes is of at least equal priority
and covers the same U.S. Fixed Assets property or assets as such other Lien,
provided, that if the Indebtedness secured by such other Lien is expressly
subordinated in right and priority of payment by its terms to the Notes, the
Lien securing the Notes shall be senior to such other Lien.
Subsidiary Guarantees, Etc.
The Indenture provides that if the Company or any Subsidiary Guarantor
shall transfer or cause to be transferred, in one or a series of related
transactions, any property or assets (including, without limitation, businesses,
divisions, real property, assets or equipment) to any Subsidiary of the Company
or to any Non-Affiliate Joint Venture of the Company, the Company shall cause
such transferee Subsidiary or Non-Affiliate Joint Venture to (i) execute and
deliver to the Trustee a supplemental indenture in form and substance reasonably
satisfactory to the Trustee pursuant to which such transferee Subsidiary or
Non-Affiliate Joint Venture shall be named as an additional Subsidiary Guarantor
and (ii) deliver to the Trustee an Opinion of Counsel reasonably satisfactory to
the Trustee that such supplemental indenture has been duly executed and
delivered by such Person. (Section 4.12(a)).
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The provisions set forth in the immediately preceding paragraph shall not
apply to the following transfers of property or assets by the Company or any
Subsidiary Guarantor:
(A) transfers of property or assets (other than cash) to Subsidiaries
of the Company and Non-Affiliate Joint Ventures, provided that such
transfer is made in exchange for cash in an amount equal to the Fair Market
Value of such property or assets;
(B) transfers of property or assets to Subsidiary Guarantors;
(C) the use of the proceeds of Indebtedness described in clauses
(iii), (iv), (v), (viii) and (ix) of the second paragraph under
"-- Limitation on Indebtedness and Preferred Stock";
(D) transfers to Alpart of the proceeds of Indebtedness described in
the first paragraph under "-- Limitation on Indebtedness and Preferred
Stock" to the extent that Alpart is an obligor or guarantor of such
Indebtedness;
(E) the provision of, and the payment for, goods and services, working
capital and technology to Subsidiaries of the Company and Non-Affiliate
Joint Ventures, in each case in the ordinary course of the businesses in
which the Company or its Subsidiaries or its Non-Affiliate Joint Ventures
were engaged on the date of the Indenture or reasonably related extensions
thereof;
(F) transfers of assets to a Subsidiary of the Company immediately
prior to the sale of such Subsidiary;
(G) transfers of cash or Cash Equivalents to Non-Affiliate Joint
Ventures engaged or to be engaged in the business of bauxite mining and/or
alumina refining and/or aluminum smelting and/or fabrication and/or
reasonably related extensions thereof;
(H) transfers of cash, Cash Equivalents, property or other assets to a
Permitted Entity in exchange for Permitted Entity Securities of such
Permitted Entity if, immediately after giving effect to such transfer, such
Permitted Entity remains a Permitted Entity;
(I) transfers of Capital Stock or other equity interests to the issuer
of such Capital Stock or other equity interests such that immediately after
giving effect to such transfer and related transfers, the proportional
beneficial ownership by the transferor of the class of Capital Stock or
equity interests so transferred is not reduced; and
(J) other transfers of assets, provided that the aggregate amount
thereof (if other than cash, such amount shall be the Fair Market Value of
such asset at the time of such transfer), less the aggregate amount of such
assets returned to the Company or any Subsidiary Guarantor (if returned
other than in cash, the amount of such assets shall be the Fair Market
Value of such assets at the time so returned), does not exceed, in the
aggregate, the greater of (i) $25,000,000 or (ii) 5% of the Company's
Consolidated Net Worth, calculated after giving effect to such transfers
and returns. (Section 4.12(b)).
The Indenture provides that the two preceding full paragraphs of this
section shall not apply to any Restricted Investment or Restricted Payment
otherwise permitted by the provisions described under " -- Limitations on
Restricted Payments and Restricted Investments." (Section 4.12(d)).
In addition, the Indenture provides that the Company shall not permit any
Permitted Entity to cease to be a Permitted Entity except:
(i) pursuant to a liquidation or dissolution of such Permitted Entity
or a transfer of all or substantially all of the properties and assets of
such Permitted Entity to its Equity Owners in proportion to their
interests, including by way of merger or consolidation of such Permitted
Entity with or into its sole Equity Owner;
(ii) pursuant to a sale in compliance with the provisions described
under " -- Limitation on Asset Sales" of all of the Permitted Entity
Securities of such Permitted Entity held directly or indirectly by the
Company or any Subsidiary Guarantor; or
(iii) if such Permitted Entity becomes a Subsidiary Guarantor.
(Section 4.12(e)).
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Notwithstanding anything in the Indenture to the contrary, VALCO shall be
permitted to merge with or into, or distribute substantially all of its assets
and liabilities to, a Permitted Entity, provided that, at the time of such
merger or distribution, such Permitted Entity has no more than $50,000 of assets
other than Capital Stock or other similar interests in VALCO. Upon the
consummation of any transaction contemplated by this paragraph, the entity
surviving such merger or distribution shall not be required (i) to become a
Subsidiary Guarantor pursuant to the provisions described in this section or
(ii) if such entity has no assets except as contemplated in this paragraph or
meets the conditions of the preceding paragraph, to remain a Permitted Entity
pursuant to the terms described in this Section. (Section 4.12(f)).
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries
The Indenture provides that the Company shall not, and shall not permit its
Subsidiaries to, create or otherwise suffer to exist any consensual encumbrances
or restrictions on the ability of any Subsidiary to pay dividends or make any
other distributions on its Capital Stock or pay any Indebtedness owed to the
Company or any Subsidiaries of the Company or to make loans or advances or
transfer any of its assets to the Company or any Subsidiary of the Company;
provided, however that such restrictions shall not prohibit Permitted Dividend
Encumbrances. (Section 4.13).
Limitation on Asset Sales
The Indenture provides that the Company shall not, and shall not permit any
of its Subsidiaries to, consummate any Asset Sale unless at least 75% of the
consideration therefor received by the Company or such Subsidiary (exclusive of
indemnities) is in the form of cash or Cash Equivalents, provided that this
sentence shall not apply to the sale or disposition of assets as a result of a
foreclosure (or a secured party taking ownership of such assets in lieu of
foreclosure) or as a result of an involuntary proceeding in which the Company
cannot, directly or through its Subsidiaries, direct the type of proceeds
received. The amount of (a) any liabilities of the Company or any Subsidiary of
the Company that are actually assumed by the transferee in such Asset Sale, or
for which the Company and its Subsidiaries are fully released, shall be deemed
to be cash for purposes of determining the percentage of cash consideration
received by the Company or its Subsidiaries and (b) any notes or other
obligations received by the Company or any Subsidiary of the Company from such
transferee that are immediately converted (or are converted within thirty days
of the related Asset Sale) by the Company or such Subsidiary into cash shall be
deemed to be cash for purposes of determining the percentage of cash
consideration received by the Company or its Subsidiaries. (Section 4.14(a)).
The Indenture further provides that the Company shall apply any Net Cash
Proceeds received after the date of the Indenture to (A) the prepayment of
Indebtedness in respect of or under the New Credit Agreement and any other
Indebtedness of the Company (other than the Notes) entitled to receive payment
pursuant to the terms thereof (excluding Indebtedness that is subordinated by
its terms to the Notes or the Guarantee thereof) (the "Specified Pari Passu
Indebtedness"), unless the holders thereof elect not to receive such prepayment
and (B) an offer to purchase (an "Asset Sale Offer") the then outstanding Notes,
on any Business Day occurring no later than 175 days after the receipt by the
Company (or any of its Subsidiaries, if applicable) of such Net Cash Proceeds
(the "Asset Sale Purchase Date," which date shall be deferred to the extent
necessary to permit the Asset Sale Offer to remain open for the period required
by applicable law), at a price (the "Asset Sale Purchase Price") equal to 100%
of the principal amount thereof together with accrued interest, if any, to but
not including the Asset Sale Purchase Date pursuant to the provisions set forth
below. Such Asset Sale Offer with respect to the Notes shall be in an aggregate
principal amount (the "Asset Sale Offer Amount") equal to the Net Cash Proceeds
(rounded down to the nearest $1,000) from the Asset Sales to which the Asset
Sale Offer relates multiplied by a fraction, the numerator of which is the
principal amount of the Notes outstanding (determined as of the close of
business on the day immediately preceding the date notice of such Asset Sale
Offer is mailed) and the denominator of which is the principal amount of the
Notes outstanding plus the aggregate principal amount of Indebtedness under the
New Credit Agreement and the Specified Pari Passu Indebtedness outstanding
(determined as of the close of business on the day immediately preceding the
date notice of such Asset Sale Offer is mailed). If (x) no Indebtedness is
outstanding in respect of or under the New Credit Agreement or the Specified
Pari Passu Indebtedness or (y) the holders of such Indebtedness entitled to
receive payment elect not to receive the payments provided for in the previous
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sentence, or (z) the application of such Net Cash Proceeds results in the
complete prepayment of such Indebtedness, then in each case any remaining
portion of such Net Cash Proceeds will be required to be applied to an Asset
Sale Offer to purchase the Notes. (Section 4.14(b)).
Notice of an Asset Sale Offer shall be mailed by the Company to all holders
at their last registered address within 145 days of the receipt by the Company
or any of its Subsidiaries of such Net Cash Proceeds. The Asset Sale Offer shall
remain open from the time of mailing until the last Business Day before the
Asset Sale Purchase Date, but in no event for a period less than twenty-four
days or less than that required by applicable law. The notice shall state, among
other things, (1) that holders will be entitled to withdraw their election if
the Trustee receives, not later than one Business Day prior to the Asset Sale
Purchase Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the holder, the principal amount of the Notes the holder delivered
for purchase, the certificate number of each Note the holder delivered for
purchase and a statement that such holder is withdrawing his, her or its
election to have such Notes purchased and (2) that if Notes in a principal
amount in excess of the Asset Sale Offer Amount are surrendered pursuant to the
Asset Sale Offer, the Company shall purchase Notes on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only Notes
in denominations of $1,000 or integral multiples thereof shall be acquired).
(Section 4.14(c)).
Notwithstanding the foregoing, the Company shall not be required to make an
Asset Sale Offer until the aggregate amount of Net Cash Proceeds so to be
applied pursuant to this covenant exceeds $25,000,000 (the "Twenty-Five Million
Threshold") and then the total amount of such Net Cash Proceeds shall be
required to be so applied in accordance with this covenant. The Company may
credit against its obligation to offer to repurchase Notes pursuant to this
covenant the principal amount of Notes acquired or held by the Company
subsequent to the date of the Asset Sale giving rise to such Asset Sale Offer
and surrendered for cancellation or redeemed or called for redemption subsequent
to such date and not previously used to satisfy any obligation of the Company to
redeem or offer to purchase Notes. In no event shall any Net Cash Proceeds that
are applied to an Asset Sale Offer be required to be applied to more than one
Asset Sale Offer. (Section 4.14(c)).
The Indenture further provides that, notwithstanding the foregoing, the
Company shall have no obligation to make an Asset Sale Offer, if, and to the
extent, the Company or any of its Subsidiaries commits within 140 days of the
receipt of such Net Cash Proceeds to reinvest (whether by acquisition of an
existing business or expansion, including, without limitation, capital
expenditures) such Net Cash Proceeds in one or more of the lines of business
(including capital expenditures) in which the Company or its Subsidiaries or its
Non-Affiliate Joint Ventures were engaged on the date of the Indenture or
reasonably related extensions of such lines of business, provided that such Net
Cash Proceeds are substantially so utilized no later than the last day of the
twelfth consecutive month (or, in the event the amount of such Net Cash Proceeds
from a single Asset Sale or series of related Asset Sales exceeds $200,000,000,
the twenty-fourth consecutive month) following the month in which such Net Cash
Proceeds are received (Section 4.16(d)).
The Indenture further provides that notwithstanding the foregoing, if an
Asset Sale consists of a sale of (i) all or a portion of the property, plant or
equipment of the Company's Gramercy alumina refinery whether now owned or
hereafter acquired, or any proceeds thereof or (ii) any U.S. Fixed Assets
acquired after the date of the Indenture which do not constitute Permitted
Collateral, the Company shall make an Asset Sale Offer with the Net Cash
Proceeds received from such Asset Sale (without regard to the Twenty-Five
Million Threshold) to the extent the Company has not committed within 140 days
of the receipt of such Net Cash Proceeds to reinvest (whether by acquisition of
an existing business or expansion, including, without limitation, capital
expenditures) such Net Cash Proceeds in U.S. Fixed Assets (other than Permitted
Collateral), provided that such Net Cash Proceeds are substantially so utilized
no later than the last day of the twelfth consecutive month (or, in the event
the amount of such Net Cash Proceeds from a single Asset Sale or series of
related Asset Sales exceeds $200,000,000, the twenty-fourth consecutive month)
following the month in which such Net Cash Proceeds are received.
SEC REPORTS
The Company shall file with the Trustee, within 15 days after it is
required to file them with the Commission, copies of the annual reports and of
the information, documents and other reports (or copies of
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such portions of any of the foregoing as the Commission may by rules and
regulations prescribe) which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. If the Company is not
subject to the requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall nonetheless file with the Commission and the Trustee copies of
such annual reports and such information, documents and other reports as it
would file if it were subject to the requirements of Section 13 or 15(d) of the
Exchange Act.
MODIFICATION OF INDENTURE
With the consent of the holders of not less than a majority in aggregate
principal amount of the outstanding Notes, the Trustee and the Company may
execute a supplemental indenture to add provisions to, or change in any manner
or eliminate any provisions of, the Indenture or modify in any manner the rights
of the holders of the Notes; provided, however, that without the consent of each
holder of an outstanding Note affected, no such supplemental indenture shall (i)
extend the stated maturity of any Note, reduce the interest rate, extend the
time or alter the manner of payment of interest thereon, reduce the principal
amount thereof or alter the timing of or reduce any premium payable upon the
redemption thereof or reduce the amount payable thereon in the event of
acceleration or the amount payable in bankruptcy, or (ii) reduce the aforesaid
percentage of aggregate principal amount of Notes the consent of the holders of
which is required for any such supplemental indenture (Section 10.02). The
Company and the Trustee may, without the consent of any holder of the Notes,
amend or supplement the Indenture for certain limited purposes, including the
cure of any ambiguity or the correction of any defect or inconsistency in the
Indenture. (Section 10.01).
DEFAULTS AND CERTAIN RIGHTS ON DEFAULT
An Event of Default is defined in the Indenture as (i) default in the
payment of principal, Change of Control Purchase Price, Asset Sale Purchase
Price or premium (if any) with respect to the Notes, as and when the same shall
become due and payable either at maturity, upon redemption or purchase by the
Company by declaration or otherwise, (ii) default in payment of any installment
of interest on any of the Notes as and when the same shall become due and
payable and such default continues for 30 days, (iii) failure on the part of the
Company, duly to observe or perform in any material respect any other of the
covenants or agreements on the part of the Company in the Notes or in the
Indenture for a period of sixty days after the date on which written notice of
such failure, which notice must specify the failure, demand it be remedied and
state that the notice is a "Notice of Default," shall have been given to the
Company by the Trustee by registered mail, which notice the Trustee shall give
upon receipt of requests to do so by the holders of at least 25% of the
aggregate principal amount of the Notes at the time outstanding, or to the
Company and the Trustee by the holders of at least 25% of the aggregate
principal amount of the Notes at the time outstanding, (iv) a default under any
mortgage, indenture or instrument under which there may be issued, secured or
evidenced any indebtedness for money borrowed by the Company or any Subsidiary,
whether such Indebtedness now exists or shall hereafter be created, in an
aggregate principal amount exceeding $25,000,000, which default (a), in the case
of a failure to make payment on any such indebtedness, shall not have been
waived, cured or otherwise ceased to exist within 30 days thereafter, or (b) in
the case of any default other than a payment default referred to in clause (a),
shall have resulted in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise have become due and
payable, or with respect to which the principal amount remains unpaid upon its
stated maturity; (v) a final judgment which, together with other outstanding
final judgments against the Company and its Significant Subsidiaries, exceeds an
aggregate of $25,000,000 (to the extent such judgments are not covered by valid
and collectible insurance from solvent unaffiliated insurers) shall be entered
against the Company and/or its Significant Subsidiaries and (a) within 30 days
after entry thereof, judgments exceeding such amount shall not have been
discharged, settled or bonded or execution thereof stayed pending appeal or,
within 30 days after the expiration of any such stay, such judgments exceeding
such amount shall not have been discharged, settled or bonded or execution
thereof stayed or (b) an enforcement proceeding shall have been commenced (and
not discharged, settled or bonded or execution thereof stayed) by any creditor
upon judgments exceeding such amount; (vi) certain events of bankruptcy,
insolvency, receivership or reorganization and (vii) the Guarantee having been
held unenforceable or invalid with respect to any Subsidiary Guarantor by a
final non-appealable order or judgment issued by a court of competent
jurisdiction or having ceased for any reason to be in full
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force and effect with respect to any Subsidiary Guarantor, or any Subsidiary
Guarantor or any person acting by or on behalf of any Subsidiary Guarantor
having denied or disaffirmed its obligations under the Guarantee. (Section
6.01).
The Indenture provides that, if an Event of Default shall have occurred and
be continuing, either the Trustee or the holders of 25% of the aggregate
principal amount of the Notes then outstanding may declare the entire principal
of and interest on the Notes to be due and payable immediately. Upon the
occurrence of certain events of bankruptcy, insolvency, receivership or
reorganization, principal of and interest on the Notes will become due and
payable without necessity of action on the part of the Trustee or the holders of
the Notes. Prior to the declaration of the maturity of the Notes as provided in
the preceding sentences, the holders of a majority of the aggregate principal
amount of the Notes at the time outstanding may on behalf of the holders of all
of the Notes waive any past default under the Indenture and its consequences,
except a default in the payment of principal of, premium, if any, Change of
Control Purchase Price, Asset Sale Purchase Price or interest on any of the
Notes or a default under Article Four of the Indenture or any other covenant or
provision of the Indenture which under Article Ten cannot be modified or amended
without the consent of the holder of each outstanding Note. In the case of any
such waiver, the Company, the Trustee and the holders of the Notes shall be
restored to their former positions and rights hereunder, respectively; but no
such waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
MERGER OR CONSOLIDATION
The Indenture provides that the Company may consolidate or merge with or
into any other corporation or corporations or sell or convey all or
substantially all of its property to any other corporation whether in a single
transaction or in a series of transactions; provided, however, that any such
consolidation, merger, sale or conveyance shall be upon the condition that (a)
immediately after giving effect to such consolidation, merger, sale or
conveyance, the corporation formed by or surviving any such consolidation or
merger, or to which such sale or conveyance shall have been made, whether the
Company or such other corporation (the "surviving corporation"), shall not be in
default in the performance or observance of any of the terms, covenants and
conditions of the Indenture to be kept or performed by the Company, (b) the
surviving corporation (if other than the Company) shall be a corporation
organized under the laws of the United States or any State thereof, (c)
immediately after giving effect to such consolidation, merger, sale or
conveyance, the surviving corporation (whether the Company or such other
corporation) could Incur $1.00 of Indebtedness pursuant to provisions described
in the first paragraph under "-- Limitation on Indebtedness and Preferred
Stock," (d) the surviving corporation (if other than the Company) shall
expressly assume the obligations of the Company by supplemental indenture
complying with the requirements of the Indenture satisfactory in form to the
Trustee and (e) immediately after giving effect to such consolidation, merger,
sale or conveyance, the surviving corporation (whether the Company or such other
corporation) shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction.
(Section 11.01(a)).
The Indenture further provides that, notwithstanding the foregoing, (i) the
Company may consolidate or merge with or into, or sell or convey all or
substantially all of its property to, KAC; provided, however, that the surviving
corporation (if other than the Company) shall expressly assume by supplemental
indenture complying with the requirements of the Indenture, the due and punctual
payment of the principal premium, if any, Change of Control Purchase Price,
Asset Sale Purchase Price and interest on all of the Notes, according to their
tenor, and the due and punctual performance and observance of all the covenants
and conditions of the Indenture to be performed or observed by the Company and
(ii) the Company may consolidate or merge with or into, or sell or convey all or
substantially all of its property to, a Subsidiary Guarantor; provided, that the
surviving corporation (if other than the Company) shall expressly assume by
supplemental indenture complying with the requirements of the Indenture, the due
and punctual payment of the principal of, premium, if any, Change of Control
Purchase Price, Asset Sale Purchase Price and interest on all of the Notes,
according to their tenor, and the due and punctual performance and observance of
all the covenants and conditions of the Indenture to be performed or observed by
the Company. (Section 11.01(b)).
The Indenture provides that, notwithstanding any other provision of the
Indenture (i) a Subsidiary Guarantor may consolidate or merge with or into, or
sell or convey all or substantially all of its property to, the
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Company, provided, that the surviving corporation (if other than the Company)
shall expressly assume by supplemental indenture complying with the requirements
of the Indenture, the due and punctual payment of the principal of, premium, if
any, Change of Control Purchase Price, Asset Sale Purchase Price and interest on
all of the Notes, according to their tenor, and the due and punctual performance
and observance of all the covenants and conditions of the Indenture to be
performed or observed by the Company and (ii) a Subsidiary Guarantor may
consolidate or merge with or into, or sell or convey all or substantially all of
its property to, any other Subsidiary Guarantor. (Section 15.03(a)).
The Indenture further provides that a Subsidiary Guarantor may merge or
consolidate with or into any other corporation or corporations (whether or not
affiliated with such Subsidiary Guarantor), or sell or convey its property as an
entirety or substantially as an entirety to any other corporation or
corporations (whether or not affiliated with such Subsidiary Guarantor);
provided, that (i) in the event that the surviving corporation is a Subsidiary
of the Company, then (a) such surviving corporation (if other than such
Subsidiary Guarantor) shall be a corporation organized under the laws of the
United States of America or any State thereof, (b) such surviving corporation
(if other than such Subsidiary Guarantor) shall assume the due and punctual
performance and observance of all of the covenants and conditions of the
Indenture to be performed by such Subsidiary Guarantor by supplemental indenture
complying with the requirements of the Indenture, (c) immediately after giving
effect to such consolidation, merger, sale or conveyance, the Company could
Incur $1.00 of Indebtedness pursuant to Section 4.10(a) of the Indenture and (d)
immediately after giving effect to such consolidation, merger, sale or
conveyance, the surviving corporation (whether such Subsidiary Guarantor or such
other corporation) shall have a Consolidated Net Worth equal to or greater than
the Consolidated Net Worth of such Subsidiary Guarantor immediately prior to
such transaction; and (ii) in the event that the surviving corporation is not a
Subsidiary of the Company, then such consolidation, merger, sale or conveyance
shall otherwise have been made in compliance with the terms of the Indenture.
(Section 15.03(b)).
SATISFACTION AND DISCHARGE
If at any time (a) the Company delivers all the outstanding Notes to the
Trustee for cancellation, other than destroyed, lost or stolen Notes, or (b) all
Notes have become due and payable, or will be or may be redeemed or will mature
within one year, and the Company has deposited with the Trustee money or certain
direct, non-callable obligations of, or guaranteed by, the United States
sufficient to pay all such Notes, upon redemption or at maturity, together with
all other sums due under the Indenture, the Company may terminate all of its
obligations under the Indenture, other than its obligations to pay the principal
of, premium, if any, Change of Control Purchase Price, Asset Sale Purchase Price
and interest on the Notes and certain other obligations (Section 12.01).
CERTAIN DEFINITIONS
The term "14 1/4% Senior Subordinated Notes" means the Company's 14 1/4%
Senior Subordinated Notes Due 1995, as amended, which were retired in 1993 and
are no longer outstanding as of the date of the Indenture.
The term "14 1/4% Senior Subordinated Note Indenture" means the 14 1/4%
Senior Subordinated Note Indenture, dated as of December 21, 1989, among the
Company, as issuer, the parties named therein as and, if applicable, thereafter
becoming, subsidiary guarantors, and The Bank of New York, a New York banking
corporation, as trustee, as amended or supplemented from time to time in
accordance with the terms thereof.
The term "Affiliate" means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with a
specified Person; provided, however, that the term Affiliate shall not include
the Company, any Subsidiary of the Company or any Non-Affiliate Joint Venture of
the Company so long as no Affiliate of the Company has any direct or indirect
interest therein, except through the Company and/or its Subsidiaries and/or its
Non-Affiliate Joint Ventures. For the purpose of this definition, control when
used with respect to any specified Person means the possession of the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms controlling and controlled have meanings correlative to the
foregoing. The
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fact that an Affiliate of a Person is a partner of a law firm that renders
services to such Person or its Affiliates does not mean that the law firm is an
Affiliate of such Person.
The term "Asset Sale" means any sale, transfer or other disposition
(including, without limitation, dispositions pursuant to a merger, consolidation
or sale and leaseback transaction of any assets (other than cash or Cash
Equivalents) on or after the date of the initial issuance of the Notes by the
Company or any of its Subsidiaries to any Person other than the Company or any
of its Subsidiaries or any Non-Affiliate Joint Venture; provided, however, that
solely for the purposes of the definition of Consolidated Cash Flow Available
for Fixed Charges, the term Asset Sale shall exclude dispositions pursuant to a
sale and leaseback transaction if the lease under such sale and leaseback
transaction is required to be classified and accounted for as a Capitalized
Lease Obligation; and provided, further, that the term Asset Sale shall not
include a Refinancing Sale and Leaseback Transaction) of any assets (other than
cash or Cash Equivalents); and provided further, that the following sales,
transfers or other dispositions of assets shall not be an "Asset Sale"
hereunder:
(A) in the ordinary course of business of the Company and its
Subsidiaries;
(B) in a single transaction or group of related transactions, the
gross proceeds of which (exclusive of indemnities) do not exceed
$10,000,000 (such proceeds, to the extent non-cash, to be determined in
good faith by the Board of Directors of the Company);
(C) resulting from the creation, incurrence or assumption of (but not
any foreclosure with respect to) any Lien not prohibited by the provisions
described under "-- Limitation on Liens";
(D) in connection with any consolidation or merger of the Company or
any Subsidiary Guarantor or sale of all or substantially all of the
property of the Company or any Subsidiary Guarantor in compliance with
applicable provisions of the Indenture;
(E) by a Subsidiary to its stockholders not prohibited by the
Indenture;
(F) which are Restricted Investments or Restricted Payments permitted
by the provisions described under "-- Limitations on Restricted Payments
and Restricted Investments"; or
(G) which consist of extensions, modifications, renewals or exchanges
of Restricted Investments pursuant to clause (b) of the definition thereof,
so long as neither the Company nor any of its Subsidiaries receives any
cash proceeds as a result of such transaction.
The term "Attributable Debt" means, with respect to a Refinancing Sale and
Leaseback Transaction, as of the date of consummation of such transaction, the
greater of (a) the Fair Market Value of the property subject to such Refinancing
Sale and Leaseback Transaction and (b) the present value (discounted at the
interest rate borne by the Notes, compounded semi-annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Refinancing Sale and Leaseback Transaction (including any
period for which such lease has been extended).
The term "Bank" means any of the financial institutions that are, or from
time to time become, lenders under the New Credit Agreement.
The term "Bank Agent" means BankAmerica Business Credit, Inc., as agent
under the New Credit Agreement, and any successor agent appointed under the New
Credit Agreement or any agent under any agreement or agreements pursuant to
which Indebtedness under the New Credit Agreement has been renewed, extended,
refunded, replaced, restructured or refinanced (or successively renewed,
extended, refunded, replaced, restructured or refinanced) and as to whom the
Company has notified the Trustee and the noteholders pursuant to the terms of
the Indenture.
The term "Bank Guarantors" means each of the following Persons, as long as
such Person guarantees any Indebtedness under the New Credit Agreement: Akron
Holding Company, an Ohio corporation, Kaiser Aluminum & Chemical Investment,
Inc., a Delaware corporation, Kaiser Aluminum Properties, Inc., a Delaware
corporation, Kaiser Aluminum Technical Services, Inc., a California corporation,
Oxnard Forge Die Company, Inc., a California corporation, Kaiser Aluminum
International, Inc., a Delaware corporation, KAC,
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KFC, each of their respective successors, each Subsidiary Guarantor and each
Non-Recourse Guarantor so long as such Non-Recourse Guarantor does not
constitute a Subsidiary Guarantor and would not be required to become a
Subsidiary Guarantor hereunder.
The term "CARIFA Financing" means the $60,000,000 CBI Industrial Revenue
Bonds, Caribbean Basin Projects Financing Authority CBI Industrial Revenue Bonds
1991 Series A and Series B (Alumina Partners of Jamaica Project) issued pursuant
to that certain Bond Purchase Agreement dated as of December 1, 1991, among the
Caribbean Basin Projects Financing Authority, Alumina Partners of Jamaica and
PaineWebber Incorporated of Puerto Rico, and any letters of credit supporting
such bonds.
A "Change of Control" shall be deemed to have occurred at such time as
MAXXAM, directly or indirectly, shall cease to have (other than by reason of the
existence of a Lien but including by reason of the foreclosure of or other
realization upon a Lien) direct or indirect sole beneficial ownership (as
defined under Regulation 13d-3 of the Exchange Act as in effect on the date of
the Indenture) of at least 40% of the total Voting Stock, on a fully diluted
basis, of the Company; provided, however, that such ownership by MAXXAM,
directly or indirectly, of 30% or greater, but less than 40%, of the total
Voting Stock, on a fully diluted basis, of the Company shall not be a Change of
Control if MAXXAM, through direct representation or through Persons nominated by
it, controls a majority of the Board of Directors of the Company necessary to
effectuate any actions by the Board of Directors of the Company; and provided,
further, that the foregoing minimum percentages shall be deemed not satisfied if
any Person or group (as defined in Section 13(d)(3) of the Exchange Act as in
effect on the date of the Indenture) shall, directly or indirectly, own more of
the total Voting Stock entitled to vote generally in the election of directors
of the Company than MAXXAM.
The term "Consolidated Amortization Expense" means, with respect to any
Person for any period, the amortization expense (including without limitation
goodwill, deferred financing charges and other intangible items) of such Person
and its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP.
The term "Consolidated Cash Flow Available for Fixed Charges" means, with
respect to any Person for any period, the sum of the amounts for such period of
(i) Consolidated Net Income, (ii) Consolidated Fixed Charges, (iii) Consolidated
Income Tax Expense (other than income taxes (including credits) with respect to
items of Net Income not included in the definition of Consolidated Net Income),
(iv) Consolidated Depreciation Expense, (v) Consolidated Amortization Expense
and (vi) any other non-cash items reducing Consolidated Net Income, minus any
non-cash items increasing Consolidated Net Income, all as determined on a
consolidated basis for such Person and its Subsidiaries in accordance with GAAP;
provided, however, that (x) if, during such period, such Person or any of its
Subsidiaries shall have engaged in any Asset Sale, Consolidated Cash Flow
Available for Fixed Charges of such Person and its Subsidiaries for such period
shall be reduced by an amount equal to the Consolidated Cash Flow Available for
Fixed Charges (if positive) directly attributable to the assets that are the
subject of such Asset Sale for such period, or increased by an amount equal to
the Consolidated Cash Flow Available for Fixed Charges (if negative) directly
attributable to the assets that are the subject of such Asset Sale for such
period and (y) if, during such period, such Person or any of its Subsidiaries
shall have acquired any material assets out of the ordinary course of business,
Consolidated Cash Flow Available for Fixed Charges shall be calculated on a pro
forma basis as if such asset acquisition and related financing had occurred at
the beginning of such period.
The term "Consolidated Depreciation Expense" means, with respect to any
Person for any period, the depreciation and depletion expense (including without
limitation the amortization expense associated with Capitalized Lease
Obligations) of such Person and its Subsidiaries for such period, determined on
a consolidated basis in accordance with GAAP.
The term "Consolidated Fixed Charge Coverage Ratio" means, with respect to
any Person as of the date of the transactions giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio (the "Transaction Date"),
the ratio of (i) the aggregate amount of Consolidated Cash Flow Available for
Fixed Charges of such Person for the four fiscal quarters immediately prior to
the Transaction Date for which financial information in respect thereof is
available to (ii) the aggregate Consolidated Fixed Charges of such Person for
the fiscal quarter in which the Transaction Date occurs and the three fiscal
quarters immediately
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subsequent to such fiscal quarter to be accrued during such period (based upon
the pro forma amount of Indebtedness to be outstanding on the Transaction Date),
assuming for the purposes of this measurement that the interest rates on which
floating interest rate obligations of such Person are based equal such rates in
effect on the Transaction Date; provided, however, that if the Company or any of
its Subsidiaries has incurred Interest Hedging Obligations (as defined in the
Indenture) which would have the effect of changing the interest rate on any
Indebtedness for such four quarter period (or any portion thereof), the
resulting rate shall be used for such four quarter period or portion thereof;
and provided, further, that any Consolidated Fixed Charges with respect to
Indebtedness incurred or for which such Person otherwise becomes liable during
the fiscal quarter in which the Transaction Date occurs shall be calculated as
if such Indebtedness was so incurred on the first day of the fiscal quarter in
which the Transaction Date occurs.
The term "Consolidated Fixed Charges" means (without duplication), with
respect to any Person for any period, the sum of:
(i) the interest expense of such Person and its Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP (less,
to the extent included therein, (a) the portion of the interest expense
required to be funded or economically borne by the Company's minority
partners in the Company's joint venture and (b) interest expense related to
the PIK Note);
(ii) all fees, commissions, discounts and other charges of such Person
and its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP, with respect to letters of credit and bankers'
acceptances and the costs (net of benefits) associated with Interest
Hedging Obligations;
(iii) the aggregate amount of dividends paid or other similar
distributions made by such Person and its Subsidiaries during such period
with respect to preferred stock (including preference stock) of such Person
or its Subsidiaries determined on a consolidated basis in accordance with
GAAP; and
(iv) amortization or write-off of debt discount in connection with any
Indebtedness of such Person and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP (excluding, to the extent
otherwise included, (A) the amortization or write-off of any deferred
financing costs in connection with the amendment or refinancing of the New
Credit Agreement and the Credit Agreement and/or the repurchase, defeasance
or redemption of the 14 1/4% Senior Subordinated Notes and (B) the
amortization or write-off of any debt discount and the premiums paid in
excess of the principal amount in connection with the repurchase,
defeasance or redemption of the 14 1/4% Senior Subordinated Notes).
The term "Consolidated Income Tax Expense" means (without duplication),
with respect to any Person for any period, the aggregate of the income tax
expense (net of applicable credits) of such Person and its Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP.
The term "Consolidated Net Income" means, with respect to any Person for
any period, the aggregate of the Net Income of such Person and its Subsidiaries
for such period taken as a single accounting period, all as determined on a
consolidated basis in accordance with GAAP, excluding (in each case to the
extent otherwise included):
(i) extraordinary gains but not extraordinary losses and excluding
gains from extinguishment of debt;
(ii) the Net Income of any Person that is not a Subsidiary of such
Person or that is accounted for on the equity method of accounting, except
to the extent of the amount of dividends or other distributions (other than
dividends or distributions of Capital Stock) actually paid to such Person
or any of its Subsidiaries by such other Person during such period;
(iii) except to the extent included by clause (ii), the Net Income of
any Person accrued prior to the date it becomes a Subsidiary of such Person
or is merged into or consolidated with such Person or any of its
Subsidiaries or that Person's assets are acquired by such Person or any of
its Subsidiaries;
(iv) the Net Income of any Subsidiary of such Person during such
period (A) to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary of such Net Income is not
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at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or (B) in the case of
a foreign Subsidiary or a Subsidiary with significant foreign source
income, to the extent such Net Income has not been distributed to such
Person and such distribution would result in a material tax liability not
otherwise deducted from the calculation of Consolidated Net Income whether
or not such deduction is required by GAAP;
(v) net after tax gains from Asset Sales (but not excluding the net
after tax losses from Asset Sales); and
(vi) interest income arising from the Existing Intercompany Note,
except to the extent such interest income is actually received by the
Company in cash;
provided, however, that (1) in determining Consolidated Net Income with respect
to the Company there shall be disregarded (a) any charge with respect to
premiums paid in excess of the principal amount in connection with the
repurchase, defeasance or redemption of the 14 1/4% Senior Subordinated Notes
and (b) the amortization or write-off of any unamortized deferred financing
costs and debt discount (other than original issue discount with respect to
Indebtedness Incurred after the date hereof) in connection with the amendment or
refinancing of the New Credit Agreement and the Credit Agreement and/or the
repurchase, defeasance or redemption of the 14 1/4% Senior Subordinated Notes
and (2) the Net Income of each of the Specified Parties otherwise included in
the Consolidated Net Income of the Company shall not be subject to any of the
limitations contained in clauses (ii) and (iv)(B) of this definition so long as
the Company's cash management and intercompany practices with respect to such
entity, as the case may be, for such period are consistent with past practice.
The term "Consolidated Net Worth" means, with respect to any Person as of
any date, the total stockholders' equity of such Person as of such date plus the
amount of Indebtedness outstanding under the PIK Note as of such date, less, to
the extent otherwise included, amounts attributable to Redeemable Stock and, in
the case of the Company, the amount attributable to the Existing Intercompany
Note, in each case determined on a consolidated basis in accordance with GAAP;
provided, however, that in determining Consolidated Net Worth with respect to
the Company there shall be disregarded (i) any charge with respect to premiums
paid in excess of the principal amount in connection with the repurchase,
defeasance or redemption of the 14 1/4% Senior Subordinated Notes and (ii) the
amortization or write-off of any unamortized deferred financing costs or debt
discount (other than original issue discount with respect to Indebtedness
Incurred after the date hereof) in connection with the amendment or refinancing
of the New Credit Agreement and the Credit Agreement and/or the repurchase,
defeasance or redemption of the 14 1/4% Senior Subordinated Notes.
The term "Defaulting Equity Owner" means, with respect to any Permitted
Entity, any Equity Owner who causes an Equity Owner Default.
The term "Equity Owner" means, with respect to any Permitted Entity, any
holder of an Ownership Interest in such Permitted Entity.
The term "Equity Owner Default" means, with respect to any issuance of
Permitted Entity Securities to the Equity Owners of a Permitted Entity, the
failure by one or more of such Equity Owners to acquire such Permitted Entity
Securities in an amount corresponding to at least its Ownership Interest of such
Permitted Entity and, as a result thereof, such Equity Owner becomes subject to,
directly or indirectly, a dilution of its interest in the future net income of
such Permitted Entity and/or a penalty pursuant to the terms of the governing
documents of such Permitted Entity.
The term "Existing Intercompany Note" means the Non-Negotiable Intercompany
Note, dated December 21, 1989, issued by KAC to the Company in an initial
principal amount of $818,585,280, as such Non-Negotiable Intercompany Note may
be amended.
The term "Fair Market Value" means, with respect to any property other than
cash, the fair market value of such property as determined in good faith by the
Board of Directors of the Company, whose determination
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shall be evidenced by a Board Resolution; provided, however, that, in the event
the Company makes a payment in the form of or otherwise transfers property other
than cash to, or receives property other than cash from, an Affiliate in an
amount in excess of $10,000,000, the Company, in addition, shall have received
an opinion from an independent investment banking firm of national standing
selected by the Company to the effect that the Board of Directors' determination
of fair market value is fair.
The term "GAAP" means generally accepted accounting principles as in effect
on December 31, 1992, and used in the preparation of the Company's consolidated
balance sheet at such date and the Company's statements of consolidated income
and cash flows for the year then ended, but in any event (i) giving effect to,
but excluding the effect of any one-time charge related to the implementation
of, Statement of Financial Accounting Standards No. 106 (Employers' Accounting
for Postretirement Benefits Other Than Pensions) and (ii) giving effect to
Statement of Financial Accounting Standards No. 109 (Accounting for Income
Taxes).
The term "Improvements" means any accessories, accessions, additions,
attachments, substitutions, replacements, improvements, parts and other property
now or hereafter affixed to any U.S. Fixed Assets or used in connection
therewith.
The term "Indebtedness" means, with respect to any Person at any date, any
of the following (without duplication):
(a) the principal amount of all obligations (unconditional or
contingent) of such Person for borrowed money (whether or not recourse is
to the whole of the assets of such person or only to a portion thereof) and
the principal amount of all obligations (unconditional or contingent) of
such Person evidenced by debentures, notes or other similar instruments
(including, without limitation, reimbursement obligations with respect to
letters of credit and bankers' acceptances);
(b) all obligations of such Person to pay the deferred purchase price
of property or services, except (x) accounts payable and other current
liabilities arising in the ordinary course of business and (y)
compensation, pension obligations and other obligations arising from
employee benefits and employee arrangements;
(c) Capitalized Lease Obligations of such Person;
(d) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed or guaranteed by such
Person;
(e) preferred stock (including preference stock) that is Redeemable
Stock (the amount of the Indebtedness in respect of such preferred stock to
be equal to the aggregate liquidation value thereof);
(f) all Indebtedness of others guaranteed by such Person;
(g) pension obligations and other similar obligations arising from
employee benefits, to the extent unfunded and assumed by such Person after
the date of the initial issuance of the Notes in the acquisition, by such
Person, of the assets or Capital Stock of another Person ("Assumed Pension
Obligations"); and
(h) all obligations under Refinancing Sale and Leaseback Transactions;
and the amounts thereof shall be the outstanding balance of any such
unconditional obligations as described in clauses (a) through (f) (other than
clause (d)), and the maximum liability of any such contingent obligations at
such date (other than with respect to clause (d)) and, in the case of clause
(d), the lesser of the fair market value at such date of any asset subject to
any Lien securing the Indebtedness of others and the amount of the Indebtedness
secured and, in the case of clause (g), the amount of Assumed Pension
Obligations shall be the amount determined by the Company in good faith as
evidenced by a certificate of the Chief Financial Officer of the Company
delivered to the Trustee and, in the case of clause (h), the Attributable Debt
with respect to such Refinancing Sale and Leaseback Transactions; provided,
however, that Indebtedness shall not include:
(A) the obligations of such Person and/or any of its Subsidiaries to
purchase or sell goods, services or technology utilized in their bauxite,
aluminum and alumina business and related extensions thereof, including on
a take-or-pay basis, pursuant to agreements entered into in the ordinary
course of business
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consistent with past practice or to fund or guarantee the obligations of
National Refractories & Minerals Corporation or any of its Affiliates in an
aggregate principal amount at any time outstanding not exceeding
$7,500,000;
(B) obligations of such Person arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business, provided that such
obligations are extinguished within two Business Days of their incurrence
(or, in the case of foreign overdrafts, within five Business Days of their
incurrence) unless covered by an overdraft credit line;
(C) obligations of such Person resulting from the endorsement of
negotiable instruments for collection in the ordinary course of business;
(D) Indebtedness consisting of stand-by letters of credit to the
extent collateralized by cash or Cash Equivalents; and
(E) Liens on assets of KAAC granted to secure Indebtedness of QAL,
provided that such Liens are (i) in existence on the date of the Indenture,
(ii) similar in all material respects to Liens in existence on the date of
the Indenture or (iii) not on assets consisting of cash, Cash Equivalents
or fixed assets and such assets are used or to be used in connection with
the business of QAL.
The term "Maximum Secured Amount" means, at any time (i) $300,000,000, plus
(ii) Net Betterments at such time, plus (iii) the outstanding amount of
Indebtedness relating to the CARIFA Financing, secured by a Lien on Permitted
Collateral, but in no event more than $43,000,000, minus (iv) in the event of a
sale of Permitted Collateral which is subject to a Lien permitted by clause (i)
under "-- Limitation on Liens," the amount, if any, of the net proceeds thereof
required to be applied to a permanent repayment or commitment reduction in
respect of the Indebtedness secured by such Lien, minus (v), in the event of the
Refinancing of any Indebtedness secured by a Lien permitted by clause (i) under
"-- Limitation on Liens," the lesser of (A) the amount of Indebtedness, if any,
not secured by Permitted Collateral which Refinances, in whole or in part, such
Indebtedness secured by a Lien permitted by clause (i) under "-- Limitation on
Liens" and (B) the amount, if any, by which the Maximum Secured Amount
immediately prior to such Refinancing, in whole or in part, of such Indebtedness
secured by a Lien permitted by clause (i) under "-- Limitation on Liens" exceeds
the aggregate amount of Indebtedness which is secured by a Lien on Permitted
Collateral permitted by clause (i) or clause (viii)(a) under "-- Limitation on
Liens" after giving effect to such Refinancing.
The term "Net Betterments" means the amount, if any, by which capital
expenditures (determined in accordance with GAAP) by the Company or any of its
Subsidiaries in respect of the Permitted Collateral on a cumulative basis for
the period from the date of the Indenture, through the date of determination in
excess of depreciation (determined in accordance with GAAP) in respect of the
Permitted Collateral on a cumulative basis for such period (provided, however,
that with respect to any Permitted Collateral existing at the time of the
Merger, the depreciation shall be the historical depreciation before adjustments
to reflect the acquisition of the Company in the Merger), but in no event less
than zero, provided, that in the event any Permitted Collateral ceases to
constitute Permitted Collateral in accordance with the definition thereof, only
the amount of Net Betterments in respect of such Permitted Collateral at such
time shall be included in any subsequent calculation of Net Betterments and
provided, further, that (a) Improvements which are subject to a Lien permitted
by clause (iv), (v) or (vi) under "-- Limitation on Liens" and (b) U.S. Fixed
Assets to the extent subject to a Lien permitted by clause (ix) under
"-- Limitation on Liens" shall not be included in the determination of Net
Betterments.
The term "Net Cash Proceeds" means cash payments received (but if received
in a currency other than United States dollars, such payments shall not be
deemed received until the earliest time at which such currency is, or could
freely be, converted into United States dollars) by or on behalf of the Company
and/or any of its Subsidiaries (including any cash payments received by way of
deferred payment of principal pursuant to a note or installment receivable or
otherwise or the cash realization of any non-cash proceeds of
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any Asset Sale, but, in each case, only as and when, and to the extent,
received) from an Asset Sale, in each case net of:
(i) all legal, title and recording tax expenses, commissions,
consulting fees, investment banking, broker's and accounting fees and
expenses and fees and expenses incurred in obtaining regulatory approvals
in connection with such Asset Sale;
(ii) the amounts of (A) any repayments of debt secured, directly or
indirectly, by Liens on the assets which are the subject of such Asset Sale
or (B) any repayments of debt associated with such assets which is due by
reason of such Asset Sale (i.e., such disposition is permitted by the terms
of the instruments evidencing or applicable to such debt, or by the terms
of a consent granted thereunder, on the condition that the proceeds (or
portion thereof) of such disposition be applied to such debt), provided,
that this clause (B) shall not apply with respect to any U.S. Fixed Assets
that do not constitute Permitted Collateral and, in the case of clauses (A)
and (B), other fees, expenses and other expenditures, in each case,
reasonably incurred as a consequence of such repayment of debt (whether or
not such fees, expenses or expenditures are then due and payable or made,
as the case may be);
(iii) all amounts deemed appropriate by the Company (as evidenced by a
signed certificate of the Chief Financial Officer of the Company delivered
to the Trustee) to be provided as a reserve, in accordance with GAAP ("GAAP
Reserves"), against any liabilities associated with such assets which are
the subject of such Asset Sale;
(iv) all foreign, federal, state and local taxes payable (including
taxes reasonably estimated to be payable) in connection with or as a result
of such Asset Sale; and
(v) with respect to Asset Sales by Subsidiaries of the Company, the
portion of such cash payments attributable to Persons holding a minority
interest in such Subsidiary;
provided, in each such case, that such fees and expenses and other amounts are
not payable to an Affiliate of the Company (except for payments made pursuant to
the Tax Sharing Agreements), and provided, further, that required redemptions of
existing preferred stock (including preference stock) of the Company outstanding
on the date of the Indenture or issued pursuant to collective bargaining
arrangements and related employee benefit arrangements in effect on the date of
the Indenture, in each case, from Persons other than Affiliates of the Company,
shall be deemed to be a fee, expense or other expenditure of such Asset Sale.
Notwithstanding the foregoing, Net Cash Proceeds shall not include proceeds
received in a foreign jurisdiction from an Asset Sale of an asset located
outside the United States to the extent (i) such proceeds cannot under
applicable law be transferred to the United States or (ii) such transfer would
result (in the good faith determination of the Board of Directors of the Company
set forth in a Board Resolution) in a foreign tax liability that would be
materially greater than if such Asset Sale occurred in the United States;
provided that if, as, and to the extent that any of such proceeds may lawfully
be (in the case of clause (i)) or are (in the case of clause (ii)) transferred
to the United States, such proceeds shall be deemed to be cash payments that are
subject to the terms of this definition of Net Cash Proceeds. Subject to the
provisions of the next preceding sentence, Net Cash Proceeds shall also include
(i) cash distributions actually received by or on behalf of the Company or any
of its Subsidiaries from any Non-Affiliate Joint Venture of the Company
representing the proceeds of a transaction by such Non-Affiliate Joint Venture
that would constitute an Asset Sale if such Non-Affiliate Joint Venture were a
Subsidiary of the Company and (ii) the amount of any reversal of GAAP Reserves
(but only as and when, and to the extent, reversed) which amount is otherwise a
deduction from Net Cash Proceeds.
The term "Net Income" means, with respect to any Person for any period, the
net income (loss) of such Person for such period determined in accordance with
GAAP.
The term "Non-Affiliate Joint Venture" means any joint venture, partnership
or other Person (other than the Company or a Subsidiary of the Company) in which
the Company and/or its Subsidiaries have an ownership interest equal to or
greater than 5% and in which no Affiliate of the Company has a direct or an
indirect ownership interest other than by virtue of the direct or indirect
ownership interest in such Non-Affiliate Joint Venture held (in the aggregate)
by the Company and/or one or more of its Subsidiaries,
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provided that such Non-Affiliate Joint Venture is engaged in one or more of the
lines of business in which the Company or its Subsidiaries or its Non-Affiliate
Joint Ventures are engaged in as of the date of the Indenture or reasonably
related extensions of such lines.
The term "Non-Defaulting Equity Owner" means, with respect to any Permitted
Entity, any Equity Owner that is not a Defaulting Equity Owner.
The term "Non-Recourse Guarantor" means a Subsidiary of the Company that
guarantees any Indebtedness under the New Credit Agreement, provided that such
guarantee is non-recourse to the assets of such Subsidiary other than to
intercompany Indebtedness owed, or from time to time owing, by the Company to
such Subsidiary, and all monetary proceeds therefrom.
The term "Ownership Interest" means, with respect to any Equity Owner of a
Permitted Entity at the time of the determination thereof, the proportion held
at such time by such Equity Owner of the outstanding Permitted Entity Securities
of such Permitted Entity that are last entitled to payment upon liquidation or
dissolution as provided in the governing instruments of such Permitted Entity or
pursuant to an agreement among the Equity Owners of such Permitted Entity.
The term "Permitted Collateral" means real property (listed on a schedule
to the Indenture), plant and equipment of the Company or any of its Subsidiaries
located in the United States of America which, as of the date of issuance of the
Notes, secures Indebtedness under the New Credit Agreement (whether or not the
Liens on such real property, plant or equipment are perfected at such time),
together with any Improvements thereto or thereon, any real property that is
contiguous to or structurally related to such real property (the "Contiguous
Property"), and any real property, plant or equipment, whether owned on the date
of the issuance of the Notes or thereafter acquired, located or used at any time
after the date of issuance of the Notes at a facility (other than the Company's
Gramercy alumina refinery) owned, leased, occupied or used by the Company or any
of its Subsidiaries as of the date of issuance of the Notes or on any Contiguous
Property), and any proceeds thereof; provided, that notwithstanding anything to
the contrary contained in the Indenture, any Permitted Collateral which is
released from all Liens thereon securing Indebtedness and which does not become
subject to a new Lien within 60 days of such release securing Indebtedness which
Refinances any of the Indebtedness (in whole or in part) previously secured by
such Permitted Collateral shall not thereafter constitute "Permitted Collateral"
under the Indenture.
As of the date of the Indenture, Permitted Collateral will include real
property listed on a schedule to the Indenture and will not include the
Company's Gramercy alumina refinery.
The term "Permitted Dividend Encumbrance" means, with respect to any
Person, any consensual encumbrances or restrictions on the ability of such
Person to pay dividends or make any other distributions on its Capital Stock or
pay any Indebtedness owed to the Company or any Subsidiaries of the Company (or,
in the case of a Permitted Entity, to its Equity Owners) or to make loans or
advances or transfer any of its assets to the Company or any Subsidiary of the
Company (or, in the case of a Permitted Entity, to its Equity Owners) existing
under or by reason of:
(i) the Indenture;
(ii) Indebtedness permitted by the provisions described in clause (ii)
of the second paragraph under "-- Limitation on Indebtedness and Preferred
Stock";
(iii) Indebtedness or other obligations in existence on the date of
the Indenture and customary rights of first refusal with respect to the
Company's and its Subsidiaries' interests in their respective Subsidiaries,
Non-Affiliate Joint Ventures and Permitted Entities;
(iv) applicable law and agreements with foreign governments with
respect to assets located in their jurisdictions;
(v)(A) customary provisions restricting (i) the subletting or
assignment of any lease or (ii) the transfer of copyrighted or patented
materials, (B) provisions in agreements that restrict the assignment of
such agreements or rights thereunder or (C) provisions of a customary
nature contained in the terms of Capital Stock restricting the payment of
dividends and the making of distributions on Capital Stock;
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(vi) Indebtedness or other obligations of any other Person acquired
(whether pursuant to a purchase of stock or assets) (including any
Non-Affiliate Joint Venture of the Company or Permitted Entity that becomes
a Subsidiary of the Company) or applicable to any assets at the time such
Person or assets were acquired by the Company, its Subsidiaries or a
Permitted Entity, in each case which Indebtedness and obligations (A) were
not created in anticipation of such acquired Person becoming a Subsidiary
of the Company or a Permitted Entity, as the case may be, or such assets
being acquired by the Company, its Subsidiaries or such Permitted Entity,
as the case may be, and (B) which encumbrances and restrictions are not
applicable to any Person or the property or assets of any Person other than
the Person or the property or assets of the Person so acquired (including
the Capital Stock of such Person) or any newly organized entity formed to
effect such acquisition and, in each case, the monetary proceeds thereof;
(vii) encumbrances and restrictions with respect to such Person
imposed in connection with an agreement for the sale or disposition of such
Person or its assets;
(viii) encumbrances and restrictions applicable only to (A) Alpart and
its assets and Capital Stock with respect to Indebtedness permitted to be
Incurred by Alpart pursuant to the first paragraph under "-- Limitation on
Indebtedness and Preferred Stock," (B) Alpart, KJC and AJI and their
respective assets and Capital Stock with respect to Indebtedness permitted
by clause (iii) of the second paragraph under "-- Limitation on
Indebtedness and Preferred Stock," (C) KAAC and its assets and Capital
Stock with respect to Indebtedness permitted to be Incurred pursuant to
clause (iv) of the second paragraph under "-- Limitation on Indebtedness
and Preferred Stock," and (D) the Person that Incurred such Indebtedness
and such Person's assets and Capital Stock with respect to Indebtedness
permitted to be Incurred by clause (viii) or (ix) of the second paragraph
under "-- Limitation on Indebtedness and Preferred Stock"; in each case
provided, that the Board of Directors of the Company has determined in good
faith that such encumbrances and restrictions would not singly or in the
aggregate have a materially adverse effect on the holders of the Notes;
(ix) Indebtedness of a Person that was a Subsidiary at the time of
Incurrence and the Incurrence of which Indebtedness is permitted by the
provisions described under "-- Limitation on Indebtedness and Preferred
Stock," provided that such encumbrances and restrictions apply only to such
Subsidiary and its assets, and provided, further, that the Board of
Directors of the Company has determined in good faith, at the time of
creation of each such encumbrance or restriction, that such encumbrances
and restrictions would not singly or in the aggregate have a materially
adverse effect on the holders of the Notes;
(x) the subordination of (A) any Indebtedness owed by the Company or
any of its Subsidiaries to the Company or any other Subsidiary to (B) any
other Indebtedness of the Company or any of its Subsidiaries, provided (A)
such other Indebtedness is permitted under the Indenture and (B) the Board
of Directors of the Company has determined in good faith, at the time of
creation of each such encumbrance or restriction, that such encumbrances
and restrictions would not singly or in the aggregate have a materially
adverse effect on the holders of the Notes;
(xi) the subordination of (A) any Indebtedness owed by a Permitted
Entity to its Equity Owners or any other Person to (B) any other
Indebtedness of such Permitted Entity, provided (I) such other
Indebtedness, at the time of the Incurrence thereof, is permitted by the
definition of Permitted Entity and (II) the Board of Directors of the
Company has determined in good faith, at the time of creation of each such
encumbrance or restriction, that such encumbrances and restrictions would
not singly or in the aggregate have a materially adverse effect on the
holders of the Notes;
(xii) Refinancing Indebtedness that is otherwise permitted in
connection with any Refinanced Indebtedness, provided that, in the case of
all Refinancing Indebtedness other than Refinancing Indebtedness Incurred
with respect to Indebtedness permitted under the provisions described under
clause (ii) under "-- Limitation on Indebtedness and Preferred Stock," any
such encumbrances or restrictions shall not be materially less favorable to
the holders of the Notes; and
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(xiii) the sale or other disposition of property subject to a Lien
securing Indebtedness, provided that such Lien and such Indebtedness are
otherwise permitted by the Indenture.
The term "Permitted Entity" means any Person (other than a Subsidiary
Guarantor) designated as such by a Board Resolution and as to which (i) the
Company, any Subsidiary Guarantor or any Permitted Entity owns all or a portion
of the Permitted Entity Securities of such Person; (ii) no more than 10
unaffiliated Equity Owners own of record any Permitted Entity Securities of such
Person; (iii) at all times, each Equity Owner owns a proportion of each class of
Permitted Entity Securities of such Person outstanding equal to such Equity
Owner's Ownership Interest at such time, other than as a result of an Equity
Owner Default; (iv) no Indebtedness or preferred stock (including preference
stock) is or has been Incurred by such Person that is outstanding other than (x)
Permitted Entity Securities held by Equity Owners and/or (y) if such Person is a
Subsidiary of the Company, Indebtedness permitted to be Incurred by such
Subsidiary at the time of the Incurrence thereof under the provisions described
in clauses (v) and (xiii) of the second full paragraph under "-- Limitation on
Indebtedness and Preferred Stock"; (v) there exist no consensual encumbrances or
restrictions on the ability of such Person to (x) pay dividends or make any
other distributions to its Non-Defaulting Equity Owners or (y) make loans or
advances or transfer any of its assets to its Non-Defaulting Equity Owners, in
each case other than Permitted Dividend Encumbrances of such Permitted Entity;
(vi) the Company, any Subsidiary Guarantor or any Permitted Entity has the right
at any time (whether by agreement, operation of law or otherwise) to (A) require
the Permitted Entity that it owns an Ownership Interest in to dissolve,
liquidate or wind up its affairs (subject to any right of the other Equity
Owners and/or such Permitted Entity to acquire all of the Permitted Securities
owned by such Equity Owner) and, subject to applicable law, to distribute its
remaining assets to its Equity Owners after payment to creditors or (B) have all
of the Permitted Entity Securities that it owns purchased by such Permitted
Entity and/or other Equity Owners; and (vii) the business engaged in by such
Person is one in which the Company or its Subsidiaries or its Non-Affiliate
Joint Ventures were engaged on the date of the Indenture or reasonably related
thereto or is the business of holding or disposing of Permitted Entity
Securities.
The term "Permitted Entity Securities" means, with respect to any Permitted
Entity, any Capital Stock or Indebtedness (whether or not a security) of such
Permitted Entity, other than Indebtedness permitted to be Incurred by such
Permitted Entity pursuant to clause (iv)(y) of the definition of Permitted
Entity, but in any event including Permitted Indebtedness described in clause
(b) of the definition thereof.
The term "Permitted Indebtedness" means:
(a) Indebtedness and preferred stock (including preference stock) of
the Company and its Subsidiaries existing on the date of the Indenture,
including, but not limited to, the 12 3/4% Notes;
(b) Indebtedness (including Redeemable Stock) owed or issued by the
Company to a Subsidiary or owed or issued by a Subsidiary to the Company,
any other Subsidiary of the Company or to any other holder of Capital Stock
of such Subsidiary in proportion to such holder's ownership interest in
such Subsidiary;
(c) Indebtedness and preferred stock (including preference stock) of a
Permitted Entity to the extent not prohibited by clause (iii) or clause
(iv)(x) of the definition thereof;
(d) Indebtedness of the Company and its Subsidiaries by reason of
entering into indemnification agreements and guarantees in connection with
the disposition of assets, provided that the Indebtedness with respect to
such indemnification agreements and guarantees shall be limited to the
amount of the net proceeds of such disposition;
(e) guarantees, letters of credit and indemnity agreements relating to
performance and surety bonds incurred in the ordinary course of business;
(f) Indebtedness of a Subsidiary of the Company (including undrawn
amounts under lines of credit that are subsequently drawn upon) issued,
assumed or guaranteed by such Subsidiary prior to the date upon which such
Subsidiary becomes a Subsidiary of the Company (excluding Indebtedness
incurred by such entity in connection with, or in contemplation of, its
becoming a Subsidiary of the Company),
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provided that such Indebtedness and the holders thereof do not, at any
time, have direct or indirect recourse to any property or assets of the
Company and its Subsidiaries other than the property and assets of such
acquired entity and its Subsidiaries, including the Capital Stock thereof,
or any newly organized entity formed to effect such acquisition, and, in
each case, the monetary proceeds thereof;
(g) Indebtedness incurred by the Company in connection with the
purchase, redemption, retirement or other acquisition by the Company of the
USWA Preferred Stock outstanding on the date of the Indenture (plus
additional shares of such USWA Preferred Stock issued as dividends thereon
or on such shares issued as dividends);
(h) Indebtedness of the Company and its captive wholly owned insurance
Subsidiaries in respect of letters of credit in an aggregate amount not to
exceed at any one time outstanding $20,000,000 issued for the account of
the Company or such Subsidiaries in support of certain self-insurance and
reinsurance obligations entered into from time to time by the Company or
such captive wholly owned insurance Subsidiaries of the Company;
(i) Indebtedness consisting of industrial revenue bonds and related
indemnity agreements; and
(j) Prior to a merger of the Company and KAC, Indebtedness in respect
of the Preferred Dividend Intercompany Notes.
The term "PIK Note" means that certain PIK Note issued by the Company to a
subsidiary of MAXXAM on December 15, 1992, in the principal amount of $2.5
million, which bears interest at a rate equal to 12% per annum and is due on
June 30, 1995.
The term "Preferred Dividend Intercompany Notes" means (i) the intercompany
note in respect of the Series A Shares, (ii) the intercompany note in respect of
the PRIDES and (iii) any other intercompany note representing a loan by KAC to
the Company from the proceeds of an offering of preferred stock by KAC which
loan shall have a term not in excess of five years from the date of issuance and
shall be in an amount equal to the aggregate dividends scheduled to accrue on
such preferred stock during the term thereof and payable at approximately the
same times and in approximately the same amounts as such dividends are payable,
provided that, (a) the aggregate amount of all such intercompany notes referred
to in this clause (iii) shall not exceed $50,000,000 at any one time outstanding
and (b) the remaining net proceeds from such preferred stock offering shall have
been used by KAC to make a capital contribution to (or to purchase common stock
of) the Company.
The term "Redeemable Stock" means, with respect to any Person, any
preferred Capital Stock of such Person, that, by its terms (or by the terms of
any security into which it is convertible or for which it is exchangeable at the
option of the holder thereof), or upon the happening of any event, matures or is
mandatorily redeemable, in whole or in part, pursuant to a sinking fund
obligation or otherwise, or, at the option of the holder thereof, is redeemable
in whole or in part, or is exchangeable into a security of a Person other than
the issuer of such Capital Stock that is owned by such Person or its
Subsidiaries or into Indebtedness of, or that is owned by, such Person or its
Subsidiaries, in each case on or prior to the scheduled maturity date of the
Notes.
The term "Refinance" means to renew, extend, refund, replace, restructure,
refinance, amend or modify any Indebtedness. The term "Refinancing" shall have a
correlative meaning.
The term "Refinancing Sale and Leaseback Transaction" means any sale and
leaseback transaction with respect to which the Attributable Debt is at least
$100,000,000, and which is designated by the Company as a Refinancing Sale and
Leaseback Transaction in a notice to the Trustee pursuant to the terms of the
Indenture, which notice shall indicate the Attributable Debt with respect to
such Refinancing Sale and Leaseback Transaction.
The term "Restricted Investment" means, with respect to any Person, (i) any
amount paid, or any property transferred, in each case, directly or indirectly
by such Person for Capital Stock or other securities of, or as a contribution
to, any Affiliate of the Company; (ii) any direct or indirect loan or advance by
such Person
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to any Affiliate of the Company other than accounts receivable of such Person
relating to the purchase and sale of inventory, goods or services arising in the
ordinary course of business; (iii) any direct or indirect guarantee by such
Person of any obligations, contingent or otherwise, of any Affiliate of the
Company; and (iv) the acquisition by such Person of, or any investment by such
Person in, any Capital Stock or similar interest of any other Person (other than
the Company); provided, however, that the following shall not be Restricted
Investments:
(a) investments in or acquisitions of Capital Stock or similar
interests in any Person (other than a Person in which Affiliates of the
Company have an interest other than through the Company, its Subsidiaries
and its Non-Affiliate Joint Ventures) that (I) is or becomes, at the time
of the acquisition thereof, a Subsidiary of the Company and is or is to be
primarily engaged in an operating business or (II) is, at the time of the
acquisition thereof, engaged or to be engaged primarily in businesses in
which the Company or its Subsidiaries or its Non-Affiliate Joint Ventures
were engaged on the date of the Indenture or reasonably related extensions
thereof, provided that such securities are not, at the time of the
acquisition thereof (without regard to any exchanges, modifications or
other changes thereto subsequent to such acquisition), registered under the
Exchange Act;
(b) Restricted Investments of such Person existing as of the date of
the Indenture and any extension, modification or renewal of such Restricted
Investment (but not increases thereof, other than as a result of the
accrual or accretion of interest or original issue discount pursuant to the
terms of such Restricted Investment), or any Restricted Investment made in
connection with an exchange of such Restricted Investment with the issuer
thereof;
(c) investments in or acquisitions of Permitted Entity Securities of
any Permitted Entity;
(d) transactions with officers or directors of the Company or any
Subsidiary of the Company entered into in the ordinary course of business
(including compensation or employee benefit arrangements with any officer
or director of the Company or any Subsidiary of the Company);
(e) investments in or acquisitions of Capital Stock or similar
interests in Persons (other than Affiliates of the Company) received in the
bankruptcy or reorganization of or by such Person or any exchange of such
investment with the issuer thereof or taken in settlement of or other
resolution of claims or disputes, and, in each case, extensions,
modifications and renewals thereof; and
(f) investments in Persons (other than Affiliates of the Company)
received by such person as consideration from Asset Sales to the extent not
prohibited by the provisions described under "-- Limitation on Asset Sales"
(including, for the purposes of this definition, those sales, transfers and
other dispositions described in clause (B) and the transactions described
in clause (D) of such definition) or any exchange of such investment with
the issuer thereof, and extensions, modifications and renewals thereof.
The term "Significant Subsidiary" shall have the meaning assigned to that
term under Regulation S-X of the Securities Act as in effect on the date of the
Indenture; provided, however, that (i) each Subsidiary Guarantor on the date of
the Indenture shall be deemed to be a Significant Subsidiary of the Company for
so long as such Subsidiary is a Subsidiary Guarantor and (ii) each of VALCO,
KAAC and Alpart, and each Subsidiary of the Company that, directly or
indirectly, holds an interest in VALCO, Alpart or QAL, and each Subsidiary
Guarantor that becomes a Subsidiary Guarantor after the date of the Indenture
(so long as such Subsidiary Guarantor is a Subsidiary Guarantor) shall be deemed
to be a Significant Subsidiary if it (singly, or, in the case of VALCO, Alpart
or QAL, together with the other Subsidiaries of the Company that hold an
interest in such entity) meets the total assets test of the term "Significant
Subsidiary" under Regulation S-X as in effect on the date of the Indenture, but
substituting 5% in such test for 10%.
The term "Specified Parties" means each of AJI, Alpart, KAAC, KJC, VALCO,
Kaiser Aluminium International, Inc., a Delaware corporation, and its
successors, Kaiser Bauxite Company, a Nevada corporation, and its successors,
Kaiser Jamaica Bauxite Company, a Jamaican partnership, and its successors, and
Queensland Alumina Security Corporation, a Delaware corporation, and its
successors.
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The term "Subordinated Note Indenture" means the indenture, dated as of
February 1, 1993, among the Company, as issuer, the parties named therein as
and, if applicable, thereafter becoming guarantors, and The First National Bank
of Boston, a national banking association, as trustee, as amended or
supplemented from time to time in accordance with the terms thereof.
The term "Subsidiary Guarantors" means the Persons from time to time named
as Subsidiary Guarantors in the Indenture or that become Subsidiary Guarantors
thereunder, and each of their respective successors, provided, however, that in
the event that a Subsidiary Guarantor is released from its Guarantee in
accordance with the terms of the Indenture, such Subsidiary Guarantor shall
without any further action no longer be a Subsidiary Guarantor for any purpose
of the Indenture or the Notes. On the date of the Indenture, the Subsidiary
Guarantors are AJI, KAAC, KFC and KJC.
The term "Tax Sharing Agreements" shall mean, collectively, the tax-sharing
agreement between the Company and KAC, dated as of June 30, 1993, and the
tax-sharing agreement between the Company and MAXXAM, dated as of December 21,
1989, and as each may be amended in accordance with Section 4.08(b)(x) of the
Indenture.
The term "U.S. Fixed Assets" means, at any time, any real property, plant
or equipment of the Company or any of its Subsidiaries located at such time in
the United States of America, now owned or hereafter acquired, together with any
fixed assets that are Improvements thereto or thereon and any fixed assets that
are proceeds thereof.
The term "Voting Stock" means, with respect to any Person, the Capital
Stock of such Person having general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of
such Person (irrespective of whether or not at the time capital stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain U.S. federal income tax consequences
associated with the acquisition, ownership and disposition of the Notes. The
summary is based upon current laws, regulations, rulings and judicial decisions
all of which are subject to change.
The discussion below does not address all aspects of federal income
taxation that may be relevant to particular Holders in the context of their
specific investment circumstances or certain types of Holders subject to special
treatment under federal income tax laws (for example, financial institutions,
tax-exempt organizations, foreign corporations, and individuals who are not
citizens or residents of the United States). In addition, the discussion does
not address any aspect of state, local or foreign taxation and assumes that
purchasers of the Notes will hold such securities as "capital assets"
(generally, property held for investment within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code").
PROSPECTIVE PURCHASERS OF THE NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS
CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF ACQUIRING, OWNING, AND
DISPOSING OF THE NOTES AS WELL AS THE APPLICATION OF STATE, LOCAL, AND FOREIGN
INCOME AND OTHER TAX LAWS.
ORIGINAL ISSUE DISCOUNT
The discussion in this paragraph is based on final Treasury regulations
dealing with original issue discount ("OID") that were issued by the Internal
Revenue Service on January 27, 1994 (the "Regulations"). The Regulations
generally apply to debt instruments issued on or after April 4, 1994 but may be
relied upon for debt instruments issued after December 21, 1992, and before
April 4, 1994.
Generally, a holder of a debt instrument issued at an OID must include OID
in income for United States federal income tax purposes as it accrues, in
accordance with a constant yield method based on a compounding of interest,
before the receipt of cash payments attributable to such income, unless the
amount of OID is de minimis (generally, 1/4 of 1 percent of such instrument's
stated redemption price at maturity
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multiplied by the number of complete years to its maturity). It is anticipated
that the amount of OID, if any, on the Notes will qualify for the de minimis
exception. Therefore, such OID will be includible in a Holder's income only as
stated principal payments are made on the Notes and will be treated as gain
recognized on retirement of the Notes. Any gain recognized by a Holder on a sale
or exchange of a Note and attributable to de minimis OID will be capital gain if
the Note was held as a capital asset, and will be long-term capital gain if the
holding period for the Note exceeds one year.
If a subsequent holder purchases a Note at a premium, such holder will not
include the de minimis OID in income.
BACKUP WITHHOLDING
Certain noncorporate holders may be subject to backup withholding at a rate
of 31% on certain payments of interest and original issue discount on the Notes,
and to proceeds of the sale of the Notes before maturity. Generally, backup
withholding applies only when the taxpayer fails to furnish or certify a proper
Taxpayer Identification Number or when the taxpayer is notified by the Internal
Revenue Service that the taxpayer has failed to report payments of interest and
dividends properly. Holders should consult their tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining any applicable exemption.
DESCRIPTION OF THE PRIDES
In connection with the offering of Notes hereby, KAC is concurrently
offering, pursuant to a separate prospectus, 8,000,000 shares of PRIDES (subject
to increase if the underwriters' 15% overallotment option is exercised). The
following is a summary of certain material terms of the shares of PRIDES.
General. The PRIDES are shares of convertible preferred stock and rank (i)
senior in right and priority of payment to the KAC Common Stock as to dividends
or upon liquidation and (ii) on a parity with KAC's outstanding Series A Shares
as to dividends and upon liquidation. The PRIDES mandatorily convert into shares
of KAC Common Stock on December 31, 1997 (the "Mandatory Conversion Date"), and
KAC has the option to redeem the shares of PRIDES, in whole or in part, at any
time and from time to time on or after December 31, 1996 and prior to the
Mandatory Conversion Date at the Call Price (as defined), payable in shares of
KAC Common Stock. In addition, the PRIDES are convertible into shares of KAC
Common Stock at the option of the holder at any time prior to the Mandatory
Conversion Date as set forth below.
Dividends. Holders of shares of PRIDES will be entitled to receive annual
cumulative dividends at a rate of $. per annum for each share of PRIDES.
Dividends cease to accrue in respect of the shares of PRIDES on the earlier of
(i) the day immediately prior to the Mandatory Conversion Date or (ii) the day
immediately prior to their earlier redemption.
Mandatory Conversion. On the Mandatory Conversion Date, unless previously
redeemed or converted, each outstanding share of PRIDES will mandatorily convert
into (i) one share of KAC Common Stock, subject to adjustment in certain events,
and (ii) the right to receive cash in an amount equal to all accrued and unpaid
dividends thereon (other than previously declared dividends payable to a holder
of record on a prior date).
Optional Redemption. Shares of PRIDES are not redeemable prior to December
31, 1996. At any time and from time to time on or after December 31, 1996 until
immediately prior to the Mandatory Conversion Date, KAC may redeem any or all of
the outstanding shares of PRIDES. Upon any such redemption, each holder will
receive, in exchange for each share of PRIDES, a number of shares of KAC Common
Stock equal to the sum of (i) $ , declining after December 31, 1996, to
$ until the Mandatory Conversion Date, and (ii) all accrued and unpaid
dividends thereon (other than previously declared dividends payable to a holder
of record as of a prior date) (the "Call Price") divided by the Current Market
Price (as defined) on the applicable date of determination, but in no event less
than of a share of KAC Common Stock, subject to adjustment.
97
<PAGE> 101
Conversion at the Option of the Holder. At any time prior to the Mandatory
Conversion Date, unless previously redeemed, each share of PRIDES is convertible
at the option of the holder thereof into of a share of KAC Common Stock,
equivalent to a conversion price of $ per share of Common Stock (the
"Conversion Price"), subject to adjustment.
UNDERWRITING
The Underwriters named below (the "Underwriters"), acting through Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), have severally
agreed, subject to the terms and conditions of a purchase agreement (the
"Purchase Agreement"), to purchase from the Company the respective principal
amounts of the Notes set forth below opposite their names. The Purchase
Agreement provides that the obligations of the Underwriters are subject to
certain conditions precedent and that the Underwriters will be obligated to
purchase all of the Notes if any are purchased.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITERS AMOUNT
-------------------------------------------------------------- -----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................... $
Bear, Stearns & Co. Inc.......................................
Donaldson, Lufkin & Jenrette Securities Corporation...........
PaineWebber Incorporated......................................
Salomon Brothers Inc..........................................
------------
Total............................................ $225,000,000
------------
------------
</TABLE>
The Underwriters propose initially to offer the Notes to the public at the
public offering price set forth on the cover page of this Prospectus, and to
certain dealers at such price less a concession not in excess of % of the
principal amount. The Underwriters may allow, and such dealers may reallow, a
discount not in excess of % of the principal amount of the Notes to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed by the Underwriters.
The Underwriters for this offering of Notes are also acting as underwriters
for the PRIDES Offering and will receive underwriting discounts and commissions
in connection therewith. The Underwriters for this offering of Notes also acted
as underwriters in connection with the public offering of the $.65 Depositary
Shares and received underwriting discounts and commissions in connection
therewith.
Donaldson, Lufkin & Jenrette Securities Corporation and Bear, Stearns & Co.
Inc. acted as underwriters in connection with the public offering by MGI, a
subsidiary of MAXXAM, of $100,000,000 aggregate principal amount of MGI's
11 1/4% Senior Secured Notes due 2003 and $126,720,000 aggregate principal
amount of MGI's 12 1/4% Senior Secured Discount Notes due 2003 for which they
received underwriting discounts and commissions.
Donaldson, Lufkin & Jenrette Securities Corporation and Salomon Brothers
Inc acted as underwriters in connection with the public offering by (i) The
Pacific Lumber Company ("Pacific Lumber"), an indirect subsidiary of MAXXAM, of
$235.0 million aggregate principal amount of Pacific Lumber's 10 1/2% Senior
Notes due 2003 for which they received underwriting discounts and commissions
and (ii) Scotia Pacific Holding Company ("Scotia Pacific"), a wholly owned
subsidiary of Pacific Lumber, of $385.0 million aggregate principal amount of
Scotia Pacific's 7.95% Timber Collateralized Notes due 2015 for which they also
received underwriting discounts and commissions.
There is no existing market for the Notes. The Underwriters have advised
the Company that each Underwriter currently intends to make a market in the
Notes, although the Underwriters are not obligated to do so and any market
making may be discontinued at any time without notice. No assurance can be
given, however, as to the liquidity of the trading market for the Notes, or that
an active trading market for the Notes will develop. If an active public market
for the Notes does not develop, the market price and liquidity of the
98
<PAGE> 102
Notes may be adversely affected. The Notes will not be listed on any national
securities exchange or authorized for trading on The Nasdaq Stock Market.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The legality of the Notes will be passed upon for the Company by Kramer,
Levin, Naftalis, Nessen, Kamin & Frankel, New York, New York. Certain legal
matters will be passed upon for the Underwriters by Latham & Watkins, New York,
New York. Kramer, Levin, Naftalis, Nessen, Kamin & Frankel performs legal
services for MAXXAM and its subsidiaries. Ezra G. Levin is a partner of that
firm and is a director of the Company, MAXXAM, KAC and certain of MAXXAM's other
subsidiaries as well as a trustee of Federated.
EXPERTS
The consolidated financial statements and schedules for the years ended
December 31, 1992, 1991 and 1990 included in this Prospectus and elsewhere in
the Registration Statement have been audited by Arthur Andersen & Co.,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
99
<PAGE> 103
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
Report of Independent Public Accountants............................................ F-2
Consolidated Balance Sheets at December 31, 1992 and 1991........................... F-3
Statements of Consolidated Income for the Years Ended December 31, 1992, 1991 and
1990............................................................................. F-4
Statements of Consolidated Cash Flows for the Years Ended December 31, 1992, 1991
and 1990......................................................................... F-5
Notes to Consolidated Financial Statements.......................................... F-6
UNAUDITED FINANCIAL STATEMENTS
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets at September 30, 1993 and December 31, 1992............. F-24
Statements of Consolidated Income (Loss) for the Nine Months Ended September 30,
1993 and 1992.................................................................... F-25
Statements of Consolidated Cash Flows for the Nine Months Ended September 30, 1993
and 1992......................................................................... F-26
Notes to Interim Consolidated Financial Statements.................................. F-27
</TABLE>
F-1
<PAGE> 104
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and the Board of Directors of Kaiser
Aluminum & Chemical Corporation:
We have audited the accompanying consolidated balance sheets of Kaiser
Aluminum & Chemical Corporation (a Delaware corporation) and subsidiaries as of
December 31, 1992 and 1991, and the related statements of consolidated income
and cash flows for each of the three years in the period ended December 31,
1992. These financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Kaiser Aluminum & Chemical
Corporation and subsidiaries as of December 31, 1992 and 1991, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1992 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN & CO.
Oakland, California
February 8, 1993
F-2
<PAGE> 105
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1992 1991
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 18.5 $ 15.5
Receivables:
Trade, less allowance for doubtful receivables of $3.0 in 1992
and $4.8 in 1991................................................ 174.0 163.9
Other............................................................ 97.1 55.1
Inventories......................................................... 439.9 498.6
Prepaid expenses and other current assets........................... 37.0 84.0
--------- ---------
Total current assets........................................ 766.5 817.1
Investments in and advances to unconsolidated affiliates.............. 150.1 161.9
Property, plant, and equipment -- net................................. 1,066.8 1,014.5
Other assets.......................................................... 116.6 145.2
--------- ---------
Total....................................................... $ 2,100.0 $ 2,138.7
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 136.6 $ 141.8
Accrued interest.................................................... 4.6 4.9
Accrued salaries, wages, and related expenses....................... 84.4 76.2
Other accrued liabilities........................................... 110.9 232.1
Payable to affiliates............................................... 78.5 87.1
Short-term borrowings............................................... 4.8 6.3
Long-term debt -- current portion................................... 25.9 26.3
--------- ---------
Total current liabilities................................... 445.7 574.7
Long-term liabilities................................................. 217.9 212.9
Long-term debt........................................................ 765.1 681.5
Minority interests.................................................... 70.1 71.9
Redeemable preference stock -- aggregate liquidation value of $58.2 in
1992 and $65.3 in 1991.............................................. 32.8 34.8
Stockholders' equity:
Preference stock -- cumulative and convertible, par value $100,
authorized 1,000,000 shares; issued 26,006 shares in 1992 and
28,411 shares in 1991............................................ 2.0 2.2
Common stock, par value 33 1/3 cents, authorized 100,000,000 shares;
issued 46,171,365 shares in 1992 and 1991........................ 15.4 15.4
Additional capital.................................................. 1,255.6 1,118.4
Retained earnings................................................... 481.2 476.2
Less: Note receivable from Kaiser Aluminum Corporation.............. (1,185.8) (1,049.3)
--------- ---------
Total stockholders' equity.................................. 568.4 562.9
--------- ---------
Total....................................................... $ 2,100.0 $ 2,138.7
--------- ---------
--------- ---------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-3
<PAGE> 106
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1992 1991 1990
-------- -------- --------
<S> <C> <C> <C>
Net sales.................................................... $1,909.1 $2,000.8 $2,095.0
-------- -------- --------
Costs and expenses:
Cost of products sold...................................... 1,619.3 1,594.2 1,525.2
Depreciation............................................... 80.3 73.2 70.5
Selling, administrative, research and development, and
general................................................. 119.3 117.6 122.9
-------- -------- --------
Total costs and expenses.............................. 1,818.9 1,785.0 1,718.6
-------- -------- --------
Operating income............................................. 90.2 215.8 376.4
Other income (expense):
Interest and other income.................................. 16.9 16.4 11.0
Interest expense........................................... (78.7) (82.7) (96.6)
-------- -------- --------
Income before income taxes and minority interests............ 28.4 149.5 290.8
Provision for income taxes................................... (5.3) (32.4) (75.6)
Minority interests........................................... 6.5 7.6 5.5
-------- -------- --------
Net income................................................... $ 29.6 $ 124.7 $ 220.7
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-4
<PAGE> 107
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1992 1991 1990
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ 29.6 $ 124.7 $ 220.7
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation............................................. 80.3 73.2 70.5
Amortization of deferred financing costs and discount on
long-term debt......................................... 11.5 10.7 10.4
Minority interests....................................... (6.5) (7.6) (5.5)
Increase in accrued income taxes......................... 3.5 10.1 32.9
Equity in losses of unconsolidated affiliates............ 1.9 19.5 14.6
Recognition of previously deferred income from a forward
alumina sale........................................... (25.7) (42.0) (95.1)
(Increase) decrease in receivables....................... (58.6) (2.7) 43.1
Decrease (increase) in inventories, prepaid expenses, and
other current assets................................... 66.3 (13.0) (48.0)
Decrease in accounts payable, payable to affiliates,
and accrued liabilities................................ (92.8) (33.8) (30.5)
Other.................................................... 18.5 4.6 (19.0)
------- ------- -------
Net cash provided by operating activities........... 28.0 143.7 194.1
Cash flows from investing activities:
Net proceeds from disposition of property and investments... 26.1 8.8 16.2
Capital expenditures........................................ (114.4) (118.1) (115.1)
------- ------- -------
Net cash used for investing activities.............. (88.3) (109.3) (98.9)
Cash flows from financing activities:
Repayments of long-term debt, including revolving credit.... (221.4) (533.3) (516.3)
Borrowings of long-term debt, including revolving credit.... 303.8 575.9 386.8
Net short-term (payments) borrowings........................ (1.5) 6.7
Borrowings from MAXXAM Inc.................................. 2.5
Dividends paid.............................................. (12.8) (94.9) (1.6)
Capital stock issued........................................ 23.3
Redemption of preference stock.............................. (7.3) (20.4) (35.4)
------- ------- -------
Net cash provided by (used for) financing
activities........................................ 63.3 (42.7) (166.5)
Net increase (decrease) in cash and cash equivalents during
the year.................................................... 3.0 (8.3) (71.3)
Cash and cash equivalents at beginning of year................ 15.5 23.8 95.1
------- ------- -------
Cash and cash equivalents at end of year...................... $ 18.5 $ 15.5 $ 23.8
------- ------- -------
------- ------- -------
Supplemental disclosure of cash flow information:
Interest paid, net of capitalized interest.................. $ 68.1 $ 74.5 $ 86.0
Income taxes paid........................................... 1.8 20.9 39.2
Tax allocation payments to MAXXAM Inc....................... 28.1 39.1 5.7
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-5
<PAGE> 108
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the statements of Kaiser
Aluminum & Chemical Corporation ("KACC" or the "Company") and its majority owned
subsidiaries. Investments in 50%-or-less-owned entities are accounted for
primarily by the equity method. Intercompany balances and transactions are
eliminated. The Company is a wholly owned subsidiary of Kaiser Aluminum
Corporation ("Kaiser"), which is an indirect subsidiary of MAXXAM Inc.
("MAXXAM"). Certain reclassifications of prior year information were made to
conform to the current presentation.
Cash and Cash Equivalents
The Company considers only those short-term, highly liquid investments with
original maturities of 90 days or less to be cash equivalents.
Inventories
Substantially all product inventories are stated at last-in, first-out
("LIFO") cost, not in excess of market. Replacement cost is not in excess of
LIFO cost. Other inventories, principally operating supplies and repair and
maintenance parts, are stated at the lower of average cost or market. Inventory
costs consist of material, labor, and manufacturing overhead, including
depreciation. Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1992 1991
------ ------
<S> <C> <C>
Finished fabricated products......................................... $ 91.2 $ 95.6
Primary aluminum and work in process................................. 128.7 184.4
Bauxite and alumina.................................................. 107.4 111.5
Operating supplies and repair and maintenance parts.................. 112.6 107.1
------ ------
$439.9 $498.6
------ ------
------ ------
</TABLE>
The Company recorded a pre-tax charge of approximately $29.0 in the fourth
quarter of 1992 because of a reduction in the carrying value of its inventories
caused principally by prevailing lower prices for alumina, primary aluminum, and
fabricated products of $18.8, and a LIFO inventory liquidation of $10.2.
Depreciation
Depreciation is computed principally by the straight-line method at rates
based upon the estimated useful lives of the various classes of assets. The
principal estimated useful lives by class of assets are:
<TABLE>
<S> <C>
Land improvements............................................. 8 to 25 years
Buildings..................................................... 15 to 45 years
Machinery and equipment....................................... 10 to 22 years
</TABLE>
Recognition of Certain Sales
In 1989, KACC entered into a forward alumina sales transaction to sell
forward alumina at fixed prices through 1992. A portion of the selling price was
received in the form of an initial payment of approximately $179.9, which
approximately equaled the expected cash profit margin for the sale, discounted
to present value. The initial payment has been recognized as revenue as the
alumina was delivered. At December 31, 1992, substantially all of the initial
payment has been recognized as revenue.
F-6
<PAGE> 109
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
Other Income
Included in other income in 1992 are approximately $14.0 of pre-tax income
for non-recurring adjustments to previously recorded liabilities and reserves in
the fourth quarter. Included in interest and other income in 1991 is the receipt
of a $12.0 fee in the first quarter from the Company's minority partner in
consideration for the execution of an expansion agreement for the Alumina
Partners of Jamaica ("Alpart") alumina refinery. The agreement provides for a
program of expansion and modernization of Alpart at the existing ownership
interest of 65% for KACC and 35% for KACC's minority partner. The prior
expansion agreement provided for expansion rights of 75% for KACC and 25% for
KACC's minority partner.
Futures Contracts and Options
The Company periodically enters into forward foreign exchange, commodity
futures, and commodity option contracts, which are primarily accounted for as
hedges of its revenues and costs. The gains and losses on these contracts are
reflected in earnings concurrently with the hedged revenues or costs. The cash
flows from these contracts are classified in a manner consistent with the
underlying nature of the transactions. At December 31, 1992, the Company has
contracts to purchase $18.3 of pounds sterling and $8.4 of Australian dollars at
various fixed rates expiring on various dates through December 31, 1993.
The Company is entitled to withdraw the excess of current market value over
the premiums paid on certain commodity option contracts. These withdrawals were
$3.7 and $70.0 at December 31, 1992 and 1991, respectively, and are included in
other accrued liabilities.
Deferred Financing Costs
Costs incurred to obtain financing are deferred and amortized over the
estimated term of the related borrowing.
Foreign Currency
The Company uses the United States dollar as the functional currency for
its foreign operations.
Fair Value of Financial Instruments
Unless otherwise disclosed, the carrying amount of all financial
instruments is a reasonable estimate of fair value.
2. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
Summary combined financial information is provided below for unconsolidated
aluminum investments, most of which supply and process raw materials. The
investees are Queensland Alumina Limited ("QAL") (28.3% owned), Anglesey
Aluminium Limited ("Anglesey") (49.0% owned), and Kaiser Jamaica Bauxite Company
(49.0% owned). The equity in earnings (losses) before income taxes of such
operations are treated as a reduction (increase) in cost of products sold. At
December 31, 1992 and 1991, KACC's net receivables from these affiliates were
not material.
F-7
<PAGE> 110
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
SUMMARY OF COMBINED FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1992 1991
------- -------
<S> <C> <C>
Current assets............................................................. $ 295.0 $ 286.9
Property, plant, and equipment -- net...................................... 389.4 411.0
Other assets............................................................... 49.9 53.4
------- -------
Total assets............................................................. $ 734.3 $ 751.3
------- -------
------- -------
Current liabilities........................................................ $ 132.8 $ 156.7
Long-term debt............................................................. 275.0 264.2
Other liabilities.......................................................... 20.0 30.7
Stockholders' equity....................................................... 306.5 299.7
------- -------
Total liabilities and stockholders' equity............................... $ 734.3 $ 751.3
------- -------
------- -------
</TABLE>
SUMMARY OF COMBINED OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1992 1991 1990
------- ------- -------
<S> <C> <C> <C>
Net sales..................................................... $ 586.6 $ 589.0 $ 569.0
Costs and expenses............................................ (586.7) (630.7) (565.4)
Provision for income taxes.................................... 6.9 9.5 4.0
------- ------- -------
Net income (loss)............................................. $ 6.8 $ (32.2) $ 7.6
------- ------- -------
------- ------- -------
Company equity in losses...................................... $ (1.9) $ (19.5) $ (12.8)
------- ------- -------
------- ------- -------
</TABLE>
The Company's equity in losses differs from the summary net income (loss)
due to various percentage ownerships in the entities and equity method
accounting adjustments.
At December 31, 1992, KACC's investment in its unconsolidated affiliates
exceeded its equity in their net assets by approximately $49.8. The Company is
amortizing this amount over a 12-year period, which results in an annual
amortization charge of approximately $7.6.
The Company and its affiliates have interrelated operations. The Company
provides some of its affiliates with services such as financing, management, and
engineering. Significant activities with affiliates include the acquisition and
processing of bauxite, alumina, and primary aluminum. Purchases from these
affiliates were $219.4, $238.7, and $228.2 in the years ended December 31, 1992,
1991, and 1990, respectively. No dividends were received from investees in the
three years ended December 31, 1992.
3. PROPERTY, PLANT, AND EQUIPMENT
The major classes of property, plant, and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1992 1991
-------- --------
<S> <C> <C>
Land and improvements......................................... $ 123.8 $ 83.2
Buildings..................................................... 164.1 141.1
Machinery and equipment....................................... 1,010.7 925.7
Construction in progress...................................... 70.3 87.5
-------- --------
1,368.9 1,237.5
Accumulated depreciation...................................... 302.1 223.0
-------- --------
Property, plant, and equipment -- net....................... $1,066.8 $1,014.5
-------- --------
-------- --------
</TABLE>
F-8
<PAGE> 111
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
4. LONG-TERM DEBT
Long-term debt and its maturity schedule are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 -----------------
AND 1992 1991
1993 1994 1995 1996 1997 AFTER TOTAL TOTAL
----- ------ ---- ---- ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1989 Credit Agreement (6.07% at
December 31, 1992)
Revolving Credit Facility...... $290.0 $290.0 $205.0
Term Loan...................... $18.3 18.3 36.6 55.0
Pollution Control and Economic
Development Facilities
Obligations (fixed and variable
rates)........................... .9 1.1 $1.2 $1.2 $1.2 $ 34.4 40.0 20.8
14 1/4% Senior Subordinated
Notes............................ 320.5 320.5 319.8
Alpart CARIFA Loan................. 60.0 60.0 60.0
Alpart Term Loan (8.95%)........... 6.2 6.3 6.2 6.3 6.3 31.3 37.5
Other Borrowings (fixed and
variable rates).................. .5 .7 .7 1.3 1.4 8.0 12.6 9.7
----- ------ ---- ---- ---- ------ ------ ------
Total..................... $25.9 $316.4 $8.1 $8.8 $8.9 $422.9 791.0 707.8
----- ------ ---- ---- ---- ------
Less current portion............... 25.9 26.3
------ ------
Long-term debt..................... $765.1 $681.5
------ ------
------ ------
</TABLE>
The 1989 Credit Agreement
KACC entered into a credit agreement with a syndicate of commercial banks
and other financial institutions (the "Banks") pursuant to the terms of which
the Banks agreed to extend to KACC credit facilities in an aggregate principal
amount of approximately $722.0 (as amended, "the 1989 Credit Agreement"). The
obligations of KACC in respect of the credit facilities are guaranteed by
Kaiser, and by a number of wholly owned subsidiaries of KACC, which, among other
things, together directly own the Company's interest in Alpart and QAL. Loans
under the 1989 Credit Agreement bear an annual interest rate, at KACC's election
from time to time, equal to (i) the Reference Rate (prime) plus 1 1/2%, (ii) the
CD Rate plus 2 5/8%, or (iii) the LIBO Rate plus 2 1/2%. All interest rates and
fees are subject to a reduction or increase of 1/2% per annum, on a
non-cumulative basis, depending upon KACC's interest coverage ratio, determined
quarterly. As of December 31, 1992, the interest coverage ratio permitted no
reduction or increase in interest rates and fees.
The 1989 Credit Agreement requires KACC to maintain certain financial
covenants and places restrictions on KACC's ability to, among other things,
incur debt and liens, make investments, pay dividends, undertake transactions
with affiliates, make capital expenditures, and enter into unrelated lines of
business. Payment of dividends by KACC to Kaiser is subject to meeting certain
conditions. As of December 31, 1992, $20.6 was available for payment of
dividends, although under the terms of the 1989 Credit Agreement, no more than
$3.0 may be paid in any quarter. The 1989 Credit Agreement requires KACC to
prepay certain outstanding amounts from proceeds from Asset Dispositions, as
defined, and to prepay certain amounts outstanding in an amount equal to 50% of
Excess Cash Flow, as defined, for each fiscal year ending on or after December
31, 1990. The 1989 Credit Agreement is secured by, among other things, (i)
mortgages on KACC's major domestic plants; (ii) subject to certain exceptions,
liens on the accounts receivable, inventory, equipment, domestic patents and
trademarks, and substantially all other personal property of KACC and certain of
its subsidiaries; (iii) a pledge of all the stock of KACC owned by Kaiser; and
(iv) pledges of all of the stock of a number of KACC's wholly owned
subsidiaries, pledges of a portion of the stock of certain foreign subsidiaries,
and pledges of a portion of the stock of certain partially owned foreign
affiliates.
F-9
<PAGE> 112
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
The 1989 Credit Agreement comprises the following:
Revolving Credit Facility -- The five-year Revolving Credit Facility
provides for loans not to exceed the lesser of $350.0 or a borrowing base
relating to the amount of eligible accounts receivable and eligible inventory of
KACC and certain of its subsidiaries. Up to $50.0 of availability under the
Revolving Credit Facility may be used for letters of credit. During each year
the Revolving Credit Facility is outstanding, KACC is required to maintain $50.0
in unutilized capacity for a minimum of thirty consecutive days. As of December
31, 1992, $24.0 (of which $14.0 may be used for letters of credit) was available
to KACC under the Revolving Credit Facility.
Term Loan -- The five-year Term Loan was originally to be repaid in ten
equal semiannual installments, commencing May 31, 1990. Following an amendment,
the 1989 Credit Agreement requires, among other things, the mandatory
prepayment, no later than July 29, 1993, of all amounts outstanding under the
Term Loan.
The Company expects that it will be able to satisfy its debt service and
capital expenditures requirements through at least March 31, 1994, from cash
flows generated by operations and, to the extent necessary, from borrowings
under the revolving credit facility of the 1989 Credit Agreement. The Company
believes that it will be able to renegotiate and/or refinance the 1989 Credit
Agreement as necessary prior to its expiration.
Gramercy Revenue Bonds
In December 1992, KACC entered into an installment sale agreement (the
"Sale Agreement") with the Parish of St. James, Louisiana (the "Louisiana
Parish"), pursuant to which the Louisiana Parish issued $20.0 aggregate
principal amount of its 7 3/4% Bonds due August 1, 2022 (the "Bonds") to finance
the construction of certain solid waste disposal facilities at KACC's Gramercy
plant. The proceeds from the sale of the Bonds were deposited into a
construction fund and may be withdrawn, from time to time, pursuant to the terms
of the Sale Agreement and the Bond indenture. At December 31, 1992, $17.4
remained in the construction fund. The Sale Agreement requires KACC to make
payments to the Louisiana Parish in installments due on the dates and in the
amounts required to permit the Louisiana Parish to satisfy all of its payment
obligations under the Bonds.
Senior Subordinated Notes
On February 1, 1993, KACC issued $400.0 of 12 3/4% Senior Subordinated
Notes due 2003 (the "12 3/4% Notes"). The net proceeds from the sale of the
12 3/4% Notes were used to retire the 14 1/4% Senior Subordinated Notes due 1995
(the "14 1/4% Notes"), to prepay $18.0 of the Term Loan, and to reduce
outstanding borrowings under the Revolving Credit Facility. These transactions
will result in a pre-tax extraordinary loss of approximately $33.0 in the first
quarter of 1993, consisting primarily of the write-off of unamortized discount
and deferred financing costs related to the 14 1/4% Notes and the tender premium
on the 14 1/4% Notes.
The obligations of KACC with respect to the 12 3/4% Notes are guaranteed,
jointly and severally, by certain subsidiaries of KACC. The indenture governing
the 12 3/4% Notes contains, among other things, restrictions on the ability of
KACC and its subsidiaries to incur debt, undertake transactions with affiliates,
and pay dividends.
Alpart CARIFA Loan
In December 1991, Alpart entered into a loan agreement with the Caribbean
Basin Projects Financing Authority ("CARIFA") under which CARIFA loaned Alpart
the proceeds from the issuance of CARIFA's industrial revenue bonds. The terms
of the loan parallel the bonds' repayment terms. The $38.0 aggregate
F-10
<PAGE> 113
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
principal amount of Series A bonds matures on June 1, 2008. The Series A bonds
bear interest at a floating rate of 87% of the applicable LIBID rate (LIBOR less
1/8 of 1%) on $37.5 of the principal amount (3.4% at December 31, 1992) with the
remaining $.5 bearing interest at a fixed rate of 6.35%. The $22.0 aggregate
principal amount of Series B bonds matures on June 1, 2007, and bears interest
at a fixed rate of 8.25%.
Proceeds from the sale of the bonds were used by Alpart to refinance
interim loans from the partners in Alpart, to pay eligible project costs for the
expansion and modernization of its alumina refinery and related port and bauxite
mining facilities, and to pay certain costs of issuance. Under the terms of the
loan agreement, Alpart must remain a qualified recipient for Caribbean Basin
Initiative funds as defined in applicable laws. Alpart has agreed to indemnify
bondholders of CARIFA for certain tax payments that could result from events, as
defined, that adversely affect the tax treatment of the interest income on the
bonds. Alpart's obligations under the loan agreement are secured by a $64.2
letter of credit guaranteed by the partners in Alpart (of which $22.5 is
guaranteed by the Company's minority partner in Alpart).
Capitalized Interest
Interest capitalized in 1992, 1991, and 1990 was $4.4, $4.2, and $8.9,
respectively.
Fair Value Disclosure
The fair value of the Company's long-term debt at December 31, 1992, is as
follows:
-- The estimated fair value of the 14 1/4% Notes is the amount used to
retire the 14 1/4% Notes in February 1993, or $347.8.
-- The fair value of all other long-term debt is estimated to be $459.0
based upon discounting the future cash flows using the current rate for
debt of similar maturities and terms.
5. INCOME TAXES
Income (loss) before income taxes and minority interests is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1992 1991 1990
------ ------ ------
<S> <C> <C> <C>
Domestic......................................... $(81.3) $ 23.3 $ 47.9
Foreign.......................................... 109.7 126.2 242.9
------ ------ ------
Total.......................................... $ 28.4 $149.5 $290.8
------ ------ ------
------ ------ ------
</TABLE>
F-11
<PAGE> 114
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
The provision (credit) for income taxes consists of:
<TABLE>
<CAPTION>
FEDERAL FOREIGN STATE TOTAL
------- ------- ----- ------
<S> <C> <C> <C> <C> <C>
1992 Current.................................. $ 9.7 $11.4 $ .1 $ 21.2
Deferred................................. (13.1) (3.3) .5 (15.9)
------- ------- ----- ------
Total.................................... $ (3.4) $ 8.1 $ .6 $ 5.3
------- ------- ----- ------
------- ------- ----- ------
1991 Current.................................. $ 25.3 $ 8.9 $ 1.1 $ 35.3
Deferred................................. (1.9) 1.4 (2.4) (2.9)
------- ------- ----- ------
Total.................................... $ 23.4 $10.3 $(1.3) $ 32.4
------- ------- ----- ------
------- ------- ----- ------
1990 Current.................................. $ 18.7 $39.4 $ 3.0 $ 61.1
Deferred................................. (4.6) 17.1 2.0 14.5
------- ------- ----- ------
Total.................................... $ 14.1 $56.5 $ 5.0 $ 75.6
------- ------- ----- ------
------- ------- ----- ------
</TABLE>
The deferred (credit) provision for income taxes results from the following
timing differences:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1992 1991 1990
------ ------ ------
<S> <C> <C> <C>
Depreciation............................................. $ 5.4 $ 7.8 $ 8.4
Undistributed earnings or losses of
foreign and unconsolidated affiliates.................. (12.3) (12.4) (3.3)
Inventory costing differences............................ (5.5) 5.9 .6
Revision of prior years' tax estimates................... (2.9) (8.7)
Net federal and foreign tax loss and credit carryforwards
utilized and other foreign tax items................... .9 9.4
Other.................................................... (.6) 3.6 (.6)
------ ------ ------
Total............................................... $(15.9) $ (2.9) $ 14.5
------ ------ ------
------ ------ ------
</TABLE>
A reconciliation between the provision for income taxes and the amount
computed by applying the federal statutory income tax rate to income before
income taxes and minority interests is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1992 1991 1990
----- ----- -----
<S> <C> <C> <C>
Amount of federal income tax based
upon the statutory rate................................... $ 9.7 $50.9 $98.9
Financial reporting/tax basis differences................... 4.2 (5.1) (8.7)
Foreign taxes, net of federal tax benefit................... .4 (.2) (3.2)
Percentage depletion........................................ (6.3) (6.0) (5.6)
Revision of prior years' tax estimates...................... (2.9) (8.7)
Other....................................................... .2 1.5 (5.8)
----- ----- -----
Provision for income taxes.................................. $ 5.3 $32.4 $75.6
----- ----- -----
----- ----- -----
</TABLE>
In the years ended December 31, 1992 and 1991, the Company has reversed
$2.9 and $8.7 of previously established income tax reserves.
The Company and its subsidiaries are included in the consolidated federal
income tax return of MAXXAM. The Company and MAXXAM entered into a tax
allocation agreement (the "KACC Tax Allocation Agreement") which became
effective as of October 28, 1988. Under the terms of the KACC Tax Allocation
Agreement, MAXXAM will compute the federal income tax liability for the Company
and its subsidiaries (collectively, the "Subgroup") as if the Subgroup were a
separate affiliated group of corporations
F-12
<PAGE> 115
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
which was never connected with MAXXAM. The 1989 Credit Agreement prohibits the
payment by KACC to MAXXAM of any amount due under the KACC Tax Allocation
Agreement until December 15, 1994.
Income taxes are classified as either domestic or foreign, based on whether
payment is made or due to the United States or a foreign country. Certain income
classified as foreign is also subject to domestic income taxes.
At December 31, 1992, the Company has approximately $1.8 of regular tax
foreign tax credit carryforwards and approximately $31.5 of alternative minimum
tax foreign tax credit carryforwards which expire through 1994. These tax
attributes are available to reduce future federal tax provisions for financial
reporting purposes. The following table presents the Company's tax attributes
for federal income tax purposes under the terms of the tax allocation agreement
at December 31, 1992:
<TABLE>
<CAPTION>
EXPIRING
THROUGH
----------
<S> <C> <C>
Regular tax attribute carryforwards:
Pre-acquisition net operating losses................... $58.1 2003
Pre-acquisition general business tax credits........... 55.9 2002
Foreign tax credits.................................... 4.5 1994
Alternative minimum tax credits........................ 3.1 Indefinite
Alternative minimum tax attribute carryforwards:
Pre-acquisition net operating losses................... 25.9 2003
Foreign tax credits.................................... 5.5 1994
</TABLE>
The above tax attributes are subject to various limitations.
In February 1992, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes ("SFAS 109"). The Company elected to adopt SFAS 109 as of January
1, 1993. The cumulative effect of the change in accounting principle for the
adoption of SFAS 109 will be recorded as a charge to operations and will reduce
results of operations by approximately $3.0. The implementation of SFAS 109 will
require the Company to restate certain assets and liabilities to their pre-tax
amounts from their net-of-tax amounts originally recorded. The adoption of SFAS
109, including the restatement of certain assets and liabilities, will primarily
result in an increase in the net carrying value of property, plant, and
equipment, an increase in long-term liabilities, and an increase in deferred
income tax liabilities. Concurrent with the adoption of SFAS 109, the Company
will implement the change in accounting method for postretirement benefits as
discussed in Note 6. This accounting method change will result in the
recognition of a deferred tax asset of approximately $234.0. The Company
believes that its ability to generate future taxable income will allow for the
realization of this deferred tax asset.
F-13
<PAGE> 116
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
6. EMPLOYEE BENEFIT AND INCENTIVE PLANS
Retirement Plans
Retirement plans are non-contributory for salaried and hourly employees.
Employee pension benefit plans status was:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------------
1992 1991
------------------------------------ ------------------------------------
PLANS WITH ASSETS PLANS WITH PLANS WITH ASSETS PLANS WITH
EXCEEDING ACCUMULATED EXCEEDING ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEEDING ASSETS BENEFITS EXCEEDING ASSETS
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Accumulated benefit obligation:
Vested employees................... $(1.8) $ (661.7) $(200.8) $ (457.4)
Nonvested employees................ (.5) (49.1) (14.0) (31.4)
------ ---------------- ----------------- ----------------
Accumulated benefit obligation..... (2.3) (710.8) (214.8) (488.8)
Additional amounts related to
projected salary increases......... (.1) (33.6) (27.5) (9.4)
------ ---------------- ----------------- ----------------
Projected benefit obligation......... (2.4) (744.4) (242.3) (498.2)
Plan assets (principally fixed income
obligations and common stocks) at
fair value......................... 2.5 570.0 217.9 386.9
------ ---------------- ----------------- ----------------
Plan assets in excess of (less than)
projected benefit obligation....... .1 (174.4) (24.4) (111.3)
------ ---------------- ----------------- ----------------
Unrecognized gains and obligations
and prior-service cost:
Net losses (gains)................. .1 34.6 .1 (2.2)
Net obligations.................... 2.6 3.8
Prior-service cost................. .2 15.7 .2 16.5
------ ---------------- ----------------- ----------------
Net unrecognized losses and
obligations........................ .3 52.9 .3 18.1
---------------- ----------------
Adjustment required to recognize
minimum liability.................. (25.3) (9.1)
------ ---------------- ----------------- ----------------
Net pension assets (liabilities)
included in the Consolidated
Balance Sheet (principally in
long-term liabilities)............. $ .4 $ (146.8) $ (24.1) $ (102.3)
------ ---------------- ----------------- ----------------
------ ---------------- ----------------- ----------------
</TABLE>
Statement of Financial Accounting Standards No. 87, Employers' Accounting
for Pensions, requires recognition of a minimum pension liability for unfunded
plans. At December 31, 1992, the Company recorded an after-tax charge to equity
of $6.7 because the additional liability required to be recognized exceeded
unrecognized prior service cost (see Note 8).
F-14
<PAGE> 117
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
The components of net periodic pension cost are:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1992 1991 1990
------ ------- ------
<S> <C> <C> <C>
Service cost -- benefits earned during the period....... $ 11.0 $ 9.8 $ 10.3
Interest cost on projected benefit obligation........... 58.8 59.3 56.3
Return on assets:
Actual (gain) loss.................................... (26.3) (100.1) 4.9
Deferred (loss) gain.................................. (31.2) 49.9 (59.2)
Net amortization and deferral......................... 2.1 .3 .8
------ ------- ------
Net periodic pension cost............................... $ 14.4 $ 19.2 $ 13.1
------ ------- ------
------ ------- ------
</TABLE>
Assumptions used to value obligations at year-end, and to determine the net
periodic pension cost in the subsequent year, are:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1992 1991 1990
----- ----- -----
<S> <C> <C> <C>
Discount rate........................................... 8.25% 8.25% 9.00%
Expected long-term rate of return on assets............. 10.00% 10.00% 10.00%
Rate of increase in compensation levels................. 5.00% 5.00% 6.00%
</TABLE>
Incentive Plans
Effective January 1, 1989, the Company adopted an unfunded Long-Term
Incentive Plan (the "LTIP") for certain key employees of the Company and its
consolidated subsidiaries. Substantially all compensation vested under the LTIP,
as amended in 1991 and 1992, has been paid to the participants in cash or common
stock of Kaiser as of December 31, 1992. Under the LTIP, as amended, amounts
earned and unvested of approximately $6.1 will vest at the rate of 25% per year
for the four-year period ending December 31, 1996. All future payments from the
LTIP are expected to be in common stock of Kaiser.
Effective January 1, 1990, the Company adopted an unfunded Middle
Management Long-Term Incentive Plan. The Company also has a supplemental savings
and retirement plan for salaried employees under which the participants
contribute a percentage of their base salaries.
The Company's expense for the above plans was $6.6, $6.5, and $15.0 for the
years ended December 31, 1992, 1991, and 1990, respectively.
Postretirement Benefits
The Company and its subsidiaries provide postretirement health care and
life insurance benefits to retired employees. Substantially all employees may
become eligible for those benefits if they reach retirement age while still
working for the Company or its subsidiaries. Those benefits are provided through
administrative service contracts with various insurance carriers. The Company or
its subsidiaries pay and expense the cost of providing these benefits as
incurred. The cost of these benefits was $47.2, $40.2, and $40.0 for the years
ended December 31, 1992, 1991, and 1990, respectively.
In December 1990, the FASB issued Statement of Financial Accounting
Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions ("SFAS 106"), which requires that the expected cost of providing
postretirement health care and life insurance benefits be charged to expense
during the years that the employees render service. This is a significant change
from the Company's current policy of recognizing these costs on a cash basis.
The Company has elected to adopt SFAS 106 as of January 1, 1993.
F-15
<PAGE> 118
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
The cumulative effect of the change in accounting principle for the adoption of
SFAS 106 will be recorded as a charge to results of operations and will reduce
pre-tax results of operations by $732.0. The tax benefit for the adoption of
SFAS 106 which will be recorded under SFAS 109, based upon the current statutory
rate, is approximately $234.0. In addition, the Company estimates that annual
1993 postretirement benefit pre-tax expense will be approximately $18.4 higher
than would have been reported under the current policy. The new accounting
method has no effect on the Company's cash outlays for retiree benefits nor will
the one-time charge affect the Company's compliance with its existing debt
covenants. The Company reserves the right, subject to applicable collective
bargaining agreements, to amend or terminate these benefits.
Postemployment Benefits
In November 1992, the FASB issued Statement of Financial Accounting
Standards No. 112, Employers' Accounting for Postemployment Benefits ("SFAS
112"). SFAS 112 requires employers to recognize the obligation to provide
postemployment benefits to former or inactive employees. The Company provides
certain benefits to former or inactive employees after employment but before
retirement. The Company has elected to adopt SFAS 112 as of January 1, 1993. The
cumulative effect of the change in accounting principle for the adoption of SFAS
112 will reduce pre-tax results of operations by approximately $10.0 to $15.0.
In addition, the Company believes that annual 1993 postemployment benefit
expenses will not be materially different than would have been reported under
the current policy. The new accounting method has no effect on the Company's
cash outlays for postemployment benefits nor will it affect the Company's
compliance with its existing debt covenants. The Company reserves the right,
subject to applicable collective bargaining agreements and applicable legal
requirements, to amend or terminate these benefits.
7. REDEEMABLE PREFERENCE STOCK
In March 1985, KACC entered into a three-year agreement with the United
Steelworkers of America (USWA) whereby shares of a new series of "Cumulative
(1985 Series A) Preference Stock" would be issued to an employee stock ownership
plan in exchange for certain elements of wages and benefits. Concurrently, a
similar plan was established for certain nonbargaining employees which provided
for the issuance of "Cumulative (1985 Series B) Preference Stock". Series A
Stock and Series B Stock ("Series A and B Stock") each have a par value of $1
per share and a liquidation and redemption value of $50 per share plus accrued
dividends, if any.
For financial reporting purposes, Series A and B Stock were recorded at
fair market value when issued, based on independent appraisals, with a
corresponding charge to compensation cost. Carrying values have been increased
each year to recognize accretion of redemption values and, in certain years,
there have been other increases for reasons described below. Issuances and
redemptions of Series A and B Stock are shown below.
<TABLE>
<CAPTION>
1992 1991 1990
--------- --------- ---------
<S> <C> <C> <C>
Shares:
Beginning of year............................... 1,305,550 1,718,051 2,407,086
Issued.......................................... 1,868 129
Redeemed........................................ (142,329) (414,369) (689,164)
--------- --------- ---------
End of year..................................... 1,163,221 1,305,550 1,718,051
--------- --------- ---------
--------- --------- ---------
</TABLE>
No additional Series A or B Stock will be issued based on compensation
earned in 1992 or subsequent years. While held by the plan trustee, Series B
Stock is entitled to cumulative annual dividends, when and as declared by the
Board of Directors, payable in stock or in cash at the option of KACC on or
after March 1,
F-16
<PAGE> 119
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
1991, in respect to years commencing January 1, 1990, based on a formula tied to
KACC's income before tax from aluminum operations. When distributed to plan
participants (generally upon separation from KACC), the Series A and B stocks
are entitled to an annual cash dividend of $5 per share, payable quarterly, when
and as declared by the Board of Directors.
Redemption fund agreements require KACC to make annual payments by March 31
each year based on a formula tied to consolidated net income until the
redemption funds are sufficient to redeem all Series A and B Stock. On an annual
basis, the minimum payment is $4.3 and the maximum payment is $7.3. In April
1988, KACC entered into a two-and-one-half-year agreement with the USWA whereby
KACC was obligated to make additional contributions to the Series A redemption
fund of (i) $2.0 each in March 1989 and 1990; and (ii) an additional amount
equal to 8.5% of the redemption value of all shares of Series A Stock
distributed from the trust occasioned by the sale of any plant covered by the
agreement to the extent there was not enough money in the redemption fund to
redeem the shares presented for payment. As a result of this agreement, KACC
also agreed with the USWA to contribute $22.5 to the Series A redemption fund in
conjunction with the sale of Ravenswood. In March 1991 and 1992, KACC
contributed $7.1 and $7.0 for the years 1990 and 1991, respectively, and will
contribute $4.3 in March 1993 for 1992.
Under the USWA labor contract effective November 1, 1990, KACC was
obligated to offer to purchase up to 80 shares of Series A Stock from each
active participant in 1991 at a price equal to its redemption value of $50 per
share. KACC also agreed to offer to purchase up to an additional 40 shares from
each participant in 1994. The employees may elect to receive their shares,
accept cash, or place the proceeds into KACC's 401(k) savings plan. Under
separate action, KACC also offered to purchase 80 shares of Series B stock from
active participants in 1991. In 1991, KACC purchased $11.1 of Series A stock and
$2.1 of Series B stock. If the remaining shares of Series A stock are purchased
by the Company, the purchases will total $4.1 in 1994.
The Series A and B Stock is distributed in the event of death, retirement,
or in other specified circumstances. KACC may also redeem such stock at $50 per
share plus accrued dividends, if any. At the option of the plan participant, the
trustee shall redeem stock distributed from the plans at redemption value to the
extent funds are available in the redemption fund. Under the Tax Reform Act of
1986, at the option of the plan participant, KACC must purchase distributed
shares earned after December 31, 1985, at redemption value on a five-year
installment basis, with interest at market rates. The obligation of KACC to make
such installment payments must be secured.
The Series A and B Stock is entitled to the same voting rights as KACC
common stock and to certain additional voting rights under certain
circumstances, including the right to elect, along with other KACC preference
stockholders, two directors whenever accrued dividends have not been paid on two
annual dividend payment dates, or when accrued dividends in an amount equivalent
to six full quarterly dividends are in arrears. The Series A and B Stock
restricts the ability of KACC to redeem or pay dividends on common stock if KACC
is in default on any dividends payable on the Series A and B Stock.
F-17
<PAGE> 120
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
8. STOCKHOLDERS' EQUITY
Changes in stockholders' equity were:
<TABLE>
<CAPTION>
PREFERENCE INTER-
STOCK COMMON ADDITIONAL RETAINED COMPANY
($100 PAR) STOCK CAPITAL EARNINGS NOTE
---------- ------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1990.............. $ 2.9 $15.0 $ 868.1 $ 246.3 $ (821.8)
Net income.......................... 220.7
Interest on intercompany note....... 107.2 (107.2)
Conversions of 6,844 preference
shares into cash................. (.5)
Dividends:
Preference stock................. (1.7)
Kaiser/KACC transfer............. (.1)
Redeemable preference stock
accretion........................ (11.8)
---------- ------ -------- ---------- ---------
BALANCE, DECEMBER 31, 1990............ 2.4 15.0 975.2 453.5 (929.0)
Net income.......................... 124.7
Interest on intercompany note....... 120.3 (120.3)
Sale of common stock to Kaiser...... .4 22.9
Conversions of 3,262 preference
shares into cash................. (.2)
Dividends:
Preference stock................. (1.9)
Common stock..................... (93.0)
Redeemable preference stock
accretion........................... (7.1)
---------- ------ -------- ---------- ---------
BALANCE, DECEMBER 31, 1991............ 2.2 15.4 1,118.4 476.2 (1,049.3)
Net income.......................... 29.6
Interest on intercompany note....... 136.5 (136.5)
Conversions of 2,405 preference
shares into cash................. (.2)
Additional pension liability
(see Note 6)..................... (6.7)
Dividends:
Preference stock................. (1.4)
Common stock..................... (11.4)
Redeemable preference stock
accretion........................ (5.1)
LTIP common stock issued............ .7
---------- ------ -------- ---------- ---------
BALANCE, DECEMBER 31, 1992............ $ 2.0 $15.4 $1,255.6 $ 481.2 $(1,185.8)
---------- ------ -------- ---------- ---------
---------- ------ -------- ---------- ---------
</TABLE>
Preference Stock
The outstanding shares of KACC preference stocks, in descending order of
seniority, were:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1992 1991
------ ------
<S> <C> <C>
Preference, Cumulative Convertible, $100 par:
4 1/8%........................................................... 4,110 4,440
4 3/4% (1957 Series)............................................. 3,054 3,721
4 3/4% (1959 Series)............................................. 14,607 15,180
4 3/4% (1966 Series)............................................. 4,235 5,070
</TABLE>
F-18
<PAGE> 121
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
KACC Cumulative Convertible Preference Stocks, $100 par value ("100
Preference Stocks"), restrict acquisition of junior stock and payment of
dividends. At December 31, 1992, such provisions were less restrictive as to the
payment of cash dividends than the 1989 Credit Agreement provisions. KACC has
the option to redeem the $100 Preference Stocks at par value plus accrued
dividends. KACC does not intend to issue any additional shares of the $100
Preference Stocks.
The 4 1/8% and 4 3/4% (1957 Series, 1959 Series, and 1966 Series) $100
Preference Stocks can be exchanged for per share cash amounts of $69.30, $77.84,
$78.38, and $76.46, respectively. KACC records the $100 Preference Stocks at
their exchange amounts for financial statement presentation.
Intercompany Note
The Intercompany Note bears interest at a fixed rate of 13% per annum. No
interest or principal payments are due until December 21, 2000, after which
interest and principal will be payable over a 15-year term pursuant to a
predetermined schedule. Accrued interest is accounted for as additional
contributed capital.
Dividends
The Company paid quarterly cash dividends on common stock of $50.0, $37.3,
$2.9, and $2.8 in 1991. The Company paid cash dividends on common stock of $2.9
in each quarter of 1992. In the event that Kaiser pays any distributions to its
shareholders, the 1989 Credit Agreement requires MAXXAM and any subsidiary of
MAXXAM to use the entire proceeds of any such distributions received by MAXXAM
or any subsidiary of MAXXAM to purchase a Pay-in-Kind Note (the "PIK Note") from
the Company. On December 15, 1992, the Company issued a PIK Note to a subsidiary
of MAXXAM in the principal amount of $2.5, representing the entire amount of the
dividend received by such subsidiary in respect of the shares of Kaiser's common
stock which it owns. The PIK Note bears interest, compounded semiannually, at a
rate equal to 12% per annum, and is due and payable, together with accrued
interest thereon, on June 30, 1995.
9. COMMITMENTS AND CONTINGENCIES
The Company has financial commitments, including purchase agreements,
tolling arrangements, forward foreign exchange contracts, forward sales
contracts, letters of credit, and guarantees.
Purchase agreements and tolling arrangements include agreements to supply
alumina to Anglesey and to purchase aluminum from that company.
Similarly, KACC has long-term agreements for the purchase and tolling of
bauxite into alumina in Australia by QAL. These obligations expire in 2008.
Under the agreements, KACC is unconditionally obligated to pay its proportional
share of debt, operating costs, and certain other costs of QAL. The aggregate
minimum amount of required future principal payments at December 31, 1992, is
$70.7, due in 1997. The KACC share of payments, including operating costs and
certain other expenses under the agreement, was $99.2, $107.6, and $88.9 for the
years ended December 31, 1992, 1991, and 1990, respectively.
Minimum rental commitments under operating leases at December 31, 1992, are
as follows: years ending December 31, 1993 -- $20.4; 1994 -- $19.3;
1995 -- $18.4; 1996 -- $18.0; 1997 -- $17.4; thereafter -- $261.7. The future
minimum rentals receivable under noncancelable subleases were $94.5 at December
31, 1992.
Rental expenses were $26.2, $23.3, and $23.1 for the years ended December
31, 1992, 1991, and 1990, respectively.
F-19
<PAGE> 122
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
Primarily included in other long-term liabilities are environmental
accruals related to potential solid waste disposal and soil and groundwater
remediation matters. The following table presents the changes in such accruals
for the years ended December 31, 1992, 1991, and 1990:
<TABLE>
<CAPTION>
1992 1991 1990
------ ------ ------
<S> <C> <C> <C>
Balance at beginning of period........................... $ 51.5 $ 57.7 $ 72.9
Additional amounts....................................... 4.5 7.8 3.6
Less expenditures........................................ (9.6) (14.0) (18.8)
------ ------ ------
Balance at end of period................................. $ 46.4 $ 51.5 $ 57.7
------ ------ ------
------ ------ ------
</TABLE>
The Company is involved in various claims, lawsuits, and other proceedings
relating to product liability, environmental protection, and a wide variety of
other matters. While uncertainties are inherent in the ultimate outcome of such
matters and it is impossible to determine the costs that ultimately may be
incurred, management believes that the resolution of such uncertainties and the
incurrence of such costs, some of which may be substantial, should not have a
material adverse effect upon the Company's consolidated financial position or
results of operations.
10. SEGMENT AND GEOGRAPHICAL AREA INFORMATION
Sales and transfers among geographic areas are made on a basis intended to
reflect the market value of products.
The aggregate foreign currency gain included in determining net income was
$12.0, $1.2, and $7.2 for the years ended December 31, 1992, 1991, and 1990,
respectively.
Sales to a single customer were $135.3, $155.9, and $204.3 of bauxite and
alumina and $144.9, $160.9, and $205.9 of aluminum processing for the years
ended December 31, 1992, 1991, and 1990, respectively.
Export sales were less than 10% of total revenue during the years ended
December 31, 1992, 1991, and 1990.
F-20
<PAGE> 123
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
Financial information by industry segment at December 31, 1992 and 1991,
and for the years ended December 31, 1992, 1991, and 1990, is as follows:
<TABLE>
<CAPTION>
YEAR ENDED BAUXITE & ALUMINUM
DECEMBER 31, ALUMINA PROCESSING CORPORATE TOTAL
------------ --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Net sales to unaffiliated
customers.................. 1992 $ 466.5 $1,442.6 $1,909.1
1991 550.8 1,450.0 2,000.8
1990 609.4 1,485.6 2,095.0
Intersegment sales........... 1992 $ 179.9 $ 179.9
1991 194.6 194.6
1990 254.7 254.7
Equity in earnings (losses)
of unconsolidated
affiliates................. 1992 $ 1.8 $ (3.7) $ (1.9)
1991 (4.4) (15.1) (19.5)
1990 (5.0) (7.8) (12.8)
Operating income (loss)...... 1992 $ 62.6 $ 104.9 $ (77.3) $ 90.2
1991 150.0 150.2 (84.4) 215.8
1990 241.4 222.6 (87.6) 376.4
Depreciation................. 1992 $ 29.8 $ 49.0 $ 1.5 $ 80.3
1991 26.4 46.0 .8 73.2
1990 25.8 43.5 1.2 70.5
Capital expenditures......... 1992 $ 50.8 $ 39.4 $ 24.2 $ 114.4
1991 51.1 64.8 2.2 118.1
1990 46.9 67.4 .8 115.1
Investment in and advances to
unconsolidated
affiliates................. 1992 $ 136.2 $ 12.5 $ 1.4 $ 150.1
1991 140.9 16.1 4.9 161.9
Identifiable assets.......... 1992 $ 715.7 $1,165.9 $ 218.4 $2,100.0
1991 693.3 1,256.2 189.2 2,138.7
</TABLE>
F-21
<PAGE> 124
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
Geographical area information relative to operations is summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED OTHER
DECEMBER 31, DOMESTIC CARIBBEAN AFRICA FOREIGN ELIMINATIONS TOTAL
------------ -------- --------- ------ ------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales to
unaffiliated
customers......... 1992 $1,359.6 $ 92.9 $263.5 $193.1 $1,909.1
1991 1,383.8 149.6 269.2 198.2 2,000.8
1990 1,384.9 186.0 286.8 237.3 2,095.0
Sales and transfers
among geographic
areas............. 1992 $ 111.8 $ 93.5 $ (205.3)
1991 116.4 112.3 (228.7)
1990 137.6 155.7 (293.3)
Equity in losses of
unconsolidated
affiliates........ 1992 $ (1.9) $ (1.9)
1991 (19.5) (19.5)
1990 (12.8) (12.8)
Operating income
(loss)............ 1992 $ (25.0) $ 18.4 $ 78.8 $ 18.0 $ 90.2
1991 59.5 47.8 72.1 36.4 215.8
1990 163.9 95.1 60.2 57.2 376.4
Investment in and
advances to
unconsolidated
affiliates........ 1992 $ 1.4 $ 29.5 $119.2 $ 150.1
1991 4.9 30.7 126.3 161.9
Identifiable
assets............ 1992 $1,302.3 $ 358.3 $227.5 $211.9 $2,100.0
1991 1,400.8 332.1 211.6 194.2 2,138.7
</TABLE>
11. SUBSIDIARY GUARANTORS
Kaiser Alumina Australia Corporation ("KAAC"), Kaiser Finance Corporation
("KFC"), Kaiser Jamaica Corporation ("KJC"), and Alpart Jamaica Inc. ("AJI")
(collectively referred to as the "Subsidiary Guarantors") are domestic wholly
owned (directly or indirectly) subsidiaries of the Company that have provided
joint and several guarantees of the 1989 Credit Agreement and subordinated
guarantees of the 14 1/4% Notes (see Note 4).
KAAC, KJC, and AJI are wholly owned subsidiaries, which serve as holding
companies for the Company's investments in Alpart, KFC, and QAL. KFC is a wholly
owned subsidiary of KAAC, whose principal business is making loans to the
Company and its subsidiaries. Summary combined financial information for the
Subsidiary Guarantors as of December 31, 1992 and 1991, is shown below. Prior
years' balances have been reclassified to conform with the current-year
presentation.
F-22
<PAGE> 125
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
SUMMARY OF COMBINED FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1992 1991
-------- --------
<S> <C> <C>
ASSETS
Current assets.......................................................... $ 94.3 $ 93.8
Due from KACC........................................................... 620.2 585.0
Investments in and advances to unconsolidated affiliates................ 106.7 110.3
Property, plant, and equipment -- net................................... 238.9 198.8
Other assets............................................................ 3.2 34.4
-------- --------
Total.............................................................. $1,063.3 $1,022.3
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities..................................................... $ 118.0 $ 102.0
Payable to KACC......................................................... 468.6 464.3
Long-term debt, net of current maturity................................. 85.0 91.3
Minority interest....................................................... 58.5 60.3
Stockholders' equity.................................................... 333.2 304.4
-------- --------
Total.............................................................. $1,063.3 $1,022.3
-------- --------
-------- --------
</TABLE>
SUMMARY OF COMBINED OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1992 1991 1990
------ ------ ------
<S> <C> <C> <C>
Net sales........................................................ $316.0 $385.1 $436.3
Costs and expenses............................................... 303.0 377.5 354.8
------ ------ ------
Operating income................................................. 13.0 7.6 81.5
Other income (expense):
Interest and other income...................................... 24.5 45.2 38.2
Interest expense............................................... (24.1) (25.3) (15.0)
------ ------ ------
Income before income taxes and minority interests................ 13.4 27.5 104.7
Provision for income taxes....................................... (2.3) (9.2) (26.8)
Minority interest................................................ 6.7 6.4 6.4
------ ------ ------
Net income....................................................... $ 17.8 $ 24.7 $ 84.3
------ ------ ------
------ ------ ------
</TABLE>
Summary of Significant Accounting Policies
Receivables and Payables -- At December 31, 1992, receivables from and
payables to KACC and affiliates include $592.2 and $242.2 of interest bearing
loans, respectively. The similar amounts at December 31, 1991 were $543.9 and
$266.7.
Inventory Valuation -- Inventories are stated at first-in, first-out (FIFO)
cost, not in excess of market.
Income Taxes -- The Subsidiary Guarantors are included in the consolidated
federal income tax return of MAXXAM, and provisions for income taxes are
computed as if each Subsidiary Guarantor were a separate company.
Investments -- At December 31, 1992, KAAC held a 28.3% interest in QAL.
This investment is accounted for by the equity method. The equity in QAL's
income (loss) before income taxes of $1.8 and $(4.4) in 1992 and 1991,
respectively, is included in the Company's cost of products sold.
Other Assets -- Included in other assets at December 31, 1991, is $31.9
cash related to the Alpart CARIFA loan, deposited with a trustee (see Note 4).
F-23
<PAGE> 126
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1993 1992
--------- --------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................ $ 12.9 $ 18.5
Receivables.......................................................... 242.6 271.1
Inventories.......................................................... 431.1 439.9
Prepaid expenses and other current assets............................ 74.1 37.0
-------- --------
Total current assets......................................... 760.7 766.5
Investments in and advances to unconsolidated affiliates............... 177.6 150.1
Property, plant, and equipment net..................................... 1,167.6 1,066.8
Deferred income taxes.................................................. 209.1
Other assets........................................................... 168.1 116.6
-------- --------
Total........................................................ $2,483.1 $2,100.0
-------- --------
-------- --------
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................... $ 105.3 $ 136.6
Accrued interest..................................................... 10.2 4.6
Accrued salaries, wages, and related expenses........................ 101.8 84.4
Other accrued liabilities............................................ 118.1 110.9
Payable to affiliates................................................ 72.6 78.5
Short-term borrowings................................................ 18.5 4.8
Long-term debt -- current portion.................................... 8.5 25.9
Note payable to parent -- current portion............................ 12.6
-------- --------
Total current liabilities.................................... 447.6 445.7
Long-term liabilities.................................................. 1,141.4 217.9
Long-term debt......................................................... 692.8 765.1
Note payable to parent................................................. 22.0
Minority interests..................................................... 69.5 70.1
Redeemable preference stock............................................ 32.3 32.8
Stockholders' equity:
Preference stock..................................................... 1.8 2.0
Common stock......................................................... 15.4 15.4
Additional capital................................................... 1,448.0 1,255.6
Retained earnings (accumulated deficit).............................. (106.1) 481.2
Less: Note receivable from Kaiser Aluminum Corporation............... (1,281.6) (1,185.8)
-------- --------
Total stockholders' equity................................... 77.5 568.4
-------- --------
Total........................................................ $2,483.1 $2,100.0
-------- --------
-------- --------
</TABLE>
The accompanying notes to interim consolidated financial statements are an
integral part of these statements.
F-24
<PAGE> 127
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1993 1992
-------- --------
<S> <C> <C>
Net sales............................................................. $1,303.2 $1,413.1
-------- --------
Costs and expenses:
Cost of products sold............................................... 1,181.0 1,178.1
Depreciation........................................................ 72.9 60.4
Selling, administrative, research and development, and general...... 90.5 88.7
-------- --------
Total costs and expenses.................................... 1,344.4 1,327.2
Operating income (loss)............................................... (41.2) 85.9
Other income (expense):
Interest and other income........................................... 9.2 2.0
Interest expense.................................................... (63.8) (58.4)
-------- --------
Income (loss) before income taxes, minority interests, extraordinary
loss, and cumulative effect of changes in accounting principles..... (95.8) 29.5
Credit (provision) for income taxes................................... 39.5 (7.9)
Minority interests.................................................... 3.2 4.9
-------- --------
Income (loss) before extraordinary loss and cumulative effect of
changes in accounting principles.................................... (53.1) 26.5
Extraordinary loss on early extinguishment of debt, net of tax benefit
of $11.2............................................................ (21.8)
Cumulative effect of changes in accounting principles,
net of tax benefit of $237.7........................................ (507.9)
-------- --------
Net income (loss)..................................................... $ (582.8) $ 26.5
-------- --------
-------- --------
</TABLE>
The accompanying notes to interim consolidated financial statements are an
integral part of these statements.
F-25
<PAGE> 128
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1993 1992
--------- ------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss).......................................................... $ (582.8) $ 26.5
Adjustments to reconcile net income (loss) to net cash (used for) provided
by operating activities:
Depreciation............................................................ 72.9 60.4
Non-cash postretirement benefit expenses other than pensions............ 14.6
Amortization of deferred financing costs and discount on long-term
debt................................................................... 8.5 8.7
Extraordinary loss on early extinguishment of debt...................... 33.0
Cumulative effect of changes in accounting principles................... 507.9
Minority interests...................................................... (3.2) (4.9)
Equity in losses of unconsolidated affiliates........................... 11.8 9.1
Recognition of previously deferred income from a forward alumina sale... (.6) (18.7)
Increase in accrued interest............................................ 5.7 10.6
Incurrence of financing costs........................................... (12.0) (1.8)
Decrease (increase) in receivables...................................... 25.0 (11.5)
Decrease in inventories, prepaid expenses, and other current assets..... 21.6 14.7
Decrease in accounts payable, payable to affiliates, and accrued
liabilities............................................................ (90.8) (83.4)
Other................................................................... (13.6) 12.7
--------- ------
Net cash (used for) provided by operating activities.................... (2.0) 22.4
--------- ------
Cash flows from investing activities:
Net proceeds from disposition of property and investments.................. 11.4 43.4
Capital expenditures....................................................... (36.4) (79.8)
--------- ------
Net cash used for investing activities.................................. (25.0) (36.4)
--------- ------
Cash flows from financing activities:
Repayments of long-term debt, including revolving credit................... (1,011.3) (97.1)
Borrowings of long-term debt, including revolving credit................... 920.0 123.5
Borrowings from MAXXAM Group Inc. (see supplemental disclosure below)...... 15.0
Borrowings from parent..................................................... 34.6
Tender premiums and other costs of early extinguishment of debt............ (27.1)
Net short-term borrowings.................................................. 13.7 4.6
Dividends paid............................................................. (.8) (9.5)
Redemption of preference stock............................................. (4.2) (7.2)
Capital contribution....................................................... 81.5
--------- ------
Net cash provided by financing activities............................... 21.4 14.3
--------- ------
Net (decrease) increase in cash and cash equivalents during the period....... (5.6) .3
Cash and cash equivalents at beginning of period............................. 18.5 15.5
--------- ------
Cash and cash equivalents at end of period................................... $ 12.9 $ 15.8
--------- ------
--------- ------
Supplemental disclosure of cash flow information:
Interest paid, net of capitalized interest................................. $ 49.6 $ 39.6
Income taxes paid.......................................................... 9.3 2.0
Tax allocation payments to MAXXAM Inc...................................... 28.0
Supplemental disclosure of non-cash financing activities:
Contribution to capital of the borrowings from MAXXAM Group Inc............ $ 15.0
</TABLE>
The accompanying notes to interim consolidated financial statements are an
integral part of these statements.
F-26
<PAGE> 129
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS OF DOLLARS)
1. GENERAL
The foregoing unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X as promulgated by the Securities and Exchange Commission.
Accordingly, said financial statements do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments necessary
for a fair statement of the results for the interim periods presented have been
included. Operating results for the first nine months of 1993 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1993. Certain reclassifications of prior period information were
made to conform to the current presentation.
Kaiser Aluminum & Chemical Corporation ("KACC or the Company") is the
principal operating subsidiary of Kaiser Aluminum Corporation ("Kaiser"). Kaiser
is a 68%-owned subsidiary of MAXXAM Inc. ("MAXXAM"). The remaining 32% of
Kaiser's equity interest is publicly held.
On February 1, 1993, the Company issued $400.0 of 12 3/4% Senior
Subordinated Notes due 2003 (the "12 3/4% Notes"). The net proceeds from the
sale of the 12 3/4% Notes were used to refinance KACC's 14 1/4% Senior
Subordinated Notes due 1995 (the "14 1/4% Notes"), to prepay $18.0 of the term
loan under KACC's 1989 Credit Agreement (the "Credit Agreement"), and to reduce
outstanding borrowings under the revolving credit facility of the Credit
Agreement. These transactions resulted in a pre-tax extraordinary loss of $33.0
in the first quarter of 1993 ($21.8 after taxes), consisting primarily of the
write-off of unamortized discount and deferred financing costs related to the
14 1/4% Notes and the payment of premiums on the 14 1/4% Notes. The obligations
of the Company with respect to the 12 3/4% Notes are guaranteed, jointly and
severally, by certain subsidiaries of the Company. The Credit Agreement and the
indenture in respect of the 12 3/4% Notes (see Note 3 below) restrict, among
other things, the Company's ability to pay dividends. Under the most restrictive
of these covenants, the Company is not currently permitted to pay dividends on
its common stock.
On June 30, 1993, Kaiser consummated the public offering (the "Public
Offering") of 17,250,000 of its $.65 Depositary Shares (the "Depositary
Shares"), each representing one-tenth of a share of Series A Mandatory
Conversion Premium Dividend Preferred Stock (the "Series A Shares"). In
connection with the Public Offering, MAXXAM Group Inc. ("MGI"), a wholly owned
subsidiary of MAXXAM, exchanged a promissory note of the Company (the "MAXXAM
Note") in the principal amount of $15.0 (which evidenced a cash loan in the
amount of $15.0 made by MGI to the Company) for 2,132,950 Depositary Shares.
The net cash proceeds from the Public Offering were approximately $119.3.
Kaiser used approximately $37.8 of such net proceeds to make a non-interest
bearing loan to the Company evidenced by a note, which note is designed to
provide sufficient funds to Kaiser to enable it to make dividend payments on the
Series A Shares until the Mandatory Conversion Date with respect to the Series A
Shares; and Kaiser used approximately $81.5 of such net proceeds and the MAXXAM
Note to make a capital contribution to the Company. The Company used
approximately $13.7 of the funds it received from Kaiser to prepay the remaining
balance of the term loan under the Credit Agreement and $105.6 of such funds to
reduce outstanding borrowings under the revolving credit facility of the Credit
Agreement.
The Company announced in October that it is restructuring its flat-rolled
products operation at its Trentwood plant in Spokane, Washington, to reduce that
facility's annual operating costs. This effort is in response to over-capacity
in the aluminum rolling industry, flat demand in can stock markets, and
declining demand for aluminum products sold to customers in the commercial
aerospace industry, all of which have
F-27
<PAGE> 130
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS)
resulted in declining prices in Trentwood's key markets. The Company expects
that the Trentwood restructuring, and the restructuring of operations at some
other facilities which is under consideration, are likely to result in a fourth
quarter pre-tax charge of approximately $30.0 to $40.0.
2. INVENTORIES
The classification of inventories is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1993 1992
------------- ------------
<S> <C> <C>
Finished fabricated products...................................... $ 89.1 $ 91.2
Primary aluminum and work in process.............................. 141.8 128.7
Bauxite and alumina............................................... 98.0 107.4
Operating supplies and repair and maintenance parts............... 102.2 112.6
------------- ------------
Total................................................... $ 431.1 $439.9
------------- ------------
------------- ------------
</TABLE>
Substantially all product inventories are stated at last-in, first-out
(LIFO) cost, not in excess of market. Replacement cost is not in excess of LIFO
cost.
3. LONG-TERM DEBT
Long-term debt is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1993 1992
------------- ------------
<S> <C> <C>
1989 Credit Agreement:
Revolving Credit Facility....................................... $ 165.0 $290.0
Term Loan....................................................... 36.6
Pollution Control and Solid Waste Disposal Obligations
(6%-7.75%)...................................................... 39.2 40.0
Alpart CARIFA Loan (fixed and variable rates)..................... 60.0 60.0
Alpart Term Loan (8.95%).......................................... 25.0 31.3
12 3/4% Senior Subordinated Notes due 2003........................ 400.0
14 1/4% Senior Subordinated Notes due 1995, net of discount of
$1.2............................................................ 320.5
Other borrowings (fixed and variable rates)....................... 12.1 12.6
------------- ------------
Total................................................... 701.3 791.0
Less current portion.............................................. 8.5 25.9
------------- ------------
Long-term debt.................................................... $ 692.8 $765.1
------------- ------------
------------- ------------
</TABLE>
Loans under the Credit Agreement bear an annual interest rate, at KACC's
election from time to time, equal to (i) the Reference Rate plus a margin of
1 1/2%, (ii) the CD Rate (Reserve Adjusted) plus a margin of 2 5/8%, or (iii)
the LIBO Rate (Reserve Adjusted) plus a margin of 2 1/2%. All margins and fees
are subject to a reduction or increase of 1/2% per annum on a non-cumulative
basis, depending upon a financial test, determined quarterly. This financial
test required an increase in margins and fees commencing with the second quarter
of 1993, and the increase will continue at least through the fourth quarter of
1993.
As of September 30, 1993, $148.9 of borrowing capacity was unused under the
revolving credit facility of the Credit Agreement (of which $13.9 could also
have been used for letters of credit).
F-28
<PAGE> 131
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS)
4. INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("SFAS 109"). The
adoption of SFAS 109 changes the Company's method of accounting for income taxes
to an asset and liability approach from the deferral method prescribed by
Accounting Principles Board Opinion No. 11, Accounting for Income Taxes. The
asset and liability approach requires the recognition of deferred income tax
assets and liabilities for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax returns. Under
this method, deferred income tax assets and liabilities are determined based on
the temporary differences between the financial statement and tax bases of
assets and liabilities using enacted tax rates. The cumulative effect of the
change in accounting principle, as of January 1, 1993, reduced the Company's
results of operations by $2.9.
The implementation of SFAS 109 required the Company to restate certain
assets and liabilities to their pre-tax amounts from their net-of-tax amounts
originally recorded in connection with the acquisition by MAXXAM in October
1988. The restatement of the assigned values with respect to certain assets and
liabilities recorded as a result of the acquisition and the recomputation of
deferred income tax liabilities under SFAS 109 resulted in: (i) an increase of
$144.6 in the net carrying value of property, plant, and equipment, (ii) an
increase of $47.8 in investments in and advances to unconsolidated affiliates,
(iii) an increase of $56.0 in long-term liabilities, (iv) a decrease of $2.5 in
other assets and an increase of $10.1 in other liabilities, and (v) an increase
of $126.7 in deferred income tax liabilities.
Concurrent with the adoption of SFAS 109, the Company implemented changes
in its accounting method for postretirement benefits pursuant to Statement of
Financial Accounting Standards No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions (SFAS 106) (see Note 5) and Statement of Financial
Accounting Standards No. 112, Employers' Accounting for Postemployment Benefits
(SFAS 112) (see Note 6). The cumulative effect of changes in accounting
principles relating to SFAS 106 and SFAS 112 totaled approximately $742.7 and
resulted in the recognition of deferred income tax assets of $237.7, net of
valuation allowances. The Company believes that its ability to generate future
taxable income will allow for the realization of these deferred income tax
assets.
F-29
<PAGE> 132
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS)
As of January 1, 1993, after giving effect to the adoption of SFAS 109,
SFAS 106, and SFAS 112, the components of the Company's net deferred income tax
assets (liabilities) were as follows:
<TABLE>
<CAPTION>
JANUARY 1,
1993
-------
<S> <C>
Deferred income tax assets:
Postretirement benefits other than pensions.............................. $ 270.8
Other liabilities........................................................ 98.8
Loss and credit carryforwards............................................ 83.3
Pensions................................................................. 45.8
Foreign and state deferred income tax liabilities........................ 44.4
Property, plant, and equipment........................................... 22.6
Other.................................................................... 18.0
Valuation allowances..................................................... (103.7)
-------
Total deferred income tax assets, net............................ 480.0
-------
Deferred income tax liabilities:
Property, plant, and equipment........................................... (218.3)
Investments in and advances to unconsolidated affiliates................. (60.9)
Inventories.............................................................. (18.6)
Other.................................................................... (28.7)
-------
Total deferred income tax liabilities............................ (326.5)
-------
Net deferred income tax assets............................................. $ 153.5
-------
-------
</TABLE>
Certain of the deferred income tax assets and liabilities listed above are
included on the Consolidated Balance Sheet in the captions entitled Receivables,
Prepaid expenses and other current assets, Other accrued liabilities, and
Long-term liabilities. The Omnibus Budget Reconciliation Act of 1993 ("the
Act"), enacted on August 10, 1993, retroactively increased the federal statutory
income tax rate from 34% to 35% for periods beginning on or after January 1,
1993. As a result of the Act, the Company increased its net deferred income tax
assets by $3.4 and recorded a deferred tax benefit of $3.4 as of the date of the
enactment. The Company has recorded the cumulative effect of the change in the
federal statutory income tax rate as an adjustment to its credit for income
taxes in the third quarter of 1993.
Current tax benefits comprise approximately $17.0 of the credit for income
taxes for the nine months ended September 30, 1993. The reconciliation of the
Company's credit (provision) for income taxes on income (loss) before income
taxes, minority interests, extraordinary loss and cumulative effect of changes
in accounting principles to the statutory rate does not differ materially from
the reconciliation as disclosed in Note 5 to the audited Consolidated Financial
Statements contained in the Company's 1992 Annual Report to Stockholders.
As shown in the unaudited Statement of Consolidated Income (Loss) for the
nine months ended September 30, 1993, the Company reported an extraordinary loss
related to the early extinguishment of debt. The Company reported the loss net
of related income taxes of $11.2 which approximated the statutory rate in effect
on the date the transaction occurred. The related income tax benefits recorded
by the Company in respect of SFAS 106 and SFAS 112 differed from the statutory
rate in effect when adopted due to valuation allowances.
As a consequence of the consummation of the Public Offering on June 30,
1993, as discussed in Note 1, the Company and its subsidiaries are no longer
included in the consolidated federal income tax return of MAXXAM. The Company
and its subsidiaries will be included in the consolidated federal income tax
return
F-30
<PAGE> 133
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS OF DOLLARS)
of Kaiser for taxable periods beginning on or after July 1, 1993. Kaiser has
obtained the approval of the Secretary of the Treasury to file a consolidated
federal income tax return for the period ending on December 31, 1993.
The tax allocation agreement between the Company and MAXXAM (the "KACC Tax
Allocation Agreement") terminated pursuant to its terms, effective for taxable
periods beginning after June 30, 1993. The Company and Kaiser entered into a tax
allocation agreement (the "New KACC Tax Allocation Agreement") which became
effective July 1, 1993. Under the terms of the New KACC Tax Allocation
Agreement, Kaiser will compute the federal income tax liability for the Company
and its subsidiaries (collectively, the "Subgroup") as if the Subgroup were a
separate affiliated group of corporations which was never connected with Kaiser.
Any unused federal income tax attribute carryforwards under the terms of
the KACC Tax Allocation Agreement were eliminated and are not available for
taxable periods beginning on or after July 1, 1993. Upon the filing of MAXXAM's
1993 consolidated federal income tax return, the tax attribute carryforwards of
the MAXXAM consolidated return group as of December 31, 1993, will be
apportioned in part to Kaiser and the Subgroup, based upon the provisions of the
relevant consolidated return regulations. It is anticipated that the amounts of
such tax attribute carryforwards apportioned to the Subgroup (and available
under the New KACC Tax Allocation Agreement) will approximate or exceed the
amounts of tax attribute carryforwards eliminated under the KACC Tax Allocation
Agreement.
5. Postretirement Benefits Other Than Pensions
The Company adopted SFAS 106 as of January 1, 1993. The costs of
postretirement benefits other than pensions are now accrued over the period
employees provide services to the date of their full eligibility for such
benefits. Previously, such costs were expensed as actual claims were incurred.
The cumulative effect of the change in accounting principle for the adoption of
SFAS 106 was recorded as a charge to results of operations of $497.7, net of
related income taxes of $234.2.
The Company's accumulated postretirement benefits obligation at the date of
adoption was:
<TABLE>
<S> <C>
Retirees................................................... $ 581.5
Actives eligible for benefits.............................. 32.7
Actives not eligible for benefits.......................... 117.7
-------
$ 731.9
-------
-------
</TABLE>
The annual assumed rate of increase in the per capita cost of covered
benefits (i.e., health care cost trend rate) is 9.5% for 1993 and is assumed to
decrease gradually to 6% for 2005 and remain at that level thereafter. Each one
percentage point change in the assumed health care cost trend rate would change
the accumulated postretirement benefit obligation as of January 1, 1993, by
approximately $85.0 and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for 1993 by approximately
$10.0.
6. POSTEMPLOYMENT BENEFITS
The Company adopted SFAS 112 as of January 1, 1993. The costs of
postemployment benefits are now accrued over the period the employee provides
services to the date of their full eligibility for such benefits. Previously,
such costs were expensed as actual claims were incurred. The cumulative effect
of the change in accounting principle for the adoption of SFAS 112 was recorded
as a charge to results of operations of $7.3, net of related income taxes of
$3.5.
F-31
<PAGE> 134
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES TO WHICH IT
RELATES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 2
Summary................................ 3
The Company............................ 9
Risk Factors........................... 9
Use of Proceeds........................ 14
Capitalization......................... 15
Selected Historical and Pro Forma
Consolidated Financial Data.......... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations........................ 17
Business............................... 25
Management............................. 44
Certain Transactions................... 61
Description of Principal
Indebtedness......................... 63
Description of Notes................... 67
Certain Federal Income Tax
Consequences......................... 96
Description of the PRIDES.............. 97
Underwriting........................... 98
Legal Matters.......................... 99
Experts................................ 99
Consolidated Financial Statements...... F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$225,000,000
KAISER ALUMINUM
& CHEMICAL
CORPORATION
% SENIOR NOTES
DUE 2002
------------------------
PROSPECTUS
------------------------
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
PAINEWEBBER INCORPORATED
SALOMON BROTHERS INC
FEBRUARY , 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 135
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses of this offering will be paid by Kaiser Aluminum & Chemical
Corporation and, exclusive of underwriting discounts and commissions, are as
follows:
<TABLE>
<S> <C>
SEC registration fee............................................. $ 77,587
NASD fee......................................................... 18,000
Printing and engraving........................................... 300,000*
Legal............................................................ 175,000*
Rating Agency fees............................................... 18,000*
Accounting....................................................... 125,000*
Blue Sky filing fees and expenses (including counsel fees)....... 10,000*
Trustee and Registrar fees....................................... 15,000*
Miscellaneous.................................................... 11,413*
----------
Total.................................................. $ 750,000
----------
----------
</TABLE>
- ---------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law (the "DGCL"), which enables a corporation in its original certificate of
incorporation or an amendment thereto to eliminate or limit the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of the director's fiduciary duty, except (i) for any breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL
(providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions), or (iv) for any transaction from which
the director derived an improper personal benefit. The Registrants Restated
Certificates of Incorporation contains provisions permitted by Section 102(b)(7)
of the DGCL.
Reference also is made to Section 145 of the DGCL which provides that a
corporation may indemnify any person, including officers and directors, who is,
or is threatened to be made, a party to any threatened, pending or completed
legal action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, if such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal proceeding, had no reasonable cause to believe that his conduct was
unlawful. A Delaware corporation may indemnify its officers, directors,
employees and agents in an action by or in the right of the corporation under
the same conditions, except that no indemnification is permitted without
judicial approval if the officer, director, employee or agent is adjudged to be
liable to the corporation. Where an officer, director, employee or agent is
successful on the merits or otherwise in the defense of any action referred to
above, the corporation must indemnify him against the expenses which such
officer, director, employee or agent actually and reasonably incurred in
connection therewith.
The restated certificates of incorporation and by-laws of the Registrants
provide for indemnification of directors, officers and employees of the
Registrants to the fullest extent authorized by law.
The Registrants have entered into, or will enter into, indemnification
agreements with each of its directors and officers which provide that the
Registrants will indemnify such individuals if and whenever they were or
II-1
<PAGE> 136
are a party or are threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that they are or were a director, officer
or employee of the Registrants or any of its subsidiaries, or are or were
serving at the request of the Registrants or any of its subsidiaries as a
director, officer, employee, agent or other official of another corporation,
partnership, joint venture, trust, or other enterprise, against judgments, fines
and amounts paid in settlement and reasonable expenses (including attorneys'
fees) actually incurred by them in connection with such action, suit or
proceeding except to the extent that (a) any judgments, fines, amounts paid in
settlement and expenses are finally determined by a court of competent
jurisdiction to have resulted from their gross negligence or bad faith in the
performance of their duties (or, alternatively in the case of certain of the
indemnification agreements, result from conduct which is finally determined by a
court of competent jurisdiction to be knowingly fraudulent or deliberately
dishonest, or to constitute willful misconduct), (b) any amount is paid without
the prior approval of the Registrants in settlement of a proceeding brought in
the name and on behalf of the Registrants or another corporation, partnership,
joint venture, trust or other enterprise for which they are or were serving at
the request of the Registrants as a director, officer, employee, agent or other
official, (c) such indemnification is otherwise prohibited by law, whether by
statute, court decision or otherwise, or (d) reimbursement of such expenses has
actually been made pursuant to insurance policies maintained by the Registrants
for their benefit. For these purposes, service at the request of the Registrants
with respect to an "other enterprise" includes service with respect to any
employee benefit plan. The agreements further provide for the advancement of
expenses incurred in defending any such action, suit or proceeding upon receipt
of a repayment undertaking if it is ultimately determined that such individuals
are not entitled to be indemnified or to the extent they recover such expenses
from others pursuant to insurance or otherwise.
The Registrants may terminate the agreements on 90 days' prior written
notice to such individuals, but the indemnification provided by the agreements
continues to apply to all actions taken or failed to be taken by such
individuals prior to the expiration of the 90-day notice period notwithstanding
such termination.
The Registrants provides liability insurance for each of its directors and
officers for certain losses arising from claims or charges made against them
while acting in their capacities as directors or officers of the Registrants.
The Purchase Agreement pursuant to which the securities are being purchased
by the Underwriters provides that the Underwriters will indemnify the Company,
its directors, each of its officers who signed the Registration Statement and
each person, if any, who controls the Company against certain losses related to
written information furnished by the Underwriters to the Company for inclusion
in the Registration Statement or Prospectus.
The foregoing discussion is qualified in its entirety by reference to the
DGCL, the Registrants restated certificates of incorporation and by-laws, and
the referenced indemnification agreements.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ---------------- ------------------------------------------------------------------------
<S> <C>
1.1 Form of Purchase Agreement
*4.1 Form of Indenture (the "Note Indenture"), among the Company, as Issuer,
Kaiser Alumina Australia Corporation, Alpart Jamaica Inc., Kaiser
Jamaica Corporation and Kaiser Finance Corporation, as Subsidiary
Guarantors, and First Trust National Association as Trustee, regarding
the Notes
4.2 Indenture, dated as of February 1, 1993, among the Company, as Issuer,
Kaiser Alumina Australia Corporation, Alpart Jamaica Inc. and Kaiser
Jamaica Corporation, as Subsidiary Guarantors, and The First National
Bank of Boston, as Trustee, regarding the Company's 12 3/4% Senior
Subordinated Notes due 2003 (incorporated by reference to Exhibit 4.2 to
Amendment No. 5 to the Registration Statement on Form S-1 on Form S-2,
dated January 22, 1993, filed by the Company, Registration No. 33-48260;
the "Company's 1993 Registration Statement")
</TABLE>
II-2
<PAGE> 137
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ---------------- ------------------------------------------------------------------------
<S> <C>
4.3 First Supplemental Indenture, dated as of May 1, 1993 (incorporated by
reference to Exhibit 4.2 to the Report on Form 10-Q for the quarterly
period ended June 30, 1993, of the Company's, filed August 10, 1993,
File No. 1-3605; the "Company's June 1993 Form 10-Q)
4.4 Credit Agreement, dated December 13, 1989 (the "Credit Agreement"),
among the Company, financial institutions a party thereto, Bank of
America National Trust and Savings Association, as Agent, and Mellon
Bank, N.A., as Collateral Agent (incorporated by reference to Exhibit
4.3 to Amendment No. 5 to the Registration Statement on Form S-1, dated
December 13, 1989, filed by the Company, Registration No. 33-48260; the
"Company's 1989 Registration Statement")
4.5 First Amendment to Credit Agreement, dated April 17, 1990 (incorporated
by reference to Exhibit 4.2 to the Report on Form 10-Q for the quarterly
period ended September 30, 1990, of MAXXAM, filed November 6, 1990, File
No. 1-3924; the "September 1990 MAXXAM Form 10-Q")
4.6 Second Amendment to Credit Agreement, dated September 17, 1990
(incorporated by reference to Exhibit 4.3 to the September 1990 MAXXAM
Form 10-Q)
4.7 Third Amendment to Credit Agreement, dated December 7, 1990
(incorporated by reference to Exhibit 4.6 to Amendment No. 1 to KAC's
1991 Registration Statement)
4.8 Fourth Amendment to Credit Agreement, dated April 19, 1991 (incorporated
by reference to Exhibit 4.1 to the Report on Form 10-Q for the quarterly
period ended March 31, 1991, filed by the Company, File No. 1-3605; the
"Company's March 1991 Form 10-Q")
4.9 Fifth Amendment to Credit Agreement, dated March 13, 1992 (incorporated
by reference to Exhibit 4.8 to Form 10-K for the period ended December
31, 1991, filed by KAC, File No. 1-9447; the "KAC 1991 Form 10-K")
4.10 Seventh Amendment to Credit Agreement, dated November 6, 1992
(incorporated by reference to Exhibit 4.10 to Amendment No. 5 to the
Company's 1993 Registration Statement)
4.11 Eighth Amendment to Credit Agreement, dated January 7, 1993
(incorporated by reference to Exhibit 4.12 to Amendment No. 5 to
Company's 1993 Registration Statement)
4.12 Ninth Amendment to Credit Agreement (including the form of Intercompany
Note annexed as an Exhibit thereto)(incorporated by reference to Exhibit
4.10 to Amendment No. 2 to the Registration Statement on Form S-1 dated
June 22, 1993, filed by KAC, Registration No. 33-49555; the "KAC 1993
Registration Statement")
4.13 Tenth Amendment to Credit Agreement, dated July 23, 1993 (incorporated
by reference to Exhibit 4.13 to the Registration Statement on Form S-3,
dated August 26, 1993, filed by the Company, Registration No. 33-50097)
4.14 Eleventh Amendment to Credit Agreement, dated January 7, 1993
(incorporated by reference to Exhibit 4.12 to Amendment No. 5 to
Registrant's 1993 Registration Statement)
4.15 Twelfth Amendment to Credit Agreement
4.16 Form of Intercompany Note between the Company and KAC (incorporated by
reference to Exhibit 4.2 to Amendment No. 5 to the Company's 1989
Registration Statement)
4.17 Senior Subordinated Intercompany Note between the Company and MAXXAM,
dated January 14, 1993 (incorporated by reference to Exhibit 4.13 to
Company's 1993 Registration Statement)
</TABLE>
II-3
<PAGE> 138
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ---------------- ------------------------------------------------------------------------
<S> <C>
4.18 Certificate of Designations of Series A Mandatory Conversion Premium
Dividend Preferred Stock of KAC, dated June 28, 1993 (incorporated by
reference to Exhibit 4.3 of the Company's June 1993 Form 10-Q)
4.19 Deposit Agreement between KAC and The First National Bank of Boston,
dated as of June 30, 1993 (incorporated by reference to Exhibit 4.4 of
the Company's June 1993 Form 10-Q)
4.20 Form of Certificate of Designations of PRIDES
*4.21 Form of Intercompany Note between the Company and KAC
*4.22 Form of Credit Agreement to be entered into by the Company, KAC,
BankAmerica Business Credit, Inc., as Agent and certain financial
institutions.
Note: The Company has not filed certain long-term debt instruments not
being registered with the Securities and Exchange Commission where the
total amount of indebtedness authorized under any such instrument does
not exceed 10% of the total assets of the Company and its subsidiaries
on a consolidated basis. The Company agrees and undertakes to furnish a
copy of any such instrument to the Securities and Exchange Commission
upon its request.
5.1 Opinion of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as to the
validity of the securities being registered hereunder
10.1 Form of indemnification agreement with officers and directors
(incorporated by reference to Exhibit (10)(b) to the Registration
Statement of KAC on Form S-4, File No. 33-12836)
10.2 Tax Allocation Agreement between MAXXAM and the Company (incorporated by
reference to Exhibit 10.21 to Amendment No. 6 to the Company's 1989
Registration Statement)
10.3 Amended and Restated Alumina Supply Agreement, dated October 11, 1989
(incorporated by reference to Exhibit 10.19 to Amendment No. 3 to the
Company's 1989 Registration Statement)
10.4 Transfer Agreement between the Company and KAC (incorporated by
reference to Exhibit 10.20 to Amendment No. 6 to the Company's 1989
Registration Statement)
10.5 The Company's Bonus Plan (incorporated by reference to Exhibit 10.25 to
Amendment No. 6 to the Company's 1989 Registration Statement)
10.6 KaiserTech Limited Long Term Incentive Plan, dated June 2, 1989, as
amended (incorporated by reference to Exhibit 10.14 to Form 10-K for the
period ended December 31, 1989, filed by the Company, File No. 1-3605)
10.7 Amendment No. 2 to the KaiserTech Limited Long Term Incentive Plan,
dated December 18, 1991 (incorporated by reference to Exhibit 10.7 to
KAC's 1991 Form 10-K)
10.8 Amendment No. 3 to the Kaiser Aluminum Corporation Long Term Incentive
Plan, dated December 31, 1991 (incorporated by reference to Exhibit 10.8
to KAC's 1991 Form 10-K)
10.9 Kaiser Aluminum Middle Management Long Term Incentive Plan, dated June
25, 1990, as amended (incorporated by reference to Exhibit 10.22 to
Amendment No. 1 to KAC's 1991 Registration Statement)
10.10 Tax Allocation Agreement between KAC and MAXXAM (incorporated by
reference to Exhibit 10.23 to Amendment No. 2 to KAC's 1991 Registration
Statement)
</TABLE>
II-4
<PAGE> 139
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ---------------- ------------------------------------------------------------------------
<S> <C>
10.11 Assumption Agreement, dated as of October 28, 1988 (incorporated by
reference to Exhibit HHH to the Final Amendment to the Schedule 13D of
MAXXAM Group Inc. and others in respect of the Common Stock of the
Company, par value $.33 1/3 per share)
10.12 Employment Agreement, dated February 1, 1989, among the Company, KAC and
John M. Seidl (incorporated by reference to Exhibit 10.18 to Amendment
No. 3 to the Company's 1989 Registration Statement)
10.13 Employment Agreement (the "Seidl-MAXXAM Employment Agreement"), dated
June 13, 1990, between MAXXAM and John M. Seidl (incorporated by
reference to Exhibit 10.21 to Amendment No. 1 to KAC's 1991 Registration
Statement)
10.14 Amendment dated February 11, 1991, to the Seidl-MAXXAM Employment Agree-
ment (incorporated by reference to Exhibit 10.21 to Form 10-K for the
period ended December 31, 1990, filed by the Company's, File No. 1-3605)
10.15 Amendment dated May 29, 1991, to the Seidl-MAXXAM Employment Agreement
(incorporated by reference to Exhibit 10.30 to Amendment No. 2 to KAC's
1991 Registration Statement)
10.16 Payment Agreement, dated December 23, 1992, between the Company and John
M. Seidl (incorporated by reference to Exhibit 10.1 to the Report on
Form 10-Q for the quarterly period ended March 31, 1993, of KAC, filed
April 28, 1993, File No. 1-3605; the "KAC's March 1993 Form 10-Q")
10.17 Employment Agreement, dated as of October 1, 1992, among the Company,
KAC and A. Stephens Hutchcraft, Jr. (incorporated by reference to
Exhibit 10.15 to Amendment No. 5 to the Company's 1993 Registration
Statement)
10.18 Severance Agreement, dated July 1, 1985, between the Company and A. S.
Hutchcraft, Jr., as amended (incorporated by reference to Exhibit
(10)(f) to the Company's 1988 Form 10-K)
10.19 Amendment, dated October 31, 1989, to the Severance Agreement of A. S.
Hutchcraft, Jr. referenced in Exhibit 10.18 above (incorporated by
reference to Exhibit 10.24 to Amendment No. 5 to the Company's 1989
Registration Statement)
10.20 Employment Agreement dated July 1, 1991, by and among MAXXAM, the
Company and Joseph A. Bonn (incorporated by reference to Exhibit 10.24
to Form 10-K for the period ended December 31, 1991, filed by the
Company, File No. 1-3605; the "Company's 1991 Form 10-K")
10.21 Employment Agreement, dated September 26, 1990, between the Company,
MAXXAM and John T. La Duc (incorporated by reference to Exhibit 10.20 to
Amendment No. 1 to KAC's 1991 Registration Statement)
10.22 Employment Agreement, dated August 22, 1990, among the Company, MAXXAM
and Robert W. Irelan (incorporated by reference to Exhibit 10.2 to the
Company's March 1991 Form 10-Q)
10.23 Promissory Note, dated October 4, 1990, by Robert W. Irelan and Barbara
M. Irelan to the Company (incorporated by reference to Exhibit 10.54 to
Form 10-K for the period ended December 31, 1990, filed by MAXXAM, File
No. 1-3924, the "MAXXAM 1990 Form 10-K")
10.24 Employment Agreement dated as of March 8, 1990, between MAXXAM and
Anthony R. Pierno (incorporated by reference to Exhibit 10.28 to
MAXXAM's 1990 Form 10-K)
10.25 Promissory Note dated February 1, 1989, by Anthony R. Pierno and Beverly
J. Pierno to MAXXAM (incorporated by reference to Exhibit 10.30 to Form
10-K for the period ended December 31, 1988, filed by MAXXAM, File No.
1-3924)
</TABLE>
II-5
<PAGE> 140
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ------------------- ------------------------------------------------------------------------
<S> <C>
10.26 Promissory Note dated July 19, 1990, by Anthony R. Pierno to MAXXAM
(incorporated by reference to Exhibit 10.31 to MAXXAM's 1990 Form 10-K)
10.27 Commercial Guaranty, dated February 22, 1993, between MAXXAM and Charter
National Bank - Houston, in respect of a loan from Charter National
Bank - Houston to Anthony R. Pierno (incorporated by reference to
Exhibit 10.26 to the Company's Form 10-K for the period ended December
31, 1992, filed by KAC, File No. 1-3605)
10.28 Employment Agreement dated as of March 8, 1990, between MAXXAM and Byron
L. Wade (incorporated by reference to Exhibit 10.50 to MAXXAM's 1990
Form 10-K)
10.29 Agreement, dated December 20, 1991, between KAC and Joseph A. Bonn
(incorporated by reference to Exhibit 10.3 to the Report on Form 10-Q
for the quarterly period ended March 31, 1992, filed by KAC, File No.
1-3605)
10.30 Employment Agreement, dated April 1, 1993, among the Company, KAC and
George T. Haymaker, Jr. (incorporated by reference to Exhibit 10.2 to
KAC's March 1993 Form 10-Q)
10.31 Kaiser 1993 Omnibus Stock Incentive Plan (incorporated by reference to
Exhibit 10.1 of KAC's June 1993 Form 10-Q)
10.32 Agreement, dated as of June 30, 1993, between KAC and MAXXAM Inc.
(incorporated by reference to Exhibit 10.2 of KAC's June 1993 Form 10-Q)
10.33 Tax Allocation Agreement, dated as of June 30, 1993, between the Company
and KAC (incorporated by reference to Exhibit 10.3 of KAC's June 1993
Form 10-Q)
12 Computation of consolidated ratio of earnings to fixed charges
21 Subsidiaries of the Company (incorporated by reference to Exhibit 22 to
Form 10-K for the period ended December 31, 1992, filed by KAC File No.
1-9447)
*23.1 Consent of Arthur Andersen & Co.
23.2 Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (included in
Exhibit 5)
24 Power of Attorney (included on signature page of this Registration
Statement)
25 Statement of Eligibility of Trustee
</TABLE>
- ---------------
* Filed herewith.
(b) Financial Statement Schedules.
The following appear after the signature page of this Registration
Statement:
Report of Independent Public Accountants on Financial Statement
Schedules
<TABLE>
<S> <C>
Schedule II -- Kaiser Aluminum & Chemical Corporation and Subsidiary Companies --
Amounts Receivable from Related Parties and Underwriters, Promoters
and Employees Other Than Related Parties
Schedule V -- Kaiser Aluminum & Chemical Corporation and Subsidiary Companies --
Consolidated Property, Plant, and Equipment
Schedule VI -- Kaiser Aluminum & Chemical Corporation and Subsidiary Companies --
Accumulated Depreciation, Depletion and Amortization of Consolidated
Property, Plant and Equipment
Schedule IX -- Kaiser Aluminum & Chemical Corporation and Subsidiary Companies --
Consolidated Short-Term Borrowings
Schedule X -- Kaiser Aluminum & Chemical Corporation and Subsidiary Companies --
Supplementary Consolidated Income Statement Information
</TABLE>
II-6
<PAGE> 141
All other schedules are omitted because the required information is
included in the Consolidated Financial Statements or the Notes thereto or is
otherwise inapplicable.
ITEM 17. UNDERTAKINGS
1. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described in Item 15 above,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at the time
shall be deemed to be the initial bona fide offering thereof.
3. The registrant hereby undertakes:
(1) That for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) That for the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-7
<PAGE> 142
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
KAISER ALUMINUM & CHEMICAL CORPORATION, CERTIFIES THAT IT HAS REASONABLE GROUNDS
TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS FOR FILING ON FORM S-2 AND HAS
DULY CAUSED THIS AMENDMENT NO. 4 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF
PLEASANTON, STATE OF CALIFORNIA, ON THE 9TH DAY OF FEBRUARY, 1994.
KAISER ALUMINUM & CHEMICAL CORPORATION
By: /s/ GEORGE T. HAYMAKER, JR.
George T. Haymaker, Jr., Chairman of the
Board and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- ---------------------------- -----------------
<S> <C> <C>
/s/ GEORGE T. HAYMAKER, JR. Chief Executive Officer and February 9, 1994
George T. Haymaker, Jr. Director
/s/ JOHN T. LA DUC Vice President and Chief February 9, 1994
John T. La Duc Financial Officer
(Principal Financial
Officer)
/s/ CHARLIE ALONGI Controller (Principal February 9, 1994
Charlie Alongi Accounting Officer)
/s/ CHARLES E. HURWITZ Director February 9, 1994
Charles E. Hurwitz
/s/ EZRA G. LEVIN Director February 9, 1994
Ezra G. Levin
/s/ ROBERT MARCUS Director February 9, 1994
Robert Marcus
/s/ PAUL D. RUSEN Director February 9, 1994
Paul D. Rusen
</TABLE>
II-8
<PAGE> 143
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, REGISTRANT,
KAISER ALUMINA AUSTRALIA CORPORATION, CERTIFIES THAT IT HAS REASONABLE GROUNDS
TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS FOR FILING ON FORM S-2 AND HAS
DULY CAUSED THIS AMENDMENT NO. 4 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF
PLEASANTON, STATE OF CALIFORNIA, ON THE 9TH DAY OF FEBRUARY, 1994.
KAISER ALUMINA AUSTRALIA CORPORATION
By: /s/ GEORGE T. HAYMAKER, JR.
George T. Haymaker, Jr., President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- ---------------------------- -----------------
<S> <C> <C>
/s/ GEORGE T. HAYMAKER, JR. President and Director February 9, 1994
George T. Haymaker, Jr. (Principal Executive
Officer)
/s/ JOHN T. LA DUC Vice President, Chief February 9, 1994
John T. La Duc Financial Officer,
Treasurer and Director
(Principal Financial
Officer)
/s/ JOSEPH A. BONN Vice President and Director February 9, 1994
Joseph A. Bonn
/s/ ANTHONY R. PIERNO Vice President, General February 9, 1994
Anthony R. Pierno Counsel and Director
/s/ CHARLIE ALONGI Controller (Principal February 9, 1994
Charlie Alongi Accounting Officer)
</TABLE>
II-9
<PAGE> 144
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, REGISTRANT,
ALPART JAMAICA INC., CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL THE REQUIREMENTS FOR FILING ON FORM S-2 AND HAS DULY CAUSED THIS
AMENDMENT NO. 4 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF PLEASANTON, STATE OF
CALIFORNIA, ON THE 9TH DAY OF FEBRUARY, 1994.
ALPART JAMAICA INC.
By: /s/ GEOFFREY W. SMITH
Geoffrey W. Smith, President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- ---------------------------- -----------------
<S> <C> <C>
/s/ GEOFFREY W. SMITH President (Principal February 9, 1994
Geoffrey W. Smith Executive Officer)
/s/ GEORGE T. HAYMAKER, JR. Director February 9, 1994
George T. Haymaker, Jr.
/s/ JOSEPH A. BONN Vice President and Director February 9, 1994
Joseph A. Bonn
/s/ JOHN T. LA DUC Vice President, Chief February 9, 1994
John T. La Duc Financial Officer,
Treasurer and Director
(Principal Financial
Officer)
/s/ ANTHONY R. PIERNO Vice President, General February 9, 1994
Anthony R. Pierno Counsel and Director
/s/ CHARLIE ALONGI Controller (Principal February 9, 1994
Charlie Alongi Accounting Officer)
</TABLE>
II-10
<PAGE> 145
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, REGISTRANT,
KAISER JAMAICA CORPORATION, CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE
THAT IT MEETS ALL THE REQUIREMENTS FOR FILING ON FORM S-2 AND HAS DULY CAUSED
THIS AMENDMENT NO. 4 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF PLEASANTON, STATE OF
CALIFORNIA, ON THE 9TH DAY OF FEBRUARY, 1994.
KAISER JAMAICA CORPORATION
By: /s/ GEOFFREY W. SMITH
Geoffrey W. Smith, President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- ---------------------------- -----------------
<S> <C> <C>
/s/ GEOFFREY W. SMITH President (Principal February 9, 1994
Geoffrey W. Smith Executive Officer)
/s/ JOHN T. LA DUC Vice President, Chief February 9, 1994
John T. La Duc Financial Officer,
Treasurer and Director
(Principal Financial
Officer)
/s/ GEORGE T. HAYMAKER, JR. Director February 9, 1994
George T. Haymaker, Jr.
/s/ JOSEPH A. BONN Vice President and Director February 9, 1994
Joseph A. Bonn
/s/ ANTHONY R. PIERNO Vice President, General February 9, 1994
Anthony R. Pierno Counsel and Director
/s/ CHARLIE ALONGI Controller (Principal February 9, 1994
Charlie Alongi Accounting Officer)
</TABLE>
II-11
<PAGE> 146
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, REGISTRANT,
KAISER FINANCE CORPORATION, CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE
THAT IT MEETS ALL THE REQUIREMENTS FOR FILING ON FORM S-2 AND HAS DULY CAUSED
THIS AMENDMENT NO. 4 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF PLEASANTON, STATE OF
CALIFORNIA, ON THE 9TH DAY OF FEBRUARY, 1994.
KAISER FINANCE CORPORATION
By: /s/ GEORGE T. HAYMAKER, JR.
George T. Haymaker, Jr., President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- ---------------------------- -----------------
<S> <C> <C>
/s/ GEORGE T. HAYMAKER, JR. President and Director February 9, 1994
George T. Haymaker, Jr. (Principal Executive
Officer)
/s/ JOHN T. LA DUC Vice President, Chief February 9, 1994
John T. La Duc Financial Officer,
Treasurer and Director
(Principal Financial
Officer)
/s/ JOSEPH A. BONN Vice President and Director February 9, 1994
Joseph A. Bonn
/s/ ANTHONY R. PIERNO Vice President, General February 9, 1994
Anthony R. Pierno Counsel and Director
/s/ CHARLIE ALONGI Controller (Principal February 9, 1994
Charlie Alongi Accounting Officer)
</TABLE>
II-12
<PAGE> 147
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with generally accepted auditing standards,
the financial statements included in the registration statement and have issued
our report thereon dated February 8, 1993. Our audit was made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
schedules listed in the index above are the responsibility of the Company's
management and are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Oakland, California
February 8, 1993
II-13
<PAGE> 148
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE II
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS, AND
EMPLOYEES OTHER THAN RELATED PARTIES
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE AT
DEDUCTIONS END OF YEAR
BALANCE AT ------------------------- -------------------
BEGINNING AMOUNTS AMOUNTS NOT
NAME OF DEBTOR OF YEAR ADDITIONS COLLECTED WRITTEN OFF CURRENT CURRENT
- --------------------------- ---------- --------- --------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1992
J. A. Bonn(1).............. $ .1 $ .1
1991
J. M. Seidl(2)............. $ 1.3 1.3
J. A. Bonn(1).............. .1 $.1
1990
None
</TABLE>
- ---------------
(1) This note bears interest at 7.09% per annum and is due on the earlier of
demand, the termination of Mr. Bonn's employment, or on June 30, 1994. The
interest is payable quarterly. The note is secured by real estate owned by
Mr. Bonn. The full amount of the note was paid in March 1992.
(2) The note of $1.0, together with its accrued interest (at 8.9% per annum),
was transferred to the Company by MAXXAM in September 1991 and was
subsequently paid off in cash.
S-1
<PAGE> 149
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE V
CONSOLIDATED PROPERTY, PLANT, AND EQUIPMENT
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE AT OTHER BALANCE AT
BEGINNING CHANGE END OF
DESCRIPTION OF YEAR ADDITIONS RETIREMENTS ADD (DEDUCT) YEAR
- --------------------------------- ---------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1992:
Land........................... $ 49.5 $ 11.0 $ 24.3 $ 84.8
Land improvements.............. 33.7 5.5 (0.2) 39.0
Buildings...................... 135.3 16.6 $ (.2) 3.3 155.0
Machinery and equipment........ 925.7 94.6 (4.8) (4.8) 1,010.7
Leasehold improvements......... 5.8 3.3 9.1
Construction in progress....... 87.5 (16.6) (.1) (.5) 70.3
---------- --------- ----------- ------------ ----------
Total....................... $1,237.5 $ 114.4 $(5.1) $ 22.1 (1) $1,368.9
---------- --------- ----------- ------------ ----------
---------- --------- ----------- ------------ ----------
Year ended December 31, 1991:
Land........................... $ 43.3 $ 1.4 $ (.2) $ 5.0 $ 49.5
Land improvements.............. 27.7 1.8 4.2 33.7
Buildings...................... 123.5 5.9 (.7) 6.6 135.3
Machinery and equipment........ 866.7 71.6 (6.0) (6.6) 925.7
Leasehold improvements......... 5.0 .7 .1 5.8
Construction in progress....... 52.4 36.7 (.1) (1.5) 87.5
---------- --------- ----------- ------------ ----------
Total....................... $1,118.6 $ 118.1 $(7.0) $ 7.8 $1,237.5
---------- --------- ----------- ------------ ----------
---------- --------- ----------- ------------ ----------
Year ended December 31, 1990:
Land........................... $ 21.1 $ .3 $ 21.9 (3) $ 43.3
Land improvements.............. 37.3 2.5 (12.1)(3) 27.7
Buildings...................... 109.5 9.6 $ (.6) 5.0 (3) 123.5
Machinery and equipment........ 771.8 115.5 (2.4) (18.2)(3) 866.7
Leasehold improvements......... 2.7 .2 2.1 (3) 5.0
Construction in progress....... 71.6 (17.8)(2) (1.4)(3) 52.4
---------- --------- ----------- ------------ ----------
Total....................... $1,014.0 $ 110.3 $(3.0) $ (2.7) $1,118.6
---------- --------- ----------- ------------ ----------
---------- --------- ----------- ------------ ----------
</TABLE>
- ---------------
(1) Consists principally of reclassifications from other current and long-term
assets to property, plant, and equipment.
(2) Represents $128.1 transfer to other fixed assets categories net of $110.3
additions to construction in progress in 1990.
(3) Consists principally of reclassifications between asset categories of the
1989 consolidation of Alpart and purchase accounting valuation adjustments
of domestic assets.
S-2
<PAGE> 150
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE VI
ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION
OF CONSOLIDATED PROPERTY, PLANT, AND EQUIPMENT
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE AT OTHER BALANCE AT
BEGINNING CHANGE END OF
DESCRIPTION OF YEAR ADDITIONS RETIREMENTS ADD (DEDUCT) YEAR
- ------------------------------------ ---------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1992:
Depletable land................... $ 1.2 $ .3 $ 1.5
Land improvements................. 4.8 1.6 $ (.1) 6.3
Buildings......................... 21.9 7.3 $ (.1) 1.6 30.7
Machinery and equipment........... 193.2 70.5 (1.1) (1.4) 261.2
Leasehold improvements............ 1.9 .6 (.1) 2.4
---------- --------- ----------- ------ ----------
Total.......................... $223.0 $80.3 $(1.2) nil $302.1
---------- --------- ----------- ------ ----------
---------- --------- ----------- ------ ----------
Year ended December 31, 1991:
Depletable land................... $ .7 $ .5 $ 1.2
Land improvements................. 3.5 1.1 $ .2 4.8
Buildings......................... 14.6 6.5 $ (.1) .9 21.9
Machinery and equipment........... 128.3 64.5 (1.6) 2.0 193.2
Leasehold improvements............ 1.2 .6 .1 1.9
---------- --------- ----------- ------ ----------
Total.......................... $148.3 $73.2 $(1.7) $ 3.2 $223.0
---------- --------- ----------- ------ ----------
---------- --------- ----------- ------ ----------
Year ended December 31, 1990:
Depletable land................... $ .5 $ .3 $ (.1) $ .7
Land improvements................. 2.4 1.3 (.2) 3.5
Buildings......................... 10.6 6.6 (2.6) 14.6
Machinery and equipment........... 63.9 61.7 $ (.7) 3.4 128.3
Leasehold improvements............ .6 .6 1.2
---------- --------- ----------- ------ ----------
Total.......................... $ 78.0 $70.5 $ (.7) $ .5 $148.3
---------- --------- ----------- ------ ----------
---------- --------- ----------- ------ ----------
</TABLE>
S-3
<PAGE> 151
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE IX
CONSOLIDATED SHORT-TERM BORROWINGS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNTS AMOUNT AVERAGE
BALANCE AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
CATEGORY OF AGGREGATE SHORT-TERM AT END OF INTEREST DURING DURING THE DURING THE
BORROWINGS YEAR RATE THE YEAR YEAR(1) YEAR(2)
- ----------------------------------- --------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Bank borrowings(3)
1992............................... $ 4.8 4.8% $52.8 $29.6 4.7%
1991............................... 6.3 4.9 50.6 29.2 7.0
1990............................... 8.7 35.9 8.8 9.3
</TABLE>
- ---------------
(1) Based on outstanding borrowings at the end of each month.
(2) Based on outstanding borrowings and weighted average interest rates at the
end of each month.
(3) Short-term bank borrowings are made available on an uncommitted basis and no
fee is charged. Maturities generally range from one to ten days with no
formal provisions for the extension of maturities. Interest rates are based
upon short-term prevailing rates.
S-4
<PAGE> 152
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE X
SUPPLEMENTARY CONSOLIDATED INCOME STATEMENT INFORMATION(1)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
CHARGED TO COSTS AND
EXPENSES
YEAR ENDED DECEMBER 31,
----------------------------
1992 1991 1990
------ ------ ------
<S> <C> <C> <C>
Maintenance and repairs.......................................... $147.0 $161.4 $157.7
------ ------ ------
------ ------ ------
Taxes, other than payroll and income taxes -- production levy on
bauxite........................................................ $ 31.5 $ 34.0 $ 33.8
------ ------ ------
------ ------ ------
</TABLE>
- ---------------
(1) The amounts for amortization of intangible assets and preoperating costs and
similar deferrals, royalties, and advertising costs are not reported as
these items did not exceed 1% of sales and revenues.
NOTE: ALL OTHER SCHEDULES ARE INAPPLICABLE OR THE REQUIRED INFORMATION IS
INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS OR THE NOTES THERETO.
S-5
<PAGE> 153
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------
<S> <C> <C>
1.1 Form of Purchase Agreement
*4.1 Form of Indenture (the "Note Indenture"), among the Company, as Issuer,
Kaiser Alumina Australia Corporation, Alpart Jamaica Inc., Kaiser
Jamaica Corporation and Kaiser Finance Corporation, as Subsidiary
Guarantors, and First Trust National Association as Trustee, regarding
the Notes
4.2 Indenture, dated as of February 1, 1993, among the Company, as Issuer,
Kaiser Alumina Australia Corporation, Alpart Jamaica Inc. and Kaiser
Jamaica Corporation, as Subsidiary Guarantors, and The First National
Bank of Boston, as Trustee, regarding the Company's 12 3/4% Senior
Subordinated Notes due 2003 (incorporated by reference to Exhibit 4.2 to
Amendment No. 5 to the Registration Statement on Form S-1 on Form S-2,
dated January 22, 1993, filed by the Company, Registration No. 33-48260;
the "Company's 1993 Registration Statement")
4.3 First Supplemental Indenture, dated as of May 1, 1993 (incorporated by
reference to Exhibit 4.2 to the Report on Form 10-Q for the quarterly
period ended June 30, 1993, of the Company's, filed August 10, 1993,
File No. 1-3605; the "Company's June 1993 Form 10-Q)
4.4 Credit Agreement, dated December 13, 1989 (the "Credit Agreement"),
among the Company, financial institutions a party thereto, Bank of
America National Trust and Savings Association, as Agent, and Mellon
Bank, N.A., as Collateral Agent (incorporated by reference to Exhibit
4.3 to Amendment No. 5 to the Registration Statement on Form S-1, dated
December 13, 1989, filed by the Company, Registration No. 33-48260; the
"Company's 1989 Registration Statement")
4.5 First Amendment to Credit Agreement, dated April 17, 1990 (incorporated
by reference to Exhibit 4.2 to the Report on Form 10-Q for the quarterly
period ended September 30, 1990, of MAXXAM, filed November 6, 1990, File
No. 1-3924; the "September 1990 MAXXAM Form 10-Q")
4.6 Second Amendment to Credit Agreement, dated September 17, 1990
(incorporated by reference to Exhibit 4.3 to the September 1990 MAXXAM
Form 10-Q)
4.7 Third Amendment to Credit Agreement, dated December 7, 1990
(incorporated by reference to Exhibit 4.6 to Amendment No. 1 to KAC's
1991 Registration Statement)
4.8 Fourth Amendment to Credit Agreement, dated April 19, 1991 (incorporated
by reference to Exhibit 4.1 to the Report on Form 10-Q for the quarterly
period ended March 31, 1991, filed by the Company, File No. 1-3605; the
"Company's March 1991 Form 10-Q")
4.9 Fifth Amendment to Credit Agreement, dated March 13, 1992 (incorporated
by reference to Exhibit 4.8 to Form 10-K for the period ended December
31, 1991, filed by KAC, File No. 1-9447; the "KAC 1991 Form 10-K")
4.10 Seventh Amendment to Credit Agreement, dated November 6, 1992
(incorporated by reference to Exhibit 4.10 to Amendment No. 5 to the
Company's 1993 Registration Statement)
4.11 Eighth Amendment to Credit Agreement, dated January 7, 1993
(incorporated by reference to Exhibit 4.12 to Amendment No. 5 to
Company's 1993 Registration Statement)
4.12 Ninth Amendment to Credit Agreement (including the form of Intercompany
Note annexed as an Exhibit thereto)(incorporated by reference to Exhibit
4.10 to Amendment No. 2 to the Registration Statement on Form S-1 dated
June 22, 1993, filed by KAC, Registration No. 33-49555; the "KAC 1993
Registration Statement")
</TABLE>
<PAGE> 154
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------
<S> <C> <C>
4.13 Tenth Amendment to Credit Agreement, dated July 23, 1993 (incorporated
by reference to Exhibit 4.13 to the Registration Statement on Form S-3,
dated August 26, 1993, filed by the Company, Registration No. 33-50097)
4.14 Eleventh Amendment to Credit Agreement, dated January 7, 1993
(incorporated by reference to Exhibit 4.12 to Amendment No. 5 to
Registrant's 1993 Registration Statement)
4.15 Twelfth Amendment to Credit Agreement
4.16 Form of Intercompany Note between the Company and KAC (incorporated by
reference to Exhibit 4.2 to Amendment No. 5 to the Company's 1989
Registration Statement)
4.17 Senior Subordinated Intercompany Note between the Company and MAXXAM,
dated January 14, 1993 (incorporated by reference to Exhibit 4.13 to
Company's 1993 Registration Statement)
4.18 Certificate of Designations of Series A Mandatory Conversion Premium
Dividend Preferred Stock of KAC, dated June 28, 1993 (incorporated by
reference to Exhibit 4.3 of the Company's June 1993 Form 10-Q)
4.19 Deposit Agreement between KAC and The First National Bank of Boston,
dated as of June 30, 1993 (incorporated by reference to Exhibit 4.4 of
the Company's June 1993 Form 10-Q)
4.20 Form of Certificate of Designations of PRIDES
*4.21 Form of Intercompany Note between the Company and KAC
*4.22 Form of Credit Agreement to be entered into by the Company, KAC,
BankAmerica Business Credit, Inc., as Agent and certain financial
institutions
Note: The Company has not filed certain long-term debt instruments not
being registered with the Securities and Exchange Commission where the
total amount of indebtedness authorized under any such instrument does
not exceed 10% of the total assets of the Company and its subsidiaries
on a consolidated basis. The Company agrees and undertakes to furnish a
copy of any such instrument to the Securities and Exchange Commission
upon its request.
5.1 Opinion of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as to the
validity of the securities being registered hereunder
10.1 Form of indemnification agreement with officers and directors
(incorporated by reference to Exhibit (10)(b) to the Registration
Statement of KAC on Form S-4, File No. 33-12836)
10.2 Tax Allocation Agreement between MAXXAM and the Company (incorporated by
reference to Exhibit 10.21 to Amendment No. 6 to the Company's 1989
Registration Statement)
10.3 Amended and Restated Alumina Supply Agreement, dated October 11, 1989
(incorporated by reference to Exhibit 10.19 to Amendment No. 3 to the
Company's 1989 Registration Statement)
10.4 Transfer Agreement between the Company and KAC (incorporated by
reference to Exhibit 10.20 to Amendment No. 6 to the Company's 1989
Registration Statement)
10.5 The Company's Bonus Plan (incorporated by reference to Exhibit 10.25 to
Amendment No. 6 to the Company's 1989 Registration Statement)
</TABLE>
<PAGE> 155
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------
<S> <C> <C>
10.6 KaiserTech Limited Long Term Incentive Plan, dated June 2, 1989, as
amended (incorporated by reference to Exhibit 10.14 to Form 10-K for the
period ended December 31, 1989, filed by the Company, File No. 1-3605)
10.7 Amendment No. 2 to the KaiserTech Limited Long Term Incentive Plan,
dated December 18, 1991 (incorporated by reference to Exhibit 10.7 to
KAC's 1991 Form 10-K)
10.8 Amendment No. 3 to the Kaiser Aluminum Corporation Long Term Incentive
Plan, dated December 31, 1991 (incorporated by reference to Exhibit 10.8
to KAC's 1991 Form 10-K)
10.9 Kaiser Aluminum Middle Management Long Term Incentive Plan, dated June
25, 1990, as amended (incorporated by reference to Exhibit 10.22 to
Amendment No. 1 to KAC's 1991 Registration Statement)
10.10 Tax Allocation Agreement between KAC and MAXXAM (incorporated by
reference to Exhibit 10.23 to Amendment No. 2 to KAC's 1991 Registration
Statement)
10.11 Assumption Agreement, dated as of October 28, 1988 (incorporated by
reference to Exhibit HHH to the Final Amendment to the Schedule 13D of
MAXXAM Group Inc. and others in respect of the Common Stock of the
Company, par value $.33 1/3 per share)
10.12 Employment Agreement, dated February 1, 1989, among the Company, KAC and
John M. Seidl (incorporated by reference to Exhibit 10.18 to Amendment
No. 3 to the Company's 1989 Registration Statement)
10.13 Employment Agreement (the "Seidl-MAXXAM Employment Agreement"), dated
June 13, 1990, between MAXXAM and John M. Seidl (incorporated by
reference to Exhibit 10.21 to Amendment No. 1 to KAC's 1991 Registration
Statement)
10.14 Amendment dated February 11, 1991, to the Seidl-MAXXAM Employment
Agreement (incorporated by reference to Exhibit 10.21 to Form 10-K for
the period ended December 31, 1990, filed by the Company's, File No.
1-3605)
10.15 Amendment dated May 29, 1991, to the Seidl-MAXXAM Employment Agreement
(incorporated by reference to Exhibit 10.30 to Amendment No. 2 to KAC's
1991 Registration Statement)
10.16 Payment Agreement, dated December 23, 1992, between the Company and John
M. Seidl (incorporated by reference to Exhibit 10.1 to the Report on
Form 10-Q for the quarterly period ended March 31, 1993, of KAC, filed
April 28, 1993, File No. 1-3605; the "KAC's March 1993 Form 10-Q")
10.17 Employment Agreement, dated as of October 1, 1992, among the Company,
KAC and A. Stephens Hutchcraft, Jr. (incorporated by reference to
Exhibit 10.15 to Amendment No. 5 to the Company's 1993 Registration
Statement)
10.18 Severance Agreement, dated July 1, 1985, between the Company and A. S.
Hutchcraft, Jr., as amended (incorporated by reference to Exhibit
(10)(f) to the Company's 1988 Form 10-K)
10.19 Amendment, dated October 31, 1989, to the Severance Agreement of A. S.
Hutchcraft, Jr. referenced in Exhibit 10.18 above (incorporated by
reference to Exhibit 10.24 to Amendment No. 5 to the Company's 1989
Registration Statement)
10.20 Employment Agreement dated July 1, 1991, by and among MAXXAM, the
Company and Joseph A. Bonn (incorporated by reference to Exhibit 10.24
to Form 10-K for the period ended December 31, 1991, filed by the
Company, File No. 1-3605; the "Company's 1991 Form 10-K")
</TABLE>
<PAGE> 156
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------
<S> <C> <C>
10.21 Employment Agreement, dated September 26, 1990, between the Company,
MAXXAM and John T. La Duc (incorporated by reference to Exhibit 10.20 to
Amendment No. 1 to KAC's 1991 Registration Statement)
10.22 Employment Agreement, dated August 22, 1990, among the Company, MAXXAM
and Robert W. Irelan (incorporated by reference to Exhibit 10.2 to the
Company's March 1991 Form 10-Q)
10.23 Promissory Note, dated October 4, 1990, by Robert W. Irelan and Barbara
M. Irelan to the Company (incorporated by reference to Exhibit 10.54 to
Form 10-K for the period ended December 31, 1990, filed by MAXXAM, File
No. 1-3924, the "MAXXAM 1990 Form 10-K")
10.24 Employment Agreement dated as of March 8, 1990, between MAXXAM and
Anthony R. Pierno (incorporated by reference to Exhibit 10.28 to
MAXXAM's 1990 Form 10-K)
10.25 Promissory Note dated February 1, 1989, by Anthony R. Pierno and Beverly
J. Pierno to MAXXAM (incorporated by reference to Exhibit 10.30 to Form
10-K for the period ended December 31, 1988, filed by MAXXAM, File No.
1-3924)
10.26 Promissory Note dated July 19, 1990, by Anthony R. Pierno to MAXXAM
(incorporated by reference to Exhibit 10.31 to MAXXAM's 1990 Form 10-K)
10.27 Commercial Guaranty, dated February 22, 1993, between MAXXAM and Charter
National Bank - Houston, in respect of a loan from Charter National
Bank - Houston to Anthony R. Pierno (incorporated by reference to
Exhibit 10.26 to the Company's Form 10-K for the period ended December
31, 1992, filed by KAC, File No. 1-3605)
10.28 Employment Agreement dated as of March 8, 1990, between MAXXAM and Byron
L. Wade (incorporated by reference to Exhibit 10.50 to MAXXAM's 1990
Form 10-K)
10.29 Agreement, dated December 20, 1991, between KAC and Joseph A. Bonn
(incorporated by reference to Exhibit 10.3 to the Report on Form 10-Q
for the quarterly period ended March 31, 1992, filed by KAC, File No.
1-3605)
10.30 Employment Agreement, dated April 1, 1993, among the Company, KAC and
George T. Haymaker, Jr. (incorporated by reference to Exhibit 10.2 to
KAC's March 1993 Form 10-Q)
10.31 Kaiser 1993 Omnibus Stock Incentive Plan (incorporated by reference to
Exhibit 10.1 of KAC's June 1993 Form 10-Q)
10.32 Agreement, dated as of June 30, 1993, between KAC and MAXXAM Inc.
(incorporated by reference to Exhibit 10.2 of KAC's June 1993 Form 10-Q)
10.33 Tax Allocation Agreement, dated as of June 30, 1993, between the Company
and KAC (incorporated by reference to Exhibit 10.3 of KAC's June 1993
Form 10-Q)
12 Computation of consolidated ratio of earnings to fixed charges
21 Subsidiaries of the Company (incorporated by reference to Exhibit 22 to
Form 10-K for the period ended December 31, 1992, filed by KAC File No.
1-9447)
*23.1 Consent of Arthur Andersen & Co.
23.2 Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (included in
Exhibit 5)
24 Power of Attorney (included on signature page of this Registration
Statement)
25 Statement of Eligibility of Trustee
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
L&W Draft
Dated 2/7/94
KAISER ALUMINUM & CHEMICAL CORPORATION,
as Issuer,
KAISER ALUMINA AUSTRALIA CORPORATION,
ALPART JAMAICA INC.,
KAISER FINANCE CORPORATION and
KAISER JAMAICA CORPORATION,
as Subsidiary Guarantors,
AND
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
INDENTURE
Dated as of February --, 1994
$225,000,000
----% Senior Notes due 2002
<PAGE> 2
RECONCILIATION AND TIE SHEET*
between
PROVISIONS OF THE TRUST INDENTURE ACT OF 1939
and
INDENTURE DATED AS OF FEBRUARY --, 1994
between
KAISER ALUMINUM & CHEMICAL CORPORATION
KAISER ALUMINA AUSTRALIA CORPORATION,
ALPART JAMAICA INC.,
KAISER FINANCE CORPORATION and
KAISER JAMAICA CORPORATION
and
FIRST TRUST NATIONAL ASSOCIATION, TRUSTEE
<TABLE>
<CAPTION>
Sections Sections of
of Act Indenture
- ------ ---------
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.09
310(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.09
310(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
310(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
310(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.09
310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08, 7.10
310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.13(a), 7.13(c)
311(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.13(b), 7.13(c)
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.01, 5.02(a)
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.02(b)
312(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.02(c)
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.04(a)
313(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
313(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.04(b)
313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.04(c)
313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.04(d)
314(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.03(a)
314(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.03(b)
314(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.03(c)
314(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.03(d)
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.05
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Sections Sections of
of Act Indenture
- ------ ---------
<S> <C>
314(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.05
314(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.05
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Omitted
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
315(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
315(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
315(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
316(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.06, 8.04
316(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Omitted
316(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
316(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.05
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.02
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04(a)
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.07
318(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.07
</TABLE>
- -------------------------
*This Reconciliation and Tie Sheet is not a part of the Indenture.
ii
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE ONE
DEFINITIONS
SECTION 1.01. Certain terms defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 1.02. References are to Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 1.03. Other definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
SECTION 2.01. Designation, amount, authentication and delivery of Notes . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.02. Form of Notes and Trustee's certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.03. Date of Notes and denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.04. Execution of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.05. Exchange and transfer of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.06. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.07. Mutilated, destroyed, lost or stolen Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.08. Cancellation of surrendered Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE THREE
REDEMPTION AND PURCHASES OF NOTES
SECTION 3.01. Redemption prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.02. Notice of redemption; selection of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.03. When Notes called for redemption become due and payable . . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.04. Cancellation of redeemed Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.05. Purchase of Notes at option of the holder upon Change of Control . . . . . . . . . . . . . . . . 36
SECTION 3.06. Effect of Change of Control Purchase Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.07. Deposit of Change of Control Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.08. Covenant to comply with securities laws upon purchase of Notes . . . . . . . . . . . . . . . . . 39
SECTION 3.09. Repayment to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE FOUR
PARTICULAR COVENANTS OF THE COMPANY
SECTION 4.01. Payments on the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.02. Maintenance of office or agency for registration of transfer, exchange and payment of Notes . . . 39
SECTION 4.03. Appointment to fill a vacancy in the office of Trustee . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.04. Provision as to paying agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.05. Maintenance of corporate existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.06. Officers' Certificate as to default and statement as to compliance . . . . . . . . . . . . . . . 41
SECTION 4.07. Usury laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.08. Restrictions on transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 4.09. Limitations on Restricted Payments and Restricted Investments . . . . . . . . . . . . . . . . . 43
SECTION 4.10. Limitation on Indebtedness and Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.11. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.12. Subsidiary guarantees, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.13. Limitation on dividends and other payment restrictions affecting Subsidiaries . . . . . . . . . 54
SECTION 4.14. Limitation on Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE FIVE
NOTEHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
SECTION 5.01. Company to furnish Trustee information as to names and addresses of noteholders . . . . . . . . 57
SECTION 5.02. Preservation and disclosure of lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.03. Reports by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.04. Reports by the Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE SIX
REMEDIES OF THE TRUSTEE AND NOTEHOLDERS
ON EVENT OF DEFAULT
SECTION 6.01. Events of Default defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.02. Payment of Notes on default; suit therefor . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.03. Application of moneys collected by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.04. Limitation on suits by holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.05. Proceedings by Trustee; remedies cumulative and continuing; delay or omission not
waiver of default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.06. Rights of holders of majority in principal amount of Notes to direct Trustee and to
waive defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.07. Trustee to give notice of defaults known to it, but may withhold in certain
circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.08. Requirement of an undertaking to pay costs in certain suits under the Indenture or
against the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.09. Waiver of stay or extension laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE SEVEN
CONCERNING THE TRUSTEE
SECTION 7.01. Duties and responsibilities of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 7.02. Reliance on documents, opinions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 7.03. No responsibility for recitals, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.04. Trustee, paying agent or Note registrar may own Notes . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.05. Moneys received by Trustee to be held in trust without interest . . . . . . . . . . . . . . . . 68
SECTION 7.06. Compensation and expenses of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.07. Right of Trustee to rely on Officers' Certificate where no other evidence specifically
prescribed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 7.08. Conflicting interest of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.09. Requirements for eligibility of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 7.10. Resignation or removal of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 7.11. Acceptance by successor to Trustee; notice of succession of a Trustee . . . . . . . . . . . . . . 74
SECTION 7.12. Successor to Trustee by merger, consolidation or succession to business; notice by
Trustee of change in its location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 7.13. Limitations on rights of Trustee as a creditor . . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE EIGHT
CONCERNING THE NOTEHOLDERS
SECTION 8.01. Evidence of action by noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 8.02. Proof of execution of instruments and of holding of Notes . . . . . . . . . . . . . . . . . . . . 78
SECTION 8.03. Who may be deemed owners of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 8.04. Notes owned by Company or controlled by controlling persons disregarded for certain
purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 8.05. Record date for action by noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 8.06. Instruments executed by noteholders bind future holders . . . . . . . . . . . . . . . . . . . . . 80
ARTICLE NINE
NOTEHOLDERS' MEETINGS
SECTION 9.01. Purposes for which meetings may be called . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 9.02. Manner of calling meetings; record date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 9.03. Call of meeting by Company or noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.04. Who may attend and vote at meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.05. Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.06. Manner of voting at meetings and record to be kept . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 9.07. Exercise of rights of Trustee and noteholders not to be hindered or delayed . . . . . . . . . . . 82
ARTICLE TEN
SUPPLEMENTAL INDENTURES
SECTION 10.01. Purposes for which supplemental indentures may be entered into without consent
of noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 10.02. Modification of Indenture with consent of holders of a majority in principal
amount of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 10.03. Effect of supplemental indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 10.04. Notes may bear notation of changes by supplemental indentures . . . . . . . . . . . . . . . . . . 84
SECTION 10.05. Officers' Certificate and Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE ELEVEN
CONSOLIDATION, MERGER AND SALE
SECTION 11.01. Company may consolidate, etc., on certain terms . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 11.02. Successor corporation to be substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 11.03. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE TWELVE
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
SECTION 12.01. Satisfaction and discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 12.02. Application by Trustee of funds deposited for payment of Notes . . . . . . . . . . . . . . . . . . 87
SECTION 12.03. Repayment of moneys held by paying agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 12.04. Repayment of moneys held by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 12.05. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
ARTICLE THIRTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
SECTION 13.01. Incorporators, stockholders, officers and directors of Company exempt from individual liability . . 88
ARTICLE FOURTEEN
MISCELLANEOUS PROVISIONS
SECTION 14.01. Successors and assigns of Company bound by Indenture . . . . . . . . . . . . . . . . . . . . . . . 89
SECTION 14.02. Acts of board, committee or officer of successor corporation valid . . . . . . . . . . . . . . . . 89
SECTION 14.03. Required notices or demands may be served by mail; waiver . . . . . . . . . . . . . . . . . . . . . 89
SECTION 14.04. Indenture and Notes to be construed in accordance with the laws of the State of New York . . . . . 89
SECTION 14.05. Evidence of compliance with conditions precedent . . . . . . . . . . . . . . . . . . . . . . . . . 89
SECTION 14.06. Payments due on Saturdays, Sundays and holidays . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 14.07. Provisions required by Trust Indenture Act of 1939 to control . . . . . . . . . . . . . . . . . . . 90
SECTION 14.08. Provisions of the Indenture and Notes for the sole benefit of the parties and the noteholders . . . 91
SECTION 14.09. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 14.10. Indenture may be executed in counterparts; acceptance by Trustee . . . . . . . . . . . . . . . . . 91
SECTION 14.11. Article and Section headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 14.12. No Adverse Interpretation of Other Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . 91
ARTICLE FIFTEEN
GUARANTEE OF NOTES
SECTION 15.01. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 15.02. Guarantee senior in respect of Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 15.03. Subsidiary Guarantors may consolidate, etc., on certain terms . . . . . . . . . . . . . . . . . . . 92
SECTION 15.04. Application of certain terms and provisions to the Subsidiary Guarantors. . . . . . . . . . . . . . 93
SECTION 15.05. Release of Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
SCHEDULE A - SCHEDULE OF LIENS SECURING INDEBTEDNESS IN EXCESS OF $5,000,000
SCHEDULE B - REAL PROPERTY CONSTITUTING PERMITTED COLLATERAL
vi
<PAGE> 8
THIS INDENTURE, dated as of the --- day of February, 1994, between
KAISER ALUMINUM & CHEMICAL CORPORATION, a corporation duly organized and
existing under the laws of the State of Delaware (hereinafter referred to as
the "Company"), as Issuer, KAISER ALUMINA AUSTRALIA CORPORATION, KAISER FINANCE
CORPORATION, ALPART JAMAICA INC. and KAISER JAMAICA CORPORATION, as Subsidiary
Guarantors, and FIRST TRUST NATIONAL ASSOCIATION, a national banking
association (hereinafter referred to as the "Trustee"), as Trustee.
W I T N E S S E T H:
WHEREAS, the Company has duly authorized an issue of its ----% Senior
Notes due February --, 2002 (hereinafter referred to as the "Notes"), for an
aggregate principal amount of up to two hundred twenty five million dollars
($225,000,000), to be issued as registered Notes without coupons, to be
authenticated by the certificate of the Trustee, to be payable on February --,
2002, and to be redeemable and purchasable as hereinafter provided; and, to
provide the terms and conditions upon which the Notes are to be authenticated,
issued and delivered, the Company has duly authorized the execution and
delivery of this Indenture;
WHEREAS, the payment of the principal of, premium, if any, Change of
Control Purchase Price, Asset Sale Purchase Price and interest on, the Notes is
hereby expressly designated, and the monetary obligations of the Company under
the Notes shall hereafter constitute for all purposes, Senior Indebtedness of
the Company under the terms of the Subordinated Note Indenture (as hereinafter
defined);
WHEREAS, the Guarantee (as hereinafter defined) of each Subsidiary
Guarantor in respect of the Notes is hereby expressly designated, and the
monetary obligations of such Subsidiary Guarantor under the Notes shall
hereafter constitute for all purposes Senior Indebtedness of such Subsidiary
Guarantor under the terms of the Subordinated Note Indenture, to the extent
that such Subsidiary Guarantor is a guarantor under the Subordinated Note
Indenture;
WHEREAS, the Company has duly delivered written notice to the trustee
under the Subordinated Note Indenture designating the Notes and the Guarantee
as Senior Indebtedness thereunder;
WHEREAS, the Notes and the Trustee's certificate of authentication to
be borne by the Notes are to be substantially in the following forms,
respectively:
[FORM OF FACE OF NOTE]
<TABLE>
<S> <C>
No. [Principal Amount]
Issue Date: CUSIP 483008 AE 8
</TABLE>
KAISER ALUMINUM & CHEMICAL CORPORATION
----% SENIOR NOTE DUE 2002
KAISER ALUMINUM & CHEMICAL CORPORATION, a corporation duly organized
and existing under the laws of the State of Delaware (herein referred to as the
"Company"), for value received, hereby promises to pay to --------------------,
or registered assigns, the principal sum of -------------------- DOLLARS on
February --, 2002, at the office or agency of the Company in the Borough of
Manhattan, the City of New York, State of New York, in such coin or currency of
The
<PAGE> 9
United States of America as at the time of payment is legal tender for the
payment of public and private debts, and to pay to the registered holder
hereof, as hereinafter provided, interest on said principal sum at the rate per
annum specified in the title of this Note, in like coin or currency,
semiannually on February 15 and August 15 in each year. Interest shall accrue
from the most recent date to which interest has been paid or duly provided for
or, if no interest has been paid or duly provided for, from February --, 1994.
The interest so payable on any February 15 or August 15 will, subject to
certain exceptions provided in the Indenture hereinafter referred to, be paid
to the person in whose name this Note is registered at the close of business on
the February 1 or August 1, as the case may be, next preceding such February 15
or August 15 whether or not such February 1 or August 1 is Business Day.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months. Payment of interest shall be made at the office or agency of the
Company maintained for such purpose within the City and State of New York or,
at the option of the Company, by check mailed by first-class mail to the
address of the person entitled thereto at such address as shall appear on the
registry books of the Company.
As provided in the Indenture, this Note shall be deemed to be a
contract made under the laws of the State of New York, and for all purposes
shall be governed by and construed in accordance with the laws of such State.
Reference is made to the further provisions of this Note set forth on
the reverse hereof. Such further provisions shall for all purposes have the
same effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been signed by the
Trustee under the Indenture referred to on the reverse hereof.
IN WITNESS WHEREOF, KAISER ALUMINUM & CHEMICAL CORPORATION has caused
this instrument to be duly executed under its corporate seal.
Dated
KAISER ALUMINUM & CHEMICAL
CORPORATION
By:
---------------------------
Name:
Title:
[Corporate Seal]
Attest:
- -----------------------------------
Secretary
2
<PAGE> 10
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Notes described in the within-mentioned Indenture.
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
By:
------------------------------
Authorized Signatory
[FORM OF REVERSE OF NOTE]
KAISER ALUMINUM & CHEMICAL CORPORATION
---% SENIOR NOTE DUE 2002
This Note is one of a duly authorized issue of Notes of the Company
known as its ---% Senior Notes due 2002 (herein referred to as the "Notes"),
limited to an aggregate principal amount of two hundred twenty five million
dollars ($225,000,000), all issued or to be issued under and pursuant to an
indenture, dated as of February --, 1994 (herein referred to as the
"Indenture"), duly executed and delivered between the Company, the Subsidiary
Guarantors (as defined in the Indenture) and First Trust National Association,
as trustee (herein referred to as the "Trustee"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the respective rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company, the Subsidiary Guarantors
and the holders of the Notes. All terms used in this Note which are defined in
the Indenture shall have the meanings assigned to them in the Indenture.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal amount of this Note plus any accrued
interest to the date of acceleration may be declared, and upon such declaration
shall become, due and payable, in the manner, with the effect and subject to
the conditions provided in the Indenture. The Indenture provides that in
certain events such declaration and its consequences may be waived by the
holders of a majority of the aggregate principal amount of the Notes then
outstanding or outstanding on the record date, if any, fixed therefor in
accordance with the provisions of the Indenture. It is also provided in the
Indenture that the holders of a majority of the aggregate principal amount of
the Notes at the time or on any such record date outstanding may on behalf of
the holders of all of the Notes waive, prior to such declaration, any past
default under the Indenture and its consequences, except a default in the
payment of the principal of, premium, if any, Change of Control Purchase Price,
Asset Sale Purchase Price or interest on any of the Notes or a default in
respect of a covenant or provision in the Indenture which under Article Ten of
the Indenture cannot be modified or amended without the consent of the holder
of each outstanding Note.
Payment of the Notes is guaranteed on a senior basis by Kaiser Alumina
Australia Corporation, Alpart Jamaica Inc., Kaiser Finance Corporation and
Kaiser Jamaica Corporation and, under certain circumstances set forth in the
Indenture, may be guaranteed by certain other Subsidiaries and Non-Affiliate
Joint Ventures of the Company. Under certain circumstances set forth in the
Indenture, each
3
<PAGE> 11
of the Subsidiary Guarantors may be released from their respective obligations
under the Indenture and the Notes.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority of the
aggregate principal amount of the Notes then outstanding or outstanding on the
record date, if any, fixed therefor in accordance with the provisions of the
Indenture, evidenced as in the Indenture provided, to execute supplemental
indentures adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or
modifying in any manner the rights of the holders of the Notes; provided,
however, that, as provided in Section 10.02 of the Indenture, without the
consent of each holder of an outstanding Note affected, no such supplemental
indenture shall, inter alia, (i) extend the stated maturity of any Note, reduce
the interest rate, extend the time or alter the manner of payment of interest
thereon, or reduce the principal amount thereof, or alter the timing of or
reduce any premium payable upon the redemption thereof, or reduce the amount
payable thereon in the event of acceleration or the amount thereof payable in
bankruptcy, or (ii) reduce the aforesaid percentage of aggregate principal
amount of Notes, the consent of the holders of which is required for any such
supplemental indenture.
Any such consent or waiver by the registered holder of this Note
(unless effectively revoked as provided in the Indenture) shall be conclusive
and binding upon such holder and upon all future holders of this Note and of
any Note issued in exchange or substitution herefor, irrespective of whether or
not any notation of such consent or waiver is made upon this Note or such other
Note.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, premium, if any, Change of
Control Purchase Price, Asset Sale Purchase Price and interest on this Note at
the place, at the respective times, at the rate and in the currency herein
prescribed.
The Notes are issuable as fully registered Notes without coupons in
denominations of $1,000 and any integral multiple of $1,000. At the office or
agency to be maintained by the Company referred to on the face hereof, and in
the manner and subject to the limitations provided in the Indenture, Notes may
be exchanged for a like aggregate principal amount of Notes in other authorized
denominations, without payment of any charge other than a sum sufficient to
reimburse the Company for any tax or other governmental charge incident
thereto. Principal of, premium, if any, Change of Control Purchase Price,
Asset Sale Purchase Price and interest on this Note are payable at the office
or agency of the Company referred to on the face hereof, except that, at the
option of the Company, payment of interest hereon may be made by check mailed
by first-class mail to the address of the person entitled thereto at such
address as shall appear on the registry books of the Company.
The Notes are subject to redemption on or after February 15, 1998, at
the option of the Company, in whole or in part on any date prior to maturity,
upon mailing by first-class mail a notice of such redemption not less than 15
nor more than 60 days prior to the date fixed for redemption to the holders of
Notes to be redeemed in whole or in part at their addresses as they shall
appear upon the registry books of the Company, all as provided in the
Indenture. Any such notice which is mailed in the manner hereinabove provided
shall be conclusively presumed to have been duly given, whether or not the
holder receives the notice.
The table below shows the redemption prices (expressed as a percentage
of principal amount) on the dates shown below. If redeemed during the 12-month
period beginning February 15, the redemption price shall be:
4
<PAGE> 12
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----------
<S> <C>
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . %
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . %
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . %
2001 and thereafter . . . . . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
in each case together with accrued and unpaid interest to (but not including)
the date fixed for redemption.
Subject to the terms and conditions of the Indenture, if any Change of
Control (as defined in the Indenture) occurs on or prior to maturity, the
Company shall offer to purchase from each holder all or any part of the
holder's Notes for which a Change of Control Purchase Notice shall have been
delivered as provided in the Indenture and not withdrawn, on the date that is
30 Business Days after the occurrence of such Change of Control (the "Change of
Control Purchase Date"), for a Change of Control Purchase Price equal to 101%
of the principal amount thereof plus accrued interest to (but not including)
the Change of Control Purchase Date, which Change of Control Purchase Price
shall be paid in cash.
Holders have the right to withdraw any Change of Control Purchase
Notice by delivering to the Trustee a written notice of withdrawal in
accordance with the provisions of the Indenture.
If cash sufficient to pay the Change of Control Purchase Price of all
Notes or portions thereof to be purchased on the Change of Control Purchase
Date is deposited with the Trustee as of the Change of Control Purchase Date,
interest shall cease to accrue (whether or not this Note is delivered to the
Trustee or any other office or agency maintained for such purpose) on such
Notes (or portions thereof) on and after the Change of Control Purchase Date,
and the holders thereof shall have no other rights as such (other than the
right to receive the Change of Control Purchase Price, upon surrender of such
Notes).
Subject to the terms and conditions of the Indenture, the Company
shall apply the Net Cash Proceeds (as defined in the Indenture) of Asset Sales
(as defined in the Indenture), under certain circumstances described in the
Indenture, to (x) the prepayment of Indebtedness (as defined in the Indenture)
in respect of or under the Credit Agreement (as defined in the Indenture) and
the Specified Pari Passu Indebtedness (as defined in the Indenture) unless the
holders thereof elect not to receive such prepayment and (y) an offer to
purchase (an "Asset Sale Offer") the then outstanding Notes, on any Business
Day occurring no later than 175 days after the receipt by the Company (or any
of its Subsidiaries, if applicable) of such Net Cash Proceeds, at a price equal
to 100% of the principal amount thereof together with accrued interest, if any,
to but not including the Asset Sale Purchase Date (as defined in the
Indenture). Such Asset Sale Offer with respect to the Notes shall be in an
aggregate principal amount (the "Asset Sale Offer Amount") equal to the Net
Cash Proceeds (rounded down to the nearest $1,000) from the Asset Sales to
which the Asset Sale Offer relates multiplied by a fraction, the numerator of
which is the principal amount of the Notes outstanding (determined as of the
close of business on the day immediately preceding the date notice of such
Asset Sale Offer is mailed) and the denominator of which is the principal
amount of the Notes outstanding plus the aggregate principal amount of
Indebtedness under the Credit Agreement and the Specified Pari Passu
Indebtedness outstanding (determined as of the close of business on the day
immediately preceding the date notice of such Asset Sale Offer is mailed). If
(x) no Indebtedness is outstanding in respect of or under the Credit Agreement
or the Specified Pari Passu Indebtedness or (y) the holders of such
Indebtedness entitled to
5
<PAGE> 13
receive payment elect not to receive the payments provided for in the previous
sentence, or (z) the application of such Net Cash Proceeds results in the
complete prepayment of such Indebtedness, then in each case any remaining
portion of such Net Cash Proceeds will be required to be applied to an Asset
Sale Offer to purchase the Notes.
Upon surrender of this Note, the transfer of this Note is registrable
by the registered holder hereof in person or by his attorney duly authorized in
writing on the registry books of the Company at the office or agency to be
maintained by the Company referred to on the face hereof, subject to the terms
of the Indenture but without payment of any charge other than a sum sufficient
to reimburse the Company for any tax or other governmental charge incident
thereto. Upon any such registration of transfer, a new Note or Notes of
authorized denomination or denominations, for the same aggregate principal
amount, will be issued to the transferee in exchange herefor.
Prior to due presentation for registration of transfer, the Company,
the Trustee, any paying agent and any Note registrar may deem and treat the
person in whose name this Note shall be registered upon the registry books of
the Company as the absolute owner of this Note (whether or not this Note shall
be overdue and notwithstanding any notation of ownership or other writing
hereon), for the purpose of receiving payment of or on account of the principal
hereof, premium, if any, Change of Control Purchase Price, Asset Sale Purchase
Price and interest due hereon and for all other purposes, and neither the
Company nor the Trustee nor any paying agent nor any Note registrar shall be
affected by any notice to the contrary. All such payments shall be valid and
effectual to satisfy and discharge the liability on this Note to the extent of
the sum or sums so paid.
No recourse shall be had for the payment of the principal of, premium,
if any, Change of Control Purchase Price, Asset Sale Purchase Price or the
interest on this Note, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture or any indenture
supplemental thereto, against any incorporator, stockholder, officer or
director, as such, past, present or future, of the Company or of any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.
6
<PAGE> 14
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to:
(Insert assignee's soc.
sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------- agent
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: ------------------- Your Signature: ----------------------------
----------------------------
(Sign exactly as your name(s) appear(s) on the Note)
Signature Guarantee: -------------------------------------
(bank, trust company or member firm
of the New York Stock Exchange)
7
<PAGE> 15
OPTION OF HOLDER TO ELECT PURCHASE
Upon an offer by the Company to purchase all or any part of this Note pursuant
to Section 3.05 or 4.14 of the Indenture, please check the appropriate box
below if you wish to elect to have all or any part of this Note so purchased.
Section 3.05---
Section 4.14---
If you wish to have only part of this Note purchased by the Company
pursuant to Section 3.05 or Section 4.14 of the Indenture, state the principal
amount you elect to have purchased:
$-------------------
Date: ------------- Signature: -----------------------------
-----------------------------
(Sign exactly as your name(s) appear(s) on the face of this Note)
Signature Guarantee: ------------------------------------------
(bank, trust company or member firm
of the New York Stock Exchange)
8
<PAGE> 16
AND WHEREAS, all acts and things necessary to make the Notes, when
executed by the Company and authenticated and delivered by the Trustee as in
this Indenture provided, the valid, binding and legal obligations of the
Company, and to constitute these presents a valid indenture and agreement
according to its terms, have been done and performed, and the execution and
delivery of this Indenture and the issuance hereunder of the Notes have in all
respects been duly authorized, and the Company, in the exercise of the legal
right and power vested in it, executes and delivers this Indenture and proposes
to make, execute, issue and deliver the Notes;
THEREFORE, in consideration of the premises and of the purchase and
acceptance of the Notes by the holders thereof, the Company, each Subsidiary
Guarantor and the Trustee each covenants and agrees, for the equal and
proportionate benefit of the respective holders from time to time of the Notes,
as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. Certain terms defined. The terms defined in this
Section 1.01 (except as herein otherwise expressly provided or unless the
context otherwise requires), for all purposes of this Indenture and of any
indenture supplemental hereto, shall have the respective meanings specified in
this Section 1.01. All other terms used in this Indenture which are defined in
the Trust Indenture Act of 1939 (as defined herein) or which are by reference
therein defined in the Securities Act of 1933 (as defined herein) (except as
herein otherwise expressly provided or unless the context otherwise requires)
shall have the meanings assigned to such terms in said Trust Indenture Act and
in said Securities Act as they were in force at the date of the execution and
delivery of this Indenture.
14 1/4% Senior Subordinated Notes: The term "14 1/4% Senior
Subordinated Notes" shall mean the Company's 14 1/4% Senior Subordinated Notes
Due 1995, as amended, which were retired in 1993 and are no longer outstanding
as of the date of this Indenture.
14 1/4% Senior Subordinated Note Indenture: The term "14 1/4% Senior
Subordinated Note Indenture" shall mean the 14 1/4% Senior Subordinated Note
Indenture, dated as of December 21, 1989, among the Company, as issuer, the
parties named therein as and, if applicable, thereafter becoming, subsidiary
guarantors, and The Bank of New York, a New York banking corporation, as
trustee, as amended or supplemented from time to time in accordance with the
terms thereof.
Affiliate: The term "Affiliate" shall mean any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with a specified Person; provided, however, that the term Affiliate
shall not (other than for purposes of Section 3.07) include the Company, any
Subsidiary of the Company or any Non-Affiliate Joint Venture of the Company so
long as no Affiliate of the Company has any direct or indirect interest
therein, except through the Company and/or its Subsidiaries and/or its
Non-Affiliate Joint Ventures. For the purpose of this definition, control when
used with respect to any specified Person means the possession of the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms controlling and controlled have meanings correlative to the
foregoing. The fact that an Affiliate of a Person is a partner of a law firm
that renders services to such Person or its Affiliates does not (other than for
purposes of Section 3.07) mean that the law firm is an Affiliate of such
Person.
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AJI: The term "AJI" shall mean Alpart Jamaica Inc., a Delaware
corporation, and its successors.
Alpart: The term "Alpart" shall mean Alumina Partners of Jamaica, a
Delaware general partnership, and its successors.
Asset Sale: The term "Asset Sale" shall mean any sale, transfer or
other disposition (including, without limitation, dispositions pursuant to a
merger, consolidation or sale and leaseback transaction) of any assets (other
than cash or Cash Equivalents) on or after the date of the initial issuance of
the Notes by the Company or any of its Subsidiaries to any Person other than
the Company or any of its Subsidiaries or any Non-Affiliate Joint Venture;
provided, however, that solely for the purposes of the definition of
Consolidated Cash Flow Available for Fixed Charges, the term Asset Sale shall
exclude dispositions pursuant to a sale and leaseback transaction if the lease
under such sale and leaseback transaction is required to be classified and
accounted for as a Capitalized Lease Obligation; and provided, further, that
the term Asset Sale shall not include a Refinancing Sale and Leaseback
Transaction; and provided, further, that the following sales, transfers or
other dispositions of assets shall not be an "Asset Sale" hereunder:
(A) in the ordinary course of business of the Company and its
Subsidiaries,
(B) in a single transaction or group of related transactions, the
gross proceeds of which (exclusive of indemnities) do not exceed $10,000,000
(such proceeds, to the extent non-cash, to be determined in good faith by the
Board of Directors of the Company),
(C) resulting from the creation, incurrence or assumption of (but not
any foreclosure with respect to) any Lien not prohibited by Section 4.11,
(D) in connection with any consolidation or merger of the Company or
any Subsidiary Guarantor or sale of all or substantially all of the property of
the Company or any Subsidiary Guarantor in compliance with the provisions of
Article Eleven, Section 15.03(a) or Section 15.03(b)(i) hereof, as the case may
be,
(E) by a Subsidiary to its stockholders not prohibited by this
Indenture,
(F) which are Restricted Investments or Restricted Payments permitted
by Section 4.09, or
(G) which consist of extensions, modifications, renewals or exchanges
of Restricted Investments pursuant to clause (b) of the definition thereof, so
long as neither the Company nor any of its Subsidiaries receives any cash
proceeds as a result of such transaction.
Attributable Debt: The term "Attributable Debt" shall mean, with
respect to a Refinancing Sale and Leaseback Transaction, as of the date of
consummation of such transaction, the greater of (a) the Fair Market Value of
the property subject to such Refinancing Sale and Leaseback Transaction and (b)
the present value (discounted at the interest rate borne by the Notes,
compounded semi-annually) of the total obligations of the lessee for rental
payments during the remaining term of the lease included in such Refinancing
Sale and Leaseback Transaction (including any period for which such lease has
been extended).
Bank: The term "Bank" shall mean any of the financial institutions
that are, or from time to time become, lenders under the Credit Agreement.
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Bank Agent: The term "Bank Agent" shall mean BankAmerica Business
Credit, Inc., as agent under the Credit Agreement, and any successor agent
appointed under the Credit Agreement or any agent under any agreement or
agreements pursuant to which Indebtedness under the Credit Agreement has been
Refinanced (or successively Refinanced) and as to whom the Company has notified
the Trustee and the noteholders pursuant to the terms of this Indenture.
Bank Guarantors: The term "Bank Guarantors" shall mean each of the
following Persons, as long as such Person guarantees any Indebtedness under the
Credit Agreement: Akron Holding Company, an Ohio corporation, Kaiser Aluminum &
Chemical Investment, Inc., a Delaware corporation, Kaiser Aluminum Properties,
Inc., a Delaware corporation, Kaiser Aluminum Technical Services, Inc., a
California corporation, Oxnard Forge Die Company, Inc., a California
corporation, Kaiser Aluminium International, Inc., a Delaware corporation, KAC,
KFC, each of their respective successors, each Subsidiary Guarantor and each
Non-Recourse Guarantor so long as such Non-Recourse Guarantor does not
constitute a Subsidiary Guarantor and would not be required to become a
Subsidiary Guarantor hereunder.
Board of Directors: The term "Board of Directors," when used with
reference to the Company, shall mean the Board of Directors of the Company, or
the executive committee of the Board of Directors of the Company, or any other
duly authorized committee of the Board of Directors of the Company.
Board Resolution: The term "Board Resolution" shall mean, with
respect to any Person, a copy of a resolution certified by the Secretary or an
Assistant Secretary of such Person to have been duly adopted by the Board of
Directors of such Person and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
Business Day: The term "Business Day" shall mean a day other than a
Saturday, a Sunday or a day in The City of New York, New York, Houston, Texas
or San Francisco, California on which banking institutions are authorized or
obligated by law, regulation or executive order to be closed.
Capital Stock: The term "Capital Stock" shall mean, with respect to
any Person, any and all shares, interests, participations or other equivalents
(however designated) of capital stock, partnership interests or other undivided
ownership interests in such Person, and warrants, options and similar rights
(other than debt securities convertible into capital stock) to acquire such
capital stock, partnership interests or other undivided ownership interests in
such Person.
Capitalized Lease Obligations: The term "Capitalized Lease
Obligations" shall mean, with respect to any Person, the obligations of such
Person to pay rent or other amounts under any lease of (or other agreement
conveying the right to use) real or personal property, which obligations are
required to be classified and accounted for as a capital lease obligation on a
balance sheet of such Person under GAAP and, for purposes of this Indenture,
the amount of such obligations at any date shall be the amount of the liability
thereof at such date, determined in accordance with GAAP.
CARIFA Financing: The term "CARIFA Financing" shall mean the
$60,000,000 CBI Industrial Revenue Bonds, Caribbean Basin Projects Financing
Authority CBI Industrial Revenue Bonds 1991 Series A and Series B (Alumina
Partners of Jamaica Project) issued pursuant to that certain Bond Purchase
Agreement dated as of December 1, 1991, among the Caribbean Basin Projects
Financing Authority, Alumina Partners of Jamaica and PaineWebber Incorporated
of Puerto Rico, and any letters of credit supporting such bonds.
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Cash Equivalents: The term "Cash Equivalents" shall mean, with
respect to any Person:
(A) Government Securities having maturities of not more than one year
from the date of acquisition,
(B) certificates of deposit of any commercial bank incorporated under
the laws of the United States, or any state, territory or commonwealth thereof,
of recognized standing having capital and unimpaired surplus in excess of
$100,000,000 and whose short-term commercial paper rating at the time of
acquisition is at least A-2 or the equivalent by Standard & Poor's Corporation
or at least P-2 or the equivalent by Moody's Investors Services, Inc. (any such
bank, an "Approved Bank"), which certificates of deposit have maturities of not
more than one year from the date of acquisition,
(C) repurchase obligations with a term of not more than 31 days for
underlying securities of the types described in clauses (A) , (B) and (D) of
this definition entered into with any Approved Bank,
(D) commercial paper or finance company paper issued by any Person
incorporated under the laws of the United States, or any state thereof, and
rated at least A-2 or the equivalent by Standard & Poor's Corporation or at
least P-2 or the equivalent by Moody's Investors Services, Inc., and in each
case maturing not more than one year from the date of acquisition, and
(E) investments in money market funds that are registered under the
Investment Company Act of 1940, which have net assets of at least $100,000,000
and at least 85% of whose assets consist of investments or other obligations of
the type described in clauses (A) through (D) above.
Center for Technology: The term "Center for Technology" shall mean the
Company's facilities located in Pleasanton, California.
Commission: The term "Commission" shall mean the United States
Securities and Exchange Commission.
Common Stock: The term "Common Stock" shall mean the Company's common
stock, par value $.01 per share, as it exists on the date of this Indenture.
Company: The term "Company" shall mean Kaiser Aluminum & Chemical
Corporation, a Delaware corporation, and, subject to the provisions of Article
Eleven, shall also include its successors and assigns.
Consolidated Amortization Expense: The term "Consolidated Amortization
Expense" shall mean, with respect to any Person for any period, the
amortization expense (including without limitation goodwill, deferred financing
charges and other intangible items) of such Person and its Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP.
Consolidated Cash Flow Available for Fixed Charges: The term
"Consolidated Cash Flow Available for Fixed Charges" shall mean (without
duplication), with respect to any Person for any period, the sum of the amounts
for such period of (i) Consolidated Net Income, (ii) Consolidated Fixed
Charges, (iii) Consolidated Income Tax Expense (other than income taxes
(including credits) with respect to items of Net Income not included in the
definition of Consolidated Net Income), (iv) Consolidated Depreciation Expense,
(v) Consolidated Amortization Expense and (vi) any other non-cash items
reducing Consolidated Net Income, minus any non-cash items increasing
Consolidated Net Income, all as determined on a consolidated basis for such
Person and its Subsidiaries in accordance with GAAP; provided, however,
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<PAGE> 20
that (X) if, during such period, such Person or any of its Subsidiaries shall
have engaged in any Asset Sale, Consolidated Cash Flow Available for Fixed
Charges of such Person and its Subsidiaries for such period shall be reduced by
an amount equal to the Consolidated Cash Flow Available for Fixed Charges (if
positive) directly attributable to the assets that are the subject of such
Asset Sale for such period, or increased by an amount equal to the Consolidated
Cash Flow Available for Fixed Charges (if negative) directly attributable to
the assets that are the subject of such Asset Sale for such period and (y) if,
during such period, such Person or any of its Subsidiaries shall have acquired
any material assets out of the ordinary course of business, Consolidated Cash
Flow Available for Fixed Charges shall be calculated on a pro forma basis as if
such asset acquisition and related financing had occurred at the beginning of
such period.
Consolidated Depreciation Expense: The term "Consolidated Depreciation
Expense" shall mean, with respect to any Person for any period, the
depreciation and depletion expense (including without limitation the
amortization expense associated with Capitalized Lease Obligations) of such
Person and its Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP.
Consolidated Fixed Charge Coverage Ratio: The term "Consolidated Fixed
Charge Coverage Ratio" shall mean, with respect to any Person as of the date of
the transactions giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date"), the ratio of (i) the aggregate
amount of Consolidated Cash Flow Available for Fixed Charges of such Person for
the four fiscal quarters immediately prior to the Transaction Date for which
financial information in respect thereof is available to (ii) the aggregate
Consolidated Fixed Charges of such Person for the fiscal quarter in which the
Transaction Date occurs and the three fiscal quarters immediately subsequent to
such fiscal quarter to be accrued during such period (based upon the pro forma
amount of Indebtedness to be outstanding on the Transaction Date), assuming for
the purposes of this measurement that the interest rates on which floating
interest rate obligations of such Person are based equal such rates in effect
on the Transaction Date; provided, however, that if the Company or any of its
Subsidiaries has incurred Interest Hedging Obligations which would have the
effect of changing the interest rate on any Indebtedness for such four quarter
period (or any portion thereof), the resulting rate shall be used for such four
quarter period or portion thereof; and provided, further, that any Consolidated
Fixed Charges with respect to Indebtedness incurred or for which such Person
otherwise becomes liable during the fiscal quarter in which the Transaction
Date occurs shall be calculated as if such Indebtedness was so incurred on the
first day of the fiscal quarter in which the Transaction Date occurs.
Consolidated Fixed Charges: The term "Consolidated Fixed Charges"
shall mean (without duplication), with respect to any Person for any period,
the sum of:
(i) the interest expense of such Person and its Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP (less, to
the extent included therein, (a) the portion of the interest expense required
to be funded or economically borne by the Company's minority partners in the
Company's joint ventures and (b) interest expense related to the PIK Note),
(ii) all fees, commissions, discounts and other charges of such
Person and its Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP, with respect to letters of credit and bankers'
acceptances and the costs (net of benefits) associated with Interest Hedging
Obligations,
(iii) the aggregate amount of dividends paid or other similar
distributions made by such Person and its Subsidiaries during such period with
respect to preferred stock (including preference stock) of such Person or its
Subsidiaries determined on a consolidated basis in accordance with GAAP, and
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<PAGE> 21
(iv) amortization or write-off of debt discount in connection with
any Indebtedness of such Person and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP (excluding, to the extent otherwise
included, (A) the amortization or write-off of any deferred financing costs in
connection with the amendment or refinancing of the Credit Agreement and the
Old Credit Agreement and/or the repurchase, defeasance or redemption of the 14
1/4% Senior Subordinated Notes and (B) the amortization or write-off of any
debt discount and the premiums paid in excess of the principal amount in
connection with the repurchase, defeasance or redemption of the 14 1/4% Senior
Subordinated Notes).
Consolidated Income Tax Expense: The term "Consolidated Income Tax
Expense" shall mean (without duplication), with respect to any Person for any
period, the aggregate of the income tax expense (net of applicable credits) of
such Person and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.
Consolidated Net Income: The term "Consolidated Net Income" shall
mean, with respect to any Person for any period, the aggregate of the Net
Income of such Person and its Subsidiaries for such period taken as a single
accounting period, all as determined on a consolidated basis in accordance with
GAAP, excluding (in each case to the extent otherwise included):
(i) extraordinary gains but not extraordinary losses and excluding
gains from extinguishment of debt,
(ii) the Net Income of any Person that is not a Subsidiary of such
Person or that is accounted for on the equity method of accounting, except to
the extent of the amount of dividends or other distributions (other than
dividends or distributions of Capital Stock) actually paid to such Person or
any of its Subsidiaries by such other Person during such period,
(iii) except to the extent included by clause (ii), the Net Income of
any Person accrued prior to the date it becomes a Subsidiary of such Person or
is merged into or consolidated with such Person or any of its Subsidiaries or
that Person's assets are acquired by such Person or any of its Subsidiaries,
(iv) the Net Income of any Subsidiary of such Person during such
period (A) to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary of such Net Income is not at the time
permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or (B) in the case of a foreign Subsidiary or a
Subsidiary with significant foreign source income, to the extent such Net
Income has not been distributed to such Person and such distribution would
result in a material tax liability not otherwise deducted from the calculation
of Consolidated Net Income whether or not such deduction is required by GAAP,
(v) net after tax gains from Asset Sales (but not excluding the net
after tax losses from Asset Sales) and
(vi) interest income arising from the Existing Intercompany Note,
except to the extent such interest income is actually received by the Company
in cash;
provided, however, that:
(1) in determining Consolidated Net Income with respect to the
Company there shall be disregarded (a) any charge with respect to premiums paid
in excess of the principal amount in connection with the repurchase, defeasance
or redemption of the 14 1/4% Senior Subordinated Notes and (b) the
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<PAGE> 22
amortization or write-off of any unamortized deferred financing costs and debt
discount (other than original issue discount with respect to Indebtedness
Incurred after the date hereof) in connection with the amendment or refinancing
of the Credit Agreement and the Old Credit Agreement and/or the repurchase,
defeasance or redemption of the 14 1/4% Senior Subordinated Notes, and
(2) the Net Income of each of the Specified Parties otherwise
included in the Consolidated Net Income of the Company shall not be subject to
any of the limitations contained in clauses (ii) and (iv)(B) of this definition
so long as the Company's cash management and intercompany practices with
respect to such entity, as the case may be, for such period are consistent with
past practice.
Consolidated Net Worth: The term "Consolidated Net Worth" shall mean,
with respect to any Person as of any date, the total stockholders' equity of
such Person as of such date plus the amount of Indebtedness outstanding under
the PIK Note as of such date, less, to the extent otherwise included, amounts
attributable to Redeemable Stock and, in the case of the Company, the amount
attributable to the Existing Intercompany Note, in each case determined on a
consolidated basis in accordance with GAAP; provided, however, that in
determining Consolidated Net Worth with respect to the Company there shall be
disregarded:
(i) any charge with respect to premiums paid in excess of the
principal amount in connection with the repurchase, defeasance or redemption of
the 14 1/4% Senior Subordinated Notes and
(ii) the amortization or write-off of any unamortized deferred
financing costs or debt discount (other than original issue discount with
respect to Indebtedness Incurred after the date hereof) in connection with the
amendment or refinancing of the Credit Agreement and the Old Credit Agreement
and/or the repurchase, defeasance or redemption of the 14 1/4% Senior
Subordinated Notes.
Credit Agreement: The term "Credit Agreement" shall mean that certain
Credit Agreement, dated as of February 15, 1994, among the Company, KAC, the
financial institutions that are, or from time to time become, parties thereto,
BankAmerica Business Credit, Inc., as agent, including all related notes,
collateral documents and guarantees, and any agreement (including all related
notes, collateral documents and guarantees) pursuant to which Indebtedness
thereunder has been Refinanced (or successively Refinanced), in each case as
any of the same has been or may be amended, supplemented, restated,
restructured or otherwise modified from time to time (in each case, in whole or
in part).
Currency Hedging Obligation: The term "Currency Hedging Obligation"
with respect to any Person shall mean the monetary obligations of such Person
pursuant to any foreign exchange contract, currency swap agreement, option or
futures contract, forward contract or other similar agreement or arrangement
designed to protect such Person or any of its Subsidiaries against fluctuations
in currency values.
Defaulting Equity Owner: The term "Defaulting Equity Owner" shall
mean, with respect to any Permitted Entity, any Equity Owner who causes an
Equity Owner Default.
Equity Owner: The term "Equity Owner" shall mean, with respect to any
Permitted Entity, any holder of an Ownership Interest in such Permitted Entity.
Equity Owner Default: The term "Equity Owner Default" shall mean,
with respect to any issuance of Permitted Entity Securities to the Equity
Owners of a Permitted Entity, the failure by one or more of such Equity Owners
to acquire such Permitted Entity Securities in an amount corresponding to at
least its Ownership Interest of such Permitted Entity and, as a result thereof,
such Equity Owner
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becomes subject to, directly or indirectly, a dilution of its interest in the
future net income of such Permitted Entity and/or a penalty pursuant to the
terms of the governing documents of such Permitted Entity.
Event of Default: The term "Event of Default" shall mean any event
specified in Section 6.01, continued for the period of time, if any, and after
the giving of notice, if any, therein designated.
Exchange Act: The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated by
the Securities and Exchange Commission thereunder.
Existing Intercompany Note: The term "Existing Intercompany Note"
shall mean the Non-Negotiable Intercompany Note, dated December 21, 1989,
issued by KAC to the Company in an initial principal amount of $818,585,280, as
such Non-Negotiable Intercompany Note may be amended.
Fair Market Value: The term "Fair Market Value" shall mean, with
respect to any property other than cash, the fair market value of such property
as determined in good faith by the Board of Directors of the Company, whose
determination shall be evidenced by a Board Resolution; provided, however,
that, in the event the Company makes a payment in the form of or otherwise
transfers property other than cash to, or receives property other than cash
from, an Affiliate in an amount in excess of $10,000,000, the Company, in
addition, shall have received an opinion from an independent investment banking
firm of national standing selected by the Company to the effect that the Board
of Director's determination of fair market value is fair.
GAAP: The term "GAAP" shall mean generally accepted accounting
principles as in effect on December 31, 1992, and used in the preparation of
the Company's consolidated balance sheet at such date and the Company's
statements of consolidated income and cash flows for the year then ended, but
in any event (i) giving effect to, but excluding the effect of any one-time
charge related to the implementation of, Statement of Financial Accounting
Standards No. 106 (Employers' Accounting for Postretirement Benefits Other Than
Pensions) and (ii) giving effect to Statement of Financial Accounting Standards
No. 109 (Accounting for Income Taxes).
Government Securities: The term "Government Securities" shall mean
direct obligations of, or obligations guaranteed by, the United States of
America for the payment of which guarantee or obligations the full faith and
credit of the United States of America is pledged.
Guarantee: The term "Guarantee" shall mean, with respect to any
Subsidiary Guarantor, the guarantee of such Subsidiary Guarantor set forth in
Article Fifteen.
Improvements: The term "Improvements" shall mean any accessories,
accessions, additions, attachments, substitutions, replacements, improvements,
parts and other property now or hereafter affixed to any U.S. Fixed Assets or
used in connection therewith.
Indebtedness: The term "Indebtedness" shall mean, with respect to any
Person at any date, any of the following (without duplication):
(a) the principal amount of all obligations (unconditional or
contingent) of such Person for borrowed money (whether or not recourse is to
the whole of the assets of such person or only to a portion thereof) and the
principal amount of all obligations (unconditional or contingent) of such
Person evidenced
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<PAGE> 24
by debentures, notes or other similar instruments (including, without
limitation, reimbursement obligations with respect to letters of credit and
bankers' acceptances);
(b) all obligations of such Person to pay the deferred purchase price
of property or services, except (X) accounts payable and other current
liabilities arising in the ordinary course of business and (y) compensation,
pension obligations and other obligations arising from employee benefits and
employee arrangements;
(c) Capitalized Lease Obligations of such Person;
(d) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed or guaranteed by such
Person;
(e) preferred stock (including preference stock) that is Redeemable
Stock (the amount of the Indebtedness in respect of such preferred stock to be
equal to the aggregate liquidation value thereof);
(f) all Indebtedness of others guaranteed by such Person;
(g) pension obligations and other similar obligations arising from
employee benefits, to the extent unfunded and assumed by such Person after the
date of the initial issuance of the Notes in the acquisition, by such Person,
of the assets or Capital Stock of another Person ("Assumed Pension
Obligations"); and
(h) all obligations under Refinancing Sale and Leaseback Transactions;
and the amounts thereof shall be the outstanding balance of any such
unconditional obligations as described in clauses (a) through (f) (other than
clause (d)), and the maximum liability of any such contingent obligations at
such date (other than with respect to clause (d)) and, in the case of clause
(d), the lesser of the fair market value at such date of any asset subject to
any Lien securing the Indebtedness of others and the amount of the Indebtedness
secured and, in the case of clause (g), the amount of Assumed Pension
Obligations shall be the amount determined by the Company in good faith as
evidenced by a certificate of the Chief Financial Officer of the Company
delivered to the Trustee and, in the case of clause (h), the Attributable Debt
with respect to such Refinancing Sale and Leaseback Transactions; provided,
however, that Indebtedness shall not include:
(A) the obligations of such Person and/or any of its Subsidiaries to
purchase or sell goods, services or technology utilized in their bauxite,
aluminum and alumina business and related extensions thereof, including on a
take-or-pay basis, pursuant to agreements entered into in the ordinary course
of business consistent with past practice, or to fund or guarantee the
obligations of National Refractories & Minerals Corporation or any of its
Affiliates in an aggregate principal amount at any time outstanding not
exceeding $7,500,000;
(B) obligations of such Person arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business, provided that such
obligations are extinguished within two Business Days of their incurrence (or,
in the case of foreign overdrafts, within five Business Days of their
incurrence) unless covered by an overdraft credit line;
(C) obligations of such Person resulting from the endorsement of
negotiable instruments for collection in the ordinary course of business;
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(D) Indebtedness consisting of letters of credit to the extent
collateralized by cash or Cash Equivalents; and
(E) Liens on assets of KAAC granted to secure Indebtedness of QAL,
provided that such Liens are (i) in existence on the date of this Indenture,
(ii) similar in all material respects to Liens in existence on the date of this
Indenture or (iii) not on assets consisting of cash, Cash Equivalents or fixed
assets and such assets are used or to be used in connection with the business
of QAL.
Indenture: The term "Indenture" shall mean this instrument as
originally executed, or, if amended or supplemented as herein provided, as so
amended or supplemented.
Interest Hedging Obligation: The term "Interest Hedging Obligation"
with respect to any Person shall mean the monetary obligations of such Person
pursuant to any interest rate swap agreement, interest rate collar agreement,
interest rate cap agreement, options or futures contract, forward contract or
other agreement or arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates.
KAAC: The term "KAAC" shall mean Kaiser Alumina Australia Corporation,
a Delaware corporation, and its successors.
KAC: The term "KAC" shall mean Kaiser Aluminum Corporation, a Delaware
corporation, and its successors.
KFC: The term "KFC" shall mean Kaiser Finance Corporation, a Delaware
corporation, and its successors.
KJC: The term "KJC" shall mean Kaiser Jamaica Corporation, a Delaware
corporation, and its successors.
Lien: The term "Lien" shall mean, with respect to any asset of any
Person, any mortgage, lien, pledge, charge, security interest or encumbrance of
any kind in respect of such asset, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
Maximum Secured Amount: The term "Maximum Secured Amount" shall mean,
at any time (i) $300,000,000, plus (ii) Net Betterments at such time, plus
(iii) the outstanding amount of Indebtedness relating to the CARIFA Financing
secured by a Lien on Permitted Collateral, but in no event more than
$43,000,000, minus (iv) in the event of a sale of Permitted Collateral which is
subject to a Lien permitted by clause (i) of Section 4.11(b) of this Indenture,
the amount, if any, of the net proceeds thereof required to be applied to a
permanent repayment or commitment reduction in respect of the Indebtedness
secured by such Lien, minus (v) in the event of the Refinancing of any
Indebtedness secured by a Lien permitted by clause (i) of Section 4.11(b), the
lesser of (A) the amount of Indebtedness, if any, not secured by Permitted
Collateral which Refinances, in whole or in part, such Indebtedness secured by
a Lien permitted by clause (i) of Section 4.11(b) of this Indenture and (B) the
amount, if any, by which the Maximum Secured Amount immediately prior to such
Refinancing, in whole or in part, of such Indebtedness secured by a Lien
permitted by clause (i) of Section 4.11(b) of this Indenture exceeds the
aggregate amount of Indebtedness which is secured by a Lien on Permitted
Collateral permitted by clause (i) or clause (viii)(a) of Section 4.11(b) of
this Indenture after giving effect to such Refinancing.
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MAXXAM: The term "MAXXAM" shall mean MAXXAM Inc., a Delaware
corporation, and its successors.
Net Betterments: The term "Net Betterments" shall mean the amount, if
any, by which capital expenditures (determined in accordance with GAAP) by the
Company or any of its Subsidiaries in respect of the Permitted Collateral on a
cumulative basis for the period from the date hereof through the date of
determination exceeds depreciation (determined in accordance with GAAP) in
respect of the Permitted Collateral on a cumulative basis for such period
(provided, however, that with respect to any Permitted Collateral existing at
the time of the merger of a subsidiary of MAXXAM with and into KAC on October
28, 1988 (the "Merger"), the depreciation shall be the historical depreciation
before adjustments to reflect the acquisition of the Company in the Merger),
but in no event less than zero, provided, that in the event any Permitted
Collateral ceases to constitute Permitted Collateral in accordance with the
definition thereof, only the amount of Net Betterments in respect of such
Permitted Collateral at such time shall be included in any subsequent
calculation of Net Betterments and provided, further, that (a) Improvements
which are subject to a Lien permitted by clause (iv), (v) or (vi) of Section
4.11(b) and (b) U.S. Fixed Assets to the extent subject to a Lien permitted by
clause (ix) of Section 4.11(b) shall not be included in the determination of
Net Betterments.
Net Cash Proceeds: The term "Net Cash Proceeds" shall mean cash
payments received (but if received in a currency other than United States
dollars, such payments shall not be deemed received until the earliest time at
which such currency is, or could freely be, converted into United States
dollars) by or on behalf of the Company and/or any of its Subsidiaries
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise or the cash
realization of any non-cash proceeds of any Asset Sale, but, in each case, only
as and when, and to the extent, received) from an Asset Sale, in each case and
without duplication, net of:
(i) all legal, title and recording tax expenses, commissions,
consulting fees, investment banking, broker's and accounting fees and expenses
and fees and expenses incurred in obtaining regulatory approvals in connection
with such Asset Sale,
(ii) the amounts of (A) any repayments of debt secured, directly or
indirectly, by Liens on the assets which are the subject of such Asset Sale or
(B) any repayments of debt associated with such assets which is due by reason
of such Asset Sale (i.e., such disposition is permitted by the terms of the
instruments evidencing or applicable to such debt, or by the terms of a consent
granted thereunder, on the condition that the proceeds (or portion thereof) of
such disposition be applied to such debt), provided, that this clause (B) shall
not apply with respect to any U.S. Fixed Assets which do not constitute
Permitted Collateral, and, in the case of clauses (A) and (B), other fees,
expenses and other expenditures, in each case, reasonably incurred as a
consequence of such repayment of debt (whether or not such fees, expenses or
expenditures are then due and payable or made, as the case may be),
(iii) all amounts deemed appropriate by the Company (as evidenced by
a signed certificate of the Chief Financial Officer of the Company delivered to
the Trustee) to be provided as a reserve, in accordance with GAAP ("GAAP
Reserves"), against any liabilities associated with such assets which are the
subject of such Asset Sale,
(iv) all foreign, federal, state and local taxes payable (including
taxes reasonably estimated to be payable) in connection with or as a result of
such Asset Sale, and
(v) with respect to Asset Sales by Subsidiaries of the Company, the
portion of such cash payments attributable to Persons holding a minority
interest in such Subsidiary;
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provided, in each such case, that such fees and expenses and other amounts are
not payable to an Affiliate of the Company (except for amounts payable pursuant
to the Tax Sharing Agreements), and provided, further, that required
redemptions of existing preferred stock (including preference stock) of the
Company outstanding on the date hereof or issued pursuant to collective
bargaining arrangements and related employee benefit arrangements in effect on
the date hereof, in each case, from Persons other than Affiliates of the
Company, shall be deemed to be a fee, expense or other expenditure of such
Asset Sale.
Notwithstanding the foregoing, Net Cash Proceeds shall not include proceeds
received in a foreign jurisdiction from an Asset Sale of an asset located
outside the United States to the extent:
(i) such proceeds cannot under applicable law be transferred to the
United States or
(ii) such transfer would result (in the good faith determination of
the Board of Directors of the Company set forth in a Board Resolution) in a
foreign tax liability that would be materially greater than if such Asset Sale
occurred in the United States;
provided that if, as, and to the extent that any of such proceeds may lawfully
be (in the case of clause (i)) or are (in the case of clause (ii)) transferred
to the United States, such proceeds shall be deemed to be cash payments that
are subject to the terms of this definition of Net Cash Proceeds. Subject to
the provisions of the next preceding sentence, Net Cash Proceeds shall also
include:
(i) cash distributions actually received by or on behalf of the
Company or any of its Subsidiaries from any Non-Affiliate Joint Venture of the
Company representing the proceeds of a transaction by such Non-Affiliate Joint
Venture that would constitute an Asset Sale if such Non-Affiliate Joint Venture
were a Subsidiary of the Company and
(ii) the amount of any reversal of GAAP Reserves (but only as and
when, and to the extent, reversed) which amount is otherwise a deduction from
Net Cash Proceeds.
Net Income: The term "Net Income" shall mean, with respect to any
Person for any period, the net income (loss) of such Person for such period
determined in accordance with GAAP.
Non-Affiliate Joint Venture: The term "Non-Affiliate Joint Venture"
shall mean any joint venture, partnership or other Person (other than the
Company or a Subsidiary of the Company) in which the Company and/or its
Subsidiaries have an ownership interest equal to or greater than 5% and in
which no Affiliate of the Company has a direct or an indirect ownership
interest other than by virtue of the direct or indirect ownership interest in
such Non-Affiliate Joint Venture held (in the aggregate) by the Company and/or
one or more of its Subsidiaries, provided that such Non-Affiliate Joint Venture
is engaged in one or more of the lines of business in which the Company or its
Subsidiaries or its Non- Affiliate Joint Ventures are engaged in as of the date
of this Indenture or reasonably related extensions of such lines.
Non-Defaulting Equity Owner: The term "Non-Defaulting Equity Owner"
shall mean, with respect to any Permitted Entity, any Equity Owner that is not
a Defaulting Equity Owner.
Non-Recourse Guarantor: The term "Non-Recourse Guarantor" shall mean
a Subsidiary of the Company that guarantees any Indebtedness under the Credit
Agreement, provided that such guarantee is non-recourse to the assets of such
Subsidiary other than to intercompany Indebtedness owed, or from time to time
owing, by the Company to such Subsidiary, and all monetary proceeds therefrom.
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Note or Notes; outstanding: The terms "Note" or "Notes" shall mean
any Note or Notes, as the case may be, authenticated and delivered under this
Indenture.
The term "outstanding," when used with reference to Notes, shall,
subject to the provisions of Section 8.04, mean, as of any particular time, all
Notes authenticated and delivered by the Trustee under this Indenture, except
(a) Notes theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(b) Notes, or portions thereof, for which the payment of principal,
interest, any redemption price, any Change of Control Purchase Price or any
Asset Sale Purchase Price in the necessary amount shall have been deposited in
trust with the Trustee or with any paying agent (other than the Company) or
shall have been set aside and segregated in trust by the Company (if the
Company shall act as its own paying agent), provided that such Notes shall have
reached their stated maturity or, if such Notes are to be or may be redeemed or
purchased prior to the maturity thereof, notice of such redemption or purchase
shall have been given as in Article Three provided, or provision satisfactory
to the Trustee shall have been made for giving such notice; and
(c) Notes in lieu of or in substitution for which other Notes shall
have been authenticated and delivered pursuant to the terms of Section 2.07,
unless proof satisfactory to the Trustee is presented that any such Notes are
held by bona fide holders in due course.
Noteholder; registered holder: The terms "noteholder," "holder of
Notes," "registered holder" or other similar term shall mean any person who
shall at the time be the registered holder of any Note or Notes on the registry
books of the Company kept for that purpose in accordance with the provisions of
this Indenture.
Officers' Certificate: The term "Officers' Certificate" shall mean a
certificate of the Company signed on behalf of the Company by the Chairman of
the Board, the President or any Vice President and by the Chief Financial
Officer, the Controller, the Treasurer, an Assistant Treasurer, the Secretary
or an Assistant Secretary of the Company. Each such certificate shall include
the statements provided for in Section 14.05 if and to the extent required by
the provisions thereof.
Old Credit Agreement: The term "Old Credit Agreement" shall mean that
certain Credit Agreement, dated as of December 13, 1989, among the Company,
KAC, the financial institutions party thereto, Bank of America National Trust
and Savings Association, as agent, and Mellon Bank, N.A., as collateral agent,
which was replaced by the Credit Agreement.
Opinion of Counsel: The term "Opinion of Counsel" shall mean an
opinion in writing signed by legal counsel, who may be an employee of, or of
counsel to, the Company and who shall be reasonably satisfactory to the
Trustee. Each such opinion shall include the statements provided for in
Section 14.05 if and to the extent required by the provisions thereof.
Ownership Interest: The term "Ownership Interest" shall mean, with
respect to any Equity Owner of a Permitted Entity at the time of the
determination thereof, the proportion held at such time by such Equity Owner of
the outstanding Permitted Entity Securities of such Permitted Entity that are
last entitled to payment upon liquidation or dissolution as provided in the
governing instruments of such Permitted Entity or pursuant to an agreement
among the Equity Owners of such Permitted Entity.
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<PAGE> 29
Permitted Collateral: The term "Permitted Collateral" shall mean
real property (as set forth in Schedule B hereto), plant and equipment of the
Company or any of its Subsidiaries located in the United States of America
which, as of the date of issuance of the Notes, secures Indebtedness under the
Credit Agreement (whether or not the Liens on such real property, plant or
equipment are perfected at such time), together with any Improvements thereto
or thereon, any real property that is contiguous to or structurally related to
such real property (the "Contiguous Property") and any real property, plant or
equipment, whether owned on the date of the issuance of the Notes or thereafter
acquired, located or used at any time after the date of issuance of the Notes
at a facility (other than the Company's Gramercy alumina refinery) owned,
leased, occupied or used by the Company or any of its Subsidiaries as of the
date of issuance of the Notes or on any Contiguous Property, and any proceeds
thereof, provided, that notwithstanding anything to the contrary contained in
this Indenture, any Permitted Collateral which is released from all Liens
thereon securing Indebtedness and which does not become subject to a new Lien
within 60 days of such release securing Indebtedness which Refinances any of
the Indebtedness (in whole or in part) previously secured by such Permitted
Collateral shall not thereafter constitute "Permitted Collateral" under the
Indenture.
Permitted Dividend Encumbrance: The term "Permitted Dividend
Encumbrance" shall mean, with respect to any Person, any consensual
encumbrances or restrictions on the ability of such Person to pay dividends or
make any other distributions on its Capital Stock or pay any Indebtedness owed
to the Company or any Subsidiaries of the Company (or, in the case of a
Permitted Entity, to its Equity Owners) or to make loans or advances or
transfer any of its assets to the Company or any Subsidiary of the Company (or,
in the case of a Permitted Entity, to its Equity Owners) existing under or by
reason of any of:
(i) this Indenture;
(ii) Indebtedness permitted under Section 4.10(b)(ii);
(iii) Indebtedness or other obligations in existence on the date of
this Indenture and customary rights of first refusal with respect to the
Company's and its Subsidiaries' interests in their respective Subsidiaries,
Non-Affiliate Joint Ventures and Permitted Entities;
(iv) applicable law and agreements with foreign governments with
respect to assets located in their jurisdictions;
(v) (A) customary provisions restricting (i) the subletting or
assignment of any lease or (ii) the transfer of copyrighted or patented
materials, (B) provisions in agreements that restrict the assignment of such
agreements or rights thereunder or (C) provisions of a customary nature
contained in the terms of Capital Stock restricting the payment of dividends
and the making of distributions on Capital Stock;
(vi) Indebtedness or other obligations of any other Person acquired
(whether pursuant to a purchase of stock or assets) (including any
Non-Affiliate Joint Venture of the Company or Permitted Entity that becomes a
Subsidiary of the Company) or applicable to any assets at the time such Person
or assets were acquired by the Company, its Subsidiaries or a Permitted Entity,
in each case which Indebtedness and obligations (A) were not created in
anticipation of such acquired Person becoming a Subsidiary of the Company or a
Permitted Entity, as the case may be, or such assets being acquired by the
Company, its Subsidiaries or such Permitted Entity, as the case may be, and (B)
which encumbrances and restrictions are not applicable to any Person or the
property or assets of any Person other than the Person or the property or
assets of the Person so acquired (including the Capital Stock of such Person)
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<PAGE> 30
or any newly organized entity formed to effect such acquisition and, in each
case, the monetary proceeds thereof;
(vii) encumbrances and restrictions with respect to such Person
imposed in connection with an agreement for the sale or disposition of such
Person or its assets;
(viii) encumbrances and restrictions applicable only to (A) Alpart
and its assets and Capital Stock with respect to Indebtedness permitted to be
Incurred by Alpart pursuant to Section 4.10(a), (B) Alpart, KJC and AJI and
their respective assets and Capital Stock with respect to Indebtedness
permitted to be Incurred pursuant to Section 4.10(b)(iii), (C) KAAC and its
assets and Capital Stock with respect to Indebtedness permitted to be Incurred
pursuant to Section 4.10(b)(iv) and (D) the Person that Incurred such
Indebtedness and such Person's assets and Capital Stock with respect to
Indebtedness permitted to be Incurred pursuant to Section 4.10(b)(viii) or
(ix); in each case provided, that the Board of Directors of the Company has
determined in good faith that such encumbrances and restrictions would not
singly or in the aggregate have a materially adverse effect on the holders of
the Notes;
(ix) Indebtedness of a Person that was a Subsidiary at the time of
Incurrence and the Incurrence of which Indebtedness is permitted by Section
4.10, provided that such encumbrances and restrictions apply only to such
Subsidiary and its assets, and provided, further, that the Board of Directors
of the Company has determined in good faith, at the time of creation of each
such encumbrance or restriction, that such encumbrances and restrictions would
not singly or in the aggregate have a materially adverse effect on the holders
of the Notes;
(x) the subordination of (A) any Indebtedness owed by the Company or
any of its Subsidiaries to the Company or any other Subsidiary to (B) any other
Indebtedness of the Company or any of its Subsidiaries, provided (A) such other
Indebtedness is permitted under this Indenture and (B) the Board of Directors
of the Company has determined in good faith, at the time of creation of each
such encumbrance or restriction, that such encumbrances and restrictions would
not singly or in the aggregate have a materially adverse effect on the holders
of the Notes;
(xi) the subordination of (A) any Indebtedness owed by a Permitted
Entity to its Equity Owners or any other Person to (B) any other Indebtedness
of such Permitted Entity, provided (I) such other Indebtedness, at the time of
the Incurrence thereof, is permitted by the definition of Permitted Entity and
(II) the Board of Directors of the Company has determined in good faith, at the
time of creation of each such encumbrance or restriction, that such
encumbrances and restrictions would not singly or in the aggregate have a
materially adverse effect on the holders of the Notes;
(xii) Refinancing Indebtedness that is otherwise permitted in
connection with any Refinanced Indebtedness,provided that, in the case of all
Refinancing Indebtedness other than Refinancing Indebtedness Incurred with
respect to Indebtedness permitted under Section 4.10(b)(ii), any such
encumbrances or restrictions shall not be materially less favorable to the
holders of the Notes; and
(xiii) the sale or other disposition of property subject to a Lien
securing Indebtedness, provided that such Lien and such Indebtedness are
otherwise permitted by this Indenture.
Permitted Entity: The term "Permitted Entity" shall mean any Person
(other than a Subsidiary Guarantor) designated as such by a Board Resolution
and as to which:
(i) the Company, any Subsidiary Guarantor or any Permitted Entity own
all or a portion of the Permitted Entity Securities of such Person;
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(ii) no more than 10 unaffiliated Equity Owners own of record any
Permitted Entity Securities of such Person;
(iii) at all times, each Equity Owner owns a proportion of each class
of Permitted Entity Securities of such Person outstanding equal to such Equity
Owner's Ownership Interest at such time, other than as a result of an Equity
Owner Default;
(iv) no Indebtedness or preferred stock (including preference stock)
is or has been Incurred by such Person that is outstanding other than (X)
Permitted Entity Securities held by Equity Owners and/or (y) if such Person is
a Subsidiary of the Company, Indebtedness permitted to be Incurred by such
Subsidiary at the time of the Incurrence thereof under Sections 4.10(b)(v) and
4.10(b)(xiii);
(v) there exist no consensual encumbrances or restrictions on the
ability of such Person to (X) pay dividends or make any other distributions to
its Non-Defaulting Equity Owners or (y) make loans or advances or transfer any
of its assets to its Non-Defaulting Equity Owners, in each case other than
Permitted Dividend Encumbrances of such Permitted Entity;
(vi) the Company, any Subsidiary Guarantor or any Permitted Entity
has the right at any time (whether by agreement, operation of law or otherwise)
to (A) require the Permitted Entity that it owns an Ownership Interest in to
dissolve, liquidate or wind up its affairs (subject to any right of the other
Equity Owners and/or such Permitted Entity to acquire all of the Permitted
Entity Securities owned by such Equity Owner) and, subject to applicable law,
to distribute its remaining assets to its Equity Owners after payment to
creditors or (B) have all of the Permitted Entity Securities that it owns
purchased by such Permitted Entity and/or other Equity Owners; and
(vii) the business engaged by such Person is one in which the Company
or its Subsidiaries or its Non-Affiliate Joint Ventures were engaged on the
date of this Indenture or reasonably related thereto or is the business of
holding or disposing of Permitted Entity Securities.
Permitted Entity Securities: The term "Permitted Entity Securities"
shall mean, with respect to any Permitted Entity, any Capital Stock or
Indebtedness (whether or not a security) of such Permitted Entity, other than
Indebtedness permitted to be Incurred by such Permitted Entity pursuant to
clause (iv)(y) of the definition of Permitted Entity, but in any event
including Permitted Indebtedness described in clause (b) of the definition
thereof.
Permitted Indebtedness: The term "Permitted Indebtedness" shall mean:
(a) Indebtedness and preferred stock (including preference stock) of
the Company and its Subsidiaries existing on the date of this Indenture,
including, but not limited to, the Subordinated Notes;
(b) Indebtedness (including Redeemable Stock) owed or issued by the
Company to a Subsidiary or owed or issued by a Subsidiary to the Company, any
other Subsidiary of the Company or to any other holder of Capital Stock of such
Subsidiary in proportion to such holder's ownership interest in such
Subsidiary;
(c) Indebtedness and preferred stock (including preference stock) of
a Permitted Entity to the extent not prohibited by clause (iii) or clause
(iv)(X) of the definition thereof;
(d) Indebtedness of the Company and its Subsidiaries by reason of
entering into indemnification agreements and guarantees in connection with the
disposition of assets, provided that the Indebtedness
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<PAGE> 32
with respect to such indemnification agreements and guarantees shall be limited
to the amount of the net proceeds of such disposition;
(e) guarantees, letters of credit and indemnity agreements relating
to performance and surety bonds incurred in the ordinary course of business;
(f) Indebtedness of a Subsidiary of the Company (including undrawn
amounts under lines of credit that are subsequently drawn upon) issued, assumed
or guaranteed by such Subsidiary prior to the date upon which such Subsidiary
becomes a Subsidiary of the Company (excluding Indebtedness incurred by such
entity in connection with, or in contemplation of, its becoming a Subsidiary of
the Company), provided that such Indebtedness and the holders thereof do not,
at any time, have direct or indirect recourse to any property or assets of the
Company and its Subsidiaries other than the property and assets of such
acquired entity and its Subsidiaries, including the Capital Stock thereof, or
any newly organized entity formed to effect such acquisition, and, in each
case, the monetary proceeds thereof;
(g) Indebtedness incurred by the Company in connection with the
purchase, redemption, retirement or other acquisition by the Company of the
USWA Preferred Stock outstanding on the date hereof (plus additional shares of
such USWA Preferred Stock issued as dividends thereon or on such shares issued
as dividends);
(h) Indebtedness of the Company and its captive wholly owned
insurance Subsidiaries in respect of letters of credit in an aggregate amount
not to exceed at any one time outstanding $20,000,000 issued for the account of
the Company or such Subsidiaries in support of certain self-insurance and
reinsurance obligations entered into from time to time by the Company or such
captive wholly owned insurance Subsidiaries of the Company;
(i) Indebtedness consisting of industrial revenue bonds and related
indemnity agreements; and
(j) prior to the merger of the Company and KAC, Indebtedness in
respect of the Preferred Dividend Intercompany Notes.
Person: The term "Person" shall mean any individual, corporation,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof.
PIK Note: The term "PIK Note" shall mean that certain PIK Note issued
by the Company to a subsidiary of MAXXAM on December 15, 1992, in the principal
amount of $2.5 million, bearing interest at a rate equal to 12% per annum and
due on June 30, 1995.
Preferred Dividend Intercompany Notes: The term "Preferred Dividend
Intercompany Notes" shall mean (i) the intercompany note in respect of the
Series A Shares, (ii) the intercompany note in respect of the PRIDES and (iii)
any other intercompany note representing a loan by KAC to the Company from the
proceeds of an offering of preferred stock by KAC which loan shall have a term
not in excess of five years from the date of issuance and shall be in an amount
equal to the aggregate dividends scheduled to accrue on such preferred stock
during the term thereof and payable at approximately the same times and in
approximately the same amounts as such dividends are payable, provided, that
(a) the aggregate amount of all such intercompany notes referred to in this
clause (iii) shall not exceed $50,000,000 at any one time outstanding and (b)
the remaining net proceeds from such preferred stock offering shall have been
used by KAC to make a capital contribution to (or to purchase common stock of)
the Company.
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Preferred Stock ($100): The term "Preferred Stock ($100)" shall mean
the Company's 4 1/8% Preference Stock, par value $100 per share, 4 3/4%
Preference Stock (1957 Series), par value $100 per share, 4 3/4% Preference
Stock (1959 Series), par value $100 per share, and 4 3/4% Preference Stock
(1966 Series), par value $100 per share.
Principal; principal amount: The terms "principal" or "principal
amount" of a Note shall mean the principal amount of such Note as set forth on
the face of such Note.
Prospectus: The term "Prospectus" shall mean that certain prospectus
dated February --, 1994, relating to the offering by the Company of the Notes.
QAL: The term "QAL" shall mean Queensland Alumina Limited, a
Queensland, Australia corporation, and its successors.
Redeemable Stock: The term "Redeemable Stock" shall mean, with
respect to any Person, any preferred Capital Stock of such Person, that, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, in whole or in
part, pursuant to a sinking fund obligation or otherwise, or, at the option of
the holder thereof, is redeemable in whole or in part, or is exchangeable into
a security of a Person other than the issuer of such Capital Stock that is
owned by such Person or its Subsidiaries or into indebtedness of, or that is
owned by, such Person or its Subsidiaries, in each case on or prior to the
scheduled maturity date of the Notes.
Refinance: The term "Refinance" shall mean to renew, extend, refund,
replace, restructure, refinance, amend or modify any Indebtedness. The term
"Refinancing" shall have a correlative meaning.
Refinancing Sale and Leaseback Transaction: The term "Refinancing Sale
and Leaseback Transaction" shall mean any sale and leaseback transaction with
respect to which the Attributable Debt is at least $100,000,000, and which is
designated by the Company as a Refinancing Sale and Leaseback Transaction in a
notice to the Trustee pursuant to the terms hereof, which notice shall indicate
the Attributable Debt with respect to such Refinancing Sale and Leaseback
Transaction.
Responsible Officer: The term "responsible officer," when used with
respect to the Trustee, shall mean any officer in its principal corporate trust
office and every other officer and assistant officer to whom any corporate
trust matter is referred because of his knowledge of and familiarity with the
particular subject.
Restricted Investment: The term "Restricted Investment" shall mean,
with respect to any Person:
(i) any amount paid, or any property transferred, in each case,
directly or indirectly by such Person for Capital Stock or other securities of,
or as a contribution to, any Affiliate of the Company;
(ii) any direct or indirect loan or advance by such Person to any
Affiliate of the Company other than accounts receivable of such Person relating
to the purchase and sale of inventory, goods or services arising in the
ordinary course of business;
(iii) any direct or indirect guarantee by such Person of any
obligations, contingent or otherwise, of any Affiliate of the Company; and
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<PAGE> 34
(iv) the acquisition by such Person of, or any investment by such
Person in, any Capital Stock or similar interest of any other Person (other
than the Company);
provided, however, that the following shall not be Restricted Investments:
(a) investments in or acquisitions of Capital Stock or similar
interests in any Person (other than a Person in which Affiliates of the Company
have an interest other than through the Company, its Subsidiaries and its
Non-Affiliate Joint Ventures) that:
(I) is or becomes, at the time of the acquisition thereof, a
Subsidiary of the Company and is or is to be primarily engaged in an
operating business or
(II) is, at the time of the acquisition thereof, engaged or
to be engaged primarily in businesses in which the Company or its
Subsidiaries or its Non-Affiliate Joint Ventures were engaged on the
date of this Indenture or reasonably related extensions thereof,
provided that such securities are not, at the time of the acquisition
thereof (without regard to any exchanges, modifications or other
changes thereto subsequent to such acquisition), registered under the
Exchange Act;
(b) Restricted Investments of such Person existing as of the date of
this Indenture and any extension, modification or renewal of such Restricted
Investment (but not increases thereof, other than as a result of the accrual or
accretion of interest or original issue discount pursuant to the terms of such
Restricted Investment), or any Restricted Investment made in connection with an
exchange of such Restricted Investment with the issuer thereof;
(c) investments in or acquisitions of Permitted Entity Securities of
any Permitted Entity;
(d) transactions with officers or directors of the Company or any
Subsidiary of the Company entered into in the ordinary course of business
(including compensation or employee benefit arrangements with any officer or
director of the Company or any Subsidiary of the Company);
(e) investments in or acquisitions of Capital Stock or similar
interests in Persons (other than Affiliates of the Company) received in the
bankruptcy or reorganization of or by such Person or any exchange of such
investment with the issuer thereof or taken in settlement of or other
resolution of claims or disputes, and, in each case, extensions, modifications
and renewals thereof; and
(f) investments in Persons (other than Affiliates of the Company)
received by such Person as consideration from Asset Sales to the extent not
prohibited by Section 4.14 (including, for the purposes of this definition,
those sales, transfers and other dispositions described in clause (B) and the
transactions described in clause (D) of such definition) or any exchange of
such investment with the issuer thereof, and extensions, modifications and
renewals thereof.
Securities Act of 1933: The term "Securities Act of 1933" shall mean
the Securities Act of 1933, as amended, and the rules and regulations
promulgated by the Securities and Exchange Commission thereunder.
Significant Subsidiary: The term "Significant Subsidiary" shall have
the meaning assigned to that term under Regulation S-X of the Securities Act as
in effect on the date of this Indenture; provided, however, that (i) each
Subsidiary Guarantor on the date of this Indenture shall be deemed to be a
Significant Subsidiary of the Company for so long as such Subsidiary is a
Subsidiary Guarantor and (ii)
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<PAGE> 35
each of VALCO, KAAC and Alpart, and each Subsidiary of the Company that,
directly or indirectly, holds an interest in VALCO, Alpart or QAL, and each
Subsidiary Guarantor that becomes a Subsidiary Guarantor after the date of this
Indenture (so long as such Subsidiary Guarantor is a Subsidiary Guarantor)
shall be deemed to be a Significant Subsidiary if it (singly, or, in the case
of VALCO, Alpart or QAL, together with the other Subsidiaries of the Company
that hold an interest in such entity) meets the total assets test of the term
"Significant Subsidiary" under Regulation S-X as in effect on the date of this
Indenture, but substituting 5% in such test for 10%.
Specified Parties: The term "Specified Parties" shall mean each of
AJI, Alpart, KAAC, KJC, VALCO, Kaiser Aluminium International, Inc., a Delaware
corporation, and its successors, Kaiser Bauxite Company, a Nevada corporation,
and its successors, Kaiser Jamaica Bauxite Company, a Jamaican partnership, and
its successors, and Queensland Alumina Security Corporation, a Delaware
corporation, and its successors.
Subordinated Notes: The term "Subordinated Notes" shall mean the
Company's 12 3/4% Senior Subordinated Notes due 2003, as amended from time to
time, issued pursuant to the Subordinated Note Indenture.
Subordinated Note Indenture: The term "Subordinated Note Indenture"
shall mean the indenture, dated as of February 1, 1993, among the Company, as
issuer, the parties named therein as and, if applicable, thereafter becoming
guarantors, and The First National Bank of Boston, a national banking
association, as trustee, as amended or supplemented from time to time in
accordance with the terms thereof.
Subsidiary: The term "Subsidiary" shall mean any corporation or
other entity of which more than 50% of the equity interest (which for a
corporation shall be the outstanding stock having ordinary voting power to
elect a majority of the Board of Directors of such corporation, irrespective of
whether or not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned (either alone or
through Subsidiaries or together with Subsidiaries) by the Company or another
Subsidiary; provided, however, that Queensland Alumina Security Corporation, a
Delaware corporation, shall be deemed not to be a Subsidiary of the Company or
any of its Subsidiaries and shall be deemed to be a Non- Affiliate Joint
Venture (for as long as it meets the definition of Non-Affiliate Joint Venture
and for as long as its operations remain substantially the same), and provided,
further, that, for purposes of the definitions of Asset Sale and Net Cash
Proceeds and for purposes of Section 4.14, each of Alpart and VALCO, so long as
it is not a wholly owned Subsidiary, shall be deemed not to be a Subsidiary of
the Company or any of its Subsidiaries and shall be deemed to be a
Non-Affiliate Joint Venture of the Company (for as long as it meets the
definition of Non-Affiliate Joint Venture). For purposes of this definition,
any directors' qualifying shares shall be disregarded in determining the
ownership of a Subsidiary.
Subsidiary Guarantors: The term "Subsidiary Guarantors" shall mean
the Persons from time to time named as Subsidiary Guarantors in this Indenture
or that become Subsidiary Guarantors hereunder, and each of their respective
successors, provided, however, that in the event that a Subsidiary Guarantor is
released from its Guarantee in accordance with the terms of this Indenture,
such Subsidiary Guarantor shall without any further action no longer be a
Subsidiary Guarantor for any purpose of this Indenture or the Notes. On the
date of this Indenture, the Subsidiary Guarantors are AJI, KFC, KAAC and KJC.
Tax Sharing Agreements: The term "Tax Sharing Agreements" shall mean,
collectively, the tax-sharing agreement between the Company and KAC, dated as
of June 30, 1993, and the tax-sharing
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agreement between the Company and MAXXAM, dated as of December 21, 1989, as
each is described in the Prospectus and as each may be amended in accordance
with Section 4.08(b)(x) of this Indenture.
Trust Indenture Act of 1939: The term "Trust Indenture Act of 1939"
shall mean the Trust Indenture Act of 1939 as it was in force at the date of
this Indenture, except as provided by Article Ten.
Trustee; principal office: The term "Trustee" shall mean First Trust
National Association, a national banking association, until a successor
replaces it in accordance with the provisions of Article Seven. The term
"principal office of the Trustee" shall mean the office of the Trustee at which
at any particular time its corporate trust business may be principally
administered, which office at the date hereof is located at First Trust Center,
180 East 5th Street, St. Paul, Minnesota 55101.
U.S. Fixed Assets: The term "U.S. Fixed Assets" shall mean, at any
time, any real property, plant or equipment of the Company or any of its
Subsidiaries located at such time in the United States of America, now owned or
hereafter acquired, together with any fixed assets that are Improvements
thereto or thereon and any fixed assets that are proceeds thereof.
USWA Preferred Stock: The term "USWA Preferred Stock" shall mean the
shares of the Company's Cumulative (1985 Series A) Preference Stock and shares
of the Company's Cumulative (1985 Series B) Preference Stock that have been or
may in the future be issued in connection with the Kaiser Aluminum USWA
Employee Stock Ownership Plan and/or the Kaiser Aluminum Salaried Employee
Stock Ownership Plan.
VALCO: The term "VALCO" shall mean Volta Aluminium Company Limited, a
Ghanaian corporation, and its successors.
SECTION 1.02. References are to Indenture. Unless the context
otherwise requires, all references herein to "Articles," "Sections" and other
subdivisions refer to the corresponding Articles, Sections and other
subdivisions of this Indenture, and the words "herein," "hereof," hereby,"
"hereunder" and words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or other subdivision hereof.
SECTION 1.03. Other definitions.
The following terms are defined in the referenced section of this
Indenture and have the meaning set forth therein for all purposes in this
Indenture (except as otherwise expressly provided or unless the context
otherwise requires):
Term Defined in Section
- ---- ------------------
"applicants" . . . . . . . . . . . . . . . . . . . . . . 5.02(b)
"Asset Sale Offer" . . . . . . . . . . . . . . . . . . . 4.14(b)
"Asset Sale Offer Amount" . . . . . . . . . . . . . . . 4.14(b)
"Asset Sale Purchase Date" . . . . . . . . . . . . . . . 4.14(b)
"Asset Sale Purchase Notice" . . . . . . . . . . . . . . 4.14(b)
"Asset Sale Purchase Price" . . . . . . . . . . . . . . 4.14(b)
"Change of Control" . . . . . . . . . . . . . . . . . . 3.05(a)
"Change of Control Purchase Date" . . . . . . . . . . . 3.05(a)
"Change of Control Purchase Notice". . . . . . . . . . . 3.05(c)
"Change of Control Purchase Price" . . . . . . . . . . . 3.05(a)
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<PAGE> 37
"Controlled Non-Affiliate Joint Venture" . . . . . . . . 4.09(a)
"Incur" . . . . . . . . . . . . . . . . . . . . . . . . 4.10(a)
"Notice of Default" . . . . . . . . . . . . . . . . . . 6.01(c)
"Other Indebtedness" . . . . . . . . . . . . . . . . . . 4.10(c)
"PRIDES" . . . . . . . . . . . . . . . . . . . . . . . . 4.09(b)(IX)
"record date" . . . . . . . . . . . . . . . . . . . . . 2.03
"Refinanced Indebtedness" . . . . . . . . . . . . . . . 4.10(b)(vi)
"Refinancing Indebtedness" . . . . . . . . . . . . . . . 4.10(b)(vi)
"Restricted Payment" . . . . . . . . . . . . . . . . . . 4.09(a)
"Series A Shares" . . . . . . . . . . . . . . . . . . . 4.09(b)(IX)
"Specified Pari Passu Indebtedness" . . . . . . . . . . 4.14(b)
"surviving corporation" . . . . . . . . . . . . . . . . 11.01(a)
"Twenty-Five Million Threshold" . . . . . . . . . . . . 4.14(c)
"Voting Stock" . . . . . . . . . . . . . . . . . . . . . 3.05(a)
The following terms are defined in the referenced section of this
Indenture and have the meaning set forth therein for purposes provided therein,
and such definitions are limited to those sections of the Indenture
specifically referenced:
Defined in Definition Limited
Term Section to Section
- ---- --------- -------------------
"amount" . . . . . . . . . . . . 7.08(d) . . . . . . . . 7 .08
"cash transaction" . . . . . . . 7.13(c) . . . . . . . . 7 .13
"Company" . . . . . . . . . . . 7.08(d) . . . . . . . . 7 .08
"Company" . . . . . . . . . . . 7.13(c) . . . . . . . . 7 .13
"defaults" . . . . . . . . . . . 6.07 . . . . . . . . . 6 .07
"defaults" . . . . . . . . . . . 7.13(c) . . . . . . . . 7 .13
"director" . . . . . . . . . . . 7.08(d) . . . . . . . . 7 .08
"dividends" . . . . . . . . . . 7.13(a) . . . . . . . . 7 .13(a)
"executive officer" . . . . . . 7.08(d) . . . . . . . . 7 .08
"in default" . . . . . . . . . . 7.08(c) . . . . . . . . 7 .08(c)(6), (7),
(8) and (9)
"other indenture securities" . . 7.13(c) . . . . . . . . 7 .13
"outstanding" . . . . . . . . . . . . . . . . . . . . . 7 .08(d)7.08
"person" . . . . . . . . . . . . 7.08(d) . . . . . . . . 7 .08
"security" . . . . . . . . . . 7.08(c) . . . . . . . . 7 .08(c)(6), (7),
(8) and (9)
"security" . . . . . . . . . . . 7.08(d) . . . . . . . . 7 .08 (other
than 7.08(c)(6),
(7), (8) and (9))
"self liquidating paper" . . . . 7.13(c) . . . . . . . . 7 .13
"trust" . . . . . . . . . . . . 7.08(d) . . . . . . . . 7 .08
"voting security" . . . . . . . 7.08(d) . . . . . . . . 7 .08
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ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
SECTION 2.01. Designation, amount, authentication and delivery of
Notes. The Notes shall be designated as the Company's ---% Senior Notes due
2002. Notes for an aggregate principal amount of two hundred twenty five
million dollars ($225,000,000), upon the execution of this Indenture, or from
time to time thereafter, may be executed by the Company and delivered to the
Trustee for authentication, and the Trustee shall thereupon authenticate and
deliver said Notes to or upon the written order of the Company, signed by its
Chairman of the Board, President or a Vice President, without any further
corporate action by the Company.
The aggregate principal amount of Notes authorized by this Indenture
is limited to two hundred twenty five million dollars ($225,000,000), and,
except as provided in this Section 2.01 and in Section 2.07, the Company shall
not execute and the Trustee shall not authenticate or deliver Notes in excess
of such aggregate principal amount.
Nothing contained in this Section 2.01 or elsewhere in this Indenture,
or in the Notes, is intended to or shall limit execution by the Company or
authentication or delivery by the Trustee of Notes under the circumstances
contemplated by Sections 2.05, 2.06, 2.07, 3.03, 3.05 and 10.04.
SECTION 2.02. Form of Notes and Trustee's certificate. The
definitive Notes and the Trustee's certificate of authentication to be borne by
the Notes shall be substantially in the form set forth in the Recitals of this
Indenture, which are part of this Indenture, and may have such letters, numbers
or other marks of identification or designation and such legends or
endorsements printed, lithographed or engraved thereon as the officers
executing the same may deem appropriate and as are not inconsistent with the
provisions of this Indenture, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Notes may be listed, or to
conform to usage.
SECTION 2.03. Date of Notes and denominations. The Notes shall bear
interest at the rate per annum of --%, payable semi-annually on February 15 and
August 15, shall mature on February --, 2002 and shall be issuable as
registered Notes without coupons in denominations of $1,000 and any integral
multiple thereof. The person in whose name any Note is registered at the close
of business on any record date (as hereinbelow defined) with respect to any
interest payment date shall be entitled to receive the interest payable thereon
on such interest payment date notwithstanding the cancellation of such Note
upon any registration of transfer or exchange thereof subsequent to such record
date and prior to such interest payment date, unless such Note shall have been
redeemed on a date fixed for redemption subsequent to such record date and
prior to such interest payment date, or unless an Event of Default shall have
occurred and be continuing as the result of a default in the payment of
interest due on such interest payment date on any Note, in which case such
defaulted interest shall be paid to the person in whose name such Note (or any
Note or Notes issued upon registration of transfer or exchange thereof) is
registered on the record date for the payment of such defaulted interest. The
principal of, premium, if any, Change of Control Purchase Price, Asset Sale
Purchase Price and interest on the Notes shall be payable at the office or
agency to be maintained by the Company in accordance with the provisions of
Section 4.02; provided, however, that payment of interest may be made at the
option of the Company by check mailed by first-class mail to the address of the
person entitled thereto as such address shall appear on the registry books of
the Company. The term "record date" as used in this Section 2.03 with
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<PAGE> 39
respect to any interest payment date shall mean the close of business on the
February 1 or August 1, as the case may be, next preceding such interest
payment date, whether or not such February 1 or August 1 is a Business Day, and
such term, as used in this Section 2.03, with respect to the payment of any
defaulted interest shall mean the tenth day next preceding the date fixed by
the Company for the payment of defaulted interest whether or not a Business
Day, but in no case shall such record date be less than ten days after notice
thereof shall have been mailed by or on behalf of the Company to all registered
holders of Notes at their addresses.
The Notes shall be dated the date of their authentication. Except as
provided in the next sentence, interest shall accrue on the Notes from the most
recent date to which interest has been paid or duly provided for or, if no
interest has been paid or duly provided for, from February --, 1994. Each Note
authenticated between the record date for any interest payment date and such
interest payment date shall be dated the date of its authentication but shall
bear interest from such interest payment date; provided, however, that if and
to the extent the Company shall default in the payment of the interest due on
such interest payment date, then any Note so authenticated shall bear interest
from the February 15 or August 15, as the case may be, next preceding the date
of such Note to which interest has been paid or duly provided for or, if no
interest has been paid or duly provided for on the Notes, from February --,
1994.
Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
SECTION 2.04. Execution of Notes. The Notes shall be signed on
behalf of the Company, manually or in facsimile, by its Chairman of the Board
or its President or a Vice President under its corporate seal (which may be in
facsimile) reproduced thereon and attested, manually or in facsimile, by its
Secretary or an Assistant Secretary. Only such Notes as shall bear thereon a
certificate of authentication substantially in the form hereinbefore recited,
signed manually by the Trustee, shall be entitled to the benefits of this
Indenture or be valid or obligatory for any purpose. Such signature by the
Trustee upon any Note executed by the Company shall be conclusive evidence that
the Note so authenticated has been duly authenticated and delivered hereunder
and that the holder is entitled to the benefits of this Indenture.
In case any officer of the Company whose signature appears on any of
the Notes, manually or in facsimile, shall cease to be such officer before such
Notes so signed shall have been authenticated and delivered by the Trustee,
such Notes nevertheless may be authenticated and delivered as though the person
whose signature appears on such Notes had not ceased to be such officer of the
Company; and any Note may be signed, and the corporate seal reproduced thereon
may be attested, on behalf of the Company, manually or in facsimile, by persons
as, at the actual date of the execution of such Note, shall be the proper
officers of the Company, although at the date of the execution of this
Indenture any such person was not such officer.
SECTION 2.05. Exchange and transfer of Notes. Notes may be exchanged
for a like aggregate principal amount of Notes in other authorized
denominations. Notes to be exchanged shall be surrendered at the office or
agency to be maintained by the Company in accordance with the provisions of
Section 4.02, and the Company shall execute and the Trustee shall authenticate
and deliver in exchange therefor the Note or Notes which the noteholder making
the exchange shall be entitled to receive.
The Company shall keep, at the office or agency to be maintained by
the Company in accordance with the provisions of Section 4.02, a register or
registers in which, subject to such reasonable regulations as it may prescribe,
the Company shall register Notes and shall register the transfer of Notes as in
this
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<PAGE> 40
Article Two provided. Upon surrender for registration of transfer of any Note
at such office or agency, the Company shall execute and the Trustee shall
authenticate and deliver in the name of the transferee or transferees a new
Note or Notes for a like aggregate principal amount.
All Notes presented or surrendered for exchange, registration of
transfer, redemption, purchase or payment shall, if so required by the Company
or the Trustee or any Note registrar (if other than the Trustee), be
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Company and the Trustee or the Note registrar (if other
than the Trustee), duly executed by the registered holder or by his attorney
duly authorized in writing and, in every case, each Note presented or
surrendered for registration of transfer shall be accompanied by the assignment
form attached to the Notes, duly executed by the registered holder or by his
attorney duly authorized in writing.
No service charge shall be made for any exchange or registration of
transfer of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto.
The Company shall not be required to issue, register the transfer of
or exchange any Notes for a period of fifteen days next preceding any date for
the selection of Notes to be redeemed. The Company shall not be required to
register the transfer of or exchange any Note called or being called for
redemption except, in the case of any Note to be redeemed in part, the portion
thereof not to be so redeemed. The Company shall not be required to register
the transfer of or exchange any Note in respect of which a Change of Control
Purchase Notice or an Asset Sale Purchase Notice has been given (unless such
notice has been withdrawn in accordance with Section 3.06 or 4.14) except, in
the case of any Note to be purchased in part, the portion thereof not to be so
purchased.
SECTION 2.06. Temporary Notes. Pending the preparation of definitive
Notes, the Company may execute and the Trustee shall authenticate and deliver
temporary Notes (printed, lithographed or typewritten) of any authorized
denomination and substantially in the form of the definitive Notes, but with or
without a recital of specific redemption prices and with such omissions,
insertions and variations as may be appropriate for temporary Notes, all as may
be determined by the Company. Temporary Notes may contain such reference to
any provisions of the Indenture as may be appropriate. Every temporary Note
shall be authenticated by the Trustee upon the same conditions and in
substantially the same manner, and with the same effect, as the definitive
Notes. Without unnecessary delay the Company will execute and deliver to the
Trustee definitive Notes and thereupon any or all temporary Notes may be
surrendered in exchange therefor, at the office or agency to be maintained by
the Company in accordance with the provisions of Section 4.02, and the Trustee
shall authenticate and deliver in exchange for such temporary Notes an equal
aggregate principal amount of definitive Notes. Until so exchanged, the
temporary Notes shall in all respects be entitled to the same benefits under
this Indenture, and shall be subject to the same provisions hereof, as
definitive Notes authenticated and delivered hereunder.
SECTION 2.07. Mutilated, destroyed, lost or stolen Notes. In case
any temporary or definitive Note shall become mutilated or be destroyed, lost
or stolen, the Company, in the case of any mutilated Note shall, and in the
case of any destroyed, lost or stolen Note may, execute, and upon its request
the Trustee shall authenticate and deliver, a new Note bearing a number, letter
or other distinguishing symbol not contemporaneously outstanding in exchange
and substitution for the mutilated Note, or in lieu of and in substitution for
the Note so destroyed, lost or stolen, or, instead of issuing a substituted
Note, if any such Note shall have matured or shall be about to mature or shall
have been selected for redemption or if the Company shall have received a
Change of Control Purchase Notice or an Asset Sale Purchase Notice in respect
of any such Note (unless such notice has been withdrawn in accordance with
Section 3.06 or 4.14), the Company may pay the same without surrender thereof
except in the case of a mutilated
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<PAGE> 41
Note. In every case the applicant for a substituted Note or for such payment
shall furnish to the Company and to the Trustee such security or indemnity as
may be required by them to save each of them harmless, and, in every case of
destruction, loss or theft, the applicant shall also furnish to the Company and
to the Trustee evidence to their satisfaction of the destruction, loss or theft
of such Note and of the ownership thereof. The Trustee may authenticate any
such substituted Note and deliver the same, or the Trustee or any paying agent
of the Company may make any such payment, upon the written request or
authorization of any officer of the Company. Upon the issuance of any
substituted Note, the Company may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses connected therewith.
Every substituted Note issued pursuant to the provisions of this
Section 2.07 shall constitute an additional contractual obligation of the
Company whether or not the destroyed, lost or stolen Note shall be found at any
time, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
All Notes shall be held and owned upon the express condition that the
foregoing provisions are exclusive with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Notes, and shall preclude (to the
extent lawful) any and all other rights or remedies, notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement or payment of negotiable instruments or other securities without
their surrender.
SECTION 2.08. Cancellation of surrendered Notes. All Notes
surrendered for the purpose of payment, redemption, purchase by the Company at
the option of the holder, exchange, substitution or registration of transfer,
shall, if surrendered to the Company or any paying agent or Note registrar, be
delivered to the Trustee and the same, together with Notes surrendered to the
Trustee for cancellation, shall be cancelled by it, and no Notes shall be
issued in lieu thereof except as expressly permitted by any of the provisions
of this Indenture. The Trustee shall destroy cancelled Notes and shall deliver
certificates of destruction thereof to the Company. If the Company shall
purchase or otherwise acquire any of the Notes, however, such purchase or
acquisition shall not operate as a payment, redemption or satisfaction of the
indebtedness represented by such Notes unless and until the Company, at its
option, shall deliver or surrender the same to the Trustee for cancellation.
ARTICLE THREE
REDEMPTION AND PURCHASES OF NOTES
SECTION 3.01. Redemption prices. The Company may, at its option,
redeem at any time all or from time to time any part of the Notes, on any date
prior to maturity at the redemption prices specified in the Notes, together
with accrued and unpaid interest thereon to but excluding the date fixed for
redemption and in the manner set forth in this Article Three. The Company,
however, shall not have the right to redeem any of the Notes prior to February
15, 1998.
SECTION 3.02. Notice of redemption; selection of Notes. In case the
Company shall desire to exercise such right to redeem all or, as the case may
be, any part of the Notes in accordance with the right reserved so to do, the
Company, or, at the Company's request, the Trustee in the name and at the
expense of the Company, shall fix a date for redemption and give notice of such
redemption to holders of the Notes to be redeemed as hereinafter in this
Section 3.02 provided.
Notice of redemption shall be given to the holders of Notes to be
redeemed as a whole or in part by mailing by first-class mail a notice of such
redemption not less than fifteen nor more than sixty days
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<PAGE> 42
prior to the date fixed for redemption to their last addresses as they shall
appear upon the registry books of the Company, but any failure to give such
notice by mailing to the holder of any Note designated for redemption as a
whole or in part, or any defect therein, shall not affect the validity of the
proceedings for the redemption of any other Notes.
Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the holder
receives the notice.
Each such notice of redemption shall specify the total principal
amount to be redeemed, the date fixed for redemption and the redemption price
at which Notes are to be redeemed, and shall state that payment of the
redemption price of the Notes to be redeemed will be made at the office or
agency to be maintained by the Company in accordance with the provisions of
Section 4.02, upon presentation and surrender of such Notes, that interest
accrued to but not including the date fixed for redemption will be paid as
specified in said notice, and that on and after said date interest thereon will
cease to accrue and that the only remaining right of the noteholder is to
receive payment of the redemption price plus such accrued interest upon
surrender. If less than all the Notes are to be redeemed, the notice of
redemption to each holder also shall state the aggregate principal amount of
Notes to be redeemed and shall identify the Notes of such holder to be
redeemed. In case any Note is redeemed in part only, the notice which relates
to such Note shall state the portion of the principal amount thereof to be
redeemed (which shall be $1,000 or an integral multiple thereof), and shall
state that on and after the date fixed for redemption, upon surrender of such
Note, the holder will receive, without charge, a new Note or Notes of
authorized denominations in the principal amount thereof remaining unredeemed.
Each notice shall give the name and address of each paying agent.
On or prior to the date fixed for redemption specified in the notice
of redemption given as provided in this Section 3.02, the Company will deposit
with the Trustee or with one or more paying agents (or, if the Company is
acting as its own paying agent, set aside, segregate and hold in trust as
provided in Section 4.04(c)) an amount of money sufficient to redeem on the
date fixed for redemption all the Notes or portions of Notes so called for
redemption (other than Notes or portions thereof called for redemption on that
date which have been delivered by the Company to the Trustee for cancellation)
at the applicable redemption price, together with accrued interest to but not
including the date fixed for redemption.
If less than all the Notes then outstanding are to be redeemed, the
Company shall give the Trustee, at least twenty-five days (or such shorter
period acceptable to the Trustee) in advance of the date fixed for redemption,
notice of the aggregate principal amount of Notes to be redeemed, and thereupon
the Trustee shall select in such manner as it shall deem appropriate and fair,
in its discretion, the Notes or portions thereof to be redeemed and shall
thereafter promptly notify the Company of the Notes or portions thereof to be
redeemed within a sufficient period of time in order that the notice provision
in Section 3.02 may be satisfied.
SECTION 3.03. When Notes called for redemption become due and
payable. If the giving of notice of redemption shall have been completed as
provided in Section 3.02, the Notes or portions of Notes specified in such
notice shall become due and payable on the date and at the place stated in such
notice at the applicable redemption price, together with interest accrued to
(but not including) the date fixed for redemption, and on and after such date
fixed for redemption (unless the Company shall default in the payment of such
Notes at the redemption price, together with interest accrued to (but not
including) the date fixed for redemption) interest on the Notes or portions of
Notes so called for redemption shall cease to accrue whether or not such Notes
are presented for payment and such Notes or portions thereof shall be deemed
not to be outstanding hereunder and shall not be entitled to any right or
benefit hereunder
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<PAGE> 43
except to receive payment of the redemption price plus accrued interest to but
not including the redemption date. On presentation and surrender of such Notes
for redemption at said place of payment in said notice specified on or after
the date fixed for redemption, the said Notes shall be paid and redeemed by the
Company at the applicable redemption price, together with interest accrued to
(but not including) the date fixed for redemption. If the date fixed for
redemption is an interest payment date, such payment shall not include accrued
interest, which interest shall be paid in the usual manner otherwise provided
for herein. Upon presentation of any Note which is redeemed in part only, the
Company shall execute and register and the Trustee shall authenticate and
deliver to the holder thereof at the expense of the Company, a new Note or
Notes in principal amount equal to the unredeemed portion of the Note so
presented.
SECTION 3.04. Cancellation of redeemed Notes. All Notes surrendered
to the Trustee, upon redemption pursuant to the provisions of this Article
Three, shall be forthwith cancelled by it.
SECTION 3.05. Purchase of Notes at option of the holder upon Change
of Control.
(a) If on or prior to maturity, there shall have occurred a Change of
Control, the Company shall offer to purchase each Note at a purchase price in
cash equal to 101% of the principal amount thereof plus interest accrued to
(but not including) the Change of Control Purchase Date (the "Change of Control
Purchase Price"), on the date that is thirty Business Days after the occurrence
of the Change of Control (the "Change of Control Purchase Date"), subject to
the satisfaction by or on behalf of the holder of the requirements set forth in
Section 3.05(c). Following a Change of Control, the Company shall not be
obligated to purchase any Notes pursuant to this Section 3.05(a) or give any
notice under Section 3.05(b) with respect to any subsequent Change of Control.
The Company's obligation to purchase Notes as provided hereunder shall for all
purposes hereof be satisfied by, and shall cease upon, the deposit of funds
with the Trustee as provided for in Section 3.07.
A "Change of Control" shall be deemed to have occurred at such time as
MAXXAM, directly or indirectly, shall cease to have (other than by reason of
the existence of a Lien but including by reason of the foreclosure of or other
realization upon a Lien) direct or indirect sole beneficial ownership (as
defined under Regulation 13d-3 of the Exchange Act as in effect on the date of
this Indenture) of at least 40% of the total Voting Stock, on a fully diluted
basis, of the Company; provided, however, that such ownership by MAXXAM,
directly or indirectly, of 30% or greater, but less than 40%, of the total
Voting Stock, on a fully diluted basis, of the Company shall not be a Change of
Control if MAXXAM, through direct representation or through persons nominated
by it, controls a majority of the Board of Directors of the Company necessary
to effectuate any actions by the Board of Directors of the Company; and
provided, further, that the foregoing minimum percentages shall be deemed not
satisfied if any person or group (as defined in Section 13(d)(3) of the
Exchange Act as in effect on the date of this Indenture) shall, directly or
indirectly, own more of the total Voting Stock entitled to vote generally in
the election of directors of the Company than MAXXAM.
"Voting Stock" means, with respect to any person, the capital stock of
such person having general voting power under ordinary circumstances to elect
at least a majority of the board of directors, managers or trustees of such
person (irrespective of whether or not at the time capital stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
(b) Within ten Business Days after the occurrence of a Change of
Control, the Company shall mail a written notice of Change of Control by
first-class mail to the Trustee and to each holder (and to beneficial owners as
required by applicable law, including without limitation, Rule 13e-4 of the
Exchange Act, if applicable) and shall cause a copy of such notice to be
published in a daily newspaper of national
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<PAGE> 44
circulation. The notice shall include a form of Change of Control Purchase
Notice (as described below) to be completed by the holder and shall state:
(1) the events causing a Change of Control and the date of
such Change of Control;
(2) the date by which the Change of Control Purchase Notice
pursuant to this Section 3.05 must be given;
(3) the Change of Control Purchase Date;
(4) the Change of Control Purchase Price;
(5) the name and address of the Trustee and the office or
agency referred to in Section 4.02;
(6) that the Notes must be surrendered to the Trustee or the
office or agency referred to in Section 4.02 to collect payment;
(7) that the Change of Control Purchase Price for any Note as
to which a Change of Control Purchase Notice has been duly given and
not withdrawn will be paid promptly following the later of the Change
of Control Purchase Date and the time of surrender of such Note as
described in (6);
(8) the procedures the holder must follow to exercise rights
under this Section 3.05 and a brief description of those rights; and
(9) the procedures for withdrawing a Change of Control
Purchase Notice.
(c) To accept the offer to purchase Notes described in Section
3.05(a), a holder must deliver a written notice of purchase (a "Change of
Control Purchase Notice") to the Trustee or to the office or agency referred to
in Section 4.02 at any time prior to the close of business on the Business Day
immediately preceding the Change of Control Purchase Date, stating:
(1) the name of the holder, the principal amount of Notes,
the certificate number or numbers of the Note or Notes which the
holder will deliver to be purchased and a statement that the offer to
purchase is being accepted;
(2) the portion of the principal amount of the Note which the
holder will deliver to be purchased, which portion must be $1,000 or
an integral multiple thereof; and
(3) that such Note shall be purchased on the Change of
Control Purchase Date pursuant to the terms and conditions specified
in the Notes.
The delivery of the Note, by hand or by registered mail prior to, on
or after the Change of Control Purchase Date (together with all necessary
endorsements), to the Trustee or to the office or agency referred to in Section
4.02 shall be a condition to the receipt by the holder of the Change of Control
Purchase Price therefor; provided, however, that such Change of Control
Purchase Price shall be so paid pursuant to this Section 3.05 only if the Note
so delivered to the Trustee or such office or agency shall conform in all
respects to the description thereof set forth in the related Change of Control
Purchase Notice; and provided, further that the Company shall have no
obligation to purchase any Notes
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<PAGE> 45
with respect to which the Change of Control Purchase Notice has not been
received by the Company prior to the close of business on the Business Day
immediately preceding the Change of Control Purchase Date.
In the event that the offer to purchase described in Section 3.05(a)
shall be accepted in accordance with the terms hereof, the Company shall
purchase from the holder thereof, pursuant to this Section 3.05, a portion of a
Note if the principal amount of such portion is $1,000 or an integral multiple
of $1,000. Provisions of this Indenture that apply to the purchase of all of a
Note also apply to the purchase of such portion of such Note.
Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.05 shall be consummated by the delivery by the Trustee or other
paying agent of the consideration to be received by the holder promptly
following the later of the Change of Control Purchase Date and the time of
delivery of the Note.
Notwithstanding anything herein to the contrary, any holder delivering
to the Trustee or to the office or agency referred to in Section 4.02, the
Change of Control Purchase Notice contemplated by this Section 3.05(c) shall
have the right to withdraw such Change of Control Purchase Notice by delivery
of a written notice of withdrawal to the Trustee or to such office or agency in
accordance with Section 3.06 at any time prior to the close of business on the
Business Day next preceding the Change of Control Purchase Date.
SECTION 3.06. Effect of Change of Control Purchase Notice. Upon
receipt by the Company of the Change of Control Purchase Notice specified in
Section 3.05(c), the holder of the Note in respect of which such Change of
Control Purchase Notice was given shall (unless such Change of Control Purchase
Notice is withdrawn as specified in the following paragraph) thereafter be
entitled to receive solely the Change of Control Purchase Price with respect to
such Note. Such Change of Control Purchase Price shall be due and payable as
of the Change of Control Purchase Date and shall be paid to such holder
promptly following the later of (X) the Change of Control Purchase Date
(provided the conditions in Section 3.05(c), as applicable, have been
satisfied) and (y) the date of delivery of such Note to the Trustee or to the
office or agency referred to in Section 4.02 by the holder thereof in the
manner required by Section 3.05(c).
A Change of Control Purchase Notice may be withdrawn by means of a
written notice of withdrawal delivered to the office of the Trustee or to the
office or agency referred to in Section 4.02 at any time on or prior to the
close of business on the Business Day next preceding the Change of Control
Purchase Date, specifying:
(1) the certificate number or numbers of the Note or Notes in respect
of which such notice of withdrawal is being submitted;
(2) the principal amount of the Note or Notes with respect to which
such notice of withdrawal is being submitted; and
(3) the principal amount, if any, of such Note or Notes which remains
subject to the original Change of Control Purchase Notice, and which has been
or will be delivered for purchase by the Company.
There shall be no purchase of any Notes pursuant to Section 3.05 if
there has occurred (prior to, on or after, as the case may be, the giving, by
the holders of such Notes, of the required Change of
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<PAGE> 46
Control Purchase Notice), and is continuing an Event of Default (other than a
default in the payment of the Change of Control Purchase Price with respect to
such Notes).
SECTION 3.07. Deposit of Change of Control Purchase Price. On or
prior to the Change of Control Purchase Date, the Company shall deposit with
the Trustee (or, if the Company or a Subsidiary or an Affiliate of either of
them is acting as paying agent, shall segregate and hold in trust as provided
in Section 4.04(c)) an amount of cash in immediately available funds sufficient
to pay the aggregate Change of Control Purchase Price of all the Notes or
portions thereof which are to be purchased on the Change of Control Purchase
Date. Upon such deposit, the Company shall be deemed to have satisfied its
obligations to purchase Notes pursuant to Section 3.05. If cash sufficient to
pay the Change of Control Purchase Price of all Notes or portions thereof to be
purchased on the Change of Control Purchase Date is deposited with the Trustee
as of the Change of Control Purchase Date, interest shall cease to accrue
(whether or not any such Note is delivered to the Trustee or any other office
or agency maintained for such purpose) on such Notes (or portions thereof) on
and after the Change of Control Purchase Date, and the holders thereof shall
have no other rights as such (other than the right to receive the Change of
Control Purchase Price, upon surrender of such Notes).
SECTION 3.08. Covenant to comply with securities laws upon purchase
of Notes. In connection with any offer to purchase or any purchase of
securities under Section 3.05 hereof, the Company shall (i) comply with Section
14(e) under the Exchange Act (or any successor provision thereof), if
applicable, and (ii) otherwise comply with all Federal and state securities
laws regulating the purchase of the Notes so as to permit the rights and
obligations under Section 4.05 to be exercised in the time and in the manner
specified in Sections 4.05 and 4.06.
SECTION 3.09. Repayment to the Company. The Trustee shall return to
the Company any cash, together with interest or dividends, if any, thereon
(subject to the provisions of Section 7.05) held by it for the payment of the
Change of Control Purchase Price of the Notes that remain unclaimed as provided
in Section 12.04 hereof; provided, however, that to the extent that the
aggregate amount of cash deposited by the Company pursuant to Section 3.07
exceeds the aggregate Change of Control Purchase Price of the Notes or portions
thereof to be purchased on the Change of Control Purchase Date, then promptly
after the Change of Control Purchase Date, the Trustee shall return any such
excess to the Company together with interest or dividends, if any, thereon
(subject to the provisions of Section 7.05).
ARTICLE FOUR
PARTICULAR COVENANTS OF THE COMPANY
The Company covenants as follows:
SECTION 4.01. Payments on the Notes. The Company will duly and
punctually pay or cause to be paid the principal of, premium, if any, Change of
Control Purchase Price, Asset Sale Purchase Price and interest on each of the
Notes at the time and place such amounts may become due and payable and in the
manner provided in the Notes and this Indenture.
SECTION 4.02. Maintenance of office or agency for registration of
transfer, exchange and payment of Notes. So long as any of the Notes shall
remain outstanding, the Company will maintain an office or agency in the
Borough of Manhattan, City of New York, State of New York, where the Notes may
be surrendered for exchange or registration of transfer as in this Indenture
provided, and where notices and demands to or upon the Company in respect to
the Notes or of this Indenture may be served,
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<PAGE> 47
and where the Notes may be presented or surrendered for payment, redemption or
purchase. The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, City of New York, State of New York for such purposes.
The Company will give to the Trustee notice of the location of any such office
or agency and of any change of location thereof. In case the Company shall
fail to maintain any such office or agency or shall fail to give such notice of
the location or of any change in the location thereof, such surrenders,
presentations and demands may be made and notices may be served at the
principal office of the Trustee in St. Paul, Minnesota, and the Company hereby
appoints the Trustee its agent to receive at the aforesaid office all such
surrenders, presentations, notices and demands.
SECTION 4.03. Appointment to fill a vacancy in the office of Trustee.
The Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 7.10, a Trustee, so
that there shall at all times be a Trustee hereunder.
SECTION 4.04. Provision as to paying agent.
(a) If the Company shall appoint a paying agent other than the
Trustee, it will cause such paying agent to execute and deliver to the Trustee
an instrument in which such agent shall agree with the Trustee, subject to the
provisions of this Section 4.04,
(1) that it will hold all sums held by it as such agent for
the payment of the principal of, premium, if any, Change of Control
Purchase Price, Asset Sale Purchase Price or interest on the Notes
(whether such sums have been paid to it by the Company or by any other
obligor on the Notes) in trust for the benefit of the holders of the
Notes, and will notify the Trustee of the receipt of sums to be so
held,
(2) that it will give the Trustee notice of any failure by
the Company (or by any other obligor on the Notes) to make any payment
of the principal of, premium, if any, Change of Control Purchase
Price, Asset Sale Purchase Price or interest on the Notes when the
same shall be due and payable, and
(3) that it will at any time during the continuance of any
Event of Default specified in subsection (a) or (b) of Section 6.01,
upon the written request of the Trustee, deliver to the Trustee all
sums so held in trust by it.
If any obligations under the Credit Agreement are outstanding, the
Company will notify the Bank Agent of the name and address of any paying agent
other than the Company or the Trustee.
(b) If the Company shall not act as its own paying agent, it will,
prior to each due date of the principal of, premium, if any, Change of Control
Purchase Price, Asset Sale Purchase Price or interest on any Notes, deposit
with such paying agent a sum sufficient to pay the principal, premium, if any,
Change of Control Purchase Price, Asset Sale Purchase Price or interest so
becoming due, such sum to be held in trust for the benefit of the holders of
Notes entitled to such principal, premium, if any, Change of Control Purchase
Price, Asset Sale Purchase Price or interest, and (unless such paying agent is
the Trustee) the Company will promptly notify the Trustee of its failure so to
act.
(c) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of, premium, if any, Change of Control
Purchase Price, Asset Sale Purchase Price or interest
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on the Notes, set aside, segregate and hold in trust for the benefit of the
persons entitled thereto, a sum sufficient to pay such principal, premium, if
any, Change of Control Purchase Price, Asset Sale Purchase Price or interest so
becoming due and will notify the Trustee of any failure to take such action.
(d) Anything in this Section 4.04 to the contrary notwithstanding,
the Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid
to the Trustee all sums held in trust by it, or by any paying agent hereunder,
as required by this Section 4.04, such sums to be held by the Trustee upon the
trusts herein contained.
(e) Anything in this Section 4.04 to the contrary notwithstanding,
the agreement to hold sums in trust as provided in this Section 4.04 is subject
to the provisions of Sections 12.03 and 12.04.
SECTION 4.05. Maintenance of corporate existence. So long as any of
the Notes shall remain outstanding, the Company will at all times (except as
otherwise provided or permitted in this Section 4.05 or elsewhere in this
Indenture) do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and the corporate existence of
each Subsidiary; provided, however, that nothing herein shall require the
Company to continue the corporate existence of any Subsidiary other than a
Subsidiary Guarantor (so long as any such Subsidiary is a Subsidiary Guarantor)
if in the judgment of the Company it shall be necessary, advisable or in the
interest of the Company to discontinue the same; and provided, further, that
any Subsidiary Guarantor may:
(a) merge or consolidate with or into the Company or any other
Subsidiary Guarantor or transfer all or substantially all of its property to
the Company or any other Subsidiary Guarantor;
(b) merge or consolidate with or into any other Person or transfer
all or substantially all of its property to any other Person as provided in
Section 15.03; and
(c) liquidate or dissolve under the laws of its jurisdiction of
formation, provided that such Subsidiary Guarantor is wholly owned directly by
the Company and/or another Subsidiary Guarantor.
SECTION 4.06. Officers' Certificate as to default and statement as to
compliance. The Company will, so long as any of the Notes are outstanding:
(a) deliver to the Trustee, promptly upon becoming aware of any Event
of Default or any event which after the passage of time or notice would become
an Event of Default, an Officers' Certificate specifying such event or Event of
Default;
(b) deliver to the Trustee within one hundred and twenty days after
the end of each fiscal year of the Company, beginning with the fiscal year
ending December 31, 1994, a statement as to compliance signed on behalf of the
Company by the Chairman of the Board or the President or any Vice President and
by the Chief Financial Officer, Treasurer or Controller of the Company stating
as to each signer thereof that:
(1) a review of the activities of the Company during such
year and of performance under this Indenture has been made under his
supervision, and
(2) to the best of his knowledge, based on such review, there
is no Event of Default or event which with notice or the passage of
time would become an Event of Default which has occurred and is
continuing, or, if there is such an event or Event of Default,
specifying each such event or Event of Default known to him and the
nature and status thereof; and
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(c) deliver to the Trustee within five days after becoming aware of
the occurrence thereof written notice of any acceleration which, with the
giving of notice and the lapse of time, would be an Event of Default within the
meaning of Section 6.01(d).
SECTION 4.07. Usury laws. The Company, to the extent it may lawfully
do so, will not voluntarily claim, and will actively resist any attempts to
claim, the benefit of any usury laws against any holder of the Notes.
SECTION 4.08. Restrictions on transactions with Affiliates.
(a) The Company shall not, and shall not permit any of its
Subsidiaries or its Non-Affiliate Joint Ventures to, enter into any transaction
or series of related transactions with any Affiliate of the Company, unless:
(i) the terms thereof are no less favorable to the Company,
such Subsidiary or such Non-Affiliate Joint Venture, as the case may
be, than those that could reasonably be expected to be obtained in a
comparable transaction with an unrelated Person,
(ii) such transaction or series of related transactions shall
have been approved as meeting such standard, in good faith, by a
majority of the independent members of the Board of Directors of the
Company evidenced by a Board Resolution and
(iii) if the amount of such transaction or the aggregate
amount of such series of related transactions is greater than
$10,000,000, the Company, such Subsidiary and/or such Non-Affiliate
Joint Venture, as the case may be, shall have received an opinion that
such transaction or series of related transactions is fair to the
Company, such Subsidiary and/or such Non-Affiliate Joint Venture, as
the case may be, from a financial point of view, from an independent
investment banking firm of national standing selected by the Company.
The Company shall deliver to the Trustee, within 60 days after the end of each
fiscal quarter of the Company, an Officers' Certificate which (x) shall specify
the aggregate dollar amount of transactions (other than transactions referred
to in Section 4.08(b)) with Affiliates of the Company occurring during such
fiscal quarter, and (y) with respect to any transaction with an Affiliate of
the Company, or series of related transactions (other than transactions
referred to in Section 4.08(b)) with Affiliates of the Company, occurring
during such fiscal quarter, shall briefly describe such transaction or
transactions.
(b) The provisions contained in the foregoing paragraphs of this
Section 4.08 shall not apply to:
(i) the making of any Restricted Payments and Restricted
Investments otherwise permitted by Section 4.09 (other than
4.09(b)(IV)),
(ii) the making of payments permitted by the Tax Sharing
Agreements,
(iii) the making of payments to MAXXAM for reimbursement for
actual services provided thereby to the Company or its Subsidiaries or
Non-Affiliate Joint Ventures based on actual costs and an allocable
share of overhead expenses,
(iv) compensation (in the form of reasonable director's fees
and reimbursement or advancement of reasonable out-of-pocket expenses)
paid to any director of the Company or its Subsidiaries or
Non-Affiliate Joint Ventures for services rendered in such person's
capacity as
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a director and indemnification and directors' and officers' liability
insurance in connection therewith,
(v) compensation, indemnification and other benefits paid or
made available to officers and employees of the Company or its
Subsidiaries or Non-Affiliate Joint Ventures for services actually
rendered, comparable to those generally paid or made available by
entities engaged in the same or similar businesses (including
reimbursement or advancement of reasonable out-of-pocket expenses and
directors' and officers' liability insurance),
(vi) loans to officers, directors and employees of the
Company or its Subsidiaries for business or personal purposes and
other loans and advances to such officers, directors and employees for
travel, entertainment, moving and other relocation expenses, in each
case made in the ordinary course of business and consistent with past
practices of the Company and its Subsidiaries,
(vii) any amendment to the Existing Intercompany Note that
extends the maturity thereof or reduces the interest rate thereon, or
any other amendment thereto that does not materially adversely affect
the holders of the Notes,
(viii) the dividend by the Company of all or any portion of
the Existing Intercompany Note and accrued interest thereon,
(ix) any merger, consolidation, transfer or sale permitted by
Section 11.01(b), and
(x) any amendment to the Tax Sharing Agreements, provided
that a majority of the independent members of the Board of Directors
of the Company evidenced by a Board Resolution determines that such
amendment would not materially adversely affect the holders of the
Notes.
SECTION 4.09. Limitations on Restricted Payments and Restricted
Investments.
(a) The Company shall not, directly or indirectly, (i) declare or pay
any dividend or make any distribution in respect of its Capital Stock (other
than dividends payable in Capital Stock of the Company other than Redeemable
Stock), (ii) make or permit any of its Subsidiaries to make any payment on
account of the purchase, redemption or other acquisition or retirement of any
Capital Stock of the Company other than through the issuance solely of Capital
Stock of the Company (other than Redeemable Stock) or rights thereto, provided
that any Subsidiary of the Company may purchase Capital Stock of the Company
from the Company or from any other Subsidiary of the Company (which purchase
shall not be a Restricted Payment or a Restricted Investment), (iii) make or
permit any of its Subsidiaries to make any voluntary purchase, redemption or
other acquisition or retirement for value of any Indebtedness that is
subordinated (pursuant to its terms) in right and priority of payment to the
Notes or any Subsidiary Guarantor's obligations under its Guarantee, as the
case may be, other than purchases, redemptions or other acquisitions or
retirements of Permitted Indebtedness described in clause (b) of the definition
thereof or purchases, redemptions or other acquisitions otherwise permitted by
the terms hereof, (each of the foregoing in clauses (i), (ii) and (iii) a
"Restricted Payment"), (iv) to the extent the Company or its Subsidiaries
exercise actual control over a Non-Affiliate Joint Venture existing on the date
of this Indenture or formed or acquired after the date of this Indenture (each
a "Controlled Non-Affiliate Joint Venture"), permit such Controlled
Non-Affiliate Joint Venture to make any Restricted Investment or (v) make or
permit any of its Subsidiaries to make any Restricted Investment, unless at the
time of, and after giving effect to, each such Restricted Payment or Restricted
Investment:
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(A) no Event of Default (and no event that, after notice or
lapse of time or both, would become an Event of Default) shall have
occurred and be continuing (or would occur and be continuing after
giving effect thereto); and
(B) the Consolidated Fixed Charge Coverage Ratio of the
Company is greater than 2.0 to 1; and
(C) the sum of:
(x) the aggregate amount expended for all Restricted
Payments after December 31, 1992, and
(y) the aggregate amount of Restricted Investments
(less the amount of (1) such Restricted Investments returned
in cash, or in property if made in property, (2) any guarantee
that constitutes a Restricted Investment, to the extent it has
been released, and (3) any direct liabilities or obligations
to be assumed or discharged in connection with such Restricted
Investments (in either case without recourse to the Company,
any of its Subsidiaries or any Controlled Non-Affiliate Joint
Venture) if such liability or obligation had been a liability
or obligation of the Company, any of its Subsidiaries or any
Controlled Non-Affiliate Joint Venture)
(in each case, the amount expended for such Restricted Payments and
Restricted Investments or the amount of any Restricted Investments
returned, if paid or returned in property other than in cash or a sum
certain guaranteed, to be the Fair Market Value of such property),
would not exceed the sum of:
(I) 50% of the Consolidated Net Income of the Company (or, if
the aggregate Consolidated Net Income of the Company for any such
period shall be a deficit, minus 100% of such deficit) accrued on a
cumulative basis for the period (taken as one accounting period) from
January 1, 1993 to the end of the Company's most recently ended fiscal
quarter for which financial statements are available at the time such
Restricted Payment or Restricted Investment is being made, and
(II) the aggregate net proceeds, including the Fair Market
Value of property other than cash, received by the Company as capital
contributions to the Company after December 31, 1992, or from the
issue or sale (other than to a Non-Affiliate Joint Venture or to a
Subsidiary of the Company), after December 31, 1992, of Capital Stock
other than Redeemable Stock (including Capital Stock, other than
Redeemable Stock, issued upon the conversion of, or in exchange for,
indebtedness or Redeemable Stock, and including upon exercise of
warrants or options or other rights to purchase such Capital Stock,
issued after December 31, 1992), or from the issue or sale, after
December 31, 1992 of any debt or other security of the Company
convertible or exercisable into such Capital Stock that has been so
converted or exercised;
provided, however, that in no event shall the Company make, or permit any of
its Subsidiaries to make, a Restricted Payment or Restricted Investment
pursuant to this Section 4.09(a) to or in MAXXAM or any Affiliate of MAXXAM if,
after giving effect thereto, (A) the aggregate amount of all Restricted
Payments and Restricted Investments (less the amount of (1) such Restricted
Investments returned in cash, or in property if made in property, (2) any
guarantee that constitutes a Restricted Investment, to the extent it has been
released, and (3) any direct liabilities or obligations to be assumed or
discharged in connection with such Restricted Investments (in either case
without recourse to the Company, any of its Subsidiaries
44
<PAGE> 52
or any Controlled Non-Affiliate Joint Venture) if such liability or obligation
had been a liability or obligation of the Company, any of its Subsidiaries or
any Controlled Non-Affiliate Joint Venture) made pursuant to this Section
4.09(a) in any calendar year to or in MAXXAM or any Affiliate of MAXXAM, less
(B) the aggregate amount of such Restricted Payments and Restricted Investments
made to or in KAC in such calendar year which are distributed or paid within
thirty days thereafter by KAC to its holders of Common Stock other than MAXXAM
and any Affiliate of MAXXAM, would exceed (C) $75,000,000; and provided,
further, that notwithstanding the foregoing, the Company may make any such
Restricted Payment or Restricted Investment to or in MAXXAM or any Affiliate of
MAXXAM if, after giving pro forma effect thereto, the Company's senior debt
rating would be Baa3 (or the equivalent) or better by Moody's Investor
Services, Inc. (or a successor rating agency) or BBB- (or the equivalent) or
better by Standard & Poor's Corporation (or a successor rating agency).
(b) The foregoing provisions of this Section 4.09 shall not be
violated by reason of the following Restricted Payments:
(I) the payment of any dividend or distribution or the
redemption of any securities within 60 days after the date of
declaration of such dividend or distribution or the giving of the
formal notice by the Company of such redemption, if at said date of
declaration of such dividend or distribution or the giving of the
formal notice of such redemption, such dividend, distribution or
redemption would have complied with Section 4.09(a);
(II) the retirement of any shares of the Company's Capital
Stock by exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Non-Affiliate Joint Venture or to a
Subsidiary of the Company) of other shares of its Capital Stock other
than Redeemable Stock or out of the proceeds of a substantially
concurrent capital contribution to the Company, provided, however,
that, to the extent the proceeds are so used, a sale of Capital Stock
or capital contribution permitted by this clause (II) shall be
excluded in determining the aggregate net proceeds received by the
Company referred to under clause (II) of Section 4.09(a);
(III) the payments provided for by clauses (ii), (iii), (iv)
and (v) and the transactions described in clauses (vi), (vii), (viii)
and (ix) (so long as, in the case of clause (ix), immediately
following such transaction, the Consolidated Net Worth of the entity
that survives such transaction is not materially lower than the
Consolidated Net Worth of the Company immediately prior to such
transaction) of Section 4.08(b);
(IV) the voluntary purchase, redemption or other acquisition
or retirement for value of Indebtedness that is subordinated (pursuant
to its terms) in right and priority of payment to the Notes or any
Subsidiary Guarantor's obligation under its Guarantee, as the case may
be, to the extent that the aggregate amount expended (exclusive of
amounts expended pursuant to clauses (V) and (VIII) of this Section
4.09(b)) for all such voluntary purchases, redemptions or other
acquisitions or retirements after the date hereof (the amount expended
for such purchases, redemptions or other acquisitions or retirements,
if paid in property other than in cash or a sum certain guaranteed, to
be the Fair Market Value of such property) does not exceed the
aggregate net proceeds, including the Fair Market Value of property
other than cash, received by the Company or any Subsidiary Guarantor
from the issue or sale (other than an issuance or sale to the Company
or a Non-Affiliate Joint Venture or Subsidiary of the Company), after
the date hereof, of Indebtedness that is subordinated (pursuant to its
terms) in right and priority of payment to the Notes or such
Subsidiary Guarantor's obligation under its Guarantee, as the case may
be, and that is otherwise permitted to be incurred pursuant to this
Indenture,provided that, to the extent the proceeds of Indebtedness so
subordinated to the Notes or any Subsidiary
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Guarantor's obligation under its Guarantee, as the case may be, are so
used, the net proceeds of issuance of any such Indebtedness upon
conversion into Capital Stock shall not be included in determining the
aggregate net proceeds received by the Company referred to under
clause (II) of Section 4.09(a);
(V) the voluntary purchase, redemption or other acquisition
or retirement for value of any Indebtedness that is subordinated
(pursuant to its terms) in right and priority of payment to the Notes
or any Subsidiary Guarantor's obligation under its Guarantee, as the
case may be, by exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Non-Affiliate Joint
Venture or to a Subsidiary of the Company) of Capital Stock (other
than Redeemable Stock) of the Company, provided, however, that, to the
extent the proceeds are so used, the issuance of Capital Stock as
permitted by this clause (V) shall not be included in determining the
aggregate net proceeds received by the Company referred to under
clause (II) of Section 4.09(a);
(VI) the payment of dividends on, and the purchase,
redemption, retirement or other acquisition of, the USWA Preferred
Stock or the Preferred Stock ($100),provided that no such payment is
made, directly or indirectly, to an Affiliate of the Company;
(VII) the payment to KAC of an amount not to exceed $300,000
in any fiscal year for the payment of KAC's reasonable out-of- pocket
expenses, provided that no part of such amount is paid directly or
indirectly to any other Affiliate of the Company and that, at the time
of each such payment, the Company is in compliance with clause (A) of
Section 4.09(a);
(VIII) Restricted Payments and Restricted Investments after
February 1, 1993, other than Restricted Payments and Restricted
Investments permitted by Section 4.09(a) or clauses (I) through (VII)
of Section 4.09(b), in an aggregate amount such that the sum of:
(X) the aggregate amount expended for all such Restricted
Payments after February 1, 1993 made pursuant to this
clause (VIII); and
(y) the aggregate amount of all Restricted Investments
made after February 1, 1993 pursuant to this clause
(VIII) (less the amount of (1) such Restricted
Investments returned in cash, or in property if made
in property, (2) any guarantee that constitutes a
Restricted Investment, to the extent it has been
released, and (3) any direct liabilities or
obligations to be assumed or discharged in connection
with such Restricted Investments (in either case
without recourse to the Company, any of its
Subsidiaries or any Controlled Non-Affiliate Joint
Venture) if such liability or obligation had been a
liability or obligation of the Company, any of its
Subsidiaries or any Controlled Non-Affiliate Joint
Venture)
(in each case, the amount expended for such Restricted Payments and Restricted
Investments or the amount of any Restricted Investments returned, if paid or
returned in property other than in cash or a sum certain guaranteed, to be the
Fair Market Value of such property)
would not exceed $50,000,000,provided that at the time of each such
Restricted Payment or Restricted Investment made pursuant to this
clause (VIII), no Event of Default (and no event that, after notice or
lapse of time or both, would become an Event of Default) shall have
occurred and be continuing (or would occur and be continuing after
giving effect thereto); andprovided, further, that in no event shall
the Company make, or permit any of its Subsidiaries to make, a
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Restricted Payment or Restricted Investment pursuant to this clause
(VIII) to or in MAXXAM or any Affiliate of MAXXAM if, after giving
effect thereto, (A) the aggregate amount of all Restricted Payments
and Restricted Investments (less the amount of (1) such Restricted
Investments returned in cash, or in property if made in property, (2)
any guarantee that constitutes a Restricted Investment, to the extent
it has been released, and (3) any direct liabilities or obligations to
be assumed or discharged in connection with such Restricted
Investments (in either case without recourse to the Company, any of
its Subsidiaries or any Controlled Non-Affiliate Joint Venture) if
such liability or obligation had been a liability or obligation of the
Company, any of its Subsidiaries or any Controlled Non-Affiliate Joint
Venture) made pursuant to this clause (VIII) to or in MAXXAM or any
Affiliate of MAXXAM, less (B) the aggregate amount of such Restricted
Payments and Restricted Investments made to or in KAC which are
distributed or paid within thirty days thereafter by KAC to its
holders of Common Stock other than MAXXAM and Affiliates of MAXXAM,
would exceed (C) $20,000,000; and
(IX) in the event that the Company merges with or into KAC
and the Preferred Dividend Intercompany Notes are extinguished, the
payment of dividends on shares of KAC's Preferred Redeemable Increased
Dividend Equity Securities, ---% PRIDES, Convertible Preferred Stock
(the "PRIDES") or shares of KAC's Series A Mandatory Conversion
Premium Dividend Preferred Stock (the "Series A Shares") and any other
preferred stock of KAC the proceeds of which gave rise to a Preferred
Dividend Intercompany Note, in an aggregate amount not to exceed the
outstanding principal amount of such Preferred Dividend Intercompany
Notes at the time of such merger.
No payments and other transfers made under clauses (II) through (VII)
and (IX) of this Section 4.09(b) shall reduce the amount available for
Restricted Payments and Restricted Investments under Section 4.09(a);
payments and other transfers made under clauses (I) and (VIII) of this
Section 4.09(b) shall reduce the amount available for Restricted
Payments and Restricted Investments under Section 4.09(a).
SECTION 4.10. Limitation on Indebtedness and Preferred Stock.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or become liable with respect to, or extend the maturity of or become
liable for the payment of, contingently or otherwise (collectively "Incur"),
any preferred stock (including preference stock) or Indebtedness, except that,
without duplication, the Company, the Subsidiary Guarantors and Alpart may
Incur preferred stock (including preference stock) or Indebtedness (including,
without duplication, guarantees of Indebtedness of the Company and its
Subsidiaries otherwise permitted by this Indenture) if after giving effect
thereto and the receipt and application of the proceeds therefrom, and assuming
that the full amount of Indebtedness permitted to be Incurred under Section
4.10(b)(ii) (after taking into account any reduction in such amount as set
forth in such Section 4.10(b)(ii)) has been Incurred (assuming, for purposes of
this calculation, an interest rate on such additional Indebtedness equal to the
weighted average interest rate on the Indebtedness then outstanding under
Section 4.10(b)(ii)), the Consolidated Fixed Charge Coverage Ratio of the
Company is greater than 2.0 to 1; provided, however, that Indebtedness of
Alpart Incurred pursuant to this clause (a) shall not exceed an aggregate of
$150,000,000 at any one time outstanding, plus an amount equal to the
reasonable fees and expenses in connection with the Incurrence of such
Indebtedness.
(b) Notwithstanding the foregoing paragraph (a) of this Section 4.10,
the following shall be permitted:
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(i) the Company and the Subsidiary Guarantors may Incur
Indebtedness in respect of the Notes;
(ii) the Company and the Subsidiary Guarantors may Incur
Indebtedness (without duplication), and the Bank Guarantors may
guarantee such Indebtedness, under the Credit Agreement, in connection
with Refinancing Sale and Leaseback Transactions or otherwise in an
aggregate amount at any one time outstanding not to exceed
$375,000,000, as reduced from time to time by any permanent reduction
in such amount as set forth in a Board Resolution;
(iii) (A) Alpart may Incur Indebtedness in an aggregate
amount not to exceed $150,000,000 at any one time outstanding and (B)
the Company, KJC and AJI (without duplication) may Incur Indebtedness
in an aggregate amount not to exceed at any one time outstanding the
product of (I) $150,000,000 multiplied by (II) the Company's then
percentage ownership interest in Alpart;provided, howeve, that the
aggregate Indebtedness (without duplication) Incurred pursuant to
clauses (A) and (B) of this clause (b)(iii) may not exceed
$150,000,000 at any one time outstanding; andprovided, further, that
in each case the proceeds of such Indebtedness are used solely for
capital improvements and expenditures, expansion and working capital
with respect to Alpart and/or to reimburse the partners of Alpart for
advances to Alpart used solely for capital improvements and
expenditures, expansion and working capital with respect to Alpart,
plus in each case an amount equal to the reasonable fees and expenses
in connection with the Incurrence of such Indebtedness;
(iv) the Company and/or KAAC (without duplication) may Incur
Indebtedness in an amount not to exceed $75,000,000 at any one time
outstanding, the proceeds of which are used solely for capital
improvements and expenditures, expansion and working capital with
respect to QAL and/or to reimburse the stockholders of QAL for
advances to QAL used solely for capital improvements and expenditures,
expansion and working capital with respect to QAL, plus an amount
equal to the reasonable fees and expenses in connection with the
Incurrence of such Indebtedness;
(v) VALCO may Incur Indebtedness, and the Company may
guarantee such Indebtedness, in an aggregate amount (without
duplication) not to exceed $25,000,000 at any one time outstanding,
the proceeds of which are used solely for capital improvements and
expenditures, expansion and working capital with respect to VALCO
and/or to reimburse the shareholders of VALCO for advances to VALCO
used solely for capital improvements and expenditures, expansion and
working capital, plus an amount equal to the reasonable fees and
expenses in connection with the Incurrence of such Indebtedness;
(vi) the Company and its Subsidiaries may Incur Indebtedness
("Refinancing Indebtedness") that serves to Refinance, in whole or in
part, the Indebtedness permitted by clauses (a) and (b) of this
Section 4.10 (the "Refinanced Indebtedness"), or any one or more
successive Refinancings of any thereof; provided, however, that:
(A) such Refinancing Indebtedness is in an aggregate
amount not to exceed the aggregate amount of such Refinanced
Indebtedness (including accrued interest thereon and undrawn
amounts under credit arrangements otherwise permitted to be
Incurred pursuant to this Indenture), the amount of any
premium required to be paid in connection with such
Refinancing pursuant to the terms of such Refinanced
Indebtedness or the amount of any reasonable and customary
premium determined by the Company to be necessary to
accomplish such Refinancing by means of a redemption, tender
offer,
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privately negotiated transaction, defeasance or other similar
transaction, and an amount equal to the reasonable fees and
expenses in connection with the Incurrence of such Refinancing
Indebtedness;
(B) neither the Company nor any of its Subsidiaries
is an obligor of such Refinancing Indebtedness, except to the
extent that such Person (I) was an obligor of such Refinanced
Indebtedness or (II) is otherwise permitted, at the time such
Refinancing Indebtedness is Incurred, to be an obligor of such
Refinancing Indebtedness; and
(C) in the case of any Refinanced Indebtedness that
is subordinated (pursuant to its terms) in right and priority
of payment to the Notes or any Subsidiary Guarantor's
obligation under its Guarantee, as the case may be, such
Refinancing Indebtedness (I) has a final maturity and weighted
average maturity at least as long as such Refinanced
Indebtedness and (II) is subordinated (pursuant to its terms)
in right and priority of payment to the Notes or such
Subsidiary Guarantor's obligation under its Guarantee, as the
case may be, at least to the same extent as such Refinanced
Indebtedness;
(vii) the Company may Incur Capitalized Lease Obligations not
exceeding $50,000,000 at any one time outstanding in connection with
the sale and leaseback of all or a portion of the Company's interest
in the Center for Technology, provided that the Net Cash Proceeds
therefrom are applied as provided by Section 4.14;
(viii) the Company and its Subsidiaries may Incur
Indebtedness, without duplication, the proceeds of which are used
solely to finance the construction, acquisition or the acquisition and
retrofitting of an aluminum smelter or smelters or related facilities
(or interests therein) and the reasonable fees and expenses in
connection with the Incurrence of such Indebtedness, in an amount not
to exceed $150,000,000 in any fiscal year (without cumulation of
unused amounts to successive years);
(ix) the Company and its Subsidiaries may Incur Indebtedness,
the proceeds of which are used solely to finance the construction or
acquisition of a fabrication plant or plants or related facilities and
the reasonable fees and expenses in connection with the Incurrence of
such Indebtedness, in an aggregate amount not to exceed $25,000,000 in
any fiscal year (without cumulation of unused amounts to successive
years);
(x) the Company and its Subsidiaries may Incur preferred
stock (including preference stock) that is not Redeemable Stock;
provided, however, that in the case of preferred stock (including
preference stock) Incurred by any Subsidiary of the Company that is
not a Subsidiary Guarantor, such preferred stock shall be issuedpro
rata to the holders of Capital Stock of such Subsidiary;
(xi) the Company and its Subsidiaries may Incur preferred
stock (including preferred stock and preference stock that is
Redeemable Stock),provided that such preferred stock or preference
stock is issued to the Company, any of its Subsidiaries or pro rata to
the holders of Capital Stock of any such Subsidiary;
(xii) the Company and its Subsidiaries may Incur Permitted
Indebtedness; and
(xiii) the Company and its Subsidiaries may Incur
Indebtedness in an amount at any one time outstanding not to exceed
$75,000,000, provided that the amount of such Indebtedness that
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may be Incurred by Subsidiaries of the Company (other than Subsidiary
Guarantors that are not Permitted Entities) shall not exceed
$25,000,000 at any one time outstanding, andprovided, further, that,
to the extent any such Indebtedness is Incurred from a Bank or an
affiliate thereof, the Bank Guarantors may guarantee such
Indebtedness.
(c) Notwithstanding the foregoing, no Subsidiary of the Company shall
assume, guarantee or in any other manner become liable with respect to any
Indebtedness of the Company or a Subsidiary Guarantor (other than such
Subsidiary) ("Other Indebtedness") which is subordinated (pursuant to its
terms) in right and priority of payment to any other Indebtedness of the
Company or such Subsidiary Guarantor unless such Subsidiary also assumes,
guarantees or otherwise becomes liable with respect to the Notes on a
substantially similar basis for so long as such Subsidiary is liable with
respect to such Other Indebtedness; provided, however, that if such Other
Indebtedness is subordinated (pursuant to its terms) in right and priority of
payment to the Notes or any Subsidiary Guarantor's obligation under its
Guarantee, as the case may be, any such assumption, guarantee or other
liability of such Subsidiary with respect to such Other Indebtedness shall be
subordinated to such Subsidiary's assumption, guarantee or other liability with
respect to the Notes to the same extent as such subordinated Indebtedness is
subordinated to the Notes or such Subsidiary Guarantor's obligation under its
Guarantee, as the case may be; and provided, further, that this paragraph shall
not be applicable to any assumption, guarantee or other liability of any
Subsidiary of the Company which existed at the time such Person became a
Subsidiary of the Company and was not Incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary of the Company, or any
Refinancing Indebtedness in connection therewith complying with Section
4.10(b)(vi) (provided, that the guarantee of such Refinancing Indebtedness is
on substantially the same terms as the guarantee of the Refinanced
Indebtedness). In the event that any Subsidiary of the Company (other than a
Subsidiary Guarantor) is required to guarantee the Notes pursuant to the next
preceding sentence, the Company shall cause such Subsidiary to (a) execute and
deliver to the Trustee a supplemental indenture in form and substance
reasonably satisfactory to the Trustee pursuant to which such Subsidiary shall
be named as an additional Subsidiary Guarantor for so long as such Subsidiary
Guarantor is so obligated with respect to such Other Indebtedness and (b)
deliver to the Trustee an Opinion of Counsel reasonably satisfactory to the
Trustee that such supplemental indenture has been duly executed and delivered
by such Person.
(d) For the purpose of determining compliance with this Section 4.10,
in the event that any Indebtedness is permitted to be Incurred pursuant to more
than one clause of Section 4.10(b), the Incurrence of such Indebtedness shall
not limit the amount of Indebtedness otherwise permitted to be Incurred, and
shall not be required to be included, under more than one such clause.
SECTION 4.11. Limitation on Liens.
(a) The Company shall not, and shall not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any
of their respective U.S. Fixed Assets to secure, directly or indirectly, any
Indebtedness, unless the Notes are equally and ratably secured on a senior
basis for so long as such secured Indebtedness is so secured.
(b) Notwithstanding anything to the contrary, this
Section 4.11 shall not prohibit:
(i) Liens on the Permitted Collateral securing outstanding
Indebtedness permitted by this Indenture in an aggregate principal
amount not to exceed the Maximum Secured Amount at the time such
Indebtedness is Incurred;
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(ii) Liens in existence on the date of the issuance of the
Notes after giving effect thereto which Liens, if such Liens secure a
single or related items of Indebtedness in a principal amount in
excess of $5,000,000, are referred to in Schedule A hereto;
(iii) Liens in favor of the Company or any Subsidiary
Guarantor;
(iv) Liens on U.S. Fixed Assets of a person existing at the
time such person is merged into or consolidated with the Company or
any Subsidiary of the Company, provided, that such Liens were in
existence prior to the contemplation of such merger or consolidation
and do not extend to any other U.S. Fixed Assets of the Company or any
Subsidiary of the Company;
(v) Liens on U.S. Fixed Assets existing at the time of
acquisition thereof by the Company or any Subsidiary of the Company,
provided, that such Liens were in existence prior to the contemplation
of such acquisition and do not extend to any other U.S. Fixed Assets
of the Company or any Subsidiary of the Company;
(vi) Liens securing Indebtedness permitted by clauses (vii),
(viii) and (ix) of Section 4.10(b), provided, that such Liens do not
extend to any U.S. Fixed Assets other than the Center for Technology
in the case of clause (vii), the applicable aluminum smelter or
smelters and related facilities in the case of clause (viii) and the
applicable fabrication plant or plants and related facilities in the
case of clause (ix), and, in each case, together with any Improvements
thereto or thereon and any proceeds thereof;
(vii) Liens securing Indebtedness permitted by clause (e) of
the definition of Permitted Indebtedness;
(viii) Liens securing the Indebtedness permitted by clauses
(iii), (iv) or (v) of Section 4.10(b) provided that such Liens do not
extend to any U.S. Fixed Assets other than (a) Permitted Collateral
(in which case the principal amount of such Indebtedness shall be
included in the calculation of the Maximum Secured Amount for purposes
of clause (i) of this paragraph and such Liens shall only be permitted
if the requirements of clause (i) are satisfied) and (b) the Capital
Stock and assets of Alpart, KJC and AJI in the case of clause (iii),
the Capital Stock and assets of KAAC in the case of clause (iv), and
the Capital Stock and assets of VALCO in the case of clause (v), plus,
in each case, the proceeds thereof;
(ix) Liens securing Indebtedness consisting of Capitalized
Lease Obligations, mortgage financings, industrial revenue bonds or
other monetary obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of
construction or installation of U.S. Fixed Assets used in the business
of the Company and its Subsidiaries, or repairs, additions or
Improvements to such U.S. Fixed Assets, provided, that such Liens (a)
secure Indebtedness in an amount not in excess of the original
purchase price or the original cost of any such U.S. Fixed Assets or
repair, addition or Improvement thereto (plus an amount equal to the
reasonable fees and expenses in connection with the Incurrence of such
Indebtedness), (b) do not extend to any other U.S. Fixed Assets (other
than Improvements thereto or thereon and any proceeds thereof) of the
Company or any Subsidiary of the Company (and, in the case of a
repair, addition or Improvement, such Lien extends only to the U.S.
Fixed Assets (and Improvements thereto or thereon) repaired, added to
or improved), and (c) secure Indebtedness incurred no later than 180
days after the acquisition or final completion of such construction,
repair, addition or Improvement;
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(x) Liens securing any Refinancings (in whole or in part) of
any Indebtedness secured by the Liens described in clauses (ii), (iv),
(v), (vi), (viii) or (ix) of this paragraph, and any successive
Refinancings of any thereof (together with any increased amount of
such Indebtedness specifically permitted pursuant to Section 4.10(b)
to cover the reasonable fees and expenses incurred in connection with
a Refinancing)),provided that each such Lien (unless otherwise
permitted by this paragraph) does not extend to any additional U.S.
Fixed Assets (other than Improvements thereto or thereon and any
proceeds thereof);
(xi) Liens on U.S. Fixed Assets securing Indebtedness in an
aggregate principal amount not to exceed $10,000,000; and
(xii) Liens on any U.S. Fixed Assets consisting of easements,
covenants, restrictions, exceptions, reservations and similar matters
which do not materially impair the use of such U.S. Fixed Assets for
the uses for which it is held and which Liens are granted to secure
Indebtedness secured by Liens permitted by the foregoing clauses (i)
through (xi).
(c) For purposes of this Section 4.11, the Notes will be
considered equally and ratably secured on a senior basis with any other Lien if
the Lien securing the Notes is of at least equal priority and covers the same
U.S. Fixed Assets as such other Lien, provided, that if the Indebtedness
secured by such other Lien is expressly subordinated in right and priority of
payment by its terms to the Notes, the Lien securing the Notes will be senior
to such other Lien.
(d) For the purpose of determining compliance with this
Section 4.11, in the event that any Lien is permitted pursuant to more than one
clause of Section 4.11(b), such Lien shall not limit any other Lien otherwise
permitted, and shall not be required to be included under more than one such
clause.
SECTION 4.12. Subsidiary guarantees, etc.
(a) If the Company or any Subsidiary Guarantor shall transfer or
cause to be transferred, in one or a series of related transactions, any
property or assets (including, without limitation, businesses, divisions, real
property, assets or equipment) to any Subsidiary of the Company or to any
Non-Affiliate Joint Venture of the Company, the Company shall cause such
transferee Subsidiary or Non-Affiliate Joint Venture to (i) execute and deliver
to the Trustee a supplemental indenture in form and substance reasonably
satisfactory to the Trustee pursuant to which such transferee Subsidiary or
Non-Affiliate Joint Venture shall be named as an additional Subsidiary
Guarantor and (ii) deliver to the Trustee an Opinion of Counsel reasonably
satisfactory to the Trustee that such supplemental indenture has been duly
executed and delivered by such Person.
(b) The provisions set forth in the immediately preceding paragraph
shall not apply to the following transfers of property or assets by the Company
or any Subsidiary Guarantor:
(A) transfers of property or assets (other than cash) to
Subsidiaries of the Company and Non-Affiliate Joint Ventures, provided
that such transfer is made in exchange for cash in an amount equal to
the Fair Market Value of such property or assets;
(B) transfers of property or assets to Subsidiary Guarantors;
(C) the use of the proceeds of Indebtedness described in
Sections 4.10(b)(iii), (iv), (v), (viii) and (ix);
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(D) transfers to Alpart of the proceeds of Indebtedness
described in Section 4.10(a) to the extent that Alpart is an obligor
or guarantor of such Indebtedness;
(E) the provision of, and the payment for, goods and
services, working capital and technology to Subsidiaries of the
Company and Non-Affiliate Joint Ventures in each case in the ordinary
course of the businesses in which the Company or its Subsidiaries or
its Non-Affiliate Joint Ventures were engaged on the date of this
Indenture or reasonably related extensions thereof;
(F) transfers of assets to a Subsidiary of the Company
immediately prior to the sale of such Subsidiary;
(G) transfers of cash or Cash Equivalents to Non-Affiliate
Joint Ventures engaged or to be engaged in the business of bauxite
mining and/or alumina refining and/or aluminum smelting and/or
fabrication and/or reasonably related extensions thereof;
(H) transfers of cash, Cash Equivalents, property or other
assets to a Permitted Entity in exchange for Permitted Entity
Securities of such Permitted Entity if, immediately after giving
effect to such transfer, such Permitted Entity remains a Permitted
Entity;
(I) transfers of Capital Stock or other equity interests to
the issuer of such Capital Stock or other equity interests such that
immediately after giving effect to such transfer and related
transfers, the proportional beneficial ownership by the transferor of
the class of Capital Stock or equity interests so transferred is not
reduced; and
(J) other transfers of assets, provided that the aggregate
amount thereof (if other than cash, such amount shall be the Fair
Market Value of such asset at the time of such transfer), less the
aggregate amount of such assets returned to the Company or any
Subsidiary Guarantor (if returned other than in cash, the amount of
such assets shall be the Fair Market Value of such assets at the time
so returned), does not exceed, in the aggregate, the greater of (i)
$25,000,000 or (ii) 5% of the Company's Consolidated Net Worth,
calculated after giving effect to such transfers and returns.
(c) If any of the Company's existing or future Subsidiaries (other
than a Bank Guarantor) or existing or future Non-Affiliate Joint Ventures shall
guarantee, directly or indirectly, or become a direct obligor with respect to,
Indebtedness under the Credit Agreement or any Refinancings thereof, the
Company shall cause each such Subsidiary or Non-Affiliate Joint Venture to (A)
execute and deliver to the Trustee a supplemental indenture in form and
substance reasonably satisfactory to the Trustee pursuant to which such
Subsidiary or Non- Affiliate Joint Venture shall be named as an additional
Subsidiary Guarantor for as long as such Subsidiary or Non-Affiliate Joint
Venture is so obligated with respect to such Indebtedness and (B) deliver to
the Trustee an Opinion of Counsel reasonably satisfactory to the Trustee that
such supplemental indenture has been duly executed and delivered by such
Person.
(d) Sections 4.12(a) and (b) shall not apply to any Restricted
Investment or Restricted Payment otherwise permitted by Section 4.09.
(e) The Company shall not permit any Permitted Entity to cease to be
a Permitted Entity except:
(i) pursuant to a liquidation or dissolution of such
Permitted Entity or a transfer of all or substantially all of the
properties and assets of such Permitted Entity to its Equity Owners in
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proportion to their interests, including by way of merger or
consolidation of such Permitted Entity with or into its sole Equity
Owner;
(ii) pursuant to a sale in compliance with Section 4.14 of
all of the Permitted Entity Securities of such Permitted Entity held
directly or indirectly by the Company or any Subsidiary Guarantor; or
(iii) if such Permitted Entity becomes a Subsidiary Guarantor.
(f) Notwithstanding anything in this Section 4.12 to the contrary,
VALCO shall be permitted to merge with or into, or distribute substantially all
of its assets and liabilities to, a Permitted Entity, provided that, at the
time of such merger or distribution, such Permitted Entity has no more than
$50,000 of assets other than Capital Stock or other similar interests in VALCO.
Upon the consummation of any transaction contemplated by this clause (f), the
entity surviving such merger or distribution shall not be required (i) to
become a Subsidiary Guarantor pursuant to this Section 4.12 or (ii) if such
entity has no assets except as contemplated in this clause (f) or meets the
conditions of clause (e) of this Section 4.12, to remain a Permitted Entity
pursuant to the this Section 4.12.
SECTION 4.13. Limitation on dividends and other payment restrictions
affecting Subsidiaries. The Company shall not, and shall not permit its
Subsidiaries to, create or otherwise suffer to exist any consensual
encumbrances or restrictions on the ability of any Subsidiary to pay dividends
or make any other distributions on its Capital Stock or pay any Indebtedness
owed to the Company or any Subsidiaries of the Company or to make loans or
advances or transfer any of its assets to the Company or any Subsidiary of the
Company; provided, however that this Section 4.13 shall not prohibit Permitted
Dividend Encumbrances.
SECTION 4.14. Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, consummate any Asset Sale unless at least 75% of the
consideration therefor received by the Company or such Subsidiary (exclusive of
indemnities) is in the form of cash or Cash Equivalents, provided that this
sentence shall not apply to the sale or disposition of assets as a result of a
foreclosure (or a secured party taking ownership of such assets in lieu of
foreclosure) or as a result of an involuntary proceeding in which the Company
cannot, directly or through its Subsidiaries, direct the type of proceeds
received. The amount of (i) any liabilities of the Company or any Subsidiary
of the Company that are actually assumed by the transferee in such Asset Sale,
or for which the Company and its Subsidiaries are fully released, shall be
deemed to be cash for purposes of determining the percentage of cash
consideration received by the Company or its Subsidiaries and (ii) any notes or
other obligations received by the Company or any Subsidiary of the Company from
such transferee that are immediately converted (or are converted within thirty
days of the related Asset Sale) by the Company or such Subsidiary into cash
shall be deemed to be cash for purposes of determining the percentage of cash
consideration received by the Company or its Subsidiaries.
(b) The Company shall apply any Net Cash Proceeds received after the
date of this Indenture to (A) the prepayment of Indebtedness in respect of or
under the Credit Agreement and any other Indebtedness of the Company (other
than the Notes) entitled to receive payment pursuant to the terms thereof
(excluding Indebtedness that is subordinated by its terms to the Notes or the
Guarantee thereof) (the "Specified Pari Passu Indebtedness"), unless the
holders thereof elect not to receive such prepayment and (B) an offer to
purchase (an "Asset Sale Offer") the then outstanding Notes, on any Business
Day occurring no later than 175 days after the receipt by the Company (or any
of its Subsidiaries, if
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applicable) of such Net Cash Proceeds (the "Asset Sale Purchase Date," which
date shall be deferred to the extent necessary to permit the Asset Sale Offer
to remain open for the period required by applicable law), at a price (the
"Asset Sale Purchase Price") equal to 100% of the principal amount thereof
together with accrued interest, if any, to but not including the Asset Sale
Purchase Date pursuant to the provisions set forth below. Such Asset Sale
Offer with respect to the Notes shall be in an aggregate principal amount (the
"Asset Sale Offer Amount") equal to the Net Cash Proceeds (rounded down to the
nearest $1,000) from the Asset Sales to which the Asset Sale Offer relates
multiplied by a fraction, the numerator of which is the principal amount of the
Notes outstanding (determined as of the close of business on the day
immediately preceding the date notice of such Asset Sale Offer is mailed) and
the denominator of which is the principal amount of the Notes outstanding plus
the aggregate principal amount of Indebtedness under the Credit Agreement and
the Specified Pari Passu Indebtedness outstanding (determined as of the close
of business on the day immediately preceding the date notice of such Asset Sale
Offer is mailed). If (X) no Indebtedness is outstanding in respect of or under
the Credit Agreement or the Specified Pari Passu Indebtedness or (y) the
holders of such Indebtedness entitled to receive payment elect not to receive
the payments provided for in the previous sentence, or (z) the application of
such Net Cash Proceeds results in the complete prepayment of such Indebtedness,
then in each case any remaining portion of such Net Cash Proceeds will be
required to be applied to an Asset Sale Offer to purchase the Notes.
(c) Notice of an Asset Sale Offer shall be mailed by the Company to
all holders at their last registered address within 145 days of the receipt by
the Company or any of its Subsidiaries of such Net Cash Proceeds. The Asset
Sale Offer shall remain open from the time of mailing until the last Business
Day before the Asset Sale Purchase Date, but in no event for a period less than
twenty-four days or less than that required by applicable law. The notice
shall state:
(1) that the Asset Sale Offer is being made pursuant to this
Section 4.14;
(2) the Asset Sale Offer Amount, the purchase price and the
Asset Sale Purchase Date;
(3) the name and address of the Trustee and that Notes must
be surrendered to the Trustee to collect the purchase price;
(4) that any Note not tendered or accepted for payment will
continue to accrue interest;
(5) that any Note accepted for payment pursuant to the Asset
Sale Offer shall cease to accrue interest on and after the Asset Sale
Purchase Date;
(6) that each holder electing to have a Note purchased
pursuant to an Asset Sale Offer will be required to surrender the
Note, with the form entitled "Option of Holder to Elect Purchase" on
the reverse of the Note (the "Asset Sale Purchase Notice") completed,
to the Trustee at the address specified in the notice at least five
Business Days before the Asset Sale Purchase;
(7) that holders will be entitled to withdraw their election
if the Trustee receives, not later than one Business Day prior to the
Asset Sale Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the holder, the principal amount of
the Notes the holder delivered for purchase, the certificate number of
each Note the holder delivered for purchase and a statement that such
holder is withdrawing his, her or its election to have such Notes
purchased;
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(8) that if Notes in a principal amount in excess of the
Asset Sale Offer Amount are surrendered pursuant to the Asset Sale
Offer, the Company shall purchase Notes on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000 or integral multiples thereof shall
be acquired); and
(9)(X) that Notes may be purchased in whole or in part (in
denominations of $1,000 or integral multiples thereof) and (y) that
holders whose Notes are purchased only in part will be issued new
Notes equal in principal amount to the unpurchased portion of the
Notes surrendered.
On or before the Asset Sale Purchase Date, the Company shall (i)
accept for payment Notes (having denominations of $1,000 or integral multiples
thereof) surrendered pursuant to the Asset Sale Offer (on a pro rata basis if
required pursuant to paragraph (c)(8) above), (ii) deposit by 10:30 a.m. New
York City time, on the Asset Sale Purchase Date, with the Trustee money in
immediately available funds sufficient to pay the Asset Sale Purchase Price of
all Notes or portions thereof so accepted and (iii) deliver Notes so accepted
to the Trustee together with an Officers' Certificate stating the Notes or
portions thereof accepted for payment by the Company. The Trustee shall
promptly mail or deliver to holders of Notes so accepted payment in an amount
equal to the purchase price, and the Company shall execute and the Trustee
shall promptly authenticate and mail or deliver to such holders a new Note
equal in principal amount to any unpurchased portion of the Note surrendered.
Any Notes not so accepted shall be promptly mailed or delivered to the holder
thereof. The Company will publicly announce the results of the Asset Sale
Offer on, or as soon as practicable after, the Asset Sale Purchase Date.
Notwithstanding the foregoing, the Company shall not be required to
make an Asset Sale Offer until the aggregate amount of Net Cash Proceeds so to
be applied pursuant to this Section 4.14 exceeds $25,000,000 (the "Twenty-Five
Million Threshold") and then the total amount of such Net Cash Proceeds shall
be required to be so applied in accordance with this Section 4.14. The Company
may credit against its obligation to offer to repurchase Notes pursuant to this
Section 4.14 the principal amount of Notes acquired or held by the Company
subsequent to the date of the Asset Sale giving rise to such Asset Sale Offer
and surrendered for cancellation or redeemed or called for redemption
subsequent to such date and not previously used to satisfy any obligation of
the Company to redeem or offer to purchase Notes. In no event shall any Net
Cash Proceeds that are applied to an Asset Sale Offer be required to be applied
to more than one Asset Sale Offer.
(d) Notwithstanding the provisions of clauses (a) and (b) of this
Section 4.14, the Company shall have no obligation to make an Asset Sale Offer
pursuant to this Section 4.14 if, and to the extent, the Company or any of its
Subsidiaries commits within 140 days of the receipt of such Net Cash Proceeds
to reinvest (whether by acquisition of an existing business or expansion,
including, without limitation, capital expenditures) such Net Cash Proceeds in
one or more of the lines of business (including capital expenditures) in which
the Company or its Subsidiaries or its Non-Affiliate Joint Ventures were
engaged on the date of this Indenture or reasonably related extensions of such
lines of business, provided that such Net Cash Proceeds are substantially so
utilized no later than the last day of the twelfth consecutive month (or, in
the event the amount of such Net Cash Proceeds from a single Asset Sale or
series of related Asset Sales exceeds $200,000,000, the twenty- fourth
consecutive month) following the month in which such Net Cash Proceeds are
received.
(e) Notwithstanding the foregoing, if an Asset Sale consists of a
sale of (i) all or a portion of the property, plant or equipment of the
Company's Gramercy alumina refinery, whether now owned or hereafter acquired,
or any proceeds thereof or (ii) any U.S. Fixed Assets acquired after the date
of this Indenture which do not constitute Permitted Collateral, the Company
shall make an Asset Sale Offer with the Net Cash Proceeds received from such
Asset Sale (without regard to the Twenty-Five Million
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Threshold) to the extent the Company has not committed within 140 days of the
receipt of such Net Cash Proceeds to reinvest (whether by acquisition of an
existing business or expansion, including, without limitation, capital
expenditures) such Net Cash Proceeds in U.S. Fixed Assets (other than Permitted
Collateral), provided that such Net Cash Proceeds are substantially so utilized
no later than the last day of the twelfth consecutive month (or, in the event
the amount of such Net Cash Proceeds from a single Asset Sale or series of
related Asset Sales exceeds $200,000,000, the twenty-fourth consecutive month)
following the month in which such Net Cash Proceeds are received.
ARTICLE FIVE
NOTEHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
SECTION 5.01. Company to furnish Trustee information as to names and
addresses of noteholders. The Company will furnish or cause to be furnished to
the Trustee:
(a) semi-annually, not more than fifteen days after each record date
for the payment of interest, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the noteholders as of such record date
as the case may be, and
(b) at such other times as the Trustee may request in writing, within
thirty days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than fifteen days prior to the
time such list is furnished;
provided, however, that so long as the Trustee is the Note registrar, no such
list shall be required to be furnished. Any such list may be dated as of a
date not more than fifteen days prior to the time such information is furnished
or caused to be furnished, and need not include information received after such
date.
SECTION 5.02. Preservation and disclosure of lists.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Notes (1) contained in the most recent list furnished to it as provided in
Section 5.01 and (2) received by it in the capacity of paying agent (if so
acting) or Note registrar.
The Trustee may destroy any list furnished to it as provided in
Section 5.01 upon receipt of a new list so furnished.
(b) In case three or more holders of Notes (hereinafter referred to
as "applicants") apply in writing to the Trustee, and furnish to the Trustee
reasonable proof that each such applicant has owned a Note for a period of at
least six months preceding the date of such application, and such application
states that the applicants desire to communicate with other holders of Notes
with respect to their rights under this Indenture or under the Notes, and is
accompanied by a copy of the form of proxy or other communication which such
applicants propose to transmit, then the Trustee shall, within five Business
Days after the receipt of such application, at its election either
(1) afford such applicants access to the information
preserved at the time by the Trustee in accordance with the provisions
of subsection (a) of this Section 5.02, or
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(2) inform such applicants as to the approximate number of
holders of Notes whose names and addresses appear in the information
preserved at the time by the Trustee in accordance with the provisions
of subsection (a) of this Section 5.02, and as to the approximate cost
of mailing to such noteholders the form of proxy or other
communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each noteholder whose name and address appears in the
information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 5.02, a copy of the form of proxy
or other communication which is specified in such request, with reasonable
promptness after a tender to the Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable expenses of mailing,
unless within five days after such tender, the Trustee shall mail to such
applicants and file with the Commission, together with a copy of the material
to be mailed, a written statement to the effect that, in the opinion of the
Trustee, such mailing would be contrary to the best interests of the holders of
Notes or would be in violation of applicable law. Such written statement shall
specify the basis of such opinion. After opportunity for hearing upon the
objections specified in the written statement so filed, the Commission may, and
if demanded by the Trustee or by such applicants shall, enter an order either
sustaining one or more of such objections or refusing to sustain any of them.
If the Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of such
objections, the Commission shall find, after notice and opportunity for
hearing, that all objections so sustained have been met, and shall enter an
order so declaring, the Trustee shall mail copies of such material to all
noteholders with reasonable promptness after the entry of such order and the
renewal of such tender; otherwise the Trustee shall be relieved of any
obligation or duty to such applicants respecting their application.
(c) Each and every holder of the Notes, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any paying agent nor the Note registrar shall be held accountable
by reason of the disclosure of any such information as to the names and
addresses of the holders of Notes in accordance with the provisions of
subsection (b) of this Section 5.02, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under said subsection
(b), nor shall any such disclosure be deemed a violation of existing law, or
any law hereafter enacted which does not specifically refer to Section 312 of
the Trust Indenture Act of 1939.
SECTION 5.03. Reports by the Company.
(a) The Company covenants and agrees to file with the Trustee within
fifteen days after the Company is required to file the same with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) which the
Company may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act. If the Company is not subject to the
requirements of Section 13 or 15(d) of the Exchange Act, the Company shall
nonetheless file with the Commission and the Trustee copies of such annual
reports and such information, documents and other reports as it would file if
it were subject to the requirements of Section 13 or 15(d) of the Exchange Act.
(b) The Company covenants and agrees to file with the Trustee and the
Commission, in accordance with the rules and regulations prescribed from time
to time by the Commission, such additional information, documents, and reports
with respect to compliance by the Company with the
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conditions and covenants provided for in this Indenture as may be required from
time to time by such rules and regulations, including, in the case of annual
reports, certificates or opinions of independent public accountants, conforming
to the requirements of Section 14.05, as to compliance with conditions or
covenants, compliance with which is subject to verification by accountants.
(c) The Company covenants and agrees to transmit to the holders of
Notes within thirty days after the filing thereof with the Trustee, in the
manner and to the extent provided in subsection (c) of Section 5.04 with
respect to reports pursuant to subsection (a) of said Section 5.04, such
summaries of any information, documents and reports required to be filed by the
Company pursuant to subsections (a) and (b) of this Section 5.03 as may be
required by rules and regulations prescribed from time to time by the
Commission.
(d) The Company covenants and agrees to furnish to the Trustee, not
less often than annually, a brief certificate from the principal executive
officer, principal financial officer or principal accounting officer as to his
or her knowledge of the Company's compliance with all conditions and covenants
under this Indenture. For purposes of this paragraph (d), such compliance
shall be determined without regard to any period of grace or requirement of
notice provided under this Indenture.
SECTION 5.04. Reports by the Trustee.
(a) On or before May 15, 1994, and on or before May 15 in every year
thereafter, so long as any Notes are outstanding hereunder, the Trustee, if
required to do so by the provisions of the Trust Indenture Act of 1939, shall
transmit to the noteholders, as hereinafter in this Section 5.04 provided, a
brief report dated as of March 15 of the year in which such report is made with
respect to any of the following events which may have occurred within the
previous 12 months (but if no such event has occurred within such period no
report need be transmitted):
(1) any change to its eligibility under Section 7.09 and its
qualifications under Section 7.08;
(2) the creation of or any material change to a relationship
specified in paragraphs (1) through (10) of Section 7.08(c);
(3) the character and amount of any advances (and if the
Trustee elects so to state, the circumstances surrounding the making
thereof) made by the Trustee (as such) which remain unpaid on the date
of such report, and for the reimbursement of which it claims or may
claim a lien or charge, prior to that of the Notes, on any property or
funds held or collected by it as Trustee, except that the Trustee
shall not be required (but may elect) to state such advances if such
advances so remaining unpaid aggregate not more than 0.5% of the
principal amount of the Notes outstanding on the date of such report;
(4) the amount, interest rate, and maturity date of all other
indebtedness owing by the Company (or by any other obligor on the
Notes) to the Trustee in its individual capacity, on the date of such
report, with a brief description of any property held as collateral
security therefor, except an indebtedness based upon a creditor
relationship arising in any manner described in paragraph (2), (3),
(4) or (6) of subsection (b) of Section 7.13;
(5) any change to the property and funds, if any, physically
in the possession of the Trustee (as such) on the date of such report;
and
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(6) any action taken by the Trustee in the performance of its
duties under this Indenture which it has not previously reported and
which in its opinion materially affects the Notes, except action in
respect of a default, notice of which has been or is to be withheld by
it in accordance with the provisions of Section 6.07.
(b) The Trustee shall transmit to the noteholders, as hereinafter
provided, a brief report with respect to the character and amount of any
advances (and if the Trustee elects so to state, the circumstances surrounding
the making thereof) made by the Trustee (as such) since the date of the last
report transmitted pursuant to the provisions of subsection (a) of this Section
5.04 (or if no such report has yet been so transmitted, since the date of
execution of this Indenture), for the reimbursement of which it claims or may
claim a lien or charge prior to that of the Notes on property or funds held or
collected by it as Trustee, and which it has not previously reported pursuant
to this subsection, except that the Trustee shall not be required (but may
elect) to report such advances if such advances remaining unpaid at any time
aggregate 10% or less of the principal amount of Notes outstanding at such
time, such report to be transmitted within ninety days after such time.
(c) Reports pursuant to this Section 5.04 shall be transmitted by
mail (i) to all holders of Notes, as the names and addresses of such holders
appear upon the registry books of the Company, (ii) to all noteholders who
have, within the two years preceding such transmission, filed their names and
addresses with the Trustee for that purpose, and, (iii) except in the case of
reports pursuant to Section 5.04(b), to all holders of Notes whose names and
addresses have been furnished to or obtained by the Trustee pursuant to Section
5.01.
(d) A copy of each such report shall, at the time of such
transmission to noteholders, be filed by the Trustee with each stock exchange
(if any) upon which the Notes are listed or admitted for trading and also with
the Commission. The Company will notify the Trustee when and as the Notes
become listed on any stock exchange.
ARTICLE SIX
REMEDIES OF THE TRUSTEE AND NOTEHOLDERS
ON EVENT OF DEFAULT
SECTION 6.01. Events of Default defined. In case one or more of the
following Events of Default shall have occurred and be continuing:
(a) default in the payment of any installment of interest upon any of
the Notes as and when the same shall become due and payable, and continuance of
such default for a period of thirty days; or
(b) default in the payment of the principal of, Change of Control
Purchase Price, Asset Sale Purchase Price, or premium, if any, on any of the
Notes as and when the same shall become due and payable either at maturity,
upon redemption or purchase by the Company pursuant to Article Three, by
declaration or otherwise; or
(c) failure on the part of the Company, duly to observe or perform in
any material respect any other of the covenants or agreements on the part of
the Company in the Notes or in this Indenture for a period of sixty days after
the date on which written notice of such failure, which notice must specify the
failure, demand it be remedied and state that the notice is a "Notice of
Default," shall have been given to the Company by the Trustee by registered
mail, which notice the Trustee shall give upon receipt of
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requests to do so by the holders of at least 25% of the aggregate principal
amount of the Notes at the time outstanding, or to the Company and the Trustee
by the holders of at least 25% of the aggregate principal amount of the Notes
at the time outstanding; or
(d) a default under any mortgage, indenture, or instrument under
which there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company or any Subsidiary, whether such
indebtedness now exists or shall hereafter be created, in an aggregate
principal amount exceeding $25,000,000, which default (a) in the case of a
failure to make payment on any such indebtedness, shall not have been waived,
cured or otherwise ceased to exist within 30 days thereafter, or (b) in the
case of any default other than a payment default referred to in clause (a),
shall have resulted in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise have become due and
payable, or with respect to which the principal amount remains unpaid upon its
stated maturity; or
(e) a final judgment which, together with other outstanding final
judgments against the Company and its Significant Subsidiaries, exceeds an
aggregate of $25,000,000 (to the extent such judgments are not covered by valid
and collectible insurance from solvent unaffiliated insurers) shall be entered
against the Company and/or its Significant Subsidiaries and (i) within 30 days
after entry thereof, judgments exceeding such amount shall not have been
discharged, settled or bonded or execution thereof stayed pending appeal or,
within 30 days after the expiration of any such stay, such judgments exceeding
such amount shall not have been discharged, settled or bonded or execution
thereof stayed or (ii) an enforcement proceeding shall have been commenced (and
not discharged, settled or bonded or execution thereof stayed) by any creditor
upon judgments exceeding such amount; or
(f) a court having jurisdiction in the premises shall have entered a
decree or order for relief against the Company in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or for all or any substantial
part of its property, or ordering the winding-up or liquidation of its affairs,
and such decree or order shall have remained unstayed and in effect for a
period of ninety consecutive days; or
(g) the Company shall have commenced a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall have consented to the entry of an order for relief in an
involuntary case under any such law, or shall have consented to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or similar official) of the Company or for all or any
substantial part of its property, or shall have made an assignment for the
benefit of creditors, or shall have taken any corporate action in furtherance
of any of the foregoing; or
(h) the Guarantee of any Subsidiary Guarantor shall be held to be
unenforceable or invalid by a final non-appealable order or judgment issued by
a court of competent jurisdiction or shall cease for any reason to be in full
force and effect with respect to such Subsidiary Guarantor, or any Subsidiary
Guarantor or any Person acting by or on behalf of any Subsidiary Guarantor
shall deny or disaffirm its obligations under its Guarantee;
then, in the case of an Event of Default specified in clause (a), (b), (c),
(d), (e) or (h), and in each and every such case, unless the principal of all
the Notes shall have already become due and payable, either the Trustee or the
holders of not less than 25% of the aggregate principal amount of the Notes
then outstanding hereunder, by notice in writing to the Company (and to the
Trustee if given by noteholders), may, and the Trustee shall if requested to do
so by the holders of not less than 25% of the aggregate
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principal amount of the Notes then outstanding hereunder, declare the principal
amount and accrued interest to the date of declaration of all the Notes to be
due and payable immediately. Upon any such declaration the same shall become
and shall be immediately due and payable, anything in this Indenture or in the
Notes contained to the contrary notwithstanding. If an Event of Default
specified in clause (f) or (g) above occurs, such amount shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any noteholder.
SECTION 6.02. Payment of Notes on default; suit therefor. The
Company covenants that (1) in case default shall be made in the payment of any
installment of interest on any of the Notes, as and when the same shall become
due and payable, and such default shall have continued for a period of thirty
days, or (2) in case default shall be made in the payment of the principal of,
and premium, if any, Change of Control Purchase Price or Asset Sale Purchase
Price on any of the Notes when the same shall have become due and payable,
whether upon maturity of the Notes or upon redemption or purchase by the
Company pursuant to Article Three or upon declaration or otherwise then, upon
demand of the Trustee, the Company will pay to the Trustee, for the benefit of
the holders of the Notes, the whole amount that then shall have become due and
payable on all such Notes for such amounts, as the case may be, with interest
upon the overdue principal, premium, if any, Change of Control Purchase Price
or Asset Sale Purchase Price, as the case may be, and installments of interest
(to the extent permitted by law) at the rate of interest borne by the Notes;
and, in addition thereto, such further amount as shall be sufficient to cover
the costs and expenses of collection, including a reasonable compensation to
the Trustee, its agents, attorneys and counsel, and any expense or liabilities
incurred by the Trustee hereunder other than through its negligence or bad
faith.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor upon the
Notes, and collect in the manner provided by law out of the property of the
Company or any other obligor upon the Notes wherever situated the moneys
adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor upon the Notes under any
applicable bankruptcy, insolvency or similar law or in case a receiver or
trustee shall have been appointed for the property of the Company or such other
obligor, or in case of any other similar judicial proceedings relative to the
Company or any other obligor upon the Notes, or to creditors or property of the
Company or such other obligor, the Trustee, irrespective of whether the
principal, Change of Control Purchase Price or Asset Sale Purchase Price, as
the case may be, of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand pursuant to the provisions of this Section
6.02, shall be entitled and empowered by intervention in such proceedings or
otherwise, to file and prove a claim or claims for the whole amount of
principal, premium, if any, Change of Control Purchase Price, Asset Sale
Purchase Price and interest owing and unpaid in respect of the Notes, and to
file such other papers or documents as may be necessary or advisable in order
to have the claims of the Trustee and of the noteholders allowed in any
judicial proceeding relative to the Company or any other obligor upon the
Notes, its creditors, or its property, and to collect and receive any moneys or
other property payable or deliverable on any such claims, and to distribute the
same after the deduction of its reasonable charges and expenses; and any
receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized by each of the noteholders to make such payments to the Trustee,
and, in the event that the Trustee shall consent to the making of such payments
directly to the noteholders, to pay to the Trustee any amount due it for
compensation and expenses, including reasonable counsel fees incurred by
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it up to the date of such distribution. To the extent that such payment of
reasonable compensation, expenses, liabilities and counsel fees out of the
estate in any such proceedings shall be denied for any reason, payment of the
same shall be secured by a lien on, and shall be paid out of, any and all
distributions, dividends, moneys, securities and other property which the
holders of the Notes may be entitled to receive in such proceedings, whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Trustee without the possession
of any of the Notes, or the production thereof on any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment, subject to the payment of the reasonable expenses,
disbursements and compensation of the Trustee, its agents and attorneys, shall
be for the ratable benefit of the holders of the Notes.
SECTION 6.03. Application of moneys collected by Trustee. Any moneys
collected by the Trustee pursuant to Section 6.02 shall be applied to the
payment of all amounts due the Trustee pursuant to Section 7.06 and thereafter
in the order following, at the date or dates fixed by the Trustee for the
distribution of such moneys, upon presentation of the several Notes, and
stamping thereon the payment, if only partially paid, and upon surrender
thereof if fully paid:
FIRST: In case no principal of, Change of Control Purchase
Price or Asset Sale Purchase Price on the outstanding Notes shall have
become due and be unpaid, to the payment of interest on the Notes, in
the order of the maturity of the installments of such interest, with
interest upon the overdue installments of interest (so far as
permitted by law and to the extent that such interest has been
collected by the Trustee) at the rate of interest borne by the Notes,
such payments to be made ratably to the persons entitled thereto,
without discrimination or preference;
SECOND: In case any principal of, Change of Control Purchase
Price or Asset Sale Purchase Price on the outstanding Notes shall have
become due, by declaration or otherwise, to the payment of the whole
amount then owing and unpaid upon the Notes for principal, premium, if
any, Change of Control Purchase Price, Asset Sale Purchase Price and
interest, as the case may be, with interest on the overdue principal,
premium, if any, Change of Control Purchase Price, Asset Sale Purchase
Price and installments of interest (so far as permitted by law and to
the extent that such interest has been collected by the Trustee), as
the case may be, at the rate of interest borne by the Notes; and in
case such moneys shall be insufficient to pay in full the whole amount
so due and unpaid upon the Notes, then to the payment of such
principal, premium, if any, Change of Control Purchase Price, Asset
Sale Purchase Price and interest, without preference or priority of
any one such applicable amount over another, or of any installment of
interest over any other installment of interest, ratably to the
aggregate of such principal, premium, if any, Change of Control
Purchase Price, Asset Sale Purchase Price and accrued and unpaid
interest; and
THIRD: To the payment of the remainder, if any, to the
Company, its successors or assigns, or to whosoever may be lawfully
entitled to receive the same, or as a court of competent jurisdiction
may direct.
SECTION 6.04. Limitation on suits by holders of Notes. No holder of
any Note shall have any right by virtue or by availing of any provision of this
Indenture to institute any suit, action or proceeding or to seek any remedy in
equity or at law upon or under or with respect to this Indenture or the Notes
or for the appointment of a receiver or trustee, or for any other remedy,
unless such holder previously
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shall have given to the Trustee written notice of default and of the
continuance thereof, as hereinabove provided, and unless also the holders of
not less than 25% of the aggregate principal amount of the Notes then
outstanding shall have made written request upon the Trustee to institute such
action, suit or proceeding or to seek such remedy in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses and liabilities to be incurred therein
or thereby, and the Trustee, for sixty days after its receipt of such notice,
request and offer of indemnity, shall have neglected or refused to institute
any such action, suit or proceeding and no direction inconsistent with such
written request shall have been given to the Trustee pursuant to Section 6.06;
it being understood and intended, and being expressly covenanted by the taker
and holder of every Note with every other taker and holder and the Trustee,
that no one or more holders of Notes shall have any right in any manner
whatever by virtue or by availing of any provision of this Indenture to affect,
disturb or prejudice the rights of the holders of any other of such Notes, or
to obtain or seek to obtain priority over or preference to any other such
holder, or to enforce any right under this Indenture, except in the manner
herein provided and for the equal, ratable and common benefit of all holders of
Notes. For the protection and enforcement of the provisions of this Section
6.04, each and every noteholder and the Trustee shall be entitled to such
relief as can be given either at law or in equity.
Notwithstanding any other provisions in this Indenture, however, the
right of any holder of any Note to receive payment of the principal of,
premium, if any, Change of Control Purchase Price, Asset Sale Purchase Price
and interest, as the case may be, on such Note, on or after the respective due
dates expressed in such Note, or to institute suit for the enforcement of any
such payment on or after such respective dates or to demand purchase of its
Notes pursuant to Article Three or Section 4.14, shall not be impaired or
affected without the consent of such holder.
SECTION 6.05. Proceedings by Trustee; remedies cumulative and
continuing; delay or omission not waiver of default. In case of a default
hereunder, the Trustee may in its discretion proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and enforce any of such
rights, either by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant
or agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law. All powers and remedies
given by this Article Six to the Trustee or to the noteholders shall, to the
extent permitted by law, be deemed cumulative and not exclusive of any thereof
or of any other powers and remedies available to the Trustee or the holders of
the Notes, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture, and no
delay or omission of the Trustee or of any holder of any of the Notes to
exercise any right or power accruing upon any default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be
a waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 6.04, every power and remedy given by this Article Six or
by law to the Trustee or to the noteholders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee or by the
noteholders.
SECTION 6.06. Rights of holders of majority in principal amount of
Notes to direct Trustee and to waive defaults. The holders of a majority of
the aggregate principal amount of the Notes at the time outstanding (determined
as provided in Section 8.04), or, if a record date is set in accordance with
Section 8.05, as of such record date, shall have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee; provided,
however, that subject to the provisions of Section 7.01, the Trustee shall have
the right to decline to follow any such direction if the Trustee shall
determine that the action so directed may not lawfully be taken, or if the
Trustee in good faith shall, by a responsible officer or
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officers of the Trustee, determine that the proceedings so directed would be
illegal or involve it in personal liability or be unjustly prejudicial to the
noteholders not joining therein, and provided further that nothing in this
Indenture shall impair the right of the Trustee in its discretion to take any
action deemed proper by the Trustee and which is not inconsistent with such
direction by noteholders. Prior to the declaration of the maturity of the Notes
as provided in Section 6.01, the holders of a majority of the aggregate
principal amount of the Notes at the time outstanding (determined as provided
in Sections 8.04 and 8.05) may on behalf of the holders of all of the Notes
waive any past default hereunder and its consequences, except a default in the
payment of principal of, premium, if any, Change of Control Purchase Price,
Asset Sale Purchase Price or interest on any of the Notes or a default under
Article Four or any other covenant or provision hereof which under Article Ten
cannot be modified or amended without the consent of the holder of each
outstanding Note. In the case of any such waiver the Company, the Trustee and
the holders of the Notes shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 6.07. Trustee to give notice of defaults known to it, but may
withhold in certain circumstances. The Trustee shall, within ninety days after
the occurrence of a default hereunder, give to the noteholders, in the manner
and to the extent provided in subsection (c) of Section 6.04 with respect to
reports pursuant to subsection (a) of Section 6.04, notice of such defaults
known to the Trustee unless such defaults shall have been cured or waived
before the giving of such notice (the term "defaults" for the purposes of this
Section 6.07 being hereby defined to be the events specified in clauses (a),
(b), (c), (d), (e), (f), (g) and (h) of Section 6.01, not including any periods
of grace provided for in clauses (a), (c), (d) and (e), respectively, and
irrespective of the giving of notice specified in clauses (c) and (d));
provided that, except in the case of default in the payment of the principal
of, premium, if any, Change of Control Purchase Price, Asset Sale Purchase
Price or interest on any of the Notes, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee, or a trust committee of directors and/or responsible officers of the
Trustee in good faith determines that the withholding of such notice is in the
interest of the noteholders.
SECTION 6.08. Requirement of an undertaking to pay costs in certain
suits under the Indenture or against the Trustee. All parties to this
Indenture agree, and each holder of any Note by his acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken, suffered or omitted by it as
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section 6.08 shall not apply to any suit instituted by the Trustee, to any suit
instituted by any noteholder, or group of noteholders, holding in the aggregate
more than 10% of the aggregate principal amount of the Notes outstanding, or to
any suit instituted by any noteholder for the enforcement of the payment of the
principal of, premium, if any, Change of Control Purchase Price, Asset Sale
Purchase Price or interest on any Note on or after the due date expressed in
such Note.
SECTION 6.09. Waiver of stay or extension laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which may affect the covenants or the performance
of this Indenture; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefits or advantage of any such law and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to
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the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE SEVEN
CONCERNING THE TRUSTEE
SECTION 7.01. Duties and responsibilities of Trustee. The Trustee,
prior to the occurrence of an Event of Default and after the curing or waiving
of all Events of Default which may have occurred, undertakes to perform such
duties and only such duties as are specifically set forth in this Indenture. In
case an Event of Default has occurred (which has not been cured or waived) the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct; provided, however, that
(a) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture, and the
Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on the part of the Trustee,
the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to
the requirements of this Indenture; but in the case of any such
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a responsible officer or officers of the Trustee, unless it shall
be proved that the Trustee was negligent in ascertaining the pertinent facts;
and
(c) the Trustee shall not be liable with respect to any action taken,
suffered or omitted to be taken by it in good faith in accordance with the
direction of the holders of not less than a majority in principal amount of the
Notes at the time outstanding (determined as provided in Section 8.04 or 8.05)
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties hereunder or in the exercise
of any of its rights or powers, if there is reasonable ground for believing
that the repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
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SECTION 7.02. Reliance on documents, opinions, etc. Subject to the
provisions of Section 7.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, note or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an instrument signed in the name of
the Company by the Chairman of the Board, the President or any Vice President
and the Secretary or any Assistant Secretary or the Treasurer or any Assistant
Treasurer (unless other evidence in respect thereof be herein specifically
prescribed); and any resolution of the Board of Directors of the Company may be
evidenced to the Trustee by a copy thereof certified by the Secretary or any
Assistant Secretary of the Company;
(c) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the noteholders, pursuant to the provisions of this
Indenture, unless such noteholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby; but nothing herein contained shall, however,
relieve the Trustee of the obligation, upon the occurrence of an Event of
Default (which has not been cured or waived), to exercise such of the rights
and powers vested in it by this Indenture, and to use the same degree of care
and skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;
(e) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Event of Default hereunder and
after the curing or waiving of all Events of Default, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond, note or other paper or document,
unless requested in writing so to do by the holders of not less than a majority
in aggregate principal amount of the Notes then outstanding (determined as
provided in Section 8.04 or 8.05); provided, however, that if the payment
within a reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in the
opinion of the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Indenture, the Trustee may require from the
noteholders reasonable indemnity against such expenses or liability as a
condition to so proceeding. The reasonable expenses of every such examination
shall be paid by the Company or, if paid by the Trustee, shall be repaid by the
Company upon demand; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys.
SECTION 7.03. No responsibility for recitals, etc. The recitals
contained herein and in the Notes (other than the certificate of authentication
on the Notes) shall be taken as the statements of the
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Company, and the Trustee assumes no responsibility for the correctness of the
same. The Trustee makes no representation as to the validity or sufficiency of
this Indenture or of the Notes. The Trustee shall not be accountable for the
use or application by the Company of any of the Notes or of the proceeds of
such Notes, or for the use or application of any moneys paid over by the
Trustee in accordance with any provision of this Indenture, or for the use or
application of any moneys received by any paying agent other than the Trustee.
SECTION 7.04. Trustee, paying agent or Note registrar may own Notes.
The Trustee, any paying agent or Note registrar, in its individual or any other
capacity, may become the owner or pledgee of Notes with the same rights it
would have if it were not Trustee, paying agent or Note registrar.
SECTION 7.05. Moneys received by Trustee to be held in trust without
interest. Subject to the provisions of Section 12.04, all moneys received by
the Trustee shall, until used or applied as herein provided, be held in trust
for the purposes for which they were received, but need not be segregated from
other funds except to the extent required by law or by any national securities
exchanges on which the Notes are listed or admitted for trading. The Trustee
shall be under no liability for interest on any moneys received by it hereunder
except such as it may agree with the Company to pay thereon.
SECTION 7.06. Compensation and expenses of Trustee. The Company
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation (which shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust), and the Company will pay or reimburse the Trustee upon its request for
all reasonable expenses, disbursements and advances incurred or made by the
Trustee in connection with the acceptance or administration of its trust under
this Indenture (including the reasonable compensation and the expenses and
disbursements of its counsel and of all persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith. The Company also covenants to indemnify the Trustee
for, and to hold it harmless against, any loss, liability or expense incurred
without negligence or bad faith on the part of the Trustee or its agents and
arising out of or in connection with the acceptance or administration of this
trust, including the costs and expenses of defending itself against any claim
of liability under this Indenture in connection with the exercise of its powers
or duties hereunder. The obligations of the Company under this Section 7.06 to
compensate the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall constitute additional indebtedness hereunder
and shall survive the satisfaction and discharge of this Indenture or
resignation or removal of the Trustee. Such additional indebtedness shall be
secured by a Lien upon all property and funds held or collected by the Trustee
as such, except funds held in trust for the benefit of the holders of
particular Notes.
SECTION 7.07. Right of Trustee to rely on Officers' Certificate where
no other evidence specifically prescribed. Subject to the provisions of
Section 7.01, whenever in the administration of the provisions of this
Indenture, the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking, suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such Certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under
the provisions of this Indenture in reliance thereon.
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SECTION 7.08. Conflicting interest of Trustee.
(a) If the Trustee has or shall acquire any conflicting interest, as
defined in this Section 7.08, then, within ninety days after ascertaining that
it has such conflicting interest, and if the default (as defined in Section
7.08(c)) to which such conflicting interest relates has not been cured or duly
waived or otherwise eliminated before the end of such ninety-day period, the
Trustee shall either eliminate such conflicting interest or, except as
otherwise provided in this Section 7.08, resign in the manner and with the
effect specified in Section 7.10, and the Company shall take prompt steps to
have a successor appointed in the manner provided in Section 7.10.
(b) In the event that the Trustee shall fail to comply with the
provisions of subsection (a) of this Section 7.08, the Trustee shall, within
ten days after the expiration of such ninety-day period, transmit notice of
such failure to the noteholders in the manner and to the extent provided in
subsection (c) of Section 5.04 with respect to reports pursuant to subsection
(a) of Section 5.04.
(c) For the purposes of this Section 7.08, the Trustee shall be
deemed to have a conflicting interest if the Notes are in default (defined as
the occurrence of any event specified in Section 6.01, but exclusive of any
period of grace or requirement of notice) and
(1) the Trustee is trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the Company are outstanding,
unless such other indenture is a collateral trust indenture under
which the only collateral consists of Notes issued under this
Indenture, provided that there shall be excluded from the operation of
this paragraph any indenture or indentures under which other
securities, or certificates of interest or participation in other
securities, of the Company are outstanding if (i) this Indenture and
such other indenture or indentures are wholly unsecured and such other
indenture or indentures are hereafter qualified under the Trust
Indenture Act of 1939, unless the Commission shall have found and
declared by order pursuant to Subsection (b) of Section 305 or
Subsection (c) of Section 307 of the Trust Indenture Act of 1939 that
differences exist between the provisions of this Indenture and the
provisions of such other indenture or indentures which are so likely
to involve a material conflict of interest as to make it necessary in
the public interest or for the protection of investors to disqualify
the Trustee from acting as such under this Indenture and such other
indenture or indentures, or (ii) the Company shall have sustained the
burden of proving, on application to the Commission and after
opportunity for hearing thereon, that the trusteeship under this
Indenture and such other indenture is not so likely to involve a
material conflict of interest as to make it necessary in the public
interest or for the protection of investors to disqualify the Trustee
from acting as such under one of such indentures;
(2) the Trustee or any of its directors or executive officers
is an underwriter for the Company;
(3) the Trustee directly or indirectly controls or is
directly or indirectly controlled by or is under direct or indirect
common control with an underwriter for the Company;
(4) the Trustee or any of its directors or executive officers
is a director, officer, partner, employee, appointee, or
representative of the Company, or of an underwriter (other than the
Trustee itself) for the Company who is currently engaged in the
business of underwriting, except that (A) one individual may be a
director and/or an executive officer of the Trustee and a director
and/or an executive officer of the Company, but may not be at the same
time an executive officer of both the Trustee and the Company; (B) if
and so long as the number of directors of the
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Trustee in office is more than nine, one additional individual may be
a director and/or an executive officer of the Trustee and a director
of the Company; and (C) the Trustee may be designated by the Company
or by any underwriter for the Company to act in the capacity of
transfer agent, registrar, custodian, paying agent, fiscal agent,
escrow agent, or depositary, or in any other similar capacity, or,
subject to the provisions of paragraph (1) of this subsection (c), to
act as trustee whether under an indenture or otherwise;
(5) ten percent or more of the voting securities of the
Trustee is beneficially owned either by the Company or by any
director, partner, or executive officer thereof, or 20 percent or more
of such voting securities is beneficially owned, collectively, by any
two or more of such persons; or 10 percent or more of the voting
securities of the Trustee is beneficially owned either by an
underwriter for the Company or by any director, partner, or executive
officer thereof, or is beneficially owned, collectively, by any two or
more such persons;
(6) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, (A) five
percent or more of the voting securities, or 10 percent or more of any
other class of security, of the Company, not including the Notes
issued under this Indenture and securities issued under any other
indenture under which the Trustee is also trustee, or (B) 10 percent
or more of any class of security of an underwriter for the Company;
(7) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, five
percent or more of the voting securities of any person who, to the
knowledge of the Trustee, owns 10 percent or more of the voting
securities of, or controls directly or indirectly or is under direct
or indirect common control with, the Company;
(8) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, 10 percent
or more of any class of security of any person who, to the knowledge
of the Trustee, owns 50 percent or more of the voting securities of
the Company;
(9) the Trustee owns on the date of default upon the Notes
(defined as the occurrence of any event specified in Section 6.01, but
exclusive of any period of grace or requirement of notice) or any
anniversary of such default while such default upon the Notes remains
outstanding, in the capacity of executor, administrator, testamentary
orinter vivos trustee, guardian, committee or conservator, or in any
other similar capacity, an aggregate of 25 per cent or more of the
voting securities, or of any class of security, of any person, the
beneficial ownership of a specified percentage of which would have
constituted a conflicting interest under paragraph (6), (7), or (8) of
this subsection (c). As to any such securities of which the Trustee
acquired ownership through becoming executor, administrator, or
testamentary trustee of an estate which included them, the provisions
of the preceding sentence shall not apply, for a period of two years
from the date of such acquisition, to the extent that such securities
included in such estate do not exceed 25 percent of such voting
securities or 25 percent of any such class of security. Promptly
after the dates of any such default upon the Notes and annually in
each succeeding year that the Notes remain in default, the Trustee
shall make a check of its holdings of such securities in any of the
above-mentioned capacities as of such dates. If the Company fails to
make payment in full of principal of, premium, if any, Change of
Control Purchase Price, Asset Sale Purchase Price or interest on any
of the Notes when and as the same becomes due and payable and such
failure continues for 30 days thereafter, the Trustee shall make a
prompt check of its holdings of such securities in any of the
above-mentioned capacities as of the date of the expiration of such
30-day period, and after such date, notwithstanding the foregoing
provisions of this paragraph (9), all such securities so held by the
Trustee, with sole or joint control over such securities vested in
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it, shall, but only so long as such failure shall continue, be
considered as though beneficially owned by the Trustee for the
purposes of paragraphs (6), (7) and (8) of this subsection (c); or
(10) except under the circumstances described in paragraphs
(1), (3), (4), (5) or (6) of Section 311(b) of the Trust Indenture Act
of 1939, the Trustee shall become a creditor of the Company.
The specifications of percentages in paragraphs (5) to (9), inclusive,
of this subsection (c) shall not be construed as indicating that the ownership
of such percentages of the securities of a person is or is not necessary or
sufficient to constitute direct or indirect control for the purpose of
paragraph (3) or (7) of this subsection (c).
For the purposes of paragraphs (6), (7), (8) and (9) of this
subsection (c) only, (A) the terms "security" and "securities" shall include
only such securities as are generally known as corporate securities, but shall
not include any note or other evidence of indebtedness issued to evidence an
obligation to repay moneys lent to a person by one or more banks, trust
companies or banking firms, or any certificate of interest or participation in
any such note or evidence of indebtedness; (B) an obligation shall be deemed to
be "in default" when a default in payment of principal shall have continued for
thirty days or more and shall not have been cured; and (C) the Trustee shall
not be deemed to be the owner or holder of (i) any security which it holds as
collateral security (as trustee or otherwise) for an obligation which is not in
default as defined in clause (B) above, or (ii), any security which it holds as
collateral security under this Indenture, irrespective of any default
hereunder, or (iii) any security which it holds as agent for collection, or as
custodian, escrow agent, or depositary, or in any similar representative
capacity.
Except as above provided, the word "security" or "securities" as used
in this Indenture, shall mean any note, stock, treasury stock, bond, note,
evidence of indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate, preorganization
certificate or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a security, fractional
undivided interest in oil, gas, or other mineral rights, or, in general, any
interest or instrument commonly known as a "security," or any certificate of
interest or participation in, temporary or interim certificate for, receipt
for, guarantee of, or warrant or right to subscribe to or purchase, any of the
foregoing.
Except in the case of a default in the payment of the principal of or
interest on the Notes, or in the payment of any sinking or purchase fund
installment, the Trustee shall not be required to resign as provided by this
Section 7.08 if the Trustee shall have sustained the burden of proving, on
application to the Commission and after opportunity for hearing thereon, that
(i) the default under this Indenture may be cured or waived during a reasonable
period and under the procedures described in such application, and (ii) a stay
of the Trustee's duty to resign will not be inconsistent with the interests of
holders of the Notes. The filing of such an application shall automatically
stay the performance of the duty to resign until the Commission orders
otherwise.
Any resignation of the Trustee shall become effective only upon the
appointment of a successor trustee and such successor's acceptance of such an
appointment.
(d) For the purposes of this Section 7.08:
(1) The term "underwriter" when used with reference to the
Company shall mean every person, who, within one year prior to the
time as of which the determination is made, has
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purchased from the Company with a view to, or has offered or sold for
the Company in connection with, the distribution of any security of
the Company outstanding at such time, or has participated or has had a
direct or indirect participation in any such undertaking, or has
participated or has had a participation in the direct or indirect
underwriting of any such undertaking, but such term shall not include
a person whose interest was limited to a commission from an
underwriter or dealer not in excess of the usual and customary
distributors' or sellers' commission.
(2) The term "director" shall mean any director of a
corporation or any individual performing similar functions with
respect to any organization whether incorporated or unincorporated.
(3) The term "person" shall mean an individual, a
corporation, a partnership, an association, a joint-stock company, a
trust, an unincorporated organization, or a government or political
subdivision thereof. As used in this paragraph, the term "trust" shall
include only a trust where the interest or interests of the
beneficiary or beneficiaries are evidenced by a security.
(4) The term "voting security" shall mean any security
presently entitling the owner or holder thereof to vote in the
direction or management of the affairs of a person, or any security
issued under or pursuant to any trust, agreement or arrangement
whereby a trustee or trustees or agent or agents for the owner or
holder of such security are presently entitled to vote in the
direction or management of the affairs of a person.
(5) The term "Company" shall mean any obligor upon the Notes.
(6) The term "executive officer" shall mean the president,
every vice-president, every trust officer, the cashier, the secretary,
and the treasurer of a corporation, and any individual customarily
performing similar functions with respect to any organization whether
incorporated or unincorporated, but shall not include the chairman of
the board of directors.
The percentages of voting securities and other securities specified in
this Section 7.08 shall be calculated in accordance with the following
provisions:
(A) A specified percentage of the voting securities of the
Trustee, the Company or any other person referred to in this Section
7.08 (each of whom is referred to as a "person" in this paragraph)
means such amount of the outstanding voting securities of such person
as entitles the holder or holders thereof to cast such specified
percentage of the aggregate votes which the holders of all the
outstanding voting securities of such person are entitled to cast in
the direction or management of the affairs of such person.
(B) A specified percentage of a class of securities of a
person means such percentage of the aggregate amount of securities of
the class outstanding.
(C) The term "amount," when used in regard to securities,
means the principal amount if relating to evidences of indebtedness,
the number of shares if relating to capital shares, and the number of
units if relating to any other kind of security.
(D) The term "outstanding" means issued and not held by or
for the account of the issuer. The following securities shall not be
deemed outstanding within the meaning of this definition:
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(i) securities of an issuer held in a sinking fund
relating to securities of the issuer of the same class;
(ii) securities of an issuer held in a sinking fund
relating to another class of securities of the issuer, if the
obligation evidenced by such other class of securities is not
in default as to principal or interest or otherwise;
(iii) securities pledged by the issuer thereof as
security for an obligation of the issuer not in default as to
principal or interest or otherwise; and
(iv) securities held in escrow if placed in escrow
by the issuer thereof;
provided, however, that any voting securities of an issuer shall be
deemed outstanding if any person other than the issuer is entitled to
exercise the voting rights thereof.
(E) A security shall be deemed to be of the same class as
another security if both securities confer upon the holder or holders
thereof substantially the same rights and privileges, provided,
however, that, in the case of secured evidences of indebtedness, all
of which are issued under a single indenture, differences in the
interest rates or maturity dates of various series thereof shall not
be deemed sufficient to constitute such series different classes, and
provided, further, that, in the case of unsecured evidences of
indebtedness, differences in the interest rates or maturity dates
thereof shall not be deemed sufficient to constitute them securities
of different classes, whether or not they are issued under a single
indenture.
SECTION 7.09. Requirements for eligibility of Trustee. The Trustee
hereunder shall at all times be a corporation organized and doing business
under the laws of the United States or any State or territory thereof or of the
District of Columbia or a corporation or other person permitted to act as the
Trustee by the Commission (pursuant to the requirements of Section 310(a)(1) of
the Trust Indenture Act of 1939), authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$25,000,000, and subject to supervision or examination by Federal, State,
Territorial, or District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section 7.09, the combined capital and surplus of such corporation shall
be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. The Trustee shall not be an obligor
upon the Notes or a person directly or indirectly controlling, controlled by,
or under common control with such obligor. In addition, the Trustee shall at
all times be approved to serve as transfer agent and registrar by any
securities exchange on which the Notes are listed or admitted for trading. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 7.09, the Trustee shall resign immediately in the
manner and with the effect specified in Section 7.10.
SECTION 7.10. Resignation or removal of Trustee.
(a) The Trustee, or any trustee hereafter appointed, may at any time
resign by giving written notice of such resignation to the Company and to the
noteholders, such notice to the noteholders to be given, by mailing (by
first-class mail) the notice to their addresses as they shall appear on the
registry books of the Company within thirty days after such notice is given to
the Company. Upon receiving such notice of resignation and evidence
satisfactory to it of such mailing, the Company shall promptly appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors of the Company, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to
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the successor trustee. If no successor trustee shall have been so appointed
and have accepted appointment within thirty days after the mailing of such
notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee, or any
noteholder who has been a bona fide holder of a Note or Notes for at least six
months may, subject to the provisions of Section 6.08, on behalf of himself and
all others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with the provisions of
subsection (a) of Section 7.08 after written request therefor by the
Company or by any noteholder who has been a bona fide holder of a Note
or Notes for at least six months, or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 7.09 and shall fail to resign after written
request therefor by the Company or by any such noteholder, or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors of the Company, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee, or,
subject to the provisions of Section 6.08, any noteholder who has been a bona
fide holder of a Note or Notes for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, remove the Trustee and appoint a successor trustee.
(c) Any resignation or removal of the Trustee and appointment of any
successor trustee pursuant to any of the provisions of this Section 7.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 7.11.
SECTION 7.11. Acceptance by successor to Trustee; notice of
succession of a Trustee. Any successor trustee appointed as provided in
Section 7.10 shall execute, acknowledge and deliver to the Company and to its
predecessor trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as trustee herein; but, nevertheless, on the written request of the
Company or of the successor trustee, the trustee ceasing to act shall, upon
payment of any amounts then due it pursuant to the provisions of Section 7.06,
execute and deliver an instrument transferring to such successor trustee all
the rights and powers of the trustee so ceasing to act. Upon request of any
such successor trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such
successor trustee of such rights and powers. Any trustee ceasing to act shall,
nevertheless, retain a lien upon all property or funds held or collected by
such trustee to secure any amounts then due it pursuant to the provisions of
Section 7.06.
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No successor trustee shall accept appointment as provided in this
Section 7.11 unless at the time of such acceptance, such successor trustee
shall be qualified under the provisions of Section 7.08 and eligible under the
provisions of Section 7.09.
Upon acceptance of appointment by a successor trustee as provided in
this Section 7.11, the Company shall mail to the noteholders by first-class
mail notice thereof. If the Company fails to mail such notice within thirty
days after acceptance of appointment by the successor trustee, the successor
trustee shall, in its discretion, cause such notice to be mailed at the expense
of the Company.
SECTION 7.12. Successor to Trustee by merger, consolidation or
succession to business; notice by Trustee of change in its location. Any
corporation into which the Trustee may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger or conversion
or consolidation to which the Trustee shall be a party, or any corporation
succeeding to the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding, provided such corporation shall be qualified
under the provisions of Section 7.08 and eligible under the provisions of
Section 7.09.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Notes shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor Trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such Notes either
in the name of any predecessor hereunder or in the name of the successor
Trustee; and in all such cases such certificates shall have the full force
which it is anywhere in the Notes or in this Indenture provided that the
certificate of the Trustee shall have; provided, however, that the right to
adopt the certificate of authentication of any predecessor Trustee or
authenticate Notes in the name of any predecessor Trustee shall apply only to
its successor, or successors by merger, conversion or consolidation.
The Trustee will give the Company prompt notice of any change in the
location of the Trustee's principal office.
SECTION 7.13. Limitations on rights of Trustee as a creditor.
(a) Subject to the provisions of subsection (b) of this Section 7.13,
if the Trustee shall be or shall become a creditor, directly or indirectly,
secured or unsecured, of the Company or of any other obligor on the Notes
within three months prior to a default, as defined in subsection (c) of this
Section 7.13, or subsequent to such a default, then, unless and until such
default shall be cured or waived, the Trustee shall set apart and hold in a
special account for the benefit of, the Trustee individually, the holders of
the Notes, and the holders of other indenture securities (as defined in
subsection (c) of this Section 7.13)
(1) an amount equal to any and all reductions in the amount
due and owing upon any claim as such creditor in respect of principal
or interest, effected after the beginning of such three months'
period, and valid as against the Company and its other creditors,
except any such reduction resulting from the receipt or disposition of
any property described in paragraph (2) of this subsection, or from
the exercise of any right of set-off which the Trustee could have
exercised if a petition in bankruptcy had been filed by or against the
Company upon the date of such default; and
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(2) all property received by the Trustee in respect of any
claims as such creditor, either as security therefor, or in
satisfaction or composition thereof, or otherwise, after the beginning
of such three months' period, or an amount equal to the proceeds of
any such property if disposed of, subject, however, to the rights, if
any, of the Company and its other creditors in such property or such
proceeds.
Nothing herein contained, however, shall affect the right of the Trustee
(A) to retain for its own account (i) payments made on
account of any such claim by any person (other than the Company) who
is liable thereon, and (ii) the proceeds of the bona fide sale of any
such claim by the Trustee to a third person, and (iii) distributions
made in cash, securities, or other property in respect of claims filed
against the Company in bankruptcy or receivership or in proceedings
for reorganization pursuant to any applicable bankruptcy, insolvency
or similar law;
(B) to realize, for its own account, upon any property held
by it as security for any such claim, if such property was so held
prior to the beginning of such three months' period;
(C) to realize, for its own account, but only to the extent
of the claim hereinafter mentioned, upon any property held by it as
security for any such claim, if such claim was created after the
beginning of such three months' period and such property was received
as security therefor simultaneously with the creation thereof, and if
the Trustee shall sustain the burden of proving that at the time such
property was so received the Trustee had no reasonable cause to
believe that a default, as defined in subsection (c) of this Section
7.13, would occur within three months; or
(D) to receive payment on any claim referred to in paragraph
(B) or (C), against the release of any property held as security for
such claim as provided in such paragraph (B) or (C), as the case may
be, to the extent of the fair value of such property.
For the purposes of paragraphs (B), (C) and (D) above, property
substituted after the beginning of such three months' period for property held
as security at the time of such substitution shall, to the extent of the fair
value of the property released, have the same status as the property released,
and to the extent that any claim referred to in any of such paragraphs is
created in renewal of or in substitution for or for the purpose of repaying or
refunding any preexisting claim of the Trustee as such creditor, such claim
shall have the same status as such preexisting claim.
If the Trustee shall be required to account, the funds and property
held in such special account and the proceeds thereof shall be apportioned
between the Trustee, the noteholders, and the holders of other indenture
securities in such manner that the Trustee, the noteholders and the holders of
other indenture securities realize, as a result of payments from such special
account and payments of dividends on claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to
applicable law, the same percentage of their respective claims, figured before
crediting to the claim of the Trustee anything on account of receipt by it from
the Company of the funds and property in such special account and before
crediting to the respective claims of the Trustee, the noteholders, and the
holders of other indenture securities dividends on claims filed against the
Company in bankruptcy or receivership or in proceedings for reorganization
pursuant to applicable law, but after crediting thereon receipts on account of
the indebtedness represented by their respective claims from all sources other
than from such dividends and from the funds and property so held in such
special account. As used in this paragraph, with respect to any claim, the
term "dividends" shall include any distribution with respect to
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such claim in bankruptcy or receivership or in proceedings for reorganization
pursuant to applicable law, whether such distribution is made in cash,
securities, or other property, but shall not include any such distribution with
respect to the secured portion, if any, of such claim. The court in which such
bankruptcy, receivership or proceeding for reorganization is pending shall have
jurisdiction (i) to apportion between the Trustee, the noteholders, and the
holders of other indenture securities, in accordance with the provisions of
this paragraph, the funds and property held in such special account and the
proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part,
to give to the provisions of this paragraph due consideration in determining
the fairness of the distributions to be made to the Trustee, the noteholders
and the holders of other indenture securities with respect to their respective
claims, in which event it shall not be necessary to liquidate or to appraise
the value of any securities or other property held in such special account or
as security for any such claim, or to make a specific allocation of such
distributions as between the secured and unsecured portions of such claims, or
otherwise to apply the provisions of this paragraph as a mathematical formula.
Any trustee who has resigned or been removed after the beginning of
such three months' period shall be subject to the provisions of this subsection
(a) as though such resignation or removal had not occurred. If any trustee has
resigned or been removed prior to the beginning of such three months' period,
it shall be subject to the provisions of this subsection (a) if and only if the
following conditions exist:
(i) the receipt of property or reduction of claim which would
have given rise to the obligation to account, if such trustee had
continued as trustee, occurred after the beginning of such three
months' period; and
(ii) such receipt of property or reduction of claim occurred
within three months after such resignation or removal.
(b) There shall be excluded from the operation of subsection (a) of
this Section 8.13 a creditor relationship arising from
(1) the ownership or acquisition of securities issued under
any indenture, or any security or securities having a maturity of one
year or more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court
of competent jurisdiction, or by this Indenture, for the purpose of
preserving any property which shall at any time be subject to the lien
of this Indenture or of discharging tax liens or other prior liens or
encumbrances thereon, if notice of such advance and of the
circumstances surrounding the making thereof is given to the
noteholders at the time and in the manner provided in Section 5.04
with respect to reports pursuant to subsections (a) and (b) thereof,
respectively;
(3) disbursements made in the ordinary course of business in
the capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(4) an indebtedness created as a result of services rendered
or premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction as defined in subsection (c) of
this Section 7.13;
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(5) the ownership of stock or of other securities of a
corporation organized under the provisions of Section 25(a) of the
Federal Reserve Act, as amended, which is directly or indirectly a
creditor of the Company; or
(6) the acquisition, ownership, acceptance or negotiation of
any drafts, bills of exchange, acceptances or obligations which fall
within the classification of self-liquidating paper as defined in
subsection (c) of this Section 7.13.
(c) As used in this Section 7.13:
(1) the term "default" shall mean any failure to make payment
in full of the principal of, premium, if any, Change of Control
Purchase Price, Asset Sale Purchase Price or interest upon any of the
Notes or upon the other indenture securities when and as any such
amounts become due and payable.
(2) the term "other indenture securities" shall mean
securities upon which the Company is an obligor (as defined in the
Trust Indenture Act of 1939) outstanding under any other indenture (A)
under which the Trustee is also trustee, (B) which contains provisions
substantially similar to the provisions of subsection (a) of this
Section 7.13, and (C) under which a default exists at the time of the
apportionment of the funds and property held in said special account.
(3) the term "cash transaction" shall mean any transaction in
which full payment for goods or securities sold is made within seven
days after delivery of the goods or securities in currency or in
checks or other orders drawn upon banks or bankers and payable upon
demand.
(4) the term "self-liquidating paper" shall mean any draft,
bill of exchange, acceptance or obligation which is made, drawn,
negotiated or incurred by the Company for the purpose of financing the
purchase, processing, manufacture, shipment, storage or sale of goods,
wares or merchandise and which is secured by documents evidencing
title to, possession of, or lien upon, the goods, wares or merchandise
or the receivables or proceeds arising from the sale of the goods,
wares or merchandise previously constituting the security, provided
the security is received by the Trustee simultaneously with the
creation of the creditor relationship with the Company arising from
the making, drawing, negotiating or incurring of the draft, bill of
exchange, acceptance or obligation.
(5) the term "Company" shall mean any obligor upon the Notes.
ARTICLE EIGHT
CONCERNING THE NOTEHOLDERS
SECTION 8.01. Evidence of action by noteholders. Whenever in this
Indenture it is provided that the holders of a specified percentage in
aggregate principal amount of the Notes may take any action (including the
making of any demand or request, the giving of any notice, consent, or waiver
or the taking of any other action), the fact that the holders of such specified
percentage, determined as of the time such action was taken or, if a record
date was set with respect thereto pursuant to Section 8.05, as of such record
date, have joined therein may be evidenced (a) by any instrument or any number
of instruments of similar tenor executed by noteholders in person or by agent
or proxy appointed in writing, or (b) by the record of the holders of Notes
voting in favor thereof at any meeting of noteholders duly
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called and held in accordance with the provisions of Article Nine, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of noteholders.
SECTION 8.02. Proof of execution of instruments and of holding of
Notes. Subject to the provisions of Sections 7.01, 7.02 and 9.05, proof of the
execution of any instrument by a noteholder or his agent or proxy shall be
sufficient if made in accordance with such reasonable rules and regulations as
may be prescribed by the Trustee or in such manner as shall be satisfactory to
the Trustee.
The ownership of Notes shall be proved by the register of such Notes,
or by a certificate of the registrar thereof.
The Trustee may accept such other proof or require such additional
proof of any matter referred to in this Section 8.02 as it shall deem
reasonable.
The record of any noteholders' meeting shall be proved in the manner
provided in Section 9.06.
SECTION 8.03. Who may be deemed owners of Notes. Prior to due
presentation for registration of transfer, the Company, the Trustee, any paying
agent and any Note registrar may deem and treat the person in whose name any
Note shall be registered upon the books of the Company as the absolute owner of
such Note (whether or not such Note shall be overdue and notwithstanding any
notation of ownership or other writing thereon) for the purposes of receiving
payment of or on account of the principal of, premium, if any, Change of
Control Purchase Price, Asset Sale Purchase Price and interest on such Note and
for all other purposes; and neither the Company nor the Trustee nor any paying
agent nor any Note registrar shall be affected by any notice to the contrary.
All such payments so made to, or upon the order of, any such holder shall be
valid, and, to the extent of the sum or sums so paid, effectual to satisfy and
discharge the liability for moneys payable upon any such Note.
SECTION 8.04. Notes owned by Company or controlled by controlling
persons disregarded for certain purposes. In determining whether the holders
of the requisite aggregate principal amount of Notes have concurred in any
demand, direction, request, notice, consent, waiver or other action under this
Indenture, Notes which are owned by the Company or any other obligor on the
Notes or by any person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company or any other obligor
on the Notes shall be disregarded and deemed not to be outstanding for the
purpose of any such determination, provided that for the purposes of
determining whether the Trustee shall be protected in relying on any such
demand, direction, request, notice, consent or waiver, only Notes which the
Trustee knows are so owned shall be so disregarded. Notes so owned which have
been pledged in good faith may be regarded as outstanding for the purposes of
this Section 8.04, if the pledgee shall establish to the satisfaction of the
Trustee the pledgee's right to vote such Notes and that the pledgee is not a
person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company or any such other obligor. In case of
a dispute as to such right, any decision by the Trustee taken upon the advice
of counsel shall be full protection to the Trustee.
SECTION 8.05. Record date for action by noteholders. Whenever in
this Indenture it is provided that holders of a specified percentage in
aggregate principal amount of the Notes may take any action (including the
making of any demand or request, the giving of any direction, notice, consent
or waiver or the taking of any other action), other than any action taken at a
meeting of noteholders called pursuant to Article Nine, the Company, pursuant
to a resolution of its Board of Directors, or the holders of at least 10% in
aggregate principal amount of the Notes then outstanding, may request the
Trustee to fix a record date for determining noteholders entitled to notice of
and to take any such action. In case the Company or the holders of Notes in
the amount above specified shall desire to request noteholders
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to take any such action and shall request the Trustee to fix a record date with
respect thereto by written notice setting forth in reasonable detail the
noteholder action to be requested, the Trustee shall promptly (but in any event
within five days of receipt of such request) fix a record date which shall be a
Business Day not less than fifteen nor more than twenty days after the date on
which the Trustee receives such request. If the Trustee shall fail to fix a
record date as hereinabove provided, then the Company or the holders of Notes
in the amount above specified may fix the same by mailing notice thereof (the
record date so fixed to be a Business Day not less than fifteen nor more than
twenty days after the date on which such written notice shall be given) to the
Trustee. If a record date is fixed according to this Section 8.05, only
persons shown as noteholders on the registry books of the Company at the close
of business on the record date so fixed shall be entitled to take the requested
action and the taking of any such action by the holders on the record date of
the required percentage of the aggregate principal amount of the Notes shall be
binding on all noteholders, provided that the taking of the requested action by
the holders on the record date of the percentage in aggregate principal amount
of the Notes specified in this Indenture in connection with such action shall
have been evidenced to the Trustee, as provided in Section 8.01, not later than
one hundred eighty days after such record date.
SECTION 8.06. Instruments executed by noteholders bind future
holders. At any time prior to (but not after) the evidencing to the Trustee,
as provided in Section 8.01, of the taking of any action by the holders of the
percentage in aggregate principal amount of the Notes specified in this
Indenture in connection with such action, any holder of a Note which is shown
by the evidence to be included in the Notes the holders of which have consented
to such action may, by filing written notice with the Trustee at its principal
office and upon proof of holding as provided in Section 8.02, revoke such
action so far as concerns such Note. Except as aforesaid any such action taken
by the holder of any Note and any direction, demand, request, waiver, consent,
vote or other action of the holder of any Note which by any provisions of this
Indenture is required or permitted to be given shall be conclusive and binding
upon such holder and upon all future holders and owners of such Note, and of
any Note issued in lieu thereof, irrespective of whether or not any notation in
regard thereto is made upon such Note. Any action taken by the holders of the
percentage in aggregate principal amount of the Notes specified in this
Indenture in connection with such action shall be conclusively binding upon the
holders of all the Notes.
ARTICLE NINE
NOTEHOLDERS' MEETINGS
SECTION 9.01. Purposes for which meetings may be called. A meeting
of noteholders may be called at any time and from time to time pursuant to the
provisions of this Article Nine for any of the following purposes:
(1) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to be
taken by noteholders pursuant to any of the provisions of Article Six;
(2) to remove the Trustee and appoint a successor trustee pursuant to
the provisions of Article Seven;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 10.02; or
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(4) to take any other action authorized to be taken by or on behalf
of the holders of any specified aggregate principal amount of the Notes under
any other provisions of this Indenture or under applicable law.
SECTION 9.02. Manner of calling meetings; record date. The Trustee
may at any time call a meeting of noteholders to take any action specified in
Section 9.01 to be held at such time and at such place in the Borough of
Manhattan, City of New York, State of New York, as the Trustee shall determine.
Notice of every meeting of the noteholders, setting forth the time and the
place of such meeting and in general terms the action proposed to be taken at
such meeting shall be mailed not less than twenty nor more than sixty days
prior to the date fixed for the meeting to such noteholders at their addresses
as such addresses appear on the registry books of the Company. For the purpose
of determining noteholders entitled to notice of any meeting of noteholders,
the Trustee shall fix in advance a date as the record date for such
determination, such date to be a Business Day not more than ten days prior to
the date of the mailing of such notice as hereinabove provided. Only persons
in whose name any Note shall be registered upon the registry books of the
Company at the close of business on a record date fixed by the Trustee as
aforesaid, or by the Company or the noteholders as in Section 9.03 provided,
shall be entitled to notice of the meeting of noteholders with respect to which
such record date was so fixed.
SECTION 9.03. Call of meeting by Company or noteholders. In case at
any time the Company, pursuant to a resolution of its Board of Directors, or
the holders of at least 10% in aggregate principal amount of the Notes then
outstanding, shall have requested the Trustee to call a meeting of noteholders
to take any action authorized in Section 9.01 by written request setting forth
in reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed notice of such meeting within twenty days after
receipt of such request, then the Company or the holders of Notes in the amount
above specified, as the case may be, may fix the record date with respect to,
and determine the time and the place in said Borough of Manhattan, City of New
York, State of New York, for, such meeting and may call such meeting to take
any action authorized in Section 9.01, by mailing notice thereof as provided in
Section 9.02. The record date fixed as provided in the preceding sentence
shall be set forth in a written notice to the Trustee and shall be a Business
Day not less than fifteen nor more than twenty days after the date on which
such notice is sent to the Trustee.
SECTION 9.04. Who may attend and vote at meetings. Only persons
entitled to receive notice of a meeting of noteholders and their respective
proxies duly appointed by an instrument in writing shall be entitled to vote at
such meeting. The only persons who shall be entitled to be present or to speak
at any meeting of noteholders shall be the persons entitled to vote at such
meeting and their counsel and any representatives of the Trustee and its
counsel and any representatives of the Company and its counsel. When a
determination of noteholders entitled to vote at any meeting of noteholders has
been made as provided in this Section, such determination shall apply to any
adjournment thereof.
SECTION 9.05. Regulations. Notwithstanding any other provisions of
this Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of noteholders, in regard to proof of the holding of
Notes and of the appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit. Except as
otherwise permitted or required by any such regulations, the holding of Notes
shall be proved in the manner specified in Section 8.02.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by noteholders as provided in Section 9.03,
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in which case the Company or the noteholders calling the meeting, as the case
may be, shall in like manner appoint a temporary chairman. A permanent
chairman and a permanent secretary of the meeting shall be elected by a vote of
the holders of a majority in principal amount of the Notes represented at the
meeting and entitled to vote.
Subject to the provisions of Section 8.04, at any meeting each
noteholder or proxy entitled to vote thereat shall be entitled to one vote for
each $1,000 principal amount of Notes held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in respect of any
Note challenged as not outstanding and ruled by the chairman of the meeting to
be not outstanding. The chairman of the meeting shall have no right to vote
other than by virtue of Notes held by him or instruments in writing as
aforesaid duly designating him as the person to vote on behalf of other
noteholders. Any meeting of noteholders duly called pursuant to the provisions
of Section 9.02 or 9.03 may be adjourned from time to time, and the meeting may
be held as so adjourned without further notice.
At any meeting of noteholders, the presence of persons who held, or
who are acting as proxy for persons who held, an aggregate principal amount of
Notes on the record date for such meeting sufficient to take action on the
business for the transaction of which such meeting was called shall constitute
a quorum, but, if less than a quorum is present, the persons holding or
representing a majority in aggregate principal amount of the Notes represented
at the meeting may adjourn such meeting with the same effect, for all intents
and purposes, as though a quorum had been present.
SECTION 9.06. Manner of voting at meetings and record to be kept.
The vote upon any resolution submitted to any meeting of noteholders shall be
by written ballots on each of which shall be subscribed the signature of the
noteholder or proxy casting such ballot, the principal amount and, if
practicable, the identifying number or numbers of the Notes held or represented
in respect of which such ballot is cast. The permanent chairman of the meeting
shall appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of noteholders shall be prepared by the secretary of the meeting and
there shall be attached to said record the original reports of the inspectors
of votes on any vote by ballot taken thereat and affidavits by one or more
persons having knowledge of the facts setting forth a copy of the notice of the
meeting and showing that said notice was mailed as provided in Section 9.02.
The record shall show the aggregate principal amount and, if practicable, the
identifying numbers of the Notes voting in favor of or against any resolution.
Each counterpart of such record shall be signed and verified by the affidavits
of the permanent chairman and secretary of the meeting and one of the
counterparts shall be delivered to the Company and the other to the Trustee to
be preserved by the Trustee.
Any counterpart record so signed and verified shall be conclusive
evidence of the matters therein stated and shall be the record referred to in
clause (b) of Section 8.01.
SECTION 9.07. Exercise of rights of Trustee and noteholders not to be
hindered or delayed. Nothing in this Article Nine shall be deemed or construed
to authorize or permit, by reason of any call of a meeting of noteholders or
any rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or
reserved to the Trustee or to the noteholders under any of the provisions of
this Indenture or of the Notes.
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ARTICLE TEN
SUPPLEMENTAL INDENTURES
SECTION 10.01. Purposes for which supplemental indentures may be
entered into without consent of noteholders. The Company, when authorized by a
Board Resolution, and the Trustee may from time to time and at any time enter
into an indenture or indentures supplemental hereto (which shall comply with
the provisions of the Trust Indenture Act of 1939 as then in effect) for one or
more of the following purposes:
(a) to comply with Article Eleven and Sections 4.10(c), 4.12(a),
4.12(c) and 15.03;
(b) to add to the covenants of the Company such further covenants,
restrictions or conditions as its Board of Directors shall consider to be for
the protection of the holders of Notes, and to make the occurrence, or the
occurrence and continuance, of a default in any of such additional covenants,
restrictions or conditions a default or an Event of Default permitting the
enforcement of all or any of the several remedies provided in this Indenture as
herein set forth; provided, however, that in respect of any such additional
covenant, restriction or condition such supplemental indenture may provide for
a particular period of grace after default (which period may be shorter or
longer than that allowed in the case of other defaults) or may provide for an
immediate enforcement upon such default or may limit the remedies available to
the Trustee upon such default.
(c) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture or any supplemental indenture as shall not
adversely affect the rights of the holders of the Notes;
(d) to provide for the issuance under this Indenture of Notes,
whether or not then outstanding, in coupon form (including Notes registrable as
to principal only) and to provide for exchangeability of such Notes with Notes
issued hereunder in fully registered form and to make all appropriate changes
for such purpose; and
(e) to comply with the requirements of the New York Stock Exchange or
any other national securities exchange on which the Notes may be issued or
admitted for trading, provided such changes do not adversely affect the rights
of any holder of Notes.
The Trustee is hereby authorized to join with the Company in the
execution and delivery of any such supplemental indenture, to make any further
appropriate agreement and stipulations which may be therein contained and to
accept the conveyance, transfer, mortgage, pledge or assignment of, any
property thereunder, provided that if any such supplemental indenture affects
the Trustee's own rights, duties or immunities under this Indenture or
otherwise, the Trustee may in its discretion, but shall not be obligated to,
enter into such supplemental indenture.
Any supplemental indenture authorized by the provisions of this
Section 10.01 may be executed by the Company and the Trustee without the
consent of the holders of any of the Notes at the time outstanding,
notwithstanding any of the provisions of Section 10.02.
SECTION 10.02. Modification of Indenture with consent of holders of a
majority in principal amount of Notes. With the consent (evidenced as provided
in Section 8.01) of the holders of not less
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than a majority in aggregate principal amount of the Notes at the time
outstanding (determined as provided in Sections 8.04 and 8.05), or, if a record
date is set with respect to such consent in accordance with Section 8.05, as of
such record date, the Company, when authorized by a Board Resolution, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto (which shall comply with the provisions of the
Trust Indenture Act of 1939 as then in effect) for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of any supplemental indenture or of modifying in any manner
the rights of the holders of the Notes; provided, however, that without the
consent of each holder of an outstanding Note affected, no such supplemental
indenture shall (i) extend the stated maturity of any Note, reduce the interest
rate, extend the time or alter the manner of payment of interest thereon,
reduce the principal amount thereof or alter the timing of or reduce any
premium payable upon the redemption thereof or the amount payable thereon in
the event of acceleration or the amount thereof payable in bankruptcy, or (ii)
reduce the aforesaid percentage of aggregate principal amount of Notes, the
consent of the holders of which is required for any such supplemental
indenture.
Upon the request of the Company, accompanied by a copy of a Board
Resolution authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of noteholders as
aforesaid, the Trustee shall join with the Company in the execution and
delivery of such supplemental indenture, provided that if such supplemental
indenture affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the noteholders under
this Section 10.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Promptly after the execution and delivery by the Company and the
Trustee of any supplemental indenture pursuant to the provisions of this
Section 10.02, the Company shall mail a notice to the noteholders, setting
forth in general terms the substance of such supplemental indenture. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
SECTION 10.03. Effect of supplemental indentures. Upon the execution
and delivery of any supplemental indenture pursuant to the provisions of this
Article Ten, this Indenture shall be and be deemed to be modified and amended
in accordance therewith and the respective rights, limitation of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Company and the holders of Notes shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and
amendments, and all the terms and conditions of any such supplemental indenture
shall be and be deemed to be part of the terms and conditions of this Indenture
for any and all purposes.
SECTION 10.04. Notes may bear notation of changes by supplemental
indentures. Notes authenticated and delivered after the execution and delivery
of any supplemental indenture pursuant to the provisions of this Article Ten,
or after any action taken at a noteholders' meeting pursuant to Article Nine,
may bear a notation in form approved by the Trustee as to any matter provided
for in such supplemental indenture or as to any action taken at any such
meeting. If the Company shall so determine, new Notes so modified as to
conform, in the opinion of the Trustee and the Company, to any modification of
this Indenture contained in any such supplemental indenture may be prepared by
the Company, authenticated by the Trustee and delivered in exchange for the
Notes then outstanding upon
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surrender of such Notes. Failure to make the appropriate notation or issue a
new Note shall not affect the validity and effect of such supplemental
indenture or noteholders' meeting.
SECTION 10.05. Officers' Certificate and Opinion of Counsel. The
Trustee may receive upon its request and, subject to the provisions of Sections
7.01 and 7.02, may rely upon an Officers' Certificate and an Opinion of Counsel
as conclusive evidence that any such indenture complies with the provisions of
this Article Ten.
ARTICLE ELEVEN
CONSOLIDATION, MERGER AND SALE
SECTION 11.01. Company may consolidate, etc., on certain terms.
(a) Nothing contained in this Indenture or in any of the Notes shall
prevent any consolidation or merger of the Company with or into any other
corporation or corporations (whether or not affiliated with the Company) or
successive consolidations or mergers in which the Company or its successor or
successors shall be a party or parties, or shall prevent any sale or conveyance
of all or substantially all the property of the Company to any other
corporation (whether or not affiliated with the Company) whether in a single
transaction or series of related transactions; provided, however, and the
Company hereby covenants and agrees, that any such consolidation, merger, sale
or conveyance shall be upon the condition that (i) immediately after giving
effect to such consolidation, merger, sale or conveyance, the corporation
(whether the Company or such other corporation) formed by or surviving any such
consolidation or merger, or to which such sale or conveyance shall have been
made, whether the Company or such other corporation (the "surviving
corporation"), shall not be in default in the performance or observance of any
of the terms, covenants and conditions of this Indenture to be kept or
performed by the Company, (ii) the surviving corporation (if other than the
Company) shall be a corporation organized under the laws of The United States
of America or any State thereof, (iii) immediately after giving effect to such
consolidation, merger, sale or conveyance, the surviving corporation (whether
the Company or such other corporation) could incur $1.00 of Indebtedness
pursuant to Section 4.10(a), (iv) the surviving corporation (if other than the
Company) shall expressly assume the due and punctual payment of the principal
of, premium, if any, Change of Control Purchase Price, Asset Sale Purchase
Price and interest on all of the Notes, according to their tenor, and the due
and punctual performance and observance of all the covenants and conditions of
this Indenture to be performed or observed by the Company, by supplemental
indenture complying with the requirements of Article Ten, satisfactory in form
to the Trustee, executed and delivered to the Trustee by such corporation and
(v) immediately after giving effect to such consolidation, merger, sale or
conveyance, the surviving corporation (whether the Company or such other
corporation) shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction.
If at any time there be any consolidation or merger or sale or conveyance of
property to which the covenant of this Section 11.01 is applicable, then, in
any such event, the surviving corporation will promptly deliver to the Trustee:
(1) an Officers' Certificate stating that as of the time
immediately after the effective date of any such transaction the
covenants contained in this Section 11.01 have been complied with; and
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(2) an Opinion of Counsel stating that such covenants have
been complied with and that any instrument or instruments executed in
the performance of such covenants comply with the requirements
thereof.
(b) Notwithstanding the foregoing Section 11.01(a), (i) the Company
may consolidate or merge with or into, or sell or convey all or substantially
all of its property to, KAC; provided, however, that the surviving corporation
(if other than the Company) shall expressly assume by supplemental indenture
complying with the requirements of Article Ten, satisfactory in form to the
Trustee, the due and punctual payment of the principal of, premium, if any,
Change of Control Purchase Price, Asset Sale Purchase Price and interest on all
of the Notes, according to their tenor, and the due and punctual performance
and observance of all the covenants and conditions of this Indenture to be
performed or observed by the Company and (ii) the Company may consolidate or
merge with or into, or sell or convey all or substantially all of its property
to, a Subsidiary Guarantor; provided, that the surviving corporation (if other
than the Company) shall expressly assume by supplemental indenture complying
with the requirements of Article Ten, satisfactory in form to the Trustee, the
due and punctual payment of the principal of, premium, if any, Change of
Control Purchase Price, Asset Sale Purchase Price and interest on all of the
Notes, according to their tenor, and the due and punctual performance and
observance of all the covenants and conditions of this Indenture to be
performed or observed by the Company.
SECTION 11.02. Successor corporation to be substituted. In case of
any such consolidation, merger, sale or conveyance and upon the assumption by
the successor corporation, in the manner hereinabove provided, of the due and
punctual payment of the principal of, premium, if any, Change of Control
Purchase Price, Asset Sale Purchase Price and interest on all of the Notes and
the due and punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed or observed by the Company, such
successor corporation shall succeed to and be substituted for the Company, with
the same effect as if it had been named herein as the party of the first part
and the Company shall be relieved of all its obligations and duties under this
Indenture and the Notes. Such successor corporation thereupon may cause to be
signed, and may issue either in its own name or in the name of the Company, any
or all of the Notes issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee; and, upon the order of such
successor corporation (instead of the Company) and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Notes which previously shall have been
signed and delivered by the officers of the Company to the Trustee for
authentication, and any Notes which such successor corporation thereafter shall
cause to be signed and delivered to the Trustee for that purpose. All the
Notes so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Notes theretofore or thereafter issued in
accordance with the terms of this Indenture as though all of such Notes had
been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale or conveyance such
changes in phraseology and form (but not in substance) may be made in the Notes
thereafter to be issued as may be appropriate.
SECTION 11.03. Opinion of Counsel. The Trustee, subject to the
provisions of Sections 7.01 and 7.02, may receive upon its request and rely on
an Opinion of Counsel as conclusive evidence that any such consolidation,
merger, sale or conveyance, and any such assumption, complies with the
provisions of this Article Eleven.
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ARTICLE TWELVE
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
SECTION 12.01. Satisfaction and discharge of Indenture. If at any time
(a) the Company shall deliver to the Trustee for cancellation all
Notes theretofore authenticated and delivered, other than (1) any Notes which
shall have been destroyed, lost or stolen and which shall have been replaced or
paid as provided in Section 2.07 or (2) any Note for the payment of the
principal of which money has theretofore been deposited in trust or segregated
and held in trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 12.04, and not theretofore
cancelled, or
(b) (1) all the Notes not theretofore cancelled or delivered to the
Trustee for cancellation shall have become due and payable, or are by their
terms to become due and payable within one year or are to be or may be called
for redemption within one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption and (2) the Company has deposited with
the Trustee, in trust, money or non- callable Government Securities maturing as
to principal and interest in such amounts and at such times as are sufficient
(in the opinion of a nationally recognized firm of independent certified
accountants expressed in a written certification thereof delivered to the
Trustee), without consideration of any reinvestment of such interest, to pay at
maturity or upon redemption all of such Notes (other than any Notes which shall
have been destroyed, lost or stolen and which shall have been replaced or paid
as provided in Section 2.07) not theretofore cancelled or delivered to the
Trustee for cancellation, including principal, premium, if any, Change of
Control Purchase Price, Asset Sale Purchase Price and interest due or to become
due to such date of maturity or date fixed for redemption, as the case may be,
and if in either case the Company shall also pay or cause to be paid all other
sums payable hereunder by the Company, then this Indenture shall cease to be of
further effect and the Trustee, on demand of the Company accompanied by an
Officers' Certificate and an Opinion of Counsel complying with Section 14.05
and at the cost and expense of the Company, shall execute proper instruments
acknowledging satisfaction of and discharging this Indenture, except for those
provisions which expressly survive as provided below; the Company, however,
hereby agreeing to reimburse the Trustee for any costs or expenses theretofore
and thereafter reasonably and properly incurred by the Trustee in connection
with this Indenture or the Notes.
Notwithstanding the foregoing, the Company's obligations in Sections
2.05, 2.07, 4.01, 4.02, 4.04, 5.01, 5.02, 7.06, 12.03 and 12.04 shall survive
until the Notes are no longer outstanding. Thereafter, only the Company's
obligations in Sections 7.06, 12.03 and 12.04 shall survive.
After a deposit made pursuant to this Section 12.01, the Trustee upon
request shall acknowledge in writing the discharge of the Company's obligations
under the Notes and this Indenture, except for those surviving obligations
specified above.
SECTION 12.02. Application by Trustee of funds deposited for payment
of Notes. All amounts deposited with the Trustee pursuant to Section 12.01
shall be held in trust and applied by it to the payment, either directly or
through any paying agent (including the Company acting as its own paying
agent), to the holders of the particular Notes, for the payment or redemption
of which such moneys have been deposited with the Trustee, of all sums due and
to become due thereon for principal, premium, if any, Change of Control
Purchase Price, Asset Sale Purchase Price and interest.
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SECTION 12.03. Repayment of moneys held by paying agent. In
connection with the satisfaction and discharge of this Indenture, all moneys
then held by any paying agent under the provisions of this Indenture shall,
upon demand of the Company, be paid to the Trustee and thereupon such paying
agent shall be released from all further liability with respect to such moneys.
SECTION 12.04. Repayment of moneys held by Trustee. The Trustee
shall promptly pay to the Company upon written request any excess money or
securities held by it at any time. Any moneys deposited with the Trustee or
any paying agent for the payment of the principal of, premium, if any, Change
of Control Purchase Price, Asset Sale Purchase Price or interest on any Notes
and not applied but remaining unclaimed by the holders of Notes for two years
after the date upon which such payment shall have become due, shall be promptly
repaid (together with any interest earned thereon) to the Company by the
Trustee or by such paying agent; and thereupon the Trustee and such paying
agent shall be released from all further liability with respect to such moneys,
and the holder of any of the Notes entitled to receive such payment shall
thereafter look only to the Company for the payment thereof, provided, however,
that the Trustee or such paying agent, before being required to make any such
repayment, may, at the expense of the Company, mail to the holders of Notes at
their last known address or cause to be published once in a newspaper published
in the English language, customarily published on each Business Day and of
general circulation in the Borough of Manhattan, City of New York, State of New
York, a notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than thirty days from the date of
such mailing or publication, any unclaimed balance of such money then remaining
will be paid to the Company.
SECTION 12.05. Reinstatement. If the Trustee is unable to apply any
money or securities deposited by the Company with the Trustee in accordance
with Section 12.01 by reason of any legal proceeding or by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the Company's obligations under
this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 12.01 until such time as the Trustee
is permitted to apply all such money or securities deposited by the Company
with the Trustee in accordance with Section 12.01; provided that if the Company
has made any payment of principal of, premium, if any, Change of Control
Purchase Price, Asset Sale Purchase Price or interest on any Notes because of
the reinstatement of its obligations, the Company shall be subrogated to the
rights of the holders of such Notes to receive such payment from the money or
securities deposited by the Company and held by the Trustee.
ARTICLE THIRTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
SECTION 13.01. Incorporators, stockholders, officers and directors of
Company exempt from individual liability. No recourse under or upon any
obligation, covenant or agreement of this Indenture or any indenture
supplemental hereto or of any Note, or for any claim based thereon or otherwise
in respect thereof, shall be had against any incorporator, stockholder, officer
or director, as such, past, present or future, of the Company or of any
successor corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that this Indenture and the obligations issued hereunder
are solely corporate obligations, and that no such personal liability whatever
shall attach to, or is or shall be incurred by, the incorporators,
stockholders, officers or directors, as such, of the Company or of any
successor corporation, or any of them, because of the
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creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Notes or implied therefrom; and that any and all such personal liability of
every name and nature, either at common law or in equity or by constitution or
statute, of, and any and all such rights and claims against, every such
incorporator, stockholder, officer or director, as such, because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Notes or implied therefrom are hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of such Notes.
ARTICLE FOURTEEN
MISCELLANEOUS PROVISIONS
SECTION 14.01. Successors and assigns of Company bound by Indenture.
All the covenants, stipulations, promises and agreements in this Indenture
contained by or in behalf of the Company shall bind its successors and assigns,
whether so expressed or not.
SECTION 14.02. Acts of board, committee or officer of successor
corporation valid. Any act or proceeding by any provision of this Indenture
authorized or required to be done or performed by any board, committee or
officer of the Company shall and may be done and performed with like force and
effect by the like board, committee or officer of any corporation that shall at
the time be the lawful sole successor of the Company.
SECTION 14.03. Required notices or demands may be served by mail;
waiver. Any notice or demand which by any provisions of this Indenture is
required or permitted to be given or served by the Trustee or by the holders of
Notes to or on the Company may be given or served by being deposited postage
prepaid (except as provided in Section 6.01(c)) by first class mail in a post
office letter box addressed (until another address is filed by the Company with
the Trustee for such purpose), as follows: Kaiser Aluminum & Chemical
Corporation, 5847 San Felipe, Suite 2600, Houston, Texas 77057, Attention:
Secretary. Any notice, direction, request or demand by any noteholder to or
upon the Trustee shall be deemed to have been sufficiently given or made, for
all purposes, if given or made at the principal office of the Trustee, to the
attention of the Corporate Trust Department.
Any notice or communication to a noteholder shall be mailed by
first-class mail to his address shown on the Company's registry. Failure to
mail a notice or communication to a noteholder or any defect in it shall not
affect its sufficiency with respect to other noteholders. If a notice or
communication is mailed in the manner so provided within the time prescribed,
it is duly given, whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the person entitled to receive such notice, either
before or after the event or action relating thereto, and such waiver shall be
equivalent of such notice. Waivers of notice by noteholders shall be filed
with the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service or as a
result of a strike, work stoppage or similar activity, or any act of God or any
other cause, it shall be impractical to mail any notice as required by this
Indenture, then any manner of giving such notice as shall be made with the
approval of the Trustee shall constitute sufficient giving of notice hereunder.
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SECTION 14.04. Indenture and Notes to be construed in accordance with
the laws of the State of New York. THIS INDENTURE AND EACH NOTE SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR
ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
SAID STATE WITHOUT REGARD TO THE PRINCIPLES OF THE CONFLICT OF LAWS PROVISIONS
THEREOF.
SECTION 14.05. Evidence of compliance with conditions precedent.
Upon any demand, request or application by the Company to the Trustee to take
any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent have been complied with,
except that in the case of any such demand, request or application as to which
the furnishing of such document is specifically required by any provision of
this Indenture relating to such particular application or demand, no additional
certificate or opinion need be furnished.
Each certificate (other than those provided for in Section 5.03(d)) or
opinion provided for in this Indenture and delivered to the Trustee with
respect to compliance with a condition or covenant provided for in this
Indenture shall include (1) a statement that the person making such certificate
or opinion has read such covenant or condition; (2) a brief statement as to the
nature and scope of the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are based; (3) a statement
that, in the opinion of such person, he has made such examination or
investigation as is necessary to enable him to express an informed opinion as
to whether or not such covenant or condition has been complied with; and (4) a
statement as to whether or not, in the opinion of such person, such condition
or covenant has been complied with.
Any certificate, statement or opinion of an officer of the Company may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of or representations by counsel, unless such officer knows that the
certificate or opinion or representations with respect to the matters upon
which his certificate, statement or opinion may be based as aforesaid are
erroneous. Any certificate, statement or opinion of counsel may be based,
insofar as it relates to factual matters, information with respect to which is
in the possession of the Company, upon the certificate, statement or opinion of
or representations by an officer or officers of the Company or public
officials, unless such counsel knows that the certificate, statement or opinion
or representations with respect to the matters upon which his certificate,
statements or opinion may be based as aforesaid are erroneous.
Any certificate, statement or opinion of an officer of the Company or
of counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants unless such officer or counsel, as the case may be, knows that the
certificate or opinion or representations with respect to the accounting
matters upon which his certificate, statement of opinion may be based as
aforesaid are erroneous. Any certificate or opinion of any independent firm of
public accountants filed with the Trustee shall contain a statement that such
firm is independent.
SECTION 14.06. Payments due on Saturdays, Sundays and holidays. In
any case where the date of payment of principal of, premium, if any, Change of
Control Purchase Price, Asset Sale Purchase Price or interest on the Notes or
the date fixed for redemption or purchase of any Note shall not be a Business
Day, then payment of principal, premium, if any, Change of Control Purchase
Price, Asset Sale Purchase Price or interest need not be made on such date, but
may be made on the next succeeding Business Day with the same force and effect
as if made on the date of payment or the date fixed for
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redemption or purchase, and no interest shall accrue on or after such original
date of payment or such original date fixed for redemption or purchase.
SECTION 14.07. Provisions required by Trust Indenture Act of 1939 to
control. If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by operation of the following
sentence, the imposed duties shall control. The provisions of Sections 310 to
317, inclusive, of the Trust Indenture Act of 1939 that impose duties on any
person (including provisions automatically deemed included in this Indenture
unless this Indenture provides that such provisions are excluded) are a part of
and govern this Indenture, whether or not physically contained herein.
SECTION 14.08. Provisions of the Indenture and Notes for the sole
benefit of the parties and the noteholders. Nothing in this Indenture or in
the Notes, expressed or implied, shall give or be construed to give any person,
firm or corporation, other than the parties hereto and the holders of the
Notes, any legal or equitable right, remedy or claim under or in respect of
this Indenture, or under any covenant, condition or provision herein contained;
all its covenants, conditions and provisions being for the sole benefit of the
parties hereto and of the holders of the Notes.
SECTION 14.09. Severability. In case any one or more of the
provisions contained in this Indenture or in the Notes shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Indenture or of such Notes, but this Indenture and such Notes shall be
construed as if such invalid or illegal or unenforceable provision had never
been contained herein or therein.
SECTION 14.10. Indenture may be executed in counterparts; acceptance
by Trustee. This Indenture may be executed in any number of counterparts, each
of which shall be an original; but such counterparts shall together constitute
but one and the same instrument. First Trust National Association hereby
accepts the trusts in this Indenture declared and provided, upon the terms and
conditions hereinabove set forth.
SECTION 14.11. Article and Section headings. The Article and Section
references herein and in the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 14.12. No Adverse Interpretation of Other Instruments. This
Indenture shall not be used to interpret another indenture, loan or debt
agreement of the Company or any Subsidiary or Affiliate of the Company. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
ARTICLE FIFTEEN
GUARANTEE OF NOTES
SECTION 15.01. Guarantee. Subject to the provisions of this Article
Fifteen, each Subsidiary Guarantor, jointly and severally, hereby
unconditionally guarantees to each holder of a Note authenticated and delivered
by the Trustee (i) the due and punctual payment of the principal of, premium,
if any, Change of Control Purchase Price, Asset Sale Purchase Price and
interest on such Note, when and as the same shall become due and payable,
whether at maturity, by acceleration or otherwise, the due and punctual payment
of interest on the overdue principal of, premium, Change of Control Purchase
Price, Asset Sale Purchase Price and interest, if any, on the Notes, to the
extent lawful, and the due and punctual performance of all other obligations of
the Company to the holders of the Notes or the Trustee all in accordance with
the terms of such Note and of this Indenture and (ii) in the case of any
extension
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<PAGE> 99
of time of payment or renewal of any Notes or any of such other obligations,
that the same will be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, at stated maturity, by acceleration
or otherwise. Each Subsidiary Guarantor hereby agrees that its obligations
hereunder shall be absolute and unconditional, irrespective of, and shall be
unaffected by, any invalidity, irregularity or unenforceability of any such
Note or this Indenture, any failure to enforce the provisions of any such Note
or this Indenture, any waiver, modification or indulgence granted to the
Company with respect thereto, by the holder of such Note or the Trustee, or any
other circumstances which may otherwise constitute a legal or equitable
discharge of a surety or guarantor. Each Subsidiary Guarantor hereby waives
diligence, presentment, filing of claims with a court in the event of merger or
bankruptcy of the Company, any right to require a proceeding first against the
Company, the benefit of discussion, protest or notice with respect to any such
Note or the indebtedness evidenced thereby and all demands whatsoever, and
covenants that this Guarantee will not be discharged as to any such Note except
by payment in full of the principal thereof, premium, if any, Change of Control
Purchase Price, Asset Sale Purchase Asset and interest thereon or as provided
in Sections 12.01, 15.03 and 15.05. Each Subsidiary Guarantor further agrees
that, as between such Subsidiary Guarantor, on the one hand, and the holders of
Notes and the Trustee, on the other hand, (i) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article Six for the
purposes of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (ii) in the event of any declaration of acceleration of
such obligations as provided in Article Six, such obligations (whether or not
due and payable) shall, subject to the other provisions of this Article
Fifteen, forthwith become due and payable by such Subsidiary Guarantor for the
purpose of this Guarantee. In addition, without limiting the foregoing
provisions, upon the effectiveness of an acceleration under Article Six, the
Trustee shall promptly make a demand for payment on the Notes under the
Guarantee provided for in this Article Fifteen.
Each Subsidiary Guarantor shall be subrogated to all rights of the
holder of any Notes against the Company in respect of any amounts paid to the
holder of Notes by such Subsidiary Guarantor pursuant to the provisions of this
Guarantee; provided, that such Subsidiary Guarantor shall not be entitled to
enforce, or to receive any payments arising out of or based upon, such right of
subrogation until the principal of, premium, if any, Change of Control Purchase
Price, Asset Sale Purchase Price and interest on all Notes shall have been paid
in full.
SECTION 15.02. Guarantee senior in respect of Subordinated Notes.
Each Subsidiary Guarantor, for itself, its successors and assigns, hereby
acknowledges that the Guarantee issued hereunder in respect of the Notes shall
hereafter constitute for all purposes Senior Indebtedness of such Subsidiary
Guarantor under the terms of the Subordinated Note Indenture to the extent that
such Subsidiary Guarantor is a guarantor under the Subordinated Note Indenture.
SECTION 15.03. Subsidiary Guarantors may consolidate, etc., on
certain terms.
(a) Notwithstanding any other provision of this Indenture (i) a
Subsidiary Guarantor may consolidate or merge with or into, or sell or convey
all or substantially all of its property to, the Company, provided, that the
surviving corporation (if other than the Company) shall expressly assume by
supplemental indenture complying with the requirements of Article Ten,
satisfactory in form to the Trustee, the due and punctual payment of the
principal of, premium, if any, Change of Control Purchase Price, Asset Sale
Purchase Price and interest on all of the Notes, according to their tenor, and
the due and punctual performance and observance of all the covenants and
conditions of this Indenture to be performed or observed by the Company and
(ii) a Subsidiary Guarantor may consolidate or merge with or into, or sell or
convey all or substantially all of its property to, any other Subsidiary
Guarantor.
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(b) Nothing contained in this Indenture or in any of the Notes shall
prevent any consolidation or merger of any Subsidiary Guarantor with or into
any other corporation or corporations (whether or not affiliated with such
Subsidiary Guarantor), or successive consolidations or mergers in which such
Subsidiary Guarantor or its successor or successors shall be a party or
parties, or shall prevent any sale or conveyance of the property of any
Subsidiary Guarantor as an entirety or substantially as an entirety to any
other corporation (whether or not affiliated with such Subsidiary Guarantor)
authorized to acquire and operate the same, whether in a single transaction or
a series of related transactions; provided, however, that each Subsidiary
Guarantor hereby covenants and agrees that any such consolidation, merger, sale
or conveyance shall be upon the condition that: (i) in the event that the
surviving corporation is a Subsidiary of the Company, then (A) such surviving
corporation (if other than such Subsidiary Guarantor) shall be a corporation
organized under the laws of the United States of America or any State thereof,
(B) such surviving corporation (if other than such Subsidiary Guarantor) shall
assume the due and punctual performance and observance of all of the covenants
and conditions of this Indenture to be performed by such Subsidiary Guarantor
by supplemental indenture complying with the requirements of Article Ten,
satisfactory in form to the Trustee, executed and delivered to the Trustee, (C)
immediately after giving effect to such consolidation, merger, sale or
conveyance, the Company could incur $1.00 of Indebtedness pursuant to Section
4.10(a) and (D) immediately after giving effect to such consolidation, merger,
sale or conveyance, the surviving corporation (whether such Subsidiary
Guarantor or such other corporation) shall have a Consolidated Net Worth equal
to or greater than the Consolidated Net Worth of such Subsidiary Guarantor
immediately prior to such transaction; and (ii) in the event that the surviving
corporation is not a Subsidiary of the Company, then such consolidation,
merger, sale or conveyance shall otherwise have been made in compliance with
the terms of this Indenture (including, without limitation, Section 4.14). In
the event that the surviving corporation is a Subsidiary of the Company, (I)
such Subsidiary Guarantor shall deliver to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such merger, consolidation or
transfer and such supplemental indenture comply with this Section 15.03(b) and
that all conditions precedent herein provided relating to such transaction have
been complied with and (II) in case of any such consolidation, merger, sale or
conveyance and upon the assumption by the surviving corporation (if other than
such Subsidiary Guarantor), by supplemental indenture executed and delivered to
the Trustee and satisfactory in form to the Trustee, of the due and punctual
performance of all the covenants and conditions of this Indenture to be
performed by such Subsidiary Guarantor, such surviving corporation shall
succeed to and be substituted for such Subsidiary Guarantor, with the same
effect as if it had been named herein as such Subsidiary Guarantor and in the
case of any such sale or conveyance, such Subsidiary Guarantor (if not the
surviving corporation) shall be relieved of all of its obligations and duties
under this Indenture and the Notes.
SECTION 15.04. Application of certain terms and provisions to the
Subsidiary Guarantors.
(a) For purposes of any provision of this Indenture which provides
for the delivery by any Subsidiary Guarantor of an Officer's Certificate and/or
an Opinion of Counsel, the definitions of such terms in Section 1.01 shall
apply to such Subsidiary Guarantor as if references therein to the Company were
references to such Subsidiary Guarantor.
(b) The Subsidiary Guarantors shall comply with all reporting
requirements of Section 5.03 as if references therein to the Company were
references to the Subsidiary Guarantors.
(c) Any request, direction, order or demand which by any provision of
this Indenture is to be made by any Subsidiary Guarantor, shall be sufficient
if evidenced as described in Section 7.02 as if references therein to the
Company were references to such Subsidiary Guarantor.
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(d) Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the holders of
Notes to or on any Subsidiary Guarantor may be given or served as described in
Section 14.03 as if references therein to the Company were references to such
Subsidiary Guarantor.
(e) Upon any demand, request or application by any Subsidiary
Guarantor to the Trustee to take any action under this Indenture, such
Subsidiary Guarantor shall furnish to the Trustee such certificates and
opinions as are required in Section 14.05 as if all references therein to the
Company were references to such Subsidiary Guarantor.
SECTION 15.05. Release of Guarantee.
(a) If at any time any Subsidiary Guarantor ceases to be a Bank
Guarantor, is not a Subsidiary Guarantor under the Subordinated Note Indenture
and no Event of Default (or event or condition which with the giving of notice
or the passage of time would be an Event of Default) then exists and is
continuing, and either (X) such Subsidiary Guarantor has not Incurred any
Indebtedness or preferred stock (including preference stock) after the date
hereof that is then outstanding other than Indebtedness Incurred pursuant to
Section 4.10(a) (but only to the extent such Indebtedness is also Indebtedness
of Alpart), Section 4.10(b)(iii) or Section 4.10(b)(iv) and, in each case,
permitted refinancings thereof, or (y) the Notes are then rated Baa3 (or the
equivalent) or better by Moody's Investor Services, Inc. (or a successor rating
agency) or BBB- (or the equivalent) or better by Standard & Poor's Corporation
(or a successor rating agency), then such Person shall cease to be a Subsidiary
Guarantor hereunder upon the delivery of the Officers' Certificate and Opinion
of Counsel set forth in paragraph (b) of this Section 15.05. Thereafter, the
Guarantee given by such Subsidiary Guarantor shall no longer have any force or
effect and such Person shall be relieved of all of its obligations and duties
under this Indenture and the Notes.
(b) Upon any Subsidiary Guarantor ceasing to be a Bank Guarantor, the
Company may, at its option, deliver to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that such Subsidiary Guarantor is no longer
a Bank Guarantor, is not a Subsidiary Guarantor under the Subordinated Note
Indenture and that no Event of Default (or event or condition which with the
giving of notice or the passage of time would become an Event of Default)
exists and is continuing and that all conditions precedent herein provided
relating to Section 15.05(a) have been complied with.
(c) Upon the sale or disposition (by merger or otherwise, including,
without limitation, pursuant to Section 15.03(b)(ii)) of a Subsidiary Guarantor
(or the Company's or a Subsidiary's interest therein) by the Company or a
Subsidiary of the Company to a Person that is not the Company or a Subsidiary
of the Company and which sale or disposition is otherwise in compliance with
the terms of this Indenture (including, without limitation, Section 4.14), the
obligations of such Subsidiary Guarantor under its Guarantee shall be deemed
released without any further action required on the part of the Trustee, such
Subsidiary Guarantor, the Company or any holder of the Notes, provided that any
guarantee of such Subsidiary Guarantor with respect to the Credit Agreement and
the Subordinated Notes, and any renewals, extensions, refundings, replacements,
restructurings or refinancings, amendments and modifications thereof, if any,
has been or is simultaneously released. At the request of the Company, the
Trustee shall execute and deliver an appropriate instrument evidencing such
release.
(d) Upon the release of any Subsidiary Guarantor from its Guarantee
pursuant to any provision of this Indenture, each other Subsidiary Guarantor
not so released shall remain liable for the full amount of principal of, and
interest on, the Notes as and to the extent provided in this Indenture.
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<PAGE> 102
IN WITNESS WHEREOF, each of KAISER ALUMINUM & CHEMICAL CORPORATION,
KAISER ALUMINA AUSTRALIA CORPORATION, ALPART JAMAICA INC., KAISER FINANCE
CORPORATION and KAISER JAMAICA CORPORATION has caused this Indenture to be
signed and acknowledged by its Chairman of the Board, its President or one of
its Vice Presidents, and its corporate seal to be affixed hereunto, and the
same to be attested by one of its Vice Presidents; and FIRST TRUST NATIONAL
ASSOCIATION has caused this Indenture to be signed and acknowledged by one of
its Vice Presidents, has caused its corporate seal to be affixed hereunto, and
the same to be attested by one of its Trust Officers, all as of the day and
year first written above.
KAISER ALUMINUM & CHEMICAL
CORPORATION
By:
------------------------------------------
Name:
Title:
[SEAL]
Attest:
KAISER ALUMINA AUSTRALIA
CORPORATION
By:
------------------------------------------
Name:
Title:
[SEAL]
Attest:
ALPART JAMAICA INC.
By:
------------------------------------------
Name:
Title:
[SEAL]
Attest:
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<PAGE> 103
KAISER FINANCE CORPORATION
By:
------------------------------------------
Name:
Title:
[SEAL]
Attest:
KAISER JAMAICA CORPORATION
By:
------------------------------------------
Name:
Title:
[SEAL]
Attest:
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
By:
------------------------------------------
Name:
Title:
[SEAL]
Attest:
- -------------------------------------------
Trust Officer
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<PAGE> 104
SCHEDULE A
SCHEDULE OF LIENS SECURING
INDEBTEDNESS IN EXCESS OF $5,000,000
[To Be Provided By The Company]
97
<PAGE> 105
SCHEDULE B
REAL PROPERTY CONSTITUTING
PERMITTED COLLATERAL
[To Be Provided By The Company]
98
<PAGE> 1
SENIOR SUBORDINATED INTERCOMPANY NOTE
February , 1994
FOR VALUE RECEIVED, the undersigned, Kaiser Aluminum &
Chemical Corporation, a Delaware corporation (the "Company"), HEREBY PROMISES
TO PAY to the order of Kaiser Aluminum Corporation, a Delaware corporation (the
"Payee"), the principal sum of
DOLLARS ($ ), which shall be due and payable as
hereinafter provided.
1. This Note shall not bear interest. This Note shall be
payable in quarterly installments on March 30, June 29, September 29 and
December 30 of each year, commencing March 30, 1994, and ending December 30,
1997, the first such quarterly installment to be in the amount of
$ and each remaining quarterly installment to be in the amount of
$ .
2. The entire unpaid principal amount of this Note shall be
due and payable on December 30, 1997. Notwithstanding the foregoing provisions
of this Note, in the event that all shares of % PRIDES, Convertible
Preferred Stock (the "PRIDES") of the Payee are redeemed or are converted into
shares of the
<PAGE> 2
common stock of the Payee pursuant to the Certificate of Designations governing
such shares of PRIDES, the Company may, after all amounts payable by the Payee
in respect of accrued and unpaid dividends in connection with such redemption
or conversion have been paid, defer further principal and interest payments on
this Note until such time as no Specified Senior Debt (as defined in Section
7(c) of this Note) is then outstanding.
3. The Company shall make each payment hereunder not later
than 5:00 p.m. (New York City time) on the day when due in lawful money of the
United States of America to the holder of this Note by delivery of a certified
or bank cashier's check in the amount of such payment or, at such holder's
option, by wire transfer of immediately available funds.
4. Whenever any payment to be made hereunder shall be stated
to be due on a Saturday, Sunday or a public or bank holiday or the equivalent
for banks generally under the laws of the State of New York (any other day
being a "Business Day"), such payment may be made on the next succeeding
Business Day.
5. The Company shall have the right to prepay the principal
amount of this Note, in whole or in part, at any time or from time to time,
without premium or penalty, but with interest on the portion of the principal
amount so prepaid accrued to the date of prepayment. This Note is an Equity
Proceeds Note (as such term is defined in the Credit Agreement dated as of
February
-2-
<PAGE> 3
15, 1994 between Kaiser Aluminum Corporation, the Company, certain financial
institutions, and BankAmerica Business Credit, Inc., as agent (in such capacity
the "Agent"), as the same has been, or may hereafter be, amended, supplemented,
restated, or otherwise modified from time to time (the "Credit Agreement")).
6. In case one or more of the following events of default
shall have occurred and be continuing:
(a) the Company fails to pay any installment of principal of,
or interest on, this Note when due, whether or not
payment is prohibited by the provisions of Section 7 of this Note; or
(b) a court having jurisdiction in the premises shall
have entered a decree or order for relief against the Company in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Company or for all or any
substantial part of its property, or ordering the winding-up or liquidation of
its affairs, and such decree or order shall have remained unstayed and in
effect for a period of ninety consecutive days; or
(c) the Company shall have commenced a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall have consented to the entry
-3-
<PAGE> 4
of an order for relief in an involuntary case under any such law, or shall have
consented to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or similar official) of the Company
or for all or any substantial part of its property, or shall have made an
assignment for the benefit of creditors, or shall have taken any corporate
action in furtherance of any of the foregoing; then, in the case of an event
specified in clause (a), unless the principal of this Note shall have already
become due and payable, the holder of this Note by notice to the Company in
writing may at its option declare the principal amount and accrued interest to
the date of declaration of this Note to be due and payable immediately. Upon
any such declaration, the same shall become and shall be immediately due and
payable, provided that any payment pursuant to such acceleration shall be
subject to Section 7(g) of this Note. If an event specified in clause (b) or
(c) above occurs, such amount shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the holder, but
subject to Section 7(g) of this Note.
7. (a) The Company, for itself, its successors and assigns,
covenants and agrees, and the Payee (and each other holder of this Note), by
its acceptance hereof, likewise covenants and agrees, for the benefit of all
present and future holders of Senior Indebtedness of the Company (as defined in
Section 7(h) of this Note), that all direct or indirect payments
-4-
<PAGE> 5
or distributions on or with respect to this Note, whether pursuant to the terms
of this Note or upon acceleration or otherwise, including, without limitation,
by way of or on account of a "Claim" (as defined hereinbelow) or the payment of
the principal of and interest on this Note, is hereby expressly subordinated,
to the extent and in the manner hereinafter set forth, in right of payment to
the prior payment in full in cash or cash equivalents of all Senior
Indebtedness of the Company (including, without limitation, interest that would
accrue but for the occurrence of any proceeding of the kind referred to in the
introductory clause of Section 7(b) of this Note, whether or not such interest
is an allowable claim in such proceeding).
(b) Upon any direct or indirect payment or distribution of
assets or securities of the Company of any kind or character, whether in cash,
property or securities, upon any dissolution, winding up, liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, reorganization, receivership or other proceedings or
upon an assignment for the benefit of creditors or any other marshalling of the
assets and liabilities of the Company or otherwise,
(i) the holders of all Senior Indebtedness of the
Company shall be entitled to receive payment in full in cash or cash
equivalents of such Senior Indebtedness of the Company (including, without
limitation, interest that would accrue but for the occurrence of any such
proceeding whether or not such inter-
-5-
<PAGE> 6
est is an allowable claim in such proceeding) before the holder of this Note
shall be entitled to receive any direct or indirect payment or distribution of
assets or securities of the Company of any kind or character, whether in cash,
property or securities, with respect to this Note, whether pursuant to the
terms of this Note or upon acceleration or otherwise, including by way of or on
account of any claim against the Company for rescission of the issuance of this
Note or for monetary damages from, or in connection with, the issuance of this
Note, or for reimbursement or contribution on account of such a claim (a
"Claim"), or the payment of principal of or interest on this Note; and
(ii) any direct or indirect payment or distribution
of assets or securities of the Company of any kind or character, whether in
cash, property or securities, to which the holder of this Note would be
entitled except for the provisions of this Section 7 shall be paid by the
Company or by any liquidating trustee or agent or other person making such
payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Senior
Indebtedness of the Company or their representative or representatives, ratably
according to the aggregate amounts remaining unpaid on account of the Senior
Indebtedness of the Company held or represented by each, to the extent
necessary to make payment in full in cash or cash equivalents of all Senior
Indebtedness of the Company (including, without limitation,
-6-
<PAGE> 7
interest that would accrue but for the occurrence of any such proceeding
whether or not such interest is an allowable claim in such proceeding)
remaining unpaid, after giving effect to any concurrent payment or distribution
to the holders of such Senior Indebtedness of the Company; and
(iii) in the event that, notwithstanding the
foregoing, any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, shall be received by the
holder of this Note, whether pursuant to the terms of this Note or upon
acceleration or otherwise, including by way of or on account of a Claim, or the
payment of principal of or interest on this Note, before all Senior
Indebtedness of the Company is paid in full in cash or cash equivalents, such
payment or distribution shall be received and held in trust for and paid over
to the holders of such Senior Indebtedness of the Company or their
representative or representatives, ratably as aforesaid, for application to the
payment of all Senior Indebtedness of the Company remaining unpaid until all
such Senior Indebtedness of the Company shall have been paid in full in cash or
cash equivalents, after giving effect to any concurrent payment or distribution
to the holders of such Senior Indebtedness of the Company.
The consolidation of the Company with, or the merger of the
Company into, another corporation or other entity or the liquidation or
dissolution of the Company following the sale or
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<PAGE> 8
conveyance of its property or assets as an entirety, or substantially as an
entirety, to another corporation or other entity shall not be deemed a
dissolution, winding up, liquidation or reorganization of the Company for the
purposes of this Section 7.
Subject to the payment in full in cash or cash equivalents of all
Senior Indebtedness of the Company, the holder of this Note shall be subrogated
(without any duty on the part of the holders of Senior Indebtedness of the
Company to warrant, create, effectuate, preserve or protect such subrogation)
to the rights of the holders of Senior Indebtedness of the Company to receive
payments or distributions of cash, property or securities of the Company
applicable to Senior Indebtedness of the Company until the principal of and
interest on this Note shall be paid in full and, for the purpose of such
subrogation, no payments or distributions to the holders of Senior Indebtedness
of the Company of cash, property or securities otherwise distributable to the
holder of this Note shall, as between the Company, its creditors other than the
holders of Senior Indebtedness of the Company, and the holder of this Note, be
deemed to be a payment by the Company to the holders of or on account of the
Senior Indebtedness of the Company. It is understood that the provisions of
this Section 7 are and are intended solely for the purpose of defining the
relative rights of the holder of this Note, on the one hand, and the holders of
Senior Indebtedness of the Company, on the other hand. Nothing contained in
this
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<PAGE> 9
Section 7 or elsewhere in this Note is intended to or shall impair, as between
the Company, its creditors other than the holders of Senior Indebtedness of the
Company, and the holder of this Note, the obligation of the Company, which is
unconditional and absolute, to pay to the holder of this Note the principal of
and interest on this Note as and when the same shall become due and payable in
accordance with its terms, or to affect the relative rights of the holder of
this Note and creditors of the Company other than the holders of Senior
Indebtedness of the Company, nor shall anything herein prevent the holder of
this Note from exercising all remedies otherwise permitted by applicable law
upon default under this Note, subject to the rights, if any, under this Section
7 of the holders of Senior Indebtedness of the Company in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy. Upon any payment or distribution of assets of the Company referred to
in this Section 7, the holder of this Note shall be entitled to rely upon any
order or decree of a court of competent jurisdiction in which any proceedings
of the nature described in this Section are pending or upon a certificate of
the liquidating trustee or agent or other person making any distribution to the
holder of this Note for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of Senior Indebtedness of the
Company and other indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or
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<PAGE> 10
distributed thereon and all other facts pertinent thereto or to this Section 7.
(c) No direct or indirect payments or distributions by or
on behalf of the Company on or with respect to this Note (whether pursuant to
the terms of this Note or upon acceleration or otherwise, including by way of
or on account of a Claim, or the payment of principal of or interest on this
Note) shall be made if, at the time of such payment or distribution, there
exists a default in the payment of all or any portion of any Senior
Indebtedness of the Company (other than a payment default to the extent it
relates to those items described in clause (i)(B) of the definition of "Senior
Indebtedness" contained in the Subordinated Indenture (as the term Subordinated
Indenture is defined in the Credit Agreement) or a payment default to the
extent it relates to those items of Senior Indebtedness of the Company referred
to in clause (ii)(B) of Section 7(h)), and such payment default (other than to
the extent it relates to those items described in clause (i)(B) of the
definition of "Senior Indebtedness" contained in the Subordinated Indenture)
shall not have been cured or waived or the benefits of this sentence waived in
writing by or on behalf of the holders of such Senior Indebtedness of the
Company. In addition, during the continuance of any other default with respect
to the obligations of the Company referred to in clause (i) of Section 7(h)
(the "Specified Senior Debt") that would permit (or would so permit with the
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<PAGE> 11
passage of time or giving of notice or both) the acceleration of the maturity
of such Specified Senior Debt, no direct or indirect payments or distributions
by or on behalf of the Company on or with respect to this Note may be made
(whether pursuant to the terms of this Note or upon acceleration or otherwise,
including by way of or on account of a Claim, or the payment of principal of or
interest on this Note) for a period (the "Payment Blockage Period") commencing
on the date of receipt by the holder of this Note of notice of such default
specifying that such notice is a Payment Blockage Notice from the Agent under
the Credit Agreement, or, if such default results from the acceleration of this
Note, commencing on the earlier of the date of receipt of such notice by the
holder of this Note or the date of such acceleration, and ending on the
earliest of (a) 179 days thereafter, (b) the date on or as of which (i) such
default has been cured or waived, (ii) the Company has delivered to the holder
of this Note an Officers' Certificate (as hereinafter defined) to such effect
and (iii) the Agent under the Credit Agreement shall have endorsed on such
Officers' Certificate that it does not object to the form or substance of such
Officers' Certificate, provided, that if such default has been cured or waived,
the Company shall promptly notify the holder of this Note of such cure or
waiver and the Agent under the Credit Agreement shall promptly endorse such
notice, and (c) the date on or as of which the Agent under the Credit Agreement
shall have consented in writing to the termination of such Payment Blockage
Period. Notwithstanding the
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<PAGE> 12
foregoing, in no event (a) may the total number of days during which any
Payment Blockage Period or Payment Blockage Periods may be in effect during any
360 consecutive day period exceed 179 days in the aggregate or (b) will
payments or distributions be prohibited by this Section 7(c) if (i) any of the
Company's 12-3/4% Senior Subordinated Notes due 2003 shall then be outstanding
and (ii) payments and distributions are not then prohibited under Sections 3.03
and (if, at the time, there are any "Subsidiary Guarantors" (as such term is
defined in the Subordinated Indenture)) 16.04 of the Subordinated Indenture.
No default which existed or was continuing on the date of the commencement of
any Payment Blockage Period with respect to Specified Senior Debt and was known
at the time of commencement thereof to the Agent under the Credit Agreement
shall be, or be made, the basis for the commencement of a second Payment
Blockage Period by the Agent under the Credit Agreement whether or not within a
period of 360 consecutive days, unless such default shall have been cured or
waived for a period of not less than 90 consecutive days. As used herein, the
term "Officers' Certificate" shall mean a certificate of the Company signed on
behalf of the Company by the Chairman of the Board, the President or any Vice
President and by the Chief Financial Officer, the Controller, the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Company.
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<PAGE> 13
In the event that, notwithstanding the foregoing, the Company
shall make any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to the holder of this Note
prohibited by the foregoing provisions of this Section 7(c) (whether pursuant
to the terms of this Note or upon acceleration or otherwise, including by way
of or on account of a Claim, or the payment of principal of or interest on this
Note), then and in any such event such payment or distribution shall, to the
extent permitted by law, be received and held in trust for the benefit of and
be paid over and delivered forthwith to the holders of the Senior Indebtedness
of the Company or their representative or representatives.
The provisions of this Section 7(c) shall not apply to any
payment with respect to which Section 7(b) would be applicable.
(d) Except as provided in clause (b) or (c) above, nothing
contained in this Note shall affect the obligation of the Company to make, or
prevent the Company from making, at any time, payments of principal or interest
on this Note.
(e) The holder of this Note shall take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Section 7, including, without limitation, in the event of any dissolution,
winding up, liquidation or bankruptcy reorganization of the Company (whether in
bankruptcy,
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<PAGE> 14
insolvency or receivership proceedings or upon a general assignment for the
benefit of creditors or any other similar remedy or otherwise) tending towards
liquidation of the business and assets of the Company, the immediate filing of
a claim for the unpaid balance of this Note in the form required in such
proceedings and using its best efforts to cause such claim to be approved. If
the holder of this Note does not file a proper claim or proof of debt in the
form required in such proceedings prior to 30 days before the expiration of the
time to file such claim or claims, the holders of Senior Indebtedness of the
Company (or their representative or representatives) are hereby authorized to
file an appropriate claim for and on behalf of the holder of this Note.
Nothing herein shall be deemed to authorize the holders of Senior Indebtedness
of the Company to authorize or consent to or accept or adopt on behalf of the
holder of this Note any plan of reorganization, arrangement, adjustment or
composition affecting this Note or the rights of the holder of this Note, or to
authorize the holders of Senior Indebtedness of the Company to vote in respect
of the claim of the holder of this Note in any such proceeding. In the event
that the provisions of this Section 7 shall at the time prohibit payments to
the holder of this Note, no holder of this Note shall waive, forgive or cancel
any monetary obligation, or any claim before a bankruptcy court, under or with
respect to this Note or any Claim.
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<PAGE> 15
(f) No right of any present or future holder of any Senior
Indebtedness of the Company to enforce subordination as provided herein shall
at any time in any way be prejudiced or impaired by any act or failure to act
on the part of the Company or by any act or failure to act, in good faith, by
any such holder, or by any noncompliance by the Company with the terms of this
Note, regardless of any knowledge thereof which any such holder may have or
otherwise be charged with. The holders of Senior Indebtedness of the Company
may at any time and from time to time, without the consent of or notice to the
holder of this Note, without incurring responsibility to the holder of this
Note and without impairing or releasing or otherwise affecting the rights of
any holder of Senior Indebtedness of the Company or the respective liabilities
or obligations of the Company or the holder this Note or in any way altering or
affecting any of the provisions of this Section 7:
(1) change the amount, manner, place or terms of payment or
change or extend the time of payment of or renew, refinance, modify,
alter or restructure the terms of the Senior Indebtedness of the
Company or any document or instrument evidencing or governing such
Senior Indebtedness of the Company in any manner or enter into or
amend in any manner any other agreement relating to Senior
Indebtedness of the Company or any security therefor;
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<PAGE> 16
(2) sell, exchange, release or otherwise deal with any
property by whomsoever at any time pledged or mortgaged to secure, or
howsoever securing, Senior Indebtedness of the Company and otherwise
deal freely with the Company;
(3) release anyone (including any guarantor) liable in
any manner for the payment or collection of Senior Indebtedness of the
Company;
(4) exercise or refrain from exercising any rights
against the Company and others (including any guarantor), including
releasing, selling or exchanging any security;
(5) apply any sums by whomsoever paid or however realized
to the Senior Indebtedness of the Company; or
(6) take any other action which otherwise might be deemed to
impair the rights of the holder of this Note.
No compromise, alteration, amendment, modification,
extension, renewal or other change of, or waiver, consent or other action in
respect of, any liabilities or obligation under or in respect of, or of any of
the terms, covenants or conditions of any indenture or other instrument
under which any Senior Indebtedness of the Company is outstanding or of such
Senior Indebtedness of the Company, whether or not in accordance with the
provisions of any applicable document, shall in any way alter or affect any of
the provisions of this Section 7. As long as
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<PAGE> 17
any Senior Indebtedness of the Company is outstanding, no amendment to, or any
waiver of the provisions of, this Section 7 which adversely affects the rights
of the holders of Senior Indebtedness of the Company under this Section 7 shall
be effective against the holders of Senior Indebtedness of the Company who have
not consented thereto.
(g) If payment of the Note is accelerated because of an event
of default as provided in Section 6 of this Note, the Company shall promptly
notify the Agent under the Credit Agreement, and the trustee under the
indenture (the "Senior Indenture") governing the Company's % Senior Notes
due 2002 (the "Senior Notes"), of the acceleration. The Company may not
pay the Note until five Business Days after the Agent under the Credit
Agreement and the trustee under the Senior Indenture receive such notice (if
any Senior Indebtedness of the Company remains outstanding) and thereafter may
pay this Note only if this Note otherwise permits the payment at that time.
(h) The term "Senior Indebtedness of the Company" shall mean
(i) all monetary obligations of the Company under the Credit Agreement,
including all related notes, collateral documents, and guarantees, in each
case, as any of the same has been or may be amended, supplemented, restated or
otherwise modified from time to time (in each case in whole or in part) and any
refundings, refinancings, replacements or restructurings of such monetary
obligations that individually or in the aggregate
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<PAGE> 18
provide, at one time, the source of repayment for at least fifty percent of the
then outstanding aggregate amount of all monetary obligations of the Company
under the Credit Agreement, and (ii) (A) all principal of, premium, if any, and
interest on the Senior Notes, and (B) all other monetary obligations of the
Company under the Senior Notes or the Senior Indenture, in each case, as the
same may be amended, supplemented, restated or otherwise modified from time to
time.
8. All powers and remedies given to the holder of this Note
shall, to the extent permitted by law, be deemed cumulative and not exclusive
of any thereof or of any other powers and remedies available to the holder of
this Note, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Note, and no delay
or omission of the holder of this Note to exercise any right or power accruing
upon any default hereunder shall impair any such right or power, or shall be
construed to be a waiver of any such default or an acquiescence therein.
9. This Note shall be binding upon the Company and its
successors and assigns, and the terms and provisions of this Note shall inure
to the benefit of Payee, the holders of Senior Indebtedness of the Company and
their respective successors and assigns, including subsequent holders hereof.
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<PAGE> 19
10. The terms and provisions of this Note are severable, and
if any term or provision shall be determined to be superseded, illegal, invalid
or otherwise unenforceable in whole or in part pursuant to applicable law by a
governmental authority having jurisdiction, such determination shall not in any
manner impair or otherwise affect the validity, legality or enforceability of
that term or provision in any other jurisdiction or any of the remaining terms
and provisions of this Note in any jurisdiction.
11. Presentment for payment, notice of dishonor, protest,
notice of protest and any other notice are hereby waived. This Note shall be
governed by, and construed in accordance with, the internal laws of the State
of New York without regard to principles of conflict of laws.
12. No amendment, modification or waiver of any term or
provision of this Note, nor consent to any departure by the Company herefrom,
shall be effective unless the same shall be in writing and signed by the holder
of this Note, and then such waiver, modification or consent shall be effective
only in the specific instance and for the specific purpose for which given.
13. Nothing in this Note, expressed or implied, shall give or
be construed to give any person, firm or corporation, other than the parties
hereto and the holders of Senior Indebtedness of the Company, any legal or
equitable right, remedy or
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<PAGE> 20
claim under or in respect of this Note, or under any covenant, condition or
provision herein contained; all its covenants, conditions and provisions being
for the sole benefit of the Company, the holder of this Note and the holders of
Senior Indebtedness of the Company.
IN WITNESS WHEREOF, the Company has caused this Note to be
executed and delivered to the Payee on the date and year first above written.
KAISER ALUMINUM & CHEMICAL
CORPORATION
By: __________________________
Name:
Title:
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<PAGE> 1
O'M&M
DRAFT
2/7/94
$250,000,000
CREDIT AGREEMENT
dated as of February 15, 1994
between
KAISER ALUMINUM & CHEMICAL CORPORATION,
KAISER ALUMINUM CORPORATION,
CERTAIN FINANCIAL INSTITUTIONS,
and
BANKAMERICA BUSINESS CREDIT, INC.,
as Agent
<PAGE> 2
TABLE OF CONTENTS
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I DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.2. Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
1.3. Cross-References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
1.4. Accounting and Financial Determinations and Other Terms . . . . . . . . . . . . . . . . 40
II COMMITMENTS AND BORROWING PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.1. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.1.1. Revolving Commitment . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.1.2. Swingline Commitment . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.1.4. Borrowing Base Determinations . . . . . . . . . . . . . . . . . . . . 43
2.2. Reduction of Revolving Commitment Amount . . . . . . . . . . . . . . . . . . . . . . . . 44
2.3. Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.4. Agent's Books and Records; Monthly Statements . . . . . . . . . . . . . . . . . . . . . 46
III REPAYMENTS, PREPAYMENTS, INTEREST, AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.1. Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.2. Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.3. Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.3.1. Prepayment Under, or Cash Collateralization of,
Revolving Commitment . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.3.3. Cash Dominion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
3.3.4. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.4. Interest Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.4.1. Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.4.2. Continuation and Conversion Elections . . . . . . . . . . . . . . . . 51
3.4.3. Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
3.4.4. Default Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
3.4.5. Interest Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . 53
3.4.6. Maximum Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
3.5. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
3.5.1. Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
3.5.2. Audit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
3.5.3. Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
IV CERTAIN LIBO RATE AND OTHER PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
4.1. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
4.2. Deposits Unavailable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
4.3. Increased Costs, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
4.4. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
4.5. Increased Capital Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
4.6. Taxes, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
4.7. Payments, Computations, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
4.8. Sharing of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
4.9. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
i
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4.10. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
4.11. Change of Lending Office, Replacement of Lender, etc . . . . . . . . . . . . . . . . . . 64
4.12. Computation of Additional Amounts Due . . . . . . . . . . . . . . . . . . . . . . . . . 65
V LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.1. Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.2. Issuance and Extensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
5.3. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
5.4. Other Lenders' Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
5.5. Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5.6. Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5.7. Mandatory Payment to Agent of Letter of Credit Outstandings . . . . . . . . . . . . . . 70
5.8. L/C Collateral Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
5.8.1. Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
5.8.2. Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
5.8.3. Application of Funds . . . . . . . . . . . . . . . . . . . . . . . . . 71
5.8.4. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
5.9. Nature of Reimbursement Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 72
5.10. Indemnification by Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
VI PARENT GUARANTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.1. Parent Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.2. Renewal, etc. of Obligations; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.3. No Impairment, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
6.4. Reinstatement; Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
VII CONDITIONS TO EXTENSIONS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
7.1. Initial Credit Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
7.1.1. Resolutions, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
7.1.2. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.1.3. Payment of Outstanding Indebtedness . . . . . . . . . . . . . . . . . 76
7.1.4. Parent Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . 76
7.1.5. Company Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . 77
7.1.6. Security Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.1.7. Company Trademark Security Agreement;
Company Patent Security Agreement . . . . . . . . . . . . . . . . . . 78
7.1.8. Company Mortgages; Company Deeds of Trust . . . . . . . . . . . . . . 78
7.1.9. Subsidiary Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.1.10. Subsidiary Pledge Agreement . . . . . . . . . . . . . . . . . . . . . 79
7.1.11. Intercompany Note Pledge Agreement . . . . . . . . . . . . . . . . . . 80
7.1.12. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . 80
7.1.13. Closing Fees, Expenses, etc . . . . . . . . . . . . . . . . . . . . . 80
7.1.14. Environmental Reports . . . . . . . . . . . . . . . . . . . . . . . . 80
7.1.15. Investment Account Letter . . . . . . . . . . . . . . . . . . . . . . 81
7.1.16. Sufficient Quantities, etc . . . . . . . . . . . . . . . . . . . . . . 81
7.1.17. Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.1.18. Issuance of Senior Debt and Equity . . . . . . . . . . . . . . . . . . 81
</TABLE>
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7.2. All Credit Extensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.2.1. Compliance with Warranties, No Default, etc . . . . . . . . . . . . . 82
7.2.2. Credit Request; Borrowing Base Certificate . . . . . . . . . . . . . . 84
7.2.3. Satisfactory Legal Form . . . . . . . . . . . . . . . . . . . . . . . 84
VIII REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
8.1. Organization, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
8.2. Due Authorization, Non-Contravention, etc . . . . . . . . . . . . . . . . . . . . . . . 85
8.3. Government Approval, Regulation, etc . . . . . . . . . . . . . . . . . . . . . . . . . . 85
8.4. Validity, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
8.5. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
8.6. No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
8.7. Absence of Default or Violation of Law . . . . . . . . . . . . . . . . . . . . . . . . . 88
8.8. Litigation, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
8.9. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
8.10. Ownership of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
8.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
8.12. Pension and Welfare Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
8.13. Environmental Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
8.14. Regulations G, U, and X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
8.15. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
8.16. Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
8.17. Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
8.18. Joint Venture Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 93
8.19. Mortgaged Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
IX COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
9.1. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
9.1.1. Financial Information, Reports, Notices, etc . . . . . . . . . . . . 94
9.1.2. Compliance with Laws, etc . . . . . . . . . . . . . . . . . . . . . . 97
9.1.3. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . 97
9.1.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
9.1.5. Books and Records; Audits; Confidentiality . . . . . . . . . . . . . . 99
9.1.6. Environmental Covenant . . . . . . . . . . . . . . . . . . . . . . . . 101
9.1.7. Performance of Instruments . . . . . . . . . . . . . . . . . . . . . . 102
9.1.8. Maintenance of Collateral . . . . . . . . . . . . . . . . . . . . . . 102
9.1.9. Collateral Reporting . . . . . . . . . . . . . . . . . . . . . . . . . 103
9.1.10. Delivery; Further Assurances . . . . . . . . . . . . . . . . . . . . . 103
9.1.11. Real Property; Title Policies; Surveys . . . . . . . . . . . . . . . . 106
9.1.12. Intercompany Demand Notes . . . . . . . . . . . . . . . . . . . . . . 107
9.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
9.2.1. Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . 107
9.2.2. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
9.2.3. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
9.2.4. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . 114
9.2.5. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
</TABLE>
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9.2.6. Restricted Payments, etc . . . . . . . . . . . . . . . . . . . . . . . 117
9.2.7. Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . 120
9.2.8. Rental Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 121
9.2.9. Take or Pay Contracts . . . . . . . . . . . . . . . . . . . . . . . . 121
9.2.10. Consolidation, Merger, etc . . . . . . . . . . . . . . . . . . . . . . 121
9.2.11. Asset Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . 122
9.2.12. Sale or Discount of Receivables . . . . . . . . . . . . . . . . . . . 123
9.2.13. Restrictions on Actions under Certain Agreements . . . . . . . . . . . 124
9.2.14. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . 125
9.2.15. Negative Pledges, etc . . . . . . . . . . . . . . . . . . . . . . . . 126
9.2.16. Sale-Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . 126
9.2.17. Change of Location or Name . . . . . . . . . . . . . . . . . . . . . . 127
9.2.18. Intercompany Transfers of Property . . . . . . . . . . . . . . . . . . 127
9.2.19. Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . 128
X EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
10.1. Listing of Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
10.1.1. Non-Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . 129
10.1.2. Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . 129
10.1.3. Non-Performance of Certain Covenants and Obligations . . . . . . . . . 129
10.1.4. Non-Performance of Certain Covenants and Obligations . . . . . . . . . 129
10.1.5. Non-Performance of Other Covenants and Obligations . . . . . . . . . . 130
10.1.6. Default on Other Indebtedness . . . . . . . . . . . . . . . . . . . . 130
10.1.7. Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
10.1.8. Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
10.1.9. Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . 131
10.1.10. Bankruptcy, Insolvency, etc . . . . . . . . . . . . . . . . . . . . . 131
10.1.11. Subordinated Debt and Senior Debt . . . . . . . . . . . . . . . . . . 132
10.1.12. Impairment of Certain Documents . . . . . . . . . . . . . . . . . . . 132
10.2. Action if Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
10.3. Action if Other Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
XI THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
11.1. Appointment; Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
11.2. Funding Reliance, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
11.3. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
11.4. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
11.5. Credit Extensions by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
11.6. Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
11.7. Copies, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
11.8. Designation of Additional Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
11.9. Certain Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
11.10. Approval of Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
XII MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
12.1. Waivers, Amendments, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
12.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
</TABLE>
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12.3. Payment of Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
12.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
12.5. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
12.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
12.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
12.8. Execution in Counterparts, Effectiveness, etc . . . . . . . . . . . . . . . . . . . . . 145
12.9. GOVERNING LAW; SUBMISSION TO JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . 145
12.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
12.11. Sale and Transfer of Credit Extensions and
Commitments; Participations in Credit
Extensions and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
12.11.1. Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
12.11.2. Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
12.12. Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
12.13. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
12.14. Arbitration; Reference Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
12.15. Final Agreement, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
</TABLE>
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<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A-1(a) Borrowing Request - Revolving Loan Borrowing
Exhibit A-1(b) Borrowing Request - Swingline Borrowings
Exhibit A-2 Continuation/Conversion Notice
Exhibit B Revolving L/C Request
Exhibit C-1 Certificate as to Senior Debt
Exhibit C-2 Certificate as to Parent Guarantor Preferred
Stock
Exhibit D-1 Borrowing Base Certificate
Exhibit D-2 Compliance Certificate
Exhibit E-1 Parent Pledge Agreement
Exhibit E-2 Parent Security Agreement
Exhibit F-1 Company Pledge Agreement
Exhibit F-2 Company Security Agreement
Exhibit F-3 Company Patent Security Agreement
Exhibit F-4 Company Trademark Security Agreement
Exhibit G Collection Bank Agreement
Exhibit H Concentration Bank Agreement
Exhibit I-1 Company Deed of Trust
Exhibit I-2 Company Mortgage
Exhibit J Subsidiary Guaranty
Exhibit K-1 Subsidiary Pledge Agreement
Exhibit K-2 Subsidiary Security Agreement
Exhibit K-3 Intercompany Note Pledge Agreement
Exhibit L-1 Opinion of Outside Counsel to Company
Exhibit L-2 Opinion of Inside Counsel to Company
Exhibit L-3 Opinion of Special Patent Counsel to Company
Exhibit L-4 Opinions of Local Counsel
Exhibit L-5 Opinion of Counsel to Agent
Exhibit M Assignee Agreement to be bound
Exhibit N Investment Account Letter
Exhibit O-1 Intercompany Demand Note
Exhibit O-2 Intercompany Demand Note
Exhibit O-3 Intercompany Demand Note
Exhibit P Equity Proceeds Note
Exhibit Q Form of Confidentiality Agreement
Exhibit R Form of RTZ Aluminum Holdings Limited Letter
Exhibit S Form of Flood Plain Status Letter
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule I Pledged Subsidiaries and Joint Venture Affiliates (Company Pledge Agreement)
Schedule II Mortgaged Real Property (Company Mortgage and Deed of Trust)
Schedule III Subsidiaries executing the Subsidiary Guaranty
Schedule IV Subsidiaries executing the Subsidiary Pledge Agreement and the Subsidiary Security Agreement
Schedule V Pledged Subsidiaries (Subsidiary Pledge Agreement)
Schedule VI Intercompany Demand Notes (Subsidiary Pledge Agreement)
</TABLE>
vi
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<TABLE>
<S> <C>
Schedule VII Subsidiaries executing Intercompany Note Pledge Agreement
Schedule VIII Intercompany Demand Notes (Intercompany Note Pledge Agreement)
Schedule IX Existing Letters of Credit
Schedule X Local Counsel
Schedule XI Other Material Subsidiaries
Schedule XII Existing Investments
Schedule XIII Certain Intercompany Debt
</TABLE>
vii
<PAGE> 9
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of February 15, 1994, is
between KAISER ALUMINUM & CHEMICAL CORPORATION, a Delaware corporation (the
"Company"), KAISER ALUMINUM CORPORATION, a Delaware corporation (the "Parent
Guarantor"), the various financial institutions that are or may from time to
time become parties hereto pursuant to the terms hereof (collectively, the
"Lenders" and, individually, a "Lender"), and BANKAMERICA BUSINESS CREDIT,
INC., a Delaware corporation, as agent (in such capacity, together with its
successors and assigns in such capacity, the "Agent") for the Lenders.
W I T N E S S E T H:
WHEREAS, the Company, a direct Subsidiary of the Parent
Guarantor, is engaged, directly and through its various Subsidiaries and Joint
Venture Affiliates, in the business of the mining of bauxite, the refining of
bauxite into alumina, the production of primary aluminum and semi-fabricated
and fabricated aluminum products, and the sale of bauxite, alumina, primary
aluminum, and semi-fabricated and fabricated aluminum products to direct
customers and distributors; and
WHEREAS, the Company desires to obtain Commitments from the
Lenders pursuant to which Loans and other Credit Extensions, in a maximum
aggregate principal amount at any one time outstanding not to exceed
$250,000,000, will be made to or for the account of the Company from time to
time prior to the Revolving Commitment Termination Date; and
WHEREAS, each Lender, severally and for itself alone, is
willing, on the terms and subject to the conditions hereinafter set forth
(including Article VII), to extend its Commitments and make its Loans and other
Credit Extensions to or for the account of the Company; and
WHEREAS, the proceeds of any Loans made on the Initial
Borrowing Date will be applied by the Company, together with other funds, to
make payment in full of all Indebtedness of the Company identified in Item 1
("Indebtedness to be Paid") of the Disclosure Schedule; and
WHEREAS, in order to induce the Lenders to enter into this
Agreement and to extend their respective Commitments and make the Loans and
other Credit Extensions, the Parent Guarantor has agreed to unconditionally
guarantee all obligations of the Company hereunder and under the other Loan
Documents; and
WHEREAS, on the terms and subject to the conditions hereof, on
or prior to the Initial Borrowing Date, the following transactions shall occur
as provided below:
<PAGE> 10
(a) as security for the Company's Obligations, the
Company shall execute and deliver to the Agent, on behalf of the
Secured Lenders:
(i) the Company Security Agreement, granting to
the Agent, on behalf of the Secured Lenders, a security
interest in the Company's personal property described therein;
(ii) the Company Pledge Agreement, pledging to
the Agent, on behalf of the Secured Lenders;
(A) all of the issued and outstanding
shares of capital stock of each first-tier, Domestic
Subsidiary of the Company listed on Schedule I
hereto;
(B) the percentage of the issued and
outstanding shares of capital stock of each
first-tier, non-Domestic Subsidiary or Joint Venture
Affiliate of the Company listed on such Schedule I
set forth opposite the name of such Subsidiary or
Joint Venture Affiliate;
(C) the KT Note; and
(D) all other promissory notes or other
debt instruments held by the Company; and
(iii) the Company Mortgages and Company Deeds of
Trust, mortgaging to the Agent (or one or more trustees
therefor) and granting to the Agent (or one or more trustees
therefor), on behalf of the Secured Lenders, a security
interest in all real property of the Company listed on
Schedule II hereto.
(b) as security for the Parent Guarantor's Obligations
under the Parent Guaranty, the Parent Guarantor shall execute and
deliver to the Agent, on behalf of the Secured Lenders:
(i) the Parent Security Agreement, granting to
the Agent, on behalf of the Secured Lenders, a security
interest in the Parent Guarantor's personal property described
therein; and
(ii) the Parent Pledge Agreement, pledging to
the Agent, on behalf of the Secured Lenders:
(A) all of the issued and outstanding
shares of capital stock of the Company held by the
Parent Guarantor; and
2
<PAGE> 11
(B) all promissory notes or other debt
instruments (other than the Equity Proceeds Notes)
held by the Parent Guarantor;
(c) each Subsidiary of the Company listed on Schedule III
hereto shall execute and deliver to the Agent, the Subsidiary
Guaranty, guaranteeing the Company's Obligations and each other such
Subsidiary's Obligations under the Subsidiary Guaranty;
(d) as security for such Subsidiary's Obligations under
the Subsidiary Guaranty, each Subsidiary of the Company listed on
Schedule IV hereto shall execute and deliver to the Agent, on behalf
of the Secured Lenders, the Subsidiary Pledge Agreement, pledging to
the Agent, on behalf of the Secured Lenders:
(i) all of the issued and outstanding shares of
capital stock of each first-tier, Domestic Subsidiary of such
Subsidiary listed on Schedule V hereto;
(ii) the percentage of the issued and
outstanding shares of capital stock of each first-tier,
non-Domestic Subsidiary of such Subsidiary listed on such
Schedule V set forth opposite the name of such Subsidiary;
(iii) any Intercompany Demand Note held by such
Subsidiary listed on Schedule VI hereto; and
(iv) all other promissory notes or other debt
instruments held by such Subsidiary;
(e) as security for such Subsidiary's Obligations under
the Subsidiary Guaranty, each Subsidiary of the Company listed on
Schedule IV hereto shall execute and deliver to the Agent the
Subsidiary Security Agreement, granting to the Agent, on behalf of the
Secured Lenders, a security interest in such Subsidiary's personal
property described therein; and
(f) each Subsidiary of the Company listed on Schedule VII
hereto which is not otherwise a party to the Subsidiary Pledge
Agreement shall execute and deliver to the Agent, on behalf of the
Secured Lenders, the Intercompany Note Pledge Agreement, pledging to
the Agent, on behalf of the Secured Lenders, any Intercompany Demand
Note held by such Subsidiary listed on Schedule VIII hereto;
NOW, THEREFORE, the parties hereto agree as follows:
3
<PAGE> 12
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms when used
in this Agreement, including its preamble and recitals, shall, except where the
context otherwise requires, have the following meanings (such meanings to be
equally applicable to the singular and plural forms thereof):
"Account" means any present or future right to payment for goods sold
or leased or for services rendered, whether due or to become due, whether now
existing or hereafter arising and whether or not it has been earned by
performance.
"Account Debtor" means each Person obligated in any way on an Account.
"Adjusted Capital Expenditures" means, for any period,
(a) Capital Expenditures for such period (exclusive of
capitalized interest)
minus
(b) that portion of Capital Expenditures for such period
(exclusive of capitalized interest) attributable to any Subsidiary of
the Company which is equal to (i) the proportionate direct or indirect
ownership of Persons other than the Company and its Subsidiaries of
the voting stock of, or partnership interest in, such Subsidiary or
(ii) if the economic burden of such Capital Expenditures is borne or
to be borne by minority owners of such Subsidiary (other than the
Company and its Subsidiaries) in a proportion other than the
proportion of their direct or indirect ownership of the voting stock
of, or partnership interest in, such Subsidiary, the proportionate
share of the economic burden of such Capital Expenditures borne or to
be borne by such minority owners.
"Affected Lender" is defined in Section 4.11(b).
"Affiliate" means, with respect to any Person, any other Person which,
directly or indirectly, controls, is controlled by, or is under common control
with such Person (excluding any trustee under, or any committee with
responsibility for administering, any Plan). A Person shall be deemed to be
"controlled by" any other Person if such other Person possesses, directly or
indirectly, power to
(a) vote 20% or more of the securities (on a fully
diluted basis) having ordinary voting power for the election of a
majority of directors or managing general partners;
4
<PAGE> 13
(b) vote sufficient securities of any class to control
the election of one or more directors or managing general partners; or
(c) direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise.
"Agent" is defined in the preamble.
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"AJI" means Alpart Jamaica Inc., a Delaware corporation.
"ALPART" means Alumina Partners of Jamaica, a Delaware general
partnership.
"Anglesey" means Anglesey Aluminum Limited, a United Kingdom
corporation.
"Asset Disposition" means any sale, transfer, lease which is accounted
for as a sale under GAAP, contribution, conveyance, or other disposition (other
than the grant of a Lien), in any case made after the Initial Borrowing Date,
of any assets of the Company or any of its Subsidiaries to any Person.
"Assignee Agreement to be Bound" means an Assignee Agreement to be
Bound in substantially the form of Exhibit M attached hereto.
"Assignee Lender" is defined in Section 12.11.1.
"Authorized Officer" means, with respect to any Obligor, those of its
officers whose signatures and incumbency shall have been certified to the Agent
and the Lenders pursuant to Section 7.1.1(a).
"Bank of America" means Bank of America National Trust and Savings
Association, a national banking association, in its individual capacity.
"Bank of America Rate" is defined in "Reference Rate".
"Borrowing" means the Revolving Loans made by all Lenders on the same
Business Day pursuant to the same Borrowing Request in accordance with Section
2.1.1 or the Swingline Loan made by Business Credit pursuant to a Borrowing
Request in accordance with Section 2.1.3.
5
<PAGE> 14
"Borrowing Base" means, at any time,
(a) an amount equal to 85% of the Net Amount of Eligible
Accounts as at such time
plus
(b) the lesser of (i) $175,000,000 and (ii) 65% of all
Eligible Inventory as at such time
minus
(c) all reserves, including any reserves for sales, excise or
similar taxes in respect of Eligible Accounts and any reserves for
rental expenses, processing fees or other expenses relating to
Eligible Inventory located at premises not owned by the Company or
KAII, which the Agent, after consultation with the Company, in its
commercially reasonable discretion deems necessary or desirable to
maintain with respect to the Company's account, including any amounts
which the Agent may be obligated to pay in the future for the account
of the Company;
provided, however, that (i) the Net Amount of Eligible Accounts of KAII
included in the Borrowing Base shall at no time exceed 20% of the Net Amount of
Eligible Accounts included in the Borrowing Base, (ii) the Net Amount of
Eligible Accounts of the Company owed by Foreign Account Debtors included in
the Borrowing Base shall at no time exceed 5% of the Net Amount of Eligible
Accounts of the Company included in the Borrowing Base and (iii) Convertor
Inventory that is located on the premises of a third party included in the
Borrowing Base shall at no time exceed 5% of Eligible Inventory included in the
Borrowing Base; and provided further that the limitation set forth in clause
(i) may, to the extent approved by the Agent in its sole discretion, be
increased by the amount, expressed in dollars, of any unused amount of the Net
Amount of Eligible Accounts of the Company owed by Foreign Account Debtors
permitted to be included in the Borrowing Base under clause (ii).
"Borrowing Base Calculation Date" means, with respect to the delivery
date of any Borrowing Base Certificate, the last day of the preceding month or
the last day of the next preceding month, as the case may be.
"Borrowing Base Certificate" means a certificate duly executed by a
Financial Authorized Officer of the Company in substantially the form of
Exhibit D-1 attached hereto.
"Borrowing Request" means a loan request and certificate duly executed
by an Authorized Officer of the Company, (a) in respect of any Borrowing of
Revolving Loans, in substantially the form of Exhibit A-1(a) attached hereto,
or (b) in respect of any
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<PAGE> 15
Borrowing of Swingline Loans, in substantially the form of Exhibit A-1(b)
attached hereto.
"Business Credit" means BankAmerica Business Credit, Inc., a Delaware
corporation.
"Business Day" means any day which is
(a) neither a Saturday or Sunday nor a legal holiday on which
banks are authorized or required to be closed in New York, New York or in San
Francisco, California; and
(b) relative to the making, continuing, converting, prepaying, or
repaying of any LIBO Rate Loans, also a day on which dealings in Dollars are
carried on in the London interbank market.
"Canadian Subsidiaries" means Kaiser Aluminum & Chemical Canada
Investment Limited, an Ontario corporation, and Kaiser Canada.
"Capital Expenditures" means, for any period, the aggregate
expenditures of the Company and its Subsidiaries on a consolidated basis for
fixed or capital assets made during such period which, in accordance with GAAP,
would be classified as capital expenditures (including the aggregate amount of
all Capitalized Lease Liabilities incurred during such period); provided,
however, that any repurchase or leaseback by the Company of a facility sold by
the Company in connection with the issuance of industrial revenue bonds by a
state, municipality or other subdivision of the United States of America or any
department, agency, public corporation or other instrumentality thereof shall
not in any event be deemed to be a Capital Expenditure.
"Capitalized Lease Liabilities" means all monetary obligations of the
Company or any of its Subsidiaries under any leasing or similar arrangement
which, in accordance with GAAP, would be classified as a capitalized lease,
and, for purposes of this Agreement and each other Loan Document, the amount of
such obligations shall be the capitalized amount thereof, determined in
accordance with GAAP, and the stated maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness, maturing not more than
one year after such time, issued or guaranteed by the United States
Government;
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<PAGE> 16
(b) any certificate of deposit or bankers' acceptance,
maturing not more than one year after such time, which is issued or
accepted by either
(i) a commercial banking institution that is a
member of the Federal Reserve System and has a combined
capital and surplus and undivided profits of not less than
$500,000,000;
(ii) any Lender; or
(iii) with respect to certificates of deposit that
do not exceed $10,000,000 in the aggregate outstanding at any
time, any other commercial banking institution;
(c) commercial paper rated A-1 or better by Standard &
Poor's Corporation or Prime-1 or better by Moody's Investors Service,
Inc.;
(d) repurchase agreements with respect to any of the
foregoing, with any bank or trust company referred to above in clause
(b) or with any nationally recognized securities dealer having total
capital and surplus and undivided profits of not less than
$500,000,000; or
(e) investments in the Goldman, Sachs & Co. Institutional
Liquid Assets fund and other money market funds which have
substantially similar investment policies.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended or otherwise modified from time to time.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means the occurrence of any of the following
events: (a) MAXXAM not owning (other than by reason of the existence of a Lien
or other encumbrance but including by reason of the foreclosure of or other
realization upon a Lien or other encumbrance) direct or indirect sole
beneficial ownership (as defined under Regulation 13d-3 of the Securities
Exchange Act of 1934 as in effect on the date of this Agreement) of at least
51% of the total common equity, on a fully diluted basis, of the Parent
Guarantor or the Company; or (b) MAXXAM, through direct representation or
through persons nominated by it, not controlling a majority of the Board of
Directors of the Parent Guarantor or the Company necessary to effectuate any
actions by the Board of Directors of the Parent Guarantor or the Company; or
(c) any person or group (as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934 as in effect on the date of this Agreement), directly or
indirectly, owning more of the total voting power entitled to vote generally in
the election of
8
<PAGE> 17
directors of the Parent Guarantor or the Company than MAXXAM; or (d) Charles
Hurwitz, members of his immediate family and trusts for the benefit thereof
(each such person, including Mr. Hurwitz and any trustee of such trusts, being
herein called a "Beneficiary") not having (other than by reason of death,
incapacity, bankruptcy, reorganization, insolvency or similar proceeding or in
connection with the resolution of any litigation outstanding as of the date of
the Subordinated Indenture or any similar litigation or the existence of a Lien
but including by reason of the foreclosure of or other realization upon a Lien
or other encumbrance) direct or indirect sole beneficial ownership (as defined
under Regulation 13d-3 of the Securities Exchange Act of 1934 as in effect on
the date of this Agreement) of at least the Minimum Percentage (defined below)
of the total equity of MAXXAM, other than as a result of new issuances of
equity securities by MAXXAM to third parties (other than to a third party who
is not a Beneficiary and who controls MAXXAM). "Minimum Percentage" means that
percentage obtained by multiplying (i) the percentage of the total equity of
MAXXAM, directly or indirectly, beneficially owned by the Beneficiaries as of
the date of the Subordinated Indenture and (ii) 80%.
"Code" means the Internal Revenue Code of 1986, as amended, reformed,
or otherwise modified from time to time.
"Collateral" means all Property and rights on or in which a Lien is
granted to the Agent (or to any agent, trustee, or other Person acting on the
Agent's behalf) pursuant to this Agreement, any of the Collateral Documents, or
any other Instruments provided for herein or therein or delivered or to be
delivered hereunder or thereunder or in connection herewith or therewith, as
any of the foregoing may be amended, supplemented, restated, or otherwise
modified from time to time in accordance with the provisions hereof or thereof.
"Collateral Documents" means, collectively, the Parent Collateral
Documents, the Company Collateral Documents, the Subsidiary Collateral
Documents, the Collection Bank Agreements, the Concentration Bank Agreement,
and each other Instrument or document pursuant to which a Lien is granted to
the Agent (or perfected in favor of the Agent) (or to or in favor of any agent,
trustee, or other Person acting on the Agent's behalf) as security for any of
the Obligations, as any of the foregoing may be amended, supplemented,
restated, or otherwise modified from time to time in accordance with the
provisions hereof or thereof.
"Collection Bank" means any bank at which the Company maintains a
collection or lockbox account or other similar collection arrangement.
"Collection Bank Agreement" means any agreement between the Company,
the Agent, and any Collection Bank and delivered pursuant to Section 7.1.19, in
substantially the form of Exhibit G attached hereto, as any such agreement may
be amended,
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<PAGE> 18
supplemented, restated, or otherwise modified from time to time in accordance
with the provisions hereof or thereof.
"Commitment" means, as the context may require, a Lender's Revolving
Commitment, or Business Credit's Swingline Commitment.
"Commitment Termination Event" means
(a) any Event of Default described in clauses (a) through
(e) of Section 10.1.10 with respect to the Company shall have
occurred; or
(b) any other Event of Default shall have occurred and be
continuing and the Agent, acting at the direction of the Required
Lenders, gives written notice to the Company pursuant to clause (a) of
Section 10.3 that the Commitments have been terminated.
"Company" is defined in the preamble.
"Company Collateral Documents" means the Company Pledge Agreement, the
Company Security Agreement, the Company Patent Security Agreement, the Company
Trademark Security Agreement, each Company Deed of Trust, each Company
Mortgage, and the Louisiana Security Documents.
"Company Deed of Trust" means any deed of trust executed and delivered
by the Company pursuant to Section 7.1.8, each in substantially the form of
Exhibit I-1 attached hereto, as amended, supplemented, restated, or otherwise
modified from time to time in accordance with the provisions hereof or thereof.
"Company Mortgage" means any mortgage executed and delivered by the
Company pursuant to Section 7.1.8, each in substantially the form of Exhibit
I-2 attached hereto, as amended, supplemented, restated, or otherwise modified
from time to time in accordance with the provisions hereof or thereof.
"Company Patent Security Agreement" means the patent security
agreement executed and delivered by the Company pursuant to Section 7.1.7, in
substantially the form of Exhibit F-3 attached hereto, as amended,
supplemented, restated, or otherwise modified from time to time in accordance
with the provisions hereof or thereof.
"Company Pledge Agreement" means the pledge agreement executed and
delivered by the Company pursuant to Section 7.1.5, in substantially the form
of Exhibit F-1 attached hereto, as amended, supplemented, restated, or
otherwise modified from time to time in accordance with the provisions hereof
or thereof.
"Company Security Agreement" means the security agreement executed and
delivered by the Company pursuant to Section 7.1.6, in substantially the form
of Exhibit F-2 attached hereto, as
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<PAGE> 19
amended, supplemented, restated, or otherwise modified from time to time in
accordance with the provisions hereof or thereof.
"Company Trademark Security Agreement" means the trademark security
agreement executed and delivered by the Company pursuant to Section 7.1.7, in
substantially the form of Exhibit F-4 attached hereto, as amended,
supplemented, restated, or otherwise modified from time to time in accordance
with the provisions hereof or thereof.
"Compliance Certificate" means a certificate of the Company duly
executed by a Financial Authorized Officer of the Company, in substantially the
form of Exhibit D-2 attached hereto, with such changes as the Agent and the
Company may from time to time agree upon for purposes of monitoring the
Company's compliance herewith.
"Concentration Account" is defined in the Concentration Bank Agreement.
"Concentration Bank Agreement" means an agreement between the Company,
the Agent, and Bank of America, as concentration bank, and delivered pursuant
to Section 7.1.19, in substantially the form of Exhibit H attached hereto, as
amended, supplemented, restated, or otherwise modified from time to time in
accordance with the provisions hereof or thereof.
"Confidential Information" is defined in clause (c) of Section 9.1.5.
"Contingent Liability" means any agreement, undertaking, or
arrangement by which any Person guarantees, endorses, agrees to purchase, or
otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a
creditor against loss) the debt, obligation, or other liability of any other
Person (other than by endorsements of Instruments in the course of collection),
or guarantees the payment of dividends or other distributions upon the shares
of any other Person. The amount of any Person's obligation under any
Contingent Liability shall (subject to any limitation set forth therein) be
deemed to be the outstanding principal amount (or maximum outstanding principal
amount, if larger) of the debt, obligation, or other liability guaranteed
thereby.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Company, in substantially the form of Exhibit A-2 attached hereto.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control
11
<PAGE> 20
which, together with the Company, are treated as a single employer under
Section 414(b) or 414(c) of the Code or Section 4001 of ERISA.
"Credit Extension" means
(a) any disbursement of Revolving Loans by the Lenders;
(b) any disbursement of Swingline Loans by Business
Credit; or
(c) any issuance or extension by an Issuer Bank of a
Letter of Credit.
"Convertor Inventory" means raw materials, work-in-process or other
goods delivered to a third party pursuant to a bailment arrangement with such
third party under which such Inventory is to be processed, improved or
otherwise altered by such third party.
"Credit Request" means any Borrowing Request or Revolving L/C Request.
"Deconsolidation Tax Allocation Agreement" means the Tax Allocation
Agreement dated June 30, 1993 between the Company and the Parent Guarantor a
copy of which has been delivered to the Agent and the Lenders prior to the date
hereof, as amended from time to time with the written consent of the Agent.
"Default" means any Event of Default or any condition, occurrence, or
event which, after notice or lapse of time or both, would constitute an Event
of Default.
"Disbursement" means any payment or disbursement made under a Letter
of Credit by the Issuer Bank thereof to the beneficiary thereunder.
"Disbursement Date" is defined in clause (a) of Section 5.5.
"Disclosure Schedule" means the Disclosure Schedule dated as of
February 15, 1994 delivered by the Company to the Agent and each Lender prior
to the execution and delivery of this Agreement, as it may be amended,
supplemented, or otherwise modified from time to time by the Company with the
prior written consent of the Agent.
"Distributions" is defined in clause (a) of Section 9.2.6.
"Dollar" and the sign "$" mean lawful money of the United States.
"Domestic Office" means, with respect to any Lender, the office of
such Lender designated as such below its signature
12
<PAGE> 21
hereto, or designated in the Assignee Agreement to be Bound pursuant to which
such Lender became a party hereto, or such other office of a Lender (or any
successor or assign of such Lender) within the United States as may be
designated from time to time by written notice from such Lender, as the case
may be, to each other Person party hereto.
"Domestic Subsidiary" means a Subsidiary that is created or organized
in or under the laws of the United States, any state thereof, or the District
of Columbia.
"EBITDA" means, for any Fiscal Quarter, an amount equal to:
(a) Net Income for such Fiscal Quarter (including
extraordinary gains and extraordinary losses, in each case as
determined in accordance with GAAP);
plus
(b) the aggregate amount deducted, in determining Net
Income for such Fiscal Quarter, in respect of all foreign, federal,
state, and local income taxes of the Company and its Subsidiaries,
calculated on a consolidated basis in accordance with GAAP;
plus
(c) the aggregate amount of interest expense (excluding
amortization of deferred financing costs and, to the extent not paid
in cash, interest on the PIK Note and the Equity Proceeds Notes) of
the Company and its Subsidiaries for such Fiscal Quarter, calculated
on a consolidated basis in accordance with GAAP,minus the amount of
interest income of the Company and its Subsidiaries which was included
in the calculation of Net Income for such Fiscal Quarter in accordance
with GAAP;
plus
(d) the aggregate amount of depreciation expense of the
Company and its Subsidiaries for such Fiscal Quarter, calculated on a
consolidated basis in accordance with GAAP;
plus
(e) the aggregate amount of amortization expense of the
Company and its Subsidiaries for such Fiscal Quarter, calculated on a
consolidated basis in accordance with GAAP;
plus
(f) the aggregate amount of the noncash portion of the
FAS 106 charge of the Company and its Subsidiaries calculated on a
consolidated basis in accordance with GAAP;
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<PAGE> 22
minus
(g) that portion of the amounts set forth in clauses (b),
(c), (d), (e), and (f) above attributable to (i) the proportionate
direct or indirect ownership of Persons other than the Company and its
Subsidiaries of the voting stock of, or partnership interest in, any
Subsidiary or (ii) if the economic burden of the amounts set forth
inclauses (b), (c), (d), (e) and (f) above is borne or to be borne by
minority owners of such Subsidiary (other than the Company and its
Subsidiaries) in a proportion other than the proportion of their
direct or indirect ownership of the voting stock of, or partnership
interest in, such Subsidiary, the proportionate share of the economic
burden of such amounts borne or to be borne by such minority owners.
"Effective Date" is defined in Section 12.8.
"Eligible Account" means, at any time, all Accounts of the Company and
KAII that are not ineligible as the basis for Credit Extensions, based on the
following criteria and on such other criteria as the Agent may, after
consultation with the Company, from time to time establish in its commercially
reasonable discretion. Without intending to limit the Agent's discretion to
establish other criteria of eligibility pursuant to the preceding sentence,
Eligible Accounts shall not include any Account:
(a) with respect to which any of the representations,
warranties, covenants, and agreements contained in Section ___ of the
Company Security Agreement or Section ____ of the Subsidiary Security
Agreement are not or have ceased to be complete and correct or have
been breached;
(b) which represents a Progress Billing other than
Progress Billings in an amount not to exceed $5,000,000 in the
aggregate;
(c) which represents a sale on a bill-and-hold,
guaranteed sale, sale and return, sale on approval, consignment,
repurchase or return basis, other than, in each case, a Product Swap
or an Account that represents the balance of an Account Debtor's
minimum annual purchase commitment to the Company provided that the
documents relating to such Account provide that title to the Inventory
purchased by the Account Debtor and held by the Company has passed to
the Account Debtor;
(d) which is evidenced by a promissory note or other
instrument or by chattel paper;
(e) with respect to which more than 90 days, in the case
of an Account as to which National Southwire is the Account Debtor,
have elapsed since the date of the original
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<PAGE> 23
invoice therefor or with respect to which more than 65 days, in the
case of all other Accounts, have elapsed since the date of the
original invoice therefor;
(f) which is not evidenced by an invoice rendered to the
Account Debtor or which is evidenced by an invoice dated later than
the date of shipment to the Account Debtor or more than 60 days after
the date of performance of the relevant service for the Account
Debtor;
(g) owed by an Account Debtor which is a director,
officer, shareholder, employee or Affiliate of the Company or KAII;
(h) if the aggregate dollar amount of all Accounts owed
by the Account Debtor thereon exceeds 5% (15% in respect of Accounts
owed by the Account Debtors identified in Item 12 ("Major Account
Debtors") of the Disclosure Schedule) of the aggregate amount of all
Accounts at such time, but only to the extent of such excess;
(i) which is owed by an Account Debtor which, at the time
of any determination of Eligible Accounts, owes any amount with
respect to any Account that has been outstanding more than 60 days
past the due date with respect thereto, other than amounts which in
total do not exceed 20% of the aggregate of all Accounts owing by such
Account Debtor and which are the subject of bona fide disputes between
such Account Debtor and the Company or KAII;
(j) which are owed by the government of the United States
of America, or any department, agency, public corporation, or other
instrumentality thereof, unless the Federal Assignment of Claims Act
of 1940, as amended, and any other steps necessary to perfect the
Agent's Security Interest therein, have been complied with to the
Agent's reasonable satisfaction with respect to such Account;
(k) which is owed by any state, municipality, or other
political subdivision of the United States of America, or any
department, agency, public corporation, or other instrumentality
thereof and as to which the Agent determines that the Agent's Security
Interest therein is not or cannot be perfected;
(l) except as provided in clause (j) above, as to which
either the perfection, enforceability, or validity of the Security
Interest in such Account, or the Agent's right or ability to obtain
direct payment to the Agent of the Proceeds of such Account, is
governed by any federal, state, or local statutory requirements other
than those of the Uniform Commercial Code;
15
<PAGE> 24
(m) with respect to which, in whole or in part, a check,
promissory note, draft, trade acceptance or other instrument for the
payment of money has been received, presented for payment and returned
uncollected for any reason;
(n) which is owed by an Account Debtor to which the
Company or KAII is indebted in any way unless the Account Debtor has
entered into an agreement acceptable to the Agent in its commercially
reasonable judgment to waive setoff rights; or if the Account Debtor
thereon has disputed liability, asserted a right of setoff or made any
claim with respect to any other Account due from such Account Debtor;
but in each such case only to the extent of such indebtedness, setoff,
dispute, or claim;
(o) as to which any one or more of the following events
has occurred with respect to the Account Debtor on such Account: death
or judicial declaration of incompetency of an Account Debtor who is an
individual; the filing by or against the Account Debtor of a request
or petition in a proceeding that is then pending for liquidation,
reorganization, arrangement, adjustment of debts, adjudication as a
bankrupt, winding-up, or other relief under the bankruptcy,
insolvency, or similar laws of the United States, any state or
territory thereof, or any foreign jurisdiction, now or hereafter in
effect; the making of any general assignment by the Account Debtor for
the benefit of creditors in a proceeding that is then pending; the
appointment of a receiver or trustee for the Account Debtor or for any
of the assets of the Account Debtor, including the appointment of or
taking possession by a "custodian," as defined in the Federal
Bankruptcy Code in a proceeding that is then pending; the institution
by or against the Account Debtor of any other type of insolvency
proceeding (under the bankruptcy laws of the United States or
otherwise) or of any formal or informal proceeding for the dissolution
or liquidation of, settlement of claims against, or winding up of
affairs of, the Account Debtor in a proceeding that is then pending;
the nonpayment generally by the Account Debtor of its debts as they
become due; or the cessation of the business of the Account Debtor as
a going concern;
(p) if the Agent believes in its commercially reasonable
judgment that the prospect of collection of such Account is impaired
or that the Account may not be paid by reason of the Account Debtor's
financial inability to pay;
(q) which is owed by an Account Debtor which the Agent,
in its commercially reasonable judgment, otherwise deems to be
uncreditworthy;
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<PAGE> 25
(r) which is owed by a Foreign Account Debtor; except to
the extent that such Account (i) is secured or payable by a letter of
credit or acceptance, (ii) insured under foreign credit insurance, on
terms and conditions satisfactory to the Agent in its commercially
reasonable discretion, or (iii) is owed by an Account Debtor
identified in Item 13 of the Disclosure Schedule ("Major Foreign
Account Debtor") unless the Agent, in its commercially reasonable
judgment, otherwise deems such Account Debtor to be creditworthy;
(s) which is not payable in the United States other than
Accounts in an aggregate amount not to exceed $2,000,000 payable in
the United Kingdom;
(t) which is not payable in Dollars, other than Accounts
in an aggregate amount not to exceed $2,000,000 payable in Pounds
Sterling, unless the Company or KAII, as the case may be, has executed
an appropriate Hedging Agreement acceptable to the Agent with respect
thereto; and
(u) which has arisen from Inventory which, at the time of
the determination of Eligible Accounts, constituted Eligible
Inventory.
"Eligible Assignee" is defined in Section 4.11(b).
"Eligible Inventory" means, at any time, any Inventory of the Company
arising in the ordinary course of the Company's business that:
(a) is not, in the reasonable opinion of the Agent,
obsolete or unmerchantable;
(b) is located in the United States or in route to the
United States; provided that such Inventory is insured in accordance
with the Company's normal practice and to the reasonable satisfaction
of the Agent and title to such Inventory has passed to the Company;
(c) upon which the Agent has a first priority perfected
Security Interest;
(d) is not stores Inventory, Tolling Inventory, repair
and maintenance Inventory, or Inventory delivered to the Company on
consignment;
(e) is not evidenced by any warehouse receipts, bills of
lading, or other documents of title, unless such receipts, bills of
lading, or documents have been delivered to the Agent;
(f) is not ineligible as the basis for Credit Extensions
based on such other criteria as the Agent may,
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<PAGE> 26
after consultation with the Company, from time to time establish in
its commercially reasonable discretion; and
(g) has not given rise to any Account which, at the time
of the determination of Eligible Inventory, constituted an Eligible
Account.
"Environmental Laws" means all applicable federal, state, or local
statutes, laws, ordinances, codes, rules, regulations, requirements, and
guidelines (including consent decrees and administrative orders to which the
Company, any of its Subsidiaries, or any Obligor is subject) relating to
protection of the environment or human health or imposing liability or
standards of conduct concerning any Hazardous Material, as any of the foregoing
may be from time to time amended or supplemented.
"Environmental Reports" means the "Environmental Assessments" report,
dated ______________, 1993, prepared by Kennedy/Jenks/Chilton, copies of which
have been delivered to the Agent and each Lender prior to the date hereof.
"Equity Proceeds Notes" means the Amended and Restated Senior
Subordinated Intercompany Note dated June 30, 1993, substantially in the form
of Exhibit P-1 attached hereto, the Senior Subordinated Intercompany Note,
substantially in the form of Exhibit P-2 attached hereto, or one or more Senior
Subordinated Intercompany Notes issued by the Company on or after the Initial
Borrowing Date, in substantially the form of Exhibit P-3 attached hereto, in
any case in an aggregate principal amount not to exceed 50% of the net proceeds
of all offerings of securities of the Parent Guarantor consummated on or after
the Initial Borrowing Date if the net proceeds of such offerings are loaned to,
contributed to, or used to purchase the stock of, the Company, as each such
promissory note may be amended or otherwise modified from time to time in
accordance with the provisions hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"Event of Cash Dominion" means (a) the occurrence of any of the
following events and the delivery by the Agent of written notice thereof to the
Company (i) the Revolving Commitment Availability is less than $40,000,000 at
any time or (ii) the Revolving Commitment Availability is less than $50,000,000
for three consecutive Business Days or (b) the occurrence of a Default and the
continuance of such Event of Default for five consecutive days after delivery
by the Agent of written notice thereof to the Company. An Event of Cash
Dominion shall terminate, provided no Default shall have occurred and be
continuing, if the Revolving Commitment Availability is greater
18
<PAGE> 27
than $50,000,000 for each day during a period of three consecutive months and
the Agent delivers written notice of such termination to the Company.
"Event of Default" is defined in Section 10.1.
"Executive Officers" means, with respect to any corporation, such
corporation's chairman, president, chief financial officer, treasurer, any vice
president, any attorney in the office of the Company's general counsel, and any
officer who performs a similar policy- making function for such corporation.
"Existing Letters of Credit" means the letters of credit listed on
Schedule IX hereto.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal (for each day during such period) to
(a) the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published for such day (or, if
such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York; or
(b) if such rate is not so published for any day which is
a Business Day, the average of the quotations for such day on such
transactions received by Bank of America from three federal funds
brokers of recognized standing selected by it.
"Fee Letter" is defined in Section 3.5.3.
"Financial Authorized Officer" means, with respect to any Obligor,
those of its Authorized Officers who occupy the offices of chief financial
officer, chief accounting officer, controller, assistant controller, treasurer,
or assistant treasurer.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months
ending on the last day of December; references to a Fiscal Year with a number
corresponding to any calendar year (e.g., the "1994 Fiscal Year") refer to the
Fiscal Year ending on the last day of December of such calendar year. The
current fiscal year of the Company will end on December 31, 1994.
"Fixed Charge Coverage Ratio" means, as of any date of determination,
the ratio of (a) the aggregate amount of EBITDA for the four Fiscal Quarters
immediately prior to such date to (b) the aggregate Fixed Charges for the
Fiscal Quarter in which such date occurs and the three Fiscal Quarters
immediately subsequent to such Fiscal Quarter (based upon the pro forma amount
of Indebtedness to be outstanding on such date), assuming
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for the purposes of this measurement that the interest rates on which floating
interest rate obligations are based equal such rates in effect on the date of
determination; provided, however, that if the Company or any of its
Subsidiaries has incurred Hedging Obligations which would have the effect of
changing the interest rate on any Indebtedness for such four Fiscal Quarter
period (or any portion thereof), the resulting rate shall be used for such four
Fiscal Quarter period or portion thereof; and provided, further, that any Fixed
Charges with respect to Indebtedness incurred during the Fiscal Quarter in
which the date of determination occurs shall be calculated as if such
Indebtedness was so incurred on the first day of the Fiscal Quarter in which
the date of determination occurs.
"Fixed Charges" means (without duplication), for any period, the sum
of:
(a) the interest expense of the Company and its
Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP (less, to the extent included therein, (i) the
portion of the interest expense required to be funded or economically
borne by the Company's minority partners in the Company's joint
ventures,
(b) all fees, commissions, discounts and other charges of
the Company and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP, with respect to letters of
credit and bankers' acceptances and the costs (net of benefits)
associated with Hedging Obligations,
(c) the aggregate amount of dividends paid or other
similar distributions made by the Company and its Subsidiaries during
such period with respect to preferred stock (including preference
stock) of the Company or its Subsidiaries determined on a consolidated
basis in accordance with GAAP, and
(d) amortization or write-off of debt discount in
connection with any Indebtedness of the Company and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP.
"Foreign Account Debtor" means an Account Debtor which (i) does not
maintain its chief executive office and principal place of business in the
United States; or (ii) is not organized under the laws of the United States or
any state thereof; or (iii) is the government of any foreign country or
sovereign state, or of any state, province, municipality, or other political
subdivision thereof, or of any department, agency, public corporation, or other
instrumentality thereof.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
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"Fundamental Loan Documents" means this Agreement, the Company
Collateral Documents, the Subsidiary Guaranty, the Subsidiary Collateral
Documents, the Parent Guaranty and the Parent Collateral Documents.
"Furukawa" means Furukawa Kaiser Forged Products Company, a
corporation organized under the laws of Japan.
"GAAP" means generally accepted accounting principles as set forth in
the opinions and pronouncements of the Securities and Exchange Commission and
the Accounting Principles Board of the American Institute of Certified Public
Accountants and the statements and pronouncements of the Financial Accounting
Standards Board and in such other statements and pronouncements by such other
Person as may be approved by a significant segment of the accounting profession
and concurred in by the independent certified public accountants certifying the
relevant audited financial statement.
"Gross Proceeds" means, with respect to any sale, transfer, lease
which is accounted for as a sale under GAAP, contribution, conveyance, or other
disposition (other than the grant of a Lien) (collectively, for purposes of
this definition, a "disposition"), in any case made after the Initial Borrowing
Date, of any assets of the Company or any of its Subsidiaries to any Person (in
a single transaction or related series of transactions), the sum of (a) the
gross cash proceeds received or to be received by the Company and its
Subsidiaries from such disposition, (b) the face amount of any promissory note
or deferred payment obligations or other security to be taken by the Company
and its Subsidiaries in connection with such disposition, (c) the aggregate
amount of Indebtedness of the Company and its Subsidiaries which is to be
assumed by the purchaser or transferee of any assets which are the subject of
such disposition, and (d) the fair market value (as determined in good faith by
the Board of Directors of the Company) of all other Property (except
indemnities and the assumption of unmatured contractual obligations) of any
kind and nature received or receivable by the Company and its Subsidiaries in
exchange for such assets.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous,
or toxic chemical, material, or substance regulated under or within
the meaning of any other Environmental Law.
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"Hedging Agreement" means (a) any interest rate swap, cap, or collar
agreement or similar arrangement entered into by the Company and any financial
institution to protect the Company against interest rate risk and (b) any
agreement or arrangement entered into by the Company and any financial
institution to protect the Company against fluctuations in currency exchange
rates.
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under any Hedging Agreement or other interest rate
or currency swap agreements, interest rate or currency cap agreements, and
interest rate or currency collar agreements, and all other agreements or
arrangements designed to protect such Person against interest rate risk or
fluctuations in currency exchange rates.
"herein", "hereof", "hereto", "hereunder", and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph, or provision of this Agreement or such other Loan Document.
"Highest Lawful Rate" is defined in clause (b) of Section 3.4.6.
"Impermissible Qualification" means, with respect to the opinion or
certification of any independent public accountant as to any financial
statement of any Obligor, any qualification, emphasis point, or exception to
such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
matters relevant to such financial statement; or
(c) which relates to the treatment or classification of
any item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause such Obligor to be in default of any of its
obligations underSection 9.2.4.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of ejusdem generis
shall not be applicable to limit a general statement which is followed by or
referable to an enumeration of specific matters to matters similar to the
matters specifically mentioned.
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"Indebtedness" means, with respect to any Person, without duplication:
(a) all obligations of such Person in respect of
principal for borrowed money, all obligations of such Person in
respect of principal (including the principal amount of any obligation
incurred in lieu of the cash payment of interest) evidenced by bonds,
debentures, notes, or other similar instruments and all obligations of
such Person in respect of interest on borrowed money or obligations
evidenced by bonds, debentures, notes, or other similar instruments to
the extent accrued and unpaid for a period exceeding seven months;
(b) all obligations, contingent or otherwise, relative to
the face or stated amount (as reduced from time to time) of all
letters of credit (including the Letters of Credit), whether or not
drawn, and bankers' acceptances issued and outstanding for the account
of such Person;
(c) all obligations of such Person as lessee under leases
which have been or should be, in accordance with GAAP, recorded as
Capitalized Lease Liabilities;
(d) net liabilities of such Person in respect of Hedging
Obligations which, in accordance with GAAP, would be included as
liabilities on the liability side of the balance sheet of such Person
as of the date at which Indebtedness is to be determined;
(e) all obligations of such Person to pay the deferred
purchase price of Property (except trade accounts payable and other
current liabilities arising in the ordinary course of business);
(f) all obligations listed in clauses (a) through (e)
secured by a Lien (other than a Lien on any assets of KAAC or any of
its Subsidiaries securing the obligations of QAL) on Property owned or
being purchased by such Person (including Indebtedness arising under
conditional sales or other title retention agreements), whether or not
such Indebtedness shall have been assumed by such Person or is limited
in recourse;
(g) any Redeemable Stock issued by such Person;
(h) all Contingent Liabilities of such Person in respect
of any Indebtedness of any other Person; and
(i) all advance payments to such Person of more than
$5,000,000 in the aggregate from any single customer of such Person
relating to the delivery of goods or the performance of services by
such Person (other than advance payments to the extent held in
segregated accounts), but only to the
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<PAGE> 32
extent that such payments originally were received more than six
months before the date on which such Person was required to deliver
such goods or perform such services, and which have not yet been
earned by such delivery or performance;
provided, however, the obligations of any Person arising from the honoring by a
bank or other financial institution of a check, draft, or similar Instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business shall not constitute
Indebtedness; provided that such obligations are extinguished within two
Business Days of their incurrence (or, in the case of foreign overdrafts,
within five Business Days of their incurrence) unless covered by an overdraft
credit line.
"Indemnified Liability" and "Indemnified Liabilities" are defined in
Section 12.4.
"Indemnified Parties" is defined in Section 12.4.
"Indemnified Persons" is defined in clause (b) of Section 11.1.
"Initial Borrowing Date" means the date on which the initial Credit
Extensions are made.
"Instrument" means any contract, agreement, indenture, mortgage,
document, or writing (whether by formal agreement, letter or otherwise) under
which any obligation is evidenced, assumed, or undertaken, or any Lien (or
right or interest therein) is granted or perfected.
"Intercompany Demand Note" means an intercompany demand revolving
note, in substantially the form of Exhibit O-1 attached hereto (or, with
respect to any such note in favor of KFC, in substantially the form of Exhibit
0-2 attached hereto, or, with respect to any such note in favor of KAAC, in
substantially the form of Exhibit 0-3 attached hereto), with appropriate
insertions, issued by the Company to any Person listed on Schedules IV and VII
hereto (or to any other Person as required by Section 9.1.12), or issued by any
Subsidiary of the Company to KFC or by KFC to KAAC, and endorsed, pledged, and
delivered by such Person, KFC, or KAAC, as the case may be, to the Agent, on
behalf of the Secured Lenders, pursuant to the Subsidiary Pledge Agreement or
the Intercompany Note Pledge Agreement, as each such promissory note may be
amended, endorsed, or otherwise modified from time to time in accordance with
the provisions hereof, and also means any other promissory note accepted from
time to time in substitution therefor or renewal thereof, in accordance with
the provisions hereof.
"Intercompany Note Pledge Agreement" means the intercompany note
pledge agreement executed and delivered by certain Subsidiaries of the Company
pursuant to Section 7.1.11 or 9.1.12,
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<PAGE> 33
as the case may be, in substantially the form of Exhibit K-3 attached hereto,
as amended, supplemented, restated, or otherwise modified from time to time in
accordance with the provisions hereof or thereof.
"Interest Coverage Ratio" means, for any period, the ratio of
(a) (i) the sum of EBITDA for all of the Fiscal Quarters
comprising such period minus (ii) the aggregate Adjusted Capital
Expenditures for all of the Fiscal Quarters comprising such period
to
(b) (i) the aggregate amount of interest expense
(excluding amortization of deferred financing costs and, to the extent
not paid in cash, interest on the PIK Note and the Equity Proceeds
Notes) of the Company and its Subsidiaries for all of the Fiscal
Quarters comprising such period, calculated on a consolidated basis in
accordance with GAAP, minus (ii) the amount of interest income of the
Company and its Subsidiaries which was included in the calculation of
Net Income, in accordance with GAAP, for all of the Fiscal Quarters
comprising such period,minus (iii) that portion of the amount set
forth in clause (i) above attributable to (A) the proportionate direct
or indirect ownership of Persons other than the Company and its
Subsidiaries of the voting stock of, or partnership interest in, any
Subsidiary or (B) if the economic burden of the amount set forth
inclause (i) above is borne or to be borne by minority owners of such
Subsidiary (other than the Company and its Subsidiaries) in a
proportion other than the proportion of their direct or indirect
ownership of the voting stock of, or partnership interest in, such
Subsidiary, the proportionate share of the economic burden of such
amount borne or to be borne by such minority owners.
"Interest Period" means, with respect to any LIBO Rate Loan, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or
3.4.2 and ending on (but excluding, for purposes of determining accrued
interest) the day which numerically corresponds to such date one, two, three,
or six months thereafter (or, if such month has no numerically corresponding
day, on the last Business Day of such month), as the Company may select in its
relevant notice pursuant to Section 2.3 or 3.4.2; provided, however, that
(a) no more than seven different Interest Periods may be
in effect at one time with respect to all Revolving Loans;
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(b) if such Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the
next following Business Day (unless such next following Business Day
is the first Business Day of a calendar month, in which case such
Interest Period shall end on the Business Day next preceding such
numerically corresponding day); and
(c) no Interest Period may end later than the date set
forth in clause (a) of the definition of "Stated Maturity Date".
"Inventory" means goods (whether consisting of whole goods, spare
parts or components), merchandise, and other personal property, wherever
located, to be furnished under any contract of service or held for sale or
lease, all raw materials, work-in-process, finished goods, returned goods, and
materials and supplies of any kind, nature or description which are or might be
used or consumed in the Company's business or used in connection with the
manufacture, packing, shipping, advertising, selling, or finishing of such
goods, merchandise, and such other personal property, and all documents of
title or other documents representing them.
"Investment" means, with respect to any Person,
(a) any loan or advance made by such Person to any other
Person (excluding commission, travel, relocation, and similar
advances) and any purchase or other acquisition made by such Person of
any bond, debenture, note, or similar instrument of any other Person;
and
(b) any ownership or similar interest held by such Person
in any other Person.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made
by the transfer or exchange of Property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such Property.
"Issuer Bank" means any Affiliate, office, branch, or agency of Bank
of America, or any other Lender, which has agreed to issue and has issued one
or more Letters of Credit at the request (such request to be made with the
consent of the Company, which consent shall not be unreasonably delayed or
withheld) of the Agent.
"Issuer Party" and "Issuer Parties" are defined in Section 5.10.
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"Joint Venture Affiliate" means QAL, KJBC, Anglesey, Furukawa, and any
other Person (a) which is not a Subsidiary of the Company, (b) in which the
Company or its Subsidiaries own an equity interest of more than 5% (and in
which no Restricted Affiliate has an equity interest, other than through a
direct or indirect ownership interest in the Company), and (c) which supplies
or processes bauxite, alumina, or aluminum to or for the Company or any of its
Subsidiaries or sells to third parties bauxite, alumina, aluminum or aluminum
products purchased from the Company or any of its Subsidiaries.
"KAII" means Kaiser Aluminium International, Inc., a Delaware
corporation.
"KATSI" means Kaiser Aluminum Technical Services, Inc., a California
corporation.
"KBC" means Kaiser Bauxite Company, a Nevada corporation.
"KFC" means Kaiser Finance Corporation, a Delaware corporation.
"Kaiser Canada" means Kaiser Aluminum & Chemical of Canada Limited, an
Ontario corporation.
"KJBC" means Kaiser Jamaica Bauxite Company, a Jamaica partnership.
"KACC" means Kaiser Alumina Australia Corporation, a Delaware
corporation.
"KJC" means Kaiser Jamaica Corporation, a Delaware corporation.
"KT Note" means the promissory note dated December 21, 1989, as amended
by Amendment dated as of July 1, 1993, executed by the Parent Guarantor and
delivered to the Company, a copy of which has been delivered to the Agent and
each Lender prior to the date hereof, and endorsed, delivered, and pledged to
the Agent, on behalf of the Secured Lenders, pursuant to the Company Pledge
Agreement or the Subsidiary Pledge Agreement, as such promissory note may be
amended, endorsed, or otherwise modified from time to time in accordance with
the provisions hereof, and also means any other promissory note accepted from
time to time in substitution therefor or renewal thereof, in accordance with
the provisions hereof.
"L/C Collateral Account" is defined in Section 5.8.1.
"Lenders" is defined in the preamble.
"Letter of Credit" is defined in Section 5.1 and includes the Existing
Letters of Credit.
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"Letter of Credit Outstandings" means, at any time, an amount equal to
the sum of
(a) the then aggregate amount which is undrawn and available
under all issued and outstanding Letters of Credit
plus
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations with respect to issued and outstanding
Letters of Credit.
"LIBO Rate" means, relative to any Interest Period, the rate of
interest determined by the Agent to be the rate per annum at which Dollar
deposits in immediately available funds are offered to Bank of America in the
London interbank market as at or about 11:00 a.m., London time, two Business
Days prior to the beginning of such Interest Period for delivery on the first
day of such Interest Period, and in an amount approximately equal to the amount
of each LIBO Rate Loan to which such Interest Period applies and for a period
equal to such Interest Period.
"LIBO Rate Loan" means all or any portion of a Loan bearing interest,
at all times during an Interest Period applicable to such Loan or portion
thereof, at a fixed rate determined by reference to the LIBO Rate (Reserve
Adjusted).
"LIBO Rate (Reserve Adjusted)" means, relative to any Interest Period,
a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined pursuant to the following formula:
LIBO Rate = LIBO Rate
-------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for each LIBO Rate Loan to which such
Interest Period applies will be determined by the Agent.
"LIBOR Office" means, with respect to any Lender, the office, if any,
of such Lender designated as such below its signature hereto, or designated in
the Assignee Agreement to be Bound pursuant to which such Lender became a party
hereto, or such other office of a Lender as designated from time to time by
written notice from such Lender to the Company and the Agent, whether or not
outside the United States, which shall be making or maintaining LIBO Rate Loans
of such Lender hereunder.
"LIBOR Reserve Percentage" means, relative to any Interest Period, a
percentage (expressed as a decimal) equal to the daily average during such
Interest Period of the percentages in effect on each day of such Interest
Period, as prescribed by the F.R.S. Board, for determining the maximum
aggregate reserve requirements (including any emergency, supplemental, or other
marginal reserve
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requirement) applicable to "Eurocurrency Liabilities" pursuant to Regulation D
or any other applicable regulation issued from time to time by the F.R.S. Board
which prescribes reserve requirements applicable to "Eurocurrency Liabilities"
as currently defined in Regulation D having a term approximately equal or
comparable to such Interest Period.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment for security purposes, deposit arrangement for security purposes,
encumbrance, lien (statutory or other), or other similar arrangement of any
kind or nature.
"Loan" means, as the context may require, a Revolving Loan of any
type, or a Swingline Loan.
"Loan Document" means this Agreement, all Letters of Credit, each
Credit Request, the Subsidiary Guaranty, the Collateral Documents, and each
other agreement, document, or Instrument executed and delivered or to be
executed and delivered by the Parent Guarantor, the Company, or any Subsidiary
of the Parent Guarantor or the Company in connection with this Agreement, as
any and all of the foregoing may be amended, supplemented, restated, or
otherwise modified from time to time in accordance with the provisions hereof
or thereof, but excluding, however, the Intercompany Demand Notes, the KT Note
and the Equity Proceeds Notes.
"Materially Adverse Effect" means, relative to any occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration, or governmental investigation or proceeding), a materially adverse
effect on:
(a) the assets of or the then-existing or projected
business, revenues, financial condition, or operations, of the Parent
Guarantor, the Company, any other Obligor which is a Significant
Subsidiary, any Joint Venture Affiliate (other than KJBC), ALPART, or
VALCO; or
(b) the ability of the Parent Guarantor, the Company, or
any other Obligor which is a Significant Subsidiary to perform any of
its payment or other material obligations under this Agreement or any
other Loan Document to which it is a party.
"MAXXAM" means MAXXAM Inc., a Delaware corporation (formerly known as
MCO Holdings, Inc.).
"Minimum Net Worth" means $410,000,000 plus 50% of Net Income (but not
loss) for each Fiscal Quarter of the Company commencing with the Fiscal Quarter
ending March 31, 1997.
"Net Amount of Eligible Accounts" means the gross amount of Eligible
Accounts less the sum of (a) all returns, discounts, claims, credits, and
allowances of any nature at any time issued
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in respect thereof and (b) all unapplied advance payments or deposits in
respect thereof.
"Net Disposition Proceeds" means, with respect to any Asset
Disposition by the Company or any Subsidiary of the Company, the excess of
(a) the sum of
(i) the gross cash proceeds received by the Company
of such Subsidiary from such disposition
plus
(ii) immediately upon receipt thereof by the Company
or such Subsidiary, the gross cash proceeds in respect of
principal from or in respect of any promissory note or
deferred payment obligations or other security taken in
connection with such disposition (including as a result of any
sale or other disposition of any such note, obligations, or
security, or as a result of any financing with respect
thereto)
minus
(b) the sum of
(i) all legal, consulting, brokerage, investment
banking, and accounting fees and disbursements and all
governmental fees incurred (or reasonably expected to be
incurred) in connection with such sale that, in any case,
except for payments for legal fees and expenses to a law firm
of which an Affiliate of the Company is a member, are not
payable to Affiliates of the Company
plus
(ii) all taxes actually paid or to be paid in
connection with such sale
plus
(iii) to the extent the proceeds described in clause
(a) are applied (or to be applied with reasonable promptness)
in payment thereof, all Indebtedness secured, directly or
indirectly (i.e., such disposition is permitted by the terms
of the Instruments evidencing or applicable to such
Indebtedness, or by the terms of a consent granted thereunder,
only on the condition that the proceeds or such disposition be
applied to such Indebtedness), by such assets.
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"Net Income" means, for any period, all amounts which, in conformity
with GAAP, would be included under net income on a consolidated income
statement of the Company and its Subsidiaries for such period; provided that
there shall be excluded (a) the income (or loss) of any Person (other than a
Subsidiary of the Company) in which any other Person (other than the Company or
any of its Subsidiaries) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to the Company or any
of its Subsidiaries by such Person during such period, (b) the income (or loss)
of any Person accrued prior to the date it becomes a Subsidiary of the Company
or is merged into or consolidated with the Company or any of its Subsidiaries
or that Person's assets are acquired by the Company or any of its Subsidiaries,
(c) the income of any Subsidiary of the Company to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that income is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary, and (d) any after-tax
gains or losses attributable to Asset Dispositions or returned surplus assets
of any Pension Plan.
"Net Worth" means the consolidated net worth of the Company and its
Subsidiaries, calculated in accordance with GAAP; provided, however, that (a)
the cumulative effect, in an amount not to exceed $508,000,000, of the changes
in accounting principles attributable to the adoption of FAS 106, 109 and 112
recorded in the first Fiscal Quarter of the 1993 Fiscal Year, shall be
excluded, and (b) the effect of any issuance after the Initial Borrowing Date
of any class of the capital stock of the Company or any of its Subsidiaries
shall be excluded.
"Nonrecourse Indebtedness" means, with respect to any Person,
Indebtedness that is nonrecourse to the credit of such Person.
"Non-United States Person" means a Person who is not (a) a citizen or
resident of the United States, (b) a corporation, partnership, or other entity
created or organized under the laws of the United States, or (c) an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source.
"Obligations" means all obligations (monetary or otherwise) of the
Company and each other Obligor arising under or in connection with this
Agreement, the Letters of Credit, and each other Loan Document.
"Obligor" means the Parent Guarantor, the Company and each of their
Subsidiaries obligated under any Loan Document.
"Organic Document" means, with respect to any Obligor, its articles or
certificate of incorporation, its by-laws, and all
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shareholder agreements, voting trusts, and similar arrangements applicable to
any of its authorized shares of capital stock.
"Parent Collateral Documents" means the Parent Pledge Agreement and
the Parent Security Agreement.
"Parent Guarantor Preferred Stock" means preferred stock of any class
or series issued by the Parent Guarantor.
"Parent Guarantor" is defined in the preamble.
"Parent Guaranty" is defined in Section 6.1.
"Parent Pledge Agreement" means the pledge agreement executed and
delivered by the Parent Guarantor pursuant to Section 7.1.4, in substantially
the form of Exhibit E-1 attached hereto, as amended, supplemented, restated, or
otherwise modified from time to time in accordance with the provisions hereof
or thereof.
"Parent Security Agreement" means the security agreement executed and
delivered by the Parent Guarantor pursuant to Section 7.1.6, in substantially
the form of Exhibit E-2 attached hereto, as amended, supplemented, restated, or
otherwise modified from time to time in accordance with the provisions hereof
or thereof.
"Participant" is defined in Section 12.11.2.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), of which the
Company or any corporation, trade, or business that is, along with the Company,
a member of a Controlled Group, is a contributing sponsor, as such term is
defined in section 4001(a)(13) of ERISA, or to which any Controlled Group
member has a reasonable possibility of any liability by reason of having been a
substantial employer within the meaning of section 4063 of ERISA at any time
during the preceding five years, or by reason of being deemed to be a
contributing sponsor under section 4069 of ERISA.
"Percentage" means, with respect to any Lender, the percentage set
forth opposite its name on the signature pages of this Agreement, or set forth
in the Assignee Agreement to be Bound pursuant to which such Lender became a
party hereto, as such percentage may be adjusted from time to time pursuant to
Assignee Agreement(s) to be Bound executed by such Lender and its Assignee
Lender(s) and delivered pursuant to Section 12.11.1.
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"Person" means any natural person, corporation, firm, association,
government, governmental agency, or any other entity, whether acting in an
individual, fiduciary, or other capacity.
"PIK Note" means the Senior Subordinated Intercompany Note of the
Company dated December 15, 1992 executed by the Company in the original
principal amount of $2,500,000, a copy of which has been delivered to the Agent
and each Lender prior to the date hereof, as such promissory note may be
amended or otherwise modified from time to time in accordance with the
provisions hereof .
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreement(s)" means, individually, the Parent Pledge
Agreement, the Company Pledge Agreement, the Intercompany Note Pledge
Agreement, or the Subsidiary Pledge Agreement, as the context may require, and,
collectively, the Parent Pledge Agreement, the Company Pledge Agreement, the
Intercompany Note Pledge Agreement, and the Subsidiary Pledge Agreement.
"Preferred Stock (USWA)" means shares of the Company's Cumulative
(1985 Series A) Preference Stock and shares of the Company's Cumulative (1985
Series B) Preference Stock which have been or may in the future be issued in
connection with the Kaiser Aluminum USWA Employee Stock Ownership Plan or the
Kaiser Aluminum Salaried Employee Stock Ownership Plan.
"Proceeds" means all products and proceeds (as defined in the Uniform
Commercial Code) of any Collateral, and all proceeds of such proceeds and
products, including all cash and credit balances, all payments under any
indemnity, warranty, or guaranty payable with respect to any Collateral, all
awards for taking by eminent domain, all proceeds of fire or other insurance,
and all money and other Property obtained as a result of any claims against
third parties or any legal action or proceeding with respect to Collateral.
"Product Swap" means an agreement by the Company or KAII to deliver
bauxite, alumina or aluminum products to or on behalf of an Account Debtor in
exchange for (i) an agreement by such Account Debtor to deliver like or related
products to or on behalf of the Company or KAII, as the case may be, and (ii)
the payment of cash in the ordinary course of business on ordinary trade terms.
"Progress Billing" means any invoice for goods sold or leased or
services rendered under a contract or agreement pursuant to which the Account
Debtor's obligation to pay such invoice is conditioned upon the completion of
any further performance by the Company or KAII under the contract or agreement.
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"Property" means any interest in any kind of property or asset,
whether real, personal or mixed or tangible or intangible.
"QAL" means Queensland Alumina Limited, a Queensland, Australia
corporation.
"Quarterly Payment Date" means the last day of each March, June,
September, and December or, if any such day is not a Business Day, the next
succeeding Business Day.
"Redeemable Stock" means any equity security or option or warrant
related thereto that by its terms or otherwise is required to be purchased or
redeemed, or is redeemable at the option of the holder thereof, in either case
at any time prior to March 31, 1999.
"Reference Rate" means the higher of (a) the Federal Funds Rate plus
one-half of one percent (1/2%) and (b) the rate of interest (the "Bank of
America Rate") publicly announced from time to time by Bank of America in San
Francisco, California, as its reference rate. The Bank of America Rate is a
rate set by Bank of America based upon various factors including Bank of
America's cost and desired return, general economic conditions, and other
factors, and is used as a reference point for pricing some loans, which loans
may be priced at, above, or below the Bank of America Rate. Any change in the
Bank of America Rate shall take effect at the opening of business on the day
specified in the public announcement of such change.
"Reference Rate Loan" means all or any portion of a Loan bearing
interest at a fluctuating rate determined by reference to the Reference Rate.
"Reimbursement Obligation" is defined in Section 5.6.
"Release" means a "release", as such term is defined in CERCLA.
"Required Lenders" means, at any time, Lenders holding at least 67% of
the then aggregate outstanding principal amount of the Revolving Credit
Outstandings, or, if no such principal amount is then outstanding, Lenders
having at least 67% of the Revolving Commitments.
"Restated Certificate of Incorporation" means the restated certificate
of incorporation of the Company dated July 25, 1989.
"Restricted Affiliate" means the Parent Guarantor, MAXXAM, and any
Affiliate of either thereof (in each case other than the Company, its
Subsidiaries which are not Restricted Subsidiaries, any Joint Venture
Affiliate, and any Subsidiary of a Joint Venture Affiliate in which neither the
Parent Guarantor, MAXXAM, nor any Affiliate of either thereof (other than the
Company, its Subsidiaries which are not Restricted Subsidiaries, or any Joint
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Venture Affiliate) has any equity interest other than through a direct or
indirect ownership interest in the Company).
"Restricted Subsidiary" means any Subsidiary of the Company in which a
Restricted Affiliate has an interest, other than through such Restricted
Affiliate's direct or indirect ownership interest in the Company.
"Revolving Commitment" is defined in clause (b) of Section 2.1.1.
"Revolving Commitment Amount" is defined in clause (b) of Section
2.1.1.
"Revolving Commitment Availability" means, at any time, the excess of
(a) the lesser of (i) the Revolving Commitment Amount at
such time and (ii) the Borrowing Base as in effect at such time
over
(b) the Revolving Credit Outstandings at such time.
"Revolving Commitment Termination Date" means the earliest of
(a) March 31, 1994 (unless the Initial Borrowing Date
shall have occurred before the close of business, San Francisco time,
on such date);
(b) February 15, 1999;
(c) the date on which the Revolving Commitment Amount is
reduced to zero pursuant to Section 2.2; and
(d) the date on which any Commitment Termination Event
occurs.
Upon the occurrence of any event described in clause (a), (b), (c), or (d), the
Revolving Commitment of each Lender and the Swingline Commitment of Business
Credit shall terminate automatically and without any further action.
"Revolving Credit Outstandings" means, at any time, the sum of (a) the
aggregate outstanding principal amount of all Revolving Loans at such time, (b)
the aggregate outstanding principal amount of all Swingline Loans at such time,
and (c) the Letter of Credit Outstandings at such time.
"Revolving L/C Request" means a request and certificate, duly executed
by an Authorized Officer of the Company, in substantially the form of Exhibit B
attached hereto, which
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request shall include a duly completed application for the issuance or
extension of a standby or commercial letter of credit in the form specified
from time to time by the proposed Issuer Bank of a Letter of Credit, as such
application may be amended, supplemented, restated, or otherwise modified from
time to time. Each Revolving L/C Request shall specify, among other things,
the date on which the proposed Letter of Credit is to be issued and whether
such Letter of Credit shall be transferable in whole or in part. All Revolving
L/C Requests and all documents submitted by the Company in support of Revolving
L/C Requests shall be in form and substance satisfactory to the relevant Issuer
Bank.
"Revolving Loans" is defined in clause (a)(i) of Section 2.1.1.
"Secured Lenders" means the Agent, each Lender and each Issuer Bank,
together with any successors and assigns thereto.
"Security Agreement(s)" means, individually, the Parent Security
Agreement, the Company Security Agreement, or the Subsidiary Security
Agreement, as the context may require, and, collectively, the Parent Security
Agreement, the Company Security Agreement, and the Subsidiary Security
Agreement.
"Security Interest" means, collectively, the Liens granted to the
Agent, on behalf of the Secured Lenders, in the Collateral pursuant to the
Collateral Documents.
"Senior Debt" means Indebtedness of the Company or any of its
Subsidiaries under the Senior Notes, the Senior Indenture, or any guaranty of
such Indebtedness.
"Senior Debt Instruments" means the Senior Notes, the Senior
Indenture, and all other Instruments and agreements executed and delivered by
the Company or any of its Subsidiaries in connection therewith.
"Senior Indenture" means the indenture dated as of , 1994
between the Company, and KFC, KAAC, AJI and KJC, as Subsidiary Guarantors, and
First Trust National Association, as trustee, pursuant to which the Senior
Notes were issued, as amended, supplemented, restated, or otherwise modified
from time to time in accordance with the terms of such indenture and this
Agreement.
"Senior Notes" means the % Senior Notes due 2002 in a principal
amount not exceeding $ issued by the Company pursuant to the Senior
Indenture, as amended, supplemented, restated or otherwise modified from time
to time in accordance with the terms of the Senior Indenture and this Agreement
and all other promissory notes accepted from time to time in substitution
therefor or renewal thereof in accordance with the terms of the Senior
Indenture and this Agreement.
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"Significant Subsidiary" means each Subsidiary of the Company that
(a) is designated with an asterisk in Item 2 ("Existing
Subsidiaries") of the Disclosure Schedule;
(b) accounted for at least 5% of consolidated revenues of
the Company and its Subsidiaries from sales to third parties for the
four Fiscal Quarters of the Company ending on the last day of the last
Fiscal Quarter of the Company immediately preceding the date as of
which any such determination is made; or
(c) has assets (other than assets which are eliminated in
consolidation) which represent at least 5% of the consolidated assets
of the Company and its Subsidiaries as of the last day of the last
Fiscal Quarter of the Company immediately preceding the date as of
which any such determination is made,
all of which, with respect to clauses (b) and (c), shall be as included in the
consolidated financial statements of the Company for the period, or as of the
date, in question.
"Solvent" means, with respect to any Person at any time, a condition
under which
(a) the fair saleable value of such Person's assets is,
at such time, greater than the total amount of such Person's
liabilities (including contingent and unliquidated liabilities) at
such time;
(b) such Person is able to pay all of its liabilities as
such liabilities mature; and
(c) such Person does not have unreasonably small capital
with which to conduct its business.
For purposes of this definition
(i) the amount of a Person's contingent or
unliquidated liabilities at any time shall be that amount
which, in light of all the facts and circumstances then
existing, represents the amount which can reasonably be
expected to become an actual or matured liability;
(ii) the "fair saleable value" of an asset shall be
the amount which may be realized within a reasonable time
either through collection or sale of such asset at its regular
market value; and
(iii) the "regular market value" of an asset shall
be the amount which a capable and diligent
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business person could obtain for such asset from an interested buyer
who is willing to purchase such asset under ordinary selling
conditions.
"Stated Amount" of each Letter of Credit means the "stated amount" or
"face amount" (or other similar term) of such Letter of Credit, as defined
therein.
"Stated Expiry Date" is defined in clause (b)(ii) of Section 5.1.
"Stated Maturity Date" means (a) in the case of any Revolving Loan,
February 15, 1999, and (b) in the case of any Swingline Loan, the seventh
calendar day following the date such Swingline Loan is made.
"Subordinated Debt" means Indebtedness of the Company or any of its
Subsidiaries under the Subordinated Notes, the Subordinated Indenture, or any
guaranty of such Indebtedness.
"Subordinated Debt Instruments" means the Subordinated Notes, the
Subordinated Indenture, and all other Instruments and agreements executed and
delivered by the Company or any of its Subsidiaries in connection therewith.
"Subordinated Indenture" means the indenture dated as of February 1,
1993 between the Company, and KAAC, AJI and KJC, as Subsidiary Guarantors, and
The First National Bank of Boston, as trustee, pursuant to which the
Subordinated Notes were issued, as supplemented to make KFC an additional
Subsidiary Guarantor (as such term is defined therein), and as the same may be
further amended, supplemented, restated, or otherwise modified from time to
time in accordance with the terms of such indenture and this Agreement.
"Subordinated Notes" means the 12 3/4% Senior Subordinated Notes due
2003 in a principal amount not exceeding $400 million issued by the Company
pursuant to the Subordinated Indenture, as amended, supplemented, restated, or
otherwise modified from time to time in accordance with the terms of the
Subordinated Indenture and this Agreement and all other promissory notes
accepted from time to time in substitution therefor or renewal thereof in
accordance with the terms of the Subordinated Indenture and this Agreement.
"Subsidiary" means, with respect to any Person, any corporation of
which more than 50% of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or
classes of such corporation shall or might have voting power upon the
occurrence of any contingency), or any other entity of which more than 50% of
the equity securities or other ownership interest, is or are at the time
directly or indirectly owned by such Person, by such
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Person and one or more other Subsidiaries of such Person, or by one or more
other Subsidiaries of such Person. Any determination of whether a Subsidiary
is directly or indirectly "wholly-owned" by any Person shall be made after
disregarding (a) any shares of such Subsidiary held by the officers, employees,
or directors of such Subsidiary and (b) any shares of such Subsidiary held by
Restricted Affiliates.
"Subsidiary Collateral Documents" means the Subsidiary Pledge
Agreement, the Subsidiary Security Agreement, and the Intercompany Note Pledge
Agreement.
"Subsidiary Guaranty" means the guaranty executed and delivered by any
Subsidiary of the Company pursuant to Section 7.1.9, in substantially the form
of Exhibit J attached hereto, as amended, supplemented, restated, or otherwise
modified from time to time in accordance with the provisions hereof or thereof.
"Subsidiary Pledge Agreement" means the pledge agreement executed and
delivered by any Subsidiary of the Company pursuant to Section 7.1.10, in
substantially the form of Exhibit K-1 attached hereto, as amended,
supplemented, restated, or otherwise modified from time to time in accordance
with the provisions hereof or thereof.
"Subsidiary Security Agreement" means the security agreement executed
and delivered by any Subsidiary of the Company pursuant to Section 7.1.6, in
substantially the form of Exhibit K-2 attached hereto, as amended,
supplemented, restated, or otherwise modified from time to time in accordance
with the provisions hereof or thereof.
"Swingline Commitment" is defined in Section 2.1.2.
"Swingline Loans" is defined in Section 2.1.2.
"Tax Allocation Agreement" means the Tax Allocation Agreement dated
December 21, 1989, between the Company and MAXXAM, a copy of which has been
delivered to the Agent and the Lenders prior to the date hereof, as amended
from time to time with the prior written consent of the Agent.
"Taxes" is defined in clause (a) of Section 4.6.
"Tolling Inventory" means raw materials, work-in-process or other
goods delivered to the Company by a third person pursuant to a bailment
arrangement with the Company under which such Inventory is to be processed,
improved, or otherwise altered by the Company.
"Transfer Agreement" means the Transfer Agreement dated as of December
21, 1989, between the Parent Guarantor and the Company, a copy of which has
been delivered to the Agent and the Lenders prior to the date hereof, as
amended, supplemented,
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restated, or otherwise modified from time to time with the prior written
consent of the Agent.
"type" means, relative to any Revolving Loan, the portion thereof, if
any, being maintained as a Reference Rate Loan or a LIBO Rate Loan.
"Uniform Commercial Code" means the Uniform Commercial Code (or any
successor statute) of the State of New York or the Uniform Commercial Code (or
any successor statute) of any other state the laws of which are required by
Section 9-103 thereof to be applied in connection with the issue of perfection
of security interests.
"United States" or "U.S." means the United States of America, its
fifty States, and the District of Columbia.
"VALCO" means Volta Aluminium Company Limited, a Ghanaian corporation.
"Welfare Plan" means a "welfare plan", as such term is defined in
section 3(1) of ERISA.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or
the context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each Credit Request, Continuation/Conversion Notice, Borrowing Base
Certificate, Compliance Certificate, Loan Document, notice, and other
communication delivered from time to time in connection with this Agreement or
any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified,
references in this Agreement and in each other Loan Document to any Article or
Section are references to such Article or Section of this Agreement or such
other Loan Document, as the case may be, and, unless otherwise specified,
references in any Article, Section, or definition to any clause are references
to such clause of such Article, Section, or definition.
SECTION 1.4. Accounting and Financial Determinations and Other
Terms. Unless otherwise specified, all accounting terms used herein or in any
other Loan Document shall be interpreted, all accounting determinations and
computations hereunder or thereunder shall be made, and all financial
statements required to be delivered hereunder or thereunder shall be prepared
in accordance with GAAP applied on a basis consistent with those used in the
preparation of the financial statements dated December 31, 1993 furnished to
the Lenders under this Agreement; provided, however, that if there is any
change in GAAP subsequent to the date of such financial statements, the Agent
and the Company shall each have the right to notify the other party that the
Required Lenders or the Company, as the case may be, wish to incorporate the
effect of any such change in GAAP on the
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operation of any covenant contained in Article IX or on the Borrowing Base, the
Interest Coverage Ratio for purposes of Section 3.4.1 or any other provision
hereof. In the event that the party receiving such notice agrees with such
request to incorporate the effect of any such change, thereafter the Company's
compliance with such covenant, the Borrowing Base, the Interest Coverage Ratio
and all other calculations in respect of any other provision hereof will be
determined on the basis of GAAP including such change.
ARTICLE II
COMMITMENTS AND BORROWING PROCEDURES
SECTION 2.1. Commitments. On the terms and subject to the
conditions of this Agreement (including Article VII), each Lender, severally
and for itself alone, agrees to make Revolving Loans and other Credit
Extensions, and Business Credit agrees to make Swingline Loans, pursuant to the
Commitments described in this Section 2.1.
SECTION 2.1.1. Revolving Commitment.
(a) From time to time on any Business Day occurring
during the period commencing on the Initial Borrowing Date, and continuing to
(but not including) the Revolving Commitment Termination Date, each Lender will
(i) make Loans (relative to such Lender, its
"Revolving Loans") to the Company equal to such Lender's
Percentage of the aggregate amount of Revolving Loans
requested by the Company pursuant to Section 2.3(a) to be made
on such Business Day, and
(ii) (A) in the case of any Issuer Bank, issue
Letters of Credit for the account of the Company, for the
benefit of the Company or any Subsidiary of the Company, or
(B) in the case of each other Lender, participate in such
Letters of Credit, in each case in accordance with Article V.
(b) The Revolving Credit Outstandings at any time shall
not exceed the lesser of (x) $250,000,000 (such amount, as it may be reduced
from time to time pursuant to Section 2.2, being herein called the "Revolving
Commitment Amount") and (y) the Borrowing Base as then in effect. The
Commitment of each Lender to make Revolving Loans and to issue or participate
in Letters of Credit is herein referred to as its "Revolving Commitment".
(c) On the terms and subject to the conditions hereof,
the Company may from time to time (i) borrow, prepay, and reborrow Revolving
Loans and (ii) request the issuance of Letters of Credit, allow Letters of
Credit to expire undrawn or, if drawn
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upon, repay Reimbursement Obligations relative thereto and request the issuance
of new Letters of Credit.
SECTION 2.1.2. Swingline Commitment.
(a) From time to time on any Business Day occurring during the
period commencing on the Initial Borrowing Date, and continuing to (but not
including) the Revolving Commitment Termination Date, Business Credit will make
a portion of the Revolving Commitment available to the Company by making Loans
("Swingline Loans") to the Company in an aggregate amount not to exceed
$25,000,000 outstanding at any one time, notwithstanding the fact that such
Borrowings may exceed Business Credit's Revolving Commitment. The Commitment
of Business Credit to make Swingline Loans from time to time is herein referred
to as its "Swingline Commitment."
(b) Business Credit at any time in its sole and absolute
discretion may require each other Lender on one Business Day's notice to make a
Revolving Loan in an amount equal to such Lender's Percentage of the aggregate
amount of Swingline Loans outstanding on the date notice is given. In the
event that Revolving Loans are made by Lenders other than Business Credit under
the immediately preceding sentence, each such Lender shall deposit with the
Agent same day funds in an amount equal to such Lender's Percentage of such
Revolving Loans. Such deposit will be made to an account which the Agent shall
specify from time to time by written notice to the Lenders. The proceeds of
such Revolving Loans shall be immediately applied to repay the outstanding
Swingline Loans and the Company authorizes the Agent to charge its account with
Bank of America (up to the amount available in such account) in order to
immediately pay Business Credit the amount of such Swingline Loans to the
extent amounts received from other Lenders are not sufficient to repay in full
the outstanding Swingline Loans. If any portion of any such amount paid to
Business Credit should be recovered by or on behalf of the Company from
Business Credit in bankruptcy, by assignment for the benefit of creditors, or
otherwise, the loss of the amount so recovered shall be ratably shared among
all Lenders in the manner contemplated by Section 4.8.
(c) Each Lender's obligation to make the Revolving Loans
referred to in clause (b) shall be absolute and unconditional and shall not be
affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against Business
Credit, the Company, or any other Person for any reason whatsoever; (ii) the
occurrence or continuance of a Default; (iii) any adverse change in the
condition (financial or otherwise) of the Company; (iv) any breach of this
Agreement by the Company or any other Lender; or (v) any other circumstance,
happening, or event whatsoever, whether or not similar to any of the foregoing.
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(d) Interest on each Swingline Loan shall accrue to
Business Credit from the date of making such Swingline Loan to and including
the earlier of (i) the date prior to the day on which payment of such Swingline
Loan is made by the Company or (ii) the date prior to the day of receipt by the
Agent from any Lender of its Percentage of any Revolving Loans made to repay
such Swingline Loan; provided that, from and after the date of the making of
any such Revolving Loans, interest shall accrue on such Lender's Percentage of
any such Revolving Loans for the account of such Lender.
SECTION 2.1.3 Lenders Not Required To Make Loans or Issue Letters
of Credit.
(a) No Lender shall be required to make any Revolving
Loan or issue (in the case of the relevant Issuer Bank) any Letter of Credit
and Business Credit shall not be required to make any Swingline Loan, if, after
giving effect thereto, the Revolving Credit Outstandings would exceed the
lesser of (x) the Borrowing Base as then in effect and (y) the Revolving
Commitment Amount as then in effect; and
(b) the Issuer Bank shall not be required to issue any
Letter of Credit if, after giving effect thereto, the Letter of Credit
Outstandings would exceed $125,000,000.
SECTION 2.1.4. Borrowing Base Determinations.
(a) Except during the continuance of an Event of Cash
Dominion, the Company will furnish to the Agent, on or before the 12th Business
Day of each month and on the date of the delivery of (i) any Borrowing Request
requesting the making of Revolving Loans, or (ii) any Revolving L/C Request, a
Borrowing Base Certificate setting forth the Company's calculation of the
Borrowing Base (with supporting calculations in reasonable detail) as of the
last day of the preceding calendar month (or, if the Credit Request described
in clause (i) or (ii) is delivered on or after the first day of any month but
before the 12th Business Day of such month (or, if earlier, the date the
Borrowing Base Certificate required to be delivered during such month is
actually delivered), as of the last day of the next preceding calendar month)
and certifying
(A) that the information contained in such
Borrowing Base Certificate is true and complete in all material
respects,
(B) that, except as is disclosed in such Borrowing
Base Certificate, the Company has no reason to believe that there has
been a material reduction in the Borrowing Base from the Borrowing
Base Calculation Date for such Borrowing Base Certificate to the date
on which such Borrowing Base Certificate is delivered,
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(C) if a Credit Request is being delivered in
connection with the delivery of such Borrowing Base Certificate, that
as of the date of such Borrowing Base Certificate, the Revolving
Credit Outstandings do not (and, after giving effect to the making of
all Loans, or the issuance of all Letters of Credit, if any, being
requested in conjunction with the delivery of such Borrowing Base
Certificate, will not) exceed the Borrowing Base which was in effect
on the Borrowing Base Calculation Date for such Borrowing Base
Certificate, and
(D) as to such other matters as the Agent may
reasonably request,
(b) During the continuance of an Event of Cash Dominion,
the Company will furnish to the Agent at least weekly, on or before the third
day of each week, a collateral summary report duly executed by a Financial
Authorized Officer of the Company setting forth sales, credit memos,
collections, discounts and outstanding Loans as of the most recent practicable
date.
During the continuance of an Event of Cash Dominion, the Borrowing Base will be
determined by the Agent, after consultation with the Company, each day on the
basis of such relevant information as the Agent deems appropriate to consider
in calculating the actual Borrowing Base, including the collateral summary
reports and such other information regarding the Accounts of the Company and
KAII and the Inventory of the Company as the Agent shall obtain from the
Company and KAII pursuant to Section 9.1.9 or otherwise.
SECTION 2.2. Reduction of Revolving Commitment Amount. The
Company may, from time to time on any Business Day occurring after the Initial
Borrowing Date, voluntarily reduce the unutilized portion of the Revolving
Commitment Amount; provided, however, that (a) all such reductions that involve
prepayments of LIBO Rate Loans shall require at least three Business Days prior
notice to the Agent, (b) all other reductions, including any such reductions
that involve prepayments of Reference Rate Loans, shall require at least one
Business Days prior notice to the Agent, (c) each such reduction shall be
permanent, and (d) any such partial reduction of the Revolving Commitment
Amount that involves prepayments of LIBO Rate Loans shall be in an amount of
not less than $5,000,000. All notices referred to in the foregoing sentence
shall be given prior to 10:00 a.m., San Francisco time, on the day of such
notice.
SECTION 2.3. Borrowing Procedure.
(a) By delivering a Borrowing Request to the Agent on or
before 10:00 a.m., San Francisco time, on a Business Day, the Company, on
advance notice of at least (i) three Business Days, in the case of any
disbursement of LIBO Rate Loans, or (ii) one Business Day, in the case of any
disbursement of Reference Rate
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Loans, but in no case more than five Business Days, may from time to time
request that the Lenders make a disbursement of Revolving Loans. Each request
for a disbursement of Reference Rate Loans shall specify an aggregate principal
amount of at least $1,000,000 and integral multiples of $1,000,000 in excess
thereof, and each request for a disbursement of LIBO Rate Loans shall specify
an aggregate principal amount of at least $5,000,000 and integral multiples of
$1,000,000 in excess thereof. On the terms and subject to the conditions of
this Agreement, each Borrowing shall be comprised of the Loans of the type(s)
and Interest Period(s) specified in such Borrowing Request and shall be made on
the Business Day specified in such Borrowing Request. The Agent shall promptly
notify each Lender by telephone (promptly confirmed in writing) of any such
Borrowing Request on the day such Borrowing Request is received by the Agent.
Prior to 9:30 a.m., San Francisco time, on the Business Day specified in such
Borrowing Request, each Lender shall deposit with the Agent same day funds in
an amount equal to such Lender's Percentage of the requested Borrowing. Such
deposit will be made to an account which the Agent shall specify from time to
time by written notice to the Lenders. To the extent funds are received from
the Lenders by 9:30 a.m., San Francisco time, on any Business Day, the Agent
shall deposit such funds into the Company's account number 12339-11101 at Bank
of America not later than 10:30 a.m., San Francisco time, on such Business Day.
No Lender's obligation to make any Loan shall be affected by any other Lender's
failure to make any Loan.
(b) By delivering a Borrowing Request to the Agent on or
before 1:00 p.m., San Francisco time, on a Business Day, the Company may from
time to time request that Business Credit make a disbursement of a Swingline
Loan. Each request for a disbursement of a Swingline Loan shall specify an
aggregate principal amount of at least $500,000 and integral multiples of
$10,000 in excess thereof. All Swingline Loans shall be Reference Rate Loans
and no Swingline Loan may be outstanding for more than seven calendar days.
Business Credit shall deposit same day funds in an amount equal to the
requested Swingline Loan into the Company's account number 12339-11101 at Bank
of America not later than 3:00 p.m., San Francisco time, on such Business Day.
(c) In lieu of delivering the above-described Borrowing
Requests, the Company may give the Agent telephone notice by the required time
of any proposed Borrowing; provided that such notice shall be promptly
confirmed in writing by delivery of a Borrowing Request on or prior to the
proposed borrowing date. Each telephone request for a Revolving Loan or a
Swingline Loan shall be conclusively presumed to be made by a Person authorized
by the Company to do so and crediting a Revolving Loan or a Swingline Loan to
the Company's deposit account shall conclusively establish the obligation of
the Company to repay such Revolving Loan or Swingline Loan as provided herein.
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SECTION 2.4. Agent's Books and Records; Monthly Statements. The
Agent will charge all Revolving Loans, Swingline Loans and, as and when they
become due and payable, other monetary Obligations to a loan account of the
Company maintained by the Agent. All fees, commissions, costs, expenses, and
other charges under or pursuant to the Loan Documents not paid when due may, at
the Agent's option, be charged as Revolving Loans to the Company's loan account
as of the date due from the Company or the date paid or incurred by the Agent,
as the case may be. The Company agrees that the Agent's books and records
showing the monetary Obligations and the transactions pursuant to this
Agreement and the other Loan Documents shall be admissible in any action or
proceeding arising therefrom, and shall constitute prima facie proof thereof,
irrespective of whether any Obligation is also evidenced by a promissory note
or other instrument. The Agent will provide to the Company a monthly statement
of Loans, payments, and other transactions pursuant to this Agreement. Such
statement shall be deemed correct, accurate, and binding on the Company and as
an account stated (except for reversals and reapplications of payments made as
provided in Section 4.7 and corrections of errors discovered by the Agent),
unless the Company notifies the Agent in writing to the contrary within 60 days
after such statement is rendered. In the event a timely written notice of
objection is given by the Company, only the items to which exception is
expressly made will be considered to be disputed by the Company.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST, AND FEES
SECTION 3.1. Repayments. The Company shall repay in full the
unpaid principal amount of each Loan upon the Stated Maturity Date therefor.
SECTION 3.2. Voluntary Prepayments. Prior to repayment in full of
each Loan pursuant to Section 3.1, and except during the continuance of an
Event of Cash Dominion, the Company may, from time to time on any Business Day,
make a voluntary prepayment, in whole or in part, without premium or penalty
(except as may be required by Section 4.4), of the outstanding principal amount
of the Loans; provided, however, that
(a) if any such prepayment of any LIBO Rate Loan is made
on any day other than the last day of the Interest Period for such
Loan the Company shall comply with the provisions ofSection 4.4;
(b) all such voluntary partial prepayments of LIBO Rate
Loans (i) shall be in an aggregate amount of not less than $5,000,000
and integral multiples of $1,000,000 in excess thereof, unless such
prepayment is a prepayment of
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the entire outstanding principal amount of LIBO Loans of all Lenders,
and (ii) shall be appliedpro rata to such LIBO Rate Loans of all
Lenders;
(c) all such voluntary partial prepayments of Reference
Rate Loans shall be, in the case of Revolving Loans, in an aggregate
amount of not less than $1,000,000 and integral multiples of
$1,000,000 in excess thereof, unless such prepayment is a prepayment
of the entire outstanding principal amount of Reference Rate Loans of
all Lenders, and, in the case of Swingline Loans, in an aggregate
amount of not less than $250,000 and integral multiples of $10,000 in
excess thereof, unless such prepayment is a prepayment of the entire
outstanding principal amount of Swingline Loans;
(d) all such voluntary partial prepayments of Reference
Rate Loans shall be applied first to Swingline Loans and then pro
ratato the Reference Rate Loans of all Lenders;
(e) all such voluntary prepayments of LIBO Rate Loans
shall require at least five Business Days prior written notice to the
Agent;
(f) all such voluntary prepayments of Reference Rate
Loans that are Revolving Loans shall require at least one but no more
than five Business Days prior written notice to the Agent; and
(g) all such voluntary prepayments of Reference Rate
Loans that are Swingline Loans may be made without any prior written
notice.
SECTION 3.3. Mandatory Prepayments. Prior to repayment in full of
each Loan pursuant to Section 3.1, the Company shall make mandatory
prepayments, without premium or penalty (except as may be required by Section
4.4), in accordance with this Section 3.3.
SECTION 3.3.1. Prepayment Under, or Cash Collateralization of,
Revolving Commitment. Except during the continuance of an Event of Cash
Dominion, the Company shall, on the second Business Day after the date of
delivery of any Borrowing Base Certificate indicating that the Revolving Credit
Outstandings on the date of such Borrowing Base Certificate exceed the
Borrowing Base as shown on such Certificate, make a mandatory prepayment of the
then aggregate outstanding principal amount of all Swingline Loans and, if all
Swingline Loans have been prepaid, shall make a mandatory prepayment of the
then aggregate outstanding principal amount of all Revolving Loans (or a
repayment of outstanding Reimbursement Obligations with respect to Letters of
Credit), and, if all Revolving Loans have been prepaid, shall furnish cash
collateral with respect to Letters of Credit, in an aggregate amount equal to
such excess. If the Company shall fail to
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deliver a Borrowing Base Certificate when due hereunder and the Agent
determines that the Revolving Credit Outstandings on the date such Borrowing
Base Certificate was due exceeded the Borrowing Base, as of the last day of the
preceding month, the Company shall on the second Business Day after receipt of
notice from the Agent, make a mandatory prepayment of the then aggregate
outstanding principal amount of all Swingline Loans and, if all Swingline Loans
have been prepaid, shall make a mandatory prepayment of the then aggregate
outstanding principal amount of all Revolving Loans (or a repayment of
outstanding Reimbursement Obligations with respect to Letters of Credit), and,
if all Revolving Loans have been prepaid, shall furnish cash collateral with
respect to Letters of Credit, in an aggregate amount equal to such excess. On
the terms and subject to the conditions hereof, the Company may reborrow
amounts applied to the prepayment of Swingline Loans and Revolving Loans
pursuant to this Agreement.
SECTION 3.3.2. Payments from Asset Distributions. During the
continuance of an Event of Cash Dominion, the Company will deposit, or cause to
be deposited, all Net Disposition Proceeds received from any Asset Disposition
pursuant to Section 9.2.11(i) in the Concentration Account, which Net
Disposition Proceeds shall be applied to the prepayment of the then aggregate
outstanding principal amount of all Swingline Loans and, if all Swingline Loans
have been prepaid, to the prepayment of the then aggregate outstanding
principal amount of all Revolving Loans. On the terms and subject to the
conditions hereof, the Company may reborrow amounts applied to the prepayments
of Swingline Loans and Revolving Loans pursuant to this Agreement.
SECTION 3.3.3. Cash Dominion. During the continuance of an Event of
Cash Dominion (a) all collected funds on deposit in the Concentration Account
pursuant to the Concentration Bank Agreement shall be applied on a daily basis
to the prepayment of the then aggregate outstanding principal amount of all
Swingline Loans and, if all Swingline Loans have been prepaid, to the
prepayment of the then aggregate outstanding principal amount of all Revolving
Loans, (b) on any day on which Revolving Credit Outstandings exceed the
Borrowing Base, as calculated as of such date, the Company shall make a
mandatory prepayment of the then aggregate outstanding principal amount of all
Swingline Loans, and, if all Swingline Loans have been prepaid, shall make a
mandatory prepayment of the then aggregate outstanding principal amount of all
Revolving Loans (or a repayment of outstanding Reimbursement Obligations with
respect to Letters of Credit), and, if all Revolving Loans have been prepaid,
shall furnish cash collateral with respect to Letters of Credit, in an
aggregate amount equal to such excess, and (c) the Company shall deposit, or
cause to be deposited, all remittances and payments received by the Company in
respect of Accounts (except Accounts of Subsidiaries and Joint Venture
Affiliates paid by accounting entries), Instruments (other than Intercompany
Demand Notes), or sales of Inventory for cash and all prepayments, deposits,
and
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other advance payments in respect of sales of Inventory, tax refunds, insurance
proceeds and other amounts received from third parties other than in the
ordinary course of business shall be deposited in the Concentration Account.
On the terms and subject to the conditions hereof, the Company may reborrow
amounts applied to the prepayment of Swingline Loans and Revolving Loans
pursuant to this Agreement.
SECTION 3.3.4. Acceleration. The Company shall, immediately upon
any acceleration of the Stated Maturity Date of any Loans pursuant to Section
10.2 or Section 10.3, repay all Loans which are so accelerated.
SECTION 3.4. Interest Provisions. Interest on the outstanding
principal amount of Loans shall accrue and be payable in accordance with this
Section 3.4, in each case computed on the basis of the actual number of days
elapsed in a 360-day year.
SECTION 3.4.1. Rates. The Company shall pay interest on the unpaid
principal amount of each Revolving Loan and Swingline Loan made to the Company
from time to time outstanding as follows:
(a) if any portion of the unpaid principal amount of such
Loan is a Reference Rate Loan, the Company shall pay interest on such
portion at a rate per annum equal to the sum of (i) the Reference Rate
from time to time in effect and (ii) a margin of 1-1/2%; and
(b) if any portion of the unpaid principal amount of such
Loan is a LIBO Rate Loan, during each Interest Period applicable
thereto, the Company shall pay interest on such portion at a rate per
annum equal to the sum of (i) the LIBO Rate (Reserve Adjusted) for
such Interest Period and (ii) a margin of 3-1/4%;
provided, however, that,
(i) so long as no Default shall have occurred and be
continuing, if as of the last day of any Fiscal Quarter, commencing
with the second Fiscal Quarter of the 1995 Fiscal Year, the Interest
Coverage Ratio for the four Fiscal Quarter period ended on such last
day is greater than or equal to 1.25 to 1.00 but less than 1.50 to
1.00, and the Agent receives a Compliance Certificate pursuant to
clause (c) of Section 9.1.1 to such effect, then, for each day during
the Fiscal Quarter in which such Compliance Certificate is required to
be delivered, the margins set forth in clauses (a) and (b) above and
any fees payable pursuant to clause (a)(ii) of Section 5.3 (in each
case without giving effect to any previous increase or reduction
pursuant to this proviso) shall each be reduced by 1/2 of 1% per
annum; and
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(ii) so long as no Default shall have occurred and be
continuing, if as of the last day of any Fiscal Quarter, commencing
with the second Fiscal Quarter of the 1995 Fiscal Year, the Interest
Coverage Ratio for the four Fiscal Quarter period ended on such last
day is greater than or equal to 1.50 to 1.00 but less than 2.00 to
1.00, and the Agent receives a Compliance Certificate pursuant to
clause (c) of Section 9.1.1 to such effect, then, for each day during
the Fiscal Quarter in which such Compliance Certificate is required to
be delivered, the margins set forth in clauses (a) and (b) above and
any fees payable pursuant to clause (a)(ii) of Section 5.3 (in each
case without giving effect to any previous increase or reduction
pursuant to this proviso) shall each be reduced by 1% per annum; and
(iii) so long as no Default shall have occurred and be
continuing, if as of the last day of any Fiscal Quarter, commencing
with the second Fiscal Quarter of the 1995 Fiscal Year, the Interest
Coverage Ratio for the four Fiscal Quarter period ended on such last
day is greater than or equal to 2.00 to 1.00, and the Agent receives a
Compliance Certificate pursuant to clause (c) of Section 9.1.1 to such
effect, then, for each day during the Fiscal Quarter in which such
Compliance Certificate is required to be delivered, the margins set
forth in clauses (a) and (b) above and any fees payable pursuant to
clause (a)(ii) of Section 5.3 (in each case without giving effect to
any previous increase or reduction pursuant to this proviso) shall
each be reduced by 1-1/2% per annum.
Prior to the date in any Fiscal Quarter on which the Agent receives
the Compliance Certificate which is required to be delivered during such Fiscal
Quarter, the interest margin and letter of credit fees shall be the same as
were applicable to the immediately preceding Fiscal Quarter. If such
Compliance Certificate shall indicate that such interest margin or letter of
credit fees should be increased pursuant to this proviso, the Company shall, on
the date of delivery of such Compliance Certificate, pay to the Agent for the
account of those Lenders which received underpayment thereof an amount equal to
the difference between (A) the aggregate amount of interest and letter of
credit fees which would theretofore have been payable during such Fiscal
Quarter had such increase been made on the first day of such Fiscal Quarter and
(B) the amounts of interest and letter of credit fees which were actually paid
during such Fiscal Quarter. If such Compliance Certificate shall indicate that
the Company paid more interest or letter of credit fees than would have been
required if any reduction therein required by this proviso had commenced on the
first day of such Fiscal Quarter, any such excess payment shall be credited to
future payments of interest or letter of credit fees, as the case may be,
payable to those Lenders which received over-payments thereof and, if the
Company shall not have received full credit for any
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such excess payment from any Lender at the time when such Lender's Commitments
hereunder terminate and all monetary Obligations owing to such Lender are paid
in full, then such Lender shall pay to the Company any such excess payment,
without interest, at such time.
In the event that any accountant's report delivered pursuant to clause
(b)(iii) of Section 9.1.1 shall indicate any miscomputation of the Interest
Coverage Ratio in any Compliance Certificate, if such accountant's report shall
indicate that the interest margin or letter of credit fees should have been
increased pursuant to this proviso for any Fiscal Quarter during the relevant
Fiscal Year, the Company shall, within ten Business Days after such
accountant's report is delivered, pay the Agent, for the account of the
Lenders, additional interest on the Loans and letter of credit fees for the
Letters of Credit in an aggregate amount equal to the excess of (A) the
aggregate amount of interest which would have been payable on the Loans and
letter of credit fees which would have been payable on the Letters of Credit
for any period of time if the Compliance Certificate in respect of the Fiscal
Quarter in question had shown the same Interest Coverage Ratio for the four
Fiscal Quarter period ended on the last day of such Fiscal Quarter as did such
accountant's report, over (B) the aggregate of the interest which was actually
paid on the Loans and the letter of credit fees which were actually paid on the
Letters of Credit in respect of such period of time. If such accountant's
report shall indicate that the Company paid more interest or letter of credit
fees than would have been required if any reduction therein had commenced on
the first day of any Fiscal Quarter during the relevant Fiscal Year, any such
excess payment shall be credited to future payments of interest or letter of
credit fees, as the case may be, payable to those Lenders which received
over-payments thereof and, if the Company shall not have received full credit
for any such excess payment from any Lender at the time when such Lender's
Commitments hereunder terminate and all monetary Obligations owing to such
Lender are paid in full, then such Lender shall pay to the Company any such
excess payment, without interest, at such time.
Upon termination of the Lenders' Commitments hereunder, no further
retroactive adjustments shall be made to the interest or letter of credit fees
paid during the term of this Agreement.
All LIBO Rate Loans shall bear interest from (and including) the first
day of the applicable Interest Period to (but excluding) the last day of such
Interest Period at the interest rate determined as applicable to such LIBO Rate
Loan; provided, however, that any margin reduction or increase resulting from
the Interest Coverage Ratio test set forth in this Section 3.4.1 shall become
effective at any time during any Interest Period.
SECTION 3.4.2. Continuation and Conversion Elections. By delivering
a Continuation/Conversion Notice to the Agent on or
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before 10:00 a.m., San Francisco time, on a Business Day, the Company may from
time to time irrevocably elect, on
(a) not less than three nor more than five Business Days
notice (in the case of continuations of or conversions into LIBO Rate
Loans), or
(b) not less than one nor more than five Business Days
notice (in the case of conversions into Reference Rate Loans)
that all or any portion of any outstanding Revolving Loan be (i) converted into
a LIBO Rate Loan, (ii) converted into a Reference Rate Loan, or (iii) continued
as a LIBO Rate Loan. All conversions of Revolving Loans that are Reference
Rate Loans shall be made pro rata among all such Reference Rate Loans of all
Lenders. All conversions or continuations of Revolving Loans that are LIBO
Rate Loans shall be made pro rata among all such LIBO Rate Loans of all
Lenders. In the absence of delivery of a Continuation/Conversion Notice with
respect to any LIBO Rate Loan within the time periods specified above before
the last day of the then current Interest Period with respect thereto, such
LIBO Rate Loan shall, on such last day, automatically convert to a Reference
Rate Loan. No portion of the outstanding principal amount of any Revolving
Loan may be continued as, or be converted into, a LIBO Rate Loan during the
continuation of any Event of Default. No Swingline Loans may be converted into
a LIBO Rate Loan.
SECTION 3.4.3. Funding. Each Lender may, if it so elects, fulfill
its obligation to make, continue, or convert any LIBO Rate Loan hereunder by
causing one of its foreign branches or Affiliates (or an international banking
facility created by such Lender) to make or maintain such LIBO Rate Loan;
provided, however, that such LIBO Rate Loan shall nonetheless be deemed to have
been made and to be held by such Lender, and the obligation of the Company to
repay such LIBO Rate Loan shall nevertheless be to such Lender for the account
of such foreign branch, Affiliate, or international banking facility. In
addition, the Company hereby consents and agrees that, for purposes of any
determination to be made for purposes of Section 4.2, 4.3, or 4.4, it shall be
conclusively assumed that each Lender elected to fund all LIBO Rate Loans by
purchasing Dollar deposits in the London interbank eurodollar market.
SECTION 3.4.4. Default Rates. During the continuation of any Event
of Default,
(a) the Company shall pay interest (after as well as
before judgment) on the principal amount of all Loans outstanding to
it at a rate per annum which is determined by increasing each of the
interest rates set forth inclauses (a) and (b) of Section 3.4.1 by 2%
per annum;
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(b) the letter of credit fees payable pursuant to clause
(a)(ii) of Section 5.3 shall be increased by 2% per annum for all
Letters of Credit; and
(c) the Company shall pay interest on any other
Obligations which are then due and payable (other than Reimbursement
Obligations which are accruing interest pursuant toSection 5.5) to the
extent permitted by applicable law, at a rate per annum equal to the
Reference Rate plus 3-1/2%.
SECTION 3.4.5. Interest Payment Dates. Interest accrued on each
Loan shall be payable
(a) with respect to Reference Rate Loans, in arrears on
the first day of each month;
(b) with respect to LIBO Rate Loans, (i) except during
the continuance of any Event of Default, on the last day of each
applicable Interest Period and, if such Interest Period shall exceed
three months, on the day which numerically corresponds to the first
day of such Interest Period and falls in the third month thereafter
(or, if there is no such numerically corresponding date, on the last
Business Day of such third month) and (ii) during the continuance of
an Event of Default, in arrears on the first day of each month; and
(c) on that portion of any Loan the Stated Maturity Date
of which is accelerated pursuant to Section 10.2 or Section 10.3,
immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
SECTION 3.4.6. Maximum Interest. It is the intention of the parties
hereto to conform strictly to applicable usury laws and, anything herein or in
any other Loan Document to the contrary notwithstanding, the obligations of the
Obligors to each Lender under this Agreement and the other Loan Documents shall
be subject to the limitation that payments of interest to such Lender shall not
be required to the extent that receipt thereof would be contrary to provisions
of law applicable to such Lender limiting rates of interest which may be
charged or collected by such Lender. Accordingly, if the transactions
contemplated hereby would be usurious under applicable law (including the
federal and state laws of the United States, or of any other jurisdiction whose
laws may be mandatorily applicable) with respect to any Lender then, in that
event, notwithstanding
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anything to the contrary in this Agreement or any other Loan Document, it is
agreed as follows:
(a) the provisions of this Section 3.4.6 shall govern and
control with respect to payments to such Lender;
(b) the aggregate of all consideration which constitutes
interest under applicable law that is contracted for, charged, or
received under this Agreement, under any of the other Loan Documents,
or otherwise in connection with this Agreement or any other Loan
Document by such Lender in respect of any Obligor, shall under no
circumstances exceed the maximum amount of interest allowed by
applicable law (such maximum lawful interest rate, if any, with
respect to such Lender being herein called the "Highest Lawful Rate"),
and any excess shall be credited to such Obligor by such Lender (or,
if such consideration shall have been paid in full, such excess
refunded to such Obligor);
(c) all sums paid, or agreed to be paid, to such Lender
for the use, forbearance, and detention of the Indebtedness of any
Obligor to such Lender hereunder or under the other Loan Documents
shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full term of such
Indebtedness until payment in full so that the actual rate of interest
is uniform throughout the full term thereof;
(d) if at any time the interest provided to be payable to
such Lender pursuant to Section 3.4.1, Section 3.4.4, and Section 5.5,
together with any other fees and additional amounts payable to such
Lender pursuant to this Agreement and the other Loan Documents, and
deemed interest under applicable law, exceeds that amount which would
have accrued at the Highest Lawful Rate, the amount of interest and
any such fees and additional amounts payable to such Lender pursuant
to this Agreement and the other Loan Documents shall be limited,
notwithstanding anything to the contrary in this Agreement or any
other Loan Document, to that amount which would have accrued at the
Highest Lawful Rate, but any subsequent reductions in the interest
rate which would otherwise apply to the Obligations payable to such
Lender, as applicable, shall not reduce the interest to accrue to such
Lender pursuant to this Agreement and the other Loan Documents below
the Highest Lawful Rate until the total amount of interest accrued to
such Lender pursuant to this Agreement and the other Loan Documents,
and such fees and additional amounts deemed to be interest, equals the
sum of (i) the amount of interest which would have accrued to such
Lender if a varying rate per annum equal to the interest provided
pursuant toSection 3.4.1, Section 3.4.4, or Section 5.5, as
applicable, had at all times been in effect, plus (ii) the amount of
fees and additional amounts which
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would have been received but for the effect of this Section 3.4.6; and
(e) if the total amount of interest paid or accrued,
together with any other fees and additional amounts payable pursuant
to this Agreement and the other Loan Documents, and deemed interest
under applicable law, by any Obligor with respect to such Lender
pursuant to this Agreement and the other Loan Documents under the
foregoing provisions of this Section 3.4.6 is less than the total
amount of interest which would have accrued if a varying rate per
annum equal to the interest provided pursuant to Section 3.4.1,
Section 3.4.4, or Section 5.5, as applicable, had at all times been in
effect and all fees and additional amounts provided to be paid to such
Lender in this Agreement and the other Loan Documents had been paid,
any subsequent reductions in the rates per annum provided pursuant
toSection 3.4.1, Section 3.4.4, and Section 5.5, shall not reduce the
interest to accrue pursuant to such Sections below the Highest Lawful
Rate until the total amount of interest accrued thereunder equals the
amount of interest that would have accrued to such Lender thereunder
if the rate provided in Section 3.4.1, Section 3.4.4, or Section 5.5,
as the case may be, had at all times been in effect. If at the date
of termination of this Agreement the total amount of interest and fees
accrued under this Agreement is less than the total amount of interest
that would have accrued if the rates per annum provided in Section
3.4.1, Section 3.4.4, and Section 5.5, as the case may be, had at all
times been in effect then such Obligor agrees to pay to such Lender an
amount equal to the difference between (i) the lesser of (A) the
amount of interest and fees which would have accrued to such Lender if
the Highest Lawful Rate had at all times been in effect, and (B) the
amount of interest and fees which would have accrued if a varying rate
per annum equal to the interest provided pursuant toSection 3.4.1,
Section 3.4.4, or Section 5.5, as applicable, had at all times been in
effect and all fees provided for in this Agreement and the other Loan
Documents to be payable to such Lender had been paid, and (ii) the
amount of interest, fees and additional amounts accrued to such Lender
in accordance with the other provisions of this Agreement and the
other Loan Documents.
For purposes of Article 5069-1.04, Vernon's Texas Civil statutes, as amended,
to the extent, if any, applicable to any Lender, each Obligor agrees that the
Highest Lawful Rate shall be the "indicated (weekly) rate ceiling" as defined
in said Article, provided that each Lender may also rely, to the extent
permitted by applicable laws, on alternative maximum rates of interest under
other laws applicable to such Lender if greater.
SECTION 3.5. Fees. The Company and the Parent Guarantor, jointly
and severally, agree to pay the fees set forth in this Section 3.5.
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SECTION 3.5.1. Commitment Fee. The Company and the Parent
Guarantor, jointly and severally, agree to pay to the Agent for the account of
each Lender, for the period (including any portion thereof when any of its
Commitments are suspended by reason of the Company's inability to satisfy any
condition of Article VII) commencing on the Effective Date and continuing
through the Revolving Commitment Termination Date, a commitment fee at the rate
of 1/2 of 1% per annum on such Lender's Percentage of the sum of the average
daily unused portion of the Revolving Commitment Amount. Such commitment fees
shall be payable by the Company in arrears on each Quarterly Payment Date,
commencing with the first such day following the Effective Date, and on the
Revolving Commitment Termination Date.
SECTION 3.5.2. Audit Fees. The Company and the Parent Guarantor,
jointly and severally, agree to pay to the Agent an audit fee equal to $500 per
day per auditor for each audit of the Collateral undertaken pursuant to Section
9.1.5 and to pay all out-of-pocket expenses of each auditor incurred in
connection with such Collateral audits; provided, however, that, except during
the continuance of an Event of Cash Dominion, the Company and the Parent
Guarantor shall not be required to pay for more than one collateral audit
during any 180-day period and, during the continuance of an Event of Cash
Dominion, shall not be required to pay for more than one collateral audit
during any 90-day period.
SECTION 3.5.3. Other Fees. The Company and the Parent Guarantor,
jointly and severally, agree to pay to the Agent certain other fees set forth
in clause (iii) of the confidential letter dated January 24, 1994 from Bank of
America to the Company (the "Fee Letter") for retention by the Agent as set
forth in the Fee Letter.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. Illegality.
(a) If any Lender shall determine (which determination
shall, upon written notice thereof to the Company and the other
Lenders, be conclusive and binding on the Company) that the
introduction of or any change in (or in the interpretation of) any law
makes it unlawful, or any central bank or other governmental authority
asserts that it is unlawful, for such Lender to make, continue, or
maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan,
the obligations of all Lenders to make, continue, maintain, or convert
any such Loans shall, upon such determination, forthwith be suspended
until such Lender shall notify the Agent that the circumstances
causing such suspension no longer exist, and all LIBO Rate Loans shall
automatically convert into Reference Rate Loans at the end of the then
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current Interest Periods with respect thereto or sooner, if required
by such law or assertion.
(b) If any Lender shall determine (which determination
shall, upon written notice thereof to the Company and the other
Lenders, be conclusive and binding on the Company) that the
introduction of or any change in (or in the interpretation of) any law
makes it unlawful, or any central bank or other governmental authority
asserts that it is unlawful, for such Lender to issue or amend (in the
case of an Issuer Bank) or to participate in (in the case of each
other Lender) any additional Letters of Credit, the obligations of all
Lenders so to issue, amend, or participate in additional Letters of
Credit shall, upon such determination, forthwith terminate, and the
Agent shall, by written notice to the Company and each Lender, declare
that such obligations have so terminated. If circumstances
subsequently change so that such affected Lender shall determine that
it is no longer so affected, such obligations shall, upon such
determination (and telephonic notice thereof immediately confirmed in
writing to the Agent, each other Lender, and the Company), forthwith
be reinstated, and the Agent shall, by written notice to the Company
and each Lender, declare that such obligations have been so
reinstated.
SECTION 4.2. Deposits Unavailable. If the Agent shall have
reasonably determined that
(a) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to Bank of America in the
relevant market; or
(b) by reason of circumstances affecting Bank of
America's relevant market, adequate means do not exist for
ascertaining the interest rate applicable hereunder to LIBO Rate
Loans,
then, upon written notice from the Agent to the Company and the Lenders, the
obligations of all Lenders under Section 2.3 and Section 3.4.2 to make or
continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall
forthwith be suspended until the Agent shall notify the Company and the Lenders
that the circumstances causing such suspension no longer exist.
SECTION 4.3. Increased Costs, etc. The Company agrees to
reimburse each Lender for any increase in the cost to such Lender of, or any
reduction in the amount of any sum receivable by such Lender in respect of,
issuing, maintaining, or participating in the Letters of Credit, or making,
continuing, or maintaining (or of its obligation to make, continue, or
maintain) any Loans as, or of converting (or of its obligation to convert) any
Loans into, LIBO Rate Loans. Such Lender shall promptly notify the Agent and
the Company in writing of the occurrence of any such
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event, such notice to state, in reasonable detail, the reasons therefor and the
additional amount required fully to compensate such Lender for such increased
cost or reduced amount as well as the calculation of such additional amount.
Such additional amounts shall be payable by the Company directly to such Lender
within 15 days of its receipt of such notice, and such notice shall, in the
absence of manifest error, be conclusive and binding on the Company.
SECTION 4.4. Funding Losses. In the event any Lender shall incur
any loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue, or maintain any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan into, a LIBO
Rate Loan) as a result of
(a) any conversion or repayment or prepayment of the
principal amount of any LIBO Rate Loans on a date other than the
scheduled last day of the Interest Period applicable thereto, whether
pursuant toSection 3.1, 3.2, 3.3, or 3.4.2 or otherwise,
(b) any Loans not being made as LIBO Rate Loans in
accordance with the Borrowing Request therefor (other than as a result
of a determination pursuant toSection 4.1 or 4.2), or
(c) any Loans not being continued as, or converted into,
LIBO Rate Loans in accordance with the Continuation/ Conversion Notice
therefor (other than as a result of a determination pursuant to
Section 4.1 or 4.2),
then, upon the written notice of such Lender to the Company (with a copy to the
Agent), the Company shall, within 15 days of its receipt thereof, pay directly
to such Lender such amount as will (in the reasonable determination of such
Lender) reimburse such Lender for such loss or expense. Such written notice
(which shall include calculations in reasonable detail) shall, in the absence
of manifest error, be conclusive and binding on the Company.
SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation, or
phase-in of, any law or regulation, directive, guideline, decision, or request
(whether or not having the force of law) of any court, central bank, regulator,
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lender or any Person controlling
such Lender, and such Lender determines (in its sole and absolute discretion)
that the rate of return on its or such controlling Person's capital as a
consequence of its Commitments or the Credit Extensions (including the
disbursement of Loans and the issuance of or participation in Letters of
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Credit) made by such Lender is reduced to a level below that which such Lender
or such controlling Person could have achieved but for the occurrence of any
such circumstance, then, in any such case upon written notice from time to time
by such Lender to the Company, with a copy to the Agent, the Company shall,
within 15 days of its receipt of such notice, pay directly to such Lender
additional amounts sufficient to compensate such Lender or such controlling
Person for such reduction in rate of return. A statement of such Lender as to
any such additional amount or amounts (including calculations thereof in
reasonable detail) shall, in the absence of manifest error, be conclusive and
binding on the Company. In determining such amount, such Lender may use any
method of averaging and attribution that it (in its sole and absolute
discretion) shall deem applicable, subject in each case to Section 4.12.
SECTION 4.6. Taxes, etc.
(a) All payments by the Company and each other Obligor
to the Agent or any Lender in respect of any Obligation shall be made
without any setoff or counterclaim, and free and clear of and without
deduction or withholding for or on account of, any present or future
Taxes now or hereafter imposed on the Agent or any Lender with respect
to such payments by any governmental or other authority, except to the
extent that such deduction or withholding is compelled by law. As
used herein, the term "Taxes" shall include all excise and other taxes
of whatever nature imposed on the Agent or any Lender with respect to,
or arising out of, such payments or the transactions contemplated
hereby (other than taxes generally assessed on the net income of the
Agent or any Lender, as the case may be, by the government of the
country, or any political subdivision or taxing authority thereof or
therein, in which the Agent or such Lender is incorporated or in which
such Lender's Domestic Office or such Lender's LIBOR Office is
located) as well as all levies, imposts, duties, charges, or fees of
whatever nature. If any Obligor is compelled by law to make any such
deduction or withholding it will:
(i) pay to the relevant authorities the full amount
required to be so withheld or deducted;
(ii) (except to the extent that such deduction or
withholding results from the breach, by the recipient of a
payment, of its agreement contained in clause (b) below, or
would not be required if such recipient's representation and
warranty contained in clause (b) below were true) pay such
additional amounts as may be necessary in order that the net
amount received by the Agent and each Lender, after such
deduction or withholding (including any required deduction or
withholding on such additional amounts) shall equal the
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amount such payee would have received had no such deduction or
withholding been made; and
(iii) promptly forward to the Agent (for delivery to
such payee) an official receipt or other documentation
satisfactory to the Agent evidencing such payment to such
authorities.
Moreover, if any Taxes are directly asserted against the Agent or any
Lender with respect to any payment made in respect of, or arising out
of, any Obligation, such payee may pay such Taxes, and each Obligor
which is obligated to pay such Obligation agrees promptly to pay such
additional amount (including any penalties, interest or expenses) as
may be necessary in order that the net amount received by such payee
after the payment of such taxes (including any Taxes on such
additional amount) shall equal the amount such payee would have
received had no such Taxes been asserted (except to the extent that
such Taxes result from the breach, by such payee, of its agreement
contained inclause (b) below or would not be asserted if such payee's
representation and warranty contained in clause (b) below were true).
For purposes of this Section 4.6, a distribution hereunder by the
Agent or any Lender to or for the account of any Lender shall be
deemed to be a payment by the applicable Obligor.
(b) Each Lender which is a Non-United States Person
agrees (to the extent it is permitted to do so under the laws and any
applicable double taxation treaties of the United States, the
jurisdiction of such Lender's incorporation, and the jurisdictions in
which such Lender's Domestic Office and such Lender's LIBOR Office are
located) to execute and deliver to the Agent for delivery to the
Company, before the first scheduled payment date in each year, either
(i) three United States Internal Revenue Service Forms 1001 or (ii)
three United States Internal Revenue Service Forms 4224 together with
three United States Internal Revenue Service Forms W-9, or any
successor forms, as appropriate, properly completed and claiming
complete or partial, as the case may be, exemption from withholding
and deduction of United States federal Taxes. Each Lender which is a
Non-United States Person represents and warrants to each Obligor and
to the Agent that, at the date of this Agreement, (i) its Domestic
Office and its LIBOR Office are entitled to receive payments of
principal, interest, Reimbursement Obligations, and fees hereunder and
under the other Loan Documents without deduction or withholding for or
on account of any Taxes imposed by the United States or any political
subdivision thereof and (ii) it is permitted to take the actions
described in the preceding sentence under the laws and any applicable
double taxation treaties of the jurisdictions specified in the
preceding sentence. Each Lender which is a Non-United States Person
further agrees
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that, to the extent any form claiming complete or partial exemption
from withholding and deduction of United States federal Taxes
delivered under this clause (b) is found to be incomplete or incorrect
in any material respect, such Lender shall (to the extent it is
permitted to do so under the laws and any double taxation treaties of
the United States, the jurisdiction of its incorporation, and the
jurisdictions in which its Domestic Office and its LIBOR Office are
located) execute and deliver to the Agent a complete and correct
replacement form.
(c) Each Lender agrees to use reasonable efforts to
change its Domestic Office or LIBOR Office to avoid or to minimize any
amounts otherwise payable underclause (a) of this Section 4.6, in each
case solely if such change can be made in a manner so that such
Lender, in its sole determination, suffers no legal, economic, or
regulatory disadvantage.
SECTION 4.7. Payments, Computations, etc.
(a) Unless otherwise expressly provided, all payments by
the Company pursuant to this Agreement or any other Loan Document
shall be made by the Company to the Agent for thepro rata account of
the Lenders entitled to receive such payment. Except for Proceeds
received directly by the Agent, all such payments required to be made
to the Agent shall be made, without setoff, deduction or counterclaim,
not later than 9:30 a.m., San Francisco time, or, with respect to
payments which are to be funded by other Credit Extensions, 10:30
a.m., San Francisco time, in either case on the date due, in same day
or immediately available funds, to such account as the Agent shall
specify from time to time by written notice to the Company. Funds
received after that time shall be deemed to have been received by the
Agent on the next succeeding Business Day. The Agent shall promptly
remit to each Lender such Lender's share, if any, of such payments
received by the Agent not later than 9:30 a.m., San Francisco time, or
10:30 a.m., San Francisco time, as applicable, for the account of such
Lender in same day funds on the day received. If the Agent fails so
to remit such funds to such Lender, the Agent shall pay to such Lender
interest on the amount of such Lender's share of such payments at the
daily average Federal Funds Rate for each day on which such failure
continues excluding the day on which such remittance is made. All
interest and commitment fees shall be computed on the basis of the
actual number of days (including the first day but excluding the last
day) occurring during the period for which such interest or fee is
payable over a year comprised of 360 days. Whenever any payment to be
made shall otherwise be due on a day which is not a Business Day, such
payment shall (except as otherwise required byclause (b) of the
definition of the term Interest Period" with respect to LIBO Rate
Loans) be made
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on the next succeeding Business Day and such extension of time shall
be included in computing interest, if any, in connection with such
payment.
(b) If after receipt of any payment of, or Proceeds
applied to the payment of, all or any part of the Obligations, the
Lenders, the Issuer Bank, or the Agent is for any reason compelled to
surrender such payment or Proceeds to any Person, because such payment
or Proceeds is invalidated, declared fraudulent, set aside, determined
to be void or voidable as a preference, impermissible set off, or a
diversion of trust funds, or for any other reason, the Obligations or
part thereof intended to be satisfied shall be revived and continue
and this Agreement shall continue in full force as if such payment or
Proceeds had not been received by the Lenders, the Issuer Bank, or the
Agent; and the Company shall be liable to the Lenders, the Issuer
Bank, and the Agent, and hereby does indemnify the Lenders, the Issuer
Bank, and the Agent and hold the Lenders, the Issuer Bank, and the
Agent harmless for, the amount of such payment or Proceeds
surrendered. The provisions of this Section 4.7 shall be and remain
effective notwithstanding any contrary action which may have been
taken by the Lenders, the Issuer Bank, and the Agent in reliance upon
such payment or Proceeds, and any such contrary action so taken shall
be without prejudice to the rights of the Lenders, the Issuer Bank,
and the Agent under this Agreement and shall be deemed to have been
conditioned upon such payment or Proceeds having become final and
irrevocable.
SECTION 4.8. Sharing of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff, or otherwise) on account of any Letter of Credit it has issued or in
which it is a participant, or on account of any Loan (other than pursuant to
the terms of Sections 4.3, 4.4, 4.5, and 4.6) in each case in excess of its pro
rata share of payments then or therewith obtained by all Lenders, such Lender
shall purchase from the other Lenders such participations in the Letters of
Credit in which they have participated or they have issued, or in Loans made by
them, as the case may be, as shall be necessary to cause such purchasing Lender
to share the excess payment or other recovery ratably with each of them;
provided, however, that if all or any portion of the excess payment or other
recovery is thereafter recovered from such purchasing Lender, the purchase
shall be rescinded and each Lender which has sold a participation to the
purchasing Lender shall repay to the purchasing Lender the purchase price to
the ratable extent of such recovery together with an amount equal to such
selling Lender's ratable share (according to the proportion of
(a) the amount of such selling Lender's required
repayment to the purchasing Lender
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to
(b) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Company agrees that any Lender
so purchasing a participation from another Lender pursuant to this Section 4.8
may, to the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to Section 4.9) with respect to such participation as fully
as if such Lender were the direct creditor of the Company in the amount of such
participation. If under any applicable bankruptcy, insolvency, or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section 4.8 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent
with the rights of the Lenders entitled under this Section 4.8 to share in the
benefits of any recovery on such secured claim.
SECTION 4.9. Setoff. Each Lender shall, with the prior written
consent of the Required Lenders, during the continuance of any Event of
Default, have the right to appropriate and apply to the payment of the
Obligations owing to it (whether or not then due), and (as security for such
Obligations) the Company hereby grants to each Lender a continuing security
interest in, any and all balances, credits, deposits, accounts, or moneys of
the Company then or thereafter maintained with such Lender, excluding any
specifically designated trust account; provided, however, that any such
appropriation and application shall be subject to the provisions of Section
4.8. Each Lender agrees promptly to notify the Company and the Agent after any
such setoff and application made by such Lender; provided, however, that the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section 4.9 are in addition
to other rights and remedies (including other rights of setoff under applicable
law or otherwise) which such Lender may have.
SECTION 4.10. Use of Proceeds. The Company shall apply the
proceeds of each Loan and shall use each Letter of Credit in accordance with
the fourth recital and for general corporate and working capital purposes of
the Company and its Subsidiaries. No proceeds of any Loan and no Letter of
Credit will be used to purchase or carry (a) any equity security not issued by
the Company of a class which is registered pursuant to Section 12 of the
Securities Exchange Act of 1934, or (b) any "margin stock", as defined in
F.R.S. Board Regulation U.
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SECTION 4.11. Change of Lending Office, Replacement of Lender, etc.
(a) Each Lender agrees that, upon the occurrence of any
event giving rise to the operation of Section 4.1, 4.3, or 4.5 with
respect to such Lender, it will, if requested by the Company and to
the extent permitted by law or by the relevant governmental authority,
in consultation with the Agent, for a period of thirty days use
reasonable efforts in good faith to avoid the illegality or to avoid
or minimize the increase in costs or reduction in payments resulting
from such event (including using reasonable efforts to change its
Domestic Office or LIBOR Office);provided that such avoidance or
minimization can be made in such a manner so that such Lender, in its
sole determination, suffers no legal, economic, or regulatory
disadvantage.
(b) If any Lender (an "Affected Lender") shall make a
determination under Section 4.1 or shall make a demand for payment
under Section 4.3, 4.5, or 4.6, and the Company shall find a Lender or
other entity capable of being an Assignee Lender under Section
12.11.1(an "Eligible Assignee") which offers in writing to
(i) purchase all, but not less than all, Loans of
and Reimbursement Obligations owed (directly or by way of
participation) to such Affected Lender,
(ii) purchase a 100% participation in all
obligations of such Affected Lender in respect of all Letters
of Credit issued or participated in by such Affected Lender,
and
(iii) assume all the Commitments of such Affected
Lender,
in each case without recourse for the full amount thereof on a
specified date, together with accrued and unpaid interest and
commitment fees thereon to the date of purchase, and all other amounts
owing to such Affected Lender hereunder and under the other Loan
Documents, and such Eligible Assignee tenders the purchase price of
such amounts on such specified date, and if, in the sole determination
of such Affected Lender, its acceptance of such offer would be
permitted by law and all relevant governmental authorities and would
not result in any legal, economic, or regulatory disadvantage to such
Affected Lender, then the Company shall be excused from the payment of
any increased costs claimed by such Affected Lender under any of such
Sections accruing after the first interest payment date pursuant to
Section 3.4.5 for each Loan of such Affected Lender on or following
such specified date, if the Affected Lender demanding payment under
any such Section declines such purchase offer. If such Affected
Lender shall accept such purchase offer, upon consummation
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of such purchase in accordance with Section 12.11.1, such Affected
Lender shall cease to be a Lender hereunder. Any reasonable expenses
actually incurred by such Affected Lender or the Agent under
thisSection 4.11 shall be paid by the Company upon delivery to the
Company of a certificate as to the amount of such expenses, which
certificate shall in the absence of manifest error be conclusive and
binding.
SECTION 4.12. Computation of Additional Amounts Due. In
determining any additional amounts due from the Company under Section 4.3, 4.4,
or 4.5 hereof, each Lender shall act reasonably and in good faith and will, to
the extent that the increased costs or reductions in amounts received or
receivable relate to such Lender's loans generally and are not specifically
attributable to the Loans hereunder, use averaging and attribution methods
which are reasonable and equitable and which cover all loans similar to the
Loans made by such Lender whether or not the loan documentation for such other
loans permits such Lender to receive increased costs of the type described in
such Sections of this Agreement.
ARTICLE V
LETTERS OF CREDIT
SECTION 5.1. Requests.
(a) By delivering to the Agent and the relevant Issuer
Bank one or more Revolving L/C Requests on or before 10:00 a.m., San
Francisco time, at least three (or such shorter period as may be
agreed among the Company, the Agent, and such Issuer Bank), but not
more than eight, Business Days before the proposed date of issuance,
the Company may request that such Issuer Bank issue, on any Business
Day on or after the Initial Borrowing Date and prior to the Revolving
Commitment Termination Date, irrevocable standby or commercial letters
of credit for its account (each such letter of credit, as it may be
amended, supplemented, extended, restated, or modified from time to
time, a "Letter of Credit"). Each Letter of Credit and Revolving L/C
Request shall be acceptable as to form, substance, beneficiary, and
purpose to the Agent and such Issuer Bank in their sole and absolute
discretion, and each Letter of Credit shall be used by the Company in
each case solely for the purposes described in Section 4.10.
(b) Upon receipt of a Revolving L/C Request under clause
(a), the Agent shall promptly notify the Lenders in writing thereof.
Each Letter of Credit shall, by its terms:
(i) be issued in a Stated Amount which, (A) when
added to the Letter of Credit Outstandings immediately
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prior to the issuance of such Letter of Credit, would not
exceed $125,000,000;
(ii) be stated to expire on a date (its "Stated
Expiry Date") no later than the tenth Business Day immediately
preceding February 15, 1999;
(iii) on or prior to its Stated Expiry Date, except
as the Issuer Bank thereof and the Agent may otherwise agree
in their sole and absolute discretion,
(A) terminate immediately upon irrevocable
notice to the Issuer Bank thereof from the
beneficiary thereunder that all obligations supported
thereby have been terminated, paid, or otherwise
satisfied in full, and
(B) terminate 30 Business Days after notice to
the beneficiary thereunder from the Issuer Bank
thereof that an Event of Default has occurred and is
continuing;
(iv) not require the Issuer Bank thereof to make
payment to any beneficiary thereof prior to the third Business
Day after a conforming demand for payment is made thereunder;
and
(v) not provide for the presentation of drafts
other than drafts payable at sight; and
(c) The Issuer Bank will make available to the
beneficiary thereunder (with a copy to the Agent) the original of each
Letter of Credit which it issues in accordance with the Revolving L/C
Request therefor and will notify the beneficiary thereof (with a copy
to the Agent) of any extension of the Stated Expiry Date thereof
pursuant toSection 5.2.
(d) On the Initial Borrowing Date, the Existing Letters
of Credit shall automatically be deemed to be Letters of Credit and
shall be subject to all the terms and conditions of this Agreement and
the Company's reimbursement obligations in respect of the Existing
Letters of Credit shall automatically be deemed to have been satisfied
by the incurrence of its Reimbursement Obligations, pursuant to this
Article V, in respect of the Letters of Credit;provided that the Agent
shall have received satisfactory evidence that each issuer of the
Existing Letters of Credit shall have consented to the termination of
such reimbursement obligations in respect of the Existing Letters of
Credit.
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SECTION 5.2. Issuance and Extensions.
(a) Subject to the terms and conditions of this Agreement
(including Article VII), each Issuer Bank shall issue Letters of
Credit in accordance with the Revolving L/C Requests made therefor.
By delivery to an Issuer Bank and the Agent of a Revolving L/C Request
at least three Business Days but not more than 45 days prior to the
Stated Expiry Date of any Letter of Credit, the Company may request
such Issuer Bank to extend the Stated Expiry Date of such Letter of
Credit for an additional period. Unless otherwise directed by the
Agent in accordance with Section 7.2, no Issuer Bank shall issue, or
extend the Stated Expiry Date of, any Letter of Credit if it shall
have received from any Obligor, the Agent, or any Lender actual notice
of a then-continuing Default or of any other failure to satisfy any of
the conditions precedent to Credit Extensions set forth inArticle VII.
(b) Notwithstanding any provision of any Revolving L/C
Request to the contrary, it is understood that in the event of any
conflict between the terms of any such Revolving L/C Request and the
terms of this Agreement, the terms of this Agreement shall control
with respect to events of default, representations and warranties, and
covenants, except that such Revolving L/C Request may provide for
further warranties relating specifically to the transaction or affairs
underlying the relevant Letter of Credit. To the extent that a
Revolving L/C Request is submitted on Bank of America Form
FX-149(7-85), or another form containing language similar to that used
in such form, (i) the term "loan" and the term "advance" shall each be
deemed to refer to the principal amount paid to the beneficiary of any
Letter of Credit pursuant to a demand for payment under such Letter of
Credit, (ii) the "maturity" of each "loan" or "advance" shall be
deemed to be the date on which the Company's Reimbursement Obligation
in respect of the relevant payment under a Letter of Credit becomes
due and payable pursuant toSection 5.6, and (iii) all references to
payments of "loans" or "advances" shall be deemed to be references to
payment of outstanding Reimbursement Obligations. The terms and
conditions of this Agreement shall be deemed to be incorporated by
reference into each Revolving L/C Request regardless of whether
expressly so stated in such Revolving L/C Request.
SECTION 5.3. Fees and Expenses.
(a) The Company agrees to pay to the Agent with respect
to each Letter of Credit,
(i) for the account of the Issuer Bank, a fronting
fee equal to three-eighths of 1% per annum on the average
daily aggregate Letter of Credit Outstandings
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(excluding, however, in the case of fees payable under
thisclause(a)(i), that portion of Letter of Credit Outstandings
constituting Reimbursement Obligations accruing interest pursuant to
Section 5.5), and
(ii) for the account of the Lenders, pro rata
according to their respective Percentages, a letter of credit
fee of 3% per annum (subject to adjustment as provided in
Section 3.4.1 and 3.4.4) on the average daily aggregate Letter
of Credit Outstandings (excluding, however, in the case of
fees payable under this clause (a)(ii), that portion of Letter
of Credit Outstandings constituting Reimbursement Obligations
accruing interest pursuant to Section 5.5) under or with
respect to all Letters of Credit accruing, as to each Letter
of Credit (other than the Existing Letters of Credit), from
and including the date of issuance thereof to and excluding
the earlier of the date such Letter of Credit is drawn in
full, expires, or is terminated and the Revolving Commitment
Termination Date and, as to each Existing Letter of Credit,
from and including the Initial Borrowing Date to and excluding
the earlier of the date such Existing Letter of Credit is
drawn in full, expires, or is terminated and the Revolving
Commitment Termination Date.
(b) Such fronting and letter of credit fees shall be
computed for the actual number of days elapsed on the basis of a 360-
day year and shall be payable in arrears on each Quarterly Payment
Date for the period ending on (but excluding) such Quarterly Payment
Date. The Company further agrees to pay to the Agent for the account
of each Issuer Bank all customary administrative fees and expenses of
such Issuer Bank in connection with the issuance and maintenance of
each Letter of Credit issued by it.
SECTION 5.4. Other Lenders' Participation. Concurrently with the
issuance of each Letter of Credit in accordance with the terms and conditions
of this Agreement, and on the Initial Borrowing Date with respect to the
Existing Letters of Credit, the Issuer Bank thereof shall be deemed to have
sold and transferred to each other Lender, and each other Lender shall be
deemed irrevocably and unconditionally to have purchased and received from such
Issuer Bank, without recourse, representation, or warranty, an undivided
interest and participation, to the extent of such other Lender's Percentage, in
such Letter of Credit and the Company's Reimbursement Obligations with respect
thereto, and each Lender shall, to the extent of its Percentage, be entitled to
receive from such Issuer Bank a ratable portion of the letter of credit fees
received by such Issuer Bank pursuant to clause (a)(ii) of Section 5.3 with
respect to each Letter of Credit. Each Lender shall, to the extent of its
Percentage, be responsible to reimburse promptly such Issuer Bank for
Reimbursement Obligations which have not been reimbursed by the
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Company in accordance with Section 5.5 (other than any Reimbursement
Obligations arising out of any wrongful Disbursement made by such Issuer Bank
as a result of acts or omissions constituting gross negligence or willful
misconduct on the part of such Issuer Bank).
SECTION 5.5. Disbursements.
(a) Each Issuer Bank will notify the Company and the
Agent in writing promptly of the presentment of any demand for payment
under any Letter of Credit issued by such Issuer Bank, together with
notice of the date (the "Disbursement Date") such payment shall be
made. On the terms and subject to the conditions of such Letter of
Credit and this Agreement, the Issuer Bank shall make such payment to
the beneficiary (or its designee) of such Letter of Credit. Prior to
10:30 a.m., San Francisco time, on the Disbursement Date, the Company
will reimburse such Issuer Bank for all amounts which it has disbursed
or is required to disburse under such Letter of Credit on such
Disbursement Date. To the extent such Issuer Bank is not reimbursed
in full in accordance with the foregoing sentence of this clause (a),
the Company's Reimbursement Obligation shall accrue interest at a rate
per annum equal to the Reference Rate from time to time in effect plus
a margin of 3-1/2% per annum, payable on demand.
(b) Upon notice by the Issuer Bank to the Company of any
Disbursement pursuant to clause (a) of this Section 5.5, the Lenders
(including such Issuer Bank) shall, upon satisfaction by the Company
of the conditions in Section 7.2 or the waiver of the conditions
ofSection 7.2 by the Agent as permitted therein, and to the extent
that the Revolving Commitment is then available, fund the
Reimbursement Obligation therefor by making Revolving Loans as
provided inSection 2.1.1 (without giving effect to such Reimbursement
Obligation for purposes of determining the Revolving Commitment
Availability).
SECTION 5.6. Reimbursement. The Company's obligation (a
"Reimbursement Obligation") under Section 5.5 to reimburse an Issuer Bank with
respect to each Disbursement (including interest thereon) shall be absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim, or defense to payment which the Company may have or have had
against a beneficiary or transferee of any Letter of Credit (or any Person or
Persons for whom any such transferee may be acting) or against the Agent or any
Lender, including any defense based upon the failure of any Disbursement to
conform to the terms of the applicable Letter of Credit (if, in the Issuer
Bank's good faith opinion, such Disbursement is determined to be appropriate)
or any non-application or misapplication by the beneficiary of the proceeds of
such Disbursement or the legality, validity, form, regularity, or
enforceability of such Letter of Credit; provided,
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however, that nothing herein shall adversely affect the right of the Company to
commence any proceeding against an Issuer Bank for any wrongful Disbursement
made by such Issuer Bank under a Letter of Credit as a result of acts or
omissions constituting gross negligence or willful misconduct on the part of
such Issuer Bank.
SECTION 5.7. Mandatory Payment to Agent of Letter of Credit
Outstandings. The Company agrees that, upon the occurrence of any event
described in Section 10.2 or any termination of the Commitments pursuant to
Section 10.3, it will immediately, upon written notice from the Agent, acting
at the direction of the Required Lenders, pay to the Agent in Dollars and in
immediately available funds an amount equal to the then aggregate Letter of
Credit Outstandings. Any amounts so received by the Agent pursuant to the
provisions of the foregoing sentence, after application against outstanding
Reimbursement Obligations, shall be deposited by the Agent into the L/C
Collateral Account pursuant to Section 5.8.1.
SECTION 5.8. L/C Collateral Account.
SECTION 5.8.1. Deposit. The Agent shall deposit all funds paid by
the Company to the Agent pursuant to Section 3.3.1 as cash collateral and
Section 5.7 (to the extent required to be deposited in the L/C Collateral
Account) to the credit of a deposit account owned by the Agent (the "L/C
Collateral Account"). As security for the payment of all Obligations, the
Company hereby grants, conveys, assigns, pledges, sets over, and transfers to
the Agent, and creates in the Agent's favor a lien on and security interest in,
all money, instruments, and securities at any time held in or acquired in
connection with the L/C Collateral Account, together with all proceeds thereof,
for the benefit of the Secured Lenders. The Company shall not have any right
to withdraw or to cause the Agent to withdraw any funds deposited in the L/C
Collateral Account. At any time and from time to time, upon the Agent's
request, the Company promptly shall execute and deliver any and all such
further instruments and documents (including financing statements and bond
powers executed in blank) as may be necessary, appropriate, or desirable in the
Agent's judgment to obtain the full benefits (including perfection and
priority) of the security interest created or intended to be created by this
Section 5.8.1 and of the rights and powers herein granted. The Company shall
not create or suffer to exist any Lien on any amounts or investments held in
the L/C Collateral Account other than the Lien granted under this Section
5.8.1.
SECTION 5.8.2. Investment. The Company, no more than three times in
any calendar month, may direct the Agent to invest the funds held in the L/C
Collateral Account (so long as the aggregate amount of such funds exceeds any
relevant minimum investment requirement) in one or more certificates of deposit
issued by the Person which is then acting as Agent or by Bank of
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America, with such maturities as the Company may specify, pending application
of such funds on account of Reimbursement Obligations or on account of other
Obligations, as the case may be. In the absence of any such direction from the
Company, the Agent shall invest the funds held in the L/C Collateral Account in
one or more certificates of deposit issued by the Person which is then acting
as Agent or by Bank of America with maturities not to exceed 30 days, unless
the aggregate amount of such funds which are not then otherwise invested is
less than the smallest certificate of deposit offered by such Person, in which
case the Agent shall have no obligation to invest such funds. All such
investments shall be made in the Agent's name. The Company recognizes that any
losses or taxes with respect to such investments shall be borne solely by the
Company, and the Company agrees to hold the Agent and the Lenders harmless from
any such losses or taxes. Unless the Company otherwise makes direct payment,
the Agent shall liquidate any investment held in the L/C Collateral Account in
order to apply the proceeds of such investment on account of Reimbursement
Obligations (or on account of other Obligations, as the case may be) without
regard to whether such investment has matured and without liability for any
penalties or other fees incurred (with respect to which the Company hereby
fully indemnifies the Agent) as a result of such application.
SECTION 5.8.3. Application of Funds. The Agent shall apply funds in
the L/C Collateral Account (a) on account of Reimbursement Obligations when the
same become due and payable if and to the extent that the Company fails
directly to pay such Reimbursement Obligations, (b) if there are Letter of
Credit Outstandings, and the balance of the L/C Collateral Account exceeds the
aggregate Letter of Credit Outstandings for five consecutive Business Days, on
account of the Obligations (other than Reimbursement Obligations) in such order
as the Agent may elect to the extent of such excess on the day of application,
and (c) after the date on which all Letters of Credit shall have expired and
the Company finally shall have paid in full all outstanding Reimbursement
Obligations, on account of the other Obligations in such order as the Agent may
elect if the Agent shall have received actual notice of the occurrence of an
Event of Default on or before such date which is continuing on such date.
Except in the case described in clause (c) above, the Agent shall release all
funds and transfer all investments remaining in the L/C Collateral Account to
the Company within five Business Days after the date on which all Letters of
Credit shall have expired and the Company finally shall have paid in full all
outstanding Reimbursement Obligations. If the Agent resigns, the outgoing
Agent and the new Agent shall effect a transfer to the new Agent of all of the
outgoing Agent's right, title, and interest in and to the L/C Collateral
Account concurrently with the effectiveness of such resignation.
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SECTION 5.8.4. Fees. The Company shall pay to the Agent fees
customarily charged by the Agent with respect to the maintenance of accounts
similar to the L/C Collateral Account.
SECTION 5.9. Nature of Reimbursement Obligations. The Company
shall assume all risks of the acts, omissions, or misuse of any Letter of
Credit by the beneficiary thereof. Neither any Issuer Bank nor the Agent or
any Lender (except to the extent of its own gross negligence or wilful
misconduct) shall be responsible for:
(a) the form, validity, sufficiency, accuracy,
genuineness, or legal effect of any Letter of Credit or any document
submitted by any party in connection with the application for and
issuance of a Letter of Credit, even if it should in fact prove to be
in any or all respects invalid, insufficient, inaccurate, fraudulent,
or forged;
(b) the form, validity, sufficiency, accuracy,
genuineness, or legal effect of any Instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or
the rights or benefits thereunder or proceeds thereof in whole or in
part, which may prove to be invalid or ineffective for any reason;
(c) failure of the beneficiary to comply fully with
conditions required in order to demand payment under a Letter of
Credit;
(d) errors, omissions, interruptions, or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise; or
(e) any loss or delay in the transmission or otherwise of
any document or draft required in order to make a Disbursement under a
Letter of Credit or of the proceeds thereof.
None of the foregoing shall affect, impair, or prevent the vesting of any of
the rights or powers granted any Issuer Bank, the Agent, or any Lender
hereunder. In furtherance and extension and not in limitation or derogation of
any of the foregoing, any action taken or omitted to be taken by such Issuer
Bank in good faith shall be binding upon the Company and each Lender and shall
not put such Issuer Bank under any resulting liability to the Company or any
Lender, except to the extent incurred by such Issuer Bank's gross negligence or
willful misconduct.
SECTION 5.10. Indemnification by Lenders. The Lenders severally
agree to indemnify each Issuer Bank (acting in its capacity as such) and each
officer, director, employee, agent, and Affiliate of each Issuer Bank
(collectively, the "Issuer Parties" and individually, an "Issuer Party"),
ratably according to their respective Percentages, to the extent not reimbursed
by
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the Company, from and against any and all actions, causes of action, suits,
losses, liabilities, damages, and expenses which may at any time (including at
any time following the payment of any of the Reimbursement Obligations) be
imposed on, incurred by, or asserted against such Issuer Party in any way
relating to or arising out of the issuance of, transfer of, or payment or
failure to pay under any Letter of Credit issued in accordance with the terms
of this Agreement or the use of proceeds of any payment made under any Letter
of Credit issued in accordance with the terms of this Agreement; provided, that
no Lender shall be liable for the payment to such Issuer Party of any portion
of such actions, causes of action, suits, losses, liabilities, damages, and
expenses which have arisen by reason of such Issuer Party's gross negligence or
willful misconduct.
ARTICLE VI
PARENT GUARANTOR
SECTION 6.1. Parent Guaranty. In consideration for the Lenders
extending the Commitments, the Parent Guarantor hereby unconditionally
guarantees, as primary obligor and not merely as surety, the due and punctual
payment and performance of all Obligations of the Company when due according to
their terms (whether by required prepayment, declaration, demand, or
otherwise). The foregoing guaranty is herein referred to as the "Parent
Guaranty".
SECTION 6.2. Renewal, etc. of Obligations; Waiver. The Parent
Guarantor agrees that the Obligations of the Company may be extended or
renewed, in whole or in part, without notice to or further assent from the
Parent Guarantor and that it will remain bound upon the Parent Guaranty
notwithstanding any extension, renewal, or other alteration of any Obligation.
The Parent Guarantor waives presentation to, demand of, payment from, and
protest of any Obligation to the Company and also waives notice of protest for
nonpayment. The obligations of the Parent Guarantor under the Parent Guaranty
shall not be affected by
(a) the failure of the Agent, any Lender, any Issuer
Bank, or any other holder of any Obligation of the Company:
(i) to assert any claim or demand, or to enforce
any right or remedy against the Company under the provisions
of this Agreement or any other Loan Document or otherwise; or
(ii) to exercise any right or remedy against any
other guarantor of any Obligations;
(b) any extension or renewal of any thereof;
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(c) any rescission, waiver, amendment, or modification of
any of the terms or provisions of this Agreement or any other
Transaction Document; or
(d) the release of any of the security held by any Lender
for any Obligations.
The Parent Guarantor further agrees that the Parent Guaranty constitutes a
guaranty of payment when due and not of collection and waives any right to
require that any resort be had by the Agent, any Lender, any Issuer Bank, or
any other holder of any Obligation of the Company to any of the security held
for payment of any Obligation or to any balance of any deposit account or
credit on its books in favor of the Company or any other Person.
SECTION 6.3. No Impairment, etc. The obligations of the Parent
Guarantor under the Parent Guaranty 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 or setoff, counterclaim, recoupment, or termination whatsoever
by reason of the invalidity, illegality, or unenforceability of the Obligations
of the Company or otherwise. Without limiting the generality of the foregoing,
the obligations of the Parent Guarantor under the Parent Guaranty shall not be
discharged or impaired or otherwise affected by the failure of the Agent, any
Lender, or any other holder of any Obligation of the Company to assert any
claim or demand or to enforce any remedy under this Agreement or any other
Transaction Document, by any waiver or modification of any thereof, by any
default, failure, or delay, willful or otherwise, in the performance of the
Obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
the Parent Guarantor, or would otherwise operate as a discharge of the Parent
Guarantor as a matter of law or equity.
SECTION 6.4. Reinstatement; Subrogation. The Parent Guarantor
agrees that the Parent Guaranty 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 the Agent, any Lender, or any other holder of any Obligation of the
Company upon the bankruptcy or reorganization of any Obligor or otherwise. The
Parent Guarantor hereby expressly waives, to the fullest extent permitted by
law, all rights of the Parent Guarantor against the Company, arising out of any
payment by the Parent Guarantor under the Parent Guaranty, or any exercise of
remedies under the Parent Pledge Agreement or the Parent Security Agreement,
whether arising by way of any right of subrogation, contribution,
reimbursement, indemnity, or otherwise and agrees that, if, and to the extent
that, any such rights may not be waived under applicable law, it will
contribute such rights to
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the Company as a capital contribution concurrently with the arising of such
rights.
ARTICLE VII
CONDITIONS TO EXTENSIONS OF CREDIT
SECTION 7.1. Initial Credit Extension. The obligations of the
Lenders and the Issuer Bank to make Credit Extensions on the Initial Borrowing
Date shall be subject to the prior or concurrent satisfaction of each of the
conditions precedent set forth in this Section 7.1.
SECTION 7.1.1. Resolutions, etc. The Agent shall have received from
each Obligor:
(a) a certificate, in form and substance satisfactory to
the Agent and the Lenders, dated the Initial Borrowing Date, of its
Secretary or Assistant Secretary as to
(i) resolutions of its Board of Directors then in
full force and effect authorizing the execution, delivery and
performance of this Agreement and each other Loan Document to
be executed by it;
(ii) the incumbency and signatures of those of its
officers authorized to act with respect to this Agreement, and
each other Loan Document to be executed by it; and
(iii) each of its Organic Documents, certified in a
manner satisfactory to the Agent,
upon which certificate the Agent and each Lender may conclusively rely
until it shall have received a further certificate of the Secretary or
Assistant Secretary of such Obligor canceling or amending such prior
certificate;
(b) a good standing certificate (or other equivalent
document or certificate satisfactory to the Agent and the Lenders)
certified by the secretary of state (or other appropriate government
official) in the jurisdiction of such Obligor's incorporation; and
(c) such other documents (certified, if requested) as the
Agent or any Lender (acting through the Agent) may reasonably request
with respect to any Organic Document.
SECTION 7.1.2. Insurance. The Agent shall have received a
certificate dated as of a recent date from Alexander & Alexander describing the
insurance policies maintained by the Parent Guarantor, the Company and each
Subsidiary of the Company executing a Subsidiary Security Agreement and
certifying that the
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insurance coverage maintained by the Parent Guarantor, the Company and such
Subsidiaries do not differ in any material respect from that described in the
"Insurance Program Review" dated October 1989, prepared by Tillinghast, a copy
of which has been delivered to the Agent and each Lender prior to the date
hereof and the insurance coverage described in such certificate shall be
satisfactory to the Agent and the Lenders. The Agent shall have received
evidence in the form of a certificate of the Company, executed by an Authorized
Officer, that all insurance policies and coverages required pursuant to Section
9.1.4, Section 6(h) of each Security Agreement and Section 1.7 of each Company
Mortgage and Company Deed of Trust are in effect, together with certificates of
insurance in form and substance satisfactory to the Agent, including evidence
satisfactory to the Agent that the Agent has been named as loss payee under
such policies as and to the extent required by each Security Agreement and each
Company Mortgage and Company Deed of Trust.
SECTION 7.1.3. Payment of Outstanding Indebtedness. Each item of
Indebtedness of the Company identified in Item 1 ("Indebtedness to be Paid") of
the Disclosure Schedule, together with all interest accrued thereon and all
prepayment premiums and other amounts payable in connection therewith, shall
have been paid in full or fully defeased. Each other item of Indebtedness of
the Company or of the Parent Guarantor shall have been disclosed in Item 4
("Ongoing Indebtedness") of the Disclosure Schedule or shall otherwise be
permitted by Section 9.2.2, and each holder whose Indebtedness is secured
(a) shall be designated in such Item 4 with an asterisk;
and
(b) unless the Agent and the Required Lenders shall have
otherwise agreed in writing, shall have released all of its Liens
(other than Liens permitted bySection 9.2.3) securing such
Indebtedness, and the Agent shall have received all UCC-3 termination
statements or other Instruments as shall be suitable or appropriate in
connection with such release.
In addition, the Agent shall have received evidence, satisfactory to the Agent,
that each issuer of the Existing Letters of Credit shall have consented to the
termination of the Company's reimbursement obligations in respect of the
Existing Letters of Credit.
SECTION 7.1.4. Parent Pledge Agreement. The Agent shall have
received the Parent Pledge Agreement, dated the Initial Borrowing Date, duly
executed by the Parent Guarantor and the Agent, and the Agent shall have
received
(a) the certificates evidencing all of the issued and
outstanding shares of capital stock of the Company owned by
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the Parent Guarantor (accompanied by undated stock powers duly
executed in blank) and
(b) any promissory notes or other debt instruments
required to be delivered pursuant to the Parent Guarantor Pledge
Agreement, endorsed (which endorsement may be on an allonge) to the
order of the Agent.
SECTION 7.1.5. Company Pledge Agreement. The Agent shall have
received the Company Pledge Agreement, dated the Initial Borrowing Date, duly
executed by the Company and the Agent, and the Agent shall have received
(a) the certificates evidencing (i) all of the issued and
outstanding shares of capital stock of each Domestic Subsidiary of the
Company which is listed on Schedule I attached hereto, and (ii) the
percentage of the issued and outstanding shares of capital stock of
each corporation listed on suchSchedule I which is not a Domestic
Subsidiary set forth opposite the name of such corporation, which
certificates shall in each case be accompanied by undated stock powers
duly executed in blank;
(b) the KT Note, duly executed by the Parent Guarantor
and endorsed to the order of the Agent; and
(c) all promissory notes or other debt instruments held
by the Company which have a face amount in excess of $100,000, in each
case endorsed (which endorsement may be on an allonge) to the order of
the Agent.
SECTION 7.1.6. Security Agreements. The Agent shall have received
the Parent Security Agreement, duly executed by the Parent Guarantor and the
Agent, the Company Security Agreement, duly executed by the Company and the
Agent, and the Subsidiary Security Agreement, duly executed by each Subsidiary
of the Company which is listed on Schedule IV hereto and the Agent, in each
case dated the Initial Borrowing Date, and the Agent shall have received
(a) duly executed financing statements (Form UCC-1),
naming the Parent Guarantor, the Company, or such Subsidiary, as the
case may be, as the debtor and the Agent as the secured party, or
other similar instruments or documents, suitable for filing under the
Uniform Commercial Code of all jurisdictions as may be necessary or,
in the reasonable opinion of the Agent, desirable to perfect the
security interests of the Agent in the Collateral granted pursuant to
the Security Agreements (other than fixtures which are not attached to
the real property covered by a Company Mortgage or Company Deed of
Trust) to the extent that perfection may be accomplished by filing
under the Uniform Commercial Code in any state in the United States or
the District of Columbia; and
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(b) with such exceptions as may have been approved by the
Agent, certified copies of Requests for Information or Copies (Form
UCC-11) (or similar search reports certified by a party reasonably
acceptable to the Agent), dated a date reasonably near the Initial
Borrowing Date, listing all effective financing statements which name
the Parent Guarantor, the Company, or any such Subsidiary (under any
present name and any previous names) as debtor and which are filed in
the jurisdictions in which filings were or are to be made pursuant to
clause (a), together with copies of such financing statements (none of
which, other than those relating to Liens described inItem 9
("Continuing Mortgages and Security Interests") of the Disclosure
Schedule, those for which executed copies of proper termination
statements (Form UCC-2 or Form UCC-3) have been delivered to the Agent
and those as to which the Agent shall have approved an exception to
this provision, shall cover any Collateral described in the Security
Agreements).
SECTION 7.1.7. Company Trademark Security Agreement; Company Patent
Security Agreement. The Agent shall have received the Company Trademark
Security Agreement and the Company Patent Security Agreement, in each case duly
executed by the Company and the Agent and dated the Initial Borrowing Date.
SECTION 7.1.8. Company Mortgages; Company Deeds of Trust. The Agent
shall have received Company Mortgages or Company Deeds of Trust, as required by
the Agent, duly executed by the Company, with respect to the real property
listed on Schedule II hereto, together with
(a) evidence of the completion of all recordings and
filings of the Company Mortgages and the Company Deeds of Trust as may
be necessary or, in the reasonable opinion of the Agent, desirable to
effectively create a valid, perfected, first-priority mortgage or deed
of trust Lien on, and security interest in, the properties purported
to be covered thereby (or evidence that provision entirely
satisfactory to the Agent and its counsel for the recording and filing
thereof and for the payment of all fees, taxes, and other expenses in
connection therewith has been made);
(b) with respect to each piece of real property covered
by a Company Mortgage or a Company Deed of Trust, one ALTA (except
with respect to real property in Texas which shall be governed by a
TLTA policy) lender's form title insurance policy in form reasonably
satisfactory to the Agent, insuring that on the Effective Date, the
Company owns a fee interest in the real property and that the Company
Mortgage or Company Deed of Trust, as the case may be, is a valid,
perfected, first-priority Lien on the real property, which policies
shall be issued to the Agent in amounts reasonably satisfactory to the
Agent by a title insurance company reasonably satisfactory to the
Agent in an
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aggregate amount of $125,000,000 for all such policies covering all
such properties, which amount shall be allocated to such properties as
set forth onSchedule II hereto, and each reinsured in amounts and with
insurance companies as reasonably required by the Agent, subject to no
exceptions other than such exceptions as are acceptable to the Agent,
and containing endorsements in form and substance satisfactory to the
Agent and the Lenders;provided, however, during the term of the Loan,
the Agent and the Lenders may require other endorsements to the title
insurance policies as may reasonably be required by any amendments to
this Agreement, in connection with any release of any real property
from the Lien of any Company Mortgage or Company Deed of Trust or any
surrender of any Company Mortgage or Company Deed of Trust;
(c) legible copies of all recorded documents noted as
exceptions in such title insurance policies;
(d) certified copies of all leases (including ground
leases) and, as to certain properties identified by the Agent, other
contracts materially affecting such real property, as requested by the
Agent or any Lender (acting through the Agent);
(e) certified rent rolls as to each property in a form
and scope satisfactory to the Agent;
(f) certified copies of all licenses, approvals, and
permits (including certificates indicating that certificates of
occupancy were issued) from federal, state, local, and other
governmental authorities materially affecting such real property that
are reasonably requested by the Agent or any Lender (acting through
the Agent);
(g) affidavits from the Company satisfactory to title
insurers; and
(h) such other approvals, consents, waivers, opinions
(including opinions of local counsel to the Company as to the
compliance of the mortgaged properties with zoning restrictions or
documents as the Agent or any Lender (acting through the Agent) may
reasonably request.
SECTION 7.1.9. Subsidiary Guaranty. The Agent shall have received
the Subsidiary Guaranty, dated the Initial Borrowing Date, duly executed by
each Subsidiary of the Company which is listed on Schedule III hereto.
SECTION 7.1.10. Subsidiary Pledge Agreement. The Agent shall have
received the Subsidiary Pledge Agreement, dated the Initial Borrowing Date,
duly executed by each Subsidiary of the
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Company listed on Schedule IV hereto and by the Agent, and the Agent shall have
received
(a) the certificates evidencing all of the shares of
capital stock required to be pledged pursuant to the Subsidiary Pledge
Agreement, which certificates shall in each case be accompanied by
undated stock powers duly executed in blank;
(b) each Intercompany Demand Note held by each such
Subsidiary, endorsed to the order of the Agent by such Subsidiary; and
(c) all promissory notes or other debt instruments held
by each such Subsidiary which have a face amount in excess of
$100,000, in each case endorsed (which endorsement may be on
anallonge) to the order of the Agent.
SECTION 7.1.11. Intercompany Note Pledge Agreement. The Agent shall
have received the Intercompany Note Pledge Agreement, dated the Initial
Borrowing Date, duly executed by each Subsidiary of the Company listed on
Schedule VII hereto which is not otherwise a party to the Subsidiary Pledge
Agreement and by the Agent, and the Agent shall have received each Intercompany
Demand Note held by each such Subsidiary, endorsed to the order of the Agent.
SECTION 7.1.12. Opinions of Counsel. The Agent shall have received
opinions, dated the Initial Borrowing Date and addressed to the Agent and all
Lenders, from
(a) Kramer, Levin, Naftalis, Nessen, Kamin & Frankel,
special outside counsel to the Obligors, in substantially the form of
Exhibit L-1 attached hereto;
(b) Anthony R. Pierno Esq., general counsel of the
Company, in substantially the form of Exhibit L-2 attached hereto;
(c) Andrew Barley, Esq., special patent and trademark
counsel to the Obligors, in substantially the form of Exhibit L-3
attached hereto;
(d) the local counsel listed in Schedule X hereto, in
substantially the forms set forth in Exhibit L-4 attached hereto; and
(e) O'Melveny & Myers, counsel to the Agent, in
substantially the form of Exhibit L-5 attached hereto.
SECTION 7.1.13. Closing Fees, Expenses, etc. The Agent shall have
received for its own account all fees, costs, and expenses due and payable
pursuant to Sections 3.5.3 and 12.3, if then invoiced.
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SECTION 7.1.14. Environmental Reports. The Agent shall have received
the Environmental Reports, in form, scope and substance satisfactory to all
Lenders, with respect to substantially all of the domestic real property owned
by the Company or any of its Subsidiaries.
SECTION 7.1.15. Investment Account Letter. The Agent shall have
received a letter, in substantially the form of Exhibit N attached hereto, with
such changes as may be approved by the Agent, duly executed by each Person with
which the Company maintains any account for investment in Cash Equivalent
Investments permitted hereunder.
SECTION 7.1.16. Sufficient Quantities, etc. The Agent shall have
received duly executed multiple original counterparts of each Loan Document
required to be executed and delivered pursuant to this Section 7.1 (other than
financing or termination statements, stock certificates or stock powers, and
such other documents where the Agent has not required delivery of counterparts)
for the Agent and each Lender together with such additional executed
counterparts as the Agent may reasonably request for filing or recordation
purposes.
SECTION 7.1.17. Availability. Following the making of the initial
Loans on the Initial Borrowing Date, the Revolving Commitment Availability
(calculated as though the Existing Letters of Credit were issued on the Initial
Borrowing Date) shall be at least $180,000,000.
SECTION 7.1.18. Issuance of Senior Debt and Equity. The Company
shall have issued the Senior Debt and the Parent Guarantor shall have issued
Parent Guarantor Preferred Stock, the aggregate gross proceeds of which shall
be at least $250,000,000. In addition, the Parent Guarantor shall have made a
capital contribution to the Company, purchased shares of capital stock of the
Company or made an intercompany loan to the Company, or any combination
thereof, in an aggregate amount equal to the cash proceeds received by the
Parent Guarantor from the issuance of such Parent Guarantor Preferred Stock,
net of all underwriting discounts and commissions and all legal, accounting and
other fees and expenses incurred in connection with the public offering of such
Parent Guarantor Preferred Stock. The Agent shall have received certificates
in substantially the form of Exhibit C-1 and C-2 attached hereto, dated the
Initial Borrowing Date, of an Authorized Officer of the Company as to the
satisfaction of the conditions set forth in this Section 7.1.18.
SECTION 7.1.19. Cash Management Arrangements. The Agent shall have
received each Collection Bank Agreement and the Concentration Bank Agreement,
duly executed by the Company, and, respectively, each Collection Bank, and Bank
of America, as concentration bank, together with such other documents,
releases, and agreements as reasonably required by the Agent or any Lender
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(acting through the Agent) in connection with perfecting its Lien in the
accounts established thereby.
SECTION 7.2. All Credit Extensions. The obligation of each
Lender to fund any Loan on the occasion of any Borrowing (including the initial
Borrowing), the obligation of Business Credit to fund any Swingline Loan, and
the obligation of any Issuer Bank to issue any Letter of Credit, as the case
may be, shall, except as provided in Section 2.1.3(b), be subject to the prior
or concurrent satisfaction (or waiver) of each of the conditions precedent set
forth in this Section 7.2. Notwithstanding the foregoing, the Lenders
acknowledge and agree that during the continuance of an Event of Cash Dominion,
in the event that the Agent, acting in its sole and absolute discretion, has
given notice of its election under the Concentration Bank Agreement to have
funds in the Concentration Account applied to repay Revolving Credit
Outstandings, (a) the Agent, acting in its sole and absolute discretion,
pursuant to Section 12.1, may waive the conditions of this Section 7.2 and
continue to make Revolving Loans and Swingline Loans, provided that the
Revolving Credit Outstandings after giving effect to such Loans do not exceed
the Borrowing Base, and instruct the applicable Issuer Bank to issue Letters of
Credit notwithstanding the existence of a Default and (b) if the Agent, acting
in its sole and absolute discretion, has determined that it is in the best
interests of the Lenders to continue to fund, the Lenders shall be obligated to
continue to make Revolving Loans and to reimburse the Agent for Swingline Loans
and shall be deemed to have purchased and received an undivided interest in
Letters of Credit made or issued after the giving of such notice by the Agent
of its election under the Concentration Bank Agreement unless and until the
Agent receives written instructions from the Required Lenders to cease making
Swingline Loans and Revolving Loans and instructing Issuer Banks to issue
Letters of Credit.
SECTION 7.2.1. Compliance with Warranties, No Default, etc. Both
immediately before and immediately after giving effect to any Credit Extension
(but, if any default of the nature referred to in Section 10.1.5 shall have
occurred with respect to any other Indebtedness, without giving effect to the
application, directly or indirectly, of the proceeds of such Credit Extension)
the following statements shall be true and correct:
(a) the representations and warranties set forth in
Article VIII (excluding, however, in the case of Borrowings other than
the Borrowing made on the Initial Borrowing Date, those contained
inSections 8.8 and 8.13 and the last sentence of Section 8.12) and in
each of the other Loan Documents shall be true and correct in all
material respects with the same effect as if then made (unless stated
to relate solely to an earlier date, in which case such
representations and warranties shall be true and correct in all
material respects as of such earlier date), except that
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after the Initial Borrowing Date, for purposes of thisclause (a), the
words "has a reasonable possibility of having a Materially Adverse
Effect" which appear in Sections 8.7 and 8.10 shall be deemed to read
"could reasonably be expected to have a Materially Adverse Effect" and
the words "has no reasonable possibility of having a Materially
Adverse Effect" which appear in Section 8.1 shall be deemed to read
"could not reasonably be expected to have a Materially Adverse
Effect";
(b) except as disclosed by the Company to the Agent and
the Lenders in Item 3 ("Litigation") or Item 8 ("Environmental
Matter") of the Disclosure Schedule or in the Environmental Reports
(i) no labor controversy, litigation, arbitration,
or governmental proceeding, or governmental investigation
known to the Company's Executive Officers (including any
litigation or governmental proceeding or such governmental
investigation with respect to any environmental matter) shall
be pending or, to the knowledge of the Company's Executive
Officers, after due inquiry, threatened against the Parent
Guarantor, the Company, or any of their Subsidiaries which has
a reasonable possibility of having a Materially Adverse Effect
or which purports to affect the legality, validity, or
enforceability of this Agreement, or any other Transaction
Document; and
(ii) no development shall have occurred in any labor
controversy, litigation, arbitration, or governmental
proceeding, or governmental investigation known to the
Company's Executive Officers (including any litigation or
governmental proceeding or such governmental investigation
with respect to any environmental matter) disclosed in Item 3
("Litigation") or Item 8 ("Environmental Matters") of the
Disclosure Schedule or in the Environmental Reports which has
a reasonable possibility of having a Materially Adverse
Effect;
provided, however, that after the Initial Borrowing Date, the words
"has a reasonable possibility of having a Materially Adverse Effect"
which appear inclauses (i) and (ii) of this clause (b) shall be deemed
to read "could reasonably be expected to have a Materially Adverse
Effect"; and
(c) no Default shall have then occurred and be
continuing; and neither the Parent Guarantor, the Company, any of
their Subsidiaries, nor any other Obligor shall be in violation of any
law, governmental regulation, or court order or decree where such
violation has a reasonable possibility of having a Materially Adverse
Effect;provided,
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howeve, that after the Initial Borrowing Date, the words "has a
reasonable possibility of having a Materially Adverse Effect" which
appear in this clause (c) shall be deemed to read "could reasonably be
expected to have a Materially Adverse Effect".
SECTION 7.2.2. Credit Request; Borrowing Base Certificate. The
Agent shall have received a Credit Request, and, in connection with any request
for any Revolving Loan or the issuance of any Letter of Credit other than
during the continuance of an Event of Cash Dominion, a Borrowing Base
Certificate delivered pursuant to Section 2.4.1 for such Credit Extension. The
delivery of a Credit Request and the acceptance by the Company of the proceeds
of such Credit Extension shall constitute a representation and warranty by the
Company that, on the date of such Credit Extension (both immediately before and
after giving effect to such Credit Extension and the application of the
proceeds thereof), except as contemplated by the last sentence of Section 7.2,
the statements made in Section 7.2.1 are true and correct.
SECTION 7.2.3. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Parent Guarantor, the Company,
any of the Company's Subsidiaries, or any other Obligor shall be reasonably
satisfactory in form and substance to the Agent and its counsel and the Agent
and its counsel shall have received all information, approvals, opinions,
documents, or instruments as the Agent or its counsel may reasonably request.
SECTION 7.3. Conditions Subsequent. Within 60 days of the
Effective Date, the Collection Bank Agreements and the Concentration Bank
Agreement shall be amended to provide for such procedures and protections as
the Agent reasonably requests related to the occurrence of an Event of Cash
Dominion and the Company, each Collection Bank and Bank of America shall have
executed such other documents, releases, and agreements as reasonably required
by the Agent.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Agent to enter into this
Agreement, and to induce the Lenders to extend their Commitments and to make
Credit Extensions hereunder, the Parent Guarantor represents and warrants (and
the Company, to the extent that any such representation and warranty shall be
applicable to the Company, its Subsidiaries, or any of its or their Properties,
also represents and warrants) unto the Agent and each Lender as set forth in
this Article VIII.
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SECTION 8.1. Organization, etc. Each of the Obligors, the
Canadian Subsidiaries, VALCO, QAL, Anglesey, ALPART, KJBC, and each other
Significant Subsidiary of the Company is a corporation, partnership, or other
entity validly organized and existing and (in the case of non-Domestic
Subsidiaries and Joint Venture Affiliates, to the extent that "good standing"
is recognized under applicable law) in good standing under the laws of the
jurisdiction of its incorporation or organization, as the case may be; is duly
qualified to do business and (in the case of non-Domestic Subsidiaries and
Joint Venture Affiliates, to the extent that "good standing" is recognized
under applicable law) in good standing as a foreign corporation, partnership,
or other entity in each jurisdiction where the nature of its business or
activities requires such qualification; and has full corporate, partnership, or
other organizational power and authority and holds all requisite governmental
licenses, permits, and other approvals to own, lease, and operate its
Properties and to conduct its business substantially as now being operated and
conducted, except where the failure to be so qualified and in good standing or
to have such power, authority, licenses, permits, and other approvals has no
reasonable possibility of having a Materially Adverse Effect. The Parent
Guarantor, the Company, each Subsidiary of the Company, and each Obligor (a)
has full corporate power and authority to enter into and perform its respective
obligations under this Agreement, and the other Loan Documents and (b) holds
all requisite governmental licenses, permits, and other approvals to enter into
and perform its respective obligations under this Agreement, and the other Loan
Documents.
SECTION 8.2. Due Authorization, Non-Contravention, etc. The
execution, delivery, and performance by each Obligor of the Loan Documents to
which such Obligor is a party are within such Obligor's corporate powers, have
been duly authorized by all necessary corporate action, and do not
(a) contravene such Obligor's Organic Documents;
(b) contravene any contractual restriction where such a
contravention has a reasonable possibility of having a Materially
Adverse Effect, or contravene any law or governmental regulation or
court decree or order binding on or affecting such Obligor; or
(c) result in, or require the creation or imposition of,
any Lien on any of such Obligor's properties, other than pursuant to
the Loan Documents.
SECTION 8.3. Government Approval, Regulation, etc. No
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body or other Person is required for
the due execution, delivery, or performance by any Obligor of any Loan Document
to which it is a party, except for the filing or recording of financing
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statements, the Company Mortgages, Company Deeds of Trust, Company Patent
Security Agreement, Company Trademark Security Agreement, any actions required
outside of the United States (with respect to Collateral located outside of the
United States or Collateral consisting of stock of foreign issuers), notations
on documents of title, and actions required under the Federal Assignment of
Claims Act of 1940 in order to perfect the security interests of the Agent in
the Collateral. None of the Parent Guarantor, the Company, or any of their
Subsidiaries is subject to regulation as an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or is a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate"
of a "holding company" or of a "subsidiary company" of a "holding company",
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
SECTION 8.4. Validity, etc. This Agreement, and all other Loan
Documents executed by the Company will, on the due execution and delivery
hereof and thereof by all parties hereto and thereto, constitute the legal,
valid, and binding obligations of the Company enforceable against the Company
in accordance with their respective terms; this Agreement and each other Loan
Document executed by the Parent Guarantor will, on the due execution hereof and
thereof by all parties hereto and thereto, constitute the legal, valid, and
binding obligations of the Parent Guarantor enforceable against the Parent
Guarantor in accordance with their respective terms; and each Loan Document
executed pursuant hereto by each other Obligor will, on the due execution and
delivery thereof by such Obligor and by all other parties thereto, constitute
the legal, valid, and binding obligation of such Obligor enforceable against
such Obligor in accordance with its terms; in each case, however, except as
enforceability may be limited by bankruptcy, insolvency, or other similar laws
of general application relating to or affecting the enforcement of creditors'
rights generally, and by general principles of equity.
SECTION 8.5. Financial Information.
(a) The consolidated balance sheet of the Company and its
Subsidiaries as of December 31, 1992 and the related statements of
consolidated income and consolidated cash flows for the year then
ended present fairly the financial position of the Company and its
Subsidiaries at December 31, 1992 and the results of their operations
and their cash flows for the year then ended in conformity with GAAP.
The consolidated balance sheet of the Company and its Subsidiaries as
of September 30, 1993 and the related statements of consolidated
income and consolidated statement of cash flows for the nine months
then ended present fairly (subject to normal year-end adjustments) the
financial position of the Company and its Subsidiaries at September
30, 1993 and the results of their operations and their cash
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flows for the nine months then ended in conformity with GAAP for
interim financial information.
(b) The consolidated balance sheet of the Parent
Guarantor and its Subsidiaries as of December 31, 1992 and the related
statements of consolidated income and consolidated cash flows for the
year then ended present fairly the financial position of the Parent
Guarantor and its Subsidiaries at December 31, 1992 and the results of
their operations and their cash flows for the year then ended in
conformity with GAAP. The consolidated balance sheet of the Parent
Guarantor and its Subsidiaries as of September 30, 1993 and the
related statements of consolidated income and consolidated statement
of cash flows for the nine months then ended present fairly (subject
to normal year-end adjustments) the financial position of the Parent
Guarantor and its Subsidiaries at September 30, 1993 and the results
of their operations and their cash flows for the nine months then
ended in conformity with GAAP for interim financial information.
(c) The financial statements and projections of the
Company dated December 28, 1993 and January 26, 1994 were prepared on
the basis of the estimates and assumptions stated therein and
represented, at each such date, the Company's good faith forecasts and
projections of its future financial performance prepared after duly
diligent investigations; such estimates, assumptions, projections, and
forecasts were fair and reasonable, and reflected the Company's
estimates of the most likely future financial results and condition of
the Company, in the light of business conditions existing at the date
thereof; and any such estimates, assumptions, projections, and
forecasts, if prepared as of the date of this Agreement, would contain
estimates of the future financial performance of the Company which
would not materially and adversely differ from the respective
estimates contained in the financial projections and forecasts. As of
the date hereof and, in connection with the initial Credit Extension,
as of the Initial Borrowing Date, no material developments have
occurred since January 26, 1994 which would lead the Company to
believe that such projections and forecasts, taken as a whole, are not
reasonably attainable, subject to the uncertainties and approximations
inherent in any projections. It is understood by the Agent and the
Lenders that all of the estimates and assumptions on which such
projections and forecasts are based may not prove to be correct, that
actual future financial performance may vary from that projected, and
that nothing contained in this clause (c) shall be construed as a
warranty, or guarantee, of future financial performance.
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SECTION 8.6. No Material Adverse Effect.
(a) For purposes of Credit Extensions to be made on the
Initial Borrowing Date, no event or events have occurred since
September 30, 1993 which, individually or in the aggregate, have had
or have a reasonable possibility of having a Materially Adverse
Effect.
(b) For purposes of Credit Extensions requested to be
made after the Initial Borrowing Date, no event or events have
occurred since the Initial Borrowing Date which, individually or in
the aggregate, have had or could reasonably be expected to have a
Materially Adverse Effect.
SECTION 8.7. Absence of Default or Violation of Law. No Obligor
nor any Subsidiary thereof is (a) in default in the payment of (or in the
performance of any material obligation applicable to) any Indebtedness
outstanding in a principal amount exceeding $10,000,000 or (b) in violation of
any law, governmental regulation, or court decree or order where such violation
has a reasonable possibility of having a Materially Adverse Effect.
SECTION 8.8. Litigation, etc. There is no pending or, to the
knowledge, after due inquiry, of the Executive Officers of the Parent Guarantor
or the Company, threatened labor controversy, litigation, action, or proceeding
affecting the Parent Guarantor, the Company, or any of their Subsidiaries or
Joint Venture Affiliates, or any of their respective Properties, or revenues,
which has a reasonable possibility of having a Materially Adverse Effect or
which purports to affect the legality, validity, or enforceability of this
Agreement, or any other Loan Document, except as disclosed in Item 3
("Litigation") or Item 8 ("Environmental Matters") of the Disclosure Schedule
or in the Environmental Reports.
SECTION 8.9. Subsidiaries.
(a) The Parent Guarantor has no Subsidiaries except the
Company and its Subsidiaries. The Company has no Subsidiaries, except
those Subsidiaries
(i) which are identified in Item 2 ("Existing
Subsidiaries") of the Disclosure Schedule; or
(ii) which have been formed or acquired in
accordance with Section 9.2.5 or 9.2.10.
(b) Other than as set forth in Schedule XI hereto, as of
the Initial Borrowing Date neither the Parent Guarantor nor the
Company has any Subsidiaries having total assets greater than
$1,000,000 (exclusive of assets eliminated in consolidation) other
than those Subsidiaries set forth in Schedules III, IV and VII hereto.
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SECTION 8.10. Ownership of Properties.
(a) The Parent Guarantor, the Company, and each of their
Subsidiaries owns good title to all of its Properties, of any nature
whatsoever, which are material to the Parent Guarantor, the Company,
and their Subsidiaries as a whole or which, in the case of Properties
owned by the Company or any of its Significant Subsidiaries, are
material to the Company or such Significant Subsidiary, in each case
free and clear of all Liens or material claims except for "Permitted
Exceptions" (as defined in the Company Mortgages and Company Deeds of
Trust) or as permitted pursuant toSection 9.2.3.
(b) The Parent Guarantor, the Company, and each of their
Subsidiaries owns (or is licensed to use) and possesses all such
patents, trademarks, trade names, service marks, and copyrights as the
Parent Guarantor and the Company consider necessary for the conduct of
its business and the business of its Subsidiaries as now conducted
without, individually or in the aggregate, any infringement or alleged
infringement upon rights of other Persons which has a reasonable
possibility of having a Materially Adverse Effect.
SECTION 8.11. Taxes. The Parent Guarantor, the Company, and each
of their Domestic Subsidiaries and their other Significant Subsidiaries have
filed all federal, state, and all other material tax returns and reports
required by law to have been filed by it and have paid or caused to be paid all
material taxes and governmental charges thereby shown to be owing, except any
such taxes or charges which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
have been set aside on its books.
SECTION 8.12. Pension and Welfare Plans. During the
twelve-consecutive-month period prior to the date of the execution and delivery
of this Agreement and prior to the date of each Credit Extension hereunder, no
actions have been taken by the Parent Guarantor, the Company, any member of
their Controlled Groups, or any other Person (with the requisite authority to
act) to terminate any Pension Plan that has insufficient assets to satisfy all
benefit liabilities thereunder (within the meaning of Section 4001(a)(16) of
ERISA), and no contribution failure has occurred with respect to any Pension
Plan sponsored or maintained by any Controlled Group member sufficient to give
rise to a Lien on assets of any Controlled Group member under section 302(f) of
ERISA, which failure has not been cured within 30 days of the applicable due
date. With respect to any Pension Plan, neither the Parent Guarantor, the
Company, nor any of their Subsidiaries has failed in any material respect to
comply with applicable provisions of ERISA and the Code and any regulations,
rulings, or notices issued thereunder. Item 7 ("Employee Benefit Plans") of
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the Disclosure Schedule lists all Welfare Plans of the Parent Guarantor, the
Company, or any of their Domestic Subsidiaries and sets forth the Company's
estimate of the expected aggregate contributions of the Parent Guarantor, the
Company, and their Domestic Subsidiaries to Pension Plans for the 1992 and 1993
Fiscal Years and the aggregate expected costs of the Parent Guarantor, the
Company and their Domestic Subsidiaries for medical benefits for the 1992 and
1993 Fiscal Years under Welfare Plans.
SECTION 8.13. Environmental Warranties. Except as set forth in
Item 8 ("Environmental Matters") of the Disclosure Schedule or in the
Environmental Reports:
(a) all facilities and Property (including underlying
groundwater) owned, operated, or leased by the Parent Guarantor, the
Company, or any of their Subsidiaries have been, and continue to be,
owned, operated, or leased by the Parent Guarantor, the Company, and
their Subsidiaries in material compliance with all Environmental Laws;
(b) there are no pending or, to the knowledge of the
Parent Guarantor's or the Company's Executive Officers, after due
inquiry, threatened
(i) claims, complaints, notices, or requests for
information received by the Parent Guarantor, the Company, or
any of their Subsidiaries, from any federal, state, or local
governmental agency or authority, or from any Person which has
commenced a legal proceeding against the Parent Guarantor, the
Company, or any of their respective Subsidiaries, with respect
to any alleged violation of any Environmental Law, or
(ii) complaints, notices, or inquiries to the Parent
Guarantor, the Company, or any of their Subsidiaries, from any
federal, state, or local governmental agency or authority, or
from any Person which has commenced a legal proceeding against
the Parent Guarantor, the Company, or any of their respective
Subsidiaries, regarding potential liability under any
Environmental Law;
(c) there have been no Releases of Hazardous Materials
at, on, into or under any Property now or previously owned, operated,
or leased by the Parent Guarantor, the Company, or any of their
Subsidiaries that, singly or in the aggregate, have a reasonable
possibility of having a Materially Adverse Effect;
(d) the Parent Guarantor, the Company, and their
Subsidiaries have been issued and are in material compliance with all
permits, certificates, approvals, licenses, and
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other authorizations relating to environmental matters and necessary
for their businesses;
(e) no Property now or previously owned, operated, or
leased by the Parent Guarantor, the Company, or any of their
Subsidiaries is listed or, to the knowledge of the Parent Guarantor's
or the Company's Executive Officers, after due inquiry, proposed for
listing (with respect to owned Property only) on the National
Priorities List pursuant to CERCLA or on the CERCLIS or, to the best
knowledge and belief of the Parent Guarantor's and the Company's
Executive Officers, on any similar state list of sites requiring
investigation or clean-up;
(f) there are no underground storage tanks (as defined in
40 C.F.R. Section 280.1, as the same may be amended, modified,
supplemented, or replaced from time to time), active or abandoned,
including petroleum storage tanks, on or under any Property now or
previously owned or leased by the Parent Guarantor, the Company, or
any of their Subsidiaries that, singly or in the aggregate, have a
reasonable possibility of having a Materially Adverse Effect;
(g) none of the Parent Guarantor, the Company, or any of
their Subsidiaries has, to the best knowledge and belief of each
Executive Officer of the Company, transported or arranged for the
transportation of any Hazardous Material to any location which is
listed or proposed for listing on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar state list or
which is the subject of federal, state, or local enforcement actions
or other investigations which has a reasonable possibility of leading
to material claims against the Parent Guarantor, the Company or such
Subsidiary thereof for any remedial work, damage to natural resources,
or personal injury, including claims under CERCLA; and
(h) there are no polychlorinated biphenyls or friable
asbestos present at any real property now or previously owned or
leased by the Parent Guarantor, the Company, or any of their
Subsidiaries that, singly or in the aggregate, have a reasonable
possibility of having a Materially Adverse Effect.
SECTION 8.14. Regulations G, U, and X. No Obligor is engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stock, and no proceeds of any Credit Extension will be used for a
purpose which violates, or would be inconsistent with, F.R.S. Board Regulation
G, U, or X. Terms for which meanings are provided in F.R.S. Board Regulation
G, U, or X or any regulations substituted therefor, as from time to time in
effect, are used in this Section 8.14 with such meanings.
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SECTION 8.15. Solvency. On and as of the date of each Credit
Extension, both before and after giving effect to
(a) all Indebtedness (including the Loans and the Letters
of Credit) being incurred, assumed, or guaranteed, and
(b) Liens created by the Company in connection therewith,
but in no case regarding the KT Note as an asset of the Company, the Company
and the Parent Guarantor will be Solvent.
SECTION 8.16. Senior Indebtedness.
(a) The monetary Obligations of the Company hereunder and
under the other Loan Documents constitute "Senior Indebtedness" of the
Company underclause (i) of the definition of the term "Senior
Indebtedness" and, to the extent that such monetary Obligations
constitute "Obligations" (as defined in the Subordinated Indenture),
"Specified Senior Debt" described in clause (i)(A) of the definition
of such term under the terms of the Subordinated Indenture; the
monetary Obligations of KFC, KAAC, AJI and KJC under the Loan
Documents constitute "Senior Indebtedness" of such corporations
underclause (i) of the definition of the term "Senior Indebtedness"
and, to the extent that such monetary Obligations constitute
"Obligations" (as defined in the Subordinated Indenture), "Guarantor
Specified Senior Debt" described in clause (i)(A) of the definition of
such term of such corporations under the terms of the Subordinated
Indenture; the subordination provisions of the Subordinated Indenture
are enforceable against the holders of the Subordinated Debt; and the
Agent and the Lenders will be entitled to the benefits of such
subordination provisions.
(b) The monetary Obligations of the Company hereunder and
under the other Loan Documents constitute "Senior Indebtedness of the
Company" (as defined in the PIK Note) under the terms of the PIK Note;
the subordination provisions of the PIK Note are enforceable against
the holder of the PIK Note; and the Agent and the Lenders will be
entitled to the benefits of such subordination provisions of the PIK
Note.
(c) The monetary Obligations of the Company hereunder and
under the other Loan Documents constitute (or, in the case of any
Equity Proceeds Note issued after the date hereof, will constitute)
"Senior Indebtedness of the Company" (as defined in each Equity
Proceeds Note) under the terms of each Equity Proceeds Note; the
subordination provisions of each Equity Proceeds Note are enforceable
(or, in the case of any Equity Proceeds Notes issued after the
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date hereof, will be enforceable) against the holder of such note; and
the Agent and the Lenders will be entitled to the benefits of such
subordination provisions of each Equity Proceeds Note.
SECTION 8.17. Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of any Obligor in
writing to the Agent or any Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all other such factual
information hereafter furnished in writing by or on behalf of any Obligor to
the Agent or any Lender pursuant to or in connection with any Loan Document
will be, true and accurate in every material respect on the date as of which
such information is dated or certified, and such information is not, or shall
not be, as the case may be, incomplete by omitting to state any material fact
necessary to make such information not misleading in light of the circumstances
then prevailing.
SECTION 8.18. Joint Venture Contingent Liabilities. Item 11
("Joint Venture Contingent Liabilities") of the Disclosure Schedule contains a
fair summary of the types of the material Contingent Liabilities of the Company
and its Subsidiaries in respect of the businesses, operations, and financial
obligations of VALCO, ALPART, Anglesey, KJBC, and QAL.
SECTION 8.19. Mortgaged Property. The real property and
improvements which are mortgaged by the Company Mortgages and Company Deeds of
Trust, as the case may be, constitute, as of the date of this Agreement, all of
the real property and improvements owned or leased by the Company or any of its
Subsidiaries which comprise, or are part of, or are used in the operations of,
or are located contiguous to, the respective plants of the Company which are
located at the locations listed on Schedule II hereto, except for certain
unimproved property which is located contiguous to the Company's facilities at
Newark, Ohio, Mead, Washington and Greenwood County, South Carolina, but will
not be so mortgaged. Such unimproved property (a) is not a part of or used in
the operations of the Company's plants in Newark, Ohio, Mead, Washington or
Greenwood County, South Carolina which are to be mortgaged to the Agent, and
(b) does not have any material structures or improvements located on it.
ARTICLE IX
COVENANTS
SECTION 9.1. Affirmative Covenants. The Parent Guarantor agrees
(and the Company, to the extent that any such agreement of the Parent Guarantor
shall be applicable to the Company, any of its Subsidiaries, or any of its or
their properties, also agrees) with the Agent and each Lender that, until all
Commitments have
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terminated, no Letters of Credit are outstanding, and all outstanding monetary
Obligations have been paid in full:
SECTION 9.1.1. Financial Information, Reports, Notices, etc. The
Company will furnish, or will cause to be furnished, to the Agent, for itself
and for delivery to the Lenders, copies of the following financial statements,
reports, notices, and information:
(a) within 50 days after the end of each of the first
three Fiscal Quarters of each Fiscal Year of the Company, consolidated
and consolidating balance sheets of the Company and its Subsidiaries
as of the end of such Fiscal Quarter and consolidated and
consolidating statements of income of the Company and its Subsidiaries
for such Fiscal Quarter and for the period commencing at the end of
the previous Fiscal Year and ending with the end of such Fiscal
Quarter and a consolidated statement of cash flows of the Company and
its Subsidiaries for the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal Quarter, certified
(subject to normal year-end adjustments) on behalf of the Company by a
Financial Authorized Officer of the Company;
(b) within 95 days after the end of each Fiscal Year of
the Company, (i) a copy of the annual audit report for such Fiscal
Year for the Company and its Subsidiaries, including therein a
consolidated balance sheet as at the close of such Fiscal Year, and
related consolidated statements of income and cash flows for such
Fiscal Year, of the Company and its Subsidiaries, in each case audited
(without any Impermissible Qualification) by Arthur Andersen & Co. or
other independent public accountants acceptable to the Agent and the
Required Lenders, (ii) a consolidating balance sheet at the close of
such Fiscal Year, and a related consolidating statement of income for
such Fiscal Year, of the Company and its Subsidiaries, certified on
behalf of the Company by a Financial Authorized Officer of the
Company, and (iii) a report from the accountants referred to in clause
(i), containing a computation prepared by the Company of each of the
financial covenants contained inSection 9.2.4 as at the end of such
Fiscal Year, and, commencing with the 1995 Fiscal Year, of the
Interest Coverage Ratio as of the end of each Fiscal Quarter of such
Fiscal Year (except the first Fiscal Quarter of the 1995 Fiscal Year),
which report shall specify that it has been prepared using the
procedures specified in the letter dated February __, 1994 from Arthur
Andersen & Co. to the Agent, a copy of which has been delivered to
each Lender, and reporting that, in making the audit necessary for the
signing of such annual report by such accountants, they have not
become aware of any material miscomputation by the Company of such
financial covenants, or of the Interest Coverage Ratio as of the end
of each of such Fiscal
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Quarters, or of any Default or Event of Default that has occurred and
is continuing, or, if they have become aware of such miscomputation,
Default, or Event of Default, describing such miscomputation, Default,
or Event of Default;
(c) as soon as available and in any event within 50 days
(or, in the case of the fourth Fiscal Quarter of any Fiscal Year, 95
days) after the end of each Fiscal Quarter, (i) a Compliance
Certificate, executed on behalf of the Company by a Financial
Authorized Officer of the Company, showing (in reasonable detail and
with appropriate calculations and computations in all respects
satisfactory to the Agent) compliance with the financial covenants set
forth inSection 9.2.4 and, commencing with the second Fiscal Quarter
of the 1995 Fiscal Year, the calculation of the Interest Coverage
Ratio for the four Fiscal Quarter Period ended on the last day of such
Fiscal Quarter and (ii) a detail schedule of Inventory by site (in
substantially the form currently produced by the Company, with such
changes as to which the Agent may consent, such consent not to be
unreasonably withheld);
(d) as soon as possible and in any event within three
Business Days after an Executive Officer of the Parent Guarantor or
the Company shall have become aware of the occurrence of
(i) any Default, a statement on behalf of the
Company by the chief financial Authorized Officer of the
Company setting forth details of such Default and the action
which the Company and/or the relevant other Obligor has taken
and proposes to take with respect thereto, or
(ii) any
(A) default or event of default (however
denominated) under any Subordinated Debt Instrument
(B) default or event of default (however
denominated) under any Senior Debt Instrument or
(C) default or event of default (however
denominated) under any agreement relating to any
Joint Venture Affiliate, ALPART, or VALCO or any
other material document or agreement to which the
Company or any of its Significant Subsidiaries is a
party, in each case where such a default or event of
default has a reasonable possibility of having a
Materially Adverse Effect,
notice and a description in reasonable detail thereof;
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(e) as soon as possible and in any event within three
Business Days after (i) the occurrence of any material adverse
development with respect to any labor controversy, litigation, action,
or proceeding described in Section 8.8 or (ii) the commencement of any
labor controversy, litigation, action, or proceeding of the type
described in Section 8.8, written notice thereof and copies of all
material documentation relating thereto;
(f) promptly after the sending or filing thereof, copies
of all publicly available reports which the Parent Guarantor or the
Company sends to any of its security holders, and all publicly
available reports and registration statements which the Parent
Guarantor or the Company or any of their Subsidiaries files with the
Securities and Exchange Commission or any national securities
exchange;
(g) as soon as possible and in any event within three
Business Days after an Executive Officer of the Parent Guarantor or
the Company shall have become aware of the taking of any action by the
Company or any other Person to terminate any Pension Plan that has
insufficient assets to satisfy all benefit liabilities thereunder
(within the meaning of Section 4001(a)(16) of ERISA), or the failure
to make a required contribution to any Pension Plan if such failure is
sufficient to give rise to a Lien against assets of any Controlled
Group member under section 302(f) of ERISA, or the taking of any
action with respect to a Pension Plan which could reasonably be
expected to result in the requirement that the Company or any
Controlled Group member furnish a bond or other security to the PBGC
or such Pension Plan, or the occurrence of any event relating to any
Pension Plan with respect to which there is a reasonable possibility
of the incurrence by the Company, the Parent Guarantor or any of their
Subsidiaries of any liability, fine, or penalty which would have a
Materially Adverse Effect, or any material increase in the contingent
liability of the Company with respect to any post-retirement Welfare
Plan benefit excluding liabilities occurring solely by operation of
any generally applicable law enacted after the date of this Agreement,
written notice thereof and copies of all material documentation
relating thereto;
(h) (i) promptly upon receipt thereof, a copy of all
notices, documents, or other Instruments received by the Company
pursuant to any Subordinated Debt Instrument or any Senior Debt
Instrument and not otherwise required to be delivered hereunder and
(ii) concurrently with the delivery thereof, a copy of all notices,
documents, or other Instruments delivered by the Company pursuant to
any Subordinated Debt Instrument or any Senior Debt Instrument and not
otherwise required to be delivered hereunder;
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(i) no later than five Business Days after the approval
thereof by the Company's Board of Directors, a copy of the annual
business plan, budget, and updated business projections of the Company
and its Subsidiaries, and upon the delivery to the Agent of any
financial statements relating to a Fiscal Quarter included in such
plan, budget, or projections, a summary comparing the Company's actual
financial performance during such Fiscal Quarter to that provided in
such plan, budget, or projections; and
(j) such other information respecting the condition or
operations, financial or otherwise, of the Parent Guarantor, the
Company, or any of their Subsidiaries as any Lender (acting through
the Agent) may from time to time reasonably request.
SECTION 9.1.2. Compliance with Laws, etc. The Parent Guarantor and
the Company will, and will cause each of their Subsidiaries to, comply in all
respects with all applicable laws, rules, regulations, and orders (except for
such noncompliance which could not reasonably be expected to have a Materially
Adverse Effect), including (and subject to the foregoing exception):
(a) subject to Section 9.2.10, the maintenance and
preservation of its corporate existence under the laws of its
jurisdiction of incorporation or organization, as the case may be, and
its qualification as a foreign corporation, partnership, or other
entity in each jurisdiction where the nature of its business requires
such qualification; and
(b) the payment, before the same become delinquent, of
all taxes, assessments, and governmental charges imposed upon it or
upon its Property, except to the extent being contested in good faith
by appropriate proceedings and for which adequate reserves in
accordance with GAAP have been set aside on its books.
SECTION 9.1.3. Maintenance of Properties. The Parent Guarantor and
the Company will, and will cause each of their Significant Subsidiaries to,
maintain, preserve, protect, and keep their material properties in good repair,
working order, and condition (ordinary wear and tear excepted), and make
necessary and proper repairs, renewals, and replacements so that their business
carried on in connection therewith may be properly conducted at all times
unless the Parent Guarantor or the Company determines in the exercise of its
good faith business judgment that the continued maintenance of any such
properties is no longer economically desirable.
SECTION 9.1.4. Insurance.
(a) The Company will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained with
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financially sound and reputable insurance companies (including,
consistent with past practice, insurance companies affiliated with the
Company, insurance with respect to their Properties and business
(including business interruption insurance, fire insurance, public
liability insurance and flood insurance) in such amounts, of such
character and against such risks as are usually maintained by
companies engaged in the same or similar business or having comparable
properties, and in any case having a coverage which is not materially
less than the insurance of such type maintained by the Company and its
Subsidiaries on the date of this Agreement,provided, that to the
extent that any of the insurance required by thisclause (a) ceases to
be available at commercially reasonable rates, the Company may effect
substitute insurance coverage therefor in accordance with prudent
standards then being followed by other companies engaged in the same
or similar business or having comparable properties. In the event
that the Company wishes to effect substitute coverage pursuant to the
foregoing proviso, it will (i) notify the Agent of such intent as soon
as reasonably practicable, and (ii) in any event not less than three
Business Days prior to the termination of the coverage for which
substitution is to be made, furnish the Agent with a report of the
Company describing in reasonable detail the nature of such substitute
coverage and the reasons why the Company believes that such substitute
coverage is appropriate.
(b) The Company will cause:
(i) the Agent and the Lenders to be named as an
additional insured, for a total coverage of $10,000,000 for
all such Persons, under the public liability policies of the
Company and its Subsidiaries; and
(ii) the Agent to be named as loss payee under all
insurance policies of the Company and its Subsidiaries that
have executed the Subsidiary Security Agreement covering loss
of or damage to Property (pursuant to loss payable clauses
satisfactory to the Agent),
and will,
(A) as soon as practicable after effecting any
insurance policies of the Company or any of its Subsidiaries
(other than ALPART or VALCO) (and, with respect to any such
policies which are replacements for other insurance policies
which are required hereby, and which are terminating, in any
event within three Business Days after such termination),
furnish the Agent with an insurance broker's certificate or
binder in respect of such policies or replacement policies;
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(B) if a replacement insurance policy for an
insurance policy which is required hereby and which is
terminating has not been effected prior to the third Business
Day before such termination, furnish the Agent on such third
Business Day a report of the Company describing in reasonable
detail the status of such replacement policies; and
(C) upon request of the Agent, furnish to the Agent
copies of all insurance policies at any time maintained by the
Parent Guarantor, the Company and each Subsidiary of the
Company executing a Security Agreement and furnish to the
Agent with copies for each Lender, on the ______ day of each
year, a certificate of an Authorized Officer of the Company
(and, if requested by the Agent, any insurance broker of the
Company) setting forth the nature and extent of all insurance
maintained by the Company, and its Significant Subsidiaries in
accordance with this Section 9.1.4 (and which, in the case of
a certificate of a broker, were placed through such broker).
SECTION 9.1.5. Books and Records; Audits; Confidentiality.
(a) Each of the Parent Guarantor and the Company will,
and will cause each of its Significant Subsidiaries to, maintain at
all times proper and complete (in all material respects) books,
records and accounts, in which complete and timely (in all material
respects) entries are made, which reflect all of its business affairs
and transactions in accordance with GAAP. The Company will and will
cause KAII to maintain at all times books and records pertaining to
the Collateral in such detail, form and scope as the Agent shall
reasonably require, including records , to the extent normally
maintained in accordance with accepted accounting principles, of (i)
all payments received and all credits and extensions granted with
respect to the Accounts, (ii) the return, rejection, repossession,
stoppage in transit, loss, damage or destruction of any Inventory, and
(iii) all other dealings affecting the Collateral.
(b) Each of the Parent Guarantor and the Company will
permit the Agent, and any Lender who wishes to accompany the Agent, or
any representatives thereof, at all reasonable times and intervals
(and at any time during the continuance of an Event of Default or an
Event of Cash Dominion), on reasonable notice during ordinary business
hours, to have access to examine, audit, make extracts from and
inspect the Company's and KAII's records, files, and books of account
and the Collateral and to discuss the Company's and KAII's affairs
with the Company's and KAII's officers and management and the
independent public accountant for the Company, KAII, and the Parent
Guarantor (and each of the Parent Guarantor and the Company hereby
authorizes such
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independent public accountant to discuss the Parent Guarantor's, the
Company's, or KAII's financial matters with the Agent and with each
Lender or its representatives). The Company will, and will cause KAII
to, deliver to the Agent, to the extent reasonably requested, any
instrument necessary for the Agent to obtain records from any service
bureau maintaining records for the Company or KAII. The Agent may, at
the Company's expense, make copies of all of the Company's and KAII's
books and records, or require the Company or KAII to deliver such
copies to the Agent. The Agent may, without expense to the Agent, use
such of the Company's and KAII's personnel, supplies, and premises as
may be reasonably necessary for maintaining or enforcing the Security
Interest. In addition, subject to the provisions ofSection 3.5.2, the
Parent Guarantor and the Company shall pay the reasonable fees of any
independent public accountant incurred in connection with the Agent's
exercise of its rights pursuant to this Section 9.1.5.
(c) Subject to the provisions of the next paragraph, the
Agent, each Lender, and each prospective purchaser of or participant
in any part of any Loan, Commitment, or any other interest under this
Agreement, each severally and for itself alone, agrees to maintain all
Confidential Information (as defined below) obtained by it in
connection with its rights under this Agreement or the other Loan
Documents, including its rights of access contained in thisSection
9.1.5 and information supplied pursuant to Section 9.1.1, confidential
and not disclose the same to any Person who is not an officer,
director, employee, legal counsel, or authorized agent or advisor of
the Agent, or any such Lender or any purchaser or prospective
purchaser of or participant in all or any part of any Loan,
Commitment, or any other interest under this Agreement pursuant to the
provisions of Section 12.11.2 who shall agree, by executing a letter
agreement substantially in the form attached hereto asExhibit Q, to be
bound by the provisions of this clause (c). The Agent, each Lender,
and each other Person bound hereby shall not use any Confidential
Information except for purposes relating to this Agreement, the other
Loan Documents, or otherwise in connection with its status as a
creditor or potential creditor of the Company pursuant to the
transactions contemplated hereby or thereby. The term "Confidential
Information" shall mean information specifically labelled or
identified as "Confidential" furnished by or on behalf of the Company
to the Agent, any Lender, or other Person exercising rights hereunder
and any information or documents (whether or not specifically labeled
or identified as "Confidential") obtained pursuant to Section 9.1.5(b)
by the Agent, any Lender or other Person exercising rights hereunder,
but shall not include any such information which (a) has become or
hereafter becomes available to the public other than as a result of a
disclosure by the Agent, any Lender, or other Person
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exercising rights hereunder or required to be bound hereby, or (b) was
or became available to the Agent, any Lender, or other Person
exercising rights hereunder or required to be bound hereby on a
non-confidential basis prior to its disclosure by the Company, its
representatives, or its agents, or (c) becomes available to the Agent,
any Lender, or other Person exercising rights hereunder or required to
be bound hereby on a non-confidential basis from a source other than
the Company, its representatives, or its agents or another Lender or
other Person exercising rights hereunder or required to be bound
hereby.
The restrictions set forth in the preceding paragraph shall
not prevent the disclosure by the Agent, any Lender, or any other
Person required to be bound hereby of any such information
(i) with the prior written consent of the Company
or as expressly contemplated by this Agreement or any other
Loan Document;
(ii) upon order of any court or administrative
agency of competent jurisdiction, to the extent required by
such order and not effectively stayed on appeal or otherwise,
or as otherwise required by law;
(iii) in connection with any litigation or other
legal proceeding at law, in equity, or in bankruptcy to which
the Parent Guarantor or the Company or any Subsidiary of
either thereof and the Agent, such Lender, or other Person are
parties; or
(iv) to any Affiliate of any Lender who shall agree,
by executing a letter agreement substantially in the form
attached hereto as Exhibit Q, to be bound by the provisions of
this clause (c);
provided, however, that, in the case of any intended disclosure under
clause (ii), the Agent, the relevant Lender, or other Person shall
(unless otherwise required by applicable law) give the Company not
less than five Business Days prior notice (or such shorter period as
may be reasonable or required by any court or agency under the
circumstances), specifying the Confidential Information involved and
stating such Person's intention to disclose such Confidential
Information (including the manner and extent of such disclosure) in
order to allow the Company an opportunity to seek an appropriate
protective order.
SECTION 9.1.6. Environmental Covenant. The Parent Guarantor and the
Company will, and will cause each of their Subsidiaries to,
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(a) use and operate all of their respective facilities
and properties in material compliance with all Environmental Laws,
keep all necessary permits, approvals, certificates, licenses, and
other authorizations relating to environmental matters in effect and
remain in material compliance therewith, and handle all Hazardous
Materials in material compliance with all applicable Environmental
Laws;
(b) (i) as soon as possible and in any event no
later than 15 Business Days after an Executive
Officer of the Company shall have become aware of the
receipt thereof, notify the Agent and provide copies
of all written claims, complaints, notices, or
inquiries by a governmental or regulatory authority,
or any Person which has commenced a legal proceeding
against the Parent Guarantor, the Company, or any of
their Subsidiaries, relating to compliance by the
Company or its Subsidiaries with, or potential
liability of the Company or its Subsidiaries under,
Environmental Laws; and
(ii) with reasonable diligence cure all
environmental defects and conditions which are the
subject of any actions and proceedings against the
Parent Guarantor, the Company, or any of their
Subsidiaries relating to compliance with
Environmental Laws, except to the extent that such
actions and proceedings (or the obligation of the
Parent Guarantor, the Company, or any such Subsidiary
to cure such defects and conditions) are being
contested by the Parent Guarantor, the Company or any
of their Subsidiaries in good faith by appropriate
proceedings; and
(c) provide such information, access, and certifications
which the Agent may reasonably request from time to time to evidence
compliance with this Section 9.1.6.
SECTION 9.1.7. Performance of Instruments. Each of the Parent
Guarantor and the Company will, and will cause each of their Subsidiaries to,
perform promptly and faithfully all of their Obligations under each Loan
Document to which it is or is to be a party, subject to any applicable grace
periods.
SECTION 9.1.8. Maintenance of Collateral. The Parent Guarantor and
the Company will, and will cause their Subsidiaries having an interest in any
Property which is, or is intended to be, Collateral to,
(a) acquire and maintain such Property in a manner that
will enable the Parent Guarantor, the Company, or such Subsidiary, as
the case may be, to cause such Property to be subject to the Liens of
the Collateral Documents; and
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(b) obtain the consent or approval of any Person whose
consent or approval is required for the grant of Liens by the Parent
Guarantor, the Company, or any such Subsidiary in any such Property.
SECTION 9.1.9. Collateral Reporting. Except during the continuance
of an Event of Cash Dominion, the Company will, and will cause KAII to, provide
the Agent with the following documents, in form and scope satisfactory to the
Agent, on a monthly basis: (a) an accounts receivable summary aging report
together with a reconciliation to the previous month's accounts receivable
summary aging report; (b) a reconciliation of the account receivable summary
aging report to the accounts receivable general ledger; (c) a monthly listing
of delinquent accounts in excess of $100,000 that are thirty days past the due
date or sixty-five days past the invoice date, (d) monthly inventory summary
reports by category, (e) monthly inventory summary reports by location; and (f)
certificates of an officer of the Company certifying on behalf of the Company
as to the foregoing. During the continuance of an Event of Cash Dominion, the
Company will, and will cause KAII to, continue to provide the Agent with the
documents described in clauses (a) through (f) above. In addition, the Company
will, and will cause KAII to, provide the Agent with the following documents
immediately upon any written request therefor by the Agent: (a) copies of
shipping and delivery documents; (b) copies of invoices, customer statements,
credit memos, remittance advises and reports, and deposit slips; (c) copies of
purchase orders, invoices, and delivery documents for Inventory of the Company
acquired by the Company; and (d) such other reports as to the Collateral as the
Agent shall request from time to time. If any of the Company's or KAII's
records or reports of the Collateral are prepared by an accounting service or
other agent, the Company hereby authorizes such service or agent to deliver
such records, reports, and related documents to the Agent.
SECTION 9.1.10. Delivery; Further Assurances. The Parent Guarantor
and the Company will, and will cause each of their wholly owned Subsidiaries
to, at the expense of the Company,
(a) without any request by the Agent, within 10 Business
Days after the receipt thereof, deliver or cause to be delivered to
the Agent, in due form for transfer (i.e., endorsed in blank or, if
appropriate, accompanied by duly executed blank stock or bond powers),
all equity securities having a value, and all debt instruments (other
than the Equity Proceeds Notes, which shall not constitute Collateral)
having face amounts, in excess of $100,000, at any time representing
all or any of the Collateral, in due form for transfer i.e., endorsed
in blank or, if appropriate, accompanied by duly executed blank bond
powers);
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(b) upon forming or acquiring any Subsidiary, immediately
notify the Agent of such formation or acquisition, and if requested by
the Agent at the request of the Required Lenders, unless such
Subsidiary is acquired or formed by a Subsidiary of the Company which
is not a Domestic Subsidiary,
(i) pledge and deliver to the Agent pursuant
to the Company Pledge Agreement or the Subsidiary Pledge
Agreement, as the case may be, certificates evidencing all of
the issued and outstanding capital stock of such Subsidiary
owned directly or indirectly by the Company (or, if such
Subsidiary is not a Domestic Subsidiary, 65% of such capital
stock) accompanied by undated stock powers duly executed in
blank or pledge to the Agent pursuant to the Company Pledge
Agreement, the Subsidiary Pledge Agreement, the Company
Security Agreement, or the Subsidiary Security Agreement, as
the case may be, all of the Company's or such Subsidiary's
general or limited partnership interest in such Subsidiary;
(ii) if such pledgor is a Subsidiary of the
Company, cause such pledgor to execute and deliver to the
Agent a counterpart of the Subsidiary Guaranty and such other
items of documentation as shall be necessary in order for such
pledgor to assume the obligations under the Subsidiary
Guaranty (and such pledgor, if a Subsidiary of the Company,
may thereupon become a "Subsidiary Guarantor" (under and as
defined in the Subordinated Indenture or the Senior Indenture)
if and to the extent required to become a "Subsidiary
Guarantor" by Section 5.12(c) of the Subordinated Indenture or
Section of the Senior Indenture); and
(iii) cause such Subsidiary to deliver to the
Agent such evidence of due execution, and such other
information with respect to its Organic Documents and
contractual obligations, and as to the Collateral in which it
has an interest, as the Agent may request, and to take all
action necessary or as the Agent may request to create,
preserve, perfect, confirm, and validate the Liens created or
purported to be created by such Collateral Documents;
(c) if any Subsidiary of the Company is required to grant
a Lien to the Agent over any interest in real property pursuant to
clause (b) of Section 9.1.11, and if requested by the Agent at the
request of the Required Lenders,
(i) cause such Subsidiary to execute and
deliver to the Agent a counterpart of the Subsidiary Guaranty
and such other items of documentation as shall
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be necessary in order for such Subsidiary to assume the obligations
under the Subsidiary Guaranty (and such Subsidiary may thereupon
become a "Subsidiary Guarantor" (under and as defined in the
Subordinated Indenture or the Senior Indenture) if and to the extent
required to become a "Subsidiary Guarantor" by Section 5.12(c) of the
Subordinated Indenture or Section of the Senior Indenture),
(ii) cause such Subsidiary to execute and
deliver to the Agent counterparts of the Subsidiary Security
Agreement, the Subsidiary Pledge Agreement, and such other
items of documentation as shall be necessary in order for such
Subsidiary to assume the obligations under the Subsidiary
Security Agreement and the Subsidiary Pledge Agreement, and
(iii) cause such Subsidiary to deliver to the
Agent such evidence of due execution, and such other
information with respect to its Organic Documents and
contractual obligations, and as to the Collateral in which it
has an interest, as the Agent may request, and to take all
action necessary or as the Agent may request to create,
preserve, perfect, confirm, and validate the Liens created or
purported to be created by such Collateral Documents;
(d) upon the opening of any account for investment in
Cash Equivalent Investments permitted hereunder by the Company or any
Obligor which has executed the Subsidiary Security Agreement, promptly
notify the Agent thereof and promptly deliver a letter, in
substantially the form of one of the letters contained inExhibit N
attached hereto, with such changes as the Agent may approve, duly
executed by the Person with which the Company or such Subsidiary
maintains such account;
(e) upon request of the Agent, furnish or cause to be
furnished to the Agent such opinions of counsel, and other documents
with respect to the Collateral as the Agent may reasonably specify;
and
(f) upon request of the Agent, forthwith execute and
deliver or cause to be executed and delivered to the Agent, in due
form for filing or recording (and pay the cost of filing or recording
the same in all public offices deemed necessary by the Agent), such
assignments, security agreements, pledge agreements, consents,
waivers, financing statements, stock or bond powers, and other
documents, and do such other acts and things, all as the Agent may
from time to time request, to establish and maintain to the
satisfaction of the Agent valid perfected Liens in all Collateral
(free of all other Liens, claims, and rights of third parties
whatsoever, except for Liens, claims, and
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rights permitted by Section 9.2.3), provided, that the Company shall
not be required to register itself in Ghana or the United Kingdom for
this purpose.
SECTION 9.1.11. Real Property; Title Policies; Surveys. As further
security for the payment of the Obligations, the Parent Guarantor and the
Company will, and will cause their Subsidiaries to:
(a) obtain and maintain the consent or approval of any
Person whose consent or approval is required to the granting of a Lien
on any interest in real property which is, or is required by the terms
of this Agreement to be, subject to a mortgage or deed of trust in
favor of the Agent; and
(b) concurrently with or promptly after the purchase or
acquisition by the Company or any such Subsidiary of, or the formation
or acquisition by the Company or any such Subsidiary of any Subsidiary
with an interest in, any real property (including all improvements)
which is located in the United States and which is structurally
related to, or which is located contiguous to, real property upon
which there is an existing Lien in favor of the Agent pursuant to a
Company Mortgage or Company Deed of Trust,
(i) execute, acknowledge, and deliver to the Agent a
mortgage or deed of trust (or, if appropriate, an amendment or
supplement to an existing mortgage or deed of trust), in such
form and substance, and in such number of counterparts, as the
Agent may reasonably require, mortgaging and granting a
security interest in such interest in real property;
(ii) obtain, with respect to each such interest in
real property, a title insurance policy (in amounts reasonably
satisfactory to the Agent) with respect to, a survey of, and
such other documents relating to, such real property, in each
case conforming to the requirements of Section 7.1.9;
(iii) cause such mortgage or deed of trust to be
duly recorded or filed to create a valid, perfected,
first-priority mortgage or deed of trust lien on, and security
interest in the property purported to be covered thereby, and
pay all fees, taxes, and other expenses in connection
therewith; and
(iv) deliver to the Agent such other items of
documentation with respect to any of the foregoing as the
Agent shall reasonably request (including certificates as to
incumbency, resolutions, and opinions of counsel in all
relevant jurisdictions).
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At the request of the Agent, the Company will cause (and, in any event, the
Company shall be permitted to cause) any real property which is required to be
mortgaged pursuant to clause (b) of this Section 9.1.11 and which is owned by a
Subsidiary of the Company, to be transferred to the Company prior to the
execution and delivery of such mortgage or deed of trust, as applicable. The
Agent and the Required Lenders shall have the right, in their sole and absolute
discretion, to accept or reject any such real property interest offered
pursuant to this Section 9.1.11.
SECTION 9.1.12. Intercompany Demand Notes. Within 60 days after the
last day of any Fiscal Quarter as of which the aggregate outstanding
Indebtedness of the Company to any wholly owned Domestic Subsidiary of the
Company exceeds $10,000,000, the Company will, if the same has not previously
been done, (a) execute and deliver to such Subsidiary an Intercompany Demand
Note payable to such Subsidiary, and (b) cause such Subsidiary to execute and
deliver the Intercompany Note Pledge Agreement and to pledge such note to the
Agent pursuant to the Intercompany Note Pledge Agreement.
SECTION 9.2. Negative Covenants. The Parent Guarantor agrees (and
the Company, to the extent that any such agreement of the Parent Guarantor
shall be applicable to the Company, any of its Subsidiaries, or any of its or
their properties, also agrees) with the Agent and each Lender that, until all
Commitments have terminated, no Letters of Credit are outstanding, and all
outstanding monetary Obligations have been paid in full:
SECTION 9.2.1. Business Activities. The Parent Guarantor will not
engage in any other business activity other than ownership of the Company and
such activities as may be incidental or related thereto including the offering
and sale of securities of the Parent Guarantor. The Company will not, and will
not permit any of its Subsidiaries to, engage in any business activity, except
those described in the first recital, those in which the Company and its
Subsidiaries are engaged on the Effective Date, and such activities as may be
incidental or related thereto or reasonably related extensions thereof.
SECTION 9.2.2. Indebtedness. The Parent Guarantor and the Company
will not, and will not permit any of their Subsidiaries to, create, incur,
assume, or suffer to exist or otherwise become or be liable in respect of any
Indebtedness, other than the following:
(a) In the case of the Parent Guarantor, the Company, and
their Subsidiaries,
(i) Indebtedness in respect of this Agreement and
the other Loan Documents;
(ii) Indebtedness identified inItem 1 ("Indebtedness
to be Paid") of the Disclosure Schedule,
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provided that the conditions set forth in Section 7.1.4 in
respect of payment of such Indebtedness shall be satisfied on
the Initial Borrowing Date; and
(iii) Indebtedness existing as of the Effective Date
which is identified in Item 4 ("Ongoing Indebtedness") of the
Disclosure Schedule;
(b) In the case of the Company and its Subsidiaries,
(i) Indebtedness of the Company in respect of the
Senior Debt, and Contingent Obligations of AJI, KJC, KFC and
KAAC as a "Subsidiary Guarantor" (under and as defined in the
Senior Indenture) in respect of the Senior Debt;
(ii) subject to Section 9.2.18, Indebtedness owing
from (A) the Company to any wholly-owned Subsidiary of the
Company (other than KAAC) which (if required by Section
9.1.12) is evidenced by an Intercompany Demand Note which has
been pledged to the Agent pursuant to the Intercompany Note
Pledge Agreement or the Subsidiary Pledge Agreement, (B) any
wholly-owned Subsidiary of the Company to the Company,
provided that such Indebtedness is not evidenced by any
instrument, (C) any wholly- owned Subsidiary of the Company to
any other wholly-owned Subsidiary of the Company, provided
that with respect to any such Indebtedness to KFC or any such
Indebtedness of KFC to KAAC, such Indebtedness is evidenced by
an Intercompany Demand Note which has been pledged to the
Agent pursuant to the Subsidiary Pledge Agreement or the
Intercompany Note Pledge Agreement, and provided, further,
that with respect to any such Indebtedness other than to KFC
(or of KFC to KAAC), such Indebtedness is not evidenced by any
instrument, (D) VALCO or ALPART to the Company, its
Subsidiaries, or Persons (other than the Company, its
Subsidiaries or any Restricted Affiliate) having an equity
interest in VALCO or ALPART, as the case may be, (E) the
Company or its Subsidiaries to VALCO or ALPART, or (F) the
Company to KAAC, provided that any such Indebtedness (other
than Indebtedness in respect of accounts payable and other
current liabilities, in each case arising in the ordinary
course of business out of the purchase by the Company of
alumina from KAAC) shall be evidenced by an Intercompany
Demand Note which has been pledged to the Agent pursuant to
the Subsidiary Pledge Agreement and Indebtedness in respect of
such accounts payable and other current liabilities shall not
be evidenced by any instrument;
(iii) Indebtedness of the Company, KJC, AJI and
KAAC (including, without duplication, Contingent
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Liabilities in respect of Indebtedness) in an aggregate amount
not to exceed $150,000,000 in respect of ALPART, $75,000,000
in respect of QAL and $25,000,000 in respect of VALCO;
provided, however, that for purposes of calculating the
aggregate amount of Indebtedness of the Company and its
Subsidiaries outstanding pursuant to this clause (b)(iii),
there shall be subtracted from the total amount of
Indebtedness of non-wholly-owned Subsidiaries an amount equal
to (A) that portion of such Indebtedness attributable to the
proportionate direct or indirect ownership of Persons other
than the Company and its Subsidiaries of the voting stock of,
or partnership interest in, such Subsidiary or (B) if the
economic burden of such Indebtedness is borne or to be borne
by minority owners of such Subsidiary (other than the Company
and its Subsidiaries) in a proportion other than the
proportion of their direct or indirect ownership of the voting
stock of, or partnership interest in, such Subsidiary, the
proportionate share of the economic burden of such
Indebtedness borne or to be borne by such minority owners;
(iv) Indebtedness incurred by the Company in
connection with the purchase, redemption, retirement, or other
acquisition by the Company of the Preferred Stock (USWA)
outstanding on the date hereof (plus additional shares of such
Preferred Stock (USWA) issued as dividends thereon or on such
shares issued as dividends) to the extent the purchase,
redemption, retirement, or acquisition thereof is required by
the Code and such Indebtedness is issued to the then holders
of or beneficial owners of such shares of Preferred Stock
(USWA);
(v) Indebtedness of the Company in an amount not
exceeding $5,000,000 at any time outstanding in respect of the
guaranty by the Company of the obligations of National
Refractories & Minerals Corporation under the Revolving Credit
and Term Loan Agreement dated as of April 30, 1985 (as the
same has been and may hereafter be amended, modified,
supplemented, restated, confirmed or replaced from time to
time) among Congress Financial Corporation (Western), National
Refractories & Minerals Corporation, National Refractories &
Minerals, Inc. and National Refractories Holding Co.;
(vi) the obligation of the Company to make advances
not exceeding $2,500,000 to National Refractories & Minerals
Corporation under the Standby Revolving Credit and Security
Agreement and Guaranty dated as of April 30, 1985 (as the same
has been and may hereafter be amended, modified, supplemented,
restated, confirmed or replaced from time to time) among the
Company, National Refractories & Minerals
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Corporation, National Refractories & Minerals, Inc. and
National Refractories Holding Co.;
(vii) the guaranty by the Company of the payment of
certain shutdown, supplemental unemployment, pension, and
retiree health and life insurance benefits as provided under
the Agreement dated February 2, 1989 (as the same has been or
may be amended, supplemented, restated, modified, confirmed,
or replaced from time to time) between the Company and the
United Steelworkers of America relating to the sale by the
Company of its smelter and rolling mill in Ravenswood, West
Virginia, to Ravenswood Acquisition Corporation;
(viii) the obligations of the Company and any of its
Subsidiaries to purchase or sell goods, services, or
technology utilized in their bauxite, alumina, and aluminum
business and related extensions thereof, including on a
take-or-pay basis, pursuant to agreements entered into the
ordinary course of business consistent with past practice;
(ix) the obligations of QAL in respect of charters
of vessels;
(x) Indebtedness of the Company in respect of
unsecured Hedging Obligations;
(xi) Indebtedness of the Company and its
Subsidiaries (other than KAAC, AJI, KJC and KAII) in respect
of letters of credit (including any such letters of credit
identified in Item 4 ("Ongoing Indebtedness") of the
Disclosure Schedule) in an aggregate amount not to exceed
$15,000,000 at any one time outstanding issued for the account
of the Company or any of its Subsidiaries in support of
certain self-insurance and reinsurance obligations;
(xii) Indebtedness of the Company in respect of the
Redeemable Stock referred to in clause (i) or (ii) of Section
9.2.6(a);
(xiii) Indebtedness of the Company under the Equity
Proceeds Notes;
(xiv) Nonrecourse Indebtedness of Subsidiaries
of the Company that are not Obligors, the proceeds of which
are used to finance the construction, acquisition or
retrofitting of aluminum smelters, alumina refineries, or
fabrication plants, including, in either case, related
facilities or interests therein;
(xv) Indebtedness of the Company in an aggregate
principal amount not to exceed $25,000,000 outstanding
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at any one time (excluding any such Indebtedness identified in
Item 4 ("Ongoing Indebtedness") of the Disclosure Schedule)
incurred in connection with one or more industrial revenue
bond financings; and
(xvi) other Indebtedness of the Company and its
Subsidiaries (other than KAAC, AJI, KJC and KAII) in an
aggregate principal amount not to exceed $30,000,000
outstanding at any one time; and
(c) in the case of the Parent Guarantor, Indebtedness
arising under the KT Note and Contingent Liabilities of the Parent
Guarantor in respect of any Indebtedness of the Company incurred
pursuant to clause (b) (other than subclause (xv) thereof) above.
SECTION 9.2.3. Liens. The Parent Guarantor will not create, incur,
assume, or suffer to exist any Lien over any of its Properties, revenues, or
assets, whether now owned or hereafter acquired, except for Liens of the type
described in clauses (a), (b), (e), and (h) of this Section 9.2.3. The Company
will not, and will not permit any of its Subsidiaries to, create, incur,
assume, or suffer to exist any Lien upon any of its Properties, revenues, or
assets, whether now owned or hereafter acquired, other than the following:
(a) Liens securing payment of the Obligations granted
pursuant to any Loan Document;
(b) Until the Initial Borrowing Date, Liens securing
payment of Indebtedness of the type permitted and described in clause
(a)(ii)of Section 9.2.2;
(c) Liens granted prior to the Effective Date and
identified in Item 5 ("Ongoing Liens") of the Disclosure Schedule;
(d) Liens granted to secure payment of Indebtedness
permitted by clause (b)(xvi) of Section 9.2.2 on any Property (other
than Accounts and Inventory) created at the time of the acquisition of
such Property in order to secure payment of the purchase price thereof
or in order to secure any loan incurred for the purpose of financing
such acquisition, and any Lien to which any Property is subject at the
time of its acquisition (including Property of a Subsidiary at the
time it becomes a Subsidiary), provided that the principal amount of
the Indebtedness secured by any such Lien does not exceed 80% of the
cost of such Property (except in the case of Liens on the Property of
a Subsidiary at the time it becomes a Subsidiary) and that no such
Lien may extend to other property, together with refundings or
extensions of the foregoing for amounts not exceeding the principal
amount of the Indebtedness so refunded or extended
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and secured only by the Property theretofore securing the same;
(e) Liens for taxes, assessments, or other governmental
charges or levies to the extent that payment thereof shall not at the
time be required in accordance with the provisions of Section 9.1.2;
(f) Liens of carriers, warehousemen, mechanics, workmen,
repairmen, vendors, materialmen, and landlords and other similar Liens
incurred in the ordinary course of business for sums not overdue or
being contested in good faith by appropriate proceedings, and deposits
or Liens to obtain the release of any such Lien;
(g) Liens and deposits incurred or made in the ordinary
course of business in connection with worker's compensation,
unemployment insurance, or other forms of governmental insurance or
benefits, or in connection with, or to secure performance of, bids,
tenders, statutory obligations, and leases (other than, in each of
such cases, for borrowed money or the obtaining of advances or credit)
entered into in the ordinary course of business, or to secure
obligations on surety or appeal bonds, and other Liens and deposits
for purposes of like nature in the ordinary course of business;
(h) judgment Liens or similar awards in existence less
than 15 days after the entry thereof or with respect to which
execution has been stayed, or the payment of which is covered (subject
to a customary deductible) by insurance;
(i) mineral leases, easements, covenants, restrictions,
exceptions, or reservations in any Property of the Company or any
Subsidiary of the Company which do not materially impair the use of
such Property for the purposes for which it is held;
(j) zoning laws and ordinances, and rights reserved to or
vested in any municipality or government or proper authority to
control or regulate any Property of the Company or its Subsidiaries,
or to use such Property in any manner which does not materially impair
the use of such Property for the purposes for which it is held by the
Company or such Subsidiary;
(k) undetermined or inchoate Liens incident to
construction, maintenance, or current operations and Liens and charges
incident to such construction, maintenance, or operations which have
been filed of record but which are being contested in good faith by
appropriate proceedings;
(l) Liens reserved in leases for rent and to assure
compliance with the lease terms covering solely Property
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kept at the leased premises and rights of lessees to Property being
leased from the Company or any of its Subsidiaries;
(m) Liens on any Property in which the Company or any of
its Subsidiaries has a leasehold estate, easement, right of way, or
similar interest and to which such interest is or may become subject,
and the rights reserved to the lessors or grantors thereof, and to
their successors and assigns, under applicable law or the instrument
creating such interest;
(n) Liens on Property (other than Accounts and Inventory)
created to secure the Company's or any Subsidiary's obligations under
agreements with respect to spot, forward, future and option
transactions, entered into in the ordinary course of business,
involving (or, in the case of futures and options, for or relating to)
the purchase and sale of aluminum, alumina, or bauxite and covering
only the Company's or such Subsidiary's rights under such agreements
and in the accounts in which such transactions are effected;
(o) minor defects and irregularities in the title to any
Property which do not in the aggregate materially impair the use of
such Property for the purposes for which it is held;
(p) Liens on Property of ALPART securing Indebtedness in
respect of ALPART permitted by clause (b)(iii) of Section 9.2.2 and
Liens on Property of VALCO securing Indebtedness in respect of VALCO
permitted byclause (b)(iii) of Section 9.2.2;
(q) Liens on Property of KAAC or its Subsidiaries
securing Indebtedness of KAAC in respect of QAL permitted by clause
(b)(iii) of Section 9.2.2;
(r) Liens on Property of Subsidiaries of the Company that
are not Obligors securing Nonrecourse Indebtedness; provided, howeve,
that no such Lien may extend to Property other than the Property
constructed, acquired or retrofitted with the proceeds of such
Nonrecourse Indebtedness or the capital stock of entities formed to
hold such interests;
(s) Liens on cash securing letters of credit in an amount
not to exceed $$15,000,000 at any one time outstanding;
(t) Liens on Property (other than Accounts and Inventory)
of the Company securing Indebtedness permitted by Section 9.2.2(b)(xv;
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(u) Liens covering portions of the proceeds of Asset
Dispositions, which are held in escrow in connection with such Asset
Dispositions;
(v) Liens on Property (other than Accounts or Inventory)
of the Company securing Indebtedness permitted by clause (b)(iv) of
Section 9.2.2; and
(w) other Liens on Property (other than Accounts and
Inventory) of the Company and its Subsidiaries incidental to the
conduct of the business of the Company and its Subsidiaries or the
ownership of their Property which were not incurred in connection with
borrowed money or the obtaining of advances or credit and which do not
in the aggregate materially detract from the value of their Property
or materially impair the use thereof in the operation of their
business and which, in any event, do not secure obligations
aggregating in excess of $5,000,000.
SECTION 9.2.4. Financial Condition. The Company will not permit:
(a) Net Worth. The Company shall not permit Net Worth as
of the end of any Fiscal Quarter set forth below to be less than the
correlative amount indicated:
<TABLE>
<CAPTION>
Fiscal Quarter Net Worth
-------------- ---------
<S> <C>
First Fiscal Quarter of 1994 $450,000,000
Second Fiscal Quarter of 1994 $433,000,000
Third Fiscal Quarter of 1994 $416,000,000
Fourth Fiscal Quarter of 1994 $400,000,000
First Fiscal Quarter of 1995 $396,000,000
Second Fiscal Quarter of 1995 $392,000,000
Third Fiscal Quarter of 1995 $388,000,000
Fourth Fiscal Quarter of 1995 $385,000,000
First Fiscal Quarter of 1996 $391,000,000
Second Fiscal Quarter of 1996 $397,000,000
Third Fiscal Quarter of 1996 $404,000,000
Fourth Fiscal Quarter of 1996 $410,000,000
First Fiscal Quarter of 1997 Minimum Net Worth
and each Fiscal Quarter thereafter
</TABLE>
(b) Interest Coverage Ratio. The Company shall not
permit the Interest Coverage Ratio (i) for the one Fiscal Quarter
period ending March 31, 1996 to be less than 1.1 to 1.0, (ii) for the
two Fiscal Quarter period ending June 30, 1996 to be less than 1.2 to
1.0, (iii) for the three Fiscal Quarter period ending September 30,
1996 to be less than 1.3 to 1.0, and (iv) for the four Fiscal Quarter
period ending on the last day of each of the Fiscal Quarters set forth
below to be less than the correlative ratio indicated:
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<PAGE> 123
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
Fourth Fiscal Quarter of 1996 1.4 to 1.0
First Fiscal Quarter of 1997 1.5 to 1.0
Second Fiscal Quarter of 1997 1.7 TO 1.0
Third Fiscal Quarter of 1997 1.8 to 1.0
Fourth Fiscal Quarter of 1997 2.0 to 1.0
and each Fiscal Quarter thereafter
</TABLE>
SECTION 9.2.5. Investments. The Parent Guarantor will not make,
incur, assume, or suffer to exist any Investment except for its ownership or
purchase of the shares of capital stock of the Company, Cash Equivalent
Investments, and Equity Proceeds Notes. The Company will not, and will not
permit any of its Subsidiaries to, make, incur, assume, or suffer to exist any
Investment in any other Person, other than the following:
(a) Investments existing on the Effective Date and
identified in Item 6 ("Ongoing Investments") of the Disclosure
Schedule;
(b) Cash Equivalent Investments;
(c) subject to Section 9.2.18, without duplication,
Indebtedness which is an Investment permitted by clause (b)(ii) of
Section 9.2.2;
(d) Investments made pursuant to the arrangements
described in clauses (b)(v) and (b)(vi) of Section 9.2.2, and deposits
permitted byclause (g) of Section 9.2.3;
(e) subject to Section 9.2.18, Investments made after
December 31, 1993 in the ordinary course of business in the Company
and its Subsidiaries;
(f) provided no Default or Event of Default under Section
10.1.1 shall have occurred and be continuing, Investments made after
December 31, 1993 in the ordinary course of business in QAL, Anglesey,
KJBC and Furukawa;
(g) Investments which are Capital Expenditures permitted
by Section 9.2.7;
(h) Investments of cash held in escrow accounts required
pursuant to the terms of any contract or agreement between the Parent
Guarantor, the Company, or any of its Subsidiaries and any Person as
in effect on the Effective Date (including escrows in existence on the
Effective Date) which are listed onSchedule XII hereto;
(i) Investments received in connection with Asset
Dispositions, and Investments in escrows established in connection
with Asset Dispositions which are permitted hereby;
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(j) trade credit extended in the ordinary course of
business (including such credit represented by any bond, note,
debenture, or similar instrument) and advance payments, made in the
ordinary course of business, under contracts for the purchase of goods
or the receipt of services, and loans and advances made to any Person
in connection with the purchase of assets by such Person for lease by
such Person to the Company or any of its Subsidiaries to the extent
that such leases are otherwise permitted hereunder;
(k) Investments in the form of advance payments in
connection with spot, forward, future and option transactions, entered
into in the ordinary course of business, involving (or, in the case of
futures and options, for or relating to) the purchase and sale of
aluminum, alumina, or bauxite;
(l) Investments acquired in the settlement or other
resolution of disputes with any Person or of debts;
(m) Investments of any Person which are in existence at
the time such Person becomes a Subsidiary of the Company and which, in
the case of any such Investments which would breach any provision of
this Agreement if made directly by the Company,
(i) were not entered into in contemplation of such
Person becoming a Subsidiary of the Company, and
(ii) do not constitute more than 20% of the assets
of such Person at the time such Person becomes a Subsidiary of
the Company;
(n) any Investments (other than Investments in MAXXAM or
any Affiliate of MAXXAM) (other than the Company, its Subsidiaries
which are not Restricted Subsidiaries, or any Joint Venture Affiliate)
not otherwise permissible hereunder in an aggregate amount not to
exceed $20,000,000 at any time outstanding;
(o) provided (i) no Default or Event of Default shall
have occurred and be continuing (or would occur after giving effect to
such Investment) and (ii) that the Consolidated Fixed Charge Coverage
Ratio is greater than 2.0 to 1, Investments in Subsidiaries and Joint
Venture Affiliates not otherwise permissible hereunder in an aggregate
amount not to exceed
(A) the sum of:
(1) 50% of Net Income (or, if Net Income
for any such period shall be a deficit, minus 100% of such
deficit) accrued on a cumulative basis for the period (taken
as one accounting period) from January 1, 1994 to
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the end of the Company's most recently ended Fiscal Quarter,
and
(2) the aggregate net proceeds,
including the fair market value of Property other than cash,
received by the Company as capital contributions (other than
from a Joint Venture Affiliate or a Subsidiary of the Company)
to the Company after December 31, 1993, or from the issue or
sale (other than to a Joint Venture Affiliate or to a
Subsidiary of the Company), after December 31, 1993, of
capital stock other than Redeemable Stock (including capital
stock, other than Redeemable Stock, issued upon the conversion
of, or in exchange for, Indebtedness or Redeemable Stock, and
including upon exercise of warrants or options or other rights
to purchase such capital stock, issued after December 31,
1993), or from the issue or sale, after December 31, 1993 of
any debt or other security of the Company convertible or
exercisable into such capital stock that has been so converted
or exercised;
minus
(B) the aggregate amount of Investments than
outstanding pursuant to clause (n); and
(p) extensions and renewals of Investments permitted by
clauses (a), (h), (i), (j), (l) and (m) of this Section 9.2.5,
provided that the principal amount thereof is not increased.
SECTION 9.2.6. Restricted Payments, etc.
(a) The Company and the Parent Guarantor will not
declare, pay, or make any dividend or distribution (in cash, Property,
or obligations) on any shares of any class of capital stock (now or
hereafter outstanding) of the Company or the Parent Guarantor or on
any warrants, options, or other rights with respect to any shares of
any class of capital stock (now or hereafter outstanding) of the
Company or the Parent Guarantor (excluding dividends or distributions
payable in its common stock (other than Redeemable Stock) or warrants
to purchase its common stock or splitups or reclassifications of its
common stock into additional or other shares of its common stock) or
apply, or permit any of their respective Subsidiaries to apply, any of
its funds, or Property to the purchase, redemption, sinking fund, or
other retirement, or agree, or permit any of their respective
Subsidiaries to agree, to purchase or redeem, any shares of any class
of capital stock (now or hereafter outstanding) of the Company or the
Parent Guarantor, or warrants, options, or other rights with respect
to any shares of any class of capital stock (now or hereafter
outstanding) of the Company or the Parent Guarantor (all of the
foregoing non-excluded dividends,
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distributions, application of funds or Property, purchases, redemption
and similar payments collectively being herein called "Distributions")
except that
(i) the Company shall be permitted to purchase,
redeem, retire, or otherwise acquire and to declare, pay, or
make dividends or other distributions on its 4-1/8% Preference
Stock, par value $100 per share, 4-3/4% Preference Stock (1957
Series), par value $100 per share, 4-3/4% Preference Stock
(1959 Series), par value $100 per share, and 4-3/4% Preference
Stock (1966 Series), par value $100 per share, in each case
only in accordance with the terms of the Restated Certificate
of Incorporation, and in each case unless (A) an Event of
Default shall have occurred and be continuing and (B) the
Company shall have been instructed by the Agent in writing not
to make any such Distribution;
(ii) the Company shall be permitted to purchase,
redeem, retire, or otherwise acquire and to declare, pay, or
make dividends or other distributions on any shares of the
Preferred Stock (USWA), in each case unless (A) an Event of
Default shall have occurred and be continuing and (B) the
Company shall have been instructed by the Agent in writing not
to make any such Distribution;
(iii) the Company shall be permitted to pay for the
benefit of, or to reimburse, the Parent Guarantor for the
reasonable out-of-pocket expenses actually incurred (and
documented as such) by the Parent Guarantor for services
rendered to the Parent Guarantor by Persons who are not
Affiliates or employees of the Parent Guarantor, MAXXAM, the
Company or any of their respective Subsidiaries (provided that
payments of legal fees and expenses to a law firm of which an
Affiliate of the Company is a member shall be permitted) in
connection with the registration, issuance or sale of
securities of the Parent Guarantor to the extent that the net
proceeds of such issuance or sale are used by the Parent
Guarantor to make a loan or capital contribution to, or
purchase securities of, the Company;
(iv) the Company shall be permitted to make
Distributions to the Parent Guarantor of all or a portion of
the KT Note and accrued interest thereon;
(v) provided no Default shall have occurred and be
continuing (or will have occurred and be continuing
immediately following such Distribution), the Company shall be
permitted to make Distributions to the Parent Guarantor in
each Fiscal Quarter in an aggregate amount not exceeding the
dividends payable by the Parent Guarantor during such Fiscal
Quarter in respect of all then outstanding shares of the
Parent Guarantor Preferred
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Stock minus the amount of any payments made during such Fiscal
Quarter on the Equity Proceeds Notes;
(vi) the Parent Guarantor shall be permitted to make
Distributions to the holders of any outstanding shares of the
Parent Guarantor Preferred Stock (or depositary shares in
respect thereof) in an amount not to exceed the payments
received or receivable from time to time by the Parent
Guarantor from the Company under clause (v) of this Section
9.2.6(a) and in respect of the Equity Proceeds Notes; and
(vii) the Parent Guarantor shall be permitted to
convert shares of the Parent Guarantor Preferred Stock (or
depositary shares in respect thereof) into the common stock of
the Parent Guarantor or redeem shares of the Parent Guarantor
Preferred Stock (or depositary shares in respect thereof) in
exchange for the common stock of the Parent Guarantor plus an
amount in cash equal to all amounts payable by the Parent
Guarantor in respect of accrued and unpaid dividends in
connection with such conversion or redemption, in each case in
accordance with the Certificate of Designations governing such
shares of Parent Guarantor Preferred Stock (or the Depositary
Agreement in respect of such depositary shares).
(b) The Company will not, and will not permit any of its
Subsidiaries to,
(i) make any payment or prepayment of principal of,
or any prepayment of interest on, any Subordinated Debt
(including pursuant to Section 4.05, 4.06, or 4.07 of the
Subordinated Indenture) or make any payment of interest on, or
any payment in respect of, any Subordinated Debt which would
violate the subordination provisions of such Subordinated
Debt;
(ii) make any prepayment of principal of, or any
prepayment of interest on, any other Indebtedness (including
the Senior Debt); provided, however, that the Company may
prepay the principal of or interest on Indebtedness in respect
of this Agreement, the Company may repay Indebtedness in
connection with the refinancing of all or substantially all of
such Indebtedness and the Company may prepay Indebtedness
(other than Indebtedness owing to any Subsidiary of the
Company or any Joint Venture Affiliate) in an amount not to
exceed $10,000,000 in the aggregate;
(iii) make any payment or prepayment of principal
of, or interest on, the PIK Note; provided, however, that if
no Event of Cash Dominion shall have occurred and be
continuing (or will have occurred immediately following
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such payment) and provided no Default shall have occurred and
be continuing (or would occur as a result of such payment) the
Company may repay the PIK Note at or after the maturity
thereof;
(iv) redeem, purchase, or defease any Subordinated
Debt, any Senior Debt, the PIK Note or any Equity Proceeds
Note;
(v) make any payment or prepayment of principal
of, or interest on, the Equity Proceeds Notes except that the
Company may pay principal and interest from time to time on
the Equity Proceeds Notes in accordance with the provisions of
the Equity Proceeds Notes, subject to the subordination
provisions thereof; provided, however, that if any Equity
Proceeds Note is issued in connection with the issuance of
Parent Guarantor Preferred Stock that is convertible into
shares of the common stock of the Parent Guarantor,
immediately upon the conversion of all of such shares of the
Parent Guarantor Preferred Stock (or depositary shares in
respect thereof) into shares of the common stock of the Parent
Guarantor pursuant to the Certificate of Designations
governing such shares of the Parent Guarantor Preferred Stock
(or the Depositary Agreement in respect of such depositary
shares), (A) the Company shall, after the payment of all
amounts payable by the Parent Guarantor in respect of accrued
and unpaid dividends in connection with such conversion and in
accordance with the terms of such Equity Proceeds Note, defer
further principal and interest payments on such Equity
Proceeds Note until such time as no Senior Indebtedness of the
Company (as defined in such Equity Proceeds Note) under or in
connection with this Agreement or the other Loan Documents or
any refinancing of such Senior Indebtedness of the Company is
then outstanding and (B) the Parent Guarantor shall, after all
amounts payable by the Parent Guarantor in respect of accrued
and unpaid dividends in connection with such conversion have
been paid, if requested by the Agent, with the written consent
of the Required Lenders, deliver such Equity Proceeds Note to
the Company as a capital contribution and the Company shall
immediately cancel such Equity Proceeds Note; or
(vi) make any payment of principal of or interest
on the Indebtedness listed on Schedule XIII hereto.
(c) The Company and the Parent Guarantor will not, and
will not permit any of their respective Subsidiaries to, make any
deposit for any of the foregoing purposes.
SECTION 9.2.7. Capital Expenditures. The Company will not, and will
not permit any of its Subsidiaries to, make Adjusted Capital Expenditures in
any Fiscal Year set forth below in an
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aggregate amount in excess of the sum of (a) the Base Amount set forth below
opposite such Fiscal Year plus (b) in the case of each Fiscal Year commencing
with the 1995 Fiscal Year the Carryover Amount applicable to such Fiscal Year:
<TABLE>
<CAPTION>
Fiscal Year Base Amount
----------- -----------
<S> <C>
1994 $60,000,000
1995 $70,000,000
1996 $75,000,000
1997 $80,000,000
1998 $90,000,000
</TABLE>
The "Carryover Amount" applicable to any Fiscal Year is equal to (i) the sum of
the Base Amounts applicable to all periods set forth which end prior to the
Fiscal Year for which the Carryover Amount is being calculated minus (ii) the
aggregate amount of Adjusted Capital Expenditures which were actually made by
the Company and its Subsidiaries during the 1994 Fiscal Year and during each
Fiscal Year thereafter prior to the Fiscal Year for which such Carryover Amount
is being calculated; provided, however, that the Carryover Amount shall not
exceed $10,000,000 for the 1995 Fiscal Year, $20,000,000 for the 1996 Fiscal
Year and $30,000,000 for any Fiscal Year thereafter.
SECTION 9.2.8. Rental Obligations. The Company will not, and will
not permit any of its Subsidiaries to, enter into at any time any arrangement
which does not create a Capitalized Lease Liability and which involves the
leasing by the Company or any of its Subsidiaries for terms which exceed, or
when added to the term of any extension which may be made at the sole option of
the Company or any such Subsidiary might exceed, one year from any lessor of
any Property (or any interest therein), except such arrangements which,
together with all other such arrangements which shall then be in effect, will
not require the payment of an aggregate amount of rentals by the Company and
its Subsidiaries on a consolidated basis (excluding escalations resulting from
a rise in the consumer price or similar index) in excess, for any Fiscal Year
of $35,000,000; provided, however, that any calculation made for purposes of
this Section 9.2.8 shall exclude any amounts required to be expended for
maintenance and repairs, insurance, taxes, assessments, and other similar
charges.
SECTION 9.2.9. Take or Pay Contracts. The Company will not, and
will not permit any of its Subsidiaries to, enter into or be a party to any
arrangement for the purchase of materials, supplies, other Property, or
services if such arrangement by its express terms requires that payment be made
by the Company or such Subsidiary regardless of whether such materials,
supplies, other Property, or services are delivered or furnished to it, except
those set forth in Item 10 ("Take or Pay and Similar Contracts") of the
Disclosure Schedule.
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SECTION 9.2.10. Consolidation, Merger, etc. The Parent Guarantor and
the Company will not, and will not permit any of their Subsidiaries to,
liquidate or dissolve, consolidate with, or merge into or with, any other
corporation, except that if no Default or Event of Default shall occur and be
continuing or shall exist at the time of any such merger or consolidation or
immediately thereafter and after giving effect thereto,
(a) any Subsidiary of the Company may liquidate or
dissolve into or may merge or consolidate with or into the Company if
the Company is the surviving corporation;
(b) any Subsidiary of the Company may liquidate or
dissolve into or may merge or consolidate with or into any other
wholly-owned Subsidiary of the Company that is an Obligor if the
Obligor is the surviving corporation;
(c) any Subsidiary of the Company that is not an Obligor
may liquidate or dissolve or merge or consolidate with or into any
other Subsidiary of the Company that is not an Obligor;
(d) the Parent Guarantor may, with the prior written
consent of the Required Lenders, merge with and into the Company and,
provided that the Parent Guarantor shall assume all of the Obligations
of the Company under this Agreement and the other Loan Documents, the
Company may, with the prior written consent of the Required Lenders,
merge with and into the Parent Guarantor; and
(e) the Company and its Subsidiaries may engage in Asset
Dispositions permitted by Section 9.2.11.
Notwithstanding the foregoing, neither the Company nor any Subsidiary may
engage in any such transaction unless at least five (or, in the case of any
such transaction involving the Company or any other Obligor, 30) Business Days
prior thereto, or such shorter period as shall be acceptable to the Agent, the
Company shall have delivered to the Agent a description of the proposed
transaction, in reasonable detail, and a certificate signed by an Authorized
Officer certifying that such transaction will not result in a Default or an
Event of Default.
SECTION 9.2.11. Asset Dispositions. The Company will not, and will
not permit any of its Subsidiaries to, make any Asset Disposition, other than
the following:
(a) the Company and its Subsidiaries may dispose of cash
or Cash Equivalent Investments;
(b) the Company or any wholly-owned Subsidiary of the
Company may dispose of its assets to the Company or any wholly-owned
Subsidiary of the Company;
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(c) the Company and its Subsidiaries may dispose of
Inventory in the ordinary course of business on ordinary trade terms;
(d) the Company and its Subsidiaries may license
technology or know-how on a nonexclusive basis in the ordinary course
of business and on ordinary trade terms;
(e) ALPART or VALCO may dispose of any of their
respective assets in the ordinary course of business;
(f) the Company may dispose of a facility that is
subsequently repurchased or leased by the Company in connection with
the issuance of industrial revenue bonds by a state, municipality or
other subdivision of the United States of America or any department,
agency, public corporation or other instrumentality thereof;
(g) the Company and its Subsidiaries may dispose of
assets (other than Accounts) with a fair market value of less than
$__________ (in a single transaction or related series of
transactions);
(h) the Company may dispose of any of its assets in
connection with the leaseback of such assets by the Company or any of
its Subsidiaries, provided that such leaseback is otherwise permitted
hereunder and such Asset Disposition occurs not later than twelve
months after such assets are placed in service;
(i) if no Default or Event of Default shall have occurred
and be continuing or shall occur after giving effect thereto, the
Company and its Subsidiaries may dispose of assets, in addition to
those dispositions permitted in clauses (a) through (h) above;
provided the fair market value of the assets disposed of pursuant to
this Section 9.2.11(g) does not exceed $25,000,000 in any Fiscal Year;
and
(j) transfers of Property permitted by Section 9.2.18.
Notwithstanding the foregoing, the Company will not, and will not permit any of
its Subsidiaries to, take any action which would require an "Asset Sale Offer"
(under and as defined in the Subordinated Indenture) to be made pursuant to
Section 5.12(b) of the Subordinated Indenture or to violate the provisions of
Section 5.12 of the Subordinated Indenture.
SECTION 9.2.12. Sale or Discount of Receivables. The Company will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
sell, sell with recourse, discount or otherwise sell for less than the face
value thereof, any of its notes or accounts receivable; provided, however, that
the Company and its Subsidiaries may sell, sell with recourse, discount or
otherwise sell for less than the face value thereof, to any Lender or
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Lenders, any notes or accounts receivable arising in connection with any sale
of product for delivery in the Commonwealth of Independent States in an
aggregate amount not to exceed $10,000,000 in any calendar month.
SECTION 9.2.13. Restrictions on Actions under Certain Agreements.
Neither the Parent Guarantor nor the Company will
(a) consent to any amendment, supplement, or other
modification of any of the terms or provisions contained in, or
applicable to, any document or instrument evidencing or governing any
Subordinated Debt or any Senior Debt, the PIK Note or any Equity
Proceeds Note other than any amendment, supplement, or other
modification which extends the date or reduces the amount of any
required repayment or any amendment, supplement or modification of the
PIK Note or any Equity Proceeds Note that is consented to in writing
by the Agent;
(b) designate any other Indebtedness as "Specified Senior
Debt" under the Subordinated Indenture or designate or permit any
Subsidiary of the Company to designate any other Indebtedness of such
Subsidiary as "Guarantor Specified Senior Debt" under the Subordinated
Indenture;
(c) take, or permit any of its Subsidiaries to take any
action, or permit, or allow any of its Subsidiaries to permit, to
exist any condition, which in any such case would require (i) the
Company to cause any of its present or future Subsidiaries (other than
KAAC, AJI, KFC and KJC, and except as otherwise provided inclauses (b)
and (c) of Section 9.1.10 and clause (b)(i) of Section 9.2.2), or
which would directly require any such Subsidiary, to guarantee or
otherwise become liable in respect of any Subordinated Debt or Senior
Debt, or (ii) the Company or any Subsidiary of the Company to provide
collateral security in respect of any Subordinated Debt or Senior
Debt;
(d) make any offer to prepay, redeem, defease or
repurchase any Subordinated Debt or Senior Debt;
(e) fail to deliver any certificate and opinion permitted
to be given to the trustee under clauses (a) and (b) of Section 16.14
of the Subordinated Indenture with respect to any "Subsidiary
Guarantor" (under and as defined in the Subordinated Indenture) or to
deliver any certificate and opinion permitted to be given to the
trustee under clauses (a) and (b) of Section 15.05 of the Senior
Indenture with respect to any "Subsidiary Guarantor" (under and as
defined in the Senior Indenture); and
(f) consent to any amendment, supplement or other
modification of any of the terms or provisions contained in, or
applicable to, any document or instrument evidencing or governing the
Parent Guarantor Preferred Stock (or depositary
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shares in respect thereof) if such amendment, supplement or other
modification would have a Materially Adverse Effect.
SECTION 9.2.14. Transactions with Affiliates. The Company will not,
and will not permit any of its Subsidiaries to, enter into, or cause, suffer,
or permit to exist any transaction, arrangement, or contract with any Affiliate
of the Company (other than the Company, its Subsidiaries which are not
Restricted Subsidiaries, Joint Venture Affiliates, and any Subsidiary of a
Joint Venture Affiliate in which neither the Parent Guarantor, MAXXAM nor any
Affiliate of either thereof (other than the Company, its Subsidiaries which are
not Restricted Subsidiaries, or any Joint Venture Affiliate) has any equity
interest other than through a direct or indirect ownership interest in the
Company) requiring, constituting or involving any payments or other transfers
of Property to be made by the Company or any Subsidiary to or for the benefit
of, or pursuant to which the Company or any of its Subsidiaries incurs a
Contingent Liability in respect of any obligation of, or incurs a contractual
obligation for the benefit of, any Affiliate of the Company (other than Persons
described in the previous parenthetical of this sentence).
Notwithstanding the foregoing provisions of this Section 9.2.14, (a)
directors, officers, and employees of the Company and its Subsidiaries may
render services to the Company and its Subsidiaries which are not Restricted
Subsidiaries for compensation and other benefits comparable to those generally
paid by corporations engaged in the same or similar businesses for the same or
similar services; (b) the transactions provided for in, and the loan evidenced
by, the KT Note shall be permitted; (c) the performance of the Tax Allocation
Agreement, the Deconsolidation Tax Allocation Agreement and the Transfer
Agreement shall be permitted, except that the Company shall not be permitted to
make any cash payments to MAXXAM or any other Affiliate pursuant to the Tax
Allocation Agreement but MAXXAM may offset amounts owing to it under the Tax
Allocation Agreement against amounts owed by MAXXAM under the Tax Allocation
Agreement; (d) the Company may make payments to MAXXAM for any Fiscal year in
respect of (i) services actually rendered to the Company during such Fiscal
Year by employees of MAXXAM, and (ii) the Company's allocable share of MAXXAM's
overhead expenses during such Fiscal Year which are attributable to employees
of the Company who are located at MAXXAM's corporate headquarters, provided
that the charges for such services are fully documented and that the aggregate
amount of such payments made by the Company to MAXXAM for any Fiscal Year does
not exceed the aggregate amount of payments made to the Company by MAXXAM for
similar purposes for any Fiscal Year by more than $1,500,000; (e) subject to
Section 9.2.10, a merger or other combination between the Company and the
Parent Guarantor shall be permitted; (f) Distributions permitted by Section
9.2.6 shall be permitted; (g) transactions between ALPART or VALCO and Persons
who own an equity interest in ALPART or VALCO shall be permitted; (h)
continuation of performance under agreements entered into with Persons who were
not then Affiliates shall be permitted (but
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excluding, however, any renegotiation, extension, or modification of such
agreements after such Person has become, or is anticipated to become, an
Affiliate), provided that such agreement was not entered into in connection
with or in anticipation of such Person becoming an Affiliate of the Company;
(i) payments of legal fees and expenses to a law firm of which an Affiliate of
the Company is a member shall be permitted; (j) the Company may provide
services and facilities to the Parent Guarantor in connection with activities
of the Parent Guarantor that are permitted by the first sentence of Section
9.2.1 in exchange for payment of its actual costs (allocated in good faith
where appropriate) of providing such services and facilities; (k) any amendment
to the KT Note that extends the maturity thereof or reduces the interest rate
thereon shall be permitted; (l) performance of the PIK Note and any Equity
Proceeds Note in accordance with the provisions of Section 9.2.6; and (m) the
issuance of any Equity Proceeds Note shall be permitted.
For purposes of thisSection 9.2.14, the term "Affiliate" shall not be
deemed to include employee benefit plans, and trusts in connection therewith,
for the benefit of employees of the Company and its Subsidiaries.
SECTION 9.2.15. Negative Pledges, etc. The Parent Guarantor and the
Company will not, and will not permit any of their Subsidiaries (other than
ALPART and VALCO) to, enter into any agreement (excluding this Agreement, any
other Loan Document, and any agreement governing any Indebtedness permitted
either by clause (a)(iii) of Section 9.2.2 as in effect on the Effective Date,
or by clause (b)(xv) of Section 9.2.2 as to the assets financed with the
proceeds of such Indebtedness) (a) prohibiting the creation or assumption of
any Lien securing the Obligations of the Company and its Subsidiaries upon its
Properties, revenues, or assets which constitute Collateral, or over any
properties, revenues, or assets which, if acquired after the Effective Date
would be required to be subjected to a Lien in favor of the Agent pursuant to
Section 9.1.10 or 9.1.11 or over any other real property owned in fee by the
Company or any such Subsidiary on the Effective Date, or (b) specifically
prohibiting the Parent Guarantor, the Company, or any other Obligor from
amending or otherwise modifying this Agreement or any other Loan Document to
which it is a party; provided, however, that the execution and delivery of the
Senior Indenture shall not be deemed to breach clause (a) of this Section
9.2.15.
SECTION 9.2.16. Sale-Leaseback Transactions. The Company will not,
and will not permit any of its Subsidiaries to, directly or indirectly, become
liable as lessee or guarantor or other surety with respect to any lease
(whether an operating or capital lease) of any Property, whether now owned or
hereafter acquired, (a) which the Company or any of its Subsidiaries has sold
or transferred or is to sell or transfer to any other Person or (b) which the
Company or any of its Subsidiaries intends to use for substantially the same
purpose as any other Property which has been or is to be sold or transferred by
the Company or such Subsidiary to any Person in
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connection with such lease, except (i) any Capitalized Lease Liabilities
permitted under Section 9.2.2 or (ii) any consolidated lease expense resulting
therefrom that would be permitted under Section 9.2.8.
SECTION 9.2.17. Change of Location or Name. Each of the Parent
Guarantor and the Company will not, nor will either permit any of its
Subsidiaries listed on Schedule IV hereto to, change
(a) the location of its principal place of business, chief
executive office, major executive office, chief place of business, or
its records concerning its business and financial affairs; or
(b) its name or the name under or by which it conducts its
business,
in each case without first giving the Agent at least 30 days, or such shorter
period as shall be acceptable to the Agent, prior written notice thereof and
taking any and all actions which the Agent may request to maintain and preserve
all Liens in favor of the Agent granted pursuant to the Collateral Documents;
provided, however, that notwithstanding the foregoing, each of the Parent
Guarantor and the Company will not, and will not permit any such Subsidiary to,
change the location of its principal place of business, chief executive office,
chief place of business, or its records concerning its business and financial
affairs
(i) to Louisiana or Tennessee, or
(ii) from the contiguous continental United States to any
place outside the contiguous continental United States.
SECTION 9.2.18. Intercompany Transfers of Property. The Parent
Guarantor and the Company will not, and will not permit any Obligor to,
transfer or cause to be transferred, in one or a series of related transactions
any Property of the Parent Guarantor, the Company or any such Subsidiary to any
Subsidiary of the Company or to any Joint Venture Affiliate, except:
(i) any Obligor may transfer goods, services, working
capital and technology (other than Accounts) to Subsidiaries of the
Company and Joint Venture Affiliates in the ordinary course of
business and may license technology or know-how to Subsidiaries of the
Company and Joint Venture Affiliates in the ordinary course of
business;provided, in each case, that after giving effect to such
transfer the Revolving Credit Outstandings immediately following such
transfer will not exceed the Borrowing Base;
(ii) any Obligor may transfer Property (other than cash and
Accounts) to Subsidiaries and Joint Venture Affiliates, provided that
such transfer is made in exchange for cash in an amount equal to the
fair market value of such Property;
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(iii) any Obligor may transfer Property (other than
Accounts) to any other Obligor;
(iv) other transfers of Property (other than Accounts);
provided that the aggregate amount thereof (if other than cash, such
amount shall be the fair market value of such asset at the time of
such transfer), less the aggregate amount of such Property returned to
the Company or any Obligor (if returned other than in cash, the amount
of such Property shall be the fair market value thereof at the time so
returned), does not exceed, in the aggregate, the greater of (A)
$25,000,000 or (B) 5% of the Company's Net Worth, calculated after
giving effect to such transfers and returns;
(v) the use of the proceeds of Indebtedness incurred by
the Company, KJC, AJI and KAAC by ALPART, QAL and VALCO pursuant to
Section 9.2.2(b)(iii);
(vi) transfers of capital stock or other equity interests
to the issuer of such capital stock or other equity interests such
that immediately after giving effect to such transfer and related
transfers, the proportional beneficial ownership by the transferor of
the class of capital stock or equity interests so transferred is not
reduced;
(vii) Investments permitted by Sections 9.2.5(f) and
9.2.5(o);
(viii) the Company may contribute to any wholly-owned
Subsidiary of the Company intercompany receivables owing by such
wholly- owned Subsidiary to the Company; and
(ix) the Company or any wholly-owned Subsidiary of the
Company may assume intercompany payables owing by any wholly-owned
Subsidiary of the Company to the Company or any wholly-owned
Subsidiary of the Company.
SECTION 9.2.19. Inconsistent Agreements. The Parent Guarantor and
the Company will not, and will not permit any of its Subsidiaries to, enter
into any material agreement (other than the Senior Debt Instruments) containing
any provision which would be violated or breached by any Credit Extension or by
the performance by the Parent Guarantor or the Company or any other Obligor of
its obligations hereunder or under any Loan Document.
ARTICLE X
EVENTS OF DEFAULT
SECTION 10.1. Listing of Events of Default. Each of the following
events or occurrences described in this Section 10.1 shall constitute an "Event
of Default".
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SECTION 10.1.1. Non-Payment of Obligations. The Company shall
default in the payment or prepayment when due of any principal of or interest
on any Loan or Reimbursement Obligation; or the Company shall default (and such
default shall continue unremedied for a period of five days) in the payment
when due of any commitment or letter of credit fee payable hereunder.
SECTION 10.1.2. Breach of Warranty. Any representation, warranty, or
certification of the Parent Guarantor, the Company, or any other Obligor made
or deemed to be made hereunder or in any other Loan Document to which it is or
is to become a party or any other writing or certificate furnished by or on
behalf of the Parent Guarantor, the Company, or any other Obligor to the Agent
or any Lender for the purposes of or in connection with this Agreement or any
such other Loan Document (including any certificates delivered pursuant to
Article VII) is or shall be incorrect when made in any material respect.
SECTION 10.1.3. Non-Performance of Certain Covenants and Obligations.
The Parent Guarantor, the Company, or any Obligor shall default in the due
performance and observance of any of its respective obligations under Sections
3.3.2, 3.3.3, 9.2.4, 9.2.6 or 9.2.7 of this Agreement or Section _____ of the
Concentration Bank Agreement.
SECTION 10.1.4. Non-Performance of Certain Covenants and Obligations.
The Parent Guarantor, the Company, or any other Obligor shall default in the
due performance and observance of any of its respective obligations under
(a) Sections of this Agreement,
(b) Section 1.2, 1.4, 1.5, 1.7, 1.10, 1.11, 1.15, 1.17,
1.19, 1.20.1, or 1.21 of any Company Mortgage or Company Deed of
Trust,
(c) Section 5(d), 6(g), 6(h), 6(j), 6(o), or 9 of the
Company Security Agreement,
(d) Section 6(g), 6(h), 6(i), or 9 of the Parent Security
Agreement,
(e) Section 6(h), 6(i), 6(j), or 9 of the Subsidiary
Security Agreement,
(f) Section 4.1 or 4.2 of the Company Pledge Agreement,
the Parent Pledge Agreement, or the Subsidiary Pledge Agreement, or
(g) Section 4.1 of the Intercompany Note Pledge Agreement,
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and such default shall continue unremedied for a period of five days after
written notice thereof shall have been given by the Company to the Agent or by
the Agent to the Company.
SECTION 10.1.5. Non-Performance of Other Covenants and Obligations.
Any Obligor shall default in the due performance and observance of any other
agreement contained herein, or in any other Loan Document to which it is or is
to become a party, and such default shall continue unremedied for a period of
30 days after written notice thereof shall have been given by the Company to
the Agent or to the Company by the Agent.
SECTION 10.1.6. Default on Other Indebtedness. A default shall occur
in the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness (other than Indebtedness
described in Section 10.1.1) of the Parent Guarantor, the Company, any of their
Subsidiaries, or any Joint Venture Affiliate having an aggregate principal
amount in excess of $20,000,000 or, in the case of Indebtedness of Joint
Venture Affiliates, having an aggregate principal amount for which the Parent
Guarantor, the Company, or any of their Subsidiaries is contingently liable in
excess of $20,000,000; or a default shall occur in the performance or
observance of any obligation or condition with respect to any such Indebtedness
if the effect of such default is to accelerate the maturity of any such
Indebtedness or to permit the holder or holders thereof, or any trustee or
agent for such holders, to cause such Indebtedness to become due and payable
prior to its expressed maturity.
SECTION 10.1.7. Judgments. A final judgment which, together with
other outstanding final judgments against the Company and its Significant
Subsidiaries, exceeds an aggregate of $20,000,000 (to the extent such judgments
are not covered by valid and collectible insurance from solvent unaffiliated
insurers) shall be entered against the Company and/or any of its Significant
Subsidiaries and (a) within 30 days after entry thereof, judgments exceeding
such amount shall not have been discharged, settled, bonded or execution
thereof stayed pending appeal or, within 30 days after the expiration of any
such stay, such judgments exceeding such amount shall not have been discharged,
settled, bonded or execution thereof stayed or (b) an enforcement proceeding
shall have been commenced (and not discharged, settled, bonded or execution
thereof stayed) by any creditor upon judgments exceeding such amount.
SECTION 10.1.8. Pension Plans. Any of the following events shall
occur with respect to any Pension Plan
(a) the taking of any action by the Parent
Guarantor, the Company, any member of their Controlled Groups, or any
other Person (with the requisite authority to act) to terminate a
Pension Plan if, as a result of such termination, the Parent
Guarantor, the Company, or any such member could reasonably expect to,
or in the case of liability arising
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under section 4063 or section 4069 of ERISA, there is a reasonable
likelihood that it could be required to, make a contribution to such
Pension Plan, or could reasonably expect to incur a liability or
obligation to such Pension Plan, in excess of $10,000,000; or
(b) a contribution failure occurs with respect to
any Pension Plan sufficient to give rise to a Lien against assets of
any Controlled Group member under Section 302(f) of ERISA in an amount
in excess of $1,000,000, which failure has not been completely cured
within 30 days of the applicable due date.
SECTION 10.1.9. Change in Control. Any Change in Control shall occur.
SECTION 10.1.10. Bankruptcy, Insolvency, etc. The Parent Guarantor,
the Company, any Significant Subsidiary, any other Obligor, or any Joint
Venture Affiliate (other than KJBC) shall
(a) become insolvent or generally fail to pay, or admit
in writing its inability or unwillingness to pay, debts as they become
due;
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator, or other custodian
for the Parent Guarantor, the Company, any Significant Subsidiary, any
other Obligor, or any such Joint Venture Affiliate or any Property of
any thereof, or make a general assignment for the benefit of
creditors;
(c) in the absence of such application, consent, or
acquiescence, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator, or other custodian for the Parent Guarantor,
the Company, any Significant Subsidiary, any other Obligor, or any
such Joint Venture Affiliate or for a substantial part of the Property
of any thereof, and, in the case of any such Person other than the
Company, such trustee, receiver, sequestrator, or other custodian
shall not be discharged within 60 days;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up, or liquidation proceeding, in respect of the Parent
Guarantor or of the Company;
(e) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up, or liquidation proceeding, in respect of any Significant
Subsidiary, any other Obligor (other than the Parent Guarantor or the
Company), or any such Joint
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Venture Affiliate, and, if such case or proceeding is not commenced by
such Person, such case or proceeding shall be consented to or
acquiesced in by such Person or shall result in the entry of an order
for relief or shall remain for 60 days undismissed; or
(f) take any corporate action authorizing, or in
furtherance of, any of the foregoing.
SECTION 10.1.11. Subordinated Debt and Senior Debt. The
Company shall be required, pursuant to the terms of any Subordinated Debt
Instrument or any Senior Debt Instrument, or shall offer, to redeem,
repurchase, prepay, or defease any Subordinated Debt or any Senior Debt.
SECTION 10.1.12. Impairment of Certain Documents. Except as
otherwise expressly permitted in any Loan Document, any of the Fundamental Loan
Documents shall terminate or cease in whole or in part to be the legally valid,
binding, and enforceable obligation of the relevant Obligor, or such Obligor or
any Person acting for or on behalf of such Obligor contests such validity,
binding effect, or enforceability, or purports to revoke any Fundamental Loan
Document, or any asset or item of Property purported to be secured by any
Collateral Document ceases to be so secured and continues not to be secured for
ten Business Days after written notice thereof has been given to such Obligor
by the Agent.
SECTION 10.2. Action if Bankruptcy. If any Event of Default
described in clauses (a) through (e) of Section 10.1.10 shall occur with
respect to the Company, the outstanding principal amount of all outstanding
Loans and all other Obligations shall automatically be and become immediately
due and payable, without notice, demand or presentment and the Company shall
pay to the Agent in Dollars and immediately available funds an amount equal to
the then aggregate Letter of Credit Outstandings in accordance with Section
5.7.
SECTION 10.3. Action if Other Event of Default. If any Event of
Default (other than any Event of Default described in clauses (a) through (e)
of Section 10.1.10 with respect to the Company) shall occur for any reason,
whether voluntary or involuntary, and be continuing,
(a) the Agent shall, upon the direction of the Required Lenders,
(i) by written notice to the Company declare the Commitments
terminated, whereupon the Commitments of each Lender will thereupon
terminate immediately and any fees payable hereunder shall become due
and payable without notice of any kind;
(ii) by written notice to the Company declare all or any
portion of the outstanding principal amount of the Loans and
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other Obligations to be due and payable, whereupon the full unpaid
amount of such Loans and other Obligations which shall be so declared
due and payable shall be and become immediately due and payable,
without further notice, demand, or presentment and the Company shall
pay to the Agent in Dollars and immediately available funds an amount
equal to the then aggregate Letter of Credit Outstandings in
accordance with Section 5.7; or
(iii) terminate any Letter of Credit which may be
terminated in accordance with its terms; and
(b) the Agent shall, upon the direction of the Required Lenders,
and may, in its sole and absolute discretion,
(i) reduce the Revolving Commitment Availability or one or
more of the elements thereof; or
(ii) decline to permit the issuance of additional Letters
of Credit or the extension of the Stated Expiry Date of any
outstanding Letter of Credit.
Each and every right, power, and remedy provided herein or in any other Loan
Document shall be cumulative and shall be in addition to every other right,
power, and remedy provided herein or in any other Loan Document or provided
under applicable law.
ARTICLE XI
THE ADMINISTRATIVE AGENT
SECTION 11.1. Appointment; Actions.
(a) Each Lender hereby appoints Business Credit as its Agent
under and for purposes of this Agreement, each of the other Loan
Documents and the Collateral Documents. Each Lender irrevocably
authorizes, and each assignee of any Lender shall be deemed to
authorize, the Agent to act on behalf of such Lender under this
Agreement, each of the other Loan Documents and the Collateral
Documents and, in the absence of other written instructions from the
Required Lenders received from time to time by the Agent (with respect
to which the Agent agrees that it will comply, except as otherwise
provided in thisSection 11.1 or as otherwise advised by counsel), each
Lender irrevocably authorizes the Agent to take such actions on its
behalf and to exercise such powers hereunder and thereunder as are in
each case specifically delegated to or required of the Agent by the
terms hereof or thereof, together with such powers as may be
reasonably incidental thereto. In addition, each Lender irrevocably
authorizes, and each assignee of a Lender shall be deemed to
authorize, the Agent to delegate from time to time all or any of its
duties hereunder to Bank of America. In the event of any such
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delegation, Bank of America shall be entitled to all of the rights of
the Agent hereunder. Each Lender agrees that no Lender shall have any
right individually to seek to realize upon the security granted by or
any guaranty provided by any Collateral Document, it being understood
and agreed that such rights and remedies may be exercised solely by
the Agent for the benefit of the Lenders in accordance with the terms
of this Agreement and the Collateral Documents.
(b) The Agent shall not have by reason of this Agreement or
any other Loan Document a fiduciary relationship in respect of any
Lender; and nothing in this Agreement or any other Loan Document,
expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement or
any other Loan Document except as expressly set forth herein or
therein. Notwithstanding the foregoing, the Lenders acknowledge that
the Agent is authorized to exercise its discretion in taking certain
actions and exercising certain powers under this Agreement, including
determining which Accounts and Inventory constitute Eligible Accounts
and Eligible Inventory, determining the Revolving Commitment
Availability pursuant toSection 10.3, and following the occurrence of
an Event of Cash Dominion, continuing to make Credit Extensions
pursuant to Section 7.2 . Each Lender hereby irrevocably indemnifies
and agrees to indemnify (which indemnity shall survive any termination
of this Agreement) the Agent, and each of its officers, directors,
employees and agents (collectively, the Indemnified Persons"), pro
rata according to such Lender's Percentage, from and against any and
all liabilities, demands, judgments, obligations, losses, damages,
claims, costs, or expenses of any kind or nature whatsoever (including
those relating to the preparation, execution, delivery,
administration, modification, amendment, or enforcement (whether
through negotiations, legal proceedings, or otherwise) of this
Agreement, and the other Loan Documents) which may at any time be
imposed on, incurred by, or asserted against, any of the Indemnified
Persons in any way relating to or arising out of this Agreement, or
any other Loan Document, including reasonable attorneys' fees and
allocated costs of in-house counsel, and as to which the Agent is not
reimbursed by the Company;provided, however, that no Lender shall be
liable for the payment of any portion of such liabilities,
obligations, losses, damages, claims, costs, or expenses of any
Indemnified Person which have resulted from such Indemnified Person's
bad faith or willful misconduct. The Agent shall not be required to
take any action, make any inquiry, or request any document hereunder,
or under any other Loan Document, or to prosecute or defend any suit
in respect of this Agreement, or any other Loan Document, unless (i)
if it has requested instructions from the Lenders as to such action,
it shall have received such instructions from the Required Lenders
(or, if required by this Agreement, all the Lenders) and (ii) it is
indemnified hereunder to its
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satisfaction. If any indemnity in favor of the Agent shall be or
become inadequate, in the determination of the Agent, the Agent may
call for additional indemnification from the Lenders and cease to do
the acts indemnified against hereunder until such additional indemnity
is given. The agreements in this clause (c) shall survive the
termination of the Commitments and the Letters of Credit and the
repayment of the Loans and other Obligations.
(c) The Company hereby requests the Agent to, and each Lender
hereby instructs the Agent to, and the Agent agrees to, deliver to the
Company on the Initial Borrowing Date, for delivery by the Company to
R.T.Z. Aluminum Holdings Limited, a letter in the form of Exhibit R
attached hereto.
(d) The Company hereby requests the Agent to, and each Lender
hereby instructs the Agent to, and the Agent agrees to, deliver to the
Company on the Initial Borrowing Date, a letter regarding the flood
plain status of the properties covered by the Company Mortgages and
the Company Deeds of Trust, in the form ofExhibit S attached hereto.
SECTION 11.2. Funding Reliance, etc.
(a) Unless the Agent shall have been notified by telephone
and such notice shall have been confirmed in writing by any Lender by
5:00 p.m., San Francisco time, on the Business Day prior to a
Borrowing that such Lender will not make available the amount which
would constitute its Percentage of such Borrowing on the date
specified therefor, the Agent may assume that such Lender has made
such amount available to the Agent and, in reliance upon such
assumption, make available to the Company a corresponding amount. If
and to the extent that such Lender shall not have made such amount
available to the Agent, such Lender and the Company severally agree to
repay the Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date the Agent made such
amount available to the Company to the date such amount is repaid to
the Agent, at the interest rate(s) applicable at the time to Loans
comprising such Borrowing.
(b) Unless the Agent shall have been notified by telephone
and such notice shall have been confirmed in writing by the Company by
5:00 p.m., San Francisco time, on the day prior to the due date of any
Obligation, that any Obligor will not make the full amount of all
payments scheduled to be made by it on such due date, the Agent may
assume that such Obligor has made such amount available to the Agent
and, in reliance upon such assumption, make available to the Lenders
their respectivepro rata shares of such amount. If the Agent makes
any such amount available to any Lender, but such amount was not in
fact made available by or on behalf of such Obligor to the Agent on
such due date, such Lender shall pay to the Agent
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on demand the amount previously made available to such Lender,
together with interest on such amount at the daily average Federal
Funds Rate for the number of days from and including the date on which
such Lender received such amount to the date on which such amount
becomes immediately available to the Agent, and together with such
other compensatory amounts as may be required to be paid by such
Lender to the Agent pursuant to the Rules for Interbank Compensation
of the Council on International Banking or the Clearinghouse
Compensation Committee, as the case may be, as in effect from time to
time. A statement of the Agent submitted to any Lender with respect
to any amounts owing under this paragraph shall be conclusive, in the
absence of manifest error. If such amount is not in fact made
available to the Agent by such Lender within two Business Days after
the date on which such Lender is (i) informed by the Agent that such
amount was not made available to the Agent by or on behalf of such
Obligor, and (ii) requested by the Agent to refund such amount to the
Agent, then the Agent shall be entitled to recover on demand an amount
calculated in the manner specified in the second preceding sentence of
this clause (b) after substituting the term "Reference Rate" for the
term "Federal Funds Rate".
SECTION 11.3. Exculpation.
(a) No Indemnified Person shall be liable to any Lender
for any action taken or omitted to be taken by such Indemnified Person
under this Agreement or any other Loan Document or in connection
herewith or therewith (except for such Indemnified Person's own
willful misconduct or bad faith), nor responsible for any recitals,
statements, representations or warranties herein or therein, nor for
the effectiveness, genuineness, enforceability, validity, or due
execution of this Agreement or any other Loan Document, nor for the
creation, perfection, or priority of any Liens purported to be created
by any of the Loan Documents, or the validity, genuineness,
enforceability, existence, condition, value, or sufficiency of any
collateral security, nor to make any inquiry respecting the
performance by any Obligor of its obligations hereunder or under any
other Loan Document. Each Indemnified Person shall be entitled to
rely upon advice of counsel concerning legal matters and upon any
notice, consent, certificate, statement, or writing which such
Indemnified Person believes to be genuine and to have been presented
by a proper Person, and shall not be liable to any Lender or any
Obligor for the consequences of such reliance.
(b) The Agent shall be deemed not to have knowledge of
the occurrence of a Default or an Event of Default (other than, in the
case of the Agent, an Event of Default arising underSection 10.1.1),
or any breach of any of the Loan Documents unless, in each case, it
shall have received written notice thereof from a Lender or from the
Company. No Indemnified Person shall be responsible or liable for any
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shortage, discrepancy, damage, loss, or destruction of any part of the
Collateral, wherever the same may be located and regardless of the
cause thereof, unless the same shall happen through its own bad faith
or willful misconduct. No Indemnified Person shall, under any
circumstances or any event whatsoever, have any liability for any
error or omission or delivery of any kind made in the settlement,
collection, or payment of any of the Collateral or of any instrument
received in payment therefor or for any damage resulting therefrom
other than as a result of its own bad faith or willful misconduct.
SECTION 11.4. Successors. The Agent may resign as such at any time
upon at least 30 days' prior written notice to the Company and all Lenders. If
the Agent at any time shall resign, the Required Lenders may appoint another
Lender or a commercial banking institution organized under the laws of the
United States (or any state thereof) or a United States branch or agency of a
foreign commercial banking institution, and having a combined capital and
surplus of at least $500,000,000 as a successor Agent which shall thereupon
become the Agent hereunder. If no successor Agent shall have been so appointed
by the Required Lenders, and shall have accepted such appointment, within 30
days after the retiring Agent's giving notice of resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent which shall be
one of the Lenders or one of such commercial banking institutions. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall be entitled to receive from the retiring Agent such
documents of transfer and assignment as such successor Agent may reasonably
request, and shall thereupon succeed to and become vested with all rights,
powers, privileges, and duties of the retiring Agent and the retiring Agent
shall be discharged from any further duties and obligations under or in
connection with this Agreement and any Loan Document. In addition, in the
event that Business Credit resigns as the Agent, Bank of America shall be
discharged from any duties and obligations under or in connection with this
Agreement and any Loan Documents that were delegated to Bank of America by
Business Credit in its capacity as Agent. After the resignation hereunder of a
retiring Agent, the provisions of
(a) this Article XI shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was the Agent
under this Agreement; and
(b) Sections 12.3 and 12.4 shall continue to inure to its
benefit.
SECTION 11.5. Credit Extensions by the Agent. Business Credit and
its successor as Agent shall have the same rights and powers with respect to
(a) the Loans made by it or any of its Affiliates and (b) Letters of Credit
issued (or participated in) by it or any of its Affiliates as any other Lender
and may exercise
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the same as if it were not the Agent. The terms "Lender" and "Lenders" as used
herein shall include the Agent in its individual capacity.
SECTION 11.6. Credit Decisions. Each Lender acknowledges that it
has, independently of the Agent, and each other Lender, and based on such
Lender's review of the financial information of the Company and such other
documents, information, and investigations as such Lender has deemed
appropriate, made its own credit decision to extend its Commitments. Each
Lender also acknowledges that it will, independently of the Agent, and each
other Lender, and based on such other documents, information, and
investigations as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement or any other Loan
Document.
SECTION 11.7. Copies, etc. The Agent shall give prompt written
notice to each Lender of each notice or request required or permitted to be
given to the Agent by any Obligor pursuant to the terms of this Agreement or
any other Loan Document (unless concurrently delivered to the Lenders by or on
behalf of such Obligor pursuant to the terms hereof). The Agent will
distribute to each Lender each document or instrument received for its account
and copies of all other communications received by the Agent from the Company
for distribution to the Lenders by the Agent in accordance with the terms of
this Agreement and the other Loan Documents.
SECTION 11.8. Designation of Additional Agents. Whenever the Agent
shall deem it necessary or prudent in order either to conform to any law of any
jurisdiction in which all or any part of the Collateral shall be situated or to
make any claim or bring any suit with respect to the Collateral or the
Collateral Documents, or in the event that the Agent shall have been requested
to do so by the Required Lenders, the Agent and to the extent necessary, the
Parent Guarantor and the Company, shall (and the Company shall cause each other
Obligor to) execute and deliver a supplemental agreement and all other
instruments and agreements necessary or proper to constitute another bank or
trust company, or one or more Persons approved by the Agent, either to act as
Agent or agents with respect to all or any part of the Collateral, in any such
case with such powers of the Agent as may be provided in such supplemental
agreement, and to vest in such bank, trust company or Person as such Agent or
separate trustee, as the case may be, any Property, title, right, or power of
the Agent deemed necessary or advisable by the Agent.
SECTION 11.9. Certain Releases.
(a) To the extent that the Agent becomes concerned that the
exercise of any remedies or any action taken or omitted to be taken by
it in connection with any Collateral shall subject it to the
possibility of any liability, cost, or expense which
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it deems to be significant, arising under any law, rules, or
regulations relating to hazardous or toxic wastes or materials, the
Agent may, without liability to any Lender or other party to this
Agreement or any other Loan Document, or any other Person, decline to
accept, abandon, forfeit, or release such Collateral regardless of any
effect such declination, abandonment, forfeiture, or release may have
upon the Lenders, or otherwise, if either (i) the Agent is requested
to decline to accept, abandon, forfeit, or release such Collateral by
the Required Lenders or (ii) the Agent is not, within 30 days after
making a specific proposal therefor, specifically indemnified to its
satisfaction by the Required Lenders or insured to its satisfaction by
a third party or parties for any liability, costs, and expenses which
might result therefrom.
(b) In addition, if the Agent becomes concerned that the
inclusion of certain Property in the Collateral is not in the best
interests of the Agent or the Lenders, either because of potential
adverse legal implications (including the potential effects of
California's "one form of action", "anti-deficiency" and related rules
of law which may apply in connection with real property located in
California) or potential liabilities, costs, or expenses which the
Agent deems to be significant that may be imposed upon a Person
secured by such Collateral, the Agent may, without liability to any
Lender or other party to this Agreement or any other Loan Document, or
any other Person, decline to accept, abandon, forfeit, or release such
Collateral regardless of any effect such declination, abandonment,
forfeiture, or release may have upon the Lenders or otherwise unless
(i) the Agent is requested to do otherwise by the Required Lenders and
(ii) the Agent is, within 30 days after making a specific proposal
therefor, specifically indemnified to its satisfaction by the Required
Lenders or insured to its satisfaction by a third party or parties for
any liability, costs, and expenses which might result therefrom.
SECTION 11.10. Approval of Loan Documents. Each of the Lenders
hereby approves the forms of the Loan Documents attached as Exhibits to this
Agreement and hereby authorizes the Agent on its behalf to accept from the
Company and the other Obligors, as the case may be, and, authorizes the Agent
to execute and deliver as Agent, the Collateral Documents in substantially the
form of such Exhibits, with such changes, additions, or deletions as the Agent,
in its sole and absolute discretion, may approve as necessary or appropriate to
accomplish the purposes of such Loan Documents. Each of the Lenders also
authorizes the Agent to accept, or execute and deliver, such additional
documents, in form and substance satisfactory to the Agent in its sole and
absolute discretion, in connection with the initial Borrowing or any subsequent
Borrowing as the Agent, in its sole and absolute discretion, may approve as
necessary or appropriate to accomplish the purposes of the Loan Documents.
Each of the Lenders further authorizes the Agent, in
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its sole and absolute discretion, to approve the form and content of all
certificates, opinions, collateral, financing statements, and other documents
delivered to it at or in connection with the initial Borrowing or any
subsequent Borrowing as the Agent, in its sole and absolute discretion, may
deem necessary or appropriate. Whenever the Agent is permitted to consent to
any matter hereunder, the Agent shall have the right, in its sole discretion,
to consult with any or all of the other Lenders prior to providing or
refraining from providing any such consent.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1. Waivers, Amendments, etc.
(a) The provisions of this Agreement and of each
other Loan Document may from time to time be amended or
modified, if such amendment or modification is in writing and
consented to by the Company or the Obligor(s) party thereto
(as the case may be) and the Required Lenders; and the
provisions of this Agreement may be waived by the Required
Lenders or by the Agent acting with the consent of the
Required Lenders; provided, however, that no such amendment,
modification, or waiver which would:
(i) modify this Section 12.1, change the
definition of "Required Lenders", or modify any
requirement hereunder that any particular action be
taken by all the Lenders or by the Required Lenders
shall be effective unless consented to by each
Lender;
(ii) increase any Revolving Commitment Amount
or the Percentage of any Lender, reduce any fees
described in Article III payable to any Lender, or
extend any Lender's Commitment Termination Date shall
be made without the consent of such Lender;
(iii) extend the due date for, or reduce the
amount of, any scheduled repayment of principal of or
interest on any Loan or any Reimbursement Obligation,
or reduce the principal amount of or rate of interest
on any Loan or reduce the amount of any Reimbursement
Obligation, shall be made without the consent of the
Lender which made such Loan or participated in such
Letter of Credit, or each Lender which issued or is
participating in the Letter of Credit with respect to
which such Reimbursement Obligation is owed, as the
case may be;
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(iv) release all, substantially all, or any
material portion of the Collateral (except for
releases in connection with dispositions of assets
which are permitted hereunder or under any Loan
Document, and releases which are required by the
Collateral Documents) without the consent of Lenders
holding at least 100% of the then aggregate
outstanding principal amount of the Revolving Credit
Outstandings or, if no such principal amount is then
outstanding, Lenders having at least 100% of the
Revolving Commitments;
(v) affect adversely the interests, rights,
or obligations of the Agent qua Agent, shall be made
without the consent of the Agent; or
(vi) modify any Letter of Credit or any
Revolving L/C Request without the consent of the
relevant Issuer Bank.
(b) Notwithstanding the foregoing, in the event that the
Revolving Commitment Availability shall at any time be less than
$40,000,000 or shall be less than $50,000,000 for three consecutive
Business Days and the Agent shall have given notice of its election
under the Concentration Bank Agreement to have funds in the
Concentration Account applied to Revolving Credit Outstandings, the
Agent may at any time thereafter, in its sole and absolute discretion,
waive any of the conditions precedent set forth in Section 7.2.
(c) No failure or delay on the part of the Agent, any
Lender, any Issuer Bank, or the holder of any of the Obligations in
exercising any power, right, or remedy under this Agreement or any
other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right, or remedy
preclude any other or further exercise thereof or the exercise of any
other power, right, or remedy. No notice to or demand on the Company
or any Obligor in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by the Agent,
any Lender, any Issuer Bank, or the holder of any of the Obligations
under this Agreement or any other Loan Document shall, except as may
be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be
granted hereunder.
(d) Each of the Parent Guarantor and the Company hereby
waives demand, presentment for payment, protest, notice of protest,
notice of acceleration (except as otherwise provided herein), or of
intention to accelerate the maturity of any of the Loans, diligence in
collecting, the bringing of any suit against any party and any notice
of or defense on account of
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any extensions, renewals, partial payments, or any changes in any of
the terms, provisions, and covenants of this Agreement, or any other
Loan Document, or any releases or substitutions of any security, or
any delay, indulgence, or other act of any trustee or any other Person
under or in connection with this Agreement, or any other Loan Document
whether before or after maturity.
SECTION 12.2. Notices. Except as otherwise provided herein or in
any other Loan Document, all notices and other communications provided to any
party hereto under this Agreement or any other Loan Document shall be in
writing or by telex or by facsimile (followed promptly thereby by mailing of
such notice or communication) and addressed, delivered, or transmitted to such
party at its address, telex, or facsimile number set forth below its signature
hereto, or set forth in the Assignee Agreement to be Bound pursuant to which
such party became a party hereto, or at such other address, telex, or facsimile
number as may be designated by such party in a notice to the other parties.
Any notice, if delivered by hand or if sent by mail or by overnight courier
properly addressed with postage prepaid, shall be deemed given when received;
any notice, if transmitted by telex or facsimile, shall be deemed given when
transmitted (answerback confirmed in the case of telexes).
SECTION 12.3. Payment of Costs and Expenses. The Parent Guarantor
and the Company, jointly and severally, agree to pay on demand all expenses of
the Agent (including the reasonable fees and out-of-pocket expenses of counsel
to the Agent and of local counsel, if any, who may be retained by counsel to
the Agent and the allocated costs of in-house counsel) in connection with
(a) the negotiation, preparation, execution, and delivery
of this Agreement and of each other Loan Document, including schedules
and exhibits, and any amendments, waivers, consents, supplements, or
other modifications to this Agreement or any other Loan Document as
may from time to time hereafter be required, whether or not the
transactions contemplated hereby are consummated,
(b) the filing, recording, refiling, and rerecording of
the Collateral Documents (including financing statements or similar
documentation) and all amendments, supplements, and modifications to
any thereof and any and all other documents or instruments of further
assurance required to be filed, recorded, refiled, or rerecorded by
the terms hereof or of the Collateral Documents, and
(c) the preparation and review of the form of any
document or instrument relevant to this Agreement or any other Loan
Document.
The Parent Guarantor and the Company, jointly and severally, further agree to
pay, and to save the Agent and the Lenders
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harmless from all liability for, any stamp, recording, or similar taxes which
may be payable in connection with the execution or delivery of this Agreement,
the Credit Extensions hereunder, the issuance of the Letters of Credit, or the
execution and delivery of any other Loan Documents. The Parent Guarantor and
the Company, jointly and severally, also agree to reimburse the Agent and each
Lender upon demand for all reasonable out-of-pocket expenses (including
attorneys' fees and legal expenses) incurred by the Agent or such Lender in
connection with the enforcement of any Obligations and to reimburse the Agent
upon demand for all reasonable out-of-pocket expenses (including attorneys'
fees and legal expenses) incurred by the Agent in connection with the
negotiation of any restructuring or "work-out," whether or not consummated, of
any Obligations.
SECTION 12.4. Indemnification. In consideration of the execution
and delivery of this Agreement by the Agent and each Lender, and the extension
of the Commitments, the Company hereby indemnifies, exonerates, and holds the
Agent and each Lender and each of their respective officers, directors,
employees, and agents (collectively, the "Indemnified Parties") free and
harmless from and against any and all actions, causes of action, suits, losses,
costs, liabilities, and damages, and expenses incurred in connection therewith
(irrespective of whether any such Indemnified Party is a party to the action
for which indemnification hereunder is sought), including reasonable attorneys'
fees and disbursements (collectively, the "Indemnified Liabilities" and,
individually, an "Indemnified Liability"), incurred by the Indemnified Parties
or any of them as result of, arising out of, or relating to
(a) any transaction or goods financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of any
Credit Extension;
(b) the entering into, issuance, acceptance, or
performance of or participation in this Agreement and any other Loan
Document by any of the Indemnified Parties (including any unsuccessful
action brought by or on behalf of the Company or any other Obligor as
the result of any determination by the Required Lenders pursuant to
Article VII not to make any Credit Extension);
(c) any investigation, litigation, or proceeding related
to any acquisition or proposed acquisition by the Parent Guarantor,
the Company, or any of their Subsidiaries or Joint Venture Affiliates
of all or any portion of the stock or assets of any Person, whether or
not such Indemnified Party is party thereto;
(d) any investigation, litigation, or proceeding related
to any environmental cleanup, audit, compliance, or other matter
relating to the protection of the environment or the Release by the
Parent Guarantor, the Company or any of their
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Subsidiaries or Joint Venture Affiliates of any Hazardous Material; or
(e) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging, or releases from,
any real property owned or operated by the Parent Guarantor, the
Company, or any of their Subsidiaries or Joint Venture Affiliates of
any Hazardous Material (including any losses, liabilities, damages,
injuries, costs, expenses, or claims asserted or arising under any
Environmental Law), regardless of whether caused by, or within the
control of, the Company or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or willful misconduct, and if and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Company hereby
agrees to make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under applicable law. Each
Indemnified Party, as soon as reasonably practicable, shall notify the Agent of
the commencement of any legal proceeding by any third Person under which any
Indemnified Liability might arise. The Agent shall notify the Company of any
such commencement promptly after the Agent receives its notice. The Company
shall have the option to participate in the defense of all claims under which
any Indemnified Liability might arise, but the Company shall not have the
option to compel any Indemnified Party to employ counsel of the Company's
choosing.
SECTION 12.5. Survival. The obligations of the Company under
Sections 4.3, 4.4, 4.5, 4.6, 4.7, 12.3, and 12.4, and the obligations of the
Lenders under Sections 4.8, 11.1 and 11.2, shall in each case survive any
termination of this Agreement. The representations and warranties made by each
Obligor in this Agreement and in each other Loan Document shall survive the
execution and delivery of this Agreement and each such other Loan Document
notwithstanding any investigation.
SECTION 12.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 12.7. Headings. The various headings of this Agreement and
of each other Loan Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or such other Loan
Document or any provisions hereof or thereof.
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SECTION 12.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts and by
the different parties on separate counterparts, each of which shall be deemed
to be an original and all of which shall constitute together but one and the
same agreement. This Agreement shall become effective on the date (the
"Effective Date") when counterparts hereof executed on behalf of the Parent
Guarantor, the Company, the Agent, and each Lender (or notice thereof
satisfactory to the Agent) shall have been received by the Agent and notice
thereof shall have been given by the Agent to the Parent Guarantor, the
Company, and each Lender.
SECTION 12.9. GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT (EXCEPT
TO THE EXTENT THAT SUCH OTHER LOAN DOCUMENT CONTAINS A CONTRARY
EXPRESS CHOICE OF LAWS PROVISION) SHALL EACH BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO SUCH LAWS RELATING TO CONFLICTS OF
LAWS.
(b) THE PARENT GUARANTOR AND THE COMPANY HEREBY SUBMIT TO
THE NON-EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL AND STATE
OF NEW YORK COURTS LOCATED IN THE BOROUGH OF MANHATTAN IN THE CITY OF
NEW YORK, NEW YORK FOR ALL PURPOSES OF OR IN CONNECTION WITH THIS
AGREEMENT, AND ALL OTHER LOAN DOCUMENTS, PROVIDED, HOWEVER, THAT
NOTHING IN THIS SECTION 12.9 SHALL AFFECT EITHER THE AGENT'S OR ANY
LENDER'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE PARENT
GUARANTOR, THE COMPANY, OR THEIR RESPECTIVE PROPERTY IN THE COURTS OF
ANY OTHER JURISDICTIONS.
(c) UNTIL SUCH TIME AS THE AGENT AND THE LENDERS SHALL
HAVE RECEIVED FINAL PAYMENT OF THE FULL AMOUNT OF ALL OBLIGATIONS AND
PERFORMANCE OF ALL OBLIGATIONS, AND ALL LETTERS OF CREDIT SHALL HAVE
EXPIRED, THE PARENT GUARANTOR AND THE COMPANY HEREBY IRREVOCABLY
DESIGNATE AND APPOINT KRAMER, LEVIN, NAFTALIS, NESSEN, KAMIN &
FRANKEL, CURRENTLY LOCATED AT 919 THIRD AVENUE, NEW YORK, NEW YORK
10022 (ATTENTION: EZRA LEVIN), AS THEIR AGENT TO ACCEPT AND
ACKNOWLEDGE ON THEIR BEHALF ANY AND ALL PROCESS WHICH MAY BE SERVED IN
CONNECTION WITH ANY SUIT, ACTION, OR PROCEEDING OF THE NATURE REFERRED
TO IN THE PRECEDING PARAGRAPH. THE PARENT GUARANTOR AND THE COMPANY
EACH HEREBY ACKNOWLEDGE THAT, TO THE FULLEST EXTENT PERMITTED BY LAW,
SUCH SERVICE SHALL BE EFFECTIVE AND BINDING SERVICE ON IT IN EVERY
RESPECT REGARDLESS OF WHETHER IT SHALL BE DOING OR SHALL HAVE AT ANY
TIME DONE BUSINESS IN THE STATE OF NEW YORK.
(d) THE PARENT GUARANTOR AND THE COMPANY HEREBY AGREE TO
TAKE ANY AND ALL ACTION THAT MAY BE NECESSARY TO ENSURE THAT AT ALL
TIMES DURING THE TERM OF THIS AGREEMENT THERE SHALL BE AN AGENT IN NEW
YORK DESIGNATED AND APPOINTED BY THEM FOR THE PURPOSE DESCRIBED ABOVE,
TO MAINTAIN SUCH DESIGNATION AND
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APPOINTMENT OF SUCH AGENT IN FULL FORCE AND EFFECT FOR THE TERM OF
THIS AGREEMENT, AND TO DELIVER PROMPTLY TO THE AGENT AT SUCH TIMES AS
THE AGENT MAY REQUEST EVIDENCE IN WRITING OF SUCH AGENT'S ACCEPTANCE
OF SUCH APPOINTMENT.
(e) THE PARENT GUARANTOR AND THE COMPANY HEREBY CONSENT
TO PROCESS BEING SERVED IN ANY SUIT, ACTION, OR PROCEEDING OF THE
NATURE REFERRED TO ABOVE EITHER (I) BY THE MAILING OF A COPY THEREOF
BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT
REQUESTED, TO ITS RESPECTIVE ADDRESS SHOWN BELOW ITS SIGNATURE HERETO
OR (II) BY SERVING A COPY THEREOF UPON THE PERSON SPECIFIED ABOVE AS
THE AUTHORIZED AGENT FOR SERVICE OF PROCESS FOR THE PARENT GUARANTOR
AND THE COMPANY (TO THE EXTENT PERMITTED BY APPLICABLE LAW, REGARDLESS
OF WHETHER THE APPOINTMENT OF SUCH AGENT FOR SERVICE OF PROCESS FOR
ANY REASON SHALL PROVE TO BE INEFFECTIVE OR SUCH AGENT FOR SERVICE OF
PROCESS SHALL ACCEPT OR ACKNOWLEDGE SUCH SERVICE); PROVIDED, HOWEVER,
THAT, TO THE EXTENT LAWFUL AND PRACTICABLE, WRITTEN NOTICE OF SAID
SERVICE UPON SAID AGENT SHALL BE MAILED BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO THE PARENT
GUARANTOR OR THE COMPANY, AS APPLICABLE, AT ITS RESPECTIVE ADDRESS
SHOWN BELOW ITS SIGNATURE HERETO. THE PARENT GUARANTOR AND THE
COMPANY AGREE THAT SUCH SERVICE, TO THE FULLEST EXTENT PERMITTED BY
LAW, (I) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS
UPON IT IN ANY SUCH SUIT, ACTION, OR PROCEEDING AND (II) SHALL BE
TAKEN AND HELD TO BE VALID PERSONAL SERVICE UPON AND PERSONAL DELIVERY
TO IT. NOTHING HEREIN SHALL AFFECT EITHER THE AGENT'S OR ANY BANK'S
RIGHT TO SERVE PROCESS IN OR TO BRING PROCEEDINGS AGAINST THE PARENT
GUARANTOR OR THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 12.10. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that:
(a) neither the Parent Guarantor nor the Company may
assign or transfer their rights or obligations hereunder without the
prior written consent of the Agent and all Lenders; and
(b) the rights of sale, assignment, and transfer of the
Lenders are subject to Section 12.11.
SECTION 12.11. Sale and Transfer of Credit Extensions and
Commitments; Participations in Credit Extensions and Commitments. Each Lender
may assign, or sell participations in, its Credit Extensions and Commitments to
one or more other Persons in accordance with this Section 12.11.
SECTION 12.11.1. Assignments. Any Lender,
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(a) with the written consents of the Company and the
Agent (which consents shall not be unreasonably delayed or withheld
and which consent, in the case of the Company, shall be deemed to have
been given in the absence of a written notice delivered by the Company
to the Agent on or before the fifth Business Day after receipt by the
Company of such Lender's request for consent, stating, in reasonable
detail, the reasons why the Company proposes to withhold such consent)
may at any time assign and delegate to one or more Affiliates of such
Lender (if such Lender is not to remain liable for the performance of
its Affiliate's obligations hereunder or under any other applicable
Loan Document),
(b) with the written consents of the Company (which
consent shall not be unreasonably delayed or withheld) and the Agent
(which consent may be withheld for any reason) may at any time assign
and delegate to one or more other banks, savings and loan
associations, commercial finance companies and other similar financial
institutions, and
(c) with written notice to the Company and the Agent, but
without the consent of the Company or the Agent, may assign and
delegate to any other Lender or to one or more Affiliates of such
Lender (if such Lender remains liable for the performance of its
Affiliate's obligations hereunder and under any other applicable Loan
Document)
(each Person described in either of the foregoing clauses as being the Person
to whom such assignment and delegation is to be made, being hereinafter
referred to as an "Assignee Lender"), all or any fraction of such Lender's
total Credit Extensions and Revolving Commitment (which assignment and
delegation shall be of a constant, and not a varying, percentage of all the
assigning Lender's Credit Extensions and Commitments); provided, however, that
the aggregate principal amount of the portion of the Revolving Commitment so
assigned to any Assignee Lender shall be not less than $20,000,000, unless such
assignment covers all of such Lender's interests and obligations hereunder and
under the Loan Documents; and provided, further, that any such Assignee Lender
will comply, if applicable, with the provisions contained in clause (b) of
Section 4.6; and provided, further, that the Parent Guarantor, the Company,
each other Obligor and the Agent shall be entitled to continue to deal solely
and directly with such assigning Lender in connection with the interests so
assigned and delegated to an Assignee Lender until
(i) written notice of such assignment and
delegation, together with payment instructions, addresses, and
related information with respect to such Assignee Lender,
shall have been given to the Company and the Agent by such
Lender and such Assignee Lender,
(ii) such Assignee Lender shall have executed and
delivered to the Company and the Agent an Assignee Agreement
to be Bound, accepted by the Agent, and
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(iii) the processing fees described below shall have
been paid.
From and after the date that the Agent accepts such Assignee Agreement to be
Bound (subject to clauses (a) and (b) above), (A) the Assignee Lender
thereunder shall be deemed automatically to have become a party hereto and to
the extent that rights and obligations hereunder have been assigned and
delegated to such Assignee Lender pursuant to such Assignee Agreement to be
Bound, shall have the rights and obligations of a Lender hereunder and under
the other Loan Documents, and (B) the assigning Lender, to the extent that
rights and obligations hereunder have been assigned and delegated by it
pursuant to such Assignee Agreement to be Bound, shall be released from its
obligations which are not then due and payable hereunder and under the other
Loan Documents. Accrued interest, and accrued fees, in respect of the rights
and obligations that have been assigned, shall be paid as provided in the
Assignee Agreement to be Bound. Accrued interest and accrued fees shall be
paid at the same time or times provided in this Agreement. Such assigning
Lender or such Assignee Lender must also pay a processing fee to the Agent upon
delivery of any Assignee Agreement to be Bound in the amount of $3500. Any
attempted assignment and delegation not made in accordance with this Section
12.11.1 shall be null and void.
SECTION 12.11.2. Participations. Any Lender may at any time
sell to one or more financial institutions (each of such financial institutions
being herein called a "Participant") participating interests in any of the
Credit Extensions, Commitments, or other interests or obligations of such
Lender hereunder; provided, however, that
(a) no participation contemplated in this Section 12.11.2
shall relieve such Lender from its Commitments or its other
obligations hereunder or under any other Loan Document,
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations,
(c) the Parent Guarantor, the Company, each other
Obligor, and the Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations
under this Agreement and each of the other Loan Documents, and
(d) no Participant, unless such Participant is an
Affiliate of such Lender, or is itself a Lender, shall be entitled to
require such Lender to take or refrain from taking any action
hereunder or under any other Loan Document.
SECTION 12.12. Other Transactions. Nothing contained herein shall
preclude the Agent or any Lender from engaging in any debt or equity
transaction, in addition to those contemplated by this
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Agreement or any other Loan Document, with the Company or any of its Affiliates
in which the Company or such Affiliate is not restricted hereby from engaging
with any other Person.
SECTION 12.13. WAIVER OF JURY TRIAL.
TO THE EXTENT ANY SUCH LITIGATION IS NOT DETERMINED BY ARBITRATION OR
BY A REFERENCE, THE AGENT, THE LENDERS, THE PARENT GUARANTOR, AND THE COMPANY
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT
OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN), OR OTHER ACTIONS OF THE AGENT, THE LENDERS, THE PARENT GUARANTOR, OR
THE COMPANY IN CONNECTION WITH OR RELATED TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT. THE PARENT GUARANTOR AND THE COMPANY EACH ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND
EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS
ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTATION, OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
SECTION 12.14. Arbitration; Reference Proceeding.
(a) Any controversy or claim between or among the
parties, including but not limited to those arising out of or relating to this
Agreement or any agreements or instruments relating hereto or delivered in
connection herewith and any claim based on or arising from an alleged tort,
shall at the request of any party be determined by arbitration. The
arbitration shall be conducted in accordance with the United States Arbitration
Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this
Agreement, and under the Commercial Rules of the American Arbitration
Association ("AAA"). The arbitration shall be conducted within the City of New
York. The arbitrator(s) shall give effect to statutes of limitation in
determining any claim. Any controversy concerning whether an issue is
arbitrable shall be determined by the arbitrator(s). Judgment upon the
arbitration award may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.
(b) Notwithstanding the provisions of clause (a), no
controversy or claim shall be submitted to arbitration without the
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consent of all parties if, at the time of the proposed submission, such
controversy or claim arises from or relates to an obligation to the Lenders
which is secured by real property collateral located in California. If all
parties do not consent to submission of such a controversy or claim to
arbitration, the controversy or claim shall be determined as provided in clause
(c).
(c) A controversy or claim which is not submitted to
arbitration as provided and limited in clauses (a) and (b) shall, at the
request of any party, be determined by a reference in accordance with INSERT
APPROPRIATE CODE SECTIONS. If such an election is made, the parties shall
designate to the court a referee or referees selected under the auspices of the
AAA in the same manner as arbitrators are selected in AAA-sponsored
proceedings. The presiding referee of the panel, or the referee if there is a
single referee, shall be an active attorney or retired judge. Judgment upon
the award rendered by such referee or referees shall be entered in the court in
which such proceeding was commenced in accordance with INSERT APPROPRIATE CODE
SECTIONS,
(d) No provision of this paragraph shall limit the right
of any party to this Agreement to exercise self-help remedies such as setoff,
to foreclose against or sell any real or personal property collateral or
security, or to obtain provisional or ancillary remedies from a court of
competent jurisdiction before, after, or during the pendency of any arbitration
or other proceeding. The exercise of a remedy does not waive the right of
either party to resort to arbitration or reference. At the Required Lenders'
option, foreclosure under a deed of trust or mortgage may be accomplished
either by exercise of power of sale under the deed of trust or mortgage or by
judicial foreclosure.
SECTION 12.15. Final Agreement, etc. This written loan agreement,
together with the other Loan Documents, represents the final agreement between
the parties with respect to the subject matter hereof and may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties with respect to the subject matter hereof. The inclusion in this
Agreement or any Loan Document of provisions not included in, or the deletion
of provisions previously included in, prior drafts of this Agreement or such
other Loan Document shall not be considered in interpreting the final executed
version of this Agreement or such other Loan Document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
KAISER ALUMINUM & CHEMICAL
CORPORATION
By________________________________
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Name Printed:
Title:
Address:
Telephone No.:
Facsimile No.:
Telex No.:
Attention:
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KAISER ALUMINUM CORPORATION
By_______________________________
Name Printed:
Title:
Address:
Telephone No.:
Facsimile No.:
Telex No.:
Attention:
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PERCENTAGE LENDERS
- ---------- -------
BANKAMERICA BUSINESS CREDIT, INC.
By ________________________________
Name Printed:
Title:
Domestic
Office:
Telephone No.:
Facsimile No.:
Telex No.:
Attention:
LIBOR
Office:
Address for
payments:
Attention:
Ref:
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BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By___________________________________
Name Printed:
Title: Vice President
Domestic
Office: 555 California Street
41st Floor
San Francisco Corporate
Office #5133
San Francisco, California 94104
Telephone No.: (415) 622-5896
Facsimile No.: (415) 622-4585
Telex No.: 67652
(Answerback BANKAMER SFO)
Attention:
LIBOR
Office: (Same as Domestic)
Address for
payments: Bank of America N.T. & S.A.
(ABA 121-000-358-S.F.)
1850 Gateway Boulevard
Concord, California 94520
Attention: Global Agency (#5596)
For Credit to account
No.: Bancontrol-1233-5-15200
Ref: Kaiser Aluminum
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AGENT
-----
BANKAMERICA BUSINESS CREDIT, INC.
By ________________________________
Name Printed:
Title:
Office:
Telephone No.:
Facsimile No.:
Telex No.:
Attention:
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN & CO.
Oakland, California
February 8, 1994
