SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. 4)*
MAXXAM INC.
(Name of Issuer)
Common Stock, $0.50 par value
(Title of Class of Securities)
577771108
(CUSIP Number)
STEVEN L. WATSON
THREE LINCOLN CENTRE
SUITE 1700
5430 LBJ FREEWAY
DALLAS, TEXAS 75240-2694
(972) 233-1700
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 17, 1997
(Date of Event which requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(Continued on following pages)
CUSIP No. 577771108
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Combined Master Retirement Trust
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE
INSTRUCTIONS)
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
Not Applicable
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
7 SOLE VOTING POWER
-0-
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 1,277,250
EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH -0-
10 SHARED DISPOSITIVE POWER
1,277,250
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,277,250
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES (SEE INSTRUCTIONS) [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.4%
14 TYPE OF REPORTING PERSON(SEE INSTRUCTIONS)
EP
CUSIP No. 577771108
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Harold C. Simmons
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP(SEE
INSTRUCTIONS)
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS(SEE INSTRUCTIONS)
Not applicable
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
7 SOLE VOTING POWER
-0-
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 1,278,250
EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH -0-
10 SHARED DISPOSITIVE POWER
1,278,250
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
-0-
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES (SEE INSTRUCTIONS) [ X ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.0%
14 TYPE OF REPORTING PERSON(SEE INSTRUCTIONS)
IN
AMENDMENT NO. 4
TO SCHEDULE 13D
This amended statement on Schedule 13D (this "Statement") relates to the
common stock, $0.50 par value per share (the "Shares"), of MAXXAM Inc., a
Delaware corporation (the "Company"). Items 2, 4, 5, 6 and 7 of this Statement
are hereby amended as set forth below.
Item 2. Identity and Background
Item 2(a) is amended as follows:
(a) This Statement is filed by (i) The Combined Master Retirement
Trust (the "CMRT"), as the direct holder of Shares and (ii) by virtue of
his position with the CMRT and certain of the other entities (as reported
on this Statement), Harold C. Simmons (collectively, the "Reporting
Persons"). By signing this Statement, each Reporting Person agrees that
this Statement is filed on its or his behalf.
The CMRT is the direct holder of 1,027,250 Shares or approximately
12.4%, respectively, of the 8,277,847 Shares outstanding as of July 31,
1997 according to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 (the "Outstanding Shares").
NL Industries, Inc. ("NL") is the direct holder of 250,000 Shares or
approximately 3.0% of the Outstanding Shares. Valhi, Inc. ("Valhi") and
Tremont Corporation ("Tremont") are the direct holders of approximately
56.3% and 17.7%, respectively, of the outstanding common stock of NL.
Valhi and Tremont together may be deemed to control NL. Valhi Group, Inc.
("VGI"), National City Lines, Inc. ("National"), the Harold Simmons
Foundation, Inc. (the "Foundation"), the Contran Deferred Compensation
Trust No. 2 (the "CDCT No. 2"), NL and Valmont Insurance Company
("Valmont") are the direct holders of approximately 34.4%, 5.1%, 3.6%,
3.4%, 0.5% and 0.4%, respectively, of the outstanding common stock of
Tremont. Together, VGI and National may be deemed to control Tremont.
Valhi is the holder of 100% of the outstanding common stock of Valmont and
may be deemed to control Valmont. VGI, National and Contran Corporation
("Contran") are the direct holders of approximately 74.7%, 10.0% and 7.4%,
respectively, of the outstanding common stock of Valhi. Together, VGI,
National and Contran may be deemed to control Valhi. National, NOA, Inc.
("NOA") and Dixie Holding Company ("Dixie Holding") are the direct holders
of approximately 73.3%, 11.4% and 15.3%, respectively, of the outstanding
common stock of VGI. Together, National, NOA and Dixie Holding may be
deemed to control VGI. Contran and NOA are the direct holders of
approximately 85.7% and 14.3%, respectively, of the outstanding common
stock of National and together may be deemed to control National. Contran
and Southwest Louisiana Land Company, Inc. ("Southwest") are the direct
holders of approximately 49.9% and 50.1%, respectively, of the outstanding
common stock of NOA and together may be deemed to control NOA. Dixie Rice
Agricultural Corporation, Inc. ("Dixie Rice") is the holder of 100% of the
outstanding common stock of Dixie Holding and may be deemed to control
Dixie Holding. Contran is the direct holder of approximately 88.7% and
54.3% of the outstanding common stock of Southwest and Dixie Rice,
respectively, and may be deemed to control Southwest and Dixie Rice.
Mr. Harold C. Simmons is chairman of the board, president and chief
executive officer of Valhi, VGI, National, NOA, Dixie Holding and Contran.
Mr. Simmons is also chairman of the board and chief executive officer of
Dixie Rice and Southwest. Additionally, Mr. Simmons is chairman of the
board of NL and a director of Tremont.
Substantially all of Contran's outstanding voting stock is held by two
trusts, the Harold C. Simmons Family Trust No. 1 dated January 1, 1964 and
the Harold C. Simmons Family Trust No. 2 dated January 1, 1964 (together,
the "Trusts"), established for the benefit of Mr. Simmons' children and
grandchildren, of which Mr. Simmons is the sole trustee. As sole trustee
of each of the Trusts, Mr. Simmons has the power to vote and direct the
disposition of the shares of Contran stock held by each of the Trusts. Mr.
Simmons, however, disclaims beneficial ownership of such shares.
By virtue of the holding of the offices, the stock ownership and his
service as trustee, all as described above, (a) Mr. Simmons may be deemed
to control such entities and (b) Mr. Simmons and certain of such entities
may be deemed to possess indirect beneficial ownership of Shares directly
held by certain of such other entities. However, Mr. Simmons disclaims
such beneficial ownership of the Shares beneficially owned, directly or
indirectly, by any of such entities.
The CMRT also holds approximately 1.0% of the outstanding common stock
of Tremont and Valhi, respectively. The CMRT is a trust formed by Valhi to
permit the collective investment by trusts that maintain the assets of
certain employee benefit plans adopted by Valhi and related companies. Mr.
Simmons is sole trustee of the CMRT and sole member of the trust investment
committee for the CMRT. Mr. Simmons is a participant in one or more of the
employee benefit plans that invest through the CMRT. Mr. Simmons, however,
disclaims beneficial ownership of the Shares held by the CMRT, except to
the extent of his vested beneficial interest therein.
The CDCT No. 2 directly holds approximately 3.4% of the outstanding
shares of Tremont common stock. NationsBank of Texas, N.A. serves as the
trustee of the CDCT No. 2. Contran established the CDCT No. 2 as an
irrevocable "rabbi trust" to assist Contran in meeting certain deferred
compensation obligations that it owes to Harold C. Simmons. If the CDCT
No. 2 assets are insufficient to satisfy such obligations, Contran is
obligated to satisfy the balance of such obligations as they come due. Due
to the terms of the CDCT No. 2, the CDCT No. 2 (i) retains the sole power
to vote the shares of Tremont common stock held by the CDCT No. 2, (ii)
retains sole dispositive power over such shares and (iii) may be deemed the
indirect beneficial owner of such shares.
Harold C. Simmons' spouse is the direct beneficial owner of 1,000
Shares (less than 0.1% of the Outstanding Shares) and less than 1.0% of the
outstanding shares of common stock of Tremont and Valhi, respectively. Mr.
Simmons may be deemed to share indirect beneficial ownership of such
shares. Mr. Simmons disclaims all such beneficial ownership.
The Reporting Persons understand that NL and Valmont directly hold
1,186,200 shares and 1,000,000 shares, respectively, of the common stock of
Valhi. The Reporting Persons further understand that, pursuant to Delaware
law, Valhi treats the shares of Valhi common stock that Valmont and NL hold
directly as treasury stock for voting purposes. For the purposes of this
Statement, such shares that Valmont and NL hold directly are not deemed
outstanding.
Item 4. Purpose of Transaction
Item 4 is amended as follows:
The CMRT and NL have entered into a Stock Purchase Agreement dated
October 17, 1997 among the CMRT, NL and the Company (the "Stock Purchase
Agreement"). On the terms and subject to the conditions of the Stock
Purchase Agreement, the CMRT and NL have agreed to sell all of their Shares
to the Company for $55 per share. The following summary of the Stock
Purchase Agreement is qualified in its entirety by reference to Exhibit 3
to this Statement, which is incorporated herein by this reference.
Pursuant to the Stock Purchase Agreement and its related documents, on
October 21, 1997, the CMRT and NL deposited into escrow (the "Escrow"),
among other things, all of their Shares (the "Escrow Shares") and the
Company deposited into Escrow an aggregate of $35,124,375 in cash (the
"Escrow Cash") and two promissory notes, one payable by the Company to the
CMRT in the principal amount of $28,249,375 and the other payable by the
Company to NL in the principal amount of $6,875,000 (collectively, the
"Notes" and collectively with the Escrow Shares and the Escrow Cash, the
"Escrow Deposits").
The Escrow Deposits are to be released from the Escrow shortly after
the occurrence of (i) the conclusion of a hearing on the defendants' motion
to dismiss NL and the CMRT from Consolidated Civil Action Nos. 12111 and
12353 (the "Consolidated Action") pending in the Court of Chancery in and
for New Castle County, Delaware (the "Court"), which motion will be filed
shortly with the Court, and (ii) the entry by the Court of an order (the
"Order") in response to the motion to dismiss the CMRT and NL from the
Consolidated Action determining (the "Determination") that no part of the
consideration of the sale of the Shares contemplated by the Stock Purchase
Agreement constitutes consideration for settlement of the claims that are
the subject of the Consolidated Action. The Company's purchase of the
Shares will be deemed to occur at the time of their release from the
Escrow.
In the event the Court enters the Order on or before March 16, 1998,
the Escrow Deposits shall be released from Escrow as follows: (1)
$28,249,375 cash to the CMRT, (2) $6,875,000 cash to NL and (3) the Notes
and the Escrow Shares to a custodian that will hold the Escrow Shares as
collateral for the Notes until the obligations under the Notes are paid in
full pursuant to the terms of two substantially similar Pledge and Custody
Agreements, one for the benefit of the CMRT and the other for the benefit
of NL (the "Pledge and Custody Agreements").
In the event the Court fails to enter the Order on or before March 16,
1998 or on an earlier date declines to make the Determination, the Escrow
Deposits shall be released to the respective parties that made such
deposits and the Company will not purchase the Shares pursuant to the Stock
Purchase Agreement.
Pursuant to the terms of the Pledge and Custody Agreements, the Escrow
Shares shall be released to the Company once the obligations under the
Notes are paid in full. Interest on the Notes is payable quarterly in
arrears as if the Notes had been executed on September 30, 1997. The
principal owing under the Notes bears interest at the rate of 10% per annum
and is due on the first anniversary of the date of the Notes. The Note
payable to the CMRT is secured by 1,027,250 Shares and the Note payable to
NL is secured by 250,000 Shares. If the value of the collateral declines
by a specified percentage, the Company must deposit additional collateral
with the custodian. Each of the CMRT and NL have customary rights of
secured parties in the event of foreclosure under the Notes or the Pledge
and Custody Agreements.
The Pledge and Custody Agreements and the Notes provide that the
Company will use its reasonable best efforts to file a shelf registration
statement covering the Escrow Shares with the Securities and Exchange
Commission (the "SEC") on or before May 15, 1998 (the "Shelf Registration
Statement") and cause the Shelf Registration Statement to be declared
effective by the SEC on or before August 13, 1998. If the Company fails to
file the Shelf Registration Statement on or before May 15, 1998, the per
annum interest rate on the Notes will increase by 100 basis points until
such filing occurs. If the SEC does not declare the Shelf Registration
Statement to be effective on or before August 13, 1998, the per annum
interest rate on the Notes will increase by 100 basis points (or an
additional 100 basis points if the Shelf Registration Statement is yet to
be filed with the SEC) until such effectiveness occurs. If the SEC has not
declared the Shelf Registration Statement effective on or before April 15,
1998, the Company is obligated to deposit with the custodian an additional
aggregate amount of $1,756,218.76 (the "Cash Deposit"), which sum shall
also constitute collateral for the Company's obligations under the Notes.
The custodian can release the Cash Deposit to the Company upon notice of
the Shelf Registration Statement becoming effective.
The Stock Purchase Agreement contains a "standstill agreement."
Assuming the obligations under the Notes are satisfied in full, until
October 17, 2002, the CMRT, NL and their respective affiliates cannot,
among other things, acquire any securities issued by the Company or certain
affiliated entities of the Company, as designated in the Stock Purchase
Agreement (collectively, the "MAXXAM Entities"), or take any actions under
certain other standstill prohibitions. Such other standstill prohibitions
include, without limitation, prohibitions on the ability to (i) acquire
assets of the MAXXAM Entities, (ii) participate in proxy solicitations
relating to securities of the MAXXAM Entities ("MAXXAM Entities'
Securities"), (iii) join a "group" for purposes of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended, relating to MAXXAM Entities'
Securities, (iv) seek to control or influence the management, policies or
affairs of any MAXXAM Entity, (v) have MAXXAM Entities' Securities on
deposit in a voting trust of similar voting arrangement, and (vi) initiate,
or advise another to initiate, a tender offer for MAXXAM Entities'
Securities or a shareholder proposal relating to MAXXAM Entities'
Securities.
The Stock Purchase Agreement provides that until release from Escrow,
the CMRT and NL may vote their Shares as they see fit with respect to any
matter brought to a vote of the Company's stockholders, but are otherwise
bound by the terms of the standstill provisions.
NL and the CMRT have agreed in principle, along with the other
plaintiffs in the Consolidated Action, to settle the Consolidated Action.
The proposed settlement provides in part for certain of the defendants in
the Consolidated Action to pay to the Company's wholly owned subsidiary,
MCO Properties Inc., certain cash and other property valued in the
aggregate at approximately $20 million.
The Reporting Persons understand that Harold C. Simmons' spouse
intends to dispose of all of her Shares promptly after the public
disclosure of the transactions among the Company, NL and the CMRT described
above.
Except as described in this Item 4, neither of the Reporting Persons
has any plans or proposals that relate to or would result in any matter
required to be disclosed in response to paragraphs (a) through (j) of Item
4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
Item 5(b) is amended as follows:
(b) Each of NL, the CMRT and Mr. Simmons' spouse has the direct power
to vote the Shares directly held by it or her. By virtue of the
relationships described in Item 2:
(1) the CMRT and Harold C. Simmons may be deemed to share the
indirect power to vote the Shares directly held by NL; and
(2) Harold C. Simmons may be deemed to share the indirect power
to vote the Shares directly held by NL, the CMRT and his spouse.
Neither NL nor the CMRT has the power to dispose of the Shares
directly held by it, on the conditions and subject to the terms of the
Stock Purchase Agreement and its related documents described in this
Statement.
Mr. Simmons' spouse has the power to dispose of the Shares directly
held by her.
Item 5(d) is amended as follows:
(d) Subject to the Stock Purchase Agreement and its related documents
described in this Statement, each of NL and the CMRT has the right to
receive and the power to direct the receipt of dividends from, and proceeds
from the sale of, the Shares directly held by such entity.
Mr. Simmons' spouse has the right to receive and the power to direct
the receipt of dividends from, and proceeds from the sale of, the Shares
directly held by her.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.
Item 6 is amended as follows:
Except as described under Item 4, neither of the Reporting Persons has
any contract, arrangement, understanding or relationship (legal or
otherwise) with any person with respect to securities of the Company,
including, but not limited to, transfer or voting of any such securities,
finder's fees, joint ventures, loans or option arrangements, puts or calls,
guarantees of profits, division of profits or losses, or the giving or
withholding of proxies.
Item 7. Material to be Filed as Exhibits.
Item 7 is amended and restated as follows:
Exhibit 1 Complaint dated November 13, 1991 filed in the Delaware
Court of Chancery in the matter of NL Industries, Inc., et al. v.
MAXXAM INC., et al. (C.A. No. 12353) (incorporated by reference
to Exhibit 1 to Amendment No. 2 to this Statement).
Exhibit 2 Memorandum Opinion of the Court of Chancery of the State of
Delaware dated April 4, 1997 in the matters of MAXXAM
Inc./Federated Development Shareholders Litigation and NL
Industries, Inc., et al. v. MAXXAM INC., et al. (Consolidated
C.A. Nos. 12111 and 12353) (incorporated by reference to Exhibit
2 to Amendment No. 3 to this Statement).
Exhibit 3* Stock Purchase Agreement dated October 17, 1997 among MAXXAM
Inc., the Combined Master Retirement Trust and NL Industries,
Inc.
- ----------
* Filed herewith.
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Date: October 21, 1997
/s/ Harold C. Simmons
--------------------------------
Harold C. Simmons
Signing in the capacities listed on Schedule
"A" attached hereto and incorporated herein by
reference.
SCHEDULE A
Harold C. Simmons, INDIVIDUALLY and as Trustee of THE COMBINED MASTER RETIREMENT
TRUST.
EXHIBIT INDEX
Exhibit 1 Complaint dated November 13, 1991 filed in the Delaware
Court of Chancery in the matter of NL Industries, Inc., et al. v.
MAXXAM INC., et al. (C.A. No. 12353) (incorporated by reference
to Exhibit 1 to Amendment No. 2 to this Statement).
Exhibit 2 Memorandum Opinion of the Court of Chancery of the State of
Delaware dated April 4, 1997 in the matters of MAXXAM
Inc./Federated Development Shareholders Litigation and NL
Industries, Inc., et al. v. MAXXAM INC., et al. (Consolidated
C.A. Nos. 12111 and 12353) (incorporated by reference to Exhibit
2 to Amendment No. 3 to this Statement).
Exhibit 3* Stock Purchase Agreement dated October 17, 1997 among MAXXAM
Inc., the Combined Master Retirement Trust and NL Industries,
Inc.
- ----------
* Filed herewith.
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (which, together with the Schedules and
Exhibits attached hereto, is collectively referred to as the or this
"Agreement") dated October 17, 1997, by and among MAXXAM INC., a Delaware
corporation ("MAXXAM"), THE COMBINED MASTER RETIREMENT TRUST, a trust organized
under the laws of Texas (the "CMRT"), and NL INDUSTRIES, INC., a New Jersey
corporation ("NL").
RECITALS
WHEREAS, the CMRT and NL are holders of certain shares of common stock
of MAXXAM with a par value of $.50 per share (the "MAXXAM Shares"); and
WHEREAS, the CMRT and NL wish to sell, and MAXXAM wishes to purchase,
all of the MAXXAM Shares held by each of the CMRT and NL on the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
covenants and agreements set forth herein, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF THE MAXXAM SHARES
1.1 On the terms and subject to the conditions of this Agreement and
the Escrow Agreement among MAXXAM, the CMRT, NL and First Trust National
Association, as escrow agent (the "Escrow Agent"), of even date herewith (the
form of which is attached as Exhibit A, the "Escrow Agreement"), the CMRT hereby
sells and MAXXAM hereby purchases from the CMRT the MAXXAM Shares listed
opposite the CMRT's name on Schedule A to this Agreement. On the terms and
subject to the conditions of this Agreement and the Escrow Agreement, NL hereby
sells and MAXXAM hereby purchases the MAXXAM Shares listed opposite NL's name on
Schedule A to this Agreement. The purchase price for such MAXXAM Shares is $55
per MAXXAM Share or an aggregate amount of $56,498,750 payable to CMRT and an
aggregate amount of $13,750,000 payable to NL, in cash and notes of MAXXAM in
the amounts listed opposite CMRT's and NL's name, respectively, on Schedule A to
this Agreement.
1.2 Closing of the purchase and sale of the MAXXAM Shares shall take place
through escrow on the terms and subject to the conditions specified in the
Escrow Agreement. The CMRT and NL have delivered and surrendered to the Escrow
Agent for the benefit of MAXXAM, one or more certificates evidencing the MAXXAM
Shares set forth opposite the respective names of CMRT and NL on Schedule A,
with the MAXXAM Shares accompanied by appropriate instruments of transfer duly
endorsed by CMRT and NL, as the case may be, transferring such MAXXAM Shares to
MAXXAM. MAXXAM has delivered to the Escrow Agent, for the benefit of the CMRT
and NL, as the case may be, (a) cash by means of wire transfer in amounts equal
to those set forth opposite the respective names of CMRT and NL on Schedule A,
(b) promissory notes in the form of Exhibit B ("Notes") in the amounts equal to
the "Principal Amount of Notes" set forth opposite the respective names of the
CMRT and NL on Schedule A, and (c) the Pledge and Custody Agreements in the form
attached as Exhibit C, for the benefit of the CMRT (the "CMRT Pledge and Custody
Agreement") and NL (the "NL Pledge and Custody Agreement"), pledging the MAXXAM
Shares purchased from CMRT and NL as security for the obligations under the
respective Notes (and accompanied by appropriate instruments of transfer duly
endorsed by MAXXAM sufficient to transfer such MAXXAM Shares to the CMRT or NL,
as the case may be, in the form attached as Exhibit D).
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF MAXXAM
MAXXAM represents and warrants to the CMRT and NL as follows:
2.1 Authority. MAXXAM is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. MAXXAM
has full corporate power and authority, without the consent or approval of any
other person, to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. All corporate action required to
be taken by or on behalf of MAXXAM to authorize the execution, delivery and
performance of this Agreement has been duly and properly taken.
2.2 Validity. This Agreement is duly executed and delivered and
constitutes a lawful, valid and binding obligation of MAXXAM, enforceable
against MAXXAM in accordance with its terms. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement by MAXXAM is not prohibited by, does not violate, conflict with, or
require consent under any provision of, and does not result in a default under
(a) the charter or bylaws of MAXXAM; (b) any material contract, agreement or
other instrument to which MAXXAM is a party or by which MAXXAM is bound; (c) any
order, writ, injunction, decree or judgment of any court or governmental agency
applicable to MAXXAM; or (d) any law, rule or regulation applicable to MAXXAM.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE CMRT
The CMRT represents and warrants to MAXXAM:
3.1 Authority. The CMRT is a trust duly organized, validly existing
and in good standing under the laws of the State of Texas. The CMRT has full
power and authority, without the consent or approval of any other person, to
execute and deliver this Agreement and to consummate the transactions
contemplated by this Agreement. All action required to be taken by or on behalf
of the CMRT to authorize the execution, delivery and performance of this
Agreement has been duly and properly taken.
3.2 Validity. This Agreement is duly executed and delivered and
constitutes a lawful, valid and binding obligation of the CMRT, enforceable
against the CMRT in accordance with its terms. The execution and delivery of
this Agreement and the consummation of the transactions contemplated by this
Agreement by the CMRT is not prohibited by, does not violate, conflict with, or
require consent under any provision of, and does not result in a default under
(a) the documents under which the CMRT was formed or the organizational
documents which govern the CMRT; (b) any material contract, agreement or other
instrument to which the CMRT is a party or by which the CMRT is bound; (c) any
order, writ, injunction, decree or judgment of any court or governmental agency
applicable to the CMRT; or (d) any law, rule or regulation applicable to the
CMRT.
3.3 Ownership. The CMRT is the sole record and beneficial owner of
the MAXXAM Shares that are being transferred to MAXXAM by the CMRT pursuant to
Article I. The MAXXAM Shares being transferred to MAXXAM by the CMRT constitute
all of such shares held, directly or indirectly, by the CMRT. The CMRT has good
and marketable title to the MAXXAM Shares being transferred to MAXXAM by the
CMRT, free and clear of any lien, security interest, encumbrance or claim of any
kind or nature whatsoever. MAXXAM is obtaining good and indefeasible title to
the MAXXAM Shares, free and clear as aforesaid, subject only to the provisions
of the Escrow Agreement and the security interest of the CMRT pursuant to the
CMRT Pledge and Custody Agreement.
3.4 Status of CMRT. The CMRT and its trustees or other persons
responsible for managing and conducting its affairs have such knowledge and
experience in financial and business matters as to enable them to evaluate the
merits and risks of the transactions contemplated by this Agreement.
3.5 Restrictive Legend. The Note issued to the CMRT has not been
registered under the Securities Act of 1933, as amended (the "Act"), and is
being acquired by the CMRT for its own account. The CMRT will not sell, assign,
transfer, pledge, hypothecate or otherwise dispose of or encumber the Note, or
any interest therein, without the express written consent of MAXXAM. The CMRT
understands that the instrument representing the Note bears the following
legend:
"The security represented by this instrument has not been
registered under the Securities Act of 1933, as amended.
Neither this instrument nor any interest therein may be
offered, sold, transferred, encumbered or otherwise
disposed of, without the express written consent of MAXXAM
Inc."
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF NL
NL represents and warrants to MAXXAM:
4.1 Authority. NL is a corporation duly organized, validly existing
and in good standing under the laws of the State of New Jersey. NL has full
corporate power and authority, without the consent or approval of any other
person, to execute and deliver this Agreement and to consummate the transactions
contemplated by this Agreement. All action required to be taken by or on behalf
of NL to authorize the execution, delivery and performance of this Agreement has
been duly and properly taken.
4.2 Validity. This Agreement is duly executed and delivered and
constitutes a lawful, valid and binding obligation of NL, enforceable against NL
in accordance with its terms. The execution and delivery of this Agreement and
the consummation of the transactions contemplated by this Agreement by NL is not
prohibited by, does not violate, conflict with, or require consent under any
provision of, and does not result in a default under (a) the charter or bylaws
of NL; (b) any material contract, agreement or other instrument to which NL is a
party or by which NL is bound; (c) any order, writ, injunction, decree or
judgment of any court or governmental agency applicable to NL; or (d) any law,
rule or regulation applicable to NL.
4.3 Ownership. NL is the sole record and beneficial owner of the
MAXXAM Shares that are being transferred to MAXXAM by NL pursuant to Article I.
The MAXXAM Shares being transferred to MAXXAM by NL constitute all of such
shares held, directly or indirectly, by NL. NL has good and marketable title to
the MAXXAM Shares being transferred to MAXXAM by NL, free and clear of any lien,
security interest, encumbrance or claim of any kind or nature whatsoever.
MAXXAM is obtaining good and indefeasible title to the MAXXAM Shares, free and
clear as aforesaid, subject only to the provisions of the Escrow Agreement and
the security interest of NL pursuant to the NL Pledge and Custody Agreement.
4.4 Status of NL. NL and its officers or other persons responsible
for managing and conducting its affairs have such knowledge and experience in
financial and business matters as to enable them to evaluate the merits and
risks of the transactions contemplated by this Agreement.
4.5 Restrictive Legend. The Note issued to NL has not been
registered under the Act, and is being acquired by NL for its own account. NL
will not sell, assign, transfer, pledge, hypothecate or otherwise dispose of or
encumber the Note, or any interest therein,
without the express written consent of MAXXAM. NL understands that the
instrument representing the Note bears the following legend:
"The security represented by this instrument has not been
registered under the Securities Act of 1933, as amended.
Neither this instrument nor any interest therein may be
offered, sold, transferred, encumbered or otherwise
disposed of, without the express written consent of MAXXAM
Inc."
ARTICLE 5
STANDSTILL AGREEMENT
5.1 Applicability of Article 5. Except as otherwise provided in
Section 5.1, this Article 5 shall become binding on the CMRT and NL and their
respective affiliates (as defined in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (the "NL parties") on the
occurrence of the Escrow Release Date (as defined in the Escrow Agreement).
(i) Between the date of this Agreement and the Escrow Release Date,
all provisions of this Article 5 shall be binding on the NL parties;
provided, however, that (x) the CMRT and NL shall be entitled to vote their
MAXXAM Shares as each may see fit with respect to any matter brought to a
vote of security holders; and (y) if the Release Deadline Date or the
Declination Date (as each are defined in the Escrow Agreement) occurs and
MAXXAM, NL and the CRMT have not agreed to amend the Escrow Agreement, no
part of this Article 5 shall be binding on the NL parties from and after
such date.
(ii) On the occurrence of the Escrow Release Date (if it occurs), all
provisions of this Article 5 shall be binding on the NL parties from and
after such date. If following the Escrow Release Date, however, an Event
of Default (as defined in either or both of the Notes) shall have occurred
and be continuing, then no part of this Article 5 shall be binding on the
NL parties from and after such date or until such date that such Event of
Default shall no longer be continuing and the Obligations (as defined in
either or both of the Pledge and Custody Agreements) are satisfied in full.
(iii) For purposes of this Article 5 and without prejudice to the
determination as to whether any person or entity constitutes an NL party:
(w) Harold C. Simmons shall be deemed an "affiliate" of NL; (x) no person
serving as an officer or director of any of the NL parties (other than Mr.
Simmons) shall be deemed to be an affiliate of any of the NL parties solely
by reason of his or her status as such unless such person is directly or
indirectly acting in concert with, on behalf of, or at the request of, one
or more of the NL parties with respect to any securities of the issuers
identified on Schedule B (the "MAXXAM Entities"); provided, however, that
during the period of five years from the date of this Agreement such
persons as a group may not acquire and hold ownership (as defined in
Section 5.2(i)) of more than 2% of any class of the outstanding securities
of any MAXXAM Entity; (y) except as provided in the following clause (z),
no employee benefit plan maintained by one or more of the NL parties shall
be deemed an affiliate of the NL parties, provided that the investment
decisions made on behalf of such benefit plans are made solely by persons
independent of each and all of the NL parties; and (z) investment managers
who Mr. Simmons individually has the power to appoint or terminate the
engagement of shall be deemed NL parties, and any such investment manager
shall be instructed by Mr. Simmons not to purchase any securities of any
MAXXAM Entity.
5.2 Standstill. Except as provided in Section 5.1, for a period of
five years from the date of this Agreement (the "Standstill Period"), each of
the NL parties, will not, directly or indirectly, acting alone or in concert
with others, undertake any of the following actions unless expressly requested
in writing in advance by the Board of Directors of MAXXAM to so act:
(i) acquire, or offer, propose or agree to acquire, or otherwise
possess, ownership (including, but not limited to, beneficial
ownership as defined in Rule 13d-3 under the Exchange Act), or assist,
advise, recommend or encourage in any way any other person (including,
but not limited to, any person making investment decisions on behalf
of any employee benefit plan maintained by any NL party) to acquire
ownership, directly or indirectly, by purchase or otherwise, of any
securities issued by any MAXXAM Entity (other than rights, options or
warrants distributed on a pro rata basis to all shareholders of MAXXAM
equally), including any rights, options or warrants to acquire any
securities of any MAXXAM Entity;
(ii) acquire ownership, or assist, advise or encourage in any way
any other person to acquire ownership, directly or indirectly, of any
of the businesses or assets, or leases, mortgages or any other form of
outstanding obligations, of any MAXXAM Entity;
(iii) make, or in any way "participate" in, directly or
indirectly, any "solicitation" of "proxies" or consents to vote,
become a "participant" in any "election contest" (as such terms are
defined or used in the proxy rules of the Securities and Exchange
Commission), or seek to advise or influence any person or entity with
respect to the voting of, any securities of any MAXXAM Entity;
(iv) form, join or in any way participate in a "group" within the
meaning of Section 13(d)(3) of the Exchange Act with respect to any
securities of any MAXXAM Entity or any securities carrying the right
or option to acquire such securities;
(v) otherwise act, directly or indirectly, alone or in concert
with others, to seek to control or influence in any manner, the
management, board of directors, policies or affairs of any MAXXAM
Entity or propose to seek to effectuate any form of business
combination or merger with any MAXXAM Entity or any affiliate thereof
or any restructuring, recapitalization or similar transactions with
respect to any MAXXAM Entity;
(vi) have any securities of any MAXXAM Entity on deposit in a voting
trust or subject any securities of any MAXXAM Entity to any
arrangements with respect to the voting of such securities or other
agreement having similar effect;
(vii) initiate or propose, or induce or attempt to induce,
advise, assist or otherwise encourage any other person or entity to
initiate or propose, (a) any tender offer for any securities of any
MAXXAM Entity, (b) any shareholder proposal with respect to any MAXXAM
Entity, or (c) any other action described in this Article 5; or
(viii) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the
foregoing.
5.3 No Waivers. None of the NL parties will take any action of any
form in any court, or before any governmental or administrative tribunal or
agency, or otherwise, seeking a waiver of any of the prohibitions contained in
this Article 5.
ARTICLE 6
MISCELLANEOUS
6.1 Costs, Expenses and Taxes. Except as provided below and as set
forth in Sections 3(f), (g), (h) and (i) of the Escrow Agreement, each party
shall pay all of its own costs and expenses, including its legal fees, in
connection with the performance of and compliance with this Agreement by such
party, and all transfer, documentary and similar taxes in connection with the
delivery of the MAXXAM Shares to be made hereunder. If an action or proceeding
is commenced by a party to enforce or interpret any provisions of this
Agreement, the non-prevailing party or parties shall promptly reimburse the
prevailing party or parties for the prevailing party's or parties' reasonable
costs and expenses of such action or proceeding, including reasonable attorneys
fees.
6.2 Nature and Survival of Representations. The representations,
warranties, covenants and agreements of the parties contained in this Agreement
or any schedule or any exhibit hereto shall be deemed incorporated in this
Agreement and shall constitute representations, warranties, covenants and
agreements of the respective party delivering the same. All such
representations, warranties, covenants and agreements shall survive the
consummation of the transactions contemplated by this Agreement.
6.3 Specific Performance. The parties acknowledge that it would be
impossible to fix the amount of money damages caused by a breach of this
Agreement by any other party, and, therefore, this Agreement may be enforced by
specific performance and/or injunctive relief. The parties hereby waive any
defense that an action to enforce this Agreement by specific performance and/or
injunctive relief is inappropriate because of an adequate remedy at law,
provided, however, that nothing in this Section 6.3 is intended to prohibit any
party from bringing an action for money damages for breach of this Agreement
(either in lieu of or in addition to an action for specific performance and/or
injunctive relief).
6.4 Successors and Assigns. None of MAXXAM, the CMRT or NL shall (or
shall agree to) assign, pledge, convey, hypothecate, grant a security interest
in, or grant to any other party any rights under this Agreement, without the
prior written consent of each other party to this Agreement, and this Agreement
shall be binding upon, and inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.
6.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware, without giving
effect to the conflicts of laws provisions thereof.
6.6 Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
6.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same agreement.
6.8 Further Assurances. Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
6.9 Amendment and Waiver. The parties may by mutual agreement amend
this Agreement in any respect, and any party, as to such party, may (a) extend
the time for the performance of any of the obligations of any other party, (b)
waive any inaccuracies in representations by any other party, (c) waive
compliance by any other party with any of the agreements contained herein and
performance of any obligations by such other party, and (d) waive the
fulfillment of any condition that is precedent to the performance by such party
of any of its obligations under this Agreement. To be effective, any such
amendment or waiver must be in writing, must refer to this Agreement, and be
signed by the party against whom enforcement of the same is sought. No failure
on the part of any party to this Agreement to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right hereunder preclude any other or future
exercise thereof or any other right.
6.10 Entire Agreement. This Agreement sets forth all of the promises,
covenants, agreements, conditions and undertakings between the parties with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written.
6.11 Jurisdiction and Venue. The parties to this Agreement agree that
any and all actions arising under or in respect of this Agreement shall be
litigated exclusively in any federal or state court of competent jurisdiction
located in the State of Delaware. By execution and delivery of this Agreement,
each party to this Agreement irrevocably submits to the personal and exclusive
jurisdiction of such courts for itself and in respect of its property which is
the subject of this Agreement with respect to such action. Each party to this
Agreement agrees that venue would be proper in any such action. Each party to
this Agreement agrees that venue would be proper in any of such courts, and
hereby waives any objection that any such court is an improper or inconvenient
forum for the resolution of any such action.
6.12 Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered
(including by Federal Express or other reputable courier service) or sent by
facsimile transmission (with a confirming copy to be sent by next day delivery
by Federal Express or other reputable, regularly operating courier service).
Notices, demands and communications to MAXXAM, the CMRT, or NL will, unless
another address is specified in writing, be sent to the respective address
indicated on the signature page to this Agreement.
6.13 Severability. Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
[Remainder of this page left blank intentionally]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year set forth opposite their respective signatures.
"MAXXAM" MAXXAM Inc.
By: /s/ Paul N. Schwartz
-----------------------------------
Its: Executive Vice President
-----------------------------------
Address: 5847 SAN FELIPE, SUITE 2600 HOUSTON, TEXAS
77057
Attention: Treasury Department
Facsimile No.: (713) 267-3704
with a copy to:
Attention: Corporate Secretary
Facsimile No.: (713) 267-3702
"THE CMRT" The Combined Master Retirement Trust
By: /s/ Harold C. Simmons
-----------------------------------
Its: Trustee
-----------------------------------
Address: THREE LINCOLN CENTRE,
SUITE 1700, 5430 LBJ FREEWAY
DALLAS, TEXAS 75240-2697
Facsimile No.: (972) 450-4278
with a copy to:
Consulting Fiduciaries, Inc.
2745 Riverwoods Road
Riverwoods, IL 60015
Attention: David Heald
Facsimile No.: 847-945-5611
"NL" NL Industries, Inc.
By: /s/ David B. Garten
-----------------------------------
Its: Vice President, Secretary and General Counsel
-----------------------------------
Address: 16825 NORTHCHASE DRIVE,
SUITE 1200, PO BOX 4272
HOUSTON, TEXAS 77210-4272
Facsimile No.: (281) 423-3333
with a copy to:
Corporate Treasurer:
Facsimile No.: (212) 421-7209
SCHEDULE A
NUMBER OF
MAXXAM CASH PRINCIPAL AMOUNT OF
SHARES DEPOSITED DEPOSITED NOTES DEPOSITED
---------------- ------------- -------------------
NL 250,000 shares $6,875,000 $6,875,000
THE CMRT 1,027,250 shares $28,249,375 $28,249,375
SCHEDULE B
For so long as each is an affiliate of MAXXAM, the following shall be
MAXXAM Entities for purposes of the Agreement:
MAXXAM Inc.
Kaiser Aluminum Corporation
Kaiser Aluminum & Chemical Corporation
MAXXAM Group Holdings, Inc.
MAXXAM Group, Inc.
The Pacific Lumber Company
Scotia Pacific Holding Company
Sam Houston Race Park, Ltd.
SHRP Equity, Inc.
Any other direct or indirect subsidiary (as such term is defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission or similar
successor regulation) of MAXXAM Inc. which shall issue securities during the
Standstill Period; provided, however, that (a) the standstill provisions of
Section 5.2 shall not be effective until such time as MAXXAM advises NL and the
CMRT in writing of any such issuance and (b) no such notification shall require
the divestment of any securities theretofore acquired.
EXHIBIT A
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made as of October ___, 1997 by
and among MAXXAM INC., a Delaware corporation ("MAXXAM"), THE COMBINED MASTER
RETIREMENT TRUST, a trust organized under the laws of Texas (the "CMRT"), NL
INDUSTRIES, INC., a New Jersey corporation ("NL"), and FIRST TRUST NATIONAL
ASSOCIATION, as escrow agent (the "Escrow Agent").
Recital
MAXXAM, the CMRT, and NL are parties to a Stock Purchase Agreement,
dated October __, 1997 (the "Stock Purchase Agreement"), pursuant to which the
CMRT and NL severally have sold to MAXXAM, and MAXXAM has purchased, the MAXXAM
Shares held severally by the CMRT and NL, on the terms and subject to the
conditions set forth in the Stock Purchase Agreement. Capitalized terms used but
not otherwise defined herein shall have the respective meanings given such terms
in the Stock Purchase Agreement.
Agreement
In consideration of the premises and the respective mutual agreements,
covenants, representations and warranties herein contained, the parties hereto
agree as follows:
1. Appointment of Escrow Agent. MAXXAM, the CMRT, and NL hereby
designate and appoint the Escrow Agent to serve in accordance with the terms and
conditions of this Agreement, and the Escrow Agent hereby agrees to act as such,
upon the terms and conditions provided in this Agreement.
2. Escrow.
a. Escrow Deposit by the CMRT. Concurrently with the execution and
delivery of this Agreement, the CMRT hereby delivers or causes to be delivered
to the Escrow Agent for the benefit of MAXXAM in accordance with the terms of
the Stock Purchase Agreement one or more certificates evidencing the MAXXAM
Shares held by the CMRT accompanied by appropriate instruments of transfer duly
endorsed transferring such MAXXAM Shares to MAXXAM (the "CMRT Escrow Deposit",
which term shall include adjustments for stock splits, stock dividends, and
similar events), and a Pledge and Custody Agreement in the form annexed as
Exhibit C to the Stock Purchase Agreement executed by the CMRT and certain other
parties (the "CMRT Pledge and Custody Agreement").
b. Escrow Deposit by NL. Concurrently with the execution and
delivery of this Agreement, NL hereby delivers or causes to be delivered to the
Escrow Agent for the benefit of MAXXAM in accordance with the terms of the Stock
Purchase Agreement one or more certificates evidencing the MAXXAM Shares held by
NL accompanied by appropriate instruments of transfer duly endorsed transferring
such MAXXAM Shares to MAXXAM (the "NL Escrow Deposit", which term shall include
adjustments for stock splits, stock dividends, and similar events), and a Pledge
and Custody Agreement in the form annexed as Exhibit C to the Stock Purchase
Agreement executed by NL and certain other parties (the "NL Pledge and Custody
Agreement").
c. Escrow Deposits by MAXXAM. Concurrently with the execution and
delivery of this Agreement, MAXXAM hereby delivers to the Escrow Agent (1) for
the benefit of the CMRT in accordance with the terms of the Stock Purchase
Agreement cash by way of wire transfer in the amount of $28,249,375 (the "CMRT
Cash Deposit"), a promissory note payable to the order of the CMRT in the
original principal amount of $28,249,375 (the "CMRT Promissory Note"), the CMRT
Pledge and Custody Agreement executed by MAXXAM and an appropriate instrument of
transfer duly endorsed by MAXXAM sufficient to transfer such MAXXAM Shares to
the CMRT (collectively, the "MAXXAM/CMRT Escrow Deposit"), and (2) for the
benefit of NL in accordance with the terms of the Stock Purchase Agreement cash
by way of wire transfer in the amount of $6,875,000 (the "NL Cash Deposit"), a
promissory note payable to the order of NL in the original principal amount of
$6,875,000 (the "NL Promissory Note"), the NL Pledge and Custody Agreement
executed by MAXXAM and an appropriate instrument of transfer duly endorsed by
MAXXAM sufficient to transfer such MAXXAM Shares to NL (collectively, the
"MAXXAM/NL Escrow Deposit" and, together with the MAXXAM/CMRT Escrow Deposit,
the "MAXXAM Deposit"). The promissory notes referred to in clauses (1) and (2)
of this Section 2(c) (the "Notes") and the Pledge and Custody Agreements
delivered to the Escrow Agent pursuant to the foregoing sentence have been
executed by the applicable parties and dated as of the date of this Agreement.
d. Investment of Cash by Escrow Agent. The Escrow Agent shall
invest and reinvest the cash referred to in Sections 2(c)(1) and 2(c)(2),
together with any interest on the Notes received by the Escrow Agent pursuant to
the terms of such Notes, in each case as MAXXAM directs from time to time by
written notice to the Escrow Agent; provided, however, that such investments and
reinvestments shall be limited to:
(i) time deposits, certificates of deposit and acceptances, not
to exceed $5 million with any one institution, maturing within ninety (90) days
from the date of acquisition thereof, issued by banks or non-bank brokerage
firms located in the United States of America, including the Escrow Agent or any
of its affiliates, and having capital, surplus and undivided profits of at least
five hundred million dollars ($500,000,000);
(ii) short term obligations of, or guaranteed by, the United
States of America or any state or agency thereof;
(iii) commercial paper rated A-1 by Standard & Poors or P-1
by Moody's Investors Service;
(iv) repurchase agreements fully collateralized by obligations
described in clauses (d)(i), (d)(ii) or (d)(iii) hereof; or
(v) shares of investment companies (such as money market funds)
registered under the Investment Company Act of 1940 which invest primarily in
any obligations described under (d)(i), (ii) or (iii) above, including those for
which the Escrow Agent or any of its affiliates provide services for a fee,
whether as an investment advisor, custodian, transfer agent, registrar, sponsor,
distributor, manager or otherwise.
In the absence of any directions from MAXXAM, the Escrow Agent shall
invest and reinvest such cash in First American Fund - Government Obligations.
e. Net Earnings. All earnings or other income received from the
investments and reinvestments provided in Section 2(d), less losses and
commissions, if any, incurred on or in making such investments and reinvestments
(such net amount being herein referred to as "Net Earnings"), shall become part
of the MAXXAM/CMRT Escrow Deposit or the MAXXAM/NL Escrow Deposit, as the case
may be, and shall be disbursed as part of the MAXXAM/CMRT Escrow Deposit and the
MAXXAM/NL Escrow Deposit in accordance with Section 2(i) hereof. Without
limiting the foregoing, the Escrow Agent will not make any payment or
distribution of the Net Earnings or the Escrow Deposits referred to in Section
2(a), Section 2(b) and Section 2(c), above, (collectively referred to as the
"Escrow Deposits"), except as and in the manner expressly provided by this
Agreement. Each party to this Agreement other than the Escrow Agent has
provided a taxpayer identification number to the Escrow Agent on the signature
page to this Agreement.
f. Right to Escrow Deposits. Until the Escrow Deposits are released
from the escrow provided herein, the Escrow Agent shall be in sole possession of
the Escrow Deposits and will not act or be deemed to act as custodian for any
party for purposes of perfecting a security interest therein.
g. Cash Payments from Escrow. Any distribution of cash to be made
by the Escrow Agent pursuant to this Agreement shall be made by wire transfer
(upon receipt of written wire transfer instructions of the recipient).
h. Status of the Escrow Deposits. It is the intent of MAXXAM, the
CMRT, and NL that each of their respective interests in the Escrow Deposits is
merely a contingent right to receipt of the Escrow Deposits, and that neither a
voluntary or involuntary case under any applicable bankruptcy, insolvency or
similar law nor the appointment of a receiver, trustee, custodian or similar
official in respect of MAXXAM, the CMRT or NL (any of which is referred to
herein as a "Bankruptcy Event") shall increase its respective interest in the
Escrow Deposits or affect, modify, convert or otherwise change the contingent
nature of its respective right to receipt of the Escrow Deposits in accordance
with the terms of this Agreement.
i. Procedures for Release of Escrow Deposits. The Escrow Deposits
shall be held and disposed of only as follows:
A. Subject to Section 2(i)(B), the Escrow Agent, upon written
notice by MAXXAM, the CMRT and NL shall (i) release to MAXXAM the CMRT Escrow
Deposit and the NL Escrow Deposit from the escrow provided for pursuant to this
Agreement and retain the CMRT Escrow Deposit and the NL Escrow Deposit, as
custodian, pursuant to the terms of the CMRT Pledge and Custody Agreement and
the NL Pledge and Custody Agreement, as the case may be, (ii) release from the
escrow provided for pursuant to this Agreement and deliver to the CMRT the CMRT
Cash Deposit and any payments of interest which have been delivered to the
Escrow Agent in respect of the CMRT Promissory Note (together with all Net
Earnings on such deposits and payments), (iii) release from the escrow provided
for pursuant to this Agreement and deliver to NL the NL Cash Deposit and any
payments of interest which have been delivered to the Escrow Agent in respect of
the NL Promissory Note (together with all Net Earnings on such deposits and
payments), (iv) release to the CMRT from the escrow provided for pursuant to
this Agreement and retain, as custodian, the CMRT Promissory Note, the CMRT
Pledge and Custody Agreement and an appropriate instrument of transfer duly
endorsed by MAXXAM sufficient to transfer such MAXXAM Shares to the CMRT,
pursuant to the terms of the CMRT Pledge and Custody Agreement, (v) release to
NL from the escrow provided for pursuant to this Agreement and retain, as
custodian, the NL Promissory Note, the NL Pledge and Custody Agreement and an
appropriate instrument of transfer duly endorsed by MAXXAM sufficient to
transfer such MAXXAM Shares to NL, pursuant to the terms of the NL Pledge and
Custody Agreement, and (vi) promptly cause the transfer agent for the MAXXAM
Shares to issue certificates evidencing MAXXAM's ownership of the MAXXAM Shares
and to record in the transfer agent's customary fashion on the certificates
and/or in the stockholders' list or similar share registry for the Common Stock
of MAXXAM the interest of NL under the NL Pledge and Custody Agreement and the
interest of the CMRT under the CMRT Pledge and Custody Agreement, and upon such
issuance to hold such certificates, respectively, for the benefit of NL as
secured party under the NL Pledge and Custody Agreement and the for the benefit
of the CMRT as secured party under the CMRT Pledge and Custody Agreement.
MAXXAM, the CMRT and NL shall be obligated to give such written notice as
provided in this Section 2(i)(A) (the "Escrow Release Notice") within three
business days after the occurrence of both of the following events: (A) the
conclusion of a hearing, following notice to the stockholders of MAXXAM (the
"Hearing"), on the defendants' motion to dismiss NL and CMRT from Consolidated
Civil Action Nos. 12111 and 12353 ("the Consolidated Action") pending in the
Court of Chancery, in and for New Castle County, Delaware (the "Court"), and (B)
the entry by the Court of an order (the "Order"), in response to a motion to
dismiss the CMRT and NL from the Consolidated Action determining (the
"Determination") that no part of the consideration for the sale of the MAXXAM
Shares contemplated by the Stock Purchase Agreement constitutes consideration
for settlement of the claims (the "Claims") that are the subject of the
Consolidated Action. The parties (other than the Escrow Agent) agree to
recommend to the Court the entry of the Order and the making of the
Determination. The parties (other than the Escrow Agent) acknowledge that an
agreement in principle to settle the Claims has been reached; however, release
of the Escrow Deposits shall not be subject to approval of any such settlement
as may be presented to the Court. Upon the release of the CMRT Escrow Deposit,
the NL Escrow Deposit, the MAXXAM/CMRT Escrow Deposit and the MAXXAM/NL Escrow
Deposit as provided in this Section 2(i)(A) (the "Escrow Release Date"), the
closing of the purchase and the sale of the MAXXAM Shares shall be deemed to
have occurred as contemplated by Section 1.2 of the Stock Purchase Agreement.
B. If the Court (i) has not signed the Order within 150 days
after the date of the Stock Purchase Agreement or such later date as the parties
may mutually agree ("Release Deadline Date"), or (ii) has made a ruling
rejecting the Determination or has declined to make the Determination, and such
decision is final and not subject to further consideration by the Court (the
"Declination Date"), then the Escrow Agent shall, upon written notice from
MAXXAM, the CMRT and NL, (a) release from the escrow provided for pursuant to
this Agreement and deliver to MAXXAM the MAXXAM Deposit and any payments of
interest which have been delivered to the Escrow Agent in respect of the CMRT
Promissory Note and/or the NL Promissory Note (along with all Net Earnings on
such deposits and payments), (b) release from the escrow provided for pursuant
to this Agreement and deliver to the CMRT the CMRT Escrow Deposit and the CMRT
Pledge and Custody Agreement, and (c) release from the escrow provided for
pursuant to this Agreement and deliver to NL the NL Escrow Deposit and the NL
Pledge and Custody Agreement. MAXXAM, the CMRT and NL shall be obligated to
give such notice within three business days after the occurrence of the Release
Deadline Date or the Declination Date, as the case may be, whichever occurs
earlier.
C. If at any time (a) MAXXAM and the CMRT shall instruct the
Escrow Agent to release the MAXXAM/CMRT Escrow Deposit and the CMRT Escrow
Deposit, or any portion of any of such Escrow Deposits, or (b) MAXXAM and NL
shall instruct the Escrow Agent to release the MAXXAM/NL Escrow Deposit and the
NL Escrow Deposit, or any portion of any of such Escrow Deposits, then the
Escrow Agent shall promptly release such Escrow Deposits (or any portion
thereof) in accordance with such instructions.
3. Protection of Escrow Agent. The parties agree that:
a. Escrow Agent's duties and responsibilities as escrow agent in
connection with this Agreement shall be purely ministerial and shall be limited
to those expressly set forth in this Agreement. Escrow Agent is not a
principal, participant or beneficiary in any transaction underlying this
Agreement and shall have no duty to inquire beyond the terms and provisions
hereof. Escrow Agent shall have no responsibility or obligation of any kind in
connection with this Agreement or the Escrow Deposits, other than to receive,
hold, invest, reinvest and deliver the Escrow Deposits as herein provided.
Without limiting the generality of the forgoing, it is hereby expressly agreed
and stipulated by the parties hereto that Escrow Agent shall not be required to
exercise any discretion hereunder and shall have no investment or management
responsibility and, accordingly, shall have no duty to or liability for its
failure to provide investment recommendations or investment advice to any of the
other parties to this Agreement. Escrow Agent shall not be liable for any error
in judgment, any act or omission, any mistake of law or fact, or for anything it
may do or refrain from doing in connection herewith, except for, subject to
paragraph d. hereinbelow, its own willful misconduct or gross negligence (it
being understood that gross negligence shall include loss (other than investment
loss) by Escrow Agent of all or any part of the items escrowed pursuant to this
Agreement or failure to follow any investment or other instructions of any of
the other parties hereto provided herein). It is the intention of the parties
hereto that Escrow Agent shall never be required to use, advance or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties or the exercise of any of its rights and powers hereunder;
b. the Escrow Agent makes no representation as to the validity,
value, genuineness or collectibility of any document or instrument held by or
delivered to it;
c. the Escrow Agent shall not be called upon to advise any party as
to taking or refraining from taking any action with respect to any property
deposited hereunder;
d. Escrow Agent may rely on, and shall not be liable for acting or
refraining from acting upon, any written notice, instruction or request or other
paper furnished to it hereunder or pursuant hereto and reasonably believed by it
to have been signed or presented by the proper party or parties. Escrow Agent
shall be responsible for holding, investing, reinvesting and disbursing the
Escrow Deposits pursuant to this Agreement; provided, however, that in no event
shall Escrow Agent be liable for any lost profits, lost savings or other
special, exemplary, consequential or incidental damages in excess of Escrow
Agent's fee hereunder (except those arising from its own willful misconduct or
gross negligence) and provided, further, that Escrow Agent shall have no
liability for any loss arising from any cause beyond its control including, but
not limited to, the following: (a) acts of God, force majeure, including,
without limitation, war (whether or not declared or existing), revolution,
insurrection, riot, civil commotion, accident, fire explosion, stoppage of
labor, strikes and other differences with employees; (b) the act, failure or
neglect of any other party to this Agreement; (c) any delay, error, omission or
default of any mail, courier, telegraph, cable and wireless agency or operator;
or (d) the acts or edicts of any government or governmental agency or other
group or entity exercising governmental powers. Escrow Agent is not responsible
or liable in any manner whatsoever for the (i) sufficiency, correctness,
genuineness or validity of the subject matter of this Agreement or any part
hereof , (ii) transaction or transactions requiring or underlying the execution
of this Agreement or the form or execution hereof or (iii) identity or authority
of any person executing this Agreement or any part hereof, or depositing the
Escrow Deposits;
e. if the Escrow Agent shall be uncertain as to its duties or rights
hereunder or shall receive instructions from any of the undersigned with respect
to any property held by it in escrow pursuant to this Agreement which, in the
opinion of the Escrow Agent, are in conflict with any of the provisions of this
Agreement or any instructions received from any other of the undersigned, the
Escrow Agent shall be entitled to refrain from taking any action until it shall
be directed otherwise by the parties pursuant to an amendment or waiver to this
Agreement in accordance with Section 4(g) below, or by order of a court of
competent jurisdiction specified in Section 4(c) below;
f. should any controversy arise involving the parties hereto or any
of them or any other person, firm or entity with respect to this Agreement or
the Escrow Deposits, or should a substitute escrow agent fail to be designated
as provided in paragraph g., or if Escrow Agent should be in doubt as to what
action to take, the Escrow Agent shall have the right, but not the obligation,
to institute a petition for interpleader in any court of competent jurisdiction
specified in Section 4(c) below to determine the rights of the parties hereto.
Should a petition for interpleader be instituted, or should the Escrow Agent be
threatened with, or become involved in, litigation or binding arbitration in
connection with this Agreement or the Escrow Deposits, then the other parties
agree, jointly and severally, to reimburse the Escrow Agent for its reasonable
attorney's fees and any and all other reasonable out of pocket expenses, losses,
costs and damages incurred by the Escrow Agent in connection with such
threatened or actual litigation prior to any disbursement hereunder (subject, as
to MAXXAM, NL and the CMRT, to the Allocation Provision, as such term is defined
in Section 3(h) below);
g. MAXXAM, the CMRT and NL may jointly remove and replace the Escrow
Agent at any time. If the Escrow Agent shall be removed as escrow agent by the
parties or shall resign or otherwise cease to act as escrow agent, MAXXAM, the
CMRT and NL shall mutually agree upon a successor which successor shall be
deemed to be the Escrow Agent for all purposes of this Agreement. If a
successor Escrow Agent has not been appointed and accepted such appointment by
the end of the thirty (30) day period following such removal, resignation or
cessation, the Escrow Agent may apply to any court in which it is permitted to
commence litigation pursuant to Section 4(c), for the appointment of a successor
Escrow Agent and deposit the Escrow Deposits with the then chief or presiding
judge of such court (and upon so depositing such property and filing its
complaint in interpleader, it shall be relieved of all liability under the terms
hereof as to the property so deposited), and the reasonable costs and expenses
and reasonable attorneys' fees which the Escrow Agent incurs in connection with
such a proceeding shall be borne one-half by MAXXAM, one-quarter by the CMRT,
and one-quarter by NL. The removal, resignation or other ceasing to act as
escrow agent by the Escrow Agent or any successor thereto shall have no effect
on this Agreement or any of the rights of the parties hereunder, all of which
shall remain in full force and effect;
h. the other parties to this Agreement hereby jointly and severally
indemnify Escrow Agent, its officers, directors, partners, employees and agents
(each herein called an "Indemnified Party") against, and hold each Indemnified
Party harmless from, any and all expenses, including, without limitation,
reasonable attorneys' fees and court costs, losses, costs, damages and claims,
including but not limited to, costs of investigation, litigation and
arbitration, tax liability and loss on investments suffered or incurred by any
Indemnified Party in connection with or arising from or out of this Agreement,
except such acts or omissions as may result from the willful misconduct or gross
negligence of such Indemnified Party; provided that the foregoing joint and
several indemnity shall not affect the liability of MAXXAM, the CMRT and NL, as
among themselves, for the specified items for which the Escrow Agent is to be
indemnified (which in the absence of fault by any of MAXXAM, the CMRT and/or NL,
shall be one-half to MAXXAM, one-fourth to the CMRT and one-fourth to NL, and in
the presence of fault by any of MAXXAM, the CMRT and/or NL, shall be as any
court of competent jurisdiction specified in Section 4(c) decides; the
"Allocation Provision"). It is express intent of each other party to this
Agreement to indemnify and hold harmless the Indemnified Parties from their own
negligent acts or omissions where permitted to do so by applicable law;
i. MAXXAM, as to one half, the CMRT, as to one quarter, and NL, as
to one quarter, hereby agree, upon execution by Escrow Agent of this Agreement,
to pay Escrow Agent (A) an annual fee of $4,000.00 for its services hereunder in
accordance with the fee schedule attached hereto, the first payment to be paid
on the date hereof and successive payments being due on each anniversary date
hereof, such fees being completely earned when due; and (B) all of Escrow
Agent's out-of-pocket expenses reasonably incurred in connection with the
performance of its duties and enforcement of its rights hereunder and otherwise
in connection with the preparation, operation, administration and enforcement of
this Agreement, including, without limitation, reasonable attorneys' fees,
brokerage costs and related expenses incurred by Escrow Agent; and
j. Escrow Agent may consult with its counsel or other counsel
satisfactory to it concerning any question relating to its duties or
responsibilities hereunder or otherwise in connection herewith, and shall not be
liable for any action taken, suffered or omitted by it in good faith upon the
advice of such counsel.
4. Miscellaneous.
a. Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered
(including by Federal Express or other reputable courier service) or sent by
facsimile transmission (with a confirming copy to be sent by next day delivery
by Federal Express or other reputable, regularly operating courier service).
Notices, demands and communications to MAXXAM, the CMRT, NL or the Escrow Agent
will, unless another address is specified in writing, be sent to the respective
address indicated on the signature page to this Agreement.
b. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware, without giving
effect to the conflicts of laws provisions thereof.
c. Jurisdiction and Venue. The parties to this Agreement agree that
any and all actions arising under or in respect of this Agreement (including,
without limitation, the resolution of any dispute regarding the Escrow Deposits)
shall be litigated exclusively in any federal or state court of competent
jurisdiction located in the State of Delaware. By execution and delivery of
this Agreement, each party to this Agreement irrevocably submits to the personal
and exclusive jurisdiction of such courts for itself and in respect of the
property escrowed hereunder with respect to such action. Each party to this
Agreement agrees that venue would be proper in any of such courts, and hereby
waives any objection that any such court is an improper or inconvenient forum
for the resolution of any such action. The Escrow Agent need not be a party to
any proceeding involving MAXXAM, the CMRT and/or NL. In any action in which the
Escrow Agent asserts that one or more of MAXXAM, the CMRT or NL are jointly and
severally liable for the obligations of MAXXAM, the CMRT or NL to the Escrow
Agent under this Agreement, the Escrow Agent shall join in such suit all of
MAXXAM, the CMRT and NL as a prerequisite for recovery against any one of them,
and MAXXAM, the CMRT and NL agree to contribute to any other party against which
such recovery is made in the proportions specified in the Allocation Provisions.
d. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same agreement.
e. Successors and Assigns. None of MAXXAM, the CMRT and NL shall
(or shall agree to) assign, pledge, convey, hypothecate, grant a security
interest in, or grant to any other party any rights under this Agreement,
including without limitation any rights in or to the Escrow Deposits, without
the prior written consent of the other parties, and this Agreement shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.
f. Specific Performance. The obligations of the parties hereto
(including the Escrow Agent) are unique in that time is of the essence, and any
delay in performance hereunder by any party will result in irreparable harm to
the other parties hereto. Accordingly, any party may seek specific performance
and/or injunctive relief before any court of competent jurisdiction specified in
Section 4(c) hereof in order to enforce this Agreement or to prevent violations
of the provisions hereof, and no party shall object to specific performance or
injunctive relief as an appropriate remedy; provided, however, that nothing in
this Section 4(f) is intended to prohibit any party from bringing an action for
money damages for breach of this Agreement (either in lieu of or in addition to
an action for specific performance and/or injunctive relief). The Escrow Agent
acknowledges that its obligations, as well as the obligations of MAXXAM, the
CMRT and NL hereunder, are subject to the equitable remedy of specific
performance and/or injunctive relief.
g. Amendment, Waiver, etc. This Agreement may only be amended,
modified, altered or revoked by a written instrument, signed by MAXXAM, the
CMRT, and NL, provided that no amendment or modification to Section 3 hereof or
which increases the duties or liabilities of the Escrow Agent will be made
without the written consent of the Escrow Agent. MAXXAM, the CMRT and NL agree
to give the Escrow Agent advance notice of any amendment or modification to this
Agreement and to provide the Escrow Agent promptly with copies of any such
amendment or modification. No failure on the part of any party to this
Agreement to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder preclude any other or future exercise thereof or any other
right.
h. Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect
i. Costs, Expenses and Taxes. Except as set forth in Section 3(f),
(g), (h) and (i) hereof, each party (other than the Escrow Agent) shall pay all
of its own costs and expenses, including its legal fees, in connection with the
performance of and compliance with this Agreement by such party. If an action
or proceeding is commenced by a party to enforce or interpret any provision of
this Agreement, the non-prevailing party or parties (other than the Escrow
Agent) shall promptly reimburse the prevailing party or parties for the
prevailing party or parties' reasonable costs and expenses of such action or
proceeding, including reasonable attorneys fees. In all cases arising under
this Agreement where any one or more or MAXXAM, the CMRT or NL have been held
jointly and severally liable with some but less than all of the other parties to
this Agreement to the Escrow Agent for any obligation under this Agreement, each
other party to this Agreement (other to Escrow Agent) shall contribute to such
liability in accordance with the Allocation Provision. The party or parties
receiving any Net Earnings shall be responsible for any taxes owed in respect
thereof.
j. Further Assurances. Each party shall cooperate and take such
action as may be reasonably requested by any other party in order to carry out
the provisions and purposes of this Agreement and the transactions contemplated
hereby.
k. Entire Agreement. This Agreement sets forth all of the promises,
covenants, agreements, conditions and undertakings between the parties with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written.
l. Severability. Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
m. Termination. This Agreement shall terminate upon release of the
Escrow Deposits pursuant to Section 2(i) hereof; provided that Sections 3 and 4
shall survive such termination.
[Remainder of this page left blank intentionally]
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
"ESCROW AGENT" First Trust National Association
By:
------------------------------------
Its:
----------------------------------
First Trust National Association
180 East 5th Street, 2nd Floor
St. Paul, Minnesota 55101
Attention: Rick Prokosch
Facsimile No.: (612) 244-0711
"MAXXAM" MAXXAM Inc.
By:
------------------------------------
Its:
----------------------------------
5847 San Felipe, Suite 2600
Houston, TX 77057
Attention: Treasury Department
Facsimile No.: (713) 267-3704
with a copy to:
Attention: Corporate Secretary
Facsimile No.: (713) 267-3702
Taxpayer I.D. No.: 95-2078752
"THE CMRT" The Combined Master Retirement Trust
By:
------------------------------------
Its:
----------------------------------
Three Lincoln Centre, Suite 1700
5430 LBJ Freeway
Dallas, TX 75240-2697
Facsimile No.: (972) 450-4278
Taxpayer I.D. No.: 75-2202890
with a copy to:
Consulting Fiduciaries, Inc.
2745 Riverwoods Road
Riverwoods, IL 60015
Attention: David Heald
Facsimile No.: 847-945-5611
"NL" NL Industries, Inc.
By:
------------------------------------
Its:
----------------------------------
16825 Northchase Drive, Suite 1200
P.O. Box 4272
Houston, TX 77210-4272
Attention: General Counsel
Facsimile No.: (281) 423-3333
Taxpayer I.D. No.: 13 5267260
with a copy to:
Corporate Treasurer
Facsimile No.: (212) 421-7209
[First Trust National Association Letterhead]
October 20, 1997
Ms. Delona Moore
MAXXAM Inc.
5847 San Felipe, Suite 2600
Houston, TX 77056
Re: MAXXAM/NL/CMRT Escrow
Dear Ms. Moore:
Thank you for naming First Trust National Association as Escrow Agent. Our fees
are as follows:
Escrow Agent
- ------------
One time acceptance fee $4,000.00
(includes first year fees)
Annual fee 750.00
(if not concluded by November 1, 1998)
Transaction fees @ $75.00 per trade
Extraordinary fees would be additional.
Again, thank you for this opportunity. I look forward to working with you on
this transaction.
Sincerely,
/s/ Rick Prokosch
Rick Prokosch
Assistant Vice President
(612) 244-0721
EXHIBIT B
THE SECURITY REPRESENTED BY THIS INSTRUMENT HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS INSTRUMENT
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, ENCUMBERED
OR OTHERWISE DISPOSED OF, WITHOUT THE EXPRESS WRITTEN CONSENT OF
MAXXAM INC.
NON-NEGOTIABLE SECURED PROMISSORY NOTE
Principal Amount
US $6,875,000 October ___, 1997
FOR VALUE RECEIVED, MAXXAM INC., a Delaware corporation (the "Maker"),
hereby promises to pay to NL INDUSTRIES, INC., a New Jersey corporation (the
"Holder"), at its principal executive offices, 16825 Northchase Drive, Suite
1200, Houston, TX 77060 (subject to Section 1 below), the principal sum of Six
Million Eight Hundred and Seventy-Five Thousand Dollars ($6,875,000), with
interest thereon, which shall be due and payable as hereinafter provided.
This Note is being issued and delivered by the Maker to the Holder as
partial consideration for the Maker's purchase of 250,000 shares (the "Shares")
of the Maker's common stock, $.50 par value, pursuant and subject to that
certain Stock Purchase Agreement, dated the date hereof between the Maker and
the Holder, and is secured under and subject to the Pledge and Custody
Agreement, dated the date hereof among the Maker, the Holder and certain other
parties (the "Pledge Agreement") in the form annexed hereto as Exhibit A.
Capitalized terms not defined herein have the meanings given them in the Pledge
Agreement.
1. Interest. (A) Except as provided in Section 1(B) and subject to the
next succeeding sentence, the Maker agrees to pay to the Holder interest from
the date hereof accrued on the unpaid principal amount of this Note from time to
time outstanding at the rate of 10% per annum, payable quarterly in arrears on
December 31, 1997, March 31, 1998 and June 30, 1998 (each a "Payment Date") and
upon the final payment in full of all unpaid principal of this Note; provided
that interest in respect of the first interest period shall accrue as if this
Note had been executed on September 30, 1997. Any interest due and payable on
this Note prior to the Escrow Release Date (as such term is defined in that
certain Escrow Agreement, dated the date hereof by the Maker, the Holder and
certain other parties; the "Escrow Agreement") shall be paid to, and held by,
the Escrow Agent (as such term is defined in the Escrow Agreement) pursuant to
the terms of the Escrow Agreement. After the Principal Payment Date (as
hereinafter defined), all past due principal and past due interest owed under
this Note will bear interest at the rate of fifteen percent (15%) per annum.
(B)(i) Pursuant to the Pledge Agreement, the Maker has agreed that
(a) it will, at the Maker's expense, within 210 days after the date of the
Pledge Agreement, use its reasonable best efforts to file the Shelf Registration
Statement, covering the issuance or delivery and resales of the Pledged Shares,
(b) it shall use its reasonable best efforts to cause such Shelf Registration
Statement to be declared effective by the Securities and Exchange Commission
within 300 days after the date of the Pledge Agreement and (c) it will use its
reasonable best efforts to maintain such Shelf Registration Statement
continuously effective under the Securities Act until the Obligations have been
satisfied in full. If the Maker fails to file the Shelf Registration Statement
within 210 days after the date of the Pledge Agreement then, at such time, the
per annum interest rate on this Note otherwise payable pursuant to Section 1(A)
of this Note will increase by 100 basis points. Such increase will remain in
effect until the date on which the Shelf Registration Statement is filed, on
which date the interest rate on this Note will revert to the interest rate
specified in Section 1(A) of this Note plus any increase in such interest rate
pursuant to Section 2(B)(ii).
(B)(ii) If the Shelf Registration Statement is not declared
effective within 300 days after the date of the Pledge Agreement (including by
reason of the Maker's failure to file the Shelf Registration Statement, then, at
such time, the per annum interest rate on this Note (otherwise payable pursuant
to Section 1(A) and 1(B)(i)) will increase by an additional 100 basis points.
Such increase or increases will remain in effect until the date on which the
Shelf Registration Statement is declared effective, on which date the interest
rate on this Note will revert to the interest rate specified in Section 1(A) of
this Note. However, if the Maker fails to keep the Shelf Registration Statement
continuously effective pursuant to Section 7 of the Pledge Agreement, then at
such time as the Shelf Registration Statement is no longer effective and until
the earlier of (i) such date that the Shelf Registration Statement is again
deemed effective or (ii) the Obligations are satisfied in full, the per annum
interest rate on this Note otherwise payable pursuant to Section 1(A) of this
Note will increase by an additional 100 basis points. The Maker will be
permitted, however, to suspend the use of the Prospectus which forms a part of
the Shelf Registration Statement as provided in the Pledge Agreement.
(C) Notwithstanding Sections 1(A) and 1(B), in no event shall the
rate of interest exceed the maximum rate permitted by applicable usury laws.
2. Principal Payment. The Maker agrees to pay to the Holder the
principal amount of this Note then outstanding, together with all unpaid
interest accrued to that date, on the first anniversary date hereof (the
"Principal Payment Date").
3. Business Day. If the Principal Payment Date or any other Payment Date
is not a business day, the payment due on that date shall be made on the next
succeeding day that is a business day. For the purposes of this Note, the
phrase "business day" means any day other than a Saturday, a Sunday or a day on
which banking institutions in Texas are authorized or required by law to be
closed.
4. Optional Prepayments. The Maker may, at its option, prepay the
principal amount of this Note at any time in whole, or from time to time in such
part as the Maker shall elect, with accrued interest on the amount prepaid to
the date of prepayment, in each case without penalty or premium therefor. All
prepayments shall be first applied to accrued and unpaid interest and then to
principal.
5. Methods of Payment. All payments of principal and interest on this
Note shall be made in lawful money of the United States of America.
6. Defaults. Any of the following shall constitute an Event of Default
hereunder:
(a) The Maker shall fail to pay any principal or interest due
hereunder, which failure shall remain uncured for a period of five (5) business
days after the same is due;
(b) If any voluntary proceeding shall be commenced by the Maker under
any chapter of the Federal Bankruptcy Code (the "Bankruptcy Code") or other law
relating to bankruptcy, bankruptcy reorganization, insolvency or relief of
debtors, or if the Maker has a proceeding commenced against it under the
provisions of the Bankruptcy Code, which proceeding is not dismissed within
ninety (90) days from the date on which it is commenced.
(c) If the Maker admits in writing its inability to pay its debts as
they become due or makes a general assignment for the benefit of its creditors;
(d) The dissolution or other winding up of the Maker; or
(e) The failure of Maker to perform in any material respect any of
its obligations as Pledgor under the Pledge Agreement and the continuance of
such failure for a period of (i) more than five (5) business days in the event
of its obligations under Sections 4(b) and 8 of the Pledge Agreement, and (ii)
more than twenty (20) business days in the event of any of its other obligations
under the Pledge Agreement, after written notice is given to the Maker by the
Holder, specifying such failure and requesting that it be remedied; provided,
however, that with respect to any provision of the Pledge Agreement for which
the Pledgor's performance is specified to occur on a stated day or within a
stated number of days (other than Section 4(a) of the Pledge Agreement), then
such day or number of days specified in the Pledge Agreement shall apply without
enlargement by the grace periods provided in this Section 6(e).
If any of the foregoing Events of Default shall occur and shall not
have been remedied, the Holder may, at the sole option of the Holder, declare
this Note to become immediately due and payable. The failure of the Holder to
exercise the option described in the preceding sentence at any time shall not
constitute a waiver of the Holder's right to exercise such option at any other
time.
7. Waiver of Notices, etc. The Maker hereby waives presentment, notice
of demand for payment, protest, notice of dishonor and any other notice of any
kind with respect to nonpayment of this Note.
8. Governing Law. This Note shall be governed by and construed in
accordance with the internal laws of the State of Delaware, without giving
effect to the conflict of laws provisions thereof.
9. Binding Effect; Assignment. All of the covenants, obligations,
promises and agreements contained in this Note made by the Maker shall be
binding upon its successors and assigns; notwithstanding the foregoing, neither
the Holder nor the Maker shall assign, transfer, encumber or otherwise dispose
of this Note or any portion thereof without the prior written consent of the
other.
10. Costs of Collection. In the event the Holder incurs costs in
collecting on this Note, this Note is placed in the hands of any attorney for
collection, suit is filed on this Note or if proceedings are had in bankruptcy,
receivership, reorganization or other legal or judicial proceedings for
collection, the Maker agrees to pay on demand to the Holder all reasonable
expenses and costs of collection, including, but not limited to, reasonable
attorneys' fees incurred in connection with any such collection, suit or
proceeding, in each case to the extent that the Holder prevails in any such
action for collection, suit or proceeding which is final and not subject to
appeal or other reconsideration.
IN WITNESS WHEREOF, the Maker has caused this instrument to be duly
executed as of the day and year set forth above.
MAXXAM INC.
By:
-------------------------
Name:
Title:
THE SECURITY REPRESENTED BY THIS INSTRUMENT HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS INSTRUMENT
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, ENCUMBERED
OR OTHERWISE DISPOSED OF, WITHOUT THE EXPRESS WRITTEN CONSENT OF
MAXXAM INC.
NON-NEGOTIABLE SECURED PROMISSORY NOTE
Principal Amount
US $28,249,375 October ___, 1997
FOR VALUE RECEIVED, MAXXAM INC., a Delaware corporation (the "Maker"),
hereby promises to pay to COMBINED MASTER RETIREMENT TRUST, a trust organized
under the laws of Texas (the "Holder"), at its principal executive offices,
Three Lincoln Centre, Suite 1700, 5430 LBJ Freeway, Dallas, TX 75240-2697 the
principal sum of Twenty-Eight Million Two Hundred Forty Nine Thousand Three
Hundred Seventy Five Dollars ($28,249,375), with interest thereon, which shall
be due and payable as hereinafter provided.
This Note is being issued and delivered by the Maker to the Holder as
partial consideration for the Maker's purchase of 1,027,250 shares (the
"Shares") of the Maker's common stock, $.50 par value, pursuant and subject to
that certain Stock Purchase Agreement, dated the date hereof between the Maker
and the Holder, and is secured under and subject to the Pledge and Custody
Agreement, dated the date hereof among the Maker, the Holder and certain other
parties (the "Pledge Agreement") in the form annexed hereto as Exhibit A.
Capitalized terms not defined herein have the meanings given them in the Pledge
Agreement.
1. Interest. (A) Except as provided in Section 1(B) and subject to the
next succeeding sentence, the Maker agrees to pay to the Holder interest from
the date hereof accrued on the unpaid principal amount of this Note from time to
time outstanding at the rate of 10% per annum, payable quarterly in arrears on
December 31, 1997, March 31, 1998 and June 30, 1998 (each a "Payment Date") and
upon the final payment in full of all unpaid principal of this Note; provided
that interest in respect of the first interest period shall accrue as if this
Note had been executed on September 30, 1997. Any interest due and payable on
this Note prior to the Escrow Release Date (as such term is defined in that
certain Escrow Agreement, dated the date hereof by the Maker, the Holder and
certain other parties; the "Escrow Agreement") shall be paid to, and held by,
the Escrow Agent (as such term is defined in the Escrow Agreement) pursuant to
the terms of the Escrow Agreement. After the Principal Payment Date (as
hereinafter defined), all past due principal and past due interest owed under
this Note will bear interest at the rate of fifteen percent (15%) per annum.
(B)(i) Pursuant to the Pledge Agreement, the Maker has agreed that
(a) it will, at the Maker's expense, within 210 days after the date of the
Pledge Agreement, use its reasonable best efforts to file the Shelf Registration
Statement, covering the issuance or delivery and resales of the Pledged Shares,
(b) it shall use its reasonable best efforts to cause such Shelf Registration
Statement to be declared effective by the Securities and Exchange Commission
within 300 days after the date of the Pledge Agreement and (c) it will use its
reasonable best efforts to maintain such Shelf Registration Statement
continuously effective under the Securities Act until the Obligations have been
satisfied in full. If the Maker fails to file the Shelf Registration Statement
within 210 days after the date of the Pledge Agreement then, at such time, the
per annum interest rate on this Note otherwise payable pursuant to Section 1(A)
of this Note will increase by 100 basis points. Such increase will remain in
effect until the date on which the Shelf Registration Statement is filed, on
which date the interest rate on this Note will revert to the interest rate
specified in Section 1(A) of this Note plus any increase in such interest rate
pursuant to Section 2(B)(ii).
(B)(ii) If the Shelf Registration Statement is not declared
effective within 300 days after the date of the Pledge Agreement (including by
reason of the Maker's failure to file the Shelf Registration Statement, then, at
such time, the per annum interest rate on this Note (otherwise payable pursuant
to Section 1(A) and 1(B)(i)) will increase by an additional 100 basis points.
Such increase or increases will remain in effect until the date on which the
Shelf Registration Statement is declared effective, on which date the interest
rate on this Note will revert to the interest rate specified in Section 1(A) of
this Note. However, if the Maker fails to keep the Shelf Registration Statement
continuously effective pursuant to Section 7 of the Pledge Agreement, then at
such time as the Shelf Registration Statement is no longer effective and until
the earlier of (i) such date that the Shelf Registration Statement is again
deemed effective or (ii) the Obligations are satisfied in full, the per annum
interest rate on this Note otherwise payable pursuant to Section 1(A) of this
Note will increase by an additional 100 basis points. The Maker will be
permitted, however, to suspend the use of the Prospectus which forms a part of
the Shelf Registration Statement as provided in the Pledge Agreement.
(C) Notwithstanding Sections 1(A) and 1(B), in no event shall the
rate of interest exceed the maximum rate permitted by applicable usury laws.
2. Principal Payment. The Maker agrees to pay to the Holder the
principal amount of this Note then outstanding, together with all unpaid
interest accrued to that date, on the first anniversary date hereof (the
"Principal Payment Date").
3. Business Day. If the Principal Payment Date or any other Payment Date
is not a business day, the payment due on that date shall be made on the next
succeeding day that is a business day. For the purposes of this Note, the
phrase "business day" means any day other than a Saturday, a Sunday or a day on
which banking institutions in Texas are authorized or required by law to be
closed.
4. Optional Prepayments. The Maker may, at its option, prepay the
principal amount of this Note at any time in whole, or from time to time in such
part as the Maker shall elect, with accrued interest on the amount prepaid to
the date of prepayment, in each case without penalty or premium therefor. All
prepayments shall be first applied to accrued and unpaid interest and then to
principal.
5. Methods of Payment. All payments of principal and interest on this
Note shall be made in lawful money of the United States of America.
6. Defaults. Any of the following shall constitute an Event of Default
hereunder:
(a) The Maker shall fail to pay any principal or interest due
hereunder, which failure shall remain uncured for a period of five (5) business
days after the same is due;
(b) If any voluntary proceeding shall be commenced by the Maker under
any chapter of the Federal Bankruptcy Code (the "Bankruptcy Code") or other law
relating to bankruptcy, bankruptcy reorganization, insolvency or relief of
debtors, or if the Maker has a proceeding commenced against it under the
provisions of the Bankruptcy Code, which proceeding is not dismissed within
ninety (90) days from the date on which it is commenced.
(c) If the Maker admits in writing its inability to pay its debts as
they become due or makes a general assignment for the benefit of its creditors;
(d) The dissolution or other winding up of the Maker; or
(e) The failure of Maker to perform in any material respect any of
its obligations as Pledgor under the Pledge Agreement and the continuance of
such failure for a period of (i) more than five (5) business days in the event
of its obligations under Sections 4(b) and 8 of the Pledge Agreement, and (ii)
more than twenty (20) business days in the event of any of its other obligations
under the Pledge Agreement, after written notice is given to the Maker by the
Holder, specifying such failure and requesting that it be remedied; provided,
however, that with respect to any provision of the Pledge Agreement for which
the Pledgor's performance is specified to occur on a stated day or within a
stated number of days (other than Section 4(a) of the Pledge Agreement), then
such day or number of days specified in the Pledge Agreement shall apply without
enlargement by the grace periods provided in this Section 6(e).
If any of the foregoing Events of Default shall occur and shall not
have been remedied, the Holder may, at the sole option of the Holder, declare
this Note to become immediately due and payable. The failure of the Holder to
exercise the option described in the preceding sentence at any time shall not
constitute a waiver of the Holder's right to exercise such option at any other
time.
7. Waiver of Notices, etc. The Maker hereby waives presentment, notice
of demand for payment, protest, notice of dishonor and any other notice of any
kind with respect to nonpayment of this Note.
8. Governing Law. This Note shall be governed by and construed in
accordance with the internal laws of the State of Delaware, without giving
effect to the conflict of laws provisions thereof.
9. Binding Effect; Assignment. All of the covenants, obligations,
promises and agreements contained in this Note made by the Maker shall be
binding upon its successors and assigns; notwithstanding the foregoing, neither
the Holder nor the Maker shall assign, transfer, encumber or otherwise dispose
of this Note or any portion thereof without the prior written consent of the
other.
10. Costs of Collection. In the event the Holder incurs costs in
collecting on this Note, this Note is placed in the hands of any attorney for
collection, suit is filed on this Note or if proceedings are had in bankruptcy,
receivership, reorganization or other legal or judicial proceedings for
collection, the Maker agrees to pay on demand to the Holder all reasonable
expenses and costs of collection, including, but not limited to, reasonable
attorneys' fees incurred in connection with any such collection, suit or
proceeding, in each case to the extent that the Holder prevails in any such
action for collection, suit or proceeding which is final and not subject to
appeal or other reconsideration.
IN WITNESS WHEREOF, the Maker has caused this instrument to be duly
executed as of the day and year set forth above.
MAXXAM INC.
By:
-------------------------
Name:
Title:
EXHIBIT C
PLEDGE AND CUSTODY AGREEMENT
PLEDGE AND CUSTODY AGREEMENT dated as of October ___, 1997 (the
"Agreement"), by and among MAXXAM Inc., a Delaware corporation (the "Pledgor"),
The Combined Master Retirement Trust, a trust organized under the laws of Texas
(the "Pledgee"), and First Trust National Association (the "Bank"), as custodian
(the "Custodian").
Contemporaneously with the execution and delivery of this Agreement,
the Pledgor has purchased 1,027,250 shares (the "Pledged Shares") of the
Pledgor's common stock, $.50 par value per share (the "Common Stock"), from the
Pledgee on the terms and subject to the conditions of (i) the Stock Purchase
Agreement among the Pledgor, the Pledgee and NL Industries, Inc., a New Jersey
corporation ("NL"), of even date herewith (the "Stock Purchase Agreement"), and
(ii) the Escrow Agreement among the Pledgor, the Pledgee, NL and the Bank, as
escrow agent, of even date herewith (the "Escrow Agreement").
Pursuant to the terms of the Stock Purchase Agreement, the Pledgee has
delivered and surrendered to the Bank, as escrow agent (the "Escrow Agent"), the
Pledged Shares sold to the Pledgor, and the Pledgor has delivered to the Escrow
Agent, among other things, its Non-Negotiable Secured Promissory Note of even
date herewith in the principal amount of $28,249,375 (the "Note") and an
appropriate instrument of transfer duly endorsed by the Pledgor sufficient to
transfer such Pledged Shares to the Pledgee (the "Stock Power") for the benefit
of the Pledgee.
Pursuant to the terms of the Escrow Agreement, the Escrow Agent may be
instructed to release the Pledged Shares and the Note from the escrow provided
for pursuant to the Escrow Agreement and to retain the Pledged Shares, the Note
and the Stock Power, as Custodian, pursuant to the terms of this Agreement (the
"Custodial Deposit").
Pursuant to Sections 8 and 9 of this Agreement, Pledgor may be
required to deposit with Custodian additional property to be held and
administered by Custodian as required by this Agreement, which, if deposited,
will become part of the Custodial Deposit.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Appointment of Custodian. Pursuant to the terms of Section
2(i)(A) of the Escrow Agreement, the Bank may be required to retain the
Custodial Deposit, as Custodian, pursuant to the terms of this Agreement. The
Pledgor and the Pledgee hereby designate and appoint the Custodian to serve in
accordance with the terms and conditions of this Agreement, and the Custodian
hereby agrees to act as such, upon the terms and conditions provided in this
Agreement. This Agreement shall be effective as of the Escrow Release Date (as
such term is defined in the Escrow Agreement).
2. Grant of Security Interest. To secure the prompt and complete
performance of its obligations to pay interest and principal on the Note in
accordance with the terms thereof (the "Obligations"), the Pledgor hereby
assigns to the Pledgee and grants to the Pledgee a first-priority security
interest in all of Pledgor's right, title and interest in, to and under: (i) the
Pledged Shares and the Stock Power, (ii) all additional securities to which the
Pledgor is or becomes entitled by virtue of its ownership of the Pledged Shares
as a result of any corporate reorganization, merger, consolidation, stock split,
stock dividend, conversion, preemptive right or otherwise, (iii) the Cash
Deposit, as defined in Section 8, when and if made, (iv) the Additional
Collateral, if any, as defined in Section 9; and (v) the proceeds from each of
the foregoing (collectively, the "Collateral").
3. Release from Custody.
(a) Except as provided in Section 8, if, for any reason, payment is
made to the Custodian, acting in its capacity as Custodian, for the account
of the Pledgee in respect of principal and/or interest under the Note, the
Custodian shall remit such payment to Pledgee.
(b) Upon the receipt of a written notice from the Pledgor (the
"MAXXAM Notice") stating that the Pledgor has paid the Obligations in full,
the Custodian shall deliver a copy of the MAXXAM Notice to the Pledgee.
If, within three (3) business days after the delivery of the MAXXAM Notice
by the Custodian to the Pledgee, the Pledgee does not deliver a written
notice to the Custodian stating that the Pledgor has not paid the
Obligations in full and objecting to the delivery of the Collateral to the
Pledgor, then the Custodian shall deliver the Collateral and the Note
(marked "CANCELLED AND PAID IN FULL") to the Pledgor, as instructed by the
MAXXAM Notice. Pledgee shall also be obligated to deliver a copy of the
notice delivered to the Custodian to Pledgor at the same time. Upon the
receipt by the Pledgor of the Collateral and the Note pursuant to the terms
of this Agreement, the Custodian shall be released from all claims,
liabilities and obligations hereunder.
(c) Upon the receipt of a written notice from the Pledgee (the
"Pledgee Notice") stating that an Event of Default under the Note has
occurred and is continuing, the Custodian shall deliver a copy of the
Pledgee Notice to the Pledgor. If, within three (3) business days after
the delivery of the Pledgee Notice by the Custodian to the Pledgor, the
Pledgor does not deliver a written notice to the Custodian objecting to the
delivery of the Collateral and the Note to the Pledgee because either (i)
an Event of Default has not occurred or (ii) an Event of Default has
occurred that is not continuing, then the Custodian shall deliver the
Collateral and the Note to the Pledgee, as instructed by the Pledgee
Notice, and the Pledgor and the Pledgee shall continue to comply with the
terms of this Agreement. Pledgor shall also be obligated to deliver a copy
of the notice delivered to the Custodian to Pledgee at the same time. Upon
the receipt by the Pledgee of the Collateral and the Note pursuant to the
terms of this Agreement, the Custodian shall be released from all claims,
liabilities and obligations hereunder.
(d) If at any time the Pledgor and the Pledgee shall instruct the
Custodian to release all or any portion of the Collateral and/or the Note,
the Custodian shall promptly release the Collateral and/or the Note in
accordance with such instructions.
4. Affirmative Covenants of the Pledgor. The Pledgor agrees that
until the Obligations have been paid in full:
(a) Financial Reports. The Pledgor shall provide to the Pledgee (i)
unaudited quarterly consolidated financial statements of the Pledgor within
60 days after the end of each of the Pledgor's fiscal quarters (other than
the fourth fiscal quarter), and (ii) audited annual consolidated financial
statements of the Pledgor within 120 days after the end of each of the
Pledgor's fiscal years, in each case in the form filed by the Pledgor with
the Securities and Exchange Commission (the "Commission").
(b) Further Assurances, etc. The Pledgor will promptly execute and
deliver all further instruments, and take all further action, that may be
reasonably necessary, or that the Pledgee may reasonably request, at any
time, and from time to time, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Pledgee
to exercise and enforce its rights and remedies hereunder with respect to
the Collateral and, upon and during the continuance of an Event of Default
under the Note, to cause the transfer agent for the Common Stock to
register the Pledgee as the record owner of the Pledged Shares on the
Pledgor's stockholders' list or similar registry for the Common Stock.
(c) Status of Pledged Shares. The Pledged Shares shall constitute
issued shares of Common Stock.
5. Voting Rights; Dividends, etc. The Pledgee agrees that unless an
Event of Default under the Note shall have occurred and be continuing, the
Pledgee shall have no voting power or entitlement to cash dividends, if any,
with respect to the Pledged Shares. Cash dividends, if any, paid on or with
respect to the Pledged Shares subsequent to the Escrow Release Date shall be
held (and invested and reinvested) by the Custodian as Collateral in accordance
with the terms and conditions provided in this Agreement. Upon the occurrence
and continuation of an Event of Default under the Note, and the Pledgee's
notification of the Pledgor of its intention to exercise its voting power under
this Section 5:
(a) The Pledgee may exercise the voting power and all other
incidental rights of ownership with respect to any Pledged Shares; and
(b) The Pledgor shall promptly deliver to the Pledgee such other
documents as may be reasonably necessary to allow the Pledgee to exercise
such voting power.
The Pledgee agrees that unless an Event of Default under the Note shall have
occurred and be continuing, the Pledgor shall have the exclusive voting power
with respect to any shares of capital stock (other than Pledged Shares which are
non-voting) constituting Collateral and the Pledgee shall, upon the written
request of the Pledgor, promptly deliver such proxies and other documents, if
any, as shall be reasonably requested by the Pledgor which are necessary to
allow the Pledgor to exercise voting power with respect to any such share of
capital stock (other than the Pledged Shares which are non-voting as aforesaid)
constituting Collateral; provided, however, that no vote shall be cast, or
consent, waiver, or ratification given, or action taken by the Pledgor that
would impair any Collateral or be inconsistent with or violate any provision of
this Agreement. The Pledgor shall give the Pledgee written notice of its
intention to cast any vote, give any consent, waiver, or ratification, or take
any other action as provided in the preceding sentence. Absent any written
response by the Pledgee to the contrary prior to the end of the fifth business
day following receipt of such notice by the Pledgee, the Pledgor may cast any
vote, give any consent, waiver, or ratification, or take any other such action
without liability to the Pledgee.
6. Certain Remedies. If any Event of Default under the Note shall
have occurred and be continuing:
(a) The Pledgee may, upon release of the Collateral by the Custodian,
exercise in respect of the Collateral, in addition to other rights and
remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party on default under the Uniform Commercial
Code (the "U.C.C.") as in effect in the State of Delaware (whether or not
the U.C.C. applies to the affected Collateral) and also may, and in the
case of the Pledged Shares shall, upon the notice and conditions specified
below, sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Pledgee's offices or elsewhere, for
cash, on credit or for future delivery, and in each case for a price which
is, and upon such other terms as are, commercially reasonable. The Pledgee
may, to the extent permitted by Section 9-504 of the U.C.C., be the
purchaser of any of the Collateral so sold and the obligations of the
Pledgor to the Pledgee may be applied as a credit against the purchase
price. The Pledgee shall provide the Pledgor at least seven (7) business
days' prior notice to the Pledgor of the time and place of any public or
private sale, which the Pledgor agrees is commercially reasonable notice.
The Pledgee agrees that the Pledged Shares shall be put up for such a
public or private sale and that the Pledgor and other persons designated by
the Pledgor shall be entitled to participate in any such public or private
sale of the Pledged Shares, or any adjournment thereof. The Pledgee shall
not be obligated to make any sale of Collateral regardless of notice of
sale having been given unless the Obligations would be satisfied in full as
a result of such sale and such sale shall be made for a price which is, and
upon such other terms as are, commercially reasonable. The Pledgee may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, upon further notice, be
made at the time and place to which it was so adjourned. Upon any such
sale the Pledgee shall have the right to deliver, assign and transfer to
the purchaser thereof the Collateral so sold. Each purchaser (including
the Pledgee or the Pledgor or Pledgor's designees) at any such sale shall
hold the Collateral so sold free from any claims or rights, and the Pledgor
hereby specifically waives, to the extent it may lawfully do so, all rights
of redemption, stay or appraisal which it has or may have under any rule of
law or statute now existing or hereafter adopted.
(b) The Pledgee may:
(i) transfer all or any part of the Collateral into the name of
the Pledgee or its nominee,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Pledgee of any amount due or to become due
thereunder,
(iii) take control of any proceeds of the Collateral, and
(iv) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the
Collateral; and
(v) instruct (in the name, place and stead of the Pledgor) the
transfer agent for the Pledged Shares to register the Pledgee as
record owner of the Pledged Shares on the Pledgor's stockholders'
list or similar share registry for the Common Stock.
7. Shelf Registration.
(a) Within 210 days after the date of this Agreement, the Pledgor
shall use its reasonable best efforts to prepare and file with the
Commission a registration statement (on Form S-3 if available) covering the
Pledgee's resale of the Pledged Shares (the "Shelf Registration Statement")
pursuant to Section 6 of this Agreement (the "Shelf Registration"). Within
300 days after the date of this Agreement, the Pledgor shall use its
reasonable best efforts to cause the Shelf Registration Statement to become
effective (the "Effective Date") under the Securities Act of 1933, as
amended (the Securities Act") and shall use its reasonable best efforts to
keep the Shelf Registration Statement effective until the earlier to occur
of (a) the Obligations being satisfied in full, or (b) one year from the
date of maturity of the Note (the "Shelf Registration Period").
(b) In connection with the Shelf Registration, the following
procedures shall apply:
(i) The Pledgor shall furnish to the Pledgee, prior to the filing
thereof with the Commission, a copy of the Shelf Registration
Statement, and each amendment thereof and each amendment or
supplement, if any, to any prospectus included therein (the
"Prospectus") and shall use reasonable efforts to reflect in each such
document, when so filed with the Commission, such comments as the
Pledgee reasonably may propose.
(ii) The Pledgor shall use its reasonable best efforts to take such
action as may be necessary so that (A) the Shelf Registration
Statement and any amendment thereto and any Prospectus and any
amendment or supplement thereto (and each report or other document
incorporated therein by reference in each case) complies in all
material respects with the Securities Act, and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the respective rules
and regulations thereunder, (B) the Shelf Registration Statement and
any amendment thereto does not, when it becomes effective, contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, (C) the Prospectus and any amendment or
supplement to such Prospectus, does not include an untrue statement of
a material fact or omit to state a material fact necessary in order to
make the statements, in the light of the circumstances under which
they were made, not misleading, and (D) upon the written request of
the Pledgee (which is hereby given) the Pledgor complies with Rule 153
of the Securities Act Rules.
(iii) The Pledgor promptly shall advise the Pledgee in writing:
(A) when the Shelf Registration Statement and any amendment thereto
has been filed with the Commission and when the Shelf Registration
Statement or any post-effective amendment thereto has become
effective; (B) of any request by the Commission for amendments or
supplements to the Shelf Registration Statement or the Prospectus or
for additional information; (C) of the issuance by the Commission of
any stop order suspending the effectiveness of the Shelf Registration
Statement or the initiation of any proceedings for that purpose; (D)
of the receipt by the Pledgor of any notification with respect to the
suspension of the qualification of the Pledged Shares included therein
for sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (E) when an event has occurred (but which writing
need not be accompanied by details of such event) that requires the
making of any changes in the Shelf Registration Statement or the
Prospectus so that, as of such date, the Shelf Registration Statement
and the Prospectus do not contain an untrue statement of a material
fact and do not omit to state a material fact required to be stated
therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading (which advice
shall be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made).
(iv) The Pledgor shall use commercially reasonable efforts to prevent
the issuance, and if issued to obtain the withdrawal, of any order
suspending the effectiveness of the Shelf Registration Statement, at
the earliest possible time.
(v) The Pledgor shall furnish to the Pledgee, without charge, at
least one copy of such Shelf Registration Statement and any post-
effective amendment thereto actually filed with the Commission
(including any reports or other documents incorporated therein by
reference, other than exhibits incorporated therein by reference),
including financial statements and schedules, and, if the Pledgee so
requests in writing, all exhibits (excluding those incorporated by
reference).
(vi) The Pledgor shall, during the Shelf Registration Period, deliver
to the Pledgee included within the Shelf Registration Statement,
without charge, as many copies of the Prospectus (including each
preliminary Prospectus) and any amendment or supplement thereto as the
Pledgee may reasonably request; and, subject to the last sentence of
subsection (ix) below, the Pledgor consents to the lawful use of the
Prospectus or any amendment or supplement thereto by the Pledgee in
connection with the offering and sale of the Pledged Shares covered by
the Prospectus or any amendment or supplement thereto during the Shelf
Registration Period.
(vii) Prior to any offering pursuant to the Shelf Registration
Statement, the Pledgor shall use its reasonable best efforts to
register or qualify or cooperate with the Pledgee and its counsel in
connection with the registration or qualification of the Pledged
Shares for offer and sale under the securities or blue sky laws of
such jurisdictions within the continental United States as the Pledgee
reasonably requests in writing and do any and all other commercially
reasonable acts or things necessary or advisable to enable the offer
and sale in such jurisdictions of the Pledged Shares covered by such
Shelf Registration Statement; provided, however, that the Pledgor will
not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action
which would subject it to general service of process or to taxation in
any such jurisdiction where it is not then so subject.
(viii) The Pledgor shall cooperate with the Pledgee to facilitate
the timely preparation and delivery of certificates representing the
Pledged Shares to be sold pursuant to the Shelf Registration Statement
free of any restrictive legends and in such permitted denominations
and registered in such names as the Pledgee may reasonably request in
connection with the sale of the Pledged Shares pursuant to such Shelf
Registration Statement.
(ix) Upon the occurrence of any event contemplated by paragraph (iii)
above, the Pledgor shall promptly prepare a post-effective amendment
to the Shelf Registration Statement or an amendment or supplement to
the related Prospectus or file any other required document so that, as
thereafter delivered to purchasers of the Pledged Shares included
therein, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. If the Pledgor notifies the Pledgee of the
occurrence of any event contemplated by paragraph (iii) above, the
Pledgee shall suspend the use of the Prospectus until the requisite
changes to the Prospectus have been made.
(x) The Pledgor may require the Pledgee selling Pledged Shares
pursuant to the Shelf Registration Statement to furnish to the Pledgor
such information regarding the Pledgee and the distribution of such
the Pledged Shares as the Pledgor may from time to time reasonably
require for inclusion in such Shelf Registration Statement.
(xi) The Pledgor shall enter into such customary and reasonable
agreements (including underwriting agreements in customary form) to
take all other appropriate commercially reasonable actions reasonably
necessary to expedite or facilitate the registration or the
disposition of the Pledged Shares pursuant to the Shelf Registration
Statement, and in connection therewith, if an underwriting agreement
is entered into, cause the same to contain indemnification provisions
and procedures substantially identical to those set forth in this
paragraph (b) (or such other customary and reasonable provisions and
procedures acceptable to such underwriters, if any) with respect to
all parties to be indemnified pursuant to this paragraph (b).
(xii) The Pledgor shall (A) make reasonably available for
inspection by the Pledgee, any underwriter participating in any
disposition pursuant to such Shelf Registration Statement, and any
attorney, accountant or other agent retained by the Pledgee or any
such underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Pledgor and its subsidiaries
provided that any such entity or person shall execute a customary
confidentiality agreement; (B) cause the Pledgor's officers and
employees to supply all relevant information reasonably requested by
such Pledgee or any such underwriter, attorney, accountant or agent in
connection with the Shelf Registration Statement as is customary for
similar due diligence examinations provided that any such entity or
person shall execute a customary confidentiality agreement; (C) make
such representations and warranties to the Pledgee and the
underwriters, if any, in form, substance and scope as are customarily
made by the Pledgor to underwriters in primary underwritten offerings;
(D) obtain opinions of counsel to the Pledgor (who may be the General
Counsel of the Pledgor) and updates thereof (which counsel and
opinions (in form, scope and substance) shall be customary and
reasonably satisfactory to the underwriters, if any) addressed to each
selling Pledgee and the underwriters, if any, covering such matters as
are customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by the
Pledgee and underwriters (it being agreed that the matters to be
covered by such opinion shall include, without limitation, as of the
date of the opinion and as of the Effective Date of the Shelf
Registration Statement or most recent post-effective amendment
thereto, as the case may be, a statement concerning the absence from
such Shelf Registration Statement and the prospectus included therein,
as then amended or supplemented, including the documents incorporated
by reference therein, of an untrue statement of a material fact or the
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading);
(E) use its reasonable best efforts to obtain "cold comfort" letters
and updates thereof from the independent certified public accountants
of the Pledgor, addressed to the Pledgee and the underwriters, if any,
in customary form and covering matters of the type customarily covered
in "cold comfort" letters in connection with primary underwritten
offerings; and (F) deliver such documents and certificates as may be
reasonably requested by any such Pledgee and the underwriters, if any,
including those to evidence compliance with any customary conditions
contained in the underwriting agreement. The foregoing actions set
forth in this paragraph (b) shall be performed at each closing under
any underwritten offering to the extent required thereunder.
(xiii) The Pledgor shall bear all fees and expenses incurred in
connection with the performance of its obligations under this
paragraph (b) and shall bear or reimburse the Pledgee for the
reasonable fees and disbursements of one firm of counsel designated by
the Pledgee to act as counsel for the Pledgee in connection therewith
(the "Pledgee's Counsel"); provided however, that the Pledgor shall
not be obligated to reimburse the Pledgee or incur expenses in excess
of $50,000 in the aggregate for the Pledgee's Counsel plus the
expenses arising from obtaining and delivering any legal opinions and
"cold comfort" letters; provided, further, that the Pledgee shall be
solely responsible for the payment of any commissions or discounts to
brokers, underwriters, or other Persons incurred in connection with
the disposition of such Pledgee's Pledged Shares.
(xiv) In connection with the Shelf Registration Statement, the
Pledgor agrees to indemnify and hold harmless the Pledgee and each
person who controls any Pledgee within the meaning of either the
Securities Act or the Exchange Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in
the Shelf Registration Statement as originally filed or in any
amendment thereof, or in any preliminary Prospectus or final
Prospectus, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that (A) the Pledgor will not be liable in
any case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to
the Pledgor by or on behalf of the Pledgee specifically for inclusion
therein and (B) the foregoing indemnity with respect to any untrue
statement or alleged untrue statement or omission or alleged omission
made in any preliminary Prospectus relating to the Shelf Registration
Statement shall not inure to the benefit of the Pledgee (or any person
controlling such Pledgee) from whom the person asserting any such
loss, claim, damage or liability purchases any of the securities that
are the subject thereof if such person did not receive a copy of the
final Prospectus (or the final Prospectus as supplemented) at or prior
to the written confirmation of the sale of such Pledged Shares to such
person and the untrue statement or alleged untrue statement or
omission or alleged omission contained in the preliminary Prospectus
was corrected in the final Prospectus (or the final Prospectus as
supplemented). This indemnity agreement will be in addition to any
liability that the Pledgor may otherwise have.
(xv) The Pledgor also agrees to indemnify or contribute to Losses (as
defined below) of any underwriters of Pledged Shares registered under
the Shelf Registration Statement, their officers, directors, employees
and agents and each person who controls such underwriters on
substantially the same basis as that of the indemnification of the
Pledgee provided in this paragraph (b) and shall, if requested by the
Pledgee, enter into an underwriting agreement reflecting such
agreement to indemnify.
(xvi) The Pledgee agrees to indemnify and hold harmless the
Pledgor, its officers and directors, and each person who controls the
Pledgor within the meaning of either the Securities Act or the
Exchange Act to the same extent as the foregoing indemnity from the
Pledgor, but only with reference to losses, claims, damages or
liabilities (or actions in respect thereof) arising out of or based
upon (A) any written information relating to the Pledgee furnished by
or on behalf of the Pledgee specifically for inclusion in the
documents referred to in the foregoing indemnity, or (B) any untrue
statement or alleged untrue statement or omission or alleged omission
made in any preliminary Prospectus relating to the Shelf Registration
Statement that was corrected in the final Prospectus (or the final
Prospectus as supplemented) if at or prior to the written confirmation
of the sale of such Pledged Shares the purchaser failed to receive the
final Prospectus (or the final Prospectus as supplemented). This
indemnity agreement will be in addition to any liability that any
Pledgee may otherwise have.
(xvii) Promptly after receipt by an indemnified party under this
paragraph (b) of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this paragraph (b), notify the
indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve the indemnifying party
from any liability it may have to any indemnified party unless such
delay prejudices the indemnifying party. In case any such action is
brought against any indemnified party and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party
to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party under this paragraph (b) for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. The
indemnified party shall use reasonable efforts to avoid duplication of
work and expense by its counsel. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which
such indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party unless such
settlement includes an unconditional release of such indemnified party
from all liability on any claims that are the subject matter of such
action. No indemnified party shall, without the prior written consent
of the indemnifying party, settle any pending or threatened action in
respect of which indemnity is sought hereunder.
(xviii) In the event that the indemnity provided in this paragraph
(b) is unavailable to or insufficient to hold harmless an indemnified
party for any reason, then each applicable indemnifying party, in lieu
of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively
"Losses") to which such indemnified party may be subject in such
proportion as is appropriate to reflect the relative benefits received
by such indemnifying party, on the one hand, and such indemnified
party, on the other hand, from the Shelf Registration Statement which
resulted in such Losses; provided, however, that in no case shall
Pledgee be responsible, in the aggregate, for any amount in excess of
the amount by which the net proceeds received by Pledgee from the sale
of the Pledged Shares pursuant to the Shelf Registration Statement
exceeds the amount of damages which such Pledgee has otherwise
actually paid in respect of a claim for which indemnity is sought. If
the allocation provided by the immediately preceding sentence is
unavailable for any reason, the indemnifying party and the indemnified
party shall contribute in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of such
indemnifying party, on the one hand, and such indemnified party, on
the other hand, in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable
considerations. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to
information provided by the indemnifying party on the one hand, or by
the indemnified party, on the other hand. The parties agree that it
would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation that does not take
account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (b), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(b)
of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For
purposes of this paragraph (b), each person who controls the Pledgee
within the meaning of either the Securities Act or the Exchange Act
shall have the same rights to contribution as the Pledgee, and each
person who controls the Pledgor within the meaning of either the
Securities Act or the Exchange Act, and each officer and director of
the Pledgor shall have the same rights to contribution as the Pledgor,
subject in each case to the applicable terms and conditions of this
paragraph (b).
(xix) The indemnification provisions of this paragraph (b) will
remain in full force and effect, regardless of any investigation made
by or on behalf of any Pledgee or Pledgor or any of the general
partners, officers, directors, employees, agents or controlling
persons referred to in this paragraph (b), and will survive the sale
by a Pledgee of the Pledged Shares covered by the Shelf Registration
Statement.
(c) Pledgor shall apply for listing of all Pledged Shares on the
American Stock Exchange and all other exchanges on which the Common Stock is
then traded, and cause such listing to be effective upon notice of issuance.
8. The Cash Deposit. If within 180 days after the date of this
Agreement the Shelf Registration Statement has not been declared effective by
the Commission, within two (2) business days after written notice of such fact
by the Pledgee to the Pledgor, the Pledgor shall deposit with the Custodian cash
by way of a wire transfer of $1,412,468.76 (the "Cash Deposit"). Until its
release as described in the next sentence, the Cash Deposit shall constitute
Collateral and shall be invested and reinvested by the Custodian in the same
manner as provided in Section 2(d) of the Escrow Agreement, which Section is
incorporated herein by reference. Upon written notice to the Custodian by the
Pledgee and the Pledgor, the Cash Deposit, or any portion thereof, together with
any earnings thereon, shall be returned by the Custodian to the Pledgor. The
Pledgee and the Pledgor shall be obligated to give the notice required by the
preceding sentence within two (2) business days after the Shelf Registration
Statement has been declared effective by the Commission. Upon release of the
Cash Deposit, or any portion thereof, as provided in this paragraph, such funds
shall no longer constitute Collateral under this Agreement.
9. Additional Collateral. The then current market value of any
marketable securities pledged under this Agreement and the amount, if any, of
the Cash Deposit (collectively, together with any earnings thereon and proceeds
therefrom, the "Pledged Collateral") shall be maintained at not less than 110%
of the remaining principal amount of the Note as set forth below. For purposes
of this Agreement, the current market value of marketable securities shall, as
of the date of each determination thereof, be based upon the average of the
closing prices of such securities on the relevant national securities exchange
in New York (or, if any such security is not traded on an exchange in New York,
the place where such security is so traded) for the twenty (20) trading days
immediately preceding the date of determination; in the event that such
securities are traded on more than one exchange, such closing prices on the
American Stock Exchange shall control. Should the then current market value of
the Pledged Collateral be less than 110% of the remaining principal amount of
the Note, Pledgor shall within 20 business days after Pledgee has notified
Pledgor in writing of such deficiency either (a) reduce the remaining principal
amount of the Note by the amount of such deficiency or (b) deliver to the
Custodian for the benefit of the Pledgee additional collateral reasonably
acceptable to Pledgee (the "Additional Collateral"), in either case so that the
then aggregate current market value of the Pledged Collateral plus the
Additional Collateral shall be not less than 110% of the remaining principal
amount of the Note. At any time when the then aggregate current market value of
the Pledged Collateral plus the Additional Collateral exceeds 110% of the
remaining principal amount of the Note, Pledgee shall, within 10 business days
after Pledgor has notified Pledgee in writing of such excess, instruct the
Custodian to return to the Pledgor an amount of the Additional Collateral so
that the then current market value of the Pledged Collateral plus the remaining
Additional Collateral shall be not greater than 110% of the remaining principal
amount of the Note.
10. Incorporation by Reference. Section 3 of the Escrow Agreement
("Section 3") is hereby incorporated by reference in this Agreement provided
that (a) references to the "Escrow Agent" in Section 3 shall be deemed to be
references to the Custodian for purposes of this Agreement, (b) references to
the "Escrow Deposits" in Section 3 shall be deemed to be references to the
Custodial Deposit for purposes of this Agreement, (c) references to "Section
4(c)" in Section 3 shall be deemed to be references to Section 12(c) for
purposes of this Agreement, (d) references to "Section 4(g)" in Section 3 shall
be deemed to be references to Section 12(g) for purposes of this Agreement, and
(e) references to the term "items escrowed hereunder" in Section 3 shall be
deemed to be references to the Custodial Deposit for purposes of this Agreement.
11. Collateral Proceeds. If an Event of Default under the Note shall
have occurred and be continuing, all cash proceeds received by the Pledgee in
respect of any sale of, collection from, or other realization upon, all or any
part of the Collateral shall be applied by the Pledgee against the Obligations,
with the Pledgor remaining liable for any deficiency. Any surplus of such cash
proceeds as well as any other Collateral (or proceeds thereof) held by the
Pledgee and remaining after payment in full of all the Obligations, shall be
paid over or transferred to the Pledgor or to whomsoever may be lawfully
entitled to receive such surplus.
12. Miscellaneous.
a. Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered
(including by Federal Express or other reputable courier service) or sent by
facsimile transmission (with a confirming copy to be sent by next day delivery
by Federal Express or other reputable courier service). Notices, demands and
communications to the Pledgor, the Pledgee or the Custodian, will, unless
another address is specified in writing, be sent to the respective address
indicated below:
If to the Custodian:
First Trust National Association
180 East 5th Street, 2nd Floor
St. Paul, Minnesota 55101
Attention: Rick Prokosch
Facsimile No.: (612) 244-0711
If to the Pledgor:
MAXXAM Inc.
5847 San Felipe, Suite 2600
Houston, Texas 77057
Attention: Treasury Department
Facsimile No.: (713) 267-3704
with a copy to:
Attention: Corporate Secretary
Facsimile No.: (713) 267-3702
If to the Pledgee:
The Combined Master Retirement Trust
Three Lincoln Centre
Suite 1700, 5430 LBJ Freeway
Dallas, Texas 75240-2697
Attention: Harold C. Simmons
Facsimile No.: (972) 450-4278
with a copy to:
Consulting Fiduciaries, Inc.
2745 Riverwoods Road
Riverwoods, IL 60015
Attention: David Heald
Facsimile No.: 847-945-5611
b. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware, without
giving effect to the conflicts of laws provisions thereof.
c. Jurisdiction and Venue. The parties to this Agreement agree
that any and all actions arising under or in respect of this Agreement
(including, without limitation, the resolution of any dispute regarding the
Custodial Deposit) shall be litigated exclusively in any federal or state court
of competent jurisdiction located in the State of Delaware. By execution and
delivery of this Agreement, each party to this Agreement irrevocably submits to
the personal and exclusive jurisdiction of such courts for itself and in respect
of its property which is subject to this Agreement with respect to such action.
Each party to this Agreement agrees that venue would be proper in any of such
courts, and hereby waives any objection that any such court is an improper or
inconvenient forum for the resolution of any such action.
d. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same agreement.
e. Successors and Assigns. The Pledgor and the Pledgee shall
not assign or agree to assign or grant to any other party any rights under this
Agreement, including without limitation any rights in or to the Custodial
Deposit, without the prior written consent of the Pledgor and the Pledgee, and
this Agreement shall be binding upon, and inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
f. Remedies. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law. The obligations of the parties
hereto (including the Custodian) are unique in that time is of the essence, and
any delay in performance hereunder by any party will result in irreparable harm
to the other parties hereto. Accordingly, any party may seek specific
performance and/or injunctive relief before any court of competent jurisdiction
specified in Section 12(c) hereof in order to enforce this Agreement or to
prevent violations of the provisions hereof, and no party shall object to
specific performance or injunctive relief as an appropriate remedy; provided,
however, that nothing in this Section 12(f) is intended to prohibit any party
from bringing an action for money damages for breach of this Agreement (either
in lieu of or in addition to an action for specific performance and/or
injunctive relief). The Custodian acknowledges that its obligations, as well as
the obligations of the Pledgor and the Pledgee hereunder, are subject to the
equitable remedy of specific performance and/or injunctive relief.
g. Amendment, Waiver, etc. This Agreement may only be amended,
modified, altered or revoked by a written instrument, signed by the Pledgor and
the Pledgee. The Pledgor and the Pledgee agree to give the Custodian advance
notice of any amendment or modification to this Agreement and to provide the
Custodian promptly with copies of any such amendment or modification. Except
with respect to Sections 3(b) and (c) hereto, no failure on the part of any
party to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any right
hereunder preclude any other or future exercise thereof or of any other right.
h. Headings. The headings preceding the text of the sections
and subsections hereof are inserted solely for convenience of reference, and
shall not constitute a part of this Agreement, nor shall they affect its
meaning, construction or effect.
i. Entire Agreement. This Agreement, together with the Note of
even date herewith, the Escrow Agreement, and the Stock Purchase Agreement, sets
forth all of the promises, covenants, agreements, conditions and undertakings
between the parties with respect to the subject matter hereof, and supersedes
all prior and contemporaneous agreements and understandings, inducements or
conditions, express or implied, oral or written.
j. Severability. Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
THE PLEDGOR:
MAXXAM INC.
By:
------------------------------
Title:
THE PLEDGEE:
THE COMBINED MASTER
RETIREMENT TRUST
By:
------------------------------
Title:
FIRST TRUST NATIONAL ASSOCIATION
By:
------------------------------
Title:
PLEDGE AND CUSTODY AGREEMENT
PLEDGE AND CUSTODY AGREEMENT dated as of October ___, 1997 (the
"Agreement"), by and among MAXXAM Inc., a Delaware corporation (the "Pledgor"),
NL Industries, Inc., a New Jersey corporation (the "Pledgee"), and First Trust
National Association (the "Bank"), as custodian (the "Custodian").
Contemporaneously with the execution and delivery of this Agreement,
the Pledgor has purchased 250,000 shares (the "Pledged Shares") of the Pledgor's
common stock, $.50 par value per share (the "Common Stock"), from the Pledgee on
the terms and subject to the conditions of (i) the Stock Purchase Agreement
among the Pledgor, the Pledgee and The Combined Master Retirement Trust, a trust
organized under the laws of Texas (the "CMRT"), of even date herewith (the
"Stock Purchase Agreement"), and (ii) the Escrow Agreement among the Pledgor,
the Pledgee, CMRT and the Bank, as escrow agent, of even date herewith (the
"Escrow Agreement").
Pursuant to the terms of the Stock Purchase Agreement, the Pledgee has
delivered and surrendered to the Bank, as escrow agent (the "Escrow Agent"), the
Pledged Shares sold to the Pledgor, and the Pledgor has delivered to the Escrow
Agent, among other things, its Non-Negotiable Secured Promissory Note of even
date herewith in the principal amount of $6,875,000 (the "Note") and an
appropriate instrument of transfer duly endorsed by the Pledgor sufficient to
transfer such Pledged Shares to the Pledgee (the "Stock Power") for the benefit
of the Pledgee.
Pursuant to the terms of the Escrow Agreement, the Escrow Agent may be
instructed to release the Pledged Shares and the Note from the escrow provided
for pursuant to the Escrow Agreement and to retain the Pledged Shares, the Note
and the Stock Power, as Custodian, pursuant to the terms of this Agreement (the
"Custodial Deposit").
Pursuant to Sections 8 and 9 of this Agreement, Pledgor may be
required to deposit with Custodian additional property to be held and
administered by Custodian as required by this Agreement, which, if deposited,
will become part of the Custodial Deposit.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Appointment of Custodian. Pursuant to the terms of Section
2(i)(A) of the Escrow Agreement, the Bank may be required to retain the
Custodial Deposit, as Custodian, pursuant to the terms of this Agreement. The
Pledgor and the Pledgee hereby designate and appoint the Custodian to serve in
accordance with the terms and conditions of this Agreement, and the Custodian
hereby agrees to act as such, upon the terms and conditions provided in this
Agreement. This Agreement shall be effective as of the Escrow Release Date (as
such term is defined in the Escrow Agreement).
2. Grant of Security Interest. To secure the prompt and complete
performance of its obligations to pay interest and principal on the Note in
accordance with the terms thereof (the "Obligations"), the Pledgor hereby
assigns to the Pledgee and grants to the Pledgee a first-priority security
interest in all of Pledgor's right, title and interest in, to and under: (i) the
Pledged Shares and the Stock Power, (ii) all additional securities to which the
Pledgor is or becomes entitled by virtue of its ownership of the Pledged Shares
as a result of any corporate reorganization, merger, consolidation, stock split,
stock dividend, conversion, preemptive right or otherwise, (iii) the Cash
Deposit, as defined in Section 8, when and if made, (iv) the Additional
Collateral, if any, as defined in Section 9; and (v) the proceeds from each of
the foregoing (collectively, the "Collateral").
3. Release from Custody.
(a) Except as provided in Section 8, if, for any reason, payment is
made to the Custodian, acting in its capacity as Custodian, for the account
of the Pledgee in respect of principal and/or interest under the Note, the
Custodian shall remit such payment to Pledgee.
(b) Upon the receipt of a written notice from the Pledgor (the
"MAXXAM Notice") stating that the Pledgor has paid the Obligations in full,
the Custodian shall deliver a copy of the MAXXAM Notice to the Pledgee.
If, within three (3) business days after the delivery of the MAXXAM Notice
by the Custodian to the Pledgee, the Pledgee does not deliver a written
notice to the Custodian stating that the Pledgor has not paid the
Obligations in full and objecting to the delivery of the Collateral to the
Pledgor, then the Custodian shall deliver the Collateral and the Note
(marked "CANCELLED AND PAID IN FULL") to the Pledgor, as instructed by the
MAXXAM Notice. Pledgee shall also be obligated to deliver a copy of the
notice delivered to the Custodian to Pledgor at the same time. Upon the
receipt by the Pledgor of the Collateral and the Note pursuant to the terms
of this Agreement, the Custodian shall be released from all claims,
liabilities and obligations hereunder.
(c) Upon the receipt of a written notice from the Pledgee (the
"Pledgee Notice") stating that an Event of Default under the Note has
occurred and is continuing, the Custodian shall deliver a copy of the
Pledgee Notice to the Pledgor. If, within three (3) business days after
the delivery of the Pledgee Notice by the Custodian to the Pledgor, the
Pledgor does not deliver a written notice to the Custodian objecting to the
delivery of the Collateral and the Note to the Pledgee because either (i)
an Event of Default has not occurred or (ii) an Event of Default has
occurred that is not continuing, then the Custodian shall deliver the
Collateral and the Note to the Pledgee, as instructed by the Pledgee
Notice, and the Pledgor and the Pledgee shall continue to comply with the
terms of this Agreement. Pledgor shall also be obligated to deliver a copy
of the notice delivered to the Custodian to Pledgee at the same time. Upon
the receipt by the Pledgee of the Collateral and the Note pursuant to the
terms of this Agreement, the Custodian shall be released from all claims,
liabilities and obligations hereunder.
(d) If at any time the Pledgor and the Pledgee shall instruct the
Custodian to release all or any portion of the Collateral and/or the Note,
the Custodian shall promptly release the Collateral and/or the Note in
accordance with such instructions.
4. Affirmative Covenants of the Pledgor. The Pledgor agrees that
until the Obligations have been paid in full:
(a) Financial Reports. The Pledgor shall provide to the Pledgee (i)
unaudited quarterly consolidated financial statements of the Pledgor within
60 days after the end of each of the Pledgor's fiscal quarters (other than
the fourth fiscal quarter), and (ii) audited annual consolidated financial
statements of the Pledgor within 120 days after the end of each of the
Pledgor's fiscal years, in each case in the form filed by the Pledgor with
the Securities and Exchange Commission (the "Commission").
(b) Further Assurances, etc. The Pledgor will promptly execute and
deliver all further instruments, and take all further action, that may be
reasonably necessary, or that the Pledgee may reasonably request, at any
time, and from time to time, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Pledgee
to exercise and enforce its rights and remedies hereunder with respect to
the Collateral and, upon and during the continuance of an Event of Default
under the Note, to cause the transfer agent for the Common Stock to
register the Pledgee as the record owner of the Pledged Shares on the
Pledgor's stockholders' list or similar registry for the Common Stock.
(c) Status of Pledged Shares. The Pledged Shares shall constitute
issued shares of Common Stock.
5. Voting Rights; Dividends, etc. The Pledgee agrees that unless an
Event of Default under the Note shall have occurred and be continuing, the
Pledgee shall have no voting power or entitlement to cash dividends, if any,
with respect to the Pledged Shares. Cash dividends, if any, paid on or with
respect to the Pledged Shares subsequent to the Escrow Release Date shall be
held (and invested and reinvested) by the Custodian as Collateral in accordance
with the terms and conditions provided in this Agreement. Upon the occurrence
and continuation of an Event of Default under the Note, and the Pledgee's
notification of the Pledgor of its intention to exercise its voting power under
this Section 5:
(a) The Pledgee may exercise the voting power and all other
incidental rights of ownership with respect to any Pledged Shares; and
(b) The Pledgor shall promptly deliver to the Pledgee such other
documents as may be reasonably necessary to allow the Pledgee to exercise
such voting power.
The Pledgee agrees that unless an Event of Default under the Note shall have
occurred and be continuing, the Pledgor shall have the exclusive voting power
with respect to any shares of capital stock (other than Pledged Shares which are
non-voting) constituting Collateral and the Pledgee shall, upon the written
request of the Pledgor, promptly deliver such proxies and other documents, if
any, as shall be reasonably requested by the Pledgor which are necessary to
allow the Pledgor to exercise voting power with respect to any such share of
capital stock (other than the Pledged Shares which are non-voting as aforesaid)
constituting Collateral; provided, however, that no vote shall be cast, or
consent, waiver, or ratification given, or action taken by the Pledgor that
would impair any Collateral or be inconsistent with or violate any provision of
this Agreement. The Pledgor shall give the Pledgee written notice of its
intention to cast any vote, give any consent, waiver, or ratification, or take
any other action as provided in the preceding sentence. Absent any written
response by the Pledgee to the contrary prior to the end of the fifth business
day following receipt of such notice by the Pledgee, the Pledgor may cast any
vote, give any consent, waiver, or ratification, or take any other such action
without liability to the Pledgee.
6. Certain Remedies. If any Event of Default under the Note shall
have occurred and be continuing:
(a) The Pledgee may, upon release of the Collateral by the Custodian,
exercise in respect of the Collateral, in addition to other rights and
remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party on default under the Uniform Commercial
Code (the "U.C.C.") as in effect in the State of Delaware (whether or not
the U.C.C. applies to the affected Collateral) and also may, and in the
case of the Pledged Shares shall, upon the notice and conditions specified
below, sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Pledgee's offices or elsewhere, for
cash, on credit or for future delivery, and in each case for a price which
is, and upon such other terms as are, commercially reasonable. The Pledgee
may, to the extent permitted by Section 9-504 of the U.C.C., be the
purchaser of any of the Collateral so sold and the obligations of the
Pledgor to the Pledgee may be applied as a credit against the purchase
price. The Pledgee shall provide the Pledgor at least seven (7) business
days' prior notice to the Pledgor of the time and place of any public or
private sale, which the Pledgor agrees is commercially reasonable notice.
The Pledgee agrees that the Pledged Shares shall be put up for such a
public or private sale and that the Pledgor and other persons designated by
the Pledgor shall be entitled to participate in any such public or private
sale of the Pledged Shares, or any adjournment thereof. The Pledgee shall
not be obligated to make any sale of Collateral regardless of notice of
sale having been given unless the Obligations would be satisfied in full as
a result of such sale and such sale shall be made for a price which is, and
upon such other terms as are, commercially reasonable. The Pledgee may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, upon further notice, be
made at the time and place to which it was so adjourned. Upon any such
sale the Pledgee shall have the right to deliver, assign and transfer to
the purchaser thereof the Collateral so sold. Each purchaser (including
the Pledgee or the Pledgor or Pledgor's designees) at any such sale shall
hold the Collateral so sold free from any claims or rights, and the Pledgor
hereby specifically waives, to the extent it may lawfully do so, all rights
of redemption, stay or appraisal which it has or may have under any rule of
law or statute now existing or hereafter adopted.
(b) The Pledgee may:
(i) transfer all or any part of the Collateral into the name of
the Pledgee or its nominee,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Pledgee of any amount due or to become due
thereunder,
(iii) take control of any proceeds of the Collateral, and
(iv) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the
Collateral; and
(v) instruct (in the name, place and stead of the Pledgor) the
transfer agent for the Pledged Shares to register the Pledgee as
record owner of the Pledged Shares on the Pledgor's stockholders'
list or similar share registry for the Common Stock.
7. Shelf Registration.
(a) Within 210 days after the date of this Agreement, the Pledgor
shall use its reasonable best efforts to prepare and file with the
Commission a registration statement (on Form S-3 if available) covering the
Pledgee's resale of the Pledged Shares (the "Shelf Registration Statement")
pursuant to Section 6 of this Agreement (the "Shelf Registration"). Within
300 days after the date of this Agreement, the Pledgor shall use its
reasonable best efforts to cause the Shelf Registration Statement to become
effective (the "Effective Date") under the Securities Act of 1933, as
amended (the Securities Act") and shall use its reasonable best efforts to
keep the Shelf Registration Statement effective until the earlier to occur
of (a) the Obligations being satisfied in full, or (b) one year from the
date of maturity of the Note (the "Shelf Registration Period").
(b) In connection with the Shelf Registration, the following
procedures shall apply:
(i) The Pledgor shall furnish to the Pledgee, prior to the filing
thereof with the Commission, a copy of the Shelf Registration
Statement, and each amendment thereof and each amendment or
supplement, if any, to any prospectus included therein (the
"Prospectus") and shall use reasonable efforts to reflect in each such
document, when so filed with the Commission, such comments as the
Pledgee reasonably may propose.
(ii) The Pledgor shall use its reasonable best efforts to take such
action as may be necessary so that (A) the Shelf Registration
Statement and any amendment thereto and any Prospectus and any
amendment or supplement thereto (and each report or other document
incorporated therein by reference in each case) complies in all
material respects with the Securities Act, and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the respective rules
and regulations thereunder, (B) the Shelf Registration Statement and
any amendment thereto does not, when it becomes effective, contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, (C) the Prospectus and any amendment or
supplement to such Prospectus, does not include an untrue statement of
a material fact or omit to state a material fact necessary in order to
make the statements, in the light of the circumstances under which
they were made, not misleading, and (D) upon the written request of
the Pledgee (which is hereby given) the Pledgor complies with Rule 153
of the Securities Act Rules.
(iii) The Pledgor promptly shall advise the Pledgee in writing:
(A) when the Shelf Registration Statement and any amendment thereto
has been filed with the Commission and when the Shelf Registration
Statement or any post-effective amendment thereto has become
effective; (B) of any request by the Commission for amendments or
supplements to the Shelf Registration Statement or the Prospectus or
for additional information; (C) of the issuance by the Commission of
any stop order suspending the effectiveness of the Shelf Registration
Statement or the initiation of any proceedings for that purpose; (D)
of the receipt by the Pledgor of any notification with respect to the
suspension of the qualification of the Pledged Shares included therein
for sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (E) when an event has occurred (but which writing
need not be accompanied by details of such event) that requires the
making of any changes in the Shelf Registration Statement or the
Prospectus so that, as of such date, the Shelf Registration Statement
and the Prospectus do not contain an untrue statement of a material
fact and do not omit to state a material fact required to be stated
therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading (which advice
shall be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made).
(iv) The Pledgor shall use commercially reasonable efforts to prevent
the issuance, and if issued to obtain the withdrawal, of any order
suspending the effectiveness of the Shelf Registration Statement, at
the earliest possible time.
(v) The Pledgor shall furnish to the Pledgee, without charge, at
least one copy of such Shelf Registration Statement and any post-
effective amendment thereto actually filed with the Commission
(including any reports or other documents incorporated therein by
reference, other than exhibits incorporated therein by reference),
including financial statements and schedules, and, if the Pledgee so
requests in writing, all exhibits (excluding those incorporated by
reference).
(vi) The Pledgor shall, during the Shelf Registration Period, deliver
to the Pledgee included within the Shelf Registration Statement,
without charge, as many copies of the Prospectus (including each
preliminary Prospectus) and any amendment or supplement thereto as the
Pledgee may reasonably request; and, subject to the last sentence of
subsection (ix) below, the Pledgor consents to the lawful use of the
Prospectus or any amendment or supplement thereto by the Pledgee in
connection with the offering and sale of the Pledged Shares covered by
the Prospectus or any amendment or supplement thereto during the Shelf
Registration Period.
(vii) Prior to any offering pursuant to the Shelf Registration
Statement, the Pledgor shall use its reasonable best efforts to
register or qualify or cooperate with the Pledgee and its counsel in
connection with the registration or qualification of the Pledged
Shares for offer and sale under the securities or blue sky laws of
such jurisdictions within the continental United States as the Pledgee
reasonably requests in writing and do any and all other commercially
reasonable acts or things necessary or advisable to enable the offer
and sale in such jurisdictions of the Pledged Shares covered by such
Shelf Registration Statement; provided, however, that the Pledgor will
not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action
which would subject it to general service of process or to taxation in
any such jurisdiction where it is not then so subject.
(viii) The Pledgor shall cooperate with the Pledgee to facilitate
the timely preparation and delivery of certificates representing the
Pledged Shares to be sold pursuant to the Shelf Registration Statement
free of any restrictive legends and in such permitted denominations
and registered in such names as the Pledgee may reasonably request in
connection with the sale of the Pledged Shares pursuant to such Shelf
Registration Statement.
(ix) Upon the occurrence of any event contemplated by paragraph (iii)
above, the Pledgor shall promptly prepare a post-effective amendment
to the Shelf Registration Statement or an amendment or supplement to
the related Prospectus or file any other required document so that, as
thereafter delivered to purchasers of the Pledged Shares included
therein, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. If the Pledgor notifies the Pledgee of the
occurrence of any event contemplated by paragraph (iii) above, the
Pledgee shall suspend the use of the Prospectus until the requisite
changes to the Prospectus have been made.
(x) The Pledgor may require the Pledgee selling Pledged Shares
pursuant to the Shelf Registration Statement to furnish to the Pledgor
such information regarding the Pledgee and the distribution of such
the Pledged Shares as the Pledgor may from time to time reasonably
require for inclusion in such Shelf Registration Statement.
(xi) The Pledgor shall enter into such customary and reasonable
agreements (including underwriting agreements in customary form) to
take all other appropriate commercially reasonable actions reasonably
necessary to expedite or facilitate the registration or the
disposition of the Pledged Shares pursuant to the Shelf Registration
Statement, and in connection therewith, if an underwriting agreement
is entered into, cause the same to contain indemnification provisions
and procedures substantially identical to those set forth in this
paragraph (b) (or such other customary and reasonable provisions and
procedures acceptable to such underwriters, if any) with respect to
all parties to be indemnified pursuant to this paragraph (b).
(xii) The Pledgor shall (A) make reasonably available for
inspection by the Pledgee, any underwriter participating in any
disposition pursuant to such Shelf Registration Statement, and any
attorney, accountant or other agent retained by the Pledgee or any
such underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Pledgor and its subsidiaries
provided that any such entity or person shall execute a customary
confidentiality agreement; (B) cause the Pledgor's officers and
employees to supply all relevant information reasonably requested by
such Pledgee or any such underwriter, attorney, accountant or agent in
connection with the Shelf Registration Statement as is customary for
similar due diligence examinations provided that any such entity or
person shall execute a customary confidentiality agreement; (C) make
such representations and warranties to the Pledgee and the
underwriters, if any, in form, substance and scope as are customarily
made by the Pledgor to underwriters in primary underwritten offerings;
(D) obtain opinions of counsel to the Pledgor (who may be the General
Counsel of the Pledgor) and updates thereof (which counsel and
opinions (in form, scope and substance) shall be customary and
reasonably satisfactory to the underwriters, if any) addressed to each
selling Pledgee and the underwriters, if any, covering such matters as
are customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by the
Pledgee and underwriters (it being agreed that the matters to be
covered by such opinion shall include, without limitation, as of the
date of the opinion and as of the Effective Date of the Shelf
Registration Statement or most recent post-effective amendment
thereto, as the case may be, a statement concerning the absence from
such Shelf Registration Statement and the prospectus included therein,
as then amended or supplemented, including the documents incorporated
by reference therein, of an untrue statement of a material fact or the
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading);
(E) use its reasonable best efforts to obtain "cold comfort" letters
and updates thereof from the independent certified public accountants
of the Pledgor, addressed to the Pledgee and the underwriters, if any,
in customary form and covering matters of the type customarily covered
in "cold comfort" letters in connection with primary underwritten
offerings; and (F) deliver such documents and certificates as may be
reasonably requested by any such Pledgee and the underwriters, if any,
including those to evidence compliance with any customary conditions
contained in the underwriting agreement. The foregoing actions set
forth in this paragraph (b) shall be performed at each closing under
any underwritten offering to the extent required thereunder.
(xiii) The Pledgor shall bear all fees and expenses incurred in
connection with the performance of its obligations under this
paragraph (b) and shall bear or reimburse the Pledgee for the
reasonable fees and disbursements of one firm of counsel designated by
the Pledgee to act as counsel for the Pledgee in connection therewith
(the "Pledgee's Counsel"); provided however, that the Pledgor shall
not be obligated to reimburse the Pledgee or incur expenses in excess
of $50,000 in the aggregate for the Pledgee's Counsel plus the
expenses arising from obtaining and delivering any legal opinions and
"cold comfort" letters; provided, further, that the Pledgee shall be
solely responsible for the payment of any commissions or discounts to
brokers, underwriters, or other Persons incurred in connection with
the disposition of such Pledgee's Pledged Shares.
(xiv) In connection with the Shelf Registration Statement, the
Pledgor agrees to indemnify and hold harmless the Pledgee and each
person who controls any Pledgee within the meaning of either the
Securities Act or the Exchange Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in
the Shelf Registration Statement as originally filed or in any
amendment thereof, or in any preliminary Prospectus or final
Prospectus, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that (A) the Pledgor will not be liable in
any case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to
the Pledgor by or on behalf of the Pledgee specifically for inclusion
therein and (B) the foregoing indemnity with respect to any untrue
statement or alleged untrue statement or omission or alleged omission
made in any preliminary Prospectus relating to the Shelf Registration
Statement shall not inure to the benefit of the Pledgee (or any person
controlling such Pledgee) from whom the person asserting any such
loss, claim, damage or liability purchases any of the securities that
are the subject thereof if such person did not receive a copy of the
final Prospectus (or the final Prospectus as supplemented) at or prior
to the written confirmation of the sale of such Pledged Shares to such
person and the untrue statement or alleged untrue statement or
omission or alleged omission contained in the preliminary Prospectus
was corrected in the final Prospectus (or the final Prospectus as
supplemented). This indemnity agreement will be in addition to any
liability that the Pledgor may otherwise have.
(xv) The Pledgor also agrees to indemnify or contribute to Losses (as
defined below) of any underwriters of Pledged Shares registered under
the Shelf Registration Statement, their officers, directors, employees
and agents and each person who controls such underwriters on
substantially the same basis as that of the indemnification of the
Pledgee provided in this paragraph (b) and shall, if requested by the
Pledgee, enter into an underwriting agreement reflecting such
agreement to indemnify.
(xvi) The Pledgee agrees to indemnify and hold harmless the
Pledgor, its officers and directors, and each person who controls the
Pledgor within the meaning of either the Securities Act or the
Exchange Act to the same extent as the foregoing indemnity from the
Pledgor, but only with reference to losses, claims, damages or
liabilities (or actions in respect thereof) arising out of or based
upon (A) any written information relating to the Pledgee furnished by
or on behalf of the Pledgee specifically for inclusion in the
documents referred to in the foregoing indemnity, or (B) any untrue
statement or alleged untrue statement or omission or alleged omission
made in any preliminary Prospectus relating to the Shelf Registration
Statement that was corrected in the final Prospectus (or the final
Prospectus as supplemented) if at or prior to the written confirmation
of the sale of such Pledged Shares the purchaser failed to receive the
final Prospectus (or the final Prospectus as supplemented). This
indemnity agreement will be in addition to any liability that any
Pledgee may otherwise have.
(xvii) Promptly after receipt by an indemnified party under this
paragraph (b) of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this paragraph (b), notify the
indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve the indemnifying party
from any liability it may have to any indemnified party unless such
delay prejudices the indemnifying party. In case any such action is
brought against any indemnified party and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party
to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party under this paragraph (b) for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. The
indemnified party shall use reasonable efforts to avoid duplication of
work and expense by its counsel. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which
such indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party unless such
settlement includes an unconditional release of such indemnified party
from all liability on any claims that are the subject matter of such
action. No indemnified party shall, without the prior written consent
of the indemnifying party, settle any pending or threatened action in
respect of which indemnity is sought hereunder.
(xviii) In the event that the indemnity provided in this paragraph
(b) is unavailable to or insufficient to hold harmless an indemnified
party for any reason, then each applicable indemnifying party, in lieu
of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively
"Losses") to which such indemnified party may be subject in such
proportion as is appropriate to reflect the relative benefits received
by such indemnifying party, on the one hand, and such indemnified
party, on the other hand, from the Shelf Registration Statement which
resulted in such Losses; provided, however, that in no case shall
Pledgee be responsible, in the aggregate, for any amount in excess of
the amount by which the net proceeds received by Pledgee from the sale
of the Pledged Shares pursuant to the Shelf Registration Statement
exceeds the amount of damages which such Pledgee has otherwise
actually paid in respect of a claim for which indemnity is sought. If
the allocation provided by the immediately preceding sentence is
unavailable for any reason, the indemnifying party and the indemnified
party shall contribute in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of such
indemnifying party, on the one hand, and such indemnified party, on
the other hand, in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable
considerations. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to
information provided by the indemnifying party on the one hand, or by
the indemnified party, on the other hand. The parties agree that it
would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation that does not take
account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (b), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(b)
of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For
purposes of this paragraph (b), each person who controls the Pledgee
within the meaning of either the Securities Act or the Exchange Act
shall have the same rights to contribution as the Pledgee, and each
person who controls the Pledgor within the meaning of either the
Securities Act or the Exchange Act, and each officer and director of
the Pledgor shall have the same rights to contribution as the Pledgor,
subject in each case to the applicable terms and conditions of this
paragraph (b).
(xix) The indemnification provisions of this paragraph (b) will
remain in full force and effect, regardless of any investigation made
by or on behalf of any Pledgee or Pledgor or any of the general
partners, officers, directors, employees, agents or controlling
persons referred to in this paragraph (b), and will survive the sale
by a Pledgee of the Pledged Shares covered by the Shelf Registration
Statement.
(c) Pledgor shall apply for listing of all Pledged Shares on the
American Stock Exchange and all other exchanges on which the Common Stock is
then traded, and cause such listing to be effective upon notice of issuance.
8. The Cash Deposit. If within 180 days after the date of this
Agreement the Shelf Registration Statement has not been declared effective by
the Commission, within two (2) business days after written notice of such fact
by the Pledgee to the Pledgor, the Pledgor shall deposit with the Custodian cash
by way of a wire transfer of $343,750.00 (the "Cash Deposit"). Until its release
as described in the next sentence, the Cash Deposit shall constitute Collateral
and shall be invested and reinvested by the Custodian in the same manner as
provided in Section 2(d) of the Escrow Agreement, which Section is incorporated
herein by reference. Upon written notice to the Custodian by the Pledgee and
the Pledgor, the Cash Deposit, or any portion thereof, together with any
earnings thereon, shall be returned by the Custodian to the Pledgor. The
Pledgee and the Pledgor shall be obligated to give the notice required by the
preceding sentence within two (2) business days after the Shelf Registration
Statement has been declared effective by the Commission. Upon release of the
Cash Deposit, or any portion thereof, as provided in this paragraph, such funds
shall no longer constitute Collateral under this Agreement.
9. Additional Collateral. The then current market value of any
marketable securities pledged under this Agreement and the amount, if any, of
the Cash Deposit (collectively, together with any earnings thereon and proceeds
therefrom, the "Pledged Collateral") shall be maintained at not less than 110%
of the remaining principal amount of the Note as set forth below. For purposes
of this Agreement, the current market value of marketable securities shall, as
of the date of each determination thereof, be based upon the average of the
closing prices of such securities on the relevant national securities exchange
in New York (or, if any such security is not traded on an exchange in New York,
the place where such security is so traded) for the twenty (20) trading days
immediately preceding the date of determination; in the event that such
securities are traded on more than one exchange, such closing prices on the
American Stock Exchange shall control. Should the then current market value of
the Pledged Collateral be less than 110% of the remaining principal amount of
the Note, Pledgor shall within 20 business days after Pledgee has notified
Pledgor in writing of such deficiency either (a) reduce the remaining principal
amount of the Note by the amount of such deficiency or (b) deliver to the
Custodian for the benefit of the Pledgee additional collateral reasonably
acceptable to Pledgee (the "Additional Collateral"), in either case so that the
then aggregate current market value of the Pledged Collateral plus the
Additional Collateral shall be not less than 110% of the remaining principal
amount of the Note. At any time when the then aggregate current market value of
the Pledged Collateral plus the Additional Collateral exceeds 110% of the
remaining principal amount of the Note, Pledgee shall, within 10 business days
after Pledgor has notified Pledgee in writing of such excess, instruct the
Custodian to return to the Pledgor an amount of the Additional Collateral so
that the then current market value of the Pledged Collateral plus the remaining
Additional Collateral shall be not greater than 110% of the remaining principal
amount of the Note.
10. Incorporation by Reference. Section 3 of the Escrow Agreement
("Section 3") is hereby incorporated by reference in this Agreement provided
that (a) references to the "Escrow Agent" in Section 3 shall be deemed to be
references to the Custodian for purposes of this Agreement, (b) references to
the "Escrow Deposits" in Section 3 shall be deemed to be references to the
Custodial Deposit for purposes of this Agreement, (c) references to "Section
4(c)" in Section 3 shall be deemed to be references to Section 12(c) for
purposes of this Agreement, (d) references to "Section 4(g)" in Section 3 shall
be deemed to be references to Section 12(g) for purposes of this Agreement, and
(e) references to the term "items escrowed hereunder" in Section 3 shall be
deemed to be references to the Custodial Deposit for purposes of this Agreement.
11. Collateral Proceeds. If an Event of Default under the Note shall
have occurred and be continuing, all cash proceeds received by the Pledgee in
respect of any sale of, collection from, or other realization upon, all or any
part of the Collateral shall be applied by the Pledgee against the Obligations,
with the Pledgor remaining liable for any deficiency. Any surplus of such cash
proceeds as well as any other Collateral (or proceeds thereof) held by the
Pledgee and remaining after payment in full of all the Obligations, shall be
paid over or transferred to the Pledgor or to whomsoever may be lawfully
entitled to receive such surplus.
12. Miscellaneous.
a. Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered
(including by Federal Express or other reputable courier service) or sent by
facsimile transmission (with a confirming copy to be sent by next day delivery
by Federal Express or other reputable courier service). Notices, demands and
communications to the Pledgor, the Pledgee or the Custodian, will, unless
another address is specified in writing, be sent to the respective address
indicated below:
If to the Custodian:
First Trust National Association
180 East 5th Street, 2nd Floor
St. Paul, Minnesota 55101
Attention: Rick Prokosch
Facsimile No.: (612) 244-0711
If to the Pledgor:
MAXXAM Inc.
5847 San Felipe, Suite 2600
Houston, Texas 77057
Attention: Treasury Department
Facsimile No.: (713) 267-3704
with a copy to:
Attention: Corporate Secretary
Facsimile No.: (713) 267-3702
If to the Pledgee:
NL Industries, Inc.
16825 Northchase Drive, Suite 1200
Houston, Texas 77210-4272
Facsimile No.: (281) 423-3333
with a copy to:
Corporate Treasurer
Facsimile No.: (212) 421-7209
b. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware, without
giving effect to the conflicts of laws provisions thereof.
c. Jurisdiction and Venue. The parties to this Agreement agree
that any and all actions arising under or in respect of this Agreement
(including, without limitation, the resolution of any dispute regarding the
Custodial Deposit) shall be litigated exclusively in any federal or state court
of competent jurisdiction located in the State of Delaware. By execution and
delivery of this Agreement, each party to this Agreement irrevocably submits to
the personal and exclusive jurisdiction of such courts for itself and in respect
of its property which is subject to this Agreement with respect to such action.
Each party to this Agreement agrees that venue would be proper in any of such
courts, and hereby waives any objection that any such court is an improper or
inconvenient forum for the resolution of any such action.
d. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same agreement.
e. Successors and Assigns. The Pledgor and the Pledgee shall
not assign or agree to assign or grant to any other party any rights under this
Agreement, including without limitation any rights in or to the Custodial
Deposit, without the prior written consent of the Pledgor and the Pledgee, and
this Agreement shall be binding upon, and inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
f. Remedies. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law. The obligations of the parties
hereto (including the Custodian) are unique in that time is of the essence, and
any delay in performance hereunder by any party will result in irreparable harm
to the other parties hereto. Accordingly, any party may seek specific
performance and/or injunctive relief before any court of competent jurisdiction
specified in Section 12(c) hereof in order to enforce this Agreement or to
prevent violations of the provisions hereof, and no party shall object to
specific performance or injunctive relief as an appropriate remedy; provided,
however, that nothing in this Section 12(f) is intended to prohibit any party
from bringing an action for money damages for breach of this Agreement (either
in lieu of or in addition to an action for specific performance and/or
injunctive relief). The Custodian acknowledges that its obligations, as well as
the obligations of the Pledgor and the Pledgee hereunder, are subject to the
equitable remedy of specific performance and/or injunctive relief.
g. Amendment, Waiver, etc. This Agreement may only be amended,
modified, altered or revoked by a written instrument, signed by the Pledgor and
the Pledgee. The Pledgor and the Pledgee agree to give the Custodian advance
notice of any amendment or modification to this Agreement and to provide the
Custodian promptly with copies of any such amendment or modification. Except
with respect to Sections 3(b) and (c) hereto, no failure on the part of any
party to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any right
hereunder preclude any other or future exercise thereof or of any other right.
h. Headings. The headings preceding the text of the sections
and subsections hereof are inserted solely for convenience of reference, and
shall not constitute a part of this Agreement, nor shall they affect its
meaning, construction or effect.
i. Entire Agreement. This Agreement, together with the Note of
even date herewith, the Escrow Agreement, and the Stock Purchase Agreement, sets
forth all of the promises, covenants, agreements, conditions and undertakings
between the parties with respect to the subject matter hereof, and supersedes
all prior and contemporaneous agreements and understandings, inducements or
conditions, express or implied, oral or written.
j. Severability. Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
THE PLEDGOR:
MAXXAM INC.
By:
------------------------------
Title:
THE PLEDGEE:
NL INDUSTRIES, INC.
By:
------------------------------
Title:
FIRST TRUST NATIONAL ASSOCIATION
By:
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Title:
EXHIBIT D
STOCK POWER
FOR VALUE RECEIVED, the undersigned,
hereby sells, assigns and transfers to
( ) shares of the common stock, par
value $0.50 per share, of MAXXAM, Inc., a Delaware corporation, standing in the
name of the undersigned on the books of said corporation and represented by
Stock Certificate No.(s)
.
The undersigned does hereby make, constitute and appoint
attorney-in-fact to so transfer the said stock on the books of MAXXAM, Inc. and
for said purpose to make and execute all necessary instruments of assignment and
transfer of the said stock and to substitute one or more persons with like full
power, hereby verifying and confirming all that said attorney or substitutes
shall lawfully do by virtue hereof.
IN WITNESS WHEREOF, this Stock Power has been executed by the
undersigned this day of , 19 .
-----------------------------------
By
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Printed Name:
------------------
Title:
---------------------------
(Medallion Guarantee)
