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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ to ________
COMMISSION FILE NUMBER 0-1339
OREGON METALLURGICAL CORPORATION
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(Exact name of registrant as specified in its charter)
Oregon 93-0448167
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
530 34th Ave. S.W., Albany, OR 97321
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(Address of principal executive (Zip Code)
offices)
Registrant's Telephone number, including area code: (503) 926-4281
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Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class which is registered
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None None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Par Value
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Based on the closing sales price of the Common Stock on March 16, 1995 as
reported on the NASDAQ National Market System, the aggregate market value of the
voting stock held by nonaffiliates of the registrant was $73,545,327.
The number of shares outstanding of the registrant's common stock, $1.00 par
value was 10,895,604 at March 16, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Oregon Metallurgical Corporation Annual Report to Shareholders for 1994 is
incorporated by reference in Parts II and IV of Form 10-K as stated herein.
The Oregon Metallurgical Corporation Proxy Statement for the Annual Meeting of
Shareholders to be held April 27, 1995, is incorporated by reference in Part III
of Form 10-K as stated herein.
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PART I
ITEM 1. BUSINESS
THE COMPANY
Oregon Metallurgical Corporation ("OREMET" or the "COMPANY") was
incorporated in Oregon in 1955 and began operations in 1956. OREMET is a major
producer and distributor of titanium sponge, ingot, mill products and castings
for aerospace, industrial and commercial applications.
The Company built its business in the 1950's and 1960's by capitalizing on
the demand for titanium from the United States Air Force and other military
programs and from the emerging commercial aerospace industry. During this
period, the Company funded its growth internally and through investments by
corporate partners. In 1968, one partner, Armco Inc. ("Armco"), a major steel
manufacturer, made a substantial investment in the Company and by the end of
1982 owned approximately 80% of the Company's common stock. In 1985, Armco sold
its interest in the Company to Owens-Corning Fiberglas Corporation ("Owens-
Corning"). In December 1987, the Company repurchased its common stock from
Owens-Corning and immediately sold shares of its common stock to the newly
created Oregon Metallurgical Corporation Employee Stock Ownership Plan (the
"ESOP"). Initially, the ESOP owned approximately 67% of the Company's
outstanding common stock while at December 31, 1994, the ESOP's ownership
interest is approximately 41%.
On September 20, 1994, the Company completed the acquisition of the net
assets and subsidiaries of the Titanium Industries Distribution Group from
Kamyr, Inc. The acquired business is being operated under the name of Titanium
Industries, Inc. ("TI"), an 80% owned subsidiary of OREMET. TI operates full-
line titanium metal service centers in the U.S., U.K. and Canada and it produces
small diameter titanium bar, weld wire and fine wire. The acquisition was
accounted for as a purchase, with the results of TI included in the Company's
financial statements from the acquisition date.
INDUSTRY OVERVIEW
Titanium was first commercially produced in the 1950's. Titanium's
superior strength-to-weight ratio, stability at high temperatures and corrosion
resistance made it well suited for the aerospace and jet engine market.
Historically, approximately 75-80% of the U.S. titanium consumption has been for
aerospace applications both in the commercial and the military sectors.
The aerospace industry has historically been characterized by severe
cyclicality, which has had a significant impact on the sales and profitability
of titanium producers, including OREMET. The last peak in the titanium
industry cycle occurred in the 1988-1990 period when domestic industry
shipments exceeded 50 million pounds in each year . In 1991, U.S. titanium
industry shipments declined by approximately 35% to 34 million pounds. This
decline was primarily due to lower demand resulting from a slump in the
commercial aerospace industry and the curtailment or
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cancellation of military programs resulting from the end of the Cold War. Data
reported by the U.S. Bureau of Mines indicates that industry shipments
increased by approximately 1 million pounds per year in 1992 and 1993, while
they dropped to approximately 35 million pounds for 1994.
The aerospace industry is expected to continue to be the primary source of
demand for titanium products. However, many opportunities exist in the non-
aerospace markets where the characteristics of titanium metal provide advantages
over competing materials, such as aluminum, nickel and stainless steels.
Titanium's resistance to the effects of atmospheric conditions and a variety of
chemicals and acids make it an attractive metal for marine and other industrial
applications where corrosion is of critical concern. As a result, titanium is
used increasingly in pollution control equipment, offshore oil installations,
mining operations and waste storage facilities. Its favorable strength-to-
weight ratio and bio-compatibility make it an increasingly popular metal for
biomedical products, such as medical implants, and consumer products, such as
golf clubs, eyeglass frames and bicycles.
PRODUCTS AND OPERATIONS
Titanium products is the Company's single business segment. A full range
of titanium products are produced for applications in both the aerospace and
non-aerospace markets. The principal product forms are titanium sponge;
titanium ingots; titanium mill products; and castings.
Titanium sponge is the commercially pure, elemental form of titanium metal.
Titanium sponge is produced by OREMET at its facility in Albany, Oregon by
reducing titanium tetrachloride using magnesium as the reduction agent. OREMET
began producing titanium sponge for internal use in 1970 and began selling it in
1987. The Company sells sponge principally to the domestic non-integrated
titanium producers, who use the sponge to produce ingot and mill products.
During 1994, the sponge plant operated at approximately 75% of its practical
annual capacity of 12 million pounds.
Titanium ingots are cylinders with a weight of up to 20 thousand pounds and
a diameter of up to 36 inches. Titanium ingots are made by OREMET at its
facility in Albany, Oregon by melting sponge or titanium recycle, or a
combination of the two, with certain other elements to form titanium alloys.
Ingot is converted in a forge, either by OREMET or by its customers, into semi-
finished shapes and then into finished mill products. The Company produces
ingot in response to specific customer orders and in a variety of sizes and
grades to meet the customer's specifications. During 1994, the ingot plant
operated at approximately 60% of its rated annual capacity of 16 million pounds.
Titanium mill products result from the forging, rolling, drawing and/or
extruding of titanium ingots or slabs. OREMET produces titanium billet, bar,
rod, wire, plate and sheet. The Company is dependent on the services of outside
processors to perform certain important processing functions. For some of its
products, OREMET is dependent on the services provided by Titanium Hearth
Technologies ("THT"), an outside processor which is 50% owned by one of the
Company's principal competitors. THT owns and operates a cold hearth melting
furnace which the Company utilizes for
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melting titanium slab that is further processed into titanium plate and sheet
for non-aerospace applications. General Electric Company, a major jet engine
manufacturer, has also specified that the THT furnace be used for melting one of
the products it purchases. Other than for those provided by THT, the services
performed by the outside processors are typically available from multiple
sources. OREMET believes that the loss of the services provided by the existing
outside processors would result in production delays and have an adverse effect
on operations.
OREMET sells its mill products to manufacturers of aircraft, jet engines,
vessels and piping for chemical plants, prosthetic and orthopedic implants, golf
clubs and other consumer goods. OREMET produces mill products at its plant in
Albany, Oregon and at a plant in Frackville, Pennsylvania.
OREMET produces titanium and zirconium castings for customers outside of
the aerospace industry. Castings are made by melting metal which is then poured
under vacuum into graphite molds. Castings generally weigh from 1 to 1 thousand
pounds. OREMET's castings are made at its Albany, Oregon plant to customer
specifications and are used in marine and other industrial applications where
corrosion is of critical concern.
RAW MATERIALS
The primary raw materials used by the Company are titanium tetrachloride,
magnesium, titanium recycle and certain combinations of primary metals that form
master alloys. Titanium tetrachloride and magnesium are the principal materials
used in the production of titanium sponge. The principal materials used in the
production of titanium ingot are sponge, titanium recycle, other metallic
elements and master alloys.
OREMET purchases its titanium tetrachloride requirements from SCM Chemicals
Inc. ("SCM") under a long term contract that expires in 2001. While the Company
believes it could obtain commercial quantities of sufficiently pure titanium
tetrachloride from other sources, any extended disruption in the supply from SCM
would have a material adverse effect on OREMET's ability to produce titanium
sponge. Magnesium is generally available from a number of suppliers.
Titanium recycle is typically available from many sources. The
availability of attractively priced titanium recycle varies due to the
fluctuations in the size of the titanium market from year to year and due to
demands from other industries, such as steel, where it is consumed in the
process. Certain of the primary metal compounds used to form master alloys are
produced by a limited number of suppliers. During January 1995, in response to
rapidly increasing costs, the Company and other primary titanium producers
imposed surcharges on their product prices for master alloys.
When available at attractive prices, the Company has purchased titanium
sponge and recycle from the Former Soviet Union ("FSU"). Continued
availability of these materials at attractive prices can not be assured due to
the uncertainties concerning the manufacturing capabilities of the FSU titanium
producers and the potential for political and economic instability within the
FSU.
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MARKETING AND DISTRIBUTION
OREMET markets its products primarily to non-integrated titanium producers
and manufacturers of titanium metal end products. The Company also sells its
mill products to regional value-added distributors who convert the mill products
to smaller lengths or sizes for resale to machine shops and other mill product
producers. The majority of sales are made through the Company's internal sales
organization. OREMET also uses independent sales representatives for the sale
of products outside of North America.
Shipments to customers may be made directly from one of the Company's mills
in Albany, Oregon or Frackville, Pennsylvania; from an outside processor; or
from one of the Company's service centers in the U.S., Canada, the U.K., or
France. The service centers maintain one of the world's largest inventories of
titanium mill products available for rapid delivery to points around the globe.
A complete line of first stage processing equipment is available and outside
machining can be arranged by the service centers to meet the needs of their
customers.
The Company estimates that its sales to the aerospace industry totaled
approximately 60%, 70% and 80% of its net sales in 1994, 1993 and 1992,
respectively. OREMET believes that its sales to the non-aerospace industry, as
a percent of total sales, will continue to increase in 1995. Industrial and
commercial applications for titanium are continuing to grow and the Company's
presence in these markets is further enhanced by the acquisition of TI in 1994.
For nearly 25 years, TI has been in the forefront of supplying and developing
titanium applications for industrial and commercial customers.
The Company has a contract to supply titanium sponge and certain other
titanium products to RMI Titanium Company ("RMI") through 2003. Sales to RMI
accounted for approximately 13%, 30% and 25% of OREMET's net sales in 1994,
1993 and 1992, respectively. No other customer accounted for more than 10% of
OREMET's net sales in any of these three years.
EXPORTS
Export sales, primarily to Europe and Asia, totaled approximately 12%, 9%
and 7% of OREMET's net sales in 1994, 1993 and 1992, respectively. In May 1994,
OREMET signed a three year contract with, and in the second half of 1994 began
supplying product to, Aerospatiale Avions, France for engine pylons on Airbus
aircraft. In addition, the Company has a contract to supply titanium armor to
the French navy in 1995. To assist in the implementation of these contracts and
to establish a basis for a sustained presence in this sector of Europe, the
Company formed a subsidiary, OREMET France S.a.r.l., during 1994 to operate a
service center in France. The acquisition of TI provided the Company with a
service center located in the U.K. with an established operation. The Company
intends to utilize these facilities to meet its customers' needs in Europe.
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BACKLOG
The Company's twelve month sales order backlog totaled approximately $44
million at December 31, 1994 and $18 million at December 31, 1993.
Approximately $8 million of the backlog at December 31,1994 is applicable to TI
which was acquired in September 1994.
COMPETITION
Although OREMET's sales are predominately to the domestic market, the
titanium industry is competitive on a worldwide basis. In each of the Company's
major product lines, OREMET believes it competes primarily on the basis of
price, quality, delivery time and customer service. OREMET's principal
competitors are other integrated and non-integrated producers of titanium
located primarily in the U.S., Europe, Japan, China and the FSU.
An integrated producer makes titanium sponge in addition to ingot and mill
products. The Company estimates that its share of U.S. sponge capacity is
approximately 35% and that its share of world capacity is about 6%. While
approximately 20% of the world's sponge production capacity is located within
the U.S., approximately 50% is located within the FSU. The Company also
competes with non-integrated producers who produce titanium products from
sponge, recycle, ingot, slab and mill products purchased from OREMET and from
others.
After the end of the Cold War, sponge produced in the FSU became available
and has been imported into the U.S. at low prices in ever increasing quantities.
Industry sources estimate that approximately 11 million pounds of sponge were
imported into the U.S. from the FSU during 1994. This is about 350% higher than
the amount imported during 1993 and it is about 50% of the estimated 1994
production of the U.S. producers.
The titanium producers in the FSU are currently working with several U.S.
companies to have their "new production" material qualified for use in critical
aerospace applications. Current pricing for FSU sponge, before consideration of
import tariffs and dumping duties, is less than the variable cost of manufacture
for U.S. producers. While the FSU producers have not been significant
participants in the U.S. market for mill products, it is believed that they have
the largest titanium mill products production capacity in the world. Their
entry into the U.S. market could materially effect the operations of the
Company.
In September 1993, an Executive Proclamation was issued by President
Clinton which had the effect of reducing or eliminating tariffs on certain
titanium products produced in the FSU. OREMET and others in the metals industry
are working together to bring the problems caused by the FSU producers selling
at prices which do not reflect the true economic cost of production to the
attention of the appropriate government agencies and elected officials.
EMPLOYEE RELATIONS
As of December 31, 1994, the Company employed 482 employees, of which 45
were employed outside of the U.S. All of the hourly production and maintenance
workers (approximately
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285) at the Albany, Oregon and Frackville, Pennsylvania manufacturing facilities
are represented by labor unions. In August 1994, the Company and the union
representing the Albany, Oregon employees agreed upon a new labor contract which
will continue through July 2000. This contract can be re-opened after three
years to address economic issues. The contract covering the Frackville,
Pennsylvania employees was negotiated in September 1994, and will continue for
three years. OREMET considers its relations with its employees to be good.
RESEARCH, TECHNICAL AND DEVELOPMENT
The Company has a modest research and development staff which maintains
contact with university and government research facilities and with major end-
users of its products to assess new applications for titanium and the need for
new or alternative alloys and titanium compositions. The Company develops
titanium alloy systems, processes and procedures for the manufacture of
experimental metal and new products. The Company also maintains a staff of
employees dedicated to process engineering. This process engineering group
continually evaluates and identifies potential improvements in the manufacturing
process. The amount of money spent on research, technical and development
activities totaled approximately $1.4 million in 1994 and approximately $0.8
million in both 1993 and 1992.
OREMET's quality control group tests products for compliance with customer
specifications, including detailed metallurgical and chemical analyses, sonic
tests and mechanical capability and property tests. The results of these tests
are then certified for conformance to specifications and then recorded for
future traceability.
PATENTS AND TRADEMARKS
The Company possesses a substantial body of trade secrets and know-how.
While no individual trade secret, patent or item of know-how is thought to be
material to the operations of the Company, in total this body of knowledge is
important to OREMET's business.
ENVIRONMENTAL
The Company is subject to federal, state and local statues and regulations
concerning environmental matters and land use. These laws are frequently
modified to be more restrictive and it is impossible to predict accurately the
future effect changes in these laws may have on the Company.
Like all titanium producers, the Company generates certain waste materials
and emissions, including substances for which disposal or emission requires
compliance with environmental laws. The Company conducts its operations at
industrial sites where hazardous substances have been managed for many years in
connection with its operations, including periods before the increased
management of these substances was required by law. Consequently, the Company
is subject to various environmental laws that impose compliance obligations and
may create liability for historical releases of hazardous substances.
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The Company has entered into a consent order with the Oregon Department of
Environmental Quality pursuant to which the Company is conducting an
investigation of hazardous substances in portions of the soil and groundwater at
its plant site in Albany, Oregon. The Company anticipates that the
investigation will result in a determination that at least some remedial action
is necessary. While the Company has reserved $1 million, the total cost of any
remedial action depends on the eventual requirements of the relevant
authorities. A neighboring property owner also is investigation groundwater
contamination at their property that may have migrated to OREMET's property and
for which OREMET may have legal claims to recover a portion of its investigation
and remedial costs.
In the past, the Company utilized off-site disposal of various wastes
generated from operations. Although the Company believes that disposal was
conducted in compliance with laws in effect at the time, a facility to which the
Company sent its wastes has been determined to be environmentally unsound under
current law. Pursuant to a final agreement with the Oregon Department of
Environmental Quality, the Company will relocate these waste materials to an
approved facility. The Company has reserved $.4 million for these relocation
costs.
In February 1995, the Oregon Department of Environmental Quality modified
OREMET's waste water discharge permit. The modified permit accelerates the
implementation of more stringent water quality standards than those contained in
OREMET's original permit. OREMET is reviewing its waste water management
practices and has developed a number of feasible alternatives which can be
implemented to maintain the Company's compliance with the terms of the modified
permit and proposed implementation schedule.
In 1991 and in 1993, the Pennsylvania Department of Environmental
Regulation and the Environmental Protection Agency (EPA) performed site
inspections, including soil and water sampling, at TI's site in Frackville,
Pennsylvania, in connection with a regional groundwater investigation of the
Frackville, Pennsylvania area. While the EPA's investigation is ongoing,
management is not aware of any pending or required actions which may arise from
this investigation.
In conjunction with the purchase of TI, Kamyr agreed to undertake
specified clean-up activities on the Frackville location. In addition, Kamyr
agreed to a specific indemnification of the Company in the event damages arise
which result from conditions which were not in compliance with environmental
laws and regulations as they existed at the time of the sale of TI.
The Company made provisions for environmental expenses of $0.2, $1.0 and
$0.2 million in 1994, 1993 and 1992, respectively. These amounts are in
addition to recurring environmental costs which are expensed as incurred and are
included in cost of sales.
Although the Company has established certain reserves for environmental
issues as described above, there can be no assurance regarding the costs that
eventually may be required to be expended or that additional environmental
claims may not be asserted. Accordingly, the costs may exceed the amounts so
reserved.
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ITEM 2. PROPERTIES
The Company's principal executive office is located in Albany, Oregon.
Manufacturing facilities in Albany, Oregon and Frackville, Pennsylvania are
owned and are described in the Products and Operations portion of Item 1,
Section I. Other than the facility in Birmingham, U.K., the service centers and
sales offices which the Company utilizes are leased.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in legal proceedings which arise
in the normal course of business. OREMET is not currently involved as a
defendant in any pending legal proceedings where the outcome would have a
material adverse effect on the business or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders during the
fourth quarter of 1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
(a) MARKET INFORMATION: Registrant's common stock is traded over the
counter, and its NASDAQ symbol is OREM. Registrant's stock commenced trading in
the National Market System (NMS) on March 5, 1985.
Information concerning the market price of Registrant's common stock is
incorporated by reference to the Quarterly Stock Data Section on page 31 of the
1994 Annual Report to Shareholders.
(b) HOLDERS: At March 10, 1995, there were 2,323 holders of Registrant's
common stock based on the holders of record as certified by the transfer agent.
The Company believes that there are an additional 4 to 5 thousand shareholders
who maintain their ownership in "street name".
(c) DIVIDENDS: There were no dividends declared in either 1994 or 1993.
Under the terms of the Company's bank credit facility, annual cash dividends are
limited to the lesser of 50% of net income, or $1.8 million per year.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is contained in the Five Year Summary
of Selected
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Financial Data Section on page 15 of the 1994 Annual Report to Shareholders and
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is contained in the Management's
Discussion and Analysis Section on pages 27 through 30 of the 1994 Annual Report
to Shareholders and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is contained on pages 16 through 26
in the 1994 Annual Report to Shareholders and is incorporated by reference
herein as listed in Item 14 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is contained in the Proxy Statement
of Registrant for the Annual Shareholders Meeting to be held April 27, 1995, in
the sections titled "Election of Directors", "Transactions With Management And
Others", and "Executive Officers". The Proxy Statement will be filed with the
Securities and Exchange Commission within 120 days after the end of the fiscal
year covered by this Report, and the sections specified in the preceding
sentence are incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is contained in the Proxy Statement
of Registrant for the Annual Shareholders Meeting to be held April 27, 1995, in
the section titled "Executive Compensation". The Proxy Statement will be filed
with the Securities and Exchange Commission within 120 days after the end of the
fiscal year covered by this Report, and the section specified in the preceding
sentence is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is contained in the Proxy Statement
of Registrant for the Annual Shareholders Meeting to be held April 28, 1995 in
the sections titled "Security
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Ownership of Certain Beneficial Owners" and "Security Ownership of Management".
The Proxy Statement will be filed with the Securities and Exchange Commission
within 120 days after the end of the fiscal year covered by this Report, and the
sections specified in the preceding sentence are incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained in the Proxy Statement
of Registrant for the Annual Shareholders Meeting to be held April 27, 1995, in
the section titled "Transactions with Management". The Proxy Statement will be
filed with the Securities and Exchange Commission within 120 days after the end
of the fiscal year covered by this Report, and the section specified in the
preceding sentence is incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
1. FINANCIAL STATEMENTS: The following Financial Statements of Oregon
Metallurgical Corporation and Report of Independent Accountants are
incorporated by reference from pages 16 through 26 of the Registrant's
1994 Annual Report to Shareholders:
Consolidated Statements of Operations - For The Years Ended December
31, 1994, 1993 and 1992.
Consolidated Balance Sheets - December 31, 1994 and 1993.
Consolidated Statements of Shareholders' Equity - For The Years Ended
December 31, 1994, 1993 and 1992.
Consolidated Statements of Cash Flows - For The Years Ended December
31, 1994, 1993 and 1992.
Notes to Consolidated Financial Statements,
Report of Independent Accountants.
2. FINANCIAL STATEMENT SCHEDULES: The following financial statement
schedule of Oregon Metallurgical Corporation for the years ended
December 31, 1994, 1993 and 1992 is filed as part of this Report and
should be read in conjunction with the Consolidated Financial
Statements of Oregon Metallurgical Corporation:
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Page
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II Valuation and Qualifying Accounts. . . . . . . . . . . . . . . S-1
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Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set
forth therein is included in the Consolidated Financial Statements or
Notes thereto.
3. EXHIBITS
The Exhibit Index on pages 12 and 13 of this Annual Report on Form 10-K
lists the exhibits that are filed as part of this Report.
(b) Reports on Form 8-K:
With regard to the Company's acquisition of Titanium Industries, Inc., the
Company filed the following current Reports on Form 8-K during the quarter
ended December 31, 1994:
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Date Date
Form of Report Filed with SEC
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8-K September 20, 1994 October 5, 1994
8-K/A September 20, 1994 November 2, 1994
8-K/A-2 September 20, 1994 December 2, 1994
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With the exception of the information incorporated by reference to the Annual
Report to Shareholders in Items 5, 6, 7 and 8 of Part II, and Item 14 of Part IV
of this Form 10-K, the Company's 1994 Annual Report to Shareholders is not to be
deemed filed as a part of this Report.
EXHIBIT INDEX
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PAGE NUMBERS
EXHIBIT MANUALLY
NO. SIGNED COPY DESCRIPTION
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2.1 N/A Stock and Asset Purchase Agreement between Kamyr, Inc.
and New TI, Inc. (Filed as exhibit (2)-1 to Form 8-K
dated September 20, 1994).
3.1 N/A Restated Articles of Incorporation. (Filed as exhibit
(3) to Form 10-K for the year ended December 31, 1993).
3.2 15 Restated Bylaws.
-----
4.1 N/A Specimen Common Stock Certificate. (Previously filed).
4.2 N/A Warrant Agreement (Nontransferable Warrant) between James
S. Paddock and the Company, dated September 19, 1994.
(Filed as exhibit (4)-1 to Form 8-K/A-2 dated September
20, 1994).
10.1 N/A Employee Stock Ownership Plan of the Company. (Filed as
exhibit 4.3 to Form S-8 Registration Statement 33-18650).*
10.2 N/A Employee Stock Ownership Trust Agreement of the Company.
(Filed as exhibit 4.4 to Form S-8 Registration Statement
33-18650). *
10.3 30 Employment Agreement dated June 28, 1993 between the
----- Company and Carlos Aguirre. *
10.4 37 Employment Agreement dated October 11, 1993 between
----- the Company and Dennis P. Kelly. *
10.5 43 Employment Agreement dated October 8, 1993 between the
----- Company and Steven H. Reichman. *
10.6 49 Employment Agreement dated February 20, 1995 between the
----- Company and John P. Byrne. *
10.7 55 Loan and Security Agreement dated as of September 19,
------ 1994 among the Company, New TI, Inc. and Bank of America
Illinois.
10.8 N/A Sales Agreement between RMI Titanium Company and the
Company (Filed as exhibit (10) to Form 10-Q for the
period ended September 30, 1994).
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10.9 N/A Corporate Organization and Shareholders Agreement Among
James S. Paddock, the Company and New TI, Inc., dated
September 19, 1994. (Filed as exhibit (10)-1 to the Form
8-K/A-2 dated September 20, 1994). *
10.10 N/A OREMET Employment Agreement between James S. Paddock and
the Company, dated September 19, 1994. (Filed as exhibit
(10)-2 to the Form 8-K/A-2 dated September 20, 1994). *
10.11 N/A Employment Agreement between James S. Paddock and New TI,
Inc., dated September 19, 1994. (Filed as exhibit (10)-3
to the Form 8-K/A-2 dated September 20, 1994). *
10.12 N/A Noncompetition and Confidentiality Agreement between
James S. Paddock and the Company, dated September 19,
1994. (Filed as exhibit (10)-4 to the Form 8-K/A-2 dated
September 20, 1994). *
10.13 N/A Noncompetition and Confidentiality Agreement between
James S. Paddock and New TI, Inc., dated September 19,
1994. (Filed as exhibit (10)-5 to the Form 8-K/A-2 dated
September 20, 1994). *
10.14 158 Titanium Tetrachloride Agreement between SCM Chemicals,
----- Inc. and the Company, dated August 11, 1990.
10.15 179 Subordinated promissory note between New TI, Inc. and the
----- former Titanium Industries, Inc., dated September 19,
1994.
11.1 192 Statement re: Computation of Per Share Earnings.
-----
13.1 193 1994 Annual Report to Shareholders. Except for the
----- portions expressly incorporated by reference, this Report
is not deemed to be filed as part of this Annual Report on
Form 10-K.
21.1 227 Subsidiaries of the Company.
-----
23.1 228 Consent of Independent Accountants.
-----
<FN>
-------------------------------
* Management contract or compensatory plan.
</TABLE>
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, this Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
OREGON METALLURGICAL CORPORATION
Date: March 17, 1995 /s/ Carlos E. Aguirre
--------------------------------------------
Carlos E. Aguirre, President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
PRINCIPAL FINANCIAL OFFICER
AND PRINCIPAL ACCOUNTING OFFICER
Date: March 20, 1995 /s/ Dennis P. Kelly
--------------------------------------------
Dennis P. Kelly, Vice President, Finance
BOARD OF DIRECTORS
Date: March 17, 1995 /s/ Carlos E. Aguirre
--------------------------------------------
Carlos E. Aguirre, President, Chief Executive Officer,
and Director
Date: March 20, 1995 /s/ Howard T. Cusic
--------------------------------------------
Howard T. Cusic, Chairman, Board of
Directors
Date: March 17, 1995 /s/ Gilbert E. Bezar
--------------------------------------------
Gilbert E. Bezar, Director
Date: March 17, 1995 /s/ Robert P. Booth
--------------------------------------------
Robert P. Booth, Director
Date: March 21, 1995 /s/ Roger V. Carter
--------------------------------------------
Roger V. Carter, Director
Date: March 20, 1995 /s/ Nicholas P. Collins
--------------------------------------------
Nicholas P. Collins, Director
Date: March 17, 1995 /s/ David H. Leonard
--------------------------------------------
David H. Leonard, Director
Date: March 17, 1995 /s/ James S. Paddock
--------------------------------------------
James S. Paddock, Director
Date: March 21, 1995 /s/ James R. Pate
--------------------------------------------
James R. Pate, Director
14
<PAGE>
BYLAWS
of
OREGON METALLURGICAL CORPORATION
Adopted by the Board of Directors
with Amendments through December 8, 1994
ARTICLE I.
The name of this corporation is OREGON METALLURGICAL CORPORATION.
ARTICLE II.
STOCKHOLDERS' MEETINGS
All meetings of stockholders shall be held either at the principal office
of the corporation in Albany, Oregon, or at such other place in the State of
Oregon as the Directors may determine.
ARTICLE III.
ANNUAL MEETINGS
The Annual Meeting of the stockholders of the corporation shall be held at
10:00am (Oregon time) on the fourth Thursday in April in each year if not a
legal holiday, and if a legal holiday, then at the same time on the next
succeeding Saturday not a legal holiday. In the event that such annual meeting
is omitted by oversight or otherwise on the date herein provided for, the
Directors shall cause a meeting in lieu thereof to be held as soon thereof as
conveniently may be, and any business transacted or elections held at such
meeting shall be as valid as if transacted or held at the Annual Meeting. Such
subsequent meeting shall be called in the same manner as provided for the annual
stockholders' meeting.
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ARTICLE IV.
SPECIAL MEETINGS
Except as otherwise provided by law, special meetings of the stockholders
of this corporation shall be held whenever called by the President or Vice
President or by the Secretary or by a majority of the Board of Directors or
whenever one or more stockholders who are entitled to vote and who held at least
forty percent (40%) of the capital stock issued and outstanding shall make
written application therefor to the Secretary or an Assistant Secretary stating
the time, place and purpose of the meeting called for.
ARTICLE V.
NOTICE OF STOCKHOLDERS' MEETING
Notice of all stockholders' meetings stating the time and the place, and
the objects for which such meetings are called, shall be given by the President
or a Vice President or the Secretary or an Assistant Secretary or by any one or
more stockholders entitled to call a special meeting of the stockholders by mail
not less than ten (10), nor more than fifty (50), days prior to the date of the
meeting, to each stockholder of record at his address as it appears on the stock
transfer books of the corporation. The person giving such notice shall make an
affidavit in relation thereto.
Any meeting of which all stockholders shall at any time waive or have
waived notice in writing shall be a legal meeting for the transaction of
business, notwithstanding that notice has not been given as hereinbefore
provided.
ARTICLE VI.
WAIVER OF NOTICE
Whenever any notice whatever is required to be given by these Bylaws, or
the Articles of Incorporation of this corporation, or any of the corporation
laws of the State of Oregon, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
16
<PAGE>
ARTICLE VII.
QUORUM OF STOCKHOLDERS
Except as hereinafter provided and as otherwise provided by law, at any
meeting of the stockholders, a majority in interest of all the capital stock
issued and outstanding, represented by stockholders of record in person or by
proxy, shall constitute a quorum; but a less interest may adjourn any meeting,
and the meeting may be held as adjourned without further notice; provided,
however, that directors shall not be elected at meetings so adjourned. When a
quorum is present at any meeting, action on a matter, other than the election of
Directors, shall be approved if the votes cast in favor of the action exceed the
votes cast opposing the action, unless the Articles of Incorporation or the
provision of the Oregon Business Corporation Act require a greater number of
affirmative votes, in which case such express provision shall govern.
ARTICLE VIII.
PROXY AND VOTING
Stockholders of record may vote at any meeting either in person or by proxy
in writing, which shall be filed with the Secretary of the meeting before being
voted. Such proxies shall entitle the holders thereof to vote at any adjournment
of such meeting, but shall not be valid after the final adjournment thereof. No
proxy shall be valid after the expiration of eleven (11) months from the date of
its execution unless the stockholder executing it shall have specified therein
the length of time it is to continue in force, which shall be for some limited
period. Each stockholder shall be entitled to one (1) vote for each share of
stock held by him except as otherwise provided in the Articles of Incorporation.
ARTICLE IX.
BOARD OF DIRECTORS
A Board of Directors shall be chosen by ballot at the Annual Meeting of the
stockholders or at any meeting held in place thereof as provided by law. The
number of Directors of this corporation shall be nine (9).
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<PAGE>
Every election of Directors by the stockholders shall be conducted by two
inspectors, neither of whom shall be a candidate for the office of Director,
appointed by the presiding officer of the meeting. The appointment of such
inspectors may be waived by the unanimous consent of all stockholders present or
represented by proxy at the meeting.
Each Director shall serve until the next Annual Meeting of the stockholders
and until his successor is duly elected and qualified. Directors need not be
stockholders in the corporation. Directors shall be not less than twenty-one
(21) years of age and at least one of them shall be a citizen of the United
States and a resident of the State of Oregon.
As long as at least 51 percent (51%) of the issued and outstanding shares
of the corporation's common stock are held by the corporation's Employee Stock
Ownership Plan, the nominees to the Board of Directors selected by the
management of the corporation to stand for election by the stockholders of the
corporation shall include the President of the corporation; three independent
persons (who are to be selected by the Board of Directors) having no affiliation
with the United Steelworkers of America, Local 7150 (the "Union Employees") or
the employees of the corporation who are not affiliated with the United
Steelworkers of America, Local 7150 (the "Salaried Employees"); two persons who
are to be selected by the Union Employees; two persons who are to be selected by
the Salaried Employees; and one person to be selected at the discretion of the
Board of Directors. Such proportional representation shall be maintained in the
event that the numbers of Directors are increased or decreased.
In order to serve on the Board of Directors effective after December 31,
1996 ("Effective Date"), a Director must be:
(a) Under age 72, and
(b) Have less than twelve (12) years of cumulative service as a Director.
This amendment shall not apply to the President. A Director who has a 72nd
birthday during a term of office, or attains twelve (12) years of service as a
Director during a term of office, shall hold office until the next annual
Shareholders' meeting.
ARTICLE X.
POWERS OF DIRECTORS
18
<PAGE>
The Board of Directors shall have the entire management of the business of
the corporation. In the management and control of the property, business and
affairs of the corporation, the Board of Directors is hereby vested with all the
powers possessed by the corporation itself, so far as this delegation of
authority is not inconsistent with the laws of the State of Oregon, with the
certificate of incorporation of the corporation, or with these Bylaws. The Board
of Directors may appoint an Executive Committee and delegate to it all powers of
the Board. The Board of Directors shall have power to determine what constitutes
net earnings, profits and surplus, respectively, what amount shall be reserved
for working capital and for any other purpose, and what amount shall be declared
as dividends, and such determination by the Board of Directors shall be final
and conclusive.
ARTICLE XI.
MEETINGS
Regular meetings of the Board of Directors shall be held at such places in
the State of Oregon, and at such times as the Board by vote may determine, and
if so determined no notice thereof need be given. Special meetings of the Board
of Directors may be held at any time or place whenever called by the Chairman of
the Board, the President, a Vice President, the Treasurer, the Secretary, an
Assistant Secretary or two Directors, notice thereof being given to each
Director by the Secretary or an Assistant Secretary or an officer calling the
meeting, or at any time without formal notice provided all the Directors are
present or those not present shall at any time waive or have waived notice
thereof. Notice of special meetings, stating the time and place thereof, shall
be given by mailing the same to each Director at his residence or business
address at least two (2) days before the meeting, or by delivering the same to
him personally or telegraphing the same to him at his residence or business
address not later than the day before the day on which the meting is to be held,
unless, in case of emergency, the Chairman of the Board of Directors or the
President shall prescribe a shorter notice to be given personally or by
telegraphing each Director at his residence or business address. Such special
meeting shall be held at such time and place as the notice thereof or waiver
shall specify. The officers of the corporation shall be elected by the Board of
Directors after its election by the stockholders, and a meeting may be held
without notice for this purpose immediately after the annual meeting of the
stockholders and at the same place.
19
<PAGE>
ARTICLE XII.
QUORUM OF DIRECTORS
A majority of the members of the Board of Directors as constituted for the
time being shall constitute a quorum for the transaction of business, but a
lesser number (not less than two) may adjourn any meeting. The Secretary shall
forthwith give notice to all Directors of the time and place of the adjourned
meeting. When a quorum is present at any meeting, a majority of the members
present thereat shall decide any question brought before such meeting except as
otherwise provided by law or by these Bylaws.
ARTICLE XIII.
OFFICERS
The officers of this corporation shall be a President, a Vice President, a
Secretary and a Treasurer. The Board of Directors, in its discretion, may elect
a Chairman of the Board of Directors who, when present, shall preside at all
meetings of the Board of Directors, and who shall have such other powers as the
Board shall prescribe.
ARTICLE XIV.
ELIGIBILITY OF OFFICERS
The President and Chairman of the Board of Directors need not be
stockholders, but shall be Directors of the corporation. The President, Vice
President, Secretary, Treasurer and such other officers as may be elected or
appointed need not be stockholders or Directors of the corporation. Any person
may hold more than one office provided the duties thereof can be consistently
performed by the same person, provided, however, that no one person shall, at
the same time, hold the offices of President and Secretary.
20
<PAGE>
ARTICLE XV.
ADDITIONAL OFFICERS AND AGENTS
The Board of Directors, at its discretion, may appoint additional Vice
Presidents, a General Manager, one or more Assistant Treasurers, and one or more
Assistant Secretaries, and such other officers or agents as it may deem
advisable, and prescribe the duties thereof.
ARTICLE XVI.
PRESIDENT
The President shall be the Chief Executive Officer of the corporation and,
when present, shall preside at all meetings of the stockholders and, unless a
Chairman of the Board of Directors has been elected and is present, shall
preside at meetings of the Board of Directors. The President or a Vice
President, unless some other person is specifically authorized by vote of the
Board of Directors, shall sign all certificates of stock, bonds, deeds,
mortgages, extension agreements, modification of mortgage agreements, leases and
contracts of the corporation. He shall perform all the duties commonly incident
to his office and shall perform such other duties as the Board of Directors
shall designate.
ARTICLE XVII.
VICE PRESIDENT
Except as specially limited by vote of the Board of Directors, any Vice
President shall perform the duties and have the powers of the President during
the absence or disability of the President and shall have the power to sign all
certificates of stock, bonds, deeds and contracts of the corporation. He shall
perform such other duties and have such other powers as the Board of Directors
shall designate.
21
<PAGE>
ARTICLE XVIII.
SECRETARY
The Secretary shall keep accurate minutes of all meetings of the
stockholders and the Board of Directors, and shall perform all the duties
commonly incident to his office, and shall perform such other duties and have
such other powers as the Board of Directors shall designate. The Secretary shall
have power, together with the President or Vice President, to sign certificates
of stock of the corporation. In his absence at any meeting an Assistant
Secretary or a Secretary pro tempore shall perform his duties thereat. In the
event two or more stockholders enter into a voting trust agreement, a copy of
such voting trust shall be filed with the Secretary. The existence of any such
voting trust agreement shall be endorsed upon each stock certificate that is
subject to the provisions thereof.
ARTICLE XIX.
TREASURER
The Treasurer, subject to the order of the Board of Directors, shall have
the care and custody of the money funds, valuable papers, and documents of the
corporation (other than his own bond, if any, which shall be in the custody of
the President), and shall have and exercise, under the supervision of the Board
of Directors, all the powers and duties commonly incident to his office, and
shall give bond in such form and with such bank or banks, trust company or trust
companies, or with such firm or firms, doing a banking business, as the
Directors shall designate. He may endorse for deposit or collection all checks
and notes payable to the corporation or to its order, and may accept drafts on
behalf of the corporation. He shall keep accurate books of account of the
corporation's transactions which shall be the property of the corporation, and,
together with all its property in his possession, shall be subject at all times
to the inspection and control of the Board of Directors.
All checks, drafts, notes or other obligations for the payment of money
shall be signed by such officer or officers or agent or agents as the Board of
Directors shall by general or special resolution direct. The Board of Directors
may also in its discretion require, by general or special resolutions, that
checks, drafts, notes and other obligations for the payment of money shall be
countersigned or registered as a condition to their validity by such officer or
officers or agent or agents as shall be directed in such resolution.
22
<PAGE>
ARTICLE XX.
RESIGNATIONS AND REMOVALS
Any Director or officer of the corporation may resign at any time by giving
written notice to the corporation, to the Board of Directors, or to the Chairman
of the Board, or to the President, or to the Secretary of the corporation. Any
such resignation shall take effect at the time specified therein, or, if the
time be not specified therein, upon its acceptance by the Board of Directors.
The Board of Directors, by vote of not less than a majority of the entire
Board, may remove from office any officer or agent elected or appointed by it.
ARTICLE XXI.
VACANCIES
If the office of the director or officer or agent becomes vacant by reason
of death, resignation, removal, disqualification, or otherwise, the Directors
may by vote of a majority of a quorum choose a successor or successors who shall
hold office for the unexpired term. If there is less than a quorum of the
Directors but at least two Directors at the time in office, the Directors may by
a majority vote choose a successor or successors who shall hold office for the
unexpired term. Vacancies in the Board of Directors may be filled for the
unexpired term by the stockholders at a meeting called for that purpose, unless
such vacancy shall have been filled by the Directors.
ARTICLE XXII.
CERTIFICATES OF STOCK
Every stockholder shall be entitled to a certificate or certificates of the
capital stock of the corporation in such form as may be prescribed by the Board
of Directors, duly numbered and sealed with the corporate seal of the
corporation and setting forth the number and kind of shares. Such certificates
shall be signed by the President or by a Vice President and by the Secretary or
an Assistant Secretary. Any stock subscription which is not paid within twenty
(20) days after written demand for payment may be
23
<PAGE>
declared forfeited by the Board of Directors.
ARTICLE XXIII.
TRANSFER OF STOCK
Shares of stock may be transferred by delivery of the certificate
accompanies either by an assignment in writing on the back of the certificate or
by a written power of attorney to sell, assign, and transfer the same on the
books of the corporation, signed by the person appearing by the certificate to
be the owner of the shares represented thereby, together with all necessary
federal and state transfer tax stamps affixed, and shall be transferable on the
books of the corporation upon surrender thereof so assigned or endorsed. The
person registered on the books of the corporation as the owner of any shares of
stock shall be entitled to all the rights of ownership with respect to such
shares. It shall be the duty of every stockholder to notify the corporation of
his post office address.
ARTICLE XXIV.
TRANSFER BOOKS
The transfer books of the stock of the corporation may be closed for such
period, not exceeding fifty (50) days, in anticipation of stockholders' meetings
as the Board of Directors may determine. In lieu of closing the transfer books,
the Board of Directors may fix a day not more than fifty (50) days prior to the
day of holding any meeting of stockholders as the day as of which stockholders
entitled to notice of and to vote at such meeting shall be determined; and only
stockholders of record on such day shall be entitled to notice or of to vote at
such meeting.
ARTICLE XXV.
LOSS OF CERTIFICATES
In case of the loss, mutilation, or destruction of a certificate of stock,
a duplicate certificate may be issued upon the owner of record filing with the
Secretary an affidavit satisfactorily proving the loss, mutilation or
destruction of the certificate and a bond with
24
<PAGE>
sufficient surety, to be approved by the Board of Directors, to protect and
indemnify the corporation from any liability or expense which it may incur by
reason of the original certificate remaining outstanding.
ARTICLE XXVI.
SEAL
The seal of this corporation shall consist of a flat-faced circular die
with the following words and figures cut or engraved thereon: "OREGON
METALLURGICAL CORPORATION, ALBANY, OREGON, Corporate Seal".
ARTICLE XXVII.
AMENDMENTS
The Bylaws of the corporation, regardless of whether made by the
stockholders or by the Board of Directors, may be amended, added to, or repealed
by vote of the holders of not less than seventy-five percent (75%) of the issued
and outstanding capital stock of this corporation, at any meeting of the
stockholders, provided notice of the proposed change is given in the notice of
meeting, or notice thereof is waived in writing, or the Bylaws may be amended by
a majority of the entire Board of Directors at any meeting of the Board.
ARTICLE XXVIII.
INDEMNIFICATION
Section 1. DIRECTORS AND OFFICERS.
The corporation shall indemnify its directors and officers to the fullest
extent not prohibited by law.
Section 2. EMPLOYEES AND OTHER AGENTS.
The corporation shall have the power to indemnify its employees and other
agents
25
<PAGE>
to the fullest extent not prohibited by law.
Section 3. NO PRESUMPTION OF BAD FAITH.
The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of NOLO CONTENDERE or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in or not opposed to the best
interests of this corporation, and, with respect to any criminal proceeding,
that the person had reasonable cause to believe that the conduct was unlawful.
Section 4. ADVANCES OF EXPENSES.
The expenses incurred by a director or officer in any proceeding shall be
paid by the corporation in advance at the written request of the director or
officer, if the director or officer:
(a) Furnishes the corporation a written affirmation of such person's good
faith and belief that such person is entitled to be indemnified by the
corporation; and
(b) Furnishes the corporation a written undertaking to repay such advance
to the extent that it is ultimately determined by a court that such person is
not entitled to be indemnified by the corporation. Such advances shall be made
without regard to the person's ability to repay such expenses and without regard
to the person's ultimate entitlement to indemnification under this Bylaw or
otherwise.
Section 5. ENFORCEMENT.
Without the necessity of entering into an express contract, all rights to
indemnification and advances under this Bylaw shall be deemed to be contractual
rights and be effective to the same extent and as if provided for in a contract
between the corporation and the director or officer who serves in such capacity
at any time while this bylaw and other applicable law, if any, are in effect.
Any right to indemnification or advances granted by this Bylaw to a director or
officer shall be enforceable by or on behalf of the person holding such right in
any court of competent jurisdiction if (a) the claim for indemnification or
advances is denied, in whole or in part, or (b) no disposition of such claim is
made with forty-five (45) days of request therefor. The claimant in such
enforcement action, if successful in whole or in part, shall also be entitled to
be paid the expense of prosecuting the claim. It shall be a defense to any such
action (other than an
26
<PAGE>
action brought to enforce a claim for expenses incurred in connection with any
proceeding in advance of its final disposition when the required affirmation and
undertaking have been tendered to be the corporation) that the claimant has not
met the standards of conduct which make it permissible under the law for the
corporation to indemnify the claimant, but the burden of proving such defense
shall be on the corporation. Neither the failure of the corporation (including
its Board of Directors, independent legal counsel or its shareholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because the
claimant has met the applicable standard of conduct, nor an actual determination
by the corporation (including its Board of Directors, independent legal counsel
or its shareholders) that the claimant has not met such applicable standard or
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
Section 6. NONEXCLUSIVITY OF RIGHTS.
The rights conferred on any person by this Bylaw shall not be exclusive of
any other right which such person may have or hereafter acquire under any
statute, provision or articles of incorporation, bylaws, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in the
person's official capacity and as to action in another capacity while holding
office.
Section 7. SURVIVAL OF RIGHTS.
The rights conferred on any person by this Bylaw shall continue as to a
person who has ceased to be a director, officer, employee or other agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
Section 8. INSURANCE.
To the fullest extent not prohibited by law, the corporation, upon approval
by the Board of Directors, may purchase insurance on behalf of any person
required or permitted to be indemnified pursuant to this Bylaw.
Section 9. AMENDMENTS.
This Amended Bylaw shall be effective November 16, 1987. Any repeal of this
Bylaw shall only be prospective and no repeal or modification herein shall
adversely affect the rights under this Bylaw in effect at the time of the
alleged occurrence of any
27
<PAGE>
action or omission to act that is the cause of any proceeding against any agent
of the corporation.
Section 10. SAVINGS CLAUSE.
If this Bylaw or any portion hereof shall be invalidated on any ground by
any court of competent jurisdiction, the corporation shall indemnify each
director, officer or other agent to the fullest extent permitted by any
applicable portion of this Bylaw that shall not have been invalidated, or by any
other applicable law.
Section 11. CERTAIN DEFINITIONS.
For the purposes of this Bylaw, the following definitions shall apply:
(a) The term "proceeding" shall be broadly construed and shall include,
with out limitation, the investigation, preparation, prosecution, defense,
settlement and appeal of any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative.
(b) The term "expenses" shall be broadly construed and shall include,
without limitation, expense of investigations, judicial or administrative
proceedings or appeals, attorneys' fees and disbursements and any expenses of
establishing a right to indemnification under Section 5 of this Bylaw, but shall
not include amounts paid in settlement, judgments or fines.
(c) The term "corporation" shall include, in addition to the resulting or
surviving corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Bylaw with respect to the resulting or surviving corporation as the
person would have with respect to such constituent corporation if its separate
existence had continued.
(d) References to a "director," "officer," "employee," or "agent" of the
corporation shall include, without limitation, situations where such person is
serving at
28
<PAGE>
the request of the corporation as a director, officer, trustee or agent of
another corporation, partnership, joint venture, trust or other enterprise.
(e) References to "other enterprises" shall include employee benefit
plans. References to "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan. References to "serving at the request
of the corporation" shall include any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries. A person who acted in good faith and
in a manner the person reasonably believed to be in the interest of the
participants and benefits of an employee benefit plan shall be deemed to have
acted in a manner "not opposed to the best interests of the corporation" as
referred to in this Bylaw.
ARTICLE XXIX.
CONTROLLER
By resolution adopted by the Board of Directors on 10/21/93, this Article
XXIX was amended to provide that the office of Controller is abolished and the
functions of the office become part of the functions of the office of Vice
President Finance and Chief Financial Officer.
ARTICLE XXX.
The provisions of Chapter 820, Oregon Laws 1987 (the "Control Share
Acquisition Statute"), shall not apply to sales or acquisition of the share of
the corporation. No amendment or repeal of this Article XXX nor the adoption of
any provision of these Bylaws inconsistent with this Article XXX, shall
adversely affect any transaction that is based upon this Article XXX and
pertains to any acquisition of shares that occurred prior to the time of such
amendment repeal, adoption or change. No change in the law shall adversely
affect or disqualify any transaction provided for in this Article XXX unless the
change in the law specifically requires such effect. If the Control Share
Acquisition Statute is amended after this Article XXX becomes effective to
adversely affect or disqualify acquisitions of shares of the corporation, then
the applicability of Chapter 820 to acquisition of shares of the corporation
shall be eliminated or limited to the fullest extent not prohibited by the
Control Share Acquisition Statute as so amended.
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EMPLOYMENT AGREEMENT
DATE: June _____, 1993
PARTIES: OREGON METALLURGICAL CORPORATION, (the "Company")
an Oregon corporation
530 West 34th Avenue
P. O. Box 580
Albany, OR 97321
CARLOS E. AGUIRRE ("Employee")
304 Benning Lane
Downingtown, PA 19335
AGREEMENT:
The parties agree as follows:
SECTION 1. EMPLOYMENT
1.1 FIXED TERM. The Company agrees to employ Employee as its President
and Chief Executive Officer for a term commencing on June 28, 1993, and
terminating on June 30, 1996, or until termination in accordance with Section 5.
If not terminated in accordance with Section 5, upon expiration of the initial
term of this Agreement this Agreement shall automatically renew for successive
one (1) year terms thereafter.
1.2 DUTIES. Employee accepts employment with the Company on the terms and
conditions set forth in this Agreement, and agrees to devote his full time and
attention (reasonable periods of illness excepted) to the performance of his
duties under this Agreement. In general, such duties shall consist of those
duties generally performed by the President and Chief Executive Officer of a
corporation engaged in the business of metals manufacturing. Employee shall
perform such specific duties and shall exercise such specific authority as may
be assigned to Employee from time to time by the board of directors of the
Company. In performing such duties, Employee shall be subject to the direction
and control of the board of directors of the Company. Employee further agrees
that in all aspects of such employment, Employee shall comply with the policies,
standards, and regulations of the Company established from time to time, and
shall perform his duties faithfully, intelligently, to the best of his ability,
and in the best interest of the Company. Employee shall serve as a director of
the Company without additional compensation. The devotion of reasonable periods
of time by Employee for personal purposes, outside business activities, or
charitable activities shall not be deemed a breach of this Agreement, provided
that such purposes or activities do not materially interfere with the services
required to be rendered to or on behalf of the Company.
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SECTION 2. COVENANT NOT TO COMPETE; CONFIDENTIALITY
2.1 NONCOMPETITION. During the term of this Agreement and for a period of
two (2) years after the termination of employment with the Company for any
reason, Employee shall not, within the United States of America, Japan, United
Kingdom, France, Germany, Israel, Sweden or Italy, directly or indirectly, (1)
own (as a proprietor, partner, stockholder, or otherwise) an interest in, or (2)
participate (as an officer, director, or in any other capacity) in the
management, operation, or control of, or (3) perform services as or act in the
capacity of an employee, independent contractor, consultant, or agent of any
enterprise engaged, directly or indirectly, in the business of buying, selling,
producing, or processing titanium or titanium products or in competition with
any other business conducted by the Company except with the prior written
consent of the Company.
2.2 CONFIDENTIALITY. Employee agrees that contemporaneously with the
execution of this Agreement Employee shall execute Company's standard form
Confidentiality Agreement.
2.3 RETURN OF DOCUMENTS. Employee acknowledges and agrees that all
originals and copies of records, reports, documents, lists, plans, drawings,
memoranda, notes, and other documentation related to the business of the Company
or containing any Confidential Information shall be the sole and exclusive
property of the Company, and shall be returned to the Company upon the
termination of employment with the Company or upon the written request of the
Company.
2.4 INJUNCTION. Employee agrees that it would be difficult to measure
damage to the Company from any breach by Employee of Section 2.1, 2.2, or 2.3
and that monetary damages would be an inadequate remedy for any such breach.
Accordingly, Employee agrees that if Employee shall breach or take steps
preliminary to breaching Section 2.1, 2.2, or 2.3, the Company shall be
entitled, in addition to all other remedies it may have at law or in equity, to
an injunction or other appropriate orders to restrain any such breach, without
showing or proving any actual damage sustained by the Company.
2.5 NO RELEASE. Employee agrees that the termination of employment with
the Company or the expiration of the term of this Agreement shall not release
Employee from any obligations under Section 2.1, 2.2, 2.3, or 2.4.
SECTION 3. COMPENSATION
3.1 BASE COMPENSATION. In consideration of all services to be rendered by
Employee to the Company, the Company shall pay to Employee base compensation of
One Hundred Ninety-Five Thousand Dollars ($195,000.00) per year, through 1994
with annual reviews, payable in equal monthly installments on the last day of
each month. Employee shall not be entitled to cost of living adjustments either
under this Agreement or under Company's
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ESOP Plan.
3.2 BONUS. Company presently has in place an Employee Stock Ownership
Plan (ESOP) and Employee will be a participant in said Plan. Under the ESOP,
there are two (2) bonus programs, one payable in cash and the other in stock.
However, under the 1993 operating plan, Company does not anticipate that any
sums will be paid under the ESOP bonus programs. Therefore, for 1993 and 1994,
Company agrees to pay to Employee a bonus of Forty Thousand Dollars ($40,000.00)
at the end of each year, with said bonus to be reduced by any sums (cash or
stock) received by Employee under the two ESOP bonus programs. After 1994 under
the present provisions of the Plan, no ESOP bonus programs will exist. Employee
agrees to develop by working with the members of the board of directors
compensation committee, equitable and achievable individual performance bonus
and long-term incentive programs to become effective in 1995. These programs
will be designed to reward both personal and company performance and will
include all executive officers of the Company.
3.3 LONG-TERM INCENTIVE PROGRAM (ESOP SHARE ALLOCATION). Pursuant to the
terms of the ESOP documents, based on 1992 contributions, Employee will receive
approximately FOURTEEN THOUSAND TWO HUNDRED FORTY-SEVEN (14,247) OREMET shares
(or excess benefit plan shares) for 1993. All ESOP shares are tax deferred. To
the extent that Employee's compensation for 1993 or 1994 exceeds federal ERISA
limits (under Internal Revenue Code Section 415), Employee will receive "excess
benefit shares" which will be redeemable in cash at some future date in
accordance with the ESOP Plan, with the amount of cash to be determined based on
the fair market value of the shares at the time of redemption. However, other
statutory or ESOP limitations may serve to limit contributions to the ESOP, or
to other qualified plans sponsored by the Company.
3.4 OTHER BENEFITS. Base compensation and bonus compensation paid to
Employee shall be in addition to any contribution made by the Company for the
benefit of Employee to any qualified retirement plan maintained by the Company
for the exclusive benefit of its salaried employees. The Company shall provide
to Employee and Employee's family the same benefits that the Company provides to
other salaried employees and their families, subject to Employee's satisfaction
of the respective eligibility conditions for such benefits.
Employee may select an American automobile, in keeping with the
Company's tradition, for lease by the Company for Employee's use. Insurance,
maintenance and operating costs of the automobile will be paid for by the
Company pursuant to current IRS regulations.
Employee shall obtain an annual physical examination and Company shall
pay for said examination.
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<PAGE>
3.5 SIGN-ON BONUS. As an inducement to joining Company, Employee
will receive a sign-on bonus in the amount of Sixty-Five Thousand Dollars
($65,000.00). In the event it is determined at the time of the annual ESOP
stock allocation that the sign-on bonus is not compensation covered by the ESOP,
Company agrees to issue Employee, from authorized unissued stock of Company, a
number of shares equivalent to the number of shares Employee would have been
allocated if the sign-on bonus had been included in covered plan compensation.
SECTION 4. EXPENSES
4.1 RELOCATION EXPENSES. Employee shall be responsible for any and
all relocation expenses of Employee, including but not limited to country club
initiation fees.
4.2 REIMBURSEMENT. Employee shall be entitled to reimbursement from
the Company for reasonable expenses necessarily incurred by Employee in the
performance of Employee's duties under this Agreement, upon presentation of
vouchers indicating in detail the amount and business purpose of each such
expense and upon compliance with the Company's reimbursement policies
established from time to time.
SECTION 5. TERMINATION
5.1 TERMINATION BY PRIOR NOTICE. The employment of Employee by the
Company may be terminated by either the Company or Employee upon the giving of
Three Hundred Sixty-Five (365) days' prior written notice to the other party
during the initial term of this Agreement. After the initial term of this
Agreement and during any subsequent renewal term this Agreement may be
terminated at any time upon the giving of six (6) months written notice by
either party. This Agreement may be terminated at any time upon the mutual
written agreement of the Company and Employee.
5.2 IMMEDIATE TERMINATION. The employment of Employee by the Company may
be terminated immediately in the sole discretion of the board of directors of
the Company upon the occurrence of any one of the following events:
5.2.1 Employee willfully and continuously fails or refuses to comply
with the policies, standards, and regulations of the Company established from
time to time;
5.2.2 Employee engages in fraud, dishonesty, or any other act of
misconduct in the performance of Employee's duties on behalf of the Company;
5.2.3 Employee fails to perform any provision of this Agreement to be
performed by Employee; or
5.2.4 Employee is deceased or suffers a permanent disability. For
purposes of this Agreement, "permanent disability" shall be defined as
Employee's inability, due to illness,
33
<PAGE>
accident, or other cause, to perform the majority of Employee's usual duties for
a period of three (3) consecutive calendar months or for a period of 120 days
(whether or not consecutive) during any 365 day period.
5.3 PRORATION OF BASE COMPENSATION. Upon the termination of employment,
the base compensation payable to Employee pursuant to Section 3.1 shall be
prorated to the date of such termination, calculated on a calendar year basis.
5.4 INVOLUNTARY TERMINATION DURING FIRST 18 MONTHS. In the event that
Employee is involuntarily terminated by Company's board of directors during the
first eighteen (18) months of this Agreement for reasons other than those
specified in Section 5.2 of this Agreement, then and in that event Employee will
receive severance pay equal to twelve (12) months' current base salary.
SECTION 6. VACATION; ILLNESS
6.1 VACATION. Employee shall be subject to Company's vacation policy for
salaried employees with Employee being credited for fifteen (15) years of
service prior to July 1, 1993.
6.2 ILLNESS. Subject to Section 5, Employee shall receive full
compensation for any period of illness or incapacity during the term of this
Agreement.
SECTION 7. CHANGE OF CONTROL AND SEVERANCE PAY
In the event there is a change in the ownership of a majority of the
outstanding capital stock of the Company, other than in accordance with the
existing ESOP Plan, and within one (1) year thereafter there is an involuntary
termination of the employment of Employee, Employee shall be paid two (2) years
salary as severance pay and Employee shall continue to be eligible for all
pension benefits otherwise available to him from Company at the end of the
severance pay period. For purposes of this Section 7, the term "involuntary
termination" shall include but shall not be limited to a reduction in
compensation or a reduction of responsibility.
SECTION 8. MISCELLANEOUS PROVISIONS
8.1 BINDING EFFECT. This Agreement shall be binding on and inure to the
benefit of the parties and their heirs, personal representatives, successors,
and, to the extent permitted by Section 8.2, assigns.
8.2 ASSIGNMENT. Except with the other party's prior written consent, a
party may not assign any rights under this Agreement.
34
<PAGE>
8.3 AMENDMENTS. This Agreement may be amended only by an instrument in
writing executed by all the parties.
8.4 HEADINGS. The headings used in this Agreement are solely for
convenience of reference, are not part of this Agreement, and are not to be
considered in construing or interpreting this Agreement.
8.5 ENTIRE AGREEMENT. This Agreement (including the exhibits) sets forth
the entire understanding of the parties with respect to the subject matter of
this Agreement and supersedes any and all prior understandings and agreements,
whether written or oral, between the parties with respect to such subject
matter.
8.6 COUNTERPARTS. This Agreement may be executed by the parties in
separate counterparts, each of which when executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument.
8.7 SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any respect for any reason, the validity and enforceability of
any such provision in any other respect and of the remaining provisions of this
Agreement shall not be in any way impaired.
8.8 WAIVER. A provision of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. No waiver of any provision
of this Agreement shall constitute a waiver of any other provision, whether or
not similar, nor shall any waiver constitute a continuing waiver. Failure to
enforce any provision of this Agreement shall not operate as a waiver of such
provision or any other provision.
8.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of Oregon.
8.10 VENUE. This Agreement has been made entirely within the state of
Oregon. This Agreement shall be governed by and construed in accordance with
the laws of the state of Oregon. If any suit or action is filed by any party to
enforce this Agreement or otherwise with respect to the subject matter of this
Agreement, venue shall be in the federal or state courts in Linn County, Oregon.
8.11 ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, including, without limitation, the making, performance, or
interpretation of this Agreement, shall be settled by arbitration in Albany,
Oregon, in accordance with ORS 36.300-36.365, and judgment on the arbitration
award may be entered in any court having jurisdiction over the subject matter of
the controversy.
THE COMPANY: OREGON METALLURGICAL
CORPORATION, an Oregon
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<PAGE>
corporation
By___________________________
Title:_______________________
EMPLOYEE:
---------------------------------
CARLOS E. AGUIRRE
36
<PAGE>
EMPLOYMENT AGREEMENT
DATE: October _____, 1993
PARTIES: OREGON METALLURGICAL CORPORATION, (the "Company")
an Oregon corporation
530 West 34th Avenue
P. O. Box 580
Albany, OR 97321
DENNIS P. KELLY ("Employee")
8 Mourning Dove Lane
Littleton, CO 80127
AGREEMENT:
The parties agree as follows:
SECTION 1. EMPLOYMENT
1.1 FIXED TERM. The Company agrees to employ Employee as its Vice
President/Finance and Chief Financial Officer for a term commencing on
October , 1993, and terminating on October 31, 1995, or until termination
in accordance with Section 5. If not terminated in accordance with Section
5, upon expiration of the initial term of this Agreement this Agreement shall
automatically renew for successive one (1) year terms thereafter.
1.2 DUTIES. Employee accepts employment with the Company on the
terms and conditions set forth in this Agreement, and agrees to devote his
full time and attention (reasonable periods of illness excepted) to the
performance of his duties under this Agreement. In general, such duties
shall consist of those duties generally performed by the Vice
President/Finance, Chief Financial Officer, and the Treasurer of a
corporation engaged in the business of metals manufacturing. Employee shall
perform such specific duties and shall exercise such specific authority as
may be assigned to Employee from time to time by the board of directors or
the president of the Company. In performing such duties, Employee shall be
subject to the direction and control of the president and of the board of
directors of the Company. Employee further agrees that in all aspects of
such employment, Employee shall comply with the policies, standards, and
regulations of the Company established from time to time, and shall perform
his duties faithfully, intelligently, to the best of his ability, and in the
best interest of the Company. The devotion of reasonable periods of time by
Employee for personal purposes, outside business activities, or charitable
activities shall not be deemed a breach of this Agreement, provided that such
purposes or activities do not materially interfere with the services required
to be rendered to or on behalf of the Company.
37
<PAGE>
SECTION 2. COVENANT NOT TO COMPETE; CONFIDENTIALITY
2.1 NONCOMPETITION. During the term of this Agreement and for a
period of two (2) years after the termination of employment with the Company
for any reason, Employee shall not, within the United States of America,
Japan, United Kingdom, France, Germany, Israel, Sweden or Italy, directly or
indirectly, (1) own (as a proprietor, partner, stockholder, or otherwise) an
interest in, or (2) participate (as an officer, director, or in any other
capacity) in the management, operation, or control of, or (3) perform
services as or act in the capacity of an employee, independent contractor,
consultant, or agent of any enterprise engaged, directly or indirectly, in
the business of buying, selling, producing, or processing titanium or
titanium products or in competition with any other business conducted by the
Company except with the prior written consent of the Company.
2.2 CONFIDENTIALITY. Employee agrees that contemporaneously with the
execution of this Agreement Employee shall execute Company's standard form
Confidentiality Agreement.
2.3 RETURN OF DOCUMENTS. Employee acknowledges and agrees that all
originals and copies of records, reports, documents, lists, plans, drawings,
memoranda, notes, and other documentation related to the business of the
Company or containing any Confidential Information shall be the sole and
exclusive property of the Company, and shall be returned to the Company upon
the termination of employment with the Company or upon the written request of
the Company.
2.4 INJUNCTION. Employee agrees that it would be difficult to
measure damage to the Company from any breach by Employee of Section 2.1,
2.2, or 2.3 and that monetary damages would be an inadequate remedy for any
such breach. Accordingly, Employee agrees that if Employee shall breach or
take steps preliminary to breaching Section 2.1, 2.2, or 2.3, the Company
shall be entitled, in addition to all other remedies it may have at law or in
equity, to an injunction or other appropriate orders to restrain any such
breach, without showing or proving any actual damage sustained by the Company.
2.5 NO RELEASE. Employee agrees that the termination of employment with
the Company or the expiration of the term of this Agreement shall not release
Employee from any obligations under Section 2.1, 2.2, 2.3, or 2.4.
SECTION 3. COMPENSATION
3.1 BASE COMPENSATION. In consideration of all services to be
rendered by Employee to the Company, the Company shall pay to Employee base
compensation of One Hundred Twenty Thousand Dollars ($120,000.00) per year,
through October, 1995 with annual reviews, payable in equal monthly
installments on the last day of each month. Employee shall not be entitled
to cost of living adjustments either under this Agreement or under Company's
ESOP Plan.
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<PAGE>
3.2 BONUS. Company presently has in place an Employee Stock Ownership
Plan (ESOP) and Employee will be a participant in said Plan. Under the ESOP,
there are two (2) bonus programs, one payable in cash and the other in stock.
However, under the 1993 operating plan, Company does not anticipate that any
sums will be paid under the ESOP bonus programs. At the end of 1994, Company
agrees to pay Employee a bonus of Ten Thousand Dollars ($10,000.00), with said
bonus to be reduced by any sums (cash or stock) received by Employee under the
two ESOP bonus programs. After 1994 under the present provisions of the Plan,
no ESOP bonus programs will exist. Company anticipates developing and incentive
bonus program and when such program is placed in effect Employee shall be a
participant therein.
3.3 LONG-TERM INCENTIVE PROGRAM (ESOP SHARE ALLOCATION). Pursuant to
the terms of the ESOP documents Employee will receive approximately TWELVE
THOUSAND (12,000) shares (or excess benefit plan shares) for 1994. All ESOP
shares are tax deferred. To the extent that Employee's compensation for 1993
or 1994 exceeds federal ERISA limits (under Internal Revenue Code Section
415) Employee will receive "excess benefit shares" which will be redeemable
in cash at some future date in accordance with the ESOP Plan, with the
additional amount of cash to be determined based on the fair market value of
the shares at the time of redemption. However, other statutory or ESOP
limitations may serve to limit contributions to the ESOP, or to other
qualified plans sponsored by the Company.
3.4 OTHER BENEFITS. Base compensation and bonus compensation paid to
Employee shall be in addition to any contribution made by the Company for the
benefit of Employee to any qualified retirement plan maintained by the Company
for the exclusive benefit of its salaried employees. The Company shall provide
to Employee and Employee's family the same benefits that the Company provides to
other salaried employees and their families, subject to Employee's satisfaction
of the respective eligibility conditions for such benefits.
Employee may select an American automobile, in keeping with the Company's
tradition, for lease by the Company for Employee's use. Insurance, maintenance
and operating costs of the automobile will be paid for by the Company pursuant
to current IRS regulations.
Employee shall obtain an annual physical examination and Company shall pay
for said examination.
3.5 SIGN-ON BONUS. As an inducement to joining Company, Employee
will receive a sign-on bonus in the amount of Fifty Thousand Dollars
($50,000.00). In the event it is determined at the time of the annual ESOP
stock allocation that the sign-on bonus is not compensation covered by the ESOP,
Company agrees to issue Employee, from authorized unissued stock of Company, a
number of shares equivalent to the number of shares Employee would have been
allocated if the sign-on bonus had been included in covered plan
39
<PAGE>
compensation.
SECTION 4. EXPENSES
4.1 RELOCATION EXPENSES. Employee shall be responsible for any and
all relocation expenses of Employee, including but not limited to country club
initiation fees.
4.2 REIMBURSEMENT. Employee shall be entitled to reimbursement from
the Company for reasonable expenses necessarily incurred by Employee in the
performance of Employee's duties under this Agreement, upon presentation of
vouchers indicating in detail the amount and business purpose of each such
expense and upon compliance with the Company's reimbursement policies
established from time to time.
SECTION 5. TERMINATION
5.1 TERMINATION BY PRIOR NOTICE. The employment of Employee by the
Company may be terminated by either the Company or Employee upon the giving of
Three Hundred Sixty-Five (365) days' prior written notice to the other party
during the initial term of this Agreement. After the initial term of this
Agreement and during any subsequent renewal term this Agreement may be
terminated at any time upon the giving of six (6) months written notice by
either party. This Agreement may be terminated at any time upon the mutual
written agreement of the Company and Employee.
5.2 IMMEDIATE TERMINATION. The employment of Employee by the Company
may be terminated immediately in the sole discretion of the president of the
Company upon the occurrence of any one of the following events:
5.2.1 Employee willfully and continuously fails or refuses to comply
with the policies, standards, and regulations of the Company established from
time to time;
5.2.2 Employee engages in fraud, dishonesty, or any other act of
misconduct in the performance of Employee's duties on behalf of the Company;
5.2.3 Employee fails to perform any provision of this Agreement to be
performed by Employee; or
5.2.4 Employee is deceased or suffers a permanent disability. For
purposes of this Agreement, "permanent disability" shall be defined as
Employee's inability, due to illness, accident, or other cause, to perform the
majority of Employee's usual duties for a period of three (3) consecutive
calendar months or for a period of 120 days (whether or not consecutive) during
any 365 day period.
5.3 PRORATION OF BASE COMPENSATION. Upon the termination of employment,
the base compensation payable to Employee pursuant to Section 3.1 shall be
prorated to the
40
<PAGE>
date of such termination, calculated on a calendar year basis.
5.4 INVOLUNTARY TERMINATION DURING FIRST 18 MONTHS. In the event that
Employee is involuntarily terminated by Company's president or board of
directors during the first eighteen (18) months of this Agreement for reasons
other than those specified in Section 5.2 of this Agreement, then and in that
event Employee will receive severance pay equal to twelve (12) months' current
base salary.
SECTION 6. VACATION; ILLNESS
6.1 VACATION. Employee shall be subject to Company's vacation policy
for salaried employees with Employee being credited for ten (10) years of
service prior to October 1, 1993.
6.2 ILLNESS. Subject to Section 5, Employee shall receive full
compensation for any period of illness or incapacity during the term of this
Agreement.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 BINDING EFFECT. This Agreement shall be binding on and inure to the
benefit of the parties and their heirs, personal representatives, successors,
and, to the extent permitted by Section 7.2, assigns.
7.2 ASSIGNMENT. Except with the other party's prior written consent, a
party may not assign any rights under this Agreement.
7.3 AMENDMENTS. This Agreement may be amended only by an instrument in
writing executed by all the parties.
7.4 HEADINGS. The headings used in this Agreement are solely for
convenience of reference, are not part of this Agreement, and are not to be
considered in construing or interpreting this Agreement.
7.5 ENTIRE AGREEMENT. This Agreement (including the exhibits) sets
forth the entire understanding of the parties with respect to the subject
matter of this Agreement and supersedes any and all prior understandings and
agreements, whether written or oral, between the parties with respect to such
subject matter.
7.6 COUNTERPARTS. This Agreement may be executed by the parties in
separate counterparts, each of which when executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument.
41
<PAGE>
7.7 SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any respect for any reason, the validity and
enforceability of any such provision in any other respect and of the
remaining provisions of this Agreement shall not be in any way impaired.
7.8 WAIVER. A provision of this Agreement may be waived only by a
written instrument executed by the party waiving compliance. No waiver of
any provision of this Agreement shall constitute a waiver of any other
provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. Failure to enforce any provision of this Agreement shall
not operate as a waiver of such provision or any other provision.
7.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of Oregon.
7.10 VENUE. This Agreement has been made entirely within the state of
Oregon. This Agreement shall be governed by and construed in accordance with
the laws of the state of Oregon. If any suit or action is filed by any party to
enforce this Agreement or otherwise with respect to the subject matter of this
Agreement, venue shall be in the federal or state courts in Linn County, Oregon.
7.11 ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, including, without limitation, the making, performance, or
interpretation of this Agreement, shall be settled by arbitration in Albany,
Oregon, in accordance with ORS 36.300-36.365, and judgment on the arbitration
award may be entered in any court having jurisdiction over the subject matter of
the controversy.
THE COMPANY: OREGON METALLURGICAL
CORPORATION, an Oregon
corporation
By______________________________
Title:_______________________
EMPLOYEE:
________________________________
DENNIS P. KELLY
42
<PAGE>
EMPLOYMENT AGREEMENT
DATE: October _____, 1993
PARTIES: OREGON METALLURGICAL CORPORATION, (the "Company")
an Oregon corporation
530 West 34th Avenue
P. O. Box 580
Albany, OR 97321
STEVEN H. REICHMAN ("Employee")
60 Salisbury Street
Worster, MA 01609
AGREEMENT:
The parties agree as follows:
SECTION 1. EMPLOYMENT
1.1 FIXED TERM. The Company agrees to employ Employee as its Vice
President/Technology and Corporate Development for a term commencing on November
, 1993, and terminating on November 30, 1995, or until termination in
accordance with Section 5. If not terminated in accordance with Section 5, upon
expiration of the initial term of this Agreement this Agreement shall
automatically renew for successive one (1) year terms thereafter.
1.2 DUTIES. Employee accepts employment with the Company on the
terms and conditions set forth in this Agreement, and agrees to devote his
full time and attention (reasonable periods of illness excepted) to the
performance of his duties under this Agreement. In general, such duties
shall consist of those duties generally performed by the Vice
President/Technology and Corporate Development of a corporation engaged in
the business of metals manufacturing which include, but are not limited to,
quality assurance, process and product development, rendering technical
assistance to production, sales and customers, the technical marketing of new
products, environmental issues, and strategic planning. Employee shall
perform such specific duties and shall exercise such specific authority as
may be assigned to Employee from time to time by the board of directors or
the president of the Company. In performing such duties, Employee shall be
subject to the direction and control of the president and of the board of
directors of the Company. Employee further agrees that in all aspects of
such employment, Employee shall comply with the policies, standards, and
regulations of the Company established from time to time, and shall perform
his duties faithfully, intelligently, to the best of his ability, and in the
best interest of the Company. The devotion of reasonable periods of time by
Employee for personal
EMPLOYMENT AGREEMENT
43
<PAGE>
purposes, outside business activities, or charitable activities shall not be
deemed a breach of this Agreement, provided that such purposes or activities do
not materially interfere with the services required to be rendered to or on
behalf of the Company.
SECTION 2. COVENANT NOT TO COMPETE; CONFIDENTIALITY
2.1 NONCOMPETITION. During the term of this Agreement and for a
period of two (2) years after the termination of employment with the Company
for any reason, Employee shall not, within the United States of America,
Japan, United Kingdom, France, Germany, Israel, Sweden or Italy, directly or
indirectly, (1) own (as a proprietor, partner, stockholder, or otherwise) an
interest in, or (2) participate (as an officer, director, or in any other
capacity) in the management, operation, or control of, or (3) perform
services as or act in the capacity of an employee, independent contractor,
consultant, or agent of any enterprise engaged, directly or indirectly, in
the business of buying, selling, producing, or processing titanium or
titanium products or in competition with any other business conducted by the
Company except with the prior written consent of the Company.
2.2 CONFIDENTIALITY. Employee agrees that contemporaneously with the
execution of this Agreement Employee shall execute Company's standard form
Confidentiality Agreement.
2.3 RETURN OF DOCUMENTS. Employee acknowledges and agrees that all
originals and copies of records, reports, documents, lists, plans, drawings,
memoranda, notes, and other documentation related to the business of the Company
or containing any Confidential Information shall be the sole and exclusive
property of the Company, and shall be returned to the Company upon the
termination of employment with the Company or upon the written request of the
Company.
2.4 INJUNCTION. Employee agrees that it would be difficult to measure
damage to the Company from any breach by Employee of Section 2.1, 2.2, or 2.3
and that monetary damages would be an inadequate remedy for any such breach.
Accordingly, Employee agrees that if Employee shall breach or take steps
preliminary to breaching Section 2.1, 2.2, or 2.3, the Company shall be
entitled, in addition to all other remedies it may have at law or in equity, to
an injunction or other appropriate orders to restrain any such breach, without
showing or proving any actual damage sustained by the Company.
2.5 NO RELEASE. Employee agrees that the termination of employment with
the Company or the expiration of the term of this Agreement shall not release
Employee from any obligations under Section 2.1, 2.2, 2.3, or 2.4.
SECTION 3. COMPENSATION
3.1 BASE COMPENSATION. In consideration of all services to be
rendered by Employee to the Company, the Company shall pay to Employee base
compensation of One
EMPLOYMENT AGREEMENT
44
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Hundred Fifteen Thousand Dollars ($115,000.00) per year, through November, 1995
with annual reviews, payable in equal monthly installments on the last day of
each month. Employee shall not be entitled to cost of living adjustments either
under this Agreement or under Company's ESOP Plan.
3.2 BONUS. Company presently has in place an Employee Stock Ownership
Plan (ESOP) and Employee will be a participant in said Plan. Under the ESOP,
there are two (2) bonus programs, one payable in cash and the other in stock.
However, under the 1993 operating plan, Company does not anticipate that any
sums will be paid under the ESOP bonus programs. At the end of 1994, Company
agrees to pay Employee a bonus of Ten Thousand Dollars ($10,000.00), with said
bonus to be reduced by any sums (cash or stock) received by Employee under the
two ESOP bonus programs. After 1994 under the present provisions of the Plan,
no ESOP bonus programs will exist. Company anticipates developing and incentive
bonus program and when such program is placed in effect Employee shall be a
participant therein.
3.3 LONG-TERM INCENTIVE PROGRAM (ESOP SHARE ALLOCATION). Pursuant to
the terms of the ESOP documents Employee will receive approximately ELEVEN
THOUSAND (11,000) shares (or excess benefit plan shares) for 1994. All ESOP
shares are tax deferred. To the extent that Employee's compensation for 1993
or 1994 exceeds federal ERISA limits (under Internal Revenue Code Section
415) Employee will receive "excess benefit shares" which will be redeemable
in cash at some future date in accordance with the ESOP Plan, with the
additional amount of cash to be determined based on the fair market value of
the shares at the time of redemption. However, other statutory or ESOP
limitations may serve to limit contributions to the ESOP, or to other
qualified plans sponsored by the Company.
3.4 OTHER BENEFITS. Base compensation and bonus compensation paid to
Employee shall be in addition to any contribution made by the Company for the
benefit of Employee to any qualified retirement plan maintained by the Company
for the exclusive benefit of its salaried employees. The Company shall provide
to Employee and Employee's family the same benefits that the Company provides to
other salaried employees and their families, subject to Employee's satisfaction
of the respective eligibility conditions for such benefits.
Employee may select an American automobile, in keeping with the Company's
tradition, for lease by the Company for Employee's use. Insurance, maintenance
and operating costs of the automobile will be paid for by the Company pursuant
to current IRS regulations.
Employee shall obtain an annual physical examination and Company shall pay
for said examination.
3.5 SIGN-ON BONUS. As an inducement to joining Company, Employee
will receive a sign-on bonus in the amount of Thirty-Five Thousand Dollars
($35,000.00). In the event it
EMPLOYMENT AGREEMENT
45
<PAGE>
is determined at the time of the annual ESOP stock allocation that the sign-on
bonus is not compensation covered by the ESOP, Company agrees to issue Employee,
from authorized unissued stock of Company, a number of shares equivalent to the
number of shares Employee would have been allocated if the sign-on bonus had
been included in covered plan compensation.
SECTION 4. EXPENSES
4.1 RELOCATION EXPENSES. Employee shall be responsible for any and
all relocation expenses of Employee, including but not limited to country club
initiation fees.
4.2 REIMBURSEMENT. Employee shall be entitled to reimbursement from
the Company for reasonable expenses necessarily incurred by Employee in the
performance of Employee's duties under this Agreement, upon presentation of
vouchers indicating in detail the amount and business purpose of each such
expense and upon compliance with the Company's reimbursement policies
established from time to time.
SECTION 5. TERMINATION
5.1 TERMINATION BY PRIOR NOTICE. The employment of Employee by the
Company may be terminated by either the Company or Employee upon the giving of
Three Hundred Sixty-Five (365) days' prior written notice to the other party
during the initial term of this Agreement. After the initial term of this
Agreement and during any subsequent renewal term this Agreement may be
terminated at any time upon the giving of six (6) months written notice by
either party. This Agreement may be terminated at any time upon the mutual
written agreement of the Company and Employee.
5.2 IMMEDIATE TERMINATION. The employment of Employee by the Company
may be terminated immediately in the sole discretion of the president of the
Company upon the occurrence of any one of the following events:
5.2.1 Employee willfully and continuously fails or refuses to comply
with the policies, standards, and regulations of the Company established from
time to time;
5.2.2 Employee engages in fraud, dishonesty, or any other act of
misconduct in the performance of Employee's duties on behalf of the Company;
5.2.3 Employee fails to perform any provision of this Agreement to be
performed by Employee; or
5.2.4 Employee is deceased or suffers a permanent disability. For
purposes of this Agreement, "permanent disability" shall be defined as
Employee's inability, due to illness, accident, or other cause, to perform the
majority of Employee's usual duties for a period of three (3) consecutive
calendar months or for a period of 120 days (whether or not
EMPLOYMENT AGREEMENT
46
<PAGE>
consecutive) during any 365 day period.
5.3 PRORATION OF BASE COMPENSATION. Upon the termination of employment,
the base compensation payable to Employee pursuant to Section 3.1 shall be
prorated to the date of such termination, calculated on a calendar year basis.
5.4 INVOLUNTARY TERMINATION DURING FIRST 18 MONTHS. In the event that
Employee is involuntarily terminated by Company's president or board of
directors during the first eighteen (18) months of this Agreement for reasons
other than those specified in Section 5.2 of this Agreement, then and in that
event Employee will receive severance pay equal to twelve (12) months' current
base salary.
SECTION 6. VACATION; ILLNESS
6.1 VACATION. Employee shall be subject to Company's vacation policy
for salaried employees with Employee being credited for ten (10) years of
service prior to November 1, 1993.
6.2 ILLNESS. Subject to Section 5, Employee shall receive full
compensation for any period of illness or incapacity during the term of this
Agreement.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 BINDING EFFECT. This Agreement shall be binding on and inure to the
benefit of the parties and their heirs, personal representatives, successors,
and, to the extent permitted by Section 7.2, assigns.
7.2 ASSIGNMENT. Except with the other party's prior written consent, a
party may not assign any rights under this Agreement.
7.3 AMENDMENTS. This Agreement may be amended only by an instrument in
writing executed by all the parties.
7.4 HEADINGS. The headings used in this Agreement are solely for
convenience of reference, are not part of this Agreement, and are not to be
considered in construing or interpreting this Agreement.
7.5 ENTIRE AGREEMENT. This Agreement (including the exhibits) sets
forth the entire understanding of the parties with respect to the subject
matter of this Agreement and supersedes any and all prior understandings and
agreements, whether written or oral, between the parties with respect to such
subject matter.
7.6 COUNTERPARTS. This Agreement may be executed by the parties in
separate
EMPLOYMENT AGREEMENT
47
<PAGE>
counterparts, each of which when executed and delivered shall be an original,
but all of which together shall constitute one and the same instrument.
7.7 SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any respect for any reason, the validity and
enforceability of any such provision in any other respect and of the
remaining provisions of this Agreement shall not be in any way impaired.
7.8 WAIVER. A provision of this Agreement may be waived only by a
written instrument executed by the party waiving compliance. No waiver of
any provision of this Agreement shall constitute a waiver of any other
provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. Failure to enforce any provision of this Agreement shall
not operate as a waiver of such provision or any other provision.
7.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of Oregon.
7.10 VENUE. This Agreement has been made entirely within the state of
Oregon. This Agreement shall be governed by and construed in accordance with
the laws of the state of Oregon. If any suit or action is filed by any party to
enforce this Agreement or otherwise with respect to the subject matter of this
Agreement, venue shall be in the federal or state courts in Linn County, Oregon.
7.11 ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, including, without limitation, the making, performance, or
interpretation of this Agreement, shall be settled by arbitration in Albany,
Oregon, in accordance with ORS 36.300-36.365, and judgment on the arbitration
award may be entered in any court having jurisdiction over the subject matter of
the controversy.
THE COMPANY: OREGON METALLURGICAL
CORPORATION, an Oregon
corporation
By______________________________
Title:_______________________
EMPLOYEE:
________________________________
Steven H. Reichman
EMPLOYMENT AGREEMENT
48
<PAGE>
EMPLOYMENT AGREEMENT
DATE: February 17, 1995
PARTIES: OREGON METALLURGICAL CORPORATION, (the "Company")
an Oregon corporation
530 34th Avenue S.W.
P.O. Box 580
Albany, OR 97321
JOHN P. BYRNE ("Employee")
4454 Bramblewood Lane N.W.
P.O. Box 627
Albany, OR 97321
AGREEMENT:
The parties agree as follows:
SECTION 1. EMPLOYMENT
1.1 FIXED TERM. The Company agrees to employ Employee as its Vice
President - Manufacturing and Engineering for a term commencing on March 1,
1995, and terminating on March 1, 1997, or until termination in accordance with
Section 5. If not terminated in accordance with Section 5, upon expiration of
the initial term of this Agreement this Agreement shall automatically renew for
successive one (1) year terms thereafter.
1.2 DUTIES. Employee accepts employment with the Company on the terms
and conditions set forth in this Agreement, and agrees to devote his full time
and attention (reasonable periods of illness excepted) to the performance of his
duties under this Agreement. In general, such duties shall consist of those
duties generally performed by the Vice President - Manufacturing and Engineering
of a corporation engaged in the business of metals manufacturing which include,
but are not limited to, the managing, planning, organizing, controlling and
coordination of all Manufacturing, Engineering and Maintenance Operations of the
Company. Employee shall perform such specific duties and shall exercise such
specific authority as may be assigned to Employee from time to time by the board
of directors or the president of the Company. In performing such duties,
Employee shall comply with the policies, standards, and regulations of the
Company established from time to time, and shall perform his duties faithfully,
intelligently, to the best of his ability, and in the best interest of the
Company. The devotion of reasonable periods of time by Employee for personal
purposes, outside business
49
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activities, or charitable activities shall not be deemed a breach of this
Agreement, provided that such purposes or activities do not materially interfere
with the services required to be rendered to or on behalf of the Company.
SECTION 2. COVENANT NOT TO COMPETE; CONFIDENTIALITY
2.1 NONCOMPETITION. During the term of this Agreement and for a period
of two (2) years after the termination of employment with the Company for any
reason, Employee shall not, within the United States of America, Japan, United
Kingdom, France, Germany, C.I.S., China, Israel, Sweden or Italy, directly or
indirectly, (1) own (as a proprietor, partner, stockholder, or otherwise) an
interest in, or (2) participate (as an officer, director, or in any other
capacity) in the management, operation, or control of, or (3) perform services
as or act in the capacity of any employee, independent contractor, consultant,
or agent of any enterprise engaged directly or indirectly, in the business of
buying, selling, producing, or processing titanium or titanium mill products or
in competition with any other business conducted by the Company in which the
employee was directly involved, except with the prior written consent of the
Company.
2.2 CONFIDENTIALITY. Employee agrees that contemporaneously with the
execution of this Agreement Employee shall execute Company's standard form
Confidentiality Agreement.
2.3 RETURN OF DOCUMENTS. Employee acknowledges and agrees that all
originals and copies of records, reports, documents, lists, plans, drawings,
memoranda, notes, and other documentation related to the business of the Company
or containing any Confidential Information shall be the sole and exclusive
property of the Company, and shall be returned to the Company upon the
termination of employment with the Company or upon the written request of the
Company.
2.4 INJUNCTION. Employee agrees that it would be difficult to measure
damage to the Company from any breach by Employee os Section 2.1, 2.2, or 2.3
and that monetary damages would be an inadequate remedy for any such breach.
Accordingly, Employee agrees that if Employee shall breach or take steps
preliminary to breaching Section 2.1, 2.2 or 2.3, the Company shall be entitled,
in addition to all other remedies it may have at law or in equity, to an
injunction or other appropriate orders to restrain any such breach, without
showing or proving any actual damage sustained by the Company.
2.5 NO RELEASE. Employee agrees that the termination of employment with
the Company or the expiration of the term of this Agreement shall not release
Employee from any obligations under Section 2.1, 2.2, 2.3, or 2.4.
50
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SECTION 3. COMPENSATION
3.1 BASE COMPENSATION. In consideration of all services to be rendered
by Employee to the Company, the Company shall pay to Employee base compensation
of One Hundred Twenty Thousand Dollars ($120,000.00) per year (equivalent to
$10,000.00 per month), through March 1997 with annual reviews, payable in equal
semi-monthly installments. In addition, the Employee will receive one (1) share
of OREMET stock per One Hundred Dollars ($100.00) of W-2 earnings to be paid
during the first quarter of each calendar year following hire date.
Employee shall not be entitled to cost of living adjustments under this
Agreement.
3.2 BONUS. Company is in the process of developing a competitive annual
and long-term incentive program and when such program is placed in effect
Employee shall be a participant therein.
3.3 OTHER BENEFITS. Base compensation and bonus compensation paid to
Employee shall be in addition to any contribution made by the Company for the
benefit of Employee to the 401(k) plan and any qualified retirement plan
maintained by the Company for the exclusive benefit of its salaried employees.
The Company shall provide to Employee and Employee's family the same benefits
that the Company provides to other salaried employees and their families,
subject to Employee's satisfaction of the respective eligibility conditions for
such benefits.
Employee may select an American automobile, in keeping with the Company's
tradition, for lease by the Company for Employee's use. Insurance, maintenance
and operating costs of the automobile will be paid for by the Company pursuant
to current IRS regulations.
Employee shall obtain an annual physical examination and Company shall pay
for said examination.
3.4 SIGN-ON BONUS. As an inducement to joining Company, Employee will
receive a sign-on bonus in the amount of Ten Thousand Dollars ($10,000.00).
SECTION 4. EXPENSES
4.1 REIMBURSEMENT. Employee shall be entitled to reimbursement from the
Company for reasonable expenses necessarily incurred by Employee in the
performance of Employee's duties under this Agreement, upon presentation of
vouchers indicating in detail the amount and business purpose of each such
expense and upon compliance with the Company's reimbursement policies
established from time to time.
51
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SECTION 5. TERMINATION
5.1 TERMINATION BY PRIOR NOTICE. The employment of Employee by the
Company may be terminated by either the Company or Employee upon the giving of
Three Hundred Sixty-Five (365) days' prior written notice to the other party
during the initial term of this Agreement. After the initial term of this
Agreement and during any subsequent renewal term this Agreement may be
terminated at any time upon the giving of six (6) months written notice by
either party. This Agreement may be terminated at any time upon the mutual
written agreement of the Company and Employee.
5.2 IMMEDIATE TERMINATION. The employment of Employee by the Company may
be terminated immediately in the sole discretion of the president of the Company
upon the occurrence of any one of the following events:
5.2.1 Employee willfully and continuously fails or refuses to comply
with the policies, standards, and regulations of the Company established from
time to time;
5.2.2 Employee engages in fraud, dishonesty, or any other act of
misconduct in the performance of Employee's duties on behalf of the Company;
5.2.3 Employee is deceased or suffers a permanent disability. For
purposes of this Agreement, "permanent disability" shall be defined as
Employee's inability, due to illness, accident, or other cause, to perform the
majority of Employee's usual duties for a period of three (3) consecutive
calendar months or for a period of 120 days (whether or not consecutive) during
any 365 day period.
5.3 PRORATION OF BASE COMPENSATION. Upon the termination of employment,
the base compensation payable to Employee pursuant to Section 3.1 shall be
prorated to the date of such termination, calculated on a calendar year basis.
5.4 INVOLUNTARY TERMINATION DURING FIRST 18 MONTHS. In the even that
Employee is involuntarily terminated by Company's president or board of
directors during the first eighteen (18) months of this Agreement for reasons
other than those specified in Section 5.2 of this Agreement, then and in that
event Employee will receive severance pay equal to twelve (12) months' current
base salary.
SECTION 6. VACATION; ILLNESS
6.1 VACATION. Employee shall be subject to Company's vacation policy for
salaried employees with Employee being credited for ten (10) years of service
prior to March 1, 1995.
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6.2 ILLNESS. Subject to Section 5, Employee shall receive full
compensation for any period of illness or incapacity during the term of this
Agreement.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 BINDING EFFECT. This Agreement shall be binding on and inure to the
benefit of the parties and their heirs, personal representatives, successors,
and, to the extent permitted by Section 7.2, assigns.
7.2 ASSIGNMENT. Except with the other party's prior written consent, a
party may not assign any rights under this Agreement.
7.3 AMENDMENTS. This Agreement may be amended only by an instrument in
writing executed by all the parties.
7.4 HEADINGS. The headings used in this Agreement are solely for
convenience of reference, are not part of this Agreement, and are not to be
considered in construing or interpreting this Agreement.
7.5 ENTIRE AGREEMENT. This Agreement (including the exhibits) sets forth
the entire understanding of the parties with respect to the subject matter of
this Agreement and supersedes any and all prior understandings and agreements,
whether written or oral, between the parties with respect to such subject
matter.
7.6 COUNTERPARTS. This Agreement may be executed by the parties in
separate counterparts, each of which when executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument.
7.7 SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any respect for any reason, the validity and enforceability of
any such provision in any other respect and of the remaining provisions of this
Agreement shall not be in any way impaired.
7.8 WAIVER. A provision of this Agreement may be waived only by a
written instrument executed by the party waiving compliance. No waiver of any
provision of this Agreement shall constitute a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
Failure to enforce any provision of this Agreement shall not operate as a waiver
of such provision or any other provision.
7.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of Oregon.
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7.10 VENUE. This Agreement has been made entirely within the state of
Oregon. This Agreement shall be governed by and construed in accordance with
the laws of the state of Oregon. If any suit or action is filed by any party to
enforce this Agreement or otherwise with respect to the subject matter of this
Agreement, venue shall be in the federal or state courts in Linn County, Oregon.
7.11 ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, including, without limitation, the making, performance, or
interpretation of this Agreement, shall be settled by arbitration in Albany,
Oregon, in accordance with ORS 36.300-36.365, and judgment on the arbitration
award may be entered in any court having jurisdiction over the subject matter of
the controversy.
THE COMPANY: OREGON METALLURGICAL
CORPORATION, an Oregon
corporation
By:
------------------------
President and
Chief Executive Officer
EMPLOYEE:
----------------------------
John P. Byrne
54
<PAGE>
_______________________________________________________________________________
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 19, 1994
AMONG
OREGON METALLURGICAL CORPORATION,
NEW TI, INC.
AND
BANK OF AMERICA ILLINOIS
_______________________________________________________________________________
55
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS AND OTHER TERMS.. . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Account Debtor. . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Account Receivable" . . . . . . . . . . . . . . . . . . . . . . . 1
"Accounts Receivable Availability" . . . . . . . . . . . . . . . . 1
"Acquisition". . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Acquisition Documents". . . . . . . . . . . . . . . . . . . . . . 2
"Agreement". . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Alternate Reference Rate" . . . . . . . . . . . . . . . . . . . . 2
"Application". . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Assignee Deposit Account" . . . . . . . . . . . . . . . . . . . . 2
"Attorneys' Fees". . . . . . . . . . . . . . . . . . . . . . . . . 2
"Banking Day". . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Borrower" and "Borrowers" . . . . . . . . . . . . . . . . . . . . 3
"Borrowing Base" . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Borrowing Base Certificate" . . . . . . . . . . . . . . . . . . . 3
"Capital Expenditures" . . . . . . . . . . . . . . . . . . . . . . 3
"Capitalized Lease". . . . . . . . . . . . . . . . . . . . . . . . 4
"Capitalized Lease Liabilities". . . . . . . . . . . . . . . . . . 4
"Closing Date" . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Collateral" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Compliance Certificate" . . . . . . . . . . . . . . . . . . . . . 4
"Computer Hardware and Software Property". . . . . . . . . . . . . 4
"Contaminants" . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Contract Right" . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Copyright Property" . . . . . . . . . . . . . . . . . . . . . . . 5
"Credit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Default Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Demand Deposit Account" . . . . . . . . . . . . . . . . . . . . . 6
"Dollars". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Eligible Account Receivable". . . . . . . . . . . . . . . . . . . 6
"Eligible Inventory" . . . . . . . . . . . . . . . . . . . . . . . 9
"Environmental Laws" . . . . . . . . . . . . . . . . . . . . . . . 10
"Environmental Lien" . . . . . . . . . . . . . . . . . . . . . . . 10
"Equipment". . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
"ERISA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
"ERISA Affiliate". . . . . . . . . . . . . . . . . . . . . . . . . 11
"ESOP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
"Eurocurrency Reserve Percentage". . . . . . . . . . . . . . . . . 11
"Eurodollar Margin". . . . . . . . . . . . . . . . . . . . . . . . 11
"Eurodollar Rate Revolving Loan" . . . . . . . . . . . . . . . . . 11
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . . 12
"Fabrication Business" . . . . . . . . . . . . . . . . . . . . . . 12
"Federal Funds Rate" . . . . . . . . . . . . . . . . . . . . . . . 12
"Federal Reserve Board". . . . . . . . . . . . . . . . . . . . . . 12
"Fixtures" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
"GAAP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
"General Intangibles". . . . . . . . . . . . . . . . . . . . . . . 12
"Grid Ratio" . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
"Guarantee Liability". . . . . . . . . . . . . . . . . . . . . . . 13
"Hazardous Materials". . . . . . . . . . . . . . . . . . . . . . . 13
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"Indebtedness" . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Intellectual Property". . . . . . . . . . . . . . . . . . . . . . 14
"Interbank Rate" . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Interbank Rate (Reserve Adjusted)". . . . . . . . . . . . . . . . 14
"Interest Period". . . . . . . . . . . . . . . . . . . . . . . . . 14
"Inventory". . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Investment" . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Kamyr". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"L/C Draft". . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Lender" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Letter of Credit" . . . . . . . . . . . . . . . . . . . . . . . . 15
"Letter of Credit Obligations" . . . . . . . . . . . . . . . . . . 15
"Liabilities". . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Liabilities to Net Worth Ratio" . . . . . . . . . . . . . . . . . 16
"Lien" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
"Loan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
"Loan Account" . . . . . . . . . . . . . . . . . . . . . . . . . . 16
"Margin Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . 16
"Material Adverse Effect". . . . . . . . . . . . . . . . . . . . . 16
"Monthly Payment Date" . . . . . . . . . . . . . . . . . . . . . . 16
"Multiemployer Plan" . . . . . . . . . . . . . . . . . . . . . . . 16
"Net Worth". . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
"Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
"Obligor". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
"Occupational Safety and Health Law" . . . . . . . . . . . . . . . 17
"Old TI" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
"Over Advances". . . . . . . . . . . . . . . . . . . . . . . . . . 17
"Overdraft Loan" . . . . . . . . . . . . . . . . . . . . . . . . . 17
"Paddock". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
"Participant". . . . . . . . . . . . . . . . . . . . . . . . . . . 17
"Patent Property". . . . . . . . . . . . . . . . . . . . . . . . . 17
"PBGC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
"Pension Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . 18
"Pro Forma Balance Sheet". . . . . . . . . . . . . . . . . . . . . 18
"Pro Forma Financial Information". . . . . . . . . . . . . . . . . 18
"Projections". . . . . . . . . . . . . . . . . . . . . . . . . . . 18
"Purchase Agreement" . . . . . . . . . . . . . . . . . . . . . . . 18
"Real Property". . . . . . . . . . . . . . . . . . . . . . . . . . 18
"Reference Rate" . . . . . . . . . . . . . . . . . . . . . . . . . 18
"Reference Rate Margin". . . . . . . . . . . . . . . . . . . . . . 19
"Reference Rate Revolving Loan". . . . . . . . . . . . . . . . . . 19
"Related Agreement". . . . . . . . . . . . . . . . . . . . . . . . 19
"Related Party". . . . . . . . . . . . . . . . . . . . . . . . . . 19
"Release". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
"Reportable Event" . . . . . . . . . . . . . . . . . . . . . . . . 19
"Revolving Credit Amount". . . . . . . . . . . . . . . . . . . . . 19
"Revolving Loan" . . . . . . . . . . . . . . . . . . . . . . . . . 20
"Revolving Loan Availability". . . . . . . . . . . . . . . . . . . 20
"Shareholders Agreement" . . . . . . . . . . . . . . . . . . . . . 20
"Subordinated Indebtedness Documents". . . . . . . . . . . . . . . 20
"Subordinated Indebtedness". . . . . . . . . . . . . . . . . . . . 20
"Subordination Agreement". . . . . . . . . . . . . . . . . . . . . 20
"Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
"Supplemental Documentation" . . . . . . . . . . . . . . . . . . . 20
"Taxes". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
57
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"Termination Date" . . . . . . . . . . . . . . . . . . . . . . . . 20
"Third Party Collateral" . . . . . . . . . . . . . . . . . . . . . 20
"TI" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
"TI Wire". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
"TIL UK ". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
"TI Financial Statements". . . . . . . . . . . . . . . . . . . . . 21
"Trade Secret" . . . . . . . . . . . . . . . . . . . . . . . . . . 21
"Trade Secrets Property" . . . . . . . . . . . . . . . . . . . . . 21
"Trademark". . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
"Trademark Property" . . . . . . . . . . . . . . . . . . . . . . . 21
"UCC". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Unmatured Event of Default" . . . . . . . . . . . . . . . . . . . 22
1.2 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . 22
1.3 Interpretation of Agreement. . . . . . . . . . . . . . . . . . . . 23
1.4 Lender's Discretion. . . . . . . . . . . . . . . . . . . . . . . . 23
1.5 Compliance with Financial Restrictions.. . . . . . . . . . . . . . 23
2. LOANS; LETTERS OF CREDIT; OTHER MATTERS.. . . . . . . . . . . . . . . . 23
2.1 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.1.1 Revolving Loans. . . . . . . . . . . . . . . . . . . . . 23
2.1.2 Limitation on Reduction of Revolving Credit Amount.. . . 24
2.1.3 Maximum Outstanding Loans. . . . . . . . . . . . . . . . 24
2.2 Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . 24
2.3 Loan Account; Demand Deposit Account.. . . . . . . . . . . . . . . 27
2.4 Interest.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.5 Borrowing Procedure. . . . . . . . . . . . . . . . . . . . . . . . 28
2.5.1 Requests for Loans.. . . . . . . . . . . . . . . . . . . 28
2.5.2 Additional Restrictions Pertaining to Eurodollar Rate
Revolving Loans. . . . . . . . . . . . . . . . . . . . . 28
2.5.3 Continuation and/or Conversion of Loans. . . . . . . . . 28
2.5.4 Information from Borrowers.. . . . . . . . . . . . . . . 29
2.5.5 Identity of Authorized Officers. . . . . . . . . . . . . 29
2.6 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.7 Overdraft Loans. . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.8 Over Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.9 All Loans One Obligation.. . . . . . . . . . . . . . . . . . . . . 31
2.10 Making of Payments; Application of Collections; Charging of
Accounts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.11 Lender's Election Not to Enforce.. . . . . . . . . . . . . . . . . 33
2.12 Reaffirmation. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.13 Setoff.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.14 Closing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.15 Nonuse Fee.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3. COLLATERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.1 Grant of Security Interest.. . . . . . . . . . . . . . . . . . . . 34
3.2 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . 36
3.3 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.4 Supplemental Documentation.. . . . . . . . . . . . . . . . . . . . 40
4. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . 40
4.1 Organization.. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
58
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4.3 No Conflicts.. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.4 Validity and Binding Effect. . . . . . . . . . . . . . . . . . . . 42
4.5 No Default.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.6 Financial Statements.. . . . . . . . . . . . . . . . . . . . . . . 43
4.7 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.8 Litigation; Contingent Liabilities.. . . . . . . . . . . . . . . . 44
4.9 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.10 Subsidiaries.. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.11 Partnerships.. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.12 Business Locations.. . . . . . . . . . . . . . . . . . . . . . . . 45
4.13 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.14 Eligibility of Collateral. . . . . . . . . . . . . . . . . . . . . 46
4.15 Control of Collateral; Lease of Property.. . . . . . . . . . . . . 46
4.16 Intellectual Property; Licenses. . . . . . . . . . . . . . . . . . 46
4.17 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.18 Contracts; Labor Matters.. . . . . . . . . . . . . . . . . . . . . 48
4.19 Pension and Welfare Plans. . . . . . . . . . . . . . . . . . . . . 48
4.20 Regulation U.. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.21 Compliance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.22 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.23 Investment Company Act Representation. . . . . . . . . . . . . . . 49
4.24 Public Utility Holding Company Act Representation. . . . . . . . . 49
4.25 Environmental and Safety and Health Matters. . . . . . . . . . . . 49
4.26 Related Agreements.. . . . . . . . . . . . . . . . . . . . . . . . 52
5. BORROWER COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.1 Financial Statements and Other Reports.. . . . . . . . . . . . . . 52
5.1.1 Financial Reports: . . . . . . . . . . . . . . . . . . . 52
(a) Annual Audit Report. . . . . . . . . . . . . . . . . . . 52
(b) Quarterly Financial Statement. . . . . . . . . . . . . . 52
(c) Monthly Financial Statement. . . . . . . . . . . . . . . 53
(d) Annual Budget and Business Plan. . . . . . . . . . . . . 53
(e) Officer's Certificate. . . . . . . . . . . . . . . . . . 53
(f) Management Letters . . . . . . . . . . . . . . . . . . . 53
5.1.2. Borrowing Base Certificate.. . . . . . . . . . . . . . . . 54
5.1.3 Agings.. . . . . . . . . . . . . . . . . . . . . . . . . 54
5.1.4 Inventory Certification. . . . . . . . . . . . . . . . . 54
5.1.5 Other Reports: . . . . . . . . . . . . . . . . . . . . . 54
(a) SEC and Other Reports. . . . . . . . . . . . . . . . . . 54
(b) Report of Change in Subsidiaries or Partnerships . . . . 54
(c) Intellectual Property. . . . . . . . . . . . . . . . . . 54
(d) Other Reports. . . . . . . . . . . . . . . . . . . . . . 54
5.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(a) Default.. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(b) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 55
(c) Judgments.. . . . . . . . . . . . . . . . . . . . . . . . . . 55
(d) Pension Plans and Welfare Plans.. . . . . . . . . . . . . . . 55
(e) Change in Collateral Locations. . . . . . . . . . . . . . . . 55
(f) Change in Place(s) of Business. . . . . . . . . . . . . . . . 56
(g) Change of Name. . . . . . . . . . . . . . . . . . . . . . . . 56
(h) Environmental and Safety and Health Matters.. . . . . . . . . 56
(i) Material Adverse Change . . . . . . . . . . . . . . . . . . . 56
(j) Default by Others.. . . . . . . . . . . . . . . . . . . . . . 56
59
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(k) Moveable Collateral.. . . . . . . . . . . . . . . . . . . . . 56
(l) Change in Management or Line(s) of Business.. . . . . . . . . 57
(m) Changes to Other Agreements.. . . . . . . . . . . . . . . . . 57
(n) Other Notices.. . . . . . . . . . . . . . . . . . . . . . . . 57
5.3 Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.4 Nature of Business.. . . . . . . . . . . . . . . . . . . . . . . . 57
5.5 Books, Records and Access. . . . . . . . . . . . . . . . . . . . . 57
5.6 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.7 Insurance Survey.. . . . . . . . . . . . . . . . . . . . . . . . . 58
5.8 Repair.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.10 Compliance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.11 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.12 Pension Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.13 Merger, Purchase and Sale. . . . . . . . . . . . . . . . . . . . . 60
5.14 Restricted Payments. . . . . . . . . . . . . . . . . . . . . . . . 60
5.15 Borrowers' and Subsidiaries' Stock.. . . . . . . . . . . . . . . . 61
5.16 Indebtedness.. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.17 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.18 Guaranties.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.19 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.20 Subsidiaries.. . . . . . . . . . . . . . . . . . . . . . . . . . . 63
5.21 Leases.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
5.22 Change in Accounts Receivable. . . . . . . . . . . . . . . . . . . 64
5.23 Related Agreements.. . . . . . . . . . . . . . . . . . . . . . . . 64
5.24 Unconditional Purchase Options.. . . . . . . . . . . . . . . . . . 64
5.25 Transactions with Related Parties. . . . . . . . . . . . . . . . . 64
6. DEFAULT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.1 Event of Default.. . . . . . . . . . . . . . . . . . . . . . . . . 64
(a) Non-Payment.. . . . . . . . . . . . . . . . . . . . . . . . . 64
(b) Non-Payment of Other Indebtedness.. . . . . . . . . . . . . . 64
(c) Acceleration of Other Indebtedness. . . . . . . . . . . . . . 65
(d) Other Obligations.. . . . . . . . . . . . . . . . . . . . . . 65
(e) Insolvency. . . . . . . . . . . . . . . . . . . . . . . . . . 65
(f) Pension Plans.. . . . . . . . . . . . . . . . . . . . . . . . 66
(g) Non-Compliance With This Agreement. . . . . . . . . . . . . . 66
(h) Non-Compliance With Related Agreements. . . . . . . . . . . . 66
(i) Warranty. . . . . . . . . . . . . . . . . . . . . . . . . . . 67
(j) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 67
(k) Validity. . . . . . . . . . . . . . . . . . . . . . . . . . . 67
(l) Conduct of Business.. . . . . . . . . . . . . . . . . . . . . 67
(m) Ownership.. . . . . . . . . . . . . . . . . . . . . . . . . . 68
(n) Material Adverse Change.. . . . . . . . . . . . . . . . . . . 68
6.2 Effect of Event of Default; Remedies.. . . . . . . . . . . . . . . 68
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND LENDER'S RIGHTS. . . . . 69
7.1 Notice of Disposition of Collateral. . . . . . . . . . . . . . . . 69
7.2 Application of Proceeds of Collateral. . . . . . . . . . . . . . . 69
7.3 Care of Collateral.. . . . . . . . . . . . . . . . . . . . . . . . 69
7.4 Performance of Borrowers' Obligations. . . . . . . . . . . . . . . 70
7.5 Lender's Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 70
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8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS.. . . . . 71
8.1 Conditions Precedent to Initial Loans. . . . . . . . . . . . . . . 71
8.1.1 Acquisition. . . . . . . . . . . . . . . . . . . . . . . 71
8.1.2 Audit. . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.1.3 Security Interest. . . . . . . . . . . . . . . . . . . . 72
8.1.4 Solvency.. . . . . . . . . . . . . . . . . . . . . . . . 72
8.1.5 Loan Availability. . . . . . . . . . . . . . . . . . . . 72
8.1.6 Equity Investment in TI. . . . . . . . . . . . . . . . . 72
8.1.7 Blocked Account; Lock Box. . . . . . . . . . . . . . . . 72
8.1.8 Effect of Law. . . . . . . . . . . . . . . . . . . . . . 72
8.1.9 Exhibits; Schedules. . . . . . . . . . . . . . . . . . . 73
8.1.10 Fees.. . . . . . . . . . . . . . . . . . . . . . . . . . 73
8.1.11 Documents. . . . . . . . . . . . . . . . . . . . . . . . 73
(a) Resolutions. . . . . . . . . . . . . . . . . . . . . . . 73
(b) Incumbency Certificate.. . . . . . . . . . . . . . . . . 73
(c) Certificate. . . . . . . . . . . . . . . . . . . . . . . 73
(d) Accountant's Letter. . . . . . . . . . . . . . . . . . . 73
(e) Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . 74
(f) Articles.. . . . . . . . . . . . . . . . . . . . . . . . 74
(g) Registration; Good Standing. . . . . . . . . . . . . . . 74
(h) Legal Opinions.. . . . . . . . . . . . . . . . . . . . . 74
(i) Insurance. . . . . . . . . . . . . . . . . . . . . . . . 74
(j) Disbursement Letter.. . . . . . . . . . . . . . . . . . . 74
(k) Subordination Agreement. . . . . . . . . . . . . . . . . 74
(l) Other Documents. . . . . . . . . . . . . . . . . . . . . 74
8.2 Continuing Conditions Precedent to all Loans and Letters of
Credit; Certification. . . . . . . . . . . . . . . . . . . . . . . 74
(a) No Change in Condition. . . . . . . . . . . . . . . . . . . . 75
(b) Default.. . . . . . . . . . . . . . . . . . . . . . . . . . . 75
(c) Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . 75
(d) Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . 75
(e) No Material Transaction.. . . . . . . . . . . . . . . . . . . 75
(f) Accounting Methods. . . . . . . . . . . . . . . . . . . . . . 75
9. INDEMNITY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
9.1. Environmental and Safety and Health Indemnity.
Each . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
9.2 General Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . 76
9.3 Capital Adequacy.. . . . . . . . . . . . . . . . . . . . . . . . . 77
9.4 Eurodollar Rate Revolving Loans. . . . . . . . . . . . . . . . . . 77
9.4.1 Eurodollar Rate Lending Unlawful.. . . . . . . . . . . . 77
9.4.2 Deposits Unavailable.. . . . . . . . . . . . . . . . . . 78
9.4.3 Increased Eurodollar Rate Revolving Loan Costs, etc. . . 78
9.4.4 Funding Losses.. . . . . . . . . . . . . . . . . . . . . 78
9.4.5 Funding. . . . . . . . . . . . . . . . . . . . . . . . . 79
9.5 Payment of Indemnity Amounts.. . . . . . . . . . . . . . . . . . . 79
10. ADDITIONAL PROVISIONS.. . . . . . . . . . . . . . . . . . . . . . . . . 79
11. GENERAL.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
11.1 Borrower Waiver.. . . . . . . . . . . . . . . . . . . . . . . 79
11.2 Power of Attorney.. . . . . . . . . . . . . . . . . . . . . . 80
11.3 Expenses; Attorneys' Fees.. . . . . . . . . . . . . . . . . . 81
61
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11.4 Lender Fees and Charges.. . . . . . . . . . . . . . . . . . . 81
11.5 Lawful Interest.. . . . . . . . . . . . . . . . . . . . . . . 82
11.6 No Waiver by Lender; Amendments.. . . . . . . . . . . . . . . 82
11.7 Termination of Credit.. . . . . . . . . . . . . . . . . . . . 82
11.8 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . 83
11.9 Assignments and Participations; Information.. . . . . . . . . 83
11.10 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 83
11.11 Successors. . . . . . . . . . . . . . . . . . . . . . . . . . 83
11.12 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 84
11.13 Execution in Counterparts.. . . . . . . . . . . . . . . . . . 84
11.14 Construction. . . . . . . . . . . . . . . . . . . . . . . . . 84
11.15 Consent to Jurisdiction.. . . . . . . . . . . . . . . . . . . 84
11.16 Subsidiary Reference. . . . . . . . . . . . . . . . . . . . . 84
11.17 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . 85
SUPPLEMENT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. LOAN AGREEMENT REFERENCE.. . . . . . . . . . . . . . . . . . . . . 1
2. REVOLVING CREDIT AMOUNTS; BORROWING BASE.. . . . . . . . . . . . . 1
2.1 Revolving Credit Amounts. . . . . . . . . . . . . . . . . . . 1
2.2 Borrowing Bases.. . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Lender's Rights.. . . . . . . . . . . . . . . . . . . . . . . 2
3. INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Revolving Loans.. . . . . . . . . . . . . . . . . . . . . . . 2
3.1.1 Interest to Maturity. . . . . . . . . . . . . . . . 2
3.1.2 DEFAULT RATE. . . . . . . . . . . . . . . . . . . . 3
3.2 Overdraft Loans; Over Advances. . . . . . . . . . . . . . . . 3
3.3 Computation.. . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Payment.. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. ADDITIONAL COVENANTS.. . . . . . . . . . . . . . . . . . . . . . . 3
4.2 Net Worth.. . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.5 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . 4
4.4 Interest Coverage.. . . . . . . . . . . . . . . . . . . . . . 5
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EXHIBITS
Exhibit A - Form of Borrowing Base Certificate
Exhibit B - Pro Forma Balance Sheet of TI
Exhibit C - Projections
Exhibit D - Form of Compliance Certificate
Exhibit E - Form of Loss Payable Endorsement
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SCHEDULES
Schedule 4.1 - Jurisdictions of Formation; States in Which
Qualified; Trade Names, Etc.
Schedule 4.7 - Insurance
Schedule 4.8 - Litigation; Contingent Liabilities
Schedule 4.9 - Existing Liens
Schedule 4.10 - Subsidiaries
Schedule 4.11 - Partnerships; Joint Ventures
Schedule 4.12 - Places of Business; Locations of Books and Records
Schedule 4.13 - Real Property
Schedule 4.15 - Leased Property
Schedule 4.16 - Intellectual Property
Schedule 4.18 - Contracts; Labor Matters
Schedule 4.19 - ERISA Matters
Schedule 4.25 - Environmental and Safety and Health Matters
Schedule 5.16 - Indebtedness
Sshedule 5.19 - Investments in Subsidiaries
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LOAN AND SECURITY AGREEMENT
THIS AGREEMENT ("AGREEMENT") is made as of the 19th day of September, 1994
by and among BANK OF AMERICA ILLINOIS, an Illinois banking corporation having
its principal office at 231 South LaSalle Street, Chicago, Illinois 60697
("LENDER"), OREGON METALLURGICAL CORPORATION, an Oregon corporation ("OREMET")
and NEW TI, INC., an Oregon corporation ("TI") (OREMET and TI being sometimes
hereinafter referred to, individually, as a "BORROWER" and, collectively, as
"BORROWERS").
W I T N E S S E T H:
WHEREAS, each of the Borrowers may, from time to time, request loans or
other financial accommodations from Lender, and the parties wish to provide for
the terms and conditions upon which such loans or other financial accommodations
shall be made;
NOW, THEREFORE, in consideration of any loan or advance or grant of credit
(including any loan or advance or grant of credit by renewal or extension)
hereafter made to each of the Borrowers by Lender, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS AND OTHER TERMS.
1.1 DEFINITIONS. In addition to terms defined elsewhere in this
Agreement or any Supplement or Exhibit hereto, when used herein, the following
terms shall have the following meanings (such meanings shall be equally
applicable to the singular and plural forms of the terms used, as the context
requires):
"ACCOUNT DEBTOR" means, with respect to each Borrower, any Person who
is or who may become obligated to such Borrower under, with respect to, or on
account of any Account Receivable, Contract Right, General Intangible or other
Collateral, in each case of such Borrower.
"ACCOUNT RECEIVABLE" means, with respect to each Borrower, any account
of such Borrower and any other right of such Borrower to payment for goods sold
or leased or for services rendered, whether or not evidenced by an instrument or
chattel paper and whether or not yet earned by performance.
"ACCOUNTS RECEIVABLE AVAILABILITY" has, with respect to each Borrower,
the meaning ascribed to such term in SUPPLEMENT A.
"ACQUISITION" means the acquisition of certain assets of Old TI and
Ti-Titanium Limited, a wholly-owned Canadian subsidiary of Old TI ("TI
LIMITED"), and the assumption of certain liabilities of Old TI and Ti Limited,
in each case by TI pursuant to the Purchase Agreement.
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"ACQUISITION DOCUMENTS" means, collectively, (i) the Purchase
Agreement, (ii) that certain Agreement of even date herewith between Kamyr and
OREMET, (iii) that certain Environmental Agreement of even date herewith between
Kamyr and TI, (iv) that certain Guarantee of even date herewith, executed by
Ahlstrom Kamyr, Inc., a New York corporation, in favor of TI, (v) that certain
Preferred Supplier Agreement of even date herewith between TI and Old TI, (vi)
the Shareholders Agreement and (vii) all other agreements, documents and
instruments executed and/or delivered by either or both of the Borrowers, Kamyr,
Old TI or any other Person, in each case pursuant thereto or in connection
therewith.
"AGREEMENT" means this Loan and Security Agreement, as it may be
amended, restated, supplemented or otherwise modified from time to time.
"ALTERNATE REFERENCE RATE" means, on any date and with respect to any
Reference Rate Revolving Loans, a fluctuating rate of interest per annum
(rounded upward to the nearest 0.125% if not already an integral multiple of
0.125%) equal to the higher of (a) the rate of interest most recently announced
by Lender as its Reference Rate; and (b) the Federal Funds Rate most recently
determined by Lender PLUS 0.50%.
The Alternate Reference Rate is not necessarily intended to be the
lowest rate of interest determined by Lender in connection with extensions of
credit. For purposes of this Agreement (i) any change in the Alternate
Reference Rate due to a change in the Reference Rate shall be effective on the
date such change in the Reference Rate is announced and (ii) any change in the
Alternate Reference Rate due to a change in the Federal Funds Rate shall be
effective on the effective date of such change in the Federal Funds Rate. If
for any reason Lender shall have determined (which determination shall be
conclusive in the absence of manifest error) that it is unable to ascertain the
Federal Funds Rate for any reason, including, without limitation, the inability
or failure of Lender to obtain sufficient bids or publications in accordance
with the terms hereof, the Alternate Reference Rate shall be the Reference Rate
until the circumstances giving rise to such inability no longer exist. Lender
will give notice promptly to each of the Borrowers of changes in the Alternate
Reference Rate.
"APPLICATION" means, with respect to each Borrower, an application by
such Borrower, in a form and containing terms and provisions acceptable to
Lender, for the issuance by Lender of a Letter of Credit for the account of such
Borrower.
"ASSIGNEE DEPOSIT ACCOUNT" has, with respect to each Borrower, the
meaning ascribed to such term in SECTION 3.2(d).
"ATTORNEYS' FEES" means the reasonable value of the services (and
costs, charges and expenses related thereto) of the attorneys (and all
paralegals, secretaries, accountants and other staff employed by such attorneys)
employed by Lender (including but not limited to attorneys and paralegals who
are employees of
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Lender) from time to time (i) in connection with the negotiation, preparation,
execution, delivery, administration and enforcement of this Agreement, any
Related Agreement and all other agreements, documents or instruments provided
for herein or therein or delivered or to be delivered hereunder or thereunder or
in connection herewith or therewith, (ii) to prepare documentation related to
the Loans made and other Liabilities of either or both of the Borrowers incurred
hereunder, (iii) to prepare any amendment to or waiver under this Agreement or
any Related Agreement and any agreements, documents or instruments related
hereto or thereto, (iv) to represent Lender in any litigation, contest, dispute,
suit or proceeding or to commence, defend or intervene in any litigation,
contest, dispute, suit or proceeding or to file a petition, complaint, answer,
motion or other pleading, or to take any other action in or with respect to, any
litigation, contest, dispute, suit or proceeding (whether instituted by Lender,
either or both of the Borrowers or any other Person and whether in bankruptcy or
otherwise) in any way or respect relating to the Collateral or Third Party
Collateral, in each case of either of the Borrowers, this Agreement or any
Related Agreement, or the affairs of either of the Borrowers or any other
Obligor or any Subsidiary of either of the Borrowers, (v) to protect, collect,
lease, sell, take possession of, or liquidate any of the Collateral or any Third
Party Collateral, in each case of either of the Borrowers, (vi) to attempt to
enforce any security interest in any of the Collateral or any Third Party
Collateral, in each case of either of the Borrowers, or to give any advice with
respect to such enforcement, and (vii) to enforce any of Lender's rights to
collect any of the Liabilities of either or both of the Borrowers.
"BANKING DAY" means any day other than (a) a Saturday, (b) a Sunday or
(c) a legal holiday on which banks are authorized or required to be closed for
the conduct of commercial banking business in Chicago, Illinois and, with
respect to Eurodollar Rate Revolving Loans, on which dealings in foreign
currencies and exchange may be carried on by banks in the interbank eurodollar
market.
"BORROWER" AND "BORROWERS" have the respective meanings ascribed to
such terms in the Preamble.
"BORROWING BASE" has, with respect to each Borrower, the meaning
ascribed to such term in SUPPLEMENT A.
"BORROWING BASE CERTIFICATE" means a document substantially in the
form of EXHIBIT A hereto, with appropriate insertions, or such other form as
shall be acceptable to Lender, as it may be amended or modified from time to
time.
"CAPITAL EXPENDITURES" means, for any period for any Person, the sum
of (a) the aggregate amount of all expenditures of such Person for fixed or
capital assets made during such period which, in accordance with GAAP, would be
classified as capital expenditures and (b) the aggregate amount of all
Capitalized Lease Liabilities of such Person incurred during such period.
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"CAPITALIZED LEASE" means any lease which is or should be capitalized
on the balance sheet of the lessee in accordance with GAAP and/or pursuant to
the Code.
"CAPITALIZED LEASE LIABILITIES" means, with respect to any Person, all
monetary obligations of such Person under any Capitalized Leases, and, for
purposes of this Agreement and each Related Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP, and the stated maturity thereof shall be the date of the last payment
of rent or any other amount due under such Capitalized Lease prior to the first
date upon which such Capitalized Lease may be terminated by the lessee without
payment of a penalty.
"CLOSING DATE" means the date the initial Loans are made under this
Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of the Code
shall be construed to also refer to any successor sections.
"COLLATERAL" has, with respect to each Borrower, the meaning ascribed
to such term in SECTION 3.1.
"COMPLIANCE CERTIFICATE" has the meaning ascribed to such term in
SECTION 5.1.1(e).
"COMPUTER HARDWARE AND SOFTWARE PROPERTY" means, with respect to any
Person:
(a) all of such Person's: computer and other electronic data
processing hardware, integrated computer systems, central processing units,
memory units, display terminals, printers, features, computer elements,
card readers, tape drives, hard and soft disk drives, cables, electrical
supply hardware, generators, power equalizers, accessories and all
peripheral devices and other related computer hardware;
(b) all of such Person's: software programs (including both source
code, object code and all related applications and data files), whether now
owned, licensed or leased or hereafter acquired by such Person, designed
for use on the computers and electronic data processing hardware described
in CLAUSE (a) of this definition;
(c) all firmware of such Person associated with the property
described in CLAUSES (a) AND (b) of this definition;
(d) all documentation (including flow charts, logic diagrams,
manuals, guides and specifications) with respect to the hardware, software
and firmware described in the preceding CLAUSES (a) THROUGH (c) of this
definition; and
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(e) all rights with respect to all of the foregoing, including
without limitation, any and all copyrights, licenses, options, warranties,
service contracts, program services, test rights, maintenance rights,
support rights, improvement rights, renewal rights and indemnifications and
any substitutions, replacements, additions or model conversions of any of
the foregoing.
"CONTAMINANTS" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, petroleum or petroleum-derived substance or waste,
or any constituent of any such substance or waste.
"CONTRACT RIGHT" means, with respect to each Borrower, any right of
such Borrower to payment under a contract, which right is not yet earned by
performance and not evidenced by an instrument or chattel paper.
"COPYRIGHT PROPERTY" means, with respect to any Person:
(a) all of such Person's copyrights (including, without limitation,
copyrights for semi-conductor chip product mask works), whether registered
or unregistered, now or hereafter in force throughout the world, including,
without limitation, all of such Person's right, title and interest in and
to all copyrights registered in the United States Copyright Office or
anywhere else in the world and also including, without limitation, the
copyrights referred to in PART A-1 of SCHEDULE 4.16 and all applications
for registration thereof, whether pending or in preparation, and all
copyrights arising from such applications,
(b) all extensions and renewals of any of the above,
(c) all copyright licenses and other agreements providing such Person
with the right to use any of the types of items referred to in CLAUSES (a)
and (b) of this definition, including, without limitation, the copyright
licenses referred to in PART A-2 of SCHEDULE 4.16,
(d) the right to sue for past, present and future infringements with
respect to the Copyright Property described in CLAUSES (a) and (b) of this
definition and, to the extent applicable, CLAUSE (c) of this definition,
and
(e) all proceeds of the foregoing, including, without limitation,
licenses, royalties, income, payments, claims by such Person against third
parties for past, present or future infringements with respect to the
Copyright Property described in CLAUSE (a) of this definition and, to the
extent applicable, CLAUSE (b) of this definition, and all rights
corresponding thereto throughout the world.
"CREDIT" means, with respect to each Borrower, the facility
established for such Borrower under this Agreement
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pursuant to which Lender will make Revolving Loans to such Borrower or issue
Letters of Credit for the account of such Borrower.
"DEFAULT RATE" means, with respect to a Loan, the rate of interest
which is applicable to such Loan after any amount thereof is not paid when due,
whether by acceleration or otherwise, as determined pursuant to SUPPLEMENT A.
"DEMAND DEPOSIT ACCOUNT" has, with respect to each Borrower, the
meaning ascribed to such term in SECTION 2.3.
"DOLLARS" and the sign "$" mean lawful money of the United States of
America.
"ELIGIBLE ACCOUNT RECEIVABLE" means, with respect to each Borrower, an
Account Receivable owing to such Borrower which meets the following
requirements:
(1) it is genuine and in all respects what it purports to be;
(2) it arises from either (a) the performance of services by such
Borrower, which services have been fully performed and, if applicable,
acknowledged and/or accepted by the Account Debtor with respect thereto; or
(b) the sale or lease of goods by such Borrower; and if it arises from the
sale or lease of goods, (i) such goods comply with such Account Debtor's
specifications (if any) and have been shipped to, or delivered to and
accepted by, such Account Debtor, and (ii) such Borrower has possession of,
or if requested by Lender has delivered to Lender, shipping and delivery
receipts evidencing such shipment, delivery and acceptance;
(3) it (a) is evidenced by an invoice rendered to the Account Debtor
with respect thereto which (i) is dated not earlier than the date of
shipment or performance, and (ii) has payment terms not unacceptable to
Lender and (b) meets the Eligible Account Receivable requirements, if any,
set forth in SUPPLEMENT A;
(4) it is not subject to any assignment, claim or Lien, other than
(i) a Lien in favor of Lender and (ii) a lien in favor of "Junior Lender"
(as defined in the Subordination Agreement), granted pursuant to the
Subordinated Indebtedness Documents and securing Subordinated Indebtedness;
(5) it is subject to a first and valid fully perfected security
interest in favor of Lender;
(6) it is a valid, legally enforceable and unconditional obligation
of the Account Debtor with respect thereto, and is not subject to setoff,
counterclaim, credit or allowance (except any credit or allowance which has
been deducted in computing the net amount of the applicable invoice as
shown in the original schedule or Borrowing Base Certificate furnished
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to Lender identifying or including such Account Receivable) or adjustment by the
Account Debtor with respect thereto, or to any claim by such Account Debtor
denying liability thereunder in whole or in part, and such Account Debtor has
not refused to accept any of the goods or services which are the subject of such
Account Receivable or offered or attempted to return any of such goods;
(7) there are no proceedings or actions which are then threatened or
pending against the Account Debtor with respect thereto or to which such
Account Debtor is a party which might result in any material adverse change
in such Account Debtor's financial condition or in its ability to pay any
Account Receivable in full when due;
(8) it does not arise out of a contract or order which, by its terms,
forbids, restricts or makes void or unenforceable the assignment by such
Borrower to Lender of the Account Receivable arising with respect thereto;
(9) the Account Debtor with respect thereto is not a Subsidiary of
such Borrower, a Related Party or an Obligor, or a director, officer,
employee or agent of such Borrower, a Subsidiary of such Borrower, a
Related Party or an Obligor;
(10) except as otherwise previously approved in writing by Lender, the
Account Debtor with respect thereto is a resident or citizen of, and is
located within, the United States of America, unless the applicable Account
Debtor has supplied such Borrower with an irrevocable letter of credit with
respect thereto, issued by a financial institution reasonably satisfactory
to Lender, sufficient to cover such Account Receivable and in form and
substance satisfactory to Lender, and such Borrower has delivered such
letter of credit to Lender pursuant to SECTION 3.2(g);
(11) it is not an Account Receivable arising from a "sale on
approval," "sale or return" or "consignment," or subject to any other
repurchase or return agreement;
(12) it is not an Account Receivable with respect to which possession
and/or control of the goods sold giving rise thereto is held, maintained or
retained by such Borrower or any Subsidiary of such Borrower, any Related
Party or any Obligor (or by any agent or custodian of such Borrower, any
Subsidiary of such Borrower, any Related Party or any Obligor) for the
account of or subject to further and/or future direction from the Account
Debtor thereof;
(13) it is not an Account Receivable which in any way fails to meet or
violates any warranty, representation or covenant contained in this
Agreement or any Related Agreement relating directly or indirectly to such
Borrower's Accounts Receivable;
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(14) the Account Debtor thereunder is not located in the States of
West Virginia, New Jersey or Minnesota, respectively, provided, however,
that such restriction shall not apply if (a) such Borrower has filed and
has effective a Notice of Business Activities Report with the appropriate
office or agency of the State of West Virginia, New Jersey or Minnesota, as
applicable, for the then current year, or (b) such Borrower is exempt from
the filing of such Report and has provided Lender with satisfactory
evidence thereof;
(15) it arises in the ordinary course of such Borrower's business;
(16) if the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, Borrower has assigned its
right to payment of such Account Receivable to Lender pursuant to the
Assignment of Claims Act of 1940, as amended;
(17) if Lender in its sole and absolute discretion has established a
credit limit for an Account Debtor, the aggregate dollar amount of Accounts
Receivable due from such Account Debtor, including such Account Receivable,
does not exceed such credit limit; and
(18) if the Account Receivable is evidenced by chattel paper or an
instrument, (a) Lender shall have specifically agreed in writing to include
such Account Receivable as an Eligible Account Receivable of such Borrower,
(b) only payments then due and payable under such chattel paper or
instrument shall be included as an Eligible Account Receivable of such
Borrower, and (c) the originals of such chattel paper or instruments have
been endorsed and/or assigned and delivered to Lender in a manner
satisfactory to Lender;
(19) it is due and payable in full within thirty (30) days of the date
of the invoice evidencing such Account Receivable and is not unpaid on the
date that is seventy-five (75) days after the date of such invoice; and
(20) the Account Debtor thereunder is not an Account Debtor with
respect to which invoices representing twenty percent (20%) or more of the
unpaid net amount of all Accounts Receivable therefrom are unpaid more than
seventy-five (75) days after the respective dates of such invoices.
An Account Receivable of a Borrower which is at any time an Eligible Account
Receivable of such Borrower, but which subsequently fails to meet any of the
foregoing requirements, shall forthwith cease to be an Eligible Account
Receivable of such Borrower. Further, with respect to any Account Receivable of
either of the Borrowers, if Lender at any time or times hereafter determines in
its sole and absolute discretion that the prospect of payment or performance by
the Account Debtor with respect thereto is or will be impaired for any reason
whatsoever, notwithstanding
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anything to the contrary contained above, such Account Receivable shall
forthwith cease to be an Eligible Account Receivable of such Borrower.
"ELIGIBLE INVENTORY" means, with respect to each Borrower, Inventory
of such Borrower which meets the following requirements:
(1) it is owned by such Borrower, and is not subject to any prior
assignment, claim or Lien, other than a Lien in favor of Lender;
(2) if held for sale or lease or furnishing under contracts of
service, it is (except as Lender may otherwise consent in writing) new and
unused;
(3) it is subject to a first and valid fully perfected security
interest in favor of Lender;
(4) it is (a) in the possession and control of such Borrower and (b)
is not stored on premises leased by such Borrower; if not in such
Borrower's possession and control, or if stored on premises leased by such
Borrower, Lender shall be in possession of such agreements, instruments and
documents as Lender may require, each in form and content acceptable to
Lender and duly executed, as appropriate, by the owner of the premises
leased by such Borrower or the bailee, warehouseman, processor or other
Person in possession or control of such Inventory, as applicable;
(5) it is not Inventory which is dedicated to or, identifiable with,
or is otherwise specifically to be used in the manufacture of, goods which
are to be sold or leased to the United States of America or any department,
agency or instrumentality thereof and in respect of which Inventory, such
Borrower shall have received any progress or other advance payment which is
or may be credited or set off against any Account Receivable of such
Borrower generated upon the sale or lease of any such goods;
(6) it is not Inventory produced in violation of the Fair Labor
Standards Act and subject to the "hot goods" provisions contained in Title
29 U.S.C. Section 215 or any successor statute or section;
(7) it is not Inventory bearing a service mark, trademark or name of
any Person other than such Borrower, or such other Persons as shall be
reasonably acceptable to Lender, or with respect to which the use by such
Borrower or the manufacture or sale thereof by such Borrower, or the sale
or disposition thereof by Lender, is or would be subject to any licensing,
patent, royalty, trademark, trade name or copyright agreement with any
Person other than such Borrower; PROVIDED, HOWEVER, that Inventory shall
not be deemed ineligible solely by reason of this clause (7), to the extent
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that the applicable service mark, trademark, name or agreement does not
restrict or otherwise interfere in any material respect with the
manufacture or sale thereof by such Borrower, or the sale or disposition
thereof by Lender;
(8) it is not (1) packaging, packing or shipping materials, (2) goods
used in connection with maintenance or repair of such Borrower's business,
properties or assets or (3) general supplies;
(9) Lender has determined in its sole and absolute discretion that it
is not unacceptable due to age, type, category, quality and/or quantity;
(10) it is not Inventory which in any way fails to meet or violates
any warranty, representation or covenant contained in this Agreement or any
Related Agreement relating directly or indirectly to such Borrower's
Inventory;
(11) it is not subject to any claim or Lien, other than (i) a Lien in
favor of Lender and (ii) a Lien in favor of "Junior Lender" (as defined in
the Subordination Agreement), granted pursuant to the Subordination
Indebtedness Documents and securing Subordinated Indebtedness; and
(12) it satisfies the Eligible Inventory Requirements, if any, set
forth in SUPPLEMENT A.
Inventory of a Borrower which is at any time Eligible Inventory of such Borrower
but which subsequently fails to meet any of the foregoing requirements shall
forthwith cease to be Eligible Inventory of such Borrower.
"ENVIRONMENTAL LAWS" means the Resource Conservation and Recovery Act,
42 U.S.C. section 690, ET SEQ., the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, any so-called "Superfund" or
"Superlien" law, the Toxic Substances Control Act, and any successor statute of
similar import, together with the regulations thereunder, in each case as in
effect from time to time, and any other federal, state or local statute, law,
ordinance, code, rule, regulation, guideline, order or decree, or other
requirement (whether or not having the force of law) regulating, relating to, or
imposing liability or standards of conduct (including, but not limited to,
permit requirements, and emission or effluent restrictions) concerning any
Hazardous Materials or any hazardous, toxic or dangerous waste, substance or
constituent, or any pollutant or contaminant or other substance, whether solid,
liquid or gas, or otherwise relating to public health and safety and/or
protection of the environment, as now or at any time hereafter in effect.
References to sections of any such statute shall be construed to also refer to
any successor sections.
"ENVIRONMENTAL LIEN" means a Lien in favor of any federal, state or
local governmental entity or agency for (1) any
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liability under any Environmental Law or (2) damages arising from or costs
incurred by such governmental entity or agency relating to a spillage, disposal,
Release or threatened Release into the environment of any Hazardous Material or
other hazardous, toxic or dangerous waste, substance or constituent, or any
pollutant or contaminant or other substance, whether solid, liquid or gas.
"EQUIPMENT" means, with respect to each Borrower, all equipment of
such Borrower of every description, including, without limitation, fixtures,
furniture, vehicles and trade fixtures, together with any and all accessions,
parts and equipment attached thereto or used in connection therewith, and any
substitutions therefor and replacements thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA AFFILIATE" means, with respect to each Borrower, any
corporation, partnership, or other trade or business (whether or not
incorporated) that is, along with such Borrower, a member of a controlled group
of corporations or a controlled group of trades or businesses, as described in
sections 414(b) and 414(c), respectively, of the Code or section 4001 of ERISA,
or a member of the same affiliated service group within the meaning of section
414(m) of the Code.
"ESOP" means the Oregon Metallurgical Corporation Employee Stock
Ownership Plan established November 16, 1987.
"EUROCURRENCY RESERVE PERCENTAGE" means, with respect to each Interest
Period for Eurodollar Rate Revolving Loans, a percentage equal to the daily
average during such Interest Period of the percentages in effect on each day of
such Interest Period, as prescribed by the Federal Reserve Board, for
determining reserve requirements applicable to "Eurocurrency liabilities"
pursuant to Regulation D or any other then applicable regulation of the Board of
Governors which prescribes reserve requirements applicable to "Eurocurrency
liabilities," as presently defined in Regulation D. For purposes of this
definition, any Eurodollar Rate Revolving Loans hereunder shall be deemed to be
"Eurocurrency liabilities" as defined in Regulation D.
"EURODOLLAR MARGIN" means three percent (3.0%); PROVIDED, HOWEVER,
that at any time that the Grid Ratio for the four (4) fiscal quarters of OREMET
ending immediately prior to such time is greater than 2.00 to 1.00, "Eurodollar
Margin" means two and one-half percent (2.5%).
"EURODOLLAR RATE REVOLVING LOAN" means any Revolving Loan or portion
thereof which bears interest at a rate determined with reference to the
Interbank Rate (Reserve Adjusted).
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"EVENT OF DEFAULT" has the meaning ascribed to such term in SECTION
6.1.
"FABRICATION BUSINESS" has the meaning assigned to that term in the
Purchase Agreement.
"FEDERAL FUNDS RATE" means for any day the weighted average of the
rates on overnight Federal Funds transactions with members of the Federal
Reserve System, arranged by Federal Funds brokers applicable to Federal Funds
transactions on such date. The Federal Funds Rate shall be determined by Lender
on the basis of reports by Federal Funds brokers to, and published daily by, the
Federal Reserve Bank of New York in the Composite Closing Quotations for U.S.
Government Securities. If such publication is unavailable or the Federal Funds
Rate is not set forth therein, the Federal Funds Rate shall be determined on the
basis of any other source reasonably selected by Lender. In the case of a
Saturday, Sunday or legal holiday on which banking institutions in Chicago,
Illinois are not required to be open, the Federal Funds Rate shall be the rate
applicable to Federal Funds Transactions on the immediately preceding day for
which the Federal Funds Rate is reported.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"FIXTURES" means, with respect to each Borrower, all fixtures of such
Borrower of every description and all substitutions and replacements of any
thereof.
"GAAP" means generally accepted accounting principles as applied in
the preparation of the audited financial statements of OREMET referred to in
SECTION 4.6(a).
"GENERAL INTANGIBLES" means, with respect to each Borrower, all of
such Borrower's intangible personal property, including things in action, causes
of action and all other personal property of such Borrower of every kind and
nature (other than accounts, inventory, equipment, chattel paper, documents,
instruments and money), including, without limitation, corporate or other
business records, inventions, designs, patents, patent applications, trademarks,
trademark applications, trade names, trade styles, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, tax refund
claims, claims against carriers and shippers, guarantee claims, security
interests, security deposits or other security held by or granted to such
Borrower to secure any payment from an Account Debtor of such Borrower, and any
rights to indemnification.
"GRID RATIO" means, with respect to any Person for any fiscal period,
the ratio of (i) EARNINGS before interest expense and provision for Taxes to
(ii) interest expense, in each case OF SUCH PERSON AND ITS CONSOLIDATED
SUBSIDIARIES for such period.
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"GUARANTEE LIABILITY" of any Person means any agreement, undertaking
or arrangement by which such Person guarantees, endorses or otherwise becomes or
is contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
indebtedness, obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.
The amount of any Person's obligation in respect of any Guarantee Liability
shall (subject to any limitation set forth therein) be deemed to be the
outstanding principal amount (or maximum principal amount, if larger) of the
debt, obligation or other liability guaranteed thereby.
"HAZARDOUS MATERIALS" means (a) any "hazardous substance" as defined
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, (b) any "hazardous waste" as defined in the Resource
Conservation and Recovery Act, as amended, (c) any petroleum product or (d) any
pollutant, contaminant or hazardous, dangerous or toxic chemical, material or
substance, defined or qualifying as such in (or for the purposes of) any
Environmental Law, and shall include, but not be limited to, petroleum,
including crude oil or any fraction thereof which is liquid at standard
conditions of temperature or pressure (60 degrees fahrenheit and 14.7 pounds per
square inch absolute), any radioactive material, including, but not limited to,
any source, special nuclear or by-product material as defined at 42 U.S.C.
section 2011 ET SEQ., as amended or hereafter amended, polychlorinated
biphenyls, and asbestos in friable form or condition.
"INDEBTEDNESS" of any Person means, without duplication, (i) any
obligation of such Person for borrowed money, including, without limitation, (a)
any obligation of such Person evidenced by bonds, debentures, notes or other
similar debt instruments, or securities providing for mandatory payments of
money, and (b) any such obligation which is non-recourse to the credit of such
Person but which is secured by any asset of such Person, (ii) any obligation,
contingent or otherwise, of such Person relative to or in connection with the
face amount of any letter of credit (including the Letters of Credit), whether
or not drawn, and any banker's acceptances, (iii) any obligation of such Person
on account of deposits or advances, (iv) whether or not included as a liability
in accordance with GAAP, any obligation of such Person to pay the deferred
purchase price of property or services, other than trade accounts payable or
accruals arising in the ordinary course of business, (v) whether or not included
as a liability in accordance with GAAP, any monetary obligation (excluding
prepaid interest thereon) of such Person or of another Person secured by a Lien
on any property or asset owned or being purchased by such first Person including
any such obligation arising under conditional sales or other title retention
agreements), whether or not such obligation shall have been assumed by such
first Person or
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is limited in recourse, (vi) any Capitalized Lease Liabilities of such Person,
(vii) any other item which, in accordance with GAAP, would be included as a
liability on the liability side of the balance sheet of such Person as of the
date at which Indebtedness is to be determined and (viii) all Guarantee
Liabilities of such Person in respect of any of the foregoing. For all purposes
of this Agreement, the Indebtedness of any Person shall include the Indebtedness
of any partnership or joint venture in which such Person is a general partner or
joint venturer.
"INTELLECTUAL PROPERTY" means, with respect to any Person,
collectively, such Person's Computer Hardware and Software Property, Copyright
Property, Patent Property, Trademark Property and Trade Secrets Property.
"INTERBANK RATE" means, with respect to each Interest Period, for a
Eurodollar Rate Revolving Loan, the rate per annum at which Dollar deposits in
immediately available funds are offered to Lender two Banking Days prior to the
beginning of such Interest Period by major banks in the interbank eurodollar
market as at or about 10:00 a.m., Chicago time, for delivery on the first day of
such Interest Period, for the number of days comprised therein and in an amount
equal to the amount of the Eurodollar Rate Revolving Loan to be outstanding
during such Interest Period.
"INTERBANK RATE (RESERVE ADJUSTED)" means, with respect to any
Eurodollar Rate Revolving Loan for any Interest Period, a rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1% determined pursuant
to the following formula:
Interbank Rate = Interbank Rate
--------------
(Reserve Adjusted) 1 - Eurocurrency Reserve Percentage
"INTEREST PERIOD" means, relative to any Eurodollar Rate Revolving
Loan, the period beginning on (and including) the date on which such Eurodollar
Rate Revolving Loan is made or continued as, or converted into, a Eurodollar
Rate Revolving Loan pursuant to SECTION 2.5 and shall end on (but exclude) the
day which numerically corresponds to such date one, two, three or six months
thereafter (or, if such month has no numerically corresponding day, on the last
Banking Day of such month), in either case as the applicable Borrower may
select; PROVIDED, HOWEVER, that (i) no Interest Period for any Eurodollar Rate
Revolving Loan shall in any event extend beyond the Termination Date, (ii) each
Interest Period with respect to an Eurodollar Rate Revolving Loan which would
otherwise end on a day which is not a Banking Day shall end on the next
succeeding Banking Day unless such next succeeding Banking Day is the first
Banking Day of a calendar month, in which case it shall end on the next
preceding Banking Day.
"INVENTORY" means, with respect to each Borrower, any and all of such
Borrower's goods, (including, without limitation, goods in transit) wheresoever
located which are or may at any time be leased by such Borrower to a lessee,
held for sale or lease, furnished under any contract of service, or held as raw
materials,
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work in process, or supplies or materials used or consumed in such Borrower's
business, or which are held for use in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, and all goods the
sale or other disposition of which has given rise to an Account Receivable,
Contract Right or General Intangible, in each case of such Borrower, which are
returned to and/or repossessed and/or stopped in transit by such Borrower or
Lender or any agent or bailee of either of them, and all documents of title or
other documents representing the same.
"INVESTMENT" of any Person means, without duplication, (a) any
investment, made in cash or by delivery of any kind of property or asset, in any
other Person, whether by acquisition of shares of stock or similar interest,
Indebtedness or other obligation or security, or by loan, advance or capital
contribution, or otherwise, (b) any Guarantee Liability of such Person and (c)
any ownership or similar interest held by such Person in any other Person. The
amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property.
"KAMYR" means Kamyr, Inc., a Delaware corporation.
"L/C DRAFT" means a draft drawn on Lender pursuant to a Letter of
Credit.
"LENDER" has the meaning ascribed to such term in the Preamble.
"LETTER OF CREDIT" means, with respect to each Borrower, a letter of
credit issued by Lender, in its discretion, on the Application of such Borrower.
"LETTER OF CREDIT OBLIGATIONS" means, with respect to each Borrower,
at any time, but without duplication, an amount equal to the sum of (i) the
aggregate outstanding face amount of all Letters of Credit issued for the
account of such Borrower PLUS (ii) the aggregate outstanding face amount of all
unpaid L/C Drafts drawn pursuant to a Letter of Credit issued for the account of
such Borrower.
"LIABILITIES" means, with respect to each Borrower, all of the
liabilities, obligations and indebtedness of such Borrower to Lender of any kind
or nature, however created, arising or evidenced, whether direct or indirect,
absolute or contingent, now or hereafter existing or due or to become due, and
including but not limited to (i) such Borrower's obligations under any Note,
(ii) such Borrower's obligations under this Agreement, (iii) such Borrower's
obligations with respect to any Letter of Credit issued for the account of such
Borrower or any Application of such
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Borrower therefor, (iv) interest, charges, expenses, Attorneys' Fees and other
sums chargeable to such Borrower by Lender under this Agreement or any Related
Agreement, and (v) the obligations of such Borrower under any Related Agreement,
including obligations of performance. "Liabilities" shall also include any and
all amendments, extensions, renewals, refundings or refinancings of any of the
foregoing (at the same or a lesser or greater amount).
"LIABILITIES TO NET WORTH RATIO" means, at any time of determination
thereof, with respect to any Person, the ratio of (i) the total liabilities of
such Person and its consolidated Subsidiaries to (ii) Net Worth of such Person,
in each case at such time.
"LIEN" means any mortgage, pledge, hypothecation, judgment lien or
similar legal process, title retention lien, or other lien, encumbrance or
security interest, including, without limitation, the interest of a vendor under
any conditional sale or other title retention agreement and the interest of a
lessor under any Capitalized Lease.
"LOAN" means (i) any Revolving Loan made pursuant to SECTION 2.1 and
(ii) any other loan or advance made to either of the Borrowers by Lender under
or pursuant to this Agreement.
"LOAN ACCOUNT" has, with respect to each Borrower, the meaning
ascribed to such term in SECTION 2.3.
"MARGIN STOCK" has the meaning ascribed to such term in Regulation U
of the Federal Reserve Board or any regulation substituted therefor, as in
effect from time to time.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon (a) the
business, operations, properties, assets or condition (financial or otherwise)
of OREMET and its Subsidiaries taken as a whole, (b) the ability of either of
the Borrowers to perform and satisfy in full the Liabilities of such Borrower in
accordance with the respective terms thereof or (c) the Collateral or Third
Party Collateral of either of the Borrowers.
"MONTHLY PAYMENT DATE" means the first day of each calendar month or,
if any such day is not a Banking Day, the next succeeding Banking Day.
"MULTIEMPLOYER PLAN" means, with respect to each Borrower, a
"multiemployer plan" as defined in SECTION 4001(a)(3) of ERISA which is
maintained for employees of such Borrower, any Subsidiary of such Borrower, any
other Obligor or any ERISA Affiliate of such Borrower.
"NET REVOLVING LOAN AVAILABILITY" means, at any time with respect to
each Borrower, an amount equal to (i) Revolving Loan Availability MINUS (ii) the
aggregate outstanding principal balance of the Loans, in each case of such
Borrower at such time.
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"NET WORTH" means at any time, with respect to any Person, the total
of shareholders' equity (including capital stock, additional paid-in capital and
retained earnings after deducting treasury stock) of such Person and its
CONSOLIDATED Subsidiaries calculated in accordance with GAAP.
"NOTE" means any promissory note of either of the Borrowers evidencing
any loan or advance (including but not limited to any Revolving Loans) made by
Lender to such Borrower pursuant to this Agreement.
"OBLIGOR" means each Borrower and each other Person who is or shall
become primarily or secondarily liable on any of the Liabilities of either or
both of the Borrowers, or who grants to Lender a Lien on any property of such
Person as security for any of the Liabilities of either or both of the
Borrowers.
"OCCUPATIONAL SAFETY AND HEALTH LAW" means the Occupational Safety and
Health Act of 1970, as amended, and any other federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating to
or imposing liability or standards of conduct concerning employee health and/or
safety, in each case as in effect from time to time. References to sections of
any Occupational Safety and Health Law shall be construed to also refer to any
successor sections.
"OLD TI" means Titanium Industries, Inc., a New Jersey corporation.
"OVER ADVANCES" has the meaning ascribed to such term in SECTION 2.8.
"OVERDRAFT LOAN" has the meaning ascribed to such term in SECTION
2.7.
"PADDOCK" means James S. Paddock, an individual.
"PARTICIPANT" means any Person, now or at any time or times hereafter,
participating with Lender in the Loans made to Borrowers pursuant to this
Agreement or any Related Agreement.
"PATENT PROPERTY" means, with respect to any Person:
(a) all of such Person's inventions (whether or not patentable and
whether or not reduced to practice) and all of such Person's patents,
patent applications (including, without limitation, all patents and patent
applications in preparation for filing) and patent disclosures throughout
the world, including without limitation, each patent and patent application
referred to in PART B-1 of SCHEDULE 4.16;
(b) all reissues, divisions, continuations, continuations-in-part,
revisions, extensions, renewals and reexaminations of any of the items
described in CLAUSE (A) of this definition;
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"NET WORTH" means at any time, with respect to any Person, the total
of shareholders' equity (including capital stock, additional paid-in capital and
retained earnings after deducting treasury stock) of such Person and its
CONSOLIDATED Subsidiaries calculated in accordance with GAAP.
"NOTE" means any promissory note of either of the Borrowers evidencing
any loan or advance (including but not limited to any Revolving Loans) made by
Lender to such Borrower pursuant to this Agreement.
"OBLIGOR" means each Borrower and each other Person who is or shall
become primarily or secondarily liable on any of the Liabilities of either or
both of the Borrowers, or who grants to Lender a Lien on any property of such
Person as security for any of the Liabilities of either or both of the
Borrowers.
"OCCUPATIONAL SAFETY AND HEALTH LAW" means the Occupational Safety and
Health Act of 1970, as amended, and any other federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating to
or imposing liability or standards of conduct concerning employee health and/or
safety, in each case as in effect from time to time. References to sections of
any Occupational Safety and Health Law shall be construed to also refer to any
successor sections.
"OLD TI" means Titanium Industries, Inc., a New Jersey corporation.
"OVER ADVANCES" has the meaning ascribed to such term in SECTION 2.8.
"OVERDRAFT LOAN" has the meaning ascribed to such term in SECTION 2.7.
"PADDOCK" means James S. Paddock, an individual.
"PARTICIPANT" means any Person, now or at any time or times hereafter,
participating with Lender in the Loans made to Borrowers pursuant to this
Agreement or any Related Agreement.
"PATENT PROPERTY" means, with respect to any Person:
(a) all of such Person's inventions (whether or not patentable and
whether or not reduced to practice) and all of such Person's patents,
patent applications (including, without limitation, all patents and patent
applications in preparation for filing) and patent disclosures throughout
the world, including without limitation, each patent and patent application
referred to in PART B-1 of SCHEDULE 4.16;
(b) all reissues, divisions, continuations, continuations-in-part,
revisions, extensions, renewals and reexaminations of any of the items
described in CLAUSE (A) of this definition;
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(c) all patent licenses of such Person (whether as licensee or
licensor), including each patent license referred to in PART B-2 of
SCHEDULE 4.16;
(d) the right to sue third parties for past, present or future
infringements of any Patent Property described in CLAUSES (A) OR (B) of
this definition and, to the extent applicable, CLAUSE (C) of this
definition; and
(e) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits), including
any claim by such Person against third parties for past, present or future
infringements of any patent or (to the extent applicable or permitted as a
matter of law) patent covered by a patent license and all rights
corresponding thereto throughout the world.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PENSION PLAN" means, with respect to each of the Borrowers, a
"pension plan," as such term is defined in Section 3(2) of ERISA, which is
subject to the provisions of Title IV of ERISA and which is established or
maintained by such Borrower, any Subsidiary of such Borrower, any other Obligor
or any ERISA Affiliate of such Borrowers, other than a Multiemployer Plan.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, or government (whether national, federal, state, county,
city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"PRO FORMA BALANCE SHEET" has the meaning ascribed to such term in
SECTION 4.6(C).
"PRO FORMA FINANCIAL INFORMATION" has the meaning assigned to such
term in SECTION 4.6(C).
"PROJECTIONS" has the meaning ascribed to such term in SECTION 4.6(C).
"PURCHASE AGREEMENT" means that certain Stock and Asset Purchase
Agreement dated as of September 19, 1994, between Kamyr and TI, as it may be
amended, restated, supplemented or otherwise modified from time to time.
"REAL PROPERTY" means, with respect to each Borrower, all real
property of such Borrower.
"REFERENCE RATE" means, at any time, the rate of interest then most
recently announced by Lender at Chicago, Illinois as its reference rate. Each
change in the interest rate on any Loan which
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is determined with reference to the Reference Rate shall take effect on the
effective date of the change in the Reference Rate.
"REFERENCE RATE MARGIN" means one and one-half percent (1.5%);
PROVIDED, HOWEVER, that (i) at any time that the Grid Ratio for the two (2)
consecutive fiscal quarters of OREMET ending immediately prior to such time is
greater than 2.00 to 1.00, "Reference Rate Margin" means one percent (1.0%) and
(ii) at any time that the Grid Ratio for the four (4) consecutive fiscal
quarters of OREMET ending immediately prior to such time is greater than 2.00 to
1.00, "Reference Rate Margin" means one-half of one percent (0.5%).
"REFERENCE RATE REVOLVING LOAN" means any Revolving Loan or portion
thereof which bears interest at a rate determined with reference to the
Alternate Reference Rate.
"RELATED AGREEMENT" means any agreement, instrument or document
(including, without limitation, notes, guarantees, mortgages, deeds of trust,
chattel mortgages, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements,
subordination agreements, trust account agreements and all other written matter)
heretofore, now, or hereafter executed and/or delivered to Lender with respect
to or in connection with or pursuant to this Agreement or any of the Liabilities
of either or both of the Borrowers, and executed by or on behalf of either or
both of the Borrowers or any other Obligor.
"RELATED PARTY" means any Person (other than the ESOP or any
Subsidiary of a Borrower) (i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with, a
Borrower, (ii) which beneficially owns or holds ten percent (10%) or more of the
equity interest of a Borrower, or (iii) ten percent (10%) or more of the equity
interest of which is beneficially owned or held by a Borrower or a Subsidiary of
a Borrower. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"RELEASE" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any property, including the movement of
Contaminants through or in the air, soil, surface water, groundwater or
property.
"REPORTABLE EVENT" has the meaning given to such term in ERISA.
"REVOLVING CREDIT AMOUNT" has, with respect to each Borrower, the
meaning ascribed to such term in SUPPLEMENT A.
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"REVOLVING LOAN" has, with respect to each Borrower, the meaning
ascribed to such term in SECTION 2.1.1.
"REVOLVING LOAN AVAILABILITY" means, with respect to each Borrower,
the lesser of (a) the Revolving Credit Amount MINUS the Letter of Credit
Obligations and (b) the Borrowing Base MINUS the Letter of Credit Obligations,
in each case of such Borrower.
"SHAREHOLDERS AGREEMENT" means that certain Corporate Organization and
Shareholders Agreement dated as of September 19, 1994, among Paddock, OREMET and
TI.
"SUBORDINATED INDEBTEDNESS DOCUMENTS" means the "Subordinated Loan
Documents" (as defined in the Subordination Agreement).
"SUBORDINATED INDEBTEDNESS" has the meaning ascribed to such term in
the Subordination Agreement.
"SUBORDINATION AGREEMENT" means that certain Subordination Agreement
of even date herewith among Lender, TI and Old TI, as it may be amended,
restated, supplemented or otherwise modified from time to time.
"SUBSIDIARY" means, as to any Person, (i) any corporation of which or
in which such Person, such Person and one or more of its Subsidiaries, or one or
more Subsidiaries of such Person directly or indirectly own 50% or more of the
combined voting power of all classes of stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon the
occurrence of any contingency), (ii) any partnership, joint venture or similar
entity of which or in which such Person, such Person and one or more of its
Subsidiaries, or one or more Subsidiaries of such Person directly or indirectly
own 50% or more of the capital interest or profits interest or (iii) any trust,
association or other unincorporated organization of which or in which such
Person, and one or more of its Subsidiaries, or one or more Subsidiaries of such
Person directly or indirectly own 50% or more of the beneficial interest.
"SUPPLEMENTAL DOCUMENTATION" has the meaning ascribed to such term in
SECTION 3.5.
"TAXES" means, with respect to any Person, taxes, assessments or other
governmental charges or levies imposed upon such Person, its income or any of
its properties, franchises or assets.
"TERMINATION DATE" means September 19, 1997 or such later date to
which it may be extended pursuant to SECTION 11.7.
"THIRD PARTY COLLATERAL" means, with respect to each Borrower, any
property of any Person other than such Borrower which
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secures payments, performance and/or observance of any Liabilities of such
Borrower.
"TI" has the meaning ascribed to such term in the Preamble.
"TI WIRE" means Titanium Wire Corporation, a Pennsylvania corporation.
"TIL UK " means Titanium International Limited, a limited liability
company.
"TI FINANCIAL STATEMENTS" has the meaning ascribed to such term in
SECTION 4.6(b).
"TRADE SECRET" has the meaning ascribed to that term in the definition
of Trade Secrets Property.
"TRADE SECRETS PROPERTY" means, with respect to any Person, all common
law and statutory trade secrets of such Person and all other confidential or
proprietary or useful information of such Person, including, without limitation,
all ideas, formulae, compositions, know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, financial, business
and marketing plans and customer and supplier lists and related information
obtained by or used in or contemplated at any time for use in the business of
such Person (all of the foregoing being collectively called a "TRADE SECRET"),
whether or not such Trade Secret has been reduced to a writing or other tangible
form, including all documents and things embodying, incorporating or referring
in any way to such Trade Secret, all Trade Secret licenses of such Person
(whether as licensee or licensor), including each Trade Secret license referred
to in SCHEDULE 4.16, and including the right to sue for and to enjoin and to
collect damages for the actual or threatened misappropriation of any Trade
Secret and for the breach or enforcement of any such Trade Secret license.
"TRADEMARK" has the meaning ascribed to that term in the definition of
Trademark Property.
"TRADEMARK PROPERTY" means, with respect to any Person:
(a) all of such Person's: trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, certification marks, collective marks, logos, trade dress
other source of business identifiers, prints and labels on which any of the
foregoing have appeared or appear, designs and general intangibles of a
like nature (all of the foregoing items in this CLAUSE (a) being
collectively called a "TRADEMARK"), now existing anywhere in the world or
hereafter adopted or acquired, whether currently in use or not, whether or
not registered, all registrations and recordings thereof and all
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applications in connection therewith, whether pending or in preparation for
filing, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any office or agency of the United
States of America or any State thereof or any foreign country, including,
without limitation, those referred to in PART C-1 of SCHEDULE 4.16;
(b) all reissues, extensions, renewals, translations, adaptations,
derivations and combinations of any of the items described in CLAUSE (a) of
this definition;
(c) all Trademark licenses and other agreements providing such Person
with the right to use any of the types of items referred to in CLAUSES (a)
and (b) of this definition, including each Trademark license referred to in
PART C-2 of SCHEDULE 4.16;
(d) all of the goodwill of the business connected with the use of,
and symbolized by the items described in, CLAUSES (a) and (b) of this
definition;
(e) the right to sue third parties for past, present and future
infringements of any Trademark Property described in CLAUSES (a) or (b) of
this definition and, to the extent applicable in CLAUSE (c) of this
definition; and
(f) all proceeds of, and rights associated with, the foregoing,
including any claim by such Person against third parties for past, present
or future infringement or dilution of any Trademark, Trademark registration
or (to the extent applicable and if permitted by applicable law) Trademark
license, referred to in CLAUSE (c) of this definition, or for any injury to
the goodwill associated with the use of any such Trademark or for breach or
enforcement of any Trademark license, and all rights corresponding thereto
throughout the world.
"UCC" means the Uniform Commercial Code as in effect in the State of
Illinois, and any successor statute, together with any regulations thereunder,
in each case as in effect from time to time. References to sections of the UCC
shall be construed to also refer to any successor sections.
"UNMATURED EVENT OF DEFAULT" means any event or condition which, with
the lapse of time or giving of notice or both, would constitute an Event of
Default.
1.2 OTHER DEFINITIONAL PROVISIONS. Unless otherwise defined or the
context otherwise requires, all financial and accounting terms used herein or in
any certificate or other document made or delivered pursuant hereto shall be
defined in accordance with GAAP. Unless otherwise defined therein, all terms
defined in this Agreement shall have the defined meanings when used in any Note
or in any certificate or other document made or
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delivered pursuant hereto. Terms used in this Agreement which are defined in
any Supplement or Exhibit hereto shall, unless the context otherwise indicates,
have the meanings given them in such Supplement or Exhibit. Other terms used
in this Agreement shall, unless the context indicates otherwise, have the
meanings provided for by the UCC to the extent the same are used or defined
therein.
1.3 INTERPRETATION OF AGREEMENT. A SECTION, an EXHIBIT or a SCHEDULE is,
unless otherwise stated, a reference to a section hereof, an exhibit hereto or a
schedule hereto, as the case may be. Section captions used in this Agreement
are for convenience only and shall not affect the construction of this
Agreement. The words "hereof," "herein," "hereto" and "hereunder" and words of
similar import when used in this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Reference to "this
Agreement" shall include the provisions of SUPPLEMENT A.
1.4 LENDER'S DISCRETION. Whenever the terms of this Agreement provide
that any determination may be made in the sole discretion of Lender, Lender
hereby agrees that it shall not make such determination in an arbitrary or
capricious manner.
1.5 COMPLIANCE WITH FINANCIAL RESTRICTIONS. Compliance with each of the
financial ratios and restrictions contained in SECTION 5 or SUPPLEMENT A shall,
except as otherwise provided herein, be determined in accordance with GAAP
consistently applied.
2. LOANS; LETTERS OF CREDIT; OTHER MATTERS.
2.1 LOANS
2.1.1 REVOLVING LOANS.
(a) Subject to the terms and conditions of this Agreement and
the Related Agreements, and in reliance upon the warranties of each of
the Borrowers set forth herein and in the Related Agreements, Lender
agrees to make such loans or advances (individually each a "REVOLVING
LOAN" of such Borrower and collectively the "REVOLVING LOANS" of such
Borrower) from time to time before the Termination Date to each
Borrower as such Borrower may from time to time request, up to but not
in excess of the Revolving Loan Availability of such Borrower. All
Revolving Loans shall bear interest at a rate determined by reference
to either the Alternate Reference Rate or the Interbank Rate (Reserve
Adjusted), pursuant to Section 2.4 and the terms and provisions of
SUPPLEMENT A. Revolving Loans of each Borrower may be repaid and,
subject to the terms and conditions hereof, reborrowed by such
Borrower to but not including the Termination Date unless the Credit
of such Borrower is otherwise terminated as provided in this
Agreement.
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(b) In the event the aggregate outstanding principal balance of
the Revolving Loans of either of the Borrowers exceeds the Revolving
Loan Availability of such Borrower, such Borrower shall, unless Lender
shall otherwise consent, without notice or demand of any kind,
immediately make such repayments of the Revolving Loans of such
Borrower or take such other actions as shall be necessary to eliminate
such excess.
(c) All Revolving Loans of each of the Borrowers hereunder shall
be paid by such Borrower on the Termination Date, unless payable
sooner pursuant to the provisions of this Agreement, but may, at such
Borrower's election, be repaid in whole or in part at any time prior
to such date without premium or penalty.
2.1.2 LIMITATION ON REDUCTION OF REVOLVING CREDIT AMOUNT.
Each Borrower may, at any time, on at least thirty (30) days' prior
written notice received by Lender, permanently reduce the Revolving Credit
Amount of such Borrower by paying to Lender such amount as is necessary to
reduce the outstanding principal balance of the Revolving Loans plus Letter
of Credit Obligations, in each case of such Borrower, to such reduced
Revolving Credit Amount; PROVIDED, HOWEVER, that (i) notwithstanding
anything to the contrary contained herein, the Revolving Credit Amount of
OREMET may not be reduced to an amount less than $500,000 and (ii) the
Revolving Credit Amount of TI may not be reduced to an amount less than
$500,000.
2.1.3 MAXIMUM OUTSTANDING LOANS. Notwithstanding any other
provision of this Agreement, the aggregate outstanding principal balance of
the Loans plus Letter of Credit Obligations shall not exceed at any time
(A) in the case of OREMET, $16,000,000, (B) in the case of TI, $8,000,000
and (C) in the case of both Borrowers in the aggregate $20,000,000;
PROVIDED, HOWEVER, that the foregoing shall not limit the right of Lender
to advance Revolving Loans to either of the Borrowers pursuant to the
provisions of SECTIONS 2.2(b), 2.2(c), 2.2(e), 3.2(c), 5.5, 5.6, 7.4, 11.3,
11.4 or any other provision of this Agreement or any Related Agreement that
permits Lender to advance Revolving Loans to such Borrower.
2.2 LETTERS OF CREDIT.
(a) In addition to Loans made pursuant to SECTION 2.1, Lender will, upon
receipt of duly executed Applications of such Borrower and such other documents,
instruments and/or agreements as Lender may reasonably require, issue Letters of
Credit for the account of either of the Borrowers on such terms as are
satisfactory to Lender; PROVIDED, HOWEVER that no Letter of Credit will be
issued for the account of either of the Borrowers if, before or after
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taking such Letter of Credit into account, the Letter of Credit Obligations of
such Borrower exceed the lesser of (i) the Revolving Credit Amount MINUS the
outstanding principal balance of the Revolving Loans, and (ii) the Borrowing
Base MINUS the outstanding principal balance of the Revolving Loans, in each
case of such Borrower.
(b) Each Borrower agrees to pay Lender, on demand, Lender's standard
administrative operating fees and charges in effect from time to time for
issuing and administering any Letters of Credit issued for the account of such
Borrower. Each Borrower further agrees to pay Lender a commission equal to two
and one-half percent (2.5%) per annum (calculated on the basis of a year
consisting of 360 days and paid for actual days elapsed) of the daily average of
the undrawn amount of each Letter of Credit issued for the account of such
Borrower and each L/C Draft drawn under such Letter of Credit. Such commissions
shall be paid at such frequency as Lender shall determine. Lender may provide
for the payment of any such fees, charges or commission due by advancing the
amount thereof to the applicable Borrower as a Revolving Loan.
(c) Each of the Borrowers agrees to reimburse Lender, on demand, for each
payment made by Lender under or pursuant to any Letter of Credit issued for the
account of such Borrower and each L/C Draft drawn under such Letter of Credit.
Each of the Borrowers further agrees to pay to Lender, on demand, interest at
the Default Rate applicable to Revolving Loans on any amount paid by Lender
under or pursuant to any Letter of Credit issued for the account of such
Borrower and each L/C Draft drawn under such Letter of Credit, from the date of
payment until the date of reimbursement to Lender. Lender may, and upon request
of the applicable Borrower when no Event of Default exists (to the extent there
is additional availability pursuant to the terms hereof for Revolving Loans to
such Borrower) shall, provide for the payment of any reimbursement obligations
of such Borrower and any interest accrued thereon by advancing all or part of
the amount thereof to such Borrower as a Revolving Loan.
(d) Each Borrower's obligation to reimburse Lender for payments and
disbursements made by Lender under or in connection with any Letter of Credit
shall be absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which such
Borrower may have or have had against Lender or any other Person, including,
without limitation, any defense based on the failure of the demand for payment
under such Letter of Credit to conform to the terms of such Letter of Credit,
the legality, validity, regularity or enforceability of such Letter of Credit,
or the identity of the transferee of such Letter of Credit or the sufficiency of
any transfer if such Letter of Credit is transferable. Each Borrower assumes
all risks of the acts or omissions of the user of any Letters of Credit issued
for the account of such Borrower and all risks of the misuse of any such Letter
of Credit. Neither Lender nor any of its correspondents, shall be responsible:
(1) for the form, validity, sufficiency, accuracy, genuineness or legal effect
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of any document specified in an Application even if it should in fact prove to
be in any or all respects invalid, insufficient, inaccurate, fraudulent, or
forged; (2) for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of Credit or L/C Draft
or any of the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (3) for
failure of any L/C Draft to bear any reference or adequate reference to any
Letter of Credit, or failure of anyone to note the amount of any L/C Draft on
the reverse of any Letter of Credit or to surrender or to take up any Letter of
Credit or to send forward any such document apart from drafts as required by the
terms of any Letter of Credit, each of which provisions, if contained in the
Letter of Credit itself, it is agreed, may be waived by Lender; (4) for errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher;
(5) for any error, neglect, default, suspension or insolvency of any
correspondents of Lender; (6) for errors in translation or for errors in
interpretation of technical terms; (7) for any loss or delay, in the
transmission or otherwise, of any such document or draft or of proceeds thereof;
(8) for the misapplication by the beneficiary of a Letter of Credit or of the
proceeds of any drawing under such Letter of Credit; (9) for any consequences
arising from causes beyond the control of Lender, including, without limitation,
any act or omission, rightful or wrongful, of any present or future de jure or
de facto government or governmental authority; or (10) for any other
circumstances whatsoever in making or failing to make payment under any Letter
of Credit, except only that each of the Borrowers shall have a claim against
Lender, and Lender shall be liable to each of the Borrowers, to the extent, but
only to the extent, of any direct, as opposed to consequential, damages suffered
by such Borrower which such Borrower proves were caused by Lender's willful
misconduct or gross negligence. None of the above shall affect, impair or
prevent the vesting of any of the rights or powers of Lender. Lender shall have
the right to transmit the terms of any Letter of Credit without translating
them.
(e) Notwithstanding anything to the contrary herein or in any Application,
upon the occurrence of an Event of Default, an amount equal to the aggregate
amount of the outstanding Letter of Credit Obligations of each of the Borrowers
shall, at Lender's option and without demand upon or further notice to such
Borrower, be deemed (as between Lender and such Borrower) to have been paid or
disbursed by Lender under the Letters of Credit issued by Lender for the account
of such Borrower and L/C Drafts drawn thereunder (notwithstanding that such
amounts may not in fact have been so paid or disbursed), and Revolving Loans to
such Borrower in all or part of the amount of such Letter of Credit Obligations
to have been made and accepted, which Loans shall be immediately due and
payable. In lieu of the foregoing, at the election of Lender at any time after
an Event of Default, each of the Borrowers agrees, upon Lender's demand, to
deliver to Lender cash Collateral equal to the aggregate Letter of Credit
Obligations of such Borrower. Any such cash Collateral and/or any amounts
received by Lender in
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payment of the Loans made pursuant to this PARAGRAPH (e) shall be held by Lender
in the Assignee Deposit Account of the respective Borrower or a separate account
appropriately designated as a cash collateral account in relation to this
Agreement and the applicable Letters of Credit and shall be retained by Lender
as collateral security in respect of, first, such Borrower's Liabilities under
or in connection with the Letters of Credit issued by Lender for the account of
such Borrower and L/C Drafts drawn thereunder and then, all other Liabilities of
such Borrower. Such amounts shall not be used by Lender to pay any amounts
drawn or paid under or pursuant to any Letter of Credit or L/C Draft, but may be
applied to reimburse Lender for drawings or payments under or pursuant to such
Letters of Credit or L/C Drafts which Lender has paid, or if no such
reimbursement is required, to payment of such other Liabilities of the
applicable Borrower as Lender shall determine. Any amounts remaining in any
cash collateral account established pursuant to this PARAGRAPH (e) following
payment in full of all Liabilities of such Borrower shall be returned to such
Borrower.
2.3 LOAN ACCOUNT; DEMAND DEPOSIT ACCOUNT. Lender shall establish or
cause to be established on its books in each Borrower's name one or more
accounts (such Borrower's "LOAN ACCOUNT") to evidence Loans made to such
Borrower. Lender will credit or cause to be credited to a commercial account
maintained by each Borrower (such Borrower's "DEMAND DEPOSIT ACCOUNT") at
Lender's 231 South LaSalle Street, Chicago, Illinois office the amount of any
sums advanced as Loans to such Borrower hereunder. Any amounts advanced as
Loans hereunder which are credited to a Borrower's Demand Deposit Account,
together with any other amounts advanced to such Borrower as a Loan pursuant to
this Agreement, will be debited to the applicable Loan Account and result in an
increase in the principal balance outstanding in such Loan Account in the amount
thereof.
2.4 INTEREST.
(a) REVOLVING LOANS. The unpaid principal amount of each Reference Rate
Revolving Loan and each Eurodollar Rate Revolving Loan hereunder shall bear
interest as long as no Event of Default exists at the rate applicable to
Reference Rate Revolving Loans or Eurodollar Rate Revolving Loans, as
applicable, indicated in SUPPLEMENT A. During the continuance of an Event of
Default, the entire unpaid principal amount of the Reference Rate Revolving
Loans and Eurodollar Rate Revolving Loans, as applicable, shall bear interest at
the Default Rate applicable to such Loans, as indicated in SUPPLEMENT A.
(b) INTEREST PAYMENT DATES. Interest accrued on each Loan shall be
payable, without duplication:
(1) in the case of each Loan, on the Termination Date;
(2) in the case of each Eurodollar Rate Revolving Loan, on the last
day of each Interest Period with respect thereto;
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(3) in the case of each Reference Rate Revolving Loan, on each
Monthly Payment Date occurring after the Closing Date;
(4) in the case of each repayment of the Revolving Loans of either of
the Borrowers which is made in connection with a reduction in the Revolving
Credit Amount of such Borrower, on the date of any such payment or
prepayment, in whole or in part, of principal outstanding on such Revolving
Loans; and
(5) on that portion of any Loans the maturity of which is accelerated
pursuant to SECTION 6.2, immediately upon such acceleration.
Interest accrued on Loans or other monetary Liabilities of either of the
Borrowers after the date such amount is due and payable (whether at maturity,
upon acceleration or otherwise) shall be payable upon demand.
2.5 BORROWING PROCEDURE.
2.5.1 REQUESTS FOR LOANS. All Loans shall be requested by the
applicable Borrower in writing or by telephone, with each such request to
be received (a) in the case of a Reference Rate Revolving Loan, not later
than 11:00 a.m. Chicago time on the Banking Day such Loan is requested to
be made and (b) in the case of a Eurodollar Rate Revolving Loan, not later
than 11:00 a.m. at least three (3) Banking Days prior to each borrowing of
Eurodollar Rate Revolving Loans, except for Overdraft Loans and Revolving
Loans made pursuant to the provisions of SECTIONS 2.2(b), 2.2(c), 2.2(e),
3.2(c), 5.5, 5.6, 7.4, 11.3, 11.4 or any other provision of this Agreement
or any other Related Agreement that permits Lender to unilaterally advance
Revolving Loans to either of the Borrowers. Each request for a Loan shall
be irrevocable and shall specify the borrowing date (which shall be a
Banking Day), the amount of the Loan, whether such Loan is a Reference Rate
Revolving Loan or a Eurodollar Rate Revolving Loan and, if a Eurodollar
Rate Revolving Loan, the initial Interest Period therefor.
2.5.2 ADDITIONAL RESTRICTIONS PERTAINING TO EURODOLLAR RATE
REVOLVING LOANS.
Each borrowing of Eurodollar Rate Revolving Loans with a specified
Interest Period must be in a minimum amount of $1,000,000 and an integral
multiple of $100,000 in excess thereof. Each of the Borrowers shall be
permitted to have no more than two (2) borrowings of Eurodollar Rate
Revolving Loans with different Interest Periods outstanding at any one
time. Lender shall have no obligation to honor a request for any
Eurodollar Rate Revolving Loan which is requested at any time that an Event
of Default or an Unmatured Event of Default exists.
2.5.3 CONTINUATION AND/OR CONVERSION OF LOANS.
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Each Borrower may elect (i) to continue any outstanding Eurodollar
Rate Revolving Loan of such Borrower from the current Interest Period of
such Loan into a subsequent Interest Period to begin on the last day of
such current Interest Period or (ii) convert any outstanding Reference Rate
Revolving Loan of such Borrower into a Eurodollar Rate Revolving Loan of
such Borrower or, on the last day of the current Interest Period, convert a
Eurodollar Rate Revolving Loan of such Borrower into a Reference Rate
Revolving Loan of such Borrower, by giving at least three (3) Banking Days'
prior written or telephonic notice to Lender specifying the date, amount
and the Interest Period, if applicable. Absent notice of continuation or
conversion, each Eurodollar Rate Revolving Loan of a Borrower shall
automatically convert into a Reference Rate Revolving Loan of such Borrower
on the last day of the current Interest Period for such Eurodollar Rate
Revolving Loan, unless paid in full on such last day. The aggregate dollar
amount of Loans of a Borrower which may be converted into or continued as
Eurodollar Rate Revolving Loans (i) shall not exceed in the aggregate an
amount equal to eighty percent (80%) of the aggregate then outstanding
principal balance of the Revolving Loans of such Borrower and (ii) shall
not be less than $1,000,000 and an integral multiple of $100,000 in excess
thereof. Lender shall have no obligation to honor (a) a request to convert
a Reference Rate Revolving Loan into a Eurodollar Rate Revolving Loan or to
continue a Eurodollar Rate Revolving Loan (i) less than thirty (30) days
before the Termination Date or (ii) at any time that an Event of Default or
an Unmatured Event of Default shall exist.
2.5.4 INFORMATION FROM BORROWERS. In addition to Borrowing Base
Certificates required pursuant to SECTION 5.1.2, each Borrower agrees to
forthwith provide Lender with such information, at such frequency and in
such format, as is reasonably required by Lender in connection with any
Loan requested or deemed requested by such Borrower, such information to be
current as of the time of such request.
2.5.5 IDENTITY OF AUTHORIZED OFFICERS. Each Borrower shall
provide Lender with documentation satisfactory to Lender indicating (a) the
names of those Persons authorized by such Borrower to sign Borrowing Base
Certificates on behalf of such Borrower and (b) the names of those Persons
authorized by such Borrower to make telephonic requests on behalf of such
Borrower for Loans or the continuation or conversion thereof and/or to
authorize on behalf of such Borrower disbursement of the proceeds of Loans
by wire transfer or otherwise, and Lender shall be entitled to rely upon
such documentation until notified in writing by such Borrower of any change
in the names of the Persons so authorized. Lender shall be entitled to act
on the instructions of anyone identifying himself as one of the Persons
authorized to request Loans or disbursements of Loan proceeds by telephone
and each Borrower shall be bound thereby in the same manner as if the
Person
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were actually so authorized. Each of the Borrowers agrees to indemnify and
hold Lender harmless from any and all claims, damages, liabilities, losses,
costs and expenses (including Attorneys' Fees) which may arise or be
created by the acceptance of instructions for making or disbursing in
accordance with this SECTION 2.5.5 the proceeds of Loans of such Borrower
by wire transfer or telephone.
2.6 NOTES. Except to the extent a Loan may, in Lender's sole and
absolute discretion, be evidenced by a Note, all Loans and payments hereunder
shall be recorded on Lender's books, which shall be rebuttably presumptive
evidence of the amount of such Loans outstanding at any time hereunder. Lender
will account monthly as to all Loans and payments hereunder and, absent
demonstrable error, each monthly accounting will be fully binding on each of the
Borrowers unless, within thirty (30) days of such Borrower's receipt thereof,
such Borrower shall provide Lender with a specific listing of exceptions.
Notwithstanding any term or condition of this Agreement to the contrary,
however, the failure of Lender to record the date and amount of any Loan of
either of the Borrowers hereunder shall not limit or otherwise affect the
obligation of such Borrower to repay any such Loan.
2.7 OVERDRAFT LOANS. Lender, in its sole and absolute discretion, and
subject to the terms hereof, may make Revolving Loans to either of the Borrowers
in an aggregate amount equal to the amount of any overdraft which may from time
to time exist with respect to the Demand Deposit Account of such Borrower or any
other bank account which such Borrower may now or hereafter have with Lender.
The existence of any such overdraft shall be deemed to be a request by such
Borrower for such Loan or Loans. Each Borrower acknowledges that Lender is
under no duty or obligation to make any Loan to such Borrower to cover any
overdraft. Each Borrower further agrees that an overdraft shall constitute a
separate Loan under this Agreement (an "OVERDRAFT LOAN"), which shall bear, from
the date on which the overdraft occurred until paid, interest in an amount equal
to the greater of 130% of the highest rate of interest then charged for Loans
(other than Overdraft Loans) made hereunder, and $50.00 per day. If Lender, in
its sole and absolute discretion, decides not to make a Loan to cover part or
all of any overdraft, Lender may return any check(s) which created such
overdraft.
2.8 OVER ADVANCES. Lender, in its sole and absolute discretion, may make
Revolving Loans to either of the Borrowers in amounts which cause the
outstanding principal balance of the Revolving Loans of such Borrower to exceed
the Revolving Loan Availability of such Borrower or otherwise permit the
outstanding principal balance of the Revolving Loans of such Borrower to at any
time exceed the Revolving Loan Availability of such Borrower and no such event
or occurrence shall cause or constitute a waiver by Lender of its right to
refuse to make any further Revolving Loans to either of the Borrowers or issue
any Letters of Credit for the account of either of the Borrowers at any time
that an Over Advance with respect to either of the Borrowers exists or would
result
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therefrom. During any period in which the aggregate outstanding Revolving Loans
of either of the Borrowers exceeds the Revolving Loan Availability of such
Borrower (such excess Liabilities of such Borrower are herein referred to as
"OVER ADVANCES" with respect to such Borrower), the amount of Over Advances
shall bear interest at a rate equal to 130% of the highest rate of interest then
charged for Loans made hereunder.
2.9 ALL LOANS ONE OBLIGATION. The Revolving Loans of each Borrower
under this Agreement shall constitute one Loan, and all Indebtedness and other
Liabilities of each Borrower to Lender under this Agreement and any of the
Related Agreements shall constitute one general obligation of such Borrower
secured by Lender's Lien on all of the Collateral and Third Party Collateral of
such Borrower, and by all other Liens heretofore, now, or at any time or times
hereafter granted by such Borrower or any other Obligor to Lender. Each
Borrower agrees that all of the rights of Lender set forth in this Agreement
shall apply to any modification of or supplement to this Agreement, any
Supplements or Exhibits hereto, and the Related Agreements, unless otherwise
agreed in writing.
2.10 MAKING OF PAYMENTS; APPLICATION OF COLLECTIONS; CHARGING OF ACCOUNTS.
(a) All payments hereunder (including payment of reimbursement obligations
and payments with respect to any Notes) shall be made without set-off or
counterclaim and shall be made to Lender in immediately available funds (except
as Lender may otherwise consent) prior to 12:30 p.m., Chicago time, on the date
due at its office at 231 South LaSalle Street, Chicago, Illinois 60697, or at
such other place as may be designated by Lender to each of the Borrowers in
writing. Any payments received after such time shall be deemed received on the
next Banking Day. Whenever any payment to be made hereunder or under any Note
shall be stated to be due on a date other than a Banking Day, such payment may
be made on the next succeeding Banking Day, and such extension of time shall be
included in the computation of payment of interest and any fees.
(b) Each Borrower authorizes Lender, and Lender will, subject to the
provisions of this PARAGRAPH (b), apply the whole or any part of any amounts
received for the account of such Borrower by Lender (whether deposited in the
Assignee Deposit Account of such Borrower or otherwise received by Lender) from
the collection of items of payment and proceeds of any Collateral or Third Party
Collateral of such Borrower, against the principal and/or interest of any Loans
made to such Borrower hereunder and/or any other Liabilities of such Borrower,
whether or not then due, in such order of application as Lender may determine,
unless such payments or proceeds are, in Lender's sole and absolute discretion,
released to such Borrower; PROVIDED, HOWEVER, that prior to the occurrence of an
Event of Default, any such amounts received by Lender shall be applied as
follows: FIRST, to payment of amounts then due with respect to fees (including
Attorneys' Fees), charges and expenses for which such Borrower is liable
pursuant to this Agreement and
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the Related Agreements; SECOND, to payment of amounts then due with respect to
interest on the Revolving Loans made to such Borrower; and THIRD, to repayment
of the Revolving Loans made to such Borrower; PROVIDED, FURTHER, that no checks,
drafts or other instruments received by Lender shall constitute final payment to
Lender unless and until such item of payment has actually been collected. All
items or amounts which are delivered to Lender by or on behalf of a Borrower or
any Obligor or any Account Debtor on account of partial or full payment or
otherwise as proceeds of any of the Collateral or Third Party Collateral of such
Borrower (including any items or amounts which may have been deposited to the
Assignee Deposit Account of such Borrower) may from time to time in Lender's
sole and absolute discretion be released to such Borrower or may be applied by
Lender towards payment of the Liabilities of such Borrower, whether or not then
due as provided in the preceding sentence. Amounts which are applied to the
Revolving Loans of either of the Borrowers shall be applied first to Reference
Rate Revolving Loans of such Borrower until no Reference Rate Revolving Loans of
such Borrower are outstanding before being applied to repay Eurodollar Rate
Revolving Loans of such Borrower. Notwithstanding anything to the contrary
herein:
(i) solely for purposes of determining the occurrence of an Event of
Default, all cash, checks, instruments and other items of payment shall be
deemed received upon actual receipt by Lender, unless the same is
subsequently dishonored for any reason whatsoever;
(ii) solely for purposes of determining whether, under SECTIONS 2.1
and 2.2, there is availability for Loans or Letters of Credit, all cash,
checks, instruments and other items of payment shall be applied against the
Liabilities of each Borrower as follows:
(1) in the case of cash and other immediately available funds,
on the Banking Day of receipt thereof by Lender of such cash or other
immediately available funds, and
(2) in the case of checks, instruments and other items of
payment not representing immediately available funds, on the first
Banking Day after receipt thereof by Lender; and
(iii) solely for purposes of interest calculation hereunder, all
cash, checks, instruments and other items of payment shall be deemed to
have been applied against the Liabilities as follows:
(1) in the case of cash and other immediately available funds,
on the Banking Day of receipt thereof by Lender of such cash or other
immediately available funds, and
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(2) in the case of checks, instruments and other items of
payment not representing immediately available funds, on the second
Banking Day after receipt thereof by Lender.
(c) Each Borrower hereby authorizes Lender, and Lender may, in its sole
and absolute discretion, charge to such Borrower at any time when due all or any
portion of any of the Liabilities of such Borrower (and interest, if any,
thereon) including but not limited to any Attorneys' Fees and other costs and
expenses of Lender for which such Borrower is liable pursuant to the terms of
this Agreement or any Related Agreement, by charging such Borrower's Demand
Deposit Account or any other bank account of such Borrower with Lender;
PROVIDED, HOWEVER that the provisions of this SECTION 2.10(c) shall not affect
such Borrower's obligation to pay when due all amounts payable by such Borrower
under this Agreement, any Note or any Related Agreement, whether or not there
are sufficient funds therefor in the Demand Deposit Account or any such other
bank account, in each case of such Borrower; and, PROVIDED, FURTHER, HOWEVER,
that so long as an Event of Default shall not have occurred and be continuing,
Lender shall give such Borrower thirty (30) days' prior written notice of any
such charge in respect of fees of external counsel (or consultants) to Lender.
2.11 LENDER'S ELECTION NOT TO ENFORCE. Notwithstanding any term or
condition of this Agreement to the contrary, Lender, in its sole and absolute
discretion, at any time and from time to time, may suspend or refrain from
enforcing any or all of the restrictions imposed in this SECTION 2, but no such
suspension or failure to enforce shall impair any right or power of Lender under
this Agreement, including, without limitation, any right of Lender to refrain
from making a Loan or issuing a Letter of Credit if all conditions precedent to
Lender's obligation to making such Loan or issuing such Letter of Credit have
not been satisfied.
2.12 REAFFIRMATION. Each Loan or Letter of Credit requested by either of
the Borrowers pursuant to this Agreement shall constitute an automatic
certification by such Borrower to Lender that (i) all of the representations and
warranties of such Borrower in this Agreement and each of the Related Agreements
are true and correct on the date of such request to the same extent as if made
on such date, except for such changes as are specifically permitted hereunder
(or under such Related Agreement), and (ii) immediately before and after making
the requested Loan or issuing the requested Letter of Credit, no Event of
Default, or Unmatured Event of Default, then exists or would result therefrom.
2.13 SETOFF. In addition to and not in limitation of all rights of offset
or banker's lien that Lender or any other holder of a Note may have under
applicable law, Lender or such other holder of a Note shall, upon the occurrence
of any Event of Default, or any Unmatured Event of Default described in SECTION
6.1(e), have the right to appropriate and apply to the payment of the
Liabilities of each Borrower any and all balances, credits,
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deposits, accounts or moneys of such Borrower then or thereafter with Lender or
such other holder.
2.14 CLOSING FEE. OREMET agrees to pay to Lender, a non-refundable
closing fee of $250,000 contemporaneously with the making of the initial Loans.
The amount of such closing fee shall be advanced to OREMET as part of the
initial Revolving Loans advanced to OREMET.
2.15 NONUSE FEE. OREMET agrees to pay to Lender a fee equal to one-half
of one percent (0.5%) per annum on the daily average amount by which $20,000,000
exceeds the aggregate outstanding principal balance of the Revolving Loans plus
the Letter of Credit Obligations, in each case of each of the Borrowers. The
fee provided for in this SECTION 2.15 shall be (i) calculated on the basis of a
year consisting of 360 days and paid for actual days elapsed and (ii) payable in
arrears on each Monthly Payment Date for the period then ended and on the last
to occur of the Termination Date and the date all Revolving Loans are repaid in
full, for the period then ended for which no fee shall have been paid.
3. COLLATERAL.
3.1 GRANT OF SECURITY INTEREST. As security for the payment of all Loans
now or hereafter made by Lender to such Borrower hereunder or under any Note,
and as security for the prompt and complete payment or other satisfaction of all
other Liabilities of such Borrower (including, without limitation, all
reimbursement obligations under any Letters of Credit issued for the account of
such Borrower), each of the Borrowers hereby grants to Lender a security
interest in and to the following property of such Borrower, whether now owned or
existing, or hereafter acquired or coming into existence, wherever now or
hereafter located (all such property is hereinafter referred to collectively as
the "COLLATERAL" of such Borrower):
(a) all Accounts Receivable of such Borrower (whether or not Eligible
Accounts Receivable);
(b) all Inventory of such Borrower (whether or not Eligible
Inventory);
(c) all General Intangibles of such Borrower;
(d) all Contract Rights and documents of title relating to Accounts
Receivable or Inventory, in each case of such Borrower;
(e) all chattel paper and instruments of such Borrower, including but
not limited to, without duplication, all chattel paper and instruments
evidencing, arising out of or relating to any obligation or amount owing or
payable to such Borrower for goods sold or leased or services rendered, or
otherwise arising out of or relating to any property described in CLAUSES
(a) through (d) above;
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(f) any and all balances, credits, deposits (general or special, time
or demand, provisional or final), accounts (including without limitation,
the Assignee Deposit Account and the Demand Deposit Account, in each case
of such Borrower) or monies of or in the name of such Borrower now or
hereafter with Lender and any and all property of every kind or description
of or in the name of such Borrower now or hereafter, for any reason or
purpose whatsoever, in the possession or control of, or in transit to, or
standing to such Borrower's credit on the books of, Lender, any agent or
bailee for Lender or any Participant (including but not limited to any
account maintained in Lender's name with any other bank or financial
institution for the collection of any Accounts Receivable of such Borrower
or cash proceeds of other Collateral of such Borrower) and any and all
property of every description of or in the name of such Borrower now or
hereafter, for any reason or purpose whatsoever, in the possession or
control of, or in transit to, or standing to such Borrower's credit on the
books of, Lender or any Participant, or any agent of or bailee for Lender
or any Participant;
(g) all interest of such Borrower in any goods the sale or lease of
which shall have given or shall give rise to, and in all guaranties and
other property securing the payment of or performance under any Accounts
Receivable, Contract Rights, General Intangibles or any chattel paper or
instruments referred to in CLAUSE (e) above;
(h) any and all other property of such Borrower, of any kind or
description of such Borrower, subject to a separate pledge or security
interest in favor of Lender or in which Lender now or hereafter has or
acquires a security interest securing any Liabilities of either or both of
the Borrowers, whether pursuant to a written agreement or instrument other
than this Agreement or otherwise;
(i) all Intellectual Property of such Borrower;
(j) all replacements, substitutions, additions or accessions to or
for any of the foregoing;
(k) to the extent related to the property described in CLAUSES (a)
through (j) above, all books, correspondence, credit files, records,
invoices and other papers and documents, including, without limitation, to
the extent so related, all tapes, cards, computer runs, computer programs
and other papers and documents in the possession or control of such
Borrower or any computer bureau from time to time acting for such Borrower,
and, to the extent so related, all rights in, to and under all policies of
insurance, including claims of rights to payments thereunder and proceeds
therefrom, including any credit insurance; and
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(l) all products, offspring, rents, issues, profits, returns, income
and proceeds of and from any and all of the foregoing Collateral of such
Borrower (including proceeds which constitute property of the types
described in CLAUSES (a) through (k) above, proceeds deposited from time to
time in the Assignee Deposit Account, and to the extent not otherwise
included, all payments under insurance (whether or not Lender is the loss
payee thereof), or any indemnity, warranty or guaranty, payable by reason
of loss or damage to or otherwise with respect to any of the foregoing
Collateral of such Borrower).
3.2 ACCOUNTS RECEIVABLE.
(a) If requested by Lender, each Borrower shall advise Lender promptly of
any Inventory of such Borrower returned by or repossessed from any Account
Debtor of such Borrower, or otherwise recovered, shall receive such Inventory in
trust and, unless instructed to deliver such Inventory to Lender, shall resell
it for Lender. If requested by Lender, each Borrower shall notify Lender
immediately of all disputes and claims by any Account Debtor of such Borrower
and settle or adjust them at no expense to Lender. If Lender directs, no
discount or credit allowance shall be granted thereafter by either of the
Borrowers to any Account Debtor, other than discounts and credit allowances
granted in the ordinary course of such Borrower's business and in accordance
with such Borrower's usual and customary business and credit practices in effect
on the Closing Date. All Account Debtor payments and all net amounts received
by Lender in settlement, adjustment or liquidation of any Account Receivable of
either of the Borrowers may be applied by Lender to such Borrower's Liabilities
or credited to such Borrower's Demand Deposit Account (subject to collection)
with Lender, as Lender may deem appropriate, as more fully described in SECTION
2.10. If requested by Lender, each Borrower will make proper entries in its
books and records, disclosing the assignment of its Accounts Receivable to
Lender.
(b) Each Borrower warrants that: (i) to the best of such Borrower's
knowledge all of the Accounts Receivable of such Borrower are and will continue
to be bona fide existing obligations created by the sale of goods, the rendering
of services, or the furnishing of other good and sufficient consideration to
Account Debtors in the regular course of such Borrower's business; (ii) all
shipping or delivery receipts and other documents furnished or to be furnished
to Lender in connection therewith are and will be genuine; and (iii) to the best
of such Borrower's knowledge none of the Accounts Receivable of such Borrower
identified or included on any schedule, Borrowing Base Certificate or report as
Eligible Accounts Receivable of such Borrower fail at the time so identified or
included to satisfy any of the requirements for eligibility set forth in the
definition of Eligible Accounts Receivable.
(c) Lender is authorized and empowered by each of the Borrowers (which
authorization and power, being coupled with an interest, is irrevocable until
the last to occur of termination of
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this Agreement and payment and performance in full of all of the Liabilities of
each Borrower under this Agreement) at any time in its sole and absolute
discretion:
(1) To request, in Lender's name, such Borrower's name or the name of
a third party, confirmation from any Account Debtor of such Borrower or
party obligated under or with respect to any Collateral of such Borrower of
the amount shown by the Accounts Receivable or other Collateral to be
payable, or any other matter stated therein;
(2) To endorse in such Borrower's name and to collect any chattel
paper, checks, notes, drafts, instruments or other items of payment
tendered to or received by Lender in payment of any Account Receivable or
other obligation owing to such Borrower;
(3) To notify, either in Lender's name or such Borrower's name,
and/or to require such Borrower to notify, any Account Debtor or other
Person obligated under or in respect of any Collateral of such Borrower, of
the fact of Lender's Lien thereon and of the collateral assignment thereof
to Lender;
(4) To direct, either in Lender's name or such Borrower's name,
and/or to require such Borrower to direct, any Account Debtor or other
Person obligated under or in respect of any Collateral of such Borrower to
make payment directly to Lender of any amounts due or to become due
thereunder or with respect thereto; and
(5) After the occurrence of an Event of Default, to demand, collect,
surrender, release or exchange all or any part of any Collateral of such
Borrower or any amounts due thereunder or with respect thereto, or
compromise or extend or renew for any period (whether or not longer than
the initial period) any and all sums which are now or may hereafter become
due or owing upon or with respect to any of the Collateral of such
Borrower, or enforce, by suit or otherwise, payment or performance of any
of the Collateral of such Borrower either in Lender's own name or in the
name of such Borrower.
Under no circumstances shall Lender be under any duty to act in regard to
any of the foregoing matters. The costs relating to any of the foregoing
matters, including Attorneys' Fees and out-of-pocket expenses, and the cost
of any Assignee Deposit Account or other bank account or accounts which may
be required hereunder, shall be borne solely by such Borrower whether the
same are incurred by Lender or such Borrower, and Lender may advance same
to such Borrower as a Revolving Loan.
(d) Unless otherwise consented to by Lender, each Borrower will, forthwith
upon receipt by such Borrower of all checks, drafts, cash and other remittances
in payment or as proceeds of, or on account of, any of the Accounts Receivable
or other Collateral
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of such Borrower, deposit the same in a special bank account (such Borrower's
"ASSIGNEE DEPOSIT ACCOUNT") with Lender or such other bank or financial
institution as Lender shall consent, over which Lender alone has power of
withdrawal, and will, to the extent required by Lender, designate with each such
deposit the particular Account Receivable or other item of Collateral of such
Borrower upon which the remittance was made. Each Borrower acknowledges that
the maintenance of the Assignee Deposit Account of such Borrower is solely for
the convenience of Lender in facilitating its own operations and such Borrower
does not and shall not have any right, title or interest in such Assignee
Deposit Account or in the amounts at any time appearing to the credit thereof.
Said proceeds shall be deposited in precisely the form received except for such
Borrower's endorsement where necessary to permit collection of items, which
endorsement such Borrower agrees to make. Pending such deposit, each Borrower
agrees not to commingle any such checks, drafts, cash and other remittances with
any of its funds or property, but will hold them separate and apart therefrom
and upon an express trust for Lender until deposit thereof is made in the
Assignee Deposit Account of such Borrower. Lender will pay over to each
Borrower any excess amounts received by Lender as payment or proceeds of
Collateral of such Borrower, whether received by Lender as a deposit in the
Assignee Deposit Account of such Borrower or received by Lender as a direct
payment on any of the sums due from such Borrower hereunder (i) upon the full
and final liquidation of all Liabilities of such Borrower and (ii) at any time
that the aggregate outstanding principal balance of the Obligations shall be
equal to zero, provided, that at such time an Event of Default or Unmatured
Event of Default shall not exist.
(e) Each Borrower appoints Lender, or any Person whom Lender may from time
to time designate, as such Borrower's attorney and agent-in-fact with power: (i)
upon the occurrence and during the continuance of an Event of Default, to notify
the post office authorities to change the address for delivery of such
Borrower's mail to an address designated by Lender; (ii) upon the occurrence and
during the continuance of an Event of Default, to receive, open and dispose of
all mail addressed to such Borrower; (iii) to send requests for verification of
Accounts Receivable or other Collateral of such Borrower to Account Debtors in
accordance with Lender's usual and customary business practices; (iv) to open an
escrow account or Assignee Deposit Account under Lender's sole control for the
collection of Accounts Receivable or other Collateral of such Borrower, if not
required contemporaneously with the execution hereof; and (v) to do all other
things which Lender is permitted to do under this Agreement or any Related
Agreement or which are necessary to carry out this Agreement and the Related
Agreements. Neither Lender nor any of its directors, officers, employees or
agents will be liable for any acts of commission or omission nor for any error
in judgment or mistake of fact or law, unless the same shall have resulted from
gross negligence or willful misconduct. The foregoing appointment and power,
being coupled with an interest, is irrevocable until all Liabilities of each
Borrower under this Agreement are paid and performed in full and this Agreement
is terminated. Each Borrower expressly waives
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presentment, demand, notice of dishonor and protest of all instruments and any
other notice to which it might otherwise be entitled.
(f) If any Account Receivable, Contract Right or General Intangible, in
each case of either of the Borrowers arises out of a contract with the United
States or any department, agency, or instrumentality thereof, such Borrower
will, unless Lender shall otherwise agree, immediately notify Lender in writing
and execute any instruments and take any steps required by Lender in order that
all monies due and to become due under such contract shall be assigned to Lender
and notice thereof given to the government under the Federal Assignment of
Claims Act of 1940, as amended or other applicable laws or regulations.
(g) If any Account Receivable or Contract Right of either of the Borrowers
is evidenced by chattel paper or promissory notes, trade acceptances, or other
instruments for the payment of money, such Borrower will, unless Lender shall
otherwise agree, deliver the originals of same to Lender, appropriately endorsed
to Lender's order and, regardless of the form of such endorsement, such Borrower
hereby expressly waives presentment, demand, notice of dishonor, protest and
notice of protest and all other notices with respect thereto.
3.3 INVENTORY.
(a) Unless Lender shall otherwise agree, if either of the Borrowers sells
Inventory for cash, all full and partial payments therefor shall be immediately
delivered by such Borrower to Lender in their original form for deposit in the
Assignee Deposit Account of such Borrower or for other application to reduction
of the Liabilities of such Borrower. All such cash shall be held by such
Borrower in trust for Lender and shall be remitted to Lender not later than the
end of the day following the day on which it is received, or at such other time
as Lender may designate.
(b) Lender shall not be liable or responsible in any way for the
safekeeping of any Inventory of either of the Borrowers delivered to it, to any
bailee appointed by or for it, to any warehouseman, or under any other
circumstances. Lender shall not be responsible for collection of any proceeds
or for losses in collected proceeds held by either of the Borrowers in trust for
Lender. Any and all risk of loss for any or all of the foregoing shall be upon
such Borrower, except for such loss as shall result from Lender's gross
negligence or willful misconduct.
(c) If requested by Lender, each Borrower shall, upon acquiring an
interest in any Inventory, deliver to Lender schedules of such Inventory,
together with supplier's invoices, warranties, production, cost and other
records as Lender may reasonably request. If requested by Lender, each Borrower
shall deliver to Lender schedules of the sale of any Inventory of such Borrower
immediately upon its sale. Any material change in the value or condition of any
Inventory of either of the Borrowers, and any
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material errors discovered in schedules delivered to Lender, shall be reported
to Lender by such Borrower immediately. Each Borrower confirms that the
warranties and representations of each of the Borrowers in this Agreement shall
apply to each schedule. Each Borrower represents and warrants that, as to each
schedule of Inventory delivered by such Borrower to Lender:
(1) The descriptions, origins, sizes, qualities, quantities, weights,
and markings of all goods stated thereon, or on any attachment thereto, are
true and correct in all material respects;
(2) None of the goods are defective, of second quality or in any
other respect unsuitable for use or sale in the ordinary course of such
Borrower's business, except where described as such; and
(3) All Inventory of such Borrower not included on such schedule has
been previously scheduled.
(d) If requested by Lender, each Borrower will notify Lender immediately
if such Borrower obtains possession (by return, repossession or otherwise) of
any Inventory of such Borrower which has been sold, and will inform Lender of
the identity of such returned or repossessed Inventory, the applicable Account
Debtor and the amount of the applicable Account Receivable.
3.4 SUPPLEMENTAL DOCUMENTATION. At Lender's request, each Borrower shall
execute and/or deliver to Lender, at any time or times hereafter, such
agreements, documents, financing statements, warehouse receipts, bills of
lading, notices of assignment of Accounts Receivable, schedules of Accounts
Receivable assigned, and other written matter necessary or reasonably requested
by Lender to perfect and maintain perfected Lender's security interest in the
Collateral of each Borrower (all the above hereinafter referred to as
"SUPPLEMENTAL DOCUMENTATION"), in form and substance acceptable to Lender, and
pay all taxes, fees and other costs and expenses associated with any recording
or filing of the Supplemental Documentation. Each Borrower hereby irrevocably
makes, constitutes and appoints Lender (and all Persons designated by Lender for
that purpose) as such Borrower's true and lawful attorney (and agent-in-fact) to
sign the name of such Borrower on any of the Supplemental Documentation and to
deliver any of the Supplemental Documentation to such Persons as Lender in its
sole and absolute discretion, may elect. Each Borrower agrees that a carbon,
photographic, photostatic, or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement.
4. REPRESENTATIONS AND WARRANTIES.
To induce Lender to make Loans to the Borrowers under this Agreement, each
of the Borrowers makes the following representations and warranties, all of
which shall be true and correct in all material respects as of the date the
initial Loans are made, in each case after giving effect to the Acquisition and
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to the other transactions contemplated by the Acquisition Documents, and shall
survive the execution of this Agreement and the making of the initial Loans:
4.1 ORGANIZATION. Each of the Borrowers and all of its corporate
Subsidiaries are corporations duly organized, validly existing and in good
standing under the laws of the jurisdictions of their respective incorporation
or formation. All of each of the Borrower's other Subsidiaries, if any, are
entities duly organized, validly existing and in good standing under the laws of
the jurisdictions of their respective organization or formation. Each of the
Borrowers and all of its Subsidiaries are in good standing and are duly
qualified to do business in each jurisdiction where, because of the nature of
their respective activities or properties, such qualification is required,
except for any such failures to so qualify which singly or in the aggregate
could not reasonably be expected to have a Material Adverse Effect. On the date
hereof, each of the Borrowers and each Subsidiary of each of the Borrowers
conduct business in their respective names exclusively and have no trade names,
styles or doing business forms, except as disclosed on SCHEDULE 4.1. SCHEDULE
4.1 sets forth a complete and accurate list, as of the date of this Agreement,
of (a) the state or other jurisdiction of formation of each of the Borrowers and
each of its Subsidiaries, (b) each state in which each of the Borrowers and each
of its subsidiaries is qualified to do business and (c) all of each of the
Borrower's and its Subsidiaries' trade names, trade styles or doing business
forms.
4.2 AUTHORIZATION. Each of the Borrowers is duly authorized, has full
power and authority, and holds all requisite governmental licenses, permits and
other approvals, to execute and deliver this Agreement, any Notes, any Related
Agreements or Supplemental Documentation contemplated by this Agreement executed
and/or delivered by it, and any Acquisition Documents executed and/or delivered
by it, and is and will continue to be duly authorized, have full power and
authority and hold all requisite governmental licenses, permits and other
approvals to borrow monies hereunder and to perform its obligations under this
Agreement, any Notes, any Related Agreements and Supplemental Documentation
executed and/or delivered by it, and any Acquisition Documents executed and/or
delivered by it. The execution, delivery and performance by each of the
Borrowers of this Agreement, any Notes, any Related Agreements or Supplemental
Documentation contemplated by this Agreement to be executed and/or delivered by
it, the consummation of the Acquisition, and the borrowings hereunder, do not
and will not require any consent or approval of any governmental agency or
except any that have been obtained and are in full force and effect. Each
Subsidiary of each of the Borrowers is duly authorized, has full power and
authority and holds all requisite governmental licenses, permits and other
approvals to execute and/or deliver any Related Agreements or Supplemental
Documentation contemplated by this Agreement to be executed and/or delivered by
it, and is and will continue to be duly authorized, have full power and
authority and hold all requisite governmental licenses, permits and other
approvals to perform its obligations under each such
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Related Agreement and Supplemental Documentation. The execution, delivery and
performance by each Subsidiary of each of the Borrowers of any Related
Agreements or Supplemental Documentation contemplated by this Agreement, do not
and will not require any consent or approval of any governmental agency or
authority except any that have been obtained and are in full force and effect.
4.3 NO CONFLICTS. The execution, delivery and performance by each of the
Borrowers of each of the Acquisition Documents, this Agreement, any Notes, and
any Related Agreements or Supplemental Documentation executed and/or delivered
by it, including the consummation of the Acquisition do not and will not
conflict with (i) except for any such conflicts which singly or in the aggregate
could not reasonably be expected to have a Material Adverse Effect, any
provision of law, (ii) the charter or by-laws of such Borrower, (iii) any
material agreement binding upon such Borrower or (iv) any court or
administrative order or decree applicable to such Borrower, and do not and will
not require, or result in, the creation or imposition of any Lien on any asset
of either of the Borrowers or any of its Subsidiaries except as provided herein.
The execution, delivery and performance by any of the Subsidiaries of either of
the Borrowers of any Related Agreements or Supplemental Documentation executed
and/or delivered by it do not and will not conflict with (i) except for any such
conflicts which singly or in the aggregate could not reasonably be expected to
have a Material Adverse Effect, any provision of law, (ii) the charter or by-
laws of such Subsidiary, (iii) any agreement binding upon such Subsidiary or
(iv) any court or administrative order or decree applicable to such Subsidiary,
and do not and will not require, or result in, the creation or imposition of any
Lien on any asset of such Subsidiary except as provided herein.
4.4 VALIDITY AND BINDING EFFECT. This Agreement, any Notes, any Related
Agreements or Supplemental Documentation contemplated by this Agreement, when
duly executed and delivered by each of the Borrowers, will be legal, valid and
binding obligations of such Borrower, enforceable against such Borrower in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency or other similar laws of general application affecting
the enforcement of creditors' rights or by general principles of equity limiting
the availability of equitable remedies. Any Related Agreements or Supplemental
Documentation contemplated by this Agreement, when duly executed and delivered
by a Subsidiary of either of the Borrowers will be legal, valid and binding
obligations of such Subsidiary enforceable against such Subsidiary in accordance
with their respective terms, except as enforceability may be limited by
bankruptcy, insolvency or other similar laws of general application affecting
the enforcement of creditors' rights or by general principles of equity limiting
the availability of equitable remedies.
4.5 NO DEFAULT. Neither of the Borrowers nor any of their respective
Subsidiaries is in default under any agreement or instrument to which such
Borrower or such Subsidiary is a party or by which any of their respective
properties or assets is bound or
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affected, which default might materially and adversely affect (i) Lender's Lien
on or rights with respect to any Collateral or Third Party Collateral of either
of the Borrowers or (ii) the financial condition or operations of either of the
Borrowers or any Subsidiary of either of the Borrowers. No Event of Default or
Unmatured Event of Default has occurred and is continuing.
4.6 FINANCIAL STATEMENTS.
(a) OREMET's audited financial statement as at December 31, 1993 and
OREMET'S unaudited financial statement as at June 30, 1994, copies of which have
been furnished to Lender, have been prepared in conformity with generally
accepted accounting principles applied on a basis consistent with that of the
preceding fiscal year and period and present fairly the financial condition of
OREMET and its Subsidiaries as at such dates and the results of their operations
for the periods then ended, subject (in the case of the interim financial
statement) to year-end audit adjustments and the absence of footnotes. Since
December 31, 1993, there has been no material adverse change in the financial
condition of OREMET and its Subsidiaries taken as a whole.
(b) Old TI's audited combined financial statement as at December 31, 1993
and Old TI'S unaudited combined financial statement as at June 30, 1994, in the
case of such financial statement as at December 31, 1993, certified by a
certified public accounting firm reasonably acceptable to Lender, copies of
which have been furnished to Lender, have been prepared in conformity with
generally accepted accounting principles and present fairly the financial
condition of Old TI (excluding the Fabrication Business) and its Subsidiaries
and as at such dates and the results of their operations for the periods then
ended, subject (in the case of the interim financial statement) to year-end
audit adjustments and the absence of footnotes. Since December 31, 1993, there
has been no material adverse change in the financial condition of Old TI
(excluding the Fabrication Business) and its Subsidiaries taken as a whole.
(c) Borrowers have furnished or caused to be furnished to Lender the
following (collectively, the "PRO FORMA FINANCIAL INFORMATION"), each as at the
Closing Date and after giving effect to the Acquisition and the other
transactions contemplated by the Purchase Agreement and the other Acquisition
Documents, the incurrence by TI of the Subordinated Indebtedness and
consummation of the other transactions required as a condition precedent to the
initial Loans under this Agreement: (i) the pro forma balance sheet of TI
setting forth the assets and liabilities and each of its Subsidiaries, which is
attached hereto as EXHIBIT B (the "PRO FORMA BALANCE SHEET") and (ii) projected
pro forma statements of earnings and cash flows and balance sheets and other
operating information for each of the Borrowers and also for OREMET and each of
its Subsidiaries on a consolidated basis, which are attached hereto as EXHIBIT C
(the "PROJECTIONS"). Such Projections shall be for a period of four (4) years
and shall consist of projected financial information on an annual basis for each
of such years and
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on a monthly basis for the twelve-month period immediately following the Closing
Date. The Pro Forma Financial Information presents fairly, on a pro forma
basis, the balance sheet of TI and each of its Subsidiaries and TI's best good
faith estimate and projections of TI's and each Subsidiary's financial position
and results of operations as of the dates and for the periods indicated. As of
the date of this Agreement, neither of the Borrowers knows of any fact that
materially affects or is likely to materially affect the reliability, accuracy
and completeness of the Pro Forma Financial Information.
4.7 INSURANCE. SCHEDULE 4.7 hereto is a complete and accurate summary
of the property and casualty insurance program carried by each of the Borrowers
and its Subsidiaries on the date hereof. SCHEDULE 4.7 includes the
insurer's(s') name(s), policy number(s), expiration date(s), amount(s) of
coverage, type(s) of coverage and applicable exclusions and deductibles. This
summary also includes a description of any self-insurance program that is in
effect.
4.8 LITIGATION; CONTINGENT LIABILITIES.
(a) Except for those referred to in SCHEDULE 4.8, no claims, litigation,
arbitration proceedings or governmental proceedings are pending or threatened
against or are affecting either of the Borrowers or any of its Subsidiaries, the
results of which singly or in the aggregate could reasonably be expected to have
a Material Adverse Effect.
(b) Other than any liability incident to the claims, litigation or
proceedings disclosed in SCHEDULE 4.8 or SCHEDULE 4.19, or provided for or
disclosed in the financial statements referred to in SECTION 4.6, neither of the
Borrowers nor any Subsidiary of either of the Borrowers has any contingent
liabilities which are material to such Borrower or such Subsidiary.
4.9 LIENS. None of the Collateral of either of the Borrowers or other
property or assets of either of the Borrowers or any Subsidiary of either of the
Borrowers is subject to any Lien (including but not limited to Liens pursuant to
Capitalized Leases under which such Borrower or any such Subsidiary is a lessee)
except: (a) Liens in favor of Lender; (b) Liens for current Taxes not delinquent
or Taxes being contested in good faith and by appropriate proceedings and as to
which such reserves or other appropriate provisions as may be required by GAAP
are being maintained; (c) carriers', warehousemen's, mechanics', materialmen's
and other like statutory Liens arising in the ordinary course of business
securing obligations which are not overdue or which are being contested in good
faith and by appropriate proceedings and as to which such reserves or other
appropriate provisions as may be required by GAAP are being maintained; (d)
easements, rights-of-way, restrictions and other similar charges or encumbrances
not interfering in any material respect with the ordinary conduct of the
business of either of the Borrowers or any Subsidiary of either of the
Borrowers; (e) Liens
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described on SCHEDULE 4.9; (f) in the case of TI, Liens on property of TI in
favor of "Junior Lender" (as defined in the Subordination Agreement) granted
pursuant to the Subordinated Indebtedness Documents and securing Subordinated
Indebtedness; and (g) Liens (other than Liens or any Collateral or Third Party
Collateral of any Borrower) in addition to those described in clauses (a)
through (f) above, provided that the fair market value of the property subject
to such Lien shall not exceed $500,000 in the aggregate for OREMET and its
Subsidiaries.
4.10 SUBSIDIARIES. Neither of the Borrowers has any Subsidiaries except as
listed on SCHEDULE 4.10. Each of the Borrowers and each Subsidiary of each of
the Borrowers own the percentage of their respective Subsidiaries described on
SCHEDULE 4.10.
4.11 PARTNERSHIPS. Except as set forth on SCHEDULE 4.11, neither of the
Borrowers nor any Subsidiary of either of the Borrowers is a partner or joint
venturer in any partnership or joint venture.
4.12 BUSINESS LOCATIONS.
(a) On the date hereof, the office where each of the Borrowers keeps books
and records concerning its Accounts Receivable and other Collateral, and such
Borrower's chief place of business and chief executive office, is located at the
respective address of such Borrower set forth on the signature pages of this
Agreement. SCHEDULE 4.12 contains a complete and accurate list, as of the date
of this Agreement and after giving effect to the Acquisition, of (i) all of each
of the Borrower's other places of business, (ii) the office where each
Subsidiary of each of the Borrowers keeps its respective books and records
concerning its assets, and such Subsidiary's chief place of business and chief
executive office and (iii) to the extent not included in CLAUSE (II) of this
sentence, each place of business of each of Subsidiary of each of the Borrowers.
(b) SCHEDULE 4.12 contains a complete and accurate list, as of the date of
this Agreement and after giving effect to the Acquisition, of (i) the locations
of all of each of the Borrower's Inventory, Equipment and Fixtures (except any
Equipment which such Borrower shall have advised Lender in writing is normally
used in more than one state and other locations of Inventory with a market value
not exceeding $250,000 in the aggregate for both Borrowers at any one of such
locations and $500,000 in the aggregate for both Borrowers for all such
locations), (ii) the locations of all Inventory, Equipment and Fixtures of each
Subsidiary of each of the Borrowers (except the location of any such Equipment
which such Borrower shall have advised Lender in writing is normally used in
more than one state ), (iii) if applicable (and to the extent not included in
the information provided pursuant to CLAUSE (II) of this PARAGRAPH (B), the
locations of all Third Party Collateral of each of the Borrowers (except any
thereof which such Borrower shall have advised Lender in writing is normally
used in more than one
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state) and (iv) if any Inventory, Equipment or other Collateral or Third Party
Collateral of either of the Borrowers or any Subsidiary of either of the
Borrowers, or any other Third Party Collateral of either of the Borrowers, is
not in the possession or control such of Borrower, such Subsidiary or the owner
of such other Third Party Collateral, as appropriate, the name and mailing
address of each bailee, processor, consignee, warehouseman or other Person in
possession or control thereof.
4.13 REAL PROPERTY. SCHEDULE 4.13 contains a complete and accurate list, as
of the date of this Agreement and after giving effect to the Acquisition, of (a)
the address of any real property owned by each of the Borrowers and each
Subsidiary of each of the Borrowers or on which any Fixtures of such Borrower or
such Subsidiary are located and (b) in the case of Fixtures located on property
not owned by such Borrower or such Subsidiary, as the case may be, the name(s)
and mailing addresses of the record owners of such property.
4.14 ELIGIBILITY OF COLLATERAL. Each Account Receivable or item of
Inventory which either of the Borrowers shall, expressly or by implication (by
inclusion on a Borrowing Base Certificate or otherwise), request Lender to
classify as an Eligible Account Receivable or as Eligible Inventory,
respectively, of such Borrower will, as of the time when such request is made,
conform in all respects to the requirements of such classification set forth in
the respective definitions of "Eligible Account Receivable" and "Eligible
Inventory" set forth herein.
4.15 CONTROL OF COLLATERAL; LEASE OF PROPERTY. Except as set forth on
SCHEDULE 4.15, neither of the Borrowers is now conducting, or permitting or
suffering to be conducted, any activities pursuant to or in conjunction with
which any of the Collateral of either of the Borrowers is now, or will be (while
any Liabilities of either of the Borrowers exist or this Agreement is in
effect), in the possession or control of, any Subsidiary of either Borrower,
Obligor (other than a Borrower) or Related Party. Except as listed on SCHEDULE
4.15 and for any such leases the annual rent payable under which leases by
OREMET and its Subsidiaries does not exceed $500,000 in the aggregate, none of
the machinery, equipment or real property used by either Borrower or any of its
Subsidiary is subject to a lease (excluding only Capitalized Leases included on
SCHEDULE 4.15) under which such Borrower or such Subsidiary is the lessee.
4.16 INTELLECTUAL PROPERTY; LICENSES. Each of the Borrowers and each of
its Subsidiaries possesses adequate Intellectual Property to continue to conduct
its respective business as heretofore conducted by it, and all such Intellectual
Property (other than Trade Secrets) existing on the date of this Agreement
(together with in the case of patents, Trademarks and copyrights, the date of
issuance thereof), are as listed on SCHEDULE 4.16. With respect to the
Intellectual Property which is useful to the conduct by each of the Borrowers
and its Subsidiaries of their respective businesses or the loss of use of which
could materially
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and adversely affect (i) Lender's Lien on or rights with respect to any material
(whether as to type, or as to amount or value in relation to the total amount of
Collateral or Third Party Collateral of such type) Collateral or Third Party
Collateral of either of the Borrowers or (ii) the business, financial condition,
operations, properties or prospects of the Borrowers, any of their respective
Subsidiaries, or the Borrowers and their respective Subsidiaries taken as a
whole:
(a) such Intellectual Property is valid and enforceable, is
subsisting, and has not been adjudged invalid or unenforceable, in whole or
in part;
(b) such Borrower or the applicable Subsidiary has made all necessary
filings and recordations required in the exercise of reasonable business
judgment, to protect its interest therein, including, without limitation,
recordations of all of its interest in its Patent Property and Trademark
Property in the United States Patent and Trademark Office and in
corresponding offices throughout the world and its claims to its Copyright
Property in the United States Copyright Office and in corresponding offices
throughout the world;
(c) except for non-exclusive licenses granted in the ordinary course
of business, such Borrower or one of its Subsidiaries is the exclusive
owner of the entire and unencumbered right, title and interest therein and
thereto and no claim has been made that the use of any of its Intellectual
Property does or may violate the asserted rights of any third party; and
(d) such Borrower and each applicable Subsidiary has performed, and
such Borrower will continue to perform, and will cause each of its
Subsidiaries to continue to perform, all acts, and such Borrower and each
applicable Subsidiary has paid and will continue to pay, all required fees
and taxes to maintain each and every item of its Intellectual Property in
full force and effect throughout the world, as applicable.
Each of the Borrowers and each of its Subsidiaries owns directly or is entitled
to use, by license or otherwise, all patents, Trademarks, Trade Secrets,
copyrights, mask works, licenses, technology, know-how, processes and rights
with respect to any of the foregoing used in, necessary for or of importance to
the conduct of such Borrower's and its Subsidiaries' respective businesses.
4.17 SOLVENCY. After giving effect to the transactions contemplated
hereby, by the Related Agreements and by the Acquisition Documents, including,
without limitation, the Acquisition and incurrence by TI of the Subordinated
Indebtedness, each of the Borrowers and each of its Subsidiaries (i) has assets
(excluding goodwill and other intangible assets not capable of valuation) having
a value, both at present fair saleable value and at fair valuation, greater than
the amount of its liabilities, (ii)
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has capital sufficient to carry on its respective business and transactions and
all business and transactions in which it is about to engage, (iii) has not
engaged in and is not about to engage in a business or transaction for which its
remaining assets are unreasonably small in relation to the business or the
transaction, (iv) is able to pay its respective debts as they mature and does
not intend to incur, or believe that it is incurring, debts beyond its ability
to pay as they mature and (v) has no actual intent to hinder, delay or defraud
either present or future creditors.
4.18 CONTRACTS; LABOR MATTERS. Except as disclosed on SCHEDULE 4.18:
(a) neither of the Borrowers nor any Subsidiary of either of the Borrowers is a
party to any contract or agreement, or is subject to any charge, corporate
restriction, judgment, decree or order, which materially and adversely affects
its business, property, assets, operations or condition, financial or otherwise;
(b) no labor contract to which either of the Borrowers or any Subsidiary of
either of the Borrowers is a party or is otherwise subject is scheduled to
expire prior to the initial Termination Date; (c) neither of the Borrowers nor
any Subsidiary of either of the Borrowers has, within the two-year period
preceding the date of this Agreement, taken any action which would have
constituted or resulted in a "plant closing" or "mass layoff" within the meaning
of the Federal Worker Adjustment and Retraining Notification Act of 1988 or any
similar applicable federal, state or local law, and neither of the Borrowers has
any reasonable expectation that any such action is or will be required at any
time prior to the initial Termination Date and (d) on the date of this Agreement
(i) neither of the Borrowers nor any Subsidiary of either of the Borrowers is a
party to any labor dispute and (ii) there are no strikes or walkouts relating to
any labor contracts to which either of the Borrowers or any of its Subsidiaries
is a party or is otherwise subject.
4.19 PENSION AND WELFARE PLANS. Each Pension Plan complies in all
material respects with all applicable statutes and governmental rules and
regulations; no Reportable Event has occurred and is continuing with respect to
any Pension Plan; neither of the Borrowers nor any ERISA Affiliate of either of
the Borrowers has withdrawn from any Multiemployer Plan in a "complete
withdrawal" or a "partial withdrawal" as defined in Sections 4203 or 4205 of
ERISA, respectively; no steps have been instituted by either of the Borrowers to
terminate any Pension Plan; no condition exists or event or transaction has
occurred in connection with any Pension Plan or Multiemployer Plan which could
result in the incurrence by either of the Borrowers, any other Obligor or any
ERISA Affiliate of either of the Borrowers of any material liability, fine or
penalty; and neither of the Borrowers nor any other Obligor nor any ERISA
Affiliate of either of the Borrowers is a "contributing sponsor" as defined in
Section 4001(a) (13) of ERISA of a "single-employer plan" as defined in Section
4001(a)(15) of ERISA which has two or more contributing sponsors at least two of
whom are not under common control. Except as listed in SCHEDULE 4.19, neither
of the Borrowers nor any Subsidiary of either of the Borrowers has any
contingent liability with respect to any
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"employee welfare benefit plans," as such term is defined in Section 3(l) of
ERISA, which covers retired or terminated employees and their beneficiaries.
4.20 REGULATION U. Neither of the Borrowers nor any Subsidiary of either
of the Borrowers is engaged in the business of purchasing or selling Margin
Stock or extending credit to others for the purpose of purchasing or carrying
Margin Stock, and no part of the proceeds of any borrowing hereunder will be
used to purchase or carry any Margin Stock or for any other purpose which would
violate any of the margin regulations of the Federal Reserve Board.
4.21 COMPLIANCE. Each of the Borrowers and each Subsidiary is in
material compliance with all statutes, judicial or administrative orders,
licenses, permits and governmental rules and regulations applicable to it.
4.22 TAXES. Each of the Borrowers and each Subsidiary of each of the
Borrowers has filed all tax returns which are required to have been filed and
has paid, or made adequate provisions for the payment of, all of its Taxes which
are due and payable, except (i) such Taxes, if any, as are being contested in
good faith and by appropriate proceedings and as to which such reserves or other
appropriate provisions as may be required by GAAP have been maintained and (ii)
such Taxes in an aggregate amount not exceeding $25,000. The federal income tax
liability of each of the Borrowers and each Subsidiary of each of the Borrowers
has been audited by the Internal Revenue Service and has been finally determined
and satisfied (or the time for audit has expired) for all tax years up to and
including the tax year ended December 31, 1986. Neither of the Borrowers is
aware of any proposed assessment against such Borrower or any of its
Subsidiaries for additional Taxes (or any basis for any such assessment) which
might be material to such Borrower and its Subsidiaries taken as a whole.
4.23 INVESTMENT COMPANY ACT REPRESENTATION. Neither of the Borrowers nor
any Subsidiary of either of the Borrowers is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
4.24 PUBLIC UTILITY HOLDING COMPANY ACT REPRESENTATION. Neither of the
Borrowers nor any Subsidiary of either of the Borrowers is a "holding company"
or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
4.25 ENVIRONMENTAL AND SAFETY AND HEALTH MATTERS. Except as disclosed on
SCHEDULE 4.25, and after giving effect to the Acquisition:
(a) Each of the Borrowers and each of its Subsidiaries, and each
property (including underlying groundwater), operation and facility that
each of the Borrowers or any of
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its Subsidiaries owns, operates or controls, have been, and continue to be,
owned, operated or controlled in material compliance in all respects with
(1) all applicable Environmental Laws and (2) all applicable Occupational
Safety and Health Laws, and each of the Borrowers and each of its
Subsidiaries, as applicable, has been issued and it and its properties,
operations and facilities are in compliance in all material respects with
all permits, certificates, approvals, licenses and other authorizations
relating to environmental matters and necessary or desirable for its
businesses;
(b) neither of the Borrowers nor any Subsidiary of either of the
Borrowers, and no property (including underlying groundwater), operation or
facility that each of the Borrowers or any Subsidiary of either of the
Borrowers may own, operate or control, is subject to any judicial or
administrative proceeding alleging the violation of any Environmental Law
or Occupational Safety and Health Law;
(c) neither of the Borrowers nor any Subsidiary of either of the
Borrowers has received any notice (1) that it may be in violation of any
Environmental Law or Occupational Safety and Health Law, or (2) threatening
the commencement of any proceeding relating to allegedly unlawful, unsafe
or unhealthy conditions or (3) alleging that it is or may be responsible
for any response, cleanup, or corrective action, including but not limited
to any remedial investigation/feasibility studies, under any Environmental
Law or Occupational Safety and Health Law;
(d) neither of the Borrowers nor any Subsidiary of either of the
Borrowers, and no property (including underlying groundwater), operation or
facility that either of the Borrowers or any Subsidiary of either of the
Borrowers owns, operates or controls, is the subject of federal or state
investigation evaluating whether any investigation, remedial action or
other response is needed to respond to (I) a spillage, disposal or Release
or threatened Release into the environment of any Hazardous Material or
other hazardous, toxic or dangerous waste, substance or constituent, or
other substance or (2) any allegedly unsafe or unhealthful condition;
(e) neither of the Borrowers nor any Subsidiary of either of the
Borrowers has filed any notice under or relating to any Environmental Law
or Occupational Safety and Health Law indicating or reporting, with respect
to any property (including underlying groundwater), operation and facility
that it may own, operate or control (1) any past or present spillage,
disposal or Release into the environment of, or treatment, storage or
disposal of, any Hazardous Material or other hazardous, toxic or dangerous
waste, substance or constituent, or other substance or (2) any potentially
unsafe or unhealthful condition, and there exists no basis for any
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such notice irrespective of whether or not such notice was actually filed;
(f) there has been no Release of Hazardous Materials at, on or under
any property, operation or facility that either of the Borrowers or any
Subsidiary of either of the Borrowers now or previously owned, operated or
controlled;
(g) no property, operation or facility that either of the Borrowers
or any Subsidiary of either of the Borrowers now or previously owned,
operated or controlled is listed or proposed for listing (with respect to
owned property only) on the National Priorities List maintained pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, on the Comprehensive Environmental Response Compensation
Liability Information System List or on any similar state list of sites
requiring investigation or clean-up;
(h) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any property, operation or
facility that either of the Borrowers or any Subsidiary of either of the
Borrowers now or previously owned, operated or controlled;
(i) neither of the Borrowers nor any Subsidiary of either of the
Borrowers has directly transported or directly arranged for the
transportation of any Hazardous Material to any location which is listed or
proposed for listing on the National Priorities List maintained pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, on the Comprehensive Environmental Response Compensation
Liability Information System List or on any similar state list of sites, or
which is the subject of federal, state or local enforcement actions or
other investigations which may lead to a claim against either of the
Borrowers or any Subsidiary of either of the Borrowers for any remedial
work, damage to natural resources or personal injury, including claims
under any Environmental Law;
(j) there are no polychlorinated biphenyls or friable asbestos
present at any property, operation or facility that either of the Borrowers
or any Subsidiary of either of the Borrowers now or previously owned,
operated or controlled;
(k) no conditions exist at, on or under any property now or
previously owned, operated or controlled by either of the Borrowers or any
Subsidiary of either of the Borrowers which, with the passage of time, or
the giving of notice or both, would give rise to liability under any
Environmental Law currently in existence; and
(l) neither of the Borrowers nor any Subsidiary of either of the
Borrowers has any contingent liability in connection with (1) any actual,
threatened, or potential
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spillage, disposal or Release into the environment of, or otherwise with
respect to, any Hazardous Material or other hazardous, toxic or dangerous
waste, substance or constituent, or other substance, whether on any
premises now or previously owned or occupied by either of the Borrowers or
any Subsidiary of either of the Borrowers or on any other premises, or (2)
any unsafe or unhealthful condition.
4.26 RELATED AGREEMENTS. All representations and warranties of each of the
Borrowers and each Subsidiary of each of the Borrowers contained in any Related
Agreements are true and correct in all material respects as if made on the date
hereof and each of the Borrowers hereby adopts and affirms all such
representations and warranties which such Borrower agrees shall be incorporated
by reference herein and made a part hereof.
5. BORROWER COVENANTS.
From the date of this Agreement and thereafter until the Credit of each
Borrower is terminated and all Liabilities of each of the Borrowers hereunder
are indefeasibly paid in full in cash, each of the Borrowers agrees that unless
Lender shall otherwise consent in writing, it will:
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. Furnish, or cause to be
furnished, to Lender in form satisfactory to Lender:
5.1.1 FINANCIAL REPORTS:
(a) ANNUAL AUDIT REPORT. Within ninety (90) days after
each fiscal year of each Borrower, a copy of the annual audit
report of such Borrower and its Subsidiaries prepared on a
consolidated basis in conformity with GAAP and certified by an
independent certified public accountant who shall be satisfactory
to Lender, together with a certificate from such accountant (i)
acknowledging its understanding that Lender and any Participant
is relying on such audit report and (ii) to the effect that, in
making the examination necessary for the signing of such annual
audit report, such accountant has not become aware of any Event
of Default or Unmatured Event of Default that has occurred and is
continuing, or, if such accountant has become aware of any such
event, describing it;
(b) QUARTERLY FINANCIAL STATEMENT. Within forty-five
(45) days (or in the case of the last quarter of each such fiscal
year, within sixty (60) days) after each quarter of each fiscal
year of each Borrower, a copy of the unaudited financial
statement of each of the Borrowers and its Subsidiaries prepared
in the same manner as the audit report referred to in preceding
CLAUSE (a), subject to year-end audit adjustments and the
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absence of footnotes, signed by such Borrower's chief financial
officer and consisting of at least a balance sheet as at the
close of such quarter and statements of earnings and source and
application of funds for such quarter and for the period from the
beginning of such fiscal year to the close of such quarter;
(c) MONTHLY FINANCIAL STATEMENT. Within thirty (30) days
(or in the case of the month of December, within sixty (60) days)
after the end of each month of each fiscal year of each Borrower,
a copy of the unaudited financial statement of such Borrower and
its Subsidiaries prepared in the same manner as the audit report
referred to in preceding CLAUSE (a), subject to year-end audit
adjustments and the absence of footnotes, signed by such
Borrower's chief financial officer and consisting of at least a
balance sheet as at the close of such month and statements of
earnings and source and application of funds for such month and
for the period from the beginning of such fiscal year to the
close of such month;
(d) ANNUAL BUDGET AND BUSINESS PLAN. On or before January
31st of each fiscal year of such Borrower, a copy of the business
plan, projections and budgets for such Borrower and its
Subsidiaries for such fiscal year, and prompt notice of any
material changes thereafter made to such business plans,
projections or budgets;
(e) OFFICER'S CERTIFICATE. Together with the financial
statements furnished under the preceding CLAUSES (a), (b) and
(c), a certificate of each of the Borrower's chief financial
officer in substantially the form of EXHIBIT D hereto (each, a
"COMPLIANCE CERTIFICATE") dated the date of such annual audit
report or such quarterly or monthly financial statement, as the
case may be, containing a statement that no Event of Default or
Unmatured Event of Default has occurred and is continuing, or, if
there is any such event, describing it and the steps, if any,
being taken to cure it, and containing a computation of, and
showing compliance with, each of the financial ratios and
restrictions contained in this SECTION 5 or in SUPPLEMENT A; and
(f) MANAGEMENT LETTERS. Within thirty (30) days after
receipt thereof, a copy of any "management letter" or similar
report received by either of the Borrowers prepared by its
internal or outside accountants.
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5.1.2. BORROWING BASE CERTIFICATE. At the end of each week and at
such other times as Lender may reasonably request, a Borrowing Base
Certificate executed and certified as accurate by such Persons as such
Borrower designates in writing to Lender pursuant to duly adopted
resolutions of such Borrower's Board of Directors authorizing such action,
showing a computation of the Borrowing Base of such Borrower as of the date
of such Borrowing Base Certificate.
5.1.3 AGINGS. Within fifteen (15) days after the end of each
month, an aging of all Accounts Receivable of such Borrower and an aging of
all accounts payable of such Borrower as of the end of such month, in form
and content reasonably acceptable to Lender.
5.1.4 INVENTORY CERTIFICATION. Within twenty-five (25) days after
the end of each month, an Inventory certification report as of the end of
the month for all Inventory locations of such Borrower, in form and content
reasonably acceptable to Lender.
5.1.5 OTHER REPORTS:
(a) SEC AND OTHER REPORTS. Copies of each filing and report
made by such Borrower or any of its Subsidiaries with or to any
securities exchange or the Securities and Exchange Commission and of
each communication from such Borrower or any of its Subsidiaries to
shareholders generally, promptly upon the filing or making thereof;
(b) REPORT OF CHANGE IN SUBSIDIARIES OR PARTNERSHIPS. Promptly
from time to time, a written report of any change in the information
set forth in SCHEDULE 4.1, 4.10 or 4.11 concerning either of the
Borrowers or any Subsidiary of either of the Borrowers.
(c) INTELLECTUAL PROPERTY. Promptly from time to time, a
written report of any material change to the list of patents,
trademarks, copyrights and other Intellectual Property information set
forth in SCHEDULE 4.16; and
(d) OTHER REPORTS. Any information required to be provided by
such Borrower pursuant to other provisions of this Agreement or any
Related Agreement and promptly from time to time such other reports or
information reasonably requested by Lender.
5.2 NOTICES. Notify Lender in writing of any of the following immediately
upon learning of the occurrence thereof (or, in the case of CLAUSES (e), (f)
(other than ITEM (iv) thereof) and (g) of this SECTION 5.2, at least 30 days
prior to the occurrence thereof), describing the same and, if applicable, the
steps being taken by the Person(s) affected with respect thereto:
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(a) DEFAULT. The occurrence of (i) an Event of Default or Unmatured
Event of Default and (ii) to the extent not included in CLAUSE (i) of this
SECTION 5.2(a), the default by such Borrower, any other Obligor, any
Subsidiary of such Borrower or any Related Party under any material note,
indenture, loan agreement, mortgage, lease, deed or other material similar
agreement to which such Borrower, any other Obligor, any Subsidiary of such
Borrower or any Related Party, as appropriate, is a party or by which it is
bound;
(b) LITIGATION. The institution of any litigation, arbitration
proceeding or governmental proceeding affecting such Borrower, any other
Obligor, any Subsidiary of such Borrower, any Related Party, any Collateral
or any Third Party Collateral of such Borrower, whether or not considered
to be covered by insurance, if such proceeding, if determined adversely to
such Borrower, could reasonably be expected to result in liability to such
Borrower in excess of $100,000;
(c) JUDGMENTS. The entry of any judgment or decree against such
Borrower, any other Obligor, any Subsidiary of such Borrower or any Related
Party, if the amount of such judgment exceeds $100,000;
(d) PENSION PLANS AND WELFARE PLANS. The occurrence of a Reportable
Event with respect to any Pension Plan; the filing of a notice of intent to
terminate a Pension Plan by such Borrower, any ERISA Affiliate of such
Borrower, or any other Obligor, the institution of proceedings to terminate
a Pension Plan by the PBGC or any other Person; the withdrawal in a
"complete withdrawal" or a "partial withdrawal" as defined in Sections 4203
and 4205, respectively, by such Borrower, any ERISA Affiliate of such
Borrower or any other Obligor from any Multiemployer Plan; or the
incurrence of any material increase in the contingent liability of such
Borrower, any other Obligor or any Subsidiary of such Borrower with respect
to any "employee welfare benefit plan" as defined in Section 3(l) of ERISA
which covers retired employees and their beneficiaries;
(e) CHANGE IN COLLATERAL LOCATIONS. If any of such Borrower's
Inventory or other Collateral or any of such Borrower's Third Party
Collateral (in each case with a fair market value of $100,000 or more for
any one such other location or in the aggregate for all such other
locations) is placed in locations other than those identified in this
Agreement or in SCHEDULE 4.12, ;
(f) CHANGE IN PLACE(S) OF BUSINESS. Any (i) proposed change is the
location of such Borrower's or any of its Subsidiaries' chief executive
office or chief place of business, (ii) proposed opening, closing or other
change in the list of offices and other places of business of such Borrower
and each Subsidiary of such Borrower set forth in SCHEDULE 4.12, (iii)
opening, closing or other change in the
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offices and other places of business of each other Obligor and each
Related Party and (iv) promptly upon the effectiveness thereof, change in
the information set forth in SCHEDULE 4.12 with respect to the list of
jurisdictions in which such Borrower or any of its Subsidiaries is
qualified to do business;
(g) CHANGE OF NAME. Any change in the name of such Borrower, any
other Obligor, any Subsidiary of such Borrower, or any Related Party, and
any change in the list of trade names and trade styles set forth in
SCHEDULE 4.1;
(h) ENVIRONMENTAL AND SAFETY AND HEALTH MATTERS. The occurrence of
any event or the acquisition of any information which, if it had occurred
or been acquired on or before the date of this Agreement, would have been
required to have been disclosed and included on SCHEDULE 4.25, including
but not limited to the existence of any Environmental Lien and the receipt
of any notice from any entity or federal, state or local government or
agency of or with respect to any actual or alleged material violation of,
or potential material liability under, any Environmental Law or any
Occupational Safety and Health Law;
(i) MATERIAL ADVERSE CHANGE. The occurrence of a material adverse
change in the business, operations or financial condition of such Borrower,
any other Obligor, any Subsidiary of such Borrower or any Related Party;
(j) DEFAULT BY OTHERS. Any material default by any Account Debtor or
other Person obligated to such Borrower, any other Obligor, or any
Subsidiary of such Borrower, under any contract, chattel paper, note or
other evidence of amounts payable or due or to become due to such Borrower,
such Obligor or Subsidiary of such Borrower if the amount payable under
such contract, chattel paper, note or other evidence of amounts payable or
due or to become due is material;
(k) MOVEABLE COLLATERAL. If any of the Collateral or Third Party
Collateral of such Borrower shall consist of goods of a type normally used
in more than one state, whether or not actually so used, any use of any
such goods in any state other than a state in which such Borrower shall
have previously advised Lender such goods will be used. Each of the
Borrowers agrees that such goods will not, unless Lender shall otherwise
consent in writing, be used outside the continental United States or in
Louisiana;
(l) CHANGE IN MANAGEMENT OR LINE(S) OF BUSINESS. Any substantial
change in the senior management of such Borrower, or any change in the
line(s) of business of such Borrower or any Subsidiary of such Borrower;
(m) CHANGES TO OTHER AGREEMENTS. Any request to amend or otherwise
modify the Purchase Agreement, any of the other
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Acquisition Documents or any Subordinated Indebtedness Documents; and
(n) OTHER NOTICES. Any notices required to be provided pursuant to
any Related Agreement or the other provisions of this Agreement, and notice
of the occurrence of such other events as Lender may reasonably from time
to time specify.
5.3 EXISTENCE. Maintain and preserve, and cause each Subsidiary to
maintain and preserve, its respective existence as a corporation or other form
of business organization, as the case may be, and, to the extent the failure to
maintain or preserve one or more of such things could reasonably be expected
singly or in the aggregate to have a Material Adverse Effect, all rights,
privileges, licenses, patents, patent rights, copyrights, trademarks, trade
names, trade styles, franchises and other authority to the extent material and
necessary for the conduct of its respective business in the ordinary course as
conducted from time to time.
5.4 NATURE OF BUSINESS. Engage, and cause each Subsidiary to engage, in
substantially the same fields of business as it is engaged in on the date hereof
and no other.
5.5 BOOKS, RECORDS AND ACCESS. Maintain, and cause each of its
Subsidiaries to maintain, complete and accurate books and records (including but
not limited to records relating to Accounts Receivable, Inventory, Equipment and
other Collateral), in which full and correct entries in conformity with GAAP
shall be made of all dealings and transactions in relation to its respective
business and activities. Cause its books and records as at the end of any
calendar month to be posted and closed not more than twenty-five (25) days after
the last business day of such month. Permit, and cause each of its Subsidiaries
to permit, access by Lender and its agents or employees to the books and records
of such Borrower and such Subsidiary at such Borrower's or such Subsidiary's
place or places of business at reasonable intervals to be determined by Lender
and without hindrance or delay, and permit and cause each Subsidiary to permit
Lender or its agents and employees, during normal business hours, to inspect
such Borrower's Inventory and such Subsidiary's inventory, and to inspect,
audit, check and make copies and/or extracts from the books, records, computer
data and records, computer programs, journals, orders, receipts, correspondence
and other data relating to Inventory, Accounts Receivable, Contract Rights,
General Intangibles, and any other Collateral or Third Party Collateral of such
Borrower, or relating to any other transactions between the parties hereto. Any
and all such inspections and/or audits shall be at such Borrower's expense, and
Lender may advance same to such Borrower as a Revolving Loan; PROVIDED, HOWEVER,
that so long as an Event of Default shall not have occurred and be continuing,
Lender shall give such Borrower thirty (30) days' prior written notice of any
such advance.
5.6 INSURANCE. Maintain, and cause each of its Subsidiaries to
maintain, insurance to such extent and against such
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hazards and liabilities as is commonly maintained by companies similarly
situated or as Lender may reasonably request from time to time. Keep the
Collateral of such Borrower properly housed and insured for its full insurable
value against loss or damage by fire, theft explosion, sprinklers, collision (in
the case of motor vehicles, and such other risks as are customarily insured
against by persons engaged in business similar to that of such Borrower, with
such companies, in such amounts and under policies in such form as shall be
reasonably satisfactory to Lender. Certificates of such policies of insurance
have been delivered to Lender prior to the date hereof together with evidence
reasonably satisfactory to Lender of payment of all premiums therefor. Each of
the Borrowers shall cause each issuer of an insurance policy to such Borrower to
provide Lender, prior to the Closing Date, with an endorsement or an independent
instrument (i) substantially in the form of EXHIBIT E or such other form and
containing such other terms as shall be acceptable to Lender and (ii) showing
loss payable to Lender and, if required by Lender, naming Lender as an
additional insured. Each of the Borrowers hereby directs all insurers under
such policies of insurance to pay all proceeds payable thereunder directly to
Lender. Each of the Borrowers appoints Lender and any Person whom Lender may
from time to time designate (and all officers, employees or agents designated by
Lender or such Person) as such Borrower's true and lawful attorney and agent-in-
fact with power to make, settle and adjust claims under such policies of
insurance, endorse the name of such Borrower on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and make
all determinations and decisions with respect to such policies of insurance.
The foregoing appointment and power, being coupled with an interest, is
irrevocable until all Liabilities of such Borrower under this Agreement are paid
and performed in full and this Agreement is terminated. In the event either of
the Borrowers at any time or times hereafter shall fail to obtain or maintain
any of the policies of insurance required herein or to pay any premium in whole
or in part relating thereto, then Lender, without waiving or releasing any
obligation of or default by such Borrower hereunder, may at any time or times
thereafter (but shall be under no obligation to do so) obtain and maintain such
policies of insurance and pay such premiums and take any other action with
respect thereto which Lender deems advisable. All sums so disbursed by Lender,
including reasonable Attorneys' Fees, court costs, expenses and other charges
relating thereto, shall be payable on demand by such Borrower to Lender, and
Lender may, in its sole and absolute discretion, advance such sums to such
Borrower as a Revolving Loan.
5.7 INSURANCE SURVEY. Provide to Lender no later than August 31st in
each fiscal year, a certificate signed by its chief financial officer that
attests to and summarizes the property and casualty insurance program carried by
such Borrower and its Subsidiaries. This summary shall include the
insurer's(s') name(s), policy number(s), expiration date(s), amount(s) of
coverage, type(s) of coverage and applicable exclusions and deductibles, as well
as a description of any self-insurance program that is in effect. Each of the
Borrowers shall notify Lender in
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writing (1) at least 20 days prior to any cancellation or material change of any
such insurance by such Borrower or any Subsidiary of such Borrower and (2)
within 5 business days after receipt of any notice (whether formal or informal)
of any cancellation or material change in any of its insurance by any of its
insurers.
5.8 REPAIR. To the extent required in the exercise of reasonable
business judgment, maintain, preserve and keep, and cause each of its
Subsidiaries to maintain, preserve and keep, its properties in operating
condition and repair, ordinary wear and tear excepted, and from time to time
make, and cause each of its Subsidiaries to make, all necessary and proper
repairs, renewals, replacements, additions, betterments and improvements thereto
so that at all times the efficiency thereof shall be fully preserved and
maintained.
5.9 TAXES. Pay, and cause each of its Subsidiaries to pay, when due,
all of its Taxes, unless and only to the extent that such Borrower or such
Subsidiary is contesting such Taxes in good faith and by appropriate proceedings
and Borrower or such Subsidiary has set aside on its books such reserves or
other appropriate provisions therefor as may be required by GAAP.
5.10 COMPLIANCE. To the extent that any such failures to comply could
reasonably be expected singly or in the aggregate to have a Material Adverse
Effect, comply, and cause each of its Subsidiaries to comply, with all statutes,
judicial or administrative orders, licenses, permits and governmental rules and
regulations applicable to it.
5.11 USE OF PROCEEDS. Use the proceeds of the initial Loans to such
Borrower to consummate the Acquisition and use the proceeds of all other
Revolving Loans to such Borrower to finance the working capital and capital
expenditure requirements of such Borrower. Neither of the Borrowers will use or
permit any proceeds of any Loans to be used, either directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of "purchasing or
carrying" any Margin Stock, and will furnish to Lender upon request, a statement
in conformity with the requirements of Federal Reserve Form U-1 referred to in
Regulation U of the Federal Reserve Board.
5.12 PENSION PLANS. Not permit, and not permit any of its Subsidiaries to
permit, any condition to exist in connection with any Pension Plan which might
constitute grounds for the PBGC to institute proceedings to have such Pension
Plan terminated or a trustee appointed to administer such Pension Plan, and not
engage in, or permit to exist or occur, or permit any of its Subsidiaries to
engage in, or permit to exist or occur, any other condition, event or
transaction with respect to any Pension Plan which could result in the
incurrence by such Borrower or any of its Subsidiaries of any material
liability, fine or penalty.
5.13 MERGER, PURCHASE AND SALE. Not, and not permit any Subsidiary to:
(a) be a party to any merger, liquidation or
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consolidation; (b) except in the normal course of its business and for such
dispositions of assets with a fair market value not exceeding $500,000 in the
aggregate in any fiscal year for OREMET and all of its Subsidiaries, sell,
transfer, convey, lease or otherwise dispose of any of its assets; (c) sell or
assign, with or without recourse, any Accounts Receivable, Contract Rights,
notes receivable or chattel paper, except as provided in this Agreement; or (d)
except for such purchases or acquisitions of assets with a fair market value not
exceeding $1,000,000 in the aggregate for OREMET and all of its Subsidiaries,
purchase or otherwise acquire all or substantially all the assets of any Person.
5.14 RESTRICTED PAYMENTS.
(a) Not declare, pay or make any dividend or distribution (in cash,
property or obligations) on any shares of any class of capital stock (now or
hereafter outstanding) of such Borrower or on any warrants, options or other
rights with respect to any shares of any class of capital stock (now or
hereafter outstanding) of such Borrower (other than dividends or distributions
payable in its common stock or warrants to purchase its common stock or split-
ups or reclassifications of its stock into additional or other shares of its
common stock) or apply, or permit any of its Subsidiaries to apply, any of its
funds, property or assets to the purchase, redemption, sinking fund or other
retirement of, or agree or permit any of its Subsidiaries to purchase or redeem,
any shares of any class of capital stock (now or hereafter outstanding) of such
Borrower, or warrants, options or other rights with respect to any shares of any
class of capital stock (now or hereafter outstanding) of such Borrower, except
for the following:
(1) in the case of OREMET, if, before and after giving effect to each
such payment, no Event of Default shall have occurred and be continuing and
Net Revolving Loan Availability with respect to OREMET shall be equal to or
greater than $4,000,000, OREMET may pay dividends on account of its common
stock in an aggregate amount not exceeding in any Fiscal Year of OREMET an
amount equal to the lesser of (i) $1,800,000 and (ii) fifty percent (50%)
of net income of OREMET for the immediately preceding Fiscal Year;
(2) in the case of OREMET, if, before and after giving effect to each
such payment, no Event of Default shall have occurred and be continuing and
Net Revolving Loan Availability with respect to OREMET shall be equal to or
greater than $4,000,000, OREMET may make payments to Paddock in connection
with the purchase of common stock of TI pursuant to the Shareholders
Agreement;
(3) in the case of TI, if, before and after giving effect to each such
payment, no Event of Default shall have occurred and be continuing and Net
Revolving Loan Availability with respect to TI shall be equal to or greater
than $4,000,000, TI may make payments to Paddock in connection with the
purchase of common stock of TI pursuant to the Shareholders Agreement
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in an aggregate amount not exceeding in any Fiscal Year of TI an amount
equal to the lesser of (i) $1,000,000 and (ii) twenty-five percent (25%) of
net income of TI for the immediately preceding Fiscal Year; and
(4) Subsidiaries of a Borrower may pay dividends and make other
distributions to such Borrower.
(b) Except to the extent permitted in this SECTION 5.14, not, and not
permit any of its Subsidiaries to:
(1) make any payment or prepayment of principal of, or make any
payment of interest on, any subordinated indebtedness (other than the
Subordinated Indebtedness) on any day other than the stated, scheduled date
for any mandatory payment set forth in any documents and instruments
memorializing such subordinated indebtedness, or which would violate the
subordination provisions of such subordinated indebtedness;
(2) make any payment or prepayment of principal of, or make any
payment of interest on, any Subordinated Indebted-ness, except as and to
the extent permitted under the Subordination Agreement; or
(3) redeem, purchase or defease, any subordinated Indebtedness
(including the Subordinated Indebtedness).
(c) Not take any action, or permit any of its Subsidiaries to take any
action, which will result in a decrease in such Borrower's or any of its
Subsidiaries' ownership interest in any of Borrower's Subsidiaries.
(d) Not, and not permit any of its Subsidiaries to, make any deposit for
any of the foregoing purposes.
5.15 BORROWERS' AND SUBSIDIARIES' STOCK. Not permit any Subsidiary to
purchase or otherwise acquire any shares of the stock of such Borrower, and not
take any action, or permit any Subsidiary of such Borrower to take any action,
which will result in a decrease in such Borrower's or any Subsidiary's ownership
interest in any Subsidiary of such Borrower.
5.16 INDEBTEDNESS. Not, and not permit any Subsidiary of such Borrower to,
incur or permit to exist any Indebtedness (including but not limited to
Indebtedness as lessee under Capitalized Leases), except: (a) Indebtedness under
the terms of this Agreement; (b) in the case of TI, the Subordinated
Indebtedness and Indebtedness to OREMET to the extent permitted pursuant to
SECTION 5.19(f); (c) in the case of TI Wire, Indebtedness to TI to the extent
permitted pursuant to SECTION 5.19(g); (d) in the case of TIL UK, Indebtedness
to TI to the extent permitted pursuant to SECTION 5.19(h); (e) other
Indebtedness outstanding on the date hereof and listed on SCHEDULE 5.16; (d)
Indebtedness hereafter incurred in connection with Liens permitted under SECTION
5.17(d); (e) other Indebtedness approved in writing by Lender.
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5.17 LIENS. Not, and not permit any Subsidiary of such Borrower to,
create or permit to exist any Lien with respect to any assets now owned or
hereafter acquired, except: (a) Liens for current Taxes not delinquent or Taxes
being contested in good faith and by appropriate proceedings and as to which
such reserves or other appropriate provisions as may be required by GAAP are
being maintained; (b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, and other like statutory Liens arising in the ordinary course of
business securing obligations which are not overdue or which are being contested
in good faith and by appropriate proceedings and as to which such reserves or
other appropriate provisions as may be required by GAAP are being maintained;
(c) pledges or deposits in connection with workers' compensation, unemployment
insurance and other social security legislation; (d) Liens in connection with
the acquisition of property after the date hereof by way of purchase money
mortgage, conditional sale or other title retention agreement, Capitalized Lease
or other deferred payment contract, and attaching only to the property being
acquired, if (i) the Indebtedness secured thereby does not exceed ninety percent
(90%) of the fair market value of such property at the time of the acquisition
thereof, and (ii) the aggregate outstanding amount of such Indebtedness of such
Borrower and its Subsidiaries does not exceed (A) in the case of OREMET and its
Subsidiaries (other than TI and its Subsidiaries), $2,500,000 and (B) in the
case of TI and its Subsidiaries, $1,000,000; (e) Liens in favor of Lender; (f)
in the case of TI, Liens a property of TI in favor of the "Junior Lender" (as
defined in the Subordination Agreement) granted pursuant to the Subordinated
Indebtedness Documents and securing Subordinated Indebtedness; (g) Liens listed
on SCHEDULE 4.9; and (h) Liens consented to in writing by Lender.
5.18 GUARANTIES. Not, and not permit any Subsidiary of such Borrower to,
become a guarantor or surety of, or otherwise become or be responsible in any
manner (whether by agreement to purchase any obligations, stock, assets, goods
or services, or to supply or advance any funds, assets, goods or services, or
otherwise) with respect to, any undertaking of any other Person, except for (i)
the endorsement, in the ordinary course of collection, of instruments payable to
it or its order and (ii) the liability of such Borrower with respect to the
Liabilities of the other Borrower.
5.19 INVESTMENTS. Not, and not permit any Subsidiary of such Borrower to,
make or permit to exist any Investment in any Person, except for:
(a) advances by such Borrower or any of its Subsidiaries to employees
of such Person for travel or other ordinary business expenses provided that
the aggregate amount of such advances outstanding at any one time shall not
exceed $25,000 (or, if advanced in respect of relocation expenses, $75,000)
for any single employee and (i) $200,000, in the aggregate, for all
employees of OREMET and its Subsidiaries (other than TI and its
Subsidiaries) and (ii) $100,000, in the aggregate for all employees of TI
and its Subsidiaries;
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(b) advances to subcontractors and suppliers in maximum aggregate
amounts reasonably acceptable to Lender but in any event not exceeding an
aggregate outstanding amount of (A) in the case of OREMET and its
Subsidiaries (other than TI and its Subsidiaries), $100,000 and (B) in the
case of TI and its Subsidiaries, $50,000;
(c) extensions of credit in the nature of Accounts Receivable or notes
receivable arising from the sale of goods and services in the ordinary
course of business;
(d) shares of stock, obligations or other securities received in
settlement of claims arising in the ordinary course of business;
(e) Investments (other than Investments in the nature of loans or
advances) in Subsidiaries of such Borrower by such Borrower and other
Subsidiaries of such Borrower in an aggregate amount not exceeding the
respective amounts set forth on Schedule 5.19;
(f) Investments in the nature of loans by OREMET to TI made on or
after the Closing Date, in an aggregate outstanding principal amount not
exceeding at any time $6,000,000;
(g) Investments in the nature of loans by TI to TI Wire made on or
after the Closing Date, in an aggregate outstanding principal amount not
exceeding at any time $1,400,000;
(h) Investments in the nature of loans by TI to TIL UK made on or
after the Closing Date, in an aggregate outstanding principal amount not
exceeding at any time $4,500,000;
(i) an Investment in the nature of a loan to Paddock by OREMET made
after the Closing Date, in the aggregate principal amount of $250,000;
(j) Investments in a corporation formed for the purpose of providing
sonic testing services to OREMET and other Persons, in an aggregate amount
not exceeding $200,000; and
(k) other Investments consented to by Lender in writing.
5.20 SUBSIDIARIES. Not, and not permit any Subsidiary of such Borrower to,
acquire any stock or similar interest in any Person, and not create, establish
or acquire any Subsidiaries other than those existing on the date of this
Agreement.
5.21 LEASES. Not enter into or permit to exist, or permit any Subsidiary
of such Borrower to enter into or permit to exist, any arrangements for the
leasing by such Borrower or such Subsidiary, as lessee under a lease which is
not a Capitalized Lease, of any real or personal property (or any interest
therein) if the aggregate rents paid by such OREMET and its Subsidiaries
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with respect to such Leases in any fiscal year would exceed $150,000.
5.22 CHANGE IN ACCOUNTS RECEIVABLE. After the occurrence of an Event of
Default or Unmatured Event of Default, not permit or agree to any extension,
compromise or settlement or make any change or modification of any kind or
nature with respect to any Account Receivable of such Borrower, including any of
the terms relating thereto.
5.23 RELATED AGREEMENTS. Not enter into, or permit any Subsidiary of such
Borrower to enter into, any agreement containing any provision which would be
violated or breached by the performance by such Borrower or such Subsidiary of
its obligations hereunder or under any Related Agreement or any instrument or
document delivered or to be delivered by such Borrower or such Subsidiary in
connection herewith.
5.24 UNCONDITIONAL PURCHASE OPTIONS. Not enter into or be a party to, or
permit any Subsidiary of such Borrowers to enter into or be a party to any
contract for the purchase of materials, supplies or other property or services,
if such contract requires that payment be made by it regardless of whether or
not delivery is ever made of such materials, supplies or other property or
services.
5.25 TRANSACTIONS WITH RELATED PARTIES. Not, and not permit any Subsidiary
of such Borrower to, enter into or be a party to any transaction or arrangement,
including, without limitation, the purchase, sale, lease or exchange of property
or the rendering of any service, with any Related Party, except in the ordinary
course of and pursuant to the reasonable requirements of such Borrower's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
such Borrower or such Subsidiary than would obtain in a comparable arm's length
transaction with a Person not a Related Party.
6. DEFAULT.
6.1 EVENT OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
(a) NON-PAYMENT. Default in the payment, when due or declared due,
of any of the Liabilities of either of the Borrowers.
(b) NON-PAYMENT OF OTHER INDEBTEDNESS. Default in the payment when
due, whether by acceleration or otherwise (subject to any applicable grace
period), of any Indebtedness of, or guaranteed by, either of the Borrowers,
any other Obligor, any Subsidiary of either of the Borrowers or any Related
Party in an aggregate outstanding principal amount of $100,000 or more
(other than (i) any Indebtedness under this Agreement and any Notes or (ii)
any Indebtedness of any
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Subsidiary of a Borrower to such Borrower or to any other Subsidiary of
such Borrower).
(c) ACCELERATION OF OTHER INDEBTEDNESS. Any event or condition
shall occur which results in the acceleration of the maturity of any
Indebtedness of, or guaranteed by, either Borrowers, any other Obligor, any
Subsidiary of either of the Borrowers or any Related Party in an aggregate
outstanding principal amount of $100,000 or more (other than (i) any
Indebtedness of any Subsidiary of a Borrower to such Borrower or to any
other Subsidiary of such Borrower and (ii) the Indebtedness under this
Agreement and any Notes) or enables the holder or holders of such other
Indebtedness or any trustee or agent for such holders (any required notice
of default having been given and any applicable grace period having
expired) to accelerate the maturity of such other Indebtedness.
(d) OTHER OBLIGATIONS. Default in the payment when due, whether by
acceleration or otherwise, or in the performance or observance (subject to
any applicable grace period or waiver of such default) of (i) any
obligation or agreement of either of the Borrowers, any other Obligor, any
Subsidiary of either of the Borrowers or any Related Party to or with
Lender (other than any obligation or agreement of either of the Borrowers
hereunder and under any Notes), or (ii) any material obligation or
agreement of either of the Borrowers, any other Obligor, any Subsidiary of
either of the Borrowers or any Related Party to or with any other Person
(other than (x) any such material obligation or agreement constituting or
related to Indebtedness, (y) accounts payable arising in the ordinary
course of business, and (z) any material obligation or agreement of any
Subsidiary of either of the Borrowers to a Borrower or to any other
Subsidiary of either of the Borrowers), except only to the extent that the
existence of any such default is being contested by such Borrower, such
other Obligor, such Subsidiary or such Related Party, as the case may be,
in good faith and by appropriate proceedings and such Borrower, such other
Obligor, such Subsidiary or such Related Party, as applicable, shall have
set aside on its books such reserves or other appropriate provisions
therefor as may be required by GAAP.
(e) INSOLVENCY. Either of the Borrowers, any other Obligor, any
Subsidiary of either of the Borrowers or any Related Party becomes
insolvent, or generally fails to pay, or admits in writing its inability to
pay, its debts as they mature, or applies for, consents to, or acquiesces
in the appointment of a trustee, receiver or other custodian for such
Borrower, such other Obligor, such Subsidiary or such Related Party, or for
a substantial part of the property of such Borrower, such other Obligor,
such Subsidiary or such Related Party, or makes a general assignment for
the benefit of creditors; or, in the absence of such application, consent
or acquiescence, a trustee, receiver or other custodian is
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appointed for either of the Borrowers, any other Obligor, any Subsidiary of
either of the Borrowers or any Related Party, or for a substantial part of
the property of either of the Borrowers, any other Obligor, any Subsidiary
of either of the Borrowers or any Related Party and is not discharged or
dismissed within 30 days; or any bankruptcy, reorganization, debt
arrangement or other proceeding under any bankruptcy or insolvency law, or
any dissolution or liquidation proceeding, is instituted by or against
either of the Borrowers, any other Obligor, any Subsidiary of either of the
Borrowers or any Related Party; or any warrant of attachment or similar
legal process is issued against any substantial part of the property of
either of the Borrowers, any other Obligor, any Subsidiary or any Related
Party.
(f) PENSION PLANS. The institution by either of the Borrowers or any
ERISA Affiliate of either of the Borrowers of steps to terminate any
Pension Plan if, in order to effectuate such termination, such Borrower or
any ERISA Affiliate would be required to make a contribution to such
Pension Plan, or would incur a liability or obligation to such Pension
Plan, in excess of $100,000; or the institution by the PBGC of steps to
terminate any Pension Plan and the continuation of either such condition
after notice thereof from Lender.
(g) NON-COMPLIANCE WITH THIS AGREEMENT. Default in the
performance of any of Borrower's agreements set forth in SECTION 2, 3.2,
3.3, 5.3, 5.5, 5.6, or 5.12 through 5.25 (and not constituting an Event of
Default under any of the other subsections of this SECTION 6.1), and
continuance of such default after notice thereof to Borrowers from Lender;
or default in the performance of any of the agreements of either of the
Borrowers set forth in SECTION 5.1.2, 5.1.3 or 5.2 (and not constituting
an Event of Default under any of the other subsections of this SECTION
6.1), and continuance of such default for three (3) Banking Days after
notice thereof to Borrowers from Lender; or default in the performance of
any other agreements of either of the Borrowers herein set forth (and not
constituting an Event of Default under any of the other subsections of this
SECTION 6.1), and continuance of such default for thirty (30) days after
notice thereof to Borrowers from Lender.
(h) NON-COMPLIANCE WITH RELATED AGREEMENTS. Default in the
performance by either of the Borrowers, any other Obligor or any Subsidiary
of either of the Borrowers of any of its agreements set forth in any
Related Agreement (and not constituting an Event of Default under any of
the other subsections of this SECTION 6.1), and continuance of such default
after notice from Lender and the expiration of the grace period (if any)
set forth therein.
(i) WARRANTY. Any warranty made by either of the Borrowers or any
other Obligor herein or in any Related Agreement is untrue or misleading in
any material respect when
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made or deemed made; or any schedule, statement, report, notice,
certificate or other writing furnished by either of the Borrowers or any
other Obligor to Lender is untrue or misleading in any material respect on
the date as of which the facts set forth therein are stated or certified;
or any certification made or deemed made by either of the Borrowers or any
other Obligor to Lender is untrue or misleading in any material respect on
or as of the date made or deemed made.
(j) LITIGATION. There shall be entered against any one of a
Borrower, any other Obligor, any Subsidiary of a Borrower or any Related
Party one or more judgments or decrees in excess of $175,000 in the
aggregate at any one time outstanding, and such judgments or decrees remain
undischarged, unvacated, unbonded or unstayed for a period of 30 calendar
days from the date of entry thereof or in any event later than five (5)
days prior to the date of any proposed sale of property thereunder, but
excluding those judgments or decrees for and to the extent which such
Borrower, such Subsidiary, such Obligor or such Related Party, as
applicable, is insured and with respect to which the insurer has assumed
responsibility in writing or for and to the extent which such Borrower,
such Subsidiary, such Obligor or such Related Party, as applicable, is
otherwise indemnified if the terms of such indemnification are satisfactory
to Lender.
(k) VALIDITY. This Agreement or any other Related Agreement, or any
Lien granted hereunder or thereunder, shall (except in accordance with its
terms), in whole or in part, terminate, cease to be effective or cease to
be the legally valid, binding and enforceable obligation of any Obligor
party thereto; either of the Borrowers, any other Obligor or any other
Person shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability; or any Lien with
respect to any material (as reasonably determined by Lender, and whether as
to type, amount or value) Collateral or Third Party Collateral of either of
the Borrowers securing any of the Liabilities of either of the Borrowers
shall, in whole or in party, cease to be a perfected first Lien, subject
only to those exceptions expressly permitted by this Agreement or the
applicable other Related Agreement.
(l) CONDUCT OF BUSINESS. If either of the Borrowers, any other
Obligor, any Subsidiary of either of the Borrowers or any Related Party is
enjoined, restrained or in any way prevented by court order, which has not
been dissolved or stayed within five (5) business days, from conducting all
or any material part of its business affairs.
(m) OWNERSHIP. OREMET shall cease for any reason to be the record
and beneficial owner, free and clear of all Liens, of at least eighty
percent (80%) of the issued and outstanding capital stock of TI, on a
fully-diluted basis.
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(n) MATERIAL ADVERSE CHANGE. Lender shall have determined in good
faith that (i) a material adverse change has occurred in the business,
operations or financial condition of either of the Borrowers, any other
Obligor, any Subsidiary of either of the Borrowers or any Related Party,
(ii) Lender's interest in any material Collateral or Third Party Collateral
of either of the Borrowers has been adversely affected or impaired, or the
value thereof to Lender has been diminished to a material extent or (iii)
the prospect of payment or performance of any obligation or agreement of
either of the Borrowers or any other Obligor hereunder or under any Related
Agreement is materially impaired, and the condition giving rise to such
determination does not constitute an Event of Default under any of the
other subsections of this SECTION 6.1 and continues to exist after notice
of such determination by Lender to Borrowers.
(o) ACQUISITION DOCUMENTS AND SUBORDINATED INDEBTEDNESS
DOCUMENTS. A default by any Person (other than Lender) shall occur
under (i) the Purchase Agreement or any of the other Acquisition Documents
or (ii) the Subordination Agreement or any of the other Subordinated
Indebtedness Documents.
6.2 EFFECT OF EVENT OF DEFAULT; REMEDIES.
(a) In the event that one or more Events of Default described in SECTION
6.1(e) shall occur, then the Credit extended to each of the Borrowers under this
Agreement shall terminate and all Liabilities of each of the Borrowers hereunder
and under any Notes shall be immediately due and payable without demand, notice
or declaration of any kind whatsoever.
(b) In the event an Event of Default other than one described in SECTION
6.1(e) shall occur, then upon notice to each of the Borrowers, Lender may
declare all Liabilities of such Borrower hereunder and under any Notes
immediately due and payable, whereupon the Credit extended to such Borrower
under this Agreement shall terminate and all Liabilities of such Borrower
hereunder and under any Notes shall be immediately due and payable. Lender shall
promptly advise each of the Borrowers of any such declaration, but failure to do
so shall not impair the effect of such declaration.
(c) In the event of the occurrence of any Event of Default Lender may
exercise any one or more or all of the following remedies, all of which are
cumulative and non-exclusive:
(1) Any remedy contained in this Agreement or in any of the Related
Agreements or any Supplemental Documentation;
(2) Any rights and remedies available to Lender under the UCC, and
any other applicable law;
(3) To the extent permitted by applicable law, Lender may, without
notice, demand or legal process of any kind, take
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possession of any or all of the Collateral of each of the Borrowers (in
addition to any such Collateral which it may already have in its
possession), wherever it may be found, and for that purpose may pursue the
same wherever it may be found, and may enter into any premises where any of
the Collateral of either of the Borrowers may be or is supposed to be, and
search for, take possession of, remove, keep and store any of the
Collateral until the same shall be sold or otherwise disposed of, and
Lender shall have the right to store the same in any of the premises of
either of the Borrowers without cost to Lender;
(4) At Lender's request, each of the Borrowers will, at such
Borrower's expense, assemble the Collateral of such Borrower and make it
available to Lender at a place or places to be designated by Lender which
is reasonably convenient to Lender and such Borrower; and
(5) Lender at its option, and pursuant to notification given to such
Borrower as provided for below, may sell any Collateral of a Borrower
actually or constructively in its possession at public or private sale and
apply the proceeds thereof as provided in SECTION 7.2.
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND LENDER'S RIGHTS.
7.1 NOTICE OF DISPOSITION OF COLLATERAL. Any notification of intended
disposition of any of the Collateral of either Borrower required by law shall be
deemed reasonably and properly given if given at least five (5) Banking Days
before such disposition.
7.2 APPLICATION OF PROCEEDS OF COLLATERAL. Any proceeds of any
disposition by Lender of any of the Collateral of a Borrower may be applied by
Lender to the payment of expenses in connection with the taking possession of,
storing, preparing for sale, and disposition of such Collateral, including
Attorneys' Fees and legal expenses, and any balance of such proceeds may be
applied by Lender toward the payment of such of the Liabilities of such
Borrower, and in such order of application, as Lender may from time to time
elect.
7.3 CARE OF COLLATERAL. Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral of either of
the Borrowers in its possession if it takes such action for that purpose as such
Borrower requests in writing, but failure of Lender to comply with such request
shall not, of itself, be deemed a failure to exercise reasonable care, and no
failure of Lender to preserve or protect any rights with respect to such
Collateral against prior parties, or to do any act with respect to the
preservation of such Collateral not so requested by such Borrower, shall be
deemed a failure to exercise reasonable care in the custody or preservation of
such Collateral.
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7.4 PERFORMANCE OF BORROWERS' OBLIGATIONS. Lender shall have the right,
but shall not be obligated, to discharge any claims against or Liens, and any
Taxes at any time levied or placed upon any or all Collateral of either of the
Borrowers including, without limitation, those arising under statute or in favor
of landlords, taxing authorities, government, public and/or private
warehousemen, common and/or private carriers, processors, finishers, draymen,
coopers, dryers, mechanics, artisans, laborers, attorneys, courts, or others.
Lender may also pay for maintenance and preservation of Collateral of either of
the Borrowers. Lender may, but is not obligated to, perform or fulfill any of
the responsibilities of either or both of the Borrowers under this Agreement
which such Borrower has failed to perform or fulfill. Lender may advance to each
of the Borrowers as a Revolving Loan any payment made or expense incurred by
Lender under this SECTION 7.4.
7.5 LENDER'S RIGHTS. None of the following shall affect the obligations
of either of the Borrowers to Lender under this Agreement or Lender's right with
respect to the remaining Collateral or any Third Party Collateral of such
Borrower (any or all of which actions may be taken by Lender at any time,
whether before or after an Event of Default, at its sole and absolute discretion
and without notice to either of the Borrowers):
(a) acceptance or retention by Lender of other property or interests
in property as security for the Liabilities of such Borrower, or acceptance
or retention of any Obligor(s), in addition to such Borrower, with respect
to any of the Liabilities of such Borrower;
(b) release of its security interest in, or surrender or release of,
or the substitution or exchange of or for, all or any part of the
Collateral or any Third Party Collateral of such Borrower or any other
property securing any of the Liabilities of such Borrower (including but
not limited to any property of any Obligor other than such Borrower), or
any extension or renewal for one or more periods (whether or not longer
than the original period), or release, compromise, alteration or exchange,
of any obligations of any guarantor or other Obligor with respect to any
such Collateral or any such property;
(c) extension or renewal for one or more periods (whether or not
longer than the original period), or release, compromise, alteration or
exchange of any of the Liabilities of such Borrower, or release or
compromise of any obligation of any Obligor with respect to any of the
Liabilities of such Borrower; or
(d) failure by Lender to resort to other security or pursue any
Person liable for any of the Liabilities of such Borrower before resorting
to the Collateral of such Borrower.
8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS.
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8.1 CONDITIONS PRECEDENT TO INITIAL LOANS. The obligation of Lender to
make the initial Loans or to issue any Letter of Credit hereunder is subject to
satisfaction of the following conditions precedent (in addition to those
provided in SECTION 8.2):
8.1.1 ACQUISITION. The respective terms of the Purchase
Agreement and the other Acquisition Documents shall be reasonably
acceptable to Lender. All conditions precedent to consummation of the
Acquisition shall have been satisfied and TI shall have acquired good and
marketable title to all of the assets to be acquired by TI under the
Purchase Agreement and the Purchase Agreement and all other material
Acquisition Documents shall be in full force and effect and no term or
condition thereof shall have been amended, modified or waived without
Lender's consent, and all governmental authorizations, consents, approvals,
licenses, permits, exemptions or other actions required in connection with
the Acquisition and the other transactions contemplated by this Agreement,
shall have been duly received and not been rescinded and each of the
Borrowers shall have so certified to Lender and, to the extent requested by
Lender, delivered to Lender copies thereof. The closing and consummation
of the Acquisition shall have occurred immediately prior to the making of
the initial Loans under this Agreement.
8.1.2 AUDIT. Lender shall have completed its due diligence
audit of the business, operations and assets of each of the Borrowers and
each other Obligor, the results of which shall provide Lender with results
and information which, in Lender's sole determination, are satisfactory to
permit Lender to enter into the secured financing transaction described in
this Agreement and the Related Agreements. Lender's due diligence
examination may include but need not be limited to (i) a field examination
of each of the Borrower's and each other Obligor's books and records, (ii)
a physical audit and inspection of each of the Borrower's and each other
Obligor's real and personal property, (iii) an analysis of all of each of
the Borrower's and each other Obligor's contingent liabilities, including
but not limited to those pertaining to environmental and health and safety
matters, employee benefit plans and pending or threatened litigation, (iv)
review of such fair market value and liquidation value appraisals of the
assets of each of the Borrowers and each other Obligor as Lender shall
determine to be necessary, in each case prepared by independent appraisers
and using such assumptions and methods of analysis as Lender shall
determine to be acceptable, and (v) a review of each of the Borrower's and
each other Obligor's current financial condition and any pro forma
financial information or cash flow projections required by Lender.
8.1.3 SECURITY INTEREST. The security interest in the Collateral
of each of the Borrowers granted under this Agreement and the Related
Agreements, and in any Third Party Collateral of each of the Borrowers, and
all other Liens
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granted to Lender to secure the Liabilities of each of the Borrowers, shall
be a senior, perfected Lien except as otherwise agreed by Lender, and all
financing statements and other documents relating to such Collateral and
Third Party Collateral shall have been filed or recorded, as appropriate.
8.1.4 SOLVENCY. After giving effect to the Acquisition and the
initial Loans to be made under this Agreement, each of the Borrowers, each
of its Subsidiaries and each other Obligor (a) shall have assets (excluding
goodwill and other intangible assets not capable of valuation) having a
value, both at present fair saleable value and at fair valuation, greater
than the amount of its liabilities, (b) shall have capital sufficient to
carry on its respective business and transactions and all business and
transactions in which it is about to engage, (c) shall not have engaged in
or be about to engage in a business or transaction for which its remaining
assets are unreasonably small in relation to the business or the
transaction, (d) shall believe that it is able to pay its respective debts
as they mature and shall not believe that it is incurring, debts beyond its
ability to pay as they mature and (e) shall have no actual intent to
hinder, delay or defraud either present or future creditors.
8.1.5 LOAN AVAILABILITY. Immediately after the making the initial
Loans, each of the Borrowers shall, under the terms and conditions of the
Agreement, have availability for at least an additional (a) in the case of
OREMET, $2,500,000 of Revolving Loans and (b) in the case of TI, $500,000
of Revolving Loans.
8.1.6 EQUITY INVESTMENT IN TI. Pursuant to the terms of the
Shareholders Agreement, TI shall have received, in immediately available
funds, an aggregate contribution to its capital from OREMET and Paddock, as
consideration for the issuance by TI to OREMET of capital stock of TI, of
at least $5,000,000.
8.1.7 BLOCKED ACCOUNT; LOCK BOX. Each of the Borrowers shall
have entered into blocked account and/or lock box agreements with Lender
for the collection and remittance to Lender of cash proceeds of Collateral
of such Borrower.
8.1.8 EFFECT OF LAW. No law or regulation affecting Lender's
entering into the secured financing transaction contemplated by this
Agreement shall impose upon Lender any material obligation, fee, liability,
loss, cost, expense or damage.
8.1.9 EXHIBITS; SCHEDULES. All Exhibits and Schedules to this
Agreement shall have been completed and submitted to Lender, shall be in
form and substance satisfactory to Lender and shall contain no facts or
information which Lender, in its sole judgment, determines to be
unacceptable.
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8.1.10 FEES. If not funded with the proceeds of the initial
Loans, Lender shall have received the closing fee referred to in SECTION
2.14 and any other fees due and payable by each of the Borrowers or any
other Person on the funding of the initial Loans.
8.1.11 DOCUMENTS. Lender shall have received all of the
following, each duly executed where appropriate and dated as of the date of
the initial Loan (or such other date as shall be satisfactory to Lender),
in form and substance satisfactory to Lender:
(a) RESOLUTIONS. A copy, duly certified by the secretary or an
assistant secretary of each of the Borrowers of (1) resolutions of the
Board of Directors of such Borrower authorizing (A) the borrowings by
such Borrower hereunder, (B) the execution, delivery and performance
by such Borrower of this Agreement, and each Related Agreement to
which such Borrower is a party or by which it is bound, and (C)
certain officers or employees of such Borrower to request borrowings
by telephone and to execute Borrowing Base Certificates, (2) all
documents evidencing any other necessary corporate action with respect
to this Agreement and the Related Agreements, and (3) all approvals or
consents, if any, with respect to this Agreement and the Related
Agreements;
(b) INCUMBENCY CERTIFICATE. A certificate of the secretary of
each of the Borrowers certifying the names of the officers of Borrower
authorized to sign this Agreement and each Related Agreement to which
Borrower is a party or by which it is bound, and all other documents
and certificates to be delivered by such Borrower hereunder, together
with the true signatures of such officers;
(c) CERTIFICATE. The certificate of the President or Chairman
of the Board of each of the Borrowers certifying to the fulfillment of
all conditions precedent to closing and funding the secured financing
transaction contemplated by this Agreement and to the truth and
accuracy, as of such date, of the representations and warranties of
such Borrower contained in this Agreement and each Related Agreement
to which such Borrower is a party or by which it is bound;
(d) ACCOUNTANT'S LETTER. With respect to the financial
statements referred to in SECTION 4.6, a "reliance letter" from the
accountants who prepared such statements in form and content
acceptable to Lender;
(e) BYLAWS. A copy, duly certified by the secretary or an
assistant secretary of each of the Borrowers, of such Borrower's
Bylaws;
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(f) ARTICLES. A copy, duly certified by the applicable
Secretary of State of each Borrower's Articles of Incorporation;
(g) REGISTRATION; GOOD STANDING. A copy, duly certified by the
applicable Secretary of State of (i) a certificate of good standing or
existence, as the case may be, in each state where each of the
Borrowers is qualified to do business or where, because of the nature
of its business or properties, qualification to do business is
required, (ii) the applications, registrations or other documents
required to be filed by each of the Borrowers to qualify to do
business in each state referred to in CLAUSE (i), and (iii) in any
state in which either Borrower is doing business under an assumed
name, a certificate or other document issued by the Secretary of State
of each such state evidencing such Borrower's authority to use such
name;
(h) LEGAL OPINIONS. Legal opinions from counsel for each of
the Borrowers in form and substance satisfactory to Lender;
(l) INSURANCE. Evidence satisfactory to Lender of the
existence of insurance on the Collateral, Third Party Collateral and
business of each of the Borrowers in amounts and with insurers
acceptable to Lender, together with evidence establishing that Lender
is named as a loss payee and/or additional insured, as applicable, on
all related insurance policies;
(j) DISBURSEMENT LETTER. Written authorization and instructions
from each of the Borrowers, in form satisfactory to Lender, for
disbursement of the proceeds of the initial Loans;
(k) SUBORDINATION AGREEMENT. The duly executed Subordination
Agreement; and
(l) OTHER DOCUMENTS. Such other documents as Lender shall
determine to be necessary or desirable.
8.2 CONTINUING CONDITIONS PRECEDENT TO ALL LOANS AND LETTERS OF CREDIT;
CERTIFICATION. The obligation of Lender to make the initial Loans and each
subsequent Loan, or to issue any Letter of Credit, is subject to satisfaction of
the following conditions precedent in addition to those provided in SECTION 8.1:
(a) NO CHANGE IN CONDITION. No change in the condition or
operations, financial or otherwise, of either of the Borrowers, any
Subsidiary of either of the Borrowers or any other Obligor, shall have
occurred which change, in the reasonable credit judgment of Lender, may
have a Material Adverse Effect;
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(b) DEFAULT. Before and after giving effect to such Loan or such
Letter of Credit, no Event of Default or Unmatured Event of Default shall
have occurred and be continuing;
(c) INSURANCE. There shall have been no material change, or
notice of prospective material change (whether such notice is formal or
informal), in the nature, extent or scope of the insurance policies of
either of the Borrowers or any Subsidiary thereof listed on SCHEDULE 4.7,
which change would have a material adverse effect on the financial
condition of such Borrower or such Subsidiary or would significantly
adversely affect such Borrower's ability to perform its obligations under
this Agreement, any Note(s), or any Related Agreement to which it is a
party or by which it is bound;
(d) WARRANTIES. Before and after giving effect to such Loan or
Letter of Credit, the warranties in SECTION 4 shall be true and correct in
all material respects as though made on the date of such Loan, except for
such changes as are specifically permitted hereunder;
(e) NO MATERIAL TRANSACTION. Neither of the Borrowers, nor any
Subsidiary of either of the Borrowers, any other Obligor or any Related
Party shall have entered into any material (as determined by Lender)
commitment or transaction, including, without limitation, transactions for
borrowings and capital expenditures, which are not in the ordinary course
of their respective businesses; and
(f) ACCOUNTING METHODS. Borrower shall not have made any material (as
determined by Lender) change in its accounting methods or principles except
as required by GAAP.
Each request for a Loan or a Letter of Credit hereunder made or deemed to have
been made by each of the Borrowers shall be deemed to be a certificate of such
Borrower as to the matters set out in the foregoing provisions of this SECTION
8.2.
9. INDEMNITY.
9.1. ENVIRONMENTAL AND SAFETY AND HEALTH INDEMNITY. Each Borrower hereby
indemnifies, exonerates and holds Lender and each other holder of a Note of such
Borrower, and each of its officers, directors, employees and agents
(collectively, the "INDEMNIFIED PARTIES") free and harmless from and against any
and all actions, causes of action, suits, costs, liabilities, losses, damages,
injuries, expenses and claims of any and every kind whatsoever (including,
without limitation, court costs and Attorneys' Fees) (a) relating to or arising
under any Environmental Law or Occupational Safety and Health Law applicable to
such Borrower and related to the business and/or operations of such Borrower; or
(b) which otherwise may be paid, incurred or suffered by or asserted against
such Indemnified Party for, with respect to, or as a direct or indirect result
of the violation by such Borrower or any
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Subsidiary of such Borrower, or any immediate or remote predecessor of any of
them, of any Environmental Law or Occupational Safety and Health Law; or (c)
with respect to, or as a direct or indirect result of, (1) the presence of any
Hazardous Material on or under, or the escape, seepage, leakage, spillage,
disposal, discharge, emission, threat of Release, or Release of any Hazardous
Material from, any property allegedly owned, operated or controlled by such
Borrower, any Subsidiary of such Borrower (or any immediate or remote
predecessors of any of them), or any property at which Hazardous Material
allegedly generated by any such Person, or any immediate or remote predecessors
of any of them, may have come to be located, or (2) the existence of any unsafe
or unhealthful condition on or at any premises operated or controlled by any
such Person or any immediate or remote predecessor of any of them. The
provisions of and undertakings and indemnification set out in this SECTION 9.1
shall survive termination of this Agreement.
9.2 GENERAL INDEMNITY. In addition to and without limitation of the
indemnity set forth in SECTION 9.1 and in addition to the payment of expenses
pursuant to SECTION 11.3, whether or not the transactions contemplated hereby
shall be consummated, each Borrower agrees to indemnify, pay and hold Lender and
any holder of any Notes of such Borrower, and the officers, directors,
employees, agents, and affiliates of Lender and such holders (collectively, the
"Indemnitees") harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever relating to
such Borrower (including, without limitation, the reasonable fees and
disbursements of counsel for any of such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not any of such Indemnitees shall be designated a party thereto) that
may be imposed on, incurred by, or asserted against any Indemnitee, in any
manner relating to or arising out of this Agreement, any Related Agreement or
any other agreements executed and delivered by such Borrower or any other
Obligor in connection herewith, the statements contained in any commitment
letter delivered by Lender, Lender's agreement to make the Loans or to issue
Letters of Credit for the account of such Borrower hereunder, the use or
intended use of any Letters of Credit issued for the account of such Borrower,
or the use or intended use of the proceeds of any of the Loans hereunder (the
"INDEMNIFIED LIABILITIES"); PROVIDED that neither of the Borrowers shall have
any obligation to an Indemnitee hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of such
Indemnitee. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it
violates any law or public policy, each Borrower shall contribute the maximum
portion that it is permitted to pay under applicable law to the payment and
satisfaction of all indemnified liabilities incurred by the Indemnitees or any
of them and payable by such Borrower pursuant to the terms of this SECTION 9.2.
The provisions of the undertakings and indemnification set out in this SECTION
9.2 shall
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survive satisfaction and payment of the Liabilities of each of the Borrowers and
termination of this Agreement.
9.3 CAPITAL ADEQUACY. If Lender shall reasonably determine that the
application or adoption of any law, rule, regulation, directive, interpretation,
treaty or guideline regarding capital adequacy, or any change therein or in the
interpretation or administration thereof, whether or not having the force or law
(including, without limitation, application of changes to Regulation H and
Regulation Y of the Federal Reserve Board issued by the Federal Reserve Board on
January 19, 1989 and regulations of the Comptroller of the Currency, Department
of the Treasury, 12 CFR Part 3, Appendix A, issued by the Comptroller of the
Currency on January 27, 1989) increases the amount of capital required or
expected to be maintained by Lender or any Person controlling Lender, and such
increase is based upon the existence of Lender's obligations to a Borrower
hereunder and other commitments of this type, then from time to time, within 10
days after demand from Lender, such Borrower shall pay to Lender such amount or
amounts as will compensate Lender or such controlling Person, as the case may
be, for such increased capital requirement. The determination of any amount to
be paid by Borrowers under this SECTION 9 shall take into consideration the
policies of Lender or any Person controlling Lender with respect to capital
adequacy and shall be based upon any reasonable averaging, attribution and
allocation methods. A certificate of Lender setting forth the amount or amounts
as shall be necessary to compensate Lender as specified in this SECTION 9 shall
be delivered to Borrowers and shall be conclusive in the absence of manifest
error.
9.4 EURODOLLAR RATE REVOLVING LOANS.
9.4.1 EURODOLLAR RATE LENDING UNLAWFUL. If Lender shall determine
(which determination shall, upon notice thereof to Borrowers be conclusive and
binding on Borrowers) that the introduction of or any change in or in the
interpretation of any law makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for Lender to make, continue
or maintain any Loan as, or to convert any Loan into, a Eurodollar Rate
Revolving Loan, the obligation of Lender to make, continue, maintain or convert
any such Loans shall, upon such determination, forthwith be suspended until
Lender shall notify Borrowers that the circumstances causing such suspension no
longer exist, and all Eurodollar Rate Revolving Loans shall automatically
convert into Reference Rate Revolving Loans at the end of the then current
Interest Periods with respect thereto or sooner, if required by such law or
assertion.
9.4.2 DEPOSITS UNAVAILABLE. If Lender shall have determined
(which determination shall, upon notice thereof to Borrowers, be conclusive and
binding on Borrowers) that
(a) Dollars deposits in the relevant amount and for the relevant
Interest Period are not available to Lender in the interbank eurodollar
market; or
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(b) by reason of circumstances affecting the interbank eurodollar
market, adequate means do not exist for ascertaining the interest rate
applicable hereunder to Eurodollar Rate Revolving Loans,
then, upon notice from Lender to Borrowers, the obligations of Lender under
SECTION 2 to make or continue any Loans as, or to convert any Loans into,
Eurodollar Rate Revolving Loans shall forthwith be suspended until Lender shall
notify Borrowers that the circumstances causing such suspension no longer exist.
9.4.3 INCREASED EURODOLLAR RATE REVOLVING LOAN COSTS, ETC. Each
of the Borrowers agrees to reimburse Lender for any increase in the cost to
Lender of, or any reduction in the amount of any sum receivable by Lender in
respect of, making, continuing or maintaining (or of its obligation to make,
continue or maintain) any Loans to such Borrower as, or of converting (or of its
obligation to convert) any Loans to such Borrower into, Eurodollar Rate
Revolving Loans which results from any change since the date of this Agreement
in any applicable law, governmental rule, regulation, guideline, order or
request (whether or not having the force of law), or in the interpretation or
administration thereof (including, by way of example, but not limited to, a
change in official reserve requirements). Lender shall promptly notify the
respective Borrower in writing of the occurrence of any such event, such notice
to state, in reasonable detail, the reasons therefor and the additional amount
required fully to compensate Lender for such increased cost or reduced amount.
Such additional amounts shall be payable by such Borrower directly to Lender
within five (5) days of such Borrower's receipt of such notice, and such notice
shall, in the absence of manifest error, be conclusive and binding on such
Borrower.
9.4.4 FUNDING LOSSES. In the event Lender shall incur any loss
or expense with respect to a Borrower (including any loss or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
Lender to make, continue or maintain any portion of the principal amount of any
Loan as, or to convert any portion of the principal amount of any Loan into, a
Eurodollar Rate Revolving Loan) as a result of
(a) any conversion or repayment or prepayment of the principal amount
of any Eurodollar Rate Revolving Loans on a date other than the scheduled
last day of the Interest Period applicable thereto, whether pursuant to
SECTION 3.1 or otherwise;
(b) any failure of such Borrower to borrow, continue or convert a
Loan on a date specified therefor in any notice or request; or
(c) any failure of such Borrower to make any payment when due of any
amount due hereunder in connection with any Loan,
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then, upon the written notice of Lender to such Borrower, such Borrower shall,
within five (5) days of its receipt thereof, pay directly to Lender such amount
as will (in the reasonable determination of Lender) reimburse Lender for such
loss or expense. Such written notice (which shall include calculations in
reasonable detail) shall, in the absence of manifest error, be conclusive and
binding on such Borrower.
9.4.5 FUNDING. Lender may, if it so elects, fulfill its
obligation to make, continue or convert Eurodollar Rate Revolving Loans
hereunder by causing one of its foreign branches or affiliates (or an
international banking facility created by such Lender) to make or maintain such
Eurodollar Rate Revolving Loan; PROVIDED, HOWEVER, that such Eurodollar Rate
Revolving Loan shall nonetheless be deemed to have been made and to be held by
Lender, and the obligation of each of the Borrowers to repay such Eurodollar
Rate Revolving Loan shall nevertheless be to Lender for the account of such
foreign branch, affiliate or international banking facility. In addition, each
of the Borrowers hereby consents and agrees that, for purposes of any
determination to be made for purposes of SECTIONS 9.4, it shall be conclusively
assumed that Lender elected to fund all Eurodollar Rate Revolving Loans by
purchasing Dollar deposits in the interbank eurodollar market.
9.5 PAYMENT OF INDEMNITY AMOUNTS. Lender may provide for the payment of
any amounts for which a Borrower is liable under this SECTION 9 by charging the
Demand Deposit Account of such Borrower, the Assignee Deposit Account of such
Borrower, or any other bank account maintained by or for the account of such
Borrower with Lender and, to the extent necessary to fund any such account,
Lender may advance the amount thereof to such Borrower as a Revolving Loan;
PROVIDED, HOWEVER, that so long as an Event of Default shall not have occurred
and be continuing, Lender agrees to use its best efforts to provide prior
written notice to such Borrower of any such charge; PROVIDED, FURTHER, HOWEVER,
that Lender's failure to provide notice of any such charge shall not affect the
validity or enforceability thereof.
10. ADDITIONAL PROVISIONS.
Additional provisions are set forth in SUPPLEMENT A.
11. GENERAL.
11.1 BORROWER WAIVER. Except as otherwise provided for in this
Agreement, each of the Borrowers waives (i) presentment, demand and protest and
notice of presentment, protest, default, non-payment, maturity, release,
compromise, settlement, one or more extensions or renewals of any or all
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guaranties at any time held by Lender on which such Borrower may in
any way be liable and hereby ratifies and confirms whatever Lender may do in
this regard; (ii) all rights to notice and a hearing prior to Lender's taking
possession or control of, or Lender's relevy, attachment or levy on or of, the
Collateral of such
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Borrower or any bond or security which might be required by any court prior to
allowing Lender to exercise any of Lender's remedies; and (iii) the benefit of
all valuation, appraisement and exemption laws. Each of the Borrowers
acknowledges that it has been advised by its counsel with respect to this
Agreement and the transactions evidenced by this Agreement.
11.2 POWER OF ATTORNEY. Each of the Borrowers appoints Lender, or any
Person whom Lender may from time to time designate, as such Borrower's attorney
and agent-in-fact with power (which appointment and powers being coupled with an
interest, is irrevocable until all Liabilities of each of the Borrowers under
this Agreement are paid and performed in full and this Agreement is terminated),
without notice to such Borrower, to:
(a) At such time or times hereafter as Lender or said agent, in its
sole and absolute discretion, may determine in such Borrower's or Lender's
name (i) endorse such Borrower's name on any checks, notes, drafts or any
other items of payment relating to and/or proceeds of the Collateral of
such Borrower which come into the possession of Lender or under Lender's
control and apply such payment or proceeds to the Liabilities of such
Borrower; (ii) endorse such Borrower's name on any chattel paper, document,
instrument, invoice, freight bill, bill of lading or similar document or
agreement in Lender's possession relating to Accounts Receivable, Inventory
or any other Collateral, in each case of such Borrower; (iii) use the
information recorded on or contained in any data processing equipment and
computer hardware and software to which such Borrower has access relating
to Accounts Receivable, Inventory and/or other Collateral, in each case of
such Borrower; (iv) use such Borrower's stationery and sign the name of
such Borrower to verification of Accounts Receivable and notices thereof to
Account Debtors; and (v) if not done by such Borrower, do all acts and
things determined by Lender to be necessary, to fulfill such Borrower's
obligations under this Agreement or any Related Agreement; and
(b) At such time or times after the occurrence of an Event of
Default, as Lender or said agent, in its sole and absolute discretion, may
determine, in such Borrower's or Lender's name: (i) demand payment of the
Accounts Receivable of such Borrower; (ii) enforce payment of the Accounts
Receivable of such Borrower, by legal proceedings or otherwise; (iii)
exercise all of Borrower's rights and remedies with respect to the
collection of the Accounts Receivable and other Collateral, in each case of
such Borrower; (iv) settle, adjust, compromise, extend or renew the
Accounts Receivable of such Borrower; (v) settle, adjust or compromise any
legal proceedings brought to collect the Accounts Receivable of such
Borrower; (vi) if permitted by applicable law, sell or assign the Accounts
Receivable and/or other Collateral of such Borrower upon such terms for
such amounts and at such time or times as Lender may deem
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advisable; (vii) discharge and release the Accounts Receivable and/or other
Collateral, in each case of such Borrower; (viii) prepare, file and sign
such Borrower's name on any proof of claim in bankruptcy or similar
document against any Account Debtor; (ix) prepare, file and sign such
Borrower's name on any notice of lien, assignment or satisfaction of lien
or similar document in connection with the Accounts Receivable and/or other
Collateral, in each case of such Borrower; and (x) do all acts and things
necessary, in Lender's sole and absolute discretion, to obtain repayment of
the Liabilities of such Borrower and to fulfill such Borrower's other
obligations under this Agreement or any Related Agreement.
11.3 EXPENSES; ATTORNEYS' FEES. Each of the Borrowers agrees,
whether or not any Loan is made to such Borrower hereunder, to pay upon demand
all Attorneys' Fees and all other reasonable expenses incurred by Lender in
connection with (i) the preparation, negotiation and execution of this
Agreement, any Related Agreement and any document required to be furnished in
connection herewith or therewith, (ii) the preparation of any and all amendments
to this Agreement or any of the Related Agreements and all other instruments or
documents provided for therein or delivered or to be delivered thereunder or in
connection therewith, (iii) the collection or enforcement of such Borrower's or
any other Obligor's obligations hereunder or under any Related Agreement, and
(iv) the collection or enforcement of any of Lender's rights in or to any
Collateral or Third Party Collateral of such Borrower. Lender may advance all
such amounts to such Borrower as Revolving Loans. Each of the Borrowers also
agrees (a) to indemnify and hold Lender harmless from any loss or expense which
may arise or be created by the acceptance, in accordance with the terms and
provisions of this Agreement, of telephonic or other instructions for making
Loans to such Borrower, and (b) to pay, and save Lender harmless from all
liability for, any stamp or other taxes which may be payable with respect to the
execution or delivery of this Agreement, or any Related Agreement or
Supplemental Documentation, or the issuance of any Note by such Borrower or of
any other instruments or documents provided for herein or to be delivered
hereunder or in connection herewith by such Borrower. The foregoing obligations
of each of the Borrowers shall survive any termination of this Agreement.
11.4 LENDER FEES AND CHARGES. Each of the Borrowers agrees to pay
Lender on demand the customary fees and charges of Lender for maintenance of
accounts with Lender or for providing other services to such Borrower. Lender
may, in its sole and absolute discretion, provide for such payment by advancing
the amount thereof to such Borrower as Revolving Loans.
11.5 LAWFUL INTEREST. In no contingency or event whatsoever shall
the interest rate charged pursuant to the terms of this Agreement exceed the
highest rate permissible under any law which a court of competent jurisdiction
shall, in a final determination, deem applicable hereto. In the event that such
a court determines that Lender has received interest hereunder in
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excess of the highest applicable rate, Lender shall promptly refund such excess
interest to the applicable Borrower.
11.6 NO WAIVER BY LENDER; AMENDMENTS. No failure or delay on the
part of Lender in the exercise of any power or right, and no course of dealing
between Borrower and Lender shall operate as a waiver of such power or right,
nor shall any single or partial exercise of any power or right preclude other or
further exercise thereof or the exercise of any other power or right. The
remedies provided for herein are cumulative and not exclusive of any remedies
which may be available to Lender at law or in equity. No notice to or demand on
either of the Borrowers not required hereunder shall in any event entitle either
of the Borrowers to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of Lender to any other or
further action in any circumstances without notice or demand. No amendment,
modification or waiver of, or consent with respect to, any provision of this
Agreement or any Related Agreement shall in any event be effective unless the
same shall be in writing and signed and delivered by Lender. Any waiver of any
provision of this Agreement, and any consent to any departure by either of the
Borrowers from the terms of any provision of this Agreement, shall be effective
only in the specific instance and for the specific purpose for which given.
11.7 TERMINATION OF CREDIT. Unless the Credit of either of the
Borrowers is otherwise terminated pursuant to the terms of this Agreement, the
Termination Date shall be automatically extended for successive one-year periods
to the next anniversary of such date unless Lender shall notify such Borrower in
writing, at least thirty (30) days prior to a scheduled Termination Date, that
Lender elects not to extend the Termination Date. Each Borrower may terminate
the Credit of such Borrower at any time upon notice to Lender and payment in
full of the outstanding principal balance of the Loans and all other Liabilities
of such Borrower under this Agreement and the Related Agreements; PROVIDED,
HOWEVER, notwithstanding anything to the contrary contained herein, upon
termination of the Credit of either of the Borrowers, pursuant to this SECTION
11.7 or otherwise, the Credit of the other Borrower shall also automatically and
permanently terminate and thereupon, the outstanding principal balance of the
Loans and all other Liabilities of such other Borrower shall become immediately
due and payable hereunder, without any notice by Lender to such other Borrower.
All of Lender's rights and remedies, the liens and security interests of Lender
in the Collateral of each of the Borrowers and all of each Borrower's respective
duties and obligations under this Agreement shall survive termination of the
Credit extended to such Borrower hereunder until all of the Liabilities of each
of the Borrowers hereunder have been finally paid and performed in full. The
termination or cancellation of the Credit of either of the Borrowers shall not
affect or impair the liabilities and obligations of such Borrower or any one or
more of the Obligors to Lender or Lender's rights with respect to any Loans and
advances made and other Liabilities incurred by such Borrower
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prior to such termination or with respect to the Collateral or any Third Party
Collateral of such Borrower.
11.8 NOTICES. Except as otherwise expressly provided herein, any
notice hereunder to each of the Borrowers or Lender shall be in writing
(including telegraphic, telex, or facsimile communication) and shall be given to
such Borrower or Lender at its address, telex number or facsimile number set
forth on the signature pages hereof or at such other address, telex number or
facsimile number as such Borrower or Lender may, by written notice, designate as
its address, telex number or facsimile number for purposes of notices hereunder.
All such notices shall be deemed to be given when transmitted by telex and the
appropriate answerback is received, transmitted by facsimile, delivered to the
telegraph office, delivered by courier, personally delivered or, in the case of
notice by mail, three (3) Banking Days following deposit in the United States
mails, properly addressed as herein provided, with proper postage prepaid;
provided, however, that notice to Lender of the Borrowers' intent to terminate
the Credit shall not be effective until actually received by Lender.
11.9 ASSIGNMENTS AND PARTICIPATIONS; INFORMATION. Each of the
Borrowers hereby consents to Lender's grant of participations in or sale,
assignment, transfer or other disposition, at any time and from time to time
hereafter, of this Agreement or any Related Agreement, or of any portion of any
thereof, including without limitation Lender's rights, titles, interests,
remedies, powers and/or duties. Lender may furnish any information concerning
either or both of the Borrowers in the possession of Lender from time to time to
assignees of the rights and/or obligations of Lender hereunder and to
participants in any Loan (including prospective assignees and participants) and
may furnish information in response to credit inquiries consistent with general
banking practice. Lender shall promptly notify Borrower of Lender's grant of
any participation in or sale, assignment, transfer or other disposition of this
Agreement or any Related Agreement, or of any portion of any thereof. Borrower
shall use its best efforts to assist Lender in its efforts to sell assignments
and participations.
11.10 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
11.11 SUCCESSORS. This Agreement shall be binding upon each of the
Borrowers and Lender and their respective successors and assigns, and shall
inure to the benefit of each of the Borrowers and Lender and the successors and
assigns of Lender. Neither Borrower shall assign its rights or duties hereunder
without the consent of Lender.
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11.12 HEADINGS. The various headings of this Agreement and of each
Related Agreement are inserted for convenience only and shall not affect the
meaning or interpretation of this Agreement or such Related Agreement or any
provisions hereof or thereof.
11.13 EXECUTION IN COUNTERPARTS. This Agreement may be executed by
the parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute together but one and the same
agreement.
11.14 CONSTRUCTION. Each of the Borrowers acknowledges that this
Agreement shall not be binding upon Lender or become effective until and unless
accepted by Lender, in writing. If so accepted by Lender, this Agreement and
the Related Agreements and Supplemental Documents shall, unless otherwise
expressly provided therein, be deemed to have been negotiated and entered into
in, and shall be governed and controlled by the internal laws (without regard to
conflicts of law principles) of, the State of Illinois as to interpretation,
enforcement, validity, construction, effect and in all other respects,
including, but not limited to, the legality of the interest rate and other
charges, but excluding perfection of security interests and liens which shall be
governed and controlled by the laws of the relevant jurisdiction. This
Agreement, any Note and the Related Agreements constitute the entire
understanding among the parties hereto with respect to the subject matters
hereof and thereof and supersede any prior agreements, written or oral, with
respect thereto.
11.15 CONSENT TO JURISDICTION. To induce Lender to accept this
Agreement, each of the Borrowers irrevocably agrees that, subject to Lender's
sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR
RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE RELATED
AGREEMENTS, OR THE SUPPLEMENTAL DOCUMENTATION OR THE COLLATERAL OF SUCH BORROWER
SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF
ILLINOIS. EACH OF THE BORROWERS HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION
OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE AND
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON SUCH BORROWER, AND AGREES
THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL DIRECTED TO SUCH
BORROWER AT THE ADDRESS STATED ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF.
11.16 SUBSIDIARY REFERENCE. Any reference herein to a Subsidiary or
Subsidiaries of a Borrower, and any financial definition, ratio, restriction or
other provision of this Agreement which is stated to be applicable to such
Borrower "and its Subsidiaries" or which is to be determined on a "consolidated"
or "consolidating" basis, shall apply only to the extent such Borrower has any
Subsidiaries and, where applicable, to the extent any such Subsidiaries are
consolidated with such Borrower for financial reporting purposes.
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11.17 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND LENDER EACH
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS (i) UNDER THIS AGREEMENT OR ANY RELATED AGREEMENT OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (ii) ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
EACH OF THE BORROWERS AND LENDER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED
FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION
OF EACH RELATED AGREEMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR LENDER ENTERING INTO THIS AGREEMENT AND EACH RELATED
AGREEMENT.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
OREGON METALLURGICAL CORPORATION
By: /s/
------------------------------
Vice President
Address: 530 34th Avenue, S.W.
Albany, Oregon 97321
Attn: Dennis P. Kelly
Telephone: 503/926-4281
Fax: 503/928-8117
NEW TI, INC.
By: /s/
------------------------------
Assistant Treasurer
Address: c/o Oregon Metallurgical Corporation
530 34th Avenue, S.W.
Albany, Oregon 97321
Attn: Dennis P. Kelly
Telephone: 503/926-4281
Fax: 503/928-8117
BANK OF AMERICA ILLINOIS
By: /s/
------------------------------
Vice President
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Business Credit Group
Telephone: 312/828-4409
Fax: 312/828-7327
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SUPPLEMENT A
TO
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 19, 1994
AMONG
OREGON METALLURGICAL CORPORATION,
NEW TI, INC.
AND
BANK OF AMERICA ILLINOIS
1. LOAN AGREEMENT REFERENCE. This SUPPLEMENT A, as it may be amended,
restated, supplemented or otherwise modified from time to time, is a part of the
Loan and Security Agreement dated as of September 19, 1994 (together with all
amendments, restatements, modifications and supplements thereto, the "LOAN
AGREEMENT") among BANK OF AMERICA ILLINOIS, an Illinois banking corporation
having its principal office at 231 South LaSalle Street, Chicago, Illinois 60697
("LENDER"), OREGON METALLURGICAL CORPORATION, an Oregon corporation ("OREMET")
and NEW TI, INC., an Oregon corporation ("TI") (OREMET and TI being sometimes
hereinafter referred to, individually, as a "BORROWER" and, collectively, as
"BORROWERS"). Terms used herein which are defined in the Loan Agreement shall
have the meaning ascribed to them therein.
2. REVOLVING CREDIT AMOUNTS; BORROWING BASE.
2.1 REVOLVING CREDIT AMOUNTS. The maximum amount of Revolving Loans
which Lender will make available to each Borrower (such amount is herein called,
with respect to each Borrower, such Borrower's "REVOLVING CREDIT AMOUNT") is (i)
in the case of OREMET, $16,000,000 and (ii) in the case of TI, $8,000,000 (in
each case, unless such amount is reduced or increased by Lender in its sole
discretion).
2.2 BORROWING BASES. The term "BORROWING BASE", as used herein with
respect to each Borrower, shall mean:
(i) an amount (with respect to each Borrower, such Borrower's "ACCOUNTS
RECEIVABLE AVAILABILITY") of up to 80% of the net amount (after
deduction of such reserves and allowances as Lender deems proper and
necessary) of such Borrower's Eligible Accounts Receivable, PLUS
(ii) an amount of up to the least of:
(A) the sum of: (1) 50% of the net value (as determined by Lender and
after deduction of such reserves and allowances as Lender deems
proper and necessary) of Eligible Inventory of such Borrower
consisting of finished goods; (2) in the case of TI only, 50% of
the net value (as determined by Lender and after deduction of
such reserves and allowances as Lender deems proper and
necessary) of Eligible Inventory of such Borrower consisting of
raw materials; and
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(3) 30% of the net value (as determined by Lender and after
deduction of such reserves and allowances as Lender deems proper
and necessary) of Eligible Inventory of such Borrower consisting
of work-in-process, sponge and usable remelt scrap;
(B) an amount equal to (1) in the case of OREMET, $10,000,000 and (2)
in the case of TI, $2,500,000; or
(C) an amount not exceeding at any time (i) in the case of OREMET,
one hundred twenty percent (120%) of such Borrower's Accounts
Receivable Availability at such time and (ii) in the case of TI,
one hundred percent (100%) of such Borrower's Accounts Receivable
Availability at such time.
2.3 LENDER'S RIGHTS. Each of the Borrowers agrees that nothing
contained in SUPPLEMENT A (i) shall be construed as Lender's agreement to resort
or look to a particular type or item of Collateral of such Borrower as security
for any specific Loan or advance or in any way limit Lender's right to resort to
any or all of the Collateral of such Borrower as security for any of the
Liabilities of such Borrower, (ii) shall be deemed to limit or reduce any Lien
on any portion of such Collateral or other security for the Liabilities or (iii)
shall supersede SECTION 2.9 of the Loan Agreement.
3. INTEREST
3.1 REVOLVING LOANS.
3.1.1 INTEREST TO MATURITY. The unpaid principal balance of the
Revolving Loans (other than Overdraft Loans and Over Advances) shall bear
interest to maturity at a rate per annum determined by reference to the
Alternate Reference Rate or the Interbank Rate (Reserve Adjusted). Subject
to the other terms and provisions of SUPPLEMENT A and of the Loan
Agreement, (i) the applicable basis for determining the rate of interest
applicable to each Revolving Loan shall be selected by the applicable
Borrower at the time a notice of borrowing, continuation or conversion, as
the case may be, with respect to such Revolving Loan is given by such
Borrower pursuant to SECTION 2.5 of the Loan Agreement, and (ii) all
Revolving Loans (other than Overdraft Loans and Over Advances shall bear
interest as follows:
(1) if a Reference Rate Revolving Loan, then at a per annum rate
equal to the sum of the Alternate Reference Rate in effect from time
to time, PLUS the Reference Rate Margin in effect at such time; or
(2) if a Eurodollar Rate Revolving Loan, then at a per annum
rate equal to the sum of the Interbank Rate (Reserve Adjusted) for the
applicable Interest Period,
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PLUS the Eurodollar Margin in effect from time to time during such
Interest Period;
PROVIDED, HOWEVER, that notwithstanding the foregoing or anything to
the contrary contained in SUPPLEMENT A or the Loan Agreement, but
subject in any event to SECTION 3.1.2 hereof, at any time that (i) the
Liabilities to Net Worth Ratio is equal to or greater than 1.00 to
1.00 OR (ii) the Grid Ratio for the fiscal quarter of OREMET ending
immediately prior to such time is equal to or less than 2.00 to 1.00,
the entire unpaid principal balance of the Revolving Loans of each of
the Borrowers (other than Overdraft Loans and Over Advances) shall
bear interest at a rate per annum equal to the Alternate Reference
Rate from time to time in effect PLUS one-and-one-half percent (1.5%).
3.1.2 DEFAULT RATE. If any amount of the Revolving Loans of
either of the Borrowers is not paid when due, whether by acceleration or
otherwise, the entire unpaid principal balance of the Revolving Loans of
each of the Borrowers (other than Overdraft Loans and Over Advances) shall
bear interest until paid at a rate per annum equal to:
(A) the greater of (i) three and one-half percent (3.5%) above
the Alternate Reference Rate from time to time in effect and (ii)
three and one-half percent (3.5%) above the Alternate Reference Rate
in effect at the time such amount became due; and
(B) in the case of Eurodollar Rate Revolving Loans, the greater
of (i) two percent (2%) above the rate applicable to such Loan at the
time such amount became due and (ii) three and one-half percent (3.5%)
percent in excess of the Alternate Reference Rate from time to time in
effect.
3.2 OVERDRAFT LOANS; OVER ADVANCES. Overdraft Loans and Over Advances
shall bear interest at the rate(s) determined pursuant to SECTION 2.7 or SECTION
2.8 of the Loan Agreement, as applicable.
3.3 COMPUTATION. Interest shall be calculated on the basis of a year
consisting of 360 days and paid for actual days elapsed. Changes in any
interest rate provided for herein which are due to changes in the Alternate
Reference Rate shall take effect on the date of the change in the Alternate
Reference Rate.
3.4 PAYMENT. Until maturity, interest on the Loans shall be payable on
each Monthly Payment Date, and at maturity. After maturity, whether by
acceleration or otherwise, accrued interest shall be payable on demand.
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<PAGE>
4. ADDITIONAL COVENANTS. From the date of the Loan Agreement and thereafter
until all of the Liabilities of each of the Borrowers are indefeasibly paid in
full in cash, each of the Borrowers agrees that, unless Lender otherwise
consents in writing, it will:
4.1 LIABILITIES TO NET WORTH COVERAGE.
(a) Not permit the Liabilities to Net Worth Ratio of OREMET to exceed
1.00 to 1.00; and
(b) Not permit the Liabilities to Net Worth Ratio of TI to exceed (i)
4.00 to 1.00, at any time during the period commencing on the Closing Date
and ending on December 30, 1995; (ii) 3.50 to 1.00 at any time during the
period commencing on December 31, 1995 and ending on December 30, 1996; and
(iii) 3.00 to 1.00, at any time thereafter.
4.2 NET WORTH.
(a) Not permit the Net Worth of OREMET to be less than (i)
$65,000,000, at any time during the period commencing on the Closing Date
and ending on December 30, 1995; (ii) $66,000,000, at any time during the
period commencing on December 31, 1995 and ending on December 30, 1996; and
(iii) $67,500,000, at any time thereafter; and
(b) Not permit the Net Worth of TI to be less than (i) $3,700,000, at
any time during the period commencing on the Closing Date and ending on
December 30, 1995; (ii) $4,600,000, at any time during the period
commencing on December 31, 1995 and ending on December 30, 1996; and (iii)
$5,600,000, at any time thereafter.
4.3 CAPITAL EXPENDITURES. Not, and not permit any Subsidiary of such
Borrower to, purchase or otherwise acquire (including, without limitation,
acquisition by way of Capitalized Lease), or commit to purchase or otherwise
acquire, any fixed asset if, after giving effect to such purchase or other
acquisition, the aggregate cost of all fixed assets purchased or otherwise
acquired (i) by OREMET and its Subsidiaries (other than TI and its Subsidiaries)
on a consolidated basis (x) during the period commencing on the Closing Date and
ending on December 31, 1994, would exceed $750,000 and (y) in any one fiscal
year would exceed $4,500,000 or (ii) by TI and its Subsidiaries on a
consolidated basis in any one fiscal year would exceed $500,000.
4.4A TI INTEREST COVERAGE. Not permit the Grid Ratio for any fiscal
quarter of TI ending after September 30, 1994 and for any fiscal year of TI
ending after December 31, 1994 to be less than 2.00 to 1.00.
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4.4B OREMET INTEREST COVERAGE.
(a) Not permit the ratio of (i) earnings before interest expense,
provision for Taxes and depreciation to (ii) interest expense, in each case of
OREMET and its consolidated Subsidiaries for the fiscal quarter ending as of
December 31, 1994, to be less than 2.75 to 1.00.
(b) Not permit the Grid Ratio of OREMET to be less than 2.00 to 1.00 for
any fiscal quarter or fiscal year, respectively, ending after December 31, 1994.
OREGON METALLURGICAL CORPORATION
By: /s/
--------------------------------
Vice President
NEW TI, INC.
By: /s/
--------------------------------
Assistant Treasurer
BANK OF AMERICA ILLINOIS
By: /s/
--------------------------------
Vice President
157
<PAGE>
TITANIUM TETRACHLORIDE AGREEMENT
This Agreement, made this 1st day of August, 1990, by and between SCM
Chemicals, Inc., a Delaware corporation with principal offices located at 7 St.
Paul Street, Suite 1010, Baltimore, Maryland 21202 (hereinafter referred to as
"SCM") and Oregon Metallurgical Corporation, an Oregon corporation with its
principal offices located at 530 West 34th Avenue, Albany, Oregon 97321
(hereinafter referred to as "Oremet") for the sale and purchase of titanium
tetrachloride (hereinafter referred to as "TiCl4").
WITNESSETH
WHEREAS, Oremet operates a plant for the production of titanium metal
sponge at Albany, Oregon (hereinafter "Oremet's Plant") and Oremet is desirous
of securing from SCM TiCl4 as a raw material for the production of titanium
metal sponge; and
WHEREAS, SCM operates a plant in Ashtabula, Ohio to produce TiCl4
(hereinafter referred to as "SCM's Ashtabula Plant II") for sale to third
parties such as Oremet; and
WHEREAS, Oremet and SCM entered into an agreement dated April 20, 1988, as
amended, for the sale and purchase of TiCL4 which agreement expires on December
31, 1991; and
WHEREAS, the parties now desire to enter into a new agreement, effective
January 1, 1992, on the terms and conditions as set forth herein.
IN CONSIDERATION of and subject to the terms, covenants and undertakings
contained herein, the parties mutually agree as follows:
ARTICLE 1. DEFINITIONS
1.1 Ton shall mean two thousand (2,000) pounds.
1.2 TiCl4 shall mean the product being sold by SCM to Oremet with
specifications described in Article V.
1.3 Contract Year for purposes of this agreement shall be the period January 1
through December 31.
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<PAGE>
ARTICLE II. PRIOR AGREEMENT
2.1 The agreement as amended, dated April 20, 1988, between Oremet and SCM
Chemicals shall expire on December 31, 1991. Other than for claims of
breach of the warranties expressed in said agreement, or for amounts which
may be due and owing to SCM at the expiration of said agreement for TiCl4
sold to Oremet prior to the expiration of the agreement, neither party
shall have any further obligations to the other under the terms and
conditions of said agreement and each party releases the other from
any claims, losses, damages of whatever kind or nature arising under said
agreement.
ARTICLE III. SCOPE
3.1 SCM agrees to sell and deliver and Oremet agrees to buy and take delivery
of TiCl4 for production of titanium sponge within the ranges
set forth in Article 7.1 and 7.2 during each Contract Year of this
Agreement (hereinafter the "Agreement").
ARTICLE IV. TERM
4.1 This Agreement shall be for an initial term (the "Initial Term") of five
(5) years commencing January 1, 1992, up to and including December 31,
1996, subject to prior termination as hereinafter provided and as provided
in Articles 4.2, 13 and 14. This Agreement shall automatically renew for
one (1) year Renewal Years (hereinafter "Renewal Year") unless either
party provides written notice to the other at least two (2) years prior
to the commencement of any Renewal Year.
4.2 Oremet may cancel this Agreement effective December 31, 1995, provided
Oremet sends a written certification signed by a duly authorized officer
of Oremet no later than December 31, 1993, that Oremet intends to build
and commence the operation of a TiCl4 facility to supply itself with
TiCl4 in quantities that are no less than the quantities supplied by SCM
pursuant to this Agreement.
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<PAGE>
ARTICLE V. SPECIFICATIONS
5.1 During each Contract Year, SCM will sell and deliver and Oremet shall
purchase and accept TiCl4 produced at SCM's Ashtabula Plant II having the
following specifications:
5.1.a. Color: water white to light straw yellow
5.1.b. Chemistry:
Chlorine (Elemental) None
Titanium Tetrachloride Min. per cent
Iron Max. ppm
Vanadium Max. ppm
Carbon Max. ppm
Silicon Max. ppm
Chromium Max. ppm
Nickel Max. ppm
Aluminum Max. ppm
Tin, Copper, & Manganese Max. ppm
Nitrogen Max. ppm
*(as a group ppm maximum any individual element)
SCM shall be responsible for establishing and using sampling
procedures and methods for chemical analysis to afford reliable
assurance of the specifications contained herein. Seller shall
certify that delivered TiCl4 is in accordance with all the
requirements of this specification. In the event of disagreement
as to the conformance of TiCl4 this specification, the parties
shall submit the dispute to an independent laboratory for
determination and agree to be bound by such determination. The
costs of such independent determination shall be equally shared.
ARTICLE VI. SCHEDULING/PASSAGE OF TITLE/RISK OF LOSS
6.1 Oremet shall furnish SCM, at least thirty (30) days in advance,
estimates of TiCl4 required by its plant for the succeeding calendar
month during the term of this Agreement. Oremet requirements shall, to the
extent possible, be uniform from month to month during any
yealy period of this Contract, and Seller's delivery of
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<PAGE>
TiCl4 shall be made on a like basis; provided that Seller shall not be
required to deliver during any calendar month an amount which is
percent greater or less than the TiCl4 supplied during the preceding
month. SCM shall not be required to deliver an amount of TiCl4 during any
calendar quarter which is percent greater or less than the TiCl4
supplied during the prior quarter.
6.2 All TiCl4 sold and purchased hereunder shall be shipped by Seller
to Buyer via Buyer's rail tank cars which Buyer covenants shall be
maintained in safe working order and comply with all applicable
regulations. Risk of loss and title to all TiCl4 shall be with
Seller until the point at which rail cars leave the property of
Seller whereupon risk of loss and title thereto shall pass to
Buyer.
ARTICLE VII. QUANTITIES
7.1 During each Contract or Renewal Year, SCM will sell and deliver
to Oremet and Oremet will purchase and accept from SCM, a minimum volume
of of TiCl4.
7.2 Unless adjusted in accordance with Article 7.4 herein, SCM will
sell and deliver to Oremet and Oremet will purchase and accept
from SCM up to a maximum volume of .
7.3 During each Contract and Renewal Year, Oremet agrees to purchase
and accept from SCM its for TiCl4 up to the
maximum quantities specified in Article 7.2 herein, or as adjusted in
accordance with Article 7.4.
7.4 If, during the term or any renewal of this Agreement, Oremet
desires to increase the maximum quantities set forth in Article
7.2, Oremet shall provide SCM with at least
written notice of the new maximum quantity which quantity
shall not exceed tons during any
Contract or Renewal Year.
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<PAGE>
7.5 The quantities of TiCl4 delivered hereunder in any month by SCM
shall be determined from volume measurements obtained by SCM
on rail cars shipped to Oremet.
ARTICLE VIII. PRICE
8.1 The base price for TiCl4, effective January 1, 1992, shall be the
price, per ton, SCM is charging Oremet for TiCl4 sold during the
plus . The base price for TiCl4 shall be
increased an additional effective January 1, 1994, based on
the selling price.
8.2 The price for TiCl4 shall be adjusted quarterly beginning January
1, 1992, to reflect the previous quarter's changes in the:
8.2.1 actual consumption of
for the production of TiCl4, a and the
weighted average individual costs of consumed
a . SCM's
only produces as
a final product;
8.2.2 weighted cost of for the
production of TiCl4 at SCM's Ashtabula Plant II;
8.2.3 the weighted cost of in the manufacture of TiCl4 at
SCM's Ashtabula-Plant II;
8.2.4 The cost associated with the
during the manufacture of TiCl4 at SCM's
Ashtabula Plant II;
8.2.5 the cost of consumed in the
manufacture of TiCl4 at SCM's Ashtabula Plant II; and
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<PAGE>
8.2.6 other conversion costs based on changes to the
.
8.3 The adjustments to the price of TiCl4 which are described in detail in
Articles 8.4 through 8.9 shall apply to every quarter of the Agreement.
At the end of each quarter, a calculation will be made to determine the
price for TiCl4 for the quarter just ended. This price will be used as the
price for the next ensuing quarter. Each of the base weighted average
costs described as cost elements "B" or "E" in the price adjustment
formulas shown in Articles 8.4 through 8.8, remains in effect for the
Contract term. These base weighted average costs shall be
the projected weighted average costs for the first quarter of
1992 of the respective cost elements in the price adjustment
formulas. All prices referred to herein shall be F.O.B.,
SCM's Ashtabula Plant II in Ohio.
8.4 COST OF
The following formula shall be used to determine the
adjustment to the selling price of TiCl4, resulting
from changes in the
<TABLE>
<CAPTION>
A C B D
<S> <C> <C> <C> <C> <C> <C> <C>
/ \ / \
ADJUSTMENT IN CENTS/LB. | ACTUAL WEIGHTED ACTUAL WEIGHTED | | BASE WEIGHTED BASE WEIGHTED |
SELLING PRICE TICL4 | AVERAGE COST/ x AVERAGE FACTOR | - | AVERAGE COST/ x AVERAGE FACTOR |
\ / \ /
<FN>
WHERE:
A = TOTAL DOLLAR COST OF DURING PREVIOUS QUARTER
----------------------------------------------------------
TOTAL CONSUMED DURNG PREVIOUS QUARTER
B = BASE WEIGHTED AVERAGE COST/TON OF
C = / \
| TON TICL4 x TONS OF |
| TON TICL4 x TONS OF | x CENTS/LB.
| TON TICL4 x TONS OF |
| ---------------------------------------------------- |
| TOTAL TONS OF ORE CONSUMED DURING PREVIOUS QUARTER |
\ /
D =
</TABLE>
163
<PAGE>
8.5 COST OF
The following formula shall be used to determine the adjustment to
the selling price of TiCl4 resulting from changes in the cost of
.
<TABLE>
<CAPTION>
A C B D
<S> <C> <C> <C> <C> <C> <C> <C>
/ \ / \
ADJUSTMENT IN CENTS/LB. | ACTUAL WEIGHTED ACTUAL WEIGHTED | | BASE WEIGHTED BASE WEIGHTED |
SELLING PRICE TICL4 | AVERAGE COST/ x AVERAGE FACTOR | - | AVERAGE COST/ x AVERAGE FACTOR |
\ / \ /
<FN>
WHERE:
A = TOTAL DOLLAR COST OF PURCHASED DURING PREVIOUS QUARTER
------------------------------------------------------------
TOTAL PURCHASED DURNG PREVIOUS QUARTER
B = BASE WEIGHTED AVERAGE COST/TON OF
C = / \
| TON TICL4 x TONS OF |
| TON TICL4 x TONS OF | x CENTS/LB.
| TON TICL4 x TONS OF |
| ---------------------------------------------------- |
| TOTAL TONS OF ORE CONSUMED DURING PREVIOUS QUARTER |
\ /
D =
</TABLE>
8.6 ADJUSTMENT
The following formula shall be used to determine the adjustment to the
selling price of TiCl4 resulting from changes in the cost of
.
<TABLE>
<CAPTION>
A B C
<S> <C> <C> <C> <C> <C>
/ \
ADJUSTMENT IN CENTS/LB. | ACTUAL WEIGHTED BASE WEIGHTED | ADJUSTMENT
SELLING PRICE TICL4 = | AVERAGE - AVERAGE | x FACTOR
\ /
<FN>
WHERE:
A = TOTAL DOLLAR COST OF CONSUMED DURING PREVIOUS QUARTER
------------------------------------------------------------
TOTAL CONSUMED DURNG PREVIOUS QUARTER
B = BASE WEIGHTED AVERAGE COST
C =
</TABLE>
164
<PAGE>
8.7 ADJUSTMENT
The following formulas shall be used to determine the
adjustment to the Selling Price of TiCl4, resulting
from changes in the Costs:
<TABLE>
<CAPTION>
SOLIDS A C B D
<S> <C> <C> <C> <C> <C> <C> <C>
/ \ / \
ADJUSTMENT IN CENTS/LB. | ACTUAL WEIGHTED ACTUAL WEIGHTED | | BASE WEIGHTED BASE WEIGHTED |
SELLING PRICE TICL4 | AVERAGE COST/ x AVERAGE FACTOR | - | AVERAGE COST/ x AVERAGE FACTOR |
\ / \ /
<FN>
WHERE:
A = TOTAL DOLLAR COST OF DURING PREVIOUS QUARTER
----------------------------------------------------------
TOTAL DURNG PREVIOUS QUARTER
B = BASE WEIGHTED AVERAGE COST
C = / \
| TON TICL4 x TONS OF |
| TON TICL4 x TONS OF | x CENTS/LB.
| TON TICL4 x TONS OF |
| ---------------------------------------------------- |
| TOTAL TONS OF ORE CONSUMED DURING PREVIOUS QUARTER |
\ /
D =
</TABLE>
<TABLE>
<CAPTION>
A C B D
<S> <C> <C> <C> <C> <C> <C> <C>
/ \ / \
ADJUSTMENT IN CENTS/LB. | ACTUAL WEIGHTED ACTUAL WEIGHTED | | BASE WEIGHTED BASE WEIGHTED |
SELLING PRICE TICL4 | AVERAGE x AVERAGE FACTOR | - | AVERAGE x AVERAGE FACTOR |
\ / \ /
<FN>
WHERE:
A = TOTAL DOLLAR COST OF DURING PREVIOUS QUARTER
----------------------------------------------------------
TOTAL DURNG PREVIOUS QUARTER
B = BASE WEIGHTED AVERAGE COST
C = / \
| TON TICL4 x TONS OF |
| TON TICL4 x TONS OF | x CENTS/LB.
| TON TICL4 x TONS OF |
| ---------------------------------------------------- |
| TOTAL TONS OF ORE USED DURING PREVIOUS QUARTER |
\ /
D =
</TABLE>
Adjustment = the adjustment in cents/lb.
Selling Price TiCl4 adjustment in cents/lb. Selling Price TiCl4.
165
<PAGE>
8.8 ADJUSTMENT
The following formulas shall be used to determine the adjustment to the
selling price of TiCl4 resulting from changes in the Costs:
<TABLE>
<CAPTION>
A B C
<S> <C> <C> <C> <C> <C>
/ \
ADJUSTMENT IN CENTS/LB. | ACTUAL WEIGHTED BASE WEIGHTED | ADJUSTMENT
SELLING PRICE TICL4 | AVERAGE COST - AVERAGE COST | x FACTOR
\ /
<FN>
WHERE:
A = TOTAL DOLLAR COST OF DURING PREVIOUS QUARTER
---------------------------------------------------------
TOTAL CONSUMED DURNG PREVIOUS QUARTER
B = BASE WEIGHTED AVERAGE COST
C =
</TABLE>
<TABLE>
<CAPTION>
D E F
<S> <C> <C> <C> <C> <C>
/ \
ADJUSTMENT IN CENTS/LB. | ACTUAL WEIGHTED BASE WEIGHTED | ADJUSTMENT
SELLING PRICE TICL4 | AVERAGE COST - AVERAGE COST | x FACTOR
\ /
<FN>
WHERE:
D = TOTAL DOLLAR COST OF DURING PREVIOUS QUARTER
---------------------------------------------------------
TOTAL CONSUMED DURNG PREVIOUS QUARTER
E = BASE WEIGHTED AVERAGE COST
F =
COST ADJUSTMENT = THE ADJUSTMENT IN CENTS/LB. SELLING PRICE TICL4
THE ADJUSTMENT IN CENTS/LB. SELLING PRICE TICL4.
</TABLE>
8.9 OTHER CONVERSION COST ADJUSTMENTS
<TABLE>
<S> <C> <C> <C> <C> <C>
ADJUSTMENT IN CENTS/LB. CENTS/LB. TICL4
SELLING PRICE TICL4 = x ADJUSTMENT FACTOR
<FN>
WHERE:
/ \
| FOR PREVIOUS QUARTER |
% CHANGE | ------------------------------------- | - 1 x 100
| BASE |
\ /
BASE QUARTER ENDING
</TABLE>
166
<PAGE>
8.10 If, at any time during the Initial Term or any Renewal Year of this
Agreement, SCM sells TiCl4, produced at SCM's Ashtabula Plant II, in
commercial quantities and of comparable quality of TiCl4
SCM's Ashtabula Plant II,
.
ARTICLE IX. PAYMENT
9.1 The terms of payment for all TiCl4 sold and delivered by SCM to
Oremet, shall be
from the date of invoice. Invoices, for a month's deliveries, shall
be made as soon as practicable after the end of the applicable months
in which deliveries have been made to Oremet.
ARTICLE X. WARRANTY
10.1 SCM warrants that the TiCl4 sold and delivered hereunder
shall conform to the specifications contained in Article V
hereof.
10.2 In the event that any shipment of TiCl4 sold and delivered hereunder does
not conform to said Specifications, SCM will, at its sole option, and as
Oremet's sole remedy replace or give credit for any TiCl4 returned to SCM
and found by SCM, not to conform to those Specifications. SCM will
or issue a credit Oremet for
TiCl4 that does not conform to specifications.
10.3 The warranty and remedy expressed in this Article X is the sole and
exclusive warranty made by SCM with respect to the TiCl4 to be sold and
delivered hereunder and exclusive remedy available to Oremet, whether
based on strict liability, negligence, breach of express or implied
warranty or any other theory or cause of
167
<PAGE>
action. THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES,
EXPRESSED, STATUTORY OR IMPLIED, INCLUDING, WITHOUT LIMITATION,
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. SCM makes no other representation or
warranty of any kind other than as stated herein and this
warranty may not be modified by any agent or other
representative of SCM.
10.4 SCM shall not be responsible for any damages whatsoever,
whether direct, special, indirect, consequential or
incidental, relating directly or indirectly to the use, sale
or resale of TiCl4, as well as for failure to perform any
obligation undertaken or imposed pursuant to this Agreement.
ARTICLE XI. AUDIT
11.1 SCM shall provide, at SCM's expense, and no more than once per
Contract or Renewal Year, a statement from its independent certified
public accountant (or Oremet's independent certified public accountant at
Oremet's expense) certifying that the selling prices of TiCl4 to Oremet
by SCM pursuant to Article VIII and any other charges which are imposed
pursuant to this Agreement have been accurately made in accordance with
the applicable Agreement provision and verified in accordance with
generally accepted accounting principles consistently applied. The
report of such independent certified public accountant shall be limited
solely to whether or not the selling price described in this Agreement is
accurate at the time of record inspection and shall not disclose to
Oremet any information contained in such records.
ARTICLE XII. FORCE MAJEURE
12.1 Neither party shall incur any liability to the other hereunder because of
its failure to perform, in whole or in part, its obligations under this
Agreement if such failure to perform is caused by strike, lockout, fire,
flood, storm, war, civil disturbance,
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<PAGE>
accident, explosion, act of God or the public enemy, federal, state or
local law, rule, order or regulation, legal restriction or limitations
or compliance therewith, whether valid or invalid, inability to obtain
raw materials of customary grade and quality, shortage of fuel,
embargo, peril of the seas and harbors or other cause beyond the
reasonable control of the party affected, whether or not of the kind
hereinabove enumerated; provided, however, that performance hereunder
shall be resumed within a reasonable time after such cause has been
removed. No party shall be required against its will to adjust or
settle any labor dispute.
12.2 In the event that either party is unable to perform, in whole or in part,
its obligations under this Agreement, by reason of any cause included in
paragraph 12.1, above for a continuous period of more than one (1) year,
then either party may elect to terminate this Agreement. The quantity
to be delivered hereunder shall be reduced to the extent of the deliveries
omitted for such cause or causes, unless both parties agree that the total
quantities to be delivered hereunder shall remain unchanged. In the
event that neither party so terminates this Agreement, and the parties
agree not to reduce the quantities to be delivered hereunder, then the
Initial Term of this Agreement, as provided in Article IV, may be
extended for a period of time equal to the period of time performance
that has been suspended pursuant to paragraph 12.1 above, if the parties
so agree by written amendment of this Agreement.
12.3 In the event that SCM's Ashtabula Plant II or Oremet's Plant is destroyed
or damaged by reason of any cause included in paragraph 12.1 above, to
such an extent that the removal of such cause would be tantamount to
rebuilding such Plant, then the party whose Plant has been so damaged or
destroyed may elect to terminate this Agreement forthwith in the event it
elects not to rebuild its Plant, and the other party may elect to
terminate this Agreement forthwith in the event
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<PAGE>
that the party whose Plant has been so damaged or destroyed has
not begun to rebuild its said Plant within six (6) months after the
event of destruction or damage.
12.4 In the event of a substantial reduction or cessation of production of
TiCl4, resulting from an event as described in paragraph 12.1 herein, SCM
will make available to Oremet, no less than Oremet's pro rata share of
SCM's inventory and reduced production, if any, of TiCl4, the said pro
rata share to be based on SCM's total deliveries of TiCl4 to its Ashtabula
Plant II TiO2 plant at Ashtabula, Ohio, and to all of SCM's TiCl4 customers
including Oremet during the ninety (90) day period ending with the Force
Majeure event.
ARTICLE XIII. DEFAULT
13.1 A "default" shall mean any failure by either party to make any payment or
to perform any obligation pursuant to this Agreement for any reason other
than a Force Majeure as defined in Article XII and the party in default
has failed to remedy or diligently commenced to remedy such failure to pay
or perform within ten (10) days after receiving written notice thereof
from the other party.
13.2 In the event of a default arising from a breach of Oremet's duty to pay for
TiCl4 delivered, SCM shall have the right to seek damages for loss or
damages actually sustained as a direct result of the default. In
addition, SCM shall have the right (subject to Oremet's right to cure its
default pursuant to this Article) to terminate this Agreement forthwith by
providing notice to such effect to Oremet.
13.3 In the event either party becomes bankrupt or insolvent, commits any act
of bankruptcy or insolvency, makes any proposal, arrangement or compromise
with its creditors or if it is liquidated or if its charter of
incorporation is relinquished or canceled, the other party shall have the
right to immediately terminate this Agreement without notice or demand.
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13.4 The rights of termination contained in this Article XIII are in addition
to the right to demand damages, specifically as permitted in this
Agreement and to any other rights and remedies as are available in this
Agreement.
ARTICLE XIV. ENVIRONMENTAL IMPACT
14.1 Either party may curtail or suspend the delivery or acceptance of a
purchase or sale, of TiCl4 hereunder, without liability to the other
during any period where such party's production at its plant is restricted
or otherwise affected by any law, rule, regulation, judgment or other,
administrative or judicial, interlocutory or final order that imposes upon
the plant of the party affected, or any supplies of such plant, new or
additional standards, procedures or limitations enforced after the date
of this Agreement for the purpose of protecting or improving the
environment (said new or additional standards, procedures or
limitations hereinafter referred to as "New Environmental Requirements").
The party affected shall give prompt notice of any such New Environmental
Requirements and the expected duration of any curtailment or suspension.
14.2 Notwithstanding any other provision contained in this Agreement, if in
order to comply with New Environmental Requirements, SCM expends funds for
new operating methods, such expenses, including direct expenses and the
amortized capital costs incurred, may, at Seller's option, (using generally
accepted depreciation methods consistently applied) be prorated against
all of the production of TiCl4 produced at Seller's Ashtabula Plant II and
Buyer shall, subject to the provisions of 14.3 below, reimburse Seller
for the percentage of such expenses that is equal to the percentage of
TiCl4 produced by Sellers plant that is subsequently sold and delivered to
Buyer. Such reimbursement shall be made quarterly over the balance of the
Agreement term. SCM agrees to consult with Oremet on the scope of any
project to comply with New Environmental requirements.
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14.3 If SCM expends funds to comply with as
aforesaid, SCM shall notify Oremet in writing of Oremet's estimated
share of such expenditures. Oremet shall, within thirty (30)
days after such notification, notify SCM in writing that it
provided that if Buyer makes no election,
If Oremet
SCM may at its option terminate this Agreement without liability to either
party.
ARTICLE XV. CONFIDENTIALITY
15.1 SCM and Oremet consider this Agreement and all of its terms and
conditions to be confidential. Each party agrees not to disclose this
Agreement or parts hereof to third parties without the prior express
written consent of the other. In addition, Oremet understands that SCM
will, during the term of this Agreement, provide Oremet with
certain information which SCM considers confidential. Such
information includes but shall not be limited to specifications,
manufacturing processes, as well as other information which
SCM will designate as confidential from time to time. Oremet will
treat SCM Confidential Information with the same degree of care it
treats its own Confidential Information and only those employees
with a need to know the information shall be permitted access to
SCM's Confidential Information. Oremet shall not disclose SCM
Confidential Information to any third party. Upon termination of
this Agreement, all Confidential Information will be returned to
SCM or be certified by Oremet as having been destroyed. This
obligation of confidentiality shall not extend to information
which Oremet already knows at the time of disclosure as evidenced
by its records or information that is lawfully available to the
public through sources other than Oremet.
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ARTICLE XVI. ASSIGNMENT
16.1 This Agreement may not be assigned by either party without the prior
written consent of the other, which consent shall not be unreasonably
withheld, provided however, that no such consent shall be necessary when
this Agreement is assigned as part of the transfer or substantially all of
the SCM's Ashtabula Plant II TiCl4 facilities at Ashtabula, Ohio, or
substantially all of Oremet's Plant.
ARTICLE XVII.
17.1 Any or increase thereof, upon the production,
sale and/or shipment of the TiCl4 sold under this Agreement (other
or entering into the costs thereof, whether by
after the
date of this Agreement, shall be added to the price herein provided, and
shall be paid to SCM by Oremet.
ARTICLE XVIII. FAIR LABOR STANDARDS ACT
18.1 SCM warrants that all goods and services furnished hereunder have been
produced in full compliance with all applicable laws and regulations,
including the applicable requirements of Sections 6, 7 and 12 of the Fair
Labor Standards Act as amended, and of regulations and orders of the U.S.
Department of Labor issued under Section 14 thereof. SCM shall also be in
compliance with applicable requirements of Executive Order 11141 and
11246, as well as the Rehabilitation Act of 1973, as amended.
ARTICLE XIX. WAIVERS
19.1 No waiver by either party, at any time, expressed or implied, or any
breach of any provision of this Agreement, shall be deemed a waiver or a
breach of any other provision. Failure of either party to complain of any
act or omission on the part of the other party, no matter how long the
same may continue, shall not be deemed
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to be a waiver of any of its rights hereunder. If any action by
either party shall require the consent or approval of the other
party, the other party's consent to or approval of such action on
any one occasion shall not be deemed a consent to or approval of
any other action on the same or any subsequent occasion.
ARTICLE XX. GOVERNING LAW
20.1 This Agreement shall be governed by and construed under the substantive
and procedural laws of the State of Ohio, excluding its choice of laws.
ARTICLE XXI. NOTICES
21.1 Any notice to be given to either party under the terms of this Agreement
shall be deemed to have been given, if delivered or transmitted by telex
or telefax, and subsequently confirmed by prepaid registered or certified
mall to the respective addresses given below:
Notices to SCM Chemicals, Inc. shall be addressed:
SCM Chemicals, Inc.
7 St. Paul Street, Suite 1010
Baltimore, MD 21202
Attention: Vice President - General Manager,
Titanium Products Business
With a Copy to:
Vice President General Counsel (Same address)
Notices to Oremet shall be addressed:
Oregon Metallurgical Corporation
530 West 34th Avenue
Albany, Oregon 97321
Attention: President
ARTICLE XXII. SEVERABILITY
22.1 If any provision of this Agreement shall be declared invalid or
unenforceable, the remainder of this Agreement shall continue in full
force and effect.
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ARTICLE XXIII. ENTIRE AGREEMENT, AMENDMENT, MODIFICATION
23.1 This Agreement states the entire understanding between the
parties hereto with respect to the subject matter hereof, and
there are no agreements or understandings, oral or written,
experienced or implied, with reference to the subject matter
hereof that are not merged herein or superseded hereby. This
Agreement replaces and supersedes the agreement between
Oremet and SCM Chemicals, Inc. dated April 20, 1988, and as
amended June 21, 1988. This Agreement may not be changed,
modified or supplemented in any manner, orally or otherwise,
except by an instrument in writing signed by a duly
authorized representative of each of the parties hereto. The
parties recognize that, for administrative purposes,
documents such as purchase orders, acknowledgments, invoices
and similar documents may be used during the time this
Agreement is in force; in no event shall any term or
condition contained in any such administrative documents be
interpreted as amending or modifying the terms of this
Agreement whether such administrative documents are signed or
not.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their duly authorized representatives, as of the day
and year first above written.
WITNESS: SCM CHEMICALS, INC.
/s/ Mary Jo Mulgrew /s/ Donald N. Borst
--------------------------------- By: ------------------------------
Title: Chairman, President & Chief
Executive Officer
---------------------------
WITNESS: OREGON METALLURGICAL CORPORATION
/s/ Frederick B. Benton
--------------------------------- By: ------------------------------
Title: President
---------------------------
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AMENDMENT TO TITANIUM TETRACHLORIDE AGREEMENT
THIS AMENDMENT to Titanium Tetrachloride Agreement made this
7 day of January, 1993, by and between SCM Chemicals, Inc, a Delaware
corporation with principal offices located at 7 St. Paul Street, Suite 1010,
Baltimore, Maryland 21202 (hereafter referred to as "SCM") and Oregon
Metallurgical Corporation, an Oregon corporation with its principal
offices located at 530 West 34th Avenue, Albany, Orgeon 97321 (hereinafter
referred to as "Oremet").
WITNESSETH:
WHEREAS, by Agreement dated the 1st of August, 1990, SCM and Oremet entered
into an agreement for the sale and purchase of titanium tetrachloride ("TiCl4")
for Oremet's manufacturing facitilies as more specifcally described in the
agreement ("Agreement"), and
WHEREAS, the parties desire to amend certain terms and conditions
of the Agreement as more particularly described as follows:
NOW THEREFORE, in consideration of the promises and mutual
covenants and agreements herein contained, Oremet and SCM agree as
follows:
1. DEFINITIONS
All defined terms, contained in the Agreement, shall have the same
meaning in this Amendment to the Titanium Tetrachloride Agreement
("Amendment").
2. ARTICLE IV. TERM
a. Delete Article 4.1, of the Agreement, and substitute the following:
"4.1 This Agreement shall be for an initial term ("Initial Term")
of ten (10) years commencing January 1, 1992, up to and including December 31,
2001, subject to either party having the right of early termination at the end
of any Contract Year by giving at least written notification to the
other, provided Oremet will have
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tons of TiCl4, pursuant to the terms and conditions of this Agreement,
by the end of said Contract Year. This Agreement is also subject to prior
termination by operation of Articles XIII and XIV."
b. Delete Article 4.2, of the Agreement, and substitute the following:
"4.2 This Agreement shall automatically renew for one (1)
year Renewal Periods (hereinafter "Renewal Period") unless either party
provides written notice to the other of termination at least
prior to the commencement of any Renewal Period."
3. ARTICLE VII. QUANTITIES
a. Delete Article 7.1, of the Agreement, and substitute the following:
"7.1 During each Contract or Renewal Year, SCM will sell and
deliver to Oremet and Oremet will purchase and accept from SCM a minimum
volume of for Contract Years 1, 2 and 3;
for Contract Years 4, 5, 6 and 7; and for
Contract Years 8, 9 and 10 of TiCl4.
b. Delete Article 7.2 of the Agreement, and substitute the following:
"7.2 Unless adjusted in accordance with Article 7.4 herein,
SCM will sell and deliver to Oremet and Oremet will purchase and accept
from SCM up to a volume of .
c. Delete Article 7.4, of the Agreement, and substitute the following:
"7.4 If, during the term or any renewal of this Agreement,
Oremet desires to increase the maximum quantities set forth in Article
7.2, Oremet shall notify SCM and SCM shall have the option to supply part
or all of Oremet's requirements above the maximum quantity set forth in Article
7.2 or none of Oremet's requirements above the maximum quantity. If SCM
of Oremet's
, then Oremet shall be permitted to
TiCl4 SCM ."
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4. All terms and conditions, contained in the Agreement, unless otherwise
modified by this Amendment, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered by their duly authorized officials as of the day and year
first above written.
WITNESS: SCM CHEMICALS, INC.
/s/ Mary Jo Mulgrew /s/ Donald V. Borst
--------------------------------- By: ------------------------------
Donald V. Borst
Title: Chairman, President & C.E.O.
---------------------------
WITNESS: OREGON METALLURGICAL CORPORATION
/s/ Frederick B. Benton /s/
--------------------------------- By: ------------------------------
Title: President
---------------------------
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This Note is subject to a Subordination Agreement, dated as of
September 19, 1994, among Bank of America Illinois, an Illinois
banking corporation, New TI, Inc., an Oregon corporation, and
Titanium Industries Inc., a New Jersey corporation. This Note is
subordinated in right and time of payment in accordance with the
terms of such Subordination Agreement to the prior indefeasible
payment in full in cash of all Senior Indebtedness (as defined
therein) and each holder of this Note, by its acceptance hereof
irrevocably agrees to be bound by the terms and provisions of such
Subordination Agreement.
SUBORDINATED PROMISSORY NOTE
$4,500,000.00 September 19, 1994
FOR VALUE RECEIVED, NEW TI, INC., an Oregon corporation having its
principal place of business at c/o Oregon Metallurgical Corporation,
530 34th Avenue, SW, Albany, Oregon 97321 (the "Payor"), promises to
pay in lawful money of the United States to the order of Titanium
Industries, Inc., a New Jersey corporation, or any successor or assign
to whom this Note has been transferred in accordance with paragraph 14
(the "Payee"), the principal sum of FOUR MILLION FIVE HUNDRED THOUSAND
DOLLARS ($4,500,000.00), together with interest thereon from the date
hereof as provided below.
1. DEFINITIONS.
"AFFILIATE" means, with respect to any Person, any
other Person directly controlling, controlled by or under common
control with, such Person.
"COLLATERAL" has the meaning assigned to such term in Section
2 of the Security Agreement (as defined in paragraph 9).
"DISTRIBUTION BUSINESS" means the titanium distribution
business as conducted at the date of this Note by Titanium Industries,
Inc., Ti-Titanium Ltd. and the Included Affiliates, which involves the
following activities: (i) the stocking and sale of a wide range of
titanium and zirconium mill products (including plate, sheet, bar,
billet, pipe, tubing, fittings, fasteners, shapes, wire and TIPE-XL)
for delivery to customers on a quick turnaround ("just-in-time") basis,
generally in less than mill size lots, (ii) custom cutting and shaping
and related first stage processing of such titanium and zirconium mill
products to meet customer specifications, in each case resulting in an
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intermediate (and not a finished) product or component for use by
manufacturers rather than end users, and (iii) the provision to
customers of related services such as testing, inventory traceability
and certification.
"ENCUMBRANCES" means liens, security interests, options,
rights of first refusal, easements, mortgages, charges, debentures,
indentures, rights-of-way, restrictions, encroachments, leases,
security agreements or any other encumbrances, restrictions or
limitations on use of real or personal property or irregularities in
title thereto.
"INCLUDED AFFILIATES" means Titanium International Limited, a
wholly-owned English subsidiary of Payor, and Titanium Wire
Corporation, a wholly-owned Pennsylvania subsidiary of Payor.
"INDEBTEDNESS" means all existing or future obligations of
Payor for money borrowed and existing and future trade payables of
Payor.
"INVENTORY" means any "inventory" as such term is defined in
section 9-109(4) of the Uniform Commercial Code and, to the extent not
included within such definition, all inventory, merchandise, goods and
other personal property which are held for sale or lease or are
furnished or are to be furnished under a contract of service or which
constitute raw materials, work in process or materials used or consumed
or to be used or consumed in Payor's business, or the processing,
packaging, delivery or shipping of the same, and all finished goods; in
each case whether now owned or hereafter acquired by Payor.
"JUNIOR INTERCOMPANY LOANS" means intercompany loans
representing the total amount by which the sum of intercompany loans
from OREMET to Payor plus bank loans to Payor exceeds the sum of 80% of
Payor's accounts receivable (net of reserves) and 50% of Payor's
inventories (net of reserves) at the time of such borrowing.
"OREMET" means Oregon Metallurgical Corporation, an Oregon
corporation.
"PERSON" means any individual, partnership, joint venture,
corporation, limited liability company, trust, unincorporated
organization, or any other entity.
"SECURITY AGREEMENT" has the meaning set forth in paragraph 9.
"SENIOR INDEBTEDNESS" has the meaning set forth in paragraph 7.
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"SENIOR-LOAN AGREEMENT" means the Loan and Security
Agreement dated as of September 19, 1994 among OREMET, Payor and Bank
of America Illinois.
"SUBORDINATION AGREEMENT" has the meaning set forth in the
legend, if any, at the beginning of this Note.
2. PRINCIPAL. The principal of this Note shall be repaid in
thirteen quarterly installments as follows:
<TABLE>
<CAPTION>
Payment Date Amount
------------------------------- -----------
<S> <C>
March 19, 1997 $300,000.00
June 19, 1997 $350,000.00
September 19, 1997 $350,000.00
December 19, 1997 $350,000.00
March 19, 1998 $350,000.00
June 19, 1998 $350,000.00
September 19, 1998 $350,000.00
December 19, 1998 $350,000.00
March 19, 1999 $350,000.00
June 19, 1999 $350,000.00
September 19, 1999 $350,000.00
December 19, 1999 $350,000.00
March 19, 2000 (the "Maturity") $350,000.00
-------------
TOTAL PRINCIPAL $4,500,000.00
</TABLE>
3. INTEREST. The unpaid balance of the principal amount stated
above shall bear simple interest at the rate of eight percent (8.0%)
per annum from the date of this Note until fully paid. Interest on the
unpaid balance of this Note shall be due on March 19, June 19,
September 19 and December 19 of each year, commencing on March 19, 1995
and ending on the earlier of Maturity or the date of prepayment in
whole of this Note, at which time all accrued but unpaid interest shall
be due, payable and collectible.
4. PAYMENT OF PRINCIPAL AND INTEREST.
(a) All principal of and interest on this Note shall be
payable not later than 12:30 p.m. (New York time) on the day when
due by wire transfer of same day funds for Payee's account No.
40553523 (ABA # 021000089) at Citibank (N.Y.) or at such other
bank in the United States as may be designated
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by it from time to time by written notice to Payor, free and clear
of and without any deductions for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings
(except as required by law).
(b) Amounts owing hereunder shall be subject to setoff
against Agreed Claims or arbitration awards in favor of Payor as
and to the extent set forth in Section 8.05 of the Stock and Asset
Purchase Agreement dated as of September 19, 1994 between Kamyr,
Inc. and Payor and Section 3.2 of the Envirormental Agreement
dated as of September 19, 1994, between Kamyr, Inc. and Payor.
5. PREPAYMENT.
(a) This Note may be prepaid in whole or in part, without
penalty.
(b) This Note shall be prepaid in whole in the event that
(i) Payor sells all or substantially all of its assets, or (ii)
OREMET ceases for any reason to own at least a majority of the
outstanding voting stock of Payor.
(c) Payor shall prepay this Note in an amount equal to
thirty percent (30%) of the net proceeds of (i) the sale by Payor
of any capital asset the net proceeds of which exceed individually
or in the aggregate one hundred thousand dollars ($100,000.00),
and (ii) any financing(s) the net proceeds of which exceed one
million dollars ($1,000,000.00) in the aggregate, which
financing(s) rank junior in priority of payment to this Note. For
purposes hereof, "net proceeds" shall mean the net cash realized
by Payor from such sale or financing(s), after the retirement of
all debt secured by the asset sold, or the retirement of the debt
refinanced by said financing(s), and payment of all expenses
related to the transactions.
6. FINANCIAL COVENANTS. From and after the date hereof and
until payment in full of all amounts of principal and interest due
hereunder:
(a) Payor shall not declare or pay any dividends or other
distribution to its shareholders unless (i) after giving effect to
the dividend or distribution, the shareholders' equity of Payor
equals or exceeds ten million dollars ($10,000,000.00), (ii) Payor
has fully and finally paid to Payee the first nine installments of
principal hereunder pursuant to paragraph 2 or the principal
balance of this Note is reduced to an amount no greater than one
million two hundred and fifty thousand dollars ($1,250,000.00) and
(iii) Payor is not otherwise in default of any obligation
hereunder. For purposes hereof,
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shareholders' equity shall be determined by reference to Payor's
balance sheet prepared in accordance with generally accepted accounting
principles, consistently applied, as of the end of the month most
recently preceding the month during which the dividend or distribution
is proposed to be made or paid; PROVIDED, HOWEVER, that any loans to
OREMET made in accordance with paragraph (e) below shall for purposes
of the determination of Payor's shareholders' equity be treated as a
dividend to its shareholders;
(b) Payor shall not incur any Indebtedness that ranks senior in
priority of payment to, or on a parity with, this Note, unless such
funds shall be:
(i) used by Payor and the Included Affiliates in the
ordinary course of the Distribution Business (it being understood
that for the purposes of this paragraph 6(b)(i), (A) the
acquisition of all or a substantial part of the assets or
outstanding stock of another Person, (B) the acquisition of any
line of business from any third party or Affiliate, (C) the
acquisition of real property from any third party or Affiliate and
(D) any single capital expenditure in an amount greater than
$100,000 for a capital asset not ordinarily used in the
Distribution Business, shall not be deemed to be "in the ordinary
course" of the Distribution Business); and
(ii) in an aggregate amount outstanding at any given time, as
shown on Payor's monthly consolidated balance sheets (which,
except for notes, shall be prepared in accordance with generally
accepted accounting principles) representing (A) no more than 80%
of the accounts receivable (net of reserves) of Payor and its
subsidiaries and (B) no more than 50% of the inventories (net of
reserves) of Payor and its subsidiaries at the time of such
proposed borrowing;
(c) Payor shall at all times maintain shareholders' equity (which
shall include Junior Intercompany Loans) of at least three million
dollars ($3,000,000);
(d) Payor shall not permit to exist at any time Indebtedness
(including this Note, but excluding trade payables and related accrued
liabilities of Payor incurred in the ordinary course and on a basis
consistent with past practice) in an aggregate amount in excess of
three times Payor's adjusted shareholders' equity; for purposes of the
foregoing ratio, Payor's "adjusted shareholders' equity" shall be
equal to the sum of Payor's shareholders' equity plus any Junior
Intercompany Loans (only to the extent that
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Junior Intercompany Loans exceed cumulative losses) plus any
cumulative net post-Closing after tax operating losses;
(e) Payor shall not lend or otherwise provide any funds, or
extend any financing, financial support or guarantees to, or on behalf
of, or make any investment in, third parties or Affiliates (other than
Included Affiliates), except that Payor shall be permitted to (i) make
payments for taxes and other trade payables arising in the ordinary
course of business, (ii) provide the guaranty from New TI to Bank of
America Illinois, dated as of September 19, 1994 and (iii) lend funds
to OREMET at such times as, and to the extent that, Payor would
otherwise be permitted to declare a dividend or other distribution in
accordance with paragraph (a) above;
(f) Payor shall not enter into any agreement with any Person
(including Affiliates) except on an arm's length basis and on terms no
less favorable to Payor than could be obtained from unrelated third
parties;
(g) Payor shall not incur any material off-balance sheet
liabilities outside the ordinary course of Payor's titanium
distribution business (including but not limited to material
liabilities incurred with respect to futures contracts, forward
contracts and derivatives);
(h) Payor shall not merge, consolidate, combine or amalgamate
with or into, or convey, transfer or lease all or a substantial portion
of its properties and assets to, any Person; or
(i) Payor shall not create or suffer to exist any Encumbrance
upon or with respect to any of Payor's present or future assets,
revenue or other property, whether tangible or intangible, real or
personal, including, without limitation, any right to receive income,
except:
(A) any Encumbrance constituting a purchase money security
interest in any equipment or fixed assets that Payor incurred or
assumed in the ordinary course and that only secures the purchase
price of such equipment or fixed asset;
(B) in order to secure Indebtedness permitted under
paragraph 6(b) that ranks senior to the Note in priority of
payment (including without limitation all Senior Indebtedness to
which this Note is subordinated pursuant to the Subordination
Agreement) and then only to the extent that Payee shall receive a
second priority security interest on any asset subject to such
Encumbrance; or
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(C) in order to secure Indebtedness permitted under
paragraph 6(b) that ranks on a parity with the Note in
priority of payment, and then only to the extent that the
payment of principal and interest on the Note is equally and
ratably secured by any asset subject to such Encumbrance;
PROVIDED, HOWEVER, that in the case of (i)(B) or (i)(C)
above, the amount secured by any such Encumbrance on assets
shall be limited to the amount of any advances to Payor or
the Included Affiliates, and such Encumbrance shall not
secure any amounts advanced to or for the benefit of any
other Affiliates of Payor or any other Person.
7. SUBORDINATION. The rights of Payee to receipt of payment of
any principal hereof or interest hereon is subject and subordinate to
the prior payment of the principal of and interest on all indebtedness
permitted to be incurred pursuant to paragraph 6(b) that by its terms
ranks senior to the Note, including without limitation all Senior
Indebtedness to which this Note is subordinated pursuant to the
Subordination Agreement (collectively, "Senior Indebtedness");
provided, however, that, subject in any event, in the case of "Senior
Indebtedness" as defined in the Subordination Agreement referred to
hereinabove, to all of the terms and provisions thereof, so long as no
Event of Default has occurred or is continuing, Payee shall be entitled
to receive payments in respect of, and in accordance with the terms of,
this Note but only after Payor has made payments in respect of any
Senior Indebtedness then due and payable in accordance with its terms.
8. OTHER COVENANTS. From and after the date hereof and until
payment in full of all amounts of principal and interest due hereunder,
Payor agrees that:
(a) Payor shall deliver to Payee:
(i) As soon as practicable and in any event within 30
days (or, in the case of December, 60 days) after the end of
each month, a statement of income and retained earnings and
sources and applications of funds of Payor for such month and
(in the case of all months except for the first month in each
fiscal year) for the period since the beginning of the
current fiscal year, and the related balance sheet as at the
end of such period, setting forth in each case in comparative
form the figures for the corresponding accounting periods in
the preceding fiscal year, all in reasonable detail, with a
certificate of a financial officer of Payor to the effect
that, subject to audit, said financial statements were
prepared in accordance with generally
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accepted accounting principles applied on a basis consistent with that
used in the preparation of Payor's annual audited financial statements
(subject to year-end audit adjustments and the absence of footnotes)
and include all adjustments which in such officer's opinion are
necessary to present fairly the statements on a going concern basis,
which contemplates realization of the assets and liquidation of the
liabilities in the normal course of business;
(ii) As soon as practicable and in any event within 45 days (or,
in the case of the last quarter of a fiscal year, 60 days) after the
end of each quarter, a statement of income and retained earnings and
sources and applications of funds of Payor for such period and for the
period since the beginning of the current fiscal year, and the related
balance sheet as at the end of such period, setting forth in each
case in comparative form the figures for the corresponding accounting
periods in the preceding fiscal year, all in reasonable detail, with a
certificate of a financial officer of Payor to the effect that,
subject to audit, said financial statements were prepared in
accordance with generally accepted accounting principles applied on
a basis consistent with that used in the preparation of Payor's
annual audited financial statements (subject to year-end audit
adjustments and the absence of footnotes) and include all adjustments
which in such officer's opinion are necessary to present fairly the
statements on a going concern basis, which contemplates realization
of the assets and liquidation of the liabilities in the normal
course of business;
(iii) As soon as available and in any event within 90 days
after the end of each fiscal year, a copy of Payor's statements of
income, retained earnings and changes in financial position of Payor
for such year, and the related balance sheet as at the end of such
year, setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, all in reasonable detail and
accompanied by (A) an audit report as to such financial statements of
independent certified public accountants of recognized national
standing, together with a statement by said accountants that in the
course of their regular examination of Payor for purposes of their
opinion they obtained no knowledge, except as specifically stated, of
the occurrence of any Event of Default (as defined below); and (B) a
certificate of a financial officer of Payor to the effect that said
financial statements fairly present the financial position and results
of operations of Payor as at the end of such year and for
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the year involved, in accordance with generally accepted
accounting principles consistently applied.
(iv) Each set of financial statements furnished pursuant to
paragraphs (i), (ii) and (iii) above shall be accompanied by a
statement of the chief financial officer of Payor (A) to the
effect that such officer has no knowledge, except as specifically
stated, of the occurrence at any time during the period to which
such financial statements relate of any Event of Default or any
event which with the lapse of time or the giving of notice or both
would constitute an Event of Default and if any such event has
occurred whether it is continuing and what steps, if any are being
taken to cure it, and (B) setting forth a computation of each of
the financial ratios and restrictions in paragraph 6 as at the end
of the period to which such financial statements relate.
(v) At such times as Payee may reasonably request, a
receivable aging report and inventory report in form and substance
reasonably acceptable to Payee.
(vi) From time to time and with reasonable promptness, such
further information regarding the business, affairs and financial
position of Payor as Payee may reasonably request.
(b) At such times as Payee may reasonably request during normal
business hours, Payor shall give Payee access to any of its offices to
permit Payee to examine, copy and make excerpts from, any and all
books, records and documents in the possession of Payor and Payor
agrees to render to Payee such clerical and other assistance as may
reasonably be requested with regard thereto. Payor shall also permit
Payee to discuss the affairs, finances and accounts of Payor with the
principal officers of Payor, at such reasonable times as Payee may
reasonably request.
(c) Except for claims or proceedings that do not seek or involve
more than $100,000, and would not, if adversely determined, have a
material adverse effect on the business, operation or financial
condition of Payor, Payor shall promptly notify Payee in writing of all
litigation or judgments or any injunction or similar equitable relief
affecting property or assets of Payor.
(d) Payor shall promptly notify Payee in writing upon
obtaining knowledge that any Event of Default or any event
that with notice or lapse of time or both, would constitute
an Event of Default shall have occurred.
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(e) Payor shall comply with all laws, acts, rules, regulations,
orders, decrees and directions of any governmental authority,
applicable to its business, including the Collateral or any part
thereof; PROVIDED, HOWEVER, that Payor may contest any law, act, rule,
regulation, order, decree or direction in good faith and by proper
proceedings which shall not, in the sole opinion of Payee, adversely
affect Payee's rights hereunder or adversely affect its security
interest in the Collateral.
(f) Except as expressly permitted by this Note, Payor will
preserve and maintain its corporate existence and all of its material
operating licenses, rights, privileges and franchises necessary or
desirable in the normal conduct of its business or for the operation of
its business.
(g) Payor shall pay and discharge promptly when due all material
taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits, or upon any property belonging to it
(including the Collateral), and any deficiency in respect of any of the
foregoing, and all material claims of any kind (including, without
limitation, claims for labor, materials and supplies) which, if unpaid,
might become a lien or charge upon the property of Payor or might
result in the sale, forfeiture or loss of, the Collateral or any
interest therein, provided that Payor shall not be required to pay any
such tax, assessment, charge, levy or claim the payment of which is
being contested in good faith and by proper proceedings and which is
adequately reserved against.
(h) Payor shall maintain insurance with responsible companies, in
such amounts and against at least such risks as are usually carried by
owners of similar businesses and properties in the same general areas
in which Payor operates, including (i) insuring its Inventory against
loss by fire, explosion and theft and (ii) insuring Payor against
liability for personal injury and property damage relating to such
Inventory; such policies shall name Payee as an additional insured with
a lender loss payable clause in favor of Payee. Payor shall deliver to
Payee, as often as Payee may reasonably request, a report of a
reputable insurance broker reasonably satisfactory to Payee with
respect to the insurance on its Inventory. All insurance with
respect to the Inventory shall provide that no cancellation, reduction
in amount or change in coverage thereof shall be effective until at
least ten (10) days after receipt by Payee of written notice thereof.
(i) Payor shall not enter into or permit any amendment,
restatement or modification of, or supplement to the Senior Loan
Agreement or any of the other documents
188
<PAGE>
executed and/or delivered pursuant thereto or in connection
therewith, if such amendment, restatement, modification or
supplement, including any refinancing, (A) would violate the
provisions of Sections 6(e) and 6(i) hereof, (B) increase the
outstanding principal amount of Senior Indebtedness (including,
for purposes of calculating such outstanding principal amount, the
maximum commitment thereunder for any revolving credit, letter of
credit or similar facility) to an amount in excess of the maximum
amount of total indebtedness (without giving effect to
intercompany loans) permitted pursuant to Section 6(b)(ii) hereof
or (C) contain financial and/or other covenants which, taken as a
whole, would be substantially more burdensome to Payor than those
contained in the Senior Loan Agreement (except that with respect
to the Senior Loan Agreement, this provision (c) applies only to
extensions of the term of such agreement beyond the original
termination date of September 19, 1997).
9. COLLATERAL. This Note is secured pursuant to, and is
entitled to the benefits of, a Security Agreement, dated as of
September 19, 1994, between Payor and Payee, as the same may be amended
or otherwise modified from time to time (the "SECURITY AGREEMENT").
10. DEFAULT. If any of the following events (each an "Event of
Default") shall occur:
(a) Payor shall fail to pay any amount of principal of, or
interest on, this Note when the same shall become due and payable
(including any amount due pursuant to paragraph 5(b) hereof) and
such failure shall continue for two Business Days after notice
from Payee; or
(b) Payor shall default in the due performance or observance
by it of any other term, covenant or agreement on its part
contained in this Note and shall fail to cure such default after
15 days written notice thereof by Payee; or
(c) any Senior Indebtedness or any Indebtedness that ranks
equal in priority of payment to the Note shall be accelerated, or
Payor shall fail to pay any such Senior Indebtedness or
Indebtedness at maturity; or
(d) Payor shall default in any material respect in the due
performance or observance by it of any term, covenant or agreement
on its part contained in the Security Agreement; or
(e) an involuntary case under the appropriate bankruptcy
Title of the United States Code, as now or hereafter in effect, or
any successor thereto (the "Bankruptcy Code"), is commenced
against Payor or OREMET,
189
<PAGE>
and the petition is not controverted within 30 days, or is not
dismissed within 60 days, after commencement of the case or an
order for relief is granted in any such case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge
of, all or substantially all of the property of Payor or OREMET,
or there is commenced against Payor or OREMET any such proceeding
which remains undismissed for a period of 60 days, or Payor or
OREMET is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is
entered; or
(f) Payor or OREMET shall institute proceedings to be
adjudicated a voluntary bankrupt, or shall consent to the filing
of a bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking an arrangement or a reorganization or
liquidation under the Bankruptcy Code or any other similar
applicable federal or state law, or shall consent to the filing of
any such petition, or shall consent to the appointment of a
receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of it or of its property, or shall make an assignment
for the benefit of creditors, or shall admit in writing its
inability to pay its debts generally as they become due, or action
shall be taken by Payor or OREMET in furtherance of any of the
aforesaid purposes;
then, and in any such event, Payee may, by notice to Payor, declare the
entire unpaid principal outstanding under this Note and all interest
accrued and unpaid thereon to be forthwith due and payable, whereupon
this Note, and all such accrued interest, shall become forthwith due
and payable, without presentment, demand, protest or further notice of
any kind, all of which are expressly waived by Payor pursuant to
paragraph 12 hereof; PROVIDED, HOWEVER, that upon the occurrence of any
of the Events of Default specified in paragraphs (e) and (f), the
entire unpaid principal outstanding under this Note and all interest
accrued and unpaid thereon shall automatically become due and payable
without declaration, demand or any other action by Payee. Failure or
delay of Payee to exercise this option shall not constitute a waiver of
the right to exercise the option in the event of a subsequent Event of
Default or in the event of continuance of any existing Event of Default
after demand for the performance of the terms of this Note.
11. ENFORCEMENT COSTS. Payor shall pay upon demand any and all
expenses, including reasonable attorneys' fees, incurred or paid by
Payee in connection with the enforcement of this Note, the collection
of any sums due hereunder, any actions for declaratory relief in any
way related to this Note, or the protection or preservation of any
rights of Payee hereunder.
190
<PAGE>
12. WAIVER. Payor and its successors and assigns hereby waive
presentment for payment, notice of dishonor, protest, notice of
protest, and diligence in collection, and consent that the time of
payment on any part of this Note may be extended by Payee without
otherwise modifying, altering, releasing, affecting, or limiting
Payor's liability. In the event that Payee demands or accepts partial
payments, such demand or acceptance shall not be deemed to constitute a
waiver of the right to demand the entire unpaid balance of this Note at
any time in accordance with the terms hereof. Any delay by Payee in
exercising any of its rights hereunder shall not operate as a waiver of
such rights.
13. AMENDMENT. The terms of this Note cannot be changed except
by a writing executed by Payee.
14. ASSIGNMENT. Payee may sell, distribute, transfer, pledge,
hypothecate, assign or otherwise dispose of this Note to any Affiliate
without the prior written consent of Payor; PROVIDED, HOWEVER, that Payee
may not otherwise sell, distribute, transfer, pledge, hypothecate,
assign or dispose of this Note without the prior written consent of
Payor. Payor may not transfer its obligations under this Note, by
assignment or otherwise, without the prior written consent of Payee.
15. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, Payor has caused this Note to be executed and
delivered by its duly authorized officer as of the day and year first
above written.
NEW TI, INC.
By:
--------------------------------
Title:
-------------------------
191
<PAGE>
OREGON METALLURGICAL CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS OF YEAR
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for
doubtful accounts:
Year ended
December 31, 1994 $117 $962 $(55)(a) $1,024
---- ---- ----- ------
Year ended
December 31, 1993 $110 $ 39 $(32)(a) $ 117
---- ---- ----- ------
Year ended
December 31, 1992 $-0- $120 $(10)(a) $ 110
---- ---- ----- ------
<FN>
(a) Amounts written off, less recoveries.
</TABLE>
192
<PAGE>
OREGON
METALLURGICAL
CORPORATION
[PHOTO]
1994
ANNUAL
REPORT
<PAGE>
CORPORATE PROFILE
Oregon Metallurgical Corporation (the Company or OREMET) began operations
in 1956. OREMET produces titanium sponge, engineered products, ingot, mill
products and castings. Titanium Industries, Inc., an 80% owned subsidiary
acquired during 1994, operates full-line titanium metal service centers in the
U.S., U.K. and Canada and produces small diameter bar, weld wire and fine wire.
The Company is a leader in developing manufacturing technology and
processes for the production of titanium, and is active in promoting the use of
titanium in increasingly diverse aerospace, industrial, medical and consumer
applications. The Company intends to maintain its reputation as a high quality
producer of titanium through continued use of advanced process technologies in
the production of its titanium products and by providing superior customer
service.
A key element of the Company's strategic plan is its employee ownership
program. The Company believes that its employees' ownership position enhances
both our employees commitment to quality and dedication to the success of the
Company.
ABOUT OUR COVER:
PHOTO OF AN ORIGINAL SILK SCREEN PAINTING DEPICTING A TITANIUM SPLATTER. ARTIST
UNKNOWN.
[PHOTO]
TITANIUM "SPLATTER", OR OVERRUN, TAKES PLACE IN THE CASTINGS PROCESS. MOLTEN
TITANIUM IS ACTUALLY SILVER IN COLOR; HOWEVER, WHEN SPILLED OR SPLATTERED, THE
REACTION OF ATMOSPHERIC OXYGEN AND NITROGEN CAUSES THE MATERIAL TO TAKE ON
BRILLIANT HUES, AS DEPICTED IN THIS PAINTING.
CONTENTS
<TABLE>
<S> <C>
Financial Summary 1
Message to Shareholders 2-3
A Year of Transition and a Year of Progress 4-12
Financial Data 13-19
Consolidated Notes to Financial Data 20-26
Report of Independent Public Accountants 26
Management Discussion and Analysis 27-30
Quarterly Stock Data 31
Board of Directors, Corporate Officers, Locations 32
</TABLE>
<PAGE>
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE DATA)
For the Years Ended December 31,
1994 1993 1992
----------------------------------------------------------
<S> <C> <C> <C>
Net sales $71,166 $55,351 $56,785
Restructuring
and environmental
charges 240 2,997 200
Net loss (2,023) (4,098)1) (4,122)2)
Net cash provided by
(used in) operating
activities (4,459) 841 7,454
Cash and cash
equivalents,
and short-term
investments 1,636 7,718 8,977
Shareholders' equity 67,282 67,065 68,402
Long-term debt
and note payable
to bank 17,177 4,750 8,100
Per Share:
Net loss (0.18) (0.38)1) (0.38)2)
Shareholders' equity $6.18 $6.16 $6.32
<FN>
1) THE NET LOSS INCLUDES A PROVISION FOR RESTRUCTURING OF $1,409, NET OF TAX
BENEFIT, OR $0.13 PER SHARE AND A PROVISION FOR ESTIMATED ENVIRONMENTAL EXPENSES
OF $674, NET OF TAX BENEFIT, OR $0.06 PER SHARE. (SEE NOTES TO FINANCIAL
STATEMENTS 12 AND 14)
2) THE NET LOSS EXCLUDES THE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES FOR INCOME TAXES AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS.
(SEE NOTES TO FINANCIAL STATEMENTS 6 AND 11)
</TABLE>
[GRAPH]
WORKING CAPITAL
(IN MILLIONS)
[GRAPH]
SALES
(IN MILLIONS)
[GRAPH]
GROSS PROFIT (LOSS)
(IN MILLIONS)
[GRAPH]
NET INCOME (LOSS)
(IN MILLIONS)
[GRAPH]
SHAREHOLDERS' EQUITY
(IN MILLIONS)
<PAGE>
MESSAGE TO SHAREHOLDERS
TO OUR SHAREHOLDERS:
[PHOTO]
We look back at 1994 as a year of transition and a year of progress. When
1993 ended, we were contending with business conditions which had combined to
cause one of the more difficult periods in the Company's history. Many of the
factors which were present in 1993 carried forward into 1994 and will continue
to challenge us in 1995. The industry continues to struggle with the effects of
excess capacity. Additionally, the availability of low priced titanium products
from the former Soviet Union (FSU) continues to have a dampening effect on
prices. To meet these challenges, our Company has implemented strategies to
expand our share of the aerospace market and increase our level of participation
in the industrial markets.
We believe that the already varied industrial applications for the use of
titanium will continue to grow. To increase our activity level in these markets
and to lessen our dependence on the historically cyclical aerospace industry, we
acquired Titanium Industries, Inc. (TI) in September of 1994. Approximately
seventy-five percent (75%) of TI's shipments are to the industrial markets. The
acquisition of TI, coupled with our other diversification efforts, will position
us to participate in the growth of the industrial markets in 1995. These moves
should enable the Company to benefit both from the growth of the various
industries it supplies as well as lessen the effect on our operations from a
downturn in any one industry.
Our efforts to expand our presence in the international markets have met
with considerable success. Notable accomplishments are the contracts to supply
engineered titanium products to Aerospatiale Avions, France for engine pylons on
Airbus[REGISTERED TRADEMARK] aircraft and titanium armor to the French Navy. To
assist in the implementation of these contracts and to establish a basis for a
sustained presence in this sector of Europe, we formed OREMET France to operate
a service center in France. The acquisition of TI provided us with a service
center located in the United Kingdom with an established customer base and a
fine reputation for reliability and customer service. We believe that we are
well positioned to expand our presence within the European community.
For the year, the Company incurred a net loss of $2,023,000, or $0.18 per
share, on net sales of $71,166,000. For 1993, the Company reported a net loss of
$4,098,000, or $0.38 per share, on sales of $55,351,000. The net loss for 1993
included additional provisions for restructuring and environmental expenses of
$2,083,000, or $0.19 per share. While results for the two years are comparable,
once adjustments are made for the non-recurring restructuring and environmental
costs, the snapshot of the full year results masks the progress which was made.
In 1993, sales declined in each quarter, and we reported a loss for the second
half of the year which more than erased the profits recorded in the first half.
In 1994, sales increased in each quarter and our losses grew smaller until the
fourth quarter when we reported net income for the quarter of $63,000, or $.01
per share.
In August of 1994, we signed a new labor contract with the United
Steelworkers of America which extends through July 2000. The contract provides
for flexibility in work rules and job assignments, and it links future increases
in wages to the profitability of the Company. The employees represented by the
Union are also substantial shareholders of the Company through the Employee
Stock Ownership Plan (ESOP). The successful conclusion of these negotiations
represented a major step forward towards our goal of creating an environment of
trust and respect.
During 1994, Mr. James S. Paddock, a Vice President of OREMET and the
President and CEO of Titanium Industries, Inc., was installed as the newest
member of the Company's Board of Directors. We believe that
2
<PAGE>
Jim's experience in the service and distribution segments of the metals industry
will make him an invaluable member of our Board. On March 1, 1995, Mr. Stephen
C. Stocks moved from the position, Vice President Manufacturing and Engineering,
to Vice President, Special Projects. Steve intends to retire during 1996, and
this move will allow for both a transition period with his successor and the
opportunity to use Steve's talents on other projects. Effective March 1, 1995,
John P. (Jack) Byrne was appointed Vice President of Manufacturing and
Engineering. Mr. Byrne has established a reputation as an effective and
innovative leader, with over 19 years of increasing responsibilities at ESCO
Corporation and IMI Titanium, Inc. Please join us in welcoming both Jim and
Jack to the Company.
We would like to take this opportunity to extend our special thanks to
Orval N. Thompson, who retired as a Member of the Board of Directors during
1994. Mr. Thompson began his association with the Company in 1956 and has been a
tireless contributor throughout his tenure. Orval will continue with his duties
as Secretary and outside counsel to the Company where he can continue to provide
the Board with his sage advice and counsel.
While many of the concerns which overhang the industry remain unresolved,
the strategic moves we have made, coupled with the increased levels of orders
and sales, leads me to believe that the outlook for 1995 will be brighter.
/s/ Carlos E. Aguirre
---------------------
CARLOS E. AGUIRRE
PRESIDENT AND CEO
[MAP]
3
<PAGE>
A YEAR OF TRANSITION AND A YEAR OF PROGRESS
THE CHALLENGES AHEAD
1994 WAS A YEAR OF TRANSITION AND A YEAR OF PROGRESS. WHILE MANY OF THE
CHALLENGES WE FACED AT THE START OF 1994 WILL CONTINUE, THE SUCCESSES WE
ACHIEVED WILL PROVIDE A FIRM FOUNDATION FROM WHICH TO MOVE FORWARD.
[PHOTO]
L TO R (SEATED) - JAMES P. DOYLE, GENERAL MANAGER, SALES; DAVID G. FLOYD, VICE
PRESIDENT, COMMERCIAL; JAMES F. MEYERINK, DIRECTOR, MARKET DEVELOPMENT;
(STANDING) JON D. LUNDBERG, DIRECTOR, SPECIAL PROJECTS, GARY A. WEBER, DIRECTOR,
FINANCIAL REPORTING & TREASURY SERVICES
The greatest challenge facing the titanium industry continues to be the
need to rationalize the excess production capacity which exists worldwide. The
aftermath of the Cold War, the collapse of the military and commercial aerospace
markets in 1991 and the emergence of the titanium producers in the Former Soviet
Union (FSU) created a substantial imbalance between the supply of and demand for
titanium products.
The titanium producers in the FSU are currently working with several US
companies to have their "new production" material qualified for use in critical
aerospace applications. Current pricing for FSU sponge, before consideration of
import tariffs and dumping duties, is less than the variable cost of manufacture
for the US producers.
We are working with others in the metals industry to bring these problems
to the attention of our representatives in Washington, and create a level
playing field. We need to find solutions which recognize the FSU's need to
convert the scrap and "old production" sponge, which exists today into cash to
meet their needs for investments in infrastructure and social programs. The
solutions also need to recognize that "new production" material must be priced
to recover all environmental, social and economic costs. Failure to achieve
these objectives could result in the closure of the US titanium sponge industry,
and the loss of emerging markets for the titanium industry.
In order to remain competitive, we will continue to utilize the lowest
total cost materials available. We will continue to evaluate technology and
capital investments which would improve our ability to efficiently convert
these materials into high quality products.
To provide a return for our shareholders, we must be profitable and we must
grow. During 1994, we became a qualified supplier for several new and difficult
to produce alloys, and developed production capabilities for engineered
components. These are higher value added products than those OREMET has
historically produced. We also increased our technical staff to better provide
us with the ability to identify and implement cost savings programs. We will
continue to place a high priority on these activities during 1995. The
development of many new markets is dependent on our being able to deliver a
product that provides a technical advantage at a price which is competitive with
existing alternative materials.
We will also evaluate strategic alliances and acquisition opportunities.
Where possible, we want to team with others to take advantage of complementary
capacity, unique equipment or technical capabilities. Acquisition candidates
will be considered if they are in businesses which are profitable or provide a
substantial turn-around potential. We will look for opprtunities which provide
significant cost advantages, substantial technical benefits, new product lines
or a growth position in an important marrket.
The acquisition of Titanium Industries, Inc. (TI) was completed at the end
of the third quarter of 1994. This 80% owned subsidiary will be managed as a
separate business. We were successful in retaining the skilled management team
which developed TI into the world's largest non-aerospace titanium distribution
business. We will be implementing programs, where the combination of OREMET's
technical and production capabilities joined with TI's customer base and
distribution expertise, will provide enhanced value to our customers and
increased profitability to our shareholders.
4
<PAGE>
[PHOTO]
PLANER MILL IN MILL PRODUCTS AREA. L TO R: STEVEN H. REICHMAN, VICE PRESIDENT,
TECHNOLOGY; CAROLYN S. KIRK, DIRECTOR, RAW MATERIAL AND SUPPLIES; STEPHEN C.
STOCKS, VICE PRESIDENT, SPECIAL PROJECTS
MARKET OUTLOOK
With the continued weak demand in both the commercial and military
aerospace sectors, OREMET increased its effort to broaden its market bases both
domestically and internationally.
The Company has regained market share in ingot sales. This was accomplished
by diversifying our alloy mix, tightening our quality standards and developing
new non-aerospace applications. We will continue our efforts to further
diversify in this area and develop new markets which have potential for future
growth.
Our sales of mill products continue to increase as we have enlarged our
range of product areas. We have broadened our line of rotating quality billet by
expanding our size and alloy ranges. Flat rolled product sales have grown
considerably as a consequence of our supplying near net-shape configurations.
Other billet sales have increased as a result of our development efforts in non-
aerospace markets such as armor, ground transportation and recreational.
Industrial product sales have improved and will continue to do so due to
our acquisition of Titanium Industries, Inc., as well as our enhanced product
processing and increased casting sales activity. The market demand for
commercially pure products is expanding, and the general turn around of the
economy has increased casting opportunities. The demand for zirconium casting
has improved due to new chemical plant construction in South America and the Far
East.
[PHOTO]
AIRBUS A340
OREMET's efforts to increase international sales continue to be successful.
This year we signed a long term contract with Aerospatiale Avions, France to
provide titanium mill products for various Airbus[REGISTERED TRADEMARK]
programs. We are also involved in development programs in Europe to provide
major quantities of non-aerospace materials. Sales to the Far East continue to
grow, especially in light of new demand for titanium recreational products. We
intend to expand European sales through OREMET France which was established
this year.
Titanium sponge sales continue to decrease as the flow of material from the
FSU enters the world markets at low pricing levels. Development programs are
under way to supply our sponge to new niche markets which are requiring a higher
purity product. Our long term contract to provide R.M.I. Titanium Company with
titanium sponge will continue to help production levels.
5
<PAGE>
A YEAR OF TRANSITION AND A YEAR OF PROGRESS
[PHOTO]
L TO R. JAMES S. PADDOCK, VICE PRESIDENT, OREMET AND PRESIDENT AND CEO, TITANIUM
INDUSTRIES, INC.; CARLOS E. AGUIRRE, PRESIDENT & CEO, OREGON METALLURGICAL
CORPORATION; DENNIS P. KELLY, VICE PRESIDENT-FINANCE, CFO
A significant achievement for OREMET in 1994 was the acquisition of
Titanium Industries, Inc. Included in TI are the wholly-owned subsidiaries
Titanium Wire Corporation and Titanium International, LTD in Great Britain, also
a world leader in the distribution and processing of zirconium. The landmark
move will lessen OREMET's dependence on the aerospace industry and will provide
enhanced access to the industrial marketplace's growing domestic and
international demand for titanium products.
James S. Paddock, President, Chief Executive Officer and Chief Operating
Officer of TI will continue in this capacity. He has also been named an officer
and director of Oregon Metallurgical Corporation.
In January of 1995, TI's distribution subsidiary in the United Kingdom
received notice that it would no longer be the distributor for aerospace
products for another titanium producer. Arrangements to obtain replacement
products from OREMET and others will be a priority project during 1995. This
operation in the UK, together with the OREMET France warehouse facility outside
of Paris, provide a base for servicing our European customers. Titanium
consumption in Europe and Asia continues to grow. We are committed to these
markets and are considering locations in Asia for a new distribution facility in
1995.
6
<PAGE>
[PHOTO]
TITANIUM INDUSTRIES, INC. CORPORATE OFFICES AND TITANIUM SCULPTURE, FAIRFIELD,
NJ.
TITANIUM INDUSTRIES, INC.
Titanium Industries, Inc. is a multi-national distribution and
manufacturing company with operations in the U.S., Canada and the U.K. It is a
distributor and first-stage processor of titanium and zirconium mill products at
eight Service Centers and Sales Offices, and it is also a mill producer of small
diameter titanium bar, weld wire, and fine wire. For nearly 25 years, TI has
been in the forefront of supplying and developing titanium applications to solve
the changing needs of industries such as chemical processing, oil and gas,
hydrometallurgy, power generation, pulp and paper, medical implant, automotive,
consumer goods, aircraft and aerospace.
TI's Service Centers maintain one of the world's largest inventories of
titanium mill products available for rapid delivery to points around the globe.
To serve the industrial, consumer, medical and aircraft markets, Titanium
Industries stocks a full range of product specifications in sheet, plate, bar,
billet, pipe, fittings, tube and wire. A complete line of first-stage processing
equipment including saw cutting, torch cutting, shearing and machining is
available to meet customer requirements. Testing, certification and traceability
assure consistent quality.
[PHOTO]
TITANIUM PLATE BEING CUT AT A SERVICE CENTER.
7
<PAGE>
A YEAR OF TRANSITION AND A YEAR OF PROGRESS
[PHOTO]
TENSILE BAR LATHE IN THE MACHINE SHOP; L TO R EDMOND R. TROUT, MACHINIST; STEVEN
H. REICHMAN, VICE PRESIDENT, TECHNOLOGY, GREG BUCHANAN, METALLURGICAL LAB
COORDINATOR. ED HAS BEEN EMPLOYED AT OREMET SINCE 1969 AND WAS RECENTLY HONORED
FOR HAVING WORKED FOR MORE THAN 18 YEARS WITHOUT MISSING A SINGLE DAY DUE TO
ILLNESS OR INJURY.
HUMAN RESOURCES
During 1994, the Company established a wholly-owned subsidiary in France,
acquired a majority interest in Titanium Industries, Inc. and opened a combined
sales and technical support office near Pittsburgh, PA. At December 31, 1994,
the Company employed approximately 600 people worldwide.
The Employee Stock Ownership Plan (ESOP), which currently owns
approximately 41% of the outstanding shares of the Company, is governed by an
elected body of both union and salaried employees. The ESOP committee provides a
forum for employees to provide input to senior management and the Board of
Directors.
In August 1994, OREMET and the United Steelworkers of America, Local 7150,
entered into a new labor contract. This contract extends through July 2000.
OREMET and the Union are committed to a partnership, characterized by
cooperation, communication, fairness and honesty in all dealings. As co-workers
and owners, we have agreed to work together to achieve growth and profitability
for the Company and to provide a rewarding and meaningful work environment for
our employees.
[PHOTO]
L TO R: CARLOS E. AGUIRRE, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF OREGON
METALLURGICAL CORPORATION; ALTON L. DORGAN, SENIOR PRESS OPERATOR AND PRESIDENT
OF THE STEEL WORKERS UNION LOCAL 7150; CARLA J. BINEK, DIRECTOR, HUMAN
RESOURCES.
8
<PAGE>
[PHOTO]
L TO R: GREG C. HOFFMAN, ENVIRONMENTAL ENGINEER; DAVID R. HIATT, DIRECTOR,
QUALITY AND ENVIRONMENTAL SERVICES; BEVERLY J. CURTIS, ENVIRONMENTAL ENGINEER.
TECHNOLOGY
The technological environment for the Company in 1994 was one of
significant change and transition. Both internal and external requirements for
improved performance were extensive. The need to perform better, faster, at
lower cost, and in compliance with more stringent and sophisticated technical
requirements was the norm.
The accomplishments included development of new, more complex titanium
products. We were chosen by both General Electric Company and Boeing Company to
be their partner in successfully qualifying new material for commercial use. Our
advancements in process technology resulted in the commercial development of
titanium aluminide, a new alloy for use in both commercial and aerospace
applications. OREMET is the premier producer of this alloy for both casting and
forging applications.
For the first time in the Company's history, we produced large quantities
of precision machined parts, ready for final machining for Airbus[REGISTERED
TRADEMARK] aircraft. New programs such as these were accomplished concurrently
with the significantly higher production levels of traditional OREMET products.
During the year, we laid the foundation for establishing a systematic
program of process improvement aimed specifically at our manufacturing
operations. The Company's key production personnel were trained in Kaizan
(continuous improvement) and other sophisticated problem solving techniques,
which will be the basis for meeting the challenges which we now face.
In the areas of product development and process improvement, we made great
strides in 1994. Cost reduction and new products will continue to be the focus
for 1995. The integration of new forms and sources of materials coupled with the
implementation of new technologies affecting manufacturing productivity will be
a continuing priority project.
ENVIRONMENTAL
The Oregon Department of Environmental Quality has notified us that our
waste water discharge permit will need to be modified. There are several
alternatives which we can implement that will allow us to continue with little
change to our existing operations. One possibility which we are investigating
and which would provide an intriguing solution, entails planting poplar trees on
our plant site. Our waste water would be used to irrigate the trees which, after
several years, would be harvested on a sustained yield basis for use in the
forest products industry.
Maintaining compliance with environmental laws and regulations is a
responsibility that the Company diligently pursues.
9
<PAGE>
[PHOTO]
RICHARD CHILDS HANDLING SPONGE REMOVAL FROM RETORT.
Titanium sponge is the commercially pure, elemental form of titanium metal,
and is produced by reducing titanium tetrachloride using magnesium as the
reduction agent. OREMET began selling titanium sponge in 1987 to both integrated
and non-integrated domestic producers of titanium, to optimize capacity
utilization and to improve profitability.
Sponge is removed from the retort's walls, then sheared and crushed into
uniform gravel-size granules. It is then acid leached to increase the purity,
dried, analyzed and graded. The 99% pure sponge is ready for further processing
into titanium ingots, while lower grade material is compacted into briquettes
for use as steel and aluminum additions.
To make ingots, sponge is combined with processed titanium chips and
alloys, each measured by a computerized weighing system to meet customer
specifications.
[PHOTO]
GARRY GARRETT MANEUVERING COPPER CRUCIBLE USED IN PRODUCTION OF TITANIUM INGOTS.
10
<PAGE>
[PHOTO]
MIDWEST GRINDER CONDITIONING BILLET AT MILL PRODUCTS.
With the completion of the mill products plant in 1981, Oregon
Metallurgical Corporation met its long-term goal: It became a fully integrated
manufacturing facility, capable of producing titanium castings, ingots and mill
products. OREMET's mill products division is one of the most advanced titanium
forging facilities in the industry.
OREMET converts ingot into smaller, more workable pieces, known as mill
products in the form of billet, bar or plate, which are further processed by
OREMET's customers into finished products. Traditionally, these products have
been sold to manufacturers of commercial and military aircraft and engine
components, as well as aerospace manufacturers. Some of the Company's mill
products customers finish OREMET's products for such diverse applications as
automobile engine valves, prosthetic and orthopedic implants and consumer
products such as golf clubs, bicycles, cameras and mountain climbing equipment.
OREMET's vertically integrated production facilities can maintain complete
control through all stages of production - a capability that is essential to
meet stringent u.S. and international standards for quality.
[PHOTO]
TITANIUM ALLOY PLATE AT OREMET MILL PRODUCTS WAREHOUSE.
11
<PAGE>
A YEAR OF TRANSITION AND A YEAR OF PROGRESS
[PHOTO]
CLEANING A CAST PART BEFORE FINAL INSPECTION.
[PHOTO]
100 LB. 22" DIAMETER TITANIUM GEAR CASTING.
TITANIUM CASTINGS
In 1957, OREMET completed the world's first titanium casting foundry and
was soon turning out quality titanium components in commercial quantities. Today
OREMET operates one of the world's largest, most experienced titanium production
facilities.
Titanium castings are made by melting billet and titanium recycle, and
pouring the liquid under vacuum into graphite molds. OREMET's castings are made
to customer specifications and are used in marine and other industrial
applications where corrosion is of critical concern. Applications for castings
include pollution control, pump and valve sets, valve parts for submarines, off-
shore oil field instrument housings, mining, and nuclear waste storage.
The use of titanium and zirconium castings produced by OREMET in corrosive
applications, pollution control equipment, marine, petrochemical and other
industries has increased significantly in recent years. And there is no doubt
that the list of applications will continue to expand as new uses are found for
this amazingly versatile material.
[PHOTO]
TITANIUM CASTINGS USED IN THE CHEMICAL PROCESS INDUSTRY.
12
<PAGE>
CONTENTS
MANAGEMENT'S STATEMENT
ON FINANCIAL REPORTING
14
FIVE YEAR SUMMARY OF
SELECTED FINANCIAL DATA
15
FINANCIAL STATEMENTS
16-26
AUDITOR'S REPORT
26
MANAGEMENT'S DISCUSSION AND
ANALYSIS
27-30
<PAGE>
MANAGEMENT'S STATEMENT ON FINANCIAL REPORTING
The management of Oregon Metallurgical Corporation is responsible for the
preparation as well as the integrity of the financial statements and related
financial data contained in this Annual Report. The financial statements have
been prepared in accordance with generally accepted accounting principles and
necessarily include amounts which represent the best estimates and judgments of
management with appropriate consideration to materiality.
The Company maintains internal accounting policies, procedures and controls
designed to provide reasonable assurance at reasonable cost that assets are
safeguarded and that transactions are properly recorded and executed in
accordance with management's authorization. Management believes the Company's
accounting controls provide reasonable assurance that errors or irregularities
which may occur are detected within a timely period by employees in the normal
course of performing their assigned functions. Our independent accountants,
whose report on their examination of the financial statements appears on page
26, also review our systems of internal accounting control in accordance with
generally accepted auditing standards for the purpose of expressing their
opinion on the financial statements.
The Board of Directors pursues its oversight role for these financial
statements through its Audit Committee, which is comprised exclusively of
outside directors. The Audit Committee meets with management and the independent
accountants. The independent accountants have access to the Audit Committee and,
without management present, the opportunity to discuss the quality of financial
reporting.
/s/ Carlos E. Aguirre
-------------------------------------
Carlos E. Aguirre
President and Chief Executive Officer
/s/ Dennis P. Kelly
-------------------------------------
Dennis P. Kelly
Vice President - Finance
Treasurer and Chief Financial Officer
14
<PAGE>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE DATA)
FOR THE YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Net sales $71,166 $55,351 $56,785 $54,241 $92,767
Cost of sales 64,527 52,636 57,352 57,432 77,737
Gross profit (loss) 6,639 2,715 (567) (3,191) 15,030
Restructuring and environmental charges 240 2,997 200 - -
Net income (loss) (2,023) (4,098)2) (4,122)3) (4,685) 8,570
Net cash provided by (used in)
operating activities (4,459) 841 7,454 961 17,677
Earnings (loss) per share (0.18) (0.38)2) (0.38)3) (0.44) 0.82
Weighted average number of
shares and share equivalents outstanding 11,001 10,839 10,754 10,603 10,453
FINANCIAL POSITION:
Cash and cash equivalents, and
short-term investments 1,636 7,718 8,977 3,560 13,375
Working capital 49,082(1) 36,467 37,296 39,291 49,456
Current ratio 3.1(1) 4.5 5.7 6.1 4.3
Net property, plant and equipment 37,520 36,204 39,811 39,069 35,210
Total assets 111,952(1) 83,326 85,701 86,520 100,007
Long-term debt and note payable to bank 17,177 4,750 8,100 8,250 11,025
Shareholders' equity 67,282 67,065 68,402 68,436 72,215
Shareholders' equity per share 6.18 6.16 6.32 6.42 6.90
Cash dividends per share - - - 0.31 0.43
SUPPLEMENTARY DATA:
Net income (loss) as a percent of net sales (2.8)% (7.4)% (7.3)% (8.6)% 9.2%
Number of employees 482 310 359 354 427
Number of shareholders 2,484 2,636 2,869 2,812 2,764
<FN>
1) THE INCREASE IN WORKING CAPITAL AND TOTAL ASSETS AND THE DECREASE IN THE
CURRENT RATIO, AS THESE ITEMS COMPARE TO PRIOR YEARS, IS PRIMARILY THE RESULT OF
THE COMPANY'S ACQUISITION OF TI ON SEPTEMBER 20, 1994.
2) THE NET LOSS INCLUDES A PROVISION FOR RESTRUCTURING OF $1,409 NET OF TAX
BENEFIT, OR $0.13 PER SHARE AND A PROVISION FOR ESTIMATED ENVIRONMENTAL EXPENSES
OF $674 NET OF TAX BENEFIT, OR $0.06 PER SHARE. (SEE NOTES TO FINANCIAL
STATEMENTS 12 AND 14)
3) THE NET LOSS EXCLUDES THE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES FOR INCOME TAXES AND POST RETIREMENT BENEFITS OTHER THAN PENSIONS.
(SEE NOTES TO FINANCIAL STATEMENTS 6 AND 11)
</TABLE>
15
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $71,166 $55,351 $56,785
Cost of sales 64,527 52,636 57,352
------- ------- -------
6,639 2,715 (567)
Restructuring cost - 2,027 -
Provision for estimated environmental matters 240 970 200
Research, technical and product development
expenses 1,376 773 750
Selling, general and administrative expenses 7,517 5,124 4,417
------- ------ ------
LOSS FROM OPERATIONS (2,494) (6,179) (6,934)
Interest income 391 816 847
Interest expense (606) (532) (689)
Minority interest in subsidiary (29) - -
------- ------- -------
LOSS BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES (2,738) (5,895) (5,776)
Income tax benefit (715) (1,797) (1,654)
------- ------- -------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES (2,023) (4,098) (4,122)
Cumulative effect of changes in accounting
principles for:
Income taxes - - 602
Postretirement benefits other than pensions,
net of $459 of income tax benefit - - (671)
-------- -------- --------
NET LOSS $(2,023) $(4,098) $(4,191)
-------- -------- --------
-------- -------- --------
Loss per share before cumulative effect of
accounting changes $(0.18) $(0.38) $(0.38)
Accounting changes - - (0.01)
------- ------- -------
NET LOSS PER SHARE $(0.18) $(0.38) $(0.39)
------- ------- -------
------- ------- -------
Weighted average shares and share
equivalents outstanding 11,001 10,839 10,754
------- ------- -------
------- ------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
16
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(IN THOUSANDS)
DECEMBER 31, 1994 AND 1993
1994 1993
---------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $1,636 $ 37
Short-term investments - 7,681
Accounts receivable, less allowance for doubtful
accounts of $1,024 and $117 20,444 10,680
Inventories 49,023 25,852
Income taxes receivable 321 1,565
Prepayments 1,031 602
Deferred income taxes 517 498
------- -------
Total current assets 72,972 46,915
Property, plant and equipment, net 37,520 36,204
Other assets, net 1,480 207
-------- -------
Total Assets $111,972 $83,326
-------- -------
-------- -------
LIABILITIES
Current liabilities:
Accounts payable $16,860 $ 3,761
Accrued payroll and employee benefits 2,944 1,367
Other accrued expenses 4,073 1,970
Current portion of long-term debt 13 3,350
------- -------
Total current liabilities 23,890 10,448
Note payable to bank 12,496 -
Long-term debt, less current portion 4,668 1,400
Deferred income taxes 1,098 2,513
Deferred compensation payable 881 564
Accrued postretirement benefit 1,457 1,336
Minority interest 200 -
------- -------
Total Liabilities 44,690 16,261
------- -------
Commitments and contingencies (Notes 10 and 12)
SHAREHOLDERS' EQUITY
Common stock, $1.00 par value: shares authorized,
25,000; shares issued, 1994 - 10,893;
1993 - 10,888 10,893 10,888
Additional paid-in capital 37,445 37,420
Retained earnings 18,960 20,983
Cumulative foreign currency translation adjustment (16) -
Note receivable - ESOP - (2,226)
-------- -------
67,282 67,065
-------- -------
$111,972 $83,326
-------- -------
-------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
17
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
FOREIGN
ADDITIONAL CURRENCY NOTE TOTAL
SHARES COMMON PAID-IN RETAINED TRANSLATION RECEIVABLE SHAREHOLDERS'
OUTSTANDING STOCK CAPITAL EARNINGS ADJUSTMENT ESOP EQUITY
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1991 10,657 $10,657 $35,590 $29,272 $(7,083) $68,436
Repayment of loan to ESOP 2,428 2,428
Issuance of common stock in
payment of employee benefits 170 170 1,559 - - 1,729
Net loss - - - (4,191) - - (4,191)
-------- ------- ------- ------- ------- -------
Balances, December 31, 1992 10,827 10,827 37,149 25,081 (4,655) 68,402
Repayment of loan to ESOP - - - - 2,429 2,429
Issuance of common stock in
payment of:
Employee benefits 8 8 59 - - 67
Restructuring cost 53 53 212 - - 265
Net loss -- - - (4,098) - (4,098)
------- ------- ------- ------- ------- -------
Balances, December 31, 1993 10,888 10,888 37,420 20,983 (2,226) 67,065
Repayment of loan by ESOP - - - - 2,226 2,226
Issuance of common stock in
payment of employee benefits 5 5 25 - - 30
Cumulative translation adjustment - - - - $(16) - 16
Net Loss - - - (2,023) - - (2,023)
------- ------- ------- ------- ------- ------- -------
Balances, December 31, 1994 10,893 $10,893 $37,445 $18,960 $(16) $- $67,282
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
18
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(2,023) $(4,098) $(4,191)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 4,014 3,937 3,735
Loss on disposition of assets - 1,000 -
Deferred income taxes (1,434) (403) 1,819
Minority interest 29 - -
Changes in assets and liabilities, net of effects from
acquisition of business:
(Increase) decrease in:
Accounts receivable (4,158) (3,141) 900
Inventories (12,209) (930) 4,313
Income taxes receivable 1,244 1,424 1,503
Prepayments (137) (250) (73)
Increase (decrease) in:
Accounts payable 7,198 1,161 (611)
Accrued payroll and employee benefits 1,577 211 3
Other accrued expenses 920 1,204 206
Other 520 726 (150)
------- ------- -------
Net cash provided by (used in) operating activities (4,459) 841 7,454
------- ------- -------
Cash flows from investing activities:
Acquisition of a business, net of cash acquired (8,223) - -
Additions to property, plant and equipment (1,929) (1,244) (4,390)
Short-term investments - purchased (1,228) (15,651) (11,875)
Short-term investments - redeemed 8,811 14,856 4,989
Other (111) 65 75
------- ------- -------
Net cash used in investing activities (2,680) (1,974) (11,201)
------- ------- -------
Cash flows from financing activities:
Net borrowings, note payable to bank 12,496 - -
Capitalized loan fees and acquisition costs (1,260) - -
Repayment of long-term debt (4,754) (3,350) (3,150)
Proceeds from note receivable - ESOP 2,226 2,429 2,428
Proceeds from long-term debt - - 3,000
Other 46 - -
------- ------- -------
Net cash provided by (used in) financing activities 8,754 (921) 2,278
------- ------- -------
Effect of exchange rates on cash and cash equivalents (16) - -
------- ------- -------
Increase (decrease) in cash and cash equivalents 1,599 (2,054) (1,469)
Cash and cash equivalents:
Beginning of year 37 2,091 3,560
------- ------- -------
End of year $ 1,636 $ 37 $ 2,091
------- ------- -------
------- ------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. ORGANIZATION AND OPERATIONS:
Oregon Metallurgical Corporation (OREMET) and Subsidiaries (the Company)
is a major producer and distributor of titanium sponge, ingot, mill products
and castings for aerospace, industrial and commercial applications. As of
December 31, 1994, the Company is 41% owned by the Oregon Metallurgical
Corporation Employee Stock Ownership Plan (the ESOP).
On September 20, 1994, the Company completed the acquisition of the net
operating assets and subsidiaries of Titanium Industries Distribution Group
(Distribution Group) from Kamyr, Inc. The Distribution Group is a full-line
service titanium metals distributor with facilities in the United States,
Canada and United Kingdom. The acquisition cost of approximately $13,502 was
funded by $5,000 in cash, $4,002 of bank financing and $4,500 of seller
financing. The acquired business is being operated under the name of Titanium
Industries, Inc. (TI), an eighty percent (80%) owned subsidiary of OREMET. The
acquisition was accounted for as a purchase with the results of TI included
in the Company's financial statements from the acquisition date.
The president and sole minority shareholder of TI is an officer and
director of the Company. The Company has agreed to acquire, for net book
value, the 20% minority interest in TI in annual increments of at least 15%
of the minority interest beginning no earlier than 1999 and no later than
2004.
The following unaudited pro forma information presents the results of
operations of OREMET and TI for the years ended December 31, 1994 and 1993
assuming that the acquisition occurred as of the beginning of the respective
periods. This pro forma information does not purport to be indicative of what
would have occurred had the acquisition been made as of those dates or of
results which may occur in the future.
<TABLE>
<CAPTION>
1994 1993
--------------------------------------------------------------------------------
<S> <C> <C>
Net sales $95,875 $90,016
Net loss $(2,262) $(4,042)
Net loss per share $ (0.20) $ (0.37)
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF CONSOLIDATION - The consolidated financial statements include
the accounts of OREMET and its majority-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS - The Company classifies all cash on deposit
with banks and all highly liquid debt investments purchased with a maturity of
90 days or less as cash and cash equivalents.
SHORT-TERM INVESTMENTS - Short-term investments are stated at cost, which
approximates market.
INVENTORIES - Inventories are carried at the lower of cost or market.
Cost is determined using the weighted average cost method. Inventory costs
generally include material, labor cost and manufacturing overhead.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are
recorded at cost. Depreciation is provided using the straight-line method
over the estimated useful lives of the assets for financial reporting
purposes and accelerated methods are used for income tax reporting purposes.
The cost and accumulated depreciation applicable to assets retired are
removed from the accounts and the gain or loss on disposition is recognized.
The Company capitalizes interest costs as part of the cost of constructing
major facilities and equipment. No interest costs were capitalized in 1994
and 1993. $67 was capitalized in 1992.
REVENUE RECOGNITION - Revenues from the sale of commercial products are
recognized upon passage of title to the customer which in most cases
coincides with shipment.
INTANGIBLE ASSETS - Intangible assets consist of organizational and debt
issuance costs and are included in "Other assets" at cost less amortization.
Organizational costs are amortized on a straight-line basis over an estimated
economic life of 15 years. Debt issue costs are amortized on the straight-line
basis over 3 years, the life of the applicable credit agreement. Unamortized
intangibles as of December 31, 1994 and 1993 were $1,178 and $114,
respectively.
DEFERRED INCOME TAXES - Effective January 1, 1992, the Company adopted
the method of accounting for deferred income taxes prescribed by Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
The Standard requires a change from the deferred to the liability method of
computing deferred income taxes. Deferred income taxes are recognized for tax
consequences of "temporary differences" by applying enacted statutory tax
rates, applicable to future years, to differences between the financial
reporting and the tax basis of existing assets and liabilities.
CONCENTRATION OF CREDIT RISK - The Company sells its products to both
domestic and international companies. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral.
FORWARD FOREIGN EXCHANGE CONTRACTS - The Company may enter into forward
foreign exchange contracts as a hedge against currency fluctuations relating
to net foreign transactions and commitments denominated in foreign
currencies. Gains and losses on forward contracts are deferred and offset
against foreign exchange gains or losses on the underlying hedged items.
FOREIGN CURRENCY TRANSLATION - The Company's foreign subsidiaries'
accounts are measured using local currency as the functional currency. Assets
and liabilities are translated at the exchange rate in effect at year end.
Revenues and expenses are translated at the average rate of exchange
prevailing during the year. Translation adjustments arising from differences
in exchange rates from period to period are included in the cumulative
adjustment account in shareholders' equity.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - Effective January 1, 1992,
the Company adopted Statement of Financial Accounting Standards (SFAS) No.
106, "Employers' Accounting for Postretirement Benefits other than Pensions".
This Standard requires the accrual during the period of employment of the
cost of salaried employees' health benefits after retirement. Postretirement
health care benefits paid on behalf of retired employees were $107, $85 and
$76 in 1994, 1993 and 1992, respectively.
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ENVIRONMENTAL EXPENDITURES - Environmental expenditures that relate to
current operations are expensed or capitalized as appropriate. Expenditures
that relate to an existing condition caused by past operations, and which do
not contribute to current or future revenue generation, are expensed.
Liabilities are recorded when environmental assessments and/or remedial
efforts are probable, and the costs can be reasonably estimated. Generally,
the timing of these accruals coincides with completion of a feasibility study
or the Company's commitment to a formal plan of action.
EARNINGS PER SHARE - Earnings (loss) per share are based on the weighted
average number of shares of common stock and common stock equivalents
outstanding during each year presented. Common stock equivalents consist of
warrants and amounts due to be settled in shares pursuant to OREMET's excess
benefit plan. Common stock equivalents are computed using the treasury stock
method.
3. ADDITIONAL CASH FLOW INFORMATION
The Company's noncash investing and financing activities and cash payments
for interest and income taxes for the year ended December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid (received)
during the year for
Interest, net of amounts
capitalized $ 614 $ 523 $ 662
Income taxes
(refunds, net of payments) (1,327) (2,817) (4,477)
-------- -------- --------
Noncash investing activities:
Acquisition of business,
net of cash acquired
Working capital other than cash $(9,630) -- --
Properties (3,278) -- --
Long-term debt assumed 185 -- --
Note issued to seller 4,500 -- --
-------- -------- --------
$(8,223) $ -- $ --
-------- -------- --------
-------- -------- --------
Noncash financing transactions:
Issuance of common stock in
payment of employee benefits $ 30 $ 67 $ 1,729
-------- -------- --------
-------- -------- --------
</TABLE>
4. INVENTORIES
Inventories at December 31 are comprised of the following:
<TABLE>
<CAPTION>
1994 1993
--------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $14,656 $ 5,511
Work-in-progress 15,288 4,535
Raw materials 19,079 15,806
-------- -------
Total $49,023 $25,852
-------- -------
-------- -------
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31 are comprised of the following:
<TABLE>
<CAPTION>
1994 1993
--------------------------------------------------------------------------------
<S> <C> <C>
Land $ 1,189 $ 1,118
Buildings and improvements 11,087 8,902
Machinery and equipment 39,940 36,763
Integrated sponge facility 45,309 44,882
Construction in progress 1,976 1,209
-------- -------
99,501 92,874
Less accumulated depreciation 61,981 56,670
-------- --------
Total $37,520 $36,204
-------- --------
-------- --------
</TABLE>
6. INCOME TAXES
Effective January 1, 1992, the Company prospectively adopted SFAS No.
109. The cumulative effect of this accounting change resulted in noncash
income of $602 ($.05 per share) in 1992.
The benefit for income taxes is comprised of the following:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Current provision (benefit)
Federal $ 422 $(1,583) $(2,989)
State 80 18 --
Deferred provision (credit) (1,217) (232) 1,335
-------- -------- --------
Total benefit $ (715) $(1,797) $(1,654)
-------- -------- --------
-------- -------- --------
</TABLE>
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Components of the deferred provision (benefit) for income taxes are as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation $ 598 $ 1,186 $ 977
Allowance for doubtful accounts (299) -- --
Inventory, lower of cost or
market adjustment -- 827 644
Inventory uniform capitalization (619) (827) (644)
Accrued vacation pay (22) (67) (6)
Deferred compensation payable (12) (54) 755
Unrealized tax benefit charged to
additional paid-in capital -- -- (496)
Pension expense (174) -- --
Benefit of state net operating
loss carryforward (83) (449) (642)
Benefit of federal net operating
loss carryforward (851) -- --
Federal alternative minimum tax
credit carryforward -- (900) --
Environmental expense provision (99) (367) --
Valuation allowance 216 628 784
Other 128 (209) (37)
-------- -------- --------
Total $(1,217) $ (232) $1,335
-------- -------- --------
-------- -------- --------
</TABLE>
The difference between the Company's tax benefit and federal tax at statutory
rates is summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal taxes at statutory rates $ (921) $(2,004) $(1,964)
State taxes (179) (389) (377)
State tax valuation allowance 216 597 784
Alternative minimum tax limitation -- 212 --
Other 169 (213) (97)
-------- -------- --------
Total $ (715) $(1,797) $(1,654)
-------- -------- --------
-------- -------- --------
</TABLE>
At December 31, 1994, the Company had a net operating loss carryforward
for state income tax purposes of $1,248, $6,800, $8,600 and $13,500 from 1994,
1993, 1992 and 1991 operations, respectively. The Company had a net operating
loss carryforward for federal income tax purposes of $1,248 from 1994 and
$1,242 from 1993. If unused, the loss carryforwards expire fifteen (15) years
after the year in which they arose. United States income tax returns for
years 1989 through 1993 are currently under examination by the Internal
Revenue Service. Assessments are not expected to have a material adverse
effect on the financial statements.
The components of the net deferred tax liability are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Pension $ 304 $ -- $ --
Allowance for doubtful accounts 346 -- --
Warranty provision 126 81 81
Deferred compensation 358 229 175
Vacation accrual 469 447 380
Safe harbor lease 296 360 411
Postretirement benefits other than
pension 591 542 482
Federal net operating loss
carryforward 851 -- --
State net operating loss carryforward 2,130 2,048 1,599
Federal alternative minimum tax
credit carryforward 900 900 --
Environmental provision 467 367 --
Capitalized investment costs 619 -- --
Other 219 278 45
Less valuation allowance (1,810) (1,595) (967)
-------- -------- --------
5,866 3,657 2,206
-------- -------- --------
Liabilities
Excess tax over book depreciation
and amortization 6,421 5,661 4,475
Pension payments -- -- 117
Other 26 11 32
-------- -------- --------
6,447 5,672 4,624
-------- -------- --------
Net deferred tax liability $ 581 $ 2,015 $ 2,418
-------- -------- --------
-------- -------- --------
Balance sheet classification
Current assets $ (517) $ (498) $ (389)
Long-term liability 1,098 2,513 2,807
-------- -------- --------
Net deferred tax liability $ 581 $ 2,015 $ 2,418
-------- -------- --------
-------- -------- --------
</TABLE>
7. NOTE PAYABLE TO BANK
The Company may borrow up to $20 million under the terms of a revolving
credit agreement at an interest rate of prime (8.5% on December 31, 1994)
plus 1.5%. Borrowings under the agreement are collateralized by accounts
receivable, inventories and other in tangible assets, including the Company's
stock in TI. The Company must pay a nonuse fee of .5% annually on the unused
portion of the commitment. The credit agreement matures September 1997 and
can be renewed for one year periods with the consent of both parties. The
credit agreement contains restrictive covenants with regard to various
financial ratios and imposes limitations on capital expenditures and
dividends. Annual cash dividends are limited to the lesser of fifty percent
(50%) of net income or $1.8 million.
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1994 1993
--------------------------------------------------------------------------------
<S> <C> <C>
Subordinate Note Due to Kamyr, Inc. $4,500 $ --
County Industrial Development
Authority Loan 181 --
Bank term loans -- 4,750
------- -------
4,681 4,750
Less current maturities 13 3,350
------- -------
$4,668 $1,400
------- -------
------- -------
</TABLE>
On September 19, 1994, as part of the Company's acquisition (see Note
1), TI entered into a subordinated debt agreement with Kamyr, Inc. for
$4,500, interest at 8%, payable quarterly commencing December 1994. The
initial principal payment of $300 is due March 1997, and payable thereafter in
quarterly installments of $350 through March 2000. The subordinated debt
agreement includes covenants relative to shareholders' equity, maximum amount
of senior debt, relative financial ratios and restrictions on dividends, new
borrowings and guarantees and liens. The loan is collateralized by a second
lien on the accounts receivable, inventories, and general intangibles of TI.
In conjunction with the acquisition, the Company retired all outstanding
amounts which were due under its bank term loans. Aggregate maturities of
long-term debt approximate the following at December 31, 1994:
<TABLE>
<S> <C>
1995 $ 13
1996 13
1997 1,362
1998 1,413
1999 1,413
Thereafter 467
------
$4,681
------
------
</TABLE>
On January 20, 1995, Titanium International, LTD. (T.I.L.), a foreign
subsidiary, entered into a credit facility with the Midland Bank plc. The
facility provides for a credit facility of approximately $2,300 a foreign
exchange facility for $900 and other guarantees of approximately $250. The
amount of borrowing is subject to 70% of eligible accounts receivable plus
60% of appraised value of building. The credit facility is collateralized by
certain assets of T.I.L. Interest is to be charged at the rate of 1.5% over
Midland Bank's base rate. The credit facility has financial covenants
pertaining to net worth and repayment of loan to parent. The Bank has the
option of terminating the funds at its discretion and is subject to review on
December 31, 1995.
9. STOCK PURCHASE WARRANTS
Warrants to purchase 200,000 shares of the Company's common stock are
outstanding. The warrants and underlying shares are subject to forfeiture
(15% per year) under certain circumstances, until September 1999. The
warrants are exercisable at $6.375 per share, and expire September 2004. The
warrants were issued in connection with the Company's acquisition of TI. The
warrant holder is the president of TI, who is also an officer and director of
the Company.
10. OPERATING LEASES
Minimum annual rental commitments at December 31, 1994, under
noncancelable operating leases, principally for railroad tank cars, sales and
service center facilities, and various pieces of equipment, are payable as
follows:
<TABLE>
<S> <C>
1995 $ 660
1996 610
1997 460
1998 360
1999 350
Thereafter 750
</TABLE>
Total rental costs were $533 in 1994 and $421 and $408 in 1993 and 1992,
respectively.
11. EMPLOYEE PENSION PLANS
PENSION PLANS
OREMET's hourly employees are covered by a union pension plan. Pension
expense is based on a fixed rate per hour established under a negotiated
union contract.
OREMET maintains a defined benefit pension plan covering its salaried
employees who have completed at least one year of service and have reached
age 21. The benefits under this plan are based on years of service and the
employee's final average earnings. The plan's assets consist of
interest-bearing obligations and equities. Pension costs for OREMET's hourly
and salaried plans were $1,287 in 1994, $1,274 in 1993 and $1,219 in 1992.
The following table sets forth the amounts recognized in the Company's
financial statements for the salaried plan's pension expense and the salaried
plan's funded status at December 31:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Pension costs for the year:
Service cost $ 522 $ 565 $ 509
Interest cost 859 779 677
Actual return on plan assets (250) (717) (638)
Net amortization and deferral (397) 119 140
-------- -------- --------
Net cost $ 734 $ 746 $ 688
-------- -------- --------
-------- -------- --------
Plan assets at fair value $ 9,863 $10,122 $ 8,788
-------- -------- --------
Projected benefits
based on employment service to date
and present pay levels:
Vested 7,976 9,542 9,562
Nonvested 300 335 432
-------- -------- --------
Accumulated benefit obligation 8,276 9,877 9,994
Additional amounts related to projected
compensation increases 2,550 2,224 2,685
-------- -------- --------
Projected benefit obligation 10,826 12,101 12,679
-------- -------- --------
Plan assets less projected benefit
obligation (963) (1,979) (3,891)
Unrecognized net obligation 276 315 458
Unrecognized prior service cost 182 205 294
Unrecognized net loss 76 1,614 3,175
Minimum pension liability -- -- (385)
-------- -------- --------
Prepaid pension cost (liability) $ (429) $ 155 $ (349)
-------- -------- --------
-------- -------- --------
</TABLE>
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In determining the actuarial present value of the projected benefit
obligation, the assumed weighted-average discount rate was 8.50% in 1994,
6.75% in 1993 and 5.75% in 1992. For 1994 and 1993, the assumed rate of
increase in future compensation levels was 4.5%. For 1992, the assumed rate of
increase in future compensation was 5%. The expected long-term rate of return
on retirement plan assets was 8.0% for each of the three years. The decrease
in the unrecognized net loss from 1992 to 1994 was primarily due to the
increase in the assumed weighted-average discount rate.
During 1993, the Company restructured its workforce, resulting in the
termination of a significant number of employees. The termination resulted in
a partial curtailment of the salaried pension plan and increased the
restructuring cost by $151.
TI sponsors a domestic 401(k) retirement savings plan. Under the
provisions of the plan, participants may contribute a percentage of their
compensation not to exceed 12%. TI matches the participants' contributions up
to 3%. Participants are fully vested with regard to TI's contributions and
earnings thereon after one (1) year of service. TI's contributions to the
plan were approximately $21. in 1994.
Titanium International, LTD. (T.I.L.) sponsors a defined contribution
pension plan for all employees over the age of 25 with one (1) year of
service. Under the plan, participants may contribute between 17.5% to 40% of
base pay depending upon their age. Participants are fully vested and T.I.L.
matches between 2% to 14% of the employee's base pay, depending upon age and
as long as the employee's contributions are at least 2%. The T.I.L.
contribution for 1994 was approximately $19.
THE ESOP
In 1987, the Company established The Oregon Metallurgical Corporation
Employee Stock Ownership Plan (ESOP), an employee stock ownership plan
covering substantially all employees of OREMET. The ESOP borrowed $17 million
from the Company to purchase shares of common stock from the Company. The
loan obligation of the ESOP is considered unearned employee benefit expense
and, as such, is recorded as a reduction of shareholders' equity. Both the
loan obligation and the unearned benefit expense have been reduced by loan
repayments made by the ESOP. The ESOP contribution expense totaled $2,382,
$2,755 and $2,924 in 1994, 1993 and 1992, respectively.
As of December 31, 1994, the note receivable from the ESOP has been
fully repaid and all shares of common stock held by the ESOP (4,484 shares)
have been allocated to OREMET employees.
EXCESS BENEFIT PLAN
OREMET maintains an unfunded excess benefit plan for participants whose
allocations of common stock of the Company to the ESOP are reduced as a
result of limitations imposed under federal income tax law. A portion of a
participant's excess benefit shares is distributable after two years, but a
participant may defer distributions. Distributions are required upon request
following a participant's termination of employment. OREMET has the option to
distribute shares in lieu of cash, but not in excess of 1% of the outstanding
shares of common stock of the Company as of the prior year end. The cash
value of dividends that would have been paid to the participant had the
participant's allocation of shares to the ESOP not been reduced will be paid
to the participant in conjunction with the payment of dividends on the
Company's common stock. The liability under this plan is recorded as deferred
compensation payable in the accompanying balance sheets. Excess benefit plan
costs were $332, $259 and $100 in 1994, 1993 and 1992, respectively.
POSTRETIREMENT BENEFIT PLANS OTHER THAN PENSIONS
Effective January 1, 1992, the Company prospectively adopted SFAS No.
106 "Employers' Accounting for Postretirement Benefits other than Pensions."
As part of adopting the Standard, the Company recorded in the first quarter
of 1992 a noncash charge of $1,130 before taxes ($671 after taxes, or $.06
per share). Orement sponsors defined benefit postretirement plans that provide
health care benefits to eligible retired salaried employees. Eligible
retirees as of December 31, 1994 are not required to contribute toward
retiree health care coverage.
The following table sets forth the plan's status reconciled with the
amount shown in the Company's balance sheets as of December 31:
<TABLE>
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $ 638 $ 701 $ 443
Fully eligible plan 140 90 529
participants
Other active plan
participants 770 949 214
Less plan assets at fair value -- -- --
-------- -------- --------
1,548 1,740 1,186
Less recognized loss 91 404 --
-------- -------- --------
Accrued postretirement benefit
benefit liability $1,457 $1,336 $1,186
-------- -------- --------
-------- -------- --------
The components of net periodic postretirement benefit costs are as follows:
1994 1993 1992
--------------------------------------------------------------------------------
Service cost, benefit
attributed to employee service
during the year $ 96 $ 97 $ 56
Interest cost on accumulated
postretirement benefit obligation 118 123 76
Net amortization and deferral 15 15
Actual return on plan assets -- -- --
-------- -------- --------
Net periodic postretirement benefit cost $229 $235 $132
-------- -------- --------
-------- -------- --------
</TABLE>
For measurement purposes, a 9.5% annual increase in the per capita cost
of postretirement medical benefits was assumed for 1994; the rate is assumed
to decrease gradually to 6% for 2001 and remain at that level thereafter. The
health care cost trend rate assumption has a significant affect on the
amounts reported. To illustrate, increasing the assumed health care cost
trend rates by one percentage point in each year would increase the
accumulated postretirement benefit obligation as of December 31, 1994 by $158,
and the aggregate of the service and interest cost components of net periodic
postretirement cost for the year then ended by $26.
The discount rate used in determining the accumulated postretirement
benefit obligation was 8.5%, 7.0% and 8.0% for 1994, 1993 and 1992,
respectively. The unrecognized loss was $91 at December 31, 1994, compared to
$404 at December 31, 1993, a decrease of $313. The decrease in the
unrecognized loss was substantially attributable to the increase in the
discount rate.
During 1993, the Company restructured its workforce, result-
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ing in the termination of a significant number of employees. The terminations
resulted in a partial curtailment of the postretirement benefit plan and
decreased the unrecognized loss component of the postretirement benefit
liability by $210.
LABOR AGREEMENT AND COMPENSATION POLICY
In 1994, OREMET concluded a new labor contract with its union employees
and established a new compensation policy affecting nonunion employees. The
new agreements provide for the restoration of pay and benefits which were
reduced at the start of the ESOP cycle which began in December 1987 and
concluded seven years later in December 1994. As a component of the
restoration package, beginning in January 1995, each OREMET employee will
earn one share of the Company's common stock for every $100 earned in
salaries and wages.
Additionally, OREMET will sponsor an employee savings plan. For each
OREMET employee, OREMET will contribute one share of Company common stock for
each day worked, or 260 shares a year for a full-time employee. Under further
provisions of the plan, OREMET may, subject to the discretion of the
Company's Board of Directors, match a percentage of participants'
contributions. At OREMET's option, the Company match may be contributed in
either cash or in common stock of the Company.
At present levels of employment and compensation, management believes
that the Company may issue employees approximately 290,000 shares of common
stock for 1995 as a result of the above agreements.
12. ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local statutes and
regulations concerning environmental matters and land use. Although the
Company believes it is in material compliance with these laws, they are
frequently modified to be more restrictive and it is impossible to predict
accurately the future effect changes in these laws may have on the Company.
Like all titanium producers, the Company generates certain waste
materials and emissions, including materials for which disposal or emission
requires compliance with environmental protection laws. The Company conducts
its operations at an industrial site where hazardous materials have been
managed for many years in connection with its operations, including periods
before careful management of these materials was required or generally
believed to be necessary. Consequently, the Company is subject to various
environmental laws that impose compliance obligations and can create
liability for historical releases of hazardous substances.
The Company has entered into a consent order with the Oregon Department
of Environmental Quality pursuant to which the Company is conducting an
investigation of hazardous substances in portions of the soil and groundwater
at its plant site (Albany, Oregon). The Company anticipates that its
investigation will result in a determination that at least some remedial
action is necessary. An estimate of the cost cannot be made at this time.
Also, a neighboring property owner is investigating groundwater contamination
at their property that may have migrated to OREMET's property and for
which OREMET may have legal claims to recover a portion of its investigation
costs.
For a number of years, the Company utilized off-site disposal for
various wastes generated from operations. Although the Company believes that
disposal was conducted in compliance with laws in effect at the time, a
facility to which the Company sent its wastes has been determined to be
environmentally unsound under current law. Pursuant to a final agreement with
the Oregon Department of Environmental Quality, the Company will relocate
these waste materials to an approved facility.
In February 1995, the Oregon Department of Environmental Quality
modified OREMET's waste water discharge permit. The modified permit
accelerates the implementation of more stringent water quality standards
which were contained in OREMET's original permit. OREMET is reviewing its
waste water management practices and has developed a number of feasible
alternatives which can be implemented to maintain the Company's compliance
with the terms of the modified permit and proposed implementation schedule.
In 1991 and in 1993, the Pennsylvania Department of Environmental
Regulation and the Environmental Protection Agency (EPA) performed site
inspections, including soil and water sampling, at TI's site in Frackville,
Pennsylvania, in connection with a regional groundwater investigation of the
Frackville, Pennsylvania area. While the EPA's investigation is ongoing,
management has not been informed of any pending or potentially required
actions which may arise from this investigation.
In conjunction with the purchase of TI (see Note 1), Kamyr, Inc. has
agreed to undertake specified clean-up activities. In addition, Kamyr, Inc.
has agreed to a substantial indemnification of the Company in the event
damages arise which result from conditions which were not in compliance with
environmental laws and regulations as they existed at the time of the sale of
TI.
Although no claims have been filed against the Company, it has completed
engineering studies with regards to the above-mentioned items and less
significant matters. As a result of these studies, which are ongoing, the
Company made provisions for environmental expenses of $240, $970 and $200 in
1994, 1993 and 1992, respectively. These amounts are in addition to recurring
environmental costs which are expensed as incurred and are included in cost
of sales. Management is unable to reasonably predict when these environmental
issues will be resolved.
13. MAJOR CUSTOMERS AND BUSINESS SEGMENTS
The Company has a contract to supply titanium sponge and certain other
titanium products through 2003 to RMI Titanium Company (RMI). Sales to RMI,
as a percentage of net sales, were 13% for 1994, 30% and 25% for 1993 and
1992, respectively.
The Company's operations are conducted primarily in one business
segment, the production and marketing of titanium metal and related products.
For years ended December 31, 1994, 1993 and 1992, foreign sales were $10,300,
$6,600, and $6,200, respectively, principally to customers in western Europe.
14. RESTRUCTURING COST
In 1993, the Company recorded a provision for restructuring of $2,027
which include nonrecurring costs of severance pay and benefits of $1,027,
incurred and substantially all paid in the third and fourth quarters of 1993,
and a write-down, in the fourth quarter of 1993, of construction in progress
of $1,000 related to a curtailed expansion of the Titanium Sponge Reduction
Plant and the related Magnesium Recovery Facility. The downsizing and
restructuring were done to reduce fixed costs and to write-off the
nonrecoverable portion of funds spent to increase sponge production capacity.
Due to the reduced demand for sponge and the availability of low priced
sponge from the Commonwealth of Independent States, the expansion was no
longer needed.
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. QUARTERLY INFORMATION (UNAUDITED)
The following table sets forth unaudited quarterly financial date for the
years ended December 31, 1994 and 1993 (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
GROSS NET NET INCOME
PROFIT INCOME (LOSS) PER
SALES (LOSS) (LOSS) SHARE
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 QUARTER:
1st $13,294 $ 89 $(1,085) $(.10)
2nd 14,503 660 (601) (.06)
3rd(1) 16,980 1,697 (400) (.03)
4th(1) 26,389 4,193 63 .01
------- ------ -------- ------
$71,166 $6,639 $(2,023) $(.18)
------- ------ -------- ------
------- ------ -------- ------
<FN>
(1) Third and Fourth quarter results include the operating results of
Titanium Industries, Inc. with sales of $1,464 and $10,053, respectively.
</TABLE>
<TABLE>
GROSS NET NET INCOME
PROFIT INCOME (LOSS) PER
SALES (LOSS) (LOSS) SHARE
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993 QUARTER
1st $18,030 $1,979 $ 432 $ .04
2nd 14,651 1,308 111 .01
3rd 12,357 415 (1,071)(1) (.10)(1)
4th 10,313 (987) (3,570)(2) (.33)(2)
------- ------- -------- ---------
$55,351 $2,715 $(4,098) $(.38)
------- ------- -------- ---------
------- ------- -------- ---------
<FN>
(1) Third quarter results include a provision for restructuring of $495, net
of tax benefits, or $0.05 per share, which includes employment related
expenses associated with the organizational downsizing.
(2) Fourth quarter results include an additional provision for restructuring
of $914, net of tax benefits, or $0.08 per share, which includes employment
related expenses, as well as a write-down of construction in progress
related to a curtailed expansion of the sponge and magnesium facilities.
Also included is a provision for estimated environmental expenses of $674,
net of tax benefits, or $0.06 per share.
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF OREGON METALLURGICAL CORPORATION:
We have audited the accompanying consolidated balance sheets of Oregon
Metallurgical Corporation and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of operations, shareholders,
equity and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Oregon
Metallurgical Corporation and subsidiaries as of December 31, 1994 and 1993,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.
As discussed in Notes 6 and 11 to the Financial Statements, the Company
changed its method of accounting for postretirement benefits other than
pensions and accounting for income taxes in 1992.
COOPERS & LYBRAND LLP
Eugene, Oregon
February 3, 1995
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
ACQUISITION OF TITANIUM INDUSTRIES, INC. (TI)
On September 20, 1994, the Company, through its newly formed subsidiary,
acquired the assets and business of the Distribution Group of TI. The
operating results of TI are included in the Company's consolidated financial
results beginning with the date of acquisition. A significant majority of the
Distribution Group's customers participate in the industrial (non-aerospace)
market as compared to OREMET's customer base which is approximately 65%
aerospace related. Beginning from the date of acquisition, TI reported 1994
sales of $11.5 million.
MARKET FOR TITANIUM PRODUCTS
The Company, as well as other major U.S. titanium producers, reported
losses in 1994, continuing a trend which began in 1991. The reported losses
are the result of declines in both demand and pricing. For each of the years
1991 through 1994, the U.S. Bureau of Mines (the Bureau) reported shipments
for U.S. companies of 34-56 million pounds. The above compares to shipments
of 53 million pounds for 1990 and average annual shipments of 44 million
pounds for the ten year period ending December 31, 1993. The decrease in
shipments for U.S. titanium producers, which began in 1991, is the direct
result of the decline in the military aerospace market, weak commercial
aerospace market and the availability of low priced titanium products from
the FSU.
The Company's twelve-month sales order backlog (sales backlog) was $44
million at December 31, 1994, an increase of 144% over the December 31, 1993
sales backlog of $18 million. The twelve-month sales order backlog reflects
recent customer order placement but may not be an accurate indicator of annual
or quarterly sales volume.
For the two year period ended December 31, 1994, the fourth quarter of
1993 was the reported low point for both sales and the sales backlog. The
steady increases, which began in the first quarter of 1994, are the result of
general increases in demand coupled with the Company's belief that it is
participating with a larger share of the overall market. Additionally, sales
and the sales backlog were positively affected by the acquisition of TI.
Management is cautiously optimistic that the factors responsible for the
positive trends which now exist will continue through 1995.
MARKET HIGHLIGHTS
During 1994, the Company experienced strong demand for titanium ingot
destined for use in the manufacture of recreational products. The Company
expects that the recreational market will remain strong throughout 1995. In
August 1994, the Company renegotiated its long-term conversion agreement with
RMI Titanium Company (RMI). The conversion agreement provides that the
Company will supply RMI with titanium sponge and certain other titanium
products. The agreement terminates in December 2003. Sales to RMI were 13%
and 30% of the Company's net sales for 1994 and 1993, respectively.
[GRAPH]
SALES & SALES BACKLOG DOLLARS
(1) These amounts reflect the activities of Titanium Industries Inc. (TI)
which was acquired by the Company on September 20, 1994. It's balances are
as follows:
<TABLE>
<CAPTION>
1994
($ millions)
Third Quarter Fourth Quarter
<S> <C> <C>
Sales 1.5 10.0
Sales Backlog 7.0 7.6
</TABLE>
In June of 1994, the Company entered into along-term contract with
Aerospatiale Avions, France. The material to be provided under this contract
will be used in the construction of the pylon assemblies for the Airbus
A-320, A-340, and ATR 42/72 aircraft. Revenues from this contract are
expected to exceed $10 million. In addition, the Company was awarded a
contract to provide titanium plate to the French Navy. Revenues from this
contract are expected to approximate $2.5 million with shipments to occur in
1995.
In conjunction with efforts to expand its international markets, the
Company has established a service center facility located close to Paris,
France. The service center will stock and cut to order a variety of OREMET
produced products. The service center is operated by OREMET France,
S.a.r.l., a wholly-owned European subsidiary.
LABOR AGREEMENT
In August 1994, the Company and the United Steelworkers of America
agreed upon a new labor contract. The new contract will extend through July
31, 2000. The employees represented by the Union are
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
also substantial owners of the Company through the Employee Stock Ownership
Plan (ESOP). When the ESOP was adopted in December of 1987, the employees
agreed to a 20% reduction in pay and benefits to provide the cash to purchase
the ESOP shares. The new contract provides at the conclusion of the ESOP
cycle, for the restoration of pay and benefits not previously reinstated. The
financial cost of the restoration, which includes additional distributions of
Company stock as well as increases in hourly pay and benefits, will be offset
by a reduction in ESOP expenses. Any additional increases in wages for the
most part are linked to the profitability of the Company.
TITANIUM SPONGE
While approximately 20% of the world's sponge production capacity is
located within the U.S., it is currently estimated that approximately 50% is
located within the FSU. After the end of the Cold War, sponge produced in the
FSU became available and has been imported into the U.S. in ever increasing
quantities. Industry sources estimate that approximately 11 million pounds of
sponge were imported into the U.S. from the FSU during 1994. This is
approximately 350% higher than the quantity imported during 1993, and it
represents approximately 33% of the sponge consumed in the U.S. during 1994.
Import duties, tariffs, dumping duties and the lack of critical
aerospace qualifications have limited the applications where this sponge can
be economically used. The Company understands that certain sponge producers
in the FsU are working on programs to have their products qualified for use
in aerospace applications and at the same time are lobbying to have the
import tariffs and dumping duties removed or substantially reduced. If the FSU
producers are successful and if they continue to sell material at prices which
do not reflect the true economic costs of production, the Company would have
to seriously consider closing its sponge production operation and purchasing
sponge from the FSU producers.
As of December 31, 1994, the Company's sponge production facilities had
a net book value of approximately $21 million. If the Company were to
permanently close it sponge facilities, the resulting write-off would be
reflected in the Company's Statement of Operations in addition to other
closure related expenses. Management and the Company's Board of Director's do
not believe that such a closure is imminent, however, given the excess
capacity now available in the industry and the potential of purchasing sponge
at prices lower than the Company's costs of production, closure of the sponge
plant at some point in the future is a possibility. Management believes that
despite the closure of its sponge production facilities, the Company would
remain competitive given the availability of lower cost titanium sponge from
the FSU.
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
Net sales increased 29% to $71.1 million in 1994, compared to $55.4
million in 1993. The Company's 1994 net sales include $11.5 million of sales
attributable to TI.
Net sales of ingot, mill products and castings increased 29% in 1994
compared to 1993. The expansion in sales across the Company's primary product
lines reflects a strengthening general economy. The increase in revenues for
these products is primarily the result of increased shipments, average prices
have remained stable between the two periods.
Sales of titanium sponge and sponge conversion services decreased 36% in
1994. The decrease in sales and conversion of titanium sponge are a direct
result of competition from lower priced titanium sponge available principally
from the FSU.
Cost of sales as a percentage of net sales decreased in 1994 to 91% from
95% for 1993. The positive change is primarily due to the increase in volume.
As a result, gross profit increased $3.9 million to $6.6 million for 1994
from $2.7 million for 1993.
During 1993, the Company recorded a non-recurring provision for
restructuring costs of $2.0 million. No additional restructuring charges were
incurred during 1994.
In 1994, the Company recorded a provision for estimated environmental
matters of $0.2 million, compared to $1.0 million in 1993, a decrease of $0.8
million or 80%. For further information see the Environmental section of this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 12 to the Financial Statements.
Research, technical and product development (R&D) increased 78% in 1994
to $1.4 million from $0.8 million in 1993. The Company has significantly
increased its emphasis on new product development and technical support.
This strategic commitment began in November 1993, with the appointment of
Steven H. Reichman to the newly created position of Vice President-Technology
and Corporate Development. Additionally, during 1994, the Company successfully
completed its search for two newly defined positions, both of which have been
filed by experienced metallurgists.
Selling, general and administrative expenses (SG&A) increased 47% in 1994
to $7.5 million from $5.1 million in 1993. The addition of Titanium
Industries, Inc. represents 69% of the increase in SG&A. The balance of the
increase in SG&A arises from management's decision to increase its allowance
for uncollectible accounts receivable and reflects the Company's increased
commitment to the expansion of its marketing efforts.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
As a result of the foregoing, the Company experienced a loss from
operations of $2.5 million in 1994 compared to a loss from operations of $6.2
million in 1993.
Interest income decreased to $0.4 million in 1994 compared to $0.8
million in 1993 due to the liquidation of the Company's portfolio of
short-term investments and a smaller outstanding balance on the note
receivable from the OREMET ESOP. The Company expects that interest income for
1995 and the foreseeable future should be negligible.
Interest expense increased to $0.6 million in 1994 compared to $0.5
million in 1993 primarily as a result of the debt incurred by the Company in
the purchase of TI. Additionally, the Company increased borrowings during the
fourth quarter of 1994 in order to finance an increase in operating levels.
The Company reported an income tax benefit of $0.7 million (effective tax
rate of 26%) for 1994 compared to a tax benefit of $1.8 million, or an
effective tax rate of 30% for 1993. See Note 6 to the Financial Statements
for an analysis of the Company's effective tax rate.
The Company reported a net loss of $2.0 million ($0.18 per share) for
1994 compared to a net loss of $4.1 million ($0.38 per share) for 1993.
1993 COMPARED TO 1992
Net sales decreased 2.5% to $55.4 million in 1993, compared to $56.8 in
1992. Decreased sales of ingot, castings, titanium sponge and conversion
services were only partially offset by increased sales of mill products.
Favorable mix shifts and small price changes in sponge, ingots, castings and
mill products offset an approximate 5% decline in shipments. Reductions in
toll melting, conversion and other services accounted for the majority of the
$1.4 million decrease in sales. These net decreases were primarily due to a
continuing weak demand for titanium metal and shrinkage of the military and
commercial aerospace markets. Imports from the FSU have intensified the
downward pressure on pricing.
Cost of sales as a percentage of net sales improved in 1993 to 95% from
101% in 1992, due primarily to increased sales of higher value-added mill
products and increased prices as previously noted. Cost of sales decreased
8.2% in 1993 to $52.6 million from $57.4 in 1992 primarily as a result of the
decrease in shipments and the reduced levels of toll melting, conversion and
other services. As a result, gross profit improved to $2.7 million in 1993
from a loss of $0.6 million in 1992.
In 1993, the Company recorded a provision for restructuring costs of $2.0
million which included non-recurring costs for severance pay and benefits of
$1.0 million and a write-down of construction in progress of $1.0 million
related to the curtailed expansion of the titanium sponge reduction and
magnesium recovery plants. This downsizing and restructuring was done to
reduce fixed costs to a level which was more supportable by the then current
level of business and to recognize that at that level and with the
availability of low priced sponge from the FSU, the expansion was no longer
needed. In addition, the Company recorded a provision for estimated
environmental expenses of $1.0 million in 1993 compared to $0.2 million in
1992. For further information see Notes 12 and 14 of Notes to the Financial
Statements.
Selling, general and administrative expense and the research, technical
and product development expense increased 14% in 1993 to $5.9 million from
$5.2 million in 1992 and increased as a percentage of net sales to 10.6% from
9.1%. This increase is primarily due to employment related expenses associated
with the transition to the new management team, increased administrative
supply expenses and increased legal and professional expenses.
As a result of the foregoing, the loss from operations increased to $6.2
million in 1993 compared to a loss of $5.9 million in 1992.
Interest expense decreased to $0.5 million in 1993 compared to $0.7
million in the previous year due primarily to a reduction in the bank term
loans.
The loss before income taxes increased slightly to $5.9 million in 1993
compared to $5.8 million in the prior year. The income tax benefits of $1.8
million in 1993 and $1.7 million in the prior year are recorded at a rate
different than the statutory rate primarily as a result of recording a state
tax valuation allowance in compliance with SFAS No. 109 "Accounting For
Income Taxes", and in 1993 recording an alternative minimum tax limitation.
Therefore, the net loss decreased for 1993 to $4.1 million compared to $4.2
million in 1992
1992 COMPARED TO 1991
Net sales increased 5% to $56.8 million in 1992, compared to $54.2
million in 1991. Increased sales of titanium sponge more than offset decreased
sales of ingot, mill products, castings and conversion services. Sales of
titanium sponge increased three-fold to $22.4 million in 1992 from $6.5
million in 1991, primarily as a result of sponge shipments to RMI under the
long-term conversion contract. The 18% decline in shipments of ingot, castings
and mill products accounted for approximately 75% of the decline in sales of
these products. Reductions in toll melting, conversion and other services were
responsible for a $2.1 million decrease in sales. These decreases were
primarily due to the weak commercial aircraft market, the continuing decline
in defense spending and a weak national economy.
Cost of sales as a percentage of net sales improved in 1992 to 102% from
106% in 1991 primarily as a result of not incurring an inventory valuation
write-down as was required in the previous year. Cost of sales increased
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
in 1992 to $57.3 million from $57.4 million in 1991 primarily as a result of
the increase in net shipments. As a result, gross profit improved to a loss of
$0.6 million in 1992 from a loss of $3.2 million in 1991.
In 1992, the Company recorded a provision for estimated environmental
expenses of $0.2 million for estimated remediation costs at a facility which
was used by the Company for waste disposal. For further information see Note
12 of Notes to Financial Statements.
Selling, general and administrative expense decreased 2% in 1992 to $5.2
million from $5.3 million in 1991 and decreased as a percentage of net sales
to 9.1% from 9.8%. This reduction was due primarily to management's focus on
controlling costs.
As a result of the foregoing, the loss from operations decreased to $5.9
million in 1992 compared to a loss of $8.5% million in 1991.
Interest income declined to $0.8 million in 1992 compared to $1.2
million in 1991 due to a reduction in interest rates on short-term investments
and a reduction in the amount of the note receivable from the ESOP and the
corresponding interest income.
Interest expense increased to $0.7 million in 1992 compared to $0.5
million in the previous year due primarily to a reduction in capitalized
interest costs to $0.1 million in 1992 compared to $0.4 million in 1991.
The loss before the cumulative effect of changes in accounting
principles declined to $4.1 million in 1992 compared to $4.7 million in the
previous year. The income tax benefits of $1.7 million in 1992 is recorded at
a rate different from the statutory rate primarily as a result of recording a
state tax valuation allowance in compliance with SFAS No. 109, "Accounting for
Income Taxes". In 1991, the income tax benefit of $3.1 million was recorded
at a rate different from the statutory rate as a result of OREMET's dividend
payments to the ESOP which are deductible for income tax purposes.
Two accounting changes as prescribed by the Financial Accounting
Standards Board were implemented in 1992 retroactive to January 1, 1992. The
net cumulative effect of these changes required by Accounting for
Postretirement Benefits, SFAS 106, and Accounting for Income Taxes, SFAS 109,
was an addition to the net loss of $0.1 million. Therefore, the net loss for
1992 decreased to $4.2 million compared to $4.7 million in 1991.
LIQUIDITY AND CAPITAL RESOURCES
In conjunction with the acquisition of TI, in September 1994, the
Company entered into a $20 million revolving credit facility with BankAmerica
Business Credit, Inc. The credit agreement expires in September 1997 and can
be renewed for one year periods with the consent of both parties. OREMET
utilized the credit agreement to refinance $3.0 million in long-term debt and
an additional $4.0 million to finance the acquisition. As of December 31,
1994, the Company has $7.5 million available under the credit agreement. The
amount of credit available under the agreement is determined by the Company's
level of eligible accounts receivable and inventories which are the primary
sources of collateral. The credit agreement is reported as a long-term
liability in the Company's Consolidated Balance Sheets.
Working capital increased $12.6 million to $49.1 million as of December
31, 1994, compared to $36.5 million as of December 31, 1993. The increase in
working capital is primarily the result of the acquisition of TI. During the
third quarter of 1994, the Company redeemed its portfolio of short-term
investments, predominantly to reduce borrowings and meet the operating
requirements of the Company.
For the year ended December 31, 1994, the Company reported $4.5 million
as net cash used in operating activities. In 1993 and 1992 the Company
generated net cash from operations of $0.8 and $7.5 million, respectively. The
1994 decrease in net cash provided by operating activities is the result of
the Company increasing its investment in inventories as a result of strong
increases in both sales and the sales backlog.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local statutes and
regulations concerning environmental matters and land use. Although the
Company believes it is in material compliance with these laws, they are
frequently modified to be more restrictive and it is impossible to predict
accurately the future effect changes in these laws may have on the Company.
Like all titanium producers, the Company generates certain waste
materials and emissions, including materials for which disposal or emission
requires compliance with environmental protection laws. The Company conducts
its operations at an industrial site where hazardous material have been
managed for many years in connection with its operations, including periods
before careful management of these materials was required or generally
believed to be necessary. Consequently, the Company is subject to various
environmental laws that impose compliance obligations and can create liability
for historical releases of hazardous substances. (See Note 12 to the Financial
Statements for a further discussion of the Company's environmental matters).
30
<PAGE>
QUARTERLY STOCK DATA
<TABLE>
<CAPTION>
MARKET FOR COMMON STOCK
HIGH LOW
-------------------------------------------------------------------------------
<S> <C> <C>
For the Year Ended December 31, 1994
First Quarter $6.75 $4.75
Second Quarter 6.37 4.37
Third Quarter 6.25 5.25
Fourth Quarter 8.37 5.62
For the Year Ended December 31, 1993
First Quarter $4.87 $3.87
Second Quarter 7.00 4.19
Third Quarter 7.50 4.87
Fourth Quarter 5.50 4.06
</TABLE>
INVESTOR INFORMATION
ANNUAL MEETING
The annual meeting of shareholders of Oregon Metallurgical Corporation
will be held in the auditorium of the Company's office building at
530 Southwest 34th Avenue in Albany, Oregon on the 27th day of April, 1995,
at 10 o'clock a.m.
FORM 10-K
A copy of the Company's annual report on Form 10-K as filed with the
Securities and Exchange Commission (without exhibits) will be furnished
without charge to any shareholder on request to:
DENNIS P. KELLY
VICE PRESIDENT, FINANCE
P.O. BOX 580
ALBANY, OR 97321
COMMON STOCK
Traded NASDAQ National Market Systems (NMS) Symbol: OREM
CORPORATE INFORMATION
TRANSFER AGENT
FIRST INTERSTATE BANK OF OREGON
P.O. BOX 2971
PORTLAND, OR 97208
GENERAL COUNSEL
WEATHERFORD, THOMPSON, QUICK & ASHENFELTER
ALBANY, OR
SPECIAL COUNSEL
SCHWABE, WILLIAMSON & WYATT, P.C.
PORTLAND, OR
ACCOUNTANTS
COOPERS & LYBRAND
EUGENE, OR
31
<PAGE>
DIRECTORS, OFFICERS AND LOCATIONS
BOARD OF DIRECTORS
CARLOS E. AGUIRRE (1)
PRESIDENT AND CHIEF EXECUTIVE OFFICER
OREGON METALLURGICAL CORPORATION
GILBERT E. BEZAR (2)(3)
RETIRED VICE PRESIDENT
AEROSPACE AND STRATEGIC MATERIALS GROUP
OWENS-CORNING FIBERGLAS CORPORATION
ROBERT P. BOOTH
CHAIRMAN OF THE BOARD
NORTHWEST TELEVISION, INC.
ROGER V. CARTER (2)
INDEPENDENT METALS TECHNOLOGY CONSULTANT
RETIRED CHIEF METALLURGIST AND MANAGER OF METALS TECHNOLOGY
BOEING COMPANY
NICHOLAS P. COLLINS (1)(3)
VICE CHAIRMAN
ESCO CORPORATION
HOWARD T. CUSIC (1)(3)
CHAIRMAN OF THE BOARD
OREGON METALLURGICAL CORPORATION
RETIRED SENIOR VICE PRESIDENT
OWENS-CORNING FIBERGLAS CORPORATION
DAVID H. LEONARD (1)(3)
PARTNER
CHURCHILL, LEONARD, BROWN, LINCOLN, LODINE AND HENDRIE
JAMES S. PADDOCK
VICE PRESIDENT
OREGON METALLURGICAL CORPORATION
PRESIDENT, CHIEF EXECUTIVE OFFICER, AND CHIEF OPERATING OFFICER
TITANIUM INDUSTRIES, INC.
JAMES R. PATE (2)
FINANCIAL SERVICES MANAGER
OREGON VOCATIONAL REHABILITATION DIVISION
(1) MEMBER OF THE EXECUTIVE COMMITTEE
(2) MEMBER OF THE AUDIT COMMITTEE
(3) MEMBER OF THE FINANCE/COMPENSATION COMMITTEE
CORPORATE OFFICERS
CARLOS E. AGUIRRE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
JOHN P. BYRNE
VICE PRESIDENT - MANUFACTURING
DAVID G. FLOYD
VICE PRESIDENT - COMMERCIAL
DENNIS P. KELLY
VICE PRESIDENT - FINANCE,
TREASURER AND CHIEF FINANCIAL OFFICER
JAMES S. PADDOCK
VICE PRESIDENT
PRESIDENT, CHIEF EXECUTIVE OFFICER, AND CHIEF OPERATING OFFICER,
TITANIUM INDUSTRIES, INC.
STEVEN H. REICHMAN
VICE PRESIDENT - TECHNOLOGY AND CORPORATE DEVELOPMENT
STEPHEN C. STOCKS
VICE PRESIDENT - SPECIAL PROJECTS
ORVAL N. THOMPSON
SECRETARY
DENNIS D. ASHENFELTER
ASSISTANT SECRETARY
LOCATIONS
OREGON METALLURGICAL CORPORATION
530 34TH AVENUE, S.W.
ALBANY, OR 97321
OREMET FRANCE
Z.I. DES BRUYERES
AVENUE J.P. TIMBAUD
78190 TRAPPES, FRANCE
TITANIUM INDUSTRIES, INC.
110 LEHIGH DRIVE
FAIRFIELD, NJ 07006
TITANIUM WIRE CORPORATION
235 INDUSTRIAL PARK ROAD
FRACKVILLE, PA 17931
TITANIUM INTERNATIONAL LTD. (U.K.)
KEYS HOUSE, GRANBY AVENUE
GARRETTS GREEN
BIRMINGHAM 833 OSP
UNITED KINGDOM
32
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF
OREGON METALLURGICAL CORPORATION
State or Country
Name of Subsidiary in Which Organized
OREMET France S.a.r.l. France
New TI, Inc., dba Titanium
Industries, Inc. * Oregon
Titanium Wire Corporation ** Pennsylvania
Titanium International Limited ** United Kingdom
* New TI, Inc. is a majority-owned (80%) subsidiary of Oregon Metallurgical
Corporation.
** Titanium Wire Corporation and Titanium International Limited are wholly-
owned subsidiaries of New TI, Inc.
227
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Oregon Metallurgical Corporation
We consent to the incorporation by reference in the Registration Statement of
Oregon Metallurgical Corporation on Form S-8 (File No. 33-18650) of our reports
dated February 3, 1995 on our audits of the consolidated financial statements
and financial statement schedule (item 14(a) of Form 10-K) of Oregon
Metallurgical Corporation as of December 31, 1994 and 1993, and for the years
ended December 31, 1994, 1993, and 1992, which reports are appearing in and
incorporated by reference in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand
COOPERS & LYBRAND L.L.P.
Eugene, Oregon
March 23, 1995
228
