<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
( ) 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 _______
CALIFORNIA STEEL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0051150
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14000 San Bernardino Avenue 92335
Fontana, California (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (909) 350-6200
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
As of May 14, 1999, 1,000 shares of the Company's common stock, no par value,
were outstanding.
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CALIFORNIA STEEL INDUSTRIES, INC.
Table of Contents
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Page
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Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1999 and December 31, 1998...................... 2
Consolidated Statements of Income for the three months ended
March 31, 1999 and 1998................................... 3
Consolidated Statements of Cash Flows for the three months
ended March 31, 1999 and March 31, 1998................... 4
Notes to Consolidated Financial Statements................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 9
Part II. Other Information
Item 1. Legal Proceedings......................................... 9
Item 2. Changes in Securities and Use of Proceeds................. 10
Item 4. Submission of Matters to a Vote of Security Holders....... 10
Item 6. Exhibits and Reports on Form 8-K.......................... 11
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CALIFORNIA STEEL INDUSTRIES, INC.
AND SUBSIDIARY
Consolidated Balance Sheets (Unaudited)
(In thousands, except per share amount)
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
1999 1998
Assets --------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................... $ 8,040 $ 11,962
Trade accounts receivable, less allowance for doubtful
receivables.................................................... 60,072 53,630
Inventories..................................................... 162,436 173,396
Deferred income taxes........................................... 4,545 4,545
Other receivables and prepaid expenses.......................... 7,050 5,211
-------- --------
Total current assets..................................... 242,143 248,744
-------- --------
Investments in affiliated company.................................... 34,726 34,726
Other assets......................................................... 1,451 --
Property, plant and equipment, net................................... 254,871 251,163
-------- --------
Total assets............................................. $533,191 $534,633
======== ========
Liabilities and stockholders' equity
Current liabilities:
Notes payable to banks.......................................... $ -- $103,700
Current installments of long-term debt.......................... 20,000 20,000
Accounts payable................................................ 37,792 50,550
Income tax payable.............................................. 6,369 --
Other accrued expenses.......................................... 21,519 22,344
-------- --------
Total current liabilities................................ 85,680 196,594
-------- --------
Long-term debt, excluding current installments....................... 220,324 120,000
Deferred income taxes................................................ 26,740 26,740
Stockholders' equity:
Class C preferred stock, $10,000 par value per share.
Authorized 3,000 shares; issued and outstanding 3,000 shares... 30,000 30,000
Common stock, no par value. Authorized 2,000 shares; issued
and outstanding 1,000 shares................................... 10,000 10,000
Retained earnings............................................... 160,447 151,299
-------- --------
Total stockholders' equity............................... 200,447 191,299
Commitments and contingencies................................... -- --
-------- --------
Total liabilities and stockholders' equity............... $533,191 $534,633
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
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CALIFORNIA STEEL INDUSTRIES, INC.
AND SUBSIDIARY
Consolidated Statements of Income (Unaudited)
(In thousands)
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<CAPTION>
Three Months Ended March 31,
-----------------------------------
1999 1998
----------- ------------
<S> <C> <C>
Net sales........................................................... $160,994 $176,175
Cost of sales, net of LIFO reserve............................. 134,443 154,660
-------- --------
Gross profit............................................ 26,551 21,515
Selling, general and administrative expenses........................ 7,321 7,279
-------- --------
Income from operations.................................. 19,230 14,236
Other income (expense):
Equity in income of affiliate.................................. -- 364
Interest expense, net.......................................... (3,774) (3,927)
Other, net..................................................... 61 (18)
-------- --------
Income before income taxes.............................. 15,517 10,655
Income taxes........................................................ 6,369 4,374
-------- --------
Net income.............................................. $ 9,148 $ 6,281
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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CALIFORNIA STEEL INDUSTRIES, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income..................................................... $ 9,148 $ 6,281
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................... 5,996 7,222
Loss on disposition and write-down of idle plant and
equipment.................................................. -- 307
Undistributed earnings of affiliate......................... -- (363)
Dividends received from affiliate........................... -- 292
Change in assets and liabilities:
Trade accounts receivable, net............................ (6,441) (10,041)
Inventories............................................... 10,960 (1,310)
Other receivables and prepaid expenses.................... (1,839) (1,875)
Other assets.............................................. (1,451) --
Accounts payable.......................................... (12,758) 4,422
Income taxes payable...................................... 6,369 4,374
Other accrued expenses.................................... (825) 2,435
--------- --------
Net cash provided by operating activities................. 9,159 11,744
--------- --------
Cash flows from investing activities:
Additions to property, plant and equipment..................... (9,705) (9,967)
--------- --------
Net cash used in investing activities..................... (9,705) (9,967)
--------- --------
Cash flows from financing activities:
Net repayments under line-of-credit agreement with banks....... (103,700) (255)
Proceeds from issuance of long-term debt....................... 100,324 --
Dividends paid................................................. -- (8,385)
--------- --------
Net cash used in financing activities....................... (3,376) (8,640)
--------- --------
Net decrease in cash and cash equivalents................... (3,922) (6,863)
Cash and cash equivalents at beginning of period............... 11,962 10,343
--------- --------
Cash and cash equivalents at end of period..................... $ 8,040 $ 3,480
========= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized)........................ $ 4,454 $ 4,839
Income taxes................................................ -- --
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
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CALIFORNIA STEEL INDUSTRIES, INC.
AND SUBSIDIARY
Notes To Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements of California
Steel Industries, Inc. and its subsidiary as of and for the three months ended
March 31, 1999 and 1998 have been prepared in accordance with generally accepted
accounting principles for interim financial information and the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. However, the
information reflects all adjustments (consisting only of normal recurring
adjustments) that, in the opinion of management, are necessary to present fairly
the financial position and results of operations for the periods indicated.
The accompanying consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
for the years ending December 31, 1998 and 1997 contained in California Steel
Industries, Inc.'s Offering Memorandum dated March 30, 1999.
2. New Accounting Pronouncements
-----------------------------
In June 1998, the Financial Accounts Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts, and hedging activities. SFAS 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 1999. Application
of this accounting standard is not expected to have a material impact on our
financial position, results of operations or liquidity.
3. Inventories
-----------
Inventories are stated at the lower of cost (determined under the last-in,
first-out method of accounting) or market value.
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
(In thousands) (In thousands)
-----------------------------------------------
<S> <C> <C>
Finished goods.................................. $ 41,163 $ 45,641
Work-in-process................................. 23,632 25,503
Raw materials................................... 93,114 96,552
Other........................................... 4,527 5,700
-------- --------
Total......................................... $162,436 $173,396
======== ========
</TABLE>
4. Credit Facility and Senior Notes
--------------------------------
As of March 10, 1999, we entered into a new bank facility with a syndicate
of financial institutions led by BankBoston, N.A. ("BKB") as loan and collateral
agent, Bank of America National Trust and Savings Association, as letter of
credit agent and documentation agent, and BancBoston Robertson Stephens Inc. and
NationsBanc Montgomery Securities LLC, as arrangers. The new bank facility
provides for a revolving credit facility with an aggregate principal amount of
up to $130,000,000 (including a $25,000,000 sublimit for letters of credit),
subject in all respects to a borrowing base coverage requirement. A substantial
portion of the advances available under the new bank facility were drawn on
March 10, 1999 to permanently repay an existing credit facility provided by a
syndicate of
5
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financial institutions led by The Dai-Ichi Kangyo Bank, Limited, Los Angeles
Agency. The new bank facility has a term of five years. Subject to the
satisfaction of customary conditions, advances under the new bank facility may
be made at any time prior to the new bank facility termination date and may be
used for working capital, capital expenditures and other corporate purposes.
At our election, amounts advanced under the new bank facility bear interest
at (i) the Base Rate or (ii) the Eurodollar Rate, plus the Applicable Margin.
The "Base Rate" is equal to the highest of (a) the rate of interest announced
publicly by BKB from time to time as BKB's prime rate and (b) the federal funds
rate plus .500%, in each case as in effect from time to time. The "Eurodollar
Rate" is the applicable reserve-adjusted rate for eurodollar deposits in the
interbank eurodollar market. The Applicable Margin in effect from time to time
will range from 0.700% to 1.00% based on our Leverage Ratio (as defined in the
new bank facility).
The new bank facility is secured by a first priority security interest in
our cash, accounts receivable, inventory and other assets.
On April 6, 1999, we issued an aggregate of $150,000,000 of ten-year 8.5%
senior unsecured notes. Interest is payable on the notes on April 1 and October
1, commencing October 1, 1999. The notes are senior in right of payment to all
of our subordinated indebtedness and equal in right of payment to all of our
existing and future indebtedness that is not by its terms subordinated to the
notes. We may redeem the notes at any time after April 1, 2004. The indenture
governing the notes contains covenants that limit our ability to incur
additional indebtedness, pay dividends on, redeem or repurchase capital stock,
make investments, create liens, sell assets, sell capital stock of certain of
our subsidiaries, engage in transactions with affiliates and consolidate, merge
or transfer all or substantially all of our assets and the assets of certain of
our subsidiaries on a consolidated basis.
Proceeds from the notes were used to permanently repay outstanding bank
debt under a $10,000,000 term loan provided by The Dai-Ichi Kangyo Bank,
Netherlands, and $50,000,000 under a revolving credit facility and $80,000,000
under a term loan under a $150 million credit facility provided by a syndicate
of institutions led by the Industrial Bank of Japan, Ltd., Los Angeles Agency.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking Statements
- ---------------------------
Certain statements included in this Quarterly Report on Form 10-Q,
including without limitation statements containing the words "believes",
"intends", and "expects" and words of similar import, constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results, performance or
achievements to differ materially from those expressed or implied by such
forward-looking statements. A number of other factors may have a material
adverse effect on our financial performance. These factors include a national
or regional slowdown which decreases the demand for our products, high levels of
steel imports, intense competition in our industry and uninsured risks such as
earthquakes. Given these uncertainties, undue reliance should not be placed on
such forward-looking statements. We disclaim any obligation to update any such
factors or to publicly announce the results of any revisions to any of the
forward-looking statements included herein to reflect future events or
developments.
Results of Operations
- ---------------------
<TABLE>
<CAPTION>
Tons Billed
March 31,
----------------------------------------------------
1999 1998
----------------------------------------------------
<S> <C> <C>
Hot Rolled........................................... 225,422 224,692
Cold Rolled.......................................... 65,816 57,055
Galvanized........................................... 115,290 87,206
ERW Pipe............................................. 22,416 32,099
------- -------
Total................................................ 428,944 401,052
======= =======
</TABLE>
Net sales. Net sales decreased $15,181,000, or 8.6%, from $176,175,000 for
the three months ended March 31, 1998 to $160,994,000 for the three months ended
March 31, 1999. Net billed tons increased by 27,892, or 7.0%, for the three
months ended March 31, 1999 as compared to the three months ended March 31,
1998. First quarter 1999 unit prices on all flat rolled products continued to
be negatively impacted by the lingering effects of import surges during 1998,
although the impact of imports was slightly offset by a shift in product mix
emphasizing cold rolled and galvanized products, as we generally sell cold
rolled and galvanized products at higher prices than hot rolled products.
Gross profit. Gross profit increased $5,036,000, or 23.4%, from
$21,515,000 for the three months ended March 31, 1998 to $26,551,000 for the
three months ended March 31, 1999. Gross profit as a percentage of net sales
increased from 12.2% for the three months ended March 31, 1998 to 16.59% for the
same period in 1999. Our gross profit increased as a result of (i) our slab
costs decreasing at a faster rate than our unit sales prices, (ii) a product mix
that included more of the higher value added galvanized products and (iii)
higher sales volumes. Additionally, during first quarter 1999, we recorded a
$7,138,000 LIFO adjustment versus a $3,938,000 LIFO adjustment recorded for
first quarter 1998, as a result of lower inventory costs. If we had used the
FIFO method of accounting instead, gross profit as a percentage of net sales
would have decreased to 10.0% for the three month period ended March 31, 1998
and 12.1% for the three month period ended March 31, 1999.
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Selling, general and administrative expenses. Selling, general and
administrative expenses remained relatively flat period to period at $7,279,000
for the first three months of 1998 compared to $7,321,000 for the same period in
1999.
Interest expense. Interest expense decreased $153,000, or 3.9%, from
$3,927,000 for the first quarter 1998, to $3,774,000 for the first quarter 1999.
Average outstanding debt increased slightly during the first quarter of 1999
compared to the first quarter 1998, but was offset by lower effective interest
rates during the three months ended March 31, 1999. Interest expense figures
are net of interest income and capitalized interest of $205,000 for the three
months ended March 31, 1999 and $364,000 for the three months ended March 31,
1998.
Income taxes. As a result of higher income before tax, income taxes
increased $1,995,000 from $4,374,000 for the three month period ended March 31,
1998 to $6,369,000 for the three month period ending March 31, 1999. Our
effective book tax rate was unchanged for the two periods at 41.05%.
Net income. Net income for the three month period ended March 31, 1999 was
$9,148,000 as compared to $6,281,000 for the three month period ended March 31,
1998, for a period to period increase of 45.6%.
Liquidity and Capital Resources
- -------------------------------
At March 31, 1999, we had $8,040,000 in cash and cash equivalents and
$10,098,000 in financing available under our credit facilities. During the
three months ended March 31, 1999, cash flow from operations generated
$9,159,000, which consisted of $9,148,000 in net income, $5,996,000 in
depreciation and amortization expense and a net cash flow decrease of $5,985,000
due to changes in assets and liabilities, the majority of which were a
$10,960,000 decrease in inventories and a $12,758,000 decrease in payables.
Cash flow from investing activities during the three months ended March 31, 1999
consisted predominately of $9,705,000 of capital expenditures. Cash flow from
financing activities during the three months ended March 31, 1999 consisted of
net repayments under both short and long-term lines of credit.
As of March 10, 1999, we entered into a new $130,000,000 five-year bank
facility of which $100,300,000 was outstanding as of March 31, 1999. The new
bank facility is collateralized by cash, accounts receivable, inventory and
other assets. Subject to the satisfaction of customary conditions and a
borrowing base, advances under the new bank facility may be made at any time
prior to the new bank facility termination date, which is the earlier to occur
of March 10, 2004 or the date which is sixty (60) days prior to the maturity of
the 8.5% senior notes. Such advances may be used for working capital, capital
expenditures and other lawful corporate purposes, including the refinancing of
existing debt.
We anticipate that our primary liquidity requirements will be for working
capital, capital expenditures, debt service and the payment of dividends. We
believe that cash generated from operations and available borrowings under the
new bank facility will be sufficient to enable us to meet our liquidity
requirements for fiscal 1999.
Year 2000
- ---------
In 1997, we began to examine our systems for Year 2000 compliance. We have
identified substantially all of our major hardware and software platforms in use
as well as our non-information technology systems such as buildings, plant,
equipment, and other infrastructure systems that may contain embedded micro-
controller technology. We also have assessed the status of Year 2000 compliance
of major vendors, third party network providers and other material service
providers.
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We have determined our systems requirements on a company-wide basis and
have begun the implementation of an enterprise resource planning (ERP) system,
which is intended not only to remedy all Year 2000 exposures, but also to
modernize several aspects of our non-production systems technologies. In
relation thereto, we have signed contracts with substantially all of our
significant hardware, software, and other equipment vendors and third party
providers related to Year 2000 compliance.
As of March 31, 1999, we have incurred approximately $958,000 in costs
related to the implementation of the ERP system. We currently estimate the
total ERP implementation discussed above will cost approximately $1,990,000 and
these costs will be capitalized to the extent permitted under generally
acceptable accounting principles. We expect the balance of $1,032,000 relating
to this project will be incurred in the second quarter of 1999.
Although our efforts to be Year 2000 compliant are intended to minimize the
adverse effects of the Year 2000 issues on our business and operations, the
actual effects of the issue will not be known until 2000. Difficulties in
implementing the ERP system or the failure of its major vendors, third party
network service providers, and other material service providers and customers to
adequately address their respective Year 2000 issues in a timely manner may have
a material adverse effect on our business, results of operations, and financial
condition. Our capital requirements may differ materially from the foregoing
estimate as a result of regulatory, technological and competitive developments
in our industry.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks related to fluctuations in interest rates on
our $150,000,000 senior unsecured notes and on our $130,000,000 floating
interest rate bank facility. We do not currently use interest rate swaps or
other types of derivative financial instruments.
For fixed rate debt such as the senior unsecured notes, changes in interest
rates generally affect the fair value of the debt instrument. For variable rate
debt such as our bank facility, changes in interest rates generally do not
affect the fair value of the debt, but do affect earnings and cash flow. We do
not have an obligation to repay our senior notes prior to maturity in 2009 and,
as a result, interest rate risk and changes in fair value should not have a
significant impact on us. Management believes that the interest rate on the
senior notes approximates the current rates available for similar types of
financing and as a result the carrying amount of the senior notes approximates
fair value. The carrying value of the floating rate bank facility approximates
fair value as the interest rate is variable and resets frequently. The bank
facility bears interest at LIBOR plus 70 to 100 basis points and management
estimates that average outstandings under the facility for the year will be
$80,000,000. Therefore, a one percentage point increase in interest rates would
result in an increase in interest expense of $800,000 for the year.
Management does not believe that the future market rate risk related to the
senior notes and the floating rate bank facility will have a material impact on
the Company's financial position, results of operations or liquidity.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are from time to time involved in litigation to the conduct of our
business. As of March 31, 1999, CSI was a defendant in certain ordinary course
litigation brought by two former employees. Subsequent to March 31, 1999, one
action was resolved resulting in no material impact to our financial
9
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condition. On September 30, 1998, we joined 11 major domestic steel producers in
filing a Petition for the Imposition of Antidumping Duties and Countervailing
Duties pursuant to Section 701, 702, 731 and 732(b) of the tariff Act of 1930,
as amended, before the International Trade Commission of the U.S. Department of
Commerce (the "DOC") and the U.S. International Trade Commission ("USITC") (Case
Nos. C-351-826, A-588-846, A-821-809 and A-351-828) in the matter of certain hot
rolled carbon steel flat products from Japan, Brazil, and the Russian
Federation. At issue is whether Japan, Brazil and Russia committed unfair and
anti-competitive trade practices in relation to their export of hot rolled band
products into the United States. The DOC arrived at a preliminary decision on
the alleged mispractices in February 1999. Based on the preliminary
determination, the DOC will require Japanese and Brazilian importers of hot
rolled steel products to post a bond or cash deposit on all imports of these
products. The Russian Federation has tentatively agreed to a six-month
moratorium on imports, to reduce Russian imports of steel mill products by
almost 70%, to post a similar bond or cash deposit and to sell steel at minimum
prices per metric ton. On April 29, 1999, the DOC issued a final determination
on Japanese hot rolled material substantially confirming the preliminary
determination and postponed its final determinations for Brazil and Russia for
approximately 30 days. Within 45 days of a final determination, the USITC will
make a final investigation and determination of whether the domestic steel
industry is suffering material injury or threat thereof by reason of unfair
imports.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
- ---------------------------------------
On April 6, 1999, we issued $150,000,000 principal amount of 8.50% fixed
interest rate senior unsecured notes due 2009 to Merrill Lynch & Co., Merrill,
Lynch Pierce, Fenner & Smith Incorporated, BancBoston Robertson Stephens Inc.
and NationsBanc Montgomery Securities LLC (collectively, the "Initial
Purchasers"). The aggregate price to the public of our senior unsecured notes
was $150,000,000 and the aggregate Initial Purchasers' discounts and commissions
were $3,375,000 resulting in aggregate proceeds to us of $146,625,000. We sold
the senior unsecured notes in reliance on the exemption provided by Section 4(2)
of the Securities Act of 1933, as amended. The Initial Purchasers subsequently
resold the senior unsecured notes in reliance on Rule 144A under the Securities
Act of 1933, as amended.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In connection with our senior unsecured notes offering described in Item 2
above, we solicited the consent of our stockholders to the issuance of the
senior unsecured notes and matters related thereto.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
- -------
Number Description
- ------ -----------
<C> <S>
3.1 Certificate of Incorporation of the Registrant as amended by
Amendment to the Certificate of Incorporation filed June 6, 1984,
with Delaware Secretary of State, as amended by the Certificate of
Amendment to the Certificate of Incorporation filed August 2, 1984,
with the Delaware Secretary of State, as amended by the Certificate
of Amendment to the Certificate of Incorporation, filed January 12,
1988, with the Delaware Secretary of State, and, as amended by the
Certificate of Ownership merging CSI Tubular Products, Inc. into the
Registrant, filed with the Delaware Secretary of State on December
20, 1993.
3.2 Bylaws of the Registrant.
4.1 Indenture dated as of April 6, 1999 between the Registrant and
State Street Bank Trust Company of California, N.A., Trustee,
relating to the Registrant's 8 1/2% Senior Notes due April 6, 2009.
4.2 Specimen Series B note (included in Exhibit 4.1).
4.3 Shareholders' Agreement, dated June 27, 1995, by and among Rio
Doce Limited, Companhia Vale do Rio Doce, Kawasaki Steel Holdings
(USA), Inc. and Kawasaki Steel Corporation.
10.1 Revolving Credit Agreement, dated as of March 10, 1999, among the
Registrant, the Lending Institutions from time to time party thereto
as lenders, BancBoston, N.A., in its capacity as Loan and Collateral
Agent, and Bank of America National Trust and Savings Association,
in its capacity as Letter of Credit and Documentation Agent and
BancBoston Robertson Stephens Inc. and NationsBanc Montgomery
Securities LLC, as the Arrangers.
10.2 Agreement for the Purchase of Carbon Steel Slabs, dated as of
December 5, 1984, by and between the Registrant and Companhia
Siderurgica De Tubarao ("CST"), as amended by Memorandum of
Agreement, dated as of June 7, 1985, Memorandum of Agreement No. MA-
02, dated as of December 9, 1986, Memorandum of Agreement No. MA-03,
dated as of December 11, 1986, Memorandum of Agreement No. MA-04,
dated as of December 11, 1986, Memorandum of Agreement No. MA-05,
dated as of May 22, 1987 and Memorandum of Agreement No. MA-06,
dated as of December 11, 1996.
10.3 Facsimile transmission, dated October 27, 1998 from the Registrant
to CST, confirming the parties mutual understanding that the
Registrant will acquire 700,000 metric tons of steel slab from CST
for 1999 delivery.
10.4 E-mails from Broken Hill Proprietary Company Ltd. ("BHP") to the
Registrant, dated October 13, 1998 and October 15, 1998,
respectively, confirming the Registrant's and BHP's mutual agreement
of October 9, 1998 and October 14, 1998, to purchase and supply
70,000 metric tons and 280,000 metric tons of steel slab during
1999.
</TABLE>
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<TABLE>
<C> <S>
10.5 Letter, dated October 6, 1998, from the Registrant to Companhia
Siderurgica National ("CSN"), confirming CSN's agreement to supply
the Registrant with 100,000 metric tons of steel in 1999.
10.6 Contract, dated August 20, 1990, by and between the Registrant and
Seamar Shipping Corporation of Monrovia, Liberia, as amended.
10.7 The Burlington Northern and Santa Fe Railway Company BNSFC 302606
Regulated Transportation Contract, dated as of November 19, 1998, by
and between the Registrant and Burlington Northern Railroad Company.
10.8 Stevedore and Terminal Services Agreement, dated as of January 1,
1996, between Rio Doce Pasha Terminal L.P. and the Registrant, as
amended.
10.9 Equipment Lease Agreement, dated as of September 30, 1998, by and
between the Registrant and State Street Bank and Trust Company of
California, National Association.
10.10 Settlement Agreement, dated as of June 1, 1995, by and among the
Registrant, Kaiser Ventures, Inc., KSC Recovery, Inc. and Kaiser
Steel Land Development, Inc.
10.11 Groundwater Indemnity Agreement, dated as of June 1, 1995, between
the Registrant and Kaiser Ventures, Inc.
10.12 1996 Expedited Remedial Action Voluntary Enforceable Agreement, by
and among the Registrant and the California Environmental
Protection Agency, Department of Toxic Substances Control.
10.13 Purchase Agreement dated March 30, 1999 by and among the
Registrant, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, BancBoston Robertson Stephens Inc. and
NationsBanc Montgomery Securities LLC.
10.14 Registration Rights Agreement dated as of April 6, 1999 by and
among the Registrant, Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, BancBoston Robertson Stephens Inc. and
NationsBanc Montgomery Securities LLC.
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None.
</TABLE>
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 14, 1999
CALIFORNIA STEEL INDUSTRIES, INC.
By: /s/ Vicente B. Wright
-------------------------------------
Vicente B. Wright,
Executive Vice President, Finance
(Principal Financial and
Accounting Officer)
13
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<C> <S>
3.1 Certificate of Incorporation of the Registrant as amended by
Amendment to the Certificate of Incorporation filed June 6, 1984, with
Delaware Secretary of State, as amended by the Certificate of
Amendment to the Certificate of Incorporation filed August 2, 1984,
with the Delaware Secretary of State, as amended by the Certificate of
Amendment to the Certificate of Incorporation, filed January 12, 1988,
with the Delaware Secretary of State, and, as amended by the
Certificate of Ownership merging CSI Tubular Products, Inc. into the
Registrant, filed with the Delaware Secretary of State on December 20,
1993.
3.2 Bylaws of the Registrant.
4.1 Indenture dated as of April 6, 1999 between the Registrant and State
Street Bank Trust Company of California, N.A., Trustee, relating to
the Registrant's 8 1/2% Senior Notes due April 6, 2009.
4.2 Specimen Series B note (included in Exhibit 4.1).
4.3 Shareholders' Agreement, dated June 27, 1995, by and among Rio Doce
Limited, Companhia Vale do Rio Doce, Kawasaki Steel Holdings (USA),
Inc. and Kawasaki Steel Corporation.
10.1 Revolving Credit Agreement, dated as of March 10, 1999, among the
Registrant, the Lending Institutions from time to time party thereto
as lenders, BancBoston, N.A., in its capacity as Loan and Collateral
Agent, and Bank of America National Trust and Savings Association, in
its capacity as Letter of Credit and Documentation Agent and
BancBoston Robertson Stephens Inc. and NationsBanc Montgomery
Securities LLC, as the Arrangers.
10.2 Agreement for the Purchase of Carbon Steel Slabs, dated as of
December 5, 1984, by and between the Registrant and Companhia
Siderurgica De Tubarao ("CST"), as amended by Memorandum of Agreement,
dated as of June 7, 1985, Memorandum of Agreement No. MA-02, dated as
of December 9, 1986, Memorandum of Agreement No. MA-03, dated as of
December 11, 1986, Memorandum of Agreement No. MA-04, dated as of
December 11, 1986, Memorandum of Agreement No. MA-05, dated as of May
22, 1987 and Memorandum of Agreement No. MA-06, dated as of December
11, 1996.
10.3 Facsimile transmission, dated October 27, 1998 from the Registrant to
CST, confirming the parties mutual understanding that the Registrant
will acquire 700,000 metric tons of steel slab from CST for 1999
delivery.
10.4 E-mails from Broken Hill Proprietary Company Ltd. ("BHP") to the
Registrant, dated October 13, 1998 and October 15, 1998, respectively,
confirming the Registrant's and BHP's mutual agreement of October 9,
1998 and October 14, 1998, to purchase and supply 70,000 metric tons
and 280,000 metric tons of steel slab during 1999.
10.5 Letter, dated October 6, 1998, from the Registrant to Companhia
Siderurgica National ("CSN"), confirming CSN's agreement to supply the
Registrant with 100,000 metric tons of steel in 1999.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.6 Contract, dated August 20, 1990, by and between the Registrant and
Seamar Shipping Corporation of Monrovia, Liberia, as amended.
10.7 The Burlington Northern and Santa Fe Railway Company BNSFC 302606
Regulated Transportation Contract, dated as of November 19, 1998, by
and between the Registrant and Burlington Northern Railroad Company.
10.8 Stevedore and Terminal Services Agreement, dated as of January 1,
1996, between Rio Doce Pasha Terminal L.P. and the Registrant, as
amended.
10.9 Equipment Lease Agreement, dated as of September 30, 1998, by and
between the Registrant and State Street Bank and Trust Company of
California, National Association.
10.10 Settlement Agreement, dated as of June 1, 1995, by and among the
Registrant, Kaiser Ventures, Inc., KSC Recovery, Inc. and Kaiser Steel
Land Development, Inc.
10.11 Groundwater Indemnity Agreement, dated as of June 1, 1995, between
the Registrant and Kaiser Ventures, Inc.
10.12 1996 Expedited Remedial Action Voluntary Enforceable Agreement, by
and among the Registrant and the California Environmental Protection
Agency, Department of Toxic Substances Control.
10.13 Purchase Agreement dated March 30, 1999 by and among the Registrant,
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, BancBoston Robertson Stephens Inc. and NationsBanc
Montgomery Securities LLC.
10.14 Registration Rights Agreement dated as of April 6, 1999 by and among
the Registrant, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, BancBoston Robertson Stephens Inc. and NationsBanc
Montgomery Securities LLC.
27.1 Financial Data Schedule
</TABLE>
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
Of
PACIFIC STEEL CORPORATION
-----------
I, THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, do hereby certify as follows:
FIRST: The name of the corporation is
PACIFIC STEEL CORPORATION
SECOND: Its registered office is to be located at 306 South State Street,
in the City of Dover, in the County of Kent, in the State of Delaware. The name
of its registered agent at that address is the United States Corporation
Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
Without limiting in any manner the scope and generality of the foregoing,
it is hereby provided that the corporation shall have the following purposes,
objects and powers:
To purchase, manufacture, produce, assemble, receive, lease or in
any manner acquire, hold, own, use, operate, install, maintain, service,
repair, process, alter, improve, import, export, sell, lease, assign,
transfer and generally to trade and deal in and with raw materials, natural
or manufactured articles of products, machinery, equipment, devices,
systems, parts, supplies, apparatus, goods, wares, merchandise and personal
property of every kind, nature or description, tangible or intangible, used
or capable of being used
<PAGE>
for any purpose whatsoever; and to engage and participate in any
mercantile, manufacturing or trading business of any kind or character.
To improve, manage, develop, sell, assign, transfer, lease,
mortgage, pledge or otherwise dispose of or turn to account or deal with
all or any part of the property of the corporation and from time to time to
vary any investment or employment of capital of the corporation.
To borrow money, and to make and issue notes, bonds, debentures,
obligations and evidences of indebtedness of all kinds, whether secured by
mortgage, pledge or otherwise, without limit as to amount, and to secure
the same by mortgage, pledge or otherwise; and generally to make and
perform agreements and contracts of every kind and description, including
contracts of guaranty and suretyship.
To lend money for its corporate purposes, invest and reinvest its
funds, and take, hold and deal with real and personal property as security
for the payment of funds so loaned or invested.
To the same extent as natural persons might or could do, to
purchase or otherwise acquire, and to hold, own, maintain, work, develop,
sell, lease, exchange, hire, convey, mortgage or otherwise dispose of and
deal in lands and lease-holds, and any interest, estate and rights in real
property, and any personal or mixed property, and any franchises, rights,
licenses or privileges necessary, convenient or appropriate for any of the
purposes herein expressed.
To apply for, obtain, register, purchase, lease or otherwise to
acquire and to hold, own, use, develop, operate and introduce and to sell,
assign, grant licenses or territorial rights in respect to, or otherwise to
turn to account or dispose of, any copyrights, trade marks, trade names,
brands, labels, patent rights, letters patent of the United States or of
any other country or government, inventions, improvements and processes,
whether used in connection with or secured under letters patent or
otherwise.
To participate with others in any corporation, partnership,
limited partnership, joint venture, or other association of any kind, or in
any transaction, undertaking or arrangement which the participating
corporation would have power to
-2-
<PAGE>
conduct by itself, whether or not such participation involves sharing or
delegation of control with or to others; and to be an incorporator,
promoter or manager of other corporations of any type or kind.
To pay pensions and establish and carry out pension, profit
sharing, stock option, stock purchase, stock bonus, retirement, benefit,
incentive and commission plans, trusts and provisions for any or all of its
directors, officers and employees, and for any or all of the directors,
officers and employees of its subsidiaries; and to provide insurance for
its benefit on the life or any of its directors, officers or employees, or
on the life of any stockholder for the purpose of acquiring at his death
shares of its stock owned by such stockholder.
To acquire by purchase, subscription or otherwise, and to hold
for investment or otherwise and to use, sell, assign, transfer, mortgage,
pledge or otherwise deal with or dispose of stocks, bonds or any other
obligations or securities of any corporation or corporations; to merge or
consolidate with any corporation in such manner as may be permitted by law;
to aid in any manner any corporation those stocks, bonds or other
obligations are held or in any manner guaranteed by this corporation, or in
which this corporation is in any way interested; and to do any other acts
or things for the preservation, protection, improvement or enhancement of
the value of any such stock, bonds or other obligations; and while owner of
any such stock, bonds or other obligations to exercise all the rights,
powers and privileges of ownership thereof, and to exercise any and all
voting powers thereon; and to guarantee the payment of dividends upon any
stock, the principal or interest or both, of any bonds or other
obligations, and the performance of any contracts.
To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes or the attainment of any of the
objects or the furtherance of any of the powers hereinbefore set forth,
either alone or in association with other corporations, firms or
individuals, and to do every other act or acts, thing or things incidental
or appurtenant to or growing out of or connected with the aforesaid
business or powers or
-3-
<PAGE>
any part or parts thereof, provided the same be not inconsistent with the
laws under which this corporation is organized.
The business or purpose of the corporation is from time to time
to do any one or more of the acts and things hereinabove set forth, and it
shall have power to conduct and carry on its said business, or any part
thereof, and to have one or more offices, and to exercise any or all of its
corporate powers and rights, in the State of Delaware, and in the various
other states, territories, colonies and dependencies of the United States,
in the District of Columbia, and in all or any foreign countries.
The enumeration herein of the objects and purposes of the
corporation shall be construed as powers as well as objects and purposes
and shall not be deemed to exclude by inference any powers, objects or
purposes which the corporation is empowered to exercise, whether expressly
by force of the laws of the State of Delaware now or hereafter in effect,
or impliedly by the reasonable construction of the said laws.
FOURTH: The total number of shares of stock which the corporation is
authorized to issue is one thousand (1,000) shares, all of which are without par
value.
FIFTH: The name and address of the sole incorporator are as follows:
NAME ADDRESS
Christopher H. Benbow 70 Pine Street, New York, N.Y. 10270
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation, and for further
definition, limitation and regulation of the powers of the corporation and of
its directors and stockholders:
-4-
<PAGE>
(1) The number of directors of the corporation shall be such as
from time to time shall be fixed by, or in the manner provided in the By-Laws.
Election of directors need not be by ballot unless the By-Laws so provide.
(2) The Board of Directors shall have power without the assent or
vote of the stockholders to make, alter, amend, change, add to or repeal the By-
Laws of the corporation; to fix and vary the amount to be reserved for any
proper purpose; to authorize and cause to be executed mortgages and liens upon
all of any part of the property of the corporation; to determine the use and
disposition of any surplus or net profits; and to fix the times for the
declaration and payment of dividends.
(3) The directors in their discretion may submit any contract or
act for approval or ratification at any annual meeting of the stockholders or at
any meeting of the stockholders called for the purpose of considering any such
act or contract, and any contract or act that shall be approved or be ratified
by the vote of the holders of a majority of the stock of the corporation which
is represented in person or by proxy at such meeting and entitled to vote
thereat (provided that a lawful quorum of stockholders be there represented in
person or by proxy) shall be as valid and as binding upon the corporation and
upon all the stockholders as though it had been approved or ratified by every
stockholder of the corporation, whether or not the contract or act would
otherwise be open to legal attack because of directors' interest, or for any
other reason.
-5-
<PAGE>
(4) In addition to the powers and authorities hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the corporation; subject, nevertheless, to the provisions of the statutes of
Delaware, of this certificate, and to any By-Laws from time to time made by the
stockholders; provided, however, that no By-Laws so made shall invalidate any
prior act of the directors which would have been valid if such By-Law had not
been made.
SEVENTH: The corporation shall, to the full extent permitted by Section
145 of the Delaware General Corporation Law, as amended from time to time,
indemnify all persons whom it may indemnify pursuant thereto.
EIGHTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class
-6-
<PAGE>
of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said court
directors. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.
NINTH: The corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.
IN WITNESS WHEREOF, I have hereunto set my hand and seal, the 2nd day of
November, 1983.
/s/ Christopher H. Benbow
-------------------------------
Christopher H. Benbow
-7-
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
PACIFIC STEEL CORPORATION
-------------------------------------------------------
Pursuant to Section 242
of the
General Corporation Law
of the
State of Delaware
-------------------------------------------------------
THE UNDERSIGNED, being the President and Secretary of PACIFIC STEEL
CORPORATION (the "Company"), does hereby certify as follows:
(1) That Article FIRST of the Certificate of Incorporation of the Company
is amended to read as follows:
"FIRST: The name of the corporation is CALIFORNIA STEEL INDUSTRIES, INC."
(2) That Article FOURTH of the Certificate of Incorporation of the Company
is amended to read as follows:
"FOURTH: The total number of shares of stock which the corporation is
authorized to issue is six thousand (6,000) shares, consisting of two
thousand (2,000) common shares, two thousand (2,000) Class A preferred
shares and one thousand (1,000) each of Class B and Class C preferred
shares, all of which are without par
-8-
<PAGE>
-2-
value. The Class A, Class B and Class C preferred shares shall
be non-voting and redeemable by the Company at a time and in a
manner and amount to be determined by the Board of Directors.
The Class A preferred shares shall be entitled to a fixed
cumulative dividend plus a percentage of the net profits of
the Company, all to be determined by the board of Directors.
The Class B and Class C preferred shares shall be entitled
only to a fixed cumulative dividend in an amount to be
determined by the Board of Directors."
(3) That the amendments set forth in paragraphs 1 and 2 above
have been duly adopted in accordance with the provisions of section 242 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have set my hand and the seal of the
Company this 4th day of June, 1984.
/s/ Michael Wilkinson [NOTARY STAMP APPEARS HERE]
------------------------
Michael Wilkinson,
President and Secretary
Sworn to before me this
4th day of June 1984.
[NOTARY STAMP APPEARS HERE]
/s/ Jack P. Covernale
___________________________
Notary Public
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
CALIFORNIA STEEL INDUSTRIES, INC.
------------------------------------------
Pursuant to Section 242
of the
General Corporation Law
of the
State of Delaware
------------------------------------------
THE UNDERSIGNED, being the President and Secretary of CALIFORNIA STEEL
INDUSTRIES, INC. (the "Company"), does hereby certify as follows:
(1) That Article THIRD of the Certificate of Incorporation of the Company
is amended to read as follows:
"THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
Without limiting in any manner the scope and generality of the foregoing,
it is hereby provided that the Corporation shall have the following purposes,
objects and powers:
(1) To manufacture, produce, buy, sell, lease, trade and deal in and with
iron ore and other metallic ores, coal, limestone and dolomite and other non-
metallic minerals, iron, steel and all other metals and metallic compounds, and
all products or articles
<PAGE>
-2-
consisting, in whole or in part, of any of the aforesaid materials or
articles, and all by-products of such manufacture or of any of the
aforesaid materials or articles, and materials, products or articles of
every kind or description, and to render service of any kind.
(2) To acquire, use, mortgage or otherwise encumber, sell or dispose of,
real or personal property of every kind and charactor or any right or
interest therein.
(3) To acquire, use, deal in and with, to accept and grant licenses with
respect to, pledge or otherwise encumber, sell or otherwise dispose of,
trade names, trademarks, inventions, formulas, improvements and processes
of any nature whatsoever, copyrights, patent rights and letters patent, or
any interest therein, of the United States and of foreign countries.
(4) To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge
or otherwise dispose of, shares of the capital stock of, or any bonds,
securities or evidence of indebtedness created by any other corporation
organized under the laws of the State of Delaware or any other state,
country, nation or government, and while the owner thereof to exercise all
the rights, powers and privileges of ownership.
(5) To promote or to aid in any manner, financially or otherwise, any
corporation or association; and for this purpose to guarantee or to become
surety upon the contracts, dividends, stocks, bonds, notes and other
obligations of such other corporation or association; and to do any other
act or thing designed to protect, preserve, improve, or enhance the value
of the stocks, bonds, or other evidence of indebtedness or securities of
such other corporation.
(6) To act in any part of the world as agent, factor, broker or
representative of corporations, associations, firms and individuals,
domestic or foreign.
(7) To borrow or raise money for any of the purposes of the Corporation
and, from time to time, without limit as to amount, to draw, make, accept,
endorse, execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures and other
<PAGE>
-3-
negotiable or non-negotiable instruments and evidences of indebtedness, and
to secure the payment thereof and of the interest thereon by mortgage upon
or pledge, conveyance or assignment in trust of the whole or any part of
the property of the Corporation, whether at the time owned or thereafter
acquired and to sell, pledge or otherwise dispose of such bonds, or other
obligations, of the Corporation for its corporate purposes.
(8) To do any and all things necessary or convenient for accomplishment of
the foregoing purposes; to carry on any lawful business whatsoever which
the Corporation may deem proper or convenient in connection with any of the
foregoing purposes, or otherwise, or which may be calculated, directly or
indirectly, to promote the interest of the Corporation or to enhance the
value of its property; to have, enjoy and exercise all rights, powers and
privileges which are now or which may hereafter be conferred upon
corporations organized under the same statutes as this Corporation."
(2) That article FOURTH of the Certificate of Incorporation of the Company
is amended to read as follows:
"FOURTH: (1) The total authorized capital stock of the Corporation
shall consist of six thousand (6,000) shares, of which two thousand (2,000)
shares shall be common stock, two thousand (2,000) shares shall be Class
"A" preferred stock, one thousand (1,000) shares shall be Class "B"
preferred stock, and one thousand (1,000) shares shall be Class "C"
preferred stock.
(2) The common stock shall be issued without par value. The Class "A",
Class "B" and Class "C" preferred stock shall each have a par value of ten
thousand Dollars ($10,000) per share.
(3) Each share of common stock shall entitle its holder to one (1) vote in
the resolutions of the meetings of Shareholders of the Corporation. The
Class "A", Class "B" and Class "C" preferred stock shall have no voting
right. The holders of the common
<PAGE>
-4-
stock shall be entitled to pre-emptive rights to subscribe to any
additional issue of common stock or any security convertible into common
stock.
(4) The Class "A", Class "B" and Class "C" preferred stock shall not be
convertible into common stock, and shall be redeemable by the Corporation,
in whole or in part, at the par value thereof, at such time as the Board of
Directors of the Corporation may determine, but in no event prior to
September 30, 1989.
(5) The Class "A" preferred stock shall enjoy priority to the common stock
in the distribution of dividends and shall be entitled to a dividend
equivalent to five percent (5%) of the par value thereof per annum, on a
cumulative basis, and shall thereafter be entitled to participate in the
distribution of dividends at the same rate and upon the same conditions as
the common stock.
(6) The Class "B" preferred stock shall enjoy priority to the common stock
in the distribution of dividends and shall be entitled to a fixed dividend
equivalent to ten percent (10%) of the par value thereof per annum, on a
cumulative basis. The Class "B" preferred stock shall not be entitled to
further participate in the distribution of dividends beyond the said annual
fixed rate.
(7) The Class "C" preferred stock shall be entitled to such priority and
such dividend as the Board of Directors of the Corporation shall determine.
(8) Each of the Class "A" and Class "B" preferred stock shall have no
priority to the other with respect to the portion of dividends in which
they have priority to the common stock."
(3) That the amendments set forth in paragraphs 1 and 2 above have been
duly adopted in accordance with the provisions of section 242 of the General
Corporation Law of the State of Delaware.
<PAGE>
-5-
IN WITNESS WHEREOF, I have set my hand and the seal of the Company this
24th day of July, 1984.
/s/Michael Wilkinson
-----------------------
Michael Wilkinson
President and Secretary
Sworn to before me this [NOTARY STAMP APPEARS HERE]
24th day of July 1984.
Donna C. Reed
- ------------------------
Notary Public
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
CALIFORNIA STEEL INDUSTRIES, INC.
-------------------------------------
Pursuant to Section 242
of the
General Corporation Law
of the
State of Delaware
-------------------------------------
THE UNDERSIGNED, being the President of California Steel Industries, Inc.
(the "Company"), does hereby certify as follows:
1. that Article FOURTH of the Certificate of Incorporation of the Company is
amended to read as follows:
"FOURTH:(1) the total authorized capital stock of the Corporation shall
consist of eight thousand {8,000) shares, of which two thousand
(2,000) shares shall be common stock, one thousand (1,000) shares
shall be class "A" preferred stock, two thousand (2,000) shares
shall be class "B" preferred stock, and three thousand (3,000)
shares shall be class "C" preferred stock.
(2) The common stock shall be issued without par value. The Class
"A", Class "B" and Class "C" preferred stock shall each have a
par value of ten thousand Dollars ($10,000) per share.
(3) Each share of common stock shall entitle its holder to one
(1) vote in the resolutions of the meetings of Shareholders of
the Corporation. The Class "A", Class "B" and Class "C" preferred
stock shall have no voting right. The holders of the common stock
shall be entitled to pre-emptive rights to subscribe to any
additional issue of common stock or any security convertible into
common stock.
(4) The redemption or conversion into any other class of stock of
the Class "A", Class "B" and Class "C" preferred stock may be
done at such time and in such
<PAGE>
manner as prescribed by the Board of Directors of the
Corporation.
(5) The Class "A" preferred stock shall enjoy priority to the
common stock in the distribution of dividends and shall be
entitled to a dividend equivalent to five percent (5%) of the par
value thereof per annum, on a cumulative basis, and shall
thereafter be entitled to participate in the distribution of
dividends at the same rate and upon the same conditions as the
common stock.
(6) The Class "B" preferred stock shall enjoy priority to the
common stock in the distribution of dividends and shall be
entitled to a fixed dividend equivalent to ten percent (10%) of
the par value thereof per annum, on a cumulative basis. The Class
"B" preferred stock shall not be entitled to further participate
in the distribution of dividends beyond the said annual fixed
rate.
(7) The Class "C" preferred stock shall enjoy priority to the
common stock in the distribution of dividends and shall be
entitled to a dividend equivalent to ten percent (10%) of the par
value thereof per annum, on a cumulative basis, and shall
thereafter be entitled to participate in the distribution of
dividends at the same rate and upon the same conditions as the
common stock.
(8) Each of the Class "A" Class "B" and Class "C" preferred stock
shall have no priority to the other with respect to the portion
of dividends in which they have priority to the common stocks."
2. That the amendments set forth in paragraph 1 above have been duly
adopted in accordance with the provision of section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have set my hand and the seal of the Company this
31st day of Dec., 1987.
<PAGE>
/s/ Hideo Sunami
-------------------------------
Hideo Sunami
President
Sworn to before me this
31st day of December, 1987 [NOTARY STAMP APPEARS HERE]
/s/ Shirley J. Pippin
- -------------------------
Notary Public
/s/ Paulo Burnier
-------------------------------
Paulo Burnier
Chief Financial Officer
(is duly authorized to exercise
the duties of the Secretary)
Sworn to before me this
6th day of January, 1988.
/s/ Shirley J. Pippin [NOTARY STAMP APPEARS HERE]
- --------------------------
Notary Public
<PAGE>
CERTIFICATE OF OWNERSHIP
------------------------
MERGING
-------
CSI TUBULAR PRODUCTS, INC.
--------------------------
INTO
----
CALIFORNIA STEEL INDUSTRIES, INC.
---------------------------------
(Pursuant to Section 253 of the
-------------------------------
Delaware Corporations Law and Section
-------------------------------------
1110 of the California Corporations Codes)
------------------------------------------
Takehiko Haga, President and Matthew Mac Fadden, Secretary of
California Steel Industries, Inc., a Delaware corporation ("CSI"),
certify that:
1. CSI owns all of the outstanding shares of capital stock of CSI
Tubular Products, Inc. ("CSITP"), a corporation duly incorporated on
September 3, 1986 under the laws of the State of California.
2. The following resolutions were adopted by the Unanimous
Written Consent of the Board of Directors of CSI:
"WHEREAS, this corporation owns all of the outstanding
shares of capital stock of CSI Tubular Products, Inc, a
California corporation ("CSITP"); and
WHEREAS, it is deemed in the best interests of this
corporation and its shareholders that this corporation merge CTP
into itself and assume all of its liabilities and obligations; it
is:
RESOLVED, that this corporation merge CSITP into itself as
of the effective date of January 1, 1994 (the "Effective Date");
RESOLVED FURTHER, that this corporation assume all of the
liabilities and obligations of CSITP; and
RESOLVED FURTHER, that the President and Secretary of this
corporation are directed to execute and file a Certificate of
Ownership pursuant to Section 253 of the Delaware Corporations
Law and Section 1110 of the California Corporations Code."
3. The following resolutions were adopted by the Unanimous
Written Consent of the Board of Directors of CSITP:
1
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"WHEREAS, all of the outstanding shares of capital stock of
this corporation are owned by California Steel Industries, Inc., a
Delaware corporation ("CSI"); and
WHEREAS, it is deemed in the best interests of this corporation
and its shareholders that this corporation merge into CSI and that CSI
assume all of this corporation's liabilities and obligations; it is:
RESOLVED, that this corporation merge into CSI as of the
effective date of January 1, 1994 (the "Effective Date"); and
RESOLVED FURTHER, that upon the later of: (i) the Effective
Date; or (ii) the filing of the Certificate of Ownership, the shares of
capital stock of this corporation shall be completely cancelled."
IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed by its president and attested by it secretary, and its corporate seal to
be affixed hereto, the 3rd day of December, A.D., 1993.
/s/ Takehiko Haga
-------------------------------
Takehiko Haga, President
Attest: /s/ Matthew Mac Fadden
------------------------------
Matthew Mac Fadden, Secretary
2
<PAGE>
State of California )
) ss.
County of San Bernardino )
Be it remembered that on this 3rd day of December, A.D. 1993, personally
came before me Eileen Bodhaine a notary public in and for the county and state
aforesaid, Takehiko Haga, president of a corporation of the State of Delaware,
the corporation described in and which executed the foregoing certificate, known
to me personally to be such, and he the said Takehiko Haga as such president,
duly executed the said certificate before me and acknowledged the said
certificate to be his act and deed and the act and deed of said corporation and
the facts stated herein are true; that the signature of the president of said
corporation to the foregoing certificate is in the handwriting of the said
president of said corporation, and that the seal affixed to said certificate,
and attested by the secretary of said corporation, is the common or corporate
seal of said corporation.
In witness whereof, I have hereunto set my hand and seal of office the
day and year aforesaid.
(Seal) [NOTARY STAMP APPEARS HERE] /s/ Eileen Bodhaine
------------------------
Notary Public
3
<PAGE>
MINUTES OF ACTION OF THE BOARD OF DIRECTORS
OF
CALIFORNIA STEEL INDUSTRIES, INC.
A DELAWARE CORPORATION
TAKEN WITHOUT A MEETING BY UNANIMOUS WRITTEN CONSENT
The actions described in these minutes of action were taken by the
board of directors of the above-named corporation by unanimous written consent
pursuant to a provision in the corporation's bylaws permitting such action to
be taken.
The directors hereby adopt the following recitals, resolutions, and
statements:
Merger of California Steel Industries, Inc. and CSI Tubular Products, Inc.
WHEREAS, this corporation owns all of the outstanding shares of capital
stock of CSI Tubular Products, Inc, a California corporation ("CSITP");
and
WHEREAS, it is deemed in the best interests of this corporation and its
shareholders that this corporation merge CSITP into itself and assume
all of its liabilities and obligations; it is:
RESOLVED, that this corporation merge CSITP into itself as of the
effective date of January 1, 1994 (the Effective Date);
RESOLVED FURTHER, that this corporation assume all of the labilities and
obligations of CTP; and
RESOLVED FURTHER, that the President and Secretary of this corporation
are directed to execute and file a Certificate of Ownership pursuant to
Section 253 of the Delaware Corporations Law and Section 1110 of the
California Corporations Code.
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The undersigned, constituting all of the directors of the corporation,
hereby adopt these minutes of action effective on and as of December 1, 1993.
/s/ Mario Pierry /s/ Marcus A. Mota e Silva
- -------------------------- ----------------------------
Mario Pierry Marcus A. Mota e Silva
/s/ Takehiko Haga /s/ Kazuhiro Nishiyama
- -------------------------- ----------------------------
Takehiko Haga Kazuhiro Nishiyama
2
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MINUTES OF ACTION OF THE BOARD OF DIRECTORS
OF
CSI TUBULAR PRODUCTS, INC.
A CALIFORNIA CORPORATION
TAKEN WITHOUT A MEETING BY UNANIMOUS WRITTEN CONSENT
The actions described in these minutes of action were taken by the
board of directors of the above-named corporation by unanimous written consent
pursuant to a provision in the corporation's bylaws permitting such action to
be taken.
The directors hereby adopt the following recitals, resolutions, and
statements:
Merger of California Steel Industries, Inc. and CSI Tubular Products, Inc.
WHEREAS, all of the outstanding shares of capital stock of this
corporation are owned by California Steel Industries, Inc., a Delaware
corporation ("CSI"); and
WHEREAS, it is deemed in the best interests of this corporation and its
shareholders that this corporation merge into CSI and that CSI assume
all of this corporation's liabilities and obligations; it is:
RESOLVED, that this corporation merge into CSI as of the effective date
of January 1, 1994 (the "Effective Date"); and
RESOLVED FURTHER, that upon the later of: (i) the Effective Date; or
(ii) the filing of the Certificate of Ownership, the shares of capital
stock of this corporation shall be completely cancelled.
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The undersigned, constituting all of the directors of the
corporation, hereby adopt these minutes of action effective on and as of
December 1, 1993.
/s/ Antonio Andrade
----------------------------
Antonio Andrade
/s/ Kazuhiro Nishiyama
----------------------------
Kazuhiro Nishiyama
2
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EXHIBIT 3.2
CALIFORNIA STEEL INDUSTRIES, INC.
(a Delaware Corporation)
BYLAWS
ARTICLE I
OFFICES
SECTION 1.01 Registered Office. The registered office of
-----------------
California Steel Industries, Inc. (hereinafter called the Company) in the State
of Delaware shall be at 306 South State Street, City of Dover, and the name of
the registered agent in charge thereof shall be The Corporation Trust Company.
SECTION 1.02 Other Offices. The Company shall have a principal
--------------
office in Fontana, California. The Company may also have an office or offices at
such other place or places, either within or without the State of Delaware, as
the Board of Directors (hereinafter called the Board) may from time to time
determine and as the business of the Company may require.
ARTICLE II
MEETING OF SHAREHOLDERS
SECTION 2.01 Annual Meetings. Annual meetings of the
---------------
shareholders of the Company for the purpose of electing Directors and for the
transaction of such other proper business as may come before such meetings may
be held as the Board shall determine by resolution no later than the end of
March of each year.
SECTION 2.02 Special Meetings. A special meeting of the
-----------------
shareholders for the transaction of any proper business may be called at any
time by the Chairman of the Board upon resolution of the Board or upon the
written request of any shareholder.
SECTION 2.03 Place of Meetings. All meetings of the
-----------------
shareholders shall be held at such time, date, and place, within or without the
State of Delaware, as may from time to time be designated by the Board.
SECTION 2.04 Notice of Meeting, Etc. Except as otherwise
----------------------
required by law, notice of each meeting of the shareholders, whether annual or
special, shall be given not less than fifteen (15) days before the date of the
meeting to each shareholder of record entitled to vote at such meeting by
delivering a written notice thereof to him or her. Such notice may be given by
telefax, telex or air mail, directed to him or her at his or her address
registered on the books of the Company or, if he or she shall not have furnished
the address, then at his or her post office address last known to the Secretary.
Except as otherwise expressly required by law, no publication of any notice of a
meeting of the shareholders shall be required. Every notice of a meeting of the
shareholders shall state the place, date and hour of the meeting and, in the
case of a special meeting, shall also state the purpose or purposes for which
such meeting is called. Notice of any meeting of shareholders shall not be
required to be given to any shareholder who shall have waived such notice and
such notice shall be deemed waived by any shareholder who shall attend such
meeting in person or by proxy, except as a shareholder who shall attend such
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
covened. Except as otherwise expressly required by law, notice of any adjourned
meeting of the shareholders need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken.
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SECTION 2.05 Quorum. Meetings of the shareholders shall be
------
legally convened only when all shareholders are present or legally represented
by their respective agents and decisions thereof shall only be made by
unanimous vote of the shareholders.
SECTION 2.06 Voting. (a) Each shareholder shall, at each meeting
------
of the shareholders, be entitled to vote in person or by proxy each share or
fractional share of the stock of the Company having voting rights on the matter
in question and which shall have been held by him or her and registered in his
or her name on the books of the Company (i) On the date fixed pursuant to
Section 9.05 of these Bylaws as the record date for the determination of
shareholders entitled to notice of and to vote at such meeting, or, (ii) If no
such record date shall have been so fixed, then (a) at the close of business on
the day next preceding the day on which notice of the meeting shall be given or,
(b) if notice of the meeting shall be waived, at the close of business on the
day next preceding the day on which the meeting shall be held.
(b) Shares of its own stock belonging to the Company or to another
corporation, if a majority of the shares entitled to vote in the election of
Directors in such other corporation is held directly or indirectly, by the
Company, shall neither be entitled to vote nor be counted for quorum purposes.
Persons holding stock of the Company in a fiduciary capacity shall be entitled
to vote such stock. Persons whose stock is pledged shall be entitled to vote,
unless in the transfer by the pledgor on the books of the Company he or she
shall have expressly empowered the pledgee to vote thereon, in which case only
the pledgee or his or her proxy may represent such stock and vote thereon. Stock
having voting power standing of record in the names of two (2) or more persons,
whether fiduciaries, members of a partnership, joint tenants in common, tenants
by entirety or otherwise, or with respect to which two (2) or more persons have
the same fiduciary relationship, shall be voted in accordance with the
provisions of the General Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the shareholder
entitled thereto in person or by his or her proxy appointed by an instrument in
writing, subscribed by such shareholder or by his or her attorney thereunto
authorized and delivered to the secretary of the meeting, provided, however,
that no proxy shall be voted or acted upon after one (1) year from its date
unless said proxy shall provide for a longer period. The attendance at any
meeting of a shareholder who may theretofore have given a proxy shall not have
the effect of revoking the same unless he or she shall in writing so notify the
secretary of the meeting prior to the voting of the proxy. At any meeting of the
shareholders all matters, except as otherwise provided in the Certificate of
Incorporation, in these Bylaws or by law, shall be decided by the unanimous vote
of the shareholders present in person or by proxy and entitled to vote thereat
and thereon, a quorum being present. The vote at any meeting of the shareholders
on any question need not be by ballot, unless so directed by the chairman of the
meeting. On a vote by ballot each ballot shall be signed by the shareholder
voting, or by his or her proxy, if there be such proxy, and it shall state the
number of shares voted.
SECTION 2.07 List of Shareholders. The Secretary of the
---------------------
Company shall prepare and make, at least ten (10) days before every meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order and showing the address of each
shareholder and the number of shares registered in the name of each shareholder.
Such list shall be open to examination by any shareholder for any purpose
germane to the meeting during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any shareholder who is
present.
SECTION 2.08. Purpose of Shareholders Meetings. The meetings of
---------------------------------
shareholders shall establish the general policies and guidelines for the
administration of the Company and shall deliberate and decide on the matters
specified below:
(1) Change in the business purposes of the Company;
(2) Dissolution or liquidation of the Company, or merger or
consolidation of the Company with any other corporation or
entity;
(3) Disposition of the whole or an important part of the business
or assets of the Company;
(4) Acquisition of the whole or any important part of the business
or assets of any other corporation or entity;
(5) Establishment of a subsidiary company of the Company or
acquisition of the capital stock of any other entity;
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<PAGE>
(6) Amendment of the Certificate of Incorporation and Bylaws of
the Company;
(7) Increase or decrease of the capital stock of the Company;
(8) Redemption of the preferred stock or conversion of the
preferred stock into the common stock;
(9) Issuance of debentures convertible to stocks;
(10) Appointment of the Board of the Company;
(11) Medium-term business plan of the Company including investment
plan and its annual revisions;
(12) Investment for improvement or expansion of the Company in
excess of two million U.S. dollars (U.S. $2,000,000);
(13) Contracts for leasing out the whole or any important part of
the business or assets of the Company;
(14) Dispositions of profit or dealing with losses of the Company;
(15) The Board's annual report and annual audited financial
statement of the Company;
ARTICLE III
CONSULTATIVE COUNCIL
SECTION 3.01 Purpose and Number. The Consultative Council is a
------------------
high level decision board which shall decide on all relevant matters submitted
to it by all or any shareholder, and shall specifically resolve any deadlock
among the Directors of the Company with respect to any issue under the functions
of the Board. The Consultative Council shall be constituted of two (2) members,
jointly appointed by the shareholders for a term of two (2) years. If there are
only two shareholders with equal number of stocks, each one of the shareholders
shall appoint one (1) Consultative Council member.
SECTION 3.02 Meetings. The Consultative Council shall meet
--------
whenever convened by any of its members or called by the Chairman of the Board,
at the request of all or any shareholder. The decisions of the Consultative
Council shall always be taken by the unanimous affirmative votes of its members.
SECTION 3.03 Arbitration. Any dispute, deadlock, controversy or
-----------
claim not resolved at the Consultative Council shall be settled by arbitration
in accordance with the American Arbitration Association rules then in effect. In
any such arbitration proceeding there shall be three (3) arbitrators. Each Party
shall appoint one (1) arbitrator and the two (2) arbitrators so appointed shall
appoint the third arbitrator who shall act as chairman of the arbitration
tribunal. The arbitration proceeding shall be conducted in Los Angeles,
California. The award of such arbitration shall be final and binding upon the
parties.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 4.01 General Powers. Subject to the provisions
--------------
contained in Article II and III, the Board shall establish the general policies
and guidelines for the administration of the Company. The business and affair of
the Company shall be managed under the direction of the Board.
SECTION 4.02 Number and Term of Office. The number of Directors
-------------------------
shall be five (5). Directors need not be shareholders. Each of the Directors of
the Company shall hold office for one (1) year and this term shall extend until
his successor shall have been duly elected and qualified or until he shall
resign or have been removed in the manner hereinafter
3
<PAGE>
provided.
SECTION 4.03 Election of Directors. The Directors shall be
---------------------
elected annually by the shareholders of the Company and the persons receiving
the greatest number of votes, up to the number of Directors to be elected, shall
be the Directors.
SECTION 4.04 Resignations. Any Director of the Company may
------------
resign at any time by giving written notice to the Board or to the Secretary of
the Company. Any such resignation shall take effect at the time specified
therein or, if the time be not specified, it shall take effect immediately upon
its receipt and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 4.05 Vacancies. Except as otherwise provided in the
---------
Certificate of Incorporation, any vacancy in the Board, whether because of
death, resignation, disqualification, an increase in the number of Directors, or
any other cause, may be filled in accordance with Section 4.02 and 4.03. Each
replacement Director so chosen to fill a vacancy shall hold office until his
successor shall have been elected and shall qualify or until he shall resign or
shall have been removed in the manner hereinafter provided.
SECTION 4.06 Notice, Place of Meeting, Etc. The Chairman of
-----------------------------
the Board shall call and preside at all meetings of the Board. Calls for any
meeting of the Board shall be given by the Secretary to each Director in writing
at least five (5) days before the day on which the meeting is to be held, unless
all the members waive the right to such prior notice. The meetings shall take
place at the head office of the company in Fontana, CA or anywhere agreed upon
by four (4) affirmative votes of the Directors. Directors may participate in any
regular or special meeting of the Board by means of conference telephone or
similar communications equipment, subject to the terms and conditions to be
established by the Board.
SECTION 4.07 Regular Meetings. Regular meetings of the Board
----------------
may be held every quarter at such times as the Board shall from time to time by
resolution determine. If any day fixed for a regular meeting shall be a legal
holiday at the place where the meeting is to be held, then the meeting shall be
held at the same hour and place on the next succeeding business day that is not
a legal holiday.
SECTION 4.08 Special Meetings. Special meetings of the Board
----------------
shall be held whenever called by the Chairman at his own initiative or upon
request of any Director. Except as otherwise provided by law or by these Bylaws,
notice of the time, place and purpose of each such special meeting shall be
given in writing sent to each Director, addressed to him at his residence or
usual place of business, at least five (5) days before the day on which the
meeting is to be held. Notice of any meeting of the Board shall not be required
to be given to any Director who is present at such meeting, except a Director
who shall attend such meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
SECTION 4.09 Quorum and Manner of Acting. Except as otherwise
---------------------------
provided in these Bylaws or by law, the presence of four (4) Directors shall be
required to constitute a quorum for the transaction of business at any meeting
of the Board, and all matters shall be decided at any such meeting, in which a
quorum is present, by the affirmative votes of four of the Directors present. In
the absence of a quorum, a majority of Directors present at any meeting may
adjourn the same from time to time until a quorum shall be present. Notice of
any adjourned meeting need not be given. The Directors shall act only as a
Board, and the individual Directors shall have no power as such. In the event of
a deadlock between the Directors with respect to any issue under its directions,
the matter shall be submitted to the Consultative Council. Should the deadlock
be not resolved at the Consultative Council, any of the parties may resort to
the arbitration procedure as stipulated in Section 3.03 hereof.
SECTION 4.10 Action by Consent. Any action required or
-----------------
permitted to be taken at any meeting of the Board, or of any committee thereof,
may be taken without a meeting if a written consent thereto is signed by all
members of the Board or of such committee, as the case may be. Such written
consent shall be filed with the minutes of proceedings of the Board.
SECTION 4.11 Removal of Directors. Subject to the provisions
--------------------
of the Certificate of Incorporation, any Director may be removed at any time,
either with or without cause, by the affirmative vote of the shareholders having
a majority of the voting power of the Company given at a special meeting of the
shareholders called for such purpose.
4
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SECTION 4.12 Compensation. The Directors shall receive only
------------
such compensation for their services as Directors, as may be allowed by
resolution at any of the meetings of the shareholders. The board may provide
that the Company shall reimburse each such Director for any expense incurred by
him on account of his attendance at any meetings of the Board or committees of
the Board. Neither the payment of such compensation nor the reimbursement of
such expenses shall be construed to preclude any Director from serving the
Company or its subsidiaries in any other capacity and receiving compensation
therefore.
SECTION 4.13 Specified Powers of the Board.
-----------------------------
The Board shall deliberate and decide on the matters specified
below:
(1) The Board shall deliberate matters listed in Section 2.08
hereof and propose them for the approval of the shareholders;
(2) Establishment of the Medium-Term Business Plan of the Company
according to shareholders' strategies, and establishment of
the basic policy, annual plan and budget of the Company,
including production, sales, profit estimates, investment plan
and other budget related matters;
(3) Investment for improvement or expansion of the plant of the
Company less than two million U.S. dollars (U.S. $2,000,000);
(4) Establishment or change of:
i) the organizational structure, at the managers' level,
including branches or liaison offices of the Company;
ii) the internal regulations of the Company;
(5) Appointment or removal of the officers and external auditors
of the Company;
(6) Determination of detailed terms and conditions for the
receiving of personnel from each shareholder or its affiliated
companies;
(7) Engagement of outside certified public accountant(s),
counsel(s), and consultant(s);
(8) Creation of advisory and other Board committees;
(9) Appointment of authorized signer(s) of the Company with
respect to contracts, checks or any other documents;
(10) General increase or decrease of the level of salary and wage
for employees and change of the salary/wage structure and
system;
(11) Determination of the amount of contribution by the Company
for profit sharing plan of employees with prior consultation
with the shareholders;
(12) Loans or prepayments or other financing agreements or
borrowing of money in excess of one million U.S. dollars
(U.S. $1,000,000), except draw-downs under already approved
loans or other financing agreements;
(13) Creating a pledge or other encumbrance on the assets of the
Company in excess of five hundred thousand U.S. dollars
(U.S. $500,000);
(14) Opening of credit in favor of a customer of the Company in
excess of five hundred thousand U.S. dollars (U.S. $500,000);
(15) Settlement of a claim with customers, suppliers, or others,
in excess of two hundred thousand U.S.
5
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dollars (U.S. $200,000);
(16) Approval of policies and general conditions for the purchase
of slabs, ocean transportation, unloading transportation by
train and purchase of machinery and equipment, materials,
utilities and services, and for the sale of finished steel
products of the Company;
(17) Approval of policies and general terms for the contracts not
specified in Paragraph (16) above in excess of five hundred
thousand U.S. dollars (U.S. $500,000);
(18) Initiation and defense of legal and administrative
proceedings involving the Company, its Director(s), and/or
its officers, provided that in the case of initiation of such
proceedings the shareholders should previously be informed;
(19) Any other business which may be submitted to the Board from
time to time, subject to the provisions of item 2.08 hereof.
SECTION 4.14 Other Powers. Any powers other than those enumerated
------------
in Section 4.13 above shall also be reserved for the Board, subject to the
provisions of item 2.08 hereof.
ARTICLE V
OFFICERS
SECTION 5.01 Number. Subject to the requirements of applicable
------
law, the officers of the Company shall be a President and such officers as may
be required by applicable law and appointed by the President and designated by
the Board and such other officers not required by law as may be appointed by the
President and designated by the Board (the number thereof and their respective
titles to be determined by the Board). The powers and duties of the President
and each officer shall be determined by applicable law or established by the
Board.
SECTION 5.02 Election, Term of Office and Qualification. Each
------------------------------------------
officer shall hold office for one year or until his successor shall have been
duly chosen and shall qualify, or until his resignation or removal in the manner
hereinafter provided.
SECTION 5.03 Removal. Any officer of the Company may be removed
-------
at any time by resolution of the Board.
SECTION 5.04 Resignations. Any officer may resign at any time by
------------
giving written notice of his resignation to the Board or the Secretary of the
Company. Any such resignation shall take effect at the time specified therein
or, if the time be no specified, upon receipt thereof by the Board or the
Secretary, as the case may be; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 5.05 Vacancies and Absences. A vacancy in any office
----------------------
because of death, resignation, removal, disqualification or other cause, may be
filled for the unexpired portion of the term thereof in the manner prescribed in
these Bylaws for regular appointments or elections to such office. In the case
of temporary absence or impediment of an officer, such officer shall appoint in
writing one of the other officers, who shall exercise, along with its own, the
function of the officer absent or under impediment.
SECTION 5.06 The President. The President of the Company shall
-------------
have, subject to the control of the Board, general and active supervision and
management over the business of the Company and over its several officers,
agents and employees.
SECTION 5.07 The Secretary. The Secretary shall be appointed by
-------------
the President, among the officers of the Company. The Secretary shall, if
present, record the proceedings of all meetings of the Board, of the
shareholders and of all committees of which a secretary shall not have been
appointed in one or more books provided for that purpose; he or she shall see
that all notices are duly given in accordance with these Bylaws and so required
by law; he or she shall be custodian of the seal of the Company and shall affix
and attest the seal to all documents to be executed on behalf of the Company
under
6
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its seal, and in general he or she shall perform all the duties incident to the
office of Secretary and such other duties as may from time to time be assigned
to him or her by the Board.
SECTION 5.08. Compensation. The compensation of the officers of
------------
the Company shall be fixed from time to time by the Board. None of such officers
shall be prevented from receiving such compensation by reason of the fact that
he is also a Director of the Company. Nothing contained herein shall preclude
any officer from serving the Company, or any affiliated company, in any other
capacity and receiving such compensation by reason of the fact that he is also a
Director of the Company. Nothing contained herein shall preclude any officer
from serving the Company, or any affiliated company, in any other capacity and
receiving proper compensation therefor.
ARTICLE VI
EXTERNAL AUDITORS
SECTION 6.01 Selection of Auditors. External auditors shall be
---------------------
designated by the Board prior to the close of business in each fiscal year, who
shall audit and examine the books of accounts of the Company and shall certify
to the Board and shareholders the annual balance of said books, which shall be
prepared at the close of each fiscal year. No Director or officer of the
Company, and no firm or corporation of which such Director or officer is a
member, shall be eligible to discharge the duties of the external auditors.
SECTION 6.02 Compensation of Auditors. The compensation of the
------------------------
external auditors shall be fixed by the Board.
ARTICLE VII
INTERNAL ORGANIZATION
SECTION 7.01 Organization. The internal organization of the
------------
Company for performance of the day-to-day activities such as
departments/sections and the number of employees to be allocated to each
department/section, shall be established by the Board in due course, always
aiming at the most efficient performance.
SECTION 7.02 Duties. The functions and duties of each
------
department/section shall be defined in the internal regulations to be timely
approved by the Board.
SECTION 7.03 Appointment of Managers. Appointment of managers,
-----------------------
each of whom shall be the head of each department, shall be confirmed by the
Board based upon nomination made by the officer in charge of the respective
area.
ARTICLE VIII
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 8.01 Execution of Contracts. The Board, except as
----------------------
otherwise provided in these Bylaws, may authorize any officer or officers, agent
or agents, to enter into any contract or execute any instrument in the name and
on behalf of the Company, and such authority may be general or confined to
specific instances; and, unless so authorized by the Board or by these Bylaws,
no officer, agent or employee shall have any power or authority to bind the
Company by any contract or engagement or to pledge its credit or to render it
liable for any purpose or in any amount.
SECTION 8.02 Checks, Drafts, Etc. All Checks, drafts or other
-------------------
orders for payment, notes or other evidence of indebtedness issued in the name
of or payable to the Company, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such officer, agent or attorney shall give such
bond, if any, as the Board may require.
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SECTION 8.03 Deposits. All funds of the Company not otherwise
--------
employed shall be deposited from time to time to the credit of the Company in
such banks, trust companies or other depositories as the Board may select. For
the purpose of deposit and for the purpose of collection for the account of the
Company, the President or any other officer or officers, agent or agents, or
attorney or attorneys of the Company who shall from time to time be determined
by the Board may endorse, assign and deliver checks, drafts and other orders for
the payment of money which are payable to the order of the Company.
SECTION 8.04 General and Special Bank Accounts. The Board may
---------------------------------
from time to time authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
select. The Board may make such special rules and regulations with respect to
such bank accounts, not inconsistent with the provisions of these Bylaws, as it
may deem expedient.
ARTICLE IX
SHARES AND THEIR TRANSFER
SECTION 9.01 Certificates for Stock. Every owner of stock of the
----------------------
Company shall be entitled to have a certificate or certificates to be in such
form as the Board shall prescribe, certifying the number and class of shares of
the stock of the Company owned by him or her. The certificates representing
shares of such stock shall be numbered in the order in which they shall be
issued and shall be signed in the name of the Company by the President or
another officer. Any of or all of the signatures on the certificates may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon any such certificate, shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, such certificate may nevertheless be issued by the Company with the
same effect as though the person who signed such certificate or whose facsimile
signature shall have been placed thereupon, were such officer, transfer agent or
registrar at the date of issue. A record shall be kept of the respective
names of the persons, firms or companies owning the stock represented by such
certificates, the number and class of shares represented by such certificates,
respectively, and the respective dates thereof, and in case of cancellation, the
respective dates of cancellation. Every certificate surrendered to the Company
for exchange or transfer shall be cancelled, and no new certificate shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for in Section 9.04.
SECTION 9.02 Transfers of Stock. Transfers of shares of stock of
------------------
the Company shall be made only on the books of the Company by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, a transfer clerk or a transfer agent
appointed as provided in Section 9.03, and upon surrender of the certificates
for such shares properly endorsed and the payment of all taxes thereon. The
person in whose name shares of stock stand on the books of the Company shall be
deemed the owner thereof for all purposes as regards the Company. Whenever any
transfer of shares shall be made for collateral security, and not absolutely,
such fact shall be so expressed in the entry of transfer if, when the
certificate or certificates shall be presented to the Company for transfer, both
the transferor and the transferee request the Company to do so.
SECTION 9.03 Regulations. The Board may make such rules and
-----------
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates for shares of
the stock of the Company. It may appoint or authorize any officer or officers to
appoint, one or more transfer clerks or one or more transfer agents and one or
more registrars, and may require all certificates for stock to bear the
signature or signatures of any of them.
SECTION 9.04 Lost, Stolen, Destroyed, and Mutilated Certificates.
---------------------------------------------------
In any case of loss, theft, destruction or mutilation of any certificate of
stock, another may be issued in its place upon proof of such loss, theft,
destruction or mutilation and, upon the giving of a bond of indemnity to the
Company in such form and in such sum as the Board may direct; provided, however,
that a new certificate may be issued without requiring any bond when, in the
judgment of the Board, it is proper to do so.
SECTION 9.05 Fixing Date for Determination of Shareholders of
------------------------------------------------
Record. In order that the Company may determine the shareholders entitled to
- ------
notice of or to vote at any meeting of shareholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
other change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board may
8
<PAGE>
fix, in advance, a record date, which shall not be more than sixty (60) nor less
than ten (10) days before the date of such meeting, nor more than sixty (60)
days prior to any other action. If in any case involving the determination of
shareholders for any purpose other than notice of or voting at a meeting of
shareholders, the Board shall not fix such a record date, the record date for
determining shareholders for such purpose shall be the close of business on the
day on which the Board shall adopt a resolution relating thereto. A
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall apply to any adjournment of such meeting; provided, however,
that the Board may fix a new record date for such adjourned meeting.
ARTICLE X
INDEMNIFICATION
SECTION 10.01 Action, Etc. other than by or in the Right of the
-------------------------------------------------
Company. The Company shall indemnify any person who was, is or threatened to be
- -------
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Company) by reason of the fact that he is or was a
Director, officer, employee or agent of the Company, or is or was serving at the
request of the Company as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner reasonably
believed to be in, or not opposed to, the best interests of the Company and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
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 he reasonably
believed to be in, or not opposed to the best interests of the Company and, with
respect to any criminal action or proceeding, that he had reasonable cause to
believe that his conduct was unlawful.
SECTION 10.02 Actions, Etc. by or in the Right of the Company.
-----------------------------------------------
The Company shall indemnify any person who was, is or threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Company to procure a judgment in its favor by reason of the fact that he
is or was a Director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a Director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorney's fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner reasonably believed to be in or not opposed
to the best interests of the Company, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Company unless and only to the extent that the Court of Chancery
of the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the Court of Chancery or such other court shall
deem proper.
SECTION 10.03 Determination of Right of Indemnification. Any
-----------------------------------------
indemnification under Section 10.01 or 10.02 (unless ordered by a court) shall
be made by the Company only as authorized in the specific case upon a
determination that indemnification of the Director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 10.01 and 10.02. Such determination shall be made
(i) by the Board by a majority vote of a quorum consisting of Directors who were
not parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested Directors so
directs, by independent legal counsel in written opinion, or (iii) by the
shareholders.
SECTION 10.04 Indemnification Against Expenses of Successful
----------------------------------------------
Party. Notwithstanding the other provisions of this Article, to the extent that
- -----
a Director, officer, employee or agent of the Company has been successful on the
merits, or otherwise, in defense of any action, suit or proceeding referred to
in Section 10.01 or 10.02 or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorney's fees) actually
and reasonably incurred by him in connection therewith.
SECTION 10.05 Prepaid Expenses. Expenses incurred by an officer
----------------
or Director in defending a civil or criminal action, suit or proceeding may be
paid by the Company in advance of the final disposition of such action, suit or
9
<PAGE>
proceeding as authorized by the Board in the specific case upon receipt of an
undertaking by or on behalf of the Director or officer to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Company as authorized in this Article. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board deems appropriate.
SECTION 10.06 Other Rights and Remedies. The indemnification
-------------------------
provided by this Article shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any Bylaws, agreement
vote of shareholders or disinterested Directors, or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
SECTION 10.07 Insurance. Upon resolution passed by the Board, the
---------
Company may purchase and maintain insurance on behalf of any person who is or
was a Director, officer, employee or agent of the Company, or is or was serving
at the request of the Company as a Director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Company would
have the power to indemnify him against such liability under the provisions of
this Article.
SECTION 10.08 Constituent Companies. For the purposes of this
---------------------
Article, references to "the Company" include all constituent Companies absorbed
in a consolidation or merger as well as the resulting or surviving Company, so
that any person who is or was a Director, officer, employee or agent of such a
constituent Company or is or was serving at the request of such constituent
Company as a Director, officer, employee or agent of another Company,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving Company as he would if he had served the resulting or surviving
Company in the same capacity.
SECTION 10.09 Other Enterprises, Fines, and Servicing at
------------------------------------------
Company's Request. For purposes of the Article references to "other enterprises"
- -----------------
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Company" shall include any service
as a Director, officer, employee or agent of the Company 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; and a person
who acted in good faith and in a manner reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this Article.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Corporate Seal. The Board shall provide a
--------------
corporate seal, which shall be in the form of a circle and shall bear the name
of the Company and words and figures showing that the Company was incorporated
in the State of Delaware and the year of the incorporation.
SECTION 11.02 Waiver of Notices. Whenever notice is required to
-----------------
be given by these Bylaws, the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 11.03 Amendments. These Bylaws may be altered, amended or
----------
repeated and new Bylaws may be made by the shareholders, at any annual meeting
of the shareholders, without previous notice, or at any special meeting of the
shareholders, provided that the notice of such proposed amendment, modification,
repeal or adoption is given in the notice of the special meeting.
10
<PAGE>
EXHIBIT 4.1
================================================================================
CALIFORNIA STEEL INDUSTRIES, INC.,
as Company
and
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
_____________________
INDENTURE
Dated as of April 6, 1999
_____________________
$150,000,000
8 1/2% Senior Notes due 2009
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ----------
<S> <C>
310(a)(1)......................................................................... 7.10
(a)(2)......................................................................... 7.10
(a)(3)......................................................................... N.A.
(a)(4)......................................................................... N.A.
(a)(5)......................................................................... 7.10
(b)............................................................................ 7.08; 7.10;
10.02
(c)............................................................................ N.A.
311(a)............................................................................ 7.11
(b)............................................................................ 7.11
(c)............................................................................ N.A.
312(a)............................................................................ 2.05
(b)............................................................................ 10.03
(c)............................................................................ 10.03
313(a)............................................................................ 7.06
(b)(1)......................................................................... N.A.
(b)(2)......................................................................... 7.06
(c)............................................................................ 7.06; 10.02
(d)............................................................................ 7.06
314(a)............................................................................ 4.06; 4.08;
10.02
(b)............................................................................ N.A.
(c)(1)......................................................................... 10.04
(c)(2)......................................................................... 10.04
(c)(3)......................................................................... N.A.
(d)............................................................................ N.A.
(e)............................................................................ 10.05
(f)............................................................................ N.A.
315(a)............................................................................ 7.01(b)
(b)............................................................................ 7.05; 10.02
(c)............................................................................ 7.01(a)
(d)............................................................................ 7.01(c)
(e)............................................................................ 6.11
316(a)(last sentence)............................................................. 2.09
(a)(1)(A)...................................................................... 6.05
(a)(1)(B)...................................................................... 6.04
(a)(2)......................................................................... N.A.
(b)............................................................................ 6.07
(c)............................................................................ 9.04
317(a)(1)......................................................................... 6.08
(a)(2)......................................................................... 6.09
(b)............................................................................ 2.04
318(a)............................................................................ 10.01
(c)............................................................................ 10.01
</TABLE>
N.A. means Not Applicable.
________________
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.............................................. 1
SECTION 1.02. Incorporation by Reference of TIA........................ 27
SECTION 1.03. Rules of Construction.................................... 28
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating......................................... 28
SECTION 2.02. Execution and Authentication;
Aggregate Principal Amount.......................... 29
SECTION 2.03. Registrar and Paying Agent.............................. 30
SECTION 2.04. Paying Agent To Hold Assets in Trust.................... 31
SECTION 2.05. Holder Lists............................................ 31
SECTION 2.06. Transfer and Exchange................................... 31
SECTION 2.07. Replacement Notes....................................... 32
SECTION 2.08. Outstanding Notes....................................... 33
SECTION 2.09. Treasury Notes.......................................... 33
SECTION 2.10. Temporary Notes......................................... 34
SECTION 2.11. Cancellation............................................ 34
SECTION 2.12. Defaulted Interest...................................... 34
SECTION 2.13. CUSIP Number............................................ 35
SECTION 2.14. Deposit of Monies....................................... 35
SECTION 2.15. Restrictive Legends..................................... 36
SECTION 2.16. Book-Entry Provisions
for Global Security................................. 38
SECTION 2.17. Special Transfer Provisions............................. 39
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee..................................... 42
SECTION 3.02. Selection of Notes To Be Redeemed...................... 42
SECTION 3.03. Optional Redemption.................................... 43
SECTION 3.04. Notice of Redemption................................... 44
SECTION 3.05. Effect of Notice of Redemption......................... 45
SECTION 3.06. Deposit of Redemption Price............................ 45
SECTION 3.07. Notes Redeemed in Part................................. 46
SECTION 3.08 Sinking Fund........................................... 46
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.......................................... 46
SECTION 4.02. Maintenance of Office or Agency........................... 46
SECTION 4.03. Corporate Existence....................................... 47
SECTION 4.04. Payment of Taxes and Other Claims......................... 47
SECTION 4.05. Maintenance of Properties
and Insurance......................................... 47
SECTION 4.06. Compliance Certificate;
Notice of Default..................................... 48
SECTION 4.07. Compliance with Laws...................................... 49
SECTION 4.08. Provision of Financial Statements......................... 49
SECTION 4.09. Waiver of Stay, Extension
or Usury Laws......................................... 50
SECTION 4.10. Limitation on Restricted Payments......................... 50
SECTION 4.11. Limitations on Transactions
with Affiliates....................................... 55
SECTION 4.12. Limitation on Indebtedness................................ 56
SECTION 4.13. Limitation on Dividend and
Other Payment Restrictions
Affecting Restricted Subsidiaries..................... 59
SECTION 4.14. Change of Control......................................... 60
SECTION 4.15. Disposition of Proceeds of Asset Sales.................... 62
SECTION 4.16. Limitation on Liens....................................... 66
SECTION 4.17. Limitation of Issuances and Sale of
Capital Stock of Restricted Subsidiaries.............. 66
SECTION 4.18. Limitation on Unrestricted Subsidiaries................... 67
SECTION 4.19. Limitation on Sale and Lease-Back Transactions............ 68
SECTION 4.20. Application of Fall Away Covenants........................ 69
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Consolidation, Merger,
Sale of Assets, Etc................................... 69
ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default......................................... 71
SECTION 6.02. Acceleration.............................................. 73
SECTION 6.03. Other Remedies............................................ 74
SECTION 6.04. Waiver of Past Defaults................................... 74
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
SECTION 6.05. Control by Majority....................................... 74
SECTION 6.06. Limitation on Suits....................................... 75
SECTION 6.07. Right of Holders To Receive Payment....................... 75
SECTION 6.08. Collection Suit by Trustee................................ 76
SECTION 6.09. Trustee May File Proofs of Claim.......................... 76
SECTION 6.10. Priorities................................................ 76
SECTION 6.11. Undertaking for Costs..................................... 77
SECTION 6.12. Restoration of Rights and Remedies........................ 77
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee......................................... 78
SECTION 7.02. Rights of Trustee......................................... 79
SECTION 7.03. Individual Rights of Trustee.............................. 80
SECTION 7.04. Trustee's Disclaimer...................................... 81
SECTION 7.05. Notice of Default......................................... 81
SECTION 7.06. Reports by Trustee to Holders............................. 81
SECTION 7.07. Compensation and Indemnification
of Trustee and Its Prior Claim........................ 82
SECTION 7.08. Replacement of Trustee.................................... 83
SECTION 7.09. Successor Trustee by Merger, Etc.......................... 84
SECTION 7.10. Eligibility; Disqualification............................. 84
SECTION 7.11. Preferential Collection of
Claims Against Company................................ 85
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations...................... 85
SECTION 8.02. Application of Trust Money................................ 88
SECTION 8.03. Repayment to the Company.................................. 88
SECTION 8.04. Reinstatement............................................. 89
SECTION 8.05. Acknowledgment of Discharge
by Trustee............................................ 89
ARTICLE NINE
MODIFICATION OF THE INDENTURE
SECTION 9.01. Without Consent of Holders................................ 90
SECTION 9.02. With Consent of Holders................................... 90
SECTION 9.03. Compliance with TIA....................................... 92
SECTION 9.04. Revocation and Effect of Consents......................... 92
SECTION 9.05. Notation on or Exchange of Notes.......................... 93
SECTION 9.06. Trustee To Sign Amendments, Etc........................... 93
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. TIA Controls.............................................. 93
SECTION 10.02. Notices................................................... 94
SECTION 10.03. Communications by Holders
with Other Holders.................................... 95
SECTION 10.04. Certificate and Opinion as
to Conditions Precedent............................... 95
SECTION 10.05. Statements Required in
Certificate or Opinion................................ 95
SECTION 10.06. Rules by Trustee, Paying
Agent, Registrar...................................... 96
SECTION 10.07. Legal Holidays............................................ 96
SECTION 10.08. Governing Law............................................. 96
SECTION 10.09. No Adverse Interpretation
of Other Agreements................................... 96
SECTION 10.10. No Personal Liability..................................... 97
SECTION 10.11. Successors................................................ 97
SECTION 10.12. Duplicate Originals....................................... 97
SECTION 10.13. Severability.............................................. 97
SECTION 10.14. Independence of Covenants................................. 97
Exhibit A - Form of Initial Note........................................ A-1
Exhibit B - Form of Exchange Note....................................... B-1
Exhibit C - Form of Certificate To Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors............. C-1
Exhibit D - Form of Certificate To Be Delivered in Connection
with Transfers Pursuant to Regulation S............... D-1
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of this Indenture
-iv-
<PAGE>
INDENTURE, dated as of April 6, 1999, between CALIFORNIA STEEL
INDUSTRIES, INC., a Delaware corporation (the "Company"), and STATE STREET BANK
AND TRUST COMPANY OF CALIFORNIA, N.A., a national banking association duly
organized under the laws of the United States, as Trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of the other party
and for the equal and ratable benefit of the Holders of the Company's 8 1/2%
Senior Notes due 2009, Series A (the "Initial Notes"), and, when and if issued
as provided in the Registration Rights Agreement of even date herewith, the
Company's 8 1/2% Senior Notes due 2009 Series B, (the "Exchange Notes" and,
together with the Initial Notes, the "Notes").
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
SECTION 1.01. Definitions.
-----------
"Acquired Indebtedness" means Indebtedness of a Person (i) assumed in
---------------------
connection with an Asset Acquisition from such Person or (ii) existing at the
time such Person becomes a Restricted Subsidiary of any other Person (other than
any Indebtedness incurred in connection with, or in contemplation of, such Asset
Acquisition or such Person becoming such a Restricted Subsidiary). Acquired
Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Restricted Subsidiary, as the case may be.
"Additional Interest" shall have the meaning set forth in the
-------------------
Registration Rights Agreement.
"Affiliate" means with respect to any specified Person:
---------
(i) any other Person directly or indirectly controlling or controlled
by or under direct or indirect common control with such specified Person;
(ii) any other Person that owns, directly or indirectly, 5% or more of
such specified Person's Capital Stock or any officer or director of any
such specified Person or other Person or, with respect to any natural
Person, any person having a relationship with such Person by blood,
marriage or adoption no more remote than first
<PAGE>
cousin; or (iii) any other Person 5% or more of the Voting Stock of which
is beneficially owned or held directly or indirectly by such specified
Person.
For the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-Registrar.
-----
"Agent Members" has the meaning provided in Section 2.16.
-------------
"Asset Acquisition" means (i) an Investment by the Company or any
-----------------
Restricted Subsidiary in any other Person pursuant to which such Person will
become a Restricted Subsidiary or will be merged or consolidated with or into
the Company or any Restricted Subsidiary or (ii) the acquisition by the Company
or any Restricted Subsidiary of the assets of any Person which constitute
substantially all of the assets of such Person, or any division or line of
business of such Person, or which is otherwise outside of the ordinary course of
business.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
----------
other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback transaction) (collectively, a "transfer"),
directly or indirectly, in one or a series of related transactions, of: (i) any
Capital Stock of any Restricted Subsidiary; (ii) all or substantially all of the
properties and assets of any division or line of business of the Company or its
Restricted Subsidiaries; or (iii) any other properties or assets of the Company
or any Restricted Subsidiary other than in the ordinary course of business. For
the purposes of this definition, the term "Asset Sale" shall not include any
transfer of properties and assets
(a) that is governed by the provisions described under Section 5.01;
provided, however, that any transaction consummated in compliance with
-------- -------
Section 5.01 involving a transfer of less than all of the properties or
assets of the Company shall be deemed to be an Asset Sale with respect to
the properties or assets of the Company that are not so transferred in such
transaction,
(b) that is of obsolete assets in the ordinary course of business,
-2-
<PAGE>
(c) that is made the subject of an Investment consummated in
compliance with Section 4.10,
(d) that is a transaction or series of related transactions for which
the Company or any of the Restricted Subsidiaries receive aggregate
consideration of less than $250,000,
(e) that is the sale by the Company of all or any portion of its
interest in CST,
(f) that is the sale by the Company or any Subsidiary of the Company
or such Subsidiary's interest in any Unrestricted Subsidiary or is the sale
of any assets by an Unrestricted Subsidiary, or
(g) that is the sale by the Company or any Subsidiary of assets that
either (i) are not used in the business of making steel or (ii) are not
critical to the Company's ability to manufacture steel products and were
not owned by the Company or such Subsidiary on the Issue Date; provided,
--------
that any sale pursuant to this subclause (g) complies with clause (ii) of
the first paragraph of Section 4.15.
"Asset Sale Offer" has the meaning set forth under Section 4.15.
----------------
"Attributable Indebtedness" in respect of a Sale and Lease-Back
-------------------------
Transaction means, as at the time of determination, the greater of (i) the fair
value of the property subject to such arrangement and (ii) the present value of
the Notes (discounted at the rate borne by the Notes, compounded semi-annually)
of the total obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale and Lease-Back Transaction (including
any period for which such lease has been extended).
"Authenticating Agent" has the meaning provided in Section 2.02.
--------------------
"Average Life to Stated Maturity" means, with respect to any
-------------------------------
Indebtedness, as at any date of determination, the quotient obtained by dividing
(i) the sum of the products of (a) the number of years from such date to the
date or dates of each successive scheduled principal payment (including, without
limitation, any sinking fund requirements) of such Indebtedness multiplied by
(b) the amount of each such principal payment by (ii) the sum of all such
principal payments.
-3-
<PAGE>
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
--------------
state or foreign law for the relief of debtors.
"Board of Directors" means (i) in the case of a Person that is a
------------------
corporation, the board of directors of such Person and (ii) in the case of any
other Person, the board of directors, board of managers, management committee or
similar governing body of such Person (or in the case of a limited partnership,
of such Person's general partner, or in the case of a limited liability company,
of such Person's manager), or any authorized committee thereof responsible for
the management of the business and affairs of such Person.
"Board Resolution" means, with respect to any Person, a copy of a
----------------
resolution certified by the secretary or an assistant secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification and delivered to the
Trustee.
"Business Day" means any day other than a Saturday, Sunday or any
------------
other day on which commercial banking institutions in the City of New York or
the city in which the Corporate Trust Office of the Trustee is located are
required or authorized by law or other governmental action to be closed.
"Capital Stock" means, with respect to any Person, any and all shares,
-------------
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock, whether now outstanding or issued after the
date of this Indenture.
"Capital Expenditure Indebtedness" means Indebtedness incurred by any
--------------------------------
Person to finance a capital expenditure so long as (i) such capital expenditure
is or should be included as an addition to "Property, Plant and Equipment" in
accordance with GAAP and (ii) such Indebtedness is incurred within 180 days of
the date such capital expenditure is made.
"Capitalized Lease Obligation" means any obligation under a lease of
----------------------------
(or other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of this Indenture, the
amount of such obligation at any date shall be the capitalized amount thereof at
such date, determined in accordance with GAAP consistently applied.
-4-
<PAGE>
"Cash Equivalents" means, at any time,
----------------
(i) any evidence of Indebtedness with a maturity of not more than
one year issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is pledged in
support thereof);
(ii) certificates of deposit or acceptances with a maturity of not
more than one year of any financial institution that is a member of the
Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500,000,000;
(iii) commercial paper with a maturity of not more than one year
issued by a corporation that is not an Affiliate of the Company organized
under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by Standard & Poor's Corporation or at
least P-1 by Moody's Investors Service, Inc.; and
(iv) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (i) and (ii)
above entered into with any financial institution meeting the
qualifications specified in clause (ii) above.
"Certificated Securities" means Notes in definitive registered form.
-----------------------
"Change of Control" means the occurrence of any of the following
-----------------
events (whether or not approved by the Board of Directors of the Company):
(i) (A) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), other than any one or more Permitted
Holders, is or becomes the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a Person shall be deemed to
have "beneficial ownership" of all securities that such Person has the
right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of a majority of the
total voting power of the then outstanding Voting Stock of the Company; or
(B) (x) any such "person" or "group," other than any one or more Permitted
Holders, is or becomes the "beneficial owner" (as defined above), directly
or indirectly, of 50% or more of the total voting power of the then
outstanding Voting Stock of the Company, and (y) at such time, neither (I)
Companhia Vale do Rio
-5-
<PAGE>
Doce and its Subsidiaries nor (II) Kawasaki Steel Corporation and its
Subsidiaries directly or indirectly own 50% or more of the total voting
power of the then outstanding Voting Stock of the Company;
(ii) after the consummation of a Public Equity Offering, during any
period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of the Company (together with any
new directors whose election to such board or whose nomination for election
by the stockholders of the Company was approved by a vote of a majority of
the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved), cease for any reason to constitute a majority of
such Board of Directors then in office; or
(iii) the Company consolidates with or merges with or into any Person
or sells, assigns, conveys, transfers, leases or otherwise disposes of all
or substantially all of its assets to any Person, or any corporation
consolidates with or merges into or with the Company, in all such foregoing
events pursuant to a transaction in which the outstanding Voting Stock of
the Company is changed into or exchanged for cash, securities or other
property, other than any such transaction where the outstanding Voting
Stock of the Company is not changed or exchanged at all (except to the
extent necessary solely to reflect a change in the jurisdiction of
incorporation of the Company) or where (A) the outstanding Voting Stock of
the Company is changed into or exchanged for (x) Voting Stock of the
surviving corporation which is not Redeemable Capital Stock or (y) cash,
securities and other property (other than Capital Stock of the surviving
corporation) in an amount which could be paid by the Company as a
Restricted Payment as described under Section 4.10 (and such amount shall
be treated as a Restricted Payment subject to the provisions in this
Indenture described under Section 4.10, (B) no "person" or "group," other
than Permitted Holders, owns immediately after such transaction, directly
or indirectly, 50% or more of the total outstanding Voting Stock of the
surviving corporation and (C) the holders of the Voting Stock of the
Company immediately prior to such transaction own, directly or indir ectly,
not less than a majority of the total voting power of the then outstanding
Voting Stock of the surviving or transferee corporation immediately after
such transaction; provided, in the case of clauses (A), (B) and (C) of this
--------
clause (iii), that one of the Permitted Holders at all times owns 50% or
more of
-6-
<PAGE>
the total voting power of the then outstanding Voting Stock of the Company.
"Change of Control Offer" has the meaning set forth under Section
-----------------------
4.14.
"Change of Control Payment Date" has the meaning set forth under
------------------------------
Section 4.14.
"Commission" means the U.S. Securities and Exchange Commission.
----------
"Commodity Price Protection Agreement" means any forward contract,
------------------------------------
commodity swap, commodity option or other similar financial agreement or
arrangement relating to, or the value of which is dependent upon, fluctuations
in commodity prices.
"Company" means California Steel Industries, Inc., a Delaware
-------
corporation.
"Consolidated Cash Flow Available for Fixed Charges" means, for any
--------------------------------------------------
period, (i) the sum of, without duplication, the amounts for such period, taken
as a single accounting period, of (a) Consolidated Net Income, (b) to the extent
reducing Consolidated Net Income, Consolidated Non-cash Charges, (c) to the
extent reducing Consolidated Net Income, Consolidated Interest Expense, and (d)
to the extent reducing Consolidated Net Income, Consolidated Income Tax Expense
less (ii) other non-cash items increasing Consolidated Net Income for such
period.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of the
-----------------------------------
aggregate amount of Consolidated Cash Flow Available for Fixed Charges of the
Company for the four full fiscal quarters immediately preceding the date of the
transaction (the "Transaction Date") giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio for which consolidated financial
information of the Company is available (such four full fiscal quarter period
being referred to herein as the "Four Quarter Period") to the aggregate amount
of Consolidated Fixed Charges of the Company for such Four Quarter Period.
For purposes of this definition, "Consolidated Cash Flow Available for
Fixed Charges" and "Consolidated Fixed Charges" will be calculated, without
duplication, after giving effect on a pro forma basis for the period of such
calculation to
(i) the incurrence of any Indebtedness and Preferred Stock of the
Company or any of the Restricted Subsidiaries during the period commencing
on the first day of the Four
-7-
<PAGE>
Quarter Period to and including the Transaction Date (the "Reference
Period"), including, without limitation, the incurrence of the Indebtedness
giving rise to the need to make such calculation, as if such incurrence
occurred on the first day of the Reference Period,
(ii) any Asset Sale or Asset Acquisition (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company or one of the Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring Acquired Indebtedness)
incurring, assuming or otherwise being liable for Acquired Indebtedness and
also including any Consolidated EBITDA (including any pro forma expense and
cost reductions as determined in accordance with Regulation S-X under the
Exchange Act) attributable to the assets which are the subject of the Asset
Acquisition or Asset Sale during the Four Quarter period) occurring during
the Reference Period, as if such Asset Sale or Asset Acquisition occurred
on the first day of the Reference Period and
(iii) the retirement of Indebtedness during the Reference Period that
cannot thereafter be reborrowed occurring as if retired on the first day of
the Reference Period.
In calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio,"
(1) interest on Indebtedness determined on a fluctuating basis as of
the Transaction Date and that will continue to be so determined thereafter
will be deemed to accrue at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date;
(2) if interest on any Indebtedness actually incurred on the
Transaction Date may optionally be determined at an interest rate based
upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rates, then the interest rate in effect on the Transaction
Date shall be deemed to have been in effect during the Reference Period;
and
(3) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered
by Interest Rate Agreements, will be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements.
-8-
<PAGE>
If the Company or any Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the above definition will give effect
to the incurrence of such guaranteed Indebtedness as if the Company or any
Restricted Subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"Consolidated Fixed Charges" means, for any period, the sum of,
--------------------------
without duplication, the amounts for such period of (i) Consolidated Interest
Expense; and (ii) the aggregate amount of cash dividends and other distributions
paid or accrued during such period in respect of Redeemable Capital Stock and
Preferred Stock of the Company.
"Consolidated Income Tax Expense" means, for any period, the provision
-------------------------------
for federal, state, local and foreign income taxes payable by the Company and
the Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, without
-----------------------------
duplication, the sum of (a) the interest expense of the Company and the
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, including, without limitation,
(i) any amortization of debt discount attributable to such period,
(ii) the net cost under or otherwise associated with Interest Rate
Agreements, Currency Agreements and Commodity Price Protection Agreements
(in each case, including any amortization of discounts),
(iii) the interest portion of any deferred payment obligation,
(iv) all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and
(v) all capitalized interest and all accrued interest, and
(b) all but the principal component of Capitalized Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by the Company and the
Restricted Subsidiaries during such period and as determined on a
consolidated basis in accordance with GAAP.
-9-
<PAGE>
"Consolidated Net Income" means, for any period, the consolidated net
-----------------------
income (or loss) of the Company and the Restricted Subsidiaries for such period
on a consolidated basis as determined in accordance with GAAP, adjusted, to the
extent included in calculating such net income (or loss), by excluding, without
duplication,
(i) all extraordinary gains or losses (net of all fees and expenses
relating thereto),
(ii) the portion of net income (or loss) of the Company and the
Restricted Subsidiaries on a consolidated basis allocable to minority
interests in unconsolidated Persons, except (a) to the extent that cash
dividends or distributions are actually received by the Company or a
Restricted Subsidiary or, (b) for purposes of Section 4.10, that portion of
equity in income of affiliate relating to the Company's interest in CST,
(iii) income of the Company and the Restricted Subsidiaries derived
from or in respect of Investments in Unrestricted Subsidiaries, except to
the extent that cash dividends or distributions are actually received by
the Company or a Restricted Subsidiary,
(iv) net income (or loss) of any Person combined with the Company or
any of the Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination,
(v) any gain or loss realized upon the termination of any employee
pension benefit plan,
(vi) gains (or losses), net of all fees and expenses relating
thereto, in respect of any Asset Sales by the Company or a Restricted
Subsidiary,
(vii) the net income of any Restricted Subsidiary to the extent that
the declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is not at the time permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders,
(viii) any restoration to income of any contingency reserve except to
the extent provision for such reserve was made out of income accrued at
any time following the Issue Date and
-10-
<PAGE>
(ix) any gain, arising from the acquisition of any securities, or
the extinguishment, under GAAP, of any Indebtedness of the Company.
"Consolidated Net Worth" with respect to any Person means the equity
----------------------
of the holders of Capital Stock of such Person and its Restricted Subsidiaries
(excluding any Redeemable Capital Stock), as reflected in a balance sheet of
such Person determined on a consolidated basis and in accordance with GAAP.
"Consolidated Non-cash Charges" means, for any period, the aggregate
-----------------------------
depreciation, amortization and other non-cash expenses of the Company and the
Restricted Subsidiaries reducing Consolidated Net Income for such period (other
than any non-cash item requiring an accrual or reserve for cash disbursements in
any future period), determined on a consolidated basis in accordance with GAAP.
"Corporate Trust Office" means the office of the Trustee at which at
----------------------
any particular time the trust created by this Indenture shall be principally
administered, which office at the date of execution of this Indenture is located
at 633 West 5th Street, 12th Floor, Los Angeles, California 90071.
"Covenant Defeasance" has the meaning set forth under Section 8.01.
-------------------
"Credit Facility" means the credit agreement dated as of March 10,
---------------
1999, among the Company, the lenders party thereto in their capacities as
lenders thereunder and BankBoston, N.A., as Loan and Collateral Agent, and Bank
of America National Trust and Savings Association, as Letter of Credit and
Documentation Agent, together with the related documents thereto (including,
without limitation, any guarantee agreements and security documents), in each
case as such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder or adding Restricted Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
"CST" means Companhia Siderurgica de Tubarao.
---
"Currency Agreement" means any foreign exchange contract, currency
------------------
swap agreement or other similar agreement or arrangement designed to protect the
Company or the Restricted Subsidiaries against fluctuations in currency values.
-11-
<PAGE>
"Custodian" means any receiver, trustee, assignee, liquidator,
---------
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of time
-------
or both would be, an Event of Default.
"defeasance" has the meaning set forth under Section 8.01.
----------
"Depository" means The Depository Trust Company, its nominees and
----------
successors.
"Designation" has the meaning set forth under Section 4.18.
-----------
"Designation Amount" has the meaning set forth under Section 4.18.
------------------
"Disinterested Director" means, with respect to any transaction or
----------------------
series of related transactions, a member of the Board of Directors of the
Company who does not have any material direct or indirect financial interest in
or with respect to such transaction or series of related transactions.
"Event of Default" has the meaning set forth under Section 6.01.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated by the Commission thereunder.
"Exchange Notes" means the 8 1/2% Senior Notes due 2009, Series B, to
--------------
be issued pursuant to this Indenture in connection with the offer to exchange
Notes for the Initial Notes pursuant to the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the registration
-------------------------------------
statement filed by the Company pursuant to the Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset or property, the
-----------------
price (or, in the case of a lease, the rent) which could be negotiated in an
arm's-length transaction, for cash, between an informed and willing seller (or
lessor) under no compulsion to sell and an informed and willing buyer (or
lessee) under no compulsion to buy. Fair Market Value with respect to any asset
or property of more than $1,000,000 shall be determined by the Board of
Directors of the Company acting in good faith evidenced by a Board Resolution
thereof delivered to the Trustee.
-12-
<PAGE>
"Four Quarter Period" has the meaning set forth in the definition of
-------------------
"Consolidated Fixed Charge Coverage Ratio."
"GAAP" means, at any date of determination, generally accepted
----
accounting principles in effect in the United States which are applicable at the
date of determination and which are consistently applied for all applicable
periods.
"Global Note" has the meaning provided in Section 2.01.
-----------
"guarantee" means, as applied to any obligation, (i) a guarantee
---------
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit. A guarantee shall include,
without limitation, any agreement to maintain or preserve any other Person's
financial condition or to cause any other Person to achieve certain levels of
operating results.
"Holder" means a registered holder of Notes.
------
"incur" has the meaning set forth in Section 4.12. "Incurrence,"
-----
"incurred" and "incurring" shall have the meanings correlative to the foregoing.
"Indebtedness" means, with respect to any Person, without duplication,
------------
(i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any trade
payables and other accrued current liabilities incurred or arising in the
ordinary course of business, but including, without limitation, all
obligations, contingent or otherwise, of such Person in connection with any
letters of credit, bankers acceptance or other similar credit transaction
or in connection with any agreement to purchase, redeem, exchange, convert
or otherwise acquire for value any Capital Stock of such Person, or any
warrants, rights or options to acquire such Capital Stock, now or hereafter
outstanding,
(ii) all obligations of such Person evidenced by bonds, notes,
debentures or other similar instruments,
-13-
<PAGE>
(iii) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property acquired by
such Person (even if the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade payables arising in the ordinary
course of business,
(iv) all Capitalized Lease Obligations of such Person,
(v) all Indebtedness referred to in clauses (i) through (iv) above
of other Persons and all dividends of other Persons, the payment of which
is secured by any Lien upon or with respect to property (including, without
limitation, accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness,
(vi) all guarantees of Indebtedness by such Person,
(vii) all Redeemable Capital Stock issued by such Person valued at
the greater of its voluntary or involuntary maximum fixed repurchase price
plus accrued and unpaid dividends,
(viii) all obligations under Interest Rate Agreements, Currency
Agreements or Commodity Price Protection Agreements of such Person and
(ix) any amendment, supplement, modification, deferral, renewal,
extension, refunding or refinancing of any liability of the types referred
to in clauses (i) through (viii) above.
For purposes hereof, the "maximum fixed repurchase price" of any
Redeemable Capital Stock that does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Redeemable Capital
Stock, such Fair Market Value shall be determined in good faith by the Board of
Directors of the issuer of such Redeemable Capital Stock.
"Indenture" means this Indenture, as amended or supplemented from time
---------
to time in accordance with the terms hereof.
-14-
<PAGE>
"Independent Financial Advisor" means a nationally recognized
-----------------------------
accounting, appraisal or investment banking firm (i) which does not, and whose
directors, officers and employees or Affiliates do not have, a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Initial Notes" means the 8 1/2% Senior Notes due 2009, Series A,
-------------
issued under this Indenture on or about the date hereof.
"Initial Purchasers" means Merrill Lynch & Co., Merrill Lynch, Pierce,
------------------
Fenner & Smith Incorporated, BancBoston Robertson Stephens Inc. and NationsBanc
Montgomery Securities LLC.
"Institutional Accredited Investor" means an institution that is an
---------------------------------
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3), or
(7) under the Securities Act.
"interest" when used with respect to any Note means the amount of all
--------
interest accruing on such Note, including any applicable defaulted interest
pursuant to Section 2.12 and any Additional Interest pursuant to the
Registration Rights Agreement.
"Interest Payment Date" means the Stated Maturity of an installment of
---------------------
interest on the Notes.
"Interest Rate Agreements" means one or more of the following
------------------------
agreements which shall be entered into by one or more financial institutions:
obligations of any Person pursuant to any arrangement with any other Person
whereby, directly or indirectly, such Person is entitled to receive from time to
time periodic payments calculated by applying either a floating or a fixed rate
of interest on a stated notional amount in exchange for periodic payments made
by such Person calculated by applying a fixed or a floating rate of interest on
the same notional amount or any other arrangement involving payments by or to
such Person based upon fluctuations in interest rates (including, without
limitation, interest rate swaps, caps, floors, collars and similar agreements)
and/or other types of interest rate hedging agreements from time to time.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended to the date hereof and from time to time hereafter.
"Investment" means, with respect to any Person, any direct or indirect
----------
advance, loan or other extension of credit
-15-
<PAGE>
(including by means of a guarantee) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others or otherwise), or any purchase or
acquisition by such Person of any Capital Stock, bonds, notes, debentures or
other securities or evidences of Indebtedness issued by any other Person and all
other items that would be classified as investments on a balance sheet prepared
in accordance with GAAP. Investments shall exclude extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices. In
addition to the foregoing, any Currency Agreement, Interest Rate Agreement,
Commodity Price Protection Agreement or similar agreement shall constitute an
Investment.
"Investment Grade" means (i) with respect to S&P, BBB- and any
----------------
category above BBB- (or equivalent successor categories); (ii) with respect to
Moody's, Baa3 and any category above Baa3 (or equivalent successor categories);
and (iii) the equivalent of any such category of S&P or Moody's used by another
Rating Agency.
"Issue Date" means April 6, 1999.
----------
"Legal Defeasance" has the meaning set forth in Section 8.01.
----------------
"Legal Holiday" has the meaning provided in Section 10.07.
-------------
"Lien" means any mortgage or deed of trust, charge, pledge, lien
----
(statutory or other), security interest, assignment for security or other
encumbrance upon any property of any kind (including any conditional sale,
capital lease or other title retention agreement), whether real, personal or
mixed, movable or immovable, now owned or hereafter acquired. A Person shall be
deemed to own subject to a Lien any property which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement.
"Liquid Assets" shall mean any marketable securities or steel slab
-------------
immediately received by, and used in the business of, the Company or any of its
Subsidiaries in an amount not to exceed 25% of the Company's total consolidated
assets.
"Maturity Date" means April 1, 2009.
-------------
"Material Subsidiary" means each Restricted Subsidiary of the Company
-------------------
that is a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X
under the Securities Act
-16-
<PAGE>
and the Exchange Act (as such regulation is in effect on the Issue Date).
"Moody's" means Moody's Investors Service, Inc. and its successors.
-------
"Net Cash Proceeds" means with respect to any Asset Sale by any
-----------------
Person, the proceeds thereof (without duplication in respect of all Asset Sales)
in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in form of, or stock or other assets
when disposed of for, cash or Cash Equivalents (except to the extent that such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary) net of
(i) brokerage commissions and other reasonable fees and expenses
(including fees and expenses of legal counsel and investment bankers)
related to such Asset Sale ,
(ii) provisions for all taxes payable as a result of such Asset
Sale,
(iii) payments made to retire Indebtedness where payment of such
Indebtedness is secured by the assets or properties the subject of such
Asset Sale,
(iv) amounts required to be paid to any Person (other than the
Company or any Restricted Subsidiary) owning a beneficial interest in or
having a Lien on the assets subject to the Asset Sale and
(v) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained
by the Company or any Restricted Subsidiary, as the case may be, after such
Asset Sale, including, without limitation, pension and other post-
employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated
with such Asset Sale (provided that the amount of any such reserves shall
be deemed to constitute Net Cash Proceeds at the time such reserves shall
have been released or are not otherwise required to be retained as a
reserve), all as reflected in an Officers' Certificate delivered to the
Trustee.
"Net Proceeds Payment Date" has the meaning set forth in Section 4.15.
-------------------------
-17-
<PAGE>
"Notes" means, collectively, the Initial Notes and, when and if issued
-----
as provided in the Registration Rights Agreement, the Exchange Notes.
"Offer Excess Proceeds" has the meaning set forth in Section 4.15.
---------------------
"Offering Memorandum" means the confidential Offering Memorandum dated
-------------------
March 30, 1999 of the Company relating to the offering of the Notes.
"Officer" means, with respect to any Person, the Chairman of the Board
-------
of Directors, the Chief Executive Officer, the President, any Executive Vice
President, any Vice President, the Chief Financial Officer, the Treasurer, the
Controller, or the Secretary of such Person, or any other officer designated by
the Board of Directors serving in a similar capacity.
"Officers' Certificate" means a certificate signed by two Officers of
---------------------
the Company.
"Opinion of Counsel" means a written opinion from legal counsel who is
------------------
reasonably acceptable to the Trustee complying with the requirements of Sections
10.04 and 10.05, as they relate to the giving of an Opinion of Counsel.
"Other Senior Debt Pro Rata Share" means the amount of the applicable
--------------------------------
Offer Excess Proceeds obtained by multiplying the amount of such Offer Excess
Proceeds by a fraction, (i) the numerator of which is the aggregate accreted
value and/or principal amount, as the case may be, of all Indebtedness (other
than (x) the Notes, (y) Subordinated Indebtedness and (z) Indebtedness under the
Credit Facility) of the Company outstanding at the time of the applicable Asset
Sale with respect to which the Company is required to use Offer Excess Proceeds
to repay or make an offer to purchase or repay and (ii) the denominator of which
is the sum of (a) the aggregate principal amount of all Notes outstanding at the
time of the applicable Asset Sale and (b) the aggregate principal amount or the
aggregate accreted value, as the case may be, of all other Indebtedness (other
than Subordinated Indebtedness and Indebtedness under the Credit Facility) of
the Company outstanding at the time of the applicable Asset Sale Offer with
respect to which the Company is required to use the applicable Offer Excess
Proceeds to offer to repay or make an offer to purchase or repay.
"Pari Passu Indebtedness" means any Indebtedness of the Company which
-----------------------
ranks pari passu in right of payment to the Notes.
-18-
<PAGE>
"Paying Agent" has the meaning provided in Section 2.03.
------------
"Permitted Holders" means (a) Companhia Vale do Rio Doce, Rio Doce
-----------------
Limited, Kawasaki Steel Corporation and Kawasaki Steel Holdings (USA), Inc. and
(b) each Affiliate of each of the entities set forth in clause (a) of this
definition for so long as they are Affiliates.
"Permitted Indebtedness" has the meaning set forth under Section 4.12.
----------------------
"Permitted Investments" means
---------------------
(i) Cash Equivalents;
(ii) Investments in prepaid expenses, negotiable instruments held
for collection and lease, utility and workers' compensation, performance
and other similar deposits;
(iii) loans and advances to employees made in the ordinary course of
business not to exceed $250,000 in the aggregate at any one time
outstanding;
(iv) Investments in partnerships, joint ventures or other entities,
including Unrestricted Subsidiaries, in an aggregate amount not to exceed
$60.0 million at any one time outstanding; provided that (x) such entity is
--------
in a steel related business or (y) such Investment is made to acquire or
develop raw materials used in steelmaking.
(v) Interest Rate Agreements, Currency Agreements and Commodity
Price Protection Agreements permitted under clauses (v), (vi) and (vii) of
the second paragraph under Section 4.12;
(vi) Investments represented by accounts receivable created or
acquired in the ordinary course of business;
(vii) loans or advances to vendors in the ordinary course of
business;
(viii) Investments existing on the Issue Date and any renewal or
replacement thereof on terms and conditions no less favorable in any
respect than that existing on the Issue Date;
(ix) Investments made by the Company or any Restricted Subsidiary as
a result of consideration received in connection with an Asset Sale made in
compliance with Section 4.15; and
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<PAGE>
(x) stock, obligations or securities received in satisfaction of
judgments or good faith settlement of litigation, disputes or other debts.
"Permitted Liens" means
---------------
(a) Liens on property of (or on shares of Capital Stock or debt
securities of) a Person existing at the time such Person
(i) is merged into or consolidated with the Company or any
Restricted Subsidiary or
(ii) becomes a Restricted Subsidiary; provided, however, that such
-------- -------
Liens were in existence prior to the contemplation of such merger, consolidation
or acquisition and do not secure any property or assets of the Company or any
Restricted Subsidiary other than the property or assets subject to the Liens
prior to such merger, consolidation or acquisition;
(b) Liens imposed by law such as landlords', carriers',
warehousemen's and mechanics' Liens and other similar Liens arising in the
ordinary course of business which secure payment of obligations not more than 60
days past due or which are being contested in good faith and by appropriate
proceedings;
(c) Liens existing on the Issue Date;
(d) Liens securing only the Notes;
(e) Liens in favor of the Company or Liens on any property or
assets of a Subsidiary (or on shares of Capital Stock or debt securities of a
Subsidiary) in favor of the Company or any Restricted Subsidiary;
(f) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent for more than 90 days or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded; provided, however, that any reserve or other appropriate provision as
-------- -------
shall be required in conformity with GAAP shall have been made therefor;
(g) easements, reservation of rights of way, restrictions and other
similar easements, licenses, restrictions on the use of properties or
imperfections of title that in the aggregate are not material in amount and do
not in any case interfere with the ordinary conduct of the business of the
Company and the Restricted Subsidiaries;
-20-
<PAGE>
(h) Liens resulting from the deposit of cash or notes in connection
with contracts, tenders or expropriation proceedings, or to secure workers'
compensation, surety or appeal bonds, costs of litigation when required by law,
public and statutory obligations, obligations under franchise arrangements
entered into in the ordinary course of business and other obligations of a
similar nature arising in the ordinary course of business;
(i) Liens in existence on the Issue Date under the Credit Facility;
(j) Liens securing Indebtedness consisting of Capitalized Lease
Obligations, Purchase Money Obligations (other than Indebtedness incurred to
finance an Asset Acquisition), Capital Expenditure Indebtedness, mortgage
financings, industrial revenue bonds or other monetary obligations, in each case
incurred solely for the purpose of financing all or any part of the purchase
price or cost of construction or installation of assets used in the business of
the Company or the Restricted Subsidiaries, or repairs, additions or
improvements to such assets; provided, however, that (I) such Liens secure
-------- -------
Indebtedness in an amount not in excess of the original purchase price or the
original cost of any such assets or repair, addition or improvement thereto
(plus an amount equal to the reasonable fees and expenses in connection with the
incurrence of such Indebtedness), (II) such Liens do not extend to any other
assets of the Company or the Restricted Subsidiaries (and, in the case of
repair, addition or improvements to any such assets, such Lien extends only to
the assets (and improvements thereto or thereon) repaired, added to or
improved), (III) the incurrence of such Indebtedness is permitted by Section
4.12 and (IV) such Liens attach prior to 90 days after such purchase,
construction, installation, repair, addition or improvement;
(k) Liens to secure any refinancings (or successive refinancings),
in whole or in part, of any Indebtedness secured by Liens referred to in the
clauses above so long as such Lien does not extend to any other property (other
than improvements thereto);
(l) Liens securing letters of credit entered into in the ordinary
course of business and consistent with past business practice;
(m) Liens securing Indebtedness of the Company or any Restricted
Subsidiary under any Interest Rate Agreements, Currency Agreements or Commodity
Price Protection Agreements;
-21-
<PAGE>
(n) Liens on and pledges of the capital stock of any Unrestricted
Subsidiary securing any Indebtedness of such Unrestricted Subsidiary;
(o) Liens arising from the rendering of a final judgment or order
against the Company or any Restricted Subsidiary that does not give rise to an
Event of Default; and
(p) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by the
Company or any Restricted Subsidiary in the ordinary course of business.
"Person" means any individual, corporation, limited liability company,
------
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Physical Notes" has the meaning provided in Section 2.01.
--------------
"plan of liquidation" means, with respect to any Person, a plan
-------------------
(including by operation of law) that provides for, contemplates or the
effectuation of which is preceded or accompanied by (whether or not
substantially contemporaneously) (a) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of such Person otherwise
than as an entirety or substantially as an entirety and (b) the distribution of
all or substantially all of the proceeds of such sale, lease, conveyance or
other disposition and all or substantially all of the remaining assets of such
Person to holders of Capital Stock of such Person.
"Preferred Stock" means, with respect to any Person, Capital Stock of
---------------
any class or, classes (however designated) of such Person which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over Capital Stock of any other class of such Person.
"principal" of any Indebtedness (including the Notes) means the
---------
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"Private Exchange Notes" has the meaning set forth in the Registration
----------------------
Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
------------------------
Notes in the form set forth in Section 2.15.
-22-
<PAGE>
"pro forma" means, with respect to any calculation made or required to
---------
be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act, as determined by the
Board of Directors of the Company in consultation with its independent public
accountants.
"Public Equity Offering" means any underwritten public offering of
----------------------
Capital Stock (other then Redeemable Capital Stock) of the Company made on a
primary basis by the Company pursuant to a registration statement filed with and
declared effective by the Commission in accordance with the Securities Act.
"Purchase Money Obligation" means any Indebtedness secured by a Lien
-------------------------
on assets related to the business of the Company and its Restricted Subsidiaries
and any additions and accessions thereto, which are purchased by the Company or
any Restricted Subsidiary at any time after the Issue Date; provided that (i)
the security agreement or conditional sales or other title retention contract
pursuant to which the Lien on such assets is created (collectively a "Purchase
Money Security Agreement") shall be entered into within 180 days after the
purchase or substantial completion of the construction of such assets and shall
at all times be confined solely to the assets so purchased or acquired, any
additions and accessions thereto and any proceeds therefrom, (ii) at no time
shall the aggregate principal amount of the outstanding Indebtedness secured
thereby be increased, except in connection with the purchase of additions and
accessions thereto and except in respect of fees and other obligations in
respect of such Indebtedness and (iii) (A) the aggregate outstanding principal
amount of Indebtedness secured thereby (determined on a per asset basis in the
case of any additions and accessions) shall not at the time such Purchase Money
Security Agreement is entered into exceed 85% of the purchase price to the
Company and its Restricted Subsidiaries of the assets subject thereto or (B) the
Indebtedness secured thereby shall be with recourse solely to the assets so
purchased or acquired, any additions and accessions thereto and any proceeds
therefrom.
"Qualified Capital Stock" of any Person means any and all Capital
-----------------------
Stock of such Person other than Redeemable Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
----------------------------- ---
specified in Rule 144A under the Securities Act.
"Rating Agencies" means (i) S&P and (ii) Moody's and (iii) if S&P or
---------------
Moody's or both shall not make a rating of the Notes publicly available, a
nationally recognized United States
-23-
<PAGE>
securities rating agency or agencies, as the case may be, selected by the
Company, which shall be substituted for S&P or Moody's or both, as the case may
be.
"Rating Category" means (i) with respect to S&P, any of the following
---------------
categories: BB, B, CCC, CC, C and D (or equivalent successor categories); (ii)
with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and
D (or equivalent successor categories); and (iii) the equivalent of any such
category of S&P or Moody's used by another Rating Agency. In determining whether
the rating of the Notes has decreased by one or more gradations, gradations
within Rating Categories (+ and -- for S&P; 1, 2 and 3 for Moody's; or the
equivalent gradations for another Rating Agency) shall be taken into account
(e.g., with respect to S&P, a decline in rating from BB+ to BB, as well as from
BB- to B+, will constitute a decrease of one gradation).
"Record Date" means the Record Date specified in the Notes.
-----------
"Redeemable Capital Stock" means any class or series of Capital Stock
------------------------
to the extent that, either by its terms, by the terms of any security into which
it is convertible or exchangeable, or by contract or otherwise, is or upon the
happening of an event (other than a Change of Control) or passage of time would
be, required to be redeemed prior to any Stated Maturity of the principal of the
Notes or is redeemable at the option of the holder thereof at any time prior to
such Stated Maturity, or is convertible into or exchangeable for debt securities
at any time prior to such Stated Maturity.
"Redemption Date," when used with respect to any Note to be redeemed,
---------------
means the date fixed for such redemption pursuant to this Indenture and the
Notes.
"redemption price," when used with respect to any Note to be redeemed,
----------------
means the price fixed for such redemption, including principal and premium, if
any, pursuant to this Indenture and the Notes.
"Reference Period" has the meaning set forth under the definition of
----------------
"Consolidated Fixed Charge Coverage Ratio."
"refinancing" has the meaning set forth under Section 4.12.
-----------
"Registrar" has the meaning provided in Section 2.03.
---------
-24-
<PAGE>
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement dated as of the Issue Date by and among the Company and the Initial
Purchasers.
"Regulation S" means Regulation S under the Securities Act.
------------
"Restricted Payment" shall have the meaning set forth in Section 4.10.
------------------
"Restricted Security" has the meaning assigned to such term in Rule
-------------------
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
-------- -------
entitled to request and conclusively rely on an Opinion of Counsel with respect
to whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company that has
---------------------
not been designated by the Board of Directors of the Company, by a board
resolution delivered to the Trustee, as an Unrestricted Subsidiary pursuant to
and in compliance with Section 4.18. Any such designation may be revoked by a
board resolution of the Board of Directors of the Company delivered to the
Trustee, subject to the provisions of such covenant.
"Restricted Subsidiary Indebtedness" means Indebtedness of any
----------------------------------
Restricted Subsidiary (i) that is not subordinated to any other Indebtedness of
such Restricted Subsidiary and (ii) in respect of which the Company is not also
obligated (by means of a guarantee or otherwise) other than, in the case of this
clause (ii), Indebtedness under the Credit Facility.
"Revocation" has the meaning set forth under Section 4.18.
----------
"Rule 144A" means Rule 144A under the Securities Act.
---------
"Sale and Lease-Back Transaction" means any arrangement with any
-------------------------------
Person providing for the leasing by the Company or a Restricted Subsidiary of
any real or tangible personal property, which property has been or is to be sold
or transferred by the Company or such Restricted Subsidiary to such Person in
contemplation of such leasing.
"S&P" means Standard & Poor's Rating Services, a division of The
---
McGraw Hill Companies, Inc., and its successors.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated by the Commission thereunder.
-25-
<PAGE>
"Stated Maturity" means, with respect to any Note or any installment
---------------
of interest thereon, the dates specified in such Note as the fixed date on which
the principal of such Note or such installment of interest is due and payable,
and when used with respect to any other Indebtedness, means the date specified
in the instrument governing such Indebtedness as the fixed date on which the
principal of such Indebtedness or any installment of interest is due and
payable.
"Subordinated Indebtedness" means, with respect to the Company,
-------------------------
Indebtedness of the Company which is expressly subordinated in right of payment
to the Notes.
"Subsidiary" means, with respect to any Person, (a) any corporation of
----------
which the outstanding shares of Voting Capital Stock having at least a majority
of the votes entitled to be cast in the election of directors shall at the time
be owned, directly or indirectly, by such Person, or (b) any other Person of
which at least a majority of the shares of Voting Capital Stock are at the time,
directly or indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved in any
----------------
consolidation or merger, or any sale, assignment, conveyance, transfer, lease or
other disposition of all or substantially all of its properties and assets as an
entirety, the Person formed by or surviving such merger or consolidation or the
Person to which such sale, assignment, conveyance, transfer or lease is made.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
---
77bbbb), as amended, as in effect on the date of this Indenture, except as
otherwise provided in Section 9.03.
"Transaction Date" has the meaning set forth under the definition of
----------------
"Consolidated Fixed Charge Coverage Ratio."
"Trust Officer" means any officer of the Trustee assigned by the
-------------
Trustee to administer this Indenture, or in the case of a successor trustee, an
officer assigned to the department, division or group performing the corporate
trust work of such successor and assigned to administer this Indenture.
"Trustee" means the party named as such in this Indenture until a
-------
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"U.S. Government Obligations" mean direct obligations of, and
---------------------------
obligations guaranteed by, the United States of America
-26-
<PAGE>
for the payment of which the full faith and credit of the United States of
America is pledged.
"U.S. Legal Tender" means such coin or currency of the United States
-----------------
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Unrestricted Subsidiary" means each Subsidiary of the Company
-----------------------
designated as such pursuant to and in compliance with the covenant described
under Section 4.18. Any such designation may be revoked by a Board Resolution
of the Company delivered to the Trustee, subject to the provisions of such
covenant.
"Voting Stock" means any class or classes of Capital Stock pursuant to
------------
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the Board of Directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary
----------------------------------
of which 100% of the outstanding Capital Stock is owned by the Company and/or
another Wholly-Owned Restricted Subsidiary. For purposes of this definition,
any directors' qualifying shares shall be disregarded in determining the
ownership of a Restricted Subsidiary.
SECTION 1.02. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the Indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute
-27-
<PAGE>
or defined by Commission rule and not otherwise defined herein have the meanings
assigned to them therein.
SECTION 1.03. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP of any date of determination;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision; and
(6) any reference to a statute, law or regulation means that
statute, law or regulation as amended and in effect from time to time and
includes any successor statute, law or regulation; provided, however, that
-------- -------
any reference to the Bankruptcy Law shall mean the Bankruptcy Law as
applicable to the relevant case.
ARTICLE TWO
THE NOTES
---------
SECTION 2.01. Form and Dating.
---------------
The Initial Notes and the Trustee's certificate of authentication
relating thereto shall be substantially in the form of Exhibit A. The Exchange
---------
Notes and the Trustee's certificate of authentication relating thereto shall be
substantially in the form of Exhibit B. The Notes may have notations, legends
---------
or endorsements required by law, stock exchange rule or depository rule or
usage. The Company and the Trustee shall approve the form of the Notes and any
notation, legend or endorsement on them. If required, the Notes may bear the
appropriate legend regarding any original issue discount for federal income tax
purposes. Each Note shall be dated the date of its issuance and shall show the
date of its authentication.
-28-
<PAGE>
The terms and provisions contained in the Notes, annexed hereto as
Exhibits A and B, shall constitute, and are hereby expressly made, a part of
- ----------------
this Indenture and, to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Notes in registered form,
substantially in the form set forth in Exhibit A (the "Global Note"), deposited
---------
with the Trustee, as custodian for the Depository, duly executed by the Company
and authenticated by the Trustee as hereinafter provided and shall bear the
legend set forth in Section 2.15. The aggregate principal amount of the Global
Note may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depository, as hereinafter
provided.
Notes issued in exchange for interests in a Global Note pursuant to
Section 2.16 may be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A (the "Physical
---------
Notes").
SECTION 2.02. Execution and Authentication;
Aggregate Principal Amount.
-----------------------------
Two Officers of the Company (each of whom shall have been duly
authorized by all requisite corporate actions) shall sign the Notes for the
Company by manual or facsimile signature.
If an Officer whose signature is on a Note was an Officer at the time
of such execution but no longer holds that office or position at the time the
Trustee authenticates the Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue in
the aggregate principal amount not to exceed $150,000,000 and (ii) Exchange
Notes for issue only in a registered Exchange Offer, pursuant to the
Registration Rights Agreement, for a like principal amount of Initial Notes, in
each case upon a written order of the Company in the form of an Officers'
Certificate of the Company. Each such written order shall specify the amount of
Notes to be authenticated and the date on which the Notes are to be
authenticated, whether the
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<PAGE>
Notes are to be Initial Notes or Exchange Notes and whether the Notes are to be
issued as Physical Notes or Global Notes or such other information as the
Trustee may reasonably request. In addition, with respect to authentication
pursuant to clause (ii) of the first sentence of this paragraph, the first such
written order from the Company shall be accompanied by an Opinion of Counsel of
the Company in a form reasonably satisfactory to the Trustee stating that the
issuance of the Exchange Notes complies with this Indenture and has been duly
authorized by the Company. The aggregate principal amount of Notes outstanding
at any time may not exceed $150,000,000, except as provided in Sections 2.07 and
2.08.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Company or with any Affiliate of the Company.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency (which shall be located
in the Borough of Manhattan in the City of New York, State of New York) where
(a) Notes may be presented or surrendered for registration of transfer or for
exchange ("Registrar"), (b) Notes may be presented or surrendered for payment
("Paying Agent") and (c) notices and demands to or upon the Company in respect
of the Notes and this Indenture may be served. The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company, upon
prior written notice to the Trustee, may have one or more co-Registrars and one
or more additional paying agents reasonably acceptable to the Trustee. The term
"Paying Agent" includes any additional Paying Agent. The Company may act as its
own Paying Agent, except that for the purposes of payments on the Notes pursuant
to Sections 4.14 and 4.15, neither the Company nor any Affiliate of the Company
may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Company shall notify the Trustee, in advance, of
-30-
<PAGE>
the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such and shall be entitled to appropriate compensation in
accordance with Section 7.07.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of demands and notices in connection with the Notes, until
such time as the Trustee has resigned or a successor has been appointed. Any of
the Registrar, the Paying Agent or any other agent may resign upon 30 days'
notice to the Company.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other than the Trustee to
agree in writing that such Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, premium, if any, or interest on, the Notes (whether such assets
have been distributed to it by the Company or any other obligor on the Notes),
and the Company and the Paying Agent shall notify the Trustee of any Default by
the Company (or any other obligor on the Notes) in making any such payment. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the continuance of any payment Default, upon written request to
a Paying Agent, require such Paying Agent to distribute all assets held by it to
the Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent, the Paying Agent shall have no further liability for such assets.
SECTION 2.05. Holder Lists.
------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Trustee is not the Registrar, the Company shall furnish or
cause the Registrar to furnish to the Trustee before each Record Date and at
such other times as the Trustee may request in writing a list as of such date
and in such form as the Trustee may reasonably require of the names and
addresses of the Holders, which list may be conclusively relied upon by the
Trustee.
SECTION 2.06. Transfer and Exchange.
---------------------
When Notes are presented to the Registrar or a co-Registrar with a
request to register the transfer of such Notes
-31-
<PAGE>
or to exchange such Notes for an equal principal amount of Notes or other
authorized denominations, the Registrar or co-Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transaction are met; provided, however, that the Notes presented or surrendered
-------- -------
for registration of transfer or exchange shall be duly endorsed or accompanied
by a written instrument of transfer in form satisfactory to the Company, the
Trustee and the Registrar or co-Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing. To permit registration of transfers
and exchanges, the Company shall execute and the Trustee shall authenticate
Notes. No service charge shall be made by a Holder for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax, fee or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charges
payable upon exchanges or transfers pursuant to Section 2.10, 3.04, 4.14, 4.15
or 9.05, in which event the Company shall be responsible for the payment of such
taxes).
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the opening
of business 15 days before the mailing of a notice of redemption of Notes and
ending at the close of business on the day of such mailing,(ii) selected for
redemption in whole or in part pursuant to Article Three, except the unredeemed
portion of any Note being redeemed in part or (iii) between a Record Date and
the next succeeding Interest Payment Date.
Any Holder of a beneficial interest in a Global Note shall, by
acceptance of such Global Note, agree that transfers of beneficial interests in
such Global Notes may be effected only through a book entry system maintained by
the Holder of such Global Note (or its agent), and that ownership of a
beneficial interest in the Note shall be required to be reflected in a book
entry system.
Neither the Company nor the Trustee shall be liable for any delay by
the Holder of a Global Note or the Depository in identifying the beneficial
owners of any Note and the Company and the Trustee may conclusively rely on
instructions from the Holder of a Global Note or the Depository for all
purposes.
SECTION 2.07. Replacement Notes.
-----------------
If a mutilated Note is surrendered to the Trustee or if the Holder of
a Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Note. If
required by
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<PAGE>
the Trustee or the Company, such Holder must provide satisfactory evidence of
such loss, destruction or taking, and an indemnity bond or other indemnity of
reasonable tenor, sufficient in the reasonable judgment of the Company and the
Trustee, to protect the Company, the Trustee or any Agent from any loss which
any of them may suffer if a Note is replaced. Every replacement Note shall
constitute an obligation of the Company. The Company and the Trustee each may
charge such Holder for its expenses in replacing such Note.
SECTION 2.08. Outstanding Notes.
-----------------
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to it
for cancellation and those described in this Section as not outstanding.
Subject to the provisions of Section 2.09, a Note does not cease to be
outstanding because the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
- ---- ----
of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date, the Maturity Date, the Change of Control
Payment Date or the Net Proceeds Payment Date the Paying Agent holds U.S. Legal
Tender or U.S. Government Obligations sufficient to pay all of the principal,
premium, if any, and interest due on the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes shall be deemed not to
be outstanding and interest on them shall cease to accrue.
SECTION 2.09. Treasury Notes.
--------------
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, consent or notice, Notes owned by
the Company or an Affiliate of the Company shall be considered as though they
are not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes which a Trust Officer of the Trustee actually knows are so owned
shall be so considered. The Company shall notify the Trustee, in writing, when
it or, to its knowledge, any of its Affiliates repurchases or otherwise acquires
Notes, of the aggregate principal amount of such Notes so repurchased or
otherwise acquired and such other
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<PAGE>
information as the Trustee may reasonably request and the Trustee shall be
entitled to rely thereon.
SECTION 2.10. Temporary Notes.
---------------
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon receipt of a written
order of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated and
the date on which the temporary Notes are to be authenticated. Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Company considers appropriate for temporary Notes and so indicate in
the Officers' Certificate. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate, upon receipt of a written order of
the Company pursuant to Section 2.02, definitive Notes in exchange for temporary
Notes.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee,
or at the direction of the Trustee, the Registrar or the Paying Agent, and no
one else, shall cancel and, at the written direction of the Company, shall
dispose, in its customary manner, of all Notes surrendered for transfer,
exchange, payment or cancellation. Subject to Section 2.07, the Company may not
issue new Notes to replace Notes that it has paid or delivered to the Trustee
for cancellation. If the Company shall acquire any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Notes unless and until the same are surrendered
to the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
------------------
The Company will pay interest on overdue principal from time to time
on demand at the rate of interest then borne by the Notes. The Company shall,
to the extent lawful, pay interest on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
of interest then borne by the Notes. Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months, and, in the case of a partial
month, the actual number of days elapsed.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest, plus (to the
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<PAGE>
extent lawful) any interest payable on the defaulted interest, to the Persons
who are Holders on a subsequent special record date, which special record date
shall be the fifteenth day next preceding the date fixed by the Company for the
payment of defaulted interest or the next succeeding Business Day if such date
is not a Business Day. The Company shall notify the Trustee in writing of the
amount of defaulted interest proposed to be paid on each Note and the date of
the proposed payment (a "Default Interest Payment Date"), and at the same time
the Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such defaulted interest or
shall make arrangements satisfactory to the Trustee for such deposit on or prior
to the date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such defaulted interest as
provided in this Section; provided, however, that in no event shall the Company
-------- -------
deposit monies proposed to be paid in respect of defaulted interest later than
11:00 a.m. New York City time of the proposed Default Interest Payment Date. At
least 15 days before the subsequent special record date, the Company shall mail
(or cause to be mailed) to each Holder, as of a recent date selected by the
Company, with a copy to the Trustee, a notice that states the subsequent special
record date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid. Notwithstanding the
foregoing, any interest that is paid prior to the expiration of the 30-day
period set forth in Section 6.01(a) shall be paid to Holders as of the regular
record date for the Interest Payment Date for which interest has not been paid.
Notwithstanding the foregoing, the Company may make payment of any defaulted
interest in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange.
SECTION 2.13. CUSIP Number.
------------
The Company in issuing the Notes may use "CUSIP" numbers, and, if so,
the Trustee shall use the CUSIP numbers in notices of redemption or exchange as
a convenience to Holders; provided, however, that no representation is hereby
-------- -------
deemed to be made by the Trustee as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes, and that reliance may be placed
only on the other identification numbers printed on the Notes. The Company
shall promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.14. Deposit of Monies.
-----------------
Prior to 11:00 a.m. New York City time on each Interest Payment Date,
Maturity Date, Redemption Date, Change of
-35-
<PAGE>
Control Payment Date and Net Proceeds Payment Date, the Company shall have
deposited with the Paying Agent in immediately available funds money sufficient
to make cash payments, if any, due on such Interest Payment Date, Maturity Date,
Redemption Date, Change of Control Purchase Date and Net Proceeds Payment Date,
as the case may be, in a timely manner which permits the Paying Agent to remit
payment to the Holders on such Interest Payment Date, Maturity Date, Redemption
Date, Change of Control Purchase Date and Net Proceeds Payment Date, as the case
may be.
SECTION 2.15. Restrictive Legends.
-------------------
Each Global Note and Physical Note that constitutes a Restricted
Security shall bear the following legend (the "Private Placement Legend") on the
face thereof until after the second anniversary of the later of the Issue Date
and the last date on which the Company or any Affiliate of the Company was the
owner of such Note (or any predecessor security) (or such shorter period of time
as permitted by Rule 144(k) under the Securities Act or any successor provision
thereunder) (or such longer period of time as may be required under the
Securities Act or applicable state securities laws in the opinion of counsel for
the Company, unless otherwise agreed by the Company and the Holder thereof):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE ACT, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE OR TRANSFER AGENT FOR THIS SECURITY), (D) OUT-
-36-
<PAGE>
SIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF AVAILABLE), OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFER IS PURSUANT TO
CLAUSE (C), (D) OR (E), THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE TRUSTEE OR TRANSFER AGENT AND THE COMPANY SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE ACT.
Each Global Note shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF
THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF
OR
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<PAGE>
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 2.17 OF THE INDENTURE GOVERNING THIS
NOTE.
SECTION 2.16. Book-Entry Provisions for Global Security.
-----------------------------------------
(a) The Global Notes initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Section 2.15.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Notes, and the Depository may be treated by the Company, the Trustee and
any Agent of the Company or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any Agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in a Global Note may be transferred or
exchanged for Physical Notes in accordance with the rules and procedures of the
Depository and the provisions of Section 2.17. In addition, Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in a Global Note if (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for the Global Notes and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in a Global Note to beneficial owners pursuant to paragraph
(b), the Registrar shall (if one or more Physical Notes are to be issued)
reflect on its books and records the date and a decrease in the principal amount
of such Global Note in an amount equal to the principal
-38-
<PAGE>
amount of the beneficial interest in the Global Note to be transferred, and the
Company shall execute and the Trustee shall authenticate and deliver, one or
more Physical Notes of like tenor and amount.
(d) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to paragraph (b), such Global Note shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Note, an equal aggregate principal amount of Physical Notes of authorized
denominations registered in the name of such beneficial owners.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in a Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.17, bear the legend regarding transfer restrictions applicable to the Physical
Notes set forth in Section 2.15.
(f) The Holder of a Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
SECTION 2.17. Special Transfer Provisions.
---------------------------
(a) Transfers to Non-QIB Institutional Accredited Investors and Non-
---------------------------------------------------------------
U.S. Persons. The following provisions shall apply with respect to the
- ------------
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor that is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after the second
anniversary of the Issue Date (provided, however, that, to the knowledge of
-------- -------
the Registrar, neither the Company nor any Affiliate of the Company has
held any beneficial interest in such Note, or portion thereof, at any time
on or prior to the second anniversary of the Issue Date) or (y) (1) in the
case of a transfer to an Institutional Accredited Investor which is not a
QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to
the Registrar a certificate substantially in the form of Exhibit C and any
---------
legal opinions and certifications required thereby or (2) in the
-39-
<PAGE>
case of a transfer to a Non-U.S. Person, the proposed transferor has
delivered to the Registrar a certificate substantially in the form of
Exhibit D; and
---------
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
written instructions given in accordance with the Depository's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of such Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred, and (b) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for on
the form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in a Global Note, upon receipt by the Registrar of
written instructions given in accordance with the Depository's and the
Registrar's procedures, the Registrar shall reflect on
-40-
<PAGE>
its books and records the date and an increase in the principal amount of
such Global Note in an amount equal to the principal amount of the Physical
Notes to be transferred, and the Trustee shall cancel the Physical Notes so
transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the requested transfer is after the second anniversary of the Issue
Date (provided, however, that, to the knowledge of the Registrar, neither the
-------- -------
Company nor any Affiliate of the Company has held any beneficial interest in
such Note, or portion thereof, at any time prior to or on the second anniversary
of the Issue Date), or (ii) there is delivered to the Registrar an Opinion of
Counsel reasonably satisfactory to the Company and the Trustee to the effect
that neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act.
(d) General. By its acceptance of any Note bearing the Private
-------
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time during the
Registrar's normal business hours upon the giving of reasonable written notice
to the Registrar.
(e) Transfers of Notes Held by Affiliates. Any certificate (i)
-------------------------------------
evidencing a Note that has been transferred to an Affiliate of the Company
within three years after the Issue Date, as evidenced by a notation on the
Assignment Form for such transfer or in the representation letter delivered in
respect thereof or (ii) evidencing a Note that has been acquired from an
Affiliate (other than by an Affiliate) in a transaction or a chain of
transactions not involving any public offering, shall, until two years after the
last date on which either the Company or any Affiliate of the Company was an
owner of such Note, in each case, bear a legend in substantially the form set
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<PAGE>
forth in Section 2.15, unless otherwise agreed by the Company (with written
notice thereof to the Trustee).
ARTICLE THREE
REDEMPTION
----------
SECTION 3.01. Notices to Trustee.
------------------
If the Company elects to redeem Notes pursuant to Paragraph 5 of the
Notes and Section 3.03, it shall notify the Trustee and the Paying Agent in
writing of the Redemption Date and the principal amount of the Notes to be
redeemed.
The Company shall give each notice provided for in this Section 3.01
at least 45 but not more than 60 days before the Redemption Date (unless a
shorter notice period shall be satisfactory to the Trustee, as evidenced in a
writing signed on behalf of the Trustee), together with an Officers' Certificate
stating the CUSIP number of the Notes being redeemed, that such redemption shall
comply with the conditions contained herein and in the Notes, the Redemption
Date, the redemption price and the principal amount of the Notes to be redeemed.
If the Company is required to make an offer to redeem Notes pursuant
to the provisions of Section 4.14 or 4.15 hereof, it shall furnish to the
Trustee at least 30 days but not more than 60 days before a Change of Control
Payment Date or Net Proceeds Payment Date (or such shorter period as may be
agreed to by the Trustee in writing), an Officers' Certificate setting forth (i)
the Section of this Indenture pursuant to which the redemption shall occur, (ii)
the Redemption Date, (iii) the principal amount of Notes to be redeemed, (iv)
the redemption price, (v) a statement to the effect that (a) the Company or one
of its Subsidiaries has effected an Asset Sale and the conditions set forth in
Section 4.15 have been satisfied or (b) a Change of Control has occurred and the
conditions set forth in Section 4.14 have been satisfied, as applicable and (vi)
the CUSIP number of the Notes being redeemed.
SECTION 3.02. Selection of Notes To Be Redeemed.
---------------------------------
In the event that less than all of the Notes are to be redeemed at any
time, selection of Notes for redemption shall be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not listed on a
national securities exchange, on a pro rata basis, by lot or by such method as
--- ----
the Trustee shall deem fair and appropriate;
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<PAGE>
provided, however, that no Notes of a principal amount of $1,000 or less shall
- -------- -------
be redeemed in part; provided, further, however, that any such redemption made
-------- ------- -------
made with the net proceeds of a Public Equity Offering shall be made on a pro
---
rata basis or on as nearly a pro rata basis as practicable (subject to the
- ---- --- ----
procedures of The Depository Trust Company or any other depositary).
Notice of redemption will be mailed by first class mail at least 30
but not more than 60 days before the redemption date to each holder of Notes to
be redeemed at its registered address. If any Note is to be redeemed in part
only, the notice of redemption that relates to such Note will state the portion
of the principal amount thereof to be redeemed. A new Note in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. On and after the redemption
date, interest will cease to accrue on Notes or portions thereof called for
redemption so long as the Company has deposited with the Paying Agent funds in
satisfaction of the applicable redemption price pursuant to this Indenture.
SECTION 3.03. Optional Redemption.
-------------------
(a) The Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after April 1, 2004, at the redemption
prices (expressed as percentages of the principal amount) set forth below, plus
accrued and unpaid interest, if any, to the date of redemption, if redeemed
during the 12-month period beginning on April 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Redemption
Price
<S> <C>
2004.................................... 104.250%
2005.................................... 102.833%
2006.................................... 101.417%
2007 and thereafter..................... 100.000%
</TABLE>
(b) On or before April 1, 2002, the Company may, at its option, use
the net proceeds of a Public Equity Offering to redeem up to 35% of the
originally issued aggregate principal amount of the Notes, at a redemption price
in cash equal to 108.500% of the principal amount, plus accrued and unpaid
interest, if any, to the redemption date; provided that at least 65% of the
--------
aggregate principal amount of Notes is outstanding following such redemption.
Notice of any such redemption must be given not later than 60 days after the
consummation of the Public Equity Offering.
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<PAGE>
SECTION 3.04. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before the Redemption Date,
the Company shall mail or cause to be mailed a notice of redemption by first
class mail to each Holder of Notes to be redeemed at its registered address,
with a copy to the Trustee and any Paying Agent. At the Company's request, the
Trustee shall give the notice of redemption in the Company's name and at the
Company's expense. The Company shall provide such notices of redemption to the
Trustee at least five days or such shorter period as shall be agreed to by the
Trustee before the intended mailing date. In any case, failure to give such
notice or any defect in the notice to the holder of any Note shall not affect
the validity of the proceeding for the redemption of any other Note.
Each notice of redemption shall identify (including the CUSIP number)
the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the redemption price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such redemption
is being made;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price plus accrued interest, if any
unless such date of redemption is an interest payment date in which case
interest will be paid to the registered owner;
(6) that, unless the Company defaults in making the redemption
payment, interest on Notes or applicable portions thereof called for
redemption ceases to accrue on and after the Redemption Date, and the only
remaining right of the Holders of such Notes is to receive payment of the
redemption price plus accrued interest as of the Redemption Date, if any,
upon surrender to the Paying Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date, and upon surrender of such Note, a new Note or Notes in the aggregate
principal amount equal to the unredeemed portion thereof will be issued;
and
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<PAGE>
(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be redeemed,
as well as the aggregate principal amount of Notes to be redeemed and the
aggregate principal amount of Notes to be outstanding after such partial
redemption.
No representation is made as to the accuracy of the CUSIP numbers
listed in such notice or printed on the Notes.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Notes.
SECTION 3.05. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.04,
such notice of redemption shall be irrevocable and Notes called for redemption
become due and payable on the Redemption Date and at the redemption price plus
accrued interest as of such date, if any. Upon surrender to the Trustee or
Paying Agent, such Notes called for redemption shall be paid on the Redemption
Date at the redemption price plus accrued interest thereon to the Redemption
Date from deposits made in accordance with Section 3.06 hereof, but installments
of interest, the maturity of which is on or prior to the Redemption Date, shall
be payable to Holders of record at the close of business on the relevant record
dates referred to in the Notes. Interest shall accrue on or after the
Redemption Date and shall be payable only if the Company defaults in payment of
the redemption price. If mailed in the manner set forth herein, the notice
shall be conclusively presumed to have been given whether or not the Holder
receives such notice.
SECTION 3.06. Deposit of Redemption Price.
---------------------------
On or before 11:00 a.m. New York City time on the Redemption Date and
in accordance with Section 2.14, the Company shall deposit with the Paying Agent
U.S. Legal Tender sufficient to pay the redemption price plus accrued interest,
if any, of all Notes to be redeemed on that date. The Paying Agent shall
promptly return to the Company any U.S. Legal Tender so deposited which is not
required for that purpose, except with respect to monies owed as obligations to
the Trustee pursuant to Article Seven.
Unless the Company fails to comply with the preceding paragraph and
defaults in the payment of such redemption price plus accrued interest, if any,
interest on the Notes to be re-
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deemed will cease to accrue on and after the applicable Redemption Date, whether
or not such Notes are presented for payment.
SECTION 3.07. Notes Redeemed in Part.
----------------------
Upon surrender of a Note that is to be redeemed in part, the Trustee
shall authenticate for the Holder a new Note or Notes equal in principal amount
to the unredeemed portion of the Note surrendered.
SECTION 3.08. Sinking Fund
------------
There shall be no sinking fund for the payment of principal on the
Notes to the Holders.
ARTICLE FOUR
COVENANTS
---------
SECTION 4.01. Payment of Notes.
----------------
(a) The Company shall pay the principal of, premium, if any, and
interest on the Notes on the dates and in the manner provided in the Notes and
in this Indenture.
(b) An installment of principal of or interest on the Notes shall be
considered paid on the date it is due if the Trustee or Paying Agent (other than
the Company or any of its Affiliates) holds, prior to 11:00 a.m. New York City
time on that date, U.S. Legal Tender designated for and sufficient to pay the
installment in full and is not prohibited from paying such money to the Holders
pursuant to the terms of this Indenture or the Notes.
(c) Notwithstanding anything to the contrary contained in this
Indenture, the Company or its Agent may, to the extent it is required to do so
by law, deduct or withhold income or other similar taxes imposed by the United
States of America from principal or interest payments hereunder.
SECTION 4.02. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain the office or agency required under Section
2.03. The Company shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands
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may be made or served at the address of the Trustee set forth in Section 10.02.
SECTION 4.03. Corporate Existence.
-------------------
Except as provided in Article Five, the Company shall do or shall
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other existence
of each of its Restricted Subsidiaries in accordance with the respective
organizational documents of the Company and its Restricted Subsidiaries and the
rights (charter and statutory) and material franchises of the Company and its
Restricted Subsidiaries; provided, however, that the Company shall not be
-------- -------
required to preserve, with respect to itself, any material right or franchise
and, with respect to any of its Restricted Subsidiaries, any such existence,
material right or franchise, if the Board of Directors of the Company shall
determine in good faith that the preservation thereof is no longer desirable in
the conduct of the business of the Company and its Subsidiaries taken as a
whole.
SECTION 4.04. Payment of Taxes and Other Claims.
---------------------------------
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon the Company or any of the
Restricted Subsidiaries or properties of the Company or any of the Restricted
Subsidiaries and (ii) all material lawful claims for labor, materials and
supplies that, if unpaid, might by law become a Lien upon the property of the
Company or any of its Restricted Subsidiaries; provided, however, that the
-------- -------
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate negotiations or
proceedings properly instituted and diligently conducted for which adequate
reserves, to the extent required under GAAP, have been taken.
SECTION 4.05. Maintenance of Properties and Insurance.
---------------------------------------
(a) The Company and each of its Restricted Subsidiaries shall cause
all material properties owned by or leased to it and used or useful in the
conduct of its business to be maintained and kept in normal condition, repair
and working order and supplied with all necessary equipment and shall cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of
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the Company or such Restricted Subsidiary may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this Section 4.05 shall
-------- -------
of prevent the Company or any its Restricted Subsidiaries from discontinuing the
use, operation or maintenance of any of such properties, or disposing of any of
them, if such discontinuance or disposal is, in the judgment of the Board of
Directors of the Company or of the Board of Directors of the Restricted
Subsidiary concerned, or of an officer (or other agent employed by the Company
or any of its Restricted Subsidiaries) of the Company or such Restricted
Subsidiary having managerial responsibility for any such property, desirable in
the conduct of the business of the Company or any of its Restricted
Subsidiaries.
(b) The Company and its Restricted Subsidiaries shall cause to be
provided insurance (including appropriate self-insurance) against loss or damage
of the kinds that, in the good faith judgment of the respective Boards of
Directors or other governing body or officer of the Company or such Restricted
Subsidiaries, as the case may be, are adequate and appropriate for the conduct
of the business of the Company or such Restricted Subsidiaries, as the case may
be, with reputable insurers or with the government of the United States of
America or an agency or instrumentality thereof, in such amounts, with such
deductibles, and by such methods as shall be customary, in the good faith
judgment of the respective Boards of Directors or other governing body or
officer of the Company or such Restricted Subsidiary, as the case may be, for
companies similarly situated in the industry.
SECTION 4.06. Compliance Certificate; Notice of Default.
-----------------------------------------
(a) The Company shall deliver to the Trustee, within 90 days after
the end of its fiscal years, an Officers' Certificate (provided, however, that
-------- -------
one of the signatories to such Officers' Certificate shall be the Company's
principal executive officer, principal financial officer or principal accounting
officer), as to such Officers' knowledge of the Company's compliance with all
conditions and covenants under this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and in the event any Default
of the Company exists, such Officers shall specify the nature of such Default.
Each such Officers' Certificate shall also notify the Trustee should the Company
elect to change the manner in which it fixes its fiscal year end.
(b) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default un-
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der this Indenture or the Notes, the Company shall deliver to the Trustee, at
its address set forth in Section 10.02, by registered or certified mail or by
facsimile transmission followed by hard copy by registered or certified mail an
Officers' Certificate specifying such event, notice or other action within 10
days of its becoming aware of such occurrence.
SECTION 4.07. Compliance with Laws.
--------------------
The Company shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as could not singly or in the
aggregate reasonably be expected to have a material adverse effect on the
financial condition, business, prospects or results of operations of the Company
and its Subsidiaries taken as a whole.
SECTION 4.08. Provision of Financial Statements.
---------------------------------
So long as the Notes are outstanding, whether or not the Company is
subject to Section 13(a) or 15(d) of the Exchange Act, or any successor
provision thereto, the Company shall, to the extent permitted by Commission
practice and applicable law and regulations, file with the Commission the annual
reports, quarterly reports and other documents that the Company would have been
required to file with the Commission pursuant to such Section 13(a) or 15(d), or
any successor provision thereto, if the Company were so subject, such documents
to be filed with the Commission on or prior to the date (the "Required Filing
Date") by which the Company would have been required so to file such documents
if the Company were so subject.
The Company shall in any event (x) within 15 days of each Required
Filing Date, whether or not permitted or required to be filed with the
Commission, (i) transmit or cause to be transmitted by mail to all holders of
Notes, as their names and addresses appear in the security register and to any
other Person described in the TIA (S) 313(c), to the extent required by the TIA,
without cost to such holders and (ii) file with the Trustee, copies of the
annual reports, quarterly reports and other documents that the Company would
have been required to file with the Commission pursuant to Section 13(a) or
15(d) of the Exchange Act, or any successor provision thereto, if the Company
were subject to either of such Sections and (y) if fil-
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ing such documents by the Company with the Commission is not permitted under the
Exchange Act, promptly upon written request and payment of the reasonable cost
of duplication and delivery, supply copies of such documents to any prospective
holder at the Company's cost.
In addition, for so long as any Notes remain outstanding, the Company
shall furnish to the holders of Notes and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act, and, to any beneficial holder of
Notes, if not obtainable from the Commission, information of the type that would
be filed with the Commission pursuant to the foregoing provisions, upon the
request of any such holder. If any Subsidiary's financial statements would be
required to be included in the financial statements filed or delivered pursuant
hereto if the Company were subject to Section 13(a) or 15(d) of the Exchange
Act, the Company shall include such Subsidiary's financial statements in any
filing or delivery pursuant hereto.
SECTION 4.09. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury law
or other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
SECTION 4.10. Limitation on Restricted Payments.
---------------------------------
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly:
(i) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of the Company or any payment to
the direct or indirect holders (in their capacities as such) of Capital
Stock of the Company (other than dividends or distributions payable solely
in shares of Qualified Capital Stock of the Company
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or in options, warrants or other rights to acquire shares of such Qualified
Capital Stock); or
(ii) purchase, redeem, defease or otherwise acquire or retire for
value, directly or indirectly, the Company's Capital Stock or any Capital
Stock of any Restricted Subsidiary (other than any such Capital Stock owned
by the Company or any Wholly-Owned Restricted Subsidiary); or
(iii) make any principal payment on, or purchase, repurchase,
redeem, defease, retire or otherwise acquire for value, prior to any
scheduled maturity, scheduled repayment, scheduled sinking fund payment or
other Stated Maturity, any Subordinated Indebtedness (other than any
Subordinated Indebtedness owed to and held by the Company or any Wholly-
Owned Restricted Subsidiary); or
(iv) make any Investment (other than any Permitted Investment) in
any Person (other than in the Company, any Wholly-Owned Restricted
Subsidiary or a Person that as a result of such Investment becomes a
Wholly-Owned Restricted Subsidiary, or is merged with or into or
consolidated with the Company or a Wholly-Owned Restricted Subsidiary
(provided the Company or a Wholly-Owned Restricted Subsidiary is the
survivor), as a result of or in connection with such Investment)
(any of the foregoing actions described in clauses (i) through (iv),
individually, a "Restricted Payment") (the amount of any such Restricted
Payment, if other than cash, shall be the Fair Market Value of the asset(s)
proposed to be transferred by the Company or such Restricted Subsidiary, as the
case may be, in each case, as determined by the Board of Directors of the
Company, whose determination shall be conclusive and evidenced by a board
resolution), unless (1) immediately before and immediately after giving effect
to such Restricted Payment on a pro forma basis, no Default shall have occurred
and be continuing; (2) immediately before and immediately after giving effect to
such Restricted Payment on a pro forma basis, the Company could incur $1.00 of
--- -----
additional Indebtedness (other than Permitted Indebtedness) under Section 4.12;
and (3) immediately after giving effect to the proposed Restricted Payment, the
aggregate amount of all such Restricted Payments (including any Designation
Amounts) declared or made after the Issue Date, does not exceed an amount equal
to the sum of without duplication:
(A) 50% of the cumulative Consolidated Net Income of the Company
during the period (treated as one accounting period) beginning on the first
day of the fiscal quarter beginning prior to the Issue Date and ending on
the last day of the Company's last fiscal quarter ending prior to
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the date of the Restricted Payment (or, if such aggregate cumulative
Consolidated Net Income shall be a deficit, minus 100% of such deficit);
plus
(B) the aggregate net cash proceeds received after the Issue Date by
the Company either (x) as capital contributions to the Company or (y) from
the issuance or sale (other than to any of the Restricted Subsidiaries) of
Qualified Capital Stock of the Company or from the exercise of any options,
warrants or rights to purchase such Qualified Capital Stock of the Company
(except, in each case, to the extent such proceeds are used to purchase,
redeem or otherwise retire Capital Stock or Subordinated Indebtedness as
set forth in clause (ii) or (iii) of paragraph (b) below and excluding the
net cash proceeds from any issuance and sale of Capital Stock or from any
such exercises, in each case, financed, directly or indirectly, using funds
borrowed from the Company or any Restricted Subsidiary until and to the
extent such borrowing is repaid); plus
(C) the aggregate net cash proceeds received after the Issue Date by
the Company from the conversion or exchange, if any, of Indebtedness of the
Company or its Subsidiaries into or for Qualified Capital Stock of the
Company, plus, whether or not such Indebtedness was issued prior to or
after the Issue Date, the aggregate of Net Cash Proceeds from their
original issuance, less any principal and sinking fund payments made
thereon; plus
(D) in the case of the disposition or repayment (in whole or in part)
of any Investment constituting a Restricted Payment made after the Issue
Date, an amount (to the extent not included in Consolidated Net Income)
equal to the lesser of the return of capital with respect to such
Investment and the initial amount of such Investment that was treated as a
Restricted Payment, in either case, less the cost of disposition of such
Investment and net of taxes; plus
(E) an amount in cash equal to the net cash proceeds of a sale by the
Company of all of a part of its interest in CST to an unaffiliated third
party; provided that such amount would not exceed the lesser of (x) the
book value of the portion of the Company's interest in CST being sold on
the balance sheet of the Company as of such sale date and (y) the Fair
Market Value of such portion of the Company's interest in CST; plus
(F) so long as the Designation thereof was treated as a Restricted
Payment made after the Issue Date, with
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respect to any Unrestricted Subsidiary that has been redesignated as a
Restricted Subsidiary after the Issue Date in accordance with Section 4.18,
the Fair Market Value of the Capital Stock of such Subsidiary owned by the
Company and the Restricted Subsidiaries, provided that such amount shall
not in any case exceed the Designation Amount with respect to such
Restricted Subsidiary upon its Designation; plus
(G) $20.0 million; and minus
(H) the greater of (i) $0 and (ii) the Designation Amount (measured
as of the date of Designation) with respect to any Subsidiary of the
Company that has been Designated as an Unrestricted Subsidiary after the
Issue Date in accordance with Section 4.18.
(b) Notwithstanding the foregoing, and in the case of clauses (ii)
through (v) below, so long as no Default or Event of Default shall have occurred
and be continuing or would arise therefrom, the foregoing provisions shall not
prohibit the following actions (each of clauses (i) through (v) being referred
to as a "Permitted Payment"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment was
permitted by the provisions of this Indenture;
(ii) the repurchase, redemption, or other acquisition or retirement
of any shares of any class of Capital Stock of the Company in exchange for
(including any such exchange pursuant to the exercise of a conversion right
or privilege in connection with which cash is paid in lieu of the issuance
of fractional shares or scrip), or out of the net cash proceeds of a
substantially concurrent issue and sale for cash to any Person (other than
to a Restricted Subsidiary) of, shares of Qualified Capital Stock of the
Company; provided that the net cash proceeds from the issuance of such
--------
shares of Qualified Capital Stock are excluded from clause (B) of the first
paragraph (a) of this Section;
(iii) the repurchase, redemption, defeasance, retirement or
acquisition for value or payment of principal of any Subordinated
Indebtedness in exchange for, or out of the net cash proceeds of a
substantially concurrent issuance and sale for cash to any Person (other
than to the Company or any Restricted Subsidiary) of, any Qualified Capital
Stock of the Company, provided that the net cash proceeds from the issuance
--------
of such shares of Qualified
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Capital Stock are excluded from clause (B) of the first paragraph (a) of
this Section;
(iv) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of principal of any Subordinated
Indebtedness (other than Redeemable Capital Stock) of the Company in
exchange for, or out of the net cash proceeds of a substantially concurrent
issuance and sale for cash to any Person (other than to a Restricted
Subsidiary) of, new Subordinated Indebtedness of the Company, provided that
--------
any such new Subordinated Indebtedness
(1) shall be in a principal amount that does not exceed the
principal amount so repurchased, redeemed, defeased, retired, acquired
or paid (or, if such Subordinated Indebtedness provides for an amount
less than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, then such lesser amount as of the
date of determination), plus the amount of any stated or reasonably
determined prepayment premium paid in connection with such repurchase,
redemption, defeasance, retirement, acquisition or payment, plus the
amount of expenses of the Company and the Restricted Subsidiaries
incurred in connection with such repurchase, redemption, defeasance,
retirement, acquisition or payment;
(2) has an Average Life to Stated Maturity equal to or greater
than the Average Life to Stated Maturity of the Subordinated
Indebtedness being repurchased, redeemed, defeased, retired, acquired
or paid; and
(3) is expressly subordinated in right of payment to the Notes
at least to the same extent as the Subordinated Indebtedness to be
repurchased, redeemed, defeased, retired, acquired or paid; and
(v) the payment of dividends on the Class C Preferred Stock of the
Company as in effect on the Issue Date not to exceed $3.0 million in any
given year.
In computing the amount of Restricted Payments previously made for
purposes of clause (3) of the first paragraph (a) of this Section, Restricted
Payments under the immediately preceding clause (i) shall be included (but only
to the extent the related dividend declaration is not so included). If the
Company makes a Restricted Payment that, at the time of the making of such
Restricted Payment would in the good faith determination of the Company be
permitted under the provisions of
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the Indenture, such Restricted Payment shall be deemed to have been made in
compliance with the Indenture notwithstanding any subsequent adjustments made in
good faith to the Company's financial statements affecting Consolidated Net
Income of the Company for any period.
SECTION 4.11. Limitations on Transactions
with Affiliates.
---------------------------
The Company shall not, and shall not permit, cause or suffer any
Restricted Subsidiary to, conduct any business or enter into any transaction (or
series of related transactions that are similar or part of a common plan) with
or for the benefit of any of their respective Affiliates or any beneficial
holder of 10% or more of the Common Stock of the Company or any officer or
director of the Company (each, an "Affiliate Transaction"), unless the terms of
the Affiliate Transaction are set forth in writing, and are fair and reasonable
to the Company or such Restricted Subsidiary, as the case may be. Each Affiliate
Transaction involving aggregate payments or other Fair Market Value in excess of
$2.5 million shall be approved by a majority of the Board of Directors of the
Company, such approval to be evidenced by a Board Resolution stating that the
Board of Directors of the Company has determined that such transaction or
transactions comply with the foregoing provisions. In addition to the foregoing,
each Affiliate Transaction involving aggregate consideration of $10.0 million or
more shall be approved by a majority of the Disinterested Directors; provided
that, in lieu of such approval by the Disinterested Directors, the Company may
obtain a written opinion from an Independent Financial Advisor stating that the
terms of such Affiliate Transaction to the Company or the Restricted Subsidiary,
as the case may be, are fair from a financial point of view.
Notwithstanding the foregoing, the restrictions set forth in this
covenant shall not apply to
(i) transactions with or among the Company and any Restricted
Subsidiary or between or among Restricted Subsidiaries;
(ii) customary directors' fees, indemnification and similar
arrangements, consulting fees, employee salaries, bonuses or employment
agreements, compensation or employee benefit arrangements and incentive
arrangements with any officer, director or employee of the Company entered
into in the ordinary course of business (including customary benefits
thereunder) and payments under any indemnification arrangements permitted
by applicable law;
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(iii) any transactions undertaken pursuant to any other
contractual obligations in existence on the Issue Date (as in effect on the
Issue Date) and any renewals, replacements or modifications of such
obligations (pursuant to new transactions or otherwise) with suppliers on
terms no less favorable than such supplier could receive from an
unaffiliated third party;
(iv) any Restricted Payments made in compliance with Section
4.10;
(v) loans, advances and reimbursements to officers, directors
and employees of the Company and the Restricted Subsidiaries for travel,
entertainment, moving and other relocation expenses, in each case made in
the ordinary course of business and consistent with past business
practices;
(vi) the pledge of any Capital Stock of Unrestricted Subsidiaries
to support the Indebtedness thereof;
(vii) the sale of products, property or services by any Person to
the Company or a Restricted Subsidiary, or by the Company or any Restricted
Subsidiary to any Person, in the ordinary course of business; and
(viii) the issuance and sale by the Company of Qualified Capital
Stock.
SECTION 4.12. Limitation on Indebtedness.
--------------------------
The Company shall not, and shall not permit any of the Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, issue, guarantee
or in any manner become liable for or with respect to, contingently or otherwise
(in each case, to "incur"), the payment of any Indebtedness (including any
Acquired Indebtedness); provided, however, that (i) the Company may incur
-------- -------
Indebtedness (including Acquired Indebtedness) and (ii) a Restricted Subsidiary
may incur Acquired Indebtedness, if, in either case, immediately after giving
pro forma effect thereto, the Consolidated Fixed Charge Coverage Ratio of the
Company is at least equal to 2.5:1.0.
Notwithstanding the foregoing, the Company and, to the extent set
forth below, the Restricted Subsidiaries may incur each and all of the following
(collectively, "Permitted Indebtedness"):
(i) Indebtedness of the Company under the Credit Facility in an
aggregate principal amount at any one time outstanding not to exceed $130.0
million;
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(ii) Indebtedness of the Company pursuant to the Notes and this
Indenture;
(iii) Indebtedness of the Company and any Restricted Subsidiary
outstanding on the Issue Date;
(iv) (a) Indebtedness of a Wholly-Owned Restricted Subsidiary
owing to and held by the Company or another Wholly-Owned Restricted
Subsidiary that is unsecured; provided that (a) any disposition, pledge or
transfer of any such Indebtedness to a Person (other than the Company or a
Wholly-Owned Restricted Subsidiary) shall be deemed to be an incurrence of
such Indebtedness by the obligor not permitted by this clause (iv), and (b)
any transaction pursuant to which any Wholly-Owned Restricted Subsidiary,
which has Indebtedness owing to the Company or any other Wholly-Owned
Restricted Subsidiary, ceases to be a Wholly-Owned Restricted Subsidiary
shall be deemed to be the incurrence of Indebtedness by such Wholly-Owned
Restricted Subsidiary that is not permitted by this clause (iv);
(v) Indebtedness of the Company or any Restricted Subsidiary
under Interest Rate Agreements not entered into for speculative purposes
covering Indebtedness of the Company or such Restricted Subsidiary;
provided, however, that such Interest Rate Agreements do not increase the
-------- -------
Indebtedness or other obligations of the Company outstanding other than as
a result of fluctuations in interest rates or by reason of fees,
indemnities and compensation payable thereunder;
(vi) Indebtedness of the Company or any Restricted Subsidiary
under Currency Agreements relating to (a) Indebtedness of the Company or
such Restricted Subsidiary and/or (b) obligations to purchase or sell
assets or properties, in each case, incurred in the ordinary course of
business of the Company; provided, however, that such Currency Agreements
-------- -------
do not increase the Indebtedness or other obligations of the Company
outstanding other than as a result of fluctuations in foreign currency
exchange rates or by reason of fees, indemnities and compensation payable
thereunder;
(vii) Indebtedness of the Company or any Restricted Subsidiary
under Commodity Price Protection Agreements relating to (a) Indebtedness of
the Company or such Restricted Subsidiary and/or (b) obligations to
purchase or sell assets or properties, in each case, incurred in the
ordinary course of business of the Company; provided, however, that such
-------- -------
Commodity Price Protection Agreements do not increase the Indebtedness or
other obligations of the
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Company outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(viii) Indebtedness of the Company represented by Capitalized Lease
Obligations or Purchase Money Obligations or other Indebtedness incurred or
assumed in connection with the acquisition or development of real or
personal property in each case incurred for the purpose of financing or
refinancing all or any part of the purchase price or cost of construction
or improvement of property used in the business of the Company (whether
through the direct purchase of assets or the purchase of Capital Stock of
any Person owning such assets and whether such Indebtedness is owed to the
seller or Person carrying out such construction or improvement or to any
third party), in an aggregate principal amount pursuant to this clause
(viii) not to exceed $25.0 million outstanding at any one time; provided,
--------
that the principal amount of any Indebtedness permitted under this clause
(viii) did not in each case at the time of incurrence exceed the Fair
Market Value of the acquired or constructed asset or improvement so
financed;
(ix) reimbursement obligations under letters of credit in the
ordinary course of business consistent with past practice (including
without limitation letters of credit in respect of workers compensation
obligations and bankers acceptances and performance bonds, surety bonds and
performance guarantees, of the Company or any Restricted Subsidiary);
(x) Capital Expenditure Indebtedness not to exceed $50.0 million
outstanding at any one time in the aggregate; provided that the principal
--------
amount of any such Indebtedness incurred pursuant to this clause (x) does
not exceed the Fair Market Value (on the date of such incurrence) of the
property acquired, constructed or leased;
(xi) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
drawn against insufficient funds in the ordinary course of business;
provided, however, that such Indebtedness is extinguished within three
business days of incurrence;
(xii) Indebtedness of the Company or any Restricted Subsidiary
consisting of indemnities or obligations in respect of purchase price
adjustments in connection with the disposition of assets;
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(xiii) any renewals, extensions, substitutions, refundings,
refinancings or replacements (collectively, a "refinancing") of any
Indebtedness incurred under the first paragraph of this Section or clause
(ii) and (iii) above, including any successive refinancings so long as the
aggregate principal amount of Indebtedness represented thereby is not
increased by such refinancing, plus the amount of any stated or reasonably
determined prepayment premium paid in connection with such a refinancing,
plus the amount of expenses of the Company or a Restricted Subsidiary
incurred in connection with such refinancing and (A) in the case of any
refinancing of Indebtedness that is Subordinated Indebtedness, such new
Indebtedness is subordinated to the Notes at least to the same extent as
the Indebtedness being refinanced and (B) such new Indebtedness has an
Average Life to Stated Maturity equal to or greater than the Average Life
to Stated Maturity of the Subordinated Indebtedness being repurchased,
redeemed, defeased, retired, acquired or paid; and
(xiv) Indebtedness of the Company in addition to that described in
clauses (i) through (xiii) above (including any Indebtedness incurred under
the Credit Facility) not to exceed $25.0 million outstanding at any one
time in the aggregate.
SECTION 4.13. Limitation on Dividend and
Other Payment Restrictions
Affecting Restricted Subsidiaries.
---------------------------------
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective or enter into any agreement with any Person that would
cause to become effective, any consensual encumbrance or restriction of any
kind, on the ability of any Restricted Subsidiary to
(i) pay dividends, in cash or otherwise, or make any other
distribution on or in respect of its Capital Stock or any other interest or
participation in, or measured by, its profits, to the Company or any other
Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other
Restricted Subsidiary,
(iii) make any Investment in the Company or any other Restricted
Subsidiary or
(iv) transfer any of its properties or assets to the Company or
any other Restricted Subsidiary, except for:
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(a) any encumbrance or restriction existing under any agreement
in effect on the Issue Date;
(b) customary non-assignment provisions in any contract or lease
entered into in the ordinary course of business;
(c) any encumbrance or restriction, with respect to a Subsidiary
that is not a Restricted Subsidiary of the Company on the Issue Date, in
existence at the time such Person becomes a Restricted Subsidiary of the
Company and not incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary; provided, however, that such
-------- -------
encumbrances and restrictions are not applicable to the Company or any
other Restricted Subsidiary, or the properties or assets of the Company or
any other Restricted Subsidiary; and
(d) any encumbrance or restriction existing under any agreement
that extends, renews, refinances or replaces the agreements containing the
encumbrances or restrictions in the foregoing clauses (a), (b) and (c), or
in this clause (d), provided that the terms and conditions of any such
--------
encumbrances or restrictions are no more restrictive in any material
respect than those under or pursuant to the agreement evidencing the
Indebtedness so extended, renewed, refinanced or replaced.
SECTION 4.14. Change of Control.
-----------------
(a) Following the occurrence of a Change of Control (the date of
such occurrence being the "Change of Control Date"), the Company shall, within
30 days after the Change of Control Date, make an offer to purchase (a "Change
of Control Offer") all of the then outstanding Notes at a purchase price (the
"Change of Control Purchase Price") in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the
purchase date. The Company shall be required to purchase all Notes properly
tendered in the Change of Control Offer and not withdrawn.
(b) Within 30 days following the date upon which the Change of
Control occurred, the Company shall mail, or cause the Trustee to mail, by first
class mail, a notice to each Holder at such Holder's last registered address,
with a copy to the Trustee, if applicable, which notice shall govern the terms
of the Change of Control Offer. The notice to the Holders shall contain all
instructions and materials necessary to en-
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able such Holders to tender Notes pursuant to the Change of Control Offer. Such
notice shall state:
(i) that the Change of Control Offer is being made pursuant to
this Section 4.14 and that all Notes tendered and not withdrawn shall be
accepted for payment;
(ii) the purchase price (including the amount of accrued
interest) and the purchase date (which shall be no earlier than 30 days nor
later than 45 days from the date such notice is mailed, other than as may
be required by law) (the "Change of Control Payment Date");
(iii) that any Note not tendered shall continue to accrue interest;
(iv) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Payment Date;
(v) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer shall be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third business day prior to the
Change of Control Payment Date;
(vi) that Holders shall be entitled to withdraw their election if
the Paying Agent receives, not later than the second business day prior to
the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Notes the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Notes purchased;
(vii) that Holders whose Notes are purchased only in part shall be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; provided, however, that each Note purchased and each
-------- -------
new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof; and
(viii) the circumstances and relevant facts regarding such Change of
Control.
On the Change of Control Payment Date, the Company shall, to the
extent permitted by law, (i) accept for payment all Notes or portions thereof
properly tendered pursuant to the
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Change of Control Offer, (ii) deposit with the Paying Agent an amount equal to
the aggregate Change of Control Payment in respect of all Notes or portions
thereof so tendered and (iii) deliver, or cause to be delivered, to the Trustee
for cancellation the Notes so accepted together with an Officers' Certificate
stating that such Notes or portions thereof have been tendered to and purchased
by the Company. The Paying Agent will promptly either (x) pay to the Holder
against presentation and surrender (or, in the case of partial payment,
endorsement) of the Global Notes or (y) in the case of Certificated Securities,
mail to each Holder of Notes the Change of Control Payment for such Notes, and
the Trustee will promptly authenticate and deliver to the Holder of the Global
Notes a new Global Note or Notes or, in the case of Certificated Securities,
mail to each Holder new Certificated Securities, as applicable, equal in
principal amount to any unpurchased portion of the Notes surrendered, if any,
provided that each new Certificated Security will be in a principal amount of
$1,000 or an integral multiple thereof. The Company will notify the Trustee and
the Holders of the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
Neither the Board of Directors of the Company nor the Trustee may
waive the provisions of this Section 4.14 relating to the Company's obligation
to make a Change of Control Offer or a Holder's right to redemption upon a
Change of Control.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.14, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached their
obligations under the provisions of this Section 4.14 by virtue thereof.
SECTION 4.15. Disposition of Proceeds of Asset Sales.
--------------------------------------
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, consummate an Asset Sale unless (i) at
least 75% of the consideration from such Asset Sale is received in cash, Cash
Equivalents or Liquid Assets (or any combination thereof) and (ii) the Company
or such Restricted Subsidiary receives consideration at the time of such Asset
Sale at least equal to the Fair Market Value of the shares or assets subject to
such Asset Sale.
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The Company or the applicable Restricted Subsidiary, as the case may
be, shall, at the Company's option,
(i) apply the Net Cash Proceeds from such Asset Sale within 360
days of the receipt thereof to repay Indebtedness under the Credit Facility
and elect to permanently reduce the commitments thereunder by the amount of
Indebtedness so repaid,
(ii) apply the Net Cash Proceeds from such Asset Sale within 360
days of the receipt thereof to repay an amount of other Indebtedness (other
than Subordinated Indebtedness) of the Company in an amount not exceeding
the Other Senior Debt Pro Rata Share and, if applicable, elect to
permanently reduce the amount of the commitments thereunder by the amount
of the Indebtedness so repaid,
(iii) apply the Net Cash Proceeds from such Asset Sale within 360
days of the receipt thereof to repay any Restricted Subsidiary Indebtedness
and, if applicable, elect to permanently reduce the commitments thereunder
by the amount of the Indebtedness so repaid or
(iv) apply such Net Cash Proceeds within 360 days thereof to an
investment in properties and assets that will be used in the same line of
business of the Company or any Restricted Subsidiary or in businesses
reasonably related thereto (or in Capital Stock and other securities of any
person that will become a Restricted Subsidiary as a result of such
investment to the extent such person owns properties and assets that will
be used in the business of the Company or its Subsidiaries existing on the
Issue Date or in businesses reasonably related thereto) ("Replacement
Assets").
Any Net Cash Proceeds from any Asset Sale that are neither used to
repay, and permanently reduce the commitments under, any Indebtedness of the
Company or any Restricted Subsidiary Indebtedness as set forth in clauses (i),
(ii) or (iii), respectively, of the preceding sentence or invested in
Replacement Assets within the 360-day period as set forth in clause (iv) shall
constitute "Offer Excess Proceeds."
When the aggregate amount of Offer Excess Proceeds equals or exceeds
$10.0 million, the Company shall make an offer to purchase (an "Asset Sale
Offer"), from all holders of the Notes, that aggregate principal amount of Notes
as can be purchased by application of the entire amount of such Offer Excess
Proceeds (and not just the amount in excess of $10.0 million) at a price in cash
equal to 100% of the principal amount thereof on any purchase date (the "Net
Proceeds Payment Date"),
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plus accrued and unpaid interest, if any,to any purchase date. Each Asset Sale
Offer shall remain open for a period of 20 business days or such longer period
as may be required by law. To the extent that the principal amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Offer Excess Proceeds,
the Company or any Restricted Subsidiary may use such deficiency for any purpose
consistent with other terms of this Indenture. If the principal amount of Notes
validly tendered and not withdrawn by holders thereof exceeds the amount of
Notes that can be purchased with the Offer Excess Proceeds, Notes to be
purchased will be selected on a pro rata basis. Upon completion of such Asset
________
Sale Offer, the amount of Offer Excess Proceeds shall be reset to zero.
If the Asset Sale Offer is on or after a Record Date and on or before
the related Interest Payment Date, any accrued interest shall be paid to the
Person in whose name a Note is registered at the close of business on such
Record Date, and no additional interest shall be payable to Holders who tender
Notes pursuant to the Asset Sale Offer.
The notice, which shall govern the terms of the Asset Sale Offer,
shall include such disclosures as are required by law and shall state:
(v) that the Asset Sale Offer is being made pursuant to this Section
4.15;
(vi) the purchase price (including the amount of accrued interest,
if any) to be paid for Notes purchased pursuant to the Asset Sale Offer and
the purchase date;
(vii) that any Note not tendered for payment will continue to accrue
interest in accordance with the terms thereof;
(viii) that, unless the Company defaults on making the payment, any Note
accepted for payment pursuant to the Net Proceeds Offer shall cease to
accrue interest after the Net Proceeds Payment Date;
(ix) that Holders accepting the Offer to have their Notes purchased
pursuant to the Asset Sale Offer will be required to surrender their Notes
to the Paying Agent at the address specified in the notice prior to the
close of business on the purchase date;
(x) that Holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the second
Business Day prior to the purchase date, a facsimile transmission or letter
set-
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ting forth the name of the Holder, the principal amount of the Notes the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased;
(xi) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; provided that each Note purchased and each such new
--------
Note issued shall be in an original principal amount in denominations of
$1,000 and integral multiples thereof;
(xii) any other procedures that a Holder must follow to accept an Asset
Sale Offer or effect withdrawal of such acceptance; and
(xiii) the name and address of the Paying Agent.
On the Net Proceeds Payment Date, the Company shall (i) accept for
payment Notes or portions thereof tendered pursuant to the Asset Sale Offer in
accordance with this Section 4.15, (ii) deposit with the Paying Agent U.S. Legal
Tender sufficient to pay the purchase price, plus accrued interest, if any, of
all Notes to be purchased in accordance with this Section 4.15 and (iii) deliver
to the Trustee Notes so accepted together with an Officers' Certificate stating
the Notes or portions thereof tendered to and accepted for payment by the
Company.
For purposes of this Section 4.15, the Trustee shall act as the Paying
Agent. The Paying Agent shall promptly (but in any case no later than 10
calendar days after the Net Proceeds Payment Date) mail or deliver to the
Holders of Notes so accepted payment in an amount equal to the purchase price
for such Notes, and the Company shall execute and issue, and the Trustee shall
promptly authenticate and mail to such Holders, a new Note equal in principal
amount to any unpurchased portion of the Note surrendered; provided that each
--------
such new Note shall be issued in an original principal amount in denominations
of $1,000 and integral multiples thereof. The Company will send to the Trustee
and the Holders of Notes on or as soon as practicable after the purchase date a
notice setting forth the results of the Asset Sale Offer. Any Notes not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provi-
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sions of any securities laws or regulations conflict with the "Asset Sale"
provisions of this Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 4.15 by virtue thereof.
SECTION 4.16. Limitation on Liens.
-------------------
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien of any kind upon any of its property or assets, whether now owned or
acquired after the Issue Date, or any proceeds therefrom, or assign or convey
any right to receive income therefrom to secure either (i) Subordinated
Indebtedness or (ii) any Indebtedness of the Company that is not Subordinated
Indebtedness, unless the Notes are equally and ratably secured with the Liens
securing such other Indebtedness, except in the case of this clause (ii),
Permitted Liens.
SECTION 4.17. Limitation of Issuances and Sale of Capital Stock of
Restricted Subsidiaries
----------------------------------------------------
The Company shall not sell and shall not cause or permit any
Restricted Subsidiary of the Company to issue, sell or transfer any Preferred
Stock of any Restricted Subsidiary (other than to the Company or to a Wholly-
Owned Restricted Subsidiary) or permit any Person (other than the Company or a
Wholly-Owned Restricted Subsidiary) to own any Preferred Stock of any Restricted
Subsidiary. In addition, the Company shall not sell or otherwise dispose of any
Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
of its Capital Stock, except
(i) to the Company or a Wholly Owned Subsidiary,
(ii) if, immediately after giving effect to such issuance, sale or
other disposition, neither the Company nor any of its Subsidiaries own any
Capital Stock of such Restricted Subsidiary and
(iii) if, immediately after giving effect to such issuance, sale
or other disposition, such Restricted Subsidiary would no longer constitute
a Wholly Owned Restricted Subsidiary and any Investment in such Person
remaining after giving effect thereto would have been permitted to be made
(and shall be deemed to have been made) under Section 4.10 on the date of
such issuance, sale or other disposition.
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SECTION 4.18. Limitation on Unrestricted
Subsidiaries.
--------------------------
The Company shall not make, and shall not permit its Restricted
Subsidiaries to make, any Investment in Unrestricted Subsidiaries if, at the
time thereof, the aggregate amount of such Investments would exceed the amount
of Restricted Payments then permitted to be made pursuant to Section 4.10. Any
Investments in Unrestricted Subsidiaries permitted to be made pursuant to this
Section 4.18 (i) will be treated as a Restricted Payment in calculating the
amount of Restricted Payments made by the Company and (ii) may be made in cash
or property.
The Company may designate after the Issue Date any Subsidiary as an
"Unrestricted Subsidiary" under this Indenture (a "Designation") only if:
(i) no Default shall have occurred and be continuing at the time of
or after giving effect to such Designation;
(ii) the Company would be permitted to make an Investment at the
time of Designation (assuming the effectiveness of such Designation)
pursuant to Section 4.10 in an amount (the "Designation Amount") equal to
the Fair Market Value of the Company's interest in such Subsidiary on such
date calculated in accordance with GAAP; and
(iii) the Company would be permitted under this Indenture to incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 4.12 at the time of such Designation (assuming the
effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to Section
4.10 for all purposes of this Indenture in the Designation Amount.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, at any time
(x) provide credit support for or subject any of its property or
assets (other than the Capital Stock of any Unrestricted Subsidiary) to the
satisfaction of, any Indebtedness of any Unrestricted Subsidiary (including
any undertaking, agreement or instrument evidencing such Indebtedness),
(y) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary or
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(z) be directly or indirectly liable for any Indebtedness (other than
Indebtedness pursuant to the Credit Facility) which provides that the
holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to
its final scheduled maturity upon the occurrence of a default with respect
to any Indebtedness of any Unrestricted Subsidiary (including any right to
take enforcement action against such Unrestricted Subsidiary),
except (i) any non-recourse guarantee given solely to support the pledge by the
Company or any Restricted Subsidiary of the Capital Stock of an Unrestricted
Subsidiary and (ii) in the case of (x) and (y), to the extent permitted under
Section 4.10. All Subsidiaries of Unrestricted Subsidiaries shall automatically
be deemed to be Unrestricted Subsidiaries.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") if:
(i) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation;
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
Indenture; and
(iii) any transaction (or series of related transactions) between
such Subsidiary and any of its Affiliates that occurred while such Subsidiary
was an Unrestricted Subsidiary would be permitted by Section 4.11 as if such
transaction (or series of related transactions) had occurred at the time of such
Revocation.
All Designations and Revocations must be evidenced by Board
Resolutions of the Company delivered to the Trustee certifying compliance with
the foregoing provisions.
SECTION 4.19. Limitation on Sale and Lease-Back
Transactions.
---------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the Fair
Market Value of the property sold, and (ii) the Company could incur the
Attributable Indebtedness in respect of such Sale and Lease-Back Transaction in
compliance with Section 4.12.
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SECTION 4.20. Application of Fall Away Covenants.
----------------------------------
If no Default has occurred and is continuing, after the rating assigned to the
Notes by both of the Rating Agencies are Investment Grade and remain as such,
the Company and the Restricted Subsidiaries will not be subject to Sections
4.10, 4.11, 4.12, 4.13, 4.15, 4.17, 4.18 and clause (iii) of the first paragraph
of Section 5.01. Once the Company and the Restricted Subsidiaries are no longer
subject to the above-mentioned provisions, all of the Company's Subsidiaries
other than CSI Foreign Sales Corporation will be Restricted Subsidiaries.
ARTICLE FIVE
SUCCESSOR CORPORATION
---------------------
SECTION 5.01. Consolidation, Merger, Sale of Asset, Etc.
-----------------------------------------
The Company shall not, in any transaction or series of related
transactions, merge or consolidate with or into, or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety to, any Person or Persons, and the Company
shall not permit any of the Restricted Subsidiaries to enter into any such
transaction or series of related transactions if such transaction or series of
related transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company and the Restricted Subsidiaries (taken
as a whole), to any Person or Persons, unless at the time and after giving
effect thereto
(i) either (A)(1) if the transaction or transactions is a merger or
consolidation involving the Company, the Company shall be the Surviving
Person of such merger or consolidation or (2) if the transaction or
transactions is a merger or consolidation involving a Restricted
Subsidiary, such Restricted Subsidiary shall be the Surviving Person of
such merger or consolidation, or (B)(1) the Surviving Person shall be a
corporation organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and (2) in the case
of a transaction involving the Company, the Surviving Person shall
expressly assume by a supplemental indenture executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of the
Company
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under the Notes and this Indenture and the Registration Rights Agreement,
and in each case, this Indenture, the Notes and the Registration Rights
Agreement shall remain in full force and effect;
(ii) immediately after giving effect to such transaction or series
of related transactions on a pro forma basis, no Default or Event of
--- -----
Default shall have occurred and be continuing;
(iii) the Company, or the Surviving Person, as the case may be,
immediately after giving effect to such transaction or series of related
transactions on a pro forma basis (including, without limitation, any
--- -----
Indebtedness incurred or anticipated to be incurred in connection with or
in respect of such transaction or series of transactions), could incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) under
Section 4.12;
(iv) immediately after giving effect to such transaction or series
of related transactions on a pro forma basis, the Company, or the Surviving
--- -----
Person, as the case may be, shall have a Consolidated Net Worth not less
than the Consolidated Net Worth of the Company immediately prior to such
transaction or series of related transactions; and
(v) at the time of the transaction if any of the property or assets
of the Company or any of its Restricted Subsidiaries would thereupon become
subject to any Lien, Section 4.16 is complied with.
In connection with any consolidation, merger, transfer, lease or other
disposition contemplated hereby, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, transfer, lease or other disposition and the
supplemental indenture in respect thereof comply with the requirements under
this Indenture.
Upon any consolidation or merger of the Company or any transfer of all
or substantially all of the assets of the Company in accordance with the
foregoing, in which the Company is not the Surviving Person, the Surviving
Person shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture and the Notes and the
Registration Rights Agreement, with the same effect as if such successor
corporation had been named as the Company therein; and thereafter, except in the
case of (a) a lease of substantially all of the assets of the Company or (b) any
sale, assignment, conveyance, transfer, lease or other disposition to
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a Restricted Subsidiary of the Company, the Company shall be discharged from all
obligations and covenants under this Indenture and the Notes.
For all purposes of this Indenture and the Notes (including the
provision of this Section and Sections 4.10, 4.12 and 4.16), Subsidiaries of any
Surviving Person shall, upon such transaction or series of related transactions,
become Restricted Subsidiaries unless and until designated as Unrestricted
Subsidiaries pursuant to and in accordance with Section 4.18 and all
Indebtedness, and all Liens on property or assets, of the Company and the
Restricted Subsidiaries in existence immediately prior to such transaction or
series of related transactions will be deemed to have been incurred upon such
transaction or series of related transactions.
ARTICLE SIX
REMEDIES
--------
SECTION 6.01. Events of Default.
-----------------
An "Event of Default" means any of the following events:
(a) the Company defaults in the payment of the principal of or
premium, if any, when due and payable, on any of the Notes (at its Stated
Maturity, upon optional redemption, acceleration, required purchase,
sinking fund, scheduled principal payment or otherwise); or
(b) the Company defaults in the payment of an installment of
interest on any of the Notes, when due and payable, continued for 30 days
or more; or
(c) the Company fails to comply with any of its obligations
described under Section 5.01, Section 4.14 or Section 4.15; or
(d) the Company fails to perform or observe any other term,
covenant or agreement contained in the Notes or this Indenture (other than
a default specified in (a), (b) or (c) above) for a period of 45 days after
written notice of such failure requiring the Company to remedy the same
shall have been given (x) to the Company by the Trustee or (y) to the
Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding; or
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(e) the Company or any Restricted Subsidiary defaults under one or
more agreements, indentures or instruments under which the Company or any
Restricted Subsidiary then has outstanding Indebtedness in excess of $10.0
million individually or in the aggregate and either (i) such Indebtedness
is already due and payable in full or (ii) such default or defaults results
in the actual acceleration of the maturity of such Indebtedness; provided,
--------
however, that no such default under any Interest Rate Agreement, Currency
-------
Agreement or Commodity Price Protection Agreement shall by itself
constitute an Event of Default hereunder unless such default consists of
the failure by the Company or any Restricted Subsidiary to pay when due any
net cash amounts actually due to the counterparty to such Interest Rate
Agreement, Currency Agreement or Commodity Price Protection Agreement;
provided, further, that a payment default described in the immediately
-------- -------
preceding proviso shall not constitute an Event of Default unless and until
such payment default continues for 30 days or more, if the acceleration or
termination event giving rise to the applicable payment obligation by the
Company or such Subsidiary was not a result of any default, action or
inaction by the Company or such Subsidiary; or
(f) one or more judgments, orders or decrees of any court or
regulatory or administrative agency for the payment of money in excess of
$10.0 million either individually or in the aggregate shall have been
rendered against the Company or any Restricted Subsidiary or any of their
respective properties and shall not have been discharged and there shall
have been a period of 60 consecutive days during which a stay of
enforcement of such judgment, order or decree, by reason of a pending
appeal or otherwise, shall not be in effect; or
(g) the Company or any of its Material Subsidiaries pursuant to or
under or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case or proceeding;
(ii) consents to the entry of an order for relief against it
in an involuntary case or proceeding;
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property;
(iv) makes a general assignment for the benefit of its
creditors; or
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(v) shall generally not pay its debts when such debts become
due or shall admit in writing its inability to pay its debts
generally; or
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company or any of its Material
Subsidiaries in an involuntary case or proceeding,
(ii) appoints a Custodian of the Company or any of its
Material Subsidiaries for all or substantially all of their properties
taken as a whole, or
(iii) orders the liquidation of the Company or any of its
Material Subsidiaries,
and in each case the order or decree remains unstayed and in effect for 60
days.
SECTION 6.02. Acceleration.
------------
If an Event of Default (other than as specified in clauses (g) or (h)
with respect to the Company or any Material Subsidiary) shall occur and be
continuing, the Trustee, by notice to the Company, or the Holders of at least
25% in aggregate principal amount of the Notes then outstanding, by notice to
the Trustee and the Company, may declare the principal of, premium, if any, and
accrued interest on all of the outstanding Notes due and payable immediately,
upon which declaration all such amounts payable in respect of the Notes will
become and be immediately due and payable. If an Event of Default specified in
clauses (g) or (h) above with respect to the Company or any Material Subsidiary
occurs and is continuing, then the principal of, premium, if any, and accrued
interest on all of the outstanding Notes will become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder of Notes.
After a declaration of acceleration, but before a judgment or decree
for payment of the money due has been obtained by the Trustee, the Holders of a
majority in aggregate principal amount of the outstanding Notes, by written
notice to the Company and the Trustee, may rescind such declaration if (a) the
Company has paid or deposited with the Trustee a sum sufficient to pay (i) all
sums paid or advanced by the Trustee under this Indenture and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, (ii) all overdue interest on all Notes, (iii) the principal of and
premium, if any, on any Notes which have become due
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otherwise than by such declaration of acceleration and interest thereon at the
rate borne by the Notes, and (iv) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne by the Notes, and (b)
all Events of Default, other than the non-payment of principal of, premium, if
any, and interest on the Notes that has become due solely by such declaration of
acceleration, have been cured or waived as provided in this Indenture.
SECTION 6.03. Other Remedies.
--------------
(a) If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of the principal of, premium, if any, or interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture.
(b) All rights of action and claims under this Indenture or the
Notes may be enforced by the Trustee even if it does not possess any of the
Notes or does not produce any of them in the proceeding. A delay or omission by
the Trustee or any Holder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or constitute a waiver of
or acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
-----------------------
Prior to the acceleration of the Notes, the Holders of a majority in
aggregate principal amount of the Notes then outstanding by notice to the
Trustee may, on behalf of the Holders of all the Notes, waive any existing
Default or Event of Default and its consequences under this Indenture, except a
Default or Event of Default specified in Section 6.01(a) or (b) or in respect of
any provision hereof that cannot be modified or amended without the consent of
the Holder so affected pursuant to Section 9.02. When a Default or Event of
Default is so waived, it shall be deemed cured and shall cease to exist. This
Section 6.04 shall be in lieu of (S) 316(a)(1)(B) of the TIA and such (S)
316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and the
Notes, as permitted by the TIA.
SECTION 6.05. Control by Majority.
-------------------
Holders of the Notes may not enforce this Indenture or the Notes
except as provided in this Article Six and under the TIA. The Holders of a
majority in aggregate principal amount of the then outstanding Notes have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or
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power conferred on the Trustee, provided, however, that the Trustee may refuse
-------- -------
to follow any direction (a) that conflicts with any rule of law or this
Indenture, (b) that the Trustee, in its sole discretion, determines may be
unduly prejudicial to the rights of another Holder, or (c) that may expose the
Trustee to personal liability for which adequate indemnity provided to the
Trustee against such liability is not reasonably assured to it; provided,
--------
further, however, that the Trustee may take any other action deemed proper by
- ------- -------
the Trustee that is not inconsistent with such direction or this Indenture. This
Section 6.05 shall be in lieu of (S) 316(a)(1)(A) of the TIA, and such (S)
316(a)(1)(A) of the TIA is hereby expressly excluded from this Indenture and the
Notes, as permitted by the TIA.
SECTION 6.06. Limitation on Suits.
-------------------
No Holder of any Notes shall have any right to institute any
proceeding with respect to this Indenture or the Notes or any remedy hereunder,
unless the Holders of at least 25% in aggregate principal amount of the
outstanding Notes have made written request, and offered reasonable indemnity,
to the Trustee to institute such proceeding as Trustee under the Notes and this
Indenture, the Trustee has failed to institute such proceeding within 15 days
after receipt of such notice, request and offer of indemnity and the Trustee,
within such 15-day period, has not received directions inconsistent with such
written request by Holders of a majority in aggregate principal amount of the
outstanding Notes.
The foregoing limitations shall not apply to a suit instituted by a
Holder of a Note for the enforcement of the payment of the principal of,
premium, if any, or interest on, such Note on or after the respective due dates
expressed or provided for in such Note.
A Holder may not use this Indenture to prejudice the rights of any
other Holders or to obtain priority or preference over such other Holders.
SECTION 6.07. Right of Holders To Receive Payment.
-----------------------------------
Notwithstanding any other provision in this Indenture, the right of
any Holder of a Note to receive payment of the principal of, premium, if any,
and interest on such Note, on or after the respective due dates expressed or
provided for in such Note, or to bring suit for the enforcement of any such
payment on or after the respective due dates, is absolute and unconditional and
shall not be impaired or affected without the consent of the Holder.
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SECTION 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default specified in clause (a) or (b) of Section 6.01
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company, or any other obligor on the
Notes for the whole amount of the principal of, premium, if any, and accrued
interest remaining unpaid, together with interest on overdue principal and, to
the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum provided for by the
Notes and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel and any other
amounts due the Trustee pursuant to the provisions of Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents, counsel, accountants and
experts) and the Holders allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Notes), its creditors or its property and
shall be entitled and empowered to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same,
and any Custodian in any such judicial proceedings is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities.
----------
If the Trustee collects any money pursuant to this Article Six it
shall pay out such money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07, including payment of all compensation, expense and
liabilities incurred, and all
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advances made, by the Trustee and the cost and expenses of collection;
Second: to Holders for interest accrued on the Notes, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Notes for interest;
Third: to Holders for the principal amounts (including any premium)
owing under the Notes, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for the principal
(including any premium); and
Fourth: the balance, if any, to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Holders pursuant to this Section
6.10.
SECTION 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court may in its discretion require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to any suit by the Trustee, any suit by a
Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than
10% in aggregate principal amount of the outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Note and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
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ARTICLE SEVEN
TRUSTEE
-------
SECTION 7.01. Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise thereof as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no covenants or obligations shall be
implied in this Indenture that are adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any such certificates or opinions that by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.02, 6.04 or 6.05.
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(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01 and
Section 7.02.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
SECTION 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel of its selection and may require an Officers' Certificate or
an Opinion of Counsel, which shall conform to Sections 11.04 and 11.05. The
Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such Officers' Certificate or Opinion of Counsel.
The Trustee may consult with counsel and the written advice of such counsel
or any Opinion of Counsel shall be full and complete authorization and
protection from liability in respect to any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
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(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled, upon reasonable notice to
the Company, to examine the books, records, and premises of the Company,
personally or by agent or attorney and to consult with the officers and
representatives of the Company, including the Company's accountants and
attorneys during reasonable business hours and subject to executing a
confidentiality undertaking in customary form with respect to confidential
or proprietary information of the Company and its Subsidiary.
(f) The Trustee shall be under no obligation to exercise any of its
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders have offered to the Trustee reasonable
indemnity satisfactory to the Trustee against the costs, expenses and
liabilities which may be incurred by it in compliance with such request,
order or direction.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(h) Delivery of reports, information and documents to the Trustee
under Section 4.08 is for informational purposes only and the Trustee's
receipt of the foregoing shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of their covenants
hereunder (as to which the Trustee is entitled to rely exclusively on
Officers' Certificates).
SECTION 7.03. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, the Company,
or any of the Subsidiaries, or their respective Affiliates with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
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SECTION 7.04. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Notes, and it shall not be accountable for the Company's
use of the proceeds from the Notes, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement of the Company in this
Indenture or the Notes other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is continuing and if it
is known to a Trust Officer, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after the occurrence thereof.
Except in the case of a Default or an Event of Default in payment of principal
of, or interest on, any Note, including an accelerated payment, a Default in
payment on the Change of Control Payment Date pursuant to a Change of Control
Offer or on the Net Proceeds Payment Date pursuant to a Net Proceeds Offer and a
Default in compliance with Article Five hereof, the Trustee may withhold the
notice if and so long as its Board of Directors, the executive committee of its
Board of Directors or a committee of its directors and/or Trust Officers in good
faith determines that withholding the notice is in the interest of the Holders.
The foregoing sentence of this Section 7.05 shall be in lieu of the proviso to
(S) 315(b) of the TIA and such proviso to (S) 315(b) of the TIA is hereby
expressly excluded from this Indenture and the Notes, as permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
-----------------------------
Within 60 days after May 15 of each year beginning with May 15, 2000,
the Trustee shall, to the extent that any of the events described in TIA (S)
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Holder a brief report dated as of such date that complies with TIA (S)
313(a). The Trustee also shall comply with TIA (S)(S) 313(b), (c) and (d).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the Commission and each stock exchange, if
any, on which the Notes are listed.
The Company shall promptly notify the Trustee if the Notes become
listed on any stock exchange and the Trustee shall comply with TIA (S) 313(d).
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SECTION 7.07. Compensation and Indemnification
of Trustee and Its Prior Claim.
--------------------------------
(a) The Company covenants and agrees: (i) to pay to the Trustee from
time to time, and the Trustee shall be entitled to, compensation for all
services rendered by it hereunder (which shall not be limited by any provision
of law in regard to the compensation of a trustee of an express trust) as the
Company and the Trustee shall, from time to time, agree in writing; (ii) to
reimburse the Trustee and each predecessor Trustee upon its written request for
all reasonable and documented expenses, fees, disbursements and advances
incurred or made by or on behalf of it in accordance with any of the provisions
of this Indenture (including the reasonable compensation, fees, and the expenses
and disbursements of its counsel and of all agents and other persons not
regularly in its employ), except any such expense, disbursement or advance as
may arise from its gross negligence, bad faith or willful misconduct; and (iii)
to indemnify the Trustee and each predecessor Trustee for, and to hold it
harmless against, any and all loss, liability, claim, damage, or expense
(including taxes other than taxes based upon the income of the Trustee) incurred
without negligence, bad faith or willful misconduct on its part, arising out of
or in connection with the acceptance or administration of this Indenture or the
trusts hereunder and its duties hereunder, including enforcement of this Section
7.07. The obligations of the Company under this Section to compensate and
indemnify the Trustee and each predecessor Trustee and to pay or reimburse the
Trustee and each predecessor Trustee for such expenses, fees, disbursements and
advances shall constitute an additional obligation hereunder and shall survive
the satisfaction and discharge of this Indenture.
(b) The Trustee shall give notice as promptly as reasonably
practicable to the Company of any action commenced against it in respect of
which indemnity may be sought hereunder, but failure to so notify the Company
shall not relieve the Company from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. Counsel to the Trustee shall be selected by the Company.
The Company may participate at its own expense in the defense of any such
action; provided, however, that counsel to the Company shall not (except with
-------- -------
the consent of the Trustee) also be counsel to the Trustee. In no event shall
the Company be liable for fees and expenses of more than one counsel (in
addition to any local counsel) separate from its own counsel for the Trustee in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
The Company shall not,
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without the prior written consent of the Trustee, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification could be
sought under this Section 7.07 (whether or not the Trustee is an actual or
potential party thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of the Trustee from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of the Trustee.
SECTION 7.08. Replacement of Trustee.
----------------------
The Trustee may resign at any time by so notifying the Company. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee and appoint a successor Trustee with the Company's consent, by so
notifying the Company and the Trustee. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in aggregate principal
amount of the outstanding Notes may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The Company shall mail notice of such successor Trustee's
appointment to each Holder.
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If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in aggregate principal amount of the outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding any resignation or replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
--------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business (including
the trust created by this Indenture) to, another corporation, the resulting,
surviving or transferee corporation without any further act shall, if such
resulting, surviving or transferee corporation is otherwise eligible hereunder,
be the successor Trustee; provided, however, that such corporation shall be
-------- -------
otherwise qualified and eligible under this Article Seven.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirement of TIA (S)(S) 310(a)(1), (2) and (5). The Trustee (or, in the case
of a Trustee that is a subsidiary of another Bank or a corporation included in a
bank holding company system, the related bank or bank holding company) shall
have a combined capital and surplus of at least $100,000,000 million as set
forth in its most recent published annual report of condition, and have an
office or agency in the City of New York. In addition, if the Trustee is a
subsidiary of another Bank or a corporation included in a bank holding company
system, the Trustee, independently of such bank or bank holding company, shall
meet the capital requirements of TIA (S) 310(a)(2). The Trustee shall comply
with TIA (S) 310(b); provided, however, that there shall be excluded from the
-------- -------
operation of TIA (S) 310(b)(1) any indenture or indentures under which other
securities, or certificates of interest or participation in other securities, of
the Company are outstanding, if the requirements for such exclusion set forth in
TIA (S) 310(b)(1) are met. The provisions of TIA (S) 310 shall apply to the
Company, as obligor of the Notes.
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SECTION 7.11. Preferential Collection of
Claims Against Company.
--------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
----------------------------------
SECTION 8.01. Termination of Company's Obligations.
------------------------------------
This Indenture will be discharged and will cease to be of further
effect (except as to surviving rights or registration of transfer or exchange of
the Notes, as expressly provided for in this Indenture) as to all outstanding
Notes when (a) either (i) all Notes, theretofore authenticated and delivered
(except lost, stolen or destroyed Notes that have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (ii) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (b)
the Company has paid all other sums payable under this Indenture by the Company;
(c) the Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel stating that all conditions precedent under this Indenture
relating to the satisfaction and discharge of this Indenture have been complied
with; and (d) such satisfaction and discharge will not result in a breach or
violation of, or constitute a default under, this Indenture or any other
material agreement or instrument to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries is bound.
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such Legal Defeasance means that the Company shall be deemed to
have paid and dis-
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charged the entire indebtedness represented by the outstanding Notes, except for
(a) the rights of Holders to receive payments in respect of the principal of,
premium, if any, and interest on the Notes when such payments are due, (b) the
Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payments, (c) the rights, powers, trust,
duties and immunities of the Trustee and the Company's obligations in connection
therewith and (d) the Legal Defeasance provisions of this Section 8.01. In
addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to covenants contained in
Sections 4.04, 4.08 and 4.10 through 4.19 and Article Five ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event of Covenant Defeasance, those events described under Section 6.01 (except
those events described in Section 6.01(a),(b),(g) and (h)) will no longer
constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders cash in United States dollars, non-callable
U.S. Government Obligations, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any,
and interest on the Notes on the stated date for payment thereof or on the
applicable Redemption Date, as the case may be;
(b) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that (i) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling
or (ii) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
based thereon such Opinion of Counsel shall confirm that, the Holders will
not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and in either case, and (iii) the Holders
will be subject to U.S. federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
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<PAGE>
(c) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders will not
recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default
under Section 6.01(g) or (h) from bankruptcy or insolvency events are
concerned;
(e) such Legal Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest with respect to any securities of
the Company;
(f) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material
agreement or instrument to which the Company is a party or by which it is
bound;
(g) such Legal Defeasance or Covenant Defeasance shall not result in
the trust arising from such deposit constituting an investment company
within the meaning of the Investment Company Act of 1940, as amended,
unless such trust shall be registered under such Act or exempt from
registration thereunder;
(h) the Company shall have delivered to the Trustee an Opinion of
Counsel in the United States to the effect that after the 91st day
following the deposit, the trust funds will not be subject to Section 547
of the United States Bankruptcy Code;
(i) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others;
(j) no event or condition shall exist that would prevent the Company
from making payments of the principal of, premium, if any, and interest on
the Notes on the date of such deposit; and
(k) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each
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<PAGE>
stating that all conditions precedent under this Indenture to either
defeasance or covenant defeasance, as the case may be, have been complied
with.
Notwithstanding the foregoing, the Opinion of Counsel required by
clauses (b)(i) and (c) above need not be delivered if all the Notes not
theretofore delivered to the Trustee for cancellation (i) have become due and
payable, (ii) will become due and payable on the maturity date within one year
or (iii) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by such
Trustee in the name, and at the expense, of the Company.
SECTION 8.02. Application of Trust Money.
--------------------------
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Section 8.01, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of the principal of
and interest on the Notes. The Trustee shall be under no obligation to invest
said U.S. Legal Tender or U.S. Government Obligations.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.01 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding Notes.
SECTION 8.03. Repayment to the Company.
------------------------
Subject to Sections 7.07 and 8.01, the Trustee and the Paying Agent
shall promptly pay to the Company upon request any excess U.S. Legal Tender or
U.S. Government Obligations held by them at any time and thereupon shall be
relieved from all liability with respect to such money. The Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of principal or interest that remains unclaimed for one year;
provided, however, that the Company shall, if requested by the Trustee or Paying
- -------- -------
Agent, give to the Trustee or Paying Agent, indemnification reasonably
satisfactory to it against any and all liability which may be incurred by it by
reason of such paying; provided, further, that the Trustee or such Paying Agent,
-------- -------
before being required to make any payment, may at the expense of the Company
cause to be published once in a newspaper of general circulation in the City of
New York or mail to each Holder entitled to such money no-
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<PAGE>
tice that such money remains unclaimed and that after a date specified therein
which shall be at least 30 days from the date of such publication or mailing any
unclaimed balance of such money then remaining will be repaid to the Company.
After payment to the Company, Holders entitled to such money must look to the
Company for payment as general creditors unless an applicable law designates
another Person, and all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
SECTION 8.04. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Section 8.01 by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to Section
8.01 until such time as the Trustee or Paying Agent is permitted to apply all
such U.S. Legal Tender or U.S. Government Obligations in accordance with Section
8.01; provided, however, that if the Company has made any payment of interest on
-------- -------
or principal of any Notes because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the U.S. Legal Tender or U.S. Government Obligations
held by the Trustee or Paying Agent.
SECTION 8.05. Acknowledgment of Discharge
by Trustee.
---------------------------
After (i) the conditions of Section 8.01 have been satisfied, (ii) the
Company has paid or caused to be paid all other sums payable hereunder by the
Company and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent referred to in clause (i) above relating to the satisfaction and
discharge of this Indenture have been complied with, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
this Indenture except for those surviving obligations specified in Section 8.01,
provided the legal counsel delivering such Opinion of Counsel may rely as to
- --------
matters of fact on one or more Officers' Certificates of the Company.
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<PAGE>
ARTICLE NINE
MODIFICATION OF THE INDENTURE
-----------------------------
SECTION 9.01. Without Consent of Holders.
--------------------------
Subject to the provisions of Section 9.02, the Company, when
authorized by a Board Resolution, and the Trustee may amend, waive or supplement
this Indenture without notice to or consent of any Holder: (a) to cure any
ambiguity, defect or inconsistency; (b) to comply with Section 5.01 of this
Indenture; (c) to provide for uncertificated Notes in addition to certificated
Notes; (d) to comply with any requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the TIA; or (e) to make
any change that would provide any additional benefit or rights to the Holders or
that does not materially adversely affect the rights of any Holder; provided,
--------
however, that the Company has delivered to the Trustee an Opinion of Counsel
- -------
stating that such change does not materially adversely affect the legal rights
of any Holder.
Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such amended or supplemental Indenture, and
upon receipt by the Trustee of the documents described in Section 9.06, the
Trustee shall join with the Company in the execution of any amended or
supplemental Indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee may but shall not be obligated to enter into
such amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.02. With Consent of Holders.
-----------------------
The Company and the Trustee may amend or supplement this Indenture or
the Notes or any amended or supplemental Indenture with the written consent of
the Holders of not less than a majority in aggregate principal amount of the
Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or, tender offer or exchange offer for, the
Notes).
Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such amended or supplemental Indenture, and
upon the filing with the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders as aforesaid, and upon receipt by the Trustee of the
documents described in Section 9.06, the Trustee shall join with the Company in
the execution of such amended or supplemen-
-90-
<PAGE>
tal Indenture unless such amended or supplemental Indenture affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its sole discretion, but shall not be obligated
to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment or waiver,
but it shall be sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
describing the amendment, supplement or waiver. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such amended or supplemental Indenture or waiver.
Subject to Sections 6.04 and 6.07, the Holders of a majority in aggregate
principal amount of the Notes then outstanding may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Notes. However, without the consent of each Holder affected thereby, an
amendment or waiver may not, directly or indirectly: (i) change the maturity of
the principal of, or any installment of interest on, any such Note or alter the
optional redemption or repurchase provisions of any such Note or this Indenture
in a manner adverse to the Holders; (ii) reduce the principal amount of (or the
premium of) any such Note; (iii) reduce the rate of or extend the time for
payment of interest on any such Note; (iv) change the place or currency of
payment of principal of (or premium) or interest on any such Note; (v) modify
any provisions of this Indenture relating to the waiver of past defaults (other
than to add sections of this Indenture or the Notes subject thereto) or the
right of the holders of Notes to institute suit for the enforcement of any
payment on or with respect to any such Note or the modification and amendment
provisions of this Indenture and the Notes (other than to add sections of this
Indenture or the Notes which may not be amended, supplemented or waived without
the consent of each Holder therein affected); (vi) reduce the percentage of the
principal amount of outstanding Notes necessary for amendment to or waiver of
compliance with any provision of this Indenture or the Notes or for waiver of
any Default in respect thereof; (vii) waive a default in the payment of
principal of, premium, if any, or interest on, or redemption payment with
respect to, the Notes (except a rescission of acceleration of the Notes by the
Holders thereof as provided in this Indenture and a waiver of the payment
default that resulted from such acceleration); (viii) modify the ranking or
priority of any Note in any manner adverse to Holders; or (ix) following the
occurrence of a Change of Control or an Asset Sale, modify the provisions of
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any covenant (or the related definitions) in this Indenture requiring the
Company to make and consummate a Change of Control Offer with respect to such
Change of Control or an Asset Sale Offer with respect to such Asset Sale or
modify any of the provisions or definitions with respect thereto in a manner
materially adverse to the Holders affected thereby otherwise than in accordance
with this Indenture.
SECTION 9.03. Compliance with TIA.
-------------------
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect; provided, however, that this
-------- -------
Section 9.03 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
SECTION 9.04. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or the Company received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver. An amendment, supplement
or waiver becomes effective upon receipt by the Trustee of such Officers'
Certificate and evidence of consent by the Holders of the requisite percentage
in principal amount of outstanding Notes.
The Company may, but shall not be obligated to, fix a Record Date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a Record Date is fixed, then notwithstanding the
second sentence of the immediately preceding paragraph, those Persons who were
Holders at such Record Date (or their duly designated proxies), and only those
Persons, shall be entitled to revoke any consent previously given, whether or
not such Persons continue to be Holders after such Record Date. No such consent
shall be valid or effective for more than 90 days after such Record Date unless
consents from Holders of the requisite percentage in principal amount of
outstanding Notes required hereunder for the
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<PAGE>
effectiveness of such consents shall have also been given and not revoked within
such 90 day period.
SECTION 9.05. Notation on or Exchange of Notes.
--------------------------------
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder of such Note to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Company or the Trustee so
determine, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms.
SECTION 9.06. Trustee To Sign Amendments, Etc.
-------------------------------
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided, however, that the Trustee
-------- -------
may, but shall not be obligated to, execute any such amendment, supplement or
waiver that affects the Trustee's own rights, duties or immunities under this
Indenture. In executing such amendment, supplement or waiver the Trustee shall
be entitled to receive indemnity reasonably satisfactory to it, and shall be
fully protected in relying upon an Opinion of Counsel and an Officers'
Certificate of the Company, stating that no Event of Default shall occur as a
result of such amendment, supplement or waiver and that the execution of such
amendment, supplement or waiver is authorized or permitted by this Indenture,
provided, however, that the legal counsel delivering such Opinion of Counsel may
- -------- -------
rely as to matters of fact on one or more Officers' Certificates of the Company.
Such Opinion of Counsel shall not be an expense of the Trustee.
ARTICLE TEN
MISCELLANEOUS
-------------
SECTION 10.01. TIA Controls.
------------
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control; provided, however, that this Section
-------- -------
10.01 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
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<PAGE>
SECTION 10.02. Notices.
-------
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
if to the Company:
California Steel Industries, Inc.
14000 San Bernardino Avenue
Fontana, CA 92335
Telecopier Number: (909) 350-6223
Attention: Executive Vice President, Finance
With a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
Telecopier Number: (213) 229-7520
Attention: Linda Curtis, Esq.
if to the Trustee:
State Street Bank and Trust Company of California, N.A.
633 West 5th Street
12th Floor
Los Angeles, CA 90071
Telecopier Number: (213) 362-7357
Attention: Corporate Trust Administration
(California Steel Industries, Inc.
8 1/2 % Senior Notes due 2009)
The Company and the Trustee by written notice to the other may
designate additional or different addresses for notices to such Person. Any
notice or communication to the Company or the Trustee shall be deemed to have
been given or made as of the date so delivered if hand delivered; when answered
back, if telexed; when receipt is acknowledged, if faxed; and five (5) calendar
days after mailing if sent by registered or certified mail, postage prepaid
(except that a notice of change of address shall not be deemed to have been
given until actually received by the addressee).
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<PAGE>
Any notice or communication mailed to a Holder shall be mailed to him
by first class mail or other equivalent means at his address as it appears on
the registration books of the Registrar ten (10) days prior to such mailing and
shall be sufficiently given to him if so mailed within the time prescribed. Any
notice or communication shall also be so mailed to any Person described in TIA
(S) 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 10.03. Communications by Holders with Other Holders.
--------------------------------------------
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and any other Person shall have the protection of TIA
(S) 312(c).
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent to be performed by the Company, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Company, if
any, provided for in this Indenture relating to the proposed action have
been complied with (which counsel, as to factual matters, may rely on an
Officers' Certificate).
SECTION 10.05. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
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<PAGE>
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with.
SECTION 10.06. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Holders. The Paying Agent
or Registrar may make reasonable rules for its functions.
SECTION 10.07. Legal Holidays.
--------------
A "Legal Holiday" used with respect to a particular place of payment
-------------
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 10.08. Governing Law.
-------------
This Indenture and the Notes shall be governed by and construed in
accordance with the laws of the State of New York but without giving effect to
applicable principles of conflicts of law.
SECTION 10.09. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
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<PAGE>
SECTION 10.10. No Personal Liability.
---------------------
No director, officer, employee or stockholder, as such, of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes, this Indenture or the Registration Rights Agreement or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
SECTION 10.11. Successors.
----------
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 10.12. Duplicate Originals.
-------------------
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
SECTION 10.13. Severability.
------------
In case any one or more of the provisions in this Indenture or in the
Notes shall be held invalid, illegal or unenforceable, in any respect for any
reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions shall not in any way be affected
or impaired thereby, it being intended that all of the provisions hereof shall
be enforceable to the full extent permitted by law.
SECTION 10.14. Independence of Covenants.
-------------------------
All covenants and agreements in this Indenture and the Notes shall be
given independent effect so that if any particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or otherwise be within the limitations of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
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<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
CALIFORNIA STEEL INDUSTRIES, INC.
By: /s/ Celo Lourenco Goncalves
---------------------------
Name: CELO LOURENCO GONCALVES
Title: PRESIDENT AND CHIEF
EXECUTIVE OFFICER
STATE STREET BANK AND TRUST COM-
PANY OF CALIFORNIA, N.A.,
as Trustee
By: /s/ Joni D'Amico
------------------------------
Name: JONI D'AMICO
Title: VICE PRESIDENT
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<PAGE>
EXHIBIT A
---------
CUSIP No.: [ ]
CALIFORNIA STEEL INDUSTRIES, INC.
8 1/2% SENIOR NOTE DUE 2009
No. [ ] $
CALIFORNIA STEEL INDUSTRIES, INC., a Delaware corporation (the
"Company", which term includes any successor entities), for value received
promise to pay to __________________________ or registered assigns the principal
sum of ($ ) Dollars on April 1, 2009.
Interest Payment Dates: April 1 and October 1, commencing October 1,
1999
Record Dates: March 15 and September 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
CALIFORNIA STEEL INDUSTRIES, INC.
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
Dated:
A-1
<PAGE>
Certificate of Authentication
This is one of the 8 1/2% Senior Notes due 2009 referred to in the
within-mentioned Indenture.
STATE STREET BANK AND TRUST COM-
PANY OF CALIFORNIA, N.A., as
Trustee
By: _____________________________
Authorized Signatory
Date of Authentication:
A-2
<PAGE>
(REVERSE OF SECURITY)
8 1/2% Senior Note due 2009
1. Interest. California Steel Industries, Inc. (the "Company"),
--------
promises to pay interest on the principal amount of this Note at the rate per
annum shown above. Interest on the Notes will accrue from the most recent date
on which interest has been paid or, if no interest has been paid, from April 6,
1999. The Company will pay interest semi-annually in arrears on each Interest
Payment Date, commencing October 1, 1999. Interest will be computed on the basis
of a 360-day year of twelve 30-day months and, in the case of a partial month,
the actual number of days elapsed.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Notes
-----------------
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange (including pursuant to an Exchange Offer (as defined in the
Registration Rights Agreement)) after such Record Date. Holders must surrender
Notes to a Paying Agent to collect principal payments. The Company shall pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal and interest by its check payable in such
U.S. Legal Tender. The Company may deliver any such interest payment to the
Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, State Street Bank and
--------------------------
Trust Company of California, N.A. (the "Trustee") will act as Paying Agent and
Registrar. The Company may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture, dated
---------
as of April 6, 1999 (the "Indenture"), between the Company and the Trustee.
This Note is one of a duly authorized issue of Initial Notes of the Company
designated as its 8 1/2% Senior Notes due 2009 (the "Initial Notes"). The Notes
are limited in aggregate principal amount to
A-3
<PAGE>
$150,000,000. The Notes include the Initial Notes and the Exchange Notes (as
defined in the Indenture) issued in exchange for the Initial Notes pursuant to
the Registration Rights Agreement. The Initial Notes and the Exchange Notes are
treated as a single class of securities under the Indenture. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
(S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture.
Notwithstanding anything to the contrary herein, the Notes are subject to all
such terms, and Holders of Notes are referred to the Indenture and said Act for
a statement of them. The Notes are general unsecured obligations of the Company.
Each Holder, by accepting a Note, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time in accordance with its terms.
5. Redemption. The Notes will be redeemable at the option of the
----------
Company, in whole or in part, at any time on and after April 1, 2004, upon not
less than 30 nor more than 60 days' notice, at the following redemption prices
(expressed as percentages of the principal amount thereof) if redeemed during
the twelve-month period commencing on April 1 of the year set forth below, plus,
in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
Year Percentage
---- ----------
2004............................................. 104.250%
2005............................................. 102.833%
2006............................................. 101.417%
2007 and thereafter.............................. 100.000%
On or before April 1, 2002, the Company may, at its option, use the
net cash proceeds of a Public Equity Offering to redeem up to 35% of the
originally issued aggregate principal amount of the Notes, at a redemption price
in cash equal to 108.500% of the principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of redemption; provided that at
--------
least 65% of the aggregate principal amount of Notes is outstanding following
such redemption. Notice of any such redemption must be given not later than 60
days after the consummation of the Public Equity Offering.
6. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such
A-4
<PAGE>
Holder's registered address. Notes in denominations larger than $1,000 may be
redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such redemption price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the redemption price plus accrued interest, if any.
7. Offers to Purchase. Sections 4.14 and 4.15 of the Indenture
------------------
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture), and subject
to further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
8. Registration Rights. Pursuant to a registration rights agreement
-------------------
by and among the Company and the Initial Purchasers, the Company will be
obligated to consummate an exchange offer pursuant to which the Holder of this
Note shall have the right to exchange this Note for Exchange Notes (as defined
in the Indenture), which have been registered under the Securities Act, in like
principal amount and having terms identical in all material respects as the
Initial Notes. The Holders of the Initial Notes shall be entitled to receive
certain additional interest payments in the event such exchange offer is not
consummated and upon certain other conditions, all pursuant to and in accordance
with the terms of the registration rights agreement.
9. Denominations; Transfer; Exchange. The Notes are in registered
---------------------------------
form, without coupons, and in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a Note shall be
---------------------
treated as the owner of it for all purposes.
A-5
<PAGE>
11. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Company at any
-----------------------------------------
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but including, under certain
circumstances, its obligation to pay the principal of and interest on the Notes
but without affecting the rights of the Holders to receive such amounts from
such deposits).
13. Amendment; Supplement; Waiver. Subject to certain exceptions set
-----------------------------
forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of a majority in aggregate
principal amount of the Notes then outstanding, and any past Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in aggregate principal amount of the Notes
then outstanding. Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Notes to, among other
things, cure any ambiguity, defect or inconsistency, provide for uncertificated
Notes in addition to or in place of certificated Notes, comply with any
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the TIA or comply with Article Five of the Indenture or
make any other change that does not adversely affect the rights of any Holder of
a Note.
14. Restrictive Covenants. The Indenture imposes certain limitations
---------------------
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of their Capital
Stock or certain Indebtedness, make certain Investments, create or incur liens,
enter into transactions with Affiliates, create dividend or other payment
restrictions affecting Restricted Subsidiaries of the Company, issue and sell
Capital Stock of Restricted Subsidiaries of the Company, and on the ability of
the Company to merge or consolidate with any other Person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of the
Company's or its Restricted Subsidiaries' assets or adopt a plan of liquidation.
Such limitations are subject to a number of important qualifications and
exceptions. If no Default has occurred and is continuing,
A-6
<PAGE>
after the rating assigned to the Notes by Moody's and S&P are Investment Grade
and remain as such, the Company and the Restricted Subsidiaries will not be
subject to Sections 4.10, 4.11, 4.12, 4.13, 4.15, 4.17, 4.18 and clause (iii) of
the first paragraph of Section 5.01 of the Indenture. Pursuant to Section 4.06
of the Indenture, the Company must annually report to the Trustee on compliance
with such limitations.
15. Successors. When a successor assumes, in accordance with the
----------
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
16. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the principal of all Notes then outstanding, plus all accrued and
unpaid interest, if any, to and including the date the Notes are paid, may be
declared due and payable in the manner and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to enforce the Indenture
or the Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest when due, for any reason or a
Default in compliance with Article Five of the Indenture) if it determines that
withholding notice is in their interest.
17. Trustee Dealings with the Company and Its Subsidiaries. The
------------------------------------------------------
Trustee under the Indenture, in its individual or any other capacity, may become
the owner or pledgee of Notes and may otherwise deal with the Company, its
Subsidiaries or their respective Affiliates as if it were not the Trustee.
18. No Recourse Against Others. No partner, director, officer,
--------------------------
employee or stockholder, as such, of the Company, as such, shall have any
liability for any obligations of the Company under the Notes, the Indenture or
the Registration Rights Agreement or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
19. Authentication. This Note shall not be valid until the Trustee
--------------
or Authenticating Agent manually signs the certificate of authentication on this
Note.
A-7
<PAGE>
20. Governing Law. This Note and the Indenture shall be governed by
-------------
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York, without regard to
principles of conflict of laws. Each of the parties hereto agrees to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Note.
21. Abbreviations and Defined Terms. Customary abbreviations may be
-------------------------------
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note.
Requests may be made to: California Steel Industries, Inc., 14000 San
Bernardino Avenue, Fontana, California 92335.
A-8
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed by an Eligible Guarantor Institution (bank, stock
broker, savings and loan association or credit union) with membership in an
approved signature guarantee medallion program pursuant to Securities and
Exchange Commission Rule 17Ad-15:
I or we assign and transfer this Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and social security or tax ID number
of assignee)
and irrevocably appoint _____________________________________________, agent to
transfer this Note on the books of the Company. The agent may substitute another
to act for him.
Dated: _____________ Signed: __________________________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ___________________________________________________________
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the Commission
of the effectiveness of a registration statement under the Securities Act of
1933, as amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) the undersigned confirms that it has not utilized any general
solicitation or general advertising in connection with the transfer:
[Check One]
---------
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
A-9
<PAGE>
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that has furnished to the Trustee a signed letter containing
certain representations and agreements (the form of which letter can
be obtained from the Trustee); or
(4) __ outside the United states to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as amended;
or
(5) __ pursuant to the exemption from registration provided by Rule 144 under
the Securities Act of 1933, as amended; or
(6) __ pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
(7) __ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
[_] The transferee is an Affiliate of the Company.
Unless one of the items is checked, the Trustee will refuse to
register any of the Notes evidenced by this certificate in the name of any
person other than the registered Holder thereof; provided, however, that if item
-------- -------
(3), (4), (5) or (7) is checked, the Company or the Trustee may require, prior
to registering any such transfer of the Notes, in their sole discretion, such
written legal opinions, certifications (including an investment letter in the
case of box (3) or (4)) and other information as the Trustee or the Company has
reasonably requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, as amended.
If none of the foregoing items are checked, the Trustee or Registrar
shall not be obligated to register this Note in the name of any person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.17 of the Indenture shall have
been satisfied.
A-10
<PAGE>
Dated: _______________________________ Signed: _____________________________
(Sign exactly as name appears
on the other side of this
Note)
Signature Guarantee: __________________________________________________________
A-11
<PAGE>
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: _________________________ _______________________________________
NOTICE: To be executed by an executive
officer
A-12
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.14 or Section 4.15 of the Indenture, check the appropriate
box:
Section 4.14 [ ]
Section 4.15 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.14 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$___________________
Dated: _____________________ _______________________________________
NOTICE: The signature on this
assignment must correspond with the
name as it appears upon the face of the
within Note in every particular without
alteration or enlargement or any change
whatsoever and be guaranteed.
Signature Guarantee: _______________________________________________
[Signature must be guaranteed by an
Eligible Guarantor Institution (bank,
stock broker, savings and loan
association or credit union) with
membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission Rule
17Ad-15.]
A-13
<PAGE>
EXHIBIT B
---------
CUSIP No.: [ ]
CALIFORNIA STEEL INDUSTRIES, INC.
8 1/2% SENIOR NOTE DUE 2009, SERIES B
No. [ ] $
CALIFORNIA STEEL INDUSTRIES, INC., a Delaware corporation (the
"Company", which term includes any successor entities), for value received,
promises to pay to _______________________ or registered assigns the principal
sum of ($ ) Dollars on April 1, 2009.
Interest Payment Dates: April 1 and October 1, commencing October 1,
1999
Record Dates: March 15 and September 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
CALIFORNIA STEEL INDUSTRIES, INC.
By: _____________________________
Name:
Title:
By: _____________________________
Name:
Title:
Dated:
B-1
<PAGE>
Certificate of Authentication
This is one of the 8 1/2% Senior Notes due 2009, Series B referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A.,
as Trustee
By: ___________________________
Authorized Signatory
Date of Authentication:
B-2
<PAGE>
(REVERSE OF SECURITY)
8 1/2% Senior Note due 2009, Series B
1. Interest. California Steel Industries, Inc. (the "Company"),
--------
promises to pay interest on the principal amount of this Note at the rate per
annum shown above. Interest on the Notes will accrue from the most recent date
on which interest has been paid or, if no interest has been paid, from April 6,
1999. The Company will pay interest semi-annually in arrears on each Interest
Payment Date, commencing October 1, 1999. Interest will be computed on the basis
of a 360-day year of twelve 30-day months and, in the case of a partial month,
the actual number of days elapsed.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Notes
-----------------
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange) after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, State Street Bank and
--------------------------
Trust Company of California, N.A. (the "Trustee") will act as Paying Agent and
Registrar. The Company may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture, dated
---------
as of April 6, 1999 (the "Indenture"), between the Company and the Trustee. This
Note is one of a duly authorized issue of Initial Notes of the Company
designated as its 8 1/2% Senior Notes due 2009 (the "Initial Notes"). The Notes
are limited in aggregate principal amount to $150,000,000. The Notes include the
Initial Notes and the Exchange Notes issued in exchange for the Initial Notes
pursuant to the Registration Rights Agreement. The Initial Notes and
B-3
<PAGE>
the Exchange Notes are treated as a single class of securities under the
Indenture. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and said Act for a statement of them. The Notes are
general unsecured obligations of the Company.
Each Holder, by accepting a Note, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time in accordance with its terms.
5. Redemption. The Notes will be redeemable at the option of the
----------
Company, in whole or in part, at any time on and after April 1, 2004, upon not
less than 30 nor more than 60 days' notice, at the following redemption prices
(expressed as percentages of the principal amount thereof) if redeemed during
the twelve-month period commencing on April 1 of the year set forth below, plus,
in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
Year Percentage
---- ----------
2004.................................................. 104.250%
2005.................................................. 102.833%
2006.................................................. 101.417%
2007 and thereafter................................... 100.000%
On or before April 1, 2002, the Company may, at its option, use the
net cash proceeds of a Public Equity Offering to redeem up to 35% of the
originally issued aggregate principal amount of the Notes, at a redemption price
in cash equal to 108.500% of the principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of redemption; provided that at
--------
least 65% of the aggregate principal amount of Notes is outstanding following
such redemption. Notice of any such redemption must be given not later than 60
days after the consummation of the Public Equity Offering.
6. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
B-4
<PAGE>
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such redemption price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the redemption price plus accrued interest, if any.
7. Offers to Purchase. Sections 4.14 and 4.15 of the Indenture
------------------
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture), and subject
to further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
8. Persons Deemed Owners. The registered Holder of a Note shall be
---------------------
treated as the owner of it for all purposes.
9. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity. If the Company at any
-----------------------------------------
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but including, under certain
circumstances, its obligation to pay the principal of and interest on the Notes
but without affecting the rights of the Holders to receive such amounts from
such deposits).
11. Amendment; Supplement; Waiver. Subject to certain exceptions set
-----------------------------
forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of a majority in aggregate
principal amount of the Notes then outstanding, and any past Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in aggregate principal amount of the Notes
then outstanding. Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Notes to, among other
things, cure any ambiguity, defect or inconsistency, provide for uncertificated
Notes in addition to or in place of certificated
B-5
<PAGE>
Notes, comply with any requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the TIA or comply with Article
Five of the Indenture or make any other change that does not adversely affect
the rights of any Holder of a Note.
12. Restrictive Covenants. The Indenture imposes certain limitations
---------------------
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of their Capital
Stock or certain Indebtedness, make certain Investments, create or incur liens,
enter into transactions with Affiliates, create dividend or other payment
restrictions affecting Restricted Subsidiaries of the Company, issue and sell
Capital Stock of Restricted Subsidiaries of the Company, and on the ability of
the Company to merge or consolidate with any other Person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of the
Company's or its Restricted Subsidiaries' assets or adopt a plan of liquidation.
Such limitations are subject to a number of important qualifications and
exceptions. If no Default has occurred and is continuing, after the rating
assigned to the Notes by Moody's and S&P are Investment Grade and remain as
such, the Company and the Restricted Subsidiaries will not be subject to
Sections 4.10, 4.11, 4.12, 4.13, 4.15, 4.17, 4.18 and clause (iii) of the first
paragraph of Section 5.01 of the Indenture. Pursuant to Section 4.06 of the
Indenture, the Company must annually report to the Trustee on compliance with
such limitations.
13. Successors. When a successor assumes, in accordance with the
----------
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
14. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the principal of all Notes then outstanding, plus all accrued and
unpaid interest, if any, to and including the date the Notes are paid, may be
declared due and payable in the manner and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to enforce the Indenture
or the Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest when due, for any reason or a
Default in compliance with Article Five of
B-6
<PAGE>
the Indenture) if it determines that withholding notice is in their interest.
15. Trustee Dealings with the Company and Its Subsidiaries. The
------------------------------------------------------
Trustee under the Indenture, in its individual or any other capacity, may become
the owner or pledgee of Notes and may otherwise deal with the Company, its
Subsidiaries or their respective Affiliates as if it were not the Trustee.
16. No Recourse Against Others. No partner, director, officer,
--------------------------
employee or stockholder, as such, of the Company, as such, shall have any
liability for any obligations of the Company under the Notes, the Indenture or
the Registration Rights Agreement or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
17. Authentication. This Note shall not be valid until the Trustee
--------------
or Authenticating Agent manually signs the certificate of authentication on this
Note.
18. Governing Law. This Note and the Indenture shall be governed by
-------------
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York, without regard to
principles of conflict of laws. Each of the parties hereto agrees to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Note.
19. Abbreviations and Defined Terms. Customary abbreviations may be
-------------------------------
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
20. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note.
Requests may be made to:
B-7
<PAGE>
California Steel Industries, Inc., 14000 San Bernardino Avenue, Fontana,
California 92335.
B-8
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed by an Eligible Guarantor Institution (bank, stock
broker, savings and loan association or credit union) with membership in an
approved signature guarantee medallion program pursuant to Securities and
Exchange Commission Rule 17Ad-15:
I or we assign and transfer this Note to:
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(Print or type name, address and zip code and social security or tax ID number
of assignee)
and irrevocably appoint _____________________________________________________ ,
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Dated: _______________________________________ Signed: _______________________
(Sign exactly as name appears
on the other side of this Note)
Signature Guarantee: ______________________________________
B-9
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.14 or Section 4.15 of the Indenture, check the appropriate
box:
Section 4.14 [ ]
Section 4.15 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.14 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$___________________
Dated: _______________ __________________________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the
face of the within Note in every particular
without alteration or enlargement or any change
whatsoever and be guaranteed.
Signature Guarantee: _____________________________
[Signature must be guaranteed by an Eligible Guarantor
Institution (bank, stock broker, savings and loan
association or credit union) with membership in an approved
signature guarantee medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15.]
B-10
<PAGE>
EXHIBIT C
---------
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
[ ], [ ]
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Ladies and Gentlemen:
In connection with our proposed purchase of 8 1/2% Senior Notes due
2009 (the "Notes") of California Steel Industries, Inc., a Delaware corporation
(the "Company"), we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated April 6, 1999, relating to the Notes and such other
information as we deem necessary in order to make our investment decision.
We acknowledge that we have read and agreed to the matters stated in the
section entitled "Transfer Restrictions" of such Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
relating to the Notes (the "Indenture") as described in the Offering
Memorandum and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended (the
"Securities Act"), and all applicable State securities laws.
3. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered
or sold within the United States or to, or for the account or benefit of,
U.S. persons except as permitted in the following sentence. We agree, on
our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Notes, we will do so only
(i) to the Company or any subsidiary thereof, (ii) inside the United States
in accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined in Rule 144A promulgated under the
Securities Act), (iii) inside the United States to an institutional "ac-
C-1
<PAGE>
credited investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the
Trustee (as defined in the Indenture) a signed letter containing certain
representations and agreements relating to the restrictions on transfer of
the Notes (the form of which letter can be obtained from the Trustee), (iv)
outside the United States in accordance with Rule 904 of Regulation S
promulgated under the Securities Act to non-U.S. persons, (v) pursuant to
the exemption from registration provided by Rule 144 under the Securities
Act (if available), or (vi) pursuant to an effective registration statement
under the Securities Act, and we further agree to provide to any person
purchasing any of the Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein.
4. We understand that, on any proposed resale of any Notes, we will
be required to furnish to the Trustee and the Company such certification,
legal opinions and other information as the Trustee and the Company may
reasonably require to confirm that the proposed sale complies with the
foregoing restrictions. We further understand that the Notes purchased by
us will bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or their investment, as the case may be.
6. We are acquiring the Notes purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
C-2
<PAGE>
You, the Company, the Trustee and others are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By: ___________________________
Name:
Title:
C-3
<PAGE>
EXHIBIT D
---------
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
------------------------
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Re: California Steel Industries, Inc.
(the "Company") 8 1/2% Senior Notes due
2009 (the "Notes")
---------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been pre-
arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You, the Company and counsel for the Company are entitled to rely upon
this letter and are irrevocably authorized
D-1
<PAGE>
to produce this letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: __________________________
Authorized Signature
D-2
<PAGE>
EXHIBIT 4.3
CALIFORNIA STEEL INDUSTRIES, INC.
SHAREHOLDERS' AGREEMENT
June 27, 1995
RIO DOCE, LIMITED
COMPANHIA VALE DO RIO DOCE
KAWASAKI STEEL HOLDING (USA), INC.
KAWASAKI STEEL CORPORATION
<PAGE>
SHAREHOLDERS' AGREEMENT
RIO DOCE, LIMITED (hereinafter called "RDL"), a corporation organized and
existing under the laws of the State of New York, U. S. A. with its principal
office at 114 West. 47th ST., New York, N. Y. 10036, U. S. A., an affiliated
corporation of COMPANHIA VALE DO RIO DOCE (hereinafter called "CVRD"), a
corporation organized and existing under the laws of the Federative Republic of
Brazil with its principal office at Av. Graca Aranha, 26, Rio de Janeiro,
Brazil, on one side.
KAWASAKI STEEL HOLDING (USA), INC. (hereinafter called "KSH"), a corporation
organized and existing under the laws of the State of Delaware with its
principal office at Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle, Delaware 19801, U. S. A., an affiliated
corporation of KAWASAKI STEEL CORPORATION, a corporation organized and existing
under the laws of Japan with its principal office at 1-28, Kitahonmachidori 1-
chome, Chuo-ku, Kobe, Japan (hereinafter called "KSC"), on the other side.
RDL and KSH hereinafter sometimes referred to individually as a "Party" and
collectively as the "Parties";
WITNESSETH THAT:
WHEREAS California Steel industries, Inc. (hereinafter called "the Company") was
organized in 1984, and manufactures and sells steel products;
WHEREAS CVRD is one of the shareholders of CST and as one of the world's leading
iron ore suppliers, has developed considerable expertise in businesses in Brazil
and abroad, which expertise CVRD has provided to the Company;
WHEREAS KSC is one of the shareholders of CST and as one of the world's leading
steel manufacturers, has developed considerable expertise in the production of
steel and steel products, which expertise KSC has provided to the Company;
WHEREAS Companhia Siderugica Tubarao (hereinafter called "CST") is a corporation
organized and existing under the laws of the Federative Republic of Brazil with
its principal office at Av. Brigadeiro Eduardo Gomes, s/n-Jardim Limoeiro,
Serra, State of Espirito Santo, Brazil, and is engaged in the production and
commercialization of steel slabs;
-1-
<PAGE>
WHEREAS SEAMAR Shipping Corporation (hereinafter called "SEAMAR") located
at 49 Broad Street, Monrovia, Liberia, is an affiliate company of CVRD, and is
engaged in the shipment of various types of goods between Brazil and other
countries, which services SEAMAR has provided to the Company;
WHEREAS RDL and KSC became, as from September 17, 1986, the sole shareholders of
the Company and a shareholders' agreement was newly concluded as of June 1, 1987
by the between RDL and KSC. As of May 22, 1989, the stock of the Company held by
KSC was transferred to KSH;
WHEREAS RDL and KSH realize the necessity to review and amend the shareholders'
agreement of June 1, 1987, since it has been eleven years from initiation of the
Company's operation, and RDL and KSH are willing to conclude a newly revised
shareholders' agreement;
NOW THEREFORE, in consideration of the premises and covenants herein contained,
the Parties do hereby agree as follows:
ARTICLE 1 - OBJECT
The Parties agree that the business and affair of the Company shall be conducted
in accordance with the provisions hereinafter set forth.
ARTICLE 2 - CAPITAL STOCK
2.1 The capital stock of the Company fully paid in is of forty
million U.S. dollars (U.S. $40,000,000) divided into one
thousand (1,000) shares of the common stock and three
thousand (3,000) shares of the preferred stock.
2.2 The capital stock of the Company is currently distributed
between the Parties as set forth below:
- --------------------------------------------------------------------------------
RDL KSH
- --------------------------------------------------------------------------------
COMMON Amount paid in $5,000,000 $5,000,000
STOCK -------------------------------------------------------------------
Number of Shares 500 500
- --------------------------------------------------------------------------------
PREFERRED Amount paid in $15,000,000 $15,000,000
STOCK -------------------------------------------------------------------
Number of Shares 1,500 1,500
- --------------------------------------------------------------------------------
-2-
<PAGE>
2.3 The characteristics and rights of the common stock and the
preferred stock currently issued are as follows:
(1) Each share of the common stock shall have no par-value and
shall entitle its holder to one vote in the resolutions of
the meeting of Shareholders of the Company.
(2) Each share of the preferred stock shall have a par-value of
ten thousand U.S. dollars (U.S. $10,000) and shall have no
voting right.
(3) The common stock and the preferred stock may be represented
by multiple or single certificates.
(4) The holders of the common stock shall be entitled to
preemptive rights to subscribe to any additional issue of
the common stock or any securities convertible into the
common stock.
(5) The redemption of the preferred stock or the conversion of
the preferred stock into the common stock may be done at
such time and in such manner as decided by Parties.
(6) The preferred stock shall enjoy priority to the common stock
in the distribution of dividends at a fixed rate of ten
percent (10%) of the par value thereof per annum, on a
cumulative basis, and shall thereafter be entitled to
further participate in the distribution of dividends beyond
the said annual fixed rate on the same conditions with the
common stock.
2.4 In the event the capital stock of the Company is increased from
time to time, such increase shall be represented by the common
stock, and/or the preferred stock, as agreed upon between the
Parties, and each of the Parties shall have the right and
obligation to subscribe to and pay fully for such new shares in
proportion to their respective shareholding ratio of the common
stock of the Company. However, either Party may let its Affiliated
Corporation(s) subscribe, in whole or in part, to the shares to be
issued to it pursuant to the provisions of Section 10.2 hereof.
-3-
<PAGE>
2.5 For the purpose of this Agreement, "Affiliated Corporation" means a
corporation which, directly or indirectly, controls, is controlled
by, or is under common control with the Party and has a common
policy with respect to this Agreement. As used herein, the term
"control" means the ownership of fifty percent (50%) or more of the
outstanding voting stock of the corporation concerned, but shall
include also any direct or indirect stock ownership which permits
de facto control.
ARTICLE 3 - AMENDMENT TO CERTIFICATE OF INCORPORATION
AND BYLAWS
3.1 The Certificate of Incorporation and Bylaws of the Company
consolidated until the present day shall be as per Annex 1 attached
hereto and may be amended from time to time upon mutual agreement
between the Parties.
3.2 The Parties recognize that the contents of the Certificate of
Incorporation and Bylaws of the Company shall always be read,
interpreted and applied within the spirit and the provisions of
this Agreement. The Parties recognize further that the contents of
certain provisions of the Certificate of Incorporation and Bylaws
are more fully explained in this Agreement.
ARTICLE 4 - MEETING OF SHAREHOLDERS
4.1 The annual meeting of Shareholders shall be held no later than the
end of March each year at such date, time and place as the Board of
Directors may determine.
4.2 The special meetings of Shareholders may be called at any time by
the Chairman of the Board of Directors, upon resolution of the
Board of Directors or upon the written request of any Shareholder.
The special meetings of Shareholders shall be held at such place as
the Board of Directors shall direct. At any special meeting of
Shareholders, only such matters shall be discussed and decided as
have been indicated by specific description in the notice thereof.
4.3 The meetings of Shareholders shall establish the general policies
and guidelines for the administration of the Company and shall
deliberate and decide on the matters specified below:
-4-
<PAGE>
(1) Change in the business purposes of the Company;
(2) Dissolution or liquidation of the Company, or merger or
consolidation of the Company with any other corporation or
entity;
(3) Disposition of the whole or an important part of the
business or assets of the Company;
(4) Acquisition of the whole or any important part of the
business or assets of any other corporation or entity;
(5) Establishment of a subsidiary company of the Company or
acquisition of the capital stock of any other entity;
(6) Amendment of the Certificate of Incorporation and Bylaws of
the Company
(7) Increase or decrease of the capital stock of the Company;
(8) Redemption of the preferred stock or conversion of the
preferred stock into the common stock;
(9) Issuance of debentures convertible to stocks;
(10) Appointment of the Board of Directors of the Company;
(11) Medium-term Business Plan of the Company including
Investment Plan and its Annual Revisions;
(12) Investment for improvement or expansion of the Company in
excess of two million U.S. dollars (U.S. $2,000,000);
(13) Contracts for leasing out the whole or an important part of
the business or assets of the Company;
(14) Disposition of profit or dealing with losses of the Company;
-5-
<PAGE>
(15) The Board's Annual Report and Annual Audited Financial
Statement of the Company;
4.4 Written notice of each meeting of Shareholders, whether it is an
annual or a special meeting of Shareholders, specifying the place,
day and time of the meeting and the purposes thereof, shall be
delivered to each Party at least fifteen (15) days before the
meeting. Such notice may be given by telefax, telex or airmail,
addressed to each Party at its address registered on the books of
the Company.
4.5 The Parties specifically agree that the meeting of Shareholders
shall be legally convened only when both Shareholders are present,
or legally represented by their respective agents, and the
decisions thereat shall only be made by the unanimous vote of the
Parties.
4.6 Each Party entitled to vote shall have the right to do so either in
person or by an agent or agents authorized by a written proxy
executed by such Party and filed with the Secretary of the Company,
provided that no such proxy shall be valid after the expiration of
one (1) year from the date of its execution, unless the Parties
executing it specify therein a longer period of time.
ARTICLE 5 - CONSULTATIVE COUNCIL
5.1 The Consultative Council shall be constituted of two (2)
members, one appointed by KSH or KSC and one appointed by RDL or
CVRD for a term of two (2) years.
5.2 The Consultative Council is a high level decision board which
shall decide on all relevant matters submitted to it by both or
either Party, and shall specifically resolve any deadlock among
the Directors of the Company with respect to any issue under
the functions of the Board of Directors.
5.3 The Consultative Council shall meet whenever convened by any of
its members or called by the Chairman of the Board of Directors,
at the request of both or either Party. The decisions of the
Consultative
-6-
<PAGE>
Council shall always be taken by the unanimous affirmative votes of
its members.
ARTICLE 6 - BOARD OF DIRECTORS
6.1 The Board of Directors shall be constituted of five (5) Directors,
Shareholders or not, one being its Chairman elected by and among
the Directors. RDL and KSH shall have the right to appoint two (2)
Directors each. The fifth Director shall be elected by unanimous
affirmative votes of Shareholders.
6.2 The Chairman of the Board of Directors shall call and preside at
all meetings of Shareholders and of the Board of Directors.
6.3 The term of office of each Director shall be for one (1) year and
shall extend until his successor has been appointed and qualified.
The compensation of each Director shall be fixed by the meeting of
Shareholders.
6.4 The business and affair of the Company shall be managed under the
direction of the Board of Directors. In the event of a deadlock
between the Directors with respect to any issue under its
functions, the matter shall be submitted by both or either Party to
the Consultative Council which shall endeavor to resolve the
impasse. Should the deadlock be not resolved at the Consultative
Council, any of the Parties may resort to the arbitration procedure
as stipulated in Section 18.10 hereof.
6.5 The regular meetings of the Board of Directors shall be held every
quarter and the special meetings of the Board of Directors shall be
held whenever called by its Chairman, at his own initiative, or
upon request of any Director. The meetings shall take place at the
head office of the Company, located at Fontana, California, or
anywhere agreed upon by four (4) affirmative votes of the
Directors. Meetings through telephone shall be permitted, if
necessary, subject to the terms and conditions to be established by
the Board of Directors.
6.6 Calls for any meeting of the Board of Directors, whether regular or
special, shall be given by the Secretary to each Director in
writing at least five (5) business days before the meeting, unless
the members waive the right to such prior notice.
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<PAGE>
6.7 The quorum of the meeting of the Board of Directors shall be four
(4) Directors and four (4) affirmative votes of Directors
present at such meeting shall decide any matter being the
subject of the meeting.
6.8 The Board of Directors shall deliberate and decide on the matters
specified below:
(1) The Board shall deliberate matters listed on Section 4.3
hereof and propose them for the approval of the Parties;
(2) Establishment of the Medium-Term Business Plan of the
Company according to Shareholders' strategies, and
establishment of the basic policy, annual plan and budget of
the Company, including production, sales, profit estimates,
investment plan and other budget related matters;
(3) Investment for improvement or expansion of the plant of the
Company less than two million U.S. dollars (U.S.
$2,000,000);
(4) Establishment or change of
i) the organizational structure, at the Managers' level,
including branches or liaison offices of the Company;
ii) the Internal Regulations of the Company;
(5) Appointment or removal of the Officers and External Auditors
of the Company;
(6) Determination of detailed terms and conditions for the
receiving of personnel from each Party or its Affiliated
Corporations;
(7) Engagement of outside certified public accountant(s),
counsel(s), and consultant(s);
(8) Creation of advisory and other Board committees;
(9) Appointment of authorized signer(s) of the Company with
respect to contracts, checks or any other documents;
-8-
<PAGE>
(10) General increase or decrease of the level of salary and wage
for employees and change of the salary/wage structure and
system;
(11) Determination of the amount of contribution by the Company
for profit sharing plan of employees with prior consultation
with the Shareholders;
(12) Loans or prepayments or other financing agreements or
borrowing of money in excess of one million U.S. dollars
(U.S. $1,000,000), except draw-downs under already approved
loans or other financing agreements;
(13) Creating a pledge or other encumbrance on the assets of the
Company in excess of five hundred thousand U.S. dollars
(U.S. $500,000);
(14) Opening of credit in favor of a customer of the Company in
excess of five hundred thousand U.S. dollars (U.S.
$500,000);
(15) Settlement of a claim with customers, suppliers, or others,
in excess of two hundred thousand U.S. dollars (U.S.
$200,000);
(16) Approval of policies and general conditions for the purchase
of slabs, ocean transportation, unloading, transportation by
train and purchase of machinery and equipment, materials,
utilities and services, and for the sale of finished steel
products of the Company;
(17) Approval of policies and general terms for the contracts not
specified in Paragraph (16) above in excess of five hundred
thousand U.S. dollars (U.S. $500,000);
(18) Initiation and defense of legal and administrative
proceedings involving the Company, its Director(s), and/or
its Officers(s), provided that in the case of initiation of
such proceedings the Parties should previously be informed;
(19) Any other business which may be submitted to the Board of
Directors from time to time, subject to the provisions of
item 4.3 hereof;.
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<PAGE>
6.9 Any powers other than those enumerated in Section 6.8 above shall
also be reserved for the Board of Directors, subject to the
provisions of item 4.3 hereof;
ARTICLE 7 - OFFICERS
7.1 The Officers of the Company shall consist of:
i) a President; and
ii) such other Officers as may be appointed by the President
and designated by the Board of Directors
7.2 RDL and KSH shall always jointly appoint the President.
7.3 RDL shall always appoint the Officers responsible for the following
areas:
(1) financial matters of the Company and its subsidiaries,
including treasury, and accounting;
(2) procurement, purchasing, transportation and handling of slabs.
KSH shall always appoint the Officers responsible for the following
areas:
(1) production, maintenance and quality control;
(2) engineering and technological matters.
RDL and KSH shall always have the right to appoint an equal number
of Officers of the Company.
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<PAGE>
7.4 In the case of vacancy of one or more Officers, the Board of
Directors shall immediately appoint the required number of new
Officers to fill the vacancy. Each of the new Officers so appointed
shall hold office for the unexpired term of his predecessor.
7.5 In the case of temporary absence or impediment of an Officer, such
Officer shall appoint in writing one of the other Officers, who
shall exercise, along with his own, the functions of the Officer
absent or under impediment.
7.6 The term of office of each Officer shall be one (1) year and shall
extend until his successor has been appointed and qualified. The
compensation of each Officer shall be fixed by the Board of
Directors.
7.7 The powers and duties of the President and CEO and each Officer
shall be established by the Board of Directors.
7.8 It is understood that the idea and spirit of check and balance
between RDL and KSH will be aimed and realized whenever possible in
the nomination of Officers by the respective Parties as well as in
the organization of the Company.
7.9 The President shall designate one of the Officers to perform, along
with his own, the functions of the Secretary of the Company.
ARTICLE 8 - EXTERNAL AUDITORS
8.1 External Auditors shall be designated by the Board of Directors
prior to the close of business in each fiscal year, who shall audit
and examine the books of accounts of the Company and shall certify
to the Board of Directors and Shareholders the annual balance of
said books, which shall be prepared at the close of each fiscal
year.
8.2 No Director or Officer of the Company, and no firm or corporation
of which such Director or Officer is a member, shall be eligible to
discharge the duties of the External Auditors.
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<PAGE>
8.3 The compensation of the External Auditors shall be fixed by the
Board of Directors.
ARTICLE 9 - INTERNAL ORGANIZATION
9.1 The internal organization of the Company for performance of the
day-to-day activities, such as departments/sections and the number
of employees to be allocated to each department/section, shall be
established by the Board of Directors in due course, always aiming
at the most efficient performance.
9.2 The functions and duties of each department/section shall be
defined in the Internal Regulations to be timely approved by the
Board of Directors.
9.3 Appointments of managers, each of whom shall be the head of each
department, shall be confirmed by the Board of Directors based upon
nomination made by the Officer in charge of the respective area.
ARTICLE 10 - TRANSFER OF SHARES
10.1 It is the basic intention of the Parties to continue to own the
stock shares of the Company in their possession. In the event,
however, that any of the Parties desires to transfer, assign or
create a pledge or other encumbrance on the shares of the Company
in its possession, the following rules shall apply:
(1) In the event RDL or KSH desires to transfer or assign the
shares of the Company in its possession to a third party
other than its Affiliated Corporations, RDL or KSH shall
first offer to each other, as the case may be, the sale of
such shares at the same terms and conditions at which the
third party has offered to purchase the shares, and RDL or
KSH shall respond to the other whether to purchase the
offered shares within thirty (30) days after such offer is
made. If the response is negative or no reply has been
obtained within such period, RDL or KSH, as the case may be,
may transfer or assign such shares to the third party,
provided that the terms and conditions of such sale shall
not be more favorable than those offered to the other Party;
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<PAGE>
(2) The Party, who will sell, transfer, assign or create a
pledge or other encumbrance on the shares of the Company in
its possession to or in favor of a third party other than
its Affiliated Corporations, shall cause such third party to
execute and deliver to the other Party an undertaking letter
that such third party shall undertake unconditionally and
irrevocably the obligations of the Party under this
Agreement in proportion to the number of shares so sold,
transferred, assigned, pledged or encumbered to or in favor
of the third party.
10.2 Any Party may sell, transfer or assign to its Affiliated
Corporations all or any part of its shares or its preemptive right
to subscribe to new shares of the Company, by giving written notice
to the other Party; provided, however, that no such sale or
transfer shall relieve the transferrer of its obligations
hereunder, and provide, further, that such Affiliated Corporation
shall have agreed to become a party hereto, and the transferor and
such Affiliated Corporation shall both be deemed to be parties to
this Agreement whereby they shall jointly assume all the
obligations of the transferor under this Agreement.
ARTICLE 11 - COMMITMENTS ON EXERCISE OF VOTING RIGHTS
11.1 The Parties agree to exercise their voting rights at all meetings
of Shareholders of the Company, whether annual or special, in such
a manner as to assure the implementation of their covenants and
undertakings in this Agreement, and to cause all elections of the
members of the Board of Directors of the Company to be effected in
accordance with the relevant provisions of this Agreement.
11.2 The Parties further agree to cause their respective designated
members of the Board of Directors to exercise their votes, whenever
required, so that the contents of this Agreement be fully respected
and implemented.
11.3 In the case the Party transfers the whole or any part of its shares
of the Company to its Affiliated Corporation, the Party and such
Affiliated Corporation shall exercise their voting rights as an
integral party.
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<PAGE>
ARTICLE 12 - ADJUSTMENT OF RIGHT TO APPOINT DIRECTORS AND OFFICERS
In the event that the shareholding ratio of the common stock between the Parties
as specified in Section 2.2 hereof should be substantially altered in the
future, each Party's right to appoint the Directors and Officers shall be
reasonably adjusted.
ARTICLE 13 - FINANCING POLICY
The Company shall target to operate as a standing-alone company, by securing its
own financial resources as may be requested by the normal operation of the
Company or by its investments. Judging from the soundness and strength of the
Company achieved in these eleven years of successful operation, the Parties
further agree not to provide any "shareholders' letter" as comfort letter or any
other letter of awareness, as may be requested by financial institutions when
the Company is securing a new financing mechanism.
ARTICLE 14 - PURCHASE OF SLABS
The Company shall continuously purchase slabs from CST as raw material for its
operation pursuant to the basic terms and conditions as agreed from time to time
between the Company and CST.
ARTICLE 15 - DISTRIBUTION OF PROFIT
Subject to any limitation on the payment of dividends contained in any agreement
to which the Company is a party, the Parties shall cause the Company to
distribute from its profits as much dividends as possible that may be
distributed under the applicable laws and regulations, provided that such
profits shall first be applied to the payment of dividends on the preferred
stock. Payment of dividends shall be discussed and determined at the annual
meeting of Shareholders taking into consideration factors such as maintaining
competitiveness of the Company, its financial position and cash flow of the
Company.
ARTICLE 16 - ACCESS TO DATA OF THE COMPANY
16.1 Either Party, through its duly authorized representative and at its
own expense, may, during business hours of the Company, examine
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<PAGE>
and copy the books and records of the Company. Further, either
Party may likewise visit the production site and any other premises
of the Company or its subsidiaries.
16.2 The Company shall prepare and send to each Party every month a
business report describing and analyzing in reasonable detail the
operation, purchase of raw materials, sale of products and
financial conditions for each period. Furthermore, the Company
shall report to each Party whenever any extraordinary event arises.
ARTICLE 17 - SPECIAL PROVISIONS
17.1 The Parties agree and undertake that the existing contracts signed
by the Company with CST and SEAMAR for the purchase of slabs and
for ocean transportation of slabs from CST to the Company,
respectively, shall be maintained in accordance with the terms and
conditions thereof.
17.2 RDL and KSH will send their respective personnel to the Company as
required by the Board of Directors of the Company for its
management and operation pursuant to the terms and conditions to be
agreed upon between the Company and the Party concerned in the
spirit of equal treatment between the Parties.
ARTICLE 18 - MISCELLANEOUS PR0VISIONS
18.1 Governmental Approvals
----------------------
The Parties acknowledge that the implementation of some provisions
of this Agreement is subject to the previous approval of the
competent governmental authorities of Japan, Brazil and the United
States of America.
18.2 Confidentiality
---------------
Each Party shall keep strictly secret and confidential any secret
and confidential information of the other Party and of the Company
which may have come to its knowledge in connection with and through
the performance of this Agreement.
-15-
<PAGE>
18.3 Assignment of Agreement
-----------------------
No Party shall assign this Agreement without the prior written
consent of the other Party.
18.4 Amendment of Agreement
----------------------
No amendment to this Agreement and/or the documents annexed hereto
shall be deemed to be effective and valid unless it is executed in
writing and the express consent of the Parties appears on the
written amendment. In the case of any change of the common stock
holding ratio between the Parties, necessary and proper amendments
hereto shall be agreed upon by and between the Parties.
18.5 Notice
------
All notices to be given hereunder shall be in writing sent by
registered or certified airmail, return receipt requested, to the
addresses stated below. If any of the Parties has changed its
address, written notice thereof shall be given to the other Party,
with copy to the Company. All notices shall be effective upon
receipt thereof. Notice by telecopy shall also be effective upon
receipt thereof, provided, however, that it shall be confirmed by
means of registered or certified airmail without delay. Any such
notices given by mail shall be considered to have been given on the
fifteenth (15th) day after having been mailed in the manner
provided above.
to RDL: c/o Companhia Vale do Rio Doce
Avenida Graca Aranha, 26-9 andar
Rio de Janeiro, RJ, Brazil
Attn: Steel Division
Telefax: (55-21) 272-4696
to KSH: c/o Kawasaki Steel Corporation
2-2-3, Uchisaiwai-cho, Chiyoda-ku
Tokyo 100, Japan
Attn.: Steel Business Planning Department
Telefax: 03-3597-3246
18.6 Applicable Law
--------------
This Agreement shall be governed by the laws of the State of
Delaware of the United States of America.
18.7 Waiver
------
No waiver of any default under this Agreement shall be effective
unless embodied in writing and signed by the Party against whom
-16-
<PAGE>
such waiver is claimed. No waiver of any breach or default shall be
deemed to be a waiver of any other or subsequent breach or default.
18.8 Entire Agreement
----------------
This Agreement sets forth the entire agreement between the Parties
and shall prevail over any previous agreement or understanding,
whether written or not, between the Parties. This Agreement
supersedes the Shareholders Agreement signed by and between RDL and
KSC on June 1, 1987.
18.9 Termination
-----------
In the event of substantial breach of this Agreement by one of the
Parties, this Agreement may be terminated by the other Party upon
ninety (90) day prior written notice to the Party committing such
breach. The said termination shall become effective at the end of
such ninety (90) day period unless the breach is cured within the
said period.
18.10 Arbitration
-----------
Any dispute, deadlock, controversy or claim arising out of or
relating to this Agreement not resolved at the Consultative Council
shall be settled by arbitration in accordance with the American
Arbitration Association rules then in effect. In any such
arbitration proceeding there shall be three (3) arbitrators. Each
Party shall appoint one (1) arbitrator and the two (2) arbitrators
so appointed shall appoint the third arbitrator who shall act as
chairman of the arbitration tribunal. The arbitration proceeding
shall be conducted in Los Angeles, California. The award of such
arbitration shall be final and binding upon the Parties.
18.11 Effective Date and Duration
---------------------------
(1) This Agreement shall come into force on the date when, after
it has been signed by the Parties, the respective Boards of
Directors of the Parties have obtained from the authorities
of their respective governments all approvals and
authorizations hereof that may be required. Each Party shall
make its best efforts to obtain, as soon as possible, such
approvals and authorizations and shall extend to the other
Party necessary assistance and cooperation for such purpose.
Such approvals and authorizations, when obtained, shall
promptly be notified by one Party to the other.
(2) This Agreement shall remain in full force unless and until
the first to occur of (i) either RDL or KSH ceasing to own
at least twenty five percent (25%) of the outstanding
common stock of
- 17-
<PAGE>
the Company, it being understood that those shares held by
any Affiliated Corporations of any of the Parties shall be
regarded as being owned by such Party, or (ii) the
dissolution or liquidation of the Company.
IN WITNESS WHEREOF, the Parties have caused their representatives, duly
authorized for the purpose, to execute three (3) copies of this instrument, all
of which shall be original, this 27 day of June, 1995, each Party retaining a
copy thereof.
RIO DOCE, LIMITED KAWASAKI STEEL HOLDINGS (USA). INC.
- ----------------- -----------------------------------
By: /s/ Mario Pierry By: /s/ M. Iwahashi
Title: Title: President
IN ACKNOWLEDGEMENT WHEREOF, the representatives of the parent companies of the
parties have signed hereunder.
COMPANHIA VALE DO KAWASAKI STEEL CORPORATION
- ----------------- --------------------------
RIO DOCE
- --------
By: /s/ Guilherme Gazolla By: /s/ K. Emoto
Title: Title: Senior Managing Director
CALIFORNIA STEEL INDUSTRIES, INC. hereby duly acknowledges this Agreement,
on the same day and year above.
CALIFORNIA STEEL INDUSTRIES, INC.
---------------------------------
By: /s/ Marcus Mota e. Silva
Title:
-18-
<PAGE>
EXHIBIT 10.1
REVOLVING CREDIT AGREEMENT
--------------------------
Dated as of March 10, 1999
among
CALIFORNIA STEEL INDUSTRIES, INC.,
the Lending Institutions listed on Schedule 1 hereto,
----------
BANKBOSTON, N.A.,
as Loan and
Collateral Agent for the Banks,
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Letter of Credit and
Documentation Agent for the Banks,
BANCBOSTON ROBERTSON STEPHENS INC.
and
NATIONSBANC MONTGOMERY SECURITIES LLC,
as the Arrangers
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
1. DEFINITIONS AND RULES OF INTERPRETATION..................................................... 1
1.1. Definitions.......................................................................... 1
1.2. Rules of Interpretation.............................................................. 23
2. THE REVOLVING CREDIT FACILITY............................................................... 24
2.1. Commitment to Lend................................................................... 24
2.2. Commitment Fee....................................................................... 25
2.3. Reduction of Total Commitment........................................................ 25
2.4. The Revolving Credit Notes........................................................... 25
2.5. Interest on Revolving Credit Loans................................................... 26
2.6. Requests for Revolving Credit Loans.................................................. 26
2.6.1. General..................................................................... 26
2.6.2. Swing Line.................................................................. 27
2.6.3. Temporary Suspension of Eurodollar Rate Options............................. 27
2.7. Conversion Options................................................................... 28
2.7.1. Conversion to Different Type of Revolving Credit Loan....................... 28
2.7.2. Continuation of Type of Revolving Credit Loan............................... 29
2.7.3. Eurodollar Rate Loans....................................................... 29
2.8. Funds for Revolving Credit Loan...................................................... 29
2.8.1. Funding Procedures.......................................................... 29
2.8.2. Advances by the Loan and Collateral Agent................................... 30
2.9. Change in Borrowing Base............................................................. 30
2.10. Settlements......................................................................... 31
2.10.1. General.................................................................... 31
2.10.2. Failure to Make Funds Available............................................ 32
2.10.3. No Effect on Other Banks................................................... 32
3. REPAYMENT OF THE REVOLVING CREDIT LOANS..................................................... 33
3.1. Maturity............................................................................. 33
3.2. Mandatory Repayments of Revolving Credit Loans....................................... 33
3.3. Optional Repayments of Revolving Credit Loans........................................ 33
4. LETTERS OF CREDIT........................................................................... 34
4.1. Letter of Credit Commitments......................................................... 34
4.1.1. Commitment to Issue Letters of Credit....................................... 34
4.1.2. Letter of Credit Applications............................................... 35
4.1.3. Terms of Letters of Credit.................................................. 35
4.1.4. Reimbursement Obligations of Banks.......................................... 35
4.1.5. Participations of Banks..................................................... 35
4.2. Reimbursement Obligation of the Borrower............................................. 35
4.3. Letter of Credit Payments............................................................ 36
4.4. Obligations Absolute................................................................. 37
4.5. Reliance by Issuer................................................................... 38
</TABLE>
<PAGE>
-ii-
<TABLE>
<S> <C>
4.6. Letter of Credit Fee................................................................. 38
5. CERTAIN GENERAL PROVISIONS.................................................................. 39
5.1. Fees Payable at Closing.............................................................. 39
5.2. Funds for Payments................................................................... 39
5.2.1. Payments to Agents.......................................................... 39
5.2.2. No Offset, etc.............................................................. 39
5.2.3. Withholding................................................................. 40
5.3. Computations......................................................................... 40
5.4. Inability to Determine Eurodollar Rate............................................... 40
5.5. Illegality........................................................................... 41
5.6. Additional Costs, etc................................................................ 41
5.7. Capital Adequacy..................................................................... 43
5.8. Certificate.......................................................................... 43
5.9. Indemnity............................................................................ 43
5.10. Interest After Default.............................................................. 44
5.11. Replacement of Bank................................................................. 44
5.12. Legal Impediment.................................................................... 45
6. COLLATERAL SECURITY......................................................................... 45
7. REPRESENTATIONS AND WARRANTIES.............................................................. 46
7.1. Corporate Authority.................................................................. 46
7.1.1. Incorporation; Good Standing................................................ 46
7.1.2. Authorization............................................................... 46
7.1.3. Enforceability.............................................................. 46
7.2. Governmental Approvals............................................................... 47
7.3. Title to Properties; Leases.......................................................... 47
7.4. Financial Statements and Projections................................................. 47
7.4.1. Fiscal Year................................................................. 47
7.4.2. Financial Statements........................................................ 47
7.4.3. Projections................................................................. 48
7.5. No Material Changes, etc............................................................. 48
7.6. Franchises, Patents, Copyrights, etc................................................. 48
7.7. Litigation........................................................................... 48
7.8. No Materially Adverse Contracts, etc................................................. 49
7.9. Compliance with Other Instruments, Laws, etc......................................... 49
7.10. Tax Status.......................................................................... 49
7.11. No Event of Default................................................................. 50
7.12. Holding Company and Investment Company Acts......................................... 50
7.13. Absence of Financing Statements, etc................................................ 50
7.14. Perfection of Security Interest..................................................... 50
7.15. Certain Transactions................................................................ 50
7.16. Employee Benefit Plans.............................................................. 50
7.16.1. In General................................................................. 50
7.16.2. Terminability of Welfare Plans............................................. 51
</TABLE>
<PAGE>
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<TABLE>
<S> <C>
7.16.3. Guaranteed Pension Plans................................................... 51
7.16.4. Multiemployer Plans........................................................ 52
7.17. Use of Proceeds..................................................................... 52
7.17.1. General.................................................................... 52
7.17.2. Regulations U and X........................................................ 52
7.17.3. Ineligible Securities...................................................... 52
7.18. Environmental Compliance............................................................ 53
7.19. Subsidiaries, etc................................................................... 55
7.20. Bank Accounts....................................................................... 55
7.21. Year 2000 Problem................................................................... 55
7.22. Disclosure.......................................................................... 55
8. AFFIRMATIVE COVENANTS OF THE BORROWER....................................................... 55
8.1. Punctual Payment..................................................................... 55
8.2. Maintenance of Office................................................................ 56
8.3. Records and Accounts................................................................. 56
8.4. Financial Statements, Certificates and Information................................... 56
8.5. Notices.............................................................................. 58
8.5.1. Defaults.................................................................... 58
8.5.2. Environmental Events........................................................ 58
8.5.3. Notification of Claim against Collateral.................................... 59
8.5.4. Notice of Litigation and Judgments.......................................... 59
8.5.5. Notices Concerning Inventory Collateral..................................... 59
8.6. Corporate Existence; Maintenance of Properties....................................... 60
8.7. Insurance............................................................................ 60
8.8. Taxes................................................................................ 60
8.9. Inspection of Properties and Books, etc.............................................. 61
8.9.1. General..................................................................... 61
8.9.2. Collateral Reports.......................................................... 61
8.9.3. Appraisals.................................................................. 61
8.9.4. Communications with Accountants............................................. 62
8.10. Compliance with Laws, Contracts, Licenses, and Permits.............................. 62
8.11. Employee Benefit Plans.............................................................. 62
8.12. Use of Proceeds..................................................................... 63
8.13. Bank Accounts....................................................................... 63
8.13.1. General.................................................................... 63
8.13.2. Acknowledgment of Application.............................................. 63
8.14. Further Assurances.................................................................. 63
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.................................................. 63
9.1. Restrictions on Indebtedness......................................................... 64
9.2. Restrictions on Liens................................................................ 64
9.3. Restrictions on Investments.......................................................... 66
9.4. Distributions........................................................................ 67
9.5. Merger, Consolidation and Disposition of Assets...................................... 67
</TABLE>
<PAGE>
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<TABLE>
<S> <C>
9.5.1. Mergers and Acquisitions.................................................... 68
9.5.2. Disposition of Assets....................................................... 68
9.6. Sale and Leaseback................................................................... 68
9.7. Compliance with Environmental Laws................................................... 69
9.8........................................................................................ 69
Permitted IBJ Debt, Permitted Refinancing Indebtedness and Indebtedness to DKB Nederland... 69
9.9. Employee Benefit Plans............................................................... 69
9.10. Business Activities................................................................. 70
9.11. Fiscal Year......................................................................... 70
9.12. Transactions with Affiliates........................................................ 70
9.13. Bank Accounts....................................................................... 70
9.14. CSIFSC.............................................................................. 70
10. FINANCIAL COVENANTS OF THE BORROWER........................................................ 71
10.1. Capital Expenditures................................................................ 71
10.2. Consolidated Tangible Net Worth..................................................... 71
10.3. Fixed Charge Coverage............................................................... 71
10.4. Interest Charge Coverage............................................................ 71
11. CLOSING CONDITIONS......................................................................... 71
11.1. Loan Documents...................................................................... 72
11.2. Certified Copies of Charter Documents and IBJ Loan Documents........................ 72
11.3. Corporate Action.................................................................... 72
11.4. Incumbency Certificate.............................................................. 72
11.5. Validity of Liens................................................................... 72
11.6. Perfection Certificates and UCC Search Results...................................... 73
11.7. Certificates of Insurance........................................................... 73
11.8. Agency Account Agreements........................................................... 73
11.9. Borrowing Base Report; Funding Audit................................................ 73
11.10. Accounts Receivable Aging Report................................................... 73
11.11. Hazardous Waste Assessments........................................................ 73
11.12. Solvency Certificate............................................................... 74
11.13. Opinion of Counsel................................................................. 74
11.14. Payment of Fees.................................................................... 74
11.15. Payoff Letter...................................................................... 74
12. CONDITIONS TO ALL BORROWINGS............................................................... 74
12.1. Representations True; No Event of Default........................................... 74
12.2. Governmental Regulation............................................................. 75
12.3. Proceedings and Documents........................................................... 75
12.4. Borrowing Base Report............................................................... 75
13. EVENTS OF DEFAULT; ACCELERATION; ETC....................................................... 75
13.1. Events of Default and Acceleration.................................................. 75
13.2. Termination of Commitments.......................................................... 79
</TABLE>
<PAGE>
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<TABLE>
<S> <C>
13.3. Remedies............................................................................ 80
13.4. Distribution of Collateral Proceeds................................................. 80
14. SETOFF..................................................................................... 81
15. THE AGENTS................................................................................. 82
15.1. Authorization....................................................................... 82
15.2. Employees and Agents................................................................ 82
15.3. No Liability........................................................................ 83
15.4. No Representations.................................................................. 83
15.4.1. General...................................................................... 83
15.4.2. Closing Documentation, etc................................................... 84
15.5. Payments............................................................................ 84
15.5.1. Payments to Agents........................................................... 84
15.5.2. Distribution by Agents....................................................... 84
15.5.3. Delinquent Banks............................................................. 84
15.6. Holders of Revolving Credit Notes................................................... 85
15.7. Indemnity........................................................................... 85
15.8. Agents as Banks..................................................................... 85
15.9. Resignation......................................................................... 86
15.10. Notification of Defaults and Events of Default..................................... 86
15.11. Duties in the Case of Enforcement.................................................. 86
16. EXPENSES AND INDEMNIFICATION............................................................... 87
16.1. Expenses............................................................................ 87
16.2. Indemnification..................................................................... 88
16.3. Survival............................................................................ 89
17. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.............................................. 89
17.1. Sharing of Information with Section 20 Subsidiary................................... 89
17.2. Confidentiality..................................................................... 89
17.3. Prior Notification.................................................................. 90
17.4. Other............................................................................... 90
18. SURVIVAL OF COVENANTS, ETC................................................................. 90
19. ASSIGNMENT AND PARTICIPATION............................................................... 91
19.1. Conditions to Assignment by Banks................................................... 91
19.2. Certain Representations and Warranties; Limitations; Covenants...................... 91
19.3. Register............................................................................ 93
19.4. New Revolving Credit Notes.......................................................... 93
19.5. Participations...................................................................... 94
19.6. Disclosure.......................................................................... 94
19.7. Assignee or Participant Affiliated with the Borrower................................ 94
19.8. Miscellaneous Assignment Provisions................................................. 95
19.9. Assignment by Borrower.............................................................. 95
19.10. Syndication........................................................................ 95
20. NOTICES, ETC............................................................................... 96
</TABLE>
<PAGE>
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<TABLE>
<S> <C>
21. GOVERNING LAW.............................................................................. 97
22. HEADINGS................................................................................... 97
23. COUNTERPARTS............................................................................... 97
24. ENTIRE AGREEMENT, ETC...................................................................... 97
25. WAIVER OF JURY TRIAL....................................................................... 98
26. CONSENTS, AMENDMENTS, WAIVERS, ETC......................................................... 98
27. SEVERABILITY............................................................................... 99
</TABLE>
<PAGE>
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SCHEDULES AND EXHIBITS
----------------------
<TABLE>
<CAPTION>
<S> <C>
Schedule 1 Banks; Commitments
Schedule 7.3 Title to Properties; Leases
Schedule 7.5 No Material Changes
Schedule 7.7 Litigation
Schedule 7.18 Environmental Compliance
Schedule 7.19 Subsidiaries
Schedule 7.20 Bank Accounts
Schedule 9.1 Permitted Existing Indebtedness
Schedule 9.2 Permitted Existing Liens
Schedule 9.3 Permitted Existing Investments
Exhibit A Form of Borrowing Base Report
Exhibit B Form of Revolving Credit Note
Exhibit C Form of Loan Request
Exhibit D Form of Compliance Certificate
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Customs Agent Agreement
</TABLE>
<PAGE>
REVOLVING CREDIT AGREEMENT
--------------------------
This REVOLVING CREDIT AGREEMENT is made as of March 10, 1999, by and among
(a) CALIFORNIA STEEL INDUSTRIES, INC., a Delaware corporation having its
principal place of business at 14000 San Bernardino Avenue, Fontana, California
92335 (the "Borrower"), (b) BANKBOSTON, N.A, BANK OF AMERICA NATIONAL TRUST AND
--------
SAVINGS ASSOCIATION and the other lending institutions listed on Schedule 1, (c)
-------- -
BANKBOSTON, N.A., as loan and collateral agent for the Banks (as hereinafter
defined), (d) BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
documentation and letter of credit agent for the Banks, and (e) BANCBOSTON
ROBERTSON STEPHENS INC. and NATIONSBANC MONTGOMERY SECURITIES LLC, as arrangers.
1. DEFINITIONS AND RULES OF INTERPRETATION.
----------------------------------------
1.1. DEFINITIONS. The following terms shall have the meanings set forth in
-----------
this (S)1 or elsewhere in the provisions of this Credit Agreement referred to
below:
Accounts Receivable. All rights of the Borrower or any of its Subsidiaries
-------------------
to payment for goods sold, leased or otherwise marketed in the ordinary course
of business and all rights of the Borrower or any of its Subsidiaries to payment
for services rendered in the ordinary course of business and all sums of money
or other proceeds due thereon pursuant to transactions with account debtors,
except for that portion of the sum of money or other proceeds due thereon that
relate to sales, use or property taxes in conjunction with such transactions,
recorded on books of account in accordance with generally accepted accounting
principles.
Adjustment Date. Each date which is the first day of the month immediately
---------------
following the month in which the Borrower's quarterly unaudited financial
statements and related Compliance Certificate are required to be delivered by
the Borrower pursuant to (S)8.4(b) and (S)8.4(d), respectively.
Affiliate. Any Person that would be considered to be an affiliate of the
---------
Borrower under Rule 144(a) of the Rules and Regulations of the Securities and
Exchange Commission, as in effect on the date hereof, if the Borrower were
issuing securities.
<PAGE>
-2-
Agency Account Agreement. See (S)8.13.1.
------------------------
Agents. Collectively, the Loan and Collateral Agent and the Letter of
------
Credit Agent.
Applicable Margin. For each period commencing on an Adjustment Date through
-----------------
the date immediately preceding the next Adjustment Date (each a "Rate Adjustment
---------------
Period"), the Applicable Margin shall be the applicable margin or rate (in each
- ------
case per annum) set forth below with respect to the Leverage Ratio, as
determined as of the end of and for the period of four consecutive fiscal
quarters of the Borrower ending immediately prior to the applicable Rate
Adjustment Period and pertaining to such Adjustment Date:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
LEVEL LEVERAGE RATIO EURODOLLAR BASE COMMITMENT FEE
RATE LOANS RATE LOANS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
I Greater than or 1.00% 0.00% 0.20%
equal to 3.5:1.0
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
II Less than 3.5:1.0
but greater than or 0.875% 0.00% 0.20%
equal to 3.0:1.0
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
III Less than 3.0:1.0
but greater than or 0.750% 0.00% 0.15%
equal to 2.5:1.0
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
IV Less than 2.5:1.0 0.700% 0.00% 0.15%
- ------------------------------------------------------------------------------
</TABLE>
Notwithstanding the foregoing, (a) for the period commencing on the Closing Date
to (but not including) the first Adjustment Date which occurs following the
earlier of (i) the quarter on which the Borrower achieves a Fixed Charge
Coverage Ratio in excess of 1.10:1.00 and (ii) the last day of the fiscal
quarter following the closing of the transactions contemplated under the
Permitted Refinancing Indebtedness, the Applicable Margin shall be at least
equal to the Applicable Margin set forth on Level II of the chart set forth
above, and (b) if the Borrower fails to deliver any financial statements when
due pursuant to (S)8.4(a) or (b) hereof or any Compliance Certificate when due
pursuant to (S)8.4(d) hereof then, for the period commencing on the next
Adjustment Date to occur subsequent to such failure (if such failure is then
continuing uncured) through the date immediately following the date on which
such financial statements or Compliance Certificate, as the case may be, is
delivered, the Applicable Margin shall be the Applicable Margin set forth on
Level I of the chart set forth above.
<PAGE>
-3-
Approved Customs Broker. A customs broker satisfactory to the Loan and
-----------------------
Collateral Agent which has entered into a Customs Agent Agreement with the Loan
and Collateral Agent and the Borrower.
Arranger(s). BancBoston Robertson Stephens Inc. and NationsBanc Montgomery
-----------
Securities LLC.
Assignment and Acceptance. See (S)19.1.
-------------------------
Balance Sheet Date. December 31, 1998.
------------------
Banks. BKB, BofA and the other lending institutions listed on Schedule 1
----- -------- -
hereto and any other Person who becomes an assignee of any rights and
obligations of a Bank pursuant to (S)19.
Base Rate. The higher of (i) the annual rate of interest announced from
---------
time to time by BKB at its head office in Boston, Massachusetts, as its "base
rate" or (ii) one-half of one percent (1/2%) above the Federal Funds Effective
Rate. For the purposes of this definition, "Federal Funds Effective Rate" shall
mean for any day, the rate per annum equal to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Loan and Collateral Agent from three funds brokers
of recognized standing selected by the Loan and Collateral Agent.
Base Rate Loans. Revolving Credit Loans bearing interest calculated by
---------------
reference to the Base Rate.
BKB. BankBoston, N.A., a national banking association, in its individual
---
capacity.
BKB Concentration Account. See (S)8.13.1.
-------------------------
BofA. Bank of America National Trust and Savings Association, a national
----
banking association, in its individual capacity.
Borrower. As defined in the preamble hereto.
--------
Borrowing Base. At the relevant time of reference thereto, an amount
--------------
determined by the Loan and Collateral Agent by reference to the most recent
Borrowing Base Report delivered to the Banks and the Loan and Collateral
<PAGE>
-4-
Agent, as adjusted pursuant to the provisions below, which is equal to the sum
of:
(a) 85% of Eligible Accounts Receivable for which invoices have been
issued and are payable; plus
----
(b) the lesser of (i) 60% of the Net Book Value of Eligible Inventory
and (ii) $90,000,000 on or prior to July 31, 1999 and $80,000,000
thereafter; minus
-----
(c) $15,000,000 on or prior to July 31, 1999 and $20,000,000
thereafter at all times; minus
-----
(d) Reserves; plus
----
(e) the Discretionary Amount.
The Loan and Collateral Agent may, in its discretion, from time to time, upon
five (5) days' prior notice to the Borrower, (x) reduce the lending formula with
respect to Eligible Accounts Receivable to the extent that the Loan and
Collateral Agent determines that: (i) the dilution with respect of the Accounts
Receivable for any period has increased in any material respect or may be
reasonably anticipated to increase in any material respect above historical
levels, or (ii) the general creditworthiness of account debtors or other
obligors of the Borrower has declined or (y) reduce the lending formula(s) with
respect to Eligible Inventory to the extent that the Loan and Collateral Agent
determines that: (i) the number of days of the turnover of the inventory of the
Borrower for any period has changed in any material adverse respect, (ii) the
liquidation value of the Eligible Inventory, or any category thereof, has
decreased, or (iii) the nature and quality of the inventory of the Borrower has
deteriorated in any material respect or the mix of such inventory has changed
materially. In determining whether to reduce the lending formula(s), the Loan
and Collateral Agent may consider events, conditions, contingencies or risks
which are also considered in determining Eligible Accounts Receivable, Eligible
Inventory or in establishing the Reserves.
Borrowing Base Report. A Borrowing Base Report signed by the chief
---------------------
financial officer of the Borrower and in substantially the form of Exhibit A
------- -
hereto.
Business Day. Any day on which banking institutions in Boston,
------------
Massachusetts and Los Angeles, California, are open for the transaction of
banking business and, in the case of Eurodollar Rate Loans, also a day which is
a Eurodollar Business Day.
<PAGE>
-5-
Capital Assets. Fixed assets, both tangible (such as land, buildings,
--------------
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
--------
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
Capital Expenditures. Amounts paid or Indebtedness incurred by the
--------------------
Borrower or any of its Subsidiaries in connection with (i) the purchase or lease
by the Borrower or any of its Subsidiaries of Capital Assets that would be
required to be capitalized and shown on the balance sheet of such Person in
accordance with generally accepted accounting principles or (ii) the lease of
any assets by the Borrower or any of its Subsidiaries as lessee under any
synthetic lease referred to in clause (vi) of the definition of the term
"Indebtedness" to the extent that such assets would have been Capital Assets had
the synthetic lease been treated for accounting purposes as a Capitalized Lease.
Capitalized Leases. Leases under which the Borrower or any of its
------------------
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.
CERCLA. See (S)7.18(a).
------
Closing Date. The first date on which the conditions set forth in (S)11
------------
have been satisfied and any Revolving Credit Loans are to be made or any Letter
of Credit is to be issued hereunder.
Code. The Internal Revenue Code of 1986.
----
Collateral. All of the property, rights and interests of the Borrower and
----------
its Subsidiaries that are subject to the security interests and mortgages
created by the Security Documents.
Commitment. With respect to each Bank, the amount set forth on Schedule 1
---------- -------- -
hereto as the amount of such Bank's commitment to make Revolving Credit Loans
to, and to participate in the issuance, extension and renewal of Letters of
Credit for the account of, the Borrower, as the same may be reduced from time to
time; or if such commitment is terminated pursuant to the provisions hereof,
zero.
Commitment Percentage. With respect to each Bank, the percentage
---------------------
<PAGE>
-6-
set forth on Schedule 1 hereto as such Bank's percentage of the Total
-------- -
Commitment.
Consolidated or consolidated. With reference to any term defined herein,
----------------------------
shall mean that term as applied to the accounts of the Borrower and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.
Consolidated EBITDA. For any period, an amount equal the consolidated
-------------------
earnings (or loss) from the operations of the Borrower and its Subsidiaries for
any period, after all expenses and other proper charges but before payment or
provision for any income taxes or interest expense for such period plus
----
depreciation, amortization and all other noncash charges for such period, all
determined in accordance with generally accepted accounting principles.
Consolidated Funded Debt. With respect to the Borrower and its
------------------------
Subsidiaries on a consolidated basis for any period, the average principal
amount outstanding during such period in respect of all Indebtedness of the
Borrower and its Subsidiaries for borrowed money and Indebtedness in respect of
Capitalized Leases, in each case determined in accordance with generally
accepted accounting principles.
Consolidated Net Income (or Deficit). The consolidated net income (or
------------------------------------
deficit) of the Borrower and its Subsidiaries, after deduction of all expenses,
taxes, and other proper charges, determined in accordance with generally
accepted accounting principles.
Consolidated Operating Cash Flow. With respect to the Borrower and its
--------------------------------
Subsidiaries for any particular fiscal period, an amount equal to (a)
Consolidated EBITDA for such period less (b) the sum of (i) the amount of
----
Capital Expenditures made during such period, plus (ii) the amount of
----
Distributions made during such period, plus (iii) income taxes paid by the
----
Borrower and its Subsidiaries during such period.
Consolidated Tangible Net Worth. The excess of Consolidated Total Assets
-------------------------------
over Consolidated Total Liabilities, and less the sum of:
(a) the total book value of all assets of the Borrower and its
Subsidiaries properly classified as intangible assets under generally
accepted accounting principles, including such items as good will, the
purchase price of acquired assets in excess of the fair market value
thereof, trademarks, trade names, service marks, brand names, copyrights,
patents and licenses, and rights with respect to the
<PAGE>
-7-
foregoing; plus
(b) all amounts representing any write-up in the book value of any
assets of the Borrower or its Subsidiaries resulting from a revaluation
thereof subsequent to the Balance Sheet Date; plus
(c) to the extent otherwise includable in the computation of
Consolidated Tangible Net Worth, any equity subscriptions receivable; plus
(d) the value of the Investments of the Borrower and its Subsidiaries
in Companhia Siderurgica de Tubarao.
Consolidated Total Assets. The sum of (i) all assets ("consolidated
------------------------- ------------
balance sheet assets") of the Borrower and its Subsidiaries determined on a
- --------------------
consolidated basis in accordance with generally accepted accounting principles,
plus (ii) without duplication, all assets leased by the Borrower or any
- ----
Subsidiary as lessee under any synthetic lease referred to in clause (vi) of the
definition of the term "Indebtedness" to the extent that such assets would have
been consolidated balance sheet assets had the synthetic lease been treated for
accounting purposes as a Capitalized Lease, plus (iii) without duplication, all
----
sold receivables referred to in clause (vii) of the definition of the term
"Indebtedness" to the extent that such receivables would have been consolidated
balance sheet assets had they not been sold.
Consolidated Total Debt Service. For any fiscal period, the sum of (i)
-------------------------------
Consolidated Total Interest Expense, plus (ii) all scheduled mandatory payments
of principal on Indebtedness of the Borrower and its Subsidiaries required to be
made during such period, including payments consisting of principal in respect
of Capitalized Leases or synthetic leases referred to in clause (vi) of the
definition of the term "Indebtedness". Demand obligations shall be deemed to be
due and payable during any fiscal period during which such obligations are
outstanding.
Consolidated Total Interest Expense. For any period, the aggregate amount
-----------------------------------
of interest required to be paid or accrued by the Borrower and its Subsidiaries
during such period on all Indebtedness of the Borrower and its Subsidiaries
outstanding during all or any part of such period, whether such interest was or
is required to be reflected as an item of expense or capitalized, including
payments consisting of interest in respect of any Capitalized Lease, or any
synthetic lease referred to in clause (vi) of the definition of the term
"Indebtedness," and including commitment fees, agency fees, facility fees,
balance deficiency fees and similar fees or expenses in connection with the
borrowing of money.
<PAGE>
-8-
Consolidated Total Liabilities. All liabilities of the Borrower and its
------------------------------
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles and classified as such on the consolidated
balance sheet of the Borrower and its Subsidiaries and all other Indebtedness of
the Borrower and its Subsidiaries, whether or not so classified.
Conversion Request. A notice given by the Borrower to the Loan and
------------------
Collateral Agent of the Borrower's election to convert or continue a Revolving
Credit Loan in accordance with (S)2.7.
Credit Agreement. This Revolving Credit Agreement, including the Schedules
----------------
and Exhibits hereto.
CSIFSC. CSI Foreign Sales Corporation, a U.S. Virgin Islands corporation.
------
CST. Companhia Siderurgica de Tubarao, a Brazilian corporation.
---
Customs Agent Agreement. A Customs Agent Agreement, substantially in the
-----------------------
form of Exhibit F hereto, entered into among the Loan and Collateral Agent, the
------- -
Borrower and an Approved Customs Broker.
Default. See (S)13.1.
-------
Delinquent Bank. See (S)15.5.3.
---------------
Derivative Contract. See paragraph (ix) of the definition of Indebtedness.
-------------------
Discretionary Amount. As at any date of determination, an amount
--------------------
determined by the Agents in their sole and absolute discretion which shall not
exceed $5,000,000 for a period not to exceed 30 consecutive days.
Distribution. The declaration or payment of any dividend on or in respect
------------
of any shares of any class of capital stock of the Borrower, other than
dividends payable solely in shares of common stock of the Borrower; the
purchase, redemption, or other retirement of any shares of any class of capital
stock of the Borrower, directly or indirectly through a Subsidiary of the
Borrower or otherwise; the return of capital by the Borrower to its shareholders
as such; or any other distribution on or in respect of any shares of any class
of capital stock of the Borrower.
DKB: The Dai-Ichi Kangyo Bank, Limited, Los Angeles Agency.
---
DKB Nederland: The Dai-Ichi Kangyo Bank Nederland N.V.
-------------
<PAGE>
-9-
Dollars or $. Dollars in lawful currency of the United States of America.
------- -
Domestic Lending Office. Initially, the office of each Bank designated as
-----------------------
such in Schedule 1 hereto; thereafter, such other office of such Bank, if any,
-------- -
located within the United States that will be making or maintaining Base Rate
Loans.
Drawdown Date. The date on which any Revolving Credit Loan is made or is
-------------
to be made, and the date on which any Revolving Credit Loan is converted or
continued in accordance with (S)2.7.
Eligible Accounts Receivable. The aggregate of the unpaid portions of
----------------------------
Accounts Receivable (net of any credits, rebates, offsets, holdbacks or other
adjustments or commissions payable to third parties that are adjustments to such
Accounts Receivable) (a) that the Borrower reasonably and in good faith
determines to be collectible; (b) that are with account debtors or other
obligors that (i) are not Affiliates of the Borrower; provided, however, at any
-----------------
time up to $2,500,000 of Accounts Receivable owed by Persons who are Affiliates
of the Borrower (other than Subsidiaries of the Borrower or Persons who own
Voting Stock of the Borrower) and otherwise qualify as Eligible Accounts
Receivable may be considered Eligible Accounts Receivable, (ii) purchased the
goods or services giving rise to the relevant Account Receivable in an arm's
length transaction, (iii) are not insolvent or involved in any case or
proceeding, whether voluntary or involuntary, under any bankruptcy,
reorganization, arrangement, insolvency, adjustment of debt, dissolution,
liquidation or similar law of any jurisdiction and (iv) are, in the Loan and
Collateral Agent's reasonable judgment, creditworthy; (c) that are in payment of
obligations that have been fully performed, do not consist of progress billings
or bill and hold invoices (except bill and hold invoices of up to $500,000 in
the aggregate at any time) and are not subject to dispute or any other similar
claims that would reduce the cash amount payable therefor; (d) that are not
subject to any pledge, restriction, security interest or other lien or
encumbrance other than those created by the Loan Documents; (e) in which the
Loan and Collateral Agent has a valid and perfected first priority security
interest; (f) that are not outstanding for more than (i) ninety (90) days past
the earlier to occur of (A) the date of the respective invoices therefor and (B)
the date of shipment thereof in the case of goods or the end of the calendar
month following the provision thereof in the case of services or (ii) sixty (60)
days past the due date therefor; (g) that are not due from an account debtor or
other obligor located in Minnesota unless the Borrower (i) has received a
certificate of authority to do business and is in good standing in such state or
(ii) has filed a notice of business activities report with the appropriate
office or agency of such state for the current year; (h) that are not
<PAGE>
-10-
due from any single account debtor or other obligor if more than twenty percent
(20%) of the aggregate amount of all Accounts Receivable owing from such account
debtor or other obligor would otherwise not be Eligible Accounts Receivable; (i)
that are payable in Dollars; (j) that are not payable from an office outside of
the United States; (k) that are not secured by a letter of credit unless the
Loan and Collateral Agent has a prior, perfected security interest in such
letter of credit, and (l) not more than 10% of such Accounts Receivable may be
from any single account debtor.
Eligible Assignee. Any of (i) a commercial bank or finance company
-----------------
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (ii)
a savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (iii) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
----
country, and having total assets in excess of $1,000,000,000, provided that such
--------
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (iv) the
central bank of any country which is a member of the OECD; and (v) if, but only
if, any Event of Default has occurred and is continuing, any other bank,
insurance company, commercial finance company or other financial institution or
other Person approved by the Agents, such approval not to be unreasonably
withheld.
Eligible Inventory. With respect to the Borrower or any of its
------------------
Subsidiaries, finished goods and work in progress and raw materials owned by the
Borrower or such Subsidiary; provided that Eligible Inventory shall not include
--------
any inventory (i) held on consignment, or not otherwise owned by the Borrower or
such Subsidiary, or of a type no longer sold by the Borrower or such Subsidiary,
(ii) which has been returned by a customer and is damaged or subject to any
legal encumbrance other than Permitted Liens, (iii) which is not in the
possession of the Borrower or such Subsidiary unless (A) the Loan and Collateral
Agent has received a waiver from the party in possession of such inventory in
form and substance satisfactory to the Loan and Collateral Agent or (B) such
inventory is In-Transit Inventory, (iv) which is held by the Borrower or such
Subsidiary on property leased by the Borrower or a Subsidiary, unless the Loan
and Collateral Agent has received a waiver from the lessor of such leased
property and, if any, sublessor thereof in form and substance satisfactory to
the Loan and Collateral Agent, (v) as to which (other than with the case of In-
Transit Inventory) appropriate Uniform
<PAGE>
-11-
Commercial Code financing statements showing the Borrower or such Subsidiary as
debtor and the Loan and Collateral Agent as secured party have not been filed in
the proper filing office or offices in order to perfect the Loan and Collateral
Agent's security interest therein, (vi) which has been shipped to a customer of
the Borrower or such Subsidiary regardless of whether such shipment is on a
consignment basis, (vii) which, other than In-Transit Inventory, is not located
within the United States of America, (viii) which the Loan and Collateral Agent
reasonably deem to be not marketable, (ix) scrap inventory, held coils (i.e.
coils not used for initial orders) in excess of $1,000,000 at any time, and
"Other Inventory" as classified by the Borrower on its financial statements as
of the Balance Statement Date, or (x) which has been owned by the Borrower or
such Subsidiary for more than one (1) year.
Employee Benefit Plan. Any employee benefit plan within the meaning of
---------------------
(S)3(3) of ERISA maintained of contributed to by the Borrower or any ERISA
Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.
Environmental Laws. See (S)7.18(a).
------------------
EPA. See (S)7.18(b).
---
ERISA. The Employee Retirement Income Security Act of 1974.
-----
ERISA Affiliate. Any Person which is treated as a single employer with the
---------------
Borrower under (S)414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
----------------------
Pension Plan within the meaning of (S)4043 of ERISA and the regulations
promulgated thereunder.
Eurocurrency Reserve Rate. For any day with respect to a Eurodollar Rate
-------------------------
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
Eurodollar Business Day. Any day on which commercial banks are open for
-----------------------
international business (including dealings in Dollar deposits) in
<PAGE>
-12-
London or such other eurodollar interbank market as may be selected by the Agent
in its sole discretion acting in good faith.
Eurodollar Lending Office. Initially, the office of each Bank designated
-------------------------
as such in Schedule 1 hereto; thereafter, such other office of such Bank, if
-------- -
any, that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar Rate
---------------
Loan, the rate of interest equal to (i) the average of the per annum rates
(rounded upwards to the nearest 1/16 of one percent) at which the Loan and
Collateral Agent's Eurodollar Lending Office is offered Dollar deposits two
Eurodollar Business Days prior to the beginning of such Interest Period in the
interbank eurodollar market where the eurodollar and foreign currency and
exchange operations of such Eurodollar Lending Office are customarily conducted,
for delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of the Eurodollar
Rate Loan to which such Interest Period applies, divided by (ii) a number equal
to 1.00 minus the Eurocurrency Reserve Rate, if applicable.
Eurodollar Rate Loans. Revolving Credit Loans bearing interest calculated
---------------------
by reference to the Eurodollar Rate.
Event of Default. See (S)13.1.
----------------
Fee Letter. The fee letter referred to in (S)5.1.
----------
Fixed Charge Coverage Ratio. See (S)10.3.
---------------------------
generally accepted accounting principles. (i) When used in (S)10, whether
----------------------------------------
directly or indirectly through reference to a capitalized term used therein,
means (A) principles that are consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, in
effect for the fiscal year ended on the Balance Sheet Date, and (B) to the
extent consistent with such principles, the accounting practice of the Borrower
reflected in its financial statements for the year ended on the Balance Sheet
Date, and (ii) when used in general, other than as provided above, means
principles that are (A) consistent with the principles promulgated or adopted by
the Financial Accounting Standards Board and its predecessors, as in effect from
time to time, and (B) consistently applied with past financial statements of the
Borrower adopting the same principles, provided that in each case referred to in
this definition of "generally accepted accounting principles" a certified public
accountant would, insofar as the use of such accounting principles is pertinent,
be in a position to deliver an unqualified opinion (other than a qualification
regarding changes in generally
<PAGE>
-13-
accepted accounting principles) as to financial statements in which such
principles have been properly applied.
Guaranteed Pension Plan. Any employee pension benefit plan within the
-----------------------
meaning of (S)3(2) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Hazardous Substances. See (S)7.18(b).
--------------------
IBJ. The Industrial Bank of Japan, Limited, Los Angeles Agency.
---
IBJ Loan Documents. The documents listed on Schedule 11.2(iii), in the
------------------ ------------------
form delivered to the Banks on the Closing Date.
Indebtedness. As to any Person and whether recourse is secured by or is
------------
otherwise available against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:
(i) every obligation of such Person for money borrowed,
(ii) every obligation of such Person evidenced by bonds, debentures,
Revolving Credit Notes or other similar instruments, including obligations
incurred in connection with the acquisition of property, assets or
businesses,
(iii) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for
the account of such Person,
(iv) every obligation of such Person issued or assumed as the
deferred purchase price of property or services (including securities
repurchase agreements but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business which are not
overdue or which are being contested in good faith),
(v) every obligation of such Person under any Capitalized Lease,
(vi) every obligation of such Person under any lease (a "synthetic
---------
lease") treated as an operating lease under generally accepted accounting
-----
principles and as a loan or financing for U.S. income tax purposes,
<PAGE>
-14-
(vii) all sales by such Person of (A) accounts or general intangibles
for money due or to become due, (B) chattel paper, instruments or documents
creating or evidencing a right to payment of money or (C) other receivables
(collectively "receivables"), whether pursuant to a purchase facility or
-----------
otherwise, other than in connection with the disposition of the business
operations of such Person relating thereto or a disposition of defaulted
receivables for collection and not as a financing arrangement, and together
with any obligation of such Person to pay any discount, interest, fees,
indemnities, penalties, recourse, expenses or other amounts in connection
therewith,
(viii) every obligation of such Person (an "equity related purchase
-----------------------
obligation") to purchase, redeem, retire or otherwise acquire for value any
----------
shares of capital stock of any class issued by such Person, any warrants,
options or other rights to acquire any such shares, or any rights measured
by the value of such shares, warrants, options or other rights,
(ix) every obligation of such Person under any forward contract,
futures contract, swap, option or other financing agreement or arrangement
(including, without limitation, caps, floors, collars and similar
agreements), the value of which is dependent upon interest rates, currency
exchange rates, commodities or other indices (a "derivative contract"),
-------------------
(x) every obligation in respect of Indebtedness of any partnership
or other entity to the extent that such Person is liable therefor as a
result of such Person's ownership interest in such entity, except to the
extent that the terms of such Indebtedness provide that such Person is not
liable therefor and such terms are enforceable under applicable law,
(xi) every obligation, contingent or otherwise, of such Person
guaranteeing, or having the economic effect of guarantying or otherwise
acting as surety for, any obligation of a type described in any of clauses
(i) through (x) (the "primary obligation") of another Person (the "primary
------------------ -------
obligor"), in any manner, whether directly or indirectly, and including,
-------
without limitation, any obligation of such Person (A) to purchase or pay
(or advance or supply funds for the purchase of) any security for the
payment of such primary obligation, (B) to purchase property, securities or
services for the purpose of assuring the payment of such primary
obligation, or (C) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such
<PAGE>
-15-
primary obligation.
The "amount" or "principal amount" of any Indebtedness at any time of
determination represented by (u) any Indebtedness, issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with generally accepted
accounting principles, (v) any Capitalized Lease shall be the principal
component of the aggregate of the rentals obligation under such Capitalized
Lease payable over the term thereof that is not subject to termination by the
lessee, (w) any sale of receivables shall be the amount of unrecovered capital
or principal investment of the purchaser (other than the Borrower or any of its
wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or
interest earned on such investment, (x) any synthetic lease shall be the
stipulated loss value, termination value or other equivalent amount, (y) any
derivative contract shall be the maximum amount of any termination or loss
payment required to be paid by such Person if such derivative contract were, at
the time of determination, to be terminated by reason of any event of default or
early termination event thereunder, whether or not such event of default or
early termination event has in fact occurred and (z) any equity related purchase
obligation shall be the maximum fixed redemption or purchase price thereof
inclusive of any accrued and unpaid dividends to be comprised in such redemption
or purchase price.
Ineligible Securities. Securities which may not be underwritten or dealt
---------------------
in by member banks of the Federal Reserve System under Section 16 of the Banking
Act of 1993 (12 U.S.C. (S)24, Seventh), as amended.
Interest Payment Date. (i) As to any Base Rate Loan, the last day of the
---------------------
calendar month with respect to interest accrued during such calendar month,
including, without limitation, the calendar month which includes the Drawdown
Date of such Base Rate Loan; (ii) as to any Eurodollar Rate Loan in respect of
which the Interest Period is (A) 3 months or less, the last day of such Interest
Period and (B) more than 3 months, the date that is 3 months from the first day
of such Interest Period and, in addition, the last day of such Interest Period.
Interest Period. With respect to each Revolving Credit Loan, (i)
---------------
initially, the period commencing on the Drawdown Date of such Revolving Credit
Loan and ending on the last day of one of the periods set forth below, as
selected by the Borrower in a Loan Request or as otherwise required by the terms
of this Credit Agreement (A) for any Base Rate Loan, the last day of the
calendar month; (B) for any Eurodollar Rate Loan, 1, 2, 3, or 6 months; and (ii)
thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Revolving Credit Loan and
<PAGE>
-16-
ending on the last day of one of the periods set forth above, as selected by the
Borrower in a Conversion Request; provided that all of the foregoing provisions
--------
relating to Interest Periods are subject to the following:
(a) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Eurodollar Business Day;
(b) if any Interest Period with respect to a Base Rate Loan would end
on a day that is not a Business Day, that Interest Period shall end on the
next succeeding Business Day;
(c) if the Borrower shall fail to give notice as provided in (S)2.7,
the Borrower shall be deemed to have requested a conversion of the affected
Eurodollar Rate Loan to a Base Rate Loan and the continuance of all Base
Rate Loans as Base Rate Loans on the last day of the then current Interest
Period with respect thereto;
(d) any Interest Period relating to any Eurodollar Rate Loan that
begins on the last Eurodollar Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Eurodollar
Business Day of a calendar month; and
(e) any Interest Period that would otherwise extend beyond the
Revolving Credit Loan Maturity Date shall end on the Revolving Credit Loan
Maturity Date.
International Standby Practices. With respect to any standby Letter of
-------------------------------
Credit, International Standby Practices (ISP98) as promulgated by the Institute
of International Banking Law & Practice, Inc., or any successor code of standby
letter of credit practices among banks adopted by the Letter of Credit Agent in
the ordinary course of its business as a standby letter of credit issuer and in
effect at the time of issuance of such Letter of Credit.
In-Transit Inventory. Raw materials owned by the Borrower or any of its
--------------------
Subsidiaries (collectively, "inventory"), which otherwise qualifies as Eligible
Inventory and (i) all title documents relating to which have been consigned
(endorsed) to one of the Agents in a manner reasonably acceptable to the Agents,
(ii) one of the Agents or an Approved Customs Broker is in
<PAGE>
-17-
possession of all documents of title relating to such inventory and (iii) such
inventory is insured in a manner reasonably acceptable to the Agents.
Investments. All expenditures made and all liabilities incurred
-----------
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (i) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (ii) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(iii) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (iv) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (ii) may be
deducted when paid; and (v) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
Letter of Credit. See (S)4.1.1.
----------------
Letter of Credit Agent. Bank of America National Trust and Savings
----------------------
Association.
Letter of Credit Agent's Head Office. The Letter of Credit Agent's head
------------------------------------
office located at 3650 14th Street, Riverside, California 92501, or at such
other location as the Letter of Credit Agent may designate from time to time.
Letter of Credit Application. See (S)4.1.1.
----------------------------
Letter of Credit Fee. See (S)4.6.
--------------------
Letter of Credit Participation. See (S)4.1.4.
------------------------------
Leverage Ratio. With respect to the Borrower and its Subsidiaries as of
--------------
the last day of and for any period, the ratio of (a) Consolidated Funded Debt of
the Borrower and its Subsidiaries for such period to (b) Consolidated EBITDA of
the Borrower and its Subsidiaries for such period.
Loan and Collateral Agent. BankBoston, N.A.
-------------------------
Loan and Collateral Agent's Head Office. The Loan and Collateral
---------------------------------------
<PAGE>
-18-
Agent's head office located at 100 Federal Street, Boston, Massachusetts 02110,
or at such other location as the Loan and Collateral Agent may designate from
time to time.
Loan and Collateral Agent's Special Counsel. Bingham Dana LLP or such
-------------------------------------------
other counsel as may be approved by the Agents.
Loan Documents. This Credit Agreement, the Revolving Credit Notes, the
--------------
Letter of Credit Applications, the Letters of Credit, the Fee Letter, any
documents entered into by the Borrower in connection with Derivative Contracts
with either of the Agents and the Security Documents.
Loan Request. See (S)2.6.
------------
Local Accounts. See (S)7.20.
--------------
Majority Banks. As of any date, the Banks holding at least fifty one
--------------
percent (51%) of the outstanding principal amount of the Revolving Credit Notes
on such date; and if no such principal is outstanding, the Banks whose aggregate
Commitments constitutes at least fifty one percent (51%) of the Total
Commitment.
Maximum Drawing Amount. The maximum aggregate amount that the
----------------------
beneficiaries may at any time draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.
Multiemployer Plan. Any multiemployer plan within the meaning of (S)3(37)
------------------
of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate.
Net Book Value. At the relevant time of reference thereto, the net book
--------------
value of Eligible Inventory determined on a first-in first-out basis and at
lower of cost or market. The "cost" of any Eligible Inventory shall be the
lesser of (a) the calculated cost of purchases, as determined from invoices
received by the Borrower or any of its Subsidiaries, or from the Borrower's or
such Subsidiary's purchase journal or stock ledger (based upon the Borrower's
accounting practices, disclosed to the Loan and Collateral Agent and in effect
on the date hereof or, if hereafter modified, modified in accordance with
generally accepted accounting principles and disclosed to the Loan and
Collateral Agent prior to such modification) and (b) the lowest ticketed or
promoted price at which such Eligible Inventory is offered to the public, after
all mark-downs (whether or not such price is then reflected in the accounting
system of the Borrower or such Subsidiary). "Cost" does not
<PAGE>
-19-
include inventory capitalization costs or, to the extent not yet paid for, other
non-purchase price charges (such as freight) used in the Borrower's or such
Subsidiary's calculation of the cost of goods sold.
Obligations. All indebtedness, obligations and liabilities of any of the
-----------
Borrower and its Subsidiaries to any of the Banks and the Agents, individually
or collectively, existing on the date of this Credit Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Credit Agreement or any of the other Loan Documents or in respect of any of the
Revolving Credit Loans made or Reimbursement Obligations incurred or any of the
Revolving Credit Notes, Letter of Credit Applications, Letters of Credit, or
other instruments at any time evidencing any thereof.
Operating Account. See (S)2.6.2.
-----------------
outstanding. With respect to the Revolving Credit Loans, the aggregate
-----------
unpaid principal thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by (S)4002 of ERISA
----
and any successor entity or entities having similar responsibilities.
Perfection Certificates. The Perfection Certificates as defined in the
-----------------------
Security Agreements.
Permitted IBJ Debt. Indebtedness of the Borrower to IBJ as evidenced by
------------------
the IBJ Loan Documents existing on the date hereof.
Permitted IBJ Liens. Liens on the Borrower's Real Estate, machinery,
-------------------
equipment and other assets pledged to secure the Permitted IBJ Debt.
Permitted Liens. Liens, security interests and other encumbrances
---------------
permitted by (S)9.2.
Permitted Refinancing Indebtedness. Indebtedness of the Borrower for
----------------------------------
borrowed money (i) which in the aggregate is not less than $150,000,000 or
greater than $250,000,000 in principal amount, (ii) which is not secured by any
assets of the Borrower or any of its Subsidiaries, (iii) which is not guaranteed
by any Subsidiary of the Borrower, (iv) on substantially the terms set forth in
the [draft Offering Memorandum dated March , 1999] delivered to the Agents on
the Closing Date or otherwise on terms and conditions which are satisfactory to
the Agents and (v) the net proceeds of which are used, concurrently with the
incurrence of such Indebtedness, to completely repay, and which refinances, the
indebtedness of the Borrower to IBJ and DKB
<PAGE>
-20-
Nederland.
Person. Any individual, corporation, partnership, trust, unincorporated
------
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
RCRA. See (S)7.18(a).
----
Real Estate. All real property at any time owned or leased (as lessee or
-----------
sublessee) by the Borrower or any of its Subsidiaries.
Record. The grid attached to a Revolving Credit Note, or the continuation
------
of such grid, or any other similar record, including computer records,
maintained by any Bank with respect to any Revolving Credit Loan referred to in
such Revolving Credit Note.
Register. See (S)19.3.
--------
Reimbursement Obligation. The Borrower's obligation to reimburse the
------------------------
Letter of Credit Agent and the Banks on account of any drawing under any Letter
of Credit as provided in (S)4.2.
Reserves. As determined by the Loan and Collateral Agent, such amounts as
--------
the Loan and Collateral Agent may from time to time reasonably establish and
revise (a) to reflect events, conditions, contingencies or risks which (i)
adversely affect either (A) any Collateral, the rights of the Loan and
Collateral Agent or any of the Banks in any Collateral or its value or (B) the
security interest and other rights of the Loan and Collateral Agent or any of
the Banks in the Collateral (including the enforceability, perfection and
priority thereof) or (ii) adversely affect in any material respect the assets
(other than any Collateral) or business or financial condition of the Borrower
or any of its Subsidiaries or (b) to reflect the reasonable belief of the Loan
and Collateral Agent that any Borrowing Base Report or other collateral report
or financial information furnished by or on behalf of the Borrower to the Loan
and Collateral Agent or any of the Banks is or may have been incomplete,
inaccurate or misleading in any material respect. Reserves may include, but are
not limited to: rent, whether for personal or real property and whether or not a
lessor's or landlord's waiver, in a form acceptable to the Loan and Collateral
Agent, has been received by the Loan and Collateral Agent from such lessor or
landlord; payables based upon past due normal trade terms; layaways and customer
deposits; taxes and other governmental charges, whether ad valorem, personal or
real property or otherwise and whether or not the tax claims therefor may have
priority over the Loan and Collateral Agent's security interest in any of the
Collateral; and any customs, duty,
<PAGE>
-21-
freight or other out-of-pocket costs or expenses required or advisable to "land"
any Inventory the purchase of which is supported by a Letter of Credit.
Revolving Credit Loan Maturity Date. The earlier to occur of March 10,
-----------------------------------
2004 or the date which is sixty (60) days prior to the maturity of the Permitted
Refinancing Indebtedness.
Revolving Credit Loans. Revolving credit loans made or to be made by the
----------------------
Banks to the Borrower pursuant to (S)2.
Revolving Credit Note Record. A Record with respect to a Revolving Credit
----------------------------
Note.
Revolving Credit Notes. See (S)2.4.
----------------------
SARA. See (S)7.18(a).
----
Section 20 Subsidiary. A Subsidiary of the bank holding company
---------------------
controlling any Bank, which Subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities.
Security Agreement. The Security Agreement, dated or to be dated on or
------------------
prior to the Closing Date, between the Borrower and the Loan and Collateral
Agent and in form and substance satisfactory to the Banks and the Agents.
Security Documents. The Security Agreement and all other instruments and
------------------
documents, including without limitation Uniform Commercial Code financing
statements, required to be executed or delivered pursuant to any Security
Document.
Settlement. The making or receiving of payments, in immediately available
----------
funds, by the Banks, to the extent necessary to cause each Bank's actual share
of the outstanding amount of Revolving Credit Loans (after giving effect to any
Loan Request) to be equal to such Bank's Commitment Percentage of the
outstanding amount of such Revolving Credit Loans (after giving effect to any
Loan Request), in any case where, prior to such event or action, the actual
share is not so equal.
Settlement Amount. See (S)2.10.1.
-----------------
Settlement Date. (a) The Drawdown Date relating to any Loan Request, (b)
---------------
the Friday of each week, or if a Friday is not a Business Day, the Business Day
immediately following such Friday, (c) at the option of the Agents, on any
Business Day following a day on which the account officers of
<PAGE>
-22-
the Agents active upon the Borrower's account become aware of the existence of
an Event of Default, (d) any Business Day on which the amount of Revolving
Credit Loans outstanding from BKB plus BKB's Commitment Percentage of the sum of
----
the Maximum Drawing Amount and any Unpaid Reimbursement Obligations is equal to
or greater than BKB's Commitment Percentage of the Total Commitment, (e) the
Business Day immediately following any Business Day on which the amount of
Revolving Credit Loans outstanding increases or decreases by more than
$5,000,000 as compared to the previous Settlement Date, (f) any day on which any
conversion of a Base Rate Loan to a Eurodollar Rate Loan occurs, or (g) any
Business Day on which (i) the amount of outstanding Revolving Credit Loans
decreases and (ii) the amount of the Loan and Collateral Agent's Revolving
Credit Loans outstanding equals zero Dollars ($0).
Settling Bank. See (S)2.10.1.
-------------
Subsidiary. Any corporation, association, trust, or other business entity
----------
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority (by number of votes) of
the outstanding Voting Stock.
Super-majority Banks. As of any date, the Banks holding at least sixty-six
--------------------
and seven-tenth percent (66.7%) of the outstanding principal amount of the
Revolving Credit Notes on such date; and if no such principal is outstanding,
the Banks whose aggregate Commitments constitutes at least sixty-six and seven-
tenth percent (66.7%) of the Total Commitment.
Total Commitment. The sum of the Commitments of the Banks, as in effect
----------------
from time to time.
Type. As to any Revolving Credit Loan its nature as a Base Rate Loan or a
----
Eurodollar Rate Loan.
Uniform Customs. With respect to any Letter of Credit, the Uniform Customs
---------------
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 or any successor version thereto adopted by the
Letter of Credit Agent in the ordinary course of its business as a letter of
credit issuer and in effect at the time of issuance of such Letter of Credit.
Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which
-------------------------------
the Borrower has not reimbursed the Letter of Credit Agent and the Banks on the
date specified in, and in accordance with, (S)4.2.
<PAGE>
-23-
Voting Stock. Stock or similar interests, of any class or classes (however
------------
designated), the holders of which are at the time entitled, as such holders, to
vote for the election of a majority of the directors (or persons performing
similar functions) of the corporation, association, trust or other business
entity involved, whether or not the right so to vote exists by reason of the
happening of a contingency.
1.2. RULES OF INTERPRETATION.
-----------------------
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification to
such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the State of New York, have the meanings
assigned to them therein, with the term "instrument" being that defined
under Article 9 of the Uniform Commercial Code.
(h) Reference to a particular "(S)" refers to that section of this
Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Credit Agreement as a whole and not to any
particular section or subdivision of this Credit Agreement.
(j) Unless otherwise expressly indicated, in the computation
<PAGE>
-24-
of periods of time from a specified date to a later specified date, the
word "from" means "from and including," the words "to" and "until" each
mean "to but excluding," and the word "through" means "to and including."
(k) This Credit Agreement and the other Loan Documents may use
several different limitations, tests or measurements to regulate the same
or similar matters. All such limitations, tests and measurements are,
however, cumulative and are to be performed in accordance with the terms
thereof.
(l) This Credit Agreement and the other Loan Documents are the result
of negotiation among, and have been reviewed by counsel to, among others,
the Agents and the Borrower and are the product of discussions and
negotiations among all parties. Accordingly, this Credit Agreement and the
other Loan Documents are not intended to be construed against the Agents or
any of the Banks merely on account of any Agent or any Bank's involvement
in the preparation of such documents.
2. THE REVOLVING CREDIT FACILITY.
-----------------------------
2.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth in
------------------
this Credit Agreement, each of the Banks severally agrees to lend to the
Borrower and the Borrower may borrow, repay, and reborrow from time to time from
the Closing Date up to but not including the Revolving Credit Loan Maturity Date
upon notice by the Borrower to the Loan and Collateral Agent given in accordance
with (S)2.6, such sums as are requested by the Borrower up to a maximum
aggregate amount outstanding (after giving effect to all amounts requested) at
any one time equal to such Bank's Commitment minus such Bank's Commitment
-----
Percentage of the sum of the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations, provided that the sum of the outstanding amount of the Revolving
--------
Credit Loans (after giving effect to all amounts requested) plus the Maximum
----
Drawing Amount and all Unpaid Reimbursement Obligations shall not at any time
exceed the lesser of (i) the Total Commitment and (ii) the Borrowing Base. The
Revolving Credit Loans shall be made pro rata in accordance with each Bank's
--- ----
Commitment Percentage. Each request for a Revolving Credit Loan hereunder shall
constitute a representation and warranty by the Borrower that the conditions set
forth in (S)11 and (S)12, in the case of the initial Revolving Credit Loans to
be made on the Closing Date, and (S)12, in the case of all other Revolving
Credit Loans, have been satisfied on the date of such request.
<PAGE>
-25-
2.2. COMMITMENT FEE. The Borrower agrees to pay to the Loan and Collateral
--------------
Agent for the accounts of the Banks in accordance with their respective
Commitment Percentages a commitment fee calculated at the rate equal to the
Applicable Margin then in effect multiplied by the average daily amount during
each calendar quarter or portion thereof from the Closing Date to the Revolving
Credit Loan Maturity Date by which the Total Commitment minus the sum of the
-----
Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceeds the
outstanding amount of Revolving Credit Loans during such calendar quarter;
provided, however, that notwithstanding the foregoing, the commitment fee shall
- -------- -------
be calculated with an Applicable Margin of 0.50% if during any quarter the
average daily Revolving Credit Loans outstanding plus the average Maximum
Drawing Amount and all Unpaid Reimbursement Obligations during such quarter is
less than (i) $50,000,000, if the average Total Commitment during such quarter
is more than $100,000,000, and (ii) $40,000,000, if the average Total Commitment
during such quarter is $100,000,000 or less. The commitment fee shall be payable
quarterly in arrears on the first day of each calendar quarter for the
immediately preceding calendar quarter commencing on the first such date
following the date hereof, with a final payment on the Revolving Credit Maturity
Date or any earlier date on which the Commitments shall terminate.
2.3. REDUCTION OF TOTAL COMMITMENT. The Borrower shall have the right at
------------------------------
any time and from time to time upon five (5) Business Days prior written notice
to the Loan and Collateral Agent to reduce by $1,000,000 or an integral multiple
thereof or terminate entirely the Total Commitment, whereupon the Commitments of
the Banks shall be reduced pro rata in accordance with their respective
--- ----
Commitment Percentages of the amount specified in such notice or, as the case
may be, terminated. Promptly after receiving any notice of the Borrower
delivered pursuant to this (S)2.3, the Loan and Collateral Agent will notify the
Banks of the substance thereof. Upon the effective date of any such reduction or
termination, the Borrower shall pay to the Loan and Collateral Agent for the
respective accounts of the Banks the full amount of any commitment fee then
accrued on the amount of the reduction. No reduction or termination of the
Commitments may be reinstated.
2.4. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans shall be
--------------------------
evidenced by separate promissory notes of the Borrower in substantially the form
of Exhibit B hereto (each a "Revolving Credit Note"), dated as of the Closing
------- - ---------------------
Date and completed with appropriate insertions. One Revolving Credit Note shall
be payable to the order of each Bank in a principal amount equal to such Bank's
Commitment or, if less, the outstanding amount of all
<PAGE>
-26-
Revolving Credit Loans made by such Bank, plus interest accrued thereon, as set
forth below. The Borrower irrevocably authorizes each Bank to make or cause to
be made, at or about the time of the Drawdown Date of any Revolving Credit Loan
or at the time of receipt of any payment of principal on such Bank's Revolving
Credit Note, an appropriate notation on such Bank's Revolving Credit Note Record
reflecting the making of such Revolving Credit Loan or (as the case may be) the
receipt of such payment. The outstanding amount of the Revolving Credit Loans
set forth on such Bank's Revolving Credit Note Record shall be prima facie
----- -----
evidence of the principal amount thereof owing and unpaid to such Bank, but the
failure to record, or any error in so recording, any such amount on such Bank's
Revolving Credit Note Record shall not limit or otherwise affect the obligations
of the Borrower hereunder or under any Revolving Credit Note to make payments of
principal of or interest on any Revolving Credit Note when due.
2.5. INTEREST ON REVOLVING CREDIT LOANS. Except as otherwise provided in
----------------------------------
(S)5.10,
(a) Each Base Rate Loan shall bear interest for the period commencing
with the Drawdown Date thereof and ending on, but excluding, the last day
of the Interest Period with respect thereto at the rate per annum equal to
the Base Rate plus the Applicable Margin.
----
(b) Each Eurodollar Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on, but excluding, the
last day of the Interest Period with respect thereto at the rate per annum
equal to the Eurodollar Rate determined for such Interest Period plus the
----
Applicable Margin.
(c) The Borrower promises to pay interest on each Revolving Credit
Loan in arrears on each Interest Payment Date with respect thereto.
2.6. REQUESTS FOR REVOLVING CREDIT LOANS.
-----------------------------------
2.6.1. GENERAL. The Borrower shall give to the Loan and Collateral
-------
Agent written notice in the form of Exhibit C hereto (or telephonic notice
------- -
confirmed in a writing in the form of Exhibit C hereto) of each Revolving
------- -
Credit Loan requested hereunder (a "Loan Request") no less than (i) two (2)
------------
Business Days prior to the proposed Drawdown Date of any Base Rate Loan and
(ii) three (3) Eurodollar Business Days prior to the proposed Drawdown Date
of any Eurodollar Rate Loan. Each such notice shall specify (A) the
principal amount of the Revolving Credit Loan requested, (B) the proposed
Drawdown Date
<PAGE>
-27-
of such Revolving Credit Loan, (C) the Interest Period for such Revolving
Credit Loan and (D) the Type of such Revolving Credit Loan. Promptly upon
receipt of any such notice, the Loan and Collateral Agent shall notify each
of the Banks thereof. Each Loan Request shall be irrevocable and binding on
the Borrower and shall obligate the Borrower to accept the Revolving Credit
Loan requested from the Banks on the proposed Drawdown Date. Each Loan
Request for a Base Rate Loan shall be in a minimum aggregate amount of
$1,000,000 or an integral multiple of $500,000 in excess thereof. Each Loan
Request for a Eurodollar Loan shall be in a minimum aggregate amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof.
2.6.2. SWING LINE. Notwithstanding the notice and minimum amount
----------
requirements set forth in (S)2.6.1 but otherwise in accordance with the
terms and conditions of this Credit Agreement, the Loan and Collateral
Agent may, in its sole discretion and without conferring with the Banks,
make Revolving Credit Loans to the Borrower (i) by entry of credits to the
Borrower's operating account (the "Operating Account") with the Loan and
-----------------
Collateral Agent to cover checks or other charges which the Borrower has
drawn or made against such account or (ii) in an amount as otherwise
requested by the Borrower. The Borrower hereby requests and authorizes the
Loan and Collateral Agent to make from time to time such Revolving Credit
Loans by means of appropriate entries of such credits sufficient to cover
checks and other charges then presented for payment from the Operating
Account or as otherwise so requested. The Borrower acknowledges and agrees
that the making of such Revolving Credit Loans shall, in each case, be
subject in all respects to the provisions of this Credit Agreement as if
they were Revolving Credit Loans covered by a Loan Request including,
without limitation, the limitations set forth in (S)2.1 and the
requirements that the applicable provisions of (S)11 (in the case of
Revolving Credit Loans made on the Closing Date) and (S)12 be satisfied.
All actions taken by the Loan and Collateral Agent pursuant to the
provisions of this (S)2.6.2 shall be conclusive and binding on the Borrower
and the Banks absent the Loan and Collateral Agent's gross negligence or
willful misconduct. Revolving Credit Loans made pursuant to this (S)2.6.2
shall be Base Rate Loans until converted in accordance with the provisions
of the Credit Agreement and, prior to a Settlement, such interest shall be
for the account of the Loan and Collateral Agent.
2.6.3 Temporary Suspension of Eurodollar Rate
----------------------------------------
<PAGE>
-28-
Options. Notwithstanding (S)2.6.1, no Eurodollar Rate Loans shall be made,
-------
and no Base Rate Loans may be converted to Eurodollar Rate Loans, for a
period (the "initial period") of seven (7) days following the Closing Date
--------------
unless prior to the end of the initial period a satisfactory syndication
has been completed. If, following the end of the initial period, no
satisfactory syndication has been completed, no Interest Period for any
Eurodollar Loan may have duration of more than one month, unless such
Interest Period commences after the earlier to occur of the expiration of
sixty (60) days following the end of the initial period and the completion
of a satisfactory syndication.
2.7. Conversion Options.
------------------
2.7.1. CONVERSION TO DIFFERENT TYPE OF REVOLVING CREDIT LOAN. The
-----------------------------------------------------
Borrower may elect from time to time to convert any outstanding Revolving
Credit Loan to a Revolving Credit Loan of another Type, provided that (i)
--------
with respect to any such conversion of a Revolving Credit Loan to a Base
Rate Loan, the Borrower shall give the Loan and Collateral Agent at least
two (2) Business Days prior written notice of such election; (ii) with
respect to any such conversion of a Base Rate Loan to a Eurodollar Rate
Loan, the Borrower shall give the Loan and Collateral Agent at least three
(3) Eurodollar Business Days prior written notice of such election; (iii)
with respect to any such conversion of a Eurodollar Rate Loan into a
Revolving Credit Loan of another Type, such conversion shall only be made
on the last day of the Interest Period with respect thereto and (iv) no
Revolving Credit Loan may be converted into a Eurodollar Rate Loan when any
Default or Event of Default has occurred and is continuing or if such
conversion is not permitted by (S)2.6.3. On the date on which such
conversion is being made each Bank shall take such action as is necessary
to transfer its Commitment Percentage of such Revolving Credit Loans to its
Domestic Lending Office or its Eurodollar Lending Office, as the case may
be. All or any part of outstanding Revolving Credit Loans of any Type may
be converted into a Revolving Credit Loan of another Type as provided
herein, provided that any partial conversion to a Base Rate Loan shall be
--------
in an aggregate principal amount of $1,000,000 or an integral multiple of
$500,000 in excess thereof and that any partial conversion to a Eurodollar
Loan shall be in an aggregate principal amount of $5,000,000 or an integral
multiple of $1,000,000 in excess thereof. Each Conversion Request relating
to the conversion of a Revolving Credit Loan to a Eurodollar Rate Loan
shall be irrevocable by the Borrower.
<PAGE>
-29-
2.7.2. CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN. Any Revolving
---------------------------------------------
Credit Loan of any Type may be continued as a Revolving Credit Loan of the
same Type upon the expiration of an Interest Period with respect thereto by
compliance by the Borrower with the notice provisions contained in
(S)2.7.1; provided that no Eurodollar Rate Loan may be continued as such
--------
when any Default or Event of Default has occurred and is continuing, but
shall be automatically converted to a Base Rate Loan on the last day of the
first Interest Period relating thereto ending during the continuance of any
Default or Event of Default of which officers of the Loan and Collateral
Agent active upon the Borrower's account have actual knowledge. In the
event that the Borrower fails to provide any such notice with respect to
the continuation of any Eurodollar Rate Loan as such, then such Eurodollar
Rate Loan shall be automatically converted to a Base Rate Loan on the last
day of the first Interest Period relating thereto. The Loan and Collateral
Agent shall notify the Banks promptly when any such automatic conversion
contemplated by this (S)2.7 is scheduled to occur.
2.7.3. EURODOLLAR RATE LOANS. Any conversion to or from Eurodollar
---------------------
Rate Loans shall be in such amounts and be made pursuant to such elections
so that, after giving effect thereto, the aggregate principal amount of all
Eurodollar Rate Loans having the same Interest Period shall not be less
than $5,000,000 or an integral multiple of $1,000,000 in excess thereof. In
addition, no more than eight (8) Eurodollar Rate Loans shall be outstanding
at any one time.
2.8. FUNDS FOR REVOLVING CREDIT LOAN.
-------------------------------
2.8.1. FUNDING PROCEDURES. Not later than 11:00 a.m. (Boston time) on
------------------
the proposed Drawdown Date of any Revolving Credit Loans, each of the Banks
will make available to the Loan and Collateral Agent, at the Loan and
Collateral Agent's Head Office, in immediately available funds, the amount
of such Bank's Commitment Percentage of the amount of the requested
Revolving Credit Loans. Upon receipt from each Bank of such amount, and
upon receipt of the documents required by (S)(S)11 and 12 and the
satisfaction of the other conditions set forth therein, to the extent
applicable, the Loan and Collateral Agent will make available to the
Borrower the aggregate amount of such Revolving Credit Loans made available
to the Loan and Collateral Agent by the Banks. The failure or refusal of
any Bank to make available to the Loan and Collateral Agent at the
aforesaid time and place on any Drawdown Date the amount of its Commitment
<PAGE>
-30-
Percentage of the requested Revolving Credit Loans shall not relieve any
other Bank from its several obligation hereunder to make available to the
Loan and Collateral Agent the amount of such other Bank's Commitment
Percentage of any requested Revolving Credit Loans.
2.8.2. ADVANCES BY THE LOAN AND COLLATERAL AGENT. The Loan and
-----------------------------------------
Collateral Agent may, unless notified to the contrary by any Bank prior to
a Drawdown Date, assume that such Bank has made available to the Loan and
Collateral Agent on such Drawdown Date the amount of such Bank's Commitment
Percentage of the Revolving Credit Loans to be made on such Drawdown Date,
and the Loan and Collateral Agent may (but it shall not be required to), in
reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Bank makes available to the Loan and
Collateral Agent such amount on a date after such Drawdown Date, such Bank
shall pay to the Loan and Collateral Agent on demand an amount equal to the
product of (i) the average computed for the period referred to in clause
(iii) below, of the weighted average interest rate paid by the Loan and
Collateral Agent for federal funds acquired by the Loan and Collateral
Agent during each day included in such period, times (ii) the amount of
-----
such Bank's Commitment Percentage of such Revolving Credit Loans, times
-----
(iii) a fraction, the numerator of which is the number of days that elapse
from and including such Drawdown Date to the date on which the amount of
such Bank's Commitment Percentage of such Revolving Credit Loans shall
become immediately available to the Loan and Collateral Agent, and the
denominator of which is 365. A statement of the Loan and Collateral Agent
submitted to such Bank with respect to any amounts owing under this
paragraph shall be prima facie evidence of the amount due and owing to the
----- -----
Loan and Collateral Agent by such Bank. If the amount of such Bank's
Commitment Percentage of such Revolving Credit Loans is not made available
to the Loan and Collateral Agent by such Bank within three (3) Business
Days following such Drawdown Date, the Loan and Collateral Agent, following
written notice to the Borrower, shall be entitled to recover such amount
from the Borrower within three (3) Business Days of delivery of such
notice, with interest thereon at the rate per annum applicable to the
Revolving Credit Loans made on such Drawdown Date.
2.9. CHANGE IN BORROWING BASE. The Borrowing Base shall be determined
------------------------
monthly (or at such other interval as may be specified pursuant to (S)8.4(f)) by
the Loan and Collateral Agent by reference to the Borrowing
<PAGE>
-31-
Base Report, commercial finance examination by the Loan and Collateral Agent and
collateral audit reports and other information obtained by or provided to the
Loan and Collateral Agent. The Loan and Collateral Agent shall give to the
Borrower and the Letter of Credit Agent written notice of any change in the
Borrowing Base determined by the Loan and Collateral Agent. In the case of a
reduction in the lending formula with respect to Eligible Accounts Receivable or
Eligible Inventory, such notice shall be effective 5 days after its receipt by
the Borrower, and in the case of any change in the general criteria for Eligible
Accounts Receivable or Eligible Inventory, such notice shall be effective upon
its receipt by the Borrower. Prior to the time that such notice becomes
effective the Borrowing Base shall be computed as it would have been computed in
the absence of such notice.
2.10. SETTLEMENTS.
-----------
2.10.1. GENERAL. On each Settlement Date, the Loan and Collateral
-------
Agent shall, not later than 11:00 a.m. (Boston time), give telephonic or
facsimile notice (i) to the Banks and the Borrower of the respective
outstanding amount of Revolving Credit Loans made and/or received by the
Loan and Collateral Agent on behalf of the Banks from the immediately
preceding Settlement Date through the close of business on the prior day
and the amount of any Eurodollar Rate Loans to be made (following the
giving of notice pursuant to (S)2.6.1(ii)) on such date pursuant to a Loan
Request and (ii) to the Banks of the amount (a "Settlement Amount") that
-----------------
each Bank (a "Settling Bank") shall pay to effect a Settlement of any
-------------
Revolving Credit Loan. A statement of the Loan and Collateral Agent
submitted to the Banks and the Borrower or to the Banks with respect to any
amounts owing under this (S)2.10 shall be prima facie evidence of the
----- -----
amount due and owing. Each Settling Bank shall, not later than 3:00 p.m.
(Boston time) on such Settlement Date, effect a wire transfer of
immediately available funds to the Loan and Collateral Agent in the amount
of the Settlement Amount for such Settling Bank. All funds advanced by any
Bank as a Settling Bank pursuant to this (S)2.10 shall for all purposes be
treated as a Revolving Credit Loan made by such Settling Bank to the
Borrower and all funds received by any Bank pursuant to this (S)2.10 shall
for all purposes be treated as repayment of amounts owed with respect to
Revolving Credit Loans made by such Bank. In the event that any bankruptcy,
reorganization, liquidation, receivership or similar cases or proceedings
in which the Borrower is a debtor prevent a Settling Bank from making any
Revolving Credit Loan to effect a Settlement as contemplated hereby, such
Settling Bank will make such dispositions and arrangements with the other
Banks with respect to
<PAGE>
-32-
such Revolving Credit Loans, either by way of purchase of participations,
distribution, pro tanto assignment of claims, subrogation or otherwise as
--- -----
shall result in each Bank's share of the outstanding Revolving Credit Loans
being equal, as nearly as may be, to such Bank's Commitment Percentage of
the outstanding amount of the Revolving Credit Loans.
2.10.2. FAILURE TO MAKE FUNDS AVAILABLE. The Loan and Collateral
-------------------------------
Agent may, unless notified to the contrary by any Settling Bank prior to a
Settlement Date, assume that such Settling Bank has made or will make
available to the Loan and Collateral Agent on such Settlement Date the
amount of such Settling Bank's Settlement Amount, and the Loan and
Collateral Agent may (but it shall not be required to), in reliance upon
such assumption, make available to the Borrower a corresponding amount. If
any Settling Bank makes available to the Loan and Collateral Agent such
amount on a date after such Settlement Date, such Settling Bank shall pay
to the Loan and Collateral Agent on demand an amount equal to the product
of (i) the average computed for the period referred to in clause (iii)
below, of the weighted average interest rate paid by the Loan and
Collateral Agent for federal funds acquired by the Loan and Collateral
Agent during each day included in such period, times (ii) the amount of
such Settlement Amount, times (iii) a fraction, the numerator of which is
the number of days that elapse from and including such Settlement Date to
the date on which the amount of such Settlement Amount shall become
immediately available to the Loan and Collateral Agent, and the denominator
of which is 360. A statement of the Loan and Collateral Agent submitted to
such Settling Bank with respect to any amounts owing under this (S)2.10.2
shall be prima facie evidence of the amount due and owing to the Loan and
----- -----
Collateral Agent by such Settling Bank. If such Settling Bank's Settlement
Amount is not made available to the Loan and Collateral Agent by such
Settling Bank within three (3) Business Days following such Settlement
Date, the Loan and Collateral Agent, following prior written notice to the
Borrower, shall be entitled to recover such amount from the Borrower within
three (3) Business Days of delivery of such notice, with interest thereon
at the rate per annum applicable to the Revolving Credit Loans as of such
Settlement Date.
2.10.3. NO EFFECT ON OTHER BANKS. The failure or refusal of any
------------------------
Settling Bank to make available to the Loan and Collateral Agent at the
aforesaid time and place on any Settlement Date the amount of such Settling
Bank's Settlement Amount shall not (i) relieve any other
<PAGE>
-33-
Settling Bank from its several obligations hereunder to make available to
the Loan and Collateral Agent the amount of such other Settling Bank's
Settlement Amount or (ii) impose upon any Bank, other than the Settling
Bank so failing or refusing, any liability with respect to such failure or
refusal or otherwise increase the Commitment of such other Bank.
3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
---------------------------------------
3.1. MATURITY. The Borrower promises to pay on the Revolving Credit Loan
--------
Maturity Date, and there shall become absolutely due and payable on the
Revolving Credit Loan Maturity Date, all of the Revolving Credit Loans
outstanding on such date, together with any and all accrued and unpaid interest
thereon.
3.2. MANDATORY REPAYMENTS OF REVOLVING CREDIT LOANS. If at any time the
----------------------------------------------
sum of the outstanding amount of the Revolving Credit Loans, the Maximum Drawing
Amount and all Unpaid Reimbursement Obligations exceeds the lesser of (i) the
Total Commitment and (ii) the Borrowing Base, then the Borrower shall
immediately pay the amount of such excess to the Loan and Collateral Agent for
the respective accounts of the Banks for application: first, to any Unpaid
Reimbursement Obligations; second, to the Revolving Credit Loans; and third, to
provide to the Letter of Credit Agent cash collateral for Reimbursement
Obligations as contemplated by (S)4.2(b) and (c). Each payment of any Unpaid
Reimbursement Obligations or prepayment of Revolving Credit Loans shall be
allocated among the Banks, in proportion, as nearly as practicable, to each
Reimbursement Obligation or (as the case may be) the respective unpaid principal
amount of each Bank's Revolving Credit Note, with adjustments to the extent
practicable to equalize any prior payments or repayments not exactly in
proportion.
3.3. OPTIONAL REPAYMENTS OF REVOLVING CREDIT LOANS. Subject to the
---------------------------------------------
provisions of (S)5.9, the Borrower shall have the right, at its election, to
repay the outstanding amount of the Revolving Credit Loans, as a whole or in
part, at any time without penalty or premium. The Borrower shall give the Loan
and Collateral Agent, no later than 10:00 a.m., Boston time, at least three (3)
Business Days prior written notice of any proposed prepayment pursuant to this
(S)3.3 of Base Rate Loans, and three (3) Eurodollar Business Days notice of any
proposed prepayment pursuant to this (S)3.3 of Eurodollar Rate Loans, in each
case specifying the proposed date of prepayment of Revolving Credit Loans and
the principal amount to be prepaid. Each such partial prepayment of the
Revolving Credit Loans shall be in an integral multiple of $1,000,000, shall be
accompanied by the payment of accrued interest on the principal prepaid to the
date of prepayment together with any
<PAGE>
-34-
amount due under (S)5.9 hereof and shall be applied, in the absence of
instruction by the Borrower, first to the principal of Base Rate Loans and then
to the principal of Eurodollar Rate Loans. Each partial prepayment shall be
allocated among the Banks, in proportion, as nearly as practicable, to the
respective unpaid principal amount of each Bank's Revolving Credit Note, with
adjustments to the extent practicable to equalize any prior repayments not
exactly in proportion.
4. LETTERS OF CREDIT.
-----------------
4.1. LETTER OF CREDIT COMMITMENTS.
----------------------------
4.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms
-------------------------------------
and conditions hereof and the execution and delivery by the Borrower of a
letter of credit application on the Letter of Credit Agent's customary form
(a "Letter of Credit Application"), the Letter of Credit Agent on behalf of
----------------------------
the Banks and in reliance upon the agreement of the Banks set forth in
(S)4.1.4 and upon the representations and warranties of the Borrower
contained herein, agrees, in its individual capacity, to issue, extend and
renew for the account of the Borrower one or more standby or documentary
letters of credit (individually, a "Letter of Credit"), in such form as may
----------------
be requested from time to time by the Borrower and agreed to by the Letter
of Credit Agent; provided, however, that, after giving effect to such
-------- -------
request, (a) the sum of the aggregate Maximum Drawing Amount and all Unpaid
Reimbursement Obligations shall not exceed $25,000,000.00 at any one time
and (b) the sum of (i) the Maximum Drawing Amount on all Letters of Credit,
(ii) all Unpaid Reimbursement Obligations, and (iii) the amount of all
Revolving Credit Loans outstanding shall not exceed the lesser of (A) the
Total Commitment and (B) the Borrowing Base. Notwithstanding the foregoing,
the Letter of Credit Agent shall have no obligation to issue any Letter of
Credit to support or secure any Indebtedness of the Borrower or any of its
Subsidiaries to the extent that such Indebtedness was incurred prior to the
proposed issuance date of such Letter of Credit, unless in any such case
the Borrower demonstrates to the satisfaction of the Letter of Credit Agent
that (x) such prior incurred Indebtedness were then fully secured by a
prior perfected and unavoidable security interest in collateral provided by
the Borrower or such Subsidiary to the proposed beneficiary of such Letter
of Credit or (y) such prior incurred Indebtedness were then secured or
supported by a letter of credit issued for the account of the Borrower or
such Subsidiary and the reimbursement obligation with respect to such
letter of credit was fully secured by a prior perfected and unavoidable
security interest in collateral provided to the issuer of
<PAGE>
-35-
such letter of credit by the Borrower or such Subsidiary. Letter of Credit
Agent shall notify the Loan and Collateral Agent of the Maximum Drawing
Amount and other terms of each proposed Letter of Credit at least two (2)
Business Days prior to the issuance thereof. Upon the issuance of any
Letter of Credit, the Letter of Credit Agent shall promptly furnish a copy
thereof to the Loan and Collateral Agent.
4.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit
-----------------------------
Application shall be completed to the satisfaction of the Letter of Credit
Agent. In the event that any provision of any Letter of Credit Application
shall be inconsistent with any provision of this Credit Agreement, then the
provisions of this Credit Agreement shall, to the extent of any such
inconsistency, govern.
4.1.3. TERMS OF LETTERS OF CREDIT. Each LeTter of Credit issued,
--------------------------
extended or renewed hereunder shall, among other things, (i) provide for
the payment of sight drafts for honor thereunder when presented in
accordance with the terms thereof and when accompanied by the documents
described therein, and (ii) have an expiry date no later than the earlier
of (a) one (1) year from the date of issuance and (b) the date which is
thirty (30) days (or, if the Letter of Credit is confirmed by a confirmer
or otherwise provides for one or more nominated persons, forty-five (45)
days) prior to the Revolving Credit Loan Maturity Date. Each Letter of
Credit so issued, extended or renewed shall be subject to either the
Uniform Customs or the International Standby Practices.
4.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank severally
----------------------------------
agrees that it shall be absolutely liable, without regard to the occurrence
of any Default or Event of Default or any other condition precedent
whatsoever, to the extent of such Bank's Commitment Percentage, to
reimburse the Letter of Credit Agent on demand for the amount of each draft
paid by the Letter of Credit Agent under each Letter of Credit to the
extent that such amount is not reimbursed by the Borrower pursuant to
(S)4.2 (such agreement for a Bank being called herein the "Letter of Credit
Participation" of such Bank).
4.1.5. PARTICIPATIONS OF BANKS. Each such payment made by a Bank
-----------------------
shall be treated as the purchase by such Bank of a participating interest
in the Borrower's Reimbursement Obligation under (S)4.2 in an amount equal
to such payment. Each Bank shall share in accordance with its participating
interest in any interest which accrues pursuant to (S)4.2.
4.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to
----------------------------------------
<PAGE>
-36-
induce the Letter of Credit Agent to issue, extend and renew each Letter of
Credit and the Banks to participate therein, the Borrower hereby agrees to
reimburse or pay to the Letter of Credit Agent, for the account of the Letter of
Credit Agent or (as the case may be) the Banks, with respect to each Letter of
Credit issued, extended or renewed by the Letter of Credit Agent hereunder,
(a) except as otherwise expressly provided in (S)4.2(b) and (c), on
each date that any draft presented under such Letter of Credit is honored
by the Letter of Credit Agent, or the Letter of Credit Agent otherwise
makes a payment with respect thereto, (i) the amount paid by the Letter of
Credit Agent under or with respect to such Letter of Credit, and (ii) the
amount of any taxes, fees, charges or other costs and expenses whatsoever
incurred by the Letter of Credit Agent or any Bank in connection with any
payment made by the Letter of Credit Agent or any Bank under, or with
respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total Commitment
to an amount less than the Maximum Drawing Amount, an amount equal to such
difference, which amount shall be held by the Letter of Credit Agent for
the benefit of the Banks and the Letter of Credit Agent as cash collateral
for all Reimbursement Obligations, and
(c) upon the termination of the Total Commitment, or the
acceleration of the Reimbursement Obligations with respect to all Letters
of Credit in accordance with (S)13, an amount equal to the then Maximum
Drawing Amount on all Letters of Credit, which amount shall be held by the
Letter of Credit Agent for the benefit of the Banks and the Letter of
Credit Agent as cash collateral for all Reimbursement Obligations.
Each such payment shall be made to the Letter of Credit Agent at the Letter of
Credit Agent's Head Office in immediately available funds. Interest on any and
all amounts remaining unpaid by the Borrower under this (S)4.2 at any time from
the date such amounts become due and payable (whether as stated in this (S)4.2,
by acceleration or otherwise) until payment in full (whether before or after
judgment) shall be payable to the Letter of Credit Agent on demand at the rate
specified in (S)5.10 for overdue principal on the Revolving Credit Loans.
4.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other
-------------------------
demand for payment shall be made under any Letter of Credit, the Letter of
Credit Agent shall notify the Borrower of the date and amount of the draft
presented or demand for payment and of the date and time when it expects to pay
such draft or honor such demand for payment. If the Borrower
<PAGE>
-37-
fails to reimburse the Letter of Credit Agent as provided in (S)4.2 on or before
the date that such draft is paid or other payment is made by the Letter of
Credit Agent, the Letter of Credit Agent may at any time thereafter notify the
Loan and Collateral Agent, who will promptly notify the Banks of their
respective Commitment Percentage of the amount of any such Unpaid Reimbursement
Obligation. No later than 3:00 p.m. (Boston time) on the Business Day next
following the receipt of such notice, each Bank shall make available to the
Letter of Credit Agent, at the Letter of Credit Agent's Head Office, in
immediately available funds, such Bank's Commitment Percentage of such Unpaid
Reimbursement Obligation, together with an amount equal to the product of (i)
the average, computed for the period referred to in clause (ii) below, of the
weighted average interest rate for federal funds during each day included in
such period, times (iii) the amount equal to such Bank's Commitment Percentage
-----
of such Unpaid Reimbursement Obligation, times (iii) a fraction, the numerator
-----
of which is the number of days that elapse from and including the date the
Letter of Credit Agent paid the draft presented for honor or otherwise made
payment to the date on which such Bank's Commitment Percentage of such Unpaid
Reimbursement obligation shall become immediately available to the Letter of
Credit Agent, and the denominator of which is 360. The responsibility of the
Letter of Credit Agent to the Borrower and the Banks shall be only to determine
that the documents (including each draft) delivered under each Letter of Credit
in connection with such presentment shall be in conformity in all material
respects with such Letter of Credit.
4.4. OBLIGATIONS ABSOLUTE. The Borrower's obligations under this (S)4
--------------------
shall be absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Letter of Credit Agent, any
Bank or any beneficiary of a Letter of Credit. The Borrower further agrees with
the Letter of Credit Agent and the Banks that the Letter of Credit Agent and the
Banks shall not be responsible for, and the Borrower's Reimbursement Obligations
under (S)4.2 shall not be affected by, among other things, the validity or
genuineness of documents or of any endorsements thereon, even if such documents
should in fact prove to be in any or all respects invalid, fraudulent or forged,
or any dispute between or among the Borrower, the beneficiary of any Letter of
Credit or any financing institution or other party to which any Letter of Credit
may be transferred or any claims or defenses whatsoever of the Borrower against
the beneficiary of any Letter of Credit or any such transferee. The Letter of
Credit Agent and the Banks shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however
<PAGE>
-38-
transmitted, in connection with any Letter of Credit. The Borrower agrees that
any action taken or omitted by the Letter of Credit Agent or any Bank under or
in connection with each Letter of Credit and the related drafts and documents,
if done in good faith, shall be binding upon the Borrower and shall not result
in any liability on the part of the Letter of Credit Agent or any Bank to the
Borrower.
4.5. RELIANCE BY ISSUER. To the extent not inconsistent with (S)4.4, the
------------------
Letter of Credit Agent shall be entitled to rely, and shall be fully protected
in relying upon, any Letter of Credit, draft, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Letter of Credit Agent. The Letter
of Credit Agent shall be fully justified in failing or refusing to take any
action under this Credit Agreement unless it shall first have received such
advice or concurrence of the Majority Banks as it reasonably deems appropriate
or it shall first be indemnified to its reasonable satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Letter of Credit Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Credit Agreement in accordance with a request of the Majority Banks,
and such request and any action taken or failure to act pursuant thereto shall
be binding upon the Banks and all future holders of the Revolving Credit Notes
or of a Letter of Credit Participation.
4.6. LETTER OF CREDIT FEE. The Borrower shall, on the date of issuance or
--------------------
any extension or renewal of any Letter of Credit pay a fee (in each case, a
"Letter of Credit Fee") to the Letter of Credit Agent (i) in respect of each
--------------------
standby Letter of Credit an amount equal to (a) Applicable Margin for Eurodollar
Rate Loans then in effect of the face amount of such standby Letter of Credit
which shall be for the accounts of the Banks in accordance with their respective
Commitment Percentages, plus (b) one quarter of one percent (0.25%) per annum of
----
the face amount of such standby Letter of Credit as a fronting fee for the
account of the Letter of Credit Agent, and (ii) in respect of each documentary
Letter of Credit an amount equal to (a) Applicable Margin for Eurodollar Rate
Loans then in effect, minus 0.50% of the face amount of such documentary Letter
-----
of Credit which shall be for the accounts of the Banks in accordance with their
respective Commitment Percentages, plus (b) one quarter of one percent (0.25%)
----
per annum of the face amount of such documentary Letter of Credit as a fronting
fee for the
<PAGE>
-39-
account of the Letter of Credit Agent. In respect of each Letter of Credit, the
Borrower shall also pay to the Letter of Credit Agent for the Letter of Credit
Agent's own account, at such other time or times as such charges are customarily
made by the Letter of Credit Agent, the Letter of Credit Agent's customary
issuance, amendment, negotiation or document examination and other
administrative fees as in effect from time to time.
5. CERTAIN GENERAL PROVISIONS.
--------------------------
5.1. FEES PAYABLE AT CLOSING. The Borrower agrees to pay all fees referred
-----------------------
to in a separate fee letter entered on or prior to the Closing Date among the
Borrower and the Agents which are payable on the Closing Date in accordance with
the terms of such fee letter.
5.2. FUNDS FOR PAYMENTS.
------------------
5.2.1. PAYMENTS TO AGENTS. All payments of principal, interest,
------------------
Reimbursement Obligations, commitment fees, Letter of Credit Fees and any
other amounts due hereunder or under any of the other Loan Documents shall
be made to the Loan and Collateral Agent or the Letter of Credit Agent, as
the case may be, for the respective accounts of the Banks and the Agents,
at the Loan and Collateral Agent's Head Office or the Letter of Credit
Agent's Head Office, as the case may be, or at such other location that
such Agent may from time to time designate, in each case in immediately
available funds.
5.2.2. NO OFFSET, ETC. All payments by the Borrower hereunder and
--------------
under any of the other Loan Documents shall be made without recoupment,
setoff or counterclaim and free and clear of and without deduction for any
taxes, levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision thereof
or taxing or other authority therein unless the Borrower is compelled by
law to make such deduction or withholding. If any such obligation is
imposed upon the Borrower with respect to any amount payable by it
hereunder or under any of the other Loan Documents, the Borrower will pay
to the Loan and Collateral Agent or the Letter of Credit Agent, as the case
may be, for the account of the Banks or (as the case may be) the Agents, on
the date on which such amount is due and payable hereunder or under such
other Loan Document, such additional amount in Dollars as shall be
necessary to enable the Banks or the Agents to receive the same net amount
which the Banks or the Agents would have received on such due date had no
such obligation been imposed upon the Borrower. The
<PAGE>
-40-
Borrower will deliver promptly to the Agents certificates or other valid
vouchers for all taxes or other charges deducted from or paid with respect
to payments made by the Borrower hereunder or under such other Loan
Document.
5.2.3. WITHHOLDING Each Bank that is a party to this Credit
-----------
Agreement and that is not incorporated under the laws of the United States
of America or a state thereof agrees that it will deliver to the Loan and
Collateral Agent, on or prior to the Closing Date, or, in the case of a
Bank which becomes a Bank pursuant to an Assignment and Acceptance, on the
date which such Assignment and Acceptance becomes effective, a copy of
United States Internal Revenue Service form 1001 or 4224 (or other
applicable form prescribed by the United States Internal Revenue Service),
in each case certifying that such Bank is entitled to receive payments
under this Credit Agreement without deduction or withholding of any United
States federal income taxes.
5.3. COMPUTATIONS. All computations of interest on the Revolving Credit
------------
Loans and of commitment fees, Letter of Credit Fees or other fees shall, unless
otherwise expressly provided herein, be based on a 360-day year and paid for the
actual number of days elapsed. Except as otherwise provided in the definition of
the term "Interest Period" with respect to Eurodollar Rate Loans, whenever a
payment hereunder or under any of the other Loan Documents becomes due on a day
that is not a Business Day, the due date for such payment shall be extended to
the next succeeding Business Day, and interest shall accrue during such
extension. The outstanding amount of the Revolving Credit Loans as reflected on
the Revolving Credit Note Records from time to time shall constitute prima facie
evidence of such outstanding amount.
5.4. INABILITY TO DETERMINE EURODOLLAR RATE. In the event, prior to the
--------------------------------------
commencement of any Interest Period relating to any Eurodollar Rate Loan, the
Loan and Collateral Agent shall determine or be notified by the Majority Banks
that adequate and reasonable methods do not exist for ascertaining the
Eurodollar Rate that would otherwise determine the rate of interest to be
applicable to any Eurodollar Rate Loan during any Interest Period, the Loan and
Collateral Agent shall forthwith give notice of such determination (which shall
be conclusive and binding on the Borrower and the Banks) to the Borrower and the
Banks. In such event (i) any Loan Request or Conversion Request with respect to
Eurodollar Rate Loans shall be automatically withdrawn and shall be deemed a
request for Base Rate Loans, (ii) each Eurodollar Rate Loan will automatically,
on the last day of
<PAGE>
-41-
the then current Interest Period relating thereto, become a Base Rate Loan, and
(iii) the obligations of the Banks to make Eurodollar Rate Loans shall be
suspended until the Loan and Collateral Agent or the Majority Banks determine
that the circumstances giving rise to such suspension no longer exist, whereupon
the Loan and Collateral Agent or, as the case may be, the Loan and Collateral
Agent upon the instruction of the Majority Banks, shall so notify the Borrower
and the Banks.
5.5. ILLEGALITY. Notwithstanding any other provisions herein, if any
----------
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Bank to make or maintain
Eurodollar Rate Loans, such Bank shall forthwith give notice of such
circumstances to the Borrower and the other Banks and thereupon (i) the
commitment of such Bank to make Eurodollar Rate Loans or convert Loans of
another Type to Eurodollar Rate Loans shall forthwith be suspended and (ii) such
Bank's Revolving Credit Loans then outstanding as Eurodollar Rate Loans, if any,
shall be converted automatically to Base Rate Loans on the last day of each
Interest Period applicable to such Eurodollar Rate Loans or within such earlier
period as may be required by law. The Borrower hereby agrees promptly to pay the
Loan and Collateral Agent for the account of such Bank, upon demand by such
Bank, any additional amounts necessary to compensate such Bank for any costs
incurred by such Bank in making any conversion in accordance with this (S)5.5,
including any interest or fees payable by such Bank to lenders of funds obtained
by it in order to make or maintain its Eurodollar Rate Loans hereunder.
5.6. ADDITIONAL COSTS, ETC. If any present or future applicable law, which
---------------------
expression, as used herein, includes statutes, rules and regulations thereunder
and interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time hereafter made upon or otherwise issued to any Bank or
Agent by any central bank or other fiscal, monetary or other authority (whether
or not having the force of law), shall:
(a) subject any Bank or Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Credit Agreement, the other Loan Documents, any Letters of Credit, such
Bank's Commitment or the Loans (other than taxes based upon or measured by
the income or profits of such Bank or Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the
<PAGE>
-42-
principal of or the interest on any Revolving Credit Loans or any other
amounts payable to any Bank or Agent under this Credit Agreement or any of
the other Loan Documents, or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Credit Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by, or letters of credit
issued by, or commitments of an office of any Bank, or
(d) impose on any Bank or Agent any other conditions or requirements
with respect to this Credit Agreement, the other Loan Documents, any
Letters of Credit, the Revolving Credit Loans, such Bank's Commitment, or
any class of loans, letters of credit or commitments of which any of the
Revolving Credit Loans or such Bank's Commitment forms a part, and the
result of any of the foregoing is
(i) to increase the cost to any Bank of making, funding,
issuing, renewing, extending or maintaining any of the Revolving
Credit Loans or such Bank's Commitment or any Letter of Credit, or
(ii) to reduce the amount of principal, interest, Reimbursement
Obligation or other amount payable to such Bank or Agent hereunder on
account of such Bank's Commitment, any Letter of Credit or any of the
Revolving Credit Loans, or
(iii) to require such Bank or Agent to make any payment or to
forego any interest or Reimbursement Obligation or other sum payable
hereunder, the amount of which payment or foregone interest or
Reimbursement Obligation or other sum is calculated by reference to
the gross amount of any sum receivable or deemed received by such Bank
or Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, following delivery to the
Borrower of a certificate in accordance with (S)5.8 hereof, pay to such Bank or
such Agent such additional amounts as will be sufficient to compensate such Bank
or Agent for such additional cost, reduction, payment or foregone interest or
Reimbursement Obligation or other sum to the extent accrued
<PAGE>
-43-
after the delivery of such notice or during a period of not more than ninety
(90) days prior to the delivery of such notice.
5.7. CAPITAL ADEQUACY. If after the date hereof any Bank or Agent
----------------
determines that (i) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies or any
change in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (ii) compliance by such Bank or
Agent or any corporation controlling such Bank or Agent with any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) of any such entity regarding capital adequacy, has the
effect of reducing the return on such Bank's or Agent's commitment with respect
to any Revolving Credit Loans to a level below that which such Bank or Agent
could have achieved but for such adoption, change or compliance (taking into
consideration such Bank's or Agent's then existing policies with respect to
capital adequacy and assuming full utilization of such entity's capital) by any
amount deemed by such Bank or (as the case may be) Agent to be material, then
such Bank or such Agent may notify the Borrower of such fact. To the extent that
the amount of such reduction in the return on capital is not reflected in the
Base Rate, the Borrower agrees to pay such Bank or (as the case may be) such
Agent for the amount of such reduction in the return on capital with respect to
a period after the delivery of such certificate specified in (S)5.8 or up to
ninety (90) days prior to the deliver of such certificate. Each Bank shall
allocate such cost increases among its customers in good faith and on an
equitable basis.
5.8. CERTIFICATE. A certificate setting forth any additional amounts
-----------
payable pursuant to (S)(S)5.6 or 5.7 and a reasonably detailed explanation of
such amounts which are due, submitted by any Bank or Agent to the Borrower,
shall be conclusive, absent manifest error, that such amounts are due and owing.
5.9. INDEMNITY. The Borrower agrees to indemnify each Bank and to hold
---------
each Bank harmless from and against any loss, cost or expense (including loss of
anticipated profits) that such Bank may sustain or incur as a consequence of (i)
default by the Borrower in payment of the principal amount of or any interest on
any Eurodollar Rate Loans as and when due and payable, including any such loss
or expense arising from interest or fees payable by such Bank to lenders of
funds obtained by it in order to maintain its Eurodollar Rate Loans, (ii)
default by the Borrower in making a borrowing or conversion after the Borrower
has given (or is deemed to have given) a Loan Request or a Conversion Request
relating thereto in accordance with (S)2.6 or (S)2.7 or (iii) the making of any
payment of a Eurodollar Rate Loan or
<PAGE>
-44-
the making of any conversion of any such Loan to a Base Rate Loan on a day that
is not the last day of the applicable Interest Period with respect thereto,
including interest or fees payable by such Bank to lenders of funds obtained by
it in order to maintain any such Loans.
5.10. INTEREST AFTER DEFAULT. During the continuance of a Default or an
----------------------
Event of Default, the principal and (to the extent permitted by applicable law)
any overdue interest, of the Revolving Credit Loans and all other overdue
amounts payable hereunder or under any of the other Loan Documents shall bear
interest at a rate per annum equal to (i) in the case of principal of the
Revolving Credit Loans, two percent (2%) above the rate of interest otherwise
applicable to such Revolving Credit Loans pursuant to (S)2.5 until such Default
or Event of Default has been cured or remedied or such Default or Event of
Default has been waived by the Majority Banks pursuant to (S)26, and (ii) in the
case of overdue interest or other amounts, the rate per annum equal to two
percent (2%) above the Base Rate compounded monthly and payable on demand until
such amount shall be paid in full (after as well as before judgment).
5.11. REPLACEMENT OF BANK.
-------------------
(a) In the event that any Bank makes a demand for payment under
(S)5.6 or (S)5.7, the Borrower may within one hundred twenty (120) days of
such demand, if no Event of Default or Default then exists, (i) reduce the
Total Commitment, in the full amount of such Bank's Commitment and repay
such Bank in full or (ii) replace such Bank with an Eligible Assignee in
accordance with (S)19.1 (including execution of an appropriate Assignment
and Acceptance Agreement). If the Borrower accomplishes the replacement or
repayment of such Bank within 120 days following the demand, the Borrower
shall only owe any such Banks amounts under (S)5.5, (S)5.6 or (S)5.7, as
applicable, hereof through the date of replacement or repayment. If the
Borrower does not accomplish either replacement or repayment of such Bank
within such 120 days, the Borrower shall owe such Bank in accordance with
the terms of any written agreement reached between Bank and the Borrower,
and, if no such agreement has been reach, the Borrower shall owe such Bank
in accordance with the terms and provisions of (S)5.5, (S)5.6 or (S)5.7, as
applicable. If the Total Commitment is reduced by the Borrower pursuant to
this (S)5.11(a), the Borrower and the Banks agree that the Commitment
Percentages of each Bank will be automatically ratably adjusted to reflect
such reduction of the Total Commitment.
(b) If (i) there exists no Default or Event of Default on any such
<PAGE>
-45-
date and no Default or Event of Default shall be caused by the action
permitted below and (ii) any Bank refuses to consent to any amendment,
waiver or consent to any provision hereof or in any Loan Document in
accordance with the terms of (S)26 (other than an amendment to increase the
Commitment of such Bank), but to which each other Bank has previously
agreed, then, the Borrower may, with the prior written consent of the Loan
and Collateral Agent, within 90 days after the date of such consent,
amendment or waiver, replace such Bank in whole with another Eligible
Assignee, pursuant to an Assignment and Acceptance Agreement and otherwise
in accordance with the terms of (S)19.
5.12. LEGAL IMPEDIMENT. No Bank shall be obligated to make any Revolving
----------------
Credit Loan, and the Letter of Credit Agent shall not be obligated to issue,
extend or renew any Letter of Credit, if any change has occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of such Bank would make it illegal for such Bank to make such Loan or to
participate in the issuance, extension or renewal of such Letter of Credit or in
the reasonable opinion of the Letter of Credit Agent would make it illegal for
the Letter of Credit Agent to issue, extend or renew such Letter of Credit.
6. COLLATERAL SECURITY.
-------------------
The Obligations shall be secured by a perfected first priority security
interest (subject only to Permitted Liens entitled to priority under applicable
law) in all of the Borrower's and its Subsidiaries (other than CSIFSC) assets,
whether now owned or hereafter acquired, pursuant to the terms of the Security
Documents to which the Borrower is a party, other than (a) any now owned or
after acquired (i) Real Estate, (ii) equipment in any of its forms (including
(A) all furniture, furnishings, trade fixtures, machinery and appliances; (B)
all production, manufacturing, distribution, selling, data-processing, computer
and office equipment; (C) all tools, tooling, molds and dies; (D) all sales
literature, promotional literature, processes, practices, techniques,
procedures, trade secrets, know-how and other information data, including
designs, drawings, compilations of data, specifications, assembly procedures,
software and firmware, in each case, in the form of equipment (all the items
described in this clause (D) collectively, the "Proprietary Works") and (E) all
-----------------
physical representations of or media containing Proprietary Works or other
information, including notebooks, drawings, diagrams, plans, manuals, computer
peripherals, hardware, firmware, software, data-storage tapes, disks, diskettes
and other computerized information, but only to the extent that such
representations or media relate to equipment), and all accessions and additions
thereto, parts and
<PAGE>
-46-
appurtenances thereof, substitutions therefor and replacements thereof, (b) any
proceeds of any or all of the items referred to in clause (a) above (including
proceeds that constitute property of any type described in clause (a) above),
including (i) all payments under insurance, or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the property described in clause (a) above and (ii) cash proceeds thereof
and (c) the interest of the Borrower in the capital stock of CST.
7. REPRESENTATIONS AND WARRANTIES.
------------------------------
The Borrower represents and warrants to the Banks and the Agents as
follows:
7.1. CORPORATE AUTHORITY.
-------------------
7.1.1. INCORPORATION; GOOD STANDING. Each of the Borrower and its
----------------------------
Subsidiaries (i) is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation, (ii) has all
requisite corporate power to own its property and conduct its business as
now conducted and as presently contemplated, and (iii) is in good standing
as a foreign corporation and is duly authorized to do business in each
jurisdiction where such qualification is necessary except where a failure
to be so qualified would not have a materially adverse effect on the
business, assets or financial condition of the Borrower or such Subsidiary.
7.1.2. AUTHORIZATION. The execution, delivery and performance of
-------------
this Credit Agreement and the other Loan Documents to which the Borrower or
any of its Subsidiaries is or is to become a party and the transactions
contemplated hereby and thereby (i) are within the corporate authority of
such Person, (ii) have been duly authorized by all necessary corporate
proceedings, (iii) do not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to which
the Borrower or any of its Subsidiaries is subject or any judgment, order,
writ, injunction, license or permit applicable to the Borrower or any of
its Subsidiaries, (iv) do not conflict with any provision of the corporate
charter or bylaws of the Borrower or any of its Subsidiaries and (v) do not
materially conflict with any provision of any agreement or other instrument
binding upon the Borrower or any of its Subsidiaries.
7.1.3. ENFORCEABILITY. The execution and delivery of this Credit
--------------
Agreement and the other Loan Documents to which the Borrower or
<PAGE>
-47-
any of its Subsidiaries is or is to become a party will result in valid and
legally binding obligations of such Person enforceable against it in
accordance with the respective terms and provisions hereof and thereof,
except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally
the enforcement of creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor
may be brought.
7.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance by
----------------------
the Borrower and any of its Subsidiaries of this Credit Agreement and the other
Loan Documents to which the Borrower or any of its Subsidiaries is or is to
become a party and the transactions contemplated hereby and thereby do not
require the approval or consent of, or filing with, any governmental agency or
authority other than those already obtained and the filing of Uniform Commercial
Code financing statements.
7.3. TITLE TO PROPERTIES; LEASES. Except as indicated on Schedule 7.3
--------------------------- ------------
hereto, the Borrower and its Subsidiaries own all of the assets reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries as at the
Balance Sheet Date or acquired since that date (except property and assets sold
or otherwise disposed of in the ordinary course of business since that date),
subject to no rights of others, including any mortgages, leases, conditional
sales agreements, title retention agreements, liens or other encumbrances except
Permitted Liens.
7.4. FINANCIAL STATEMENTS AND PROJECTIONS.
------------------------------------
7.4.1. FISCAL YEAR. The Borrower and each of its Subsidiaries has a
-----------
fiscal year which is the twelve months ending on December 31 of each
calendar year.
7.4.2. FINANCIAL STATEMENTS. There has been furnished to each of
--------------------
the Banks a consolidated balance sheet of the Borrower and its Subsidiaries
as at the Balance Sheet Date, and a consolidated statement of income of the
Borrower and its Subsidiaries for the fiscal year then ended, certified by
KPMG Peat Marwick LLP. Such balance sheet and statement of income have been
prepared in accordance with generally accepted accounting principles and
fairly present the financial condition of the Borrower as at the close of
business on the date thereof and the results of operations for the fiscal
year then ended. There are no contingent liabilities of the Borrower or any
of its Subsidiaries as of such date involving material amounts, known to
the
<PAGE>
-48-
officers of the Borrower, which were not disclosed in such balance sheet
and the notes related thereto.
7.4.3. PROJECTIONS. The projections of the annual operating budgets
-----------
of the Borrower and its Subsidiaries on a consolidated basis, balance
sheets and cash flow statements for the 1999 to 2003 fiscal years, copies
of which have been delivered to each Bank, disclose all assumptions made
with respect to general economic, financial and market conditions used in
formulating such projections. To the knowledge of the Borrower or any of
its Subsidiaries, no facts exist that (individually or in the aggregate)
would result in any material change in any of such projections. The
projections are based upon reasonable estimates and assumptions, have been
prepared on the basis of the assumptions stated therein and reflect the
reasonable estimates of the Borrower and its Subsidiaries of the results of
operations and other information projected therein.
7.5. NO MATERIAL CHANGES, ETC. Except as set forth in Schedule 7.5
------------------------ ------------
hereto, since the Balance Sheet Date, (i) there has occurred no materially
adverse change in the financial condition or business of the Borrower and its
Subsidiaries as shown on or reflected in the consolidated balance sheet of the
Borrower and its Subsidiaries as at the Balance Sheet Date, or the consolidated
statement of income for the fiscal year then ended, other than changes in the
ordinary course of business that have not had any materially adverse effect
either individually or in the aggregate on the business or financial condition
of the Borrower or any of its Subsidiaries and (ii) the Borrower has not made
any Distribution.
7.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each of the Borrower and its
------------------------------------
Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate
for the conduct of its business substantially as now conducted without known
conflict with any rights of others.
7.7. LITIGATION. Except as set forth in Schedule 7.7 hereto, there are no
---------- ------------
actions, suits, proceedings or investigations of any kind pending or, to the
Borrower's knowledge, threatened against the Borrower or any of its Subsidiaries
before any court, tribunal or administrative agency or board as to which there
is a reasonable possibility of adverse determination and that, if adversely
determined, could reasonably be expected, either in any case or in the
aggregate, to materially adversely affect the properties, assets, financial
condition or business of the Borrower and its Subsidiaries or materially impair
the right of the Borrower and its Subsidiaries, considered as a whole, to carry
on business substantially as now conducted by them, or result in any
<PAGE>
-49-
substantial liability not adequately covered by insurance, or for which adequate
reserves are not maintained on the consolidated balance sheet of the Borrower
and its Subsidiaries, or which question the validity of this Credit Agreement or
any of the other Loan Documents, or any action taken or to be taken pursuant
hereto or thereto.
7.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Borrower nor any
------------------------------------
of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or
could reasonably be expected in the future to have a materially adverse effect
on the business, assets or financial condition of the Borrower or any of its
Subsidiaries. Neither the Borrower nor any of its Subsidiaries is a party to any
contract or agreement that has or is expected, in the judgment of the Borrower's
officers, to have any materially adverse effect on the business of the Borrower
or any of its Subsidiaries.
7.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the Borrower
--------------------------------------------
nor any of its Subsidiaries is in violation of any provision of its charter
documents, bylaws, or any agreement or instrument to which it may be subject or
by which it or any of its material properties may be bound or any decree, order,
judgment, statute, license, rule or regulation, in any of the foregoing cases in
a manner that could reasonably be expected to result in the imposition of
substantial penalties or materially and adversely affect the financial
condition, properties or business of the Borrower or any of its Subsidiaries.
7.10. TAX STATUS. The Borrower and its Subsidiaries (i) have made or filed
----------
all federal and material state income and all other material tax returns,
reports and declarations required by any jurisdiction to which any of them is
subject, (ii) have paid all taxes and other governmental assessments and charges
shown or determined to be due on such returns, reports and declarations, except
those being contested in good faith and by appropriate proceedings and (iii)
have set aside on their books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Borrower know of no basis for any such claim. The Borrowing Base Report most
recently delivered to the Loan and Collateral Agent sets forth the amount of
reserves established by the Borrower and each of its Subsidiaries to cover the
Borrower's or such Subsidiary's sales or use tax obligations in each
jurisdiction where the Borrower or such Subsidiary is required to pay such
taxes. Such reserves are adequate for the payment of all of such obligations.
<PAGE>
-50-
7.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred
and is continuing.
7.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the Borrower
-------------------------------------------
nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of
a "holding company", or an affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is it an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.
7.13. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to
------------------------------------
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any assets or property of the Borrower or any of its Subsidiaries or any
rights relating thereto.
7.14. PERFECTION OF SECURITY INTEREST. All filings, assignments, pledges
-------------------------------
and deposits of documents or instruments have been made and all other actions
have been taken that are necessary or advisable in the reasonable opinion of the
Borrower's counsel, under applicable law, to establish and perfect the Loan and
Collateral Agent's security interest in the Collateral. The Collateral and the
Loan and Collateral Agent's rights with respect to the Collateral are not
subject to any setoff, claims, withholdings or other defenses. The Borrower is
the owner of the Collateral free from any lien, security interest, encumbrance
and any other claim or demand, except for Permitted Liens.
7.15. CERTAIN TRANSACTIONS. None of the officers, directors, or employees
--------------------
of the Borrower or any of its Subsidiaries is presently a party to any
transaction with the Borrower or any of its Subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Borrower, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner.
7.16. EMPLOYEE BENEFIT PLANS.
----------------------
7.16.1. IN GENERAL. Each Employee Benefit Plan and each
----------
<PAGE>
-51-
Guaranteed Pension Plan has been maintained and operated in compliance in
all material respects with the provisions of ERISA and, to the extent
applicable, the Code. The Borrower has heretofore delivered to the Loan and
Collateral Agent the most recently completed annual report, Form 5500, with
all required attachments, and actuarial statement required to be submitted
under (S)103(d) of ERISA, with respect to each Guaranteed Pension Plan.
7.16.2. TERMINABILITY OF WELFARE PLANS. No Employee Benefit Plan,
------------------------------
which is an employee welfare benefit plan within the meaning of (S)3(1) or
(S)3(2)(B) of ERISA, provides benefit coverage subsequent to termination of
employment, except as required by Title I, Part 6 of ERISA or the
applicable state insurance laws. The Borrower may terminate each such Plan
at any time (or at any time subsequent to the expiration of any applicable
bargaining agreement) in the discretion of the Borrower without liability
to any Person other than for claims arising prior to termination.
7.16.3. GUARANTEED PENSION PLANS. Each contribution required to be
------------------------
made to a Guaranteed Pension Plan, whether required to be made to avoid the
incurrence of an accumulated funding deficiency, the notice or lien
provisions of (S)302(f) of ERISA, or otherwise, has been timely made. No
waiver of an accumulated funding deficiency or extension of amortization
periods has been received with respect to any Guaranteed Pension Plan, and
neither the Borrower nor any ERISA Affiliate is obligated to or has posted
security in connection with an amendment to a Guaranteed Pension Plan
pursuant to (S)307 of ERISA or (S)401(a)(29) of the Code. No liability to
the PBGC (other than required insurance premiums, all of which have been
paid) has been incurred by the Borrower or any ERISA Affiliate with respect
to any Guaranteed Pension Plan and there has not been any ERISA Reportable
Event (other than an ERISA Reportable Event as to which the requirement of
30 days notice has been waived), or any other event or condition which
presents a material risk of termination of any Guaranteed Pension Plan by
the PBGC. Based on the latest valuation of each Guaranteed Pension Plan
(which in each case occurred within twelve months of the date of this
representation), and on the actuarial methods and assumptions employed for
that valuation, the aggregate benefit liabilities of all such Guaranteed
Pension Plans within the meaning of (S)4001 of ERISA did not exceed the
aggregate value of the assets of all such Guaranteed Pension Plans,
disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities by
more than
<PAGE>
-52-
$1,000,000.
7.16.4. MULTIEMPLOYER PLANS. Neither the Borrower nor any ERISA
-------------------
Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under (S)4201 of ERISA or as a
result of a sale of assets described in (S)4204 of ERISA. Neither the
Borrower nor any ERISA Affiliate has been notified that any Multiemployer
Plan is in reorganization or insolvent under and within the meaning of
(S)4241 or (S)4245 of ERISA or is at risk of entering reorganization or
becoming insolvent, or that any Multiemployer Plan intends to terminate or
has been terminated under (S)4041A of ERISA.
7.17. USE OF PROCEEDS.
---------------
7.17.1. GENERAL. The proceeds of the Revolving Credit Loans shall
-------
be used solely to refinance certain indebtedness of the Borrower to DKB and
for working capital and general corporate purposes. The Borrower will
obtain Letters of Credit solely for working capital purposes and as
security for capital expenditures; provided, however, the Borrower shall
not obtain Letters of Credit to support workers compensation obligations.
7.17.2. REGULATIONS U AND X. No portion of any Revolving Credit
-------------------
Loan is to be used, and no portion of any Letter of Credit is to be
obtained, for the purpose of purchasing or carrying any "margin security"
or "margin stock" as such terms are used in Regulations U and X of the
Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and
224.
7.17.3. INELIGIBLE SECURITIES. No portion of the proceeds of any
---------------------
Revolving Credit Loans is to be used, and no portion of any Letter of
Credit is to be obtained, for the purpose of (a) knowingly purchasing, or
providing credit support for the purchase of, Ineligible Securities from a
Section 20 Subsidiary during any period in which such Section 20 Subsidiary
makes a market in such Ineligible Securities, (b) knowingly purchasing, or
providing credit support for the purchase of, during the underwriting or
placement period, any Ineligible Securities being underwritten or privately
placed by a Section 20 Subsidiary, or (c) making, or providing credit
support for the making of, payments of principal or interest on Ineligible
Securities underwritten or privately placed by a Section 20 Subsidiary and
issued by or for the benefit of the Borrower or any Subsidiary or other
Affiliate of the Borrower.
<PAGE>
-53-
7.18. ENVIRONMENTAL COMPLIANCE. The Borrower has taken all steps required
------------------------
by applicable law to investigate the past and present condition and usage of the
Real Estate and the operations conducted thereon and, based upon such
investigation, has determined that:
(a) except as set forth on Schedule 7.18, none of the Borrower, its
-------- ----
Subsidiaries or any operator of the Real Estate or any operations thereon
is in violation, or alleged violation, of any judgment, decree, order, law,
license, rule or regulation pertaining to environmental matters, including
without limitation, those arising under the Resource Conservation and
Recovery Act ("RCRA"), the Comprehensive Environmental Response,
----
Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund
------
Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean
----
Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or
any state or local statute, regulation, ordinance, order or decree relating
to health, safety or the environment (hereinafter "Environmental Laws"),
------------------
which violation would have a material adverse effect on the environment or
the business, assets or financial condition of the Borrower or any of its
Subsidiaries;
(b) except as set forth on Schedule 7.18, neither the Borrower nor
-------- ----
any of its Subsidiaries has received notice from any third party including,
without limitation, any federal, state or local governmental authority, (i)
that any one of them has been identified by the United States Environmental
Protection Agency ("EPA") as a potentially responsible party under CERCLA
---
with respect to a site listed on the National Priorities List, 40 C.F.R.
Part 300 Appendix B; (ii) that any hazardous waste, as defined by 42 U.S.C.
(S)6903(5), any hazardous substances as defined by 42 U.S.C. (S)9601(14),
any pollutant or contaminant as defined by 42 U.S.C. (S)9601(33) and any
toxic substances, oil or hazardous materials or other chemicals or
substances regulated by any Environmental Laws ("Hazardous Substances")
--------------------
which any one of them has generated, transported or disposed of has been
found at any site at which a federal, state or local agency or other third
party has conducted or has ordered that any Borrower or any of its
Subsidiaries conduct a remedial investigation, removal or other response
action pursuant to any Environmental Law; or (iii) that it is or shall be a
named party to any claim, action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or otherwise) arising
out of any third party's incurrence of costs, expenses, losses or damages
of any kind whatsoever in connection with the release of Hazardous
Substances;
<PAGE>
-54-
(c) except as set forth on Schedule 7.18 attached hereto, to the best
-------- ----
of the Borrower's knowledge: (i) no portion of the Real Estate has been
used for the handling, processing, storage or disposal of Hazardous
Substances except in accordance with applicable Environmental Laws, and no
underground tank or other underground storage receptacle for Hazardous
Substances is located on any portion of the Real Estate, which would have a
material adverse effect on the value of the Real Estate or the business of
the Borrower or any of its Subsidiaries; (ii) in the course of any
activities conducted by the Borrower, its Subsidiaries or operators of its
properties, no Hazardous Substances have been generated or are being used
on the Real Estate except in accordance with applicable Environmental Laws
which would have a material adverse effect on the value of the Real Estate
or the business of the Borrower or any of its Subsidiaries; (iii) there
have been no releases (i.e. any past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, disposing or dumping) or threatened releases of Hazardous
Substances on, upon, into or from the properties of the Borrower or its
Subsidiaries, which releases would have a material adverse effect on the
value of any of the Real Estate or adjacent properties or the environment;
(iv) there have been no releases on, upon, from or into any real property
in the vicinity of any of the Real Estate which, through soil or
groundwater contamination, may have come to be located on, and which would
have a material adverse effect on the value of, the Real Estate; and (v) in
addition, any Hazardous Substances that have been generated on any of the
Real Estate have been transported offsite only by carriers having an
identification number issued by the EPA, treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required
under applicable Environmental Laws, which transporters and facilities have
been and are operating in compliance with such permits and applicable
Environmental Laws, and any violation of the foregoing would not have a
material adverse effect on the value of any of the Real Estate or the
business of the Borrower or any of its Subsidiaries; and
(d) none of the Borrower and its Subsidiaries or any of the Real
Estate is subject to any applicable environmental law requiring the
performance of Hazardous Substances site assessments, or the removal or
remediation of Hazardous Substances, or the giving of notice to any
governmental agency or the recording or delivery to other Persons of an
environmental disclosure document or statement by virtue of the
transactions set forth herein and contemplated hereby.
<PAGE>
-55-
7.19. SUBSIDIARIES, ETC. Schedule 7.19 sets forth the only Subsidiaries
----------------- -------- ----
of the Borrower. Except as set forth on Schedule 7.19 hereto, neither the
-------- ----
Borrower nor any Subsidiary of the Borrower is engaged in any joint venture or
partnership with any other Person.
7.20. BANK ACCOUNTS. Schedule 7.20 sets forth the account numbers and
------------- -------- ----
location of all bank accounts of the Borrower or any of its Subsidiaries (the
"Local Accounts").
7.21. Year 2000 Problem. The Borrower and its Subsidiaries have reviewed
-----------------
the areas within their businesses and operations which could be adversely
affected by, and have developed or are developing a program to address on a
timely basis, the "Year 2000 Problem" (i.e. the risk that computer applications
used by the Borrower or any of its Subsidiaries may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior to and
any date after December 31, 1999). Based upon such review, the Borrower
reasonably believes that the "Year 2000 Problem" will not have any materially
adverse effect on the business or financial condition of the Borrower or any of
its Subsidiaries.
7.22. DISCLOSURE. None of this Credit Agreement or any of the other Loan
----------
Documents contains any untrue statement of a material fact or omits to state a
material fact (known to the Borrower or any of its Subsidiaries in the case of
any document or information not furnished by it or any of its Subsidiaries)
necessary in order to make the statements herein or therein not misleading.
There is no fact known to the Borrower or any of its Subsidiaries which
materially adversely affects, or which is reasonably likely in the future to
materially adversely affect, the business, assets, financial condition or
prospects of the Borrower or any of its Subsidiaries, exclusive of effects
resulting from changes in general economic conditions, legal standards or
regulatory conditions.
8. AFFIRMATIVE COVENANTS OF THE BORROWER.
-------------------------------------
The Borrower covenants and agrees that, so long as any Revolving Credit
Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding
or any Bank has any obligation to make any Revolving Credit Loans or the Letter
of Credit Agent has any obligation to issue, extend or renew any Letters of
Credit:
8.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually pay or cause
----------------
to be paid the principal and interest on the Revolving Credit Loans, all
Reimbursement Obligations, the Letter of Credit Fees, the commitment fees, the
Loan and Collateral Agent's fee, Letter of Credit Agent's fee and all
<PAGE>
-56-
other amounts provided for in this Credit Agreement and the other Loan Documents
to which the Borrower or any of its Subsidiaries is a party, all in accordance
with the terms of this Credit Agreement and such other Loan Documents.
8.2. MAINTENANCE OF OFFICE. The Borrower will maintain its chief
---------------------
executive office in 14000 San Bernardino Ave., Fontana, CA 92335, or at such
other place in the United States of America as the Borrower shall designate upon
written notice to the Loan and Collateral Agent, where notices, presentations
and demands to or upon the Borrower in respect of the Loan Documents to which
the Borrower is a party may be given or made.
8.3. RECORDS AND ACCOUNTS. The Borrower will (i) keep, and cause each of
--------------------
its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will be made in accordance with generally
accepted accounting principles, (ii) maintain adequate accounts and reserves for
all taxes (including income taxes), depreciation, depletion, obsolescence and
amortization of its properties and the properties of its Subsidiaries,
contingencies, and other reserves, and (iii) at all times engage KPMG Peat
Marwick LLP or another "big five" certified public accountants (including any
successors thereto) or other independent certified public accountants
satisfactory to the Agents, as the independent certified public accountants of
the Borrower and its Subsidiaries and will not permit more than thirty (30) days
to elapse between the cessation of such firm's (or any successor firm's)
engagement as the independent certified public accountants of the Borrower and
its Subsidiaries and the appointment in such capacity of a successor firm.
8.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Borrower will
--------------------------------------------------
deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than ninety
(90) days after the end of each fiscal year of the Borrower, the
consolidated balance sheet of the Borrower and its Subsidiaries and the
consolidating balance sheet of the Borrower and its Subsidiaries, each as
at the end of such year, and the related consolidated statement of income
and consolidated statement of cash flow and consolidating statement of
income and consolidating statement of cash flow for such year, each setting
forth in comparative form the figures for the previous fiscal year and all
such consolidated and consolidating statements to be in reasonable detail,
prepared in accordance with generally accepted accounting principles, and
certified without qualification by KPMG Peat Marwick LLP or by another "big
five" certified public accountants (including any successors thereto) or by
<PAGE>
-57-
other independent certified public accountants satisfactory to the Agents,
together with a written statement from such accountants to the effect that
they have read a copy of this Credit Agreement, and that, in making the
examination necessary to said certification, they have obtained no
knowledge of any Default or Event of Default, or, if such accountants shall
have obtained knowledge of any then existing Default or Event of Default
they shall disclose in such statement any such Default or Event of Default;
provided that such accountants shall not be liable to the Banks for failure
--------
to obtain knowledge of any Default or Event of Default;
(b) as soon as practicable, but in any event not later than thirty
(30) days after the end of each of the fiscal quarters of the Borrower,
copies of the unaudited consolidated balance sheet of the Borrower and its
Subsidiaries and the unaudited consolidating balance sheet of the Borrower
and its Subsidiaries, each as at the end of such quarter, and the related
consolidated statement of income and consolidated statement of cash flow
and consolidating statement of income and consolidating statement of cash
flow for the portion of the Borrower's fiscal year then elapsed, all in
reasonable detail and prepared in accordance with generally accepted
accounting principles, together with a certification by the principal
financial or accounting officer of the Borrower that the information
contained in such financial statements fairly presents the financial
position of the Borrower and its Subsidiaries on the date thereof (subject
to year-end adjustments);
(c) as soon as practicable, but in any event within thirty (30) days
after the end of each month in each fiscal year of the Borrower, unaudited
monthly consolidated financial statements of the Borrower and its
Subsidiaries for such month and unaudited monthly consolidating financial
statements of the Borrower and its Subsidiaries for such month, each
prepared in accordance with generally accepted accounting principles,
together with a certification by the principal financial or accounting
officer of the Borrower that the information contained in such financial
statements fairly presents the financial condition of the Borrower and its
Subsidiaries on the date thereof (subject to year-end adjustments);
(d) simultaneously with the delivery of the financial statements
referred to in subsections (a), (b) and (c) above, a statement certified by
the principal financial or accounting officer of the Borrower in
substantially the form of Exhibit D hereto (the "Compliance Certificate")
------- - ----------------------
and setting forth in reasonable detail computations evidencing compliance
with the covenants contained in (S)10 and (if
<PAGE>
-58-
applicable) reconciliations to reflect changes in generally accepted
accounting principles since the Balance Sheet Date;
(e) contemporaneously with the filing or mailing thereof, copies of
all material of a financial nature filed with the Securities and Exchange
Commission or sent to the stockholders of the Borrower;
(f) within ten (10) days after the end of each calendar month or at
such earlier time as the Loan and Collateral Agent may reasonably request,
a Borrowing Base Report setting forth the Borrowing Base as at the end of
such calendar month or other date so requested by the Loan and Collateral
Agent;
(g) within ten (10) days after the end of each calendar month, an
Accounts Receivable aging report;
(h) from time to time, not to exceed once per calendar year, upon
request of either Agent, projections of the Borrower and its Subsidiaries
updating those projections delivered to the Banks and referred to in
(S)7.4.2 or, if applicable, updating any later such projections delivered
in response to a request pursuant to this (S)8.4(h); and
(i) from time to time such other financial data and information
(including accountants' management letters) as any Agent or any Bank may
reasonably request.
8.5. NOTICES.
-------
8.5.1. DEFAULTS. The Borrower will promptly notify each of the Agents
--------
in writing of the occurrence of any Default or Event of Default. If any
Person shall give any notice or take any other action in respect of a
claimed default (whether or not constituting an Event of Default) under
this Credit Agreement or any other note, evidence of indebtedness,
indenture or other obligation to which or with respect to which the
Borrower or any of its Subsidiaries is a party or obligor, whether as
principal, guarantor, surety or otherwise, the Borrower shall forthwith
give written notice thereof to each of the Agents, describing the notice or
action and the nature of the claimed default.
8.5.2. ENVIRONMENTAL EVENTS. The Borrower will promptly give notice
--------------------
to each of the Agents and each of the Banks (i) of any violation of any
Environmental Law that the Borrower or any of its Subsidiaries reports in
writing or is reportable by such Person in writing (or for
<PAGE>
-59-
which any written report supplemental to any oral report is made) to any
federal, state or local environmental agency and (ii) upon becoming aware
thereof, of any inquiry, proceeding, investigation, or other action,
including a notice from any agency of potential environmental liability, of
any federal, state or local environmental agency or board, that has the
potential to materially affect the assets, liabilities, financial
conditions or operations of the Borrower or any of its Subsidiaries, or the
Loan and Collateral Agent's security interests pursuant to the Security
Documents.
8.5.3. NOTIFICATION OF CLAIM AGAINST COLLATERAL. The Borrower will,
----------------------------------------
immediately upon becoming aware thereof, notify each of the Agents and each
of the Banks in writing of any setoff, claims, withholdings or other
defenses to which any of the Collateral, or the Loan and Collateral Agent's
rights with respect to the Collateral, are subject.
8.5.4. NOTICE OF LITIGATION AND JUDGMENTS. The Borrower will, and
----------------------------------
will cause each of its Subsidiaries to, give notice to each of the Agents
and each of the Banks in writing within fifteen (15) days of becoming aware
of any litigation or proceedings threatened in writing or any pending
litigation and proceedings affecting the Borrower or any of its
Subsidiaries or to which the Borrower or any of its Subsidiaries is or
becomes a party involving an uninsured claim against the Borrower or any of
its Subsidiaries that could reasonably be expected to have a materially
adverse effect on the Borrower or any of its Subsidiaries and stating the
nature and status of such litigation or proceedings. The Borrower will, and
will cause each of its Subsidiaries to, give notice to each of the Agents,
in writing, in form and detail satisfactory to each of the Agents, within
ten (10) days of any judgment not covered by insurance, final or otherwise,
against the Borrower or any of its Subsidiaries in an amount in excess of
$250,000.
8.5.5. NOTICES CONCERNING INVENTORY COLLATERAL. The Borrower shall
---------------------------------------
provide to the Loan and Collateral Agent prompt notice of (i) any physical
count of the Borrower's or any of its Subsidiaries' inventory, together
with a copy of the results thereof certified by the Borrower or such
Subsidiary, (ii) any determination by the Borrower or any of its
Subsidiaries that the inventory levels of the Borrower or such Subsidiary
are not adequate to meet the sales projections of the Borrower or such
Subsidiary, and (iii) any failure of the Borrower or any of its
Subsidiaries to pay rent at any location, which failure continues for more
than three days following the day on which such
<PAGE>
-60-
rent is due and payable by the Borrower or such Subsidiary.
8.6. Corporate Existence; Maintenance of Properties. The Borrower will
----------------------------------------------
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence, rights and franchises and those of its
Subsidiaries and will not, and will not cause or permit any of its Subsidiaries
to, convert to a limited liability company. It (i) will cause all of its
properties and those of its Subsidiaries used or useful in the conduct of its
business or the business of its Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment,
(ii) will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Borrower may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times, and (iii) will, and will
cause each of its Subsidiaries to, continue to engage primarily in the
businesses now conducted by them and in related businesses; provided that
--------
nothing in this (S)8.6 shall prevent the Borrower from discontinuing the
operation and maintenance of any of its assets or any of those of its
Subsidiaries if such discontinuance is, in the judgment of the Borrower,
desirable in the conduct of its or their business and that do not in the
aggregate materially adversely affect the business of the Borrower and its
Subsidiaries on a consolidated basis.
8.7. Insurance. The Borrower will, and will cause each of its Subsidiaries
---------
to, maintain with financially sound and reputable insurers insurance with
respect to its properties and business against such casualties and contingencies
as shall be in accordance with the general practices of businesses engaged in
similar activities in similar geographic areas and in amounts, containing such
terms, in such forms and for such periods as may be reasonable and prudent and
in accordance with the terms of the Security Agreements.
8.8. TAXES. The Borrower will, and will cause each of its Subsidiaries
-----
to, duly pay and discharge, or cause to be paid and discharged, before the same
shall become overdue, all taxes, assessments and other governmental charges
imposed upon it and its real properties, sales and activities, or any part
thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies that if unpaid might by law become a lien or
charge upon any of its property; provided that any such tax, assessment, charge,
--------
levy or claim need not be paid if the validity or amount thereof shall currently
be contested in good faith by appropriate proceedings and if the Borrower or
such Subsidiary shall have set aside on its books adequate reserves with respect
thereto; and provided further that the Borrower and each Subsidiary of the
-------- -------
Borrower will pay all such taxes, assessments,
<PAGE>
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charges, levies or claims forthwith upon the commencement of proceedings to
foreclose any lien that may have attached as security therefor.
8.9. INSPECTION OF PROPERTIES AND BOOKS, ETC.
---------------------------------------
8.9.1. GENERAL. The Borrower shall permit the Banks, through the
-------
Agents or any of the Banks' other designated representatives, to visit and
inspect any of the properties of the Borrower or any of its Subsidiaries,
to examine the books of account of the Borrower and its Subsidiaries (and
to make copies thereof and extracts therefrom), and to discuss the affairs,
finances and accounts of the Borrower and its Subsidiaries with, and to be
advised as to the same by, its and their officers, all at such reasonable
times and intervals as any Agent or Bank may reasonably request. The Loan
and Collateral Agent may, at the Borrower's expense, participate in or
observe any physical count of inventory included in the Collateral.
8.9.2. COLLATERAL REPORTS. No more frequently than three times
------------------
during each calendar year, or more frequently as determined by the Agents
if an Event of Default shall have occurred and be continuing, upon the
request of the Agents, the Borrower will obtain and deliver to the Agents,
or, if the Agents so elects, will cooperate with the Agents in the Agent's
obtaining, a report of an independent collateral auditor satisfactory to
the Agents (which may be affiliated with one of the Banks) with respect to
the Accounts Receivable and inventory components included in the Borrowing
Base, which report shall indicate whether or not the information set forth
in the Borrowing Base Report most recently delivered is accurate and
complete in all material respects based upon a review by such auditors of
the Accounts Receivable (including verification with respect to the amount,
aging, identity and credit of the respective account debtors and the
billing practices of the Borrower or its applicable Subsidiary) and
inventory (including verification as to the value, location and respective
types). All such collateral value reports shall be conducted and made at
the expense of the Borrower.
8.9.3. APPRAISALS. If an Event of Default shall have occurred and be
----------
continuing, upon the request of the Agents, the Borrower will obtain and
deliver to the Agents appraisal reports in form and substance and from
appraisers satisfactory to the Agents, stating the then current business
value of each of the Borrower and its Subsidiaries. All such appraisals
shall be conducted and made at the expense of the Borrower.
<PAGE>
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8.9.4. COMMUNICATIONS WITH ACCOUNTANTS. The Borrower authorizes the
-------------------------------
Agents and, if accompanied by the Agents, the Banks to communicate directly
with the Borrower's independent certified public accountants and authorizes
such accountants to disclose to the Agents and the Banks any and all
financial statements and other supporting financial documents and schedules
including copies of any management letter with respect to the business,
financial condition and other affairs of the Borrower or any of its
Subsidiaries. At the request of the Agents, the Borrower shall deliver a
letter addressed to such accountants instructing them to comply with the
provisions of this (S)8.9.4.
8.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. The
------------------------------------------------------
Borrower will, and will cause each of its Subsidiaries to, comply with (i) the
applicable laws and regulations wherever its business is conducted, including
all Environmental Laws, except where the failure to so comply would not be
expected to have a materially adverse effect upon the business, assets or
financial conditions of the Borrower and its Subsidiaries on a consolidated
basis, (ii) the provisions of its charter documents and by-laws, (iii) all
agreements and instruments by which it or any of its properties may be bound,
except where the failure to so comply could not reasonably be expected to have a
materially adverse effect upon the business, assets or financial conditions of
the Borrower and its Subsidiaries on a consolidated basis, and (iv) all
applicable decrees, orders, and judgments. If any authorization, consent,
approval, permit or license from any officer, agency or instrumentality of any
government shall become necessary or required in order that the Borrower or any
of its Subsidiaries may fulfill any of its obligations hereunder or any of the
other Loan Documents to which the Borrower or such Subsidiary is a party, the
Borrower will, or (as the case may be) will cause such Subsidiary to,
immediately take or cause to be taken all reasonable steps within the power of
the Borrower or such Subsidiary to obtain such authorization, consent, approval,
permit or license and furnish the Agents and the Banks with evidence thereof.
8.11. EMPLOYEE BENEFIT PLANS. The Borrower will (i) promptly upon request
----------------------
of the Loan and Collateral Agent, furnish to the Loan and Collateral Agent a
copy of the most recent actuarial statement required to be submitted under
(S)103(d) of ERISA and Annual Report, Form 5500, with all required attachments,
in respect of each Guaranteed Pension Plan and (ii) promptly upon receipt or
dispatch, furnish to the Loan and Collateral Agent any notice, report or demand
sent or received in respect of a Guaranteed Pension Plan under (S)(S)302, 4041,
4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer
Plan, under (S)(S)4041A, 4202, 4219, 4242, or 4245 of
<PAGE>
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ERISA.
8.12. USE OF PROCEEDS. The Borrower will use the proceeds of the Revolving
---------------
Credit Loans and will obtain Letters of Credit solely for the purposes set forth
in (S)7.17.1.
8.13. BANK ACCOUNTS.
-------------
8.13.1. GENERAL. On or prior to the Closing Date, the Borrower
-------
will, and will cause each of its Subsidiaries other than CSIFSC to, (i)
establish a depository account (the "BKB Concentration Account") under the
-------------------------
control of the Loan and Collateral Agent for the benefit of the Banks and
the Agents, in the name of the Borrower, (ii) cause all financial
institutions at which the Local Accounts are maintained to entered into
agency account agreements and, if applicable, lock box agreements
(collectively, "Agency Account Agreements") in form and substance
-------------------------
satisfactory to the Loan and Collateral Agent (which shall provide for,
among other things, the right of the Loan and Collateral Agent to require
any such financial institution to transfer any deposits held by such
financial institution to the BKB Concentration Account upon written notice
from the Loan and Collateral Agent after the occurrence and continuation
without cure of a Default or Event of Default), (iii) cause all cash
proceeds of Accounts Receivable to be deposited only into the BKB
Concentration Account or the Local Accounts, and (iv) at all times ensure
that immediately upon the Borrower's or any of its Subsidiaries' receipt of
any funds constituting or cash proceeds of any Collateral, all such amounts
shall have been deposited in the BKB Concentration Account or the Local
Accounts.
8.13.2. ACKNOWLEDGMENT OF APPLICATION. The Borrower hereby agrees
-----------------------------
that all amounts received by the Loan and Collateral Agent in the BKB
Concentration Account will be held as Collateral for the Obligations to be
applied in accordance with (S)13.4.
8.14. FURTHER ASSURANCES. The Borrower will, and will cause each of its
------------------
Subsidiaries to, cooperate with the Banks and the Agents and execute such
further instruments and documents as the Banks or the Agents shall reasonably
request to effectuate the transactions contemplated by this Credit Agreement and
the other Loan Documents.
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
------------------------------------------
The Borrower covenants and agrees that, so long as any Revolving Credit
Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is
<PAGE>
-64-
outstanding or any Bank has any obligation to make any Revolving Credit Loans or
the Letter of Credit Agent has any obligations to issue, extend or renew any
Letters of Credit:
9.1. RESTRICTIONS ON INDEBTEDNESS. The Borrower will not, and will not
----------------------------
permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness other
than:
(a) Indebtedness to the Banks and the Agents arising under any of the
Loan Documents;
(b) endorsements for collection, deposit or negotiation and warranties
of products or services, in each case incurred in the ordinary course of
business;
(c) Indebtedness incurred in connection with the acquisition after the
date hereof of any real or personal property by the Borrower or such
Subsidiary or under any Capitalized Lease, provided that the aggregate
--------
principal amount of such Indebtedness of the Borrower and its Subsidiaries
shall not exceed the aggregate amount of $5,000,000 at any one time;
(d) Indebtedness existing on the date hereof and listed and described
on Schedule 9.1 hereto and any extensions, renewals or replacements thereof
-------- ---
which are, in each case, on terms and conditions no less favorable to the
Borrower and the interest of the Agents and the Banks;
(e) Indebtedness of a Subsidiary of the Borrower existing on the date
hereof to the Borrower;
(f) Permitted IBJ Debt;
(g) Permitted Refinancing Indebtedness;
(h) Other Indebtedness not otherwise permitted by this (S)9.1;
provided, that combined sum of the aggregate outstanding principal amount
--------
of all such Indebtedness of the Borrower and its Subsidiaries permitted
pursuant to this (S)9.1(h) and the aggregate outstanding principal amount
of Indebtedness permitted under (S)9.1(c) shall not exceed $5,000,000 at
any time.
9.2. RESTRICTIONS ON LIENS. The Borrower will not, and will not permit any
---------------------
of its Subsidiaries to, (i) create or incur or suffer to be created or
<PAGE>
-65-
incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property or
assets of any character whether now owned or hereafter acquired, or upon the
income or profits therefrom; (ii) transfer any of such property or assets or the
income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (iii) acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement; (iv) suffer to
exist for a period of more than thirty (30) days after the same shall have been
incurred any Indebtedness or claim or demand against it that if unpaid would by
law or upon bankruptcy or insolvency, or otherwise, be given any priority
whatsoever over its general creditors which in the aggregate exceed the lesser
of (A) $1,000,000 and (B) $5,000,000 minus the amount of the Indebtedness of the
-----
Borrower and its Subsidiaries described under (S)(S)9.1(c) and 9.1(h); or (v)
sell, assign, pledge or otherwise transfer any "receivables" as defined in
clause (vii) of the definition of the term "Indebtedness," with or without
recourse; provided that the Borrower or any of its Subsidiaries may create or
--------
incur or suffer to be created or incurred or to exist:
(a) liens in favor of the Borrower on all or part of the assets of
Subsidiaries of the Borrower securing Indebtedness owing by Subsidiaries of
the Borrower to the Borrower;
(b) liens to secure taxes, assessments and other government charges in
respect of obligations not overdue or liens on properties to secure claims
for labor, material or supplies in respect of obligations not overdue;
(c) deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or
other social security obligations;
(d) liens on properties in respect of judgments or awards that have
been in force for less than the applicable period for taking an appeal so
long as execution is not levied thereunder or in respect of which the
Borrower or such Subsidiary shall at the time in good faith be prosecuting
an appeal or proceedings for review and in respect of which a stay of
execution shall have been obtained pending such appeal or review;
(e) liens of carriers, warehousemen, mechanics and materialmen, and
other like liens on properties, in existence less than 120 days from the
date of creation thereof in respect of obligations not
<PAGE>
-66-
overdue;
(f) encumbrances on Real Estate consisting of easements, rights of
way, zoning restrictions, restrictions on the use of real property and
defects and irregularities in the title thereto, landlord's or lessor's
liens under leases to which the Borrower or a Subsidiary of the Borrower is
a party, and other minor liens or encumbrances none of which in the opinion
of the Borrower interferes materially with the use of the property affected
in the ordinary conduct of the business of the Borrower and its
Subsidiaries, which defects do not individually or in the aggregate have a
materially adverse effect on the business of the Borrower individually or
of the Borrower and its Subsidiaries on a consolidated basis;
(g) liens existing on the date hereof and listed on Schedule 9.2
-------- ---
hereto and any extensions, renewals or replacements thereof which are, in
each case, on terms and conditions no less favorable to the Borrower and
the interest of the Agents and the Banks;
(h) purchase money security interests in or purchase money mortgages
on real or personal property acquired after the date hereof to secure
purchase money Indebtedness of the type and amount permitted by (S)9.1(c),
incurred in connection with the acquisition of such property, which
security interests or mortgages cover only the Indebtedness incurred solely
for the purpose of financing the acquisition of such real or personal
property so acquired;
(i) liens in favor of the Loan and Collateral Agent for the benefit of
the Banks and the Agents under the Loan Documents;
(j) Permitted IBJ Liens; and
(k) liens on assets other than inventory or Accounts Receivables which
are pledged to secure Indebtedness of the type and amount permitted by
(S)9.1(h).
9.3. RESTRICTIONS ON INVESTMENTS. The Borrower will not, and will not
---------------------------
permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United States
of America that mature within one (1) year from the date of purchase by the
Borrower;
<PAGE>
-67-
(b) demand deposits, certificates of deposit, bankers acceptances and
time deposits of United States banks having total assets in excess of
$1,000,000,000;
(c) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any state thereof that at the time of purchase have been rated
and the ratings for which are not less than "P 1" if rated by Moody's
Investors Service, Inc., and not less than "A 1" if rated by Standard and
Poor's Rating Group;
(d) Investments existing on the date hereof and listed on Schedule 9.3
-------- ---
hereto;
(e) Investments with respect to Indebtedness permitted by (S)9.1(g) so
long as such entities remain Subsidiaries of the Borrower;
(f) Investments consisting of Investments by the Borrower in
Subsidiaries of the Borrower existing on the Closing Date;
(g) Investments consisting of promissory notes received as proceeds of
asset dispositions permitted by (S)9.5.2; and
(h) Investments consisting of loans and advances to employees for
moving, entertainment, travel and other similar expenses in the ordinary
course of business not to exceed $250,000 in the aggregate at any time
outstanding;
(i) Investments under the Loan Documents;
9.4. DISTRIBUTIONS. The Borrower will not make any Distributions; provided,
------------- ---------
however, so long as no Default or Event of Default exist or would result
- --------
therefrom, the Borrower may: (a) make semi-annual Distributions not to exceed
50% of the Consolidated Net Income of the Borrower for the two fiscal quarters
most recently ended so long as (i) such Distributions are made within 45 days
after delivery to the Banks of the financial statements required by Section
8.4(a) and (b) and (ii) the Borrower has delivered calculations to the Agents,
demonstrating in a format satisfactory to the Agents that the making of such
Distribution will not cause a Default or Event of Default on a projected basis
for the next two fiscal quarters of the Borrower; and (b) make Distributions to
the preferred stockholders of the Borrower not to exceed $3,000,000 per year.
9.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.
-----------------------------------------------
<PAGE>
-68-
9.5.1. MERGERS AND ACQUISITIONS. The Borrower will not, and will not
------------------------
permit any of its Subsidiaries to, become a party to any merger or
consolidation, or agree to or effect any asset acquisition or stock
acquisition other than: (a) the acquisition of assets in the ordinary
course of business consistent with the Borrower's steel business; (b) the
merger or consolidation of one or more of the Subsidiaries of the Borrower
with and into the Borrower; (c) the merger or consolidation of two or more
Subsidiaries of the Borrower; and (d) other stock and asset acquisitions so
long as (i) the aggregate purchase price paid by the Borrower or its
Subsidiaries shall not exceed $20,000,000 from the Closing Date, (ii) after
giving effect to any such acquisition the Borrowing Base shall exceed the
outstanding amount of Revolving Credit Loans plus the Maximum Drawing
Amount of all Unpaid Reimbursement Obligations by at least $15,000,000,
(iii) on the last day of the fiscal quarter following any such acquisition
the Fixed Charge Ratio shall not be less than 1.25:1.00, (iv) any such
acquisitions of a substantial portion of the assets of any Person have been
approved by not less than a majority of the Board of Directors of the
target Person (consisting of directors who were directors of said Person
for the twelve (12) months period preceding such acquisition), (v) prior to
and after giving effect to such acquisition there shall be no Default or
Event of Default, (vi) the Borrower has demonstrated to the reasonable
satisfaction of the Loan and Collateral Agent that, after giving effect to
such acquisition, the Borrower shall be in compliance, on a pro forma
basis, with the financial covenants contained in (S)10 hereof for the 12
months following such acquisition; and (vi) the acquisition is of a
business which is in the steel related business or is made to acquire or
develop raw materals used in steel making.
9.5.2. DISPOSITION OF ASSETS. The Borrower will not, and will not
---------------------
permit any of its Subsidiaries to, become a party to or agree to or effect
any disposition of assets other than: (a) the sale of inventory, the
licensing of intellectual property and the disposition of obsolete assets,
in each case in the ordinary course of business consistent with the
Borrower's steel business; (b) the sale or other disposition of capital
stock of CST held by the Borrower; and (c) disposition of assets not in the
ordinary course of business which does not exceed, in the aggregate,
$10,000,000, provided, that such assets are or are to be no longer used in
--------
the Borrower's business.
9.6. SALE AND LEASEBACK. The Borrower will not, and will not permit any of
------------------
its Subsidiaries to, enter into any arrangement, directly or indirectly, whereby
the Borrower or any Subsidiary of the Borrower shall sell or transfer
<PAGE>
-69-
any property owned by it in order then or thereafter to lease such property or
lease other property that the Borrower or any Subsidiary of the Borrower intends
to use for substantially the same purpose as the property being sold or
transferred.
9.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will not, and will
----------------------------------
not permit any of its Subsidiaries to, (i) use any of the Real Estate or any
portion thereof for the handling, processing, storage or disposal of Hazardous
Substances, (ii) cause or permit to be located on any of the Real Estate any
underground tank or other underground storage receptacle for Hazardous
Substances, (iii) generate any Hazardous Substances on any of the Real Estate,
(iv) conduct any activity at any Real Estate or use any Real Estate in any
manner so as to cause a release (i.e. releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping) or threatened release of Hazardous Substances on, upon or
into the Real Estate or (v) otherwise conduct any activity at any Real Estate or
use any Real Estate in any manner that would violate any Environmental Law or
bring such Real Estate in violation of any Environmental Law.
9.8. PERMITTED IBJ DEBT, PERMITTED REFINANCING INDEBTEDNESS AND
----------------------------------------------------------
INDEBTEDNESS TO DKB NEDERLAND. The Borrower will not amend, supplement or
- -----------------------------
otherwise modify the terms of any Permitted IBJ Debt, any Permitted Refinancing
Indebtedness or the Indebtedness to DKB Nederland permitted under (S)9.1(d)
other than on terms and conditions no less favorable to the Borrower, any
Subsidiary or the interest of the Agents or the Banks, or prepay, redeem or
repurchase any Permitted Refinancing Indebtedness.
9.9. EMPLOYEE BENEFIT PLANS. Neither the Borrower nor any ERISA Affiliate
----------------------
will
(a) engage in any "prohibited transaction" within the meaning of
(S)406 of ERISA or (S)4975 of the Code which could result in a material
liability for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in (S)302 of ERISA, whether or
not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could
result in the imposition of a lien or encumbrance on the assets of the
Borrower or any of its Subsidiaries pursuant to (S)302(f) or (S)4068 of
ERISA; or
<PAGE>
-70-
(d) amend any Guaranteed Pension Plan in circumstances requiring the
posting of security pursuant to (S)307 of ERISA or (S)401(a)(29) of the
Code; or
(e) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of (S)4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of
such Plans, disregarding for this purpose the benefit liabilities and
assets of any such Plan with assets in excess of benefit liabilities, by
more than the amount set forth in (S)7.16.3.
9.10. Business Activities. The Borrower will not, and will not permit any
-------------------
of its Subsidiaries to, engage directly or indirectly (whether through
Subsidiaries or otherwise) in any type of business other than the businesses
conducted by them on the Closing Date and in related businesses.
9.11. Fiscal Year. The Borrower will not, and will not permit any of it
-----------
Subsidiaries to, change the date of the end of its fiscal year from that set
forth in (S)7.4.1.
9.12. Transactions with Affiliates. The Borrower will not, and will not
----------------------------
permit any of its Subsidiaries to, engage in any transaction with any Affiliate
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any such Affiliate or, to the
knowledge of the Borrower, any corporation, partnership, trust or other entity
in which any such Affiliate has a substantial interest or is an officer,
director, trustee or partner, unless such transaction is on fair and reasonable
terms no less favorable to the Borrower than would have been obtainable on an
arm's-length with a Person other than an Affiliate.
9.13. BANK ACCOUNTS. The Borrower will not, and will not permit any of its
-------------
Subsidiaries to, (i) establish any bank accounts other than the BKB
Concentration Account of the Local Accounts without Loan and Collateral Agent's
prior written consent, (ii) violate directly or indirectly any Agency Account
Agreement or other bank agency or lock box agreement in favor of the Loan and
Collateral Agent for the benefit of the Banks and the Agents with respect to
such account.
9.14. CSIFSC. The Borrower will not permit CSIFSC to conduct any business
------
or own assets in excess of $500,000 in the aggregate at any time.
<PAGE>
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10. FINANCIAL COVENANTS OF THE BORROWER.
-----------------------------------
The Borrower covenants and agrees that, so long as any Revolving Credit
Loan, Unpaid Reimbursement Obligation, Letter of Credit or Revolving Credit Note
is outstanding or any Bank has any obligation to make any Revolving Credit Loans
or the Letter of Credit Agent has any obligation to issue, extend or renew any
Letters of Credit.
10.1. CAPITAL EXPENDITURES. The Borrower will not make, or permit any
--------------------
Subsidiary of the Borrower to make, Capital Expenditures that exceed, in the
aggregate, $55,000,000 for the Borrower's 1999 fiscal year and $40,000,000 for
each fiscal year thereafter; provided, however, that, if during any fiscal year
-------- -------
the amount of Capital Expenditures permitted for that fiscal year is not so
utilized, such unutilized amount may be utilized in the next succeeding fiscal
year but not in any subsequent fiscal year.
10.2. CONSOLIDATED TANGIBLE NET WORTH. The Borrower will not permit
-------------------------------
Consolidated Tangible Net Worth to be less than the sum of (a) $142,000,000,
plus (b) on a cumulative basis, 50% of positive Consolidated Net Income for each
fiscal year subsequent to the Closing Date, plus (c) the proceeds received by
the Borrower in connection with the sale of equity securities of the Borrower or
its Subsidiaries.
10.3. FIXED CHARGE COVERAGE. Commencing on December 31, 1998, the Borrower
---------------------
will not permit, as of the last day of any fiscal quarter of the Borrower, the
ratio of (i) Consolidated Operating Cash Flow for the four fiscal quarters then
ended to (ii) Consolidated Total Debt Service for such period (the "Fixed Charge
------------
Coverage Ratio") to be less than the ratio set forth below opposite such date:
- --------------
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
12/31/99 1.10:1.00
3/31/00 1.15:1.00
The last day of each fiscal
quarter beginning with 6/30/00 1.25:1.00
</TABLE>
10.4. INTEREST CHARGE COVERAGE. The Borrower will not permit the ratio of
------------------------
(i) Consolidated Operating Cash Flow for the four fiscal quarters then ended to
(ii) Consolidated Total Interest Expense for such period to be less than
1.00:1.00 on March 31, 1999, June 30, 1999 and September 30, 1999.
11. CLOSING CONDITIONS.
------------------
The obligations of the Banks to make the initial Revolving Credit
<PAGE>
-72-
Loans and of the Letter of Credit Agent to issue any initial Letters of Credit
shall be subject to the satisfaction of the following conditions precedent on or
prior to March 15, 1999:
11.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been duly
--------------
executed and delivered by the respective parties thereto, shall be in full force
and effect and shall be in form and substance satisfactory to each of the Banks.
Each Bank shall have received a fully executed copy of each such document.
11.2. CERTIFIED COPIES OF CHARTER DOCUMENTS AND IBJ LOAN DOCUMENTS. Each
------------------------------------------------------------
of the Banks shall have received from the Borrower and each of its Subsidiaries
a copy, certified by a duly authorized officer of such Person to be true and
complete on the Closing Date, of each of (i) its charter or other incorporation
documents as in effect on such date of certification, (ii) its by-laws as in
effect on such date, (iii) the IBJ Loan Documents as listed on Schedule 11.2
-------- ----
(iii) and (iv) the revised covenants for fiscal year 1999 under the Permitted
- -----
IBJ Debt in form and substance satisfactory to the Banks.
11.3. CORPORATE ACTION. All corporate action necessary for the valid
----------------
execution, delivery and performance by the Borrower and each of its Subsidiaries
of this Credit Agreement and the other Loan Documents to which it is or is to
become a party shall have been duly and effectively taken, and evidence thereof
satisfactory to the Banks shall have been provided to each of the Banks.
11.4. INCUMBENCY CERTIFICATE. Each of the Banks shall have received from
----------------------
the Borrower an incumbency certificate, dated as of the Closing Date, signed by
a duly authorized officer of the Borrower, and giving the name and bearing a
specimen signature of each individual who shall be authorized: (i) to sign, in
the name and on behalf of each of the Borrower, each of the Loan Documents and
Subordination Documents to which the Borrower is or is to become a party; (ii)
to make Loan Requests and Conversion Requests and to apply for Letters of
Credit; and (iii) to give notices and to take other action on its behalf under
the Loan Documents.
11.5. VALIDITY OF LIENS. The Security Documents shall be effective to
-----------------
create in favor of the Loan and Collateral Agent a legal, valid and enforceable
first (except for Permitted Liens entitled to priority under applicable law)
security interest in and lien upon the Collateral. All filings, recordings,
deliveries of instruments and other actions necessary or desirable in the
opinion of the Loan and Collateral Agent to protect and preserve such security
interests shall have been duly effected. The Loan and Collateral Agent shall
have received evidence thereof in form and substance satisfactory
<PAGE>
-73-
to the Loan and Collateral Agent.
11.6. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The Loan and
----------------------------------------------
Collateral Agent shall have received from the Borrower a completed and fully
executed Perfection Certificate and the results of UCC searches with respect to
the Collateral, indicating no liens other than Permitted Liens and otherwise in
form and substance satisfactory to the Loan and Collateral Agent.
11.7. CERTIFICATES OF INSURANCE. The Agents shall have received (i) a
-------------------------
certificate of insurance from an independent insurance broker dated as of the
Closing Date, identifying insurers, types of insurance, insurance limits, and
policy terms, and otherwise describing the insurance obtained in accordance with
the provisions of the Security Agreements and (ii) certified copies of all
policies evidencing such insurance (or certificates therefore signed by the
insurer or an agent authorized to bind the insurer).
11.8. AGENCY ACCOUNT AGREEMENTS. The Borrower shall have established the
-------------------------
BKB Concentration Account, and the Loan and Collateral Agent shall have received
an Agency Account Agreement executed by each depository institution at which the
Borrower maintains Local Accounts.
11.9. BORROWING BASE REPORT; FUNDING AUDIT. The Loan and Collateral Agent
------------------------------------
shall have received (i) from the Borrower the initial Borrowing Base Report
dated as of the Closing Date and (ii) a pre-funding audit from the Loan and
Collateral Agent's examiners verifying the components of the Borrowing Base in
form and substance satisfactory to the Agents.
11.10. ACCOUNTS RECEIVABLE AGING REPORT. The Loan and Collateral Agent
--------------------------------
shall have received from the Borrower the most recent Accounts Receivable aging
report of the Borrower and its Subsidiaries dated as of a date which shall be no
more than fifteen (15) days prior to the Closing Date and the Borrower shall
have notified the Loan and Collateral Agent in writing on the Closing Date of
any material deviation from the Accounts Receivable values reflected in such
Accounts Receivable aging report and shall have provided the Loan and Collateral
Agent with such supplementary documentation as the Loan and Collateral Agent may
reasonably request.
11.11. HAZARDOUS WASTE ASSESSMENTS. The Agents shall have received
---------------------------
hazardous waste site assessments from environmental engineers and in form and
substance satisfactory to the Agents, covering all Real Estate and all other
real property in respect of which the Borrower or any of its Subsidiaries may
have material liability, whether contingent or otherwise, for
<PAGE>
-74-
dumping or disposal of Hazardous Substances.
11.12. SOLVENCY CERTIFICATE. Each of the Banks shall have received an
--------------------
officer's certificate of the Borrower dated as of the Closing Date as to the
solvency of the Borrower and its Subsidiaries following the consummation of the
transactions contemplated herein and in form and substance satisfactory to the
Banks.
11.13. OPINION OF COUNSEL. Each of the Banks and the Agents shall have
------------------
received a favorable legal opinion addressed to the Banks and the Agents, dated
as of the Closing Date, in form and substance satisfactory to the Banks and the
Agents, from Gibson, Dunn & Crutcher LLP, counsel to the Borrower and its
Subsidiaries.
11.14. PAYMENT OF FEES. The Borrower shall have paid to the Banks or the
---------------
Agents, as appropriate, the closing fee, the Agents' fees and all other amounts
due and payable under this Agreement.
11.15. PAYOFF LETTER. The Loan and Collateral Agent shall have received a
-------------
payoff letter from DKB, indicating the amount of the obligations of the Borrower
under the revolving credit facilities agented by DKB, to be discharged on the
Closing Date and an acknowledgment by DKB that upon receipt of such funds it
will forthwith execute and deliver to the Loan and Collateral Agent for filing
all termination statements and take such other actions as may be necessary to
discharge all security interests granted by the Borrower or any of its
Subsidiaries in favor of DKB.
12. CONDITIONS TO ALL BORROWINGS.
----------------------------
The obligations of the Banks to make any Revolving Credit Loan, and of the
Letter of Credit Agent to issue, extend or renew any Letter of Credit, in each
case whether on or after the Closing Date, shall also be subject to the
satisfaction of the following conditions precedent:
12.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
-----------------------------------------
representations and warranties of any of the Borrower and its Subsidiaries
contained in this Credit Agreement, the other Loan Documents or in any document
or instrument delivered pursuant to or in connection with this Credit Agreement
shall be true as of the date as of which they were made and shall also be true
at and as of the time of the making of such Revolving Credit Loan or the
issuance, extension or renewal of such Letter of Credit, with the same effect as
if made at and as of that time (except to the extent of changes
<PAGE>
-75-
resulting from transactions contemplated or permitted by this Credit Agreement
and the other Loan Documents and changes occurring in the ordinary course of
business that singly or in the aggregate are not materially adverse, or to the
extent that such representations and warranties relate expressly to an earlier
date) and no Default or Event of Default shall have occurred and be continuing.
The Loan and Collateral Agent shall have received a certificate of the Borrower
signed by an authorized officer of the Borrower to such effect.
12.2. GOVERNMENTAL REGULATION. Each Bank shall have received such
-----------------------
statements in substance and form reasonably satisfactory to such Bank as such
Bank shall require for the purpose of compliance with any applicable regulations
of the Comptroller of the Currency or the Board of Governors of the Federal
Reserve System.
12.3. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the
-------------------------
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident thereto shall be satisfactory in substance and in
form to the Banks and to the Agents and the Agents' Special Counsel, and the
Banks, the Agents and such counsel shall have received all information and such
counterpart originals or certified or other copies of such documents as the
Agents may reasonably request.
12.4. BORROWING BASE REPORT. The Loan and Collateral Agent shall have
---------------------
received the most recent Borrowing Base Report required to be delivered to the
Loan and Collateral Agent in accordance with (S)8.4(f) and, if requested by the
Loan and Collateral Agent, a Borrowing Base Report dated within five (5) days of
the Drawdown Date of such Loan or of the date of issuance, extension or renewal
of such Letter of Credit.
13. EVENTS OF DEFAULT; ACCELERATION; ETC.
------------------------------------
13.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following events
----------------------------------
("Events of Default" or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice or lapse of time, "Defaults") shall occur:
--------
(a) the Borrower shall fail to pay any principal of the Revolving
Credit Loans or any Reimbursement Obligation when the same shall become due
and payable, whether at the stated date of maturity or any accelerated date
of maturity or at any other date fixed for payment;
(b) the Borrower or any of its Subsidiaries shall fail to pay
<PAGE>
-76-
any interest on the Revolving Credit Loans, the commitment fee, any Letter
of Credit Fee, the Loan and Collateral Agent's fee, or other sums due
hereunder or under any of the other Loan Documents, within two (2) Business
Days of when the same shall become due and payable, whether at the stated
date of maturity or any accelerated date of maturity or at any other date
fixed for payment;
(c) the Borrower shall fail to comply with any of its covenants
contained in (S)8.2, 8.3, 8.4, 8.5, 8.13, 9, or 10;
(d) the Borrower or any of its Subsidiaries shall fail to perform any
term, covenant or agreement contained herein or in any of the other Loan
Documents (other than those specified elsewhere in this (S)13.1) for thirty
(30) days after written notice of such failure has been given to the
Borrower by any Agent;
(e) any representation or warranty of the Borrower or any of its
Subsidiaries in this Credit Agreement or any of the other Loan Documents or
in any other document or instrument delivered pursuant to or in connection
with this Credit Agreement shall prove to have been false in any material
respect upon the date when made or deemed to have been made or repeated;
(f) the Borrower or any of its Subsidiaries shall fail to pay at
maturity, or within any applicable period of grace, any obligation for
borrowed money or credit received or in respect of any Capitalized Leases
in each case in excess of $5,000,000, or fail to observe or perform any
material term, covenant or agreement contained in any agreement by which it
is bound, evidencing or securing borrowed money or credit received or in
respect of any Capitalized Leases in each case in excess of $5,000,000 for
such period of time as would permit (assuming the giving of appropriate
notice if required) the holder or holders thereof or of any obligations
issued thereunder to accelerate the maturity thereof, or any such holder or
holders shall rescind or shall have a right to rescind the purchase of any
such obligations;
(g) the Borrower or any of its Subsidiaries shall make an assignment
for the benefit of creditors, or admit in writing its inability to pay or
generally fail to pay its debts as they mature or become due, or shall
petition or apply for the appointment of a trustee or other custodian,
liquidator or receiver of the Borrower or any of its Subsidiaries or of any
substantial part of the assets of the Borrower or any of its Subsidiaries
or shall commence any case or other proceeding relating to the Borrower or
any of its Subsidiaries under any
<PAGE>
-77-
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law of any jurisdiction, now or
hereafter in effect, or shall take any action to authorize or in
furtherance of any of the foregoing, or if any such petition or application
shall be filed or any such case or other proceeding shall be commenced
against the Borrower or any of its Subsidiaries and the Borrower or any of
its Subsidiaries shall indicate its approval thereof, consent thereto or
acquiescence therein or such petition or application shall not have been
dismissed within forty-five (45) days following the filing thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any of
its Subsidiaries bankrupt or insolvent, or approving a petition in any such
case or other proceeding, or a decree or order for relief is entered in
respect of the Borrower or any Subsidiary of the Borrower in an involuntary
case under federal bankruptcy laws as now or hereafter constituted;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any final
judgment against the Borrower that, with other outstanding final judgments,
undischarged, against the Borrower exceeds in the aggregate $1,000,000;
(j) if any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded or the Loan and Collateral Agent's security interests,
mortgages or liens in a substantial portion of the Collateral shall cease
to be perfected, or shall cease to have the priority contemplated by the
Security Documents, in each case otherwise than in accordance with the
terms thereof or with the express prior written agreement, consent or
approval of the Banks, or any action at law, suit or in equity or other
legal proceeding to cancel, revoke or rescind any of the Loan Documents
shall be commenced by or on behalf of the Borrower or any of its
Subsidiaries party thereto or any of their respective stockholders, or any
court or any other governmental or regulatory authority or agency of
competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more of
the Loan Documents is illegal, invalid or unenforceable in accordance with
the terms thereof;
(k) the Borrower or any ERISA Affiliate incurs any liability to the
PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA in an
aggregate amount exceeding $1,000,000, or the Borrower
<PAGE>
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or any ERISA Affiliate is assessed withdrawal liability pursuant to Title
IV of ERISA by a Multiemployer Plan requiring aggregate annual payments
exceeding $1,000,000, or any of the following occurs with respect to a
Guaranteed Pension Plan: (i) an ERISA Reportable Event, or a failure to
make a required installment or other payment (within the meaning of
(S)302(f)(1) of ERISA), provided that the Loan and Collateral Agent
--------
determines in its reasonable discretion that such event (A) could be
expected to result in liability of the Borrower or any of its Subsidiaries
to the PBGC or such Guaranteed Pension Plan in an aggregate amount
exceeding $1,000,000 and (B) could constitute grounds for the termination
of such Guaranteed Pension Plan by the PBGC, for the appointment by the
appropriate United States District Court of a trustee to administer such
Guaranteed Pension Plan or for the imposition of a lien in favor of such
Guaranteed Pension Plan; or (ii) the appointment by a United States
District Court of a trustee to administer such Guaranteed Pension Plan; or
(iii) the institution by the PBGC of proceedings to terminate such
Guaranteed Pension Plan;
(l) the Borrower or any of its Subsidiaries shall be enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting any material part of
its business and such order shall continue in effect for more than thirty
(30) days;
(m) there shall occur any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy,
or other casualty, which in any such case causes, for more than fifteen
(15) consecutive days, the cessation or substantial curtailment of revenue
producing activities at any facility of the Borrower or any of its
Subsidiaries which could reasonably be expected to have a material adverse
effect on the Borrower's ability to comply with its obligations hereunder.
(n) there shall occur the loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by
the Borrower or any of its Subsidiaries if such loss, suspension,
revocation or failure to renew would have a material adverse effect on the
business or financial condition of the Borrower or such Subsidiary;
(o) the Borrower or any of its Subsidiaries shall be indicted for a
state or federal crime, or any civil or criminal action shall otherwise
have been brought or threatened against the Borrower or any of its
Subsidiaries, a punishment for which in any such case could
<PAGE>
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include the forfeiture of any assets of the Borrower or such Subsidiary
included in the Borrowing Base or any assets of the Borrower or such
Subsidiary not included in the Borrowing Base but having a fair market
value in excess of $1,000,000;
(p) (i) Kawasaki Steel Corporation and Companhia Vale do Rio Doce
shall directly or indirectly together own less than 50% of the outstanding
shares of common stock of the Borrower, or shall cease to possess the right
to appoint a majority of the Board of Directors of the Borrower, or (ii) a
"Change of Control" under and as defined in the Permitted Refinancing
Indebtedness shall have occurred;
then, and in any such event, so long as the same may be continuing, either of
the Agents may, and upon the request of the Super-majority Banks shall, by
notice in writing to the Borrower declare all amounts owing with respect to this
Credit Agreement, the Revolving Credit Notes and the other Loan Documents and
all Reimbursement Obligations to be, and they shall thereupon forthwith become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by the Borrower; provided
--------
that in the event of any Event of Default specified in (SS)13.1(g), 13.1(h) or
13.1(j), all such amounts shall become immediately due and payable automatically
and without any requirement of notice from any Agent or any Bank.
13.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of
--------------------------
Default specified in (S)13.1(g), (S)13.1(h) or (S)13.1(j) shall occur, any
unused portion of the credit hereunder shall forthwith terminate and each of the
Banks shall be relieved of all further obligations to make Loans to the Borrower
and the Letter of Credit Agent shall be relieved of all further obligations to
issue, extend or renew Letters of Credit. If any other Event of Default shall
have occurred and be continuing, or if on any Drawdown Date or other date for
issuing, extending or renewing any Letter of Credit the conditions precedent to
the making of the Revolving Credit Loans to be made on such Drawdown Date or (as
the case may be) to issuing, extending or renewing such Letter of Credit on such
other date are not satisfied, any Agent may and, upon the request of the
Majority Banks, shall, by notice to the Borrower, terminate the unused portion
of the credit hereunder, and upon such notice being given such unused portion of
the credit hereunder shall terminate immediately and each of the Banks shall be
relieved of all further obligations to make Loans and the Letter of Credit Agent
shall be relieved of all further obligations to issue, extend or renew Letters
of Credit. No termination of the credit hereunder shall relieve the Borrower or
any of its Subsidiaries of any of the Obligations.
<PAGE>
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13.3. REMEDIES. In case any one or more of the Events of Default shall
--------
have occurred and be continuing, and whether or not the Banks shall have
accelerated the maturity of the Revolving Credit Loans pursuant to (S)13.1, each
Bank, if owed any amount with respect to the Revolving Credit Loans or the
Reimbursement Obligations, may, with the consent of the Majority Banks but not
otherwise, proceed to protect and enforce its rights by suit in equity, action
at law or other appropriate proceeding, whether for the specific performance of
any covenant or agreement contained in this Credit Agreement and the other Loan
Documents or any instrument pursuant to which the Obligations to such Bank are
evidenced, including as permitted by applicable law the obtaining of the ex
--
parte appointment of a receiver, and, if such amount shall have become due, by
- -----
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of such Bank. No remedy herein conferred upon any Bank
or Agent or the holder of any Revolving Credit Note or purchaser of any Letter
of Credit Participation is intended to be exclusive of any other remedy and each
and every remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or any other provision of law.
13.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that, following
-----------------------------------
the occurrence or during the continuance of any Default or Event of Default, any
Agent or any Bank, as the case may be, receives any monies in connection with
the enforcement of any the Security Documents, or otherwise with respect to the
realization upon any of the Collateral, such monies shall be distributed for
application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of each Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by each Agent in connection with the collection of such monies by
each Agent, for the exercise, protection or enforcement by each Agent of
all or any of the rights, remedies, powers and privileges of each Agent
under this Credit Agreement or any of the other Loan Documents or in
respect of the Collateral or in support of any provision of adequate
indemnity to each Agent against any taxes or liens which by law shall have,
or may have, priority over the rights of each Agent to such monies;
(b) Second, to all other Obligations (other than Obligations under
Derivative Contracts with either of the Agents) in such order or preference
as the Majority Banks may determine; provided, however, that (i)
-------- -------
distributions shall be made (A) pari passu among Obligations with respect
---- -----
to the Agents' fee payable pursuant to (S)5.1 and all other
<PAGE>
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Obligations and (B) with respect to each type of Obligation owing to the
Banks, such as interest, principal, fees and expenses, among the Banks pro
---
rata, and (ii) the Loan and Collateral Agent may in its discretion make
----
proper allowance to take into account any Obligations not then due and;
(c) Third, to all Obligations under Derivative Contracts with either
of the Agents, pro rata;
--- ----
(d) Fourth, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Banks and the Agents of all of the
Obligations, to the payment of any obligations required to be paid pursuant
to (S)9-504(1)(c) of the Uniform Commercial Code of the State of New York;
and
(e) Fifth, the excess, if any, shall be returned to the Borrower or to
such other Persons as are entitled thereto.
14. SETOFF.
------
Each of the Banks agrees with each other Bank that (i) if an amount to be
set off is to be applied to Indebtedness of the Borrower to such Bank, other
than Indebtedness evidenced by the Revolving Credit Notes held by such Bank or
constituting Reimbursement Obligations owed to such Bank, such amount shall be
applied ratably to such other Indebtedness and to the Indebtedness evidenced by
all such Revolving Credit Notes held by such Bank or constituting Reimbursement
Obligations owed to such Bank, and (ii) if such Bank shall receive from the
Borrower, whether by voluntary payment, exercise of the right of setoff,
counterclaim, cross action, enforcement of the claim evidenced by the Revolving
Credit Notes held by, or constituting Reimbursement Obligations owed to, such
Bank by proceedings against the Borrower at law or in equity or by proof thereof
in bankruptcy, reorganization, liquidation, receivership or similar proceedings,
or otherwise, and shall retain and apply to the payment of the Revolving Credit
Note or Revolving Credit Notes held by, or Reimbursement Obligations owed to,
such Bank any amount in excess of its ratable portion of the payments received
by all of the Banks with respect to the Revolving Credit Notes held by, and
Reimbursement Obligations owed to, all of the Banks, such Bank will make such
disposition and arrangements with the other Banks with respect to such excess,
either by way of distribution, pro tanto assignment of claims, subrogation or
--- -----
otherwise as shall result in each Bank receiving in respect of the Revolving
Credit Notes held by it or Reimbursement obligations owed it, its proportionate
payment as contemplated by this Credit Agreement; provided that if all or any
--------
part of such excess payment is thereafter recovered
<PAGE>
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from such Bank, such disposition and arrangements shall be rescinded and the
amount restored to the extent of such recovery, but without interest.
15. THE AGENTS.
----------
15.1. AUTHORIZATION.
-------------
(a) Each of the Agents is authorized to take such action on behalf
of each of the Banks and to exercise all such powers as are hereunder and
under any of the other Loan Documents and any related documents delegated
to such Agent, together with such powers as are reasonably incident
thereto, provided that no duties or responsibilities not expressly assumed
--------
herein or therein shall be implied to have been assumed by the Agents.
(b) The relationship between the Agents and each of the Banks is
that of an independent contractor. The use of the term "Agent" is for
convenience only and is used to describe, as a form of convention, the
independent contractual relationship between the Agents and each of the
Banks. Nothing contained in this Credit Agreement nor the other Loan
Documents shall be construed to create an agency, trust or other fiduciary
relationship between the Agents and any of the Banks.
(c) As an independent contractor empowered by the Banks to exercise
certain rights and perform certain duties and responsibilities hereunder
and under the other Loan Documents, each of the Agents is nevertheless a
"representative" of the Banks, as that term is defined in Article 1 of the
Uniform Commercial Code, for purposes of actions for the benefit of the
Banks and the Agents with respect to all collateral security and guaranties
contemplated by the Loan Documents. Such actions include the designation
of the Loan and Collateral Agent as "secured party", "mortgagee" or the
like on all financing statements and other documents and instruments,
whether recorded or otherwise, relating to the attachment, perfection,
priority or enforcement of any security interests, mortgages or deeds of
trust in collateral security intended to secure the payment or performance
of any of the Obligations, all for the benefit of the Banks and the Agents.
15.2. EMPLOYEES AND AGENTS. Each of the Agents may exercise its powers and
--------------------
execute its duties by or through employees or agents and shall be entitled to
take, and to rely on, advice of counsel concerning all matters pertaining to its
rights and duties under this Credit Agreement and the other Loan Documents. Each
of the Agents may utilize the services of such Persons
<PAGE>
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as such Agent in its sole discretion may reasonably determine, and all
reasonable fees and expenses of any such Persons shall be paid by the Borrower.
15.3. NO LIABILITY. Neither the Agents nor any of its shareholders,
------------
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agents or such other
Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
15.4. NO REPRESENTATIONS.
------------------
15.4.1. GENERAL. The Agents shall not be responsible for the
-------
execution or validity or enforceability of this Credit Agreement, the
Revolving Credit Notes, the Letters of Credit, any of the other Loan
Documents or any instrument at any time constituting, or intended to
constitute, collateral security for the Revolving Credit Notes, or for the
value of any such collateral security or for the validity, enforceability
or collectability of any such amounts owing with respect to the Revolving
Credit Notes, or for any recitals or statements, warranties or
representations made herein or in any of the other Loan Documents or in any
certificate or instrument hereafter furnished to it by or on behalf of the
Borrower or any of its Subsidiaries, or be bound to ascertain or inquire as
to the performance or observance of any of the terms, conditions, covenants
or agreements herein or in any instrument at any time constituting, or
intended to constitute, collateral security for the Revolving Credit Notes
or to inspect any of the properties, books or records of the Borrower or
any of its Subsidiaries. The Agents shall not be bound to ascertain whether
any notice, consent, waiver or request delivered to it by the Borrower or
any holder of any of the Revolving Credit Notes shall have been duly
authorized or is true, accurate and complete. Each of the Agents has not
made nor does it now make any representations or warranties, express or
implied, nor does it assume any liability to the Banks, with respect to the
credit worthiness or financial conditions of the Borrower or any of its
Subsidiaries. Each Bank acknowledges that it has, independently and without
reliance upon the Agents or any other Bank, and based upon such information
and documents as it has deemed appropriate, made its own credit analysis
and decision to enter into this Credit Agreement.
<PAGE>
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15.4.2. CLOSING DOCUMENTATION, ETC. For purposes of determining
--------------------------
compliance with the conditions set forth in (S)11, each Bank that has
executed this Credit Agreement shall be deemed to have consented to,
approved or accepted, or to be satisfied with, each document and matter
either sent, or made available, by the Agents or the Arrangers to such Bank
for consent, approval, acceptance or satisfaction, or required thereunder
to be to be consent to or approved by or acceptable or satisfactory to such
Bank, unless an officer of the Agents or the Arrangers active upon the
Borrower's account shall have received notice from such Bank prior to the
Closing Date specifying such Bank's objection thereto and such objection
shall not have been withdrawn by notice to the Agents or the Arrangers to
such effect on or prior to the Closing Date.
15.5. PAYMENTS.
--------
15.5.1. PAYMENTS TO AGENTS. A payment by the Borrower to the Loan
------------------
and Collateral Agent hereunder or the Letter of Credit Agreement, as the
case may be, or any of the other Loan Documents for the account of any Bank
shall constitute a payment to such Bank. Each of the Agents agrees promptly
to distribute to each Bank such Bank's pro rata share of payments received
--- ----
by such Agent for the account of the Banks except as otherwise expressly
provided herein or in any of the other Loan Documents.
15.5.2. DISTRIBUTION BY AGENTS. If in the opinion of either of the
----------------------
Agents the distribution of any amount received by it in such capacity
hereunder, under the Revolving Credit Notes or under any of the other Loan
Documents might involve it in liability, it may refrain from making
distribution until its right to make distribution shall have been
adjudicated by a court of competent jurisdiction. If a court of competent
jurisdiction shall adjudge that any amount received and distributed by
either of the Agents is to be repaid, each Person to whom any such
distribution shall have been made shall either repay to such Agent its
proportionate share of the amount so adjudged to be repaid or shall pay
over the same in such manner and to such Persons as shall be determined by
such court.
15.5.3. DELINQUENT BANKS. Notwithstanding anything to the contrary
----------------
contained in this Credit Agreement or any of the other Loan Documents, any
Bank that fails (i) to make available to the appropriate Agent its pro rata
--- ----
share of any Revolving Credit Loan or to purchase any Letter of Credit
Participation or (ii) to comply with the provisions of (S)14 with respect
to making dispositions and
<PAGE>
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arrangements with the other Banks, where such Bank's share of any payment
received, whether by setoff or otherwise, is in excess of its pro rata
--- ----
share of such payments due and payable to all of the Banks, in each case
as, when and to the full extent required by the provisions of this Credit
Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be
---------------
deemed a Delinquent Bank until such time as such delinquency is satisfied.
A Delinquent Bank shall be deemed to have assigned any and all payments due
to it from the Borrower, whether on account of outstanding Loans, Unpaid
Reimbursement Obligations, interest, fees or otherwise, to the remaining
nondelinquent Banks for application to, and reduction of, their respective
pro rata shares of all outstanding Loans and Unpaid Reimbursement
--- ----
Obligations. The Delinquent Bank hereby authorizes each of the Agents to
distribute such payments to the nondelinquent Banks in proportion to their
respective pro rata shares of all outstanding Loans and Unpaid
--- ----
Reimbursement Obligations. A Delinquent Bank shall be deemed to have
satisfied in full a delinquency when and if, as a result of application of
the assigned payments to all outstanding Loans and Unpaid Reimbursement
Obligations of the nondelinquent Banks, the Banks' respective pro rata
--- ----
shares of all outstanding Loans and Unpaid Reimbursement Obligations have
returned to those in effect immediately prior to such delinquency and
without giving effect to the nonpayment causing such delinquency.
15.6. HOLDERS OF REVOLVING CREDIT NOTES. Each of the Agents may deem and
---------------------------------
treat the payee of any Revolving Credit Note or the purchaser of any Letter of
Credit Participation as the absolute owner or purchaser thereof for all purposes
hereof until it shall have been furnished in writing with a different name by
such payee or by a subsequent holder, assignee or transferee.
15.7. INDEMNITY. The Banks ratably agree hereby to indemnify and hold
---------
harmless each of the Agents and its affiliates from and against any and all
claims, actions and suits (whether groundless or otherwise), losses, damages,
costs, expenses (including any expenses for which such Agent or such affiliate
has not been reimbursed by the Borrower as required by (S)16), and liabilities
of every nature and character arising out of or related to this Credit
Agreement, the Revolving Credit Notes, or any of the other Loan Documents or
----------------------
the transactions contemplated or evidenced hereby or thereby, or such Agent's
actions taken hereunder or thereunder, except to the extent that any of the same
shall be directly caused by such Agent's willful misconduct or gross negligence.
15.8. AGENTS AS BANKS. In its individual capacity, each of the Agents
---------------
<PAGE>
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shall have the same obligations and the same rights, powers and privileges in
respect to its Commitment and the Revolving Credit Loans made by it, and as the
holder of any of the Revolving Credit Notes and as the purchaser of any Letter
----------------------
of Credit Participations, as it would have were it not also an Agent.
15.9. RESIGNATION. Any Agent may resign at any time by giving sixty (60)
-----------
days prior written notice thereof to the Banks and the Borrower. Upon any such
resignation, the Majority Banks shall have the right to appoint a successor
Agent. Unless a Default or Event of Default shall have occurred and be
continuing, such successor Agent shall be reasonably acceptable to the Borrower.
If no successor Agent shall have been so appointed by the Majority Banks and
shall have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Banks, appoint a successor Agent, which shall be a financial institution
having a rating of not less than A or its equivalent by Standard & Poor's
Corporation. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation, the provisions of this Credit
Agreement and the other Loan Documents shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as Agent.
15.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank hereby
----------------------------------------------
agrees that, upon learning of the existence of a Default or an Event of Default,
it shall promptly notify the Agents thereof. Each of the Agents hereby agrees
that, upon receipt of any notice under this (S)15.10 or upon otherwise learning
of the existence of a Default or an Event of Default, it shall promptly notify
the other Agent, each of the Banks (other than the Bank that provided such
notice to such Agent) and the Borrower of the existence of such Default or Event
of Default.
15.11. DUTIES IN THE CASE OF ENFORCEMENT. In case one of more Events of
---------------------------------
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Loan and Collateral Agent shall, if
(i) so requested by the Majority Banks and (ii) the Banks have provided to the
Loan and Collateral Agent such additional indemnities and assurances against
expenses and liabilities as the Loan and Collateral Agent may reasonably
request, proceed to enforce the provisions of the Security Documents authorizing
the sale or other disposition of all or any part of the Collateral and exercise
all or any such other legal and equitable and other rights or remedies as it may
have in respect of such Collateral. The Majority Banks may direct the Loan and
Collateral Agent in writing as to the method
<PAGE>
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and the extent of any such sale or other disposition, the Banks hereby agreeing
to indemnify and hold the Loan and Collateral Agent, harmless from all
liabilities incurred in respect of all actions taken or omitted in accordance
with such directions, provided that Loan and Collateral Agent need not comply
--------
with any such direction to the extent that the Loan and Collateral Agent
reasonably believes the Loan and Collateral Agent's compliance with such
direction to be unlawful or commercially unreasonable in any applicable
jurisdiction.
16. EXPENSES AND INDEMNIFICATION.
----------------------------
16.1. EXPENSES. The Borrower agrees to pay (i) the reasonable costs of
--------
producing and reproducing this Credit Agreement, the other Loan Documents and
the other agreements and instruments mentioned herein, (ii) any taxes (including
any interest and penalties in respect thereto) payable by any Agent, Arranger or
Bank (other than taxes based upon any Agent's, or Arranger's or any Bank's net
income) on or with respect to the transactions contemplated by this Credit
Agreement (the Borrower hereby agreeing to indemnify each Agent, Arranger and
Bank with respect thereto), (iii) the reasonable fees, expenses and
disbursements of the Loan and Collateral Agent's Special Counsel or any local
counsel to the Loan and Collateral Agent incurred in connection with the
preparation, syndication, administration or interpretation of the Loan Documents
and other instruments mentioned herein, each closing hereunder, any amendments,
modifications, approvals, consents or waivers hereto or hereunder, or the
cancellation of any Loan Document upon payment in full in cash of all of the
Obligations or pursuant to any terms of such Loan Document for providing for
cancellation, (iv) the fees, expenses and disbursements of any Agent, any of its
affiliates or any Arranger incurred in connection with the preparation,
syndication, administration or interpretation of the Loan Documents and other
instruments mentioned herein, including all title insurance premiums and
surveyor, engineering and appraisal charges, (v) any fees, costs, expenses and
bank charges, including bank charges for returned checks, incurred by the Agents
in establishing, maintaining or handling agency accounts, lock box accounts and
other accounts for the collection of any of the Collateral; (vi) all reasonable
out-of-pocket expenses (including without limitation reasonable fees and costs
for one outside counsel for the Agents, and reasonable consulting, accounting,
appraisal, investment banking and similar professional fees and charges)
incurred by any Bank or any Agent in connection with (A) the enforcement of or
preservation of rights under any of the Loan Documents against the Borrower or
any of its Subsidiaries or the administration thereof after the occurrence of a
Default or Event of Default and (B) any litigation, proceeding or dispute
whether arising hereunder or
<PAGE>
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otherwise, in any way related to any Bank's or any Agent's relationship with the
Borrower or any of its Subsidiaries and (vii) all reasonable fees, expenses and
disbursements of any Bank or any Agent incurred in connection with UCC searches,
UCC filings or mortgage recordings. Without in any way limiting the Agents' or
Banks' rights to be reimbursed by the Borrower and its Subsidiaries pursuant to
(S)(S)16.1 and 16.2, at the begining of each year the Agents will provide the
Borrower of an estimate as to the amount of expenses for which they shall seek
reimbursement from the Borrower during the course of such year.
16.2. INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless
---------------
the Agents, its affiliates, the Banks and the Arrangers from and against any and
all claims, actions and suits whether groundless or otherwise, and from and
against any and all liabilities, losses, damages and expenses of every nature
and character arising out of this Credit Agreement or any of the other Loan
Documents or the transactions contemplated hereby ("Claims") including, without
limitation, (i) any actual or proposed use by the Borrower or any of its
Subsidiaries of the proceeds of any of the Revolving Credit Loans or Letters of
Credit, (ii) the reversal or withdrawal of any provisional credits granted by
the Loan and Collateral Agent upon the transfer of funds from lock box, bank
agency or concentration accounts or in connection with the provisional honoring
of checks or other items, (iii) any actual or alleged infringement of any
patent, copyright, trademark, service mark or similar right of the Borrower or
any of its Subsidiaries comprised in the Collateral, (iv) the Borrower or any of
its Subsidiaries entering into or performing this Credit Agreement or any of the
other Loan Documents or (v) with respect to the Borrower and its Subsidiaries
and their respective properties and assets, the violation of any Environmental
Law, the presence, disposal, escape, seepage, leakage, spillage, discharge,
emission, release or threatened release of any Hazardous Substances or any
action, suit, proceeding or investigation brought or threatened with respect to
any Hazardous Substances (including, but not limited to, claims with respect to
wrongful death, personal injury or damage to property), in each case including,
without limitation, the reasonable fees and disbursements of one outside counsel
for the Agents incurred in connection with any such investigation, litigation or
other proceeding. In litigation, or the preparation therefor, the Banks, the
Arrangers and each of the Agents and its affiliates shall be entitled to select
their own counsel and, in addition to the foregoing indemnity, the Borrower
agrees to pay promptly the reasonable fees and expenses of one outside counsel
for the Agents. If, and to the extent that the obligations of the Borrower under
this (S)16.2 are unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment in satisfaction of such obligations
which is permissible under
<PAGE>
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applicable law. Notwithstanding the foregoing, the Borrower shall have no
liability pursuant to this (S)16.2 to any Person to the extent that any Claims
arose solely from such Person's gross negligence or willful misconduct.
16.3. SURVIVAL. The covenants contained in this (S)16 shall survive
--------
payment or satisfaction in full of all other Obligations.
17. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.
---------------------------------------------
17.1. SHARING OF INFORMATION WITH SECTION 20 SUBSIDIARY. The Borrower
-------------------------------------------------
acknowledges that from time to time financial advisory, investment banking and
other services may be offered or provided to the Borrower or one or more of its
Subsidiaries, in connection with this Credit Agreement or otherwise, by a
Section 20 Subsidiary. The Borrower, for itself and each of its Subsidiaries,
hereby authorizes (a) such Section 20 Subsidiary to share with each Agent and
each Bank any information delivered to such Section 20 Subsidiary by the
Borrower or any of its Subsidiaries, and (b) each Agent and each Bank to share
with such Section 20 Subsidiary any information delivered to such Agent or such
Bank by the Borrower or any of its Subsidiaries pursuant to this Credit
Agreement, or in connection with the decision of such Bank to enter into this
Credit Agreement; it being understood, in each case, that any such Section 20
Subsidiary receiving such information shall be bound by the confidentiality
provisions of this Credit Agreement. Such authorization shall survive the
payment and satisfaction in full of all of Obligations.
17.2. CONFIDENTIALITY. Each of the Banks and each of the Agents agrees, on
---------------
behalf of itself and each of its affiliates, directors, officers, employees and
representatives, to use all due care to keep confidential, in accordance with
their customary procedures for handling confidential information of the same
nature and in accordance with safe and sound banking practices, any non-public
information supplied to it by the Borrower or any of its Subsidiaries pursuant
to this Credit Agreement, provided that nothing herein shall limit the
--------
disclosure of any such information (a) after such information shall have become
public other than through a violation of this (S)17, (b) to the extent required
by statute, rule, regulation or judicial process, (c) to counsel for any Bank or
any Agent, (d) to bank examiners or any other regulatory authority having
jurisdiction over any Bank or any Agent, or to auditors or accountants, (e) to
any Agent, any Bank or any Section 20 Subsidiary, (f) in connection with any
litigation to which any one or more of the Banks, the Agents or any Section 20
Subsidiary is a party, or in connection with the enforcement of rights or
remedies hereunder or under any other Loan Document, (g) to a Subsidiary or
affiliate of such Bank as provided in (S)17.1 or (h) to any assignee or
participant (or prospective
<PAGE>
-90-
assignee or participant) so long as such assignee or participant agrees to be
bound by the provisions of (S)19.6.
17.3. PRIOR NOTIFICATION. Unless specifically prohibited by applicable law
------------------
or court order, each of the Banks and each of the Agents shall, prior to
disclosure thereof, notify the Borrower of any request for disclosure of any
such non-public information by any governmental agency or representative thereof
(other than any such request in connection with an examination of the financial
condition of such Bank by such governmental agency) or pursuant to legal
process.
17.4. OTHER. In no event shall any Bank or any Agent be obligated or
-----
required to return any materials furnished to it or any Section 20 Subsidiary by
the Borrower or any of its Subsidiaries. The obligations of each Bank under this
(S)17 shall supersede and replace the obligations of such Bank under any
confidentiality letter in respect of this financing signed and delivered by such
Bank to the Borrower prior to the date hereof and shall be binding upon any
assignee of, or purchaser of any participation in, any interest in any of the
Revolving Credit Loans or Reimbursement Obligations from any Bank.
18. SURVIVAL OF COVENANTS, ETC.
--------------------------
All covenants, agreements, representations and warranties made herein, in
the Revolving Credit Notes, in any of the other Loan Documents or in any
documents or other papers delivered by or on behalf of the Borrower or any of
its Subsidiaries pursuant hereto shall be deemed to have been relied upon by the
Banks and the Agents at the time made or deemed made, notwithstanding any
investigation heretofore or hereafter made by any of them, and shall survive the
making by the Banks of any of the Revolving Credit Loans and the issuance,
extension or renewal of any Letters of Credit, as herein contemplated, and shall
continue in full force and effect so long as any Letter of Credit or any amount
due under this Credit Agreement or the Revolving Credit Notes or any of the
other Loan Documents remains outstanding or any Bank has any obligation to make
any Revolving Credit Loans or the Letter of Credit Agent has any obligation to
issue, extend or renew any Letter of Credit, and for such further time as may be
otherwise expressly specified in this Credit Agreement. All statements
contained in any certificate or other paper delivered to any Bank or any Agent
at any time by or on behalf of the Borrower or any of its Subsidiaries pursuant
hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by the Borrower or such Subsidiary
hereunder.
<PAGE>
-91-
19. ASSIGNMENT AND PARTICIPATION.
----------------------------
19.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein, each
---------------------------------
Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including all or
a portion of its Commitment Percentage and Commitment and the same portion of
the Revolving Credit Loans at the time owing to it, the Revolving Credit Notes
held by it and its participating interest in the risk relating to any Letters of
Credit); provided that (i) each Agent and, unless a Default or Event of Default
--------
shall have occurred and be continuing, the Borrower, shall have given its prior
written consent to such assignment, which consent, in the case of the Borrower,
will not be unreasonably withheld, (ii) each such assignment shall be of a
constant, and not a varying, percentage of all the assigning Bank's rights and
obligations under this Credit Agreement, (iii) each assignment shall be in an
amount that is a whole multiple of $5,000,000 or the entire amount of such
Bank's Commitment, and (iv) the parties to such assignment shall execute and
deliver to the Loan and Collateral Agent, for recording in the Register (as
hereinafter defined), an Assignment and Acceptance, substantially in the form of
Exhibit E hereto (an "Assignment and Acceptance"), together with any Revolving
- ------- - -------------------------
Credit Notes subject to such assignment. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least five (5)
Business Days after the execution thereof, (i) the assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Bank hereunder, and (ii) the assigning Bank
shall, to the extent provided in such assignment and upon payment to the Loan
and Collateral Agent of the registration fee referred to in (S)19.3, be released
from its obligations under this Credit Agreement.
19.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS. By
--------------------------------------------------------------
executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:
(a) other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, the assigning Bank makes no representation or
warranty, express or implied, and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
this Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant
<PAGE>
-92-
hereto or the attachment, perfection or priority of any security interest
or mortgage,
(b) the assigning Bank makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrower
and its Subsidiaries or any other Person primarily or secondarily liable in
respect of any of the Obligations, or the performance or observance by the
Borrower and its Subsidiaries or any other Person primarily or secondarily
liable in respect of any of the Obligations of any of their obligations
under this Credit Agreement or any of the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto;
(c) such assignee confirms that it has received a copy of this Credit
Agreement, together with copies of the most recent financial statements
referred to in (S)7.4 and (S)8.4 and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision
to enter into such Assignment and Acceptance;
(d) such assignee will, independently and without reliance upon the
assigning Bank, the Agents or any other Bank and based on such documents
and information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under this Credit
Agreement;
(e) such assignee represents and warrants that it is an Eligible
Assignee;
(f) such assignee appoints and authorizes the Agents to take such
action as agents on its behalf and to exercise such powers under this
Credit Agreement and the other Loan Documents as are delegated to the
Agents by the terms hereof or thereof, together with such powers as are
reasonably incidental thereto;
(g) such assignee agrees that it will perform in accordance with their
terms all of the obligations that by the terms of this Credit Agreement are
required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements with the
assigning Bank satisfactory to such assignee with respect to its pro rata
--- ----
share of Letter of Credit Fees in respect of
<PAGE>
-93-
outstanding Letters of Credit.
19.3. REGISTER. The Loan and Collateral Agent shall maintain a copy of
--------
each Assignment and Acceptance delivered to it and a register or similar list
(the "Register") for the recordation of the names and addresses of the Banks and
--------
the Commitment Percentage of, and principal amount of the Revolving Credit Loans
owing to and Letter of Credit Participations purchased by, the Banks from time
to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agents and the Banks may treat each Person
whose name is recorded in the Register as a Bank hereunder for all purposes of
this Credit Agreement. The Register shall be available for inspection by the
Borrower and the Banks at any reasonable time and from time to time upon
reasonable prior notice. Upon each such recordation, the assigning Bank agrees
to pay to the Loan and Collateral Agent a registration fee in the sum of $3,000;
provided, however, that no such fee shall be due from BofA for assignments made
- -------- -------
within the first 60 days after the Closing Date in connection with the initial
syndication of the facility.
19.4. NEW REVOLVING CREDIT NOTES. Upon its receipt of an Assignment and
--------------------------
Acceptance executed by the parties to such assignment, together with each Note
subject to such assignment, the Loan and Collateral Agent shall (i) record the
information contained therein in the Register, and (ii) give prompt notice
thereof to the Borrower and the Banks (other than the assigning Bank). Within
five (5) Business Days after receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Loan and Collateral Agent, in exchange
for each surrendered Note, a new Note to the order of such Eligible Assignee in
an amount equal to the amount assumed by such Eligible Assignee pursuant to such
Assignment and Acceptance and, if the assigning Bank has retained some portion
of its obligations hereunder, a new Note to the order of the assigning Bank in
an amount equal to the amount retained by it hereunder. Such new Revolving
Credit Notes shall provide that they are replacements for the surrendered
Revolving Credit Notes, shall be in an aggregate principal amount equal to the
aggregate principal amount of the surrendered Revolving Credit Notes, shall be
dated the effective date of such in Assignment and Acceptance and shall
otherwise be substantially the form of the assigned Revolving Credit Notes.
Within five (5) days of issuance of any new Revolving Credit Notes pursuant to
this (S)19.4, the Borrower shall deliver an opinion of counsel, addressed to the
Banks and the Agents, relating to the due authorization, execution and delivery
of such new Revolving Credit Notes and the legality, validity and binding effect
thereof, in form and substance satisfactory to the Banks. The surrendered
Revolving Credit Notes shall be cancelled and returned to the
<PAGE>
-94-
Borrower.
19.5. PARTICIPATIONS. Each Bank may sell participations to one or more
--------------
banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents; provided
--------
that (i) each such participation shall be in an amount of not less than
$5,000,000, (ii) any such sale or participation shall not affect the rights and
duties of the selling Bank hereunder to the Borrower and (iii) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents shall be
the rights to approve waivers, amendments or modifications that would reduce the
principal of or the interest rate on any Revolving Credit Loans, extend the term
or increase the amount of the Commitment of such Bank as it relates to such
participant, reduce the amount of any commitment fees or Letter of Credit Fees
to which such participant is entitled or extend any regularly scheduled payment
date for principal or interest.
19.6. DISCLOSURE. The Borrower agrees that in addition to disclosures
----------
made in accordance with standard and customary banking practices any Bank may
disclose information obtained by such Bank pursuant to this Credit Agreement to
assignees or participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential assignees or
- --------
participants shall agree (i) to treat in confidence such information unless such
information otherwise becomes public knowledge, (ii) not to disclose such
information to a third party, except as required by law or legal process and
(iii) not to make use of such information for purposes of transactions unrelated
to such contemplated assignment or participation. For purposes of this (S)19.6
an assignee or participant or potential assignee or participant may include a
counterparty with whom such Bank has entered into or potentially might enter
into a derivative contract referenced to credit or other risks or events arising
under this Credit Agreement or any other Loan Document. Anything to the contrary
contained herein notwithstanding, each Bank and each Agent may include
references to the Borrower (and may utilize any logo or other distinctive symbol
associated with the Borrower) in connection with any advertising, promotion, or
marketing undertaken by such Bank or such Agent.
19.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any
----------------------------------------------------
assignee Bank is an Affiliate of the Borrower, then any such assignee Bank shall
have no right to vote as a Bank hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or other modifications to any of the Loan Documents or
for purposes of making requests to the Agents pursuant to
<PAGE>
-95-
(S)13.1 or (S)13.2, and the determination of the Majority Banks shall for all
purposes of this Credit Agreement and the other Loan Documents be made without
regard to such assignee Bank's interest in any of the Revolving Credit Loans or
Reimbursement Obligations. If any Bank sells a participating interest in any of
the Revolving Credit Loans or Reimbursement Obligations to a participant, and
such participant is the Borrower or an Affiliate of the Borrower, then such
transferor Bank shall promptly notify the Loan and Collateral Agent of the sale
of such participation. A transferor Bank shall have no right to vote as a Bank
hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or modifications
to any of the Loan Documents or for purposes of making requests to the Agents
pursuant to (S)13.1 or (S)13.2 to the extent that such participation is
beneficially owned by the Borrower or any Affiliate of the Borrower, and the
determination of the Majority Banks shall for all purposes of this Credit
Agreement and the other Loan Documents be made without regard to the interest of
such transferor Bank in the Revolving Credit Loans or Reimbursement Obligations
to the extent of such participation.
19.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall
-----------------------------------
retain its rights to be indemnified pursuant to (S)16 with respect to any claims
or actions arising prior to the date of such assignment. If any assignee Bank is
not incorporated under the laws of the United States of America or any state
thereof, it shall, prior to the date on which any interest or fees are payable
hereunder or under any of the other Loan Documents for its account, deliver to
the Borrower and the Loan and Collateral Agent certification as to its exemption
from deduction or withholding of any United States federal income taxes.
Anything contained in this (S)19 to the contrary notwithstanding, any Bank may
at any time pledge all or any portion of its interest and rights under this
Credit Agreement (including all or any portion of its Revolving Credit Notes) to
any of the twelve Federal Reserve Banks organized under (S)4 of the Federal
Reserve Act, 12 U.S.C. (S)341. No such pledge or the enforcement thereof shall
release the pledgor Bank from its obligations hereunder or under any of the
other Loan Documents.
19.9. ASSIGNMENT BY BORROWER. The Borrower shall not assign or transfer
----------------------
any of its rights or obligations under any of the Loan Documents without the
prior written consent of each of the Banks.
19.10. SYNDICATION. The Borrower hereby agrees to assist and cooperate
-----------
with the Arrangers in its efforts to complete the syndication of the commitments
and Revolving Credit Loans hereunder, including, but not limited to, promptly
preparing and providing materials and information reasonably deemed necessary by
the Arrangers to successfully complete and
<PAGE>
-96-
otherwise facilitate such syndication, including, without limitation, all
projections prepared by or on behalf of the Borrower relating to the
transactions contemplated hereby. The Borrower and its respective directors,
officers, employees and agents shall, at the reasonable request of the
Arrangers, meet with potential lenders and provide such additional information
as such Persons might reasonably request at a time and location to be agreed
upon by the Borrower.
20. NOTICES, ETC.
------------
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Revolving Credit Notes or any Letter of Credit
Applications shall be in writing and shall be delivered in hand, mailed by
United States registered or certified first class mail, postage prepaid, sent by
overnight courier, or sent by telegraph, telecopy, facsimile or telex and
confirmed by delivery via courier or postal service, addressed as follows:
(a) if to the Borrower, at 14000 San Bernardino Ave., Fontana, CA
92335, Attention: Executive Vice President, Finance, or at such other
address for notice as the Borrower shall last have furnished in writing to
the Person giving the notice;
(b) if to the Loan and Collateral Agent, at 100 Federal Street,
Boston, Massachusetts 02110, USA, Attention: William J. Sherald, Jr. or
such other address for notice as the Loan and Collateral Agent shall last
have furnished in writing to the Person giving the notice;
(c) if to the Letter of Credit Agent, at 3650 14th Street, 2nd Floor,
Riverside, California 92501, Attention: Helen C. Wilson, Vice President, or
at such other address for notice as the Borrower shall last have furnished
in writing to the Person giving the notice; and
(d) if to any Bank, at such Bank's address set forth on Schedule 1
-------- -
hereto, or such other address for notice as such Bank shall have last
furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
<PAGE>
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21. GOVERNING LAW.
-------------
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
STATE OF NEW YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF SAID STATE OF NEW YORK (EXCLUDING THE LAWS APPLICABLE TO
CONFLICTS OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING
THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE
OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS
SPECIFIED IN (S)20. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT
IS BROUGHT IN AN INCONVENIENT COURT.
22. HEADINGS.
--------
The captions in this Credit Agreement are for convenience of reference only
and shall not define or limit the provisions hereof.
23. COUNTERPARTS.
------------
This Credit Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Credit Agreement it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought.
24. ENTIRE AGREEMENT, ETC.
---------------------
The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Credit Agreement nor any term
hereof may be changed, waived, discharged or terminated, except as provided in
(S)26.
<PAGE>
-98-
25. WAIVER OF JURY TRIAL.
--------------------
The Borrower hereby waives its right to a jury trial with respect to any
action or claim arising out of any dispute in connection with this Credit
Agreement, the Revolving Credit Notes or any of the other Loan Documents, any
rights or obligations hereunder or thereunder or the performance of which rights
and obligations. Except as prohibited by law, the Borrower hereby waives any
right it may have to claim or recover in any litigation referred to in the
preceding sentence any special, exemplary, punitive or consequential damages or
any damages other than, or in addition to, actual damages. The Borrower (i)
certifies that no representative, agent or attorney of any Bank or any Agent has
represented, expressly or otherwise, that such Bank or such Agent would not, in
the event of litigation, seek to enforce the foregoing waivers and (ii)
acknowledges that the Agents and the Banks have been induced to enter into this
Credit Agreement, the other Loan Documents to which it is a party by, among
other things, the waivers and certifications contained herein.
26. CONSENTS, AMENDMENTS, WAIVERS, ETC.
----------------------------------
Any consent or approval required or permitted by this Credit Agreement to
be given by the Banks may be given, and any term of this Credit Agreement, the
other Loan Documents or any other instrument related hereto or mentioned herein
may be amended, and the performance or observance by the Borrower or any of its
Subsidiaries of any terms of this Credit Agreement, the other Loan Documents or
such other instrument or the continuance of any Default or Event of Default may
be waived (either generally or in a particular instance and either retroactively
or prospectively) with, but only with, the written consent of the Borrower and
the written consent of the Majority Banks. Notwithstanding the foregoing, the
rate of interest on the Revolving Credit Notes (other than interest accruing
pursuant to (S)5.10 following the effective date of any waiver by the Majority
Banks of the Default or Event of Default relating thereto) or the amount of the
commitment fee or Letter of Credit Fees may not be decreased without the written
consent of each Bank affected thereby; the amount of the Commitments may not be
increased without the written consent of the Borrower and of each Bank affected
thereby; the Revolving Credit Loan Maturity Date may not be postponed without
the written consent of each Bank affected thereby; this (S)26 and the definition
of Majority Banks may not be amended, without the written consent of all of the
Banks and the Borrower; and the amount of the Loan and Collateral Agent's fee or
any Letter of Credit Fees; (S)15 may not be amended without the written consent
of each of the Agents; (S)10 may not be amended or waived without the written
consent of the Super-majority Banks; the Borrowing Base may not be
<PAGE>
-99-
amended to increase the lending formula(s) with respect to Eligible Accounts
Receivable or Eligible Inventory without the written consent of all of the
Banks; and the definition of "Eligible Accounts Receivable", "Eligible
Inventory" or "Discretionary Amount" may not be amended without the written
consent of all of the Banks. No waiver shall extend to or affect any obligation
not expressly waived or impair any right consequent thereon. No course of
dealing or delay or omission on the part of any Agent or any Bank in exercising
any right shall operate as a waiver thereof or otherwise be prejudicial thereto.
No notice to or demand upon the Borrower shall entitle the Borrower to other or
further notice or demand in similar or other circumstances.
27. SEVERABILITY.
------------
The provisions of this Credit Agreement are severable and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Credit Agreement in any jurisdiction.
<PAGE>
-100-
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
CALIFORNIA STEEL INDUSTRIES, INC.
By: /s/ Celeo Lourenco Goncalves
-------------------------------------
Name: Celeo Lourenco Goncalves
Title: President and Chief
Executive Officer
BANKBOSTON, N.A., individually
and as Loan and Collateral Agent
By: /s/ Howard Bailey
-------------------------------------
Name: Howard Bailey
Title: Director
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION, individually and as
Letter of Credit Agent,
By: /s/ James Heil
-------------------------------------
Name: James Heil
Title: Vice President
BANCBOSTON ROBERTSON
STEPHENS INC., as Arranger
By: /s/ Theodore J. Davies
------------------------------------
Name: Theodore J. Davies
Title: Director
<PAGE>
-101-
NATIONSBANC MONTGOMERY
SECURITIES LLC, as Arranger
By: /s/ Jane E. Rawles
----------------------------------
Name: Jane E. Rawles
Title: Vice President
<PAGE>
EXHIBIT A
---------
BORROWING BASE REPORT
---------------------
<PAGE>
EXHIBIT B
---------
REVOLVING CREDIT NOTE
---------------------
<PAGE>
EXHIBIT C
---------
REVOLVING CREDIT LOAN REQUEST
-----------------------------
<PAGE>
EXHIBIT D
---------
COMPLIANCE CERTIFICATE
----------------------
<PAGE>
EXHIBIT E
---------
ASSIGNMENT AND ACCEPTANCE
-------------------------
<PAGE>
EXHIBIT F
---------
CUSTOMS AGENT AGREEMENT
-----------------------
<PAGE>
EXHIBIT 10.2
MEMORANDUM OF AGREEMENT MA-06
-----------------------------
The Memorandum of Agreement MA-06 is made this 11th of December, 1996 by and
between Companhia Siderurgica de Tubarao ("Seller") and California Steel
Industries, Inc. ("Purchaser") (collectively denominated "Parties") in view of
the following:
Whereas, Seller and Purchaser entered into the Agreement for Purchase and Sell
of Carbon Steel Slabs ("the Agreement") on December 5, 1984; and
Whereas, Seller and Purchaser subsequently amended the Agreement by the
execution of Memorandum of Agreements "MA-01, MA-02, MA-03, MA-04, and MA-05";
and
Whereas, Seller and Purchaser wish to amend the quantity of slabs provided for
in Exhibit A of the Agreement; and
Whereas, Purchaser and Seller are willing to include some additional provisions
to adjust the base price of slabs;
Now THEREFORE, Seller and Purchaser agree to modify the Agreement as amended as
follows:
1. Seller must guarantee supply of a stable quantity of steel
slabs to Purchaser at the market price, which basic terms and
conditions are to be agreed upon by the parties, observing
the following volumes, subject to adjustments commonly agreed
to by Purchaser and Seller:
1
<PAGE>
<TABLE>
<CAPTION>
Optional Additional
Calendar Volume Guaranteed Volume in Metric
Year in Metric Tons Tons
<S> <C> <C>
1997 930,000 -
1998 1,150,000 300,000
1999 1,300,000 300,000
2000 1,350,000 300,000
Beyond 2000 1,450,000 300,000
</TABLE>
The above guaranteed amounts shall replace the amount set fourth
in Exhibit A of the Agreement.
2. In the year that Seller relines its Blast Furnace number 1 (one)
the guaranteed and the optional volumes of slabs shall be reduced
by 22%. A six months notice of this relining will be given by
Seller to Purchaser.
3. Purchaser's election for the additional volume shall be given to
Seller on or before October 1, of the previous year. The total
volume so elected shall be delivered by Seller equally
distributed by calendar quarter.
4. Upon mutual agreement, the parties may reduce or increase the
volumes scheduled for a particular quarter. Neither party may do
so without the consent of the other.
5. Seller shall propose to Purchaser the expected base price of
slabs to be charged in the following calendar quarter deliveries
no later than forty (40) calendar days prior to the commencement
of such quarter.
6. If the Purchaser does not accept this proposal, Seller and
Purchaser, based on the best updated information from the market,
will develop a free negotiation and must mutually decide the slab
base price on or before the twenty-fifth (25th) day prior
2
<PAGE>
to the beginning of such quarter. Both parties will use their
best efforts to make this negotiation successful.
7. If the Parties do not agree the slab base price until the 25th
(twenty-fifth) day prior to the quarter, they will immediately
set a provisional price for that next quarter. The Parties will
continue to negotiate the final price until reaching an
agreement. The payment of the difference between the provisional
and final base price will be made by the appropriate party as
soon as practical following determination of slab base price.
8. One year after this agreement is in effect, the Parties will
analyze the effectiveness of the rules established on the clauses
5th (fifth) and 6th (sixth), above. The parties will then
mutually decide to leave rules as written, or modify them as
appropriate.
9. The Parties agree to amend the article 3 (three) of the Agreement
extending its effects until December 31, 2004, and continue
thereafter until six (6) months written notice of cancellation is
given by either party to the other.
11. This Memorandum of Agreement is effective as of the date it is
executed by both parties.
12. In all other respects the Agreement as amended remains unchanged.
In Witness Whereof, Seller and Purchaser have caused this Memorandum to be
executed on the day and year first above written.
/s/ Miguel Jourdan /s/ Benjamin Baptista
- --------------------------------- ---------------------------------
California Steel Industries, Inc. Companhia Siderurgica de Tubarao
CSI CST
3
<PAGE>
MEMORANDUM OF AGREEMENT MA-05
-----------------------------
This MEMORANDUM OF AGREEMENT NO.05 is made this 22nd of May, 1987 by and between
Companhia Siderurgica de Tubarao ("Seller") and California Steel Industries,
Inc. ("Purchaser").
WITNESSETH THAT
---------------
WHEREAS, Seller and Purchaser entered on December 5, 1984, the Agreement for
Purchase and Sale of Carbon Steel Slabs (the "Agreement");
WHEREAS, the Agreement provides for the base price of the slabs to be adjusted
for every calendar quarter through the application of a specific formula under
item 3 of the Exhibit A to the Agreement;
WHEREAS, Seller and Purchaser are willing to revise the principle to adjust the
base price of slabs;
NOW THEREFORE, Seller and Purchaser do hereby agree as follows:
1. Seller shall inform Purchaser the expected base price of slabs to
be charged for the following calendar quarter deliveries no later
than forty (40) days prior to the commencement of such quarter.
2. Seller and Purchaser shall mutually decide said base price on or
before the twenty-fifth (25th) day prior to the beginning of such
quarter.
3. The unit base price for the first quarter of 1987 shall be
US$178/mt (one hundred seventy-eight US dollars per metric ton),
and for the second quarter of 1987 shall be US$181/mt, (one
hundred eighty-one US dollars per metric ton).
4. For purposes of price application, calendar quarter deliveries
shall be determined by the Bill of Lading dates.
In Witness Whereof, Seller and Purchaser have caused this Memorandum to be
executed on the day and year first above written.
/s/ Paulo Burnier /s/ Fernando Paschoal Guerra
- ---------------------------------- --------------------------------------
CALIFORNIA STEEL INDUSTRIES, INC. COMPANHIA SIDERURGICA DE TUBARAO - CST
<PAGE>
MEMORANDUM OF AGREEMENT NO. MA-04
This MEMORANDUM OF AGREEMENT NO. MA-04 is made this 11th day of December
1986 by and between Companhia Siderurgica de Tubarao - CST ("Seller") and
California Steel Industries, Inc. ("Purchaser").
WITNESSETH THAT
WHEREAS, Seller and Purchaser entered into on December 5, 1984, the
Agreement for Purchase and Sale of Carbon Steel Slabs (the "Agreement"); on June
7, 1985 the first Memorandum of Agreement (the "Memorandum"); and on December 9,
1986 the second Memorandum of Agreement No. MA-02 (the "Memorandum MA-02");
WHEREAS, the Memorandum provides for certain conditions to provisorily
apply the minimum contractual price as the sales price of Slabs;
WHEREAS, the Memorandum MA-02 provides for a waiver in the minimum
contractual price during 1986 deliveries and establishes that the parties shall
settle the compensation due to the Memorandum and Memorandum MA-02;
Now therefore, Seller and Purchaser do hereby agree as follows:
Notwithstanding any provision to the contrary contained in the
Agreement, the Memorandum, and the Memorandum MA-02, Purchaser agrees to
compensate Seller in the amount equivalent to US$1,526,064.47 (One
million five hundred twenty-six thousand sixty-four dollars and 47
cents).
In Witness Whereof, Seller and Purchaser have caused this memorandum to
be executed on the day and year first above written.
/s/ Paulo Burnier/S. Umemoto /s/ Fernando Paschoal Guerra
- -------------------------------- --------------------------------
CALIFORNIA STEEL INDUSTRIES, INC. COMPANHIA SIDERURGICA DE TUBARAO
<PAGE>
MEMORANDUM OF AGREEMENT NO. MA-03
This MEMORANDUM OF AGREEMENT NO. MA-03 is made this 11th day of December
1986 by and between Companhia Siderurgica de Tubarao - CST ("Seller") and
California Steel Industries, Inc. ("Purchaser").
WITNESSETH THAT
WHEREAS, Seller and Purchaser entered into on December 5, 1984, the
Agreement for Purchase and Sale of Carbon Steel Slabs (the "Agreement"); on June
7, 1985 the first Memorandum of Agreement (the "Memorandum"); and on December 9,
1986 the second Memorandum of Agreement No. MA-02 (the "Memorandum MA-02" );
WHEREAS, the Memorandum provides for certain conditions to provisorily
apply the minimum contractual price as the sales price of Slabs;
WHEREAS, the Memorandum MA-02 provides for a waiver in the minimum
contractual price during 1986 deliveries and establishes that the parties shall
settle the compensation due to the Memorandum and Memorandum MA-02;
WHEREAS, Seller recognizes the necessity to settle certain claims
occurred on Ships No. 1, 2, 3, 4 and 5 to Purchaser.
Now therefore, Seller and Purchaser do hereby agree as follows:
Notwithstanding any provision to the contrary contained in the
Agreement, the Memorandum, and the Memorandum MA-02, Seller agrees to
compensate Purchaser in the amount equivalent to US$861,738.11 (Eight
hundred sixty-one thousand seven hundred thirty-eight dollars and 11
cents).
In Witness Whereof, Seller and Purchaser have caused this Memorandum to
be executed on the day and year first above written.
/s/ Paulo Burnier
/s/ S. Umemoto /s/ Fernando Paschoal Guerra
- -------------------------------- --------------------------------
CALIFORNIA STEEL INDUSTRIES, INC. COMPANHIA SIDERURGICA DE TUBARAO
<PAGE>
MEMORANDUM OF AGREEMENT NO. MA-02
This MEMORANDUM OF AGREEMENT NO. MA-02 is made this 9th of December,
1986 by and between Companhia Siderurgica de Tubarao - CST ("Seller") and
California Steel Industries, Inc. ("Purchaser").
WITNESSETH THAT
WHEREAS, Seller and Purchaser entered into on December 5, 1984 the
Agreement for Purchase and Sale of Carbon Steel Slabs (the "Agreement") and on
June 7th, 1985 the first Memorandum of Agreement (the "Memorandum");
WHEREAS, the Agreement provides for that the sales price of Slabs to be
delivered under the Agreement on or after April 1, 1985 shall be determined
pursuant to the price adjustment formula set forth in Exhibit A to the
Agreement;
WHEREAS, the Memorandum provides for certain conditions to provisorily
apply the minimum contractual price as the sales price of Slabs to be delivered
under the Agreement for the second and third quarters (April - September), 1985;
WHEREAS, the continuing depression of the U.S. West Coast Market for
steel products is seriously affecting Purchaser;
WHEREAS, Seller is willing to concede a waiver in the minimum
contractual price during 1986 deliveries in order to assist Purchaser to
overcome said situation under certain conditions;
NOW THEREFORE, Seller and Purchaser do hereby agree as follows:
1 - Notwithstanding any provision to the contrary contained in the Agreement
and the Memorandum, the sales price of the Slabs of standard
specifications to be delivered under the Agreement during the 1st and
2nd quarters (January - June), 1986 shall be on hundred sixty-eight
dollars and sixty cents (US$ 168.60 - waived sales price) per Metric Ton
on F.O.B. ST Praia Mole basis.
The waived sales price of the Slabs of standard specifications to be
delivered during the 3rd and 4th quarters (July - December), 1986, shall
be mutually agreed up to June 5, 1986, and September 5, 1986,
respectively.
<PAGE>
2 - The minimum contractual price specified in the Agreement and the same
conditions of the Memorandum shall be applied to the fourth quarter,
1985.
3 - The compensation, which is entered an account to Purchaser's debit, for
the shipments made during the second, third and fourth quarters 1985
established on the first Memorandum as well as that, which is entered an
account to Purchaser's credit, of the first shipment realized on the
first quarter of 1986 shall be effected together on a date during 1987
to be mutually agreed upon by the Parties.
4 - The killed steel extras contained in Exhibit D of the Agreement shall be
changed and valid during 1986 as follows:
<TABLE>
<CAPTION>
FROM TO
---- --
<S> <C> <C>
- K-LC US$ 21/MT US$ 12/MT
- L-LMn US$ 21/MT US$ 12/MT
- K-HMn Mn > 1% US$ 30/MT US$ 15/MT
5 - The capitalized terms used herein shall have the same meanings as
ascribed to them in the Agreement.
6 - This Memorandum of Agreement does not cancel the pricing and adjustment
Articles of the Agreement as well as the special conditions of the first
memorandum of Agreement and shall remain valid throughout the year of
1986.
</TABLE>
In Witness Whereof, Seller and Purchaser have caused this Memorandum to be
executed on the day and year first above written.
/s/ Paulo Burnier /s/ Fernando Paschoal Guerra
/s/ S. Umemoto /s/ Arthur Carlos G. Santos
- --------------------------------- --------------------------------
California Steel Industries, Inc. Companhia Siderurgica de Tubarao -
CST
<PAGE>
MEMORANDUM OF AGREEMENT
-----------------------
This MEMORANDUM OF AGREEMENT is made this 7th day of June, 1985 by and
between Companhia Siderurgica de Tubarao - CST ("Seller") and California Steel
Industries, Inc. ("Purchaser").
WITNESSETH THAT:
WHEREAS, Seller and Purchaser entered into on December 5, 1984 the
Agreement for Purchase and Sale of Carbon Steel Slabs (the "Agreement");
WHEREAS, the Agreement provides for that the sales price of Slabs to be
delivered under the Agreement on or after April l, 1985 shall be determined
pursuant to the price adjustment formula set forth in Exhibit A to the
Agreement;
WHEREAS, the sales price applicable to the Slabs of standard
specifications to be delivered during the second and third quarters, 1985 will
be one hundred and eighty dollars and forty-eight cents ($180.48) per Metric Ton
on F.O.B. Praia Mole basis if determined pursuant to the above-mentioned price
adjustment formula;
WHEREAS, Purchaser is soliciting Seller for certain discount of the said
sale price applicable to the second and third quarters, 1985 delivery,
considering the current depression of the U.S. West Coast Market for steel
products; and
WHEREAS, Seller is willing to accept the Purchaser's above solicitation
with certain conditions;
NOW THEREFORE, Seller and Purchaser do hereby agree as follows:
-1-
<PAGE>
1. Notwithstanding any provision to the contrary contained in the Agreement,
the sales price of the Slabs of standard specifications to be delivered
under the Agreement during the second and third calendar quarters (April-
September), 1985 shall be One Hundred Seventy-Four Dollars ($174.00) per
Metric Ton on F.O.B. Praia Mole basis.
2. Purchaser shall compensate Seller for the difference between (i) the
total sales value of the Slabs delivered during the second and third
calender quarters, 1985 which CST would have received from Purchaser if
the sales price thereof had been determined in compliance with the
Agreement and (ii) the total sales value thereof which CST will receive
under the discounted sales price as agreed upon in Item 1 above, by
adjusting such difference to the sales value of the Slabs to be delivered
under the Agreement during the fourth calendar quarter, 1985 and, if not
possible, during the first calendar quarter, 1986.
3. The capitalized terms used herein shall have the same meanings as
ascribed to them in the Agreement.
In witness whereof, Seller and Purchaser have caused this Memorandum to
be executed on the day and year first above written.
California Steel Industries, Inc. Companhia Siderurgica de Tubarao - CST
/s/ Michael Wilkinson /s/ Arthur Carlos G. Santos
- ---------------------------------- --------------------------------------
By: By:
Title: Title:
/s/ Paulo Burnier /s/ J. Wellington Rezende
- ---------------------------------- --------------------------------------
By: By:
Title: Title:
-2-
<PAGE>
AGREEMENT FOR THE PURCHASE OF CARBON STEEL SLABS
BETWEEN
CALIFORNIA STEEL INDUSTRIES, INC.
AND
COMPANHIA SIDERURGICA DE TUBARAO
<PAGE>
TABLE OF CONTENTS
-----------------
DOCUMENT TAB NUMBER
------- ----------
Agreement 1
Exhibit A - Quantity, Price and Delivery Conditions 2
Exhibit B - Technical Protocol 3
Exhibit C - Shipping Conditions 4
Exhibit D - Extras 5
Miscellaneous 6
<PAGE>
Companhia Siderurgica
De Tubarao - CST
Avenida Princesa Isabel - 10(degree) Andar
Vitoria, BRAZIL
Attention:
-------------------------------------
Re: Agreement For Purchase and Sale
of Carbon Steel Slabs,
dated December 5, 1984
-------------------
Gentlemen:
This letter is written for the purpose of clarifying our mutual
understanding of the following:
Includable as deductible costs on resale of slabs by CST under the
conditions provided in Section 8.6 of the above-referenced agreement, at page 9,
are any Brazilian government export incentive payments lost by CST as a result
of nonexport of the slabs, up to the maximum of fifteen percent (15%) of the
selling price of the slabs then applicable to California Steel Industries, Inc.
If the foregoing adequately sets forth our mutual understanding, please
so indicate at the place provided on the enclosed copy of this letter, and
return that copy to us.
Very truly yours,
CALIFORNIA STEEL INDUSTRIES, INC
Acknowledged and agreed this
day of , 1984.
- ----- ------------ /s/ Paulo Burnier
COMPANHIA SIDERURGICA DE TUBARAO
By: /s/ Guilherme Sarcinelli
---------------------------------
Title: DIRECTOR
-------------------------------
<PAGE>
AGREEMENT FOR PURCHASE AND
SALE OF CARBON STEEL SLABS
--------------------------
THIS AGREEMENT made and entered into this 5th
---
day of December, 1984, by and between
--------
COMPANHIA SIDERURGICA DE TUBARAO - CST, a
corporation organized and existing under the
laws of Brazil with main office at Avenida
Princesa Isabel, 599 - 10(degree) andar,
Vitoria, State of Espirito Santo, Brazil
(hereinafter referred to as "Seller") and
CALIFORNIA STEEL INDUSTRIES, INC., a
corporation organized and existing under the
laws of the State of Delaware, United States
of America with main office at 1400 San
Bernardino Avenue, Fontana, California 92339
(hereinafter referred to as "Purchaser"),
Seller and Purchaser hereinafter collectively
referred to as "Parties".
WHEREAS, Purchaser desires to continuously purchase the slabs (as hereinafter
defined) from Seller; and
WHEREAS, Seller desires to continuously sell the slabs to Purchaser;
NOW IT IS HEREBY AGREED as follows:
<PAGE>
ARTICLE 1
Definitions
-----------
The defined terms used in this Agreement shall, unless the context
indicates otherwise, have the meanings specified in this Article l.
(a) "Slabs" shall mean carbon steel slabs manufactured by
-----
Seller's slabbinq mill which meet the technical specifications set forth in the
technical protocol, dated August 30, 1984, and which may be revised in December,
1984, attached hereto as Exhibit B and incorporated herein by reference.
(b) "Ton" shall mean a metric ton of 2,204.6 pounds
---
avoirdupois.
(c) "Dollars" and "Cents" shall mean lawful money of the
------- -----
United States of America.
(d) "F.O.B." shall mean free-on-board as defined in
------
"Incoterms," 1953 as amended in effect as of the date hereof and as published by
the International Chamber of Commerce.
(e) "Bill of Lading" shall mean the document of title
--------------
evidencing receipt of the cargo loaded, signed by the master of the vessel, or
under his authorization.
(f) "Purchase Order" shall mean Purchaser's written order
--------------
for slabs under this Agreement, setting forth quantity, specifications, unit and
total price, which may be issued by telex, telecopy or other written form.
2
<PAGE>
(g) "Cargo Readiness Date" shall mean a date on or before
--------------------
which the slabs shall be ready for delivery to the Purchaser as set forth in
item 8.2 hereof.
ARTICLE 2
Purchase and Sale
-----------------
Seller agrees to sell and deliver, and Purchaser agrees to purchase
and take delivery of the slabs, in the quantities, at the prices and in
accordance with the terms, conditions and specifications stated herein.
ARTICLE 3
Term of Agreement
-----------------
This Agreement shall become effective retroactive as of September 1,
1984, and shall remain in effect until December 31, 1999, and continue
thereafter until six (6) months written notice of cancellation is given by
either party to the other.
ARTICLE 4
Price and Payment
-----------------
The sales price and payment for all slabs sold and purchased hereunder
shall be as provided for in Exhibit A, attached hereto and incorporated herein
by reference.
3
<PAGE>
ARTICLE 5
Quantities
----------
5.1 Quantity. Quantities of slabs to be sold and delivered under
--------
this Agreement shall be as provided for in Exhibit A. If Seller is unable to
supply any or all of the quantities ordered, Purchaser shall have the right to
purchase slabs from alternative sources.
5.2 Re-Sale. The slabs shall be supplied solely for re-rolling at
-------
Purchaser's Fontana plant, and Purchaser shall not re-sell the slabs to any
other party for any purpose, without previous understandings between the parties
and with Seller's prior written consent, which consent shall not be unreasonably
withheld.
ARTICLE 6
Purchaser's Specifications
--------------------------
6.1 General Slab Characteristics. The slabs to be purchased and
----------------------------
delivered under this Agreement shall meet the applicable specifications,
including marking, as set forth in Exhibit B, which exhibit may be amended from
time to time by mutual agreement of the parties. If slabs are improperly
conditioned or marked, the provisions of Article 11 shall apply.
6.2 Physical Characteristics. Each type of slab shall conform to the
------------------------
physical characteristics for that type of slab as set forth in Exhibit B.
Dimension will be expressed in the im-
4
<PAGE>
perial system unless otherwise agreed upon. Seller will determine weights by
actual scale weighing in metric tons. In case of breakdown of Seller's weighing
scale, the weight of the slabs shall be calculated as defined in Exhibit B.
Weights shall be used for the computation of sales prices set forth in Exhibit
A. Seller will provide documentation of measurements for each slab and total
shipment weights.
Purchaser may measure and weigh each slab upon arrival at its Fontana
plant. If Purchaser reports a different measurement or weight than the Seller,
the provisions of Article 11 shall apply.
6.3 Chemical Characteristics. Seller, at Seller's expense, will
-------------------------
furnish Purchaser with such mill test records of chemical characteristics as
Purchaser may require, as set forth in Exhibit B.
Purchaser may test each slab at its Fontana plant within the schedule
as per Article 11. If Purchaser's test demonstrates that a slab does not meet
the specifications for its type as specified in Exhibit B, the provisions of
Article 11 shall apply.
ARTICLE 7
Warranties
----------
7.1 Seller's Warranties. Seller warrants to Purchaser that it has
-------------------
lawful title to the slabs, that the title conveyed
5
<PAGE>
shall be good and its transfer lawful, and that the slabs shall be delivered
free from any security interest or other lien or encumbrance upon title.
Seller further warrants to Purchaser that the slabs will meet the
specifications stated in Exhibit B and that the manufacture and sale of slabs
does not and will not infringe upon any patent, trademark or copyright.
Seller shall indemnify and hold Purchaser free and harmless from and
against any and all claims, demands, costs and liabilities, including legal
expenses, arising out of any breach or claim of breach of the warranties in this
item.
7.2 Purchaser's Warranties. Purchaser warrants to Seller that the
----------------------
slab specifications provided by Purchaser to Seller do not and will not infringe
upon any patent, trademark or copyright, and shall indemnify and hold Seller
free and harmless from and against any and all claims, demands, costs and
liabilities, including legal expenses, arising out of any breach or claim of
breach of the warranties in this item.
ARTICLE 8
Purchase Orders for Slabs
-------------------------
8.1 Delivery Instructions. Purchaser will submit to Seller, by the
---------------------
dates stated in item 8.2, its purchase order confirming the data as determined
in item 1.1(f) required for each shipload. Any other terms and conditions of
such purchase orders
6
<PAGE>
which are in addition to or in conflict with the provisions of this Agreement
shall not apply to sales of slabs hereunder.
8.2 Delivery Dates. Purchaser shall deliver its purchase order(s) to
--------------
Seller either on the tenth (10th), twentieth (20th) or thirtieth (30th) day of
each month, and in accordance with Exhibit A, and Seller will deliver the
ordered slabs within the following time periods. From the date of receipt of a
purchase order, Seller shall, within ten (10) calendar days, acknowledge receipt
of such purchase order and, as long as the slabs specifications are per Exhibit
B, the slabs shall be ready for loading thirty (30) calendar days after the date
of Seller's issuance of acknowledgment of receipt of such purchase order. Should
the Seller be unable to produce any slabs ordered, Seller shall within the above
ten (10) day period notify Purchaser, who shall specify within three (3) working
days alternative specifications.
8.3 New Specifications of Slabs. In the event that new specifications
---------------------------
with respect to sizes, other than those of Exhibit B are required by Purchaser,
Seller shall use its best efforts to study such specifications and inform
Purchaser of its acceptance or counter offer within three (3) working days. With
respect to new specifications regarding grade, type of steel and chemical
composition, Seller shall inform Purchaser within five (5) working days.
8.4 Delay in Delivery. Subject to the provisions of Article 9, if
-----------------
Seller is unable to make delivery of the slabs
7
<PAGE>
specified in Purchaser's purchase orders by the time such delivery is
established under item 8.2, and provided the vessel has arrived within the time
specified, or as otherwise mutually agreed, any deadfreight and/or demurrage
shall be borne by Seller. If Purchaser is required to terminate or renegotiate a
shipping contract because of any such delay in Seller's deliveries, Seller shall
also reimburse Purchaser for all direct costs, expenses and termination
penalties reasonably incurred by Purchaser in connection therewith and duly
verified by Seller.
8.5 Default by Purchaser to Make Vessel Ready for Shipment. In case
------------------------------------------------------
the Purchaser fails to make the vessel ready to load any of the shiploads of the
slabs which Seller has made ready for loading within fifteen (15) days from the
cargo readiness date, delivery of such shipload of the slabs shall be deemed to
have been made, and title and risks of the slabs shall automatically transfer
from Seller to the Purchaser. In such case, Seller shall acquire the right to
receive payment of the slabs by executing the letter of credit. For the purpose
of collecting payment, Seller shall issue a warehouse receipt in original which
will substitute for the documents prescribed in the letter of credit, except for
the commercial invoice.
8.6 Storage of Slabs. In case Purchaser fails to provide a ship for a
----------------
period of time in excess of forty-five (45) days from the cargo readiness date
for the shipload set forth in each purchase order, Seller shall, for the
Purchaser, continue to store the slabs in Seller's plant until the Purchaser
will have
8
<PAGE>
actually taken delivery thereof, provided that the Purchaser shall bear and pay
to Seller the storage cost duly demonstrated by Seller from the date next to the
last day of the said forty-five (45) day period until the day on which the
Purchaser will have actually taken delivery of the slabs. The storage cost shall
be paid by Purchaser within thirty (30) days of its receipt of Seller's debit
note which shall be issued by Seller once every thirty (30) days. After the
expiration of ninety (90) days from the cargo readiness date, should Purchaser
not have taken delivery of the slabs, Seller will be entitled to re-sell said
slabs in the market, remitting to Purchaser the lesser of the sales price
received from Purchaser and the sales price obtained in the market, after
deduction of all expenses and costs resulting from the cancelled shipment.
For the above purpose, Purchaser hereby expressly gives to Seller
the necessary power to, in name of Purchaser, sell the slabs and receive and
give receipt of any amount received for such a sale.
8.7 Release of Obligation. The provisions of item 8.5, however, shall
---------------------
not release Seller from its obligations to load, in accordance with Exhibit C
hereof, the slabs stored in Seller's plant as provided in item 8.6 on board the
vessel which the Purchaser will allocate later for the slabs, without prejudice
to Seller's right to dispose of the slabs as provided under item 8.6.
9
<PAGE>
ARTICLE 9
Force Majeure
-------------
9.1 Force Majeure. Subject to the notice provisions in item 9.2 and
-------------
without prejudice to the provisions of 8.5 through 8.7, neither Seller nor
Purchaser (herein called the "Affected Party") shall be liable for any delay or
failure to perform their respective obligations under this Agreement due to any
cause beyond the reasonable control of the Affected Party, including, but not
limited to, shortage of vessels, fires, strikes, boycotts, lockouts, civil
commotion, war, embargoes, floods, earthquakes, acts of God, actions, demands or
requirements of governmental activities, and restraints or quotas imposed by
statute or other means. In the event that Purchaser evokes shortage of vessels,
Seller will have the right to contract any kind of vessel for shipment not yet
effected, independently of the quantities per shipment as stated in item 1 -
Exhibit A. In such case the sales conditions will change from the FOB to the C&F
or CIF condition, according to Purchaser choice, which then will reimburse
Seller for all expenses resulting from the changes in the sales conditions.
Purchaser will be held responsible to provide all the necessary modifications in
the pertinent documentation, including the letter of credit.
10
<PAGE>
9.2 Notice. The party whose performance of any obligation is directly
------
affected or who has reason to believe such performance may be affected by reason
of any of the "force majeure" causes referred to in item 9.1 shall immediately
give notice thereof to the other party by telex or cable and shall also, within
ten (10) days thereafter, give written notice of the particulars of the event,
including available supporting documentation. The party so affected shall also
take reasonable steps to resume performance hereunder with the least possible
delay. If delay in the delivery of slabs due to such causes continues for a
period of sixty (60) days beyond the delivery date specified in the purchase
order, then such delivery may be cancelled by either party on written notice to
the other. Failure or delay in obtaining export licenses shall not be excused as
to any shipment unless Seller shall have declared force majeure with respect to
all or any part of the tonnage to be loaded at or prior to the time of
Purchaser's fifteen (15) day notice of the vessel's estimated arrival date at
the loading port. In the event that slabs were already produced, or whenever the
production of other slabs cannot be promptly suspended for technical reasons, a
written notice of force majeure shall not release Purchaser from the obligation
for the payment of said slabs, and item 8.6 shall be in full force and
specifically applicable in this case. For purposes of this item, the production
of other slabs shall include the steelmaking production which has been commenced
and which must be duly completed to finished slabs up to five thousand (5,000)
tons.
11
<PAGE>
ARTICLE 10
Cancellation
------------
If either party shall:
(1) Materially default in performance hereof or breach any of
its obligations hereunder, but not limited to payment for any shipment, and,
upon written notice by the other party, shall not cure such default diligently
and within a reasonable time;
(2) become insolvent or a trustee or receiver of its business
or assets is appointed by any court; or,
(3) if it shall make an assignment for the benefit of
creditors; then in any of such events, the other party may cancel this Agreement
in whole or in part by written notice, without liability or obligation
whatsoever, by reason of or resulting from such cancellation. The cancellation
or the right to cancel this Agreement does not constitute a waiver by either
party of its rights or remedies under this Agreement or as provided by law.
ARTICLE 11
Claims
------
11.1 Inspection. For purposes of vessel loading only, inspection by
----------
Seller before shipment shall be conclusive for determination that the slabs were
in accordance with the general
12
<PAGE>
specifications as set forth in Exhibit B hereunder, but this shall not preclude
Purchaser's inspection for purposes of the warranties set forth herein and in
this Article 11.
11.2 Purchaser's Claims of Failure to Meet General Specifications and
----------------------------------------------------------------
Warranties. Purchaser will inspect slabs upon their arrival at its Fontana
- ----------
plant, but not later than thirty (30) days after arrival of vessel at
destination port berth, for patent defects. If slabs are not properly
conditioned or marked, or have other patent defects, Purchaser will notify
Seller with documentary evidence, including photographs, of the patent defects
of such nonconformity or defects, within thirty (30) days of the arrival of the
slabs. Seller will then have a reasonable opportunity to inspect such slabs in
order to arrive to a mutually agreed settlement of the claim. Unless Seller
instructs Purchaser otherwise within thirty (30) days of its receipt of the
notice of defect(s), Purchaser may condition or mark the slabs, or otherwise
proceed to cure the defect. The reasonable cost, duly proven, of curing the
defect shall be paid by Seller.
11.3 Purchaser's Claims of Failure to Meet Physical and/or Dimensional
-----------------------------------------------------------------
Specifications. Purchaser may measure and weigh each slab upon its arrival at
- --------------
its Fontana plant, but not later than thirty (30) days after its arrival at
destination port berth. If the size or weight of a slab does not meet the
specification set forth in Exhibit B, Purchaser will promptly notify Seller of
such failure. Seller will then have a reasonable opportunity to inspect such
slabs in order to arrive to a mutually agreed settlement of the claim.
13
<PAGE>
Unless Seller instructs Purchaser otherwise within thirty (30)
days of its receipt of the notice of nonconformity or defects, Purchaser may
proceed to either sell the slab on the open market, or use or scrap the slab in
its operations. If the slab is sold, the Seller will pay the difference between
Purchaser's purchase price and the sales price. If the slab is used or scrapped,
the Seller will pay the difference between Purchaser's purchase price and the
value of the slab as scrap or for the purpose for which it was used.
11.4 Purchaser's Claims of Failure to Meet Chemical Specifications.
-------------------------------------------------------------
Purchaser may test the chemical properties of each slab, but not later than one
hundred fifty (150) days after arrival at destination port berth. If Purchaser's
test shows that a slab does not have the chemical characteristics required under
Exhibit B, Purchaser will promptly notify Seller of such failure, Seller will
then have a reasonable opportunity to inspect such slabs in order to arrive to a
mutually agreed settlement of the claim. Unless Seller instructs Purchaser
otherwise within thirty (30) days of its receipt of the notice of such failure,
Purchaser may proceed to either sell the slab on the open market, or use or
scrap the slab in its operations. If the slab is sold, the Seller will pay the
difference between Purchaser's purchase price and the sales price. If the slab
is used or scrapped, the Seller will pay the difference between Purchaser's
purchase price and the value of the slab as scrap or for the purpose for which
it was used.
14
<PAGE>
11.5 Latent Defects. If hidden latent defects in the slabs
--------------
attributable to the slab manufacture due to primary and secondary pipe, gross
non-metallic inclusions, skin laminations, and excessive chemical segregation
are discovered after the processing of the slabs by Purchaser, but not later
than one hundred eighty (180) days after arrival of the vessel at destination
port berth, Purchaser will promptly notify Seller of such defect. Seller will
then have a reasonable opportunity to inspect the slabs (or the product produced
therefrom) in order to arrive to a mutually agreed settlement of the claim.
Unless Seller instructs Purchaser otherwise within thirty (30) days of its
receipt of the notice of the defects, Purchaser may proceed to either sell the
slab (or product) on the open market or use or scrap the slab (or product) in
its operations. If the slab (or product) is sold, the Seller will pay the
difference between Purchaser's purchase price and the sales price. If the slab
(or product) is used or scrapped, the Seller will pay the difference between
Purchaser's purchase price and the value of the slab (or product) for the
purpose for which it was used.
11.6 Independent Expert. If the issues of items 11.2, 11.3, 11.4 and
------------------
11.5 cannot be resolved by the parties, either party may request an examination
by an independent expert after a period of thirty (30) days following rejection
or failure to settle a claim within the time specified in this Article.
The expert shall be chosen by mutual agreement and its findings
shall be conclusive and binding on Purchaser and
15
<PAGE>
Seller. The expense of the expert shall be borne by Seller if the slabs are
found to be defective, and by Purchaser if the slabs are found not to be
defective.
Within fifteen (15) days after the expert issues its findings, the
parties shall reach a settlement concerning the implementation of the findings.
If such settlement includes an obligation of either party to reimburse the other
party, the party obligated to make such reimbursement shall do so after such
settlement is reached.
11.7 Purchase Price of Slabs. For purposes of items 11.3 and 11.4
-----------------------
above, the "purchase price" of slabs shall be the full invoice price, plus
reasonable insurance, duty, wharfage, handling and freight cost to Purchaser's
Fontana, California, plant, all of which shall be duly certified by Seller.
11.8 Consequential Damages. Seller shall not be liable to Purchaser
---------------------
for consequential damages, directly or indirectly, suffered by Purchaser and the
responsibility of Seller to Purchaser shall be limited to the replacement value
of the slab found to be defective.
ARTICLE 12
Arbitration
-----------
This Article implements the provisions of Articles 6 and 7 by
providing specific remedies in addition to those provided by law, for delivery
of slabs that fail to meet specifications or warranties. The parties agree that
they will each co-
16
<PAGE>
operate fully with the other to minimize the number and cost of claims. Any
controversy or claim arising out of or relating to this Agreement, or the breach
thereof, which is not settled by the parties, shall, following the written
demand of either party, be settled by arbitration in accordance with the then
current rules of the International Chamber of Commerce - ICC. The place of
hearing for any such arbitration shall be Paris, France. Judgment upon the award
rendered by the arbitrator or arbitrators may be entered in any court having
jurisdiction thereof.
ARTICLE 13
General Provisions
------------------
13.1 Notices. Unless otherwise specified, all notices and
-------
communications with regard to this Agreement ("communications") which are given
by one party to the other under this Agreement shall be given in writing or by
telegram or telex. Communications shall be deemed to be properly served or given
within ten (10) days of dispatch if properly posted, prepaid, by the fastest
means (other than special delivery) or within twenty-four (24) hours of
transmission if by telegram or telex if properly sent, addressed:
(a) To Seller at such address or addresses as Seller may from
time to time notify Purchaser that communications shall be
sent, and until such notification to:
17
<PAGE>
COMPANHIA SIDERURGICA DE
TUBARAO - CST
Caixa Postal - 211 BR 101 Norte
KM 8.5 Carapina Serra
Espirito Santo, Brasil CEP 29160
Attention: Superintendencia
De Vendas
Telex No. (27) 2371CSTU BR
(b) To Purchaser at such address
as Purchaser may from time to time
notify Seller that communications
shall be sent, and until such
notification:
CALIFORNIA STEEL INDUSTRIES, INC.
14000 San Bernardino Avenue
Post Office Box 5080
Fontana, California 92337
Attention: Purchasing Manager
13.2 Governing Law. This Agreement is subject to and shall be
-------------
construed, interpreted and enforced under the laws of the State of California,
United States of America.
13.3 Assignment. No party to this Agreement shall assign their
----------
interest in this Agreement or any rights or duties thereunder without the prior
written consent of the other party.
13.4 Entire Understanding. This Agreement sets forth the entire
--------------------
understanding of the parties with respect to the subject matter of this
Agreement and supersedes all prior negotiations, communications and
understandings between the parties.
18
<PAGE>
13.5 Waiver. The rights of Seller and Purchaser shall not be
------
prejudiced or restricted by any indulgence or forbearance extended by either
party to the other. No waiver by either party in respect of any breach shall
operate as a waiver in respect of any subsequent breach.
13.6 Severability. All provisions of this Agreement shall be
------------
severable for purposes of enforcement. In the event that any term or provision
is ruled unenforceable through the judgment of any arbitrator or by any court of
competent jurisdiction, the other terms and provisions shall remain in full
force and effect. Any such unenforceable term or provision shall be re-formed by
such arbitrator or court so as to give it maximum permissible effect.
13.7 Modifications. This Agreement can be amended, modified or
-------------
supplemented only by a writing signed by both of the parties. Any purported oral
amendment, modification or supplement shall be void.
ARTICLE 14
Revision
--------
Terms and conditions set forth in this Agreement shall be reviewed and
may be changed by mutual agreement, if necessary, at intervals of every two (2)
years after the date of effectiveness of this Agreement or when either party
does so request.
19
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
first above written.
SELLER: PURCHASER:
------ ---------
COMPANHIA SIDERURGICA CALIFORNIA STEEL INDUSTRIES,
DE TUBARAO INC.
By: /s/ Guilherme Sarcinelli By: /s/ Michael Wilkinson
------------------------- ----------------------
Title: DIRECTOR Title: CHAIRMAN
---------------------- -------------------
By: /s/ Guilherme Sarcinelli By: /s/ Paulo Burnier
------------------------- ----------------------
Title: F/ PRESIDENT Title:
---------------------- ------------------
20
<PAGE>
EXHIBIT A
TO AGREEMENT FOR PURCHASE
AND SALE OF CARBON STEEL SLABS
Quantity, Price and Delivery Conditions:
1 - Quantity and Delivery Period
----------------------------
Purchaser's Fontana, California, steel mill requirements of carbon
steel slabs, up to the base amount of seven hundred thousand (700,000)
metric tons per calendar year, with a variance of plus ten percent
(10%) or minus fifteen percent (15%), except that this amount shall be
pro-rated for the remaining part of 1984.
The base amount for any calendar year may be increased or decreased at
Purchaser's option by five percent (5%) of the base amount of the
previous year, up to a maximum of one million one hundred thousand
(1,100,000) and down to a minimum of six hundred thousand (600,000)
metric tons for any calendar year. Purchaser's election in this
respect shall be given to Seller on or before October 1, of the
previous year. In the event Purchaser fails in good faith to order its
requirements up to the base amount for any calendar year, Seller shall
have the option of electing to terminate this Agreement on ten (10)
days notice to Purchaser, except that it shall remain effective, as
applicable, to any purchase orders and unfulfilled obligations of
either party which are outstanding as of the date of termination.
The base amount for each calendar year shall be allocated and ordered
by Purchaser in equal monthly amounts, with minimum 30,000 and maximum
45,000 tons lots to be loaded on one vessel furnished by Purchaser for
direct shipment to Los Angeles, California.
For quantities ordered through March 1985, not more than five percent
(5%) thereof shall be for killed steel. After March 1985, not more
than fifteen percent (15%) shall be for killed steel, of which not
more than one-third (1/3) shall be aluminum killed.
Delivery allowance of plus or minus five percent (5%) in total shall
be permitted for each shipment.
<PAGE>
Purchaser shall provide by October 1 and April 1 of each year, a six-
month forecast, starting from the following January 1 and June 1
respectively, containing the estimated monthly tonnage and its
provisional lay-day periods.
2 - Products Specifications
-----------------------
a. Rolling ranges
l. Slab thickness: 6" to 9"
2. Slab width: 30" to 74"
3. Slab length: 75" to 264"
b. Quality. Slab to be of basic commercial quality grades (1006-1008-
-------
1010 up to 1025). Detailed quality specification to be agreed upon
between Seller and Purchaser, and incorporated as an Exhibit B to
this Agreement.
3 - Price
-----
a. Deliveries made through March, 1985: One Hundred Ninety Dollars
($190.00) per metric ton of slab of standard specifications.
b. Deliveries made April 1, 1985, and thereafter: Prices shall be
adjusted for every calendar quarter reflecting variances in the
U.S. West Coast Market (excluding Gulf Coast) prevailing prices for
fabricated prime quality products as manufactured by Purchaser [hot
coils, cold rolled, and galvanized products] and Purchaser's sales
mix of such products by applying the following formula:
P\R\ = Po [(A + B) - 2]
------------
A
WHERE
P\R\ = Revised slab price applicable to shipments of calendar
quarter "N"
Po = Slab price of US$ 190/MT
2
<PAGE>
A = US$ 414.80 / Short Ton (ST) - Weighted average resulting
from the calculation of West Coast Market selling prices
acceptable to both parties as valid for the second quarter
of 1984, applied to Purchaser's product mix as follows:
<TABLE>
<CAPTION>
PRICES
PRODUCT MIX (%) (US$/ST)
------- ------- --------
<S> <C> <C>
Hot Coil/Sheet/Pickled 60 360
Cold Rolled 18 420
Galvanized 22 560
</TABLE>
B = Weighted average of Purchaser's actual selling price, for
the product mix as determined below, applicable to
deliveries effected in the last month of quarter "N-2" and
two first months of quarter "N-1"
<TABLE>
<CAPTION>
PRODUCT MIX (%)
------- -------
<S> <C>
Hot Coil/Sheet/Pickled 60
Cold Rolled 18
Galvanized 22
</TABLE>
Purchaser shall advise Seller of the adjusted price for such
quarter and of the selling prices referred to above for the
previous three (3) months on or before the twenty-fifth (25th) day
prior to the beginning of such quarter. Seller shall have the
right to examine all records relating to Purchaser's sales, and
shall advise Purchaser of any discrepancies in this regard on or
before the first (1st) day of such quarter. The adjusted price
shall apply to deliveries under bills of lading issued during the
quarter.
c. Minimum price payable as a result of price adjustments under (b)
above is One Hundred Seventy-Four Dollars ($174.00) per metric
ton, FOB Praia Mole,
3
<PAGE>
stowed, lashed, secured, and dunnaged, with letter of credit as
provided below.
d. Price adjustments provisions under (b) above, including minimum
price under (c) above, will be renegotiated after two (2)
consecutive years of contract operation, with due consideration of
prevailing market conditions and trends, so as to preserve the
initial margins balance for Seller and Purchaser.
e. For slabs of nonstandard specifications, extra amounts as set
forth in Exhibit D will be added as applicable.
4 - Payment
-------
a. An irrevocable and transferable letter of credit, in form as set
forth in Exhibit E attached hereto and incorporated herein by
reference, without recourse payable at sight against presentation
of shipping documents, shall be opened by telex for the payment for
each shipment by Purchaser in favor of Seller.
b. The letter of credit mentioned above shall be established through a
prime American bank no later than forty (40) days before the slabs
will be ready for each shipment, and shall be valid for negotiation
of the relative document for at least fifteen (15) days after the
date of Bill of Lading or Warehouse Receipt, and shall cover one
hundred and five percent (105%) of the purchase value of each
shipment.
c. Purchaser shall inform Seller of the date when Purchaser opened the
said letter of credit by telex within two (2) working days of such
date.
d. Remarks on the Bill of Lading concerning rust, scratches, dents and
color of the slabs shall not render the Bill of Lading
unacceptable.
e. Charter party Bill of Lading shall he acceptable.
f. In the event of late payment of any amount due hereunder, Purchaser
shall bear and pay to Seller overdue interest on the delayed
amount, at City Bank's prime rate for three (3) month period quoted
on the due date of the delayed amount by First National City Bank
per annum (a year being three hundred and sixty (360) days) plus
one (1) percent.
4
<PAGE>
g. Should any sale be financed under FINEX program or other similar
financing program arranged by Purchaser, Seller shall not be held
responsible for any disbursements or obligations whatsoever. The
FINEX Agent in Brazil shall be chosen by mutual agreement between
Seller and Purchaser.
5 - Taxes and Fees
--------------
All taxes, fees and charges payable in Brazil, whether levied on cargo,
or Seller, including Port Utilization Tax and Merchant Marine Renewal
Tax, shall be paid by Seller. All taxes, fees and charges payable in
the United States, whether levied on cargo, freight, or Purchaser,
shall be paid by Purchaser.
6 - Export Licenses
---------------
All export licenses, certificates or other authorizations required for
the export of the slabs from Brazil shall be obtained and paid for by
Seller.
7 - Shipping Documents
------------------
A. The shipping documents covering each shipment of the slabs shall
consist of the following documents:
(1) Bill of Lading: (1) original and (3)
non-negotiable
copies;
(2) Commercial Invoice: (1) original and (3)
copies;
(3) Mill sheet/Weight list: (2) copies mentioning
chemical composition
by ladle analysis per
each heat No., and
weight and all relat-
ing information which
correspond to slab
marking;
(4) Certificate of Origin: (3) certificates of
origin certifying the
Brazilian origin of
slab, but without
mentioning its value.
5
<PAGE>
(5) SSSI: (2) originals.
(6) U.S. Special Customs Invoice (2) originals.
B. In the event of any shipment not occurring on the scheduled date,
according to item 8.5 of the Agreement, the shipping documents
mentioned on item 7.(A) 1 above, except the commercial invoice, will
be substituted by a warehouse receipt, in order to enable the Seller
to negotiate pertinent letter of credit.
8 - Insurance
---------
Since this Agreement is on a FOB ST condition, Purchaser shall provide
an open cover or provisional insurance before the time of shipment, and
the letter of credit shall clearly exempt Seller from providing
insurance certificates.
In the event an accident occurs, Purchaser shall promptly notify Seller
and take necessary steps so that neither Seller nor Purchaser shall
forfeit any of the benefits under the insurance.
6
<PAGE>
EXHIBIT 10.3
Vicente Wright California Steel
14000 San Bernardino Ave. Industries
Fontana, Calif. 92335
Phone: (909) 350-6204
Fax: (909) 350-6223
Fax
To: Mr. Benjamin Baptista Filho From Vicente Wright
Fax 9-011-55-27-348-1488 Date October 27, 1998
Phone Pages: 1
Re: Slab Business - 1999 CC: Mr. Toshiro Sagae
|_| Urgent |_| For Review |_| Please Comment
|_| Please Reply |_| Please Recycle
. Comments: In accordance with our various telephone conversations, I am pleased
to confirm our mutual understandings to acquire a minimum of 700,000 mt of steel
slabs from CST for 1999 delivery at a price of Us$155/mt FOB ST - Praia Mole.
All other terms to be as per the conditions presently being practiced for our
slab deliveries.
Also, in order to give us more flexibility, CST was to study the possibility of
revising its extras' structure for API grades. Please let us know the results of
your internal findings.
/s/ Vicente Wright
<PAGE>
EXHIBIT 10.4
Toshiro Sagae
================================================================================
From:
Sent: Tuesday, October 13, 1998 4:56 PM
To: Toshiro Sagae
Subject: Quarter 1, 1999 slab business
Dear Toshiro,
This confirms our telephone agreement of October 9, 1998.
We sold to you and you purchased from us
Product: Prime Concast Steel Slabs
Quantity: 70,000 metric tons, +/- 5%
Price: US$163.00 per metric ton, base grades, CFR FO Long Beach, Ca.
Shipment 35,000 tons January 1999 from Port Kembla Australia
35,000 tons February 1999 from Port Kembla Australia
Payment Terms: Net cash 30 days from ocean B/L date
All other Terms and Conditions are as per previous orders and Supply
Agreement/Technical Protocol.
Again, thank you very much for placing this business with us.
Best Regards,
Manny Schultz
1
<PAGE>
Toshiro Sagae
================================================================================
From:
Sent: Thursday, October 15, 1998 3:00 PM
To: Vicente Wright
Cc: Laurenson, Jon JG; Schulz, Dieter D; Nancy Wilson; Toshiro Sagae
Subject: Slab Sales Contract April through December 1999 shipment
Importance: High
Dear Vicente,
This confirms our mutual agreement of October 14, 1998.
We sold to you and you purchased from us
Product: Prime Concast Slabs
Quantity: 280,000 metric tons, +/- 5%,
Plus 35,000 metric tons, at your option for quarter 4,
1999 shipment
Option validity is July 30, 1999.
Price: US$165.00 per metric ton, base grades, CFR FO Los Angeles/Long
Beach, Ca.
Shipments: 35,000 metric tons each month, April through November 1999,
with option for December 1999
Payment Terms: Net cash 30 days from ocean bill of lading date
All other Terms and Conditions are as per previous orders and Supply
Agreement/Technical Protocol.
We appreciate your business and as always will give it our fullest attention.
Best Regards,
Manny Schultz
1
<PAGE>
EXHIBIT 10.5
CALIFORNIA STEEL INDUSTRIES, INC.
To: CSN
Attn: Mr. Paulo Musetti
Director
From: Toshiro Sagae Fax: (909)350-5911 Phone: (909)350-6479
Date: Oct. 6, 1998
Re: 100,000 MT of Steel Slabs from CSN to CSI
Dear Paulo,
In accordance with our understanding yesterday, we listed below some questions
to arrange the steel slab shipments for first quarter 1999.
1) Negotiation Points:
- ----------------------
. The negotiation of 100,000 MT of steel slabs was fixed between the two
companies on October 2, 1998.
. The price agreed was US$150.00/MT FOB ST loading port.
. The number of shipments will depend on the quantity of each lot. The
quantity of each lot will depend on the loading port CSN will choose. CSN
will decide in the near future about the loading port.
2) Questions:
- -------------
. Does CSN have any question related to technical issues? Chemistry? Sizes?
Tolerance? Slab marking? Etc.
. Which port will be the loading port?
. Taking into consideration that the first shipment should occur in January
1999, please inform us when you need a purchase order with specifications
and tonnage?
. Can CSN use Praia Mole terminal as its loading port? If it is possible,
CSI prefers to ship through Praia Mole Terminal because this terminal is
the most efficient slab loading port and CSI maintains constant shipments
of Panamax type.
. As soon as CSN decides about the loading port, please inform us as soon as
possible related to the loading conditions including any information
regarding port facilities and respective capacities.
. Does the vessel (probably Handysize, if the loading port will not be Praia
Mole) need to be a self-loader or not?
. How many days are necessary for Lay-days?
We appreciate your response to these questions and appreciate your cooperation.
Best Regards,
S/ Toshiro Sagae
<PAGE>
Toshiro Sagae
Slab Purchase Manager
CSI
<PAGE>
EXHIBIT 10.6
ADDENDUM NR. 35
TO THE CHARTER PARTY DATED AUGUST 20TH, 1990 BETWEEN CALIFORNIA STEEL INDUSTRIES
OF CALIFORNIA, USA, AS CHARTERERS AND SEAMAR SHIPPING CORPORATION, AS OWNERS.
- --------------------------------------------------------------------------------
It is this day mutually agreed between Charterers and Owners the following
modifications on Addenda nr. 32 and nr. 33:
The cargo shall be loaded at the rate of 9,000 MT per day of 24 consecutive
hours, weather permitting, Sunday and Holidays included.
The basic freight rate shall then be US$ 16,59 (sixteen dollars and fifty five
cents US$ currency) per metric ton, free in and out stowed, lashed, secured,
trimmed and dunnaged, basis 1/1, applied on Bill of Lading quantity, for
shipments of 55.000 MT 5 pct M.O.L. in Charterers' option.
These modifications shall apply to the shipments performed from November
onwards, under the 1998 contractual year. All other terms and conditions of
Addenda nr. 32 and nr. 33 and the relevant Charter Party shall remain in full
force and effect.
Rio de Janeiro, October 13th, 1998
Charterers Owners
/s/ Toshiro Sagai /s/ Nelson Luiz Carlini
- ----------------------------------- -------------------------------------
California Steel Industries, Inc. Seamar Shipping Corporation
NELSON LUIZ CARLINI
President
/s/ Ronaldo Pereira Lyrio
-------------------------------------
Seamar Shipping Corporation
RONALDO PEREIRA LYRIO
Commercial and Operations
Vice President
<PAGE>
AC - 148
ADDENDUM NR. 34
TO THE CHARTER PARTY DATED AUGUST 20TH, 1990 BETWEEN CALIFORNIA STEEL INDUSTRIES
OF CALIFORNIA, USA, AS CHARTERERS AND SEAMAR SHIPPING CORPORATION, AS OWNERS.
- --------------------------------------------------------------------------------
It is this day mutually agreed between Charterers and Owners the following
additional conditions for two shipments to be performed on July, 1998.
1 - Quantity
first shipment: 35,000 MT 5 pct M.O.L. in Charterers' option,
second shipment: 31,600 MT 5 pct M.O.L. in Charterers' option.
2 - Laydays
first shipment: July 01st - 11th, 1998,
second shipment: July 15th - 26th, 1998
3 - Freight Rate
US$ 16.74 (sixteen dollars and seventy four cents US$ currency) per metric ton,
free in and out stowed, lashed, secured, trimmed and dunnaged, basis 1/1,
applied on Bill of Lading quantity.
No bunker surcharge to apply.
All other terms and conditions of the relevant Charter Party and Addendum Nr. 32
(thirty-two) shall remain in full force and effect.
Rio de Janeiro, July 21st, 1998
<TABLE>
<CAPTION>
Charterers Owners
<S> <C>
/s/ Toshiro Sagai /s/ Nelson Luiz Carlina /s/ Ronaldo Pereia Lyrio
- --------------------------------- ------------------------------------------------------------------------
California Steel Industries, Inc. Seamar Shipping Corporation
President Director Commercial and Operations Vice President
</TABLE>
<PAGE>
SC 148
ADDENDUM NR. 33
TO THE CHARTER PARTY DATED AUGUST 20TH, 1990 BETWEEN CALIFORNIA STEEL INDUSTRIES
OF CALIFORNIA, USA, AS CHARTERERS AND SEAMEAR SHOPPING CORPORATION, AS OWNERS.
- --------------------------------------------------------------------------------
It is this day mutually agreed between Charterers and Owners the following
correction on Addendum nr. 32:
The basic freight rate shall be US$ 16,74 (sixteen dollars and seventy four
cents US$ currency) per metric ton, free in and out stowed, lashed, secured,
trimmed and dunnaged, basis 1/1, applied on Bill of Lading quantity, for
shipments of 55,000 MT 5 pct M.O.L. in Charterers' option.
This is retroactive to all the shipments already performed on the 1998
contractual year. All other terms and conditions of Addendum nr. 32 and the
relevant Charter Party shall remain in full force and effect.
Rio de Janeiro, July 21st, 1998
<TABLE>
<CAPTION>
Charterers Owners
<S> <C>
/s/ Vicente Wright /s/ Nelson Luiz Carlini /s/ Ronaldo Pereira Lyrio
- --------------------------------- ------------------------------------------------------------------------------
California Steel Industries, Inc. Seamar Shipping Corporation
NELSON LUIZ CARLINI RONALD PEREIRA LYRIO
President Director Commercial and Operations Vice President
</TABLE>
<PAGE>
SC - 148
ADDENDUM NR. 32
TO THE CHARTER PARTY DATED AUGUST 20TH, 1990 BETWEEN CALIFORNIA STEEL INDUSTRIES
OF CALIFORNIA, USA, AS CHARTERERS AND SEAMAR SHIPPING CORPORATION, AS OWNERS.
- --------------------------------------------------------------------------------
It is this day mutually agreed between Charterers and Owners the following
conditions for 1998 contractual year (January 1st to December 31st, 1998):
1 - Loading Port
1 (one) safe port, 1 safe berth Praia Mole, Vitoria, ES, Brazil.
2 - Discharging Port
1 (one) safe port, 1 (one) safe berth Rio doce Pasha Terminal, Los Angeles, CA,
USA, where Charterers guarantee a minimum available draft of 40 FT SW at berth
and approaches thereto.
3 - Loading Terms
The cargo shall be loaded at the rate of 8,000 MT per day of 24 consecutive
hours, weather permitting, Sunday and Holidays included.
Notice of Readiness shall be tendered in writing, telex or cable, by the Master
of the performing vessel to the Charterers/Agents after the vessel's arrival at
or off the loading port, whether in berth or not, and accepted immediately any
time day/night, Sundays and Holidays included.
Laytime shall commence 3 (three) hours after NOR is tendered, unless sooner
commenced, in which case such time actually used to count as laytime.
4 - Discharging Terms
The cargo shall be discharged at the rate of 14,000 MT per day of 24 consecutive
hours, weather permitting, Sunday and Holidays included.
Notice of Readiness shall be tendered in writing, telex, or cable, by the Master
of the performing vessel to the Charterers/Agents after the vessel's arrival at
or off the discharging port, whether in berth or not, and accepted immediately
any time day/night, Sundays and Holidays included.
Laytime shall commence 12 (twelve) hours after NOR is tendered, unless sooner
commenced in which case such time actually used to count as laytime.
<PAGE>
5 - Freight Rate Bunker Escalation / Cargo Size
Basic freight rate shall be US$ 17,00 (seventeen dollars US$ currency) per
metric ton, free in and out stowed, lashed, secured, trimmed and dunnaged, basis
1/1, applied on Bill of Lading quantity, for shipments of 55.000 MT 5 pct M.O.L.
in Charterers' option.
Freight formula:
Fr = P + 3.14 * F/Fo + 10.81 * C/Co - (1/12000 - 1/14000) * (C+500), where:
Fr is the basic freight rate in U$ dollars per metric ton
P is a fixed value, US $3.08/mt (due to port charges)
F is US$ 91.00/mt
Fo is US$ 82.25/mt
C is the time charter rate for 1 (one) year period for a Panamax
vessel of about 75.000 DWT, established by mutual agreement as US$
10,500 / day for the 1998 contractual year.
Co is US$ 11,000.00 / day.
The basic freight rate above shall be adjusted according to the following Bunker
Adjustment Formula:
BA = 0.032 (P - Po), where:
BA is the adjustment in the freight rate due to bunker variation,
P is the average price of intermediate fuel oil (180 CST), in US$/mt,
as per Bunker Fuel Report at Rotterdam in force on the date of the
Bill of Lading,
Po is US$ 91.00/mt
6 - Demurrage / Despatch (at both ends)
Demurrage rate at both ends shall be U$D 11,000.00 per day or pro-rata.
Despatch rate shall be half of demurrage rate.
7 - Vessels Nomination Procedure
Charterers to advise Owners of vessel's intended laydays latest 30 (thirty) days
prior to the first day of the laydays.
Laydays to be mutually agreed upon between Charterers and Owners with 11
(eleven) days spread.
Owners to nominate vessel latest 15 (fifteen) days prior to the first day of
laydays.
All other terms and conditions of the relevant Charter Party shall remain in
full force and effect.
Rio de Janeiro, December 12th, 1997
<TABLE>
<CAPTION>
Charterers Owners
<S> <C>
/s/ Miguel Jourdan /s/ Ronaldo Pereira Lyrio Carlos Alberto Cafuha
- ---------------------------------- -------------------------------------------------------------------------------------
California Steel Industries, Inc. Seamar Shipping Corporation
Commercial and Operations Vice President Financial Vice President and Secretary
</TABLE>
<PAGE>
Rio de Janeiro, August 27th, 1990
Item 4.1
Our re: DCO/CSI-012/90
To
California Steel Industries - CSI
14000 San Bernardino Avenue
Fontana, California
- -------------------
Att.: Mr. Carlos Peiter
- -----------------------
Re: C/P between SEAMAR and CSI dated August 20th, 1990
- ------------------------------------------------------
Dear Sir
We have pleasure in enclosing two originals of above contract, which please
return one original to us as soon as possible countersigned.
Sincerely Yours
/s/ Nadim Abdala Sareyed-Dim
NADIM ABDALA SAREYED-DIM
Commercial Vice President
<PAGE>
Adopted by
The Documentary Committee of the General
Council of British Shipping, London
and the Documentary Committee of The Japan
Shipping Exchange, Inc., Tokyo
Copyright, published by The Baltic
and International Maritime
Conference (BIMCO), Copenhagen
- --------------------------------------------------------------------------------
1. Shipbroker RECOMMENDED
THE BALTIC AND INTERNATIONAL MARITIME
CONFERENCE UNIFORM GENERAL CHARTER (AS
REVISED 1822 and 1878) INCLUDING
"F.I.O." ALTERNATIVE, ETC.
(To be used for trades for which no
approved form is in force)
CODE NAME: "GENCON"
- --------------------------------------------------------------------------------
x x x x x x x x x x 2. Place and date
Rio de Janeiro August, 20th, 1990
- --------------------------------------------------------------------------------
3. Owners/Place of business (Cl. 1) 4. Charterers/Place of business (Cl.1)
SEAMAR SHIPPING CORPORATION of Monrovia, CALIFORNIA STEEL INDUSTRIES of
Liberia California, U.S.A.
- --------------------------------------------------------------------------------
5. Vessel's name (Cl. 1) 6. GRT/NRT (Cl. 1)
To be nominated (See Clause 18) -x-x-x-x-x-x-
- --------------------------------------------------------------------------------
7. Deadweight cargo carrying capacity 8. Present position (C1. 1)
in tons (abt.) (Cl. 1)
-x-x-x-x-x-x-x- -x-x-x-x-x-x-
- --------------------------------------------------------------------------------
9. Expected ready to load (abt.)
(Cl. 1)
(See Clause 19)
- --------------------------------------------------------------------------------
10. Loading port or place (Cl. 1) 11. Discharging port or place (C1. 1)
1/2 safe berth(s) at Los Angeles or
One (1) or two (2) safe berth(s) at Long Beach, USA, where Charterers
Praia Mole, Vitoria, ES, Brasil. guarantee a minimum available draft of
38' SW a berth and approaches thereto.
- --------------------------------------------------------------------------------
12. Cargo (also state quantity and margin in Owners' option, if agreed: if full
and complete cargo not agreed state "part cargo") (Cl. 1)
See Clause 20.
- --------------------------------------------------------------------------------
13. Freight rate (also state if payable 14. Freight payment (state currency
on delivered or intaken quantity) and method of payment; also
(Cl. 1) beneficiary and bank account)
See Clause 21. (Cl. 1)
See Clause 22.
- --------------------------------------------------------------------------------
15. Loading and discharging costs (state 16. Laytime (if separate laytime for
alternative (a) or (b) of Cl. 5; also load. and disch. is agreed, fill
indicate if vessel is gearless) in a) and if total laytime for
load. and disch. fill in c) only
(Cl. 1)
See Clause 21 (b). ___________________________________
a) Laytime for loading 5.000 MT/day
of 24 consecutive hours.
___________________________________
b) Laytime for discharging
_____________________________________
17. Shippers (state name and address) See Clause 24.
(Cl. 6) ___________________________________
c) Total laytime for loading and
COMPANHIA SIDERURGICA DE TUBARAO of discharging
Serra, ES, Brazil, CST
-x-x-x-x-x-x-x-x-
- --------------------------------------------------------------------------------
18. Demurrage rate (loading and 19. Cancelling date (Cl. 10)
discharging) (Cl. 7)
(As per Clause 19).
See Clause 25.
- --------------------------------------------------------------------------------
20. Brokerage commission and to whom payable (C1. 14)
-x-x-x-x-x-x-x-x-
- --------------------------------------------------------------------------------
21. Additional clauses covering special provisions, if agreed.
Additional Clause 18 through 32 an attached, are deemed and to be fully
incorporated into this Charter Party.
- --------------------------------------------------------------------------------
It is mutually agreed that this Contract shall be performed subject to the
conditions contained in this Charter which shall include Part I as well as Part
II. In the event of a conflict of conditions, the provisions of Part I shall
prevail over those Part II to the extent of such conflict.
Signature (Owners) Signature (Charterers)
/s/ Nadim Abdala Sarayed - Dim/ /s/ Paulo Burnier
Antonio Marques Fernondes
SEAMAR SHIPPING CORPORATION, Liberia CALIFORNIA STEEL INDUSTRIES, U.S.A.
<PAGE>
1. It is agreed between the party mentioned in Box 3 as Owners of the steamer
or motor-vessel named in Box 5, of the gross/nett Register tons indicated
in Box 6 and carrying about the number of tons of deadweight cargo stated
in box 7, now in position as stated in Box 8 and expected ready to load
under this Charter about the date indicated in Box 9, and the party
mentioned as Charterers in Box 4 that:
The said vessel shall proceed to the loading port or place stated in Box
10 or so near thereto as she may safely get and lie always afloat, and
there load a cargo as stated in Box 12 (Charterers to provide all mats
and/or wood for dunnage and any separations required, the Owners allowing
the use of any dunnage wood on board if required) which the Charterers
bind themselves to ship, and being so loaded the vessel shall proceed to
the discharging port or place stated in Box 11 or so near thereto as she
may safely get and lie always afloat and there deliver the cargo on being
paid freight on delivered or intaken quantity as indicated in Box 13 at
the rate stated in Box 13.
2. Owners' Responsiblilty Clause
Owners are to be responsible for loss of or damage to the goods or for
delay in delivery of the goods only in case the loss, damage or delay has
been caused by the improper or negligent stowage of the goods (unless
stowage performed by shippers/Charterers or their stevedores or servants)
or by personal want of due diligence on the part of the Owners or their
Manager to make the vessel in all respects seaworthy and to secure that
she is properly manned, equipped and supplied or by the personal act or
default of the Owners or their Manager.
And the Owners are responsible for no loss or damage or delay arising from
any other cause whatsoever, even from the neglect or default of the
Captain or crew or some other person employed by the Owners on board or
ashore for whose acts they would, but for this clause, be responsible, or
from unseaworthiness of the vessel on loading or commencement of the
voyage or at any time whatsoever. Damage caused by contact with or
leakage, smell or evaporation from other goods or by the inflammable or
explosive nature or insufficient package of other goods not to be
considered as caused by improper or negligent stowage, even if in fact so
caused.
3. Deviation Clause
The vessel has liberty to call at any port or ports in any order, for any
purpose, to sail without pilots, to tow and/or assist vessels in all
situations, and also to deviate for the purpose of saving life and/or
property.
4. Payment of Freight
The freight to be paid in the manner prescribed in Clause 22.
5. Loading/Discharging Costs (See Clause 21 (b))
6. Laytime (See also Clause 24)
(a) laytime for landing
The cargo shall be loaded as indicated in Box 16, weather
permitting, Sundays and holidays included.
(c) Commencement of laytime (loading). Notice of loading port to be given
to the Shippers named in Box 17. Time actually used before
commencement of laytime shall count. Time lost in waiting for berth to
count as loading time.
7. Demurrage (See Clause 25)
8. Lien Clause
Owners shall have a lien on the cargo for freight, dead-weight, demurrage
and damages for detention, Charterers shall remain responsible for dead-
weight and demurrage (including damages for detention, incurred at port of
loading. Charterers shall also remain responsible for freight and
demurrage (including damages for detention) incurred at port of discharge,
but only to such extent as the Owners have been unable to obtain payment
thereof by exercising the lien on the cargo.
9. Bills of Lading (See Clause 29)
10. Canceling Clause
Should the vessel not be ready to load (whether in berth or not) on or
before the date indicated in Box 19, Charterers have the option of
canceling this voyage, such option to be declared, if demanded, at least
48 hours before vessel's expected arrival at port of loading. Should the
vessel be delayed on account of average or otherwise, Charterers to be
informed as soon as possible, and if the vessel is delayed for more than
10 days after the day she is stated to be expected ready to load,
Charterers have the option of canceling this voyage unless a canceling
date has been agreed upon.
11. General Average
General average to be settled in New York according to York-Antwerp Rules,
1974. Proprietor of cargo to pay the cargo's share in the general expenses
even if same have been necessitated through neglect or default of the
Owners' servants (see clause 2).
12. Indemnity
Indemnity for non-performance of this Charterparty, proved damages, not
exceeding estimated amount of freight.
13. Agency
In every case the Owners shall appoint his own Broker or Agent both at the
port of loading and the port of discharge.
14. Brokerage
15. GENERAL STRIKE CLAUSE
Neither Charterers nor Owners shall be responsible for the consequence
of any strikes or lock-outs preventing or delaying the fulfillment of any
obligations under this contract.
If there is a strike or lock-out affecting the loading of the cargo, or
any part of it, when vessel is ready to proceed from her last port or at
any time during the voyage to the port or ports of loading or after her
arrival there. Captain or Owners may ask Charterers to declare, that they
agree to reckon the laydays as if there were no strike or lock-out. Unless
Charterers have given such declaration in writing (by telegram, if
necessary) within 24 hours, Owners shall have the option of canceling this
contract. If part cargo has already been loaded, Owners must proceed with
same, (freight payable on loaded quantity only) having liberty to complete
with other cargo on the way for their own account.
If there is a strike or lock-out affecting the discharge of the cargo on
or after vessel's arrival at or off port of discharge and same has not
been settled within 40 hours, Receivers shall have the option of keeping
vessel waiting until such strike or lockout is at an end against paying
half demurrage after expiration of the time provided for discharging, or
of ordering the vessel to a safe port where she can safely discharge
without risk of being detained by strike or lock-out. Such orders to be
given within 48 hours after Captain or Owners have given notice to
Charterers of the strike or lock-out affecting the discharge. On delivery
of the cargo at such port, all conditions of this Charterparty and of the
Bill of Lading shall apply and vessel shall receive the same freight as if
she had discharged at the original port of destination, except that if the
distance of the substituted port exceeds 100 nautical miles, the freight
on the cargo delivered at the substituted port to be increased in
proportion.
16. War risks ("Voywar 1950")
(1) In these clauses "War Risks" shall include any blockade or any action
which is announced as a blockade by any Government or by any belligerent
or by any organized body, sabotage, piracy, and any actual or threatened
war, hostilities, warlike operations, civil war, civil commotion, or
revolution.
(2) If at any time before the Vessel commences loading, it appears that
performance of the contract will subject the Vessel or her Master and crew
or her cargo to war risks at any stage of the adventure, the Owners shall
be entitled by letter or telegram dispatched to the Charterers, to cancel
this Charter.
(3) The Master shall not be required to load cargo or to continue loading
or to proceed on or to sign Bill(s) of Lading for any adventure on which
or any port at which it appears that the Vessel, her Master and crew or
her cargo will be subjected to war risks. In the event of the exercise by
the Master of his right under this Clause after part or full cargo has
been loaded, the Master shall be at liberty either to discharge such Cargo
at the loading port or to proceed therewith. In the latter case the Vessel
shall have liberty to carry other cargo for Owners' benefit and
accordingly to proceed to and load or discharge such other cargo at any
other port or ports whatsoever, backwards or forwards, although in a
contrary direction to or out of or beyond the ordinary route. In the event
of the Master electing to proceed with part cargo under this Clause
freight shall in any case be payable on the quantity delivered.
(4) If at the time the Master elects to proceed with part or full cargo
under Clause 3, or after the Vessel has left the loading port, or the
last of the loading ports, if more than one, it appears that further
performance of the contract will subject the Vessel, her Master and crew
or her cargo, to war risks, the cargo shall be discharged, or if
<PAGE>
the discharge has been commenced shall be completed at any safe port in
vicinity of the port of discharge as may be ordered by the Charterers. If
no such orders shall be received from the Charterers within 48 hours after
the Owners have dispatched a request by telegram to the Charterers for the
nomination of a substitute discharging port, the Owners shall be at
liberty to discharge the cargo at any safe port which they may, in their
discretion, decide on and such discharge shall be deemed to be due
fulfillment of the contract of affreightment. In the event of cargo being
discharged at any such other port, the Owners shall be entitled to freight
as if the discharge had been effected at the port or ports named in the
Bill(s) of Lading or to which the Vessel may have been ordered pursuant
thereto.
(5) (a) The Vessel shall have liberty to comply with any directions or
recommendations as to loading, departure, arrival, routes, ports of call,
stoppages, destination, zones, waters, discharge, delivery or in any other
wise whatsoever (including any direction or recommendation not to go to
the port of destination or to delay proceeding thereto or to proceed to
some other port) given by any Government or by any belligerent or by any
organized body engaged in civil war, hostilities or warlike operations or
by any person or body acting or purporting to act as or with the authority
of any Government or belligerent or of any such organized body or by any
committee or person having under the terms of the war risks insurance on
the Vessel, the right to give any such directions or recommendations. If,
by reason of or in compliance with any such direction or recommendation,
anything is done or is not done, such shall not be deemed a deviation.
(b) If, by reason of or in compliance with any such directions or
recommendations, the Vessel does not proceed to the port or ports named in
the Bill(s) of Lading or to which she may have been ordered pursuant
thereto, the Vessel may proceed to any port as directed or recommended or
to any safe port which the Owners in their discretion may decide on and
there discharge the cargo. Such discharge shall be deemed to be due
fulfillment at the contract of affreightment and the Owners shall be
entitled to freight as if discharge had been effected at the port or ports
name in the Bill(s) of Lading or to which the Vessel may have been ordered
pursuant thereto.
(6) All extra expenses (including insurance costs) involved in discharging
cargo at the loading port or in reaching or discharging the cargo at any
port as provided in Clauses 4 and 5 (b) hereof shall be paid by the
Charterers and/or cargo owners, and the Owners shall have a lien on the
cargo for all moneys due under these Clauses.
17. General Ice Clause
Port of Loading
(a) In the event of the loading port being inaccessible by reason of ice
when vessel is ready to proceed from her last port or at any time during
the voyage or on vessel's arrival in case frost sets in after vessel's
arrival, the Captain for fear of being frozen in is at liberty to leave
without cargo, and this Charter shall be null and void.
(b) If during loading the Captain, for fear of vessel being frozen in,
deems it advisable to leave, he has liberty to do so with what cargo he
has on board and to proceed to any other port or ports with option of
completing cargo for Owners' benefit for any port or ports including port
of discharge. Any part cargo thus loaded under this Charter to be
forwarded to destination at vessel's expense but against payment of
freight, provided that no extra expenses be thereby caused to the
Receivers, freight being paid on quantity delivered (in proportion if
lumpsum), all other conditions as per Charter.
(c) In case of more than one loading port, and if one or more of the ports
are closed by ice, the Captain or Owners to be at liberty either to load
the part cargo at the open port and fill up elsewhere for their own
account as under section (b) or to declare the Charter null and void
unless Charterers agree to load full cargo at the open port.
(d) This Ice Clause not to apply in the Spring.
Port of discharge
(a) Should ice (except in the Spring) prevent vessel from reaching port of
discharge Receivers shall have the option of keeping vessel waiting until
the re-opening of navigation and paying demurrage, or of ordering the
vessel to a safe and immediately accessible port where she can safely
discharge without risk of detention by ice. Such orders to be given within
48 hours after Captain or Owners have given notice to Charterers of the
impossibility of reaching port of destination.
(b) If during discharging the Captain for fear of vessel being frozen in
deems it advisable to leave, he has liberty to do so with what cargo he
has on board and to proceed to the nearest accessible port where she can
safely discharge.
(c) On delivery of the cargo at such port, all conditions of the Bill of
Lading shall apply and vessel shall receive the same freight as if she had
discharged at the original port of destination, except that if the
distance of the substituted port exceeds 100 nautical miles, the freight
on the cargo delivered at the substituted port to be increased in
proportion.
<PAGE>
ADDITIONAL CLAUSES TO THE CHARTER PARTY DATED AUGUST 20TH, 1990 BETWEEN SEAMAR
SHIPPING CORPORATION, AS OWNERS, AND CALIFORNIA STEEL INDUSTRIES, AS CHARTERERS
18. VESSELS' DESCRIPTION
Vessel to be nominated shall be described, all about, as follows:
NAME OF SHIP:
DWT:
SUMMER DRAFT:
TPC:
FLAG:
YEAR BUILT:
TYPE:
HOLD/HATCH:
HATCHCOVER TYPE:
CRANES:
LOA:
BEAM:
MOULDED DEPTH:
HATCH SIZES IN MTRS:
HOLD BALE CUBICS IN M3:
HOLD SIZES IN MTRS:
FLAT FLOOR AREA EXCLUDING SLOPE:
TANK TOP STRENGTH PER HOLD:
PORT OF REGISTER:
The vessel to be highest classed LRS or equivalent single deck bulk
carrier in good working order at all hatches.
Owners to have the option to combine the shipments with other harmless
cargo.
Owners option to nominate gearless or geared vessels.
Charterer's approval to be confirmed max 2 (two) working days after
vessel's nomination which shall be minimum 10 days prior to the
commencement of laydays.
When requested by Owners Charterers shall confirm within max 1 (one)
working day.
1
<PAGE>
19. LAYDAYS
a) Latest September 30, Charterers shall give Owners a tentative annual
schedule per quarter for the following contract year.
b) Tentative monthly shipping schedule covering next quarter shall be
given by Charterers at latest thirty (30) days prior to the
commencement of each quarter, and Owners shall confirm such schedule
within 1 (one) week.
c) VESSELS NOMINATION PROCEDURE
1) Charterers to advise Owners of tentative shipping schedule on
an annual/quarterly basis.
2) Charterers to advise Owners immediately upon placing a
shipment purchase order with CST - stating shipment date and
cargo size, 45-day notice.
3) 30 days prior to the shipment date Charterers to advise Owners
of the (12 days) laydays required by CST. Production readiness
stem to be confirmed - with 5 pct. m.o.l. in Charterers'
option.
4) Minimum 15 days prior to the 1st day of the laydays, Owners to
nominate a vessel for the shipment indicating vessel position
and ETA and 12 days laydays.
5) Charterers to advise Owners within 2 (two) working days of
vessels acceptance, except when Owners request Charterers
acceptance within maximum 1 (one) working day.
d) If a vessel arrives before or after the laydays narrowed by Owners
as mentioned above, the acceptance outside the said laydays is
subject to further consultation between Owners and Charterers.
20. CARGO/QUANTITY/STEMS/SIZES
a) The total quantity of steel slabs produced by Companhia Siderurgica
de Tubarao, Espirito Santo, Brazil, destined to California Steel
Industries, California-USA where Charterers guarantee the minimum
yearly quantity of 600.000 MT.
2
<PAGE>
b) Size of shipments shall be as per Clause 21. Owners' option to
nominate different size of shipments given written notice to
Charterers.
c) If charterers fail to supply a cargo as nominated, dead freight
shall be payable but the Charterers shall not be bound to supply
cargo in excess of stem size. The laytime shall be calculated on
that quantity.
21. PERIOD/FREIGHT RATE/BUNKER ESCALATION
a) Duration of the Contract
This contract to enter into force on the date of its signature and
will expire on May, 29th, 2000.
b) Loading and Discharging Costs
Cargo to be loaded and discharged by Charterers on a "free in and
out stowed, trimmed, lashed, secured and dunnaged basis" (FIOST)
utilizing cranes supplied by Charterers.
The parties mutually agree that all dunnage to be unloaded have no
commercial value and all expenses to dispose or remove off the quay,
pier or terminal shall be for Charterers' account.
c) Freight Rates/Bunker Escalation
The freight rates for shipment of 45.000 MT 5 pct m.o.l. in
Charterers' option, in United States Dollars, per metric ton, free
in and out stowed, lashed, secured, trimmed, dunnaged basis 1/1 on
Bill of Lading quantity, shall be:
c.1) For shipments from August 20th, 1990 up to December 31st 1990:
The basic freight rate shall be US$ 24.12/metric ton.
c.2) For shipments from January 01st, 1991 up to December 31st
1992:
For each contract year 1991 and 1992 the basic freight rate
referred in item c.1 above shall be subject to the following
Time Charter adjustment:
TCA = 0.0012 (T/C - US$ 13,200) where:
TCA = Time Charter adjustment
T/C = Time Charter hire, in US$ per day for an average
"Panamax" bulk carrier of 60.000 DWT, for 1 year period
to be established by mutual agreement, in December of
the preceding year.
3
<PAGE>
In case Charterers and Owners fail to reach a mutual
acceptable agreement on the prevailing time charter rates,
each party shall nominate an independent first class
shipbroker, which jointly will appoint a third
independent first class shipbroker. These three (3)
shipbrokers shall jointly evaluate the prevailing time-charter
market and their decision shall be final and binding upon the
parties.
c.3) The basic freight rates defined as per item c.1 and c.2 shall
be adjusted according to the following Bunker Adjustment
Formula:
BA = 0.032 (Pa - US$ 100.00/MT), where:
BA = Bunker Adjustment
PA = Price of intermediate fuel oil (180 CST) as per
Bunker Fuel Report for the average price at Los
Angeles Port of the week of the date of the Bill
of Lading;
c.4) For shipments from January 01st 1993 onwards, freight rates
and escalation clauses shall be mutually agreed upon between
the parties.
22. FREIGHT PAYMENT
Freight to be paid 100% (one hundred percent) by Charterers in United
States Dollars to Owners within 5 (five) working days after Bill of Lading
signature at:
BANCO DO BRASIL S/A - New York Branch, NY to
credit SEAMAR SHIPPING CORPORATION,
account number 2203741.
Freight to be discountless and non-returnable vessel and/or cargo lost or
not lost.
23. NOTICE OF VESSEL'S ETA
a) Owners/vessel to give Charterers 15(fifteen) days approximate Notice
of vessel's ETA at loading port. Thereafter Owners/Master shall give
Shippers/Charterers Agents 7(seven), 5(five), 3(three) days and 24
hours prior Notice of vessel's ETA at loading port.
b) Vessel/Owners to give 15(fifteen) and 7(seven) days Notice ETA to
Agents/Receivers at discharging port. Furthermore, vessel to give
5(five) and 3(three) days as well as 24 hours Notice of ETA to
Agents/Receivers.
4
<PAGE>
24. LAYTIME
At Loading Port
a) Notice of Readiness shall be tendered by Master or his Agents to
Shippers or their Agents after vessel's arrival at or off the
loading port, whether in berth or not, and accepted immediately any
time day/night, Sundays and Holidays included.
b) Laytime shall commence 3 (three) hours after N.O.R. is tendered,
unless sooner commenced in which case such time actually used to
count as laytime.
c) At least 5 (five) days prior to arrival at loading port Owners shall
provide to Charterers or their nominees the loadplan, workable
hatches and loading sequence by hatch.
d) On arrival at the loadport, the preliminary stowage plan to be
jointly presented by the master/owner and cargo superintendent to
shippers.
e) Ships holds to be properly swept, cleaned and dried at vessel's
expense to the satisfaction of Charterers/Shippers Agents before
Notice of Readiness be tendered unless cleaning does not interfere
with loading programme.
f) Charterers to have privilege of using a second berth at loading
port, as per clause 10.
At Discharge Port
a) Notice of Readiness
NOR shall be tendered in writing, telex or cable by the Master of the
performing vessel to Charterers/Agents. Notice shall be to the effect that
the performing vessel is ready in all respects to commence discharge and
that such vessel is an "arrived" ship, as defined by the custom of the
discharge port. The time or arrival and position shall clearly be stated.
NOR to Charterers/Agents shall be deemed to be accepted once given.
b) Laytime
Upon tendering to and acceptance by Charterers/Agents of NOR, laytime
shall commence 12 hours thereafter unless sooner commenced in which case
actual time used to count.
Laytime shall terminate upon completion of discharge of the cargo from the
performing vessel at the discharge port.
5
<PAGE>
c) In the event that SEAMAR carries other cargo than the steel slabs
destined for California Steel Industries and should the other cargo
affect in any way the loading or discharge program of steel slabs,
the provisions for laytime at the discharge port are subject to
mutual agreement.
d) Discharge Terms
10,000 metric tons of cargo per weather working day, Sundays
included. Federal and California state holidays excluded as defined
in the COLLECTIVE BARGAINING AGREEMENT.
At Both Ends
a) At port of loading/discharging if provided, vessel to give free use
of derricks, cranes, power, winches, gear and tackle in good working
condition at all time free of expense to Shippers/Receivers and
electric lights as required in holds or on deck. Shore winchmen if
used for Shippers/Receivers account.
b) The stevedores at loading and discharging ports, although appointed
by Charterers, Shippers, Receivers or their Agents, are to be under
the direct control of the Master and stowage/securing done to his
satisfaction, and with coordination of the cargo superintendent
following the method and practice outlined in the booklet entitled
"A Working Standard for the Stowage and Receiving of Export Steel
Cargoes".
c) The Master to sign Statement of Facts concerning the time used in
loading and discharging submitted to him by vessel's Agents and
making his reservation if he considers such Statement incorrect.
d) Time eventually lost due to weather conditions preventing vessel
from entering port and/or berth shall be discounted from laytime.
e) Opening and closing of hatches at loading/discharging port to be
carried out by Crew in Owners' account and count as laytime.
25. DEMURRAGE/DESPATCH (At Both Ends)
Charterers to pay demurrage at the rate stated below per day or pro-rata
for any part of a day for all time used in excess of allowed laytime.
Owners to pay despatch money at the rate of half demurrage per day or
pro-rata for any part of a day
6
<PAGE>
for all time saved in loading/discharging.
Demurrage to be settled immediately upon agreement of Statement of Facts.
- For shipments from August 20th 1990 up to December 31st 1990:
Demurrage/Despatch: US$ 14,200/US$ 7,100 per day or pro-rata.
- For shipments from January 01st 1991 up to December 31st 1992:
Demurrage rate shall be the Time Charter hire as per clause 21 c.2
above plus US$ 1,000.00
Despatch rate shall be half of demurrage rate.
- For shipments from January 01st 1993 onwards:
To be agreed between the parties at the same time as the freight
rates.
26. TAXES/DUES/CHARGES
At Loading Port
All Brazilian taxes present or future levied on Cargo and freight,
including Port Utilization Tax to be for Charterers/Shipper account;
vessel paying normal port expenses.
At Discharging Port
Any dues and/or taxes levied on Cargo and/or freight, if any, to be for
Charterers' account. Customary port charges on vessel to be for Owners'
account.
27. SHIFTING/OVERTIME
At both ends shifting/overtime, if any, time and expenses to be for the
account of the party ordering same but if ordered by Port Authorities time
and expense to be 50% (fifty percent) for the Owners and 50% (fifty
percent) for the Charterers at loading/discharging ports.
Vessel's shifting alongside quay will not be considered as additional
berth. All shore expenses for such shifting to be for Charterer's account
and time to count. Officers and Crew's expenses to be for ship's account.
Fuel used in such shifting to be for the Owners' account.
7
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28. STEVEDORING DAMAGES AT LOADING AND DISCHARGING PORT
Vessel's bulkheads, ladders, pipes bilges and any other projections within
vessel's holds or on deck to be sheltered against stevedore damage,
failing which Owners shall be responsible for any consequences hereof.
Master to notify the Stevedores of damages in writing within 12 (twelve)
hours of its occurrence and any claims for Stevedores damage to be settled
directly between Owners and Stevedores. If in the event a settlement is
not made within 90/120 days, Charterers agree to give complete assistance
to the Owners in their efforts to settle claims. Charterers always
remaining ultimately responsible for such settlements.
Time required to complete repairs of loading/discharging damage to vessel,
if any, shall count as laytime used in loading/discharging.
29. BILL OF LADING
Bills of Lading quantity to be determined by Shipper, Owners not being
responsible for weight declared.
Bills of Lading to be marked "Freight payable as per Charter Party".
30. EXTRA INSURANCE
Any extra insurance on Cargo due to vessel's age, class or flag to be for
Owners' account.
31. ARBITRATION
Should any dispute arise between Owners and Charterers the matter in
dispute shall be referred to three persons in New York, one to be
appointed by each of the parties hereto and the third by the two so
chosen; their decision or that of any two of them shall be final and for
the purpose of enforcing any award their decisions may be made a rule of
the Court.
The arbitrators shall be knowledgeable in shipping matters. The
arbitration is to be conducted in accordance with the Rules of Society of
Maritime Arbitrators, Inc. of New York, USA.
8
<PAGE>
32. ADDITIONAL CLAUSES
New Jason Clause, New Both-to-Blame Collision Clause and Chamber of
Shipping War Risk Clauses Nos. 1 and 2 to be deemed fully incorporated in
this Charter Party.
US Paramount Clause to be incorporated in Bills of Lading only.
9
<PAGE>
EXHIBIT 10.7
THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY
BNSFC 302606
REGULATED TRANSPORTATION CONTRACT
Effective Date: 01-01-1999 Expiration Date: 12-31-2003
1. INTRODUCTION
This Transportation Contract ("Contract"), governed and construed in accordance
with the laws of the State of Texas is entered into January 01, 1999 by and
between the party ("Customer") named below and the rail carrier(s) ("Railroad")
named below. Address(es) for Railroad will be as shown in The Official Railway
Guide.
Customer: CALIFORNIA STEEL INDUSTRIES INC
Participating Carrier: THE BURLINGTON NORTHERN AND SANTA FE RAILWAY
COMPANY having an office at 3001 Lou Menk Drive, P.O.
Box 961069, Fort Worth, TX 76161-0069
Railroad agrees to perform the transportation for its portion of the Route(s) as
specified in this Contract and all Amendments thereto in exchange for Customer's
utilization of Railroad in said movements. The Bill of Lading date will govern
as the day on which a shipment has been made. The date of shipment will govern
as to the applicable rate or charges and tonnage requirements as covered by this
Contract and all Amendments thereto. This Contract and all Amendments thereto
comprise the entire Contract and merges and supersedes all prior understandings
and representations between Customer and Railroad concerning the subject matter.
The terms as set forth in this Contract and all Amendments thereto have been
arrived at after mutual negotiation and, therefore, it is the intention of the
parties that its terms may not be construed against any of the parties by reason
of the fact that it was prepared by one of the parties. The parties to this
Contract and all Amendments thereto will protect the confidentiality of the
terms and conditions of this Contract and all Amendments thereto. Only where a
party is required by a court of competent jurisdiction or federal agency to
reveal any of the terms and provisions of this Contract and all Amendments
thereto, or where all parties give their written consent to disclosure, will
disclosure be allowed. The party making disclosure will notify the others in
advance of such disclosure. If a third party requests a transportation contract
to cover traffic moving in whole or in part under this Contract or Amendments
thereto, Customer or Railroad may advise that a Contract or Amendment covering
the traffic exists and may reveal its duration and the identity of the parties
to the Contract or Amendments. Nothing in this confidentiality provision will
preclude the use of this Contract or Amendments by any party hereto to obtain
financing.
Customer warrants it is the purchaser of transportation services covered by this
Contract and all Amendments thereto.
At the request of Railroad, Customer shall make available to Railroad, or its
designated agent, at a reasonable time during normal business hours, records
relating to this Contract or Amendments.
2. TERM
This Contract will become effective on 01-01-99 and shall remain in effect
through 12-31-03.
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3. RENEWABILITY
This Contract may only be renewed by mutual consent of the parties, and any such
renewal shall be in the form of an Amendment.
4. TRANSPORTATION SERVICE ATTACHMENT
Railroad shall transport the commodity(ies) ("Commodity") as named in the
Transportation Service Attachment attached hereto and made a part of this
Contract for Customer from the origin(s) ("Origin(s)") to the destination(s)
("Destination(s)") via the ("Route(s)") as set forth in the Transportation
Service Attachment.
5. EQUIPMENT
Equipment used under this Contract/Amendment shall be as described in the
Official Railway Equipment Register, RER 6412 Series and as identified in the
aforementioned Transportation Service Attachment.
Railroad will provide this equipment consistent with its common carrier
obligations.
Railroad reserves the right to furnish any type or size of equipment that meets
the above description to fill car orders under this Contract.
6. GOVERNING PROVISIONS
Except as otherwise provided for in this Contract, shipments moving under this
Contract or Amendments thereto will be governed by the tariffs, exempt
circulars, rate memorandums, rules and regulations which would apply if this
Contract or Amendments thereto were not in effect, except that origin and
destination intermediate application rules will not apply. If, for any reason,
any rule, regulation, or provision of any tariff, exempt circular or rate
memorandum referenced under this Contract or Amendments thereto is canceled or
becomes inapplicable, the last published provision that would have been applied
will govern. In the event of conflict between the above-referenced rules,
regulations, etc., which are herein incorporated by general reference, this
Contract or Amendments thereto shall govern.
Railroad's obligation to provide service under this Contract or Amendments
thereto shall be no greater than it would be as a common carrier. Services or
other matters not specifically addressed in this Contract or Amendments thereto,
including but not limited to, loss and damage liability and settlement, credit
and collection, and track weight limitations, shall continue to be governed by
rules, regulations, tariffs, and statutory provisions, as amended from time to
time, which would apply if it were not for this Contract or Amendments thereto,
and which are incorporated herein by reference.
This Contract or Amendments thereto shall not relieve Railroad of its common
carrier obligations as set forth in the Uniform Straight Bill of Lading terms
and conditions. Said terms and conditions shall govern all shipments made
hereunder and are incorporated herein by reference and made a part hereof as if
fully herein set forth; provided, however, that in the event of any
inconsistency between said terms and conditions and any other provisions of this
Contract or Amendments thereto, the provisions of this Contract or Amendments
thereto shall govern.
7. SERVICE GUARANTEE FOR LOADED MOVEMENT
The service guarantee applies to unit trains loaded with steel slabs which are
moved from Los Angeles Harbor or Long Beach, California to Kaiser, California.
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Burlington Northern Santa Fe agrees to, either actively or constructively, place
loaded trains at CSI's designated unloading facility, at Kaiser, California, at
or prior to 9:00 A.M. of the morning subsequent to the release of trains at
origin. When train does not meet the above service commitment, CSI agrees to
notify Burlington Northern Santa Fe by fax @ 213-267-5668 within 12 hours of
train's actual arrival, indicating the actual time of arrival.
Burlington Northern Santa Fe guarantees that all trains shall meet the
applicable standard for rail transit time set forth above, during each Service
Period. A Service Period is defined as a period of one calendar month. The first
Service Period will commence on the first day of January, 1999. Each Service
Period will include all trains which were placed or released in interchange with
CSI during such Service Period.
If at the end of a Service Period, Burlington Northern Santa Fe fails to meet
this Service Guarantee on one or more trains, Burlington Northern Santa Fe will
pay CSI $597.00 per train, for each train Burlington Northern Santa Fe fails to
deliver at, or before 9:00 A.M. on any day. For CSI's convenience, Burlington
Northern Santa Fe will make every effort to place loaded trains at CSI's
unloading facility at Kaiser, California prior to 6:30 A.M.
The service commitment specified above shall not apply where Burlington Northern
Santa Fe is unable to perform due to an Act of God, strikes, lockouts, wrecks,
mechanical breakdowns in equipment of facilities of Burlington Northern Santa
Fe, CSI or its agent, or any act or failure on the part of CSI or its agent.
8. SERVICE COMMITMENT
If CSI or its agent meets its obligations in the next paragraph, Burlington
Northern Santa Fe agrees to place an empty train at CSI's designated loading
facility located at the Port of Long Beach or Los Angeles Harbor, California at
or prior to the time for which CSI or its agent had ordered placement.
CSI or its agent shall give Burlington Northern Santa Fe notice by a telephone
call at 213-267-4086, to place an empty train, or a portion thereof, at CSI's
designated loading facility at the Port of Long Beach or Los Angeles Harbor,
California no later than 22 hours before the time at which CSI or its agent
desires the train to be placed.
If Burlington Northern Santa Fe fails to meet the service commitment as above
stated for reasons other than those set forth in the next paragraph, Burlington
Northern Santa Fe agrees to pay CSI a sum not to exceed $900.00 per hour (CSI
will submit invoice furnished by their agent (RDP) outlining actual per hour
out-of-pocket cost but not to exceed $900.00 per hour) up to a maximum, of eight
(8) hours for each hour or portion thereof, that elapses between the time of
actual placement and the time for which placement was ordered. Notwithstanding
the foregoing if Burlington Northern Santa Fe is not able to furnish empty cars
for the 8:00 A.M. or 1:00 P.M. loading shift but telephones CSI's agent (RDP)
not later than 7:00 A.M. of the same day; Burlington Northern Santa Fe agrees to
pay CSI a sum not to exceed $900.00 per hour (CSI will submit invoice furnished
by their agent (RDP) outlining actual per hour out-of-pocket costs but not to
exceed $900.00 per hour) for a total of (4) hours in lieu of (8) hours as
provided above. Provided however that Burlington Northern Santa Fe shall not be
obligated to make such payment unless CSI or its agent has given Burlington
Northern Santa Fe notice of CSI's intent to invoke this Section, within the
first two (2) hours of such delay, by telephone call at 213-267-4086 and has
followed such notice with a Telefax (fax 213-267-5668).
The service commitment specified above shall not apply where Burlington Northern
Santa Fe is unable to perform due to an Act of God, strikes, lockouts, wrecks,
mechanical breakdowns in equipment or facilities of Burlington Northern Santa
Fe, CSI or its agent, or any act or failure to act on the part of CSI or its
agent.
Page 3
<PAGE>
By way of clarification, derailments of empty unit trains, or any portion
thereof, or collisions with other vehicles or objects while enroute to CSI or
its agent at Los Angeles Harbor to meet a prescheduled empty train loading
appointment, shall not constitute grounds for exclusion from Service Commitment
requirements and responsibilities.
9. DEMURRAGE PROVISIONS
"Thirty-six (36) hours free time will be allowed for loading cars at Origin and
thirty-six (36) hours free time will be allowed for unloading cars at
Destination, regardless of the number of cars placed. The free time shall be
computed from the first 7:00 A.M. after time of initial, actual or constructive
placement of the cars, excluding Saturday, Sunday or Holidays."
10. BILLING
Each shipment made under this Contract or Amendments thereto shall be evidenced
by a Standard Uniform Straight Bill of Lading, Order Notify Bill of Lading
("Bill of Lading") or Shipping Order. All cars for each shipment are to be
billed on one (1) Bill of Lading or Shipping Order. At the time shipment is
tendered the original and all copies of the Bill of Lading or Shipping Order or
other shipping orders shall contain reference to the BNSF Contract Number
assigned to this Contract or Amendments thereto.
11. PAYMENT PLAN
BNSF is the carrier collecting freight charges from Customer on shipments moving
under the provisions of this Contract. Payment of all charges shall be prepaid
and made according to ICC or Canadian Credit Regulations and subsequent
amendments. If payments are not made within the prescribed credit period, or if
Customer does not have credit with BNSF, payment may be required in advance of
service.
12. ASSIGNMENT
Either (Any) party hereto may assign its rights and benefits under this Contract
or Amendments thereto, other than the right to receive transportation services;
but neither (no) party hereto may assign its obligations or duties hereunder,
including but not limited to, the obligation to provide transportation services
to any other person.
13. LOSS AND DAMAGE
Standard common carrier liability pursuant to 49 U.S.C. 11706 will apply on
shipments made under this Contract and Amendments thereto. Accordingly, Railroad
shall not be liable for any loss, damage or injury caused by an act of God, the
public enemy, act of the Customer, a public authority, or inherent vice or
nature of the goods. Railroad shall not be liable for any loss, damage or injury
due to improper loading. Pursuant to 49 U.S.C. 11706, all claims against
Railroad must be brought within nine (9) months and all civil actions against
Railroad must be brought within two (2) years.
14. FORCE MAJEURE
In the event any party cannot perform under this Contract or Amendments thereto
due to or as a result of the following causes: acts of God, including, but not
limited to flood, storm, earthquake, hurricane, tornado, or other severe weather
or climatic conditions; acts of public enemy, war, blockade, insurrection,
derailment, vandalism, sabotage, fire, accident, wreck, washout or explosion;
labor strike or interference, lockout or labor dispute, shortage of diesel fuel,
embargo or AAR service order or governmental law, orders or regulation, or
breakage of machinery; and/or any like causes beyond the reasonable control of
Customer or Railroad, the parties' obligations under this Contract and
Amendments thereto shall be suspended to the extent made necessary by the Force
Majeure event at the affected origin(s) and/or
Page 4
<PAGE>
destination(s) during any such disability period insofar as it applies to the
affected location(s). Suspension shall not result in extension of the term of
this Contract or Amendments thereto.
This Contract and Amendments thereto contains a minimum percentage requirement
("Minimum Volume"). Any shipments made contrary to the route(s) specified in
this Contract or Amendments thereto due to a Force Majeure will be excluded in
determining compliance with any minimum percentage requirement.
The party claiming the Force Majeure shall take all reasonable steps to remove
the Force Majeure event, and shall promptly notify the other party(ies) within a
period of five (5) days, excluding weekends and holidays when it learns of the
existence of a Force Majeure condition and will similarly notify the other
party(ies) within a period of five (5) days, excluding weekends and holidays,
when the Force Majeure is terminated.
15. NOTICES
Any notice given under this Contract or Amendments thereto shall be effective
when received. Notices, except as otherwise provided herein, shall be delivered
to the party(ies) entitled to receive the same by personal delivery, by
Registered or Certified Mail, Return Receipt Requested, or by any electronic
means which can produce a written copy provided that acknowledgment of receipt
of the electronic communication is obtained. Notices shall be addressed to the
appropriate party(ies) as shown in this Contract.
Any notices pertaining to a Force Majeure or to matters of an emergency or
operating nature may be given by an reasonable means. Any notice given verbally
shall be confirmed in writing by First Class Mail as soon as practicable, if
requested by party(ies) receiving such notice.
16. LINE ABANDONMENT
The Terms of this Contract or Amendments thereto in no way obligates the
Railroad to continue ownership, maintenance (including weight standards) or
operations of any rail lines. Railroad will not be liable for any increased
transportation costs or consequential damages that may result from such
discontinuation.
If Customer fails to satisfy the Minimum Volume requirements of this Contract or
Amendments thereto due solely to Railroad's discontinuation of service(s) named
in the above paragraph then, as Customer's remedy, the Minimum Volume for the
then current period shall be waived.
17. AMENDMENT
All amendments to the terms of this Contract shall be in writing and signed by
the parties.
18. DEFAULT
If any party shall default in any material covenant, condition or obligation of
this Contract or Amendments thereto which is not excused by Force Majeure, and
continues in default for a period of ten (10) days after written notice is given
to the defaulting party, the nondefaulting party may without prejudice to other
rights and remedies, terminate this Contract or Amendments thereto by giving
thirty (30) days written notice to the party in default.
If this Contract is terminated by Customer due to Railroad default, and Contract
contains a Minimum Volume requirement, then all shipments which moved under this
Contract during the then current Period shall be determined as if the Minimum
Volume requirements of this Contract has not met the Minimum
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<PAGE>
Volume requirements of this Contract for the then current Period, liquidated
damages will be assessed in accordance with provisions contained in the
Liquidated Damages section of the Contract.
19. SEVERABILITY
Any part, term or provision of this Contract or Amendments thereto that is held
to be unenforceable, illegal, against public policy, or in conflict with any
federal, state or local laws, shall be severable from the rest of the Contract.
The remaining portions of the Contract or Amendments thereto shall not be
affected. The rights and obligations of the parties shall be construed and
inferred as if the Contract did not contain the particular term, part, or
provision held to be invalid, unless the invalid provisions contain the material
financial terms of this Contract, or when considered in the aggregate, render
the administration of this Contract unreasonably burdensome, in which case
(unless new terms or provisions can be negotiated within three (3) months of
written request for renegotiation by either party) this Contract and Amendments
thereto shall be terminated. In the event of termination, the Minimum Volume
requirement of this Contract and Amendments thereto will be waived for the then
current Period.
If on 12/31/2000 CSI elects to change port of entry from Long Beach, CA or Los
Angeles Harbor, CA, CSI will notify BNSF of such anticipated change at least
three (3) months prior to 12/31/2000. CSI and BNSF will then commence
negotiations for transportation charges from the new port of entry.
20. MINIMUM VOLUME REQUIREMENT
The Minimum Volume Requirement in this contract will be 1,400,000 Metric Tons
per year. The 1,400,000 Metric Ton commitment is not limited to slab or coil
tonnage originating at Long Beach, CA or Los Angeles Harbor, CA. Volume
commitment can be satisfied with slab or coil tonnage from other ports or from
domestic sources. Customer must submit written certification to the following:
The Burlington Northern and Santa Fe Railway Company
Attention: Manager Liability Rating
176 East Fifth Street
St. Paul, MN 55101
with a copy to Railroad at address(es) as shown in The Official Railway Guide,
within thirty (30) days after the close of each Period stating whether the
Minimum Volume has or has not been met. Customer will, upon request, permit
Railroad or its authorized agent to inspect Customer's shipping documents to
verify that certification is correct.
Railroad or its agent will protect the confidentiality of such documents.
21. LIQUIDATED DAMAGES
If Customer fails to meet the Minimum Volume requirements of this Contract or
Amendments thereto during any Period, Customer will pay Railroad, in addition to
the freight charges that have already been assessed pursuant to this Contract or
Amendments thereto, the amount as indicated on the Transportation Service
Attachment.
Payments for liquidated damages, along with supporting calculation, will be made
within thirty (30) days after the close of the Period, with added interest at a
rate of one and one-half percent (1-1/2%) for each month or portion thereof to:
The Burlington Northern Santa Fe Railroad
Attention: Manager Liability Rating
176 E. 5th Street
St. Paul, MN 55101
Page 6
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22. SIGNATURES
Intending to be legally bound, the parties hereto have caused this Contract to
be executed by their representatives as written below:
CALIFORNIA STEEL INDUSTRIES INC
By: /s/ Celo Lourenco Goncalves
------------------------------------
Title: President & CEO
---------------------------------
Date: 11/19/98
----------------------------------
BURLINGTON NORTHERN RAILROAD COMPANY
By: /s/ Daniel L. Garin
------------------------------------
Title: V.P. Metals & Minerals
---------------------------------
Date: 11/19/98
----------------------------------
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<PAGE>
THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY
BNSFC 302606
REGULATED TRANSPORTATION CONTRACT
* Transportation Service Agreement *
Origin Long Beach, CA
Los Angeles Harbor, CA
Destination Kaiser, CA
Equipment
Price applies in Coil Cars (General Car Types: OC -
Open Coil Cars, CD-Closed Coil Cars, CL -
Coil Cars) or Flat Cars (General Car Type: FP - Flat
Pedestal Cars). Price applies in railroad owned or
leased equipment.
Route BNSF
Commodity
33-121-50 - SLAB BKDN IORS
33-123 - IRON OR STEEL SHEET OR
================================================================================
Effective Expiration Commodity Base Rate Volume in
Date Date (Per Metric Ton) Metric Tons
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Minimum Weight will be 81.8 Metric Tons per car
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
01/01/1999 12/31/1999 33-121-50 $4.35 0 to 1,400,000
- --------------------------------------------------------------------------------
01/01/1999 12/31/1999 33-121-50 $4.00 over 1,400,000
- --------------------------------------------------------------------------------
01/01/1999 12/31/1999 33-123 $4.55 no volume
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
01/01/2000 12/31/2000 33-121-50 $4.40 0 to 1,400,000
- --------------------------------------------------------------------------------
Ol/01/2000 12/31/2000 33-121-50 $4.05 over 1,400,000
- --------------------------------------------------------------------------------
01/01/2000 12/31/2000 33-123 $4.62 no volume
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
01/01/2001 12/31/2001 33-121-50 $4.48 0 to 1,400,000
- --------------------------------------------------------------------------------
01/01/2001 12/31/2001 33-121-50 $4.12 over 1,400,000
- --------------------------------------------------------------------------------
01/01/2001 12/31/2001 33-123 $4.70 no volume
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
01/01/2002 12/31/2002 33-121-50 $4.57 0 to 1,400,000
- --------------------------------------------------------------------------------
01/01/2002 12/31/2002 33-121-50 $4.20 over 1,400,000
- --------------------------------------------------------------------------------
01/01/2002 12/31/2002 33-123 $4.79 no volume
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
01/01/2003 12/31/2003 33-121-50 $4.66 0 to 1,400,000
- --------------------------------------------------------------------------------
01/01/2003 12/31/2003 33-121-50 $4.28 over 1,400,000
- --------------------------------------------------------------------------------
01/01/2003 12/31/2003 33-123 $4.88 no volume
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 10.8
STEVEDORE AND TERMINAL SERVICES AGREEMENT BETWEEN
RIO DOCE PASHA TERMINAL L.P.
AND
CALIFORNIA STEEL INDUSTRIES, INC.
This Stevedore and Terminal Services Agreement ("Agreement") is made and
entered into as of the 1st day of January 1996 by and between Rio Doce Pasha
Terminal L.P., a California limited partnership (hereinafter, "Contractor"), and
California Steel Industries, Inc., a Delaware corporation (hereinafter,
"Customer").
1. GENERAL
(a) Contractor shall provide stevedore and terminal services for
handling steel slabs owned by or consigned to Customer to be
discharged from vessels at Mormon Island Terminal, 802 South
Fries Avenue - Wilmington, California 90744.
(b) Contractor shall provide necessary labor, supervision, security
and customary equipment to perform stevedore and terminal
services upon the terms set forth in this Agreement and the
attached rate schedules.
(c) Customer shall utilize the services of Contractor pursuant to
this Agreement for importing steel slabs owned by or consigned
to Customer with a minimum of 1,000,000 metric tons each year
of this Agreement provided that the following two provisions
are met. (1) This minimum is only guaranteed if Customer
imports one million tons. (2) If Contractor requests customer
to move a vessel to another terminal, tonnage will count
towards the minimum as though the vessel discharged at
Contractor's facility.
If this Agreement terminates on any day other than January 1st,
this minimum annual tonnage shall be pro rated accordingly.
(d) Contractor shall provide a safe and suitable berth with
container cranes having a guaranteed minimum draft of forty
(40) feet.
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2. VESSEL STEVEDORING AND TRAIN AND TRUCK LOADING SERVICES
Contractor shall provide Customer with the following
services and the services described on Schedule IV
hereto:
(a) Movement of steel slab cargoes from stow in
vessel to point of rest in yard. Contractor
shall order stevedoring labor to work each of
Customer's vessels at the first shift after the
arrival of the vessel at the berth. If the
vessel arrives during a shift, Contractor may
order labor if Customer agrees to pay standby
time or Contractor may order labor at its own
expense. In the event that Customer's vessel
arrives simultaneously with another vessel,
Contractor shall use its best efforts to work
at least one (1) gang per shift on each
vessel, unless otherwise agreed by Contractor
and Customer.
(b) Contractor shall load steel slab cargo to slab
rail cars or tally delivery to trucks, keeping
the item/heat segregation. Unit train rail cars
shall be loaded so as to maximize the
utilization of available railcar loading
weights.
3. INVOICING AND PAYMENT
(a) Contractor shall be entitled to deliver its
invoice to Customer immediately following vessel
departure. Customer shall pay Contractor's
invoice in U.S dollars at the place specified in
the invoice within thirty (30) days after
invoice presentation. Contractor shall be
entitled to collect interest on late payments at
an annual rate of 2% over the prime rate of
interest charged by Bank of America NT & SA, San
Francisco, California.
(b) In the event Customer disputes any portion or an
invoice, Customer shall pay the undisputed
portion within the requisite time for payment of
such invoice. Thereafter. Customer shall discuss
the disputed portion of such invoice promptly
with Contractor. In the event the parties are
unable to resolve such dispute within ninety
(90) days of the date of the invoice, or
Customer is late in paying any invoice, either
Contractor or Customer shall be entitled to
initiate arbitration pursuant to Article 13
hereof
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<PAGE>
4. UNLOADING CONDITIONS
(a) Berthing priority will be accorded to Customer's vessels if
they arrive within four (4) hours of the previously estimated
time, which must be given to the terminal operator seventy-two
(72) hours prior to the vessel's arrival. This priority will
not accord Customer the right to any berth at which another
vessel is finishing work resulting from berth priority given
immediately prior to Customer's own priority or to any berth
where a vessel has been waiting for the start of a new shift
to begin working. Contractor and customer agree to closely
coordinate vessel arrivals in order to optimize berth
availability for vessels utilizing container cranes.
(b) If another vessel is scheduled to arrive while Customer's
vessel is at berth, Contractor, at its option and expense, may
order overtime shifts to work Customer's vessel in order to
clear the berth promptly for use by the other vessel. If
Customer's vessel is scheduled to arrive while another vessel
is at berth, Contractor shall use its best efforts to clear
the berth as soon as possible.
(c) Contractor, at its option and expense, may shift Customer's
vessel for up to twenty-four (24) hours if required in order
to allow a liner vessel to be unloaded at the same berth,
provided that Contractor has discharged all critical cargo as
defined by Customer, and provided there is no interruption in
rail service to Customer.
(d) Contractor shall unload steel slabs from Customer's vessels at
an average rate of 14,000 metric tons per 24-hour laytime
period. To the extent that the average number of metric tons
unloaded from a vessel by contractor per 24-hour laytime
period is less than 14,000, Contractor shall pay vessel
demurrage to Customer. To the extent that the average number
of metric tons unloaded from vessel by Contractor per
24-hour laytime period exceeds 14,000, Customer shall pay
vessel dispatch to Contractor at the full dispatch rate.
The demurrage rate per metric ton per 24-hour laytime period
will be equal to the demurrage rate as agreed to between
Customer and the owner of the vessel, which demurrage rate
for each shipment will be submitted by Customer and the owner
of the vessel to Contractor for its confirmation.
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<PAGE>
(e) Laytime shall commence at 1800 hours if the notice of
readiness is tendered before noon, and shall commence at
0800 hours the next working day if the notice of readiness
is tendered within office hours after noon, unless discharge
of cargo commences earlier, in which case the time actually
used shall count at laytime. Laytime shall continue until
completion of discharge of the cargo. Laytime shall
include all weather working days of the year, Saturdays and
Sundays included, other than the federal and California state
holidays specified in the PMA/ILWU Agreement. Laytime shall
cease at 1700 hours on the day preceding such a holiday and
shall resume at 0800 hours on the day following such a
holiday. Time lost in waiting for a berth shall count as
laytime. Time lost due to weather conditions that prevent
the vessel from entering the port and/or berth, and/or due
to health and safety reasons as determined by arbitration in
accordance with the PMA/ILWU Agreement, shall not count as
laytime. Opening and closing of hatchcovers shall count as
laytime.
5. RATES
For performance of services, Customer shall pay Contractor compensation
computed in accordance with the rates in force at the time of
commencement of the services. The following rate schedules are attached
hereto and made part of this Agreement:
Schedule I Stevedore and Terminal Service Rates
Schedule II Gang Hour/Manhour Billing Rates
Schedule III Equipment Rental Rates
Schedule IV Services Rendered
6. DOCUMENTATION
(a) Customer shall provided Contractor with all documents,
information and instructions required in order to allow
Contractor to perform efficient services, including the
following:
(i) Vessel manifest and stowage plan/cargo book, four (4)
days prior to vessel arrival, with the exception of
steel slab cargo originating in Mexico.
(ii) Slab priority list, three (3) days prior to arrival.
Page 4
<PAGE>
(iii) Custom clearance documents, prior to vessel arrival
where feasible.
(iv) Vessel schedules, at least once a week.
(v) Delivery and receiving schedules, two (2) days in
advance.
(b) Contractor shall prepare and deliver to Customer all documents
and information required by law or reasonably requested by
Customer, in a form mutually agreed upon between Customer and
Contractor, including the following:
(i) Rail car or truck loading lists, showing the
identification of each slab, by supplier, by heat,
ingot and slab number, and by car or truck,
immediately following completion of unit train
loading via telecopier.
(ii) Vessel daily working report, on a daily basis.
7. LIABILITY AND INSURANCE
(a) Contractor agrees to indemnify and hold harmless Customer from
and against any loss, damage or injury caused by the
negligence of Contractor, its agents, or any subcontractor
consented to by Customer pursuant to Article 11 hereof, or any
employee of the foregoing, provided, however, that if such
loss or damage is caused or contributed to by the negligence
or breach of implied warranty of Customer, the vessel, owners,
vessel operators or their agents, employees or other
independent contractors hired by Customer, then such
obligation of Contractor to indemnify shall be reduced by the
amount of proportional fault attributable to such persons or
entities.
(b) If the services to be provided by either party to this
Agreement are suspended, abated, prevented or impaired by
reason of strikes, lockouts, union disputes, or other labor
disturbances, governmental acts or regulations, diplomatic
acts, fire, flood, earthquake, action of the elements,
explosion, marine casualty, riots, sabotage, war, warlike
actions, civil disturbances, acts of God, or other events of
force majeure, then either party may suspend or reduce
services without liability to the other for such suspension or
reduction.
Page 5
<PAGE>
(c) Contractor shall be discharged from all liability in respect
to loss of, or damage to, any cargo or goods handled under
this Agreement unless claim is brought within one year after
delivery of the goods or the date when the goods should have
been delivered.
(d) Contractor, and any subcontractor consented to by Customer
pursuant to Article 11 hereof, shall maintain, during the term
of this Agreement, insurance covering its operations as
follows:
(i) Worker's Compensation Insurance for the protection of
its employees in accordance with the California
Compensation Act and the Federal Longshoremen's and
Harbor Worker's Compensation Act.
(ii) Terminal Operator's Liability Insurance with a care,
custody and control endorsement and a combined single
limit of not less than $10,000,000 in respect to any
one accident or occurrence.
(iii) Umbrella Liability of not less than $10,000,000 in
respect to any one accident or occurrence.
(e) Contractor, and any subcontractor consented to by Customer
pursuant to Article 11 hereof, will provide Customer, prior to
inception and annually thereafter, with certificates of
insurance naming Customer as additional insured and shall give
90 days' notice of cancellation of any policy.
(f) If, during the course of, or after completion of, discharging
steel slab cargo from one of Customer's vessels, Contractor is
advised by the Master of the vessel or its agent, that
stevedoring damage has occurred to the vessel during discharge
operations, such incident of stevedoring damage, the repair
and any claim resulting therefrom shall be handled directly
between the vessel owners and their agents or insurers and
Contractor.
(g) Contractor shall not be liable for failure to perform any
services caused by defects in cargo and its stowage.
(h) Contractor shall not be responsible for any disruption in
electrical power necessary to operate, or inadequate power
supply needed to operate, efficiently.
Page 6
<PAGE>
8. TERM
(a) This Agreement shall be effective as of January 1, 1996 and
shall remain in full force and effect for five (5) years and
then until terminated by ninety (90) days' prior written
notice by either party hereto to the other.
(b) Notwithstanding any such termination, Contractor shall
continue to be responsible for the loading and discharging of
any cargo which Contractor is handling on the effective date
of such termination. Termination of this Agreement shall not
relieve either party of any liability or obligation that may
have accrued prior thereto.
9. ILWU-PMA AGREEMENT AND PORT TARIFFS
(a) Contractor is a party to the P.M.A. agreement with the
International Longshoremen's and Warehousemen's Union and as
such must comply with the rules, regulations, wage schedule
and other provisions of that agreement. Contractor shall not
be responsible for delays occasioned by the enforcement of
such agreements and policies, union disputes or other labor
disturbances, unless caused by Contractor's failure to comply
with the terms of such agreements and policies.
(b) Wharfage, mooring, dockage, or other tariff items, included or
excluded in the rate schedules attached hereto, shall be
charged to Customer under applicable tariffs issued by port or
governmental authorities. Such charges shall be for Customer's
account and Customer shall indemnify and hold Contractor free
and harmless of and from related costs.
10. DEFAULT
In the event of default by either party in observing or performing its
obligations hereunder, the other party shall have the right to give the
defaulting party a written notice specifying the nature of such default
and if, within thirty (30) days after receipt of such notice, the
defaulting party has not cured or diligently commenced cure of such
default, the other party shall have the right thereupon to terminate
this Agreement. This right of termination is in addition to any other
rights or remedies the parties may have, and failure to exercise it
shall not constitute a waiver of any other remedies available under
this Agreement or at law.
Page 7
<PAGE>
11. NO ASSIGNMENT
Neither party may assign this Agreement, in whole or in part, or assign
any rights or delegate any duties hereunder, without the prior written
consent of the other party.
12. GOVERNING LAW
This contract shall be governed by and construed in accordance with the
laws of California.
13. ARBITRATION
(a) It is agreed that in the event that any disagreement, dispute,
controversy or claim arises out of, or in relation to, or in
connection with this Agreement, or breach thereof, the parties
shall seek to solve the matter amicably through discussions
between the parties.
(b) Any disagreement, dispute, controversy or claim arising out
of, or in relation to, or in connection with this Agreement,
or breach thereof, shall be finally settled by arbitration
in Los Angeles, California, in the United States. The
arbitration shall be brought before three (3) arbitrators.
Each party shall select one (1) arbitrator and the two (2)
arbitrators selected by the parties shall select the third
arbitrator. The arbitration proceedings shall be conducted
in accordance with the Rules of Commercial Arbitration and
Conciliation of the International Chamber of Commerce and in
the English language. Judgment upon the award rendered by
the arbitrators may be entered in any court having
jurisdiction thereof.
14. ENTIRE AGREEMENT
This agreement constitutes the entire agreement, between the parties
with respect to the subject matter hereof, regardless of any
representations previously, contemporaneously, or subsequently made by
any principals or agents of the parties hereto. This Agreement cannot
be amended or modified in any respect except by a written document
executed by authorized representatives of Customer and Contractor.
Page 8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first written above.
RIO DOCE PASHA TERMINAL L.P. CALIFORNIA STEEL INDUSTRIES, INC.
By: RDP TERMINAL, INC. By:_______________________________
General Partner Kazuhiro Nishiyama
Title: Executive Vice President &
Assistant to President
By: /s/ Mauro Oliveira Dias
---------------------------
Mauro Oliveira Dias
Senior Vice President, Finance
By: /s/ James W. Hull By:
--------------------------- --------------------------------
James W. Hull Antonio A. Andrade
Senior Vice President, Operations Executive Vice President, Finance
Page 9
<PAGE>
Steel Slabs
- ---------------------------------------------------------
RIO DOCE PASHA TERMINAL
CALIFORNIA STEEL INDUSTRIES, INC.
SCHEDULE I
EFFECTIVE: JANUARY 1, 1996
STEVEDORE AND TERMINAL SERVICES CHARGES
(1) The stevedore and terminal rate for discharging of steel slabs and
loading to rail cars shall be $10.07 per metric tons (mtons), 1st or
2nd shift, seven days a week, already adjusted to January 1st, 1996.
This rate consists of the following rate factors:
From: January 01, 1996
Until: June 30, 1996
(a) ILWU labor, vessel unloading $2.19
(b) ILWU labor, train loading $1.09
(c) ILWU labor, maintenance $0.51
-----------------------
Total manning $3.79
(d) PMA tonnage assessment $0.81
(e) Equipment & overhead $ .87
(f) Wharfage $4.60
-----------------------
TOTAL $10.07
(2) The above rate is subject to rate inclusions/not inclusions listed in
Schedule IV, Articles A, B and C of this agreement, and the following
conditions:
(a) Rates are based on the current mix of individual steel slabs
with weights less than and greater than 22 mton, and will be
of a similar ratio through 1997 year end. Customer and
Contractor will review the mix of individual slab weights in
1998.
(b) Vessels to be of the open hatch class, and cargo to be stowed
with proper blockage stow, with sufficient access and
separation to allow ease of slinging cargo for maximum lifts
up to 45 mtons with the container cranes. (Stowage commonly
referred to as a "California" stow).
- Page 1 -
<PAGE>
Steel Slabs
- ---------------------------------------------------------
(c) For cargoes requiring positioning under the hatch projection,
Contractor will provide for the service without extra charge
to Customer.
(3) Service charges for operations other than stated above shall be
negotiated on a vessel by vessel basis.
(4) Rail car loading shall be performed only during weekdays, from 0800
through 1700 hours.
(5) ILWU labor on standby awaiting for rail cars to be positioned will be
charged to Customer at the rates set forth in Schedules II and III
attached hereto.
ROUTINE RATE ADJUSTMENT FACTORS
(1) All rates in this Agreement are based on ILWU wages, PMA man-hour
assessments, PMA tonnage assessments, insurance and taxes in effect on
the date of this Agreement. Increases or decreases in any of those
costs during the term of this Agreement shall be reflected in the rates
of this Agreement by the same amount of any such increases or
decreases.
(2) Wharfage charges at $4.60 per mton of steel slabs shall be adjusted in
accordance with increases or decreases in the Port Tariff Rate during
the term of this Agreement.
(3) Equipment costs, including for vessel unloading and rail car loading,
and Contractor's overhead shall be adjusted each July 1st by the
percentage change in the Southern California Consumer Price Index for
the year ending the previous March 31st.
VOLUME DISCOUNT
Contractor will give Customer a volume discount of $1.18 for tonnage in excess
of the annual minimum guarantee of 1,000,000 mtons.
- Page 2 -
<PAGE>
Steel Slabs
- ---------------------------------------------------------
OTHER DISCOUNTS
(a) The steel slab throughput for cargo on vessels provided with
the proper stow as described above and worked with vessel gear
(which in Contractor's opinion is capable of production
closely comparable to that of the shore gantry crane) will
receive a discount of $1.00 per metric ton.
(b) Those steel slab cargoes which are taken by truck will receive
a discount of $0.75 per metric ton.
- Page 3 -
<PAGE>
Steel Slabs
- ---------------------------------------------------------
RDP TERMINAL
CALIFORNIA STEEL INDUSTRIES, INC.
SCHEDULE II
GANG HOUR/MANHOUR BILLING RATES
EFFECTIVE: JANUARY 1, 1996
A. GANG HOUR BILLING RATES (STEVEDORE ONLY) PER HOUR
(1) Standby/detention - 1st shift $1,099.26
- 2nd shift $1,353.27
- Overtime shift $1,535.17
(2) Extra labor - - 1st shift $1,264.15
- 2nd shift $1,556.26
- overtime shift $1,765.45
NOTE 1. Refer to Schedule III for equipment charges.
NOTE 2: Extra labor rates consist of detention rates plus 15%
markup.
B. MAN-HOUR BILLING RATES - PER HOUR (EXTRA LABOR @ 15% MARKUP)
Labor Class 1st Det 1st Xtr 2nd Diff OT Diff 3rd Diff 3rd OTD
Longshoreman 43.81 47.21 11.34 17.01 20.41 27.22
Skilled (2.75%) 44.75 48.25 11.65 17.48 20.97 27.96
Skilled (3.50%) 45.00 45.52 11.74 17.61 21.13 28.17
Skilled (4.25%) 45.26 48.81 11.82 17.73 21.28 28.37
Skilled (4.50%) 45.34 48.90 11.85 17.78 21.33 28.44
Skilled (6.75%) 54.14 58.45 12.11 18.16 21.79 29.05
Crane/Tophandler 54.14 58.45 12.11 18.16 21.79 29.05
Gearmen 54.14 58.45 12.11 18.16 21.79 29.05
Mechanic 59.50 64.35 13.61 20.42 24.50 32.66
20% Foreman 60.05 64.90 13.61 20.41 24.49 32.66
30% Foreman 73.67 79.75 14.74 22.11 26.54 35.38
Basic Clerk 43.81 47.21 11.34 17.01 20.41 27.22
Supervisor 63.69 66.64 12.47 16.71 22.45 29.94
Supercargo 68.62 74.26 13.67 20.50 24.60 32.80
Floorrunner 63.89 68.84 12.47 18.71 22.45 29.94
Cooper 43.81 47.21 11.34 l7.0l 20.41 27.22
Chief Cooper 63.89 68.84 12.47 18.71 22 45 29.94
- Page 4 -
<PAGE>
Steel Slabs
- ---------------------------------------------------------
RDP TERMINAL
CALIFORNIA STEEL INDUSTRIES, INC.
SCHEDULE III
EQUIPMENT RENTAL RATES
EFFECTIVE: JANUARY 1, 1996
Charge Per Hour
Forklift - capacity 15 tons $ 30.00
Forklift - capacity 32 tone $ 65.00
Forklift - capacity 45 tons $ 70.00
Tractor and trailer $ 20.00
Gantry Crane (Speed Loader) $ 90.00
Container Crane at Detention $335.00
Container Crane at Extra Labor $555.00
- Page 5 -
<PAGE>
Steel Slabs
- ---------------------------------------------------------
RDP TERMINAL
CALIFORNIA STEEL INDUSTRIES, INC.
SCHEDULE IV
SERVICES RENDERED - SUMMARY
A. STEVEDORING SERVICES. Contractor agrees to provide to Customer
the following stevedoring services as included/not included:
<TABLE>
<CAPTION>
<S> <C>
Item Observation
---- -----------
Labor performed on a 8/hr S/T, Included
first shift
Overtime differentials, 2nd shift, Included
weekdays
Overtime differentials, 1st and Included
2nd shift, weekends
Overtime differentials, 3rd shift Not Included
Contractor's equipment Included
Port's container crane Included
PMA man hour assessments Included
PMA tonnage assessments Included
Insurance and taxes Included
Fuel and electricity Included
Contractor's supervision Included
Initial coverage/uncovering Included
automatic hatch covers
Normal unlashing Included
Removal of dunnage and securing Included
materials
Unloading of steel slabs Included
Unload adrift/damaged steel slabs Not Included
(to be performed at extra
labor plus equipment
per Schedules II and III)
Discharging of previous portdunnage Not Included
and/or dunnage for cargoes other
than steel slabs (to be
performed at extra labor plus
equipment per Schedules II and III)
Detention/standby due to late Not Included
arrival, failures of vessel's
equipment or other circumstances
beyond Contractor's control
</TABLE>
- Page 6 -
<PAGE>
Steel Slabs
- ---------------------------------------------------------
RDP TERMINAL
CALIFORNIA STEEL INDUSTRIES, INC.
SCHEDULE IV
SERVICES RENDERED - SUMMARY
A. STEVEDORING SERVICES
Item Observation
---- -----------
Standby due to Contractor's Included
equipment
Minimum guarantee time for ILWU Included
labor
Recoopering adrift and/or damaged Not Included
cargo
Tallying the movement of steel slabs Included
and noting exceptions
Cargo Penalty Assessments when Not Included
applicable per ILWU-PMA Agreement
Checking and tallying the movement Included
of steel slab off of vessels
and noting exceptions
B. TRAIN LOADING. Contractor agrees to provide the following
terminal services as included/not included.
Item Observation
---- -----------
Planning yard layout for steel slabs Included
Labor for loading steel slabs to Included
rail cars, Monday - Friday,
0800-1700 hours
Contractor's equipment Included
PMA man hour assessments Included
Insurance and taxes Included
Carfares Included
Fuel and electricity Included
- Page 7 -
<PAGE>
Steel Slabs
- -------------------------------------------------------------------------------
RDP TERMINAL
CALIFORNIA STEEL INDUSTRIES, INC.
SCHEDULE IV
SERVICES RENDERED - SUMMARY
B. TRAIN LOADING
Item Observation
---- -----------
Contractor's supervision Included
Tallying the delivery of steel slabs Included
to train/truck and keeping
item/heat segregation
Rail car loading of steel slabs Included
Detention due to reasons beyond Not Included
Contractor's control
Documentation Included
Security Included
C. OTHER TERMINAL SERVICES
Item Observation
---- -----------
Wharfage Included
Dockage Not Included
Lines/Tugs/Pilots Not Included
Storage. Storage will be charged to Included
customer only if a streamlined
outflow from the terminal of at
least 5,000 mtons of slabs per
weekday is not maintained.
- Page 8 -
<PAGE>
CALIFORNIA STEEL INDUSTRIES, INC.
RIO DOCE PASHA TERMINAL, L.P.
EXHIBIT 1- Minimum 14,000 MT Per Day
LABOR COSTS FOR SLAB OPERATIONS - LOS ANGELES
EFFECTIVE: JULY 1, 1995
1. STEVEDORE GANG COSTS - WEEKDAY, DAY SHIFT (2 GANGS)
--------------------------------------------------------------------
# MEN LABOR CLASS HOURS RATE WAGES
----- ----------- ----- ---- -----
2 Hatch Foremen 16 29.48 471.68
" 4 44.23 176.92
2 Hatch Clerks 16 22.68 362.88
4 Crane Operators 20 24.21 484.20
16 36.32 581.12
2 Hatchtenders 16 23.47 375.52
4 Key Holdmen 32 23.30 745.60
16 Basic L/S 128 22.68 2903.04
4 Lift Drivers 32 23.64 756.48
6 Truck Drivers 48 23.70 1137.60
2 Key Foremen 16 29.48 471.68
" 4 44.23 176.92
1 Supercargo 8 27.34 218.72
" 3 41.00 123.00
1 Floor Runner 8 24.95 199.60
" 3 37.42 112.26
---- ----- -------
44 MEN 370 9297.22
AVERAGE PER GANG HOUR 581.08
ASSMT INS/TAX TTL AMOUNT
----- ------- ----------
164.64 235.84 872.16
41.16 88.46 306.54
156.64 181.44 700.96
195.80 242.10 922.10
156.64 290.56 1028.32
156.64 187.76 719.92
313.28 372.80 1431.68
1253.12 1451.52 5607.68
313.28 378.24 1448.00
469.92 568.80 2176.32
164.64 235.84 872.16
41.16 88.46 306.54
78.32 109.36 406.40
29.37 61.50 213.87
78.32 99.80 377.72
29.37 56.13 197.76
- -------- ------- -------
3642.30 4648.61 17588.13
227.64 290.54
2. STEVEDORE GANG COSTS - WEEKDAY, NIGHT SHIFT (2 GANGS)
--------------------------------------------------------------------
#MEN LABOR CLASS HOURS RATE WAGES
---- ----------- ----- ---- -----
2 Hatch Foremen 16 39.31 628.96
" 4 44.23 176.92
2 Hatch Clerks 16 30.24 483.84
4 Crane Operators 20 32.28 645.60
" 16 36.32 581.12
2 Hatchtender 16 31.30 500.80
4 Key Holdmen 32 31.07 994.24
16 Basic L/S 128 30.24 3870.72
4 Lift Drivers 32 31.53 1008.96
6 Truck Drivers 46 31.60 1516.80
2 Key Foreman 16 39.31 628.96
" 4 44.23 176.92
1 Supercargo 8 36.45 291.60
" 3 41.00 123.00
1 Floor Runner 8 33.26 266.08
" 3 37.42 112.26
----- --- --- --------
44 MEN 370 12006.78
AVERAGE PER GANG HOUR 750.42
ASSMT INS/TAX TTL AMOUNT
------ ------- ----------
164.64 314.48 1108.08
41.16 88.45 306.54
156.64 241.92 882.40
195.80 312.80 1164.20
156.64 290.56 1028.32
156.64 250.40 907.84
313.28 497.12 1804.64
1253.12 1935.36 7059.20
313.28 504.48 1826.72
469.92 758.40 2745.12
164.64 314.48 1108.08
41.16 88.46 306.54
78.32 145.80 515.72
29.37 61.50 213.87
78.32 133.04 477.44
29.37 56.13 197.76
------- ------- --------
3642.30 6003.39 21652.47
227.64 375.21
<PAGE>
3. STEVEDORE GANG COSTS - WEEKEND, DAY SHIFT (2 GANGS)
- ------------------------------------------------------
# MEN LABOR CLASS HOURS RATE WAGES
- ----- ----------- ----- ---- -----
2 Hatch Foremen 16 44.23 707.68
" 4 66.35 265.40
2 Hatch Clerks 16 34.02 544.32
4 Crane Operators 20 36.32 726.40
" 16 54.48 871.68
2 Hatchtenders 16 35.21 563.36
4 Key Holdmen 32 34.96 1,118.72
16 Basic L/S 128 34.02 4,354.56
4 Lift Drivers 32 35.47 1,135.04
6 Truck Drivers 48 35.55 1,706.40
2 Key Foremen 16 44.23 707.68
" 4 66.35 265.40
1 Supercargo 8 41.00 328.00
" 3 61.60 184.50
1 Floor Runner 8 37.42 299.36
" 3 56.13 168.39
---- ----- ---------
44 MEN 370 13,946.89
AVERAGE PER GANG HOUR 871.68
ASSMT INS/TAX TTL AMOUNT
----- ------- ----------
164.64 353.64 1,226.16
41.16 132.70 439.26
156.64 272.16 973.12
195.80 363.20 1,285.40
156.64 435.84 1,464.16
156.64 281.68 1,001.68
313.28 559.36 1,991.36
1,253.12 2,177.28 7,784.96
313.28 567.52 2,015.84
469.92 853.20 3,029.52
164.64 353.84 1,226.16
41.16 132.70 439.26
78.32 164.00 570.32
29.37 92.25 306.12
78.32 149.68 527.36
29.37 84.20 281.96
-------- -------- ---------
3,642.30 6,973.45 24,562.64
227.64 435.84
4. STEVEDORE GANG COSTS - WEEKEND, NIGHT SHIFT (2 GANGS)
- --------------------------------------------------------
# MEN LABOR CLASS HOURS RATE WAGES
- ----- ----------- ----- ---- -----
2 Hatch Foremen 16 44.23 707.68
" 4 66.35 265.40
2 Hatch Clerks 16 34.02 544.32
4 Crane Operators 20 36.32 726.40
" 16 54.48 871.68
2 Hatchtenders 16 35.21 563.36
4 Key Holdmen 32 34.96 1,118.72
16 Basic L/S 128 34.02 4,354.56
4 Lift Drivers 32 35.47 1,135.04
6 Truck Drivers 48 35.55 1,706.40
2 Key Foremen 16 44.23 707.68
" 4 66.35 265.40
1 Supercargo 8 41.00 328.00
" 3 61.60 184.50
1 Floor Runner 8 37.42 299.36
" 3 56.13 168.39
--- ---------
44 MEN 370 13,946.89
AVERAGE PER GANG HOUR 871.68
ASSMT INS/TAX TTL AMOUNT
------ ------- ----------
164.64 353.84 1,226.16
41.16 132.70 439.26
156.64 272.16 973.12
195.80 363.20 1,285.40
156.64 435.84 1,464.16
156.64 281.68 1,001.68
313.28 559.36 1,991.36
1,253.12 2,177.28 7,784.96
313.28 567.52 2,015.84
469.92 853.20 3,029.52
164.64 353.84 1,226.16
41.16 132.70 439.26
78.32 164.00 570.32
29.37 92.25 306.12
78.32 149.68 527.36
29.37 84.20 281.96
-------- -------- ---------
3,642.30 6,973.45 24,562.64
227.64 435.84
<PAGE>
5. SEVEN DAY AVERAGE HOURLY GANG COST TTL HRS RATE/HR TTL AMOUNT
- --------------------------------------------------------------------------------
WEEKDAY, DAY 5 DAYS @ 16 HOURS EACH 80 1,099.26 $ 87,940.80
WEEKDAY, NIGHT 5 NIGHTS @ 16 HOURS EACH 80 1,353.27 108,261.60
WEEKEND, DAY 2 DAYS @ 16 HOURS EACH 32 1,535.16 49,125.12
WEEKEND, NIGHT 2 NIGHTS @ 16 HOURS EACH 32 1,535.16 49,125.12
--- -------- -----------
TOTAL 224 $294,452.64
7 - DAY AVERAGE HOURLY GANG COST
6. RAILCAR LOADING - WEEKDAY
- ----------------------------
# MEN LABOR CLASS HOURS RATE WAGES ASSMT
- ----- ----------- ----- ----- ------ -----
1 Foreman 8 29.48 235.84 82.32
* 2 44.23 88.46 20.58
2 Crane Operators 10 24.21 242.10 97.90
* 8 36.32 290.56 78.32
4 Dockmen 32 22.68 725.76 313.28
1 Wedgeman 8 22.68 181.44 78.32
4 Lift Drivers 32 23.64 756.48 313.28
2 Car Runners 16 27.34 437.44 156.64
* 6 41.00 246.00 58.74
--- -------- --------
14 MEN 122 3,204.08 1,199.38
AVERAGE PER HOUR (A) 400.51 149.92
INS/TAX TTL AMOUNT
------- ----------
117.92 436.08
44.23 153.27
121.05 461.05
145.28 514.16
362.88 1,401.92
90.72 350.48
378.24 1,448.00
218.72 812.80
123.00 427.74
-------- --------
1,602.04 6,005.50
200.26
AVERAGE PER HOUR AS OF 07/01/94 $ 787.75
7. RAILCAR LOADING - WEEKEND
- ----------------------------
# MEN LABOR CLASS HOURS RATE WAGES ASSMT
- ----- ----------- ----- ---- ----- -----
1 Foreman 8 44.23 353.84 82.32
* 2 44.23 88.46 20.58
2 Crane Operators 10 36.32 363.20 97.90
* 8 36.32 290.56 78.32
4 Dockmen 32 34.02 1,088.64 313.28
1 Wedgeman 8 34.02 272.16 78.32
4 Lift Drivers 32 35.47 1,135.04 313.28
2 Car Runners 16 41.00 656.00 156.64
* 6 41.00 246.00 58.74
--- -------- --------
14 MEN 122 4,493.90 1,199.38
AVERAGE PER HOUR (B) 561.74 149.92
INS/TAX TTL AMOUNT
------- ----------
176.92 613.08
44.23 153.27
181.60 642.70
145.28 514.16
544.32 1,946.24
136.08 486.56
567.52 2,015.84
328.00 1,140.64
123.00 427.74
-------- --------
2,246.95 7,940.23
280.67
OVERTIME DIFFERENTIAL PER HOUR (B-A) $ 241.64
<PAGE>
8. PMA TONNAGE ASSESSMENT- FROM 07/01/05 TO 06/30/96
-------------------------- ------------- -----------
TONNAGE ASSESSMENT- PER KT $1.28 $0.81
EFFECTIVE
9.OVERALL COST 1/1/96
--------------- ---------
a. Vessel Unloading, I.L.W.U. Labor $2.19
b. Train Loading I.L.W.U. Labor $1.09
c. Maintenance, I.L.W.U. Labor $0.51
d. PMA Tonnage Assessment $0.81
e. Equipment & Overhead $0.87
f. Wharfage $4.60
---------
TOTAL $10.07
=========
Volume Discount $1.18 per MT for all tonnage after one million metric
tons.
<PAGE>
Rio Doce Pasha Terminal, L.P. General Office:
A California Limited Partnership Tel: (310) 835-5042
RDP Terminal, Inc. (General Partner) FAX: (310) 835-1082
802 S. Fries Avenue Wilmington, CA 90744 Executive Office:
Tel: (310) 835-9869
FAX: (310) 835-9861
November 15, 1996
Mr. Miguel Jourdan
Executive Vice President, Finance
California Steel Industries, Inc.
14000 San Bernardino Ave.
Fontana, CA 92335
Re: Stevedore / Terminal Rates - June 29, 1996 through June 27, 1997
Port of Los Angeles - Rio Doce Pasha Terminal, L.P.
Dear Mr. Jourdan:
Pursuant to the terms of our agreement, we herewith attach amended Schedules I &
II which reflect the recently negotiated wages in the Memorandum of
Understanding between the ILWU and the PMA, and the increase in PMA man-hour
assessments effective July 1, 1996. Schedules III & IV were not affected and
therefore remain unchanged.
Also attached are the labor cost calculations as well as railcar detention and
differential costs for rail failures and weekend operations.
Although wages were dramatically increased, please keep in mind that last year
the rates were significantly reduced. Moreover, next year the wage increases
will only be $1.00 per hour and the following year there will be no increase to
wages. However, PMA man-hour assessments are calculated on a year to year basis.
We will immediately begin retroactive adjustments of all invoices back to June
28, 1996.
We thank you for your patience during the long ratification process and for
allowing us to be of service these many years. We look forward to continuing our
close and successful relationship. Please call if you should have any questions.
We remain sincerely yours,
RIO DOCE PASHA TERMINAL, L.P.
/s/ Fred Van Deventer
Fred Van Deventer
cc: Mr. Mauro Dias; Mr. Carl Horn; Mr. Scot Buckles
<PAGE>
22.2 All joint working and dispatching rules shall remain in effect unless
changed by mutual agreement. All other restrictions on the Employer or employees
that are in conflict with the provisions of this Agreement are null and void.
Section 23
TERM OF AGREEMENT
This Agreement shall remain in effect until 5:00 p.m., July 1, 1999,
and shall be deemed renewed thereafter from year to year unless either party
gives written notice to the other of a desire to modify or terminate the same,
said notice to be given at least 60 days prior to the expiration date.
IN WITNESS WHEREOF, the Parties here to have signed this Agreement.
Dated: November 1, 1996
Pacific Maritime Association International Longshore and
Warehouse Union
On behalf of its members Local 91
/s/ Ivan Olson
/s/ Terry N. Lane
Local 92
/s/ Walt Butler
Local 94
/s/ George Kuvakas
Local 98
/s/ Paul Weiser
Unit 29
/s/ George Kuvakas
Unit 46
/s/ George Kuvakas
<TABLE>
<CAPTION>
1st & 2nd 3rd
1st 2nd Shift 3rd Shift
Shift Shift Overtime Shift Overtime
<S> <C> <C> <C> <C> <C>
20% Foreman $30.40 $40.53 $45.60 $48.64 $54.72
30% Walking Boss/
Foreman $34.00 $44.00 $49.50 $52.80 $59.40
<CAPTION>
1997-1999 WAGE SCHEDULE
Effective 8:00 a.m., June 28, 1997
1st & 2nd 3rd
1st 2nd Shift 3rd Shift
Shift Shift Overtime Shift Overtime
<S> <C> <C> <C> <C> <C>
20% Foreman $31.40 $41.87 $47.10 $50.24 $56.52
30% Walking Boss/
Foreman $34.00 $45.33 $51.00 $54.40 $61.20
</TABLE>
Pay Guarantee Plan Section 20
Rules and Administration
Section 20
PAY GUARANTEE PLAN, RULES, AND ADMINISTRATION
This Pay Guarantee Plan continues and is an extension of the Pay
Guarantee Plan provided in the Memorandum of Understanding of February 10, 1972,
as amended through July 1, 1993.
Preamble
The basic intention of the Pay Guarantee Plan (hereinafter PGP) is to
provide a weekly income to eligible registered men.
20.1 For each year of the Agreement the Employers will have a contingent
liability for the Pay Guarantee Plan of the following maximum amounts:
First year (6/29/96 to 6/28/97) .........................$24,960,000
Second year (6/28/97 to 6/27/98)..........................$20,020,000
Third year (6/27/98 to 7/01/99)..........................$20,020,000
20.11 In the first year $6,240,000 will be made available each quarter; in the
second year $5,005,000 will be made available in each quarter; in the third year
$5,005,000 will be made available each quarter.
20.12 One-thirteenth of each quarter's amount will be contingent liabilities and
will be available at the end of each payroll week to meet the Plan's payout
requirements for that week.
20.13 At the end of the first payroll week if the benefits that have been paid
are less than the amount available for that week, the unused amount will be made
available for the next payroll week(s) as provided in Section 20.3. Thereafter,
the unused amount of the total available in any payroll week shall be made
available for the following payroll week(s). This accumulating procedure shall
continue over the full 156-week contract period.
20.14 The Employers will determine the method by which contributions for the
contingent liability will be collected and made available.
20.2 Benefits. Effective with the beginning of the third payroll quarter of
1987, PGP benefits for Class A employees shall be a maximum of 38 hours pay each
week; PGP benefits for Class B employees who have 5 or more vacation qualifying
years as of the preceding April 1 shall be a maximum of 38 hours pay each week;
PGP benefits for Class B employees with less than 5 vacation qualifying years as
of the preceding April 1 shall be a maximum of 28 hours pay each week. The
hourly rate of PGP pay shall be the employee's appropriate straight time rate of
pay as provided under Section 4.13.
20.21 An exception to the benefits provided in Section 20.2 above shall be that
new registrants after July 1, 1984 shall not be entitled to PGP benefits until
completion of 1 year of registration.
20.22 The benefits payable each week shall be the difference between a man's
earnings for the 4-week period ending with the current week and PGP benefits for
those 4 weeks.
20.221 Earnings are defined as all earnings and/or compensation received during
the payroll week or period including such payments as straight time, overtime,
skill pay, penalty cargo pay, travel time pay, pay for vacations and paid
holidays, jury duty pay, State unemployment benefits and PGP payments.
20.2211 Compensation shall include all payroll adjustments including monetary
claims paid as a result of LRC or arbitration decisions. Payroll adjustments
shall be included as
<PAGE>
CALIFORNIA STEEL INDUSTRIES, INC.
RIO DOCE PASHA TERMINAL, L.P.
EXHIBIT 1 - Minimum 14,000 MT Per Day
LABOR COSTS FOR SLAB OPERATIONS - LOS ANGELES
EFFECTIVE: JANUARY 1, 1998 THROUGH JUNE 27, 1998
1. STEVEDORE GANG COSTS - WEEKDAY, DAY SHIFT (2 GANGS)
- --------------------------------------------------------------------------------
ADDED
STEADY TOTAL
# MEN LABOR CLASS HOURS HOURS HOURS RATE
- ----- ------------ ----- ------ ----- -----
2 Hatch Foremen 16 2 18 34.00
" 4 2 6 51.00
2 Hatch Clerks 16 0 16 25.68
4 Crane Operators 20 4 24 30.22
" 16 0 16 45.32
2 Hatchtenders 16 0 16 27.95
4 Key Holdmen 32 0 32 30.22
16 Basic L/S 128 0 128 25.68
4 Lift Drivers 32 0 32 30.22
" 0 4 4 45.32
6 Truck Drivers 48 0 48 27.95
2 Key Foremen 16 2 18 34.00
" 4 2 6 51.00
1 Supercargo 8 0 8 32.48
" 3 0 3 48.73
1 Floor Runner 8 0 8 31.35
" 3 0 3 47.03
-- --- -- ---
44 MEN 370 16 386
AVERAGE PER GANG HOUR
1996 GANG COST
INCREASE %
WAGES ASSMT INS/TAX TTL AMOUNT
----- ----- ------- ----------
621.00 251.28 306.00 1,169.28
306.00 83.76 153.00 542.76
410.88 191.36 205.44 807.68
725.28 287.04 362.64 1,374.96
725.12 191.36 362.56 1,279.04
447.20 191.36 223.60 862.16
967.04 382.72 483.52 1,833.28
3,287.04 1,530.88 1,643.52 6,461.44
967.04 382.72 483.52 1,833.28
181.28 47.84 90.64 319.76
1,341.60 574.08 670.80 2,586.48
612.00 251.28 306.00 1,169.28
306.00 83.76 153.00 542.76
259.84 95.68 129.92 486.44
146.19 35.88 73.10 255.17
250.80 95.68 125.40 471.88
141.09 35.88 70.55 247.52
--------- -------- -------- ---------
11,686.40 4,712.56 5,843.21 22,242.17
730.40 294.54 365.20
666.20 261.64 333.10 1,260.94
10.25%
2. STEVEDORE GANG COSTS - WEEKDAY, NIGHT SHIFT (2 GANGS)
- --------------------------------------------------------------------------------
ADDED
STEADY TOTAL
# MEN LABOR CLASS HOURS HOURS HOURS RATE
- ----- ----------- ----- ------ ----- ----
2 Hatch Foremen 16 2 18 45.33
* 4 2 6 51.00
2 Hatch Clerks 16 0 16 34.24
* 16 0 16 45.32
4 Crane Operators 20 4 24 40.29
2 Hatchtender 16 0 16 37.26
4 Key Holdmen 32 0 32 40.29
16 Basic L/S 128 0 128 34.24
4 Lift Drivers 32 0 32 40.29
* 0 4 4 45.32
6 Truck Drivers 48 0 48 37.26
2 Key Foremen 16 2 18 45.33
* 4 2 6 51.00
1 Supercargo 8 0 8 43.31
* 3 0 3 48.73
1 Floor Runner 8 0 8 41.80
* 3 0 3 47.03
- ---- --- -- ---
44 MEN 370 16 386
AVERAGE PER GANG HOUR
1996 GANG COST
INCREASE %
WAGES ASSMT INS/TAX TTL AMOUNT
----- ----- ------- ----------
815.94 251.28 407.97 1,475.19
306.00 83.76 153.00 542.76
547.84 191.36 273.92 1,013.12
725.12 191.36 362.56 1,279.04
966.96 287.04 483.48 1,737.48
596.16 191.36 298.08 1,085.60
1,289.28 382.72 644.64 2,316.64
4,382.72 1,530.88 2,191.36 8,104.96
1,289.28 382.72 644.64 2,316.64
161.28 47.84 90.64 319.76
1,788.48 574.08 894.24 3,256.80
815.94 251.28 407.97 1,475.19
306.00 83.76 153.00 542.76
346.48 95.68 173.24 615.40
146.19 35.88 73.10 255.17
334.40 95.68 167.20 597.28
141.09 35.88 70.55 247.52
--------- -------- -------- ---------
14,979.16 4,712.56 7,489.59 27,181.31
936.20 294.54 468.10
859.61 261.64 429.80 1,551.05
9.53%
Page 1
<PAGE>
California Consumer Price Index Page 1 of 2
CA TRADE AND COMMERCE AGENCY
California Consumer Price Index (CPI)
The CPI is a measure of prices at the consumer level, based upon a
survey Of goods and services conducted by the U.S. Bureau of Labor
Statistics. The CPI can be used to calculate consumer price
inflation by comparing index levels at different points in time.
The U.S. Bureau of Labor Statistics (BLS) publishes CPI data for
major metropolitan areas in the U.S., as well as a U.S. City
Average. The California CPI is calculated by the California
Department of Industrial Relations as a weighted average of the
three major metropolitan areas in the state surveyed by BLS. The
table below contains CPIs for California, the U.S., and the major
metropolitan areas in the state.
(Note: The Bureau of Labor Statistics prepares two CPI series:
Urban Wage Earners and Clerical Workers (CPI-W) and All Urban
Consumers (CPI-U). Each index is based on the expenditures of their
respective groups. However, the CPI-U is the more widely used index
for measuring consumer price inflation and is the series presented
below.)
Return to Links to Economic Data by Subject
-------------------------------------------
---------------------------------------------------------
Consumer Price Index
All Urban Consumers (CPI-U)
(1982-1984=100)
Los Angeles San Francisco
California Anaheim Oakland
Riverside San Jose*
1997:
Jan. 158.8 159.1 157.0
Feb. 159.2 159.2 157.9
Mar. 160.0 159.8 159.2
Apr. 160.2 159.9 159.6
May 160.0 159.5 159.8
Jun. 160.0 159.4 160.0
Jul. 160.2 159.5 160.6
Aug. 160.5 159.7 161.1
Sep 161.2 160.5 161.6
San Diego** U.S. City
Average
- 159.1
- 159.6
- 160.0
- 160.2
- 160.1
- 160.3
163.7 160.5
- 160.8
- 161.2
<PAGE>
California Consumer Price Index Page 2 of 2
Oct. 161.9 161.1 162.5
Nov. 161.7 160.7 162.6
Dec. 162.0 161.2 162.6
Annual Ave. 160.5 160.0 160.4
1998:
Jan. - 161.0 -
Feb. 162.1 161.1 163.2
Mar. - 161.4 -
Apr. 163.1 161.8 164.6
May - 162.3 -
Jun. 163.6 162.2 165.5
Jul. - 162.1 -
Aug. 164.3 162.6 166.6
- 161.6
- 161.5
163.7 161.3
163.7 160.5
- 161.6
- 161.9
- 162.2
- 162.5
- 162.8
- 163.0
166.0 163.2
- 163.4
* The index for San Francisco-Oakland-San Jose will be published
by the U.S. Bureau of Labor Statistics for even numbered months
only.
** The index for San Diego is published semi-annually for
July and December.
<PAGE>
Rio Doce Pasha Terminal, L.P. General Office:
A California Limited Partnership Tel: (310) 835-5042
RDP Terminal, Inc. (General Partner) FAX: (310) 835-1082
802 S. Fries Avenue Wilmington, CA 90744
Executive Office:
Tel: (310) 835-9869
FAX: (310) 835-9861
September 12, 1997
Mr. Miguel Jourdan
Executive Vice President, Finance
California Steel Industries, Inc.
14000 San Bernardino Ave.
Fontana, CA 92335
Re: Stevedore/Terminal Rates - June 28, 1997 through December 31,
1997 Stevedore/Terminal Rates - January 1, 1998 through June
27, 1998 Port of Los Angeles - Rio Doce Pasha Terminal, L.P.
Dear Mr. Jordan:
Further to our letter of June 27, 1997 and our numerous discussions
concerning the rate adjustments, we are pleased to submit the attached
Schedules I & II for the above referenced time periods. Schedules III &
IV were not affected and therefore remain unchanged.
A. June 28, 1997 through December 31, 1997
This rate is consistent with past adjustments wherein labor wage
increases have been passed along in our rates with the following
additions:
1. RDP will invoice on its monthly miscellaneous railcar bills
$.05 per MT and the cost of a half a wedgeman (4 Hrs for
every shift worked), to cover the cost of additional wedging
demands.
2. Slabs larger than 22 MT each, exceeding 45,000 MT per annum,
will not be subject to the volume discount.
Dispatch/Demurrage for vessels with slabs larger than 22 MT,
exceeding 45,000 MT per annum to be calculated at 10,000 MT
per day. For June 28 through December 31, 1997 we will
prorate this to tonnage exceeding 22,500 MT.
B. January 1, 1998
Starting January 1, 1998 the rate will include the additional hours that
are required to retain steady labor which has become an intregal part of
the gang cost.
<PAGE>
Mr. Miguel Jourdan
September 12, 1997
Page 2
If all is in order please advise and we will immediately begin to
retroactively adjust invoices since June 28. If you should have any
questions or comments we would be most pleased to discuss any items at
your convenience.
We remain sincerely yours,
RIO DOCE PASHA TERMINAL, L.P.
/s/ Fred Van Deventer
Fred Van Deventer
Contract Administration Manager
c: Mr. Mauro Dias
Mr. Carl Horn
Mr. Jeff Burgin
<PAGE>
Steel Slabs
- ---------------------------------------------------------
RIO DOCE PASHA TERMINAL
CALIFORNIA STEEL INDUSTRIES, INC.
SCHEDULE I
EFFECTIVE: JUNE 28, 1997 THROUGH DECEMBER 31, 1997
STEVEDORE AND TERMINAL SERVICE CHARGES
(1) The stevedore and terminal rate for discharging of steel slabs and
loading to rail cars shall be $10.91 per metric tons (mtons), 1st or
2nd shift, seven days a week. This rate consists of the following
rate factors:
From: June 28, 1997
Until: DECEMBER 31, 1998
(a) ILWU labor, vessel unloading $2.620
(b) ILWU labor, train loading $1.318
(c) ILWU labor, maintenance $0.606
------
Total manning $4.544
(d) PMA tonnage assessment $0.841
(e) Equipment & overhead $0.920
(f) Wharfage $4.600
------
TOTAL $10.91
(2) The above rate is subject to rate inclusions/not inclusions listed
in Schedule IV, Articles A, B and C of this agreement, and the
following conditions:
(a) Rates are based on the current mix of individual steel
slabs with weights less than and greater than 22 mton, and
will be of a similar ratio through 1997 year end. Customer
and Contractor will review the mix of individual slab
weights in 1998.
(b) Vessels to be of the open hatch class, and cargo to be
stowed with proper blockage stow, with sufficient access
and separation to allow ease of slinging cargo for maximum
lifts up to 45 mtons with the container cranes. (Stowage
commonly referred to as a "California" stow).
- Page 1 -
<PAGE>
Steel Slabs
- ---------------------------------------------------------
(c) For cargoes requiring positioning under the hatch
projection, Contractor will provide for the service without
extra charge to Customer.
(3) Service charges for operations other than stated above shall be
negotiated on a vessel by vessel basis.
(4) Rail car loading shall be performed only during weekdays, from 0800
through 1700 hours.
(5) ILWU labor on standby awaiting for rail cars to be positioned will
be charged to Customer at the rates set forth in Schedules II and
III attached hereto.
ROUTINE RATE ADJUSTMENT FACTORS
(1) All rates in this agreement are based on ILWU wages, PMA man-hour
assessments, PMA tonnage assessments, insurance and taxes in effect
on the date of this agreement. Increases or decreases in any of
those costs during the term of this agreement shall be reflected in
the rates of this agreement by the same amount of any such increases
or decreases.
(2) Wharfage charges at $4.60 per mton of steel slabs shall be adjusted
in accordance with increases or decreases in the Port Tariff Rate
during the term of this agreement.
(3) Equipment costs, including for vessel unloading and rail car
loading, and Contractor's overhead shall be adjusted each July 1st
by the percentage change in the Southern California Consumer Price
Index for the year ending the previous March 31st.
VOLUME DISCOUNT
Contractor will give Customer a volume discount of $1.18 for tonnage in
excess of the annual minimum guarantee of 1,000,000 mtons.
- Page 2 -
<PAGE>
Steel Slabs
- ---------------------------------------------------------
OTHER DISCOUNTS
(a) The steel slab throughput for cargo on vessels provided
with the proper stow as described above and worked with
vessel gear (which in Contractor's opinion is capable of
production closely comparable to that of the shore gantry
crane) will receive a discount of $1.00 per metric ton.
(b) Those steel slab cargoes which are taken by truck will
receive a discount of $0.75 per metric ton.
- Page 3 -
<PAGE>
Steel Slabs
- ---------------------------------------------------------
RDP TERMINAL
CALIFORNIA STEEL INDUSTRIES, INC.
SCHEDULE II
GANG HOUR/MANHOUR BILLING RATES
EFFECTIVE: JUNE 28, 1997 THROUGH DECEMBER 31, 1997
A. GANG HOUR BILLING RATES (STEVEDORE ONLY) PER HOUR
---------------------------------------- ---------
(1) Standby/detention - 1st shift $1,316.98
- 2nd shift $1,617.65
- Overtime shift $1,834.58
(2) Extra labor - 1st shift $1,514.53
- 2nd shift $1,860.30
- Overtime shift $2,109.77
NOTE 1: Refer to Schedule III for equipment charges.
NOTE 2: Extra labor rates consist of detention rates plus 15%
markup.
B. MAN-HOUR BILLING RATES - PER HOUR (EXTRA LABOR @ 15% MARKUP)
------------------------------------------------------------
Labor Class 1st Det 1st Xtr 2nd Diff OT Diff 3rd Diff 3rd OTD
----------- ------- ------- -------- ------- -------- -------
Longshoremen 50.48 54.33 12.84 19.26 23.11 30.82
Skilled L/S (10%) 53.89 58.08 13.97 20.96 25.16 33.54
Skilled L/S (20%) 57.29 61.82 15.11 22.67 27.20 36.26
Crane/Tophandler 67.28 71.81 15.11 22.67 27.20 36.26
Gearman 67.28 71.81 15.11 22.67 27.20 36.26
Mechanic 68.00 72.59 15.31 22.97 28.16 36.74
Lead Mechanic 83.18 88.14 16.54 24.81 29.77 39.70
Key Foremen 87.58 92.68 17.00 25.50 30.60 40.80
Basic Clerk 50.48 54.33 12.84 19.26 23.11 30.82
Supervisor (15%) 74.93 79.29 14.54 21.81 26.17 34.90
Supervisor (25%) 79.61 84.31 15.67 23.51 28.22 37 62
Supervisor (30%) 81.94 86.81 16.24 24.36 29.23 38.98
Cooper 50.48 54.33 12.84 19.26 23.11 30.82
Chief Cooper 74.93 79.29 14.54 21.81 26.17 34.90
- Page 4 -
<PAGE>
CALIFORNIA STEEL INDUSTRIES, INC.
RIO DOCE PASHA TERMINAL, L.P.
EXHIBIT 1 - Minimum 14,000 MT Per Day
LABOR COSTS FOR SLAB OPERATIONS - LOS ANGELES
EFFECTIVE: JUNE 28, 1997 THROUGH DECEMBER 31, 1997
1. STEVEDORE GANG COSTS - WEEKDAY, DAY SHIFT (2 GANGS)
------------------------------------------------------
# MEN LABOR CLASS HOURS RATE WAGES
----- ----------- ------ ----- ------
2 Hatch Foremen 16 34.00 544.00
" 4 51.00 204.00
2 Hatch Clerks 16 25.68 410.88
4 Crane Operators 20 30.22 604.40
" 16 45.32 725.12
2 Hatchtenders 16 27.95 447.20
4 Key Holdmen 32 30.22 967.04
16 Basic L/S 128 25.68 3287.04
4 Lift Drivers 32 30.22 967.04
6 Truck Drivers 48 27.95 1341.60
2 Key Foremen 16 34.00 544.00
" 4 51.00 204.00
1 Supercargo 8 32.48 259.84
" 3 48.73 146.19
1 Floor Runner 8 31.35 250.80
" 3 47.03 141.09
-- --- --------
44 MEN 370 11044.24
AVERAGE PER GANG HOUR 690.27
1996 GANG COST 666.2
INCREASE %
ASSMT INS/TAX TTL AMOUNT
------ ------- ----------
223.36 272.00 1039.36
55.84 102.00 361.84
191.36 206.44 807.68
239.20 302.20 1145.80
191.36 362.56 1279.04
191.36 223.60 862.16
382.72 483.52 1833.28
1530.88 1643.52 6461.44
382.72 483.52 1833.28
574.08 670.80 2586.48
223.36 272.00 1039.36
55.84 102.00 361.84
95.68 129.92 485.44
35.88 73.10 255.17
95.68 125.40 471.88
35.88 70.55 247.52
------- ------- --------
4505.20 5522.13 21071.57
281.58 345.13
261.64 333.1 $1,260.94
4.44%
2. STEVEDORE GANG COSTS - WEEKDAY, NIGHT SHIFT (2 GANGS)
--------------------------------------------------------
# MEN LABOR CLASS HOURS RATE WAGES
----- ----------- ----- ---- -----
2 Hatch Foremen 16 45.33 725.28
" 4 51.00 204.00
2 Hatch Clerks 16 34.24 547.84
4 Crane Operators 20 40.29 805.80
" 16 45.32 725.12
2 Hatchtender 16 37.26 596.16
4 Key Holdmen 32 40.29 1289.28
16 Basic L/S 128 34.24 4382.72
4 Lift Drivers 32 40.29 1289.28
6 Truck Drivers 48 37.26 1788.48
2 Key Foreman 16 45.33 725.28
" 4 51.00 204.00
1 Supercargo 8 43.31 346.48
" 3 48.73 146.19
1 Floor Runner 8 41.80 334.40
" 3 47.03 141.09
--- --- --------
44 MEN 370 14251.40
AVERAGE PER GANG HOUR 890.71
1996 GANG COST 859.61
INCREASE %
ASSMT INS/TAX TTL AMOUNT
------ ------- ----------
223.36 362.64 1311.28
55.84 102.00 361.84
191.36 273.92 1013.12
239.20 402.90 1447.90
191.36 362.56 1279.04
191.36 298.08 1085.60
382.72 644.64 2316.64
1530.88 2191.36 8104.96
382.72 644.64 2316.64
574.08 894.24 3256.80
223.36 362.64 1311.28
55.84 102.00 361.84
95.68 173.24 615.40
35.88 73.10 255.17
95.68 167.20 597.28
35.88 70.55 247.52
------- ------- --------
4505.20 7125.71 25882.31
281.58 445.36
261.64 429.80 $1,551.05
4.29%
Page 1
<PAGE>
3. STEVEDORE GANG COSTS - WEEKEND, DAY SHIFT (2 GANGS)
------------------------------------------------------
#MEN LABOR CLASS HOURS RATE WAGES
---- ----------- ----- ---- -----
2 Hatch Foremen 16 51.00 816
" 4 76.50 306
2 Hatch Clerks 16 38.52 616.32
4 Crane Operators 20 45.32 906.4
" 16 67.98 1087.68
2 Matchtenders 18 41.92 670.72
4 Key Holdmen 32 45.32 1450.24
16 Basic L/S 128 38.52 4930.56
4 Lift Drivers 32 45.32 1450.24
6 Truck Drivers 48 41.92 2012.16
2 Key Foremen 16 51.00 816
" 4 76.50 306
1 Supercargo 8 48.73 389.84
" 3 73.10 219.3
1 Floor Runner 8 47.03 376.24
" 3 70.55 211.65
--- --- --------
44 MEN 370 16565.36
AVERAGE PER GANG HOUR 1035.33
1996 GANG COST 999.26
INCREASE %
ASSMT INS/TAX TTL AMOUNT
----- ------- ----------
223.36 408.00 1447.36
55.84 153.00 514.84
191.36 308.16 1115.84
239.20 453.20 1598.80
191.36 543.84 1822.88
191.36 335.36 1197.44
382.72 725.12 2558.08
1530.88 2465.28 8926.72
382.72 725.12 2558.08
574.08 1006.08 3592.32
223.36 408.00 1447.36
55.84 153.00 514.84
95.68 194.92 680.44
35.88 109.65 364.83
95.68 188.12 660.04
35.88 105.83 353.36
------- ------- --------
4505.20 8282.68 29353.23
281.58 517.67
261.64 499.63 $1,760.53
4.21%
4. STEVEDORE GANG COSTS - WEEKEND, NIGHT SHIFT (2 GANGS)
--------------------------------------------------------
# MEN LABOR CLASS HOURS RATE WAGES
----- ----------- ----- ---- -----
2 Hatch Foreman 16 51.00 816.00
" 4 76.50 306.00
2 Hatch Clerks 16 38.52 616.32
4 Crane Operators 20 45.32 906.40
" 16 67.98 1087.68
2 Hatchtender 16 41.92 670.72
4 Key Holdmen 32 45.32 1450.24
16 Basic L/S 128 38.52 4930.56
4 Lift Drivers 32 45.32 1450.24
6 Truck Drivers 48 41.92 2012.16
2 Key Foreman 16 51.00 816.00
" 4 76.50 306.00
1 Supercargo 8 48.73 389.84
" 3 73.10 219.30
1 Floor Runner 8 47.03 376.24
" 3 70.55 211.65
--- --- --------
44 MEN 370 16565.35
AVERAGE PER GANG HOUR 1035.33
1996 GANG COST 999.26
INCREASE %
ASSMT INS/TAX TTL AMOUNT
----- ------- ----------
223.36 408.00 1447.36
55.84 153.00 514.84
191.36 308.16 1115.84
239.20 453.20 1598.80
191.36 543.84 1822.88
191.36 335.36 1197.44
382.72 725.12 2558.08
1530.88 2465.28 8926.72
382.72 725.12 2558.08
574.08 1006.08 3592.32
223.36 408.00 1447.36
55.84 153.00 514.84
95.68 194.92 680.44
35.88 109.65 364.83
95.68 188.12 660.04
35.88 505.83 353.36
------- ------- --------
4505.20 8282.68 29353.23
281.58 517.67
261.64 499.63 $1,760.53
4.21%
Page 2
<PAGE>
5. SEVEN DAY AVERAGE HOURLY GANG COST TTL HRS RATE/HR TTL AMOUNT
------------------------------------- ------- ------- ----------
WEEKDAY, DAY 5 DAYS @ 16 HOURS EACH 80 1,316.98 $105,358.40
WEEKDAY, NIGHT 5 NIGHTS @ 16 HOURS EACH 80 1,617.65 129,412.00
WEEKEND, DAY 2 DAYS @ 16 HOURS EACH 32 1,834.58 58,706.56
WEEKEND, NIGHT 2 NIGHTS @ 16 HOURS EACH 32 1,834.58 58,706.56
--- -----------
TOTAL 224 $352,183.52
7 - DAY AVERAGE HOURLY GANG COST
7 - DAY AVERAGE HOURLY GANG COST AS OF 06/29/96 $1,507.29
INCREASE % 4.31%
6. RAILCAR LOADING - WEEKDAY
----------------------------
# MEN LABOR CLASS HOURS RATE WAGES
----- ----------- ----- ---- -----
1 Foreman 8 34.00 272.00
" 2 51.00 102.00
2 Crane Operators 10 30.22 302.20
" 8 45.32 362.56
4 Dockmen 32 25.68 821.76
1 Wedgeman 8 25.68 205.44
4 Lift Drivers 32 30.22 967.04
2 Car Runners 16 32.48 519.68
" 6 48.73 292.38
-- --- -------
14 MEN 122 3845.06
AVERAGE PER HOUR (A) 480.63
AVERAGE PER HOUR AS OF 06/29/98
INCREASE %
ASSMT INS/TAX TTL AMOUNT
----- ------- ----------
111.68 136.00 519.68
27.92 51.00 180.92
119.60 151.10 572.90
95.68 181.28 639.52
382.72 410.88 1615.36
95.68 102.72 403.84
382.72 483.52 1833.28
191.36 259.84 970.88
71.76 146.19 510.33
------- ------- -------
1479.12 1922.53 7246.71
184.89 240.32
$868.91
4.25%
7. RAILCAR LOADING - WEEKEND
----------------------------
# MEN LABOR CLASS HOURS RATE WAGES
----- ----------- ----- ---- -----
1 Foreman 8 51.00 408.00
" 2 76.50 153.00
2 Crane Operators 10 45.32 453.20
" 8 45.32 382.56
4 Dockmen 32 38.52 1232.64
1 Wedgeman 8 38.52 308.16
4 Lift Drivers 32 45.32 1450.24
2 Car Runners 16 48.73 779.68
" 6 48.73 292.38
-- --- -------
14 MEN 122 5439.86
AVERAGE PER HOUR (B) 679.98
OVERTIME DIFFERENTIAL PER HOUR (B - A)
ASSMT INS/TAX TTL AMOUNT
----- ------- ----------
111.68 204.00 723.68
27.92 76.50 257.42
119.60 226.60 799.40
95.68 181.28 639.52
382.72 616.32 2231.68
95.68 154.08 557.92
382.72 725.12 2558.08
191.36 389.84 1360.88
71.76 146.19 510.33
------- ------- -------
1479.12 2719.93 9638.91
184.89 339.99
$299.02
Page 3
<PAGE>
8. PMA TONNAGE ASSESSMENT- FROM 07/01/97 TO 06/30/98
-------------------------- ------------- -----------
TONNAGE ASSESSMENT - PER KT $0.915 $0.841
EFFECTIVE EFFECTIVE %
9. OVERALL COST 6/29/96 6/28/97 Increase
----------------------------------------------------------------------------
a. Vessel Unloading, I.L.W.U. Labor $2.512 $2.620 4.30%
b. Train Loading, I.L.W.U. Labor $1.264 $1.318 4.27%
d. Maintenance, I.L.W.U. Labor $0.581 $0.606 4.30%
e. PMA Tonnage Assessment $0.915 $0.841 -8.09%
f. Equipment & Overhead $0.895 $0.920 2.79%
g. Wharfage $4.600 $4.600 0.00%
TOTAL $10.77 $10.91 1.30%
====== ======
Volume Discount: $1.18 per MT for all tonnage after one million metric tons.
Large Slabs: Slabs larger than 22 MT each, exceeding 45,000 MT
per annum, will not be subject to the volume discount.
Dispatch/Demurrage for vessels with slabs larger then 22
MT, exceeding 45,000 MT per annum, to be calculated at
10,000 MT per day.
Wedges/Wedgemen: Because of additional requirements by the railroad,
RDP will invoice on its monthly miscellaneous railcar
bills $ .05 per MT for wedges. Moreover, RDP will
invoice an additional half a wedgeman (4 Hrs) for every
day railcars are loaded.
10. Railcar Loading - Detentions / Differentials
------------------------------------------------------------------------
A. Weekdays (Monday through Friday, 0800-1700)
Detentions - Standby for Railcars $905.84 Per Hour
B. Weekends, Holidays, & Extended Shifts
Detentions - Standby for Railcars $1,204.86 Per Hour
Overtime Differential $299.02 Per Hour
Page 4
<PAGE>
Steel Slabs
- ---------------------------------------------------------
RIO DOCE PASHA TERMINAL
CALIFORNIA STEEL INDUSTRIES, INC.
SCHEDULE I
EFFECTIVE: JANUARY 1, 1998 THROUGH JUNE 27, 1998
STEVEDORE AND TERMINAL SERVICE CHARGES
(1) The stevedore and terminal rate for discharging of steel slabs and
loading to rail cars shall be $11.12 per metric tons (mtons), 1st or
2nd shift, seven days a week. This rate consists of the following
rate factors:
From: JANUARY 1, 1998
Until: JUNE 27, 1998
(a) ILWU labor, vessel unloading $2.731
(b) ILMU labor, train loading $1.425
(c) ILWU labor, maintenance $0.604
------
Total manning $4.760
(d) PMA tonnage assessment $0.841
(e) Equipment & overhead $0.920
(f) Wharfage $4.600
------
TOTAL $11.12
(2) The above rate is subject to rate inclusions/not inclusions listed
in Schedule IV, Articles A, B and C of this agreement, and the
following conditions:
(a) Rates are based on the current mix of individual steel slabs
with weights less than and greater than 22 mton, and will be
of a similar ratio through 1998 year end. Customer and
Contractor will review the mix of individual slab weights in
1999.
(b) Vessels to be of the open hatch class, and cargo to be
stowed with proper blockage stow, with sufficient access and
separation to allow ease of slinging cargo for maximum lifts
up to 45 mtons with the container cranes. (Stowage commnonly
referred to as a "California" stow).
- Page 1 -
<PAGE>
Steel Slabs
- ---------------------------------------------------------
(c) For cargoes requiring positioning under the hatch
projection, Contractor will provide for the service without
extra charge to Customer.
(3) Service charges for operations other than stated above shall be
negotiated on a vessel by vessel basis.
(4) Rail car loading shall be performed only during weekdays, from 0800
through 1700 hours.
(5) ILMU labor on standby awaiting for rail cars to be positioned will
be charged to Customer at the rates set forth in Schedules II and
III attached hereto.
ROUTINE RATE ADJUSTMENT FACTORS
(1) All rates in this agreement are based on ILWU wages, PMA man-hour
assessments, PMA tonnage assessments, insurance and taxes in effect
on the date of this agreement. Increases or decreases in any of
those costs during the term of this agreement shall be reflected in
the rates of this agreement by the same amount of any such increases
or decreases.
(2) Wharfage charges at $4.60 per mton of steel slabs shall be adjusted
in accordance with increases or decreases in the Port Tariff Rate
during the term of this agreement.
(3) Equipment costs, including for vessel unloading and rail car
loading, and Contractor's overhead shall be adjusted each July 1st
by the percentage change in the Southern California Consumer Price
Index for the year ending the previous March 31st.
VOLUME DISCOUNT
Contractor will give Customer a volume discount of $1.18 for tonnage in
excess of the annual minimum guarantee of 1,000,000 mtons.
- Page 2 -
<PAGE>
Steel Slabs
- ---------------------------------------------------------
OTHER DISCOUNTS
(a) The steel slab throughput for cargo on vessels provided with
the proper stow as described above and worked with vessel
gear (which in Contractor's opinion is capable of production
closely comparable to that of the shore gantry crane) will
receive a discount of $1.00 per metric ton.
(b) Those steel slab cargoes which are taken by truck will
receive a discount of $0.75 per metric ton.
- Page 3 -
<PAGE>
Steel Slabs
- ---------------------------------------------------------
RDP TERMINAL
CALIFORNIA STEEL INDUSTRIES, INC.
SCHEDULE II
GANG HOUR/MANHOUR BILLING RATES
EFFECTIVE: JANUARY 1, 1998 THROUGH JUNE 27, 1998
A. GANG HOUR BILLING RATES (STEVEDORE ONLY) PER HOUR
---------------------------------------- --------
(1) Standby/detention - - 1st shift $1,390.14
- 2nd shift $1,698.84
- Overtime shift $1,874.55
(2) Extra labor - 1st shift $1,598.66
- 2nd shift $1,953.67
- Overtime shift $2,155.73
NOTE 1: Refer to Schedule III for equipment charges.
NOTE 2: Extra labor rates consist of detention rates plus 15%
markup.
B. MAN-HOUR BILLING RATES - PER HOUR (EXTRA LABOR @ 15% MARKUP)
------------------------------------------------------------
1st 1st 2nd OT 3rd 3rd
Labor Class Det Xtr Diff Diff Diff OTD
----------- ----- ----- ----- ----- ----- -----
Longshoremen 50.48 54.33 12.84 19.26 23.11 30.82
Skilled L/S (10%) 53.89 58.08 13.97 20.96 25.16 33.54
Skilled L/S (20%) 57.29 61.82 15.11 22.67 27.20 36.26
Crane/Tophandler 67.28 71.81 15.11 22.67 27.20 36.26
Gearman 67.28 71.81 15.11 22.67 27.20 36.26
Mechanic 68.00 72.59 15.31 22.97 28.16 36.74
Lead Mechanic 83.18 88.14 16.54 24.81 29.77 39.70
Key Foremen 87.58 92.68 17.00 25.50 30.60 40.80
Basic Clerk 50.48 54.33 12.84 19.26 23.11 30.82
Supervisor (15%) 74.93 79.29 14.54 21.81 26.17 34.90
Supervisor (25%) 79.61 84.31 15.67 23.51 28.22 37.62
Supervisor (30%) 81.94 86.81 16.24 24.36 29.23 38.98
Cooper 50.48 54.33 12.84 19.26 23.11 30.82
Chief Cooper 74.93 79.29 14.54 21.81 26.17 34.90
- Page 4 -
<PAGE>
CALIFORNIA STEEL INDUSTRIES, INC.
RIO DOCE PASHA TERMINAL, L.P.
EXHIBIT 1 - Minimum 14,000 MT Per Day
LABOR COSTS FOR SLAB OPERATIONS - LOS ANGELES
EFFECTIVE: JANUARY 1, 1998 THROUGH JUNE 27, 1998
1. STEVEDORE GANG COSTS - WEEKDAY, DAY SHIFT (2 GANGS)
- -------------------------------------------------------------------------------
ADDED
STEADY TOTAL
# MEN LABOR CLASS HOURS HOURS HOURS RATE WAGES
- ----- ----------- ----- ------ ----- ----- ------
2 Hatch Foremen 16 2 18 34.00 612.00
" 4 2 6 51.00 306.00
2 Hatch Clerks 16 0 16 25.68 410.88
4 Crane Operators 20 4 24 30.22 725.28
" 16 0 16 45.32 725.12
2 Hatchtenders 16 0 16 27.95 447.20
4 Key Holdmen 32 0 32 30.22 967.04
16 Basic L/S 128 0 128 25.68 3287.04
4 Lift Drivers 32 0 32 30.22 967.04
" 0 4 4 45.32 181.28
6 Truck Drivers 48 0 48 27.95 1341.60
2 Key Foremen 16 2 18 34.00 612.00
" 4 2 6 51.00 306.00
1 Supercargo 8 0 8 32.48 259.84
" 3 0 3 48.73 146.19
1 Floor Runner 8 0 8 31.35 250.80
" 3 0 3 47.03 141.09
-- --- -- --- --------
44 MEN 370 16 386 11686.40
AVERAGE PER GANG HOUR 730.40
1996 GANG COST 666.2
INCREASE %
ASSMT INS/TAX TTL AMOUNT
------ ------- ----------
251.28 306.00 1169.28
83.76 153.00 542.76
191.36 205.44 807.68
287.04 362.64 1374.96
191.36 362.56 1279.04
191.36 223.60 862.16
382.72 483.52 1833.28
1530.88 1643.52 6461.44
382.72 483.52 1833.28
47.84 90.64 319.76
574.08 670.80 2586.48
251.28 306.00 1169.28
83.76 153.00 542.76
95.68 129.92 485.44
35.88 73.10 255.17
95.68 125.40 471.88
35.88 70.55 247.52
------- ------- --------
4712.56 5843.21 22242.17
294.54 365.20
261.64 333.1 $1,260.94
10.25%
2. STEVEDORE GANG COSTS - WEEKDAY, NIGHT SHIFT (2 GANGS)
- --------------------------------------------------------
ADDED
STEADY TOTAL
# MEN LABOR CLASS HOURS HOURS HOURS RATE WAGES
- ----- ----------- ----- ----- ----- ---- ------
2 Hatch Foremen 16 2 18 45.33 815.94
" 4 2 6 51.00 306.00
2 Hatch Clerks 16 0 16 34.24 547.84
4 Crane Operators 20 4 24 40.29 966.96
" 16 0 16 45.32 725.12
2 Hatchtender 16 0 18 37.26 598.16
4 Key Holdmen 32 0 32 40.29 1289.28
16 Basic L/S 128 0 128 34.24 4382.72
4 Lift Drivers 32 0 32 40.29 1289.28
" 0 4 4 45.32 181.28
6 Truck Drivers 48 0 48 37.26 1788.48
2 Key Foreman 16 2 18 45.33 815.94
" 4 2 6 51.00 306.00
1 Supercargo 8 0 8 43.31 346.48
" 3 0 3 48.73 146.19
1 Floor Runner 8 0 8 41.80 334.40
" 3 0 3 47.03 141.09
-- --- -- --- --------
44 MEN 370 16 386 14979.16
AVERAGE PER GANG HOUR 936.20
1996 GANG COST 859.61
INCREASE %
ASSMT INS/TAX TTL AMOUNT
------ ------ ----------
251.28 407.97 1475.19
83.76 153.00 542.76
191.36 273.92 1013.12
287.04 483.48 1737.48
191.36 362.56 1279.04
191.36 298.08 1085.60
382.72 644.64 2316.64
1530.88 2191.36 8104.98
382.72 644.64 2316.64
47.84 90.64 319.76
574.08 894.24 3256.80
251.28 407.97 1475.19
83.76 153.00 542.76
95.68 173.24 615.40
35.88 73.10 255.17
95.68 167.20 597.28
35.88 70.55 247.52
------- ------- --------
4712.56 7489.59 27181.31
294.54 468.10
261.64 429.80 $1,551.05
9.53%
Page 1
<PAGE>
3. STEVEDORE GANG COSTS - WEEKEND, DAY SHIFT (2 GANGS)
- ------------------------------------------------------
ADDED
STEADY TOTAL
# MEN LABOR CLASS HOURS HOURS HOURS RATE WAGES
- ----- ----------- ----- ------ ----- ---- -----
2 Hatch Foremen 16 0 16 51.00 816.00
" 4 0 4 76.50 306.00
2 Hatch Clerks 16 0 16 38.52 616.32
4 Crane Operators 20 4 24 45.32 1087.68
" 16 0 16 67.98 1087.68
2 Hatchtenders 16 0 16 41.92 670.72
4 Key Holdmen 32 0 32 45.32 1450.24
16 Basic L/S 128 0 128 38.52 4930.56
4 Lift Drivers 32 4 36 45.32 1631.52
6 Truck Drivers 48 0 48 41.92 2012.16
2 Key foremen 16 0 16 51.00 816.00
" 4 0 4 76.50 306.00
1 Supercargo 8 0 8 48.73 389.84
" 3 0 3 73.10 219.30
1 Floor Runner 8 0 8 47.03 376.24
" 3 0 3 70.55 211.65
-- --- - --- -------
44 MEN 370 8 378 16927.9
AVERAGE PER GANG HOUR 1057.99
1996 GANG COST 999.26
INCREASE %
ASSMT INS/TAX TTL AMOUNT
----- ------- ----------
223.36 408.00 1447.36
55.84 153.00 514.84
191.36 308.16 1115.84
287.04 543.84 1918.56
191.36 543.84 1822.88
191.36 335.36 1197.44
382.72 725.12 2558.08
1530.88 2465.28 8926.72
430.56 815.76 2877.84
574.08 1006.08 3592.32
223.36 408.00 1447.36
55.84 153.00 514.84
95.68 194.92 680.44
35.88 109.65 364.83
95.68 188.12 660.04
35.88 105.83 353.36
------- ------- --------
4600.88 8463.96 29992.75
287.56 529.00
261.64 499.63 $1,760.53
6.48%
4. STEVEDORE GANG COSTS - WEEKEND, NIGHT SHIFT (2 GANGS)
- --------------------------------------------------------
ADDED
STEADY TOTAL
#MEN LABOR CLASS HOURS HOURS HOURS RATE WAGES
- ---- ----------- ----- ------ ----- ------ --------
2 Hatch Foreman 16 0 16 51.00 816.00
" 4 0 4 76.50 306.00
2 Hatch Clerks 16 0 16 38.52 616.32
4 Crane Operators 20 4 24 45.32 1087.68
" 16 0 16 67.98 1087.68
2 Hatchtender 16 0 16 41.92 670.72
4 Key Holdmen 32 0 32 45.32 1450.24
16 Basic L/S 128 0 128 38.52 4930.56
4 Lift Drivers 32 4 36 45.32 1631.52
6 Truck Divers 48 0 48 41.92 2012.16
2 Key Foreman 16 0 16 51.00 816.00
" 4 0 4 76.50 306.00
1 Supercargo 8 0 8 48.73 389.84
" 3 0 3 73.10 219.30
1 Floor Runner 8 0 8 47.03 376.24
" 3 0 3 70.55 211.65
-- --- - --- --------
44 MEN 370 8 378 16927.91
AVERAGE PER GANG HOUR 1057.99
1996 GANG COST 999.26
INCREASE %
ASSMT INS/TAX TTL AMOUNT
------ ------- ----------
223.36 408.00 1447.36
55.84 153.00 514.84
191.36 308.16 1115.84
287.04 543.84 1918.56
191.36 543.84 1822.88
191.36 335.36 1197.44
382.72 725.12 2558.08
1530.88 2465.28 8926.72
430.56 815.76 2877.84
574.08 1006.08 3592.32
223.36 408.00 1447.36
55.84 153.00 514.84
95.68 194.92 680.44
35.88 109.65 364.83
95.68 188.12 660.04
35.88 105.83 353.36
------- ------- --------
4600.88 8463.96 29992.76
287.56 529.00
261.64 499.63 $1,760.53
6.48%
Page 2
<PAGE>
5. SEVEN DAY AVERAGE HOURLY GANG COST TTL HRS RATE/HR TTL AMOUNT
- ------------------------------------- ------- ------- ----------
WEEKDAY, DAY 5 DAYS @ 16 HOURS EACH 80 1,390.14 $111,211.20
WEEKDAY, NIGHT 5 NIGHTS@16 HOURS EACH 80 1,698.84 135907.2
WEEKEND, DAY 2 DAYS @ 16 HOURS EACH 32 1,874.55 59985.6
WEEKEND, NIGHT 2 NIGHTS @ 16 HOURS EACH 32 1,874.55 59985.6
--- -----------
TOTAL 224 $367,089.60
7 - DAY AVERAGE HOURLY GANG COST
7 - DAY AVERAGE HOURLY GANG COST AS OF 06/29/98 $1,507.29
INCREASE % 8.72%
6. RAILCAR LOADING - WEEKDAY
ADDED
STEADY TOTAL
# MEN LABOR CLASS HOURS HOURS HOURS RATE WAGES
- ----- ----------- ----- ------ ----- ----- ------
1 Foreman 8 1 9 34.00 306.00
" 2 1 3 51.00 153.00
2 Crane Operators 10 2 12 30.22 362.64
" 8 0 8 45.32 362.56
4 Dockmen 32 0 32 25.68 821.76
1 Wedgeman 8 0 8 25.68 205.44
4 Lift Drivers 32 0 32 30.22 967.04
" 0 4 4 45.32 181.28
2 Car Runners 16 0 16 32.48 519.68
" 6 0 6 48.73 292.38
-- --- - --- -------
14 MEN 122 8 130 4171.78
AVERAGE PER HOUR (A) 521.47
ASSMT INS/TAX TTL AMOUNT
------ ------ ------
125.64 153.00 584.64
41.88 76.50 271.38
143.52 181.32 687.48
95.68 181.28 639.52
382.72 410.88 1615.36
95.68 102.72 403.84
382.72 483.52 1833.28
47.84 90.64 319.76
191.36 259.84 970.88
71.76 146.19 510.33
------- ------- -------
1578.80 2085.89 7836.47
197.35 260.74
AVERAGE PER HOUR AS OF 06/29/96 $868.91
INCREASE % 12.73%
7. RAILCAR LOOADING - WEEKEND
- -----------------------------
ADDED
STEADY TOTAL
# MEN LABOR CLASS HOURS HOURS HOURS RATE WAGES
- ----- ----------- ----- ----- ----- ----- ------
1 Foreman 8 1 9 51.00 459.00
" 2 1 3 76.50 153.00
2 Crane Operators 10 2 12 45.32 543.84
" 8 0 8 45.32 362.56
4 Dockmen 32 0 32 38.52 1232.64
1 Wedgeman 8 0 8 38.52 308.16
4 Lift Drivers 32 4 36 45.32 1631.52
2 Car Runners 16 0 16 48.73 779.68
" 6 0 6 48.73 292.38
-- --- - --- -------
14 MEN 122 8 130 5762.78
AVERAGE PER HOUR (B) 720.35
ASSMT INS/TAX TTL AMOUNT
------ ------- ----------
125.64 229.50 814.14
27.92 76.50 257.42
143.52 271.92 959.28
95.68 181.28 639.52
382.72 616.32 2231.68
95.68 154.08 557.92
430.56 815.76 2877.84
191.36 389.84 1360.88
71.76 146.19 510.33
------- ------- --------
1564.84 2881.39 10209.01
195.61 360.17
OVERTIME DIFFERENTIAL PER HOUR (B - A) $296.57
Page 3
<PAGE>
8. PMA TONNAGE ASSESSMENT- FROM 07/01/97 TO 06/30/98
- -------------------------- ------------- -----------
TONNAGE ASSESSMENT - PER KT $0.915 $0.841
EFFECTIVE EFFECTIVE %
9. OVERALL COST 6/29/96 6/28/97 Increase
- --------------- --------- --------- --------
a. Vessel Unloading, I.L.W.U. Labor $2.512 $2.731 8.72%
b. Train Loading, I.L.W.U. Labor $1.264 $1.425 12.74%
c. Maintenance, I.L.W.U. Labor $0.581 $0.604 3.96%
d. PMA Tonnage Assessment $0.915 $0.841 -8.09%
e. Equipment & Overhead $0.895 $0.920 2.79%
f. Wharfage $4.600 $4.600 0.00%
TOTAL $10.77 $11.12 3.25%
==========
Volume Discount: $1.18 per MT for all tonnage after one million metric tons.
Large Slabs: Slabs larger than 22 MT each, exceeding 45,000 MT per annum,
will not be subject to the volume discount. Dispatch/Demurrage for
vessels with slabs larger than 22 MT, exceeding 45,000 MT per
annum, to be calculated at 10,000 MT per day.
Wedges/Wedgemen: Because of additional requirements by the railroad, RDP will
invoice on its monthly miscellaneous railcar bills $ .05 per
MT for wedges. Moreover, RDP will invoice an additional half a
wedgeman (4 Hrs) for every day railcars are loaded.
10. Railcar Loading - Detentions / Differentials
- ------------------------------------------------
A. Weekdays (Monday through Friday, 0800-1700)
Detentions - Standby for Railcars $979.56 Per Hour
B. Weekends, Holidays, & Extended Shifts
Detentions - Standby for Railcars $1,276.13 Per Hour
Overtime Differential $296.57 Per Hour
Page 4
<PAGE>
[LOGO OF RIO DOCE] [LETTERHEAD OF RIO DOCE PASHA TERMINAL, L.P.]
March 22, 1999
Vicente B. Wright
CALIFORNIA STEEL INDUSTRIES
14000 San Bernardino Avenue
P.O. Box 5080
Fontana, CA 92335
Vicente,
With our busy schedules it seemed as if it would be impossible to sit down and
discuss 1998, let alone upcoming contract negotiations.
So, it was a pleasure to have the dialog we had. It shows we are very proud of
our companies as well as the direction they are heading.
As we had agreed, RDP will not increase the stevedoring rates through June 1999.
We do intend to negotiate new rates with CSI once the ILWU contract has been
completed. We would expect this to be some time in late July of 1999.
Thank you and best regards,
/s/ Jeff Burgin
Jeff Burgin
V.P./G.M.
<PAGE>
EXHIBIT 10.9
EQUIPMENT LEASE AGREEMENT
Dated as of September 30, 1998
Between
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, NATIONAL ASSOCIATION
not in its individual capacity
but solely as Owner Trustee
as Lessor,
and
CALIFORNIA STEEL INDUSTRIES, INC.,
as Lessee
Steel Galvanizing Equipment
CLOSING DOCUMENTS
<PAGE>
EQUIPMENT LEASE AGREEMENT
CLOSING DOCUMENTS
Parties
- -------
California Steel California Steel Industries, Inc., a Delaware
corporation
State Street State Street Bank and Trust Company of California,
National Association, a national banking corporation
IBJ The Industrial Bank of Japan, Limited, a Japanese
banking corporation acting by and through its duly
licensed Los Angeles Agency
IBJTC Leasing IBJTC Leasing Corporation, a New York corporation
DKB The Dai-Ichi Kangyo Bank, Limited, a Japanese banking
corporation acting by and through its duly licensed
Los Angeles Agency
Document Tab No.
-------- -------
A. Equipment Lease Agreement, dated as of September 30, 1998, between 1
State Street, as Lessor and California Steel, as Lessee.
Exhibits:
--------
Exhibit A Form of Lease Supplement
Exhibit B Form of Report of Alterations
Exhibit C Form of Notice of Accident
Exhibit D Form of Notice of Liens
Exhibit E Form of Notice of Change of Principal Place of
Business
Exhibit F Form of Certificate of Chief Financial Officer -
Monthly Financial Statements
Exhibit G Form of Certificate of Responsible Officer
Schedules:
---------
Schedule A Basic Rent Payments and Rent Payment Dates
Schedule B Stipulated Loss Values
Schedule C Termination Values
-1-
<PAGE>
Document Tab No.
-------- -------
B. Closing Documents.
1. Lease Supplement No. 1, dated September 30, 1998, among 2
State Street, as Lessor and California Steel, as Lessee.
2. Tax Indemnification Agreement, dated as of September 30, 3
1998, between IBJTC Leasing, as Owner, and California
Steel, as Lessee.
3. Irrevocable License Agreement, dated as of September 30, 4
1998, between California Steel, as Grantor, State
Street, as Lessor, and IBJTC Leasing, as Agent, recorded
with the San Bernardino County Recorder on November 6,
1998 as Document No. 1998-0476403.
4. Acknowledgment Agreement, dated as of September 30, 5
1998, among State Street, as Owner Trustee, IBJ, as
Agent, and IBJ, as Party in Interest, recorded with the
San Bernardino County Recorder on November 6, 1998 as
Document No. 1998-0476401.
5. Acknowledgment Agreement, dated as of September 30, 6
1998, among State Street, as Owner Trustee, IBJ, as
Agent, and DKB, as Party in Interest, recorded with the
San Bernardino County Recorder on November 6, 1998 as
Document No. 1998-0476402.
6. Promissory Note, dated June 24, 1997, in the amount of 7
$35,000,000 by State Street in favor of IBJ, marked
"Canceled."
7. Promissory Note, dated September 30, 1998, in the amount 8
of $27,635,051.20 by State Street in favor of IBJ.
8. Revised Schedule 1 to the Participation Agreement, dated 9
as of June 12, 1997, among California Steel, as Lessee;
State Street, as Owner Trustee and Lessor; IBJ, as
Initial Lender and Agent for the Lenders; and IBJTC
Leasing, as Initial Beneficiary and Arranger.
9. Opinion of Willis Corroon, independent insurance broker, 10
dated September 30, 1998.
10. Evidence of Property Insurance. 11
12. Preliminary Title Report from Chicago Title Company 12
dated September 15, 1998.
13. Release of Mechanic's Lien by Robertson's, dated 13
September 22, 1998.
-2-
<PAGE>
Document Tab No.
-------- -------
14. Release of Mechanic's Lien Bond, Private Work, by The 14
American Insurance Company (for claimant B&B Industrial
Services, Inc.), dated September 29, 1998.
C. Closing Certificates.
1. California Steel Secretary Certificate, dated September 15
30, 1998, regarding authorization by the Board of
Directors and incumbency.
2. California Steel Officer Certificate, dated September 16
30, 1998, regarding representations and warranties.
3. California Steel Completion Certificate, dated September 17
29, 1998.
4. Delaware Long-Form Good Standing Certificate for 18
California Steel dated September 24, 1998, attaching
certified copies of all documents filed with the
Delaware Secretary of State.
5. California Secretary of State Good Standing Certificate 19
dated September 24, 1998 and California Franchise Tax
Good Standing Certificate dated September 23, 1998 for
California Steel.
6. State Street Officer Certificate, dated September 30, 20
1998, regarding authorization by the Board of Directors
and incumbency and attaching Articles of Association and
Bylaws.
7. State Street Officer Certificate, dated September 30, 21
1998, regarding representations and warranties.
D. Opinions.
1. Opinion of Gibson, Dunn & Crutcher LLP. 22
2. Opinion of Morgan, Lewis & Bockius LLP. 23
-3-
<PAGE>
- --------------------------------------------------------------------------------
EQUIPMENT LEASE AGREEMENT
Dated as of September 30, 1998
between
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, NATIONAL ASSOCIATION
not in its individual capacity
but solely as Owner Trustee,
as Lessor
and
CALIFORNIA STEEL INDUSTRIES, INC.,
as Lessee
- --------------------------------------------------------------------------------
CERTAIN RIGHTS, TITLE AND INTEREST IN AND TO THIS EQUIPMENT LEASE AGREEMENT ON
THE PART OF CALIFORNIA STEEL INDUSTRIES, INC. HAVE BEEN ASSIGNED TO AND ARE
SUBJECT TO A LIEN AND SECURITY INTEREST IN FAVOR OF THE INDUSTRIAL BANK OF
JAPAN, LIMITED, LOS ANGELES AGENCY, AS AGENT, UNDER A LOAN AND SECURITY
AGREEMENT, DATED AS OF JUNE 12, 1997. TO THE EXTENT, IF ANY, THAT THIS EQUIPMENT
LEASE AGREEMENT CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE
UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO
SECURITY INTEREST IN THIS EQUIPMENT LEASE AGREEMENT MAY BE CREATED THROUGH THE
TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL COUNTERPART
THAT CONTAINS THE RECEIPT THEREFOR EXECUTED BY THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES BRANCH, AS AGENT, ON OR IMMEDIATELY FOLLOWING THE SIGNATURE
PAGE THEREOF.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I Definitions; Construction of References ................ 1
SECTION 1.1 Definitions ............................................ 1
SECTION 1.2 Construction of References ............................. 1
ARTICLE II Lease of Equipment ..................................... 2
ARTICLE III Rent ................................................... 2
SECTION 3.1 Basic Rent ............................................. 2
SECTION 3.2 Supplemental Rent ...................................... 2
SECTION 3.3 Method of Payment ...................................... 2
SECTION 3.4 Late Payment ........................................... 3
SECTION 3.5 Net Lease; No Setoff; etc. ............................. 3
SECTION 3.6 Indemnity for Break Funding Costs and
Lenders' Costs ......................................... 4
ARTICLE IV Recomputation of Stipulated Loss Value
and Termination Value .................................. 4
SECTION 4.1 Adjustments for Payments Under the Tax
Indemnification Agreement .............................. 4
SECTION 4.2 Limitations on Adjustments ............................. 4
ARTICLE V Purchase Option ........................................ 5
SECTION 5.1 Purchase Option ........................................ 5
SECTION 5.2 Purchase and Transfer of Equipment ..................... 6
ARTICLE VI Obsolescence Termination ............................... 7
ARTICLE VII Disclaimer of Warranties ............................... 8
ARTICLE VIII Restriction on Liens ................................... 9
ARTICLE IX Operation and Maintenance .............................. 9
SECTION 9.1 Operation and Maintenance .............................. 9
SECTION 9.2 Replacement of Parts ................................... 9
SECTION 9.3 Optional Alterations ...................................10
SECTION 9.4 Title to Parts .........................................10
SECTION 9.5 Removal of Severable Alterations .......................11
SECTION 9.6 Parts Free and Clear of Liens ..........................11
SECTION 9.7 Restriction on Lessee Improvements and
Removal of Parts .......................................11
SECTION 9.8 Records ................................................12
SECTION 9.9 Reports of Alterations .................................12
SECTION 9.10 Licenses and Permits ...................................12
ARTICLE X Insurance ..............................................12
SECTION 10.1 Insurance ..............................................12
SECTION 10.2 Policy Provisions ......................................13
SECTION 10.3 Evidence of Insurance ..................................15
SECTION 10.4 Insurance Report .......................................15
SECTION 10.5 Payment of Proceeds ....................................16
-i-
<PAGE>
ARTICLE XI Return and Disposition of Leased Property ..............16
ARTICLE XII Additional Covenants of Lessee .........................17
SECTION 12.1 Further Assurances .....................................17
SECTION 12.2 Tax Indemnity Agreement ................................17
SECTION 12.3 Financial and Other Information ........................17
ARTICLE XIII Loss, Destruction, Condemnation or
Damage .................................................18
SECTION 13.1 Replacement or Payment of Stipulated Loss
Value on an Event of Loss ..............................18
SECTION 13.2 Application of Other Payments on an Event
of Loss ................................................19
SECTION 13.3 Application of Payments Not Relating to
an Event of Loss .......................................20
SECTION 13.4 Other Dispositions .....................................21
SECTION 13.5 Special Event of Loss ..................................21
ARTICLE XIV Interest Conveyed to Lessee ............................21
SECTION 14.1 Interest Conveyed ......................................21
SECTION 14.2 Equipment as Personal Property .........................21
ARTICLE XV Restrictions on Assignment and Sublease;
Location ...............................................22
SECTION 15.1 ASSIGNMENT AND SUBLEASE ................................22
SECTION 15.2 Location ...............................................23
ARTICLE XVI Inspection and Notices .................................23
SECTION 16.1 Condition and Operation ................................23
SECTION 16.2 Liability ..............................................24
SECTION 16.3 Liens ..................................................24
SECTION 16.4 Change of Principal Place of Business ..................24
SECTION 16.5 Identification Marks ...................................24
ARTICLE XVII Events of Default ......................................25
ARTICLE XVIII Enforcement ............................................27
SECTION 18.1 Remedies ...............................................27
SECTION 18.2 Survival of Lessee's Obligations .......................29
SECTION 18.3 Remedies Cumulative ....................................30
SECTION 18.4 Storage Agreement ......................................30
ARTICLE XIX Right to Perform for Lessee ............................31
ARTICLE XX Indemnities ............................................31
SECTION 20.1 General Indemnity ......................................31
SECTION 20.2 Federal Tax Indemnities ................................34
SECTION 20.3 Fees, Taxes and Other Charges ..........................34
SECTION 20.4 Survival ...............................................39
ARTICLE XXI Miscellaneous ..........................................40
SECTION 21.1 Further Assurances .....................................40
SECTION 21.2 Quiet Enjoyment ........................................40
-ii-
<PAGE>
SECTION 21.3 Collateral as Security for Lessor's
Obligations ............................................41
SECTION 21.4 Notices ................................................41
SECTION 21.5 Severability ...........................................41
SECTION 21.6 Amendment ..............................................42
SECTION 21.7 Headings ...............................................42
SECTION 21.8 Counterparts; Uniform Commercial Code ..................42
SECTION 21.9 Governing Law ..........................................42
SECTION 21.10 Performance of Obligations to Lenders ..................42
SECTION 21.11 Confidentiality ........................................42
SECTION 21.12 Binding Effect; Successors and Assigns;
Survival ...............................................43
SECTION 21.13 Limitations of Lessor's Liability ......................43
SECTION 21.14 Chattel Paper ..........................................44
Exhibits:
- --------
EXHIBIT A - Form of Lease Supplement
EXHIBIT B - Form of Report of Alterations
EXHIBIT C - Form of Notice of Accident
EXHIBIT D - Form of Notice of Liens
EXHIBIT E - Form of Notice of Change of Principal Place
of Business
EXHIBIT F - Form of Certificate of Chief Financial Officer -
Monthly Financial Statements
EXHIBIT G - Form of Certificate of Responsible Officer
Schedules:
- ---------
SCHEDULE A - Basic Rent Payments and Rent Payment Dates
SCHEDULE B - Stipulated Loss Values
SCHEDULE C - Termination Values
-iii-
<PAGE>
EQUIPMENT LEASE AGREEMENT
THIS EQUIPMENT LEASE AGREEMENT (this "Agreement" or this "Lease") is
entered into as of September 30, 1998 between STATE STREET BANK AND TRUST
---------------------------
COMPANY OF CALIFORNIA NATIONAL ASSOCIATION, a national banking association, not
- ------------------------------------------
in its individual capacity but solely as Owner Trustee, except as expressly
provided herein (the "Lessor") and CALIFORNIA STEEL INDUSTRIES, INC., a Delaware
---------------------------------
corporation (the "Lessee").
Recitals:
--------
A. The Lessor has acquired ownership of, and title to, the Equipment in
accordance with the Participation Agreement.
B. The Lessor desires to lease to the Lessee, and the Lessee desires to
lease from Lessor, the Equipment pursuant to the terms and conditions of this
Agreement.
C. The Lessor and the Lessee agree that this Agreement shall constitute
and govern the lease of the Equipment.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
hereto, intending to be legally bound hereby, hereby agree as follows:
ARTICLE I
Definitions; Construction of References
---------------------------------------
SECTION 1.1 Definitions. The capitalized terms used herein and not
-----------
otherwise defined shall have the meanings assigned thereto in Appendix A to the
Participation Agreement dated as of June 12, 1997, among The Industrial Bank of
Japan, Limited, a Japanese banking corporation acting by and through its duly
licensed Los Angeles Agency, not in its individual capacity but solely as agent,
The Industrial Bank of Japan, Limited, a Japanese banking corporation acting by
and through its duly licensed Los Angeles Agency, as initial lender, IBJ Leasing
Corporation, a New York corporation, as initial beneficiary, IBJ Leasing
Corporation, a New York corporation, as arranger, the Lessor and the Lessee (the
"Participation Agreement") for all purposes hereof (such definitions to be
equally applicable to both the singular and plural forms of the terms defined).
SECTION 1.2 Construction of References. All references in this instrument
--------------------------
to designated Sections and other subdivisions are to designated Sections and
other subdivisions of this instrument, and the words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Lease as a whole and
not to any particular Section or other subdivision.
-1-
<PAGE>
Except as otherwise indicated, all the agreements or instruments herein
defined shall mean such agreements or instruments as the same may from time to
time be supplemented or amended or the terms thereof waived or modified to the
extent permitted by, and in accordance with, the terms thereof.
ARTICLE II
Lease of Equipment
------------------
On the Lease Commencement Date, subject to all the terms and conditions of
this Lease, the Lessor shall lease, and hereby as of the Lease Commencement Date
does lease, the Equipment described in the applicable Lease Supplement to the
Lessee, and the Lessee shall lease, and hereby as of the Lease Commencement Date
does lease, such Equipment from the Lessor, for the Lease Term.
ARTICLE III
Rent
----
SECTION 3.1 Basic Rent. The Lessee shall pay to the Lessor Basic Rent in
----------
arrears for the Equipment in consecutive installments on the Basic Rent Payment
Dates shown on Schedule A annexed hereto and in the amounts as provided in such
Schedule A.
SECTION 3.2 Supplemental Rent. The Lessee shall pay to the Lessor, or to
-----------------
whoever shall be entitled thereto as expressly provided herein or in any other
Operative Document, any and all Supplemental Rent promptly as the same shall
become due and payable.
SECTION 3.3 Method of Payment. Basic Rent and Supplemental Rent (other
-----------------
than Excepted Payments which shall be paid directly to the Lessor upon the
written instructions of the Agent) shall be paid directly to the Agent as
provided in Section 21.3 hereof provided that to the extent provided in Section
21.3 hereof and after the Notes and all other amounts owing to the Lenders have
been paid in full, such amounts shall be payable to the Lessor at such place as
the Lessor shall specify in writing. Each payment of Rent shall be made by the
Lessee in immediately available funds prior to 1:00 P.M., New York time at the
place of payment (or, so long as the Loan Agreement remains in effect, such
earlier time as the Lessor, with the Lessee's prior written consent, shall agree
to make payment to the Agent), on the scheduled date when such payment shall be
due, unless such scheduled date shall not be a Business Day, in which case such
payment shall be made on the next following Business Day, with the same force
and effect as though made on such scheduled date; provided, however, that if
such next following Business Day occurs in the month following the month in
which such scheduled
-2-
<PAGE>
date occurs, then such payment shall be made on the next preceding Business Day.
SECTION 3.4 Late Payment. If any Rent shall not be paid when due, the
------------
Lessee shall pay to the Lessor (or, in the case of Supplemental Rent, to whoever
shall be entitled thereto as expressly provided herein or in any other Operative
Document), as Supplemental Rent, interest (to the extent permitted by law) on
such overdue amount from and including the due date thereof to but excluding the
date of payment thereof (unless such payment shall be made after 1:00 P.M., New
York time at the place of payment, on such date of payment, in which case such
date of payment shall be included) at the Overdue Rate. If any Rent shall be
paid on the date when due, but after 1:00 P.M., local time at the place of
payment or at any time thereafter, interest shall be payable at the Overdue Rate
for that day together with all interest due for each day thereafter.
SECTION 3.5 Net Lease; No Setoff; etc. This Lease is a net lease and,
--------------------------
notwithstanding any other provision of this Lease, it is intended that Basic
Rent and Supplemental Rent shall be paid without notice, demand, counterclaim,
setoff, deduction or defense and without abatement, suspension, deferment,
diminution or reduction. Except to the extent otherwise expressly specified
herein, the obligations and liabilities of the Lessee hereunder shall in no way
be released, discharged or otherwise affected for any reason, including without
limitation: (a) any defect in the condition, quality or fitness for use of the
Equipment or any part thereof; (b) any damage to, removal, abandonment, salvage,
loss, scrapping or destruction of or any requisition or taking of the Equipment
or any part thereof; (c) any restriction, prevention or curtailment of or
interference with any use of the Equipment or any part thereof; (d) any defect
in title to or rights to the Equipment or any Lien on such title to or rights to
the Equipment; (e) any change, waiver, extension, indulgence or other action or
omission in respect of any obligation or liability of the Lessor, the Agent or
the Lenders; (f) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceedings relating to the
Lessee, the Lessor, the Agent, the Lenders, or any other Person, or any action
taken with respect to this Lease by any trustee or receiver of the Lessee, the
Lessor, the Lenders, the Agent, or any other Person, or by any court, in any
such proceeding; (g) any claim that the Lessee has or might have against any
Person, including without limitation the Lessor or the Agent, the Lenders; (h)
any failure on the part of the Lessor to perform or comply with any of the terms
hereof or of any other agreement; (i) any invalidity or unenforceability or
disaffirmance of this Lease against or by the Lessee or any provision hereof or
any of the other Operative Documents or any provision of any thereof; or (j) any
other occurrence whatsoever, whether similar or dissimilar to the foregoing,
whether or not the Lessee shall have notice or knowledge of any of the
foregoing. This Lease shall be noncancelable by the Lessee and, except as
expressly provided
-3-
<PAGE>
herein, the Lessee, to the extent permitted by law, waives all right now or
hereafter conferred by statute or otherwise to quit, terminate or surrender this
Lease, or to any diminution or reduction of Rent payable by the Lessee
hereunder. If for any reason whatsoever this Lease shall be terminated in whole
or in part by operation of law or otherwise except as expressly provided herein,
the Lessee shall, to the extent permitted by applicable law, nonetheless pay to
the Lessor (or, in the case of Supplemental Rent, to whoever shall be entitled
thereto as expressly provided herein or in any other Operative Document) an
amount equal to each Rent payment at the time and in the manner that such
payment would have become due and payable under the terms of this Lease if it
had not been terminated in whole or in part, and in such case, so long as such
payments are made and no Lease Event of Default shall have occurred and be
continuing the Lessor will deem this Lease to have remained in effect.
SECTION 3.6 Indemnity for Break Funding Costs and Lenders' Costs. If
----------------------------------------------------
Lessee makes any payment of Basic Rent on any day later than as otherwise
required under this Lease in addition to all other amounts payable by Lessee in
accordance with the Lease, an amount which in the Lessee's opinion, is
sufficient to indemnify the Lessor (i) for Break Funding Costs; and (ii) for
Lenders' Costs, in both cases whether incurred by the Lessor or the Lenders (for
which the Lessor is required to indemnify the Lenders).
ARTICLE IV
Recomputation of Stipulated
---------------------------
Loss Value and Termination Value
--------------------------------
SECTION 4.1 Adjustments for Payments Under the Tax Indemnification
------------------------------------------------------
Agreement. In the event that the Lessee shall have indemnified the Lessor
- ---------
pursuant to the Tax Indemnification Agreement for any Loss (as defined in the
Tax Indemnification Agreement), the Stipulated Loss Value and Termination Value
set forth on Schedules B and C shall be revised as set forth in Section 10.9 of
the Participation Agreement.
SECTION 4.2 Limitations on Adjustments. After giving effect to any
--------------------------
adjustment referred to in this Article IV:
(a) at each time thereafter when Stipulated Loss Value may be
payable by the Lessee pursuant to this Lease, the sum of the following
amounts: (i) Stipulated Loss Value payable under this Lease at such time;
(ii) any Basic Rent payable under this Lease at such time; and (iii) any
other amounts unconditionally payable by the Lessee under this Lease in
connection with such payment of Stipulated Loss Value on or prior to the
date for payment thereof and required to be paid to the Lenders pursuant
to the Loan Agreement shall be
-4-
<PAGE>
at least sufficient to pay in full the aggregate unpaid principal amount
of the Outstanding Notes plus premium, if any, and accrued interest
thereon at such time;
(b) at each time thereafter when Termination Value shall be payable
by the Lessee pursuant to this Lease, the sum of the following amounts:
(i) Termination Value payable under this Lease at such time; (ii) any
Basic Rent payable under this Lease at such time; and (iii) any other
amounts unconditionally payable by the Lessee under this Lease in
connection with such payment of Termination Value on or prior to the date
for payment thereof and required to be paid to the Lenders pursuant to the
Loan Agreement shall be at least sufficient to pay in full the aggregate
unpaid principal amount of the Outstanding Notes plus premium, if any, and
accrued interest thereon at such time; and
(c) the amount of Basic Rent payable on each Rent Payment Date
thereafter shall be equal to or greater than the aggregate amount of
principal and accrued interest which becomes due and payable on the Notes
on such Rent Payment Date.
ARTICLE V
Purchase Option
---------------
SECTION 5.1 Purchase Option. Unless a Lease Default pursuant to Section
---------------
17(a) or 17(e) or Lease Event of Default shall have occurred and be continuing,
the Lessee shall have the right at its option upon no more than two hundred
seventy (270) days prior written notice and on at least one hundred eighty (180)
days prior written notice to the Lessor, the Agent and the Lenders (which notice
shall be irrevocable), to purchase all (but not less than all) of the Equipment
from the Lessor:
(a) on the last Rent Payment Date at a purchase price equal to the
Fair Market Sales Value of such Equipment as of the last Rent Payment
Date;
(b) on the seventh anniversary of the Lease Commencement Date at a
purchase price equal to fifty-two percent (52%) of the Lessor's Cost of
such Equipment; and
(c) on any Rent Payment Date (i) if the Lessee has or will become
obligated to pay an amount greater than five percent (5%) of the
Stipulated Loss Value of the Equipment as of each Rent Payment Date to the
Lessor under (A) Article XX of this Lease; (B) Article XI of the
Participation Agreement; or (C) the Tax Indemnification Agreement for any
Indemnified Expense
-5-
<PAGE>
(as defined in the Participation Agreement and the Lease) and any Loss (as
defined in the Tax Indemnity Agreement) and the termination of the Lease
will allow the Lessee to legally avoid making such payment (provided that
the Lessee takes all commercially reasonable legal actions required to
avoid such Loss); or (ii) if there is a change in any law or regulation
governing the operation and use of the Equipment which has or will
obligate the Lessee to incur expenses, or reimburse the Lessor for
expenses, in an amount greater than five percent (5%) of the Stipulated
Loss Value of the Equipment as of each Rent Payment Date in maintaining or
modifying the Equipment in order to comply with such change of law or
regulation and termination of the Lease will legally allow the Lessee to
avoid incurring such expenses or reimbursing the Lessor for such expenses
(provided that the Lessee takes all commercially reasonable legal actions
necessary to avoid the Lessor or the Lessee incurring such expenses) at a
purchase price equal to the higher of (A) the Fair Market Sales Value of
such Equipment as of such Rent Payment Date or (B) the Stipulated Loss
Value for the Equipment on such Rent Payment Date, plus in either case
Break Funding Costs. Fair Market Sales Value of the Equipment shall be
determined by the mutual agreement of the Lessor and the Lessee on or
before a date forty (40) Business Days prior to the proposed purchase date
after receipt by the Lessor of the notice referred to above, or, if they
shall fail to agree within such period, such Fair Market Sales Value shall
be determined by the Section 5.1(c) Appraisal Procedure.
SECTION 5.2 Purchase and Transfer of Equipment. If the Lessee shall have
----------------------------------
exercised (i) the options to purchase the Equipment provided in clauses (a) or
(c) of Section 5.1 hereof, the Lessee shall pay for the Equipment in immediately
available funds and purchase the Equipment on the date specified; or (ii) the
option to purchase the Equipment provided in clause (b) of Section 5.1 hereof,
the Lessee shall pay for such Equipment in cash or by executing and delivering
to the Lessor a Promissory Note, in form prescribed by the Lessor, evidencing
the purchase price, payable on such terms as may be mutually acceptable to the
Lessor and the Lessee. If the Lessee shall fail to pay for the Equipment on such
date, the Lessee shall no longer have any right to purchase the Equipment
pursuant to Section 5.1 and in the case of the exercise with respect to any
option provided in Section 5.1 (other than the option exercisable on the last
Basic Rent Payment Date) the Lessee shall continue to pay Rent hereunder as such
becomes due and payable. Upon payment by the Lessee to the Lessor of the
purchase price for the Equipment in immediately available funds as provided in
clause (i) above or by executing and delivering of a promissory note as provided
in clause (ii) above, plus any accrued and unpaid Basic Rent due or accrued to
-6-
<PAGE>
and including the date of purchase, and all Supplemental Rent owing by the
Lessee to and including the date of purchase and the Break Funding Cost, if any,
due with respect to the prepayment of principal due on the Notes as a result of
the termination of this Lease, the Lessor shall transfer to the Lessee, AS IS,
WHERE IS, WITHOUT RECOURSE OR WARRANTY OF ANY KIND OR NATURE, but free and clear
of Lessor Liens and the lien of the Loan Agreement, all the Lessor's right,
title and interest in, to and under the Equipment, together with all of the
Lessor's right, title and interest, if any, in, to and under any warranty,
claims, rights and causes of action (whether actual or potential) against
Danieli-Wean with respect to the Equipment. Thereupon the obligations of the
Lessee hereunder (other than any such obligations expressed herein as surviving
termination of this Lease) shall terminate.
ARTICLE VI
Obsolescence Termination
------------------------
Unless a Lease Default or a Lease Event of Default shall have occurred and
be continuing, the Lessee shall have the right, on the terms and subject to the
conditions contained in this Article VI, at its option at any time on at least
one hundred eighty (180) days prior written notice (a "Notice of Article VI
Termination") to the Lessor, the Agent and the Lenders, to terminate this Lease
as to all (but not less than all) of the Equipment (the "Article VI Termination
Date") on or after the fifth anniversary of the Lease Commencement Date, if such
Item or Items shall have become Obsolete. During the period commencing with the
date on which such Notice of Article VI Termination is given until the Article
VI Termination Date, the Lessee, as agent for the Lessor, shall use its best
efforts to obtain cash bids for the purchase of the Equipment. The Lessor shall
also have the right to obtain cash bids for the purchase thereof, either
directly or through agents other than the Lessee. The Lessee shall certify to
the Lessor in writing the amount and terms of each bid received by the Lessee
and the name and address of the Person submitting a bid (which Person shall not
be the Lessee or any Affiliate of the Lessee but may be the Lessor). On the
Article VI Termination Date, the Lessor shall (subject to receipt of the sale
price and all additional payments specified in the next sentence), without
recourse or warranty but free and clear of Lessor Liens and the lien of the Loan
Agreement (if and to the extent the Lenders are required to release the same),
sell the Equipment for cash to the bidder which shall have submitted the highest
bid prior to such date and the Lessor shall be released from all obligations
with respect to the Equipment. The total sales price realized at such sale shall
be retained by the Lessor pursuant to this Lease, and, in addition, on the
Article VI Termination Date, the Lessee shall pay to the Lessor (or, in the case
of Supplemental Rent, the Person entitled thereto) (i) the excess, if any, of
the Termination Value of the Equipment over
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the sales price of the Equipment after deducting all expenses incurred by the
Lessor and the Agent on behalf of the Lenders in connection with such sale; (ii)
any accrued and unpaid Basic Rent due or accrued and unpaid to but not including
the Article VI Termination Date; and (iii) all Supplemental Rent owing by the
Lessee under this Lease to and including the Article VI Termination Date,
including Break Funding Costs, if any. If a sale shall not have occurred on or
as of the Article VI Termination Date, the Equipment shall continue to be
subject to this Lease and this Lease shall continue in full force and effect
with respect thereto. In the event of any such sale and upon compliance by the
Lessee with the provisions of this Article VI, the obligation of the Lessee to
pay Basic Rent with respect to the Equipment shall cease, the Lease Term shall
end with respect to the Equipment and the obligations of the Lessee hereunder
with respect to the Equipment (other than any such obligations surviving
termination of this Lease, including the obligations set forth in Article XX
hereof) shall terminate as of the Article VI Termination Date. The Lessor shall
be under no duty to solicit bids, to inquire into the efforts of the Lessee to
obtain bids or otherwise to take any action in connection with any such sale
other than to sell the Equipment as provided above. At such sale the Lessor
shall transfer to the third party purchaser, AS IS, WHERE IS, WITHOUT RECOURSE
OR WARRANTY OF ANY KIND OR NATURE, but free and clear of Lessor Liens and the
lien of the Loan Agreement, all the Lessor's right, title and interest in, to
and under the Equipment, together with all of the Lessor's right, title and
interest, if any, in, to and under any warranty, claims, right and causes of
action (whether actual or potential) against Danieli-Wean with respect to the
Equipment.
ARTICLE VII
Disclaimer of Warranties
------------------------
THE EQUIPMENT IS BEING LEASED BY THE LESSOR TO THE LESSER ON AN "AS-IS,
WHERE-IS" BASIS. NEITHER THE LESSOR (IN ITS INDIVIDUAL OR TRUST CAPACITIES), THE
AGENT NOR THE LENDERS HAVE MADE OR SHALL BE DEEMED TO HAVE MADE ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE,
MERCHANTABILITY, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, OPERATION,
FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT, ABSENCE OF LATENT DEFECTS OR
FITNESS FOR USE OF THE EQUIPMENT FOR ANY PARTICULAR PURPOSE (OR ANY PART
THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO THE EQUIPMENT (OR ANY PART THEREOF) except that the
Lessor hereby represents and warrants that the Equipment is and shall be free
of Lessor Liens and Lessor, in its individual capacity, hereby represents and
warrants that the Equipment shall be free of Trustee Liens. It is agreed that
except as expressly provided herein, all risks incident to the matters discussed
in the preceding sentence, as between the Lessor, the Agent or the Lenders, on
the one hand, and the Lessee, on the other, are to be
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borne by the Lessee. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN NEGOTIATED, AND,
EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY STATED, THE FOREGOING PROVISIONS ARE
INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY REPRESENTATIONS OR
WARRANTIES BY THE LESSOR, THE AGENT OR THE LENDERS, EXPRESS OR IMPLIED, WITH
RESPECT TO THE EQUIPMENT, THAT MAY ARISE PURSUANT TO ANY LAW NOW OR HEREAFTER IN
EFFECT, OR OTHERWISE.
ARTICLE VIII
Restriction on Liens
--------------------
The Lessee shall not directly or indirectly create, incur, assume or
suffer to exist any Lien on or with respect to the Equipment, title thereto or
any interest therein, except Permitted Liens. The Lessee shall promptly, at its
own expense, take such action as may be necessary duly to discharge or eliminate
or bond in a manner satisfactory to the Lessor any such Lien if the same shall
arise at any time. The Lessee further agrees that it shall pay or cause to be
paid on or before the time or times prescribed by law (after giving effect to
any applicable grace period) any taxes, assessments, fees or charges imposed on
the Lessee (or any affiliated or related group of which the Lessee is a member)
under the laws of any jurisdiction that, if unpaid, might result in any Lien
that is not a Permitted Lien.
ARTICLE IX
Operation and Maintenance
-------------------------
SECTION 9.1 Operation and Maintenance. The Lessee shall operate, service,
-------------------------
repair and maintain the Equipment during the Lease Term in a manner so that each
Item will be and remain in serviceable and good condition and (i) in the same
condition as when new, normal wear and tear excepted; (ii) in material
compliance with all recommendations and specifications of the manufacturer(s);
(iii) in material accordance with all applicable requirements of law and any
governmental authority having jurisdiction; (iv) in compliance with the standard
imposed by any insurance policies required by Article X hereof with respect to
such Item or any part thereof; and (v) in no case to a lesser standard than that
held for similar equipment owned by the Lessee.
SECTION 9.2 Replacement of Parts. Except after the occurrence of an Event
--------------------
of Loss, the Lessee, at its own expense (unless prohibited by applicable law or
regulation), shall promptly replace all necessary or useful appliances, parts,
instruments, appurtenances, accessories and miscellaneous property of whatever
nature (herein collectively referred to as "Parts"), that may from time to time
be incorporated or installed
-9-
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in or attached to or otherwise part of (collectively, "incorporated in") the
Equipment and that may from time to time become worn out, destroyed, damaged
beyond repair, lost, condemned, confiscated, stolen or seized for any reason
whatsoever. The Lessor hereby authorizes the Lessee to order Parts as the agent,
and in the name, of the Lessor, but at the sole cost and expense of the Lessee.
In addition, in the ordinary course of maintenance, service, repair or testing,
the Lessee may remove any Parts, but the Lessee shall cause such Parts to be
replaced as promptly as practicable. All replacement Parts shall be free and
clear of all Liens except Permitted Liens and shall be in at least as good
operating condition as, and shall have a value and utility at least equal to,
the Parts replaced, assuming such replaced Parts were in condition and repair
required to be maintained by the terms hereof.
SECTION 9.3 Optional Alterations. In addition to the foregoing, the
--------------------
Lessee, at its own expense (subject to Section 9.5 hereof), may from time to
time:
(a) make such Alterations to the Equipment as the Lessee may deem
desirable in the proper conduct of its business, provided that such
Alterations (i) are readily removable without causing damage to any of the
Equipment; (ii) do not adversely affect the productive capacity, cost
efficiency, utility, reliability or value of the Equipment; and (iii) such
Alterations do not cause the Lease to lose its characteristic as a lease
for federal income tax purposes ("Severable Alterations"); and
(b) make such Alterations to the Equipment as the Lessee may deem
desirable in the proper conduct of its business, provided that such
Alterations (i) do not adversely affect the productive capacity, cost
efficiency, utility, reliability or value of the Equipment; and (ii) such
Alterations do not cause the Lease to lose its characteristic as a lease
for federal income tax purposes ("Non-Severable Alterations").
SECTION 9.4 Title to Parts. Title to each Part (including any
--------------
Non-Severable Alteration but excluding any Severable Alteration) shall without
further act vest in the Lessor and shall be deemed to constitute a part of the
Equipment and be subject to this Lease and each of the Operative Documents if
such Part shall be required to be incorporated in the Equipment pursuant to the
terms of Section 9.1 or 9.2 hereof. Title to each Severable Alteration shall
vest in the Lessee. In all other cases, title to a Part or Parts shall vest in
Lessor. All Parts (other than Severable Alterations) at any time removed from
the Equipment shall remain the property of the Lessor, no matter where located,
until such time as such Parts shall be replaced by Parts that have been
incorporated in the Equipment and that meet the requirements for replacement
Parts specified in Section 9.2
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hereof. Immediately upon any replacement Part becoming incorporated in the
Equipment as provided in Section 9.2 hereof, without further act, (i) title to
the removed Part shall thereupon vest in such Person as shall be designated by
the Lessee, free and clear of all rights of the Lessor; (ii) title to such
replacement Part shall thereupon vest in the Lessor; and (iii) such replacement
Part shall become subject to this Lease and each of the other Operative
Documents and be deemed part of the Equipment for all purposes hereof to the
same extent as the Parts originally incorporated in the Equipment.
SECTION 9.5 Removal of Severable Alterations. The Lessee (i) during the
--------------------------------
Lease Term, may remove any Severable Alteration at any time, so long as such
removal shall not result in any violation of any law or governmental regulation
and so long as no Lease Default or Lease Event of Default shall have occurred
and be continuing; and (ii) upon the termination of this Lease and prior to the
delivery of the Equipment to the Lessor in accordance with the provisions of the
Lease (other than upon the termination of this Lease pursuant to Article V or
Article XVIII hereof) may remove all Severable Alterations; provided, however,
that to the extent Severable Alterations are removed, the Equipment shall be
restored so that it is returned to the Lessor in fully operational condition and
in compliance with the provisions of Sections 9.1 and 9.2 hereof; provided
further, that if the Lessee shall not have removed a Severable Alteration prior
to the delivery of the Equipment to the Lessor in accordance with the provisions
of this Lease, then all of Lessee's right, title and interest to such Severable
Alteration shall without further action vest in the Lessor; and provided
further, that if the Lessee does not exercise the purchase option set forth in
Section 5.1(a) hereof and purchase the Equipment on the last Rent Payment Date,
then, at the Lessor's option, the Lessee shall not remove Severable Alterations
and shall sell the Severable Alterations for a purchase price equal to the Fair
Market Sales Value of the Severable Alterations. Fair Market Sales Value of the
Severable Alterations shall be determined by the mutual agreement of the Lessor
and the Lessee on or before a date thirty (30) Business Days prior to the
termination of the Lease, or, if they shall fail to agree within such period,
such Fair Market Sales Value shall be determined by the Appraisal Procedure. The
Lessor and the Lessee shall share the costs of such Appraisal Procedure equally.
SECTION 9.6 Parts Free and Clear of Liens. Any Part title to which shall
-----------------------------
vest in the Lessor pursuant to Section 9.4 hereof shall be free and clear of all
Liens except Permitted Liens.
SECTION 9.7 Restriction on Lessee Improvements and Removal of Parts.
-------------------------------------------------------
Except as expressly required or permitted by Sections 9.1, 9.2 and 9.3 hereof,
the Lessee shall not, without the prior written consent of the Lessor, make any
alteration to any Item or remove any Part from any Item.
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<PAGE>
SECTION 9.8 Records. The Lessee shall maintain or cause to be maintained
-------
operating logs, maintenance and repair reports, current operating manuals (if
any) and a complete set of plans and specifications (if any) for each Item in
accordance with prudent industry practice. Such logs, reports, manuals and plans
and specifications shall be made available, at the Lessee's expense, to the
Lessor upon reasonable request.
SECTION 9.9 Reports of Alterations. The Lessee shall furnish to the Lessor
----------------------
and the Agent, upon request, a report, in substantially the form annexed as
Exhibit B describing in reasonable detail all Alterations to the Equipment and
all Parts added to the Equipment or replaced (other than alterations and Parts
constituting routine or preventive maintenance) during the preceding calendar
year and the coat of and the ownership of each Alteration and each Part added or
replaced costing (in each case) more than Two Million Dollars ($2,000,000).
SECTION 9.10 Licenses and Permits. Without limiting the generality of
--------------------
Section 9.1, the Lessee shall obtain and maintain in full force and effect all
governmental licenses and permits necessary or advisable to operate the
Equipment.
ARTICLE X
Insurance
---------
SECTION 10.1 Insurance. Without limiting any other obligation or liability
---------
of the Lessee hereunder, the Lessee, at all times during the Lease Term, shall
carry and maintain at its own expense at least the minimum insurance coverage
with respect to each Item set forth in this Article X. Such insurance may be
carried under blanket policies maintained by the Lessee so long as such policies
otherwise comply with the terms and provisions of this Article X. The Lessee
shall maintain:
(a) all-risk property insurance covering physical loss or damage to
the Equipment. At all times during the Lease Term, the amount of such
insurance shall be at least the Stipulated Loss Value as of the next
succeeding Rent Payment Date plus an amount equal to any Basic Rent due
and payable on such Rent Payment Date, and such insurance shall include,
without limitation, the following:
(i) flood and windstorm insurance, customarily included under
all-risk policies available with respect to equipment similar in
kind and location to the Equipment; and
(ii) "boiler and machinery" property damage insurance with
respect to damage to the Equipment and related property included in
the Lessee's
-12-
<PAGE>
Premises from risks normally insured against under machinery
policies in an amount equal to at least the Stipulated Loss Value as
of the next succeeding Rent Payment Due plus an amount equal to any
Basic Rent due and payable on such Rent Payment Date.
(b) comprehensive general public liability insurance, including
blanket contractual, personal injury, property damage and loss of use of
property of others, insurance applicable to the Equipment in such amounts
as are usually carried by Persons operating manufacturing facilities
presenting comparable risks in the same general region of the Facility but
in any event with a combined single limit of not less than Fifty Million
Dollars ($50,000,000).
Any loss of the type customarily covered by the policies described in
Sections 10.1(a) and (b), whether actually covered in whole or in part by such
policies, shall be the responsibility of the Lessee and the absence of such
coverage shall not relieve the Lessee from any of its obligations under any of
the Operative Documents.
All insurance policies carried in accordance with this Section 10.1 must
be maintained with insurers of recognized responsibility and standing in the
industry and authorized to do an insurance business in each jurisdiction in
which any Equipment will be located and not disqualified from insuring risks in
the State of California (the "Approved Insurer").
Any insurance policies carried in accordance with this Section 10.1 may be
subject to (i) exclusions substantially similar to those contained in similar
insurance policies for equipment of a type similar to the Equipment in effect on
the Lease Commencement Date; and (ii) such deductible amounts and retentions as
shall not exceed the following amounts specified with respect to such policies:
(1) Property Damage Five Million Dollars ($5,000,000)
(2) Public Liability Five Million Dollars ($5,000,000)
Notwithstanding anything to the contrary in this Article X, the Lessee
shall at all time maintain insurance with respect to the Equipment at least
comparable with its standard corporate practice with respect to equipment
similar to the Equipment.
SECTION 10.2 Policy Provisions. Any insurance policy maintained by the
-----------------
Lessee pursuant to Section 10.1 hereof shall:
(a) specify the Lessor (in both its individual and trust
capacities), the Equity Participants, the Agent and the Lenders as
additional insureds, as their
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respective interests may appear, and with respect to property damage
insurance, specify the Lenders, the Agent and Lessor, as their interests
may appear, as loss payees pursuant to a standard loss payable clause as
long as the Loan Agreement is in effect;
(b) provide (except in the case of public liability insurance and
workers' compensation insurance) that all property damage insurance
proceeds in respect of any loss or occurrence shall be adjusted with the
Lessee (subject to approval of Lessor), unless a Lease Default or Lease
Event of Default shall have occurred and be continuing, in which case such
proceeds shall be adjusted by the Lenders (subject to the approval of
Lessor), and payable (x) in respect of payments not exceeding Two Hundred
Fifty Thousand Dollars ($250,000) provided no Lease Default or Lease Event
of Default shall have occurred or be continuing, to the Lessee; and (y) in
all other circumstances (A) unless and until receipt of notice from the
Agent stating that the Loan Agreement shall have been satisfied and
discharged, to the Agent and (B) thereafter, to the Lessor;
(c) include effective waivers by the insurer of all claims for
insurance premiums or commissions of additional premiums or assessments
against the Lessor (in both its individual and trust capacities), the
Agent and the Lenders (if such policies provide for the payment hereof)
to the extent required under the Approved Broker Insurance Determination;
(d) provide that in respect of the interest of the Lessor, the
Equity Participants, the Agent and the Lenders, such policies shall not be
invalidated by any action or inaction of the Lessee or any other Person
and shall insure the Lessor, the Agent and the Lenders regardless of, and
any claims for losses shall be payable notwithstanding to the extent
required under the Approved Insurance Broker Determination:
(i) any act of negligence, including any breach of any
condition or warranty in any policy of insurance, of the Lessee, the
Lessor, the Equity Participants, the Agent, the Lenders or any other
Person;
(ii) the use of the Equipment for purposes more hazardous
than permitted by the terms of the policy;
(iii) any foreclosure or other proceeding or notice of sale
relating to the Equipment; or
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<PAGE>
(iv) any change in the title to or ownership of the Equipment;
(e) provide that such insurance shall be primary insurance and that
the insurers under such insurance policies shall be liable under such
policies without right of contribution from any other insurance coverage
effected by or on behalf of the Lessor, the Equity Participants, the Agent
or the Lenders under any other insurance policies covering a loss that is
also covered under the insurance policies maintained by the Lessee
pursuant to this Article X and shall expressly provide that all provisions
thereof, except the limits of liability (which shall be applicable to all
insureds as a group) and liability for premiums (which shall be solely a
liability of the Lessee), shall operate in the same manner as if there
were a separate policy covering each insured;
(f) provide that any cancellation thereof or material adverse change
therein shall not be effective as to the Lessor, the Equity Participants,
the Agent and the Lenders until at least thirty (30) days after receipt by
the Lessor, the Agent and the Lenders of written notice thereof;
(g) waive any right of subrogation of the insurers against the
Lessor, the Equity Participants, the Agent and the Lenders, and waive any
right of the insurers to any setoff or counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any liability
of the Lessor, the Equity Participants, the Agent or the Lenders to the
extent required under the Approved Insurance Broker Determination; and
(h) provide that the whole or any part of the right, title and
interest of the Lessor or the Lessee therein may be assigned to the Agent
on behalf of the Lenders.
SECTION 10.3 Evidence of Insurance. The Lessee shall deliver to the
---------------------
Lessor, the Agent and the Lenders at least two (2) days before the Lease
Commencement Date copies of all policies of insurance required hereby and, by
the Lease Commencement Date, certificates of insurance evidencing the provisions
described in Section 10.2 hereof executed by the Approved Insurer or its duly
authorized agent.
SECTION 10.4 Insurance Report. Within thirty (30) days after any material
----------------
change (including any material increase in deductible amounts) in the
information set forth in the certificates provided pursuant to Section 10.3
hereof, the Lessee shall deliver to the Lessor and the Agent a certificate of
the
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<PAGE>
Approved Insurance Broker setting forth the insurance, if any, obtained by the
Lessee pursuant to this Article X and then in effect, and stating whether, in
the opinion of the Approved Insurance Broker, the insurance policies comply with
the requirements of this Article X, stating that all premiums then due thereon
have been paid, stating that such insurance policies are in full force and
effect and stating that the insurance is in such amounts and covers such risks
as is customary in the industry for a company such as the Lessee.
SECTION 10.5 Payment of Proceeds. All property damage insurance proceeds
-------------------
received by or payable to the Lessor, the Equity Participants, the Agent or the
Lenders on account of any damage to or destruction of the Equipment or any part
thereof (less the actual costs, fees and expenses incurred in the collection
thereof), other than any damage or destruction constituting an Event of Loss,
unless a Lease Default or a Lease Event of Default shall have occurred and be
continuing, shall be paid over to the Lessee or as it may direct from time to
time, upon delivery of evidence satisfactory to the Agent and the Lessor that
the Equipment has been fully repaired and is in the condition required by the
terms of this Lease, to pay (or reimburse the Lessee for) the costs referred to
in Section 13.3 hereof upon receipt by the Lessor, the Equity Participants,
Agent or the Lenders, as the case may be, of an Officer's Certificate of the
Lessee to the effect that (i) the sums requested are for the payment (or
reimbursement) of costs as aforesaid which have become due and payable, or which
will become due and payable within thirty (30) days of the date of such
Officer's Certificate, or which have theretofore been paid by the Lessee, and
setting forth such costs in reasonable detail; (ii) such costs have not been
included under any Officer's Certificate previously submitted pursuant to this
Section 10.5; and (iii) the balance of the amounts held by the Lessor, the
Equity Participants, the Agent or the Lenders pursuant to this Section 10.5 are
sufficient, together with funds otherwise available to the Lessee for the
purpose, to complete the repairs and replacement of Parts contemplated by clause
first of Section 13.3 hereof (or that such repairs and replacement of Parts have
been completed.
ARTICLE XI
Return and Disposition of Leased Property
-----------------------------------------
Unless the Equipment shall have been transferred to the Lessee pursuant to
Article V, Article VI, Section 13.1 or Article XVIII hereof, on termination of
this Lease, and at the Lessee's own cost and expense, the Lessee shall forthwith
return the Equipment (together with all related training, operating and service
manuals and records in the possession of the Lessee) to the Lessor properly
crated and disassembled, in good condition, repair and in working order, having
been maintained according to
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the standards required by this Lease, with all parts fully functional and able
to perform their intended function, with all Equipment meeting the
manufacturer's original specifications and in a condition appropriate for a
commercially reasonable sale, at a location designated by the Lessor in the
continental United States, free and clear of Liens other than Lessor Liens. In
the event an Item does not meet the return condition set forth in this Article
XI, the Lessee shall cause such Item to be repaired and refurbished at its
expense. In the event of a dispute relating to the return condition of the
Equipment, the dispute between the Lessor and the Lessee shall be settled by an
independent expert mutually appointed by the Lessor and the Lessee, the expenses
of which shall be shared equally by the Lessor and the Lessee. At reasonable
times and upon reasonable notice during the 180-day period prior to the end of
the Lease (provided the Lessee has not exercised its option to purchase) the
Lessor or any prospective purchaser of the Equipment may inspect the Equipment
subject to reasonable security measures imposed by the Lessee including barring
any inspector because of a competitive business relationship. The Lessee agrees
to provide the Lessor free storage of the Equipment on the Lessee's Premises for
a period not to exceed one hundred eighty (180) days after the expiration or
earlier termination of the Lease for the Equipment.
ARTICLE XII
Additional Covenants of Lessee
------------------------------
SECTION 12.1 Further Assurances. The Lessee shall cause to be promptly and
------------------
duly taken, executed, acknowledged or delivered all such further acts,
conveyances, documents and assurances as the Lessor may from time to time
reasonably request in order to carry out more effectively the intent and
purposes of this Lease and the other Operative Documents and the transactions
contemplated hereby and thereby (including, without limitation, the execution
and filing of any and all Uniform Commercial Code financing statements and other
filings or registrations which the Lessor may from time to time request to be
filed or effected).
SECTION 12.2 Tax Indemnity Agreement. Not later than the Lease
-----------------------
Commencement Date, the Lessee shall duly execute and deliver to Lessor the Tax
Indemnity Agreement.
SECTION 12.3 Financial and Other Information. During the Lease Term, the
-------------------------------
Lessee shall deliver to the Lessor and the Equity Participants the following:
(a) Annual financial statements. Within one hundred twenty (120)
---------------------------
days after the end of each fiscal year of the Lessee, copies of the
balance sheet of the Lessee as of the end of such fiscal year and the
related statements of income and changes in financial position for such
fiscal year, prepared in conformity with generally accepted accounting
-17-
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principles consistently applied, accompanied by an audit report thereon by
certified public accountants of recognized national standing selected by
the Lessee, all in reasonable detail and setting forth in comparative form
the corresponding figures for the preceding fiscal year;
(b) Monthly financial statements. Within thirty (30) days after the
----------------------------
end of each calendar month, an unaudited consolidated balance sheet of the
Lessee and its subsidiaries as of the end of such month and unaudited
consolidated statements of income, retained earnings and cash flows of the
Lessee and its subsidiaries for the period commencing at the end of the
preceding fiscal year and ending with the end of such month, setting forth
in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, all in reasonable
detail and accompanied with a Certificate of Chief Financial Officer in
the form annexed as Exhibit F, wherein the chief financial officer of the
Lessee duly certifies (subject to normal year-end audit adjustments) that
such statements have been prepared in accordance with generally accepted
accounting principles; provided; however, that after the IBJ Credit
Termination Date the Lessee shall be required to deliver quarterly
financial statements in lieu of such monthly financial statements;
(c) Annual certificate. Within thirty (30) days after the end of
------------------
each fiscal year of the Lessee, a Certificate executed by a Responsible
Officer of the Lessee in the form annexed as Exhibit G, certifying that
(i) the Equipment is in good operating condition; (ii) the Equipment is
being maintained as required hereunder; and (iii) no Event of Loss has
occurred with respect to any Item during the previous fiscal year; and
(d) Other information. Such other information (financial or
-----------------
otherwise) relating to the affairs of the Lessee as the Lessor may
reasonably request.
Notwithstanding anything to the contrary herein contained, receipt
by the Agent under the IBJ Credit Agreement of any of the financial
information required under clauses (a) and (b) of this Section 12.3, shall
be deemed to satisfy the obligations of such clauses.
ARTICLE XIII
Loss, Destruction, Condemnation or Damage
-----------------------------------------
SECTION 13.1 Replacement or Payment of Stipulated Loss Value on an Event
-----------------------------------------------------------
of Loss. If an Event of Loss shall occur with respect to any Item or Items, the
- -------
Lessee shall give the Lessor and the Agent prompt written notice of such
occurrence and the date thereof, and the Lessee at its option shall:
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(a) continue the Lease, without interruption, as if no such Event of
Loss had occurred, purchase in Lessor's name equipment having a value and
utility at least equal to such Item or Items replaced and provide to the
Lessor appropriate documentation evidencing the Lessor's title to such
Item or Items, which shall be free and clear of all Liens except Permitted
Liens and which shall be in as good operating condition as such Item
replaced and, in any case, in the condition required by the terms of this
Lease; or
(b) give the Lessor the date on which the Stipulated Loss Value for
such Item or Items is payable pursuant to this Section 13.1, and shall pay
the Stipulated Loss Value with respect to such Item or Items, determined
as of the Rent Payment Date which is at least thirty (30) days following
the occurrence of such Event of Loss (such Rent Payment Date to be
referred to hereinafter as the "Determination Date"), plus (i) Basic Rent
due as of the Determination Date; and (ii) Break Funding Costs, if any.
Upon payment in full of such Stipulated Loss Value, Basic Rent and Break
Funding Costs, if any, and all other Rent due or accrued through the date
of payment, (i) the Lease Term for such Item or Items shall end; (ii) the
obligations of the Lessee hereunder with respect to such Item or Items
(other than any other such obligations expressed herein as surviving
termination of this Lease) shall terminate as of the date of such payment;
and (iii) the Lessor shall transfer to the Lessee AS IS, WHERE IS, WITHOUT
RECOURSE OR WARRANTY OF ANY KIND OR NATURE WHATSOEVER, but free and clear
of Lessor Liens and the lien of the Loan Agreement all right, title and
interest of the Lessor in, to and under such Item or Items, together with
all of the Lessor's right, title and interest, if any, in, to and under
any warranty, claims, rights and causes of action (whether actual or
potential) against Danieli-Wean with respect to such Item or Items. In the
Event that an Item is not returned to the Lessor at the end of the Lease
Term, if such Item is required to be returned under this Lease and an
Event of Loss has occurred with respect to such Item, the Stipulated Loss
Value applicable to such Item, shall be the Stipulated Loss Value in
effect on the last day of the Lease Term.
SECTION 13.2 Application of Other Payments on an Event of Loss. Any
-------------------------------------------------
payments (except for payments under insurance policies maintained other than
pursuant to Article X of this Lease) received at any time by the Lessor or by
the Lessee from any governmental authority or other Person (except the Lessee)
as a result of the occurrence of an Event of Loss shall be applied as follows:
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(a) all such payments received at any time by the Lessee shall be
promptly paid to the Lessor for application pursuant to the following
provisions of this Section 13.2, except that so long as no Lease Default
or Lease Event of Default shall have occurred and be continuing, the
Lessee may retain any amounts that the Lessor would at the time be
obligated to reimburse or pay to the Lessee under the provisions of
paragraph (b) or (c) below;
(b) so much of such payments as shall not exceed the amount required
to be paid by the Lessee pursuant to the first sentence of Section 13.1
hereof shall be applied in reduction of the Lessee's obligation to pay
such amounts if not already paid by the Lessee or, if already paid by the
Lessee, shall be applied to reimburse the Lessee for its payment of such
amounts, unless a Lease Default or a Lease Event of Default shall have
occurred and be continuing; and
(c) the balance, if any, of such payments remaining thereafter shall
be retained by the Lessor or paid by the Lessee to the Lessor, except that
(i) any such payments remaining thereafter as may be attributable to the
proceeds of insurance maintained by the Lessee; and (ii) any proceeds of
requisition of use payments made by any governmental authority and
attributable to the Equipment for a period equal to the Lease Term, shall
be retained by the Lessee or paid by the Lessor to the Lessee.
SECTION 13.3 Application of Payments Not Relating to an Event of Loss.
--------------------------------------------------------
Unless a Lease Default or a Lease Event of Default shall have occurred and be
continuing, payments (except for payments under insurance policies maintained
other than pursuant to Article X of this Lease) received at any time by the
Lessor or the Lessee from any governmental authority or other Person with
respect to any loss, condemnation, confiscation, or seizure of, or requisition
of title to or use of, or damage to, the Equipment or any part thereof not
constituting an Event of Loss shall be paid to or retained by the Lessee (except
as otherwise provided in Article X hereof) and shall be applied as follows:
first, directly in payment for repairs or replacement of the Equipment in
- -----
respect of which such payment was received in accordance with the provisions of
Article X hereof, if not already paid for by the Lessee, or, if already paid for
by the Lessee, shall be applied to reimburse the Lessee for such payment; and
second, the balance remaining, if any, at the end of such payments remaining
- ------
thereafter as may be attributable to (x) the proceeds of insurance maintained by
Lessee pursuant to Article X hereof or (y) amounts paid by any government
authority with respect to any requisition of use of the Equipment during the
Lease Term, shall be retained by the Lessee. The Lessee shall maintain records
setting forth information relating to the
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receipt and application of such payments in accordance with this Section 13.3.
Such records shall be kept on file by the Lessee at its offices and copies shall
be provided to the Lessor upon request.
SECTION 13.4 Other Dispositions. Notwithstanding the foregoing provisions
------------------
of this Article XIII, so long as a Lease Default or a Lease Event of Default
shall have occurred and be continuing, any amount that would otherwise be
payable to or for the account of, or that would otherwise be retained by, the
Lessee pursuant to this Article XIII shall be paid to the Agent on behalf of the
Lenders (or to the Lessor after the lien of the Loan Agreement shall have been
released) as security for the obligations of the Lessee under this Lease and, at
such time thereafter as no Lease Default or a Lease Event of Default shall be
continuing, such amount shall be paid promptly to the Lessee unless the Lessor
shall have theretofore declared this Lease to be in default pursuant to Section
18.1 hereof, in which event such amount shall be disposed of by the Lenders in
accordance with the provisions of the Loan Agreement or by the Lessor in its
sole discretion if the lien of the Loan Agreement shall have been released.
SECTION 13.5 Special Event of Loss. If a Special Event of Loss shall
---------------------
occur, then the Lessee shall give the Lessor and the Agent prompt written notice
of such occurrence and upon receipt of payment of the Special Stipulated Loss
Value, such payment shall be applied as provided in Section 2.7 of the
Participation Agreement and the Basic Rent, Stipulated Loss Values, Termination
Values and the percentage set forth in Section 5.1(b) hereof, shall be adjusted
as provided in Section 10.7 of the Participation Agreement.
ARTICLE XIV
Interest Conveyed to Lessee
---------------------------
SECTION 14.1 Interest Conveyed. This Lease is an agreement of lease and
-----------------
does not convey to the Lessee any right, title or interest in or to the
Equipment except as a lessee.
SECTION 14.2 Equipment as Personal Property.
------------------------------
(a) Personal property. Each Item is intended to be and shall be and at all
-----------------
times shall remain separately identifiable personal property, severable from any
real property on which it is located.
(b) Separation from Personal Property. The Lessee shall not permit any
---------------------------------
Item to be attached to, installed in or used, stored or maintained with, any
other personal property (except other Items) in such manner or under such
circumstances that such
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Item would become an accession to or confused with such other personal property.
(c) Separation from Real Property. The Lessee shall not permit any Item to
-----------------------------
be attached to, installed in or used, stored or maintained with, any real
property in such manner or under such circumstances that any Person would
acquire any rights in such Item paramount to or ratable with the rights of the
Lessor, the Agent on behalf of the Lenders or the Lenders by reason of such Item
being deemed to be real property or a fixture thereon unless the Lessee has
complied with the provisions of Section 6.1(1) of the Participation Agreement.
The Lessee will not enter into or be a party to any lease or mortgage of any
real property on which any Item is or is to be located, unless (i) such lease or
mortgage permits (or such lessor or mortgagee otherwise consents to in writing)
the operation of such Item and the removal of such Item at any time free and
clear of any lien on the part of the lessor or mortgagee of such property and
shall be subordinate to the rights of the Lessor, the Agent on behalf of the
Lenders or the Lenders and their respective successors and permitted assigns
under this Lease; or (ii) the Lessee has complied with the provisions of Section
6.1(1) of the Participation Agreement.
(d) Severance and Waiver Agreement. On the Initial Closing, (i) the Lessee
------------------------------
executed and delivered the Severance and Waiver Agreement with respect to
Equipment installed on the Lessee's Premises; and (ii) the Lessee complied with
the Initial Closing Date Conditions Precedent set forth in Section 5.1(o) and
(p) of the Participation Agreement.
ARTICLE XV
Restrictions on Assignment and Sublease; Location
-------------------------------------------------
SECTION 15.1 ASSIGNMENT AND SUBLEASE. EXCEPT AS PROVIDED IN SECTION 21.3
-----------------------
HEREOF AND SECTION 8.1 OF THE PARTICIPATION AGREEMENT, THE LESSOR MAY NOT ASSIGN
ANY OF ITS RIGHT, TITLE OR INTEREST IN, TO OR UNDER THIS LEASE, PROVIDED, THAT,
SUBJECT TO SECTION 8.1 OF THE PARTICIPATION AGREEMENT, UPON PAYMENT IN FULL OF
THE NOTES, THE LESSOR MAY ASSIGN, SELL, TRANSFER AND/OR GRANT A SECURITY
INTEREST IN, THIS LEASE, ANY LEASE SUPPLEMENT AND/OR ANY OF THE EQUIPMENT, WITH
THE PRIOR WRITTEN CONSENT OF THE LESSEE, WHICH CONSENT SHALL NOT BE UNREASONABLY
WITHHELD, AND UPON SUCH CONSENT, AND SUCH ASSIGNEE, TRANSFERRED OR SECURED PARTY
SHALL HAVE ALL RIGHTS OF THE LESSOR OR A SECURED PARTY OF THE LESSOR, AS THE
CASE MAY BE, HEREUNDER, AND THE LESSOR SHALL PAY ANY REASONABLE OUT-OF-POCKET
COSTS AND EXPENSES OF LESSEE IN CONNECTION THEREWITH. THE LESSEE MAY NOT
SUBLEASE THE EQUIPMENT OR ANY PART THEREOF OR ASSIGN ANY OF ITS RIGHTS OR
INTEREST HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF THE LESSOR AND THE AGENT
ON BEHALF OF THE LENDERS, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD OR
DELAYED; PROVIDED, HOWEVER, THAT (I) ANY
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SUCH PERMITTED SUBLEASE OR ASSIGNMENT SHALL NOT RELEASE THE LESSEE FROM ANY OF
ITS OBLIGATIONS OR LIABILITIES OF ANY NATURE WHATSOEVER ARISING UNDER ANY OF THE
OPERATIVE DOCUMENTS; (II) ANY SUCH PERMITTED SUBLEASE OR ASSIGNMENT SHALL BE
EXPRESSLY SUBJECT TO AND SUBORDINATE TO THIS LEASE; (III) NO SUCH SUBLEASE OR
ASSIGNMENT SHALL BE PERMITTED IF A LEASE DEFAULT OR LEASE EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING; AND (IV) NO SUCH SUBLEASE OR ASSIGNMENT SHALL BE
PERMITTED IF IT HAS MATERIAL ADVERSE TAX CONSEQUENCES TO THE LESSOR. THESE
PROVISIONS SHALL BE BINDING ON ANY SUBSEQUENT ASSIGNEE OR SUBLESSEE OF THE
LESSEE'S OR THE LESSOR'S RIGHTS OR INTEREST HEREUNDER. THE RIGHTS AND
OBLIGATIONS OF THE LESSOR AND THE LESSEE HEREUNDER SHALL INURE TO THE BENEFIT
OF, AND BE BINDING UPON, THE PERMITTED SUCCESSORS AND ASSIGNS OF THE LESSOR AND
THE LESSEE, RESPECTIVELY.
SECTION 15.2 Location. The Lessee shall not remove, or permit to be
--------
removed, the Equipment, any Item or any Part thereof without the prior written
consent of the Lessor, except that the Lessee or any other Person may remove (i)
in accordance with the provisions of Section 9.5 hereof, any Part with respect
to which title has passed to or remained with the Lessee, or such Person as
provided in Section 9.4 hereof; (ii) the Equipment, if title to the Equipment
shall have passed to the Lessee in accordance with the provisions of Article V
or Article VI or Section 13.1 hereof; or (iii) any Part in accordance with the
provisions of Section 9.2 hereof.
ARTICLE XVI
Inspection and Notices
----------------------
SECTION 16.1 Condition and Operation. The Agent, on behalf of the Lenders,
-----------------------
and the Lessor and their authorized representatives (the "Inspecting Parties"),
at their own expense and risk, may inspect the Equipment and Lessee's records
pertaining to the Equipment without disturbing Lessee's operations in any
unreasonable way and in compliance with the Lessee's security and safety
restrictions. Lessee agrees to make a good faith effort to make the Equipment
and records available for such inspections. After a Lease Event of Default has
occurred and is continuing or after the Lessee has given notice of a termination
pursuant to Article VI or has failed to exercise its purchase options under
Article V one hundred eighty (180) days prior to the end of the Lease Term, the
Inspecting Parties, at their expense and risk, and at any time, may also inspect
the books and records of the Lessee relating to the Equipment and make copies
and abstracts therefrom. The Lessee shall furnish to the Inspecting Parties
statements accurate in all material respects regarding the condition and state
of repair of the Equipment, all at such times and as often as may be reasonably
requested. None of the Inspecting Parties shall have any duty to make any such
inspection or inquiry and none of the Inspecting Parties shall
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incur any liability or obligation by reason of not making any such inspection or
inquiry. To the extent permissible, the Lessee shall prepare and file in timely
fashion, or, where the Lessor shall be required to file, the Lessee shall
prepare and deliver to the Lessor within a reasonable time prior to the date
for filing, any reports with respect to the condition or operation of the
Equipment that shall be required to be filed with any Federal, state or other
governmental or regulatory authority.
SECTION 16.2 Liability. The Lessee, promptly after obtaining knowledge
---------
thereof, shall give prompt written notice, in substantially the form annexed as
Exhibit C, to the Lessor, the Equity Participants and the Agent of each accident
likely to result in material damages, or claims for material damages against the
Lessee or any such Person, with respect to the Equipment in excess of Two
Hundred Fifty Thousand Dollars ($250,000) and occurring in whole or in part
(whenever asserted) during the Lease Term, and on request shall furnish to the
Lessor and the Agent information as to the time, place and nature thereof, the
names and addresses of the parties involved, any Persons injured, witnesses and
owners of any property damaged, and such other information as may be known to
it, and shall promptly upon request furnish the Lessor and the Agent with copies
of all correspondence, papers, notices and documents whatsoever received by the
Lessee in connection therewith.
SECTION 16.3 Liens. The Lessee, promptly and in no event later than 10
-----
days after it shall have obtained knowledge thereof, shall give prompt, written
notice, in substantially the form annexed as Exhibit D, to the Lessor and the
Agent, of the attachment of any Lien that it shall be obligated to discharge or
eliminate pursuant to Article VIII hereof and the full particulars thereof
(including the means by which the Lessee proposes to remove said Lien) unless
the same shall have been removed or discharged by the Lessee.
SECTION 16.4 Change of Principal Place of Business. The Lessee shall give
-------------------------------------
a written notice, in substantially the form annexed as Exhibit E, to the Lessor
and the Agent of the change of the Lessee's principal place of business, within
thirty (30) days of such change.
SECTION 16.5 Identification Marks. The Lessee shall not allow the name of
--------------------
any Person to be placed upon any Item as a designation which might be
interpreted as indicating a claim of ownership thereof or a security interest
therein by any Person other than the Lessor, any permitted assignee of the
Lessor or the Agent.
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<PAGE>
ARTICLE XVII
Events of Default
-----------------
The following events shall constitute Lease Events of Default (whether any
such event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order or any court or any order, rule or regulation of any administrative or
governmental body):
(a) the Lessee shall fail to make any payment of Basic Rent when
due;
(b) the Lessee shall fail to make any payment of Supplemental Rent
(including payments of Stipulated Loss Values and Termination Values) or
any other amount payable hereunder within ten (10) Business Days after
written notice of such failure from the Lessor or the Lender;
(c) the Lessee shall fail to perform or observe any covenant,
condition or agreement to be performed or observed by it under Section
10.1, 10.2 or 15.1 hereof and such failure shall continue unremedied for a
period of ten (10) Business Days after written notice thereof from the
Lessor;
(d) the Lessee shall fail to perform or observe any covenant,
condition or agreement (not included in clause (a), (b) or (c) of this
Article XVII) to be performed or observed by it hereunder or under any
other Operative Document (including, without limitation, the covenants and
agreements of the Lessee set forth in Article VI of the Participation
Agreement), or under any document delivered by the Lessee in accordance
with any Operative Document (other than the Tax Indemnification
Agreement), and such failure shall continue unremedied for a period of
thirty (30) Business Days after written notice thereof from the Lessor;
provided, however, that such failure shall not constitute an Event of
Default for a period of six (6) months from the date of such written
notice if, and so long as during such six-month period the Lessee is
diligently attempting to cure such failure and so long as such failure
shall not involve any danger of the sale, forfeiture or loss of any part
of the Equipment, title thereto or any interest therein and shall not
interfere with the use or disposition of the Equipment or the payment of
Rent;
(e) the filing by the Lessee of any petition commencing dissolution
or liquidation of the Lessee by the Lessee of a voluntary case under any
applicable
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bankruptcy, insolvency or other similar law now or hereafter in effect, or
the Lessee shall have consented to the entry of an order for relief in an
involuntary case under any such law, or the failure of the Lessee
generally to pay its debts as such debts become due (within the meaning of
the Bankruptcy Reform Act of 1978, as amended), or the failure by the
Lessee promptly to satisfy or discharge any execution, garnishment or
attachment of such consequence as will impair its ability to carry out its
obligations under this Lease, or the appointment of or taking possession
by a receiver, custodian or trustee (or other similar official) for the
Lessee or any substantial part of its property, or a general assignment by
the Lessee for the benefit of its creditors, or the entry by the Lessee
into an agreement of composition with its creditors, or the Lessee shall
have taken any corporate action in furtherance of any of the foregoing; or
the filing against the Lessee of an involuntary petition in bankruptcy
which results in an order for relief being entered or, notwithstanding
that an order for relief has not been entered, the petition is not
dismissed within ninety (90) days of the date of the filing of the
petition, or the filing under any law relating to bankruptcy, insolvency
or relief of debtors of any petition against the Lessee for
reorganization, composition, extension or arrangement with creditors which
either (i) results in a finding or adjudication of insolvency of the
Lessee; or (ii) is not dismissed within ninety (90) days of the date of
the filing of such petition (the term "dissolution or liquidation" of the
Lessee as used in this subsection, shall not be construed to include the
cessation of the corporate existence of the Lessee resulting either from a
merger or consolidation of the Lessee into or with another corporation or
a dissolution or liquidation of the Lessee following a transfer of all or
substantially all of its assets as an entirety, unless the conditions
permitting such actions contained in Article VII of the Participation
Agreement are not satisfied;
(f) the Lessee shall default in the payment of money in excess of
Five Million Dollars ($5,000,000) under any lease, loan or other
instrument for borrowed money (including, without limitation, under the
IBJ Credit Agreement);
(g) the Lessee shall cease to exist for any reason;
(h) a judgment for the payment of money in excess of Five Million
Dollars ($5,000,000), which is not covered by insurance, shall be rendered
against the Lessee and such judgment shall remain in force
-26-
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undismissed, unstayed, unbonded or unvacated for a period of thirty (30)
consecutive days after the date of entry;
(i) any of the Operative Documents shall for any reason cease to be
in full force and effect, except for those Operative Documents which have
been performed in accordance with their terms; or
(j) any representation or warranty by the Lessee in any Operative
Document (other than the Tax Indemnification Agreement) or in any
certificate or document delivered pursuant thereto shall have been
materially false when made and, if capable of curing, is not cured within
thirty (30) days after written notice.
ARTICLE XVIII
Enforcement
-----------
SECTION 18.1 Remedies. Upon the occurrence of any Lease Event of Default
and at any time thereafter so long as the same shall be continuing, the Lessor,
at its option, by notice to the Lessee, may declare this Lease to be in default,
and at any time then or thereafter the Lessor may do one or more of the
following as the Lessor in its sole discretion shall determine:
(a) the Lessor, by notice to the Lessee, may rescind or terminate
this Lease;
(b) the Lessor may demand that the Lessee, and the Lessee shall upon
the written demand of the Lessor, return the Equipment promptly to the
Lessor in the manner and condition required by, and otherwise in
accordance with all of the provisions of, Articles IX and XI hereof as if
the Equipment were being returned at the end of the Lease Term, and the
Lessor shall not be liable for the reimbursement of the Lessee for any
costs and expenses incurred by the Lessee in connection therewith; and
thereupon the Lessor either (i) may enter upon the property of the Lessee
and take immediate possession of (to the exclusion of the Lessee) the
Equipment or remove the Equipment or both, by summary proceedings or
otherwise, all without liability to the Lessee for or by reason of such
entry or taking of possession, whether for the restoration of damage to
property caused by such taking or for any proceeds arising from the
disposition thereof, or otherwise; or (ii) may enter the Facility under
the License, take immediate possession (to the exclusion of the Lessee) of
the Equipment and store the Equipment therein, as provided in the License;
-27-
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(c) the Lessor may sell all or any part of the Equipment at public
or private sale, as the Lessor may determine, free and clear of any rights
of the Lessee and without any duty to account to the Lessee with respect
to such action or inaction or any proceeds with respect thereto (except to
the extent required by paragraph (f) below if the Lessor shall elect to
exercise its rights thereunder) in which event the Lessee's obligation to
pay Basic Rent hereunder for periods commencing after the date of receipt
of payment from such sale shall be terminated or proportionately reduced,
as the case may be (except to the extent that Basic Rent is to be included
in computations under paragraph (e) or (f) below if the Lessor shall elect
to exercise its rights thereunder);
(d) the Lessor may hold, keep idle or lease to others all or any
part of the Equipment as the Lessor in its sole discretion may determine,
free and clear of any rights of the Lessee and without any duty to account
to the Lessee with respect to such action or inaction or for any proceeds
with respect to such action or inaction, except that the Lessee's
obligation to pay Basic Rent with respect to the Equipment for periods
commencing after the Lessee shall have been deprived of use of the
Equipment pursuant to this paragraph (d) shall be reduced by the net
proceeds, if any, received by the Lessor from leasing the Equipment to any
Person other than the Lessee for the same periods or any portion thereof;
(e) the Lessor, whether or not the Lessor shall have exercised or
shall thereafter at any time exercise any of its rights under clause (b),
(c) or (d) above with respect to the Equipment, may demand, by written
notice to the Lessee specifying a payment date which shall be a Rent
Payment Date not earlier than ten (10) days after the date of such notice,
that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor,
on the payment date specified in such notice, as liquidated damages for
loss of a bargain and not as a penalty (in lieu of Basic Rent for the
Equipment due after the payment date specified in such notice), any unpaid
Basic Rent for the Equipment due through the payment date specified in
such notice, plus Break Funding Costs, if any, plus whichever of the
following amounts the Lessor, in its sole discretion, shall specify in
such notice (together with interest on such amount at the Overdue Rate
from the payment date specified in such notice to the date of actual
payment):
(i) an amount equal to the excess, if any, of the Stipulated
Loss Value of the Equipment,
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computed as of the payment date specified in such notice, over the
Fair Market Sales Value of the Equipment as of the payment date
specified in such notice (such Fair Market Sales Value to be
determined by mutual agreement of the Lessor and the Lessee or if
they cannot agree within ten (10) days after such notice by the
Appraisal Procedure);
(ii) an amount equal to (A) the excess, if any of such
Stipulated Loss Value over the sum of (A) the net proceeds of a sale
of any of the Equipment pursuant to clause (c) above which has
occurred prior to the date of payment of the amount due hereunder
(although the Lessor has no obligation whatsoever to exercise any
right pursuant to clause (c) above) and (B) if any of the Equipment
has not been sold pursuant to clause (c) above, the Fair Market
Sales Value of such Equipment pursuant to clause (i) above;
(f) if the Lessor shall have sold all the Equipment pursuant to
paragraph (c) above, the Lessor, in lieu of exercising its rights under
paragraph (e) above, if it shall so elect, may demand that the Lessee pay
to the Lessor, and the Lessee shall pay to the Lessor, on the date of such
sale, as liquidated damages for loss of a bargain and not as a penalty (in
lieu of Basic Rent due for periods commencing after the next Rent Payment
Date following the date of such sale), any unpaid Basic Rent for the
Equipment due through such Rent Payment Date, plus Break Funding Costs, if
any, plus the amount of any deficiency between the net proceeds of such
sale and the Stipulated Loss Value of the Equipment, computed as of such
Rent Payment Date, together with interest at the Overdue Rate on the
amount of such Rent and such deficiency from the date of such sale until
the date of payment and discharge of the Notes with any funds realized
pursuant to this Section 18.1(f); or
(g) the Lessor may exercise any other right or remedy that may be
available to it under applicable law or proceed by appropriate court
action or actions either at law or in equity to enforce the terms hereof
or to recover damages for the breach thereof.
SECTION 18.2 Survival of Lessee's Obligations. No termination of this
--------------------------------
Lease, in whole or in part, or repossession of any of the Equipment or exercise
of any remedy under Section 18.1 hereof, except as specifically provided
therein, shall relieve the Lessee of any of its liabilities and obligations
hereunder. In addition, the Lessee shall be liable, except as otherwise provided
above, for any and all unpaid Rent due hereunder before,
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after or during the exercise of any of the foregoing remedies, including all
legal fees and other costs and expenses incurred by the Lessor and the Lenders
by reason of the occurrence of any Lease Event of Default or the exercise of the
Lessor's remedies with respect thereto, and including all costs and expenses
incurred in connection with the return of the Equipment in the manner and
condition required by, and otherwise in accordance with the provisions of,
Articles IX and XI hereof as if such Equipment were being returned at the end of
the Lease Term. At any sale of the Equipment or any part thereof or any other
rights pursuant to Section 18.1 hereof, the Lessor or the Agent on behalf of the
Lenders may bid for and purchase such property.
SECTION 18.3 Remedies Cumulative. To the extent permitted by, and subject
-------------------
to the mandatory requirements of, applicable law, each and every right, power
and remedy herein specifically given to the Lessor or otherwise in this Lease
shall be cumulative and shall be in addition to every other right, power and
remedy herein specifically given or now or hereafter existing at law, in equity
or by statute, and each and every right, power and remedy whether specifically
herein given or otherwise existing may be exercised from time to time and as
often and in such order as may be deemed expedient by the Lessor, and the
exercise or the beginning of the exercise of any power or remedy shall not be
construed to be a waiver of the right to exercise at the same time or thereafter
any right, power or remedy. No delay or omission by the Lessor in the exercise
of any right, power or remedy or in the pursuit of any remedy shall impair any
such right, power or remedy or be construed to be a waiver of any default on the
part of the Lessee or to be an acquiescence therein. No express or implied
waiver by the Lessor of any Lease Event of Default shall in any way be, or be
construed to be, a waiver of any future or subsequent Lease Event of Default. To
the extent permitted by applicable law, the Lessee hereby waives any rights now
or hereafter conferred by statute or otherwise that may require the Lessor to
sell, lease or otherwise use the Equipment or part thereof in mitigation of the
Lessor's damages upon the occurrence of a Lease Event of Default or that may
otherwise limit or modify any of the Lessor's rights or remedies under this
Article XVIII.
SECTION 18.4 Storage Agreement. The Lessee hereby grants to the Lessor the
-----------------
right to store the Equipment in the Facility for a period of eighteen (18)
months following a Lease Event of Default and exercise of any remedy under this
Article XVIII at no cost to the Lessor. During such storage period, the Lessor
shall have the right to enter the Lessee's Premises and the Facility during
regular business hours to inspect and/or remove the Equipment.
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ARTICLE XIX
Right to Perform for Lessee
---------------------------
During the continuance of a Lease Event of Default, if the Lessee shall
fail to perform or comply with any of its agreements contained herein, the
Lessor may perform or comply with such agreement, and the amount of such payment
and the amount of the expenses of the Lessor incurred in connection with such
payment or the performance of or compliance with such agreement, as the case may
be, together with interest thereon at the Overdue Rate, shall be deemed
Supplemental Rent, payable by the Lessee upon demand. Without limitation on the
foregoing, the Lessee hereby acknowledges that if it fails to maintain insurance
as required under Article X then the Lessor shall have the right to obtain
insurance coverage which so complies with such Article and that the Lessee shall
be estopped from asserting as a defense to any demand for reimbursement by the
Lessor of the cost of such alternate insurance that such alternate insurance
could have been obtained at a lower cost.
ARTICLE XX
Indemnities
-----------
SECTION 20.1 General Indemnity.
-----------------
(a) Payment of Indemnified Expenses by Lessee. Whether or not any of the
-----------------------------------------
transactions contemplated by the Operative Documents shall be consummated
(unless such transactions are consummated and any of the items hereinafter
described shall constitute Transaction Costs), the Lessee shall pay, and shall
indemnify and hold harmless each Indemnitee from and against, any and all
liabilities, obligations, losses, damages, penalties, claims, actions, suits,
costs, expenses and disbursements, including legal fees and expenses, of
whatsoever kind and nature (herein collectively referred to as "Indemnified
Expenses" and individually as an "Indemnified Expense"), imposed on, incurred by
or asserted against any Indemnitee (whether because of an action or omission by
such Indemnitee or otherwise), in any way relating to or arising out of (i) the
Operative Documents, the Notes or the participation of the Lessor, or payments
made pursuant thereto or any other transactions contemplated by the Operative
Documents; (ii) the manufacture, financing, construction, purchase, acceptance,
rejection, ownership, acquisition, delivery, nondelivery, lease, sublease,
re-lease, preparation, installation, storage, maintenance, repair,
transportation, transfer of title, abandonment, possession, rental, use,
operation, condition, return, sale or other disposition or other application of
all or any part of any interest in the Equipment, including without limitation
(A) claims or penalties arising from any violation of law or based upon
liability in tort (strict or otherwise) or from the
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active or passive negligence of any Indemnitee, (B) loss of or damage to any
property or the environment or death or injury to any Person, (C) latent or
other defects, whether or not discoverable, and (D) any claim for patent,
trademark or copyright infringement relating to the Equipment, the Overall
Transaction or any process, method or product used or produced by the Lessee by
operation of the Equipment; (iii) the sale or other disposition of the Equipment
or any part thereof after a Lease Event of Default, an Event of Loss, a
termination of the Lease pursuant to Article XVIII or a purchase by the Lessee
pursuant to Article VI; (iv) the presence, handling, use or storage of any
Hazardous Substance or Hazardous Condition on, in, under or around Lessee's
Premises, or the transportation of any Hazardous Substance to or from Lessee's
Premises, including without limitation any Release, spill, discharge, emission,
migration or disposal, whether on- or off-site, of any Hazardous Substance; or
(v) violation or claim of violation of any laws for the protection of human
health or safety or the environment, including Environmental Law(s), in
connection with use or operation of Lessee's Premises or any equipment or
facilities used in connection therewith.
Without limitation of the foregoing, whether or not any of the
transactions contemplated by the Operative Documents shall be consummated
(except to the extent that any of the items hereafter described shall constitute
Transaction Costs, the Lessee shall pay all reasonable costs and expenses
incurred by any Indemnitee in connection with (i) a Lease Default or Lease
Event of Default; (ii) the entering into or giving or withholding of any
amendments, supplements, waivers or consents with respect to any Operative
Document requested by the Lessee; or (iii) any Event of Loss, or any prepayment
of the Notes.
(b) Exceptions. The indemnities contained in Section 20.1(a) hereof with
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regard to any particular Indemnitee shall not extend to any Indemnified Expense
(i) resulting directly from the willful misconduct or gross negligence of any
Indemnitee (other than willful misconduct or gross negligence imputed to such
Indemnitee solely by reason of its interest in the Equipment); (ii) resulting
solely from the breach by any Indemnitee of any of its representations,
warranties or covenants in any of the Operative Documents; (iii) unless a Lease
Event of Default shall have occurred and be continuing, and the Lessor or the
Agent on behalf of the Lenders shall be exercising remedies with respect
thereto, to the extent such Indemnified Expense shall relate to acts or events
not attributable to the Lessee that occur upon the expiration of the Lease Term
after the Equipment has been purchased by the Lessee or returned to the Lessor
and the Lease has been terminated; (iv) so long as no Lease Event of Default
shall have occurred and be continuing, to the extent attributable solely to the
disposition or attempted disposition of the Equipment or any interest thereof,
by or on behalf of any Indemnitees, other than a sale, transfer or other
disposition of the Equipment pursuant to Articles VI, XIII or XVIII hereof or as
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required by any Operative Document; (v) constituting Fees, Taxes or Other
Charges, indemnification of which is the subject of the Tax Indemnification
Agreement; or (vi) which does not constitute an out-of-pocket expense of the
Indemnitee. Nothing in Section 20.1(a) hereof shall be deemed to create or
constitute a guaranty by the Lessee of the payment by the Lessor of the
principal of or the premium, if any, or interest on the Notes.
(c) Notice. If any party entitled to indemnity under this Section 20.1 or
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the Lessee shall have received written notice of any liability indemnified
against under this Section 20.1, it shall give prompt notice thereof to the
Lessee, or the party entitled to be indemnified, as the case may be. The failure
to give such notice shall not affect any obligation under this Section 20.1,
provided, however, that any Indemnitee so failing to give notice shall indemnify
the Lessee for all direct damages proximately caused by such failure. In case
any action, including any investigatory proceeding, shall be brought against, or
commenced with respect to, any Indemnitee in respect of which the Lessee is
required to indemnify such Indemnitee pursuant to the provisions of this Section
20.1, the Lessee shall have the right to assume the defense thereof, including
the employment of counsel satisfactory to such Indemnitee and the payment of all
expenses. In the event the Lessee assumes the defense of any such action, any
Indemnitee shall have the right to employ separate counsel in such action and
participate therein, but the fees and expenses of such counsel shall be at the
expense of such Indemnitee, unless (i) the employment of such counsel has been
specifically authorized by the Lessee; (ii) the named parties to such action
(including any impleaded parties) include both such Indemnitee and the Lessee
and representation of such Indemnitee and the Lessee by the same counsel would
be inappropriate under applicable standards of professional conduct due to
actual or potential conflicting interests between them; or (iii) the counsel
employed by the Lessee and satisfactory to such Indemnitee has advised such
Indemnitee, in writing, that such counsel's representation of such Indemnitee
would be likely to involve such counsel in representing differing interests
which could adversely affect either the judgment or loyalty of such counsel to
such Indemnitee, whether it be a conflicting, inconsistent, diverse or other
interest (in which case the Lessee shall not have the right to assume the
defense of such action on behalf of such Indemnitee; it being understood,
however, that in connection with any one such action, or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, the Lessee shall not be liable
for the reasonable fees and expenses of more than one separate firm of
attorneys, and of any local counsel retained by said firm, at any one time for
each such Indemnitee, which firm shall be designated in writing by such
Indemnitee). Settlement of any such action may not be made without the consent
of the Indemnitee entitled to indemnity for the claim from which such action
arose. The Lessee shall not be liable for any settlement of any such action
effected without its consent, but
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if settled with the consent of the Lessee or if there be a final judgment,
beyond further review or appeal, in any such action, the Lessee agrees to
indemnify and hold harmless any Indemnitee from and against any loss or
liability by reason of such settlement or judgment.
(d) Supplemental Rent. The Lessee covenants and agrees to pay, as
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Supplemental Rent, all amounts under this Section 20.1 on demand by the relevant
Indemnitee.
SECTION 20.2 Federal Tax Indemnities. The Lessee agrees with the Lessor to
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comply with and to pay directly to the Lessor, as Supplemental Rent, all amounts
payable by it under the Tax Indemnification Agreement, which provisions are
hereby incorporated herein by this reference as fully as if set forth in full at
this place.
SECTION 20.3 Fees, Taxes and Other Charges.
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(a) Payment by Lessee. (1) The Lessee hereby agrees to pay and assume
-----------------
liability for, and on written demand to indemnify, protect, defend, save and
hold harmless on an after-tax basis each Indemnitee from and against, any and
all governmental or quasi-governmental fees (including without limitation
license and registration fees), taxes (including without limitation gross
receipts, franchise, sales, use, property, excise, real or personal, tangible or
intangible, interest equalization and stamp taxes), assessments, levies,
imposts, duties, charges or withholdings of any nature whatsoever, together
with any and all penalties, fines, additions to tax or interest thereon ("Fees,
Taxes and Other Charges") imposed against any Indemnitee, the Lessee or the
Equipment or any portion thereof by any Federal, state or local government or
taxing authority in the United States of America or by any foreign government or
any subdivision or taxing authority thereof, upon or with respect to (i) the
Equipment or any portion thereof or interest therein, (ii) the manufacture,
financing, construction, preparation, installation, purchase, ownership,
acquisition, acceptance, rejection, delivery, non-delivery, possession,
re-leasing, rental, use, operation, transportation, leasing, subleasing,
condition, maintenance, repair, sale, transfer of title, return, abandonment, or
other application or disposition of the Equipment or any portion thereof, (iii)
the rental payments, receipts, earnings or profits arising from the Equipment or
any portion thereof or interest therein or payable pursuant to this Lease, (iv)
interest, principal and other amounts payable on the Notes or any other
indebtedness secured by the Equipment and the payment thereof pursuant to the
Notes and any other indebtedness secured by the Equipment, (v) the Operative
Documents or the issuance of the Notes or any instrument contemplated by the
Operative Documents, or (vi) otherwise with respect to or in connection with the
Overall Transaction.
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(2) Without prejudice to the provisions of the Tax Indemnification
Agreement and notwithstanding anything in the foregoing, the provisions of this
Section 20.3 shall not apply to:
(i) United States Federal income tax;
(ii) Fees, Taxes and Other Charges on, or measured in whole or in
part by, the net or gross income of an Indemnitee imposed by the United
States or by any state or local taxing authority in the United States (in
each case, except to the extent such Fees, Taxes and Other Charges are in
the nature of sales, use, license, ad valorem or property taxes);
(iii) Fees, Taxes and Other Charges on, or measured in whole or in
part by the franchise, capital, conduct of business, net worth or tax
preference of an Indemnitee and imposed by the United States or any state
or local taxing authority in the United States (other than such a tax
imposed by the state taxing jurisdiction in which the principal place of
business of the Lessor is located or any other state in which the
Equipment may be located) and not described in (ii) above; provided,
however, that this clause shall not apply to the extent that (i) any such
Fees, Taxes and Other Charges are in the nature of sales, use, license, ad
valorem or property taxes, or (ii) the amount of such Fees, Taxes or Other
Charges exceeds the amount of Fees, Taxes or Other Charges that would have
been imposed solely as a result of activities of an Indemnitee unrelated
to the Overall Transaction and not involving the Equipment;
(iv) Fees, Taxes or Other Charges imposed by any foreign taxing
authority other than Fees, Taxes or Other Charges imposed by a foreign
taxing authority as a result of or in connection with the presence,
location, use or operation of the Equipment in such foreign jurisdiction,
the presence of any Lessee Person in such foreign jurisdiction or any
Lessee Person engaging in activities in or otherwise maintaining contact
with such foreign jurisdiction;
(v) Fees, Taxes and Other Charges to the extent on, levied on, or
measured by, any fees or compensation received by an Indemnitee for
services rendered in connection with the Overall Transaction;
(vi) Fees, Taxes and Other Charges that are included in Lessor's
Cost;
(vii) Fees, Taxes or Other Charges which result from any Indemnitee
being engaged in activities in, or
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otherwise maintaining contact with, the jurisdiction imposing such Fees,
Taxes or Other Charges, in each case if unrelated to the Overall
Transaction and not involving the Equipment.
(viii) so long as no Lease Default or Lease Event of Default has
occurred and is continuing, Fees, Taxes or other Charges imposed as a
result of the voluntary sale, transfer, assignment or other disposition
(it being understood that any transfer attributable directly or indirectly
to any substitution, replacement, removal, modification or addition made
by any Lessee Person is not voluntary) of any interest in any Note or the
Equipment by an Indemnitee;
(ix) Fees, Taxes or Other Charges imposed solely with respect to
any period after the end of the Lease Term unless a Lease Event of Default
has occurred and is continuing, provided that the exclusion set forth in
this clause (ix) shall not apply to any Fees, Taxes or Other Charges
resulting from events or circumstances occurring or matters arising prior
to or simultaneously with the end of the Lease Term or the exercise by the
Lessee of its rights under Article V of the Lease;
(x) Fees, Taxes or Other Charges imposed as the result of any
transfer or disposition of any interest in the Equipment or any Note by
any Indemnitee resulting from bankruptcy or other proceedings for the
relief of debtors (voluntary or involuntary) in which the transferor is
the debtor unless such transfer or disposition is pursuant to or arises in
connection with a Lease Default or Lease Event of Default or Event of Loss
or shall result from or in connection with the failure of Lessee to abide
by or perform any of its obligations under the Operative Documents;
(xi) Fees, Taxes and Other Charges imposed solely as a result of
the willful misconduct or gross negligence of the Indemnitee other than
willful misconduct or gross negligence imputed to such Indemnitee by
reason of such Indemnitee's participation in the Overall Transaction;
(xii) Fees, Taxes and Other Charges imposed solely as a result of
the breach of any representation, warranty or covenant to the Lessee
contained in the Operative Documents, but only if such breach is not
attributable to any act or omission of any Lessee Person or any breach or
inaccuracy of any representation, warranty or covenant of any Lessee
Person; or
(xiii) Fees, Taxes and Other Charges (other than California Taxes)
in the nature of withholding taxes
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(other than California Withholding Taxes) imposed on or with respect to
payments required pursuant to the Operative Documents.
(3) The Lessee shall provide (at its own expense) such information as may
be reasonably requested by an Indemnitee to enable the Indemnitee to fulfill its
tax filing requirements with respect to the transactions contemplated by this
Lease. If any return, statement, report or other document (a "Report") is
required by law to be made or filed with respect to any Fees, Taxes and Other
Charges which the Lessee is required to pay under this Section 20.3, the Lessee
shall notify the affected Indemnitee of such requirement and
(i) To the extent permitted by law (unless otherwise directed by
the Indemnitee in writing) or required by law, make and file in the
Lessee's own name such Report in such manner as will show the interest of
the Indemnitee in the Equipment in a manner satisfactory to the Indemnitee
and furnish the Indemnitee with a copy of such Report, or
(ii) If such Report is required to be in the name of or filed by
the Indemnitee (unless otherwise directed by the Indemnitee in writing),
prepare and furnish such Report for filing by the Indemnitee in such
manner as shall be satisfactory to the Indemnitee and send the same to the
Indemnitee for filing not later than 15 days prior to the due date
(including any extensions thereof), or
(iii) If such Report is required to reflect items in addition to
Fees, Taxes and Other Charges which Lessee is required to pay under this
Section 20.3 (as reasonably determined by the Indemnitee), provide the
Indemnitee with information within a reasonable time and in such form as
shall be reasonably acceptable to the Indemnitee, sufficient to permit
such information to be reviewed, and such Report to be properly made and
timely filed, by the Indemnitee.
The Lessee shall hold each Indemnitee harmless from and against any liabilities
(including, but not limited to, penalties, additions to tax, fines and interest)
arising out of any insufficiency or inaccuracy of any such Report or any failure
to file any such Report in a timely manner if such insufficiency, inaccuracy or
failure is attributable to the Lessee. Each Indemnitee agrees that it will
promptly forward to the Lessee any notice, bill or any advice received by it
concerning any such Fees, Taxes and Other Charges and will, at Lessee's expense,
use its reasonable best efforts and take such lawful and reasonable steps as may
be proposed by the Lessee in writing to minimize any of the same for which the
Lessee is responsible under this Section 20.3.
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(4) The amount which the Lessee shall be required to pay to or for the
account of any Indemnitee with respect to any Fees, Taxes and Other Charges
which are subject to indemnification under this Section 20.3 shall be an amount
sufficient to restore the Indemnitee to the same position the Indemnitee would
have been in had such Fees, Taxes and Other Charges not been incurred or
imposed. If the payment by the Lessee under this Section 20.3 of an amount equal
to such Fees, Taxes and Other Charges would be more or less than the amount
which would be required to make such Indemnitee whole as a result of any tax
effect to an Indemnitee in connection with such payment of such Fees, Taxes or
Other Charges, including, without limitation (i) the inclusion of any payment to
be made by the Lessee under this Section 20.3 in the taxable income of any
Indemnitee in one year and the deduction of the Fees, Taxes and Other Charges
with respect to which such payment is made from the taxable income of such
Indemnitee in a different year, (ii) the nondeductibility of such Fees, Taxes
and Other Charges from the taxable income of such Indemnitee or (iii) the
anticipated realization by such Indemnitee in a different year of tax benefits
resulting from the transaction giving rise to such Fees, Taxes and Other
Charges, the amount of the indemnity to be paid by the Lessee shall be adjusted
to an amount which (after taking into account all tax effects on such
Indemnitee, any loss of use of money resulting from differences in timing
between the inclusion of such indemnity in the taxable income of such Indemnitee
and the anticipated realization by such Indemnitee of tax benefits resulting
from the transaction to which such indemnity is related and the present value of
any anticipated future tax benefits to be realized by such Indemnitee as a
result of deducting such Fees, Taxes and Other Charges or as a result of the
transaction giving rise thereto) will be sufficient to place the Indemnitee in
the same position such Indemnitee would have been in had such Fees, Taxes and
Other Charges not been imposed. All computations for purposes hereof shall be
based on tax rates in effect on the date payment pursuant to this Section 20.3
is made. Computations involving the loss of use of money or calculations of
present value shall be based on the Prime Rate as adjusted for applicable income
tax effects and compounded semi-annually on the Rent Payment Dates. In the case
of any dispute with regard to the computations made pursuant to this paragraph
procedures similar to those described in Section 6 of the Tax Indemnification
Agreement will be utilized to resolve such dispute. Each Indemnitee shall in
good faith use reasonable efforts in filing its tax returns and in dealing with
taxing authorities to seek and claim all tax benefits available with respect to
items referred to herein. This paragraph (4) also shall apply, mutatis mutandis,
for the purpose of determining the amount which the Lessee shall be required to
pay to or for the account of any Indemnitee with respect to any Indemnified
Expenses which are subject to indemnification under Section 20.1 hereof.
(b) Refunds. If any Indemnitee shall obtain a refund or credit of all or
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any part of any Fees, Taxes and Other Charges,
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payment of or indemnity for which shall have been made by the Lessee pursuant to
this Section 20.3, such Indemnitee shall, unless a Lease Default or a Lease
Event of Default shall have occurred and be continuing, promptly pay to the
Lessee (i) the amount of such refund or credit (together with any interest paid
to such Indemnitee with respect to such refund or credit) plus (ii) an amount
equal to all tax benefits realized by such Indemnitee as the result of the
payment of the amounts referred to in clause (i) above and this clause (ii).
(c) Withholding. Lessee agrees that all payments by or on behalf of Lessee
-----------
(including without limitation any amounts paid as Rent and Supplemental Rent)
shall be made free and clear of, and without deduction for, any and all
California Withholdings (and, in the event any withholding is required or
imposed, the Lessee shall pay, at the time it is required to make any such
payments upon which such withholding is required or imposed, an additional
amount such that the net amount actually received will, after reduction for any
such withholding, equal the full amount of the payment due absent such
withholding) and any such payment shall be free of expense for collection or
other charges associated with such withholding; provided, however, that Lessee's
obligations under this Section 20.3(c) shall not apply to the extent that such
California Withholding Tax is imposed upon or with respect to a transferee of
Equity Participants, Lenders or Lessor and would not have been imposed upon or
with respect to Equity Participants, Lenders or Lessor, respectively. In the
event that Lessee pays any California Withholding Tax pursuant to this Section
20.3(c) which Lessee is not obligated to indemnify against under the Operative
Documents, then the party benefiting from such payment by or on behalf of Lessee
("Payee") shall reimburse Lessee for such amount of California Withholding Tax
paid by Lessee within the earlier of (i) ninety (90) days after the date that
Payee files the California income tax return that should reflect such
California Withholding Tax (or, if earlier, the last day such return could be
filed after taking into account extensions); and (ii) thirty (30) days after the
date Payee receives a refund of California income taxes that it would not have
received but for the payment of such California Withholding Taxes.
SECTION 20.4 Survival. The obligations of the Lessee under Sections 20.1,
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20.2 and 20.3 shall survive the termination of this Lease and are expressly made
for the benefit of and shall be enforceable by any Indemnitee, separately or
together, without declaring this Lease to be in default and notwithstanding any
assignment by the Lessor of this Lease or any of its rights hereunder. The
extension of applicable statutes of limitations by an Indemnitee or the Lessee
shall not affect the survival of the Lessee's or any Indemnitee's obligations,
as the case may be, under any of such Sections. The obligations of the
Indemnitees under this Article XX shall survive the termination of this Lease.
All payments required to be paid pursuant to Sections 20.1, 20.2 and 20.3 shall
be made directly to, or as otherwise
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requested by, the Indemnitee entitled thereto, upon written demand by such
Indemnitee. All such written demands shall specify the amounts payable and the
facts upon which the right to indemnification is based.
ARTICLE XXI
Miscellaneous
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SECTION 21.1 Further Assurances. The Lessee shall cause the Operative
------------------
Documents and any amendments and supplements to any of them (together with any
other instruments, financing statements, continuation statements, records or
papers necessary in connection therewith) to be recorded and/or filed and
rerecorded and/or refiled in each jurisdiction as and to the extent required by
law in order to, and shall take such other actions as may from time to time be
necessary to, establish, perfect and maintain (i) the Lessor's right, title and
interest in and to the Equipment, not subject to any Liens except Permitted
Liens; (ii) for the benefit of the Lenders and other holders of Notes, the first
mortgage lien and first priority security interest in the Collateral provided
for in the Loan Agreement including any Parts made subject to this Lease or the
Loan Agreement pursuant to Section 9.2 hereof or Section 2.10 of the
Participation Agreement; and (iii) each of the other rights and interests
created by the Loan Agreement or by any other Operative Document in the Lessor,
the Agent, the Lenders or any holder of a Note. The Lessee will promptly and
duly execute and deliver to each of the Lessor, the Agent and the Lenders such
documents and assurances and take such further action as the Lessor may from
time to time reasonably request in order to carry out more effectively the
intent and purpose of the Operative Documents and to establish and protect the
rights and remedies created or intended to be created in favor of the Lessor, to
establish, perfect and maintain the Lessor's right, title and interest in and to
the Equipment and, for the benefit of the Lenders and other holders of Notes,
the first priority security interest in the Collateral provided for in the Loan
Agreement, including without limitation if requested by the Lessor, the Agent,
or the Lenders at the expense of the Lessee, the recording or filing of
counterparts or appropriate memoranda of the Operative Documents, and of such
financing statements or other documents with respect thereto as the Lessor or
the from time to time reasonably request, and the Lessor agrees promptly to
execute and deliver such of the foregoing financing statements or other
documents as may require execution by the Lessor.
SECTION 21.2 Quiet Enjoyment. The Lessor covenants that it will not
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interfere in the Lessee's quiet enjoyment of the Equipment hereunder during the
Lease Term, so long as no Lease Event of Default has occurred and is continuing.
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SECTION 21.3 Collateral as Security for Lessor's Obligations. In order to
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secure the indebtedness evidenced by the Notes, the Loan Agreement provides,
among other things, for the creation in favor of the Agent on behalf of the
Lenders of a first priority security interest for the benefit of the Agent on
behalf of the Lenders and any other holder of Notes in the Collateral (including
the Equipment) and for the assignment by the Lessor to Agent on behalf of the
Lenders of the right, title and interest of the Lessor in and to this Lease and
the other Operative Documents, to the extent provided in the Loan Agreement. The
Lessee hereby (i) consents to the Loan Agreement and such assignment pursuant to
the terms of the Loan Agreement; (ii) agrees to pay directly to the Agent on
behalf of the Lenders and the Lessor at The Bank of America National Trust and
Savings Association, San Francisco, California, ABA number 1210-0035-8, under
the name "The Industrial Bank of Japan, Ltd., Los Angeles Agency" with account
number 62906-14014, or such other address as the Agent shall advise the Lessor
in writing (or, after receipt of notice from the Agent stating that the Notes
have been paid in full and the lien of the Loan Agreement has been discharged,
to the Lessor) all amounts of Rent and any other payments due or to become due
to the Lessor hereunder (except to the extent such payments constitute Excepted
Payments and except to the extent provided in the following sentence); and (iii)
agrees that the right of the Lenders to such payments hereunder shall be
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including without limitation those circumstances set forth in
Section 3.5 hereof. The Lessee agrees to make all payments of Supplemental Rent
which constitute Excepted Payments directly to Lessor, and so long as no Event
of Default (as defined in the Loan Agreement) shall have occurred and be
continuing, the Lessee shall pay directly to the Lessor any amounts of Rent to
which the Lessor would be entitled under Article VI of the Loan Agreement, such
amounts to be notified to the Lessee by the Lenders in writing.
SECTION 21.4 Notices. Unless otherwise specifically provided herein, all
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notices, consents, directions, and approvals, provided herein, and all notices,
consents, instructions, requests and other communications required or permitted
by the terms hereof to be given to any Person shall be in writing and any such
notice shall become effective five (5) Business Days after being deposited in
the mails, certified or registered with appropriate postage prepaid for
first-class mail or, if delivered by hand or in the form of a telex, facsimile
transmission or telegram (followed in each case by written confirmation sent by
certified or registered mail, postage prepaid), when received, and shall be
directed to the Address of such Person. From time to time any such Person may
designate a new address for purposes of notice hereunder by notice to each of
the other parties to the Participation Agreement.
SECTION 21.5 Severability. Any provision of this Lease that shall be
------------
prohibited or unenforceable in any jurisdiction
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shall be ineffective as to such jurisdiction to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the Lessee hereby waives any provision of law that
renders any provision hereof prohibited or unenforceable in any respect.
SECTION 21.6 Amendment. This Lease and any of the terms hereof may not be
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terminated, amended, supplemented, waived or modified orally, but only by an
instrument in writing signed by the party against which the enforcement of the
termination, amendment, supplement, waiver or modification shall be sought and,
for so long as the Loan Agreement is in effect, with the prior written consent
of the Agent on behalf of the Lenders. The parties agree that any consents
required hereunder shall not be unreasonably withheld.
SECTION 21.7 Headings. The Table of Contents and headings of the various
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Articles and Sections of this Lease are for convenience of reference only and
shall not modify, define or limit any of the terms or provisions hereof.
SECTION 21.8 Counterparts; Uniform Commercial Code. This Lease may be
-------------------------------------
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 21.9 Governing Law. This Lease has been delivered in, and shall in
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all respects be governed by, and construed in accordance with, the laws of the
State of California applicable to agreements made and to be performed entirely
within such State, including all matters of construction, validity and
performance.
SECTION 21.10 Performance of Obligations to Lenders. The provisions of
-------------------------------------
this Lease which require or permit action by, the consent, approval or
authorization of, the furnishing of any document, paper or information to, or
the performance of any other obligation to, the Lenders shall not be effective,
and the Sections hereof containing such provisions shall be read as though there
were no such requirements of permissions, after all the Notes shall have been
paid in full in accordance with their terms.
SECTION 21.11 Confidentiality. The Lessor acknowledges that the Lessee is
---------------
the proprietor of proprietary information pertaining to the Equipment. The
proprietary information or portions thereof may be disclosed to the Lessor
pursuant to the terms of this Lease or in connection with the Overall
Transaction and/or may be observed by the Lessor during any inspection or tour
of the Equipment in connection herewith or therewith.
-42-
<PAGE>
The Lessor agrees to use its best efforts to prevent unauthorized
disclosure or unauthorized transfer to any third parties (who are not parties to
the Overall Transaction) of any and all proprietary information. The Lessor
agrees to return to the Lessee upon its request and upon termination of this
Lease, all such proprietary information then in its possession that is in
documentary or written form, provided that the Lessor may disclose such
proprietary information to the extent necessary to remarket or release any Item
after a Lease Event of Default or after termination or expiration of the Lease
with respect to such Item.
The obligations set forth in this Section 21.11 shall survive the
termination of this Lease; provided, however, that such obligations shall not
apply in respect of any portion of the proprietary information, if and when such
portion (i) shall otherwise become legally available to the public; (ii) was
otherwise in the lawful possession of the receiving party; or (iii) shall have
been lawfully disclosed to the receiving party by a third party not under any
obligation of confidentiality to the Lessee in respect thereof.
The Lessor agrees that any breach of the obligations of confidentiality
set forth in this Section 21.11 would result in damage to the Lessee which could
not be adequately or reasonably compensated for by damages at law. It is
therefore further agreed that the Lessee will be entitled to immediate
injunctive relief or other equitable relief to restrain any such breach, in
addition to any other remedies to which the Lessee may be entitled at law.
Nothing in this Section 21.11 shall prevent the Lessor from disclosing or
providing proprietary information to the Lenders or the Agent or any other party
to the Overall Transaction.
SECTION 21.12 Binding Effect; Successors and Assigns; Survival. The terms
------------------------------------------------
and provisions of this Lease, and the respective rights and obligations
hereunder of the Lessor and the Lessee, shall be binding upon their respective
successors and assigns (including, in the case of the Lessor, any Person to whom
the Lessor may transfer the Equipment), and inure to the benefit of their
respective permitted successors and assigns, and the rights hereunder of the
Lessor, the Agent and the Lenders shall inure (subject to such conditions as are
contained herein) to the benefit of their respective permitted successors and
assigns.
SECTION 21.13 Limitation of Lessor's Liability. All representations,
--------------------------------
warranties and undertakings of Lessor hereunder (except as expressly provided
herein) shall be binding upon Lessor only in its capacity as Owner Trustee under
the Trust Agreement and in no case shall the Trust Company be personally liable
for or on account of, any statements, representations, warranties, covenants or
obligations stated to be those of Lessor hereunder, except that the Trust
Company (or any successor Owner
-43-
<PAGE>
Trustee) shall be personally liable (i) in the case of handling funds, for its
failure to act with the same care as the Trust Company uses in handling its own
funds, and, in all other cases, for its gross negligence or willful conduct and
(ii) for its breach of its covenants, representations and warranties contained
herein to the extent covenanted or made in its individual capacity.
SECTION 21.14 Chattel Paper. The parties hereto agree that certain rights,
-------------
title and interest of Lessor in and to this Lease and to the Equipment have been
assigned to and are subject to a lien and security interest in favor of The
Industrial Bank of Japan, Limited, Los Angeles Branch, as Agent, under the Loan
Agreement. To the extent, if any, that this Lease constitutes chattel paper (as
such term is defined in the Uniform Commercial Code as in effect in any
applicable jurisdiction), no security interest in this Lease may be created
through the transfer or possession of any counterpart other than the original
counterpart that contains the receipt therefor executed by The Industrial Bank
of Japan, Limited, Los Angeles Branch, as Agent on or immediately following the
signature page thereof.
[Remainder of Page Intentionally Left Blank]
-44-
<PAGE>
IN WITNESS WHEREOF, the undersigned have each caused this Equipment Lease
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Owner
Trustee, as Lessor
By: /s/ DONALD E. SMITH
--------------------------------------
Name: DONALD E. SMITH
--------------------------------
Title: VICE PRESIDENT
-------------------------------
CALIFORNIA STEEL INDUSTRIES, INC.,
as Lessee
By: /s/ LOURENCO GONCALVES
--------------------------------------
Name: LOURENCO GONCALVES
--------------------------------
Title: PRESIDENT AND C.E.O.
-------------------------------
* Receipt of the original counterpart of the foregoing Equipment Lease
Agreement is hereby acknowledged on this 30th day of September, 1998:
- ----------------------------------
By----------------------------------
- -------------------
* This language contained in original counterpart only.
-45-
<PAGE>
Schedule A
----------
to
--
Equipment Lease Agreement
-------------------------
BASIC RENT PAYMENTS AND RENT PAYMENT DATES
Rent Payment Date Basic Rent*
----------------- -----------
3/30/99 5.70808
9/30/99 2.59436
3/30/00 11.86710
9/30/00 2.28419
3/30/01 6.45698
9/30/01 2.14461
3/30/02 12.02429
9/30/02 1.81413
3/30/03 7.23302
9/30/03 1.63287
3/30/04 13.54599
9/30/04 6.72415
3/30/05 1.05074
9/30/05 7.04065
3/30/06 12.64533
9/30/06 0.73606
3/30/07 13.77618
9/30/07 0.29987
3/30/08 13.53298
9/30/08 3.73476
* Basic Rent is the factor listed below times the Lessor's Cost of
$34,543,814.
<PAGE>
Schedule B
----------
to
--
Equipment Lease Agreement
-------------------------
STIPULATED LOSS VALUES
Payment Date Stipulated Loss Value
------------ ---------------------
9/30/98 105.48698
3/30/99 103.62887
9/30/99 104.58519
3/30/00 96.06935
9/30/00 96.70440
3/30/01 93.05076
9/30/01 93.50715
3/30/02 84.02939
9/30/02 84.41492
3/30/03 79.37681
9/30/03 79.76309
3/30/04 68.24511
9/30/04 63.18087
3/30/05 63.65039
9/30/05 52.00000
3/30/06 46.92747
9/30/06 47.24568
3/30/07 34.68482
9/30/07 35.32309
3/30/08 22.91427
9/30/08 20.00000
<PAGE>
Schedule C
----------
to
--
Equipment Lease Agreement
-------------------------
TERMINATION VALUES
Payment Date Termination Value
------------ -----------------
9/30/98 105.48698
3/30/99 103.62887
9/30/99 104.58519
3/30/00 96.06935
9/30/00 96.70440
3/30/01 93.05076
9/30/01 93.50715
3/30/02 84.02939
9/30/02 84.41492
3/30/03 79.37681
9/30/03 79.76309
3/30/04 68.24511
9/30/04 63.18087
3/30/05 63.65039
9/30/05 52.00000
3/30/06 46.92747
9/30/06 47.24568
3/30/07 34.68482
9/30/07 35.32309
3/30/08 22.91427
9/30/08 20.00000
<PAGE>
EXHIBIT 10.10
SETTLEMENT AGREEMENT
by and among
KAISER VENTURES INC.
KSC RECOVERY, INC.
KAISER STEEL LAND DEVELOPMENT, INC.
and
CALIFORNIA STEEL INDUSTRIES, INC.
dated as of
JUNE 1, 1995
<PAGE>
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is entered into as of June 1, 1995, by and
among KAISER VENTURES INC., a Delaware corporation ("KAISER"), KSC RECOVERY,
INC., a Delaware corporation ("RECOVERY"), KAISER STEEL LAND DEVELOPMENT, INC.,
a Delaware corporation ("DEVELOPMENT") and CALIFORNIA STEEL INDUSTRIES, INC., a
Delaware corporation ("CSI"). This Agreement is made, without any party hereto
admitting any liability or fact or conceding any question of law, except as
specifically provided herein, in full compromise and final settlement of all
claims among the parties including, but not limited to, the differences and
causes of action arising in or related to the disputes and matters in litigation
described below.
RECITALS
A. From 1942 until 1983, Kaiser Steel Corporation operated a large
steel production and processing facility on approximately 2,000 acres of land
near Fontana, California owned by Kaiser Steel Corporation (the "FONTANA
PROPERTY"). Pursuant to an Agreement of Purchase and Sale entered into effective
as of August 17, 1984 (the "1984 AGREEMENT"), CSI purchased approximately 378
acres of the FONTANA PROPERTY. In 1988 and
<PAGE>
1989, CSI acquired from third parties approximately 43 and 29 acres,
respectively, of property previously owned by Kaiser Steel Corporation and
comprising a portion of the FONTANA PROPERTY. The 378, 43 and 29 acres of the
FONTANA PROPERTY formerly owned by Kaiser Steel Corporation and now owned by CSI
are hereinafter collectively referred to as the "CSI PROPERTY." Certain portions
of the FONTANA PROPERTY retained by KAISER following the sale of the CSI
PROPERTY to CSI and described on the map attached hereto as Exhibit "1" are
hereinafter referred to as the KAISER PROPERTY.
B. Since the August 17, 1984 sale, Kaiser Steel Corporation and its
successors have supplied utility services, water and other services to CSI
through a series of contractual arrangements with CSI, the most recent of which
was dated August 1, 1991, known as the "SERVICES AGREEMENT." A number of
disputes have arisen as between CSI and KAISER under the SERVICES AGREEMENT
including, but not limited to, the following:
1. Whether CSI is liable for costs incurred by KAISER for the
installation of secondary containment with respect to KAISER's industrial
wastewater pretreatment plant, utility lines and storage tanks (the "SECONDARY
CONTAINMENT MATTERS");
2. Whether CSI is liable for all potential fines, penalties,
fees, charges and costs relating to the SECONDARY CONTAINMENT MATTERS;
-3-
<PAGE>
3. Whether CSI is liable to reimburse KAISER for all potential
fines, penalties, fees, charges and/or costs that KAISER may incur or be liable
for as a result of notices of violation or orders of corrective action
previously issued by the Chino Basin Municipal Water District or that may
hereafter be issued by the Chino Basin Municipal Water District (the "NOV and
OCA MATTERS");
4. Whether CSI is liable to reimburse KAISER for KAISER's
costs associated with the closure of KAISER's industrial wastewater pretreatment
plant (the "CLOSURE COST MATTERS");
5. Whether CSI is liable to reimburse KAISER for any costs
that KAISER may incur with respect to the closure or remediation of the Chemwest
ferrous chloride plant (the "CHEMWEST MATTERS");
6. Whether CSI is liable to reimburse KAISER for any costs
that KAISER may incur with respect to permit fees, remediation expenses and
compliance with permit requirements regarding discharges from CSI in the
vicinity of Mulberry Ditch and its related structures including, but not limited
to, the Mulberry Pond currently located upon property owned by John Boruchen
(the "MULBERRY DITCH MATTERS");
7. Whether CSI is liable to reimburse KAISER for any costs
that KAISER may incur with respect to its compliance with the Salt Offset
Agreement (the "SALT OFFSET AGREEMENT") between KAISER and the California State
Regional Water Quality
-4-
<PAGE>
Control Board/Santa Ana Region (the "RWQCB") and Cleanup and Abatement Orders
87-121 and 91-40 issued against KAISER by the RWQCB (the "SALT OFFSET MATTERS");
8. Whether CSI is liable to reimburse KAISER for any costs
that KAISER may incur for replenishment fees to the Chino Basin Municipal Water
District or corresponding fees that may be owed to the Fontana Mutual Water
Company, Fontana Union Water Company or Cucamonga County Water District for
water furnished to CSI by KAISER under the SERVICES AGREEMENT (the "WATER
MATTERS");
9. Whether CSI is liable to reimburse KAISER for any
incidental expenses that KAISER may incur as a result of KAISER's ceasing to
provide utility services to CSI (the "TRANSITIONAL MATTERS"); and
10. Whether CSI is liable to reimburse Kaiser for standby
charges assessed to KAISER by the Chino Basin Municipal Water District (the
"STANDBY CHARGES").
C. On February 11, 1987, Kaiser Steel Corporation filed a petition
with the United States Bankruptcy Court for the District of Colorado (the
"BANKRUPTCY COURT"), initiating proceedings pursuant to chapter 11 of the
Bankruptcy Code (11 U.S.C. ss. 101 et seq.). Such proceedings were conducted by
and before the Honorable Charles E. Matheson, United States Bankruptcy Judge,
and are entitled In re Kaiser Steel Corporation, Case No. 87 B 01552 E (Jointly
Administered) (the
-5-
<PAGE>
"BANKRUPTCY CASE"). On October 4, 1988, the BANKRUPTCY COURT entered an order
confirming Kaiser Steel Corporation's Second Amended Joint Plan of
Reorganization, As Modified (the "PLAN").
D. CSI filed a proof of claim in the BANKRUPTCY CASE which, as
amended, sought the allowance of a claim in a sum in excess of $54 million. That
claim was premised upon certain alleged property damage on and under the CSI
PROPERTY allegedly caused by Kaiser Steel Corporation. CSI has expended, and
will in the future expend, certain sums for the purpose of investigating and
remediating the forgoing property damage. CSI currently asserts that its
expenses and damages for property damage substantially exceed $54 million.
Pursuant to the terms of the PLAN, RECOVERY has assumed the administration of
Kaiser Steel Corporation's bankruptcy estate and the filing and prosecution of
objections to claims filed in the BANKRUPTCY CASE. RECOVERY disputes both the
merits and the amount of CSI's claim and has initiated a contested matter in the
BANKRUPTCY CASE by filing an objection to CSI's proof of claim. That contested
matter is presently pending before the BANKRUPTCY COURT.
E. CSI asserts that certain of its claims against KAISER were not
discharged by the order confirming the PLAN. KAISER contends that all of CSI's
claims were discharged. The BANKRUPTCY COURT has previously ruled that CSI's
claims were discharged, but that ruling is not final and remains subject to
appeal.
-6-
<PAGE>
F. KAISER is currently pursuing the recovery of certain monies from
certain general liability insurance carriers (the "INSURERS") as a result, in
part, of the alleged property damage on or under the FONTANA PROPERTY, including
the CSI PROPERTY, and other properties, in the matter of Kaiser Steel Resources,
Inc. v. Accident & Casualty Insurance Company of Winterthur, et al., San
Francisco County Superior Court Case No. 906233 (the "INSURANCE LITIGATION").
CSI asserts that it is entitled to a share of the proceeds of the INSURANCE
LITIGATION, to pursue the INSURERS independently for coverage under KAISER's
policies of insurance, or that it should be assigned the right to separately
pursue the INSURERS. KAISER disputes the foregoing contentions of CSI.
G. A number of other disputes have arisen between the parties as a
result of the 1984 sale. These disputes include, but are not limited to, the
following:
1. The non-agricultural overlying water rights and water
storage contracts to which CSI and KAISER are entitled as a result of CSI's
acquisition of the CSI PROPERTY,
2. Whether, and to what extent, the Court ought to adopt the
findings of the Referee appointed by the Court in the proceeding initiated by
CSI and the Chino Basin Watermaster on or about August 25, 1992 captioned "Joint
Motion to Interpret, Enforce, Carry-out, Modify, Amend or Amplify the Judgment
Herein,"
-7-
<PAGE>
3. The correct interpretation of the judgment (the "1978
JUDGMENT") entered in the matter of Chino Basin Municipal Water District v. City
of Chino, et al., San Bernardino County Superior Court Case No. RCV 51010 (the
"WATER CASE"), as it refers to the 2,930.274 acre feet per year of the safe
yield as identified at line 9 of Exhibit "D" to the 1978 JUDGMENT (the "WATER
RIGHTS"),
4. The purposes for which the WATER RIGHTS may be used under
the 1978 JUDGMENT,
5. CSI's and KAISER's performance under the SERVICES
AGREEMENT,
6. CSI's and KAISER's operations on their own property and the
impacts of those operations on the other's property,
7. The relationship of CSI and KAISER as respects their
attempts to comply with governmental regulatory requirements concerning the
investigation and remediation of alleged property damage on or under their
properties, and
8. Other matters relating to CSI's and KAISER's properties and
their responsibilities therefor.
H. There are numerous railroad tracks on the FONTANA PROPERTY,
including the CSI PROPERTY. The respective rights and obligations of each of CSI
and KAISER with respect to those railroad tracks are enumerated in an
"Agreement" dated August 17, 1987 by and between CSI and Kaiser Steel
Corporation (the
-8-
<PAGE>
"RAILROAD AGREEMENT") and an agreement dated November 20, 1990 by and between
CSI, KAISER, Southern Pacific Transportation Company and The Atchison, Topeka
and Santa Fe Railway Company (the "FOUR PARTY AGREEMENT").
I. Pursuant to the terms of the RAILROAD AGREEMENT and the FOUR
PARTY AGREEMENT, KAISER desires to exercise its right to abandon railway track
numbers 1000 and 1400, providing The Atchison, Topeka and Santa Fe Railway
Company (the "SANTA FE") with access to the CSI PROPERTY from the Santa Fe Lead
Track and to afford the SANTA FE with alternative railway access to the CSI
PROPERTY through track numbers 1200 and 1209. CSI will not oppose KAISER's
abandonment of track numbers 1000 and 1400, subject to the terms and conditions
of this SETTLEMENT AGREEMENT.
J. Finally, CSI has sought to promote the enactment of legislation
with respect to governmental regulation of the CSI PROPERTY and the KAISER
PROPERTY which, if enacted, would impact upon the rights of the other parties to
this SETTLEMENT AGREEMENT.
K. The purpose of this SETTLEMENT AGREEMENT is to settle all claims
and disputes between and among the parties, without any party admitting to any
liability or fact and to provide for the continuing relationship between KAISER
and CSI with respect to their various properties and operations.
NOW, THEREFORE, IN CONSIDERATION OF THE PRECEDING RECITALS AND THE MUTUAL
COVENANTS HEREINAFTER CONTAINED, AND FOR OTHER
-9-
<PAGE>
GOOD AND VALUABLE CONSIDERATION, RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED BY ALL
PARTIES, THE PARTIES AGREE AS FOLLOWS:
l. Appointment of Escrow.
Concurrently with their execution of this SETTLEMENT
AGREEMENT, the parties hereto shall execute escrow instructions, in the form
attached hereto as Exhibit "2," (the "ESCROW INSTRUCTIONS") appointing State
Street Bank and Trust of California, N.A. ("ESCROW HOLDER") to act as the escrow
holder under the terms of this SETTLEMENT AGREEMENT.
2. Bankruptcy Proceedings.
a. Allowance of Claim. Concurrently with their execution of
this SETTLEMENT AGREEMENT, the parties hereto will execute a "Stipulation to
Allowance of CSI Claim" (the "STIPULATION") in the form attached hereto as
Exhibit "3." Upon the satisfaction or written waiver of the conditions set forth
at Paragraphs 8(a) and 8(b) hereof, RECOVERY shall request that the BANKRUPTCY
COURT enter an order approving the STIPULATION, allowing CSI's claim in the
BANKRUPTCY CASE as described in the STIPULATION, and directing that RECOVERY
disburse to CSI the cash and stock to which CSI is entitled, under the terms of
the STIPULATION and the PLAN, based upon the amount of the claim provided for in
the STIPULATION. KAISER agrees that, upon CSI's request, it will reasonably
assist CSI in selling the shares of KAISER stock received by CSI under the terms
of the STIPULATION and the PLAN.
-10-
<PAGE>
b. Assignment of Bankruptcy Distribution(s). CSI hereby
directs RECOVERY to pay any cash, and to deliver any stock, that CSI may be
entitled to receive under the STIPULATION or the PLAN to ESCROW HOLDER, who
shall hold and deliver possession of such property pursuant to the ESCROW
INSTRUCTIONS.
c. Recognition of Discharge. CSI agrees, irrevocably and
forever, to refrain from any and all claims or assertions that KAISER's
obligation to reimburse CSI for any expenses, damages or liabilities incurred,
or to be incurred, by CSI with respect to the investigation, remediation and
existence of any substances released on or under the FONTANA PROPERTY prior to
October 4, 1988 were not discharged by the order confirming the PLAN in the
BANKRUPTCY CASE, except with respect to those obligations expressly assumed by
KAISER under the terms of this SETTLEMENT AGREEMENT and the exhibits hereto.
3. Millsite Water Rights.
a. Recognition of Water Claims. Concurrently with their
execution of this SETTLEMENT AGREEMENT, the parties shall execute the Water
Rights Agreement attached hereto as Exhibit "4" (the "WATER RIGHTS AGREEMENT")
for the purpose of acknowledging CSI's interests in certain portions of the
WATER RIGHTS (the "CSI WATER RIGHTS") and KAISER's interests in certain portions
of the WATER RIGHTS (the "KAISER WATER RIGHTS").
-11-
<PAGE>
b. Title with respect to the CSI WATER RIGHTS. Subject to the
1978 JUDGMENT and the continuing jurisdiction in the WATER CASE, KAISER warrants
to CSI as follows:
(1) That, as of August 17, 1984, KAISER owned the
FONTANA PROPERTY and the WATER RIGHTS;
(2) That KAISER has not conveyed, leased, assigned,
licensed, sold, transferred, pledged, mortgaged, or encumbered the CSI WATER
RIGHTS, except to CSI as acknowledged in this AGREEMENT and the WATER RIGHTS
AGREEMENT;
(3) That KAISER has not received any assessment as
provided by paragraph 55 of the 1978 JUDGMENT, which it has not paid;
(4) That the CSI WATER RIGHTS have not been lost by
virtue of a written election filed with the Chino Basin Watermaster (the
"WATERMASTER") or by order of the Court in the WATER CASE, as provided by
paragraph 61 of the 1978 JUDGMENT;
(5) Subject to the relationship between CSI and KAISER
under the SERVICES AGREEMENT, the CSI WATER RIGHTS have not been changed in the
character of the use as provided by paragraph 43 of the 1978 JUDGMENT;
(6) That the CSI WATER RIGHTS have not been the subject
of an agency agreement, as provided by paragraph 6, Exhibit "G" of the 1978
JUDGMENT; and
(7) That KAISER has done nothing, and has no knowledge
as to any action taken by any other party, to impair
-12-
<PAGE>
the exercise by CSI of voting rights in the Overlying Non Agricultural Pool and
Advisory Committee in accordance with its ownership of the CSI WATER RIGHTS.
c. Title with respect to Local Storage Agreement Nos. 9.0 and
9.1. Subject to the 1978 JUDGMENT and the continuing jurisdiction in the WATER
CASE, KAISER warrants to CSI that:
(1) KAISER has not defaulted under the terms of Local
Storage Agreements Nos. 9.0 and 9.1 and that those agreements have not been
assigned to any party other than: (a) to CSI, as provided for in this AGREEMENT
and the WATER RIGHTS AGREEMENT and (b) as set forth in the SALT OFFSET
AGREEMENT; and
(2) The termination of Local Storage Agreements Nos. 9.0
and 9.1 according to their terms shall not effect CSI's entitlement to the
stored water referred to at paragraph 2(c) of the WATER RIGHTS ACKNOWLEDGEMENT.
d. Indemnification. KAISER will defend CSI against any and all
third party claims, demands, actions, liabilities or allegations of any kind
based upon or relating to a fact or alleged fact that is not consistent with
paragraphs 3(b) and 3(c) above; and KAISER will indemnify and hold CSI harmless
from any loss incurred by CSI as a consequence of such a third party claim,
demand, action, liability or allegation. As used herein, the term "third party
claim" refers to claims asserted by any party, other than CSI and KAISER.
-13-
<PAGE>
4. Industrial Water and Sewage Lines.
a. Recognition of Title to Industrial Waste and Sewage Lines.
Concurrently with its execution of this SETTLEMENT AGREEMENT, KAISER shall
execute and deliver to ESCROW HOLDER a "Corporation Quitclaim Deed," in the form
attached hereto as Exhibit "5," (the "QUITCLAIM") for the purpose of recognizing
CSI's title in and to the sewage, stormwater and industrial water lines on or
underlying CSI's property and adjacent public rights of way (the "LINES"),
acquired by CSI pursuant to the 1984 AGREEMENT, subject to KAISER's
non-exclusive right of use as described in paragraph 4(c) hereof.
b. Allocation of responsibility for LINES. CSI will assume
all responsibility and liability for the LINES, to the extent that they are
located on or under the CSI PROPERTY and to the extent that they connect the CSI
PROPERTY to KAISER's wastewater treatment plants located south of San Bernardino
Avenue, to the point at which the LINES enter the KAISER PROPERTY, from and
after the date upon which it receives the QUITCLAIM.
c. Amendment of Reservations and Exceptions. Concurrently with
their execution of this SETTLEMENT AGREEMENT, CSI and KAISER shall execute an
"Amendment to Part B of Exhibit A to Grant Deed-Reservations and Exceptions in
Favor of Grantor" (the "RESERVATION"), in the form attached hereto as Exhibit
"6," for the purpose of granting to KAISER, its successors, assigns
-14-
<PAGE>
and tenants certain non-exclusive rights with respect to the use of the LINES.
5. Discharge Units.
a. Recognition of title to Discharge Capacity Units.
Concurrently with its execution of this SETTLEMENT AGREEMENT, KAISER shall
execute and deliver to ESCROW HOLDER an "Application for Assignment of Capacity
Contracts" in the form attached hereto as Exhibit "7" (the "ASSIGNMENT")
effectuating the ministerial act of confirming CSI's entitlement to twenty-seven
(27) discharge units in the Chino Basin Municipal Water District non-reclaimable
waste system pursuant to the 1984 AGREEMENT and the ordinances of the Chino
Basin Municipal Water District.
b. Reimbursement of Minimum Volumetric Charges. Following the
conclusion of any administrative appeal therefrom, CSI shall reimburse Kaiser
for any minimum volumetric charges with respect to the twenty-seven (27)
discharge units referred to in paragraph 5(a), above, that Kaiser is required
to pay to the Chino Basin Municipal Water District for the period from August 1,
1994 through the conclusion of said administrative appeal. Kaiser shall
prosecute an administrative appeal from such charges, at its sole cost and
expense. In the event that Kaiser fails to prosecute such administrative appeal,
CSI may do so in Kaiser's name, with the costs of such appeal to be deducted
from any amounts otherwise payable to Kaiser pursuant to the
-15-
<PAGE>
provisions of this paragraph 5(b). Notwithstanding anything herein to the
contrary, in no event shall CSI's liability under this paragraph exceed the sum
of $137,880.00 plus the sum of $12,271.50 per month from June 1, 1995 through
the earlier of: (i) date upon which the administrative appeal is concluded or
October 31, 1995. The amounts payable pursuant to this paragraph shall be
payable solely from the proceeds of the INSURANCE LITIGATION to be paid to CSI,
or received by CSI, pursuant to paragraph 9(a)(4) of this SETTLEMENT AGREEMENT.
In the event that the foregoing funds are insufficient to pay all or any portion
of the amounts payable pursuant to this paragraph 5(b), then CSI shall not be
obligated to pay any deficiency remaining after application of the payments
required hereunder. In the event that KAISER becomes entitled to obtain a refund
of the foregoing standby charges after it has received the sums due pursuant to
this paragraph, KAISER shall remit said refund to CSI immediately upon its
receipt of same.
6. Payments to ESCROW HOLDER.
CSI shall pay to KAISER, through ESCROW HOLDER, in the manner,
at the time, and from the funds referred to herein, in settlement of all of the
matters described in the recitals to this SETTLEMENT AGREEMENT, the following
amounts:
a. Within seven (7) days following the execution of this
SETTLEMENT AGREEMENT, the sum of $256,500.00;
-16-
<PAGE>
b. The minimum sum of $2,730,000 and the maximum sum of
$3,250,000 as follows:
(1) Upon CSI's receipt of cash distributions pursuant to
the PLAN, CSI shall pay to ESCROW HOLDER the amount of cash so distributed up to
the sum of $600,000.00;
(2) Upon CSI's receipt of the proceeds of the sale of
stock distributed to CSI pursuant to the PLAN and to be delivered to ESCROW
HOLDER pursuant to this SETTLEMENT AGREEMENT and the ESCROW INSTRUCTIONS, CSI
shall pay to ESCROW HOLDER the amount of sales proceeds received by it; and
(3) Within ninety days following the distribution of
stock to CSI pursuant to the PLAN, CSI shall pay to ESCROW HOLDER an amount
equal to the average of the "bid" and "asked" price of said stock for the five
trading days preceding the day that such stock is distributed to CSI, less any
sums paid to ESCROW HOLDER pursuant to paragraph 6(b)(2) hereof.
(4) In the event that the sum of the payments made by
CSI to ESCROW HOLDER pursuant to paragraphs 6(b)(l), 6(b)(2) and 6(b)(3) hereof
do not exceed $2,730,000.00 within ninety days following distribution of the
stock to CSI, then CSI shall immediately pay to ESCROW HOLDER an amount
sufficient to bring the total of said payments to $2,730,000.00.
(5) In no event shall the sum of the payments made to
ESCROW HOLDER pursuant to subparagraphs 6(b)(1), 6(b)(2) and 6(b)(3) hereof
exceed the sum of $3,250,000.00.
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c. In the event that ESCROW HOLDER has received less than the
sum of $3,250,000.00 pursuant to paragraph 6(b) hereof, the difference between
$3,250,000.00 and the amounts paid pursuant to said paragraph (the "REMAINING
OBLIGATION") shall be paid by CSI to ESCROW HOLDER from the following funds,
upon CSI's receipt of those funds:
(1) Any cash distribution received by CSI pursuant to
the PLAN in excess of $600,000.00; and
(2) Any funds received by CSI pursuant to paragraph 9 of
this SETTLEMENT AGREEMENT.
(3) In the event that the foregoing funds are
insufficient to pay all or any portion of the REMAINING OBLIGATION, then CSI
shall not be obligated to pay any deficiency remaining after application of the
payments required hereunder. It is the intention of the parties that CSI's
obligation to pay the REMAINING OBLIGATION is to be without recourse to CSI or
to any assets of CSI except for the funds specified in paragraph 6(c) of this
SETTLEMENT AGREEMENT.
7. Allocation of environmental responsibility.
a. Groundwater. Concurrently with their execution of this
SETTLEMENT AGREEMENT, CSI and KAISER shall execute a "Groundwater Indemnity
Agreement" in the' form attached hereto as Exhibit "8" (the "GROUNDWATER
INDEMNITY AGREEMENT") for the purpose of allocating financial responsibility as
between
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them with respect to any groundwater contamination that may exist, or in the
future exist, at the FONTANA PROPERTY.
b. Soil. CSI acknowledges that, as a result of the provisions
of this SETTLEMENT AGREEMENT, it is releasing KAISER from any responsibility
that it may otherwise have for any expenses, damages or liabilities incurred or
to be incurred with respect to the investigation, remediation or existence of
any substances released on or in the soil on the CSI PROPERTY as may exist on
the date of this SETTLEMENT AGREEMENT or as the soil of the CSI PROPERTY may be
affected by releases predating this SETTLEMENT AGREEMENT. KAISER acknowledges
that, as a result of the provisions of this SETTLEMENT AGREEMENT, it is
releasing CSI from any responsibility that it may otherwise have for any
expenses, damages or liabilities incurred or to be incurred with respect to the
investigation, remediation or existence of any substances released on or in the
soil on the KAISER PROPERTY as may exist on the date of this SETTLEMENT
AGREEMENT or as the soil of the KAISER PROPERTY may be affected by releases
predating this SETTLEMENT AGREEMENT.
c. Third Parties. CSI agrees that it will stop all current
efforts, and forever refrain in the future from any further efforts or attempts,
to have the State of California, the Environmental Protection Agency of the
United States or any other third party assert claims against any of DEVELOPMENT,
RECOVERY or KAISER for the investigation or remediation of the FONTANA
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PROPERTY, or in any way related to the investigation or remediation of the
FONTANA PROPERTY, with respect to any alleged contamination on, under or around
the FONTANA PROPERTY prior to the date of this SETTLEMENT AGREEMENT.
DEVELOPMENT, KAISER and RECOVERY agree that they, and each of them, will stop
all current efforts, and forever refrain in the future from any further efforts
or attempts, to have the State of California, the Environmental Protection
Agency of the United States or any other third party assert claims against CSI
for the investigation or remediation of the FONTANA PROPERTY, or in any way
related to the investigation or remediation of the FONTANA PROPERTY, with
respect to any alleged contamination on, under or around the FONTANA PROPERTY
prior to the date of this SETTLEMENT AGREEMENT. Nothing contained herein shall
be construed so as to: (a) preclude or restrict CSI and KAISER, or either of
them, from dealing with the State of California, the Environmental Protection
Agency of the United States or any other third party with respect to the
environmental condition of their own properties, (b) preclude or restrict CSI
and KAISER, or either of them, from participating in remediation districts with
respect to contamination that they, or either of them, may have released, or (c)
preclude or restrict CSI and KAISER, or either of them, in such discussions as
they may have with any governmental regulatory agency, from referring to the
condition or status of the other's property, or such agreements as may have been
made,
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or may in the future be made, with respect to the investigation and remediation
of the other's property.
8. Conditions.
The parties hereto agree that this SETTLEMENT AGREEMENT shall
cease to be of any force or effect unless the following events occur on or
before 180 days following the date upon which the last of the parties hereto
executes this SETTLEMENT AGREEMENT or such date thereafter as may be mutually
agreed upon by the parties to this SETTLEMENT AGREEMENT:
a. Watermaster approval.
(1) The WATERMASTER shall approve the execution and
implementation of the WATER RIGHTS AGREEMENT without the assessment or payment
of any replenishment charges; or,
(2) If the WATERMASTER levies replenishment charges,
then either CSI or KAISER may, but has no obligation to, pay such charges and
proceed with the implementation of this SETTLEMENT AGREEMENT; or
(3) If neither CSI nor KAISER elects to unilaterally pay
said charges, and if CSI and KAISER do not agree upon a sharing of the
replenishment charges, then either or both of CSI or KAISER may petition a court
of competent jurisdiction for an order determining that such charges need not be
paid, and, upon the entry of such an order and such order becoming final, this
condition shall be deemed satisfied; or
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(4) If neither CSI nor KAISER elects to unilaterally pay
said charges, and if CSI and KAISER do not agree upon a sharing of the
replenishment charges, then either or both of CSI or KAISER may petition a court
of competent jurisdiction for an order determining that such charges need not be
paid, and, should the court enter an order directing the payment of a
replenishment fee, then either CSI or KAISER may, but have no obligation to, pay
such charges and proceed with the implementation of this SETTLEMENT AGREEMENT;
b. Court approval. The San Bernardino County Superior Court
approve the WATER RIGHTS AGREEMENT in the WATER CASE; and
c. BANKRUPTCY COURT approval. The BANKRUPTCY COURT enter an
order approving the STIPULATION as described at paragraph 2(a), above.
9. INSURANCE LITIGATION.
a. Application of Recoveries. Any recovery that is received by
KAISER as a result of the INSURANCE LITIGATION shall be treated as follows:
(1) First, KAISER shall retain any recovery in an amount
equal to all expenses incurred by KAISER in pursuing the INSURANCE LITIGATION
and its settlement, including recovery of all legal fees, non-refundable
retainers and expenses which KAISER has paid, or is obligated to pay, to its
counsel, its experts, its consultants, or others in connection with the
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INSURANCE LITIGATION, but excluding any sums spent solely for the purpose of
investigating or remediating any environmental property damage on, under or
around the FONTANA PROPERTY. Within 30 days following CSI's written request
therefore, KAISER will provide to CSI a written accounting to establish the
amounts of these past and future payments. In no event shall the foregoing
expenses exceed the sum of $5,000,000.00.
(2) Second, Kaiser shall retain an amount equal to the
amounts paid by it in defending against CSI's environmental property damage
claims, including matters relating to CSI's objections to the SALT OFFSET
AGREEMENT; provided however that such amounts shall not exceed the sum of
$850,000.00. Within 30 days following CSI's written request therefore, KAISER
will provide to CSI a written accounting to establish the amount of the
foregoing payments.
(3) Third, following recovery of the amounts set forth
in paragraph 9(a)(1) and 9(a)(2), above, KAISER shall retain the sum of
$5,204,000.00.
(4) Fourth, following the amounts set forth in
paragraphs 9(a)(1), 9(a)(2) and 9(a)(3), above, one-third (1/3) of any excess
proceeds shall be paid to CSI and two-thirds (2/3) of any excess proceeds shall
be paid to KAISER.
b. Maintenance of Litigation. KAISER will remain in charge of
all aspects of the INSURANCE LITIGATION, as well as the settlement negotiations,
and will retain the sole
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decision making authority as to the acceptance or rejection of settlement
proposals, the strategy of litigation and all other decisions affecting or
relating to the INSURANCE LITIGATION. CSI shall not take any action against the
insurance carriers or the insurance policies involved in the INSURANCE
LITIGATION. Upon request by CSI, KAISER will inform CSI of the status of the
INSURANCE LITIGATION and any settlement discussions that may have taken place,
provided however that KAISER is not required to waive or violate any
attorney-client privilege in making such disclosures and CSI acknowledges that
KAISER may withhold any information the disclosure of which would require it to
waive or violate any attorney-client privilege.
c. Non-Assignment of policies or claims. CSI and KAISER
acknowledge that KAISER's obligations hereunder constitute a present assignment
of a portion of the monies that KAISER may recover by virtue of the INSURANCE
LITIGATION and are not, in any manner, an assignment of any interest in or to
any insurance policy or claim. KAISER acknowledges that, to the extent that any
resolution of the INSURANCE LITIGATION requires it to assume any liability under
the relevant insurance policies, such liability will be exclusively that of
KAISER and that under no circumstances will CSI assume such liability or KAISER
receive any credit against the sums to be paid to CSI as provided for herein
based upon its assumption of such liability.
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10. Service Agreement Matters.
a. Acid Waste Treatment Plant. KAISER will hold CSI harmless
and indemnify CSI from any closure or post-closure costs associated with
KAISER's acid waste treatment plant located south of San Bernardino Avenue and
its related facilities, except to the extent set forth in paragraph 10(b) below.
CSI will hold KAISER harmless from, and indemnify KAISER against, any closure or
post-closure costs associated with the pipelines on the CSI PROPERTY and
underneath San Bernardino Avenue connecting CSI's plant to the foregoing acid
waste treatment plant.
b. Fines and Assessments. Pursuant to the terms of the
SERVICES AGREEMENT, CSI will pay to KAISER, within thirty days of written
notice, an amount equal to any sums that KAISER is obligated to pay for any
costs, fines or other expenses relating to secondary containment matters at
KAISER's acid waste treatment facility based upon, or related to, the operations
of said facility prior to May 3, 1994, limited to a maximum amount of
$100,000.00. KAISER acknowledges that, except as provided herein and as may have
been previously paid by CSI, CSI is not obliged to pay any sums to KAISER,
pursuant to the SERVICES AGREEMENT, or otherwise, on account of any fines or
assessments resulting from the operation or condition of said facility; such
fines or assessments will be the sole responsibility of KAISER,
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and KAISER will indemnify and hold CSI harmless against such fines and
assessments.
c. SERVICES AGREEMENT. Concurrently with their execution of
this SETTLEMENT AGREEMENT, KAISER and CSI shall execute an "Amended Services
Agreement" in the form attached hereto as Exhibit "9."
d. Railroad Track.
(1) Abandonment of Track. In accordance with the
provisions of paragraph 12(a) of the RAILROAD AGREEMENT, CSI shall not object to
the abandonment of those portions of track numbers 1000 and 1400 on the FONTANA
PROPERTY, other than the CSI PROPERTY, as shown by the dotted line labeled "6
Track to be removed and salvaged" on the map attached hereto as Exhibit "10"
provided that:
(a) KAISER constructs, at KAISER's expense, such
additional "track," as that term is defined in the RAILROAD AGREEMENT, and
related equipment, so as to provide access to the SANTA FE to track numbers 1200
and 1209 on the CSI PROPERTY from the Santa Fe Lead Tracks. Such access shall be
at least equal in quality to the access to track numbers 1000 and 1400 currently
provided to the SANTA FE, such that the SANTA FE shall be able to operate trains
of at least equal size and weight, and at least equal speed, upon the new
tracks to be constructed pursuant to this paragraph as the SANTA FE currently
operates upon tracks 1000 and 1400. Such tracks shall be
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constructed generally along the boldface line labeled "2 New Lead Track" on the
map attached hereto as Exhibit "10."
(b) KAISER obtains the written consent of each of
the parties to the FOUR PARTY AGREEMENT to an amendment to that agreement
providing the SANTA FE with the right to make use of tracks 1200 and 1209.
(2) Upgrading of Track. In the event that CSI desires to
upgrade any portion of the railroad track referred to in paragraph 10(d)(1)
beyond a condition required to operate trains of equal size and weight, and at
least at equal speed, upon the new tracks to be constructed pursuant to
paragraph 10(d)(1), any additional expense incurred as a result of such
upgrading shall be borne by CSI.
(3) Sharing of Track. Provided that CSI receives at
least 90 days notice thereof, KAISER shall have the right to preclude CSI from
making use of the railroad tracks on KAISER's property on up to twelve days per
year on six weekends per year, 8 hours per day.
(4) Transportation Committee. Within ten days following
the effectiveness of this SETTLEMENT AGREEMENT, CSI and KAISER will appoint a
Transportation Committee consisting of two or fewer representatives from each of
KAISER and CSI. The Transportation Committee shall meet to attempt to schedule
trains during periods of activity on the KAISER PROPERTY so as to minimize any
conflicts between CSI's use of the railroad tracks
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on the KAISER PROPERTY and the activities being conducted on the KAISER
PROPERTY. However, nothing contained herein is intended to limit, restrict or
modify CSI's right to make use of those tracks, except as expressly set forth in
paragraph 10(d)(3) of this SETTLEMENT AGREEMENT.
(5) Continued Validity of RAILROAD AGREEMENT and FOUR
PARTY AGREEMENT. Notwithstanding the releases provided for in this SETTLEMENT
AGREEMENT, the RAILROAD AGREEMENT and the FOUR PARTY AGREEMENT shall remain in
full force and effect.
e. Utilities Committee. Within 10 days following the execution
of the SETTLEMENT AGREEMENT, CSI and KAISER will appoint a Utilities Committee
consisting of two or fewer representatives from each of KAISER and CSI. The
Utilities Committee shall address the issues of separation of utilities, such as
water, electricity and sewer service, which will be affected by the termination
of the existing SERVICES AGREEMENT, coordination of the removal of the East
Ladder railroad track, and such other matters as the parties may determine to be
appropriate or convenient in connection with the efforts of the parties to
obtain independent utility services for each of KAISER and CSI.
11. Mutual Releases.
Conditioned upon the occurrence of each of the conditions set
forth in paragraph 8 hereof, and subject to their respective rights and
obligations under the Terms of this
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SETTLEMENT AGREEMENT and each of the agreements to be executed pursuant to this
SETTLEMENT AGREEMENT, KAISER, RECOVERY AND DEVELOPMENT, on the one hand, and
CSI, on the other, do hereby fully, completely, finally and forever release,
relinquish and discharge each other and their respective subsidiaries,
affiliates, officers, directors, predecessors, agents, employees, attorney's,
successors and assigns of and from any and all claims, actions, causes of
action, demands, rights, debts, agreements, promises, liabilities, damages,
accountings, costs and expenses, whether known or unknown, suspected or
unsuspected, of every nature whatsoever which any of them have or may have
against the other, arising directly or indirectly out of any agreement,
transaction, fact, act or omission whatsoever, whether known or unknown,
howsoever and wheresoever occurring prior to the date hereof, being hereinafter
referred to as the "RELEASED CLAIMS."
It is the intention of the parties to this release that this
SETTLEMENT AGREEMENT shall be effective as a full and final accord and
satisfaction and release of each and every RELEASED CLAIM. In furtherance of
this intention, the parties to this release, and each of them, acknowledge that
they are familiar with Section 1542 of the Civil Code of the State of
California, which provides as follows:
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A general release does not extend to
claims which the creditor does not know or
suspect to exist in his favor at the time
of executing a release, which, if known by
him, must have materially affected his
Settlement with the debtor.
The parties to this release, and each of them, hereby waive
and relinquish all of the rights and benefits which any of them has, or may
have, under Section 1542 of the Civil Code of the State of California (as well
as any similar rights and benefits which they may have by virtue of any statute
or rule of law in any other state or territory of the United States). The
parties to this release, and each of them, hereby acknowledge that they may
hereafter discover facts in addition to, or different from, those which they now
know or believe to be true with respect to the subject matter of this SETTLEMENT
AGREEMENT and the RELEASED CLAIMS, but that notwithstanding the foregoing, it is
their intention hereby to fully, finally, completely and forever settle and
release each, every and all RELEASED CLAIMS, and that in furtherance of such
intention, the releases herein given shall be and remain in effect as full and
complete general releases, notwithstanding the discovery or existence of any
such additional or different facts.
The parties to this release, and each of them, hereby warrant
and represent to each other that, as to any RELEASED CLAIM, each of them is the
sole and absolute owner thereof, free and clear of all of the rights and
interest therein
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and has the right, ability and sole power to release such RELEASED CLAIM.
12. Future Cooperation.
CSI and KAISER acknowledge that it is difficult, if not
impossible, for CSI and KAISER to determine, at this time, the precise uses to
which each of them may put their property or the impact of such potential uses
upon the other. However, CSI and KAISER each acknowledge that the assistance and
cooperation of the other would be of material benefit to their use and enjoyment
of their properties. As a result, each of CSI and KAISER agree, upon the written
request of the other, to assist and cooperate with the other, subject to the
following: (a) such assistance and cooperation must not unreasonably interfere
with the existing operations of the party whose assistance or cooperation is
sought, or such future operations as are reasonably contemplated by that party,
(b) such assistance or cooperation shall not require the party whose assistance
or cooperation is sought to expend any funds, (c) such assistance or cooperation
shall not require the party whose assistance or cooperation is sought to violate
or waive any attorney-client, attorney work-product, trade secret or similar
privilege regarding the confidentiality of information held by such party, and
(d) the party whose assistance or cooperation is sought may condition such
assistance or cooperation upon such terms as that party may reasonably
determine, such as the procurement of
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adequate insurance or the provision of an indemnification against liability by
reason of such assistance or cooperation. The only criterion relevant to
determining whether the refusal of a party to assist or cooperate, or whether a
condition placed upon such assistance or cooperation, is, or was, reasonable
shall be the burden placed upon that party by the request for assistance or
cooperation. By way of example only, such assistance and cooperation may
include, but is not necessarily limited to: (a) the granting of non-exclusive
licenses, (b) sharing information concerning the environmental condition of
their properties, (c) jointly petitioning governmental or quasi-governmental
agencies, such as the WATERMASTER or (d) providing temporary access to their
properties.
13. Disclaimer of Warranties.
EXCEPT AS OTHERWISE PROVIDED HEREIN, THE TRANSFER OF ANY
ASSETS BY KAISER PURSUANT TO THIS SETTLEMENT AGREEMENT SHALL BE WITHOUT ANY
REPRESENTATION OR WARRANTY (IMPLIED OR OTHERWISE) AS TO THE MERCHANTABILITY OF
ANY OF THE ACQUIRED ASSETS OR THEIR FITNESS FOR ANY PURPOSE OR ANY OTHER MATTER.
IT IS UNDERSTOOD AND AGREED THAT CSI SHALL HAVE INSPECTED THE ACQUIRED ASSETS
AND SATISFIED ITSELF AS TO THEIR PHYSICAL CONDITION, AND THAT, SUBJECT TO THE
TERMS OF THIS SETTLEMENT AGREEMENT, CSI SHALL ACCEPT ALL OF THE SAME IN THEIR
"AS IS, WHERE IS" CONDITION. IN ADDITION, EXCEPT AS OTHERWISE PROVIDED HEREIN,
KAISER SHALL MAKE NO ADDITIONAL WARRANTY OR
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REPRESENTATION (IMPLIED OR OTHERWISE) AS TO THE ACCURACY OR COMPLETENESS OF ANY
DATA, INFORMATION, OR MATERIALS HERETOFORE OR HEREAFTER FURNISHED CSI IN
CONNECTION WITH THE COMPANY, OR AS TO THE QUALITY OR CAPACITY OF THE ACQUIRED
ASSETS.
14. Arbitration.
Any dispute between CSI, on the one hand, and KAISER or
RECOVERY, on the other, shall be submitted to arbitration upon the written
request of one of the parties after service of such request on the other party.
It is the intent of the parties that all future disputes between them be subject
to arbitration, including, but not limited to, the following:
a. Any dispute concerning the implementation, performance or
interpretation of this SETTLEMENT AGREEMENT or the exhibits hereto;
b. Any dispute concerning the parties' ongoing operations and
their impact upon each other;
c. Any dispute over the future activities of KAISER and CSI
and their impact upon each other; and
d. Any dispute concerning their respective properties.
Notwithstanding the foregoing, in the event that either party
hereto desires to obtain interlocutor injunctive relief against any other party
hereto, such party may institute litigation in a court of proper jurisdiction
and may, under otherwise appropriate circumstances, obtain a temporary
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restraining order, preliminary injunction or any functionally equivalent relief
pending an adjudication on the merits of that party's claim in arbitration.
However, other than ruling upon a party's request for such relief, such court
shall not rule upon the merits of that party's claims, but shall stay
prosecution of such action pending completion of arbitration proceedings in
accordance with the terms of this SETTLEMENT AGREEMENT.
Upon the giving and the receipt of a written request of one of
the parties for arbitration, the parties may agree to appoint a single
arbitrator to hear and decide the dispute. If they cannot agree upon a single
arbitrator, there shall be three arbitrators, one named in writing by KAISER,
one named by CSI, each submitting their name within 10 days of the date of the
written request of the party or parties requesting arbitration, and a third
arbitrator chosen by the two arbitrators appointed by the parties. Should any
party to such arbitration refuse or neglect to join in the appointment of the
arbitrator(s) or to furnish the arbitrator(s) with any papers or information
demanded, the arbitrator(s) may proceed ex parte.
A hearing on the matter to be arbitrated shall take place
before the arbitrator(s) at the location, time and place selected by the
arbitrator(s). The arbitrator(s) shall determine the procedures to be followed
in the arbitration, including, but not limited to: (a) whether the parties shall
be entitled to conduct discovery and, if so, the nature and amount
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of such discovery and (b) the manner in which evidence shall be submitted to the
arbitrator(s). The arbitrator(s) shall select the location, time and place of
the arbitration hearing promptly and shall give each party written notice of the
place and time of the arbitration hearing at least 10 days before the date
selected. At the hearing, any relevant evidence may be presented by any party.
The parties may waive application of the formal rules of evidence applicable to
judicial proceedings, in which case evidence may be admitted or excluded in the
sole discretion of the arbitrator(s). The arbitrator(s) shall hear and determine
the matter and shall execute and acknowledge a decision in writing and cause a
copy of the decision to be delivered to each of the parties. If there is only
one arbitrator, his or her decision shall be binding and conclusive on the
parties, and if there are three arbitrators, the decision of any two shall be
binding and conclusive on the parties.
A judgment confirming the decision of the arbitrator(s) may be
given by any Court having jurisdiction, or such court as may vacate, modify, or
correct the decision, in accordance with the prevailing provisions of the
California Arbitration Act or any successor statute. The costs of the
arbitration shall be borne by the losing party, or shall be borne in such
proportions as the arbitrator(s) may determine.
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15. Authority.
Each of the parties represents to the other parties that it
has full legal authority to enter into, execute, deliver and perform this
SETTLEMENT AGREEMENT and that the persons who have signed this SETTLEMENT
AGREEMENT on its behalf have been duly authorized to sign and deliver this
SETTLEMENT AGREEMENT by proper action of its board of directors. Each of the
parties further represents to the other parties that the execution and delivery
of this SETTLEMENT AGREEMENT and compliance with the provisions hereof will not
conflict with its duties under or constitute a breach of or default under any
law, administrative regulation, court decree, resolution, article of
incorporation, bylaws or other agreement to which it is subject or by which it
is bound.
16. Representations and Modifications.
Any oral representations concerning this SETTLEMENT AGREEMENT
shall be of no force or effect and no party hereto is relying upon any oral
representation of any other party hereto in entering into this SETTLEMENT
AGREEMENT. This SETTLEMENT AGREEMENT may only be amended or modified by a
subsequent amendment or modification in writing, executed by all of the parties
hereto affected by that amendment or modification, which expresses, by its
terms, an intention to modify this SETTLEMENT AGREEMENT.
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17. Covenant of Good Faith and Fair Dealing.
The parties acknowledge and agree that their performance of
their obligations pursuant to this SETTLEMENT AGREEMENT shall be undertaken in
good faith, and that they shall deal fairly with each other.
18. Severability.
Nothing contained in this SETTLEMENT AGREEMENT shall be
construed so as to require the commission of any act contrary to law, and
wherever there is any conflict between any provision contained herein and any
present or future statute, law, ordinance or regulation, contrary to which the
parties have no legal right to contract, such statute, law, ordinance or
regulation shall prevail, but the affected provisions of this SETTLEMENT
AGREEMENT shall be curtailed and limited only to the extent necessary to bring
them within the requirements of such statute, law, ordinance or regulation
without invalidating or affecting the remaining provisions of this SETTLEMENT
AGREEMENT.
19. Further Assurances.
Each of the parties hereto shall execute and deliver any and
all additional papers, documents, and other assurances, and shall do any and all
acts and things reasonably necessary in connection with the performance of its
obligations hereunder and to carry out the intent of the parties, and to correct
or modify in good faith any errors or omissions which shall subsequently be
discovered.
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20. Successors and Assigns.
This SETTLEMENT AGREEMENT and all exhibits hereto shall be
binding on the parties hereto and upon any of their subsidiaries, successors or
assigns, including any successors in title to the KAISER PROPERTY and the CSI
PROPERTY, in whole or in part.
21. Integration.
This SETTLEMENT AGREEMENT, and its exhibits, constitutes the
final and complete agreement of the parties hereto with respect to the subject
matter hereof and supersedes all prior or contemporaneous negotiations,
promises, covenants, agreements or representations concerning any matters
directly, indirectly or collaterally related to the subject matter of this
SETTLEMENT AGREEMENT. The parties hereto have expressly and intentionally
included in this SETTLEMENT AGREEMENT all collateral or additional agreements
which may, in any manner, touch or relate to any of the subject matter of this
SETTLEMENT AGREEMENT and, therefore, all promises, covenants and agreements,
collateral or otherwise, are included herein. It is the intention of the parties
to this SETTLEMENT AGREEMENT that it shall constitute an integration of all
their agreements, and each understands that in the event of any subsequent
litigation, controversy or dispute concerning any of its terms, conditions or
provisions, no party hereto shall be permitted to offer or introduce any oral or
extrinsic evidence concerning any other
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collateral or oral agreement between the parties not included herein.
22. Notices.
Any and all notices between the parties provided for or
permitted under this SETTLEMENT AGREEMENT, or by law, shall be in writing and
shall be deemed duly served when personally delivered to a party, or, in lieu of
such personal service, when deposited in the United States mail, certified,
postage prepaid, addressed to such party at the following addresses:
a. If to CSI:
California Steel Industries, Inc.
14000 San Bernardino Avenue
P.O. Box 5080
Fontana, California
Attention: Mr. James Declusin
with a copy to:
Morgan, Lewis & Bockius
801 South Grand Avenue
22nd Floor
Los Angeles, California 90017
Attention: Richard W. Esterkin, Esq.
b. If to KAISER, RECOVERY or DEVELOPMENT:
Kaiser Ventures, Inc.
3633 East Inland Empire Blvd.
Suite 850
Ontario, California 91764
Attention: Terry L. Cook, Esq.
-39-
<PAGE>
with a copy to:
Lindquist, Vennum & Christensen
600 17th Street
Suite 2125
Denver, Colorado 80202-5401
Attention: Craig A. Christensen, Esq.
or to such other place as may from time to time be specified in a notice to each
of the parties hereto given pursuant to this paragraph as the address for
service of notice on such party. For the purposes of this SETTLEMENT AGREEMENT,
delivery by facsimile shall be deemed to be personal delivery of any notice
hereunder.
23. Attorney's Fees.
In the event there is any dispute concerning the terms of this
SETTLEMENT AGREEMENT, or the performance of any party hereto pursuant to the
terms of this SETTLEMENT AGREEMENT, and any party hereto retains counsel for the
purpose of enforcing any of the provisions of this SETTLEMENT AGREEMENT, or
asserting the terms of this SETTLEMENT AGREEMENT in defense of any suit or
arbitration proceeding filed against said party, the prevailing party in such a
dispute shall be entitled to recover, in addition to any other remedy to which
such party may be entitled, all of its costs and attorney's fees incurred in
connection with the dispute, irrespective of whether or not a lawsuit or
arbitration proceeding is actually commenced or prosecuted to conclusion.
-40-
<PAGE>
24. Time.
Time is of the essence in the performance of the terms hereof.
25. Counterparts.
This SETTLEMENT AGREEMENT may be signed in counterparts and
shall be binding upon the parties hereto as if all of said parties executed the
original hereof.
26. Waiver.
No waiver by any party hereto of any provision hereof shall be
deemed to be a waiver of any other provision hereof or of any subsequent breach
of the same or any other provision hereof.
27. Construction of SETTLEMENT AGREEMENT.
This SETTLEMENT AGREEMENT shall be liberally construed to
effectuate the intention of the parties. In determining the meaning of, or
resolving any ambiguity with respect to, any word, phrase or provision of this
SETTLEMENT AGREEMENT, neither this SETTLEMENT AGREEMENT nor any uncertainty or
ambiguity herein shall be construed or resolved against any party (including the
party primarily responsible for the drafting and preparation of this SETTLEMENT
AGREEMENT), under any rule of construction or otherwise, it being expressly
understood and agreed that each of the parties has at all times been
independently advised by its own attorney and that the parties
-41-
<PAGE>
have had an equal opportunity to participate in the drafting of this SETTLEMENT
AGREEMENT.
28. Choice of Laws.
This SETTLEMENT AGREEMENT shall be governed by and construed
in accordance with the Constitution and the internal laws of the State of
California, and applicable provisions of the Constitution and laws of the United
States of America.
29. Captions
The captions or headings in this SETTLEMENT AGREEMENT are for
convenience only and in no way define, limit or describe the scope or intent of
any provision or paragraph of this SETTLEMENT AGREEMENT.
IN WITNESS WHEREOF, the parties have caused this SETTLEMENT
AGREEMENT to be executed as of the date first above written.
KAISER VENTURES INC.
By: /s/ Daniel N. Larson
-------------------------------------
President
By: /s/ Terry L. Cook
-------------------------------------
Secretary
KSC RECOVERY, INC.
By: /s/ Terry L. Cook
-------------------------------------
President
(Signatures continued to next page)
-42-
<PAGE>
By: /s/ Paul E. Shampay
-------------------------------------
Secretary
KAISER STEEL DEVELOPMENT, INC.
By: /s/ Daniel N. Larson
-------------------------------------
President
By: /s/ Terry L. Cook
-------------------------------------
Secretary
CALIFORNIA STEEL INDUSTRIES, INC.
By: /s/ Marcus Mota e Silva
-------------------------------------
President
By: /s/ Matthew MacFadden
-------------------------------------
Secretary
Approved as to form:
MORGAN, LEWIS & BOCKIUS
By: /s/ Richard W. Esterkin
---------------------------------
Richard W. Esterkin
801 South Grand Avenue
Suite 2200
Los Angeles, California 90017
Telephone: (213) 612-2500
ATTORNEYS FOR CALIFORNIA STEEL
INDUSTRIES, INC.
(Signatures continued to next page)
-43-
<PAGE>
LINDQUIST, VENNUM & CHRISTENSEN
P.L.L.P
By /s/ Craig A Christensen
----------------------------------
Craig A Christensen
600 Seventeenth Street
Suite 212 South
Denver, Colorado 80202-5401
Telephone: (303) 573-5900
ATTORNEYS FOR KAISER VENTURES INC.
AND KSC RECOVERY, INC.
-44-
<PAGE>
CALIFORNIA STEEL INDUSTRIES, INC.
By:
-------------------------------------
President
By:
-------------------------------------
Secretary
STATE STREET BANK & TRUST OF CALIFORNIA,
N.A.
By:
-------------------------------------
Approved as to form:
MORGAN, LEWIS & BOCKIUS
By:
----------------------------------
Richard W. Esterkin
801 South Grand Avenue
Suite 2200
Los Angeles, California 90017
Telephone: (213) 612-2500
ATTORNEYS FOR CALIFORNIA STEEL
INDUSTRIES, INC.
LINDQUIST, VENNUM & CHRISTENSEN
P.L.L.P.
By
----------------------------------
Craig A. Christensen
600 Seventeenth Street
Suite 2125 South
Denver, Colorado 80202-5401
Telephone: (303) 573-5900
ATTORNEYS FOR KAISER VENTURES, INC.
AND KSC RECOVERY, INC.
12
<PAGE>
[LOGO] CALIFORNIA STEEL INDUSTRIES, INC.
- --------------------------------------------------------------------------------
14000 San Bernardino Avenue, P.O. Box 5080
Fontana, California 92335
Telex 201239 (909) 350-6300
January 22, 1999
Alan Bick
Gibson, Dunn & Crutcher LLP
Jamboree Center
4 Park Plaza
Irvine, CA 92614
Dear Alan:
Please find enclosed the Exhibits pertaining to the Settlement agreement
between Kaiser and CSI that I forwarded to you.
If you have any questions, please contact me at (909) 350-6205.
Sincerely,
/s/ Pat Morin
Pat Morin, C.P.A.
California Steel Industries, Inc.
<PAGE>
[MAP]
MAP SOURCE U.S.G.S 7.5' Quadrangle, Fontana, Guasti, California, 1981
- --------------------------------------------------------------------------------
KAISER PROPERTY
- --------------------------------------------------------------------------------
<PAGE>
ESCROW INSTRUCTIONS
These Escrow Instructions are entered into as of June 1, 1995, by
and among KAISER VENTURES, INC., a Delaware Corporation ("KAISER"), KSC
RECOVERY, INC., a Delaware Corporation ("RECOVERY"), CALIFORNIA STEEL
INDUSTRIES, INC., a Delaware Corporation ("CSI"), and State Street Bank & Trust
of California, N.A. ("ESCROW HOLDER").
RECITALS
A. Concurrently herewith, CSI, KAISER, Kaiser Steel Development,
Inc. and RECOVERY are entering into a Settlement Agreement for the purpose of
resolving various disputes between them as described therein (the "SETTLEMENT
AGREEMENT").
B. Pursuant to the terms of the SETTLEMENT AGREEMENT, the parties to
these Escrow Instructions desire to enter into these Escrow Instructions (the
"ESCROW INSTRUCTIONS") for the purpose of effectuating the SETTLEMENT AGREEMENT.
It is therefore agreed as follows:
1. Incorporation of standard escrow instructions.
ESCROW HOLDER's standard form of escrow instructions are
attached hereto as Exhibit "A" and are incorporated herein by this reference as
though set forth in full hereat. Except as explicitly provided herein to the
contrary,
<PAGE>
CSI, KAISER, RECOVERY and ESCROW HOLDER agree to be bound by said escrow
instructions.
2. Incorporation of defined terms.
Except as explicitly set forth herein, each of the terms
defined in the SETTLEMENT AGREEMENT and the exhibits to the SETTLEMENT AGREEMENT
used in these ESCROW INSTRUCTIONS shall have the meaning ascribed to them in the
SETTLEMENT AGREEMENT and the exhibits to the SETTLEMENT AGREEMENT.
3. Interest bearing accounts.
All funds deposited herein shall be held by ESCROW HOLDER in
interest bearing accounts with the interest on such deposits to accrue to the
benefit of the party entitled to receive such funds.
4. Deposit of documents with ESCROW HOLDER.
a. Documents to be deposited by CSI.
(1) Initial Payment. At the time prescribed in paragraph
6(a) of the SETTLEMENT AGREEMENT, CSI shall deposit with ESCROW HOLDER the sum
of $256,500.00 pursuant to that paragraph.
(2) Other Payments. At the times prescribed in
paragraphs 6(b) and 6(c) of the SETTLEMENT AGREEMENT, CSI shall deposit with
ESCROW HOLDER any amounts due pursuant to those paragraphs.
(3) RESERVATION. Concurrently with its execution of the
SETTLEMENT AGREEMENT, pursuant to paragraph 4(c)
2
<PAGE>
of the SETTLEMENT AGREEMENT, CSI shall execute and deliver the RESERVATION to
ESCROW HOLDER.
(4) Notice of satisfaction of conditions. Within five
days following the satisfaction of the conditions to the effectiveness of the
SETTLEMENT AGREEMENT set forth at paragraph 8 of the SETTLEMENT AGREEMENT, CSI
shall execute and deliver to ESCROW HOLDER a notice stating that those
conditions have been fulfilled.
(5) ESCROW HOLDER's fees. CSI shall pay to ESCROW HOLDER
one-half (1/2) of ESCROW HOLDER's fees and expenses.
b. Documents to be deposited by KAISER.
(1) QUITCLAIM. Concurrently with its execution of the
SETTLEMENT AGREEMENT, pursuant to paragraph 4(a) of the SETTLEMENT AGREEMENT,
KAISER shall execute and deliver the QUITCLAIM to ESCROW HOLDER.
(2) ASSIGNMENT. Concurrently with its execution of the
SETTLEMENT AGREEMENT, pursuant to paragraph 5(a) of the SETTLEMENT AGREEMENT,
KAISER shall execute and deliver the ASSIGNMENT to ESCROW HOLDER.
(3) WATER RIGHTS ACKNOWLEDGMENT. Concurrently with its
execution of the WATER RIGHTS AGREEMENT, pursuant to paragraph 3 of the WATER
RIGHTS AGREEMENT, KAISER shall execute and deliver the WATER RIGHTS
ACKNOWLEDGEMENT to ESCROW HOLDER.
3
<PAGE>
(4) RESERVATION. Concurrently with its execution of the
SETTLEMENT AGREEMENT, pursuant to paragraph 4(c) of the SETTLEMENT AGREEMENT,
KAISER shall execute and deliver the RESERVATION to ESCROW HOLDER.
(5) Proceeds of INSURANCE LITIGATION. Upon its receipt
of any proceeds of the INSURANCE LITIGATION to which CSI is entitled pursuant to
paragraph 9(a)(4) of the SETTLEMENT AGREEMENT, KAISER shall deposit such
proceeds with ESCROW HOLDER.
(6) Notice of satisfaction of conditions. Within five
days following the satisfaction of the conditions to the effectiveness of the
SETTLEMENT AGREEMENT set forth at paragraph 8 of the SETTLEMENT AGREEMENT,
KAISER shall execute and deliver to ESCROW HOLDER a notice stating that those
conditions have been fulfilled.
(7) ESCROW HOLDER's Fees. KAISER shall pay to ESCROW
HOLDER one-half (1/2) of ESCROW HOLDER's fees and expenses.
c. Documents to be Deposited by RECOVERY
At the times prescribed in the STIPULATION, RECOVERY
shall deposit with ESCROW HOLDER the cash and stock to which CSI is entitled
pursuant to the terms of the STIPULATION and the PLAN.
5. Delivery of documents and funds by ESCROW HOLDER
a. Funds and documents to be delivered to KAISER. Provided
that ESCROW HOLDER has received the documents
4
<PAGE>
described in paragraphs 3(b)(1) - (4) of these ESCROW INSTRUCTIONS, and has
received written notice from both CSI and KAISER of the satisfaction of the
conditions to the effectiveness of the SETTLEMENT AGREEMENT, at the times
described below, ESCROW HOLDER shall deliver the following funds to KAISER:
(1) Proceeds of Initial Payment. At such time as ESCROW
HOLDER has received the payment required pursuant to paragraph 6(a)(1) of the
SETTLEMENT AGREEMENT, ESCROW HOLDER shall deliver the sum of $256,500.00 to
KAISER in satisfaction of CSI's obligations under paragraph 6(a) of the
SETTLEMENT AGREEMENT.
(2) Proceeds of Bankruptcy Claim. At such time as ESCROW
HOLDER receives those cash payments to which CSI is entitled pursuant to the
terms of the STIPULATION and the PLAN, the proceeds from the sale of the stock
to be distributed to CSI pursuant to the terms of the STIPULATION and the PLAN
or the cash payments required pursuant to paragraphs 6(b)(3) and 6(4) of the
SETTLEMENT AGREEMENT, ESCROW HOLDER shall deliver such cash to KAISER to the
extent necessary to satisfy CSI's obligations pursuant to paragraphs 6(b) and
6(c)(1) of the SETTLEMENT AGREEMENT.
(3) Proceeds of other payments. In the event that ESCROW
HOLDER receives any funds pursuant to paragraph 4(b)(5) of these ESCROW
INSTRUCTIONS, ESCROW HOLDER shall
5
<PAGE>
distribute such funds to KAISER, immediately upon ESCROW HOLDER'S receipt
thereof, as follows:
(a) First, to the extent necessary to satisfy
CSI's obligations under paragraph 6(c) of the SETTLEMENT AGREEMENT, in
satisfaction of such obligations, and
(b) Second, to the extent necessary to satisfy
CSI's obligations under paragraph 6(b) of the SETTLEMENT AGREEMENT, in
satisfaction of such obligations.
b. Documents to be delivered to CSI. Following ESCROW HOLDER's
receipt or a written notice from each of CSI and KAISER that the conditions to
the effectiveness of the SETTLEMENT AGREEMENT have been satisfied, ESCROW HOLDER
shall deliver the following documents to CSI at the times set forth below:
(1) ASSIGNMENT. At such time as ESCROW HOLDER has
received the ASSIGNMENT from KAISER, ESCROW HOLDER shall deliver the ASSIGNMENT
to CSI.
(2) QUITCLAIM. At such time as ESCROW HOLDER has
received the QUITCLAIM from KAISER, ESCROW HOLDER shall deliver the QUITCLAIM to
CSI.
(3) Cash. ESCROW HOLDER shall deliver to CSI any cash
received by ESCROW HOLDER from RECOVERY, from KAISER or resulting from the
proceeds of stock held for CSI's account in excess of those sums to which
KAISER is entitled pursuant to paragraph 6 of the SETTLEMENT AGREEMENT.
6
<PAGE>
c. Stock.
(1) Delivery of stock to third parties. In the event
that CSI determines to sell the stock deposited with ESCROW HOLDER by RECOVERY
during the term of this escrow, ESCROW HOLDER shall deliver possession, to such
party as CSI may designate, of all, or any portion, of said stock, as directed
by CSI, upon ESCROW HOLDER's receipt of a sum equal to the proceeds of such
sale, less any costs of such sale, such as sales commissions and escrow fees.
(2) Disposition of sales proceeds. In the event that
ESCROW HOLDER receives any proceeds from the sale of the stock deposited with
ESCROW HOLDER by RECOVERY, ESCROW HOLDER shall deliver such proceeds to KAISER,
to the extent necessary to satisfy CSI's obligation pursuant to paragraph 6(b)
of the SETTLEMENT AGREEMENT. Any remaining proceeds shall be paid to CSI.
(3) Disposition of stock. In the event that CSI does not
sell all of the stock deposited with ESCROW HOLDER by RECOVERY within ninety
days of said deposit, then ESCROW HOLDER shall deliver to CSI any portion of
said stock that has not been sold after ESCROW HOLDER has received a sum equal
to that required by paragraph 6(b) of the SETTLEMENT AGREEMENT.
6. Notices.
Any and all notices between the parties provided for or
permitted under these ESCROW INSTRUCTIONS, or by law,
7
<PAGE>
shall be in writing and shall be deemed duly served when personally delivered to
a party, or, in lieu of such personal service, when deposited in the United
States mail, certified, postage prepaid, addressed to such party at the
following addresses:
a. If to CSI:
California Steel Industries, Inc.
14000 San Bernardino Avenue
P.O. Box 5080
Fontana, California
Attention: Mr. James Declusin
with a copy to:
Morgan, Lewis & Bockius
801 South Grand Avenue
22nd Floor
Los Angeles, California 90017
Attention: Richard W. Esterkin, Esq.
b. If to KAISER:
Kaiser Recovery, Inc.
3633 East Inland Empire Blvd.
Suite 850
Ontario, California 91764
Attention: Terry L. Cook, Esq
with a copy to:
Lindquist, Vennum & Christensen
600 17th Street
Suite 2125
Denver, Colorado 80202-5401
Attention: Craig A. Christensen, Esq.
c. If to ESCROW HOLDER:
State Street Bank and Trust Company of
California, N.A.
725 South Figueroa Street
Suite 3100
Los Angeles, California 90017
Attention: Corporate Trust Department
8
<PAGE>
or to such other place as may from time to time be specified in a notice to each
of the parties hereto given pursuant to this paragraph as the address for
service of notice on such party.
7. Attorney's Fees.
In the event there is any dispute concerning the terms of
these ESCROW INSTRUCTIONS or the performance of any party hereto pursuant to the
terms of these ESCROW INSTRUCTIONS, and any party hereto retains counsel for the
purpose of enforcing any of the provisions of these ESCROW INSTRUCTIONS or
asserting the terms of these ESCROW INSTRUCTIONS in defense of any suit filed
against said party, the prevailing party in such a dispute shall be entitled to
recover, in addition to any other remedy to which such party may be entitled,
all of its costs and attorney's fees incurred in connection with the dispute
irrespective of whether or not a lawsuit is actually commenced or prosecuted to
conclusion.
8. Integration.
These ESCROW INSTRUCTIONS, the SETTLEMENT AGREEMENT and the
exhibits to the SETTLEMENT AGREEMENT constitute the final and complete agreement
of the parties hereto with respect to the subject matter hereof and supersedes
all prior or contemporaneous negotiations, promises, covenants, agreements or
representations concerning any matters directly, indirectly or collaterally
related to the subject matter of these ESCROW INSTRUCTIONS. The parties hereto
have expressly and
9
<PAGE>
intentionally included in these ESCROW INSTRUCTIONS, the SETTLEMENT AGREEMENT
and the exhibits to the SETTLEMENT AGREEMENT all collateral or additional
agreements which may, in any manner, touch or relate to any of the subject
matter of these ESCROW INSTRUCTIONS and, therefore, all promises, covenants and
agreements, collateral or otherwise, are included herein or therein. It is the
intention of the parties to these ESCROW INSTRUCTIONS that they, together with
the SETTLEMENT AGREEMENT and the exhibits to the SETTLEMENT AGREEMENT shall
constitute an integration of all their agreements, and each understands that in
the event of any subsequent litigation, controversy or dispute concerning any of
its terms, conditions or provisions, no party hereto shall be permitted to offer
or introduce any oral or extrinsic evidence concerning any other collateral or
oral agreement between the parties not included herein or therein.
9. Time.
Time is of the essence in the performance of the terms hereof.
10 Counterparts.
These ESCROW INSTRUCTIONS may be signed in counterparts and
shall be binding upon the parties hereto as if all of said parties executed the
original hereof.
11. Waiver.
No waiver by any party hereto of any provision hereof shall be
deemed to be a waiver of any other provision
10
<PAGE>
hereof or of any subsequent breach of the same or any other provision hereof.
12. Amendment.
These ESCROW INSTRUCTIONS cannot be amended or modified except
by a writing executed by the parties hereto which expresses, by its terms, an
intention to modify these ESCROW INSTRUCTIONS.
13. Successors.
These ESCROW INSTRUCTIONS shall be binding upon and inure to
the benefit of, and be enforceable by, the parties hereto and their respective
administrators, trustees, executors, personal representatives, successors and
permitted assigns.
IN WITNESS WHEREOF, the parties hereto have executed these ESCROW
INSTRUCTIONS as of the day and year set forth above.
KAISER VENTURES, INC.
By:
--------------------------------
President
By:
--------------------------------
Secretary
KSC RECOVERY, INC.
By:
--------------------------------
President
By:
--------------------------------
Secretary
11
<PAGE>
MARKED TO SHOW CHANGES
Exhibit "A"
ESCROW INSTRUCTIONS
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
725 South Grand Avenue
Suite 3100
Los Angeles, California 90017
Attention: Corporate Trust Department
These Escrow Instructions are attached as Exhibit "A" to that certain Escrow
Agreement dated as of June 1, 1995 ("The Escrow Agreement") among Kaiser
Ventures, Inc., a Delaware corporation ("Kaiser"), KSC Recovery, Inc., a
Delaware corporation ("Recovery"), California Steel Industries, Inc., a Delaware
Corporation ("CSI") and State Street Bank and Trust Company of California, N.A.,
as Escrow Holder (the "Escrow Holder"). Capitalized terms not otherwise defined
herein shall have the meaning assigned to them in the Escrow Agreement.
1. Acceptance of Appointment. State Street Bank and Trust Company of
California, N.A. hereby accepts its appointment as "Escrow Holder" under the
Escrow Agreement upon the terms and conditions set forth herein.
2. Termination of Escrow. In the event that the conditions of the
Escrow Agreement have not been complied with at the expiration of the time
provided for therein, the Escrow Holder shall keep the escrow open and shall
complete performance of the Escrow Agreement at the earliest possible date
thereafter, unless any of the other parties to the Escrow Agreement have made
written demand upon the Escrow Holder for the return of the funds and/or
instruments deposited by such person. If the Escrow Holder receives such a
demand, the Escrow Holder may withhold and stop all further proceedings under
the Escrow Agreement, without liability to any person or party to the Escrow
Agreement, until cancellation instructions, in writing and signed by all parties
to the Escrow Agreement, have been delivered to the Escrow Holder. Upon receipt
of such cancellation instructions, the Escrow Holder shall disburse the escrowed
funds and instruments, less the fees (including a reasonable cancellation fee)
and expenses of the Escrow Holder, in accordance with such cancellation
instructions.
3. Investment of Funds. The Escrow Holder shall invest the funds it
holds under the Escrow Agreement in accordance with the instructions of the
party entitled to receive such funds; provided, that in the absence of written
instructions, the Escrow Holder shall invest the funds in its internal money
market account ("IMMA"). The Escrow Holder shall have the right to liquidate any
investments held in order to provide funds necessary to make required payments
under the
<PAGE>
Escrow Agreement. The Escrow Holder shall not have any liability for any loss
sustained as a result of any investment made pursuant to the instructions of the
parties hereto or as a result of any liquidation of any investment prior to its
maturity.
4. Disbursements. Unless otherwise instructed in writing prior to
the date of disbursement, all disbursements of funds and/or instruments shall be
made by U.S. mail to the designated parties at the addresses set forth in the
Escrow Agreement.
5. Disposal of Files. The Escrow Holder is authorized to destroy or
otherwise dispose of any and all documents, papers, instructions, correspondence
and other material pertaining to the Escrow Agreement at the expiration of five
years from the date of close of the escrow or the cancellation of the escrow
without liability; provided, that the Escrow Accent shall give notice of its
intent to the parties to the Escrow Agreement and such parties shall have the
opportunity to review and make copies of the documents to be destroyed. If
within 10 Business Days after such notice is given, the Escrow Holder has not
received a request from a party to review the documents to be disposed of, the
Escrow Holder may proceed with such destruction or disposal.
6. Taxes. The Escrow Holder shall not be responsible for the payment
of any taxes, charges or governmental levies associated with the investment of
funds, transfer of stock or transfer of documents contemplated by the Escrow
Agreement.
7. Reliance on Instructions. The Escrow Holder may rely, and shall
be protected in acting or refraining from acting, upon any written notice,
instruction or request furnished to it under the Escrow Agreement and believed
by it to be genuine and to have been signed or presented by the proper party or
parties. The Escrow Holder shall be under no duty to inquire into or investigate
the validity, accuracy, or content of any such document. The Escrow Holder shall
have no duty to solicit any payments which may be required from any party under
the Escrow Agreement.
8. Limitation of Liability. The Escrow Holder shall not be liable
for any action taken or omitted by it in good faith unless a court of competent
jurisdiction determines that the Escrow Holder's negligence or willful
misconduct was the cause of any loss to any of the other parties to the Escrow
Agreement. The Escrow Holder may consult with counsel of its own choice and
shall have full and complete authorization and protection for any action taken
or omitted by it hereunder in good faith and in accordance with the opinion of
such counsel. Anything in the Escrow Agreement to the contrary notwithstanding,
in no event shall the Escrow Holder be liable for special, indirect,
<PAGE>
incidental, or consequential losses or damages of any kind whatsoever
(including, but not limited to, lost profits), even if the Escrow Holder has
been advised in advance of the likelihood of such losses or damages and
regardless of the form of action.
9. Resignation. The Escrow Holder may resign and be discharged from
its duties or obligations hereunder by giving notice in writing of such
resignation specifying a date when such resignation shall take effect, which
date shall be no sooner than thirty (30) days after provision of such notice to
the other parties to the Escrow Agreement. The escrow shall not terminate on
such resignation. Any successor escrow holder appointed shall, upon manifesting
acceptance of such appointment by countersigning a copy of the Escrow Agreement,
become and be the Escrow Holder under the Escrow Agreement, with the same
powers, duties, and authorities which such successor would have had if
originally named in the Escrow Agreement as Escrow Holder. Notwithstanding its
resignation and discharge, the resigning Escrow Holder hereby agrees to follow
any instructions the other parties hereto may give it directing transfer of the
funds, stock and documents held under the Escrow Agreement to the successor
Escrow Holder.
10. Escrow Holder's Fees. The other parties to the Escrow Agreement
shall promptly (i) pay the Escrow Holder for the services to be rendered under
the Escrow Agreement, at the rates and in the percentages set forth in Exhibit A
attached hereto, and (ii) pay or reimburse the Escrow Holder upon request for
all reasonable expenses, disbursements and advances, including reasonable
attorneys' fees, incurred or made by it in connection with the preparation,
execution, performance, delivery, modification and termination of the Escrow
Agreement.
11. Indemnification. The other parties to the Escrow Agreement
hereby agree, jointly and severally, to indemnify the Escrow Holder for, and to
hold it harmless against, any loss, liability, or expense arising out of or in
connection with the Escrow Agreement and the carrying out of its duties
thereunder or upon the cancellation thereof, including the costs and expenses of
defending itself against any claim of liability, except as a result of the
Escrow Holder's negligence or wilful misconduct.
12. Conflicting Demands. If conflicting demands are made on the
Escrow Holder by the parties to the Escrow Agreement, or notice is served upon
the Escrow Holder in connection with any legal action arising out of the Escrow
Agreement, the Escrow Holder shall not be required to take any further action
with respect to the Escrow Agreement, but may stop all further proceedings
without liability to any person or party to the Escrow Agreement. The Escrow
Holder may bring suit in interpleader or for declaratory relief as to its rights
and
-3-
<PAGE>
obligations under the Escrow Agreement. If the Escrow Holder is required to
respond to any legal summons or proceedings or if any action in interpleader or
for declaratory relief is brought by the Escrow Holder, the other parties to the
Escrow Agreement jointly and severally agree to pay all costs, expense and
reasonable attorney's fees expended or incurred by the Escrow Holder.
13. No Implied Duties. The duties and responsibilities of the Escrow
Holder hereunder shall be determined solely by the express provisions of the
Escrow Agreement, and no other or further duties or responsibilities shall be
implied. The Escrow Holder shall not have any liability under, nor any duty to
inquire into the terms and provisions of any agreement or instructions, other
than as outlined in the Escrow Agreement.
14. Funds Transfer Instructions. In the event funds transfer
instructions are given, whether oral or written, the Escrow Holder is authorized
to seek confirmation of such instructions by telephone call-back to the person
or persons designated on Exhibit B hereto, and the Escrow Holder may rely upon
the confirmations of anyone purporting to be the person or persons so
designated. The persons and telephone numbers for call-backs may be changed only
in a writing actually received and acknowledged by the Escrow Holder. The
parties to the Escrow Agreement acknowledge that such security procedure is
commercially reasonable.
-4-
<PAGE>
EXHIBIT A
FEES
Escrow Fee - $4,000.00 (this Escrow Fee is to be shared equally by Kaiser
and CSI)
Investment Fees - $25.00 per trade for book-entry securities $50.00 per trade
for securities requiring physical delivery (these investments
fees shall be paid in each case by the party requesting the
investments
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<PAGE>
EXHIBIT B
TELEPHONE NUMBER(S) FOR CALL-BACKS
PERSON(S) DESIGNATED TO CONFIRM FUNDS TRANSFER INSTRUCTIONS
Kaiser:
James F. Verhey
Vice President-Finance and
Chief Financial Officer
(909) 483-8513
CSI:
Ira Frazer, Esq.
909) 350-6010
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<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLORADO
In re ) Chapter 11 Proceedings
)
COTTONWOOD CANYON LAND CO., ) Case No. 87 B 1552 E
KAISER STEEL CORPORATION, ) Case No. 87 B 1553 E
KAISER STEEL TUBING, INC., ) Case No. 87 B 1705 E
KT REALTY INCORPORATED, ) Case No. 87 B 1707 E
MYERS DRUM COMPANY, ) Case No. 87 B 1708 E
LAKE TAMARISK DEVELOPMENT CORP., ) Case No. 87 B 1709 E
UNION STEEL COMPANY, ) Case No. 87 B 1710 E
)
Reorganized Debtors. ) (Jointly Administered as
________________________________________ ) Case No. 87 B 1552 E)
- --------------------------------------------------------------------------------
STIPULATION TO ORDER ALLOWING
CLAIM OF CALIFORNIA STEEL INDUSTRIES
THIS STIPULATION ALLOWING CLAIM OF CALIFORNIA STEEL INDUSTRIES (the
"STIPULATION") is entered into as of the 1st day of July, 1994, by and among KSC
RECOVERY, INC., a Delaware corporation ("RECOVERY"), and CALIFORNIA STEEL
INDUSTRIES, INC., a California corporation ("CSI") with reference to the
following facts:
RECITALS
A. From 1942 until 1983, Kaiser Steel Corporation ("KSC") operated a large
steel production and processing facility on approximately 2,000 acres of land
near Fontana, California owned by KSC (the "FONTANA PROPERTY"). Pursuant to an
Agreement of
<PAGE>
Purchase and Sale entered into effective as of August 17, 1984, CSI purchased
approximately 378 acres of the Fontana Property (the "CSI PROPERTY").
B. Prior to the sale of the CSI PROPERTY to CSI, as a result of KAISER'S
prior operations on the CSI PROPERTY, the CSI PROPERTY allegedly became
contaminated with a variety of industrial byproducts.
C. On February 11, 1987, KSC filed a petition with the United States
Bankruptcy Court for the District of Colorado (the "BANKRUPTCY COURT"),
initiating proceedings pursuant to chapter 11 of the Bankruptcy Code (11 U.S.C.
ss. 101 et seq.). Such proceedings were conducted by and before the Honorable
Charles E. Matheson, United States Bankruptcy Judge, and are entitled "In re
Kaiser Steel Corporation, Case No. 87 B 01552 E (Jointly Administered)" (the
"BANKRUPTCY CASE").
D. On October 4, 1988, the BANKRUPTCY COURT entered an order confirming
KSC's Second Amended Joint Plan of Reorganization, As Modified (the "PLAN").
Pursuant to the terms of the PLAN, RECOVERY is charged with filing and
prosecuting objections to any claims filed in the BANKRUPTCY CASE.
E. On or about January 12, 1988, CSI filed a proof of claim in the
BANKRUPTCY CASE asserting that KSC was liable to CSI for the sum of $165,825.68
theretofore expended by CSI, and an unstated amount for future expenditures that
CSI anticipated, in investigating and remediating the contamination placed in
and under the CSI PROPERTY by KSC (the "PROOF OF CLAIM"). On
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<PAGE>
November 6, 1989, RECOVERY filed an objection to the PROOF OF CLAIM.
F. On February 19, 1992, CSI amended the PROOF OF CLAIM to assert that the
damages caused to CSI by the contamination placed in and under the CSI PROPERTY
by KSC exceeded the sum of $54 million. On March 5, 1992, RECOVERY filed an
objection to the PROOF OF CLAIM, as amended. The contested matter initiated by
the foregoing objections to the PROOF OF CLAIM is presently pending before the
BANKRUPTCY COURT.
G. CSI asserts that its claims were not discharged by the order confirming
the PLAN. RECOVERY contends that all of CSI's claims were discharged. The
BANKRUPTCY COURT has previously ruled that CSI's claims were discharged, but
that ruling is not final and remains subject to appeal.
H. In order to eliminate the uncertainty inherent in the litigation of the
allowability and amount of the PROOF OF CLAIM, as well as to avoid the
expenditure of further costs of litigation, the parties hereto now wish to
resolve the disputes between them concerning the allowability and amount of
CSI's claims against KSC, as well as whether those claims were discharged by the
BANKRUPTCY COURT'S order confirming the PLAN.
IT IS THEREFORE STIPULATED as follows:
l. Allowance of claim.
The PROOF OF CLAIM shall be allowed in the sum of $27.5 million and
shall receive a distribution under the PLAN as a Class 4A claim based upon its
allowance in said amount.
2. Distribution under PLAN.
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<PAGE>
Within ten (10) days following the date upon which this STIPULATION
becomes effective, RECOVERY shall disburse to CSI, as an initial distribution on
account of its allowed claim, the minimum sum of $1,500,000.00 in cash and at
least 281,509 shares of stock in Kaiser Resources Inc., the reorganized debtor
under the PLAN. Thereafter, RECOVERY shall distribute to CSI such additional
property as CSI may be entitled to receive under the PLAN at the time and in the
manner described in the PLAN.
3. Effective date of STIPULATION.
This STIPULATION shall become effective ten (10) days following the
entry of an order of the BANKRUPTCY COURT approving this STIPULATION, allowing
the PROOF OF CLAIM as provided herein and directing RECOVERY to make the
distributions to CSI described herein and required under the PLAN unless a party
in interest files a notice of appeal from such order and obtains a stay of such
order on or before ten (10) days following the entry of such order. In the event
that a party in interest files a notice of appeal from such order and obtains a
stay of such order on or before ten (10) days following the entry of such order,
this STIPULATION shall become effective upon the entry of a final order
approving this STIPULATION, allowing the PROOF OF CLAIM as provided herein and
directing RECOVERY to make the distributions to CSI described herein and
required under the PLAN. In the event that the effective date of this
STIPULATION shall fail to occur on or before __________, then, at the option of
either party hereto, exercised by providing written notice to the other party
-4-
<PAGE>
hereto in the manner prescribed for notice herein, this STIPULATION shall be of
no further force or effect.
4. Notices.
Any and all notices between the parties provided for or permitted
under this STIPULATION, or by law, shall be in writing and shall be deemed duly
served when personally delivered to a party, or, in lieu of such personal
service, when deposited in the United States mail, certified, postage prepaid,
addressed to such party at the following addresses:
A. If to CSI:
California Steel Industries, Inc.
14000 San Bernardino Avenue
P.O. Box 5080
Fontana, California
Attention: Mr. James Declusin
with a copy to:
Morgan, Lewis & Bockius
801 South Grand Avenue
22nd Floor
Los Angeles, California 90017
Attention: Richard W. Esterkin, Esq.
B. If to KAISER:
Kaiser Recovery, Inc.
3633 East Inland Empire Blvd.
Suite 850
Ontario, California 91764
Attention: Terry L. Cook, Esq.
with a copy to:
Lindquist, Vennum & Christensen
600 17th Street
Suite 2125
Denver, Colorado 80202-5401
Attention: Craig A. Christensen, Esq.
or to such other place as may from time to time be specified in a notice to each
of the parties hereto given pursuant to this paragraph as the address for
service of notice on such party.
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<PAGE>
5. Time.
Time is of the essence in the performance of the terms hereof.
6. Waiver.
No waiver by any party hereto of any provision hereof shall be deemed to
be a waiver of any other provision hereof or of any subsequent breach of the
same or any other provision hereof.
7. Amendment.
This STIPULATION cannot be amended or modified except by a writing
executed by the parties hereto which expresses, by its terms, an intention to
modify this STIPULATION.
8. Successors.
This STIPULATION shall be binding upon and inure to the benefit of, and
be enforceable by, the parties hereto and their respective administrators,
trustees, executors, personal representatives, successors and permitted assigns.
IN WITNESS WHEREOF, the parties hereto have executed this
STIPULATION as of the day and year set forth above.
LINDQUIST, VENNUM & CHRISTENSEN
CRAIG A. CHRISTENSEN
By:
------------------------------------
Craig A. Christensen,
Attorneys for Kaiser Recovery, Inc.
MORGAN, LEWIS & BOCKIUS
RICHARD W. ESTERKIN
By:
------------------------------------
Richard W. Esterkin
Attorneys for California Steel
Industries, Inc.
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<PAGE>
WATER RIGHTS AGREEMENT
This WATER RIGHTS AGREEMENT is entered into as of June 1, 1995, by and
between Kaiser Ventures Inc. ("KAISER") and California Steel Industries, Inc.
("CSI") with reference to the following facts:
RECITALS
A. From 1942 until 1983, Kaiser Steel Corporation operated a large
steel production and processing facility on approximately 2,000 acres of land
near Fontana, California, owned by Kaiser Steel Corporation (the "FONTANA
PROPERTY"). Pursuant to an Agreement of Purchase and Sale entered into effective
as of August 17, 1984, CSI purchased approximately 378 acres of the FONTANA
PROPERTY. In 1988 and 1989, CSI acquired from third parties approximately 43 and
29 acres, respectively, of property previously owned by Kaiser Steel Corporation
and comprising a portion of the FONTANA PROPERTY. The 378, 43 and 29 acres of
the FONTANA PROPERTY formerly owned by Kaiser Steel Corporation and now owned by
CSI are hereinafter collectively referred to as the "CSI PROPERTY."
B. Pursuant to the judgment (the "1978 JUDGMENT") in Chino Basin
Municipal Water District v. City of Chino, et al., San Bernardino Superior
Court, Case No. RCV 51010 (the "WATER
<PAGE>
CASE"), non-agricultural overlying rights to the beneficial use of 2,930.274
acre-feet of water annually from the safe yield of the Chino groundwater basin
was decreed as set forth at page 60, line 9 of Exhibit "D" to the 1978 JUDGMENT
(the "WATER RIGHTS"). The WATER RIGHTS are more specifically described in
Section II.B.8 and Exhibits "D" and "G" of the 1978 JUDGMENT.
C. From 1984 through the date of this WATER RIGHTS AGREEMENT, CSI
has operated a steel processing plant on the CSI PROPERTY. From 1984 through the
date of this WATER RIGHTS AGREEMENT, KAISER delivered water to CSI pursuant to
certain utility services agreements.
D. On or about August 25, 1992, CSI and the Chino Basin Watermaster
(the "WATERMASTER") filed a "Joint Motion to Interpret, Enforce, Carry-out,
Modify, Amend or Amplify the Judgment Herein" in the WATER CASE (the "JOINT
MOTION"). KAISER disputed CSI's and WATERMASTER's claims in the JOINT MOTION.
The Court referred the JOINT MOTION to a Special Referee for the preparation of
a report and recommendation. Although the Special Referee's report has been
filed with the Court, no final order on the JOINT MOTION has been entered by the
Court.
E. On or about March 25, 1993, CSI filed "California Steel
Industries, Inc.'s Notice of Motion to Interpret, Enforce, Carry-out, Modify,
Amend, or Amplify Paragraph 7, Page 66 of Exhibit G of the 1978 Judgment" (the
"EXHIBIT G MOTION"). KAISER Disputed CSI's claims in the EXHIBIT G MOTION. The
Court
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<PAGE>
has not ruled on the EXHIBIT G MOTION pending its ruling on the JOINT MOTION.
F. On October 21, 1993, the California Regional Water Quality
Control Board, Santa Ana Region (the "RWQCB") adopted Resolution No. 93-72,
which allowed KAISER to fulfill certain groundwater remediation obligations
described therein by participating in a desalter project being undertaken by the
Santa Ana Watershed Project Authority pursuant to the terms of a Salt Offset
Agreement (the "SALT OFFSET AGREEMENT"). CSI objected to the Resolution and, on
or about March 10, 1994, brought an action to contest the Resolution and the
SALT OFFSET AGREEMENT, such action being entitled California Steel Industries,
Inc. v. California Regional Water Quality Control Board, Santa Ana Region, San
Bernardino County Superior Court Case No. SCV 10862 (the "SALT OFFSET ACTION").
The SALT OFFSET ACTION has been dismissed.
G. KAISER has entered into Chino Basin Local Storage Agreements 9.0
and 9.1, which permit the storage of a total of 30,000 acre feet of overlying
water rights carried over from preceding years. As of June 30, 1994, 21,046.61
acre feet of water were in storage under those contracts and 2,930.274 acre-feet
of water was held as carryover water. Those contracts have expired and, as of
the date of this WATER RIGHTS AGREEMENT, KAISER is attempting to renew or to
replace those contracts. As used herein, the term "LOCAL STORAGE AGREEMENTS"
refers to Local
-3-
<PAGE>
Storage Agreements 9.0 and 9.1, as well as to any renewals or replacements of
those agreements that KAISER may obtain.
H. Concurrently with their execution of this WATER RIGHTS AGREEMENT,
the parties are entering into a "Settlement Agreement" for the purpose of
resolving a number of disputes as between them (the "SETTLEMENT AGREEMENT").
I. The parties would like to compromise and settle their disputes
concerning CSI's and KAISER's entitlement to certain of the WATER RIGHTS and the
proposed amendments to the Watermaster Rules and Regulations currently being
litigated in the WATER CASE as a result of the JOINT MOTION and the EXHIBIT G
MOTION.
In compromise of the disputes between the parties regarding the
ownership and use of the WATER RIGHTS, including all carryover and storage
rights associated therewith, and in consideration of the mutual promises set
forth in the SETTLEMENT AGREEMENT and in this WATER RIGHTS AGREEMENT, the
parties agree as follows:
1. Incorporation of defined terms.
Except as explicitly set forth herein, each of the terms
defined in the SETTLEMENT AGREEMENT and the exhibits to the SETTLEMENT AGREEMENT
used in this WATER RIGHTS AGREEMENT shall have the meaning ascribed to them in
the SETTLEMENT AGREEMENT and the exhibits to the SETTLEMENT AGREEMENT.
-4-
<PAGE>
2. Appointment of Escrow.
Concurrently with their execution of this WATER RIGHTS
AGREEMENT, the parties hereto shall execute escrow instructions, in the form
attached to the SETTLEMENT AGREEMENT as Exhibit "2," appointing State Street
Bank and Trust of California, N.A. ("ESCROW HOLDER") to act as the escrow holder
under the terms of this WATER RIGHTS AGREEMENT.
3. Allocation of WATER RIGHTS.
In compromise of the disputes between the parties, including
their claimed entitlement to beneficially use the WATER RIGHTS and carryover and
storage rights associated therewith, and in consideration of the mutual
covenants set forth in the SETTLEMENT AGREEMENT, concurrently with their
execution of this WATER RIGHTS AGREEMENT, KAISER and CSI shall execute and
deliver to ESCROW HOLDER a "Water Rights Acknowledgment" in the form attached
hereto as Exhibit "A" (the "WATER RIGHTS ACKNOWLEDGMENT"). Within seven (7) days
of this WATER RIGHTS AGREEMENT becoming effective, ESCROW HOLDER shall deliver
the WATER RIGHTS ACKNOWLEDGMENT to CSI, which may then record the WATER RIGHTS
ACKNOWLEDGMENT in the Official Records of the County Recorder of San Bernardino
County, California and otherwise proceed in accordance with the 1978 JUDGMENT by
filing the WATER RIGHTS ACKNOWLEDGMENT with WATERMASTER.
-5-
<PAGE>
4. ASSIGNMENT of WATER RIGHTS.
Immediately after executing this WATER RIGHTS AGREEMENT, the
parties will jointly undertake to enter into an appropriate agency agreement,
pursuant to Paragraph 6 of Exhibit "G" of the 1978 JUDGMENT, and the rules and
regulations of WATERMASTER, and consistent with the provisions of this WATER
RIGHTS AGREEMENT and the WATER RIGHTS ACKNOWLEDGEMENT respecting the use and
priorities of the "Joint Water Rights" described in the WATER RIGHTS
ACKNOWLEDGMENT (the "JOINT WATER RIGHTS"), with the San Gabriel Valley Water
Company (the "WATER COMPANY"), pursuant to which:
a. the PARTIES shall assign the JOINT WATER RIGHTS to the
WATER COMPANY for a period ending upon June 30, 2005, and
b. the WATER COMPANY shall:
(1) provide water service to the overlying lands of CSI
and KAISER, subject to the provisions of paragraph 4(b)(1) of the WATER RIGHTS
ACKNOWLEDGMENT, and
(2) pay to KAISER an amount equal to at least 90% of the
then-current replenishment charge for the CHINO BASIN for such portion of the
JOINT WATER RIGHTS as may be used by CSI or KAISER.
In the event such an agency agreement is not consummated with
the WATER COMPANY, CSI shall pay KAISER an amount equal to 90% of the
then-current replenishment charge for
-6-
<PAGE>
the CHINO BASIN for all or any portion of the JOINT WATER RIGHTS used by CSI on
its lands.
5. Agreement to be delivered to WATERMASTER.
A copy of this WATER RIGHTS AGREEMENT and of the WATER RIGHT
ACKNOWLEDGMENT shall be delivered to WATERMASTER by CSI and KAISER, with
directions to modify WATERMASTER's records in accordance therewith. CSI and
KAISER shall jointly request that WATERMASTER correct its records to reflect the
allocation of water set forth in the WATER RIGHTS ACKNOWLEDGMENT.
6. Acknowledgment of source of water delivered to CSI by KAISER.
CSI and KAISER agree that, from 1984 through 1994, all of the
water delivered to CSI by KAISER was derived from either KAISER's rights as a
shareholder of Fontana Union Mutual Water Company or from the "CSI Water Rights"
as described in the WATER RIGHTS ACKNOWLEDGMENT (the "CSI WATER RIGHTS"), or
both. To the extent that the water produced and delivered by KAISER to CSI was
derived from the CSI WATER RIGHTS, or CSI's stored water resulting from the CSI
WATER RIGHTS, such water was delivered by KAISER to CSI at CSI's request and on
CSI's behalf.
7. Effect of WATER RIGHTS AGREEMENT upon prior water charges.
Notwithstanding the provisions of this WATER RIGHTS AGREEMENT
and the WATER RIGHTS ACKNOWLEDGMENT, neither KAISER nor CSI shall be entitled to
any adjustments to previously
-7-
<PAGE>
billed rates and charges for past deliveries of water to CSI by KAISER.
8. (1) WATER RIGHTS defined by 1978 JUDGMENT.
The WATER RIGHTS are subject to the provisions of the 1978
JUDGMENT, which defines and limits their use. Nothing in this WATER RIGHTS
AGREEMENT or the WATER RIGHTS ACKNOWLEDGMENT is intended to change or modify the
nature or use of the WATER RIGHTS in a manner inconsistent with the 1978
JUDGMENT.
9. Performance of SALT OFFSET AGREEMENT.
a. KAISER acknowledges its obligations, pursuant to the terms
of the SALT OFFSET AGREEMENT, to abandon to the WATERMASTER 1,000 acre-feet of
water a year for 25 years to satisfy the replenishment obligation of the SAWPA
desalter project. KAISER and CSI agree that KAISER'S obligation to abandon water
to WATERMASTER hereunder shall be an obligation expressly made for the benefit
of WATERMASTER and enforceable by WATERMASTER pursuant to the continuing
jurisdiction of the Court under the 1978 JUDGMENT. The parties agree that the
obligations of KAISER to WATERMASTER under this agreement shall be binding upon
KAISER's successors and assigns.
b. In partial satisfaction of its obligations under the SALT
OFFSET AGREEMENT, on or before December 1, 1995, KAISER shall irrevocably
abandon to the WATERMASTER at least 18,000 acre feet of its stored water for the
purpose of
-8-
<PAGE>
satisfying the replenishment obligation of the SAWPA desalter project.
c. To the extent that CSI does not make use of the JOINT WATER
RIGHTS, as defined in the WATER RIGHTS ACKNOWLEDGMENT, during the INTERIM
PERIOD, as defined therein, KAISER shall either:
(1) irrevocably abandon said water to the WATERMASTER
for the purpose of satisfying the replenishment obligation of the SAWPA desalter
project or
(2) store said water under the LOCAL STORAGE AGREEMENTS
and account for the storage of such water separately from the remainder of the
water stored under the LOCAL STORAGE AGREEMENTS.
d. To the extent that KAISER has not already fulfilled all of
its obligations to provide water to the SAWPA desalter project, during the FINAL
PERIOD, as that term is defined in the WATER RIGHTS ACKNOWLEDGMENT, KAISER shall
either:
(1) irrevocably abandon to the WATERMASTER for the
purpose of satisfying the replenishment obligation of the SAWPA desalter project
the water to which it is entitled by reason of the JOINT WATER RIGHTS or
(2) store said water under the LOCAL STORAGE AGREEMENTS
and account for the storage of such water separately from the remainder of the
water stored under the LOCAL STORAGE AGREEMENTS.
-9-
<PAGE>
e. To the extent that KAISER elects to store water as provided
at paragraphs 9(c)(2) and 9(d)(2) of this WATER RIGHTS AGREEMENT, KAISER shall
abandon a sufficient quantity of said water to the WATERMASTER for the purpose
of satisfying the replenishment obligation of the SAWPA desalter project, at or
before the time that it is obligated to provide such water under the SALT OFFSET
AGREEMENT, so as to satisfy its obligations under the SALT OFFSET AGREEMENT at
or before the time that said obligations are due.
10. Court approval of WATER RIGHTS AGREEMENT. Within thirty days
following their execution of this WATER RIGHTS AGREEMENT, the PARTIES shall
jointly petition the court having jurisdiction over the WATER CASE for an order:
a. approving this WATER RIGHTS AGREEMENT,
b. decreeing CSI's exclusive right to the beneficial use of
the CSI WATER RIGHTS and the parties' mutual rights to the beneficial use of the
JOINT WATER RIGHTS as provided in the WATER RIGHTS ACKNOWLEDGMENT, and
c. approving KAISER's abandonment of 18,000 acre feet of its
stored water to the WATERMASTER for the SAWPA desalter project as described at
paragraph 9(b) if this WATER RIGHTS AGREEMENT.
Pending the entry of such an order, the parties shall request that the court
having jurisdiction over the WATER CASE stay all proceedings with respect to the
JOINT MOTION and the EXHIBIT G
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<PAGE>
MOTION. Upon the entry of a final order as set forth above, and all of the
conditions to the effectiveness of the SETTLEMENT AGREEMENT having been
satisfied, CSI shall execute a "Notice of Withdrawal of Motion" with respect to
the JOINT MOTION and the EXHIBIT G MOTION in the form attached hereto as Exhibit
"B".
11. Condition to effectiveness of WATER RIGHTS AGREEMENT.
This WATER RIGHTS AGREEMENT shall become effective upon the
entry of an order of the Court in the WATER CASE approving this WATER RIGHTS
AGREEMENT as provided herein.
12. Advice of counsel.
The PARTIES represent and warrant that they have sought and
obtained the advice and counsel of their attorneys with respect to this WATER
RIGHTS AGREEMENT.
13. Amendment.
This WATER RIGHTS AGREEMENT cannot be modified except by
written document signed by all of the PARTIES.
14. Choice of laws.
This WATER RIGHTS AGREEMENT shall in all respects be
interpreted, enforced, and governed by and under the internal laws of the State
of California.
15. Interpretation of WATER RIGHTS AGREEMENT.
This WATER RIGHTS AGREEMENT has been mutually drafted. The
language of this WATER RIGHTS AGREEMENT shall be
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<PAGE>
construed as a whole according to a fair meaning, and not strictly for or
against any of the parties.
16. Costs.
The parties shall each bear their own respective attorneys'
fees and costs in connection with the JOINT MOTION, the EXHIBIT G MOTION and the
preparation of this WATER RIGHTS AGREEMENT.
17. Attorney's fees.
In the event that either of the parties breaches this WATER
RIGHTS AGREEMENT, the breaching party or parties shall pay each prevailing party
all costs of any action or proceeding for damages and/or enforcement, including
reasonable attorney's fees and costs.
18. Integration.
This WATER RIGHTS AGREEMENT is part of the SETTLEMENT
AGREEMENT and is subject to its terms and conditions. Except as explicitly set
forth in the SETTLEMENT AGREEMENT, this WATER RIGHTS AGREEMENT constitutes the
final and complete agreement of the parties hereto with respect to the subject
matter hereof and supersedes all prior or contemporaneous negotiations,
promises, covenants, agreements or representations concerning any matters
directly, indirectly or collaterally related to the subject matter of this WATER
RIGHTS AGREEMENT. The parties hereto have expressly and intentionally included
in this WATER RIGHTS AGREEMENT and the SETTLEMENT AGREEMENT all
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<PAGE>
collateral or additional agreements which may, in any manner, touch or relate to
any of the subject matter of this WATER RIGHTS AGREEMENT and, therefore, all
promises, covenants and agreements, collateral or otherwise, are included herein
and therein. It is the intention of the parties to this WATER RIGHTS AGREEMENT
that it and the SETTLEMENT AGREEMENT shall constitute an integration of all
their agreements, and each understands that in the event of any subsequent
litigation, controversy or dispute concerning any of its terms, conditions or
provisions, no party hereto shall be permitted to offer or introduce any oral or
extrinsic evidence concerning any other collateral or oral agreement between the
parties not included herein or in the SETTLEMENT AGREEMENT.
19. Counterparts.
This WATER RIGHTS AGREEMENT may be executed in counterparts by
the PARTIES and shall become effective and binding at such time as all of the
PARTIES have signed a counterpart of this WATER RIGHTS AGREEMENT.
WHEREFORE, the parties hereto have executed this WATER RIGHTS
AGREEMENT as of the date and year set forth above.
Dated: ____________, 1995 KAISER VENTURES INC.
By: _____________________________
Dated: ____________, 1995 CALIFORNIA STEEL INDUSTRIES, INC.
By: _____________________________
(Signatures continued to next page)
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<PAGE>
APPROVED AS TO FORM:
Dated: _______________, 1995 BEST, BEST & KRIEGER
By: _____________________________
Arthur L. Littleworth
Anne T. Thomas
Gene Tanaka
Attorneys for KAISER
Ventures, Inc.
Dated: _______________, 1995 LAW OFFICES OF JOHN D. MUSICK, JR.
AND ASSOCIATES
By: _____________________________
John D. Musick,, Jr.
Attorneys for California Steel
Industries, Inc.
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<PAGE>
WATER RIGHTS ACKNOWLEDGMENT
This Water Rights Acknowledgment (the "WATER RIGHTS ACKNOWLEDGMENT")
is entered into as of June 1, 1995, by and between Kaiser Ventures, Inc.
("KAISER") and California Steel Industries, Inc. ("CSI").
RECITALS
A. From 1942 until 1983, Kaiser Steel Corporation operated a large
steel production and processing facility on approximately 2,000 acres of land
near Fontana, California, owned by Kaiser Steel Corporation (the "FONTANA
PROPERTY"). Pursuant to an Agreement of Purchase and Sale entered into effective
as of August 17, 1984, CSI purchased approximately 378 acres of the FONTANA
PROPERTY. In 1988 and 1989, CSI acquired from third parties approximately 43 and
29 acres, respectively, of property previously owned by Kaiser Steel Corporation
and comprising a portion of the FONTANA PROPERTY. The 378, 43 and 29 acres of
the FONTANA PROPERTY formerly owned by Kaiser Steel Corporation and now owned by
CSI are hereinafter collectively referred to as the "CSI PROPERTY."
B. Pursuant to the judgment (the "1978 JUDGMENT") in Chino Basin
Municipal Water District v. City of Chino. et al., San Bernardino Superior
Court, Case No. RCV 51010 (the "WATER
<PAGE>
CASE"), non-agricultural overlying rights to the beneficial use of 2,930.274
acre feet of water annually from the safe yield of the Chino groundwater basin
was decreed as set forth at page 60, line 9 of Exhibit "D" to the 1978 JUDGMENT
(the "WATER RIGHTS"). The WATER RIGHTS are more specifically described in
Section II.B.8 and Exhibits "D" and "G" of the 1978 JUDGMENT.
C. KAISER has entered into Chino Basin Local Storage Agreements 9.0
and 9.1, which permit the storage of a total of 30,000 acre feet of overlying
water rights carried over from preceding years. As of June 30, 1994, 21,046.61
acre feet of water were in storage under those contracts and 2,930.274 acre-feet
of water was held as carryover water. Those contracts have expired and, as of
the date of this WATER RIGHTS ACKNOWLEDGMENT, KAISER is attempting to renew or
to replace those contracts. As used herein, the term "LOCAL STORAGE AGREEMENTS"
refers to Local Storage Agreements 9.0 and 9.1, as well as to any renewals or
replacements of those agreements that KAISER may obtain.
D. From 1984 through the date of this WATER RIGHTS ACKNOWLEDGMENT,
CSI has operated a steel processing plant on the CSI PROPERTY. From 1984 through
the date of this WATER RIGHTS. ACKNOWLEDGMENT, KAISER delivered water to CSI
pursuant to certain utility services agreements.
E. On or about August 25, 1992, CSI and the Chino Basin Watermaster
(the "WATERMASTER") filed a "Joint Motion to Interpret, Enforce, Carry-out,
Modify, Amend or Amplify the
2
<PAGE>
Judgment Herein" in the WATER CASE (the "JOINT MOTION"). KAISER disputed CSI's
claims in the JOINT MOTION.
F. On or about March 25, 1993, CSI filed "California Steel
Industries, Inc.'s Notice of Motion to Interpret, Enforce, Carry-out, Modify,
Amend, or Amplify Paragraph 7, Page 66 of Exhibit G of the 1978 Judgment" (the
"EXHIBIT G MOTION"). KAISER disputed CSI's claims in the EXHIBIT G MOTION. The
Court has not ruled on the EXHIBIT G MOTION.
G. On October 21, 1993, the California Regional Water Quality
Control Board, Santa Ana Region (the "RWQCB") adopted Resolution No. 93-72,
which was intended to allow KAISER to fulfill certain groundwater remediation
obligations described therein by participating in a desalter project being
undertaken by the Santa Ana Watershed Project Authority pursuant to the terms of
a "Salt Offset Agreement" (the "SALT OFFSET AGREEMENT"). CSI objected to the
SALT OFFSET AGREEMENT and filed a petition for a writ of mandate, which has now
been dismissed.
H. Concurrently with their execution of this WATER RIGHTS
ACKNOWLEDGMENT, the parties are entering into a "Settlement Agreement" (the
"SETTLEMENT AGREEMENT") and a Ground Water Indemnity Agreement (the "GROUNDWATER
INDEMNITY AGREEMENT"), for the purposes of resolving certain disputes and
allocating certain liabilities and potential liabilities as between them, and a
"Water Rights Agreement," for the purpose of resolving their disputes relating
to the WATER RIGHTS and
3
<PAGE>
carryover and storage rights associated therewith (the "WATER RIGHTS
AGREEMENT"). The PARTIES are entering into this WATER RIGHTS ACKNOWLEDGMENT for
the purpose of effectuating the foregoing Agreements.
IT IS THEREFORE agreed that:
1. Incorporation of defined terms.
Except as explicitly set forth herein, each of the terms
defined in the SETTLEMENT AGREEMENT and the exhibits to the SETTLEMENT AGREEMENT
used in this WATER RIGHTS ACKNOWLEDGMENT shall have the meaning ascribed to them
in the SETTLEMENT AGREEMENT and the exhibits to the SETTLEMENT AGREEMENT.
2. Acknowledgment of CSI WATER RIGHTS.
KAISER hereby recognizes CSI's sole ownership and exclusive
right to use the following portions of the WATER RIGHTS and formally
relinquishes any right title, claims or interest in said portions of the WATER
RIGHTS to CSI:
a. 1000 acre feet annually of the decreed WATER RIGHTS as of
August 17, 1984, including all right, title and interest to carried-over and
stored water resulting from an under exercise of those rights occurring on and
after August 17, 1984;
b. 300 acre feet annually of the decreed WATER RIGHTS as of
July 1, 1995, including all right, title and interest to carried-over and stored
water resulting from an under exercise of those rights occurring on and after
July 1, 1995;
4
<PAGE>
c. The unused balance of the 1000 acre feet of the decreed
WATER RIGHTS referred to at paragraph 2(a), above, consisting of 510.14 acre
feet of existing storage, as of June 30, 1994, held under the LOCAL STORAGE
AGREEMENTS; and
d. 3024.09 acre feet of KAISER's capacity storage right under
the LOCAL STORAGE AGREEMENTS, which provide, or it is anticipated will provide,
for a total storage capacity of 30,000.00 acre feet.
3. Acknowledgment of KAISER WATER RIGHTS.
CSI hereby recognizes KAISER's sole ownership and exclusive
right to use the following portions of the WATER RIGHTS and formally
relinquishes any right title, claims or interest in said portions of the WATER
RIGHTS to KAISER:
a. 2930.274 acre feet annually of the decreed WATER RIGHTS,
including all right, title and interest to carried-over and stored water
resulting from an under exercise of those rights from the date of the entry of
the 1978 JUDGMENT through August 17, 1984;
b. 1000 acre feet annually of the decreed WATER RIGHTS,
including all right, title and interest to carried-over and stored water
resulting from an under exercise of those rights, effective August 17, 1984, and
at all times thereafter;
c. 21,535.44 acre feet of stored water, as of June 30, 1994,
held under the LOCAL STORAGE AGREEMENTS with WATERMASTER;
5
<PAGE>
d. 1,930.274 acre-feet of carried over water: and
e. 26,975.91 acre feet of the capacity storage right in the
LOCAL STORAGE AGREEMENTS.
4. Acknowledgment of Joint WATER RIGHTS.
KAISER and CSI acknowledge that they have jointly held ownership of
the following WATER RIGHTS:
a. 930.274 acre feet annually of the decreed WATER RIGHTS,
including all right title and interest to carried-over and stored water
resulting from an under exercise of those rights, effective August 17, 1984 and
continuing through and including June 30, 1995; provided that KAISER had the
exclusive right to the use of the foregoing water, together with the rights to
carried-over and storage water resulting from the under exercise of those
rights.
b. 630.274 acre feet annually of the decreed WATER RIGHTS,
including all right, title and interest to carried-over and stored water
resulting from an under exercise of those rights, effective July 1, 1995 (the
"JOINT WATER RIGHTS"); provided that:
(1) Interim Period.
CSI shall have the first priority for use of the
JOINT WATER RIGHTS on its lands from July 1, 1995 through June 30, 2005 (the
"INTERIM PERIOD"), provided it first puts to use the 1,300 acre-feet referred to
at paragraphs 2(a)
6
<PAGE>
and 2(b) of this WATER RIGHTS ACKNOWLEDGMENT plus any water in CSI's carry-over
and/or storage account. KAISER shall have the right to use any portion of the
JOINT WATER RIGHTS not used by CSI during the INTERIM PERIOD. KAISER shall have
the exclusive right to carry over and store for its benefit, including
satisfaction of its obligations under the SALT OFFSET AGREEMENT, any unexercised
portion of the JOINT WATER RIGHTS during the INTERIM PERIOD.
(2) July 1, 2005 and thereafter.
KAISER shall have the first priority for the use of the
JOINT WATER RIGHTS on the KAISER PROPERTY, or in fulfillment of its obligations
under the SALT OFFSET AGREEMENT, from July 1, 2005 and thereafter (the "FINAL
PERIOD"), provided: (1) with respect to its use to fulfill its obligations under
the SALT OFFSET AGREEMENT, KAISER shall first exhaust any water it may have in
its storage account and then shall have put to beneficial use on the KAISER
PROPERTY, or used in fulfillment of its salt offset obligations, its right to
the 1000 acre feet of water referred to in paragraph 3(b) above before making
any use of the JOINT WATER RIGHTS and (2) with respect to its use on the KAISER
PROPERTY, KAISER shall first exhaust its right to the 1000 acre feet referred to
at paragraph 3(b) above and then any water that it may have in its storage
account before making any use of the JOINT WATER RIGHTS. CSI shall have the
right to use any portion of the JOINT WATER R1GHTS not used by KAISER during the
7
<PAGE>
FINAL PERIOD. KAISER shall have the right to carry over and store for its sole
benefit any unexercised portion of the JOINT WATER RIGHTS during the FINAL
PERIOD.
(3) KAISER's use of the JOINT WATER RIGHTS, and any
water carried over and stored for KAISER'S benefit as a result of the JOINT
WATER RIGHTS, is subject to KAISER's obligations under the WATER RIGHTS
AGREEMENT.
Dated: _________________, 1995 KAISER VENTURES, INC.
By:________________________________
Dated: _________________, 1995 CALIFORNIA STEEL INDUSTRIES, INC.
By:________________________________
APPROVED AS TO FORM:
Dated: _________________, 1995 BEST, BEST & KRIEGER
By:________________________________
Arthur L. Littleworth
Anne T. Thomas
Gene Tanaka
Attorneys for KAISER
Ventures, Inc.
Dated: _________________, 1995 LAW OFFICES OF JOHN D. MUSICK, JR.
AND ASSOCIATES
By:________________________________
John D. Musick, Jr.
Attorneys for California Steel
Industries, Inc.
8
<PAGE>
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
On _____________, 1995 before me, ______________________, personally appeared
________________________ personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose names are subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
----------------------------------
Signature of Notary Public
9
<PAGE>
John Musick, Jr.
and Associates
2049 Century Park East
Suite 1100
Los Angeles, CA 90067
(310) 552-1974
Attorneys for:
Intervenor California Steel
Industries, Inc.
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN BERNARDINO
WEST DISTRICT
CHINO BASIN MUNICIPAL WATER DISTRICT, )
)
) Case No. RCV 51010
Plaintiff, )
) NOTICE OF WITHDRAWAL
v. ) OF MOTION
)
CITY OF CHINO, ET AL., )
)
Defendants. )
TO ALL PARTIES AND THEIR ATTORNEYS:
Notice is hereby given that Intervenor California Steel Industries, Inc.
("CSI") does hereby withdraw from the Joint Motion filed on or about August 25,
1992 with Plaintiff Chino Basin Municipal Water District as Chino Basin
Watermaster, and entitled "Joint Motion to Interpret, Enforce, Carryout, Modify,
Amend, or Amplify the Judgment Herein."
Notice is further given that CSI does hereby withdraw and dismiss its
Motion filed on or about March 25, 1993 and entitled
-1-
<PAGE>
"Motion to Interpret, Enforce, Carryout, Modify, Amend, or Amplify Paragraph 7,
Page 66 of Exhibit G of the Judgment."
Dated:__________________
THE LAW OFFICES OF JOHN D.
MUSICK, JR. AND ASSOCIATES
By:
----------------------------
Attorneys for California
Steel Industries, Inc.
<PAGE>
RECORDING REQUEST
California Steel Industries, Inc.
14000 San Bernardino Avenue
Fontana, California 92335
Attn:
AND WHEN RECORDED MAIL TO
California Steel Industries, Inc.
Name 14000 San Bernardino Avenue
Fontana, California 92335
Street Attn:
Address
City &
State __________________________________
MAIL TAX STATEMENTS TO
California Steel Industries, Inc.
Name 14000 San Bernardino Avenue
Fontana, California 92335
Street Attn:
Address
City &
State __________________________________
- --------------------SPACE ABOVE THIS LINE FOR RECORDER'S USE--------------------
[ILLEGIBLE] Corporation Quitclaim Deed
[ILLEGIBLE] [ILLEGIBLE]
- --------------------------------------------------------------------------------
The undersigned grantor(s) declares(s):
Documentary transfer tax is $ 0.
( ) computed on full value of property conveyed, or
( ) computed on full value less value of liens and encumbrances remaining
at time of sale.
( ) Unincorporated area: ( ) City of _______________________, and
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
Kaiser Resources Inc., ("Grantor")
a corporation organized under the laws of the State of Delaware
hereby REMISES, RELEASES AND QUITCLAIMS to
California Steal Industries, Inc., a California corporation ("Grantee")
the following described real property in the unicorporated area Country of San
Bernardino , State of California:
See Exhibit "A" and Exhibit "1"
attached hereto.
In Witness Whereof, said corporation has caused its corporation name and seal
to be affixed hereto and this instrument to be executed by its ______________
President and _____________ Secretary thereunto duly authorized.
Dated: ________________________________ Kaiser Resources Inc., a Delaware
Corporation
STATE OF CALIFORNIA ) By __________________________________
COUNTY OF ____________________________) SS President
) By __________________________________
On _________________ before me, the Secretary
undersigned, a Notary Public in and for
said State, personally appeared ________
________________________________________
personally known to me or proved to me
on the basis of satisfactory evidence to
be the person who executed the within
instrument as the ______________________
President, and _________________________
________________________________________
personally known to be or proved to me
on the basis of satisfactory evidence to
be the person who executed the within
instrument as the ______________________
Secretary of the Corporation that
executed the within instrument and
acknowledged to me that such corporation
executed the within instrument pursuant
to its by-laws or a resolution of its
board of directors. WITNESS my hand and
official seal.
Signature ______________________________
[ILLEGIBLE]
- --------------------------------------------------------------------------------
Title Order No._________________________ Escrow or Loan No. ____________________
- --------------------------------------------------------------------------------
MAIL TAX STATEMENTS AS DIRECTED ABOVE
<PAGE>
EXHIBIT "A"
Any and all interest of Grantor in and to all pipes, pipelines, conduits or
other facilities (the "Pipelines") used to convey or drain sewage, industrial
wastes or surface water on, under or over that certain real property described
in Exhibit "1" attached hereto.
* * * *
This quitclaim is being made to settle a dispute between Grantor and Grantee
with respect to the ownership of the above described Pipelines. Grantee claims
such Pipelines were already conveyed by Grantor to Grantee pursuant to the terms
of that certain Grant Deed recorded on August 20, 1984 as Instrument No.
94-197915 in the Official Records of San Bernardino County, California. The
purpose of this Quitclaim Deed is to eliminate any ambiguity that may exist
concerning the ownership of said Pipelines.
-1-
<PAGE>
EXHIBIT "1"
Parcel 2 on Parcel Map 8682 as recorded in Book 89 of Parcel Maps, Pages 37
through 43, inclusive, Records of San Bernardino County, California.
-2-
<PAGE>
RECORDING REQUESTED BY:
Richard W. Esterkin
Morgan, Lewis & Bockius
801 South Grand Avenue
22nd Floor
Los Angeles, California 90017
AND WHEN RECORDED MAIL TO:
Richard W. Esterkin
Morgan, Lewis & Bockius
801 South Grand Avenue
22nd Floor
Los Angeles, California 90017
- --------------------------------------------------------------------------------
AMENDMENT TO PART B OF EXHIBIT A TO GRANT DEED -
AND EXCEPTIONS IN FAVOR OF GRANTOR
This Amendment to Part B of Exhibit A to Grant Deed - Reservations
and Exceptions in Favor of Grantor (the "Amendment") is made as of this first
day of June, 1995 by and between Kaiser Ventures Inc. ("Kaiser"), a Delaware
corporation, successor-in-interest to Kaiser Steel Corporation ("KSC"), and
California Steel Industries, Inc., a Delaware corporation ("CSI"), with respect
to the following facts and circumstances.
R E C I T A L S
A. On August 20, 1984, KSC conveyed to CSI certain real property
situated in the County of San Bernardino, State of California. Said real
property was conveyed pursuant to that certain grant deed (the "Kaiser-CSI Grant
Deed") recorded on August 20, 1984, as Instrument No. 84-197915 in the Official
Records of San Bernardino County.
B. Exhibit A to the Kaiser-CSI Grant Deed contained, in addition to
the legal description of the real property being conveyed, certain reservations
of easements and other exceptions which were set forth in Part B to said Exhibit
A, entitled "Reservations and Exceptions in Favor of Grantor" (referred to
hereinafter as the "Reservations and Exceptions").
C. Kaiser and CSI now desire to amend the Reservations and
Exceptions to reflect certain new agreements between the parties.
<PAGE>
NOW, THEREFORE in view of the foregoing and for other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
agree as follows:
1. The Reservations and Exceptions, set forth in Part B of Exhibit A
to the Kaiser-CSI Grant Deed, are hereby amended as follows:
a. Paragraph 1 of Part B of Exhibit A to the Kaiser-CSI Grant
Deed is hereby deleted in its entirety.
b. Paragraph 2 of Part B of Exhibit A to the Kaiser-CSI Grant
Deed is hereby deleted in its entirety as the easements provided for therein
have expired in accordance with their terms.
c. Paragraph 3(a) of Part B of Exhibit A to the Kaiser-CSI
Grant Deed is hereby deleted in its entirety as the easements provided for
therein have expired in accordance with their terms.
d. Paragraph 3(b) of Part B of Exhibit A to the Kaiser-CSI
Grant Deed is not affected by this Amendment.
e. The rights reserved by Grantor pursuant to paragraph 3(c)
of Part B of Exhibit A to the Kaiser-CSI Grant Deed are hereby limited such
that, from and after the date of this Amendment, Grantor shall have the
following rights, and only the following rights, by reason of said paragraph:
(1) An easement for the use of all sanitary sewer lines,
both surface and subsurface, and all replacements or substitutions therefore,
for purposes of conveying or draining sewage generated by Kaiser or its lessees
from any area owned by Kaiser lying north of the Servient Tenement. CSI shall
repair, maintain or replace, as necessary, such sewer lines in accordance with
the following terms and conditions: (A) any such repair, maintenance or
replacement shall be performed in a manner which will allow Kaiser to continue
to use such sewer lines as repaired, maintained or replaced; (B) CSI shall have
no obligation to repair, replace, upgrade or improve such sewer lines so as to
provide Kaiser with any sewage disposal capacity in excess of the capacity used
by Kaiser as of the date of this Amendment; (C) to the extent there is sewage
disposal capacity in excess of that presently used by CSI and Kaiser, CSI shall
have priority over Kaiser to any such excess capacity. Such easement shall
expire immediately and automatically without any act by any party as soon as CSI
ceases to have its sewage treated at the Kaiser Sewage Treatment Plant as
defined in the Amended Services Agreement referred to subparagraph 4(d) below;
provided that CSI
<PAGE>
shall provide KAISER with one year written notice of its intention to cease
having its sewage treated at the Kaiser Sewage Treatment Plant.
(2) a nonexclusive easement for all ditches and storm
water drains existing as of August 17, 1984, and all replacements or
substitutions therefore, for purposes of conveying or draining surface water
from any area lying north of the Servient Tenement.
f. The rights reserved by Grantor pursuant to paragraph 3(d)
of Part B of Exhibit A to the Kaiser-CSI Grant Deed are hereby limited such
that, from and after the date of this Amendment, Grantor shall have a
nonexclusive easement for use of all electrical and other utility transmission
facilities existing as of August 17, 1984 and all replacements or substitutions
therefor, and no other rights, by reason of said paragraph.
g. Paragraph 3(e) of Part B of Exhibit A to the Kaiser-CSI
Grant Deed is not affected by this Amendment.
h. Paragraphs 4(a) and 4(b) of Part B of Exhibit A to the
Kaiser-CSI Grant Deed are not affected by this Amendment.
i. Paragraph 4(c) of Part B of Exhibit A to the Kaiser-CSI
Grant Deed is not affected by this Amendment, except to the extent that:
(1) this Amendment recognizes that the easements granted
under paragraph B(3)(a) of Part B of Exhibit A to the Kaiser-CSI Grant Deed have
expired according to their terms, and
(2) this Amendment limits the term of the easement
granted under paragraph B(3)(c) of Part B of Exhibit A to the Kaiser-CSI Grant
Deed as provided at paragraph 1(e) of this Amendment.
j. Paragraph 4(d) of Part B of Exhibit A to the Kaiser-CSI
Grant Deed is not affected by this Amendment, except that the parties
acknowledge that it was their intent in said paragraph that the reference
therein to "Exhibit B to the Services Agreement of even date between Grantor and
Grantee" included all extensions and replacements of said agreement including,
but not limited to, Exhibit B to the Amended Services Agreement dated as of
January 1, 1995 between Kaiser Ventures, Inc. and California Steel Industries,
Inc. being executed
3
<PAGE>
concurrently with this Amendment, and all extensions and replacements of Part B
of Exhibit A to the Kaiser-CSI Grant Deed.
k. Paragraph 4(e) of Part B of Exhibit A to the Kaiser-CSI
Grant Deed is not affected by this Amendment.
1. Paragraph 5(a) of Part B of Exhibit A to the Kaiser-CSI
Grant Deed is hereby deleted in its entirety since such easement has expired in
accordance with its terms.
m. Paragraph 5(b) of Part B of Exhibit A to the Kaiser-CSI
Grant Deed is not affected by this Amendment.
2. Except as amended hereby, the Reservations and Exceptions shall
remain in full force and effect.
3. Notices.
Any and all notices between the parties provided for or
permitted under this Amendment, or by law, shall be in writing and shall be
deemed duly served when personally delivered to a party, or, in lieu of such
personal service, when deposited in the United States mail, certified, postage
prepaid, addressed to such party at the following addresses:
a. If to CSI:
California Steel Industries, Inc.
14000 San Bernardino Avenue
P.O. Box 5080
Fontana, California
Attention: Mr. James Declusin
with a copy to:
Morgan, Lewis & Bockius
801 South Grand Avenue
22nd Floor
Los Angeles, California 90017
Attention: Richard W. Esterkin, Esq.
b. If to KAISER or RECOVERY:
Kaiser Ventures Inc.
3633 East Inland Empire Blvd.
Suite 850
Ontario, California 91764
Attention: Terry L. Cook, Esq.
4
<PAGE>
with a copy to:
Lindquist, Vennum & Christensen
600 17th Street
Suite 2125
Denver, Colorado 80202-5401
Attention: Craig A. Christensen, Esq.
or to such other place as may from time to time be specified in a notice to each
of the parties hereto given pursuant to this paragraph as the address for
service of notice on such party. For the purposes of this Amendment, delivery by
facsimile shall be deemed to be personal delivery of any notice hereunder.
IN WITNESS WHEREOF, the parties have caused this Amendment to
be executed as of the date and year first above written.
KAISER VENTURES INC.,
a Delaware Corporation
By: /s/ Daniel N. Larson
-------------------------------------
President
By: /s/ Terry L. Cook
-------------------------------------
Secretary
CALIFORNIA STEEL INDUSTRIES, INC.,
a Delaware Corporation
By: /s/ Marcus Mota e Silva
-------------------------------------
President
By: /s/ Matthew MacFadden
-------------------------------------
Secretary
5
<PAGE>
APPLICATION FOR ASSIGNMENT OF CAPACITY CONTRACT
TO: Chino Basin Municipal Water District
9400 Cherry Avenue
Building A
Fontana, California 92335
The undersigned hereby make application for assignment of contracts for
capacity in Chino Basin Municipal Water District's non-reclaimable industrial
wastewater system pursuant to Ordinance NO. 52 as adopted July 1, 1992, and as
said Ordinance has been amended to date.
1. Name of Assignor: Kaiser Resources, Inc. ("KRI"), sucessor in interest to
Kaiser Steel Corporation ("KSC").
Address: 8300 Utica Avenue, Ranche Cucamonga, California 91730
Name of Assignee: California Steel Industries, Inc. ("CSI")
Address: 14000 San Bernardino Ave., Fontana, California 92335
2. Assignor's contact: Rob Kurtman
Address: 8300 Utica Avenue, Ranche Cucamonga, California 91730
Telephone: (909) 948-3143
Assignee's contact: Dennis Poulsen
Address: 14000 San Bernardino Ave., Fontana, California 92335
Telephone: (909) 380-4300
3. Number of capacity units currently held by Assignor: 43 units in three
contracts dated August 29, 1968, September 23, 1970 and May 3, 1970.
Number of capacity units to be assigned: 27 units in two contracts dated
August 22, 1968 and September 22, 1970.
One capacity unit equals 45 gallons per minute maximum in
instantaneous flow.
4. Date assignment of capacity required: October 31, 1995
5. Assignor does not hold or plan to obtain Option Agreements.
<PAGE>
6. Assignee's industry that will create non-reclaimable wastewater:
Steel manufacturing
7. A brief description of Assignee's industrial process that will
create non-reclaimable wastewater:
steel manufacturing which utilizes hydraulic fluids from operations,
cooling waters and rolling solutions resulting in acid rinse wastewater,
spent pickle liquor, and alkaline wastewater, which are part of the
process to produce hot rolled steel sheets and coils, cold rolled steel
sheets and coils, plate and galvanized rolled steel sheets and coils.
8. The address to which said assignment of capacity contracts will be
appurtenant:
14000 San Bernardino Ave.
Fontana, California 92335
9. The legal description and map of the real property to which the assigned
capacity contracts will be appurtenant is set forth on Exhibits A and B.
10. The "Existing Industry Permit for Industrial Wastewater Discharge",
"Additional Information Questionnaire" and the "Industrial Wastewater
Critical Parameter Report Form" are already on file.
ASSIGNOR: KAISER VENTURES INC.
----------------------------------
BY: /s/ Daniel N. Larson Pres. - CEO
----------------------------------------
DATE: October 5, 1995
--------------------------------------
ASSIGNEE:
----------------------------------
BY: /s/ Marcus Mota e Silva
----------------------------------------
DATE:
--------------------------------------
<PAGE>
EXHIBIT A
All of the real property owned by California Steel Industries comprising of
approximately 450 acres located on the north and south side of San Bernardino
Avenue in the County of San Bernardino, State of California described more
specifically as follows:
Parcel 2 of Parcel Map 8682 in Book 89 of Parcel Maps, Pages 37 through
43, Records of San Bernardino County, California
AND
Lot 1008 and a portion of Lot 1009, Semi-tropic Land and Water Company in
the County of San Bernardino, State of California, as per plat recorded in
Book 11 of Maps, page 12, records of said County, lying north of the
following described line:
Commencing at the northeast corner of said Lot 1008, said point being the
intersection of the centerlines of San Bernardino Avenue and Calabash
Avenue: thence along the centerline of Calabash Avenue south 0 (degree)
07' 38" west, 1035.93 feet to the point of beginning: thence on a line
parallel to the centerline of San Bernardino Avenue, south 89 (degree) 45'
53" west, 1410.51 feet to the west line of said Lot 1009.
Together with that portion of Mulberry Avenue, 30 feet wide, adjoining
said lots on the west, extending from a line 168.07 feet south of the
center line of San Bernardino Avenue, to a line 40 feet north of the north
line of Colton Avenue as delineated on the above described map, as said
Avenue was vacated by the Board of Supervisors of the County of San
Bernardino by document recorded in Book 4220, page 576, Official Records.
Note: Areas and distances are computed to street centers.
AND
Parcel A:
Parcel 1 and Parcel 2 of Parcel Map. No 9818, as per plat recorded in Book
104 of Parcel Maps, pages 88 to 91, inclusive records of the County
Recorder of San Bernardino County, California.
<PAGE>
Parcel B:
The following easements which were reserved in that certain Grant Deed,
dated August 17, 1984, wherein Grantor is the Grantor and California Steel
Industries, Inc. is the Grantee, which Grant Deed was recorded in the
records of the County Recorder of San Bernardino County, California, on
August 29, 1984, as instrument No. 84-197915, Official Records, but only
to the extent necessary to serve the buildings which are presently located
on Parcel 1 and Parcel 2 of Parcel Map No. 9818, in the County of San
Bernardino, State of California, and up to 700,000 square feet of
additional buildings on such parcels:
(A) The easement described in subparagraph B.3(c) of Exhibit "A" of such
Grant Deed;
(B) The easements described in subparagraph B.3(d) of Exhibit "A" of such
Grant Deed;
Parcel C:
A nonexclusive easement, in the County San Bernardino, State of
California, for the use of all sanitary sewer, domestic water and
electrical transmission facilities which (A) now exist on the following
described real property and (B) which serve the real property described in
Parcel "A" above.
The following real property is affected by the aforementioned easement:
Parcel 1 and Parcel 3 of Parcel Map 8682, as recorded in Parcel Map No.
89, pages 37 through 43, inclusive, records of San Bernardino County,
California.
The aforementioned easement is appurtenant to the real property described
in Parcel "A" above, and was granted by an instrument recorded May 16,
1986 as instrument No. 86-128269, Official Records.
Parcel D:
A nonexclusive easement in the County of San Bernardino, State of
California, for the use of all storm drain facilities which (A) now exist
on the following described real property and (D) which serve the real
property described in Parcel "A" above.
The following real property is affected by the aforementioned easement:
<PAGE>
All of that certain real property owned on the date hereof by Kaiser Steel
Corporation, (1) or any of its subsidiaries, lying south of San Bernardino
Avenue, north of Valley Boulevard (Colton Avenue), west of Cherry Avenue
and east of Calabash, within an unincorporated portion of San Bernardino
County near the City of Fontana California.
The aforementioned easement is appurtenant to the real property described
in Parcel "A" above, and was granted by an instrument recorded May 16,
1986 as instrument No. 86-128269 Official Records.
A more visual description of the property herein described is attached as
Exhibit B for your convenience.
- ------------
(1) Kaiser Steel Corporation ("KSC") is now known as Kaiser Resources, Inc.
("KRI"). This language was taken from a deed of the property to California
Steel Industries, Inc. dating to the time when KRI was known as KSC.
<PAGE>
[FLOOR MAP]
EXHIBIT B
<PAGE>
GROUNDWATER INDEMNITY AGREEMENT
This GROUNDWATER INDEMNITY AGREEMENT is entered into as of June 1, 1995,
by and between Kaiser Ventures Inc. ("KAISER") and California Steel Industries,
Inc. ("CSI") with reference to the following facts:
RECITALS
A. From 1942 until 1983, Kaiser Steel Corporation operated a large
steel production and processing facility on approximately 2,000 acres of land
near Fontana, California, owned by Kaiser Steel Corporation (the "FONTANA
PROPERTY"). Pursuant to an Agreement of Purchase and Sale entered into effective
as of August 17, 1984, CSI purchased approximately 378 acres of the FONTANA
PROPERTY. In 1988 and 1989, CSI acquired from third parties approximately 43 and
29 acres, respectively, of property previously owned by Kaiser Steel Corporation
and comprising a portion of the FONTANA PROPERTY. The 378, 43 and 29 acres of
the FONTANA PROPERTY formerly owned by KAISER Steel Corporation and now owned by
CSI are hereinafter collectively referred to as the "CSI PROPERTY."
B. As a result of the operations of Kaiser Steel Corporation at the
FONTANA PROPERTY, various contaminants may have been released into the
environment, including the soil underlying portions of the CSI PROPERTY.
<PAGE>
C. On or about November 16, 1992, CSI and the California State
Department of Toxic Substances Control ("DTSC") entered into a "Voluntary
Enforceable Agreement" (the "VEA"). The VEA establishes a procedure pursuant to
which CSI will investigate the type and extent of the contamination present at
the CSI PROPERTY and, if necessary, remediate the CSI PROPERTY. At this time, it
is unclear whether DTSC will require CSI to investigate or remediate the
groundwater underlying the CSI PROPERTY.
D. Pursuant to the Judgment in Chino Basin Municipal Water District
v. City of Chino. et al., San Bernardino Superior Court, Case No. RCV 51010 (the
"1978 JUDGMENT"), non-agricultural overlying rights to the beneficial use of
2,930.274 acre-feet of water annually from the safe yield of the Chino
groundwater basin (the "CHINO BASIN") was decreed as set forth at page 60, line
9 of Exhibit "D" to the 1978 JUDGMENT (the "WATER RIGHTS"). The WATER RIGHTS are
more specifically described in Section II.B.8 and Exhibits "D" and "G" of the
1978 JUDGMENT.
E. On August 26, 1987, the California State Regional Water Quality
Control Board, Santa Ana Region (the "RWQCB"), pursuant to its authority under
Section 13304 of the California Water Code, issued Cleanup and Abatement Order
("CAO") No. 87-121, which required KAISER to investigate groundwater in the
vicinity of the FONTANA PROPERTY. As a result of the investigation undertaken by
KAISER pursuant to that order, and
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<PAGE>
other investigations undertaken by KAISER prior to the issuance of that order, a
plume of groundwater containing elevated levels of total dissolved solids
("TDS"), total organic compounds ("TOC") and sulfates was discovered to be
emanating from the FONTANA PROPERTY (the "PLUME").
F. The Santa Ana Watershed Project Authority ("SAWPA") has
undertaken a project to remove excess salt from the groundwater of the CHINO
BASIN by means of the construction and operation of one or more desalting
plants, to be located in the lower CHINO BASIN, which would remove excess salts
from the groundwater, dispose of the resulting brines in the Santa Ana Regional
Interceptor ("SARI") line, and make the reclaimed ground water available for
use.
G. KAISER has proposed that it fulfill its groundwater remediation
obligations imposed by CAO No. 87-121 and RWCQB Order No. 91-40, which modifies
Order No. 87-121, by participating in SAWPA's desalter project, both by making a
onetime cash contribution for the benefit of the desalter and also by assigning
or abandoning to the Chino Basin Water District as Chino Basin Watermaster
("WATERMASTER"), over a period of 25 years, 25,000 acre-feet of water derived
from the WATER RIGHTS.
H. On March 5, 1993, the RWQCB adopted Resolution No. 93-19, which
was intended to discharge CAO No. 87-121 and Order No. 91-40 and to allow KAISER
to fulfill its groundwater remediation obligations imposed therein by
participating in
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<PAGE>
SAWPA's desalter project. Resolution No. 93-19 was made contingent on the
approval, prior to September 5, 1993, by the Superior Court of San Bernardino
County of certain rules and regulations of WATERMASTER, which would allow the
assignment or abandonment of stored water by KAISER to the WATERMASTER for the
benefit of the desalter project.
I. CSI objected to the salt-offset agreement set forth in Resolution
No. 93-19, and brought an action against the RWQCB entitled California Steel
Industries, Inc. v. California Regional Water Quality Control Board/Santa Ana
Region, San Bernardino Superior Court, Case No. SCV 04837. Subsequently, the
Court did not timely approve the necessary WATERMASTER rules and regulations to
permit the abandonment or assignment of water from KAISER to the WATERMASTER for
the benefit of the desalter, and Resolution 93-19 expired by its terms on
September 5, 1993.
J. On October 21, 1993, the RWQCB adopted Resolution No. 93-72,
which was intended to discharge CAO No. 87-121 and CAO No. 91-40, and allow
KAISER to fulfill its groundwater remediation obligations with respect to PLUME,
by participating in SAWPA's desalter project pursuant to the terms of an
agreement with the RWQCB (the "SALT OFFSET AGREEMENT").
K. CSI has entered into a "Settlement Agreement and Optional
Guarantee of Performance" with the RWQCB, which provides, in substance, that, if
KAISER defaults under the SALT OFFSET AGREEMENT and the RWQCB issues a cleanup
and abatement
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<PAGE>
order to CSI, CSI will have the option of assuming KAISER's unsatisfied
obligations under the SALT OFFSET AGREEMENT in full satisfaction of CSI's
obligations, if any, to investigate and remediate the PLUME (the "GUARANTY").
L. Concurrently with their execution of this GROUNDWATER INDEMNITY
AGREEMENT, the PARTIES are entering into a Settlement Agreement for the purpose
of resolving a number of disputes as between them (the "SETTLEMENT AGREEMENT").
M. The PARTIES would like to compromise and settle their disputes
and provide for the allocation of responsibility as between them with respect to
any groundwater contamination that later may be found to have originated from
any portion of the FONTANA PROPERTY.
IT IS THEREFORE AGREED as follows:
1. Incorporation of defined terms.
Except as explicitly set forth herein, each of the terms defined in
the SETTLEMENT AGREEMENT and the exhibits to the SETTLEMENT AGREEMENT used in
this GROUNDWATER INDEMNITY AGREEMENT shall have the meaning ascribed to them in
the SETTLEMENT AGREEMENT and the exhibits to the SETTLEMENT AGREEMENT.
2. Allocation of groundwater liability.
a. KAISER shall indemnify and hold CSI harmless against any
liability, expense or damage arising from any claim concerning any of the
following:
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<PAGE>
(1) the PLUME,
(2) any groundwater contamination that originated from
any portion of the KAISER PROPERTY, and
(3) any groundwater contamination caused by the element
chrome originally released by KAISER in, under or on the FONTANA PROPERTY.
b. CSI shall indemnify and hold KAISER harmless against any
liability, expense or damage arising from any claim concerning any groundwater
contamination that originated from any portion of the CSI PROPERTY except for
either of the following:
(1) the PLUME, or
(2) any groundwater contamination caused by the element
chrome originally released by KAISER in, under or on the FONTANA PROPERTY.
c. Notwithstanding the foregoing, in the event that either CSI
or KAISER engage in any groundwater investigation, the party engaging in such
investigation shall bear the cost of such investigation unless and until it is
determined that there exists contamination in the groundwater such that the
party conducting such investigation would be entitled to indemnification under
the provisions of paragraphs 2(a) or 2(b), above. From and after that date, the
party required to indemnify the party who conducted the groundwater
investigation shall reimburse the party who conducted the
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<PAGE>
groundwater investigation for the costs of such investigation incurred after
that date.
d. The indemnification obligations provided for herein shall
include any expenses incurred by either CSI or KAISER for the purpose of
remediating the matters referred to herein as well as any liability that either
CSI or KAISER may have to any third party by reason of such matters. The
indemnification obligations provided for herein shall exclude any depreciation
in the value of the parties' respective properties as well as any obligation to
reimburse a party for any increased general, administrative overhead costs that
such party may incur by reason of any groundwater contamination that may exist,
such as salary reimbursement for the time spent by employees of the parties in
connection with groundwater investigation or remediation activities.
e. As used in this paragraph 2, the term "claim" refers to any
assertion by any third party that either of CSI or KAISER are liable to such
third party as a result of the matters described herein and to any expenses that
either of CSI or KAISER may incur for the purpose of remediating any groundwater
contamination as the result of the assertion of such claim.
3. Representations and warranties.
a. KAISER represents and warrants that:
(1) it is unaware of any groundwater contamination that
it reasonably believes would require
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<PAGE>
investigation or remediation emanating from the FONTANA PROPERTY, other than the
PLUME.
(2) it intends to perform its obligations under the SALT
OFFSET AGREEMENT by providing a portion of the water to which it is entitled by
reason of the KAISER WATER RIGHTS to the SAWPA desalter project, and
(3) it has sought and obtained the advice of counsel
with respect to the provisions of this GROUNDWATER INDEMNITY AGREEMENT.
b. CSI represents and warrants that:
(1) it is unaware of any groundwater contamination that
it reasonably believes would require investigation or remediation emanating from
the KAISER PROPERTY or the CSI PROPERTY, other than the PLUME,
(2) it is unaware of any groundwater test results
indicating the presence of chrome in groundwater in, under or emanating from the
FONTANA PROPERTY, other than as reported by Montgomery Engineers to KAISER, and
(3) it has sought and obtained the advice of counsel
with respect to the provisions of this GROUNDWATER INDEMNITY AGREEMENT.
4. Dismissal of litigation.
Within seven days following the effective date of this
GROUNDWATER INDEMNITY AGREEMENT as provided in paragraph 6, below, CSI shall
file a dismissal, with prejudice, of Case No.
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<PAGE>
SCV 04837 in the form attached hereto as Exhibit "A." Each party to the
foregoing case shall bear their own costs and attorneys' fees incurred with
respect to that case.
5. Future assurances.
Subject to its right to assert its rights with respect to the
CSI WATER RIGHTS, CSI agrees:
a. to cease, desist, and refrain from any and all present or
future efforts, undertakings, attempts, actions, allocations, claims, petitions,
writs, or any court action, or actions in any forum whatsoever, which directly
or indirectly interferes, obstructs, hinders, prevents, impedes, delays or
interrupts performance of Resolution No. 93-72 or the SALT-OFFSET AGREEMENT,
including the assignment or abandonment of water rights for the benefit of the
SAWPA desalter program and the consummation of the SAWPA agreement;
b. not to challenge or oppose the action of the Advisory
Committee of the WATERMASTER, the WATERMASTER or the Court having jurisdiction
over the 1978 JUDGMENT implementing the assignment or abandonment of the WATER
RIGHTS for the benefit of the desalter project; and
c. to refrain from all efforts to interfere with CAO No.
87-121 and Order 91-40, any efforts before the legislature, any efforts before
any other courts, forums or public or private entities of any sort, or any and
all efforts to interfere with KAISER's water usage, diversion, sale or
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<PAGE>
consumption in any manner, shape or form for the purpose of permitting KAISER to
comply with its obligations under Order No. 93-72 and the SALT OFFSET AGREEMENT.
Nothing contained herein shall preclude CSI from entering into, and exercising
its rights under, the GUARANTY.
6. Conditions to effectiveness.
This GROUNDWATER INDEMNITY AGREEMENT shall be effective upon
the SETTLEMENT AGREEMENT becoming effective.
7. Amendment.
This GROUNDWATER INDEMNITY AGREEMENT cannot be modified except
by written documents signed by all of the PARTIES.
8. Choice of laws.
This GROUNDWATER INDEMNITY AGREEMENT shall in all respects be
interpreted, enforced, and governed by and under the internal laws of the State
of California.
9. Construction.
This GROUNDWATER INDEMNITY AGREEMENT has been mutually
drafted. The language of this GROUNDWATER INDEMNITY AGREEMENT shall be construed
as a whole according to a fair meaning, and not strictly for or against any of
the PARTIES.
10. Attorney's fees.
In the event that any Agreeing Party breaches this GROUNDWATER
INDEMNITY AGREEMENT, the breaching party or parties shall pay each prevailing
party all costs of any action or
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<PAGE>
preceding for damages and/or enforcement, including reasonable attorneys' fees
and costs.
11. Integration.
This GROUNDWATER INDEMNITY AGREEMENT is part of the SETTLEMENT
AGREEMENT and is subject to its terms and conditions. Except as explicitly set
forth in the SETTLEMENT AGREEMENT, this GROUNDWATER INDEMNITY AGREEMENT
constitutes the final and complete agreement of the parties hereto with respect
to the subject matter hereof and supersedes all prior or contemporaneous
negotiations, promises, covenants, agreements or representations concerning any
matters directly, indirectly or collaterally related to the subject matter of
this GROUNDWATER INDEMNITY AGREEMENT. The parties hereto have expressly and
intentionally included in this GROUNDWATER INDEMNITY AGREEMENT and the
SETTLEMENT AGREEMENT all collateral or additional agreements which may, in any
manner, touch or relate to any of the subject matter of this GROUNDWATER
INDEMNITY AGREEMENT and, therefore, all promises, covenants and agreements,
collateral or otherwise, are included herein and therein. It is the intention of
the parties to this GROUNDWATER INDEMNITY AGREEMENT that it and the SETTLEMENT
AGREEMENT shall constitute an integration of all their agreements, and each
understands that in the event of any subsequent litigation, controversy or
dispute concerning any of its terms, conditions or provisions, no party hereto
shall be permitted to offer or introduce any oral or extrinsic evidence
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<PAGE>
concerning any other collateral or oral agreement between the parties not
included herein or in the SETTLEMENT AGREEMENT.
12. Waiver.
No waiver by any party hereto of any provision hereof shall
be deemed to be a waiver of any other provision hereof or of any subsequent
breach of the same or any other provision hereof.
13. Successors.
This GROUNDWATER INDEMNITY AGREEMENT shall be binding upon and
inure to the benefit of, and be enforceable by, the parties hereto and their
respective administrators, trustees, executors, personal representatives,
successors and permitted assigns.
14. Counterparts.
This GROUNDWATER INDEMNITY AGREEMENT may be executed in
counterparts by the PARTIES and shall become effective and binding at such time
as all of the PARTIES have signed a counterpart of this GROUNDWATER INDEMNITY
AGREEMENT.
WHEREFORE, the parties hereto have executed this GROUNDWATER
INDEMNITY AGREEMENT as of the date and year set forth above.
Dated: October 5, 1995 KAISER VENTURES INC.
By: /s/ Daniel N. Larson
------------------------
(Signatures Continued-Next Page)
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<PAGE>
Dated: _______, 1994 CALIFORNIA STEEL INDUSTRIES, INC.
By: /s/ Marcus Mota e Silva
------------------------
APPROVED AS TO FORM AND CONTENT:
Dated: Oct. 17, 1995 BEST, BEST & KRIEGER
By: /s/ Arthur L. Littleworth
--------------------------
Arthur L. Littleworth
Anne T. Thomas
Gene Tanaka
Attorneys for KAISER
Ventures, Inc.
Dated: Oct. 24, 1995 LAW OFFICES OF JOHN D. MUSICK, JR.
and ASSOCIATES
By: /s/ John D. Musick
------------------------
John D. Musick, Jr.
Attorneys for California
Steel Industries, Inc.
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<PAGE>
AMENDED SERVICES AGREEMENT
dated as of January 1, 1995
between
KAISER VENTURES INC.
and
CALIFORNIA STEEL INDUSTRIES, INC.
<PAGE>
AMENDED SERVICES AGREEMENT
THIS AMENDED SERVICES AGREEMENT ("Agreement") is dated and effective
as of January 1, 1995 between KAISER VENTURES INC., a Delaware corporation
("Kaiser"), and CALIFORNIA STEEL INDUSTRIES, INC., a Delaware corporation
("CSI").
WITNESSETH:
WHEREAS, in July 1984, CSI purchased from Kaiser Steel Corporation
("KSC"), predecessor in interest to Kaiser, certain land (described as Parcel 2
of Parcel Map 8682 as recorded in Book 89 of Parcel Maps, Pages 37 through 43,
Records of San Bernardino County, California) and subsequently CSI has acquired
adjacent parcels and the improvements thereon (collectively, the "CSI
Property"); and
WHEREAS, Kaiser is successor to certain property (the "Kaiser
Property") formerly owned by KSC which is adjacent to the CSI Property; and
WHEREAS, since 1984, Kaiser and CSI (hereinafter at times referred
to collectively as the "Parties" or individually as a "Party") have entered into
a series of services agreements, with the last such agreement dated August 1,
1991 (the "Prior Agreement"), whereby CSI purchased certain utilities and
services from Kaiser; and
WHEREAS, the Prior Agreement has lapsed and Kaiser and CSI wish to
provide one another certain utilities and services for use with respect to the
Kaiser Property and the CSI Property, as the case may be.
NOW, THEREFORE, in consideration of the covenants herein set forth,
the Parties agree as follows:
1. Utilities: Services.
a. Kaiser and CSI shall furnish, in accordance with Exhibit A
hereto, certain utilities and services to one another for use at the Kaiser
Property and the CSI Property.
b. Kaiser and CSI shall not be liable to one another for failure to
furnish facilities and other services to the Kaiser Property and the CSI
Property in accordance with Exhibit A, hereto if the failure results from (i)
acts of God, (ii) strikes, lockouts or other labor disputes, (iii) the making of
repairs, alterations or improvements, (iv) inability to secure a proper supply
of utilities, labor or services, or (v) any cause beyond
<PAGE>
Kaiser's or CSI's reasonable control (a "Force Majeure Event"). Kaiser or CSI,
as the case may be, shall use reasonable efforts to remedy any Force Majeure
Event, provided that neither Party shall have any obligation to resolve any
obligation or dispute except on terms acceptable to it in its sole discretion
c. Under no circumstances whatsoever shall either Party be liable to
the other for loss of profits or any other consequential damages caused by
Kaiser's or CSI's failure to furnish utilities and services with respect to the
CSI Property or the Kaiser Property in accordance with Exhibit A hereto. If any
utilities to be furnished by Kaiser or CSI hereunder are rationed by
governmental authority, public utility or other entity, Kaiser or CSI, as the
case may be, may apportion such utilities in any reasonable manner without
liability to the other. Except as otherwise set forth in this Agreement, no
failure to furnish utilities and no apportionment of utilities hereunder shall
affect either Party's obligations under this Agreement.
2. Term.
Except as provided at paragraph II(C) of Exhibit "B" hereto, the
term of this Agreement shall begin on the date hereof and shall terminate on
July 31, 1996 unless sooner terminated as provided herein.
3. Parents.
a. All amounts payable by CSI to Kaiser hereunder shall be paid
within the time periods set forth in Exhibit A and without deduction or offset,
at Kaiser's address for notice hereunder or as Kaiser may otherwise direct.
b. All amounts payable by Kaiser to CSI hereunder shall be paid
within the time periods set forth in Exhibit A and without deduction or offset,
at CSI's address for notice hereunder or as CSI may otherwise direct.
4. Use and Operation.
a. This Agreement and the obligations hereunder have been
specifically tailored to the unique relationship between, and the respective
capacities of, Kaiser and CSI and, therefore, may not be assigned by CSI or
Kaiser either voluntarily or by operation of law without the other Party's prior
written consent, which will not be unreasonably withheld.
b. Notwithstanding the foregoing, CSI or Kaiser may provide a
portion of the services received by it hereunder to a
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<PAGE>
lessee or purchaser of a portion or the CSI Property or the Kaiser Property, as
the case may be, provided that (i) use of the leased or purchased premises for
the purposes specified in the lease will not materially increase either Party's
obligations hereunder, (ii) the lease or purchase agreement expressly
incorporates, for the benefit of Kaiser or CSI, as the case may be, provisions
substantially identical to Sections 1.b, 1.c. 5.c and 6 hereof, and (iii) CSI or
Kaiser may adjust the prices payable under this Agreement to reflect any
increased cost of providing services to the other as a result of such use.
Nothing in this Agreement shall obligate Kaiser or CSI to provide services
directly to any such purchaser or lessee or shall make any such purchaser or
lessee a third party beneficiary of this Agreement.
5. Insurance.
a. CSI and Kaiser, at their own expense, shall maintain, during the
term of this Agreement, the following policies of insurance in such amounts as
is each Party's ordinary and customary business practice:
i. Commercial General Liability
ii. Automobile and Property Damage Liability
iii. Worker's Compensation Insurance
b. Kaiser and CSI shall, upon demand, provide the other Party with
proof of the coverage required in Subsection 5.a above.
c. Kaiser and CSI each hereby releases from liability and waive any
rights of recovery against the other and the shareholders, directors, officers,
employees, attorneys, contractors, agents and affiliates of the other, for any
loss arising out of personal injury or property damage on, in or about the CSI
Property or the Kaiser Property, or out of the ownership, use, occupancy or
maintenance of the CSI Property or the Kaiser Property, to the extent the loss
is covered by insurance. Each Party shall give notice to its insurance carriers
that the foregoing mutual release and waiver is contained in this Agreement.
6. Indemnity: Exculpation.
a. In the provision of services under this Agreement, Kaiser and CSI
shall indemnify, defend, protect and hold one another harmless against and from
(i) any loss or liability for personal injury or property damage arising in, on
or about the CSI Property or the Kaiser Property, or out of the ownership, use,
occupancy or maintenance of the CSI Property or the Kaiser
3
<PAGE>
Property, except to the extent such loss or liability is a direct result of
Kaiser's or CSI's gross negligence; (ii) any violation of this Agreement by
Kaiser or CSI; and (iii) any act or omission of Kaiser or CSI, or their
employees, agents, contractors or invitees.
b. Kaiser, as a material part of the consideration to CSI, hereby
assumes all risk of personal injury or property damage arising in, on or about
the Kaiser Property, or out of the ownership, use, occupancy or maintenance of
the Kaiser Property, from any cause.
c. CSI, as a material part of the consideration to Kaiser, hereby
assumes all risk of personal injury or property damage arising in, on or about
the CSI Property, or out of the ownership, use, occupancy or maintenance of the
CSI Property, from any cause.
d. References to "Kaiser" and "CSI" in Sections 6.a, 6.b and 6.c
shall be deemed to include Kaiser's and CSI's subsidiaries, shareholders,
directors, officers, employees, attorneys, contractors, agents and affiliates,
successors and assigns.
7. Default.
a. The occurrence of any one or more of the following events shall
constitute a default ("Default") hereunder:
i. The failure by Kaiser or CSI to make when due any payment
required of such Party hereunder, if such failure continues for a period of five
(5) business days after written notice thereof from either Party to the
defaulting Party.
ii. The failure by Kaiser or CSI to perform or observe any
covenant or condition of this Agreement to be performed or observed by such
Party other than those described in clause 7.a.i above, if such failure
continues for a period of thirty (30) calendar days after written notice thereof
from either Party to the defaulting Party; provided, however, that if the
nature of the obligation is such that a period of more than 30 days is
reasonably required for cure, then there shall be no Default so long as such
Party commences the cure, within the 30-day period and thereafter diligently
pursues it to completion.
iii. The filing by or against Kaiser or CSI of a petition to
have such Party adjudged a bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against such Party, the same is dismissed within sixty (60)
days); or the
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<PAGE>
appointment of a trustee or receiver to take possession of, or the attachment or
other judicial seizure of, substantially all of such Party's assets located at
the CSI Property or the Kaiser Property, as the case may be, if the right to
take possession or the seizure is not terminated within sixty 60) days.
b. If a Default by either Party occurs, the non-defaulting Party
may, at any time thereafter, with or without notice (except, for notices
required by law) or demand and without limiting such non-defaulting Party in the
exercise of any other right or remedy:
i. Terminate this Agreement; and
ii. Pursue any other remedy now or hereafter available to such
non-defaulting Party.
c. If either Kaiser or CSI, after notice from the other Party, fails
to make a payment or perform any other act required hereunder (whether or not a
Default has occurred), the notifying Party may make such payment or perform such
other act to the extent such Party may reasonably deem desirable. The defaulting
Party shall reimburse the non-defaulting Party on demand for any costs
(including attorneys' fees) the non-defaulting Party incurs in connection
therewith. No such action by the non-defaulting Party shall cure or waive the
other Party's default.
d. Arbitration.
i. Demand. Any dispute between CSI, on the one hand, and
Kaiser, on the other, shall be submitted to arbitration upon the written request
of one of the Parties after service of such request on the other Party. It is
the intent of the Parties that all future disputes between them concerning the
implementation, performance or interpretation of this Agreement or the exhibits
hereto be subject to binding arbitration.
ii. Interlocutor Injunctive Relief. Notwithstanding the
foregoing, in the event that either Party hereto desires to obtain interlocutory
injunctive relief against the other Party hereto, such Party may institute
litigation in a court of proper jurisdiction and may, under otherwise
appropriate circumstances, obtain a temporary restraining order, preliminary
injunction or any functionally equivalent relief pending an adjudication in
arbitration on the merits of that Party's claim. However, other than ruling upon
a Party's request for such relief, such court shall not rule upon the merits of
that Party's claims, but shall stay prosecution of such action pending
5
<PAGE>
completion of arbitration proceedings in accordance with the terms of this
Agreement.
iii. Arbitrators. Upon the giving and the receipt of a written
request of one of the Parties for arbitration, the Parties may agree to
appoint a single arbitrator to hear and decide the dispute. If they cannot agree
upon a single arbitrator, there shall be three arbitrators, one named in writing
by Kaiser, one named by CSI, each submitting their name within 10 days of the
date of the written request of the Party requesting arbitration, and a third
arbitrator chosen by the two arbitrators appointed by the Parties. Should any
Party to such arbitration refuse or neglect to join in the appointment of the
arbitrator(s) or to furnish the arbitrator(s) with any papers or information
demanded, the arbitrator(s) may proceed ex parte.
iv. Location: Procedures. A hearing on the matter to be
arbitrated shall take place before the arbitrator(s) at the location, time and
place in San Bernardino County, California, selected by the arbitrator(s). The
arbitrator(s) shall determine the procedures to be followed in the arbitration,
including, but not limited to: (a) whether the Parties shall be entitled to
conduct discovery and, if so, the nature and amount of such discovery and (b)
the manner in which evidence shall be submitted to the arbitrator(s). The
arbitrator(s) shall select the location, time and place of the arbitration
hearing promptly and shall give each Party written notice of the place and time
of the arbitration hearing at least 10 days before the date selected. At the
hearing, any relevant evidence may be presented by either Party. The Parties may
waive application of the formal rules of evidence applicable to judicial
proceedings, in which case evidence may be admitted or excluded in the sole
discretion of the arbitrator(s).
v. Decision. The arbitrator(s) shall hear and determine the
matter and shall execute and acknowledge a decision in writing and cause a copy
of the decision to be delivered to each of the Parties. If there is only one
arbitrator, his or her decision shall be binding and conclusive on the Parties,
and if there are three arbitrators, the decision of any two shall be binding and
conclusive on the Parties.
A judgment confirming the decision of the arbitrator(s) may be
given by any court having jurisdiction, or such court may vacate, modify, or
correct the decision, in accordance with the prevailing provisions of the
California Arbitration Act or any successor statute. The costs of the
arbitration shall be borne by the losing Party, or shall be borne in such
proportions as the arbitrator(s) may determine.
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<PAGE>
vi. Service. Any petition to compel arbitration or to appoint
a neutral arbitrator pursuant to this Section 7.d or to confirm, correct or
vacate a decision or award under this Section and responses thereto, and any
notices relating thereto or to the arbitration may be served in the manner
provided for notices in Section 8.a.
8. General Provisions.
a. Notice. Any demand, consent or notice required or permitted to be
given hereunder shall be in writing, shall be given by personal delivery or by
certified U.S. mail, return receipt requested, addressed to Kaiser or to CSI at
their respective addresses given below, and shall be effective on receipt (or if
rejected, shall be effective and deemed received on the date of rejection).
Either Party may by notice to the other specify a different address in the
United States for notice purposes.
(1) If to CSI:
California Steel Industries, Inc.
14000 San Bernardino Avenue
P.O. Box 5080
Fontana, California
Attention: Mr. James Declusin
with a copy to:
Morgan, Lewis & Bockius
801 South Grand Avenue
22nd Floor
Los Angeles, California 90017
Attention: Richard W. Esterkin, Esq.
(2) If to Kaiser:
Kaiser Ventures Inc.
3633 East Inland Empire Blvd.
Suite 850
Ontario, California 91764
Attention: Terry L. Cook, Esq.
7
<PAGE>
with a copy to:
Lindquist, Vennum & Christensen
600 17th Street
Suite 2125
Denver, Colorado 80202-5401
Attention: Craig A. Christensen, Esq.
b. Waiver. No waiver by Kaiser or CSI of any provision hereof shall
be deemed a waiver of any other provision or of any subsequent breach of the
same provision. The acceptance of any payment hereunder by Kaiser or CSI shall
not be a waiver of any preceding breach by the other of any provision hereof,
other than the failure of CSI or Kaiser to pay the particular payment so
accepted, regardless of Kaiser's or CSI's knowledge, as the case may be, of the
preceding breach at the time of acceptance.
c. Attorney's Fees. In the event there is any dispute concerning the
terms of this Agreement, or the performance of any Party pursuant to the terms
of this Agreement, and any Party retains counsel for the purpose of enforcing
any of the provisions of this Agreement, or asserting the terms of this
Agreement in defense of any suit or arbitration proceeding filed against said
Party, the prevailing Party in such a dispute shall be entitled to recover, in
addition to any other remedy to which such Party may be entitled, all of its
reasonable costs and reasonable attorney's fees incurred in connection with the
dispute, irrespective of whether or not a lawsuit or arbitration proceeding is
actually commenced or prosecuted to conclusion.
d. Entry Inspection. Upon reasonable notice, Kaiser's or CSI's duly
authorized agents shall have the right to enter the CSI Property or the Kaiser
Property, as the case may be, and the facilities thereon for the purpose of
inspecting the same in connection with the utilities and services furnished in
accordance with this Agreement.
e. Choice of Law. This Agreement shall be governed by the laws of
the State of California.
9. Authority.
Kaiser and CSI represent and warrant that each one has the legal
ability to enter into and fully perform the provisions of this Agreement.
8
<PAGE>
IN WITNESS THEREOF, this Services Agreement has been executed as of
the date first set forth above.
KAISER VENTURES INC.
By: /s/ Daniel N. Larson
------------------------
President
By: /s/ Terry L. Cook
------------------------
Secretary
CALIFORNIA STEEL INDUSTRIES, INC.
By: /s/ Marcus Mota e Silva
------------------------
President
By: /s/ Matthew MacFadden
------------------------
Secretary
Approved as to form:
MORGAN, LEWIS & BOCKIUS
By: /s/ Richard W. Esterkin
--------------------------
Richard W. Esterkin
801 South Grand Avenue
Suite 2200
Los Angeles, California 90017
Telephone: (213) 612-2500
ATTORNEYS FOR CALIFORNIA STEEL
INDUSTRIES, INC.
(Signatures continued to next page)
9
<PAGE>
LINDQUIST, VENNUM & CHRISTENSEN
P.L.L.P.
By: /s/ Craig Christensen
------------------------
Craig Christensen
600 Seventeenth Street
Suite 2125 South
Denver, Colorado 80202-5401
Telephone: (303) 573 5900
ATTORNEYS FOR KAISER-VENTURES INC.
10
<PAGE>
Exhibit A to
Amended Services Agreement
UTILITIES AND SERVICES
I. General Provisions.
A. General.
l. Except as expressly provided herein, CSI shall furnish all
utilities and services necessary or appropriate for CSI's operations at the CSI
Property and Kaiser shall furnish all utilities and services necessary or
appropriate for Kaiser's operations at the Kaiser Property. Except as expressly
provided herein, neither Party has any obligation to furnish or make available
to the other any services or utilities.
2. Each Party shall maintain all utility and service facilities
within the CSI Property or the Kaiser Property, as the case may be, which are
used to service the CSI Property or the Kaiser Property, or premises of third
parties to which Kaiser or CSI furnishes utilities and services as provided in
this Agreement.
3. Each Party's responsibility for failure to deliver the quantities
or quality of the utilities and services specified by this Agreement will be
limited to the prompt restoration of such utility or service to its specified
quantity and/or quality as soon as is reasonably possible after notice from the
other Party and after the cause of such failure is removed. Except as may be due
to Kaiser's or CSI's willful intent or gross negligence, neither Party will be
responsible for any damage to the other caused by any such utilities so
delivered. In any event, the Parties' liability is subject to the limitations
set forth in Sections 1.b and 6 of this Agreement.
4. Subject to the terms and conditions set forth in this Agreement,
Kaiser shall provide to CSI the following utilities and services:
a. Treatment of sewage water for recycling into CSI's
industrial makeup water system as set forth in Section
II below.
b. Required maintenance of appropriate discharge permits as
set forth in Section III below.
<PAGE>
Exhibit A to
Amended Services Agreement
5. Subject to the terms and conditions set forth in this Agreement,
CSI shall provide to Kaiser the following utilities and services:
a. Electrical energy as set forth in Section IV below.
b. Required maintenance of appropriate discharge permits as
set forth in Section III below.
Charges for such utilities and services shall be as specified herein.
B. General Operating Conditions.
1. Kaiser's or CSI's obligation to provide utilities and services
hereunder is expressly conditioned on each Party's ability to maintain necessary
permits or contractual entitlements for its operations in connection therewith,
and upon Kaiser or CSI obtaining authority from the agencies or other entities
involved to serve the other Party using Kaiser's or CSI's permits and
entitlements, as the case may be, which each Party shall use reasonable efforts
to maintain or obtain.
2. Both Kaiser and CSI shall comply with all applicable statutes,
regulations, rules and ordinances regarding air quality, water quality, and
hazardous or toxic waste, substances, or materials, and any other applicable
statutes, regulations, rules and ordinances regarding the environment
(collectively, "Environmental Laws"), as well as with the terms of all permits,
governmental authorizations and the like applying to the Parties' usage of the
utilities and services supplied hereunder. Each Party (the "Indemnifying Party")
hereby agrees to indemnify, defend, protect and hold harmless the other Party
from all liabilities, damages, fines, costs of remedial action, civil penalties,
and the like, on account of or resulting from any liability arising from any
violation by the Indemnifying Party of, any Environmental Law. However, each
Party is responsible for reviewing the actual provisions of all permits
applicable to such services and utilities, including without limitation permits
issued pursuant to Environmental Laws, and for operating in a manner consistent
with such provisions.
3. CSI and Kaiser shall each comply with requirements of the federal
Clean Water Act for notification of the National Response Center (and with the
notice requirements of other applicable federal, state and local statutes,
rules, regulations
2
<PAGE>
Exhibit A to
Amended Services Agreement
and ordinances) of any reportable release or a hazardous substance, material, or
pollutant, and each party agrees to provide contemporaneous notice of any such
reportable release to the other where such release occurs with respect to or in
connection with any services or utilities provided hereunder.
4. In the event either Party is in default of any of its operational
obligations under this Exhibit A, either Party may notify the defaulting Party's
on-site operating management. If the situation is not corrected within
seventy-two (72) hours following such notification, Kaiser or CSI, as the case
may be, following notice to the other, in its sole discretion, may take any
actions which it deems necessary to insure compliance with applicable permit,
statutory, regulatory or contractual requirements, including, without
limitation, expending such sums as are reasonably necessary to achieve such
compliance. In the event that either Party would suffer substantial damage by
reason of such a default prior to the expiration of the foregoing seventy-two
(72) hour notice period, either Party shall be entitled to take whatever
immediate actions it deems necessary in order to protect its respective systems
and property and/or to insure such compliance. All costs expended by a Party for
the purpose of curing the other Party's default as provided herein shall be for
the other Party's account, provided that the Party so charged is in actual
violation. Each Party hereto hereby grants a right to enter upon their property
to the other Party hereto for the purpose of taking actions in compliance with
the provisions of this paragraph.
5. Kaiser and CSI shall adhere to such reasonable procedures as each
may specify for notifying the other's designated personnel of unusual
occurrences or potentially dangerous conditions arising in the conduct of
day-to-day operations which may affect either Party or the provision of services
and utilities under this Agreement.
6. The Parties shall at all times cooperate with each other to the
end that the operations of CSI and Kaiser hereunder generally can co-function on
a reasonable basis. To that end, the Parties agree that they will exchange the
names and the phone numbers of personnel to be contacted on a 24-hour-per-day
basis. It is also recognized that it is essential that any upset in any system
subject to this Agreement be communicated to the other Party at the earliest
possible time. The Parties will communicate as far ahead of time as possible
concerning planned outages or suspected trouble in the systems or property of
each Party. CSI and Kaiser shall comply with the reasonable
3
<PAGE>
Exhibit A to
Amended Services Agreement
directions of each other as to the nature and scope of their respective
operations which affect, directly or indirectly, the utilities or services being
provided under this Exhibit A.
7. Kaiser and CSI shall have the right to furnish the utilities and
services to be furnished to one another hereunder to third parties on properties
in the vicinity of the CSI Property or the Kaiser Property, and to use all
easements reserved in the CSI Property or the Kaiser Property for this purpose,
if in accordance with applicable permits. If, during the term of this Agreement,
by reason of any cause whatsoever, the supply of such utilities and services
shall not be sufficient to supply CSI or Kaiser, as the case may be, and such
other parties, the Party supplying such utility, upon reasonable written notice
to the other, shall have the right at such times to distribute such services pro
rata, and for the purpose of doing so may establish and enforce such reasonable
rules and regulations as may be necessary and expedient.
8. Subject to Section 1.c of this Agreement, CSI and Kaiser shall be
responsible for any damage to each other's facilities or property caused by the
other Party, and for all costs and expenses incurred by the Party whose
facilities have been damaged in repairing all such damage, as well as for
down-time of such facilities and other expenses incurred by the damaged Party,
due to CSI's or Kaiser's failure to comply with its obligations as set forth in
this Exhibit A.
9. Receipt of any invoice pursuant to this Agreement shall be deemed
to have occurred within five days of mailing of such invoice. All such costs,
expenses and charges shall bear interest from the date paid by Kaiser or CSI to
third parties, or otherwise from the due date as provided herein, at a per annum
rate equal to the lesser of the prime rate established by the Bank of America as
it varies from time to time, plus three percent (3%), until paid, or the maximum
rate permitted by law.
II. SANITARY SEWERS AND SEWAGE TREATMENT PLANT
A. Operation and Maintenance. Kaiser agrees to treat sanitary sewage from
the CSI Property at Kaiser's treatment facility (the "Sewage Treatment Plant")
and to provide treated effluent from the Sewage Treatment Plant to CSI for use
in the CSI industrial water system. Kaiser shall operate, maintain and repair
the Sewage Treatment Plant, except that CSI personnel shall monitor operation of
the Sewage Treatment Plant during swing and graveyard shifts at CSI's expense.
4
<PAGE>
Exhibit A to
Amended Services Agreement
1. CSI shall be responsible for maintenance and repair of the
sanitary sewers within the CSI Property and must obtain Kaiser's approval,
which will not be unreasonably withheld, for additional connections or
discharges to such sanitary sewers.
2. Discharges to the sanitary sewers by CSI, Kaiser and any tenant
of CSI or Kaiser discharging wastes to the sanitary sewer system will be limited
to toilets, personnel clean-up areas and showers and shall not include
industrial wastes or any cooling water discharges.
B. Service Costs. CSI shall pay to Kaiser the following sums for treatment
of CSI's sanitary sewage and provision of industrial makeup water:
1. Effective February 1, 1995, and continuing through and including
July 1, 1995, $15,000.00 per month, payable in advance on the first of each
month,
2. Effective August 1, 1995, and continuing through and including
July 1, 1996, $17,000.00 per month, payable in advance on the first of each
month,
3. Effective August 1, 1996 and continuing through the remainder of
the term of this Agreement, the sum of $17,000.00 plus the "CPI Increase," as
that term is defined at paragraph II(B)(5) below, per month.
4. Except as provided in paragraphs II(B)(6) and II(B)(7) hereof,
80% of all labor and reasonable maintenance expenses incurred by Kaiser in the
operation of its sewage treatment plant.
All such charges will be payable within fifteen (15) days of billing by Kaiser.
"Reasonable maintenance expenses" payable by CSI shall include only the
following: (a) electrical expenses, (b) expenses incurred to purchase chemicals
used in the treatment of sewage and (c) expenses incurred to repair or replace
existing equipment at the sewage treatment plant in a cumulative amount not to
exceed the sum of $10,000.00 per year for the period August 1, 1994 through July
31, 1996 and the sum of $10,000.00 plus the "CPI Increase," as that term is
defined at paragraph II(B)(5) below, per year. Under no circumstances shall
"reasonable maintenance expenses" include any expenses designed solely to
upgrade the operations or to increase the current capacity of the Sewage
Treatment Plant.
5
<PAGE>
Exhibit A to
Amended Services Agreement
5. As used in paragraph II(B)(3) hereof, the term "CPI Increase"
means the product obtained by multiplying the sum of $17,000.00 by a fraction,
the numerator of which is the Index, as defined below, published nearest but
prior to the Adjustment Date and the denominator of which is the Index published
nearest but prior to August 1, 1995. As used in paragraph II(B)(4) thereof, the
term "CPI Increase" means the product obtained by multiplying the sum of
$10,000.00 by a fraction, the numerator of which is the Index, as defined below,
published nearest but prior to the Adjustment Date and the denominator of which
is the Index published nearest but prior to August 1, 1995. As used herein the
term "Index" refers to the Consumer Price Index for Urban Wage Earners and
Clerical Workers, U.S. City Average, All Items, 1967 equals 100], published by
the Bureau of Labor Statistics of the United States Department of Labor. As used
herein the term "Adjustment Date" refers to August 1, 1996 and to August 1 of
each year thereafter during the term of this agreement.
6. In the event that Kaiser's sewage treatment plant requires
repairs costing in excess of $500.00, Kaiser shall provide such notice to CSI of
the need for such repairs as is reasonable under the circumstances. Thereafter,
CSI shall, within such time as is reasonable under the circumstances, provide
Kaiser with a notice either stating that CSI desires to complete such repairs
itself, in which event CSI shall thereafter diligently prosecute such repairs to
their completion, or that CSI desires Kaiser to complete such repairs, in which
event, subject to the limitation contained in paragraph II(B)(3) hereof, Kaiser
shall diligently prosecute such repairs to their completion. In the event that
CSI completes such repairs, Kaiser shall pay to CSI, within fifteen (15) days of
billing by CSI, 20% of the cost of such repairs.
7. Kaiser shall not have the right to assess CSI for expenses which
are designed to enhance the sewage treatment plant or leave Kaiser with an asset
in significantly better condition or of a significantly greater value than it
currently has. In the event that Kaiser is required to expend monies to maintain
the sewage treatment plant in excess of those provided for herein and Kaiser
elects not to expend its funds for that purpose, then Kaiser shall provide CSI
with a notice in writing specifying the maintenance that it desires to perform,
the cost of such maintenance and requesting that CSI pay to Kaiser 80% of the
cost of such maintenance. In the event that CSI fails to pay to Kaiser such cost
within 60 days of such notice, then Kaiser may, but is not required to,
terminate this agreement insofar as it
6
<PAGE>
Exhibit A to
Amended Services Agreement
provides for Kaiser's treatment of CSI's sewage and cease treating CSI's sewage.
C. Term. Kaiser's obligation to provide sewage treatment and industrial
wastewater pursuant to the terms of this agreement shall terminate on the later
of: (1) August 1, 1996 or (2) following 18 months written notice by either CSI
or Kaiser to the other of that party's election to terminate Kaiser's obligation
to provide sewage treatment and industrial wastewater pursuant to the terms of
this agreement.
D. Discharge: Effluent Quality. CSI shall be responsible for any of its
improper discharges to the sanitary sewers on the CSI Property and the Sewage
Treatment Plant, and for all costs, damages and down-time which result
therefrom. CSI shall bear the risk that the Sewage Treatment Plant effluent
delivered to the CSI industrial water system does not meet the quality
requirements set forth in Subsection II.E below; provided, however, that CSI
shall not be required to accept such effluent where the failure to meet the
quality requirements in Subsection II.E is due to the negligent operation of the
Sewage Treatment Plant by Kaiser or Kaiser's failure to adequately maintain and
repair such facility ("non-conforming effluent").
In the event that Kaiser delivers non-conforming effluent to CSI for
use in the industrial water system, without limiting any of its remedies, CSI
shall be entitled to return such effluent to the Sewage Treatment Plant and
Kaiser shall, at its sole expense (including direct and indirect labor costs and
reasonable maintenance expenses), retreat the non-conforming effluent and
redeliver such effluent to CSI for use in the industrial water system.
E. Quality of Sewage Treatment Effluent. Based on historical data, it is
expected that the increment in certain chemical constituents in excess of those
found in the domestic water supply will fall within the following limits:
7
<PAGE>
Exhibit A to
Amended Services Agreement
Constituent Unit Range
- ----------- ---- -----
Filtrable Residue mg/L 75-130
(TDS)
(dried at 180(degrees))
Calcium (Ca) mg/L 0-120
Magnesium (Mg) mg/L 0-2
Sulfate (SO4) mg/L 20-40
Chloride (Cl) mg/L 20-40
In addition, it is expected that the following constituents will be
present in the Sewage Treatment Plant effluent in the indicated ranges:
Constituent Unit Range
- ----------- ---- -----
Ammonia (N) mg/L 0.2-4.0
BOD5 mg/L 0.7-10
COD mg/L 15-40
Suspended Solids mg/L 2-15
pH 6.3-7.5
III. STORMWATER DRAINAGE SYSTEM
A. Kaiser shall be responsible for maintaining the portions of the
stormwater drainage system (the "Stormwater System") located on the Kaiser
Property and preventing Unauthorized Discharges, as defined in Subsection III.C.
below, into the Stormwater System from the Kaiser Property. CSI shall be
responsible for maintaining the portions of the Stormwater System located on the
CSI Property and for preventing any Unauthorized Discharges into the Stormwater
System from the CSI Property. CSI or Kaiser shall also be responsible for the
cleanup of any release of hazardous waste or material that enters the Stormwater
System from the CSI Property or the Kaiser Property, respectively.
8
<PAGE>
Exhibit A to
Amended Services Agreement
B. Kaiser shall not develop its property to the north of the CSI Property
such that the rainwater runoff from that property into the Stormwater System on
the CSI Property is either substantially increased or concentrated so as to
exceed the capacity of the Stormwater System on the CSI Property.
C. Kaiser currently holds, but is in the process of terminating, a NPDES
permit governing the quality of rainwater runoff leaving the Fontana Property
and other property and discharging to flood control channels through Mulberry
Ditch (the "Mulberry Ditch Permit"). Because approximately half of the drainage
area controlled by the Mulberry Ditch Permit is under CSI's control, while the
other half is under Kaiser's control, CSI shall reimburse Kaiser for fifty
percent (50%) of the reasonable costs of maintaining the Mulberry Ditch Permit,
including expenditures incurred for the purpose of complying with permit
conditions, including without limitation, monitoring costs (collectively,
"Compliance Costs"). In the event that CSI obtains a NPDES permit governing
rainwater runoff from the CSI Property discharging to the flood control channels
through Mulberry Ditch and Kaiser relinquishes the Mulberry Ditch Permit and
obtains a new individual NPDES permit, each party shall bear its own costs of
compliance.
D. CSI and Kaiser shall prevent the release or discharge of process
industrial water or other wastewater into the Stormwater System. Neither Kaiser
nor CSI shall discharge into the portions of the Stormwater System located on
the CSI Property, or portions of the Stormwater System located outside the CSI
Property, any effluent which exceeds the discharge limitations established by
the Mulberry Ditch Permit, as it now exists or as it may be modified in the
future, or any such limitations established by any NPDES permit that may be
obtained by CSI as described in Subsection III.C, above ("Unauthorized
Discharges").
IV. ELECTRICAL UTILITIES
A. CSI shall remain a customer of Southern California Edison ("SCE") for
the three existing lines connecting to the existing four 66 KV substations on
the CSI Property. CSI will use billing meters owned by SCE as the basis of
determining the charges to Kaiser for Kaiser's electrical energy usage. Such
determination shall be made from the amounts of electrical energy usage showing
on the SCE meters and the amounts of electrical energy used at the CSI Property
as determined from CSI meters. The charges for Kaiser's energy usage shall then
be billed to
9
<PAGE>
Exhibit A to
Amended Services Agreement
Kaiser by CSI for Kaiser's portion of charges for the electrical energy used and
miscellaneous charges.
l. In order that both Parties may avail themselves of the most
economical rate provided by SCE (presently the I6 tariff), CSI shall maintain
certain equipment supplied by SCE located in the Plate Mill Motor room. Such
equipment wi11 be used by SCE to notify CSI that the total electrical load to
both the Kaiser Property and the CSI Property must be reduced to five (5)
megawatts (or to such other lower amount mutually agreed upon by the Parties)
within the 30-minute period following such notification. Such reduced load shall
be measured over a fifteen (15) minute interval. CSI shall be responsible for
monitoring such equipment for an interruption notification from SCE and then to
cause the electrical demand (the "load") to be reduced to meet the
reduced-demand requirement. CSI and Kaiser shall jointly develop a procedure by
which CSI will notify Kaiser of any interruption as described herein and Kaiser
shall assist in reducing the load.
a. CSI agrees to pay and hold Kaiser free and harmless from
any and all penalties assessed by SCE for any failure to meet the reduced level
of five (5) megawatts required by the I6 tariff (the "firm service level").
b. Kaiser agrees to release CSI from any claim arising from or
in connection with the interruption of power as required or caused by SCE.
Kaiser further agrees to notify any lessee on the Kaiser Property that uses
electricity supplied via CSI equipment of the terms of this Agreement with
respect to electrical utilities, and to obtain from any such lessee the release
of CSI from any claim arising from or in connection with the interruption of
power as required or caused by SCE. The provisions of this subparagraph IV.A.l.b
shall apply to any firm service level negotiated by CSI pursuant to subparagraph
IV.A.3. below.
2. CSI reserves the right, upon six (6) months' notice to Kaiser, to
discontinue furnishing electrical energy to Kaiser as set forth in this
Agreement. In the event that CSI elects to discontinue furnishing such
electrical energy to Kaiser, then Kaiser shall be responsible for arranging to
become a SCE customer or to obtain electrical energy from such other source of
electricity as it deems appropriate.
3. CSI shall have the right to negotiate with SCE for the reduction
of the firm service level to and including zero
10
<PAGE>
Exhibit A to
Amended Services Agreement
megawatts. In the event of any such reduction, CSI shall pay and hold Kaiser
free and harmless from any and all penalties assessed by SCE as a result of any
failure to meet the reduced firm service level.
4. Payments by Kaiser to CSI for the cost of electrical energy
provided hereunder shall be payable within fifteen (15) days of billing by CSI.
B. CSI shall be responsible for maintenance and calibration of all
internal meters within the CSI Property that are necessary for proper billing of
Kaiser. Kaiser shall be entitled to co-read the meters necessary for such
billing. Kaiser shall cooperate with CSI to resolve problems in billing;
however, if Kaiser contends that SCE's billing is incorrect, CSI shall only be
required to assist Kaiser in making SCE aware of the contended discrepancy. In
any event, SCE's final billing for the period in dispute will be used by CSI as
the final basis of charges to Kaiser by CSI for such period.
V. MISCELLANEOUS PROVISIONS
A. Discharge Conditions. CSI and Kaiser shall keep wastewater discharges
from the Stormwater System, the sanitary sewers, and the Sewage Treatment Plant.
B. Mutual Use of Fire Hydrants. In the event of a fire on the CSI Property
or on the Kaiser Property in the vicinity of the CSI Property, the nearest fire
hydrants on either the CSI Property or the Kaiser Property may be used
regardless of the location of the fire. However, if CSI uses a hydrant as a
source of water for non-fire use, the hydrant must be from a line within the CSI
Property, and if Kaiser uses a hydrant as a source of water for non-fire use,
the hydrant must be from a line on the Kaiser Property. There will be no charge
or cost to the other for any water used in fighting any fire.
C. Relocation. In the event that Kaiser intends to develop or sell any
portion of the Kaiser Property on which is located the CSI equipment described
in Subsections V.C.1 and V.C.2 below, CSI shall, at its expense, relocate the
same to the CSI Property, a public right of way or (with Kaiser's consent, which
shall not be unreasonably withheld) another route on the Kaiser Property. CSI
shall effect such relocation within six (6) months after receiving written
notice of Kaiser's intent to develop or sell such portion of the Kaiser
Property.
11
<PAGE>
Exhibit A to
Amended Services Agreement
1. The CSI domestic water line serving the Oregon Steel Mill.
2. The electrical power line entering the Kaiser Property from the
CSI Property before returning to the CSI Property to service CSI cooling towers.
D. Reasonable Rules of Operation. Kaiser and CSI each may establish such
reasonable rules pertaining to the other Party's operations as may be required
to properly operate the systems furnishing utilities and service hereunder. CSI
and Kaiser shall cooperate with each other in developing and complying with all
such rules so as to ensure the safest and most trouble-free operation of such
systems for the benefit of both Parties.
12
<PAGE>
[MAP]
R RESOURCES, INC. CM ENGINEERING ASSOCIATE, INC.
<PAGE>
EXHIBIT 10.11
GROUNDWATER INDEMNITY AGREEMENT
This GROUNDWATER INDEMNITY AGREEMENT is entered into as of June 1, 1995,
by and between Kaiser Ventures Inc. ("KAISER") and California Steel Industries,
Inc. ("CSI") with reference to the following facts:
RECITALS
--------
A. From 1942 until 1983, Kaiser Steel Corporation operated a large
steel production and processing facility on approximately 2,000 acres of land
near Fontana, California, owned by Kaiser Steel Corporation (the "FONTANA
PROPERTY"). Pursuant to an Agreement of Purchase and Sale entered into effective
as of August 17, 1984, CSI purchased approximately 378 acres of the FONTANA
PROPERTY. In 1988 and 1989, CSI acquired from third parties approximately 43 and
29 acres, respectively, of property previously owned by Kaiser Steel Corporation
and comprising a portion of the FONTANA PROPERTY. The 378, 43 and 29 acres of
the FONTANA PROPERTY formerly owned by KAISER Steel Corporation and now owned by
CSI are hereinafter collectively referred to as the "CSI PROPERTY."
B. As a result of the operations of Kaiser Steel Corporation at the
FONTANA PROPERTY, various contaminants may have been released into the
environment, including the soil underlying portions of the CSI PROPERTY.
<PAGE>
C. On or about November 16, 1992, CSI and the California State
Department of Toxic Substances Control ("DTSC") entered into a "Voluntary
Enforceable Agreement" (the "VEA"). The VEA establishes a procedure pursuant to
which CSI will investigate the type and extent of the contamination present at
the CSI PROPERTY and, if necessary, remediate the CSI PROPERTY. At this time, it
is unclear whether DTSC will require CSI to investigate or remediate the
groundwater underlying the CSI PROPERTY.
D. Pursuant to the Judgment in Chino Basin Municipal Water District
------------------------------------
v. City of Chino, et al., San Bernardino Superior Court, Case No. RCV 51010 (the
- ------------------------
"1978 JUDGMENT"), non-agricultural overlying rights to the beneficial use of
2,930.274 acre-feet of water annually from the safe yield of the Chino
groundwater basin (the "CHINO BASIN") was decreed as set forth at page 60, line
9 of Exhibit "D" to the 1978 JUDGMENT (the "WATER RIGHTS"). The WATER RIGHTS are
more specifically described in Section II.B.8 and Exhibits "D" and "G" of the
1978 JUDGMENT.
E. On August 26, 1987, the California State Regional Water Quality
Control Board, Santa Ana Region (the "RWQCB"), pursuant to its authority under
Section 13304 of the California Water Code, issued Cleanup and Abatement Order
("CAO") No. 87-121, which required KAISER to investigate groundwater in the
vicinity of the FONTANA PROPERTY. As a result of the investigation undertaken by
KAISER pursuant to that order, and
-2-
<PAGE>
other investigations undertaken by KAISER prior to the issuance of that order, a
plume of groundwater containing elevated levels of total dissolved solids
("TDS"), total organic compounds ("TOC") and sulfates was discovered to be
emanating from the FONTANA PROPERTY (the "PLUME").
F. The Santa Ana Watershed Project Authority ("SAWPA") has
undertaken a project to remove excess salt from the groundwater of the CHINO
BASIN by means of the construction and operation of one or more desalting
plants, to be located in the lower CHINO BASIN, which would remove excess salts
from the groundwater, dispose of the resulting brines in the Santa Ana Regional
Interceptor ("SARI") line, and make the reclaimed ground water available for
use.
G. KAISER has proposed that it fulfill its groundwater remediation
obligations imposed by CAO No. 87-121 and RWCQB Order No. 91-40, which modifies
Order No. 87-121, by participating in SAWPA's desalter project, both by making a
onetime cash contribution for the benefit of the desalter and also by assigning
or abandoning to the Chino Basin Water District as Chino Basin Watermaster
("WATERMASTER"), over a period of 25 years, 25,000 acre-feet of water derived
from the WATER RIGHTS.
H. On March 5, 1993, the RWQCB adopted Resolution No. 93-19, which
was intended to discharge CAO No. 87-121 and Order No. 91-40 and to allow KAISER
to fulfi11 its groundwater remediation obligations imposed therein by
participating in
-3-
<PAGE>
SAWPA's desalter project. Resolution No. 93-19 was made contingent on the
approval, prior to September 5, 1993, by the Superior Court of San Bernardino
County of certain rules and regulations of WATERMASTER, which would allow the
assignment or abandonment of stored water by KAISER to the WATERMASTER for the
benefit of the desalter project
I. CSI objected to the salt-offset agreement set forth in Resolution
No. 93-19, and brought an action against the RWQCB entitled California Steel
Industries, Inc. v. California Regional Water Quality Control Board/Santa Ana
Region, San Bernardino Superior Court, Case No. SCV 04837. Subsequently, the
Court did not timely approve the necessary WATERMASTER rules and regulations to
permit the abandonment or assignment of water from KAISER to the WATERMASTER for
the benefit of the desalter, and Resolution 93-19 expired by its terms on
September 5, 1993.
J. On October 21, 1993, the RWQCB adopted Resolution No. 93-72,
which was intended to discharge CAO No. 87-121 and CAO No. 91-40, and allow
KAISER to fulfill its groundwater remediation obligations with respect to PLUME,
by participating in SAWPA's desalter project pursuant to the terms of an
agreement with the RWQCB (the "SALT OFFSET AGREEMENT").
K. CSI has entered into a "Settlement Agreement and Optional
Guarantee of Performance" with the RWQCB, which provides, in substance, that, if
KAISER defaults under the SALT OFFSET AGREEMENT and the RWQCB issues a cleanup
and abatement
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<PAGE>
order co CSI, CSI will have the option of assuming KAISER's unsatisfied
obligations under the SALT OFFSET AGREEMENT in full satisfaction of CSI's
obligations, if any, to investigate and remediate the PLUME (the "GUARANTY").
L. Concurrently with their execution of this GROUNDWATER INDEMNITY
AGREEMENT, the PARTIES are entering into a Settlement Agreement for the purpose
of resolving a number of disputes as between them (the "SETTLEMENT AGREEMENT").
M. The PARTIES would like to compromise and settle their disputes
and provide for the allocation of responsibility as between them with respect to
any groundwater contamination that later may be found to have originated from
any portion of the FONTANA PROPERTY.
IT IS THEREFORE AGREED as follows:
1. Incorporation of defined terms.
------------------------------
Except as explicitly set forth herein, each of the terms
defined in the SETTLEMENT AGREEMENT and the exhibits to the SETTLEMENT AGREEMENT
used in this GROUNDWATER INDEMNITY AGREEMENT shall have the meaning ascribed to
them in the SETTLEMENT AGREEMENT and the exhibits to the SETTLEMENT AGREEMENT.
2. Allocation of groundwater liability.
-----------------------------------
a. KAISER shall indemnify and hold CSI harmless against any
liability, expense or damage arising from any claim concerning any of the
following:
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<PAGE>
(1) the PLUME,
(2) any groundwater contamination that originated from
any portion of the KAISER PROPERTY, and
(3) any groundwater contamination caused by the element
chrome originally released by KAISER in, under or on the FONTANA PROPERTY.
b. CSI shall indemnify and hold KAISER harmless against any
liability, expense or damage arising from any claim concerning any groundwater
contamination that originated from any portion of the CSI PROPERTY except for
either of the following:
(1) the PLUME, or
(2) any groundwater contamination caused by the element
chrome originally released by KAISER in, under or on the FONTANA PROPERTY.
c. Notwithstanding the foregoing, in the event that either CSI
or KAISER engage in any groundwater investigation, the party engaging in such
investigation shall bear the cost of such investigation unless and until it is
determined that there exists contamination in the groundwater such that the
party conducting such investigation would be entitled to indemnification under
the provisions of paragraphs 2(a) or 2(b), above. From and after that date, the
party required to indemnify the party who conducted the groundwater
investigation shall reimburse the party who conducted the
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<PAGE>
groundwater investigation for the costs of such investigation incurred after
that date.
d. The indemnification obligations provided for herein shall
include any expenses incurred by either CSI or KAISER for the purpose of
remediating the matters referred to herein as well as any liability that either
CSI or KAISER may have to any third party by reason of such matters. The
indemnification obligations provided for herein shall exclude any depreciation
in the value of the parties' respective properties as well as any obligation to
reimburse a party for any increased general, administrative overhead costs that
such party may incur by reason of any groundwater contamination that may exist,
such as salary reimbursement for the time spent by employees of the parties in
connection with groundwater investigation or remediation activities.
e. As used in this paragraph 2, the term "claim" refers to any
assertion by any third party that either of CSI or KAISER are liable to such
third party as a result of the matters described herein and to any expenses that
either of CSI or KAISER may incur for the purpose of remediating any groundwater
contamination as the result of the assertion of such claim.
3. Representations and warranties.
------------------------------
a. KAISER represents and warrants that:
(1) it is unaware of any groundwater contamination that it
reasonably believes would require
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<PAGE>
investigation or remediation emanating from the FONTANA PROPERTY, other than the
PLUME,
(2) it intends to perform its obligations under the SALT
OFFSET AGREEMENT by providing a portion of the water to which it is entitled by
reason of the KAISER WATER RIGHTS to the SAWPA desalter project, and
(3) it has sought and obtained the advice of counsel
with respect to the provisions of this GROUNDWATER INDEMNITY AGREEMENT.
b. CSI represents and warrants that:
(1) it is unaware of any groundwater contamination that
it reasonably believes would require investigation or remediation emanating from
the KAISER PROPERTY or the CSI PROPERTY, other than the PLUME,
(2) it is unaware of any groundwater test results
indicating the presence of chrome in groundwater in, under or emanating from the
FONTANA PROPERTY, other than as reported by Montgomery Engineers to KAISER, and
(3) it has sought and obtained the advice of counsel
with respect to the provisions of this GROUNDWATER INDEMNITY AGREEMENT.
4. Dismissal of litigation.
-----------------------
Within seven days following the effective date of this
GROUNDWATER INDEMNITY AGREEMENT as provided in paragraph 6, below, CSI shall
file a dismissal, with prejudice, of Case No.
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<PAGE>
SCV 04837 in the form attached hereto as Exhibit "A." Each party to the
foregoing case shall bear their own costs and attorneys' fees incurred with
respect to that case.
5. Future assurances.
-----------------
Subject to its right to assert its rights with respect to the
CSI WATER RIGHTS, CSI agrees:
a. to cease, desist, and refrain from any and a11 present or
future efforts, undertakings, attempts, actions, allocations, claims, petitions,
writs, or any court action, or actions in any forum whatsoever, which directly
or indirectly interferes, obstructs, hinders, prevents, impedes, delays or
interrupts performance of Resolution No. 93-72 or the SALT-OFFSET AGREEMENT,
including the assignment or abandonment of water rights for the benefit of the
SAWPA desalter program and the consummation of the SAWPA agreement;
b. not to challenge or oppose the action of the Advisory
Committee of the WATERMASTER, the WATERMASTER or the Court having jurisdiction
over the 1978 JUDGMENT implementing the assignment or abandonment of the WATER
RIGHTS for the benefit of the desalter project; and
c. to refrain from all efforts to interfere with CAO No.
87-121 and Order 91-40, any efforts before the legislature, any efforts before
any other courts, forums or public or private entities of any sort, or any and
all efforts to interfere with KAISER's water usage, diversion, sale or
-9-
<PAGE>
consumption in any manner, shape or form for the purpose of permitting KAISER to
comply with its obligations under Order No. 93-72 and the SALT OFFSET AGREEMENT.
Nothing contained herein shall preclude CSI from entering into, and exercising
its rights under, the GUARANTY.
6. Conditions to effectiveness.
---------------------------
This GROUNDWATER INDEMNITY AGREEMENT shall be effective upon
the SETTLEMENT AGREEMENT becoming effective.
7. Amendment.
---------
This GROUNDWATER INDEMNITY AGREEMENT cannot be modified except
by written documents signed by all of the PARTIES.
8. Choice of laws.
--------------
This GROUNDWATER INDEMNITY AGREEMENT shall in all respects be
interpreted, enforced, and governed by and under the internal laws of the State
of California.
9. Construction.
------------
This GROUNDWATER INDEMNITY AGREEMENT has been mutually
drafted. The language of this GROUNDWATER INDEMNITY AGREEMENT shall be construed
as a whole according to a fair meaning, and not strictly for or against any of
the PARTIES.
10. Attorney's fees.
---------------
In the event that any Agreeing Party breaches this GROUNDWATER
INDEMNITY AGREEMENT, the breaching party or parties shall pay each prevailing
party al1 costs of any action or
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<PAGE>
preceding for damages and/or enforcement, including reasonable attorneys' fees
and costs.
11. Integration.
-----------
This GROUNDWATER INDEMNITY AGREEMENT is part of the SETTLEMENT
AGREEMENT and is subject to its terms and conditions. Except as explicitly set
forth in the SETTLEMENT AGREEMENT, this GROUNDWATER INDEMNITY AGREEMENT
constitutes the final and complete agreement of the parties hereto with respect
to the subject matter hereof and supersedes all prior or contemporaneous
negotiations, promises, covenants, agreements or representations concerning any
matters directly, indirectly or collaterally related to the subject matter of
this GROUNDWATER INDEMNITY AGREEMENT. The parties hereto have expressly and
intentionally included in this GROUNDWATER INDEMNITY AGREEMENT and the
SETTLEMENT AGREEMENT all collateral or additional agreements which may, in any
manner, touch or relate to any of the subject matter of this GROUNDWATER
INDEMNITY AGREEMENT and, therefore, all promises, covenants and agreements,
collateral or otherwise, are included herein and therein. It is the intention of
the parties to this GROUNDWATER INDEMNITY AGREEMENT that it and the SETTLEMENT
AGREEMENT shall constitute an integration of all their agreements, and each
understands that in the event of any subsequent litigation, controversy or
dispute concerning any of its terms, conditions or provisions, no party hereto
shall be permitted to offer or introduce any oral or extrinsic evidence
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<PAGE>
concerning any other collateral or oral agreement between the parties not
included herein or in the SETTLEMENT AGREEMENT.
12. Waiver.
------
No waiver by any party hereto of any provision hereof shall be
deemed to be a waiver of any other provision hereof or of any subsequent breach
of the same or any other provision hereof.
13. Successors.
----------
This GROUNDWATER INDEMNITY AGREEMENT shall be binding upon and
inure to the benefit of, and be enforceable by, the parties hereto and their
respective administrators, trustees, executors, personal representatives,
successors and permitted assigns.
14. Counterparts.
------------
This GROUNDWATER INDEMNITY AGREEMENT may be executed in
counterparts by the PARTIES and shall become effective and binding at such time
as all of the PARTIES have signed a counterpart of this GROUNDWATER INDEMNITY
AGREEMENT.
WHEREFORE, the parties hereto have executed this GROUNDWATER
INDEMNITY AGREEMENT as of the date and year set forth above.
Dated: October 5, 1995 KAISER VENTURES, INC.
---------
By: /s/ Daniel N. Larson
-------------------------
(Signatures Continued-Next Page)
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<PAGE>
Dated: _________, 1994 CALIFORNIA STEEL INDUSTRIES, INC.
By: /s/ Marcus Mota e Silva
-------------------------
APPROVED AS TO FORM AND CONTENT:
Dated: Oct. 17, 1995. BEST, BEST & KRIEGER
-------
By: /s/ Arthur L. Littleworth
-------------------------
Arthur L. Littleworth
Anne T. Thomas
Gene Tanaka
Attorneys for KAISER
Ventures, Inc.
Dated: Oct. 24, 1995. LAW OFFICES OF JOHN D. MUSICK, JR.
------- and ASSOCIATES
By: /s/ John D. Musick, Jr.
-------------------------
John D. Musick, Jr.
Attorneys for California
Steel Industries, Inc.
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<PAGE>
EXHIBIT 10.12
STATE OF CALIFORNIA
ENVIRONMENTAL PROTECTION AGENCY
DEPARTMENT OF TOXIC SUBSTANCES CONTROL
In the Matter of: )
)
California Steel Industries, Inc.,) Docket No. HSA 95/96-068
14000 San Bernardino )
Avenue, Fontana, California ) Expedited Remedial Action
92335 ) Voluntary Enforceable
) Agreement
Responsible Person(s): )
) Health and Safety Code
Same as above ) Section 25398.2(b)
- ----------------------------------
I. INTRODUCTION
1.1. Parties. The California Environmental Protection Agency, Department
of Toxic Substances Control (DTSC) hereby enters into this Expedited Remedial
Action Enforceable Agreement (Agreement) with California Steel Industries, Inc.
(CSI). DTSC and CSI are referred to collectively herein as "Parties."
1.2. Site. CSI is the current owner and operator of the 450-acre site
which is the subject of this Agreement and which is located at 14000 San
Bernardino Avenue, Fontana, San Bernardino County, California, 92335 (the
"Site"). From 1984 to the present, CSI has operated a specialty steel mill at
the Site, which consists of various facilities, including steel processing
1
<PAGE>
and finishing operations that roll, process and finish low carbon and
semi-finished steel. For approximately 41 years prior to that time, Kaiser Steel
Corporation owned and operated an integrated steel mill consisting of rolling
mills and a primary production steel plant on the Site and on adjacent property.
The Site is zoned by San Bernardino County as heavy industrial and is located
near a mixed industrial and residential area in an unincorporated area of San
Bernardino County, near Fontana, California. A location map and diagram of the
Site are attached as Exhibit A and Exhibit B, respectively.
1.3. Jurisdiction. This Agreement is entered into by DTSC and CSI pursuant
to Health and Safety Code Section 25398.2(b).
1.4. Purpose. The purpose of this Agreement is to take necessary response
actions at the Site in accordance with the standards and procedures set forth in
Chapters 6.65 (commencing with section 25260) and 6.85 (commencing with section
25396) of Division 20 of the Health and Safety Code. The response actions taken
under this Agreement include, but may not be limited to: (i) conducting a Site
investigation to determine the nature and extent of any hazardous substances
releases or threatened hazardous substance releases at the Site; (ii) performing
a health risk assessment to evaluate whether any potential threat
2
<PAGE>
is posed to human health and/or the environment by any hazardous substances
releases or threatened hazardous substances releases at the Site; (iii)
developing and implementing remedial actions, if necessary, to allow the Site to
be permanently used for its planned use as an industrial facility in an area
zoned for heavy industrial use without any significant risk to public health or
any significant potential for future environmental damage; (iv) developing and
implementing any required operation and maintenance activities necessary to
ensure that any remedial actions taken remain effective; (v) taking any
necessary actions to institute any land use controls required in conjunction
with any remedial actions taken; (vi) complying with the California
Environmental Quality Act (CEQA); and (vi) implementing and facilitating public
participation activities during all phases of the response actions taken at the
Site. The purpose of this Agreement is also for DTSC to obtain reimbursement
from CSI for the state's response costs that are related to the Site, in
accordance with Paragraph 4.9 of this Agreement.
II. BACKGROUND
2.1. Liability of Responsible Person. From 1984 to the present, CSI has
operated a specialty steel mill at the Site.
3
<PAGE>
CSI is the current owner and operator of the Site. DTSC alleges, but CSI does
not admit, the following:
Releases or threatened releases of hazardous substances requiring removal
or remedial action have occurred at the Site. Releases or threatened releases
that have occurred at the Site may include, but are not limited to, releases of
the following hazardous substances: metals, including copper, lead, zinc,
arsenic, and chromium; polynuclear aromatic hydrocarbons, including benzo (a)
anthracene, benzo (a) pyrene, chrysene, and phenanthrene; volatile organic
compounds, including acetone and benzene; polychlorinated biphenyls; and
petroleum hydrocarbons.
CSI is a "person," as defined in section 107(a) of the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA) (42 U. S. C.
Section 9607(a)), and is therefore a "responsible person" within the meaning of
Health and Safety Code Section 25396(u).
Kaiser Steel Corporation, Kaiser Ventures (formerly Kaiser Steel
Resources), Inc., American Deferred Exchange Corporation, DBS-1 (co-trustees of
the Adaya Family Trust), and CSC Fontana also have been identified as
"potentially responsible persons", as defined by Health and Safety Code Section
25396(u), with respect to the Site based on prior releases or threatened
4
<PAGE>
releases of hazardous substances that have occurred at the Site. Nothing in this
Agreement is intended or shall be construed to release or affect the liability
of those responsible persons.
2.2. Notice of Intent. CSI signed and submitted a Notice of Intent dated
May 23, 1995, as required under section 25396.6(c)(3) of the Health and Safety
Code (Exhibit C). By signing the Notice of Intent, CSI stated its intent to
enter into this Agreement with DTSC for the purpose of taking necessary response
actions at the Site. CSI further stated its intent to pay all response costs
related to the Site, including any costs that otherwise might be paid by the
Expedited Site Remediation Trust Fund established under California Health and
Safety Code section 25399.1 ("ERAP Trust Fund") or another responsible person,
in accordance with Paragraph 4.9 of this Agreement. Both parties agree CSI's
agreement not to seek reimbursement for response costs for the site from the
ERAP Trust Fund constitutes a material term and that failure to comply with this
requirement is sufficient grounds for DTSC to remove the Site from eligibility
for response action pursuant to Chapters 6.65 and 6.85 of Division 20 of the
Health and Safety Code and that further response actions at the Site shall be
taken pursuant to Chapter 6.8 (commencing with section 25300) of Division 20 of
the
5
<PAGE>
Health and Safety Code. Notwithstanding the foregoing, as set forth in Paragraph
4.15.4 of this Agreement, CSI specifically reserves the right to pursue other
potentially responsible parties for response costs or other costs incurred by
CSI.
2.3. Site Selected for Expedited Remediation. On August 1, 1995, the Site
Designation Committee determined that DTSC is the appropriate administering
agency and subsequently designated DTSC to oversee response actions at the Site
and, as necessary, Site remediation and remedial action pursuant to the
Expedited Remedial Action Program. CSI agrees to implement the requirements
stated in the Site Designation Committee's resolution (Exhibit D).
2.4. Site Conference. The site conference was held on October 2, 1995,
with members of the community, regulatory agencies, identified potentially
responsible persons and other interested persons.
III. AGREEMENT
3. IT IS HEREBY AGREED THAT CSI shall conduct the following response
actions in accordance with Chapters 6.65 and 6.85 of Division 20 of the Health
and Safety Code, regulations promulgated in Division 4.5 of Title 22 of the
California Code of
6
<PAGE>
Regulations, and all other applicable state and local laws and regulations, and
in the manner specified herein.
3.1. Scope of Work. CSI agrees to conduct response actions at the Site as
described below. CSI shall submit for review, comment and approval all plans,
reports and specifications necessary to implement the response actions at the
Site.
3.1.1. Site Investigation. CSI agrees to implement the DTSC-approved
"Remedial Investigation Workplan" for the Site (prepared by Levine.Fricke and
dated May 25, 1995 (as amended June 26, 1995)), as that Remedial Investigation
Workplan was approved and subsequently may be amended, by developing sampling
and analysis plans for each area of concern identified therein. The objectives
of the Site investigation are to collect the information necessary to:
(a) Determine the nature and extent of releases and/or threatened
releases of hazardous substances to the air, soil, ground water, and
surface water at the Site and migration, if any, of hazardous
substance releases from the Site;
(b) Identify any existing and potential migration pathways at and from
the Site, including direction, rate, and dispersion of hazardous
substances;
7
<PAGE>
(c) Determine the probability and potential magnitude of actual harm, if
any, to public health and safety or the public welfare or to the
environment posed by any threatened or actual releases of hazardous
substances at or from the Site;
(d) Identify and evaluate appropriate response measures, as necessary,
to prevent or minimize future releases of hazardous substances at
the Site and to mitigate any hazardous substance releases which have
already occurred at the Site, including any preliminary and
intermediate actions which may be taken prior to the approval of the
remedial action plan; and
(e) Collect and evaluate the information necessary to prepare a remedial
action plan for the Site in accordance with the requirements of
Health and Safety Code Section 25398.6, which fulfills the intent of
Health and Safety Code Section 25398.4.
3.1.2. Site Investigation Report. The Site investigation report shall be
prepared and submitted by CSI to DTSC for review and approval. The Site
investigation report shall summarize the results of the Site investigation,
including reduction, presentation and interpretation of all applicable data and
8
<PAGE>
information generated or compiled during the Site investigation. The Site
investigation report shall cover the following subjects relating to the Site:
(a) Introduction and Executive Summary. This introduction should present
an overview of the Site investigation, making certain to
appropriately address the name of the facility, Site location and
parcel number(s), nature of business conducted at the Site, reason
for the investigation, and an overview of the other components of
the investigation, including:
(1) Scope of information presented in the Site investigation.
(2) Highlights of the Site investigation.
(b) Site Background. This section should summarize the available
information regarding known or potential sources of contamination
which constitute the primary reason for investigating the Site. Most
of this information has been developed in previous phases of the
investigation. Include in the summary:
(1) Site operation, i.e.: type of activity, years of operation, current
and prior land use, surrounding land
9
<PAGE>
use, facility ownership/operations, property owners, or other
required information;
(2) Historical use of the Site that led to the problem, including any
event which may have affected the release of chemicals, e.g.,
underground tank leak, fire, spills to ground, and infiltration from
surface impoundments.
(3) Chronology of Site investigations and remedial activities, including
prior assessments and remediation. Reference any previous studies
and include the date, title, and name of the preparer and a summary
of the findings.
(4) Description of any removal action measures taken to date.
(5) The presentation of the conceptual site models used to scope the
site investigation and to identify the receptors potentially at
risk, the potential risks associated with each chemical of concern,
the potential exposure pathways that are to be considered, and the
distances to sensitive populations, nearby drinking water supply
wells, and critical wildlife habitats.
(6) Maps that identify the Site in relation to the surrounding area,
onsite activity, and proposed areas,
10
<PAGE>
including any offsite areas, that may be affected by any proposed
remedy.
(c) Nature and Extent of Contamination. This section should describe the
Site characteristics based on the results of the Site investigation
and should set forth the full nature and extent of any
contamination, including the vertical and horizontal extent of
contamination in soil, ground water, surface water, sediment, and
air, and the potential for offsite migration. This section shall
evaluate the following:
(1) Chemicals of concern. For each sample collected and analyzed,
provide information pertaining to the number, location, depth,
analytical method and collection procedure, and Quality
Assurance/Quality Control (QA/QC) parameters. This information
should be used to assess the types and amounts of any contamination,
degree of toxicity, migration potential, and comparative background
analysis.
(2) Discrete areas. Delineate discrete areas of contamination that
contain hazardous substances that are in high concentrations or are
considered highly
11
<PAGE>
mobile, as described in the DTSC Expedited Remedial Action Program's
Risk Management Policy and Procedure.
(d) Geological investigation. For the Site and all areas of concern,
describe and relate the results of sampling and associated geology
by considering:
(1) type of soil/rock, soil group, surface soil conditions, subsurface
soil conditions;
(2) soil sampling results, including number of samples, analytical
methods, QA/QC parameters.
(e) Hydrogeological investigation. Summarize the following information:
(1) depth to groundwater and flow direction data, surface water
conditions and beneficial uses, subsurface water conditions and
beneficial uses;
(2) water sampling results, including number of samples, frequency of
sampling events, analytical methods, QA/QC parameters;
(3) well construction data and well log information;
(4) contaminants detected and nature and extent of contamination and the
possibility of offsite migration.
12
<PAGE>
(f) Air investigation. Summarize results of any required air sampling
conducted as a result of the Site investigation.
(g) Summary, Conclusions and Recommendations.
3.1.3. Remedial Action Plan. CSI shall prepare a remedial action plan that
requires, as necessary, response actions that, when fully implemented, allow the
Site to be permanently used for its planned use as an industrial facility in an
area zoned for heavy industrial use without any significant risk to human health
or any significant potential for future environmental damage. As part of the
remedial action plan, CSI may identify and propose for DTSC approval facilities
or areas of concern at the Site where no further action is necessary. Upon
approval from DTSC, CSI will be obligated to undertake no further response
actions under this Agreement with respect to those areas of concern. The
remedial action plan shall be developed in the following manner:
(a) Development of a Draft Remedial Action Plan. CSI shall develop a
draft remedial action plan for the Site and/or for each area of
concern. The draft remedial action plan shall be submitted for DTSC
review, comment, and approval. The draft plan shall be designed to
meet the criteria stated in Health and
13
<PAGE>
Safety Code Section 25398.6 and shall include the content as
described in that section and the DTSC Expedited Remedial Action
Program's Remedial Action Plan Policy and Procedure. In addition,
the draft remedial action plan shall include the following:
(1) Discrete Areas. Clearly describe any discrete areas of the Site
which contain hazardous substances which are present in high
concentrations or are highly mobile and proposed response actions
for any such areas.
(2) Health Risk Assessment. Prepare a Site-specific and/or area of
concern-specific assessment that evaluates the potential human
health risks, if any, that are posed by the hazardous substance
releases or threatened releases at the Site, the potential human
health risks, if any, that may result if the Site is permanently
used for its planned use after any response actions are completed,
and the adverse effects on the environment, if any, of the hazardous
substance releases. The Site-specific and/or area of
concern-specific assessment shall be carried out using standard
criteria, principles, and protocols for risk assessments adopted by
DTSC and
14
<PAGE>
developed pursuant to Section 57004 of the Health and Safety Code.
(3) Identification of Areas of Concern for Which No Further Action is
Required. Identify those areas of concern for which no further
response action should be required because any actual or threatened
release at that area of concern does not pose any significant risk
to public health and the environment.
(4) Land Use Controls. The draft remedial action plan shall include a
description of any proposed or required land use controls to be
instituted as part of the Site response actions. Any proposed or
required land use control covenants shall be developed as separate
documents and shall be submitted for DTSC review, comment, and
approval. They should be developed utilizing the guidance in the
DTSC Expedited Remedial Action Program's Land Use Controls Policy
and Procedure.
(b) Public Comment and Final Approval. After review and preliminary
approval by DTSC, the draft remedial action plan shall be subject to
public comment and public meeting prior to final approval, in
accordance with
15
<PAGE>
Section 25398.6 of the Health and Safety Code. CSI agrees to
implement the approved remedial action plan.
3.1.4. Engineering Design. An engineering design shall be prepared, as
necessary, to implement a selected remedy and shall be submitted for DTSC's
review, comment, and approval. CSI shall implement the approved design. The
design shall include the technical and operational plans for implementing the
approved response actions. Engineering designs that discuss remedial
alternatives not contained in the approved remedial action plan will not be
considered without modification and review, comment and approval of the remedial
action plan. The content of an engineering design shall consider and include, as
necessary, the following:
(a) Design criteria, process unit and pipe sizing calculations, process
diagrams, and final plans and specifications for facilities to be
constructed.
(b) Description of equipment used to excavate, handle, and transport
contaminated materials.
(c) A field sampling and laboratory analysis plan addressing sampling
during implementation and to confirm achievement of the performance
objectives of the remedial action plan.
16
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(d) A transportation plan identifying routes of travel and final
destination of wastes generated and disposed.
(e) For groundwater extraction systems: aquifer test results, capture
zone calculations, specifications for extraction and performance of
monitoring wells, and a plan to demonstrate that capture is
achieved.
(f) An updated health and safety plan addressing the implementation
activities.
(g) Identification of any necessary permits and agreements.
(h) An operation and maintenance plan including any required monitoring.
(i) A detailed schedule for implementation of the remedial action
consistent with the schedule contained in the approved remedial
action plan, including procurement, mobilization, construction
phasing, sampling, facility start-up, and testing.
3.1.5. California Environmental Quality Act (CEQA). All response actions
conducted at the Site shall be subject to environmental review by DTSC, as
necessary and appropriate, under CEQA. In the event that DTSC determines that
CEQA review is required and DTSC is designated as the lead agency, CSI agrees to
pay for any necessary documents, including but not limited to, an
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Initial Study or initial review, that may be required to comply with CEQA. Based
upon the Initial Study or review, or other information provided, DTSC will
determine whether a Notice of Exemption, Negative Declaration or Environmental
Impact Report should be prepared in support of its decision to approve
implementation of any necessary response actions. CSI agrees to cooperate with
DTSC in the preparation of any documents necessary to comply with CEQA. CSI's
obligation to reimburse DTSC for any costs of CEQA compliance shall be governed
by the terms set forth in Paragraph 4.10 of this Agreement.
3.1.6. Public Participation. CSI shall implement its approved public
participation plan, as necessary, while response actions are being conducted at
the Site. That public participation plan shall conform to DTSC's Public
Participation Policy and Procedure and shall be modified or updated, as
necessary.
3.2. Responsibilities of Responsible Person. CSI agrees to:
(a) Comply with all statutes, regulations, orders, and standards
applicable to taking response action at the Site, including any land
use controls that may be required as part of the response actions;
and
(b) Comply with all terms and conditions of this Agreement.
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3.3. Permits and Authorizations. CSI agrees to obtain, pay all applicable
costs for, sign and file, as necessary, any required permits or other
authorizations that may be required to conduct response actions at the Site,
including any boring, well, excavation, and treatment permits, and any land use
controls documents. DTSC agrees to cooperate with CSI in connection with this
process.
3.4. Departmental Review and Approval. DTSC, shall review and comment on
any draft or final report, plan, schedule or other document submitted for
approval pursuant to this Agreement within 45 days of submittal (or within 60
days, with respect to the remedial action plan); provided, however, that where a
public comment period and/or meeting is required prior to final approval of a
document, DTSC shall have 45 days (or 60 days, with respect to the remedial
action plan) after the close of the public comment period to review and comment
on the document. If DTSC believes that the document is not satisfactory, DTSC
shall return the submitted document to CSI with a written explanation of the
basis for the belief that such document is unsatisfactory within that time
period. Within a reasonable time period established by DTSC, which shall not be
less than 15 working days, CSI shall address DTSC's comments and resubmit the
document and an
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explanation of how or why such resubmitted document addresses DTSC's concerns.
Upon receipt of the resubmitted document, DTSC shall notify CSI in writing of
its approval or disapproval of such resubmitted document. The notification shall
include a written explanation of DTSC's determination, as appropriate. If DTSC
makes a determination that the resubmitted document does not comply with this
Agreement, the provisions of Paragraph 4.14, below (dispute resolution) shall
apply. DTSC further may, with CSI's consent, modify any document as deemed
necessary and approve such document, as modified. Nothing in this paragraph is
intended to or shall preclude DTSC and CSI from engaging in informal discussions
regarding documents submitted to DTSC for review and approval; such informal
discussions are encouraged under this Agreement.
3.4.1. DTSC Oversight. DTSC agrees to provide the oversight of response
actions at the Site necessary to ensure that the expedited remedial action goals
contemplated under Chapters 6.65 (commencing with section 25260) and 6.85
(commencing with section 25396) of Division 20 of the Health and Safety Code can
be achieved. Such oversight may include, but is not limited to, site visits,
field work oversight, research pertaining to legal and technical requirements,
and potentially
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responsible party searches. DTSC also agrees to provide CSI with written and/or
oral comments on all documents, plans, and submittals. Those documents include
all site investigation plans and reports, the draft remedial action plan, health
risk assessment, any engineering designs necessary to implement any approved
remedial actions, operation and maintenance plans, any necessary land use
controls, and any other documents that may be determined to be necessary to
implement response actions at the Site.
3.5. Extension Requests and Approvals. If CSI for any reason is unable to
perform any activity or submit any document within the time required under this
Agreement, CSI may request an extension of such time from DTSC in writing. If
DTSC determines that good cause exists for an extension, it will grant the
request and specify a new schedule in writing. CSI shall comply with the new
schedule. DTSC's decision not to grant a request for an extension of time shall
be subject to dispute resolution under Paragraph 4.14 below.
3.6. Modifications. DTSC or CSI may propose that CSI perform additional
activities or delete activities under this Agreement (a "Modification"). Any
such proposal shall be made in writing and shall explain the basis for the
proposal. Receipt of
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a proposal for Modification shall begin a review and negotiation period which
shall continue for 15 days, unless the Parties agree to a longer period. Any
mutually agreed upon Modification shall be prepared as an addendum to this
Agreement and shall be effective upon execution by both Parties. DTSC or CSI's
denial of a proposed Modification shall be in writing with an explanation of the
denial. DTSC's denial of a proposed Modification shall be subject to the
informal Dispute Resolution procedures set forth in Paragraph 4.14(a).
3.7. Certificate of Completion. Within 90 days of completion of all final
response actions pursuant to the approved remedial action plan, CSI shall file a
request for a certificate of completion with DTSC. In accordance with Health and
Safety Code section 25398.15, such request may be filed even though long-term
operation and maintenance requirements and other long-term remedial activities
remain an ongoing obligation, if all other final response actions have been
completed. Except as provided in Health and Safety Code Sections 25264 and
25265, issuance by DTSC of the certificate of completion shall constitute a
determination that CSI has complied with the requirements of all state and local
laws, ordinances, regulations and standards that are applicable to the Site
investigation and
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remedial action for which the certificate is issued. No agency that has
jurisdiction over hazardous materials releases may take action against CSI with
respect to any or all hazardous materials releases or threatened releases that
were the subject of the Site investigation and remedial action unless one of the
conditions in Health and Safety Code Section 25264(c)(1)-(6) applies. The
issuance of a certificate of completion by DTSC is expressly conditioned upon
the complete and satisfactory performance by CSI of its obligations under this
Agreement.
3.8. Financial Assurance. Prior to obtaining a certificate of completion,
CSI agrees to establish and maintain adequate financial assurance, as necessary,
for any response costs allocated to an orphan share and any ongoing operation
and maintenance required as part of any remedial actions. Any such financial
assurance shall meet the requirements set forth in Section 67401.6 of Title 22
of the California Code of Regulations, subsequently as amended.
IV. STANDARD PROVISIONS
4.1. Covenant Not To Sue. Except as expressly provided in this Agreement,
DTSC and CSI covenant not to sue each other for performance of response actions
or recovery of response costs related to the Site pursuant to the federal
Comprehensive
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Environmental Response Compensation and Liability Act (CERCLA) (42 U.S.C.
Section 9601 et seq.). This covenant not to sue is expressly conditioned on full
and complete compliance by CSI and DTSC with all obligations, orders and
requirements under Chapters 6.65 and 6.85 of Division 20 of the Health and
Safety Code, the regulations promulgated thereunder, and the complete and timely
performance of all of the terms of this Agreement. This covenant not to sue
shall not apply to natural resource damage claims filed pursuant to subdivision
(f) of Section 107 of CERCLA (42 U.S.C. Section 9607(f). With respect to future
liability, this covenant not to sue shall take effect upon DTSC's issuance of a
Certificate of Completion pursuant to Health and Safety Code Sections 25264(b)
and 25398.15(b). This covenant not to sue extends to DTSC and CSI and their
respective officers, directors, shareholders, employees, agents, affiliates,
successors and assigns, and does not extend to any other person. This covenant
not to sue shall not apply and shall not limit DTSC's ability to take action
against a responsible person under any of the circumstances set forth in Health
and Safety Code sections 25264(c) and 25265.
4.2. Agreement Manager. Allen Wolfenden, DTSC's Chief of Accelerated
Remedial Action Programs Branch, is designated by
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DTSC as its Manager for this Agreement. Dennis R. Poulsen, Manager Environmental
Services, California Steel Industries, Inc., is designated by CSI as its Manager
for this Agreement. DTSC and CSI shall provide each other with advance written
notice of any change in their respective Managers.
4.3. Notices and Submittals. All notices, documents and communications
required to be given under this Agreement, unless otherwise specified herein,
shall be sent to the respective parties at the following addresses in a manner
that produces a record of the sending of the notice, document or communication,
such as certified mail, overnight delivery service, facsimile transmission or
courier hand delivery service:
4.3.1. To DTSC:
Allen K. Wolfenden, Chief
Attention: Tim Miles
Accelerated Remedial Action Programs Branch
Department of Toxic Substances Control
10151 Croydon Way, Suite 3
Sacramento, California 95827-2106
Fax: 916-255-3697
Phone: 916-255-3710
4.3.2. To CSI:
Dennis R. Poulsen
Manager Environmental Services
California Steel Industries, Inc.
14000 San Bernardino Ave, P.O. Box 5080
Fontana, California 92335
Fax: 909/350-5998
Phone: 909/350-5973
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With a copy to:
Ira Frazer
General Counsel
California Steel Industries, Inc.
14000 San Bernardino Ave, P.O. Box 5080
Fontana, California 92335
Fax: 909/350-5998
Phone: 909/350-5978
4.3.3 Either party may change the persons identified above by providing
prior written notice to the other party.
4.4. Communications. All DTSC approvals and decisions made regarding
documents and communications will be communicated to CSI in writing by the
Branch Chief, Accelerated Remedial Action Programs Branch, Department of Toxic
Substances Control, or his/her designee. DTSC should identify its designee (and
any changes thereof) to CSI in advance and on a timely basis. Except in the case
of an emergency, no informal advice, guidance, or suggestions or comments by
DTSC regarding reports, plans, specifications, schedules or any other writings
by DTSC shall be construed to relieve CSI of the obligation to obtain such
written approvals.
4.5. Site Access. CSI shall provide DTSC with access to the Site at all
reasonable times during normal business hours, as necessary to implement this
Agreement. In carrying out activities pursuant to this Paragraph 4.5, DTSC and
its
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authorized representatives shall provide reasonable advance notice to CSI prior
to requesting such access and shall use their respective best efforts to avoid
interfering with or impeding CSI's performance under this Agreement and CSI's
conduct of its business operations at the Site. All DTSC representatives
entering the Site shall have current health and safety training, as required by
law, and shall comply with all of CSI's health and safety rules in effect.
Nothing in this Agreement is intended to limit or restrict, or to expand, the
right of entry or inspection that DTSC or any other agency otherwise has under
applicable law.
4.5.1. To the extent that the Site or any other property to which access
is required for the implementation of this Agreement is owned or controlled by
persons other than CSI, CSI shall make good faith efforts to secure from such
persons access for CSI, as well as for DTSC, its representatives, and
contractors, as necessary to implement this Agreement. In the event that CSI is
unable to obtain offsite access where necessary to fulfill its obligations under
this Agreement, DTSC shall make good faith efforts to obtain such offsite access
for CSI or shall waive the requirement for offsite access. In the event that CSI
is unable to meet any deadline set forth in or required under this Agreement due
to CSI's and/or DTSC's inability to obtain offsite
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access, DTSC shall grant CSI an extension of such deadline, based upon the facts
presented, unless DTSC finds that CSI did not make good faith efforts to obtain
such offsite access.
4.6. Sampling, Data and Document Availability. CSI shall maintain a
central depository of the data, reports, and other documents prepared pursuant
to this Agreement. CSI shall permit DTSC and its authorized representatives to
inspect and copy at all reasonable times during normal business hours all
sampling, testing, monitoring or other data generated by CSI or on CSI's behalf
pertaining to work undertaken pursuant to this Agreement. DTSC shall provide
reasonable advance notice to CSI prior to such inspection and copying and shall
use its best efforts to avoid interfering with or impeding CSI's performance
under this Agreement and CSI's conduct of its business operations at the Site.
In the event that any data or information requested by DTSC contains
confidential business or trade secret information, CSI may designate such
information as "Confidential," and DTSC shall treat such information in
accordance with the provisions of the California Public Records Act, California
Government Code section 6250 et seq., and corresponding regulations applicable
to the treatment of materials designated as confidential business or trade
secret information. Nothing in this Agreement is intended
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to limit or restrict data and information gathering authority that DTSC or any
other agency may have by operation of law.
CSI shall inform DTSC at least seven days in advance of all field work and
shall allow DTSC and its authorized representatives to take duplicates of any
samples collected by CSI pursuant to this Agreement.
4.7. Liability. Except as provided in Paragraph 4.1, nothing in this
Agreement shall constitute or be considered a satisfaction or release from
liability for any condition or claim arising as a result of CSI's current or
future operations. Nothing in this Agreement is intended or shall be construed
to limit the rights of any of the parties with respect to claims arising out of
or relating to the deposit or disposal at any other location of substances
removed from the Site.
4.8. Government Liabilities. The State of California (State) does not
assume any liability by entering into this Agreement. The State of California
shall not be liable for any injuries or damages to persons or property resulting
from acts or omissions by CSI in carrying out activities pursuant to this
Agreement, nor shall the State of California be held liable as a party to any
contract entered into by CSI or its agents in carrying out activities pursuant
to this Agreement.
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4.9. Costs. CSI agrees to pay all response costs related to the Site, in
accordance with Section 25398.2(b)(1)(B) of the Health and Safety Code, provided
that DTSC complies with the standards and procedures set forth in Paragraph 4.10
of this Agreement with respect to all response costs covered by Paragraph 4.10.
Such response costs, in so far as they are specific to the site, include but are
not limited to: all DTSC oversight costs; DTSC overhead costs; orphan share
costs; other responsible person(s) costs not paid by another responsible
person(s); and all costs incurred in implementing and administering Chapters
6.65 and 6.85 of Division 20 of the Health and Safety Code with respect to the
Site, including costs incurred in relation to any judicial review of a decision
of an arbitration panel or any costs of conducting an arbitration in so far as
these response costs are consistent with the definition and allocation of
response costs in the California Expedited Remedial Action Reform Act of 1994
(California Health and Safety Code section 25396 et seq.) and the corresponding
regulations as they now read or may be subsequently amended. For purposes of
this paragraph, applicable response costs shall be determined as the Health and
Safety Code and the corresponding regulations read on the date that the
assessment of costs by DTSC is final, including
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resolution of administrative appeals, arbitration, or judicial review, if any.
CSI agrees that it will not seek payment from the ERAP Trust Fund for any orphan
share costs that may be assigned by a DTSC apportionment of liability for the
Site.
4.10. DTSC Oversight Costs. CSI agrees to reimburse DTSC for all DTSC
oversight costs related to the Site incurred under this Agreement, in accordance
with the procedures set forth below.
4.10.1. The following procedures will be followed with respect to the
reimbursement of oversight costs by DTSC.
(a) Prior to commencing any principal task under this Agreement, which
shall include the preparation and/or implementation of (i) the Site
Investigation and Report, (ii) the Remedial Action Plan (including
Health Risk Assessment), (iii) the Engineering Design, (iv) the
Public Participation Plan, (v) the Certification of Completion, (vi)
any documents necessary to comply with CEQA, and (vii) any other
significant tasks undertaken pursuant to this Agreement (hereinafter
"Principal Task"), DTSC shall meet with CSI to discuss and establish
a written budget estimate for DTSC's oversight costs that may be
assessed in
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connection with that Principal Task. DTSC shall monitor the costs
incurred and inform CSI prior to exceeding the cost estimate for any
Principal Task. Nothing in this provision limits or alters DTSC's
obligation and right to approve or disapprove any action or report
called for under this Agreement.
(b) DTSC shall invoice CSI quarterly for oversight costs expended by
DTSC. The supporting documentation is a material part of the
invoice. The supporting documentation shall be submitted on or
before the day of the invoice and shall provide the following
information: (i) for employee time, the supporting documentation
shall specify on a daily basis the identity of each employee who has
performed work, the amount of time worked by that employee (to the
quarter hour), and the specific tasks completed by that employee;
(ii) for expenses, the invoice shall reflect the specific charges
for each category of expense incurred within that month and shall
provide detailed information on each travel-related expense. A
sample form illustrating the information and level of detail
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required for the supporting documentation is included as Exhibit E.
(c) CSI shall pay DTSC's costs as indicated on the invoice within 60
days of receipt of DTSC's invoice except those amounts which CSI
disputes. If CSI disputes any portion of the invoice, CSI shall make
a written submittal setting forth the reason for the dispute to the
DTSC Manager within 30 days of receipt of DTSC's invoice. DTSC and
CSI will attempt to resolve any dispute relating to oversight costs
informally. If DTSC and CSI cannot reach any agreement informally
within 30 days of receipt of CSI's submittal, they will follow the
dispute resolution procedures set forth in Paragraph 4.14 of this
Agreement. Payment of any disputed amount will be due within 15 days
of resolution of the dispute.
4.10.2. Each payment made by CSI pursuant to this Agreement shall be by a
check made payable to the "Department of Toxic Substances Control", and bearing
on its face the project code 490001 for the Site. Payments shall be sent to:
Accounting/Cashier
Department of Toxic Substances Control
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P.O. Box 806
Sacramento, California 95812-0806
4.10.3. DTSC shall retain all cost records associated with the work
performed by DTSC under this Agreement until at least six years after the
certification of completion is issued. Upon written request by CSI to the DTSC
Manager, these records will be available for review and/or copying within 10
days during normal DTSC working hours.
4.11. Cost Recovery. To the extent authorized by applicable law failure by
CSI to comply with any term of this Agreement, or any obligation or requirement
of Chapters 6.65 and 6.85 of Division 20 of the Health and Safety Code, any
regulation promulgated thereunder, or order issued or adopted therefrom, may
subject CSI to liability for all costs incurred by DTSC related to the Site
including but not limited to, oversight costs, overhead costs, response costs,
all costs paid or assigned for payment from the Expedited Site Remediation Trust
Fund, Hazardous Substance Account, Hazardous Waste Control Account, Hazardous
Substance Cleanup Fund and any other DTSC costs pursuant to Health and Safety
Code sections 25399 and 25360; CERCLA section 107 (42 U.S.C. section 9607) and
any other applicable federal and state laws.
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4.12. Amendments. This Agreement may be amended or modified solely upon
written agreement between DTSC and CSI.
4.13. Assignment. DTSC and CSI declare their mutual recognition that
performance under this Agreement is founded upon DTSC's confidence in the
reputation and other attributes of CSI. For this reason, if CSI desires to make
an assignment of rights and obligations under this Agreement, it shall submit a
written request for approval to DTSC. Such request shall identify the proposed
assignee and include an explanation of the reason and basis for the proposed
assignment. DTSC shall approve such assignment in writing within 30 days unless
DTSC reasonably determines that the proposed assignee is not capable of
performing the obligations imposed on CSI under this Agreement and provides a
written explanation of the bases for its determination within the same time
period. If the parties are unable to resolve their dispute relating to the
assignment through good faith negotiation, they shall follow the dispute
resolution procedures set forth in Paragraph 4.14 of this Agreement. The
effective date of the assignment shall be the date upon which DTSC issues
written approval.
4.14. Dispute Resolution. If CSI believes there is a dispute between CSI
and DTSC under this Agreement, including,
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without limitation, any disputes relating to any document required to be
prepared under this Agreement, any cleanup standards proposed by DTSC, or any
oversight costs assessed by DTSC, the following steps will be followed:
(a) Informal Dispute Resolution. CSI initially will attempt to resolve any
dispute with DTSC informally through the following two-step procedure:
(1) CSI first shall discuss the problem informally with DTSC's Project
Manager assigned to this Agreement. If the problem is not resolved
at this stage, CSI shall direct the dispute, together with any
supporting evidence, in writing, to DTSC's Accelerated Remedial
Action Programs Branch Chief. The letter must state the issue(s) in
dispute, the legal or other basis for CSI's position and the remedy
sought. The Branch Chief shall issue a written decision with an
explanation for his or her decision within ten (10) business days
after receipt of the letter from CSI. The decision shall be mailed
to CSI by first class mail, postage prepaid. Should CSI disagree
with the Branch Chief's decision, CSI may appeal to the Deputy
Director.
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(2) To appeal to the Deputy Director, CSI must prepare a letter stating
the reasons why the Branch Chief's decision is not acceptable.
Attached to the letter shall be (1) CSI's original statement of the
dispute, (2) supporting documents, and (3) a copy of the Branch
Chief's response. This letter and attachments shall be sent to
DTSC's Deputy Director for Site Mitigation within ten (10) business
days from the date of mailing listed in (1) above. The Deputy
Director or designee shall review CSI's letter and supporting
documents, consider the issues raised and render a written decision
to CSI within twenty (20) business days of receipt of the CSI's
letter. The decision of the Deputy Director or designee shall be
final.
(b) Arbitration. If CSI disagrees with a final decision of the Deputy Director
relating to an issue that may be referred to arbitration under Chapter
6.85 of Division 20 of the Health and Safety Code, CSI may file a petition
for arbitration with respect to that issue pursuant to that chapter.
(c) Judicial Review. CSI shall have the right to seek judicial review of any
final decision of the Deputy Director or any arbitration decision reached
pursuant to Chapter 6.85 of
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Division 20 of the Health and Safety Code. CSI shall seek judicial review
within 30 days of any such final decision or arbitration decision.
(d) During the pendency of all Dispute Resolution procedures set forth in this
paragraph, the time periods for completion of work to be performed under
this Agreement which are affected by the dispute shall be extended for a
period of time not to exceed the actual time taken to resolve the dispute.
Subject to section 25398.10(d) of the Health and Safety Code or a
determination by DTSC that an interim endangerment exists at the site or a
condition poses an immediate risk to human health and/or the environment,
the existence of a dispute shall not excuse, toll or suspend any other
compliance obligation or deadline imposed under this Agreement.
4.15. Reservation of Rights. DTSC and CSI reserve the following rights.
4.15.1. Termination. DTSC reserves the right to terminate this Agreement
and remove the Site from eligibility for response action under Chapters 6.65 and
6.85 of Division 20 of the Health and Safety Code, and thereafter to pursue
enforcement (including response actions) under applicable federal and state
laws, if CSI
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materially fails to comply with any term of this Agreement or any provision of
Chapters 6.65 and 6.85 of Division 20 of the Health and Safety Code. DTSC shall
provide CSI with written notice of any alleged noncompliance and, except where a
time period previously has been specified herein or except in the case of an
interim endangerment, shall specify a reasonable time of not less than 15 days
for CSI to remedy such noncompliance or to demonstrate compliance. CSI may
appeal any determination of noncompliance through the dispute resolution
procedures set forth in Paragraph 4.14, above. If CSI timely remedies such
noncompliance in accordance with the notice from DTSC, a schedule specified by
DTSC, or a final decision reached in the dispute resolution process, CSI shall
be deemed to be in compliance with the Agreement. Upon a final decision by DTSC
to terminate the Agreement in accordance with the standards and procedures set
forth at the beginning of this paragraph, DTSC and CSI shall be bound by, and
CSI will be required to comply with, the terms of the Voluntary and Enforceable
Agreement and Imminent And/Or Substantial Endangerment Order dated November
1992, amended May 1994 (Docket No. I&SE 91/92-005) ("VEA") to the extent that
those terms apply to any future response actions taken at the Site and any such
response actions further shall be taken pursuant to
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Chapter 6.8 of Division 20 of the Health and Safety Code. CSI, however, shall
not be obligated to comply with obligations imposed under the VEA to the extent
that DTSC determines that CSI already has complied with equivalent obligations
imposed under this Agreement.
4.15.2. Except as otherwise limited by this Agreement, DTSC reserves the
right to take any enforcement action, including an action for response costs,
injunctive relief, monetary penalties, and punitive damages, that it determines
to be necessary pursuant to Health and Safety Code Section 25398.3 and/or any
other applicable authority. Nothing in this Agreement is intended or shall be
construed to limit or preclude DTSC from taking any other action authorized by
law or equity to protect public health or safety or the environment and
recovering the cost thereof; provided, however, that DTSC shall not take any
such action against CSI regarding work covered by this Agreement without first
exhausting all measures available pursuant to this Agreement, including, without
limitation, provisions regarding modifications and dispute resolution. CSI
expressly reserves all rights and defenses it may have with respect to any such
action.
4.15.3. By entering into this Agreement, CSI does not admit to any fact,
fault or liability under any statute, regulation or
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common law for conditions which existed before, during, or after the execution
of this Agreement. CSI further makes no admission of liability and does not
admit or acknowledge any causal or other relationship between any of its
activities, past or present, and any conditions at or around the Site, nor does
CSI admit or acknowledge any legal responsibility for any such conditions or for
remedying any contamination. CSI expressly denies any such relationship,
liability or responsibility. By entering into this Agreement, CSI is not waiving
any right, claim, remedy, appeal, cause of action or defense in this or any
other proceeding, except as explicitly stated in this Agreement.
4.15.4. Nothing in this Agreement shall constitute or be construed as a
waiver of CSI's rights (including any covenant not to sue or release), with
respect to any claim, cause of action, or demand in law or equity that CSI may
have against any "person", as defined in Health and Safety Code section 25319,
that is not a signatory to this Agreement. In particular, CSI expressly reserves
all rights it may have under applicable statutes, regulations and common law to
assert the responsibility of other persons for any hazardous substances releases
or threatened hazardous substances releases at or migrating from the Site, and
to recover the costs of response measures, including
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environmental investigations, from such responsible parties. CSI further
expressly reserves any rights it has to seek a judicial or arbitral allocation
and apportionment of its liability under state or federal law. This Agreement
expressly does not create rights in or obligations to third parties.
4.15.5. Except as otherwise provided in this Agreement, CSI shall not be
entitled to a refund from DTSC or to assert a claim against DTSC for any amount
paid or expended under this Agreement.
4.16. Force Majeure. CSI shall perform its obligations under this
Agreement unless such performance is prevented or delayed by events which
constitute a force majeure. For the purposes of this Agreement, a "force
majeure" is defined as any event arising from causes beyond the reasonable
control of CSI or its contractors, subcontractors or consultants that delays or
prevents performance and that cannot be, or could not have been, overcome by the
exercise of due diligence by CSI. Such events may include but are not limited to
acts of God, including landslides, lightning, fires, storms, floods, pestilence,
freezing, and earthquakes; explosions, sabotage, civil disturbances, acts of the
public enemy, wars, blockades, public riots; strikes, lockouts or other
industrial disturbances;
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eminent domain, condemnation or other taking, or archaeological finds. Neither
economic hardship nor increased costs shall be considered an event beyond the
control of CSI, and such events shall not trigger the force majeure clause. In
the event of a force majeure, the time for performance of the activity delayed
by the force majeure shall be extended for the minimum time necessary to allow
completion of the delayed activity. The time for performance of any activity
dependent on performance of the delayed activity shall be similarly extended. In
the event of a force majeure, CSI shall orally notify DTSC no later than
forty-eight (48) hours after CSI becomes aware of the force majeure and shall
notify DTSC in writing within fourteen (14) calendar days after discovery of a
force majeure. The written notification shall describe the force majeure delay,
the anticipated length of the delay, and any measures CSI is taking to mitigate
the event or delay.
4.17. Regulatory Materials. Upon request by CSI, DTSC, to the best of its
ability, shall identify to CSI all applicable DTSC, EPA, or other governmental
policies, guidances, and procedures necessary for the performance of work
hereunder. Upon request, DTSC shall provide any such DTSC policies, guidances,
and procedures to CSI.
43
<PAGE>
4.18. Privileged Materials and Communications. Nothing in this Agreement
shall be construed or interpreted as a waiver of CSI's right to preserve the
confidentiality of attorney-client communications or the rights of CSI's counsel
to preserve the confidentiality of any attorney work-product.
4.19. Notification of Environmental Conditions. CSI shall notify DTSC's
Project Manager immediately upon learning of any conditions constituting an
immediate threat to public health and/or the environment that are reportable to
DTSC pursuant to section 25359.4(a) of the Health and Safety Code or an "interim
endangerment," as that term is defined in Section 25396(k) of the Health and
Safety Code.
4.20. Third Party Actions. In the event that CSI brings any suit or claim
for damages or contribution against a third party or for contribution for
matters related to the Site, CSI shall notify DTSC within ten (10) days after
service of the complaint in the third party action or any dispositive motion
involving DTSC. CSI shall pay all costs incurred by DTSC relating to third party
actions including, but not limited to, responding to subpoenas.
4.21. Compliance with Applicable Laws. Nothing in this Agreement shall
relieve CSI from complying with all applicable
44
<PAGE>
laws and regulations, and CSI shall conform all actions required by this
Agreement with all applicable federal, state and local laws and regulations.
4.22. Headings. The headings set forth in this Agreement are included for
convenience of reference only and shall be disregarded in the construction and
interpretation of any of the provisions of this Agreement.
4.23. Severability. The requirements of this Agreement are severable, and
the Parties shall comply with each and every provision hereof, notwithstanding
the effectiveness of any other provision.
4.24. Exhibits. All exhibits attached to this Agreement are incorporated
herein by this reference.
4.25. Incorporation of Plans and Reports. All plans, schedules, reports,
specifications and other documents that require DTSC approval and are submitted
by CSI pursuant to this Agreement are incorporated herein upon approval by DTSC
and shall be implemented by CSI as approved.
4.26. Time Periods. Unless otherwise specified, time periods begin from
the date this Agreement is fully executed, and "days" means calendar days.
45
<PAGE>
4.27. Parties Bound. This Agreement applies to and is binding upon CSI,
and its successors and assigns, and upon DTSC, and any successor agency of the
State of California that may have responsibility for and jurisdiction over the
subject matter of this Agreement. No change in the ownership or corporate or
business status of any signatory, or of the facility or Site, shall alter any
signatory's responsibilities under this Agreement.
4.28. Drafting. This Agreement is deemed to have been drafted equally by
the parties hereto.
4.29. Integration Clause. DTSC and CSI declare that this Agreement,
including all Exhibits and Appendices hereto, contains a total integration of
all rights and obligations of both parties. There are no extrinsic conditions or
collateral agreements or undertakings of any kind. In regarding this instrument
as the full and final expression of their Agreement, it is the express intention
of both DTSC and CSI that any and all prior or contemporaneous agreements,
promises, negotiations, or representations, either oral or written, relating to
the subject matter of this Agreement which are not expressly set forth herein
are to have no force, effect, or legal consequence of any kind.
46
<PAGE>
4.30. Supersession of Voluntary and Enforceable Agreement and Imminent
And/Or Substantial Endangerment Order. Subject to Paragraph 4.14.1, this
Agreement supersedes the Voluntary and Enforceable Agreement and Imminent And/Or
Substantial Endangerment Order dated November 1992, amended May 1994 (Docket No.
I&SE 91/92-005) ("VEA"). Subject to Paragraph 4.14.1 of this Agreement, the VEA
shall be void and shall have no force or effect.
4.31. California Law. This Agreement shall be governed, performed and
interpreted under the laws of the State of California.
4.32. Enforceability. In any action by DTSC to enforce the terms and
conditions of this Agreement, CSI consents to, and agrees not to contest, the
authority or jurisdiction of DTSC to enter into or enforce this Agreement, and
agrees not to contest the validity of this Agreement or its terms. CSI
specifically agrees not to dispute the validity of this Agreement or its terms
in any administrative action, court action, arbitration proceeding or other
proceeding involving or affecting this Agreement. Nothing in this paragraph
shall prevent CSI from contesting or disputing the meaning of the terms in this
Agreement.
47
<PAGE>
4.33. Counterparts. This Agreement may be executed and delivered in any
number of counterparts, each of which when executed and delivered shall be
deemed to be an original, but such counterparts shall together constitute one
and the same document.
4.34. Effective Date. This Agreement is final and effective on the date
upon which it is fully executed by the parties hereto.
4.35. Representative Authority. The undersigned representative of the
parties to this Agreement certifies that he or she is fully authorized to enter
into the terms and conditions of this Agreement and to execute and legally bind
the parties to this Agreement.
48
<PAGE>
/s/ Allen K. Wolfenden 7/2/96
- ---------------------- ------
Allen K. Wolfenden, Chief Date
Department of Toxic Substances Control
Accelerated Remedial Action Programs Branch
10151 Croydon Way, Suite 3
Sacramento, California 95827-2106
/s/ James E. Declusin 6/28/96
- --------------------- -------
James E. Declusin Date
Senior Executive Vice President
California Steel Industries, Inc.
14000 San Bernardino Ave.
Fontana, California 92335
I. Exhibits:
A. Site Location Map
B. Site Diagram
C. Notice of Intent
D. Site Designation Committee Selection Resolution
E. Time Reporting Form
49
<PAGE>
[ Exhibit A - Site Location Map ]
<PAGE>
[ Exhibit B - Site Diagram ]
<PAGE>
Exhibit C - Notice of Intent
CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY
DEPARTMENT OF TOXIC SUBSTANCES CONTROL
EXPEDITED REMEDIAL ACTION PROGRAM
NOTICE OF INTENT
o The notice of intent must be signed by the applicant or authorized agent
of the applicant and returned with the application and PEA. The
application cannot be processed without the notice being signed. A
separate Notice of Intent should be submitted for each applicant. Signing
this notice does not obligate the applicant to enter into an agreement.
The agreement required pursuant to the statute will be executed after the
site has been selected for the program.
- --------------------------------------------------------------------------------
The undersigned, signifying intent, hereby submits this application to the
Department of Toxic Substances Control and the Site Designation Committee
pursuant to Section 25396.6 (c)(3) of California Health and Safety Code for
selection for the California Expedited Remedial Action Program and; if selected,
to be bound by the requirements of Chapter 6.85 of the California Health and
Safety Code. The undersigned also intends to enter into an enforceable agreement
with the Department for the purpose of taking expedited response actions and
agrees to pay all response costs related to the implementation of the program
and the expedited response actions, including all response costs not otherwise
paid by the trust fund or another responsible person.
- --------------------------------------------------------------------------------
Signature of applicant: /s/ Dennis R. Poulsen
---------------------------------
- --------------------------------------------------------------------------------
Printed name of applicant Dennis R. Poulsen
---------------------------------
Title: Manager, Environmental Services
---------------------------------
California Steel Industries, Inc.
Date: May 23, 1995
---------------------------------
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<PAGE>
Exhibit D - Site Designation Committee Selection Resolution
CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY
SITE DESIGNATION COMMITTEE
RESOLUTION NO. 95-17
August, 1, 1995
WHEREAS, Chapter 6.65 of the Health and Safety Code, commencing with
Section 25260 establishes a Site Designation Committee; and
WHEREAS, Chapter 6.85 of the Health and Safety Code, commencing with
Section 25396 establishes the Expedited Remedial Action Program (ERAP); and
WHEREAS, Health and Safety Code Section 25396.6 gives the Site Designation
Committee the authority to designate the Department of Toxic Substances Control
(DTSC) as the administering agency to oversee site investigation and remedial
action pursuant to the ERAP; and
WHEREAS, California Steel Industries, Inc., a responsible person as
defined in Health and Safety Code Section 25396(u), requested the Site
Designation Committee to designate DTSC as the administering agency pursuant to
ERAP at 14000 San Bernardino Avenue, Fontana, California, more particularly,
Parcel 0231-121-04 of Parcel Map 9818 of Parcel 2 and Parcel 0321-121-05 of
Parcel Map 8682 - the portion of Parcel 2 lying north of San Bernardino Avenue
in the City of Fontana, County of San Bernardino, State of California (site);
and
WHEREAS, California Steel Industries, Inc. submitted information
equivalent to a completed preliminary endangerment assessment which concludes
that significant response actions are necessary at the site and includes an
analysis of the scope and identity of the affected community on May 23, 1995.
DTSC has determined the submittal meets the requirements for a completed
preliminary endangerment assessment pursuant to title 22, California Code of
Regulations, Section 67401.3; and
WHEREAS, the Site Designation Committee received the request, together
with the DTSC recommendation, on July 20, 1995 that California Steel Industries,
Inc. be selected with designation of DTSC as an administering agency pursuant to
ERAP on August 1, 1995; and
WHEREAS, the Site Designation Committee noticed a hearing for August 1,
1995, and heard public testimony regarding the application; and
<PAGE>
SITE DESIGNATION COMMITTEE
RESOLUTION NO. 95-17
Page Two
WHEREAS, the Site Designation Committee considered the application and
furthermore, considered all factors and criteria set forth in Health and Safety
Code Sections 25262(c) and 25396.6(c); and
WHEREAS, the Site Designation Committee found the site is not on, or
eligible to be placed on, the National Priorities List prepared pursuant to the
federal act, or is not a site which is owned or operated by a department,
agency, or instrumentality of the United States; and
WHEREAS, the Site Designation Committee found there are no funds available
in the trust fund to cover all of the response action costs that will or may be
assigned to the orphan share at the site and that California Steel Industries,
Inc. agreed in writing to pay for the orphan share at the site and it will not
at any time seek payment of response costs from the trust fund; and
WHEREAS, the Site Designation Committee found that on May 23, 1995
California Steel Industries, Inc. submitted a notice of intent to the DTSC to be
bound by the requirements of Chapter 6.85, enter into an enforceable agreement
with DTSC and pay all responsible costs not otherwise paid by another
responsible person; and
WHEREAS, the Site Designation Committee found, as of this date, there is
no known condition of "interim endangerment", as defined in Health and Safety
Code Section 25396, subdivision k, existing at the site; and
WHEREAS, the Site Designation Committee found DTSC has issued an order and
entered into an enforceable agreement with California Steel Industries, Inc.
under Chapter 6.8 of the Health and Safety Code, commencing with Section 25300.
Pursuant to Health and Safety Code Section 25396.6(c)(5)(B), the Site
Designation Committee waives the requirement in Section 25396.6(c)(5)(A) that no
more than five sites may selected that are currently under an order or
enforceable agreement with the DTSC because selection under Chapter 6.85 will
not delay response action at the site and is in the public interest; and
WHEREAS, the Site Designation Committee directs that the approved Remedial
Investigation workplan shall be used as the basis for the site investigation
workplan. Any changes in the workplan shall be at the discretion of the DTSC;
and
<PAGE>
SITE DESIGNATION COMMITTEE
RESOLUTION NO. 95-17
Page Three
WHEREAS, California Steel Industries, Inc. agrees to reimburse the state
for response costs incurred by any state agency in implementing, administering
and in overseeing response actions under Chapters 6.65 and 6.85; and
WHEREAS, the Site Designation Committee has determined that, based on
consideration of all of the factors listed in Health and Safety Code Sections
25262(c) and 25396.6(c), DTSC is the appropriate agency to act as the
administering agency to oversee site investigation and remedial action pursuant
to the Expedited Remedial Action Program.
NOW, THEREFORE BE IT RESOLVED that the Site Designation Committee hereby
designates DTSC as the administering agency for the site.
CERTIFICATION
The undersigned Chair of the Site Designation Committee does hereby certify that
the foregoing is a full, true, and correct copy of a resolution duly and
regularly adopted at a meeting of the Site Designation Committee held in
Sacramento, California on August 1, 1995.
DATED: AUG 08 1995 /s/ Val F. Siebal, Chair
------------------------- -----------------------------------
Val F. Siebal, Chair
Site Designation Committee
<PAGE>
Exhibit E - Time Reporting Form
Staff Name: Quarter/Year Covered:
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Date Hours Description of Work
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<PAGE>
EXHIBIT 10.13
$150,000,000
CALIFORNIA STEEL INDUSTRIES, INC.
PURCHASE AGREEMENT
------------------
March 30, 1999
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
BANCBOSTON ROBERTSON STEPHENS INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
California Steel Industries, Inc., a Delaware corporation (the
"Company"), confirms its agreement with Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other
Initial Purchasers named in Schedule A hereto (collectively, the "Initial
Purchasers," which term shall also include any initial purchaser substituted as
hereinafter provided in Section 11 hereof), for whom Merrill Lynch, BancBoston
Robertson Stephens, Inc. and NationsBanc Montgomery Securities LLC are acting as
representatives (in such capacity, the "Representatives"), with respect to the
issue and sale by the Company and the purchase by the Initial Purchasers, acting
severally and not jointly, of the respective principal amounts set forth in said
Schedule A of $150,000,000 aggregate principal amount of the Company's 8 1/2%
Senior Notes due 2009 (the "Securities"). The Securities are to be issued
pursuant to an indenture dated as of April 6, 1999 (the "Indenture") between the
Company and State Street Bank and Trust Company of California, N.A., as trustee
(the "Trustee"). Securities issued in book-entry form will be issued to Cede &
Co. as nominee of The Depository Trust Company ("DTC") pursuant to a letter
agreement, to be dated as of the Closing Time (as
<PAGE>
defined in Section 2(b)) (the "DTC Agreement"), among the Company, the Trustee
and DTC.
The Company understands that the Initial Purchasers propose to make an
offering of the Securities on the terms and in the manner set forth herein and
agrees that the Initial Purchasers may resell, subject to the conditions set
forth herein, all or a portion of the Securities to purchasers ("Subsequent
Purchasers") at any time after the date of this Agreement. The Securities are
to be offered and sold through the Initial Purchasers without being registered
under the Securities Act of 1933, as amended (the "1933 Act"), in reliance upon
exemptions therefrom. Pursuant to the terms of the Securities and the
Indenture, investors that acquire Securities may only resell or otherwise
transfer such Securities if such Securities are hereafter registered under the
1933 Act or if an exemption from the registration requirements of the 1933 Act
is available (including the exemption afforded by Rule 144A ("Rule 144A") or
Regulation S ("Regulation S") of the rules and regulations promulgated under the
1933 Act by the Securities and Exchange Commission (the "Commission")).
The holders of Securities (including the Initial Purchasers and
subsequent transferees) will be entitled to the benefits of a registration
rights agreement, to be dated as of April 6, 1999 (the "Registration Rights
Agreement"), by and among the Company and the Initial Purchasers substantially
in the form attached as Exhibit A hereto.
The Company has prepared and delivered to each Initial Purchaser
copies of a preliminary offering memorandum dated March 17, 1999 (the
"Preliminary Offering Memorandum") and has prepared and will deliver to each
Initial Purchaser, on the date hereof or the next succeeding day, copies of a
final offering memorandum dated March 30, 1999 (the "Final Offering
Memorandum"), each for use by such Initial Purchaser in connection with its
solicitation of purchases of, or offering of, the Securities. "Offering
Memorandum" means, with respect to any date or time referred to in this
Agreement, the most recent offering memorandum (whether the Preliminary Offering
Memorandum or the Final Offering Memorandum, or any amendment or supplement to
either such document) which has been prepared and delivered by the Company to
the Initial Purchasers in connection with their solicitation of purchases of, or
offering of, the Securities.
-2-
<PAGE>
SECTION 1. Representations and Warranties.
------------------------------
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Initial Purchaser as of the date hereof and as
of the Closing Time referred to in Section 2(b) hereof, and agrees with each
Initial Purchaser as follows:
(i) Similar Offerings. The Company has not, directly or
-----------------
indirectly, solicited any offer to buy or offered to sell, and will not,
directly or indirectly, solicit any offer to buy or offer to sell, in the
United States or to any U.S. citizen or resident, any security that is or
would be integrated with the sale of the Securities in a manner that would
require the Securities to be registered under the 1933 Act.
(ii) Offering Memorandum. The Offering Memorandum does not, and
-------------------
at the Closing Time will not, include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided the Company makes no representation,
--------
warranty or agreement as to statements contained in or omitted from the
Offering Memorandum made in reliance upon and in conformity with
information furnished to the Company in writing by any Initial Purchaser
through the Representatives expressly for use in the Offering Memorandum.
(iii) Independent Accountants. The accountants who certified the
-----------------------
financial statements and supporting schedules included in the Offering
Memorandum are independent certified public accountants with respect to the
Company and its subsidiary within the meaning of Regulation S-X under the
1933 Act.
(iv) Financial Statements. The financial statements of the Company
--------------------
and its consolidated subsidiary, together with the related schedules and
notes, included in the Offering Memorandum present fairly the financial
position of the Company and its consolidated subsidiary at the dates
indicated and the statement of operations, stockholders' equity and cash
flows of the Company and its consolidated subsidiary for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved. The sup-
-3-
<PAGE>
porting schedules, if any, included in the Offering Memorandum present
fairly in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial information
included in the Offering Memorandum present fairly the information shown
therein and have been compiled on a basis consistent with that of the
audited financial statements included in the Offering Memorandum.
Each of the Company and its subsidiary maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (1)
transactions are executed in accordance with management's general or
specific authorizations; (2) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability; (3) access to assets is permitted only in
accordance with management's general or specific authorization; and (4) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(v) No Material Adverse Change in Business. Since the respective
--------------------------------------
dates as of which information is given in the Offering Memorandum, except
as otherwise stated therein, (A) there has been no material adverse change
in the condition, financial or otherwise, or in the earnings or business
affairs of the Company and its subsidiary considered as one enterprise (a
"Material Adverse Effect"), whether or not arising in the ordinary course
of business, (B) there have been no transactions entered into by the
Company or its subsidiary, other than those in the ordinary course of
business, which are material with respect to the Company and its subsidiary
considered as one enterprise and (C) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class
of its capital stock.
(vi) Good Standing of the Company. The Company has been duly
----------------------------
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has the corporate power and authority
to own, lease and operate its properties and to conduct its business as
described in the Offering Memorandum and to enter into and perform its
obligations under this Agreement; and the Company is duly qualified as a
foreign corporation to transact business and is in good standing in each
other jurisdiction in which such qualification is required,
-4-
<PAGE>
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect.
(vii) No Significant Subsidiaries. The Company does not have a
---------------------------
"significant subsidiary" (as such term is defined in Rule 1-02 of
Regulation S-X).
(viii) Capitalization. The capitalization of the Company is as set
--------------
forth in the Offering Memorandum in the column entitled "Actual" under the
caption "Capitalization."
(ix) Authorization of Agreement. This Agreement has been duly
--------------------------
authorized, executed and delivered by the Company.
(x) Authorization of the Indenture. The Indenture has been duly
------------------------------
authorized by the Company and, at the Closing Time, will have been duly
executed and delivered by the Company and will constitute a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as the enforcement thereof may be limited
by bankruptcy, insolvency (including, without limitation, all laws relating
to fraudulent transfers), reorganization, moratorium or other similar laws
relating to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(xi) Authorization of the Registration Rights Agreement. The
--------------------------------------------------
Registration Rights Agreement has been duly authorized by the Company and,
when executed and delivered by the Company, will constitute a valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as the enforcement thereof may be limited
by bankruptcy, insolvency (including, without limitation, all laws relating
to fraudulent transfers), reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in equity) and
except as rights to indemnity and contribution there-
-5-
<PAGE>
under may be limited by Federal and state securities laws or principles of
public policy.
(xii) Authorization of the Securities. The Securities, Exchange
-------------------------------
Notes and Private Exchange Notes (each as defined in the Registration
Rights Agreement), if any, have been duly authorized and, at the Closing
Time, will have been duly executed by the Company and, when authenticated
in the manner provided for in the Indenture and delivered against payment
of the purchase price therefor, will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other similar laws
relating to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law), and will be in the form
contemplated by, and entitled to the benefits of, the Indenture; and the
Exchange Notes and the Private Exchange Notes, if any, when executed,
authenticated, issued and delivered by the Company, in exchange for the
Securities in accordance with the terms of the Registration Rights
Agreement, will constitute valid and binding obligations of the Company,
entitled to the benefits of the Indenture and enforceable against the
Company in accordance with the terms thereof, except as the enforcement
thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a proceeding
at law or in equity).
(xiii) Authorization of New Credit Facility. The Credit Facility
------------------------------------
(as defined in the Indenture) has been duly authorized by the Company and
constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency (including without
limitation, all laws relating to fraudulent transfer), reorganization,
moratorium or other similar laws relating to or affecting enforcement of
creditor's rights generally, or by general principles of
-6-
<PAGE>
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law).
(xiv) Description of the Securities, the Registration Rights
------------------------------------------------------
Agreement and the Indenture. The Securities, the Exchange Notes, the
---------------------------
Private Exchange Notes, if any, the Registration Rights Agreement and the
Indenture will conform in all material respects to the respective
statements relating thereto contained in the Offering Memorandum and will
be in substantially the respective forms previously delivered to the
Initial Purchasers.
(xv) Absence of Defaults and Conflicts. Neither the Company nor
---------------------------------
its subsidiary is in violation of its charter or by-laws or in default in
the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to
which the Company or its subsidiary is a party or by which it or its
subsidiary may be bound, or to which any of the property or assets of the
Company or its subsidiary is subject (collectively, "Agreements and
Instruments"), except for such defaults that would not result in a Material
Adverse Effect; and the execution, delivery and performance of this
Agreement, the Indenture and the Securities and any other agreement or
instrument entered into or issued or to be entered into or issued by the
Company in connection with the transactions contemplated hereby or thereby
or in the Offering Memorandum and the consummation of the transactions
contemplated herein and in the Offering Memorandum (including the issuance
and sale of the Securities and the use of the proceeds from the sale of the
Securities as described in the Offering Memorandum under the caption "Use
of Proceeds") and compliance by the Company with its obligations hereunder
have been duly authorized by all necessary corporate action and do not and
will not, whether with or without the giving of notice or passage of time
or both, conflict with or constitute a breach of, or default or a Repayment
Event (as defined below) under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
or any of its subsidiaries pursuant to, the Agreements and Instruments,
except for such conflicts, breaches or defaults or liens, charges or
encumbrances that, in the aggregate, would not result in a Material Adverse
Effect, nor will such action result in any violation of the provisions of
the charter or by-laws of the Company or its subsidiary or any appli-
-7-
<PAGE>
cable law, statute, rule, regulation, judgment, order, writ or decree of
any government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or its subsidiary or any of their
assets or properties. As used herein, a "Repayment Event" means any event
or condition that gives the holder of any note, debenture or other evidence
of indebtedness (or any person acting on such holder's behalf) the right to
require the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or its subsidiary.
(xvi) Absence of Labor Dispute. No labor dispute with the
------------------------
employees of the Company or its subsidiary exists or, to the knowledge of
the Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any of its
subsidiary's principal suppliers, manufacturers, customers or contractors,
which, in either case, may reasonably be expected to result in a Material
Adverse Effect.
(xvii) Absence of Proceedings. Except as disclosed in the Offering
----------------------
Memorandum, there is no action, suit, proceeding, inquiry or investigation
before or by any court or governmental agency or body, domestic or foreign,
now pending, or, to the knowledge of the Company, threatened, against or
affecting the Company or its subsidiary that might reasonably be expected
to result in a Material Adverse Effect, or that might reasonably be
expected to materially and adversely affect the properties or assets of the
Company or its subsidiary or the consummation of this Agreement or the
performance by the Company of its obligations hereunder. The aggregate of
all pending legal or governmental proceedings to which the Company or its
subsidiary is a party or of which any of their respective property or
assets is the subject which are not described in the Offering Memorandum,
including ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.
(xviii) Possession of Intellectual Property. The Company and its
-----------------------------------
subsidiary own or otherwise possess the right to use patents, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") used in the
conduct of the business as currently conducted, and neither the Company nor
its
-8-
<PAGE>
subsidiary has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect to
any Intellectual Property except to the extent the absence of which would
have a Material Adverse Effect, that would result in a Material Adverse
Effect.
(xix) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities hereunder or the consummation of the transactions
contemplated by this Agreement.
(xx) Possession of Licenses and Permits. The Company and its
----------------------------------
subsidiary possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them except for those the
lack of which would not cause a Material Adverse Effect; the Company and
its subsidiary are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not, in
the aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, except when the invalidity
of such Governmental Licenses or the failure of such Governmental Licenses
to be in full force and effect would not have a Material Adverse Effect;
and neither the Company nor its subsidiary has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.
(xxi) Title to Property. The Company and its subsidiary have valid
-----------------
title to all real property owned by the Company and its subsidiary and
valid title to all other properties owned by them, in each case, free and
clear of all mortgages, pledges, liens, security interests, claims,
restrictions or encumbrances of any kind, except such as (a) are described
in the Offering Memorandum or (b) do not, singly or in the aggregate,
materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Com-
-9-
<PAGE>
pany or its subsidiary; and all of the leases and subleases material to the
business of the Company and its subsidiary, considered as one enterprise,
and under which the Company or its subsidiary holds properties described in
the Offering Memorandum, are in full force and effect, and neither the
Company nor its subsidiary has any notice of any material claim of any sort
that has been asserted by anyone adverse to the rights of the Company or
its subsidiary under any of the leases or subleases mentioned above, or
materially affecting or questioning the rights of such the Company or its
subsidiary to the continued possession of the leased or subleased premises
under any such lease or sublease.
(xxii) Tax Returns. The Company and its subsidiary have filed all
-----------
material federal, state, local and foreign tax returns that are required to
be filed or have duly requested extensions thereof and have paid all taxes
reflected as due on such returns and any related assessments, fines or
penalties, except for any such tax, assessment, fine or penalty that is
being contested in good faith and by appropriate proceedings or except for
any failure to file such returns that, in the aggregate, would not have a
Material Adverse Effect; and adequate charges, accruals and reserves have
been provided for in the financial statements referred to in Section
1(a)(iv) above in respect of all federal, state, local and foreign taxes
for all periods as to which the tax liability of the Company or any of its
subsidiaries has not been finally determined or remains open to examination
by applicable taxing authorities.
(xxiii) Environmental Laws. Except as described in the Offering
------------------
Memorandum and except such matters as would not, singly or in the
aggregate, result in a Material Adverse Effect, to the knowledge of the
Company, after due inquiry, (A) neither the Company nor its subsidiary is
in violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, or rule of common law or any judicial or
administrative interpretation thereof, including any judicial or
administrative order, decree or judgment, relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, indoor air, surface water, groundwater, land
surface or subsurface strata, and natural resources such as flora, fauna
and wetlands) including, without limitation, laws and regulations relating
to the release or threatened release of Hazardous Materials or to
-10-
<PAGE>
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and its subsidiary have all material
permits, authorizations and approvals required under any applicable
Environmental Laws which are all in full force and effect, and are each in
compliance with their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigations or proceedings relating to any Environmental Law against the
Company or its subsidiary, and (D) there are no past or present events,
conditions, activities or circumstances that might reasonably be expected
to prevent the Company or its subsidiary from compliance with Environmental
Laws or give rise to any liability under any Environmental Law (E) neither
the Company nor its subsidiary has assumed by contract or agreement any
liabilities or obligations arising under any Environmental Law including,
without limitation, any such liabilities or obligations with respect to
formerly owned, leased or operated real property or facilities, or former
divisions or subsidiaries, (F) neither the Company nor its subsidiary has
entered into or agreed to any judgment, decree or order by any judicial or
administrative tribunal or agency and neither the Company nor its
subsidiary is subject to any judgment, decree order or agreement, in each
case relating to compliance with any Environmental Law or requiring the
Company or its subsidiary to conduct any investigation, response,
corrective or other action with respect to any Hazardous Materials under
any Environmental Laws.
(xxiv) ERISA. Except as described in the Offering Memorandum, to the
-----
knowledge of the Company, after due inquiry, none of the Company or its
subsidiary has incurred any liability for any prohibited transaction or
funding deficiency or any complete or partial withdrawal liability with
respect to any pension, profit sharing or other plan which is subject to
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
-----
to which the Company or its subsidiary makes or ever has made a
contribution and in which any employee of the Company or its subsidiary is
or has ever been a participant, which, individually or in the aggregate,
could reasonably be expected to have or result in a Material Adverse
Effect. With respect to such plans, to the knowledge of Company, after due
inquiry, each of the Company and its subsidiary is in compliance in all
respects with all applicable provisions
-11-
<PAGE>
of ERISA, except where the failure to so comply could not, in the
aggregate, reasonably be expected to have or result in a Material Adverse
Effect.
(xxv) Insurance. The Company and its subsidiary are insured by
---------
financially sound and reputable insurers, in such amounts and covering such
risks as is prudent and customary in the business and in the location in or
at which they are engaged, and all such insurance is in full force and
effect.
(xxvi) Questionable Payments. To the Company's knowledge, neither
---------------------
the Company nor its subsidiary nor any employee or agent of the Company or
its subsidiary has received or retained any funds in violation of any law,
rule or regulation, which payment, receipt or retention of funds is of a
character required to be disclosed in the Offering Memorandum.
(xxvii) Investment Company Act. The Company is not, and upon the
----------------------
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Offering
Memorandum will not be, an "investment company" or an entity "controlled"
by an "investment company" as such terms are defined in the Investment
Company Act of 1940, as amended (the "1940 Act").
(xxviii) Market Data. The statistical and market-related data
-----------
included in the Offering Memorandum are based on or derived from sources
that the Company believes to be reliable and accurate in all material
respects or represent the Company's good faith estimates that are made on
the basis of data derived from such sources.
(xxix) Registration Rights. There are no holders of securities
-------------------
(debt or equity) of the Company, or holders of rights (including, without
limitation, preemptive rights), warrants or options to obtain securities of
the Company, who in connection with the issuance, sale and delivery of the
Securities and the Exchange Notes, if any, and the execution, delivery and
performance of this Agreement and the Registration Rights Agreement, have
the right to request the Company to register securities held by them under
the 1993 Act.
(xxx) Rule 144A Eligibility. The Securities are eligible for
---------------------
resale pursuant to Rule 144A and will not be, at
-12-
<PAGE>
the Closing Time, of the same class as securities listed on a national
securities exchange registered under Section 6 of the 1934 Act, or quoted
in a U.S. automated interdealer quotation system.
(xxxi) No General Solicitation. None of the Company, its
-----------------------
affiliates, as such term is defined in Rule 501(b) under the 1933 Act
("Affiliates"), or any person acting on its or any of their behalf (other
than the Initial Purchasers, as to whom the Company makes no
representation) has engaged or will engage, in connection with the offering
of the Securities, in any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the 1933 Act.
(xxxii) No Registration Required. Subject to compliance by the
------------------------
Initial Purchasers with the representations and warranties set forth in
Section 2 and the procedures set forth in Section 6 hereof, it is not
necessary in connection with the offer, sale and delivery of the Securities
to the Initial Purchasers and to each Subsequent Purchaser in the manner
contemplated by this Agreement and the Offering Memorandum to register the
Securities under the 1933 Act or to qualify the Indenture under the Trust
Indenture Act of 1939, as amended (the "1939 Act").
(xxxiii) No Directed Selling Efforts. With respect to those
---------------------------
Securities sold in reliance on Regulation S, (A) none of the Company, its
Affiliates or any person acting on its or their behalf (other than the
Initial Purchasers, as to whom the Company makes no representation) has
engaged or will engage in any directed selling efforts within the meaning
of Regulation S and (B) each of the Company and its Affiliates and any
person acting on its or their behalf (other than the Initial Purchasers, as
to whom the Company makes no representation) has complied and will comply
with the offering restrictions requirement of Regulation S.
(xxxiv) Solvency. Neither the Company nor its subsidiary is now,
--------
or hereafter giving effect to the issuance of the Notes and the
consummation of the transactions contemplated by the Final Memorandum will
be (i) insolvent, (ii) left with unreasonable small capital with which to
engage in its business or (iii) incurring debt beyond its ability to pay
such debts as they become due or intends to, nor do any of them believe
that they will, incur debts beyond their ability to pay such debts as they
mature. As
-13-
<PAGE>
of the date hereof, the fair market value of the assets of the Company and
its subsidiary exceeds, and at the Closing Time the fair market value of
the assets of the Company and its subsidiary will exceed, the amounts that
will be required to be paid on or in respect of their existing debts and
other liabilities when and as they become absolute and mature. The assets
of the Company and its subsidiary do not constitute unreasonably small
capital to carry on their respective businesses as conducted or proposed to
be conducted.
(xxxv) No Stabilization or Manipulation. Neither the Company nor
--------------------------------
any of its officers, directors or controlling persons has taken, directly
or indirectly, any action designed to cause or result in, or that has
constituted or that might reasonably be expected to constitute, the
stabilization or manipulation (as such terms are defined under the
Securities Exchange Act of 1934, as amended) of the price of any security
of the Company to facilitate the sale or resale of the Securities.
(b) Officer's Certificates. Any certificate signed by any officer
of the Company or its subsidiary delivered to the Representatives or to counsel
for the Initial Purchasers shall be deemed a representation and warranty by the
Company to each Initial Purchaser as to the matters covered thereby.
SECTION 2. Sale and Delivery to Initial Purchasers; Closing.
------------------------------------------------
(a) Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each Initial Purchaser, severally and not jointly, and
each Initial Purchaser, severally and not jointly, agrees to purchase from the
Company, at the price set forth in Schedule B, the aggregate principal amount of
Securities set forth in Schedule A opposite the name of such Initial Purchaser,
plus any additional principal amount of Securities that such Initial Purchaser
may become obligated to purchase pursuant to the provisions of Section 11
hereof.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the office of Cahill Gordon &
Reindel, 80 Pine Street, New York, New York 10005, or at such other place as
shall be agreed upon by the Representatives and the Company, at 9:00 A.M. on the
fifth business day after the date hereof (unless postponed
-14-
<PAGE>
in accordance with the provisions of Section 11), or such other time not later
than ten business days after such date as shall be agreed upon by the
Representatives and the Company (such time and date of payment and delivery
being herein called the "Closing Time").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account or accounts designated by the Company, against
delivery to the Representatives for the respective accounts of the Initial
Purchasers of certificates for the Securities to be purchased by them. It is
understood that each Initial Purchaser has authorized the Representatives, for
its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Securities which it has agreed to purchase. Merrill
Lynch, individually and not as representative of the Initial Purchasers, may
(but shall not be obligated to) make payment of the purchase price for the
Securities to be purchased by any Initial Purchaser whose funds have not been
received by, the Closing Time, but such payment shall not relieve such Initial
Purchaser from its obligations hereunder. The certificates representing the
Securities shall be registered in the name of Cede & Co. pursuant to the DTC
Agreement and shall be made available for examination and packaging by the
Initial Purchasers in The City of New York not later than 10:00 A.M. on the last
business day prior to the Closing Time.
(c) Qualified Institutional Buyer. Each Initial Purchaser severally
and not jointly represents and warrants to, and agrees with, the Company that it
is a "qualified institutional buyer" within the meaning of Rule 144A under the
1933 Act (a "Qualified Institutional Buyer").
(d) Denominations; Registration. Certificates for the Securities
shall be in such denominations ($1,000 or integral multiples thereof) and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time.
SECTION 3. Covenants of the Company. The Company covenants with each
------------------------
Initial Purchaser as follows:
(a) Offering Memorandum. The Company, as promptly as possible, will
furnish to each Initial Purchaser, without charge, such number of copies of the
Preliminary Offering Memorandum, the Final Offering Memorandum and any
amendments and supplements thereto and documents incorporated by reference
therein as such Initial Purchaser may reasonably request.
-15-
<PAGE>
(b) Notice and Effect of Material Events. The Company will
immediately notify each Initial Purchaser, and confirm such notice in writing,
of (x) any filing made by the Company of information relating to the offering of
the Securities with any securities exchange or any other regulatory body in the
United States or any other jurisdiction, and (y) prior to the completion of the
placement of the Securities by the Initial Purchasers as evidenced by a notice
in writing from the Initial Purchasers to the Company, any material changes in
or affecting the earnings, business affairs or business prospects of the Company
and its subsidiaries that (i) make any statement in the Offering Memorandum
false or misleading or (ii) are not disclosed in the Offering Memorandum. In
such event or if during such time any event shall occur as a result of which it
is necessary, in the reasonable opinion of the Company, its counsel, the Initial
Purchasers or counsel for the Initial Purchasers, to amend or supplement the
Final Offering Memorandum in order that the Final Offering Memorandum not
include any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the light of
the circumstances then existing, the Company will forthwith amend or supplement
the Final Offering Memorandum by preparing and furnishing to each Initial
Purchaser an amendment or amendments of, or a supplement or supplements to, the
Final Offering Memorandum (in form and substance satisfactory in the reasonable
opinion of counsel for the Initial Purchasers) so that, as so amended or
supplemented, the Final Offering Memorandum will not include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances existing at the time
it is delivered to a Subsequent Purchaser, not misleading.
(c) Amendment to Offering Memorandum and Supplements. The Company
will advise each Initial Purchaser promptly of any proposal to amend or
supplement the Offering Memorandum and will not effect such amendment or
supplement without the consent of the Initial Purchasers. Neither the consent
of the Initial Purchasers, nor the Initial Purchasers' delivery of any such
amendment or supplement, shall constitute a waiver of any of the conditions set
forth in Section 5 hereof.
(d) Qualification of Securities for Offer and Sale. The Company will
use its best efforts, in cooperation with the Initial Purchasers, to qualify the
Securities for offering and sale under the applicable securities laws of such
jurisdictions as the Representatives may designate and will maintain such
qualifications in effect as long as required for the sale of
-16-
<PAGE>
the Securities; provided, however, that the Company shall not be obligated to
-------- -------
file any general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is not
so qualified or to subject itself to taxation in respect of doing business in
any jurisdiction in which it is not otherwise so subject.
(e) Rating of Securities. The Issuer shall take all reasonable
action necessary to enable Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc. ("S&P"), and Moody's Investors Service, Inc. ("Moody's"), to provide
their respective credit ratings of the Securities.
(f) DTC. The Company will cooperate with the Representatives and use
its best efforts to permit the Securities to be eligible for clearance and
settlement through the facilities of DTC.
(g) Use of Proceeds. The Company will use the net proceeds received
by it from the sale of the Securities in the manner specified in the Offering
Memorandum under "Use of Proceeds."
(h) Restriction on Sale of Securities. During a period of 180 days
from the date of the Offering Memorandum, the Company will not, without the
prior written consent of Merrill Lynch, directly or indirectly, issue, sell,
offer or agree to sell, grant any option for the sale of, or otherwise dispose
of, any other debt securities of the Company or securities of the Company that
are convertible into, or exchangeable for, the Securities or such other debt
securities (other than in connection with the Exchange Offer (as defined in the
Offering Memorandum) or borrowings under the New Credit Facility).
(i) Legends. Each certificate for a Security will bear the legend
contained in "Notice to Investors" in the Offering Memorandum for the time
period and upon the other terms stated in the Offering Memorandum.
(j) Periodic Reports. For a period of three years after the Closing
Time, the Company will furnish to the Initial Purchasers copies of all annual
reports, quarterly reports and current reports filed with the Commission on
Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated by
the Commission, and such other documents, reports and information as shall be
furnished by the Company generally to the
-17-
<PAGE>
holders of the Securities or to security holders of its publicly issued
securities generally.
SECTION 4. Payment of Expenses.
-------------------
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation and printing of the Offering Memorandum (including financial
statements and any schedules or exhibits and any document incorporated therein
by reference) and of each amendment or supplement thereto, (ii) the preparation,
printing and delivery to the Initial Purchasers of this Agreement, the
Registration Rights Agreement, any Agreement among Initial Purchasers, the
Indenture and such other documents as may be required in connection with the
offering, purchase, sale and delivery of the Securities, (iii) the preparation,
issuance and delivery of the certificates for the Securities to the Initial
Purchasers, including any charges of DTC in connection therewith; (iv) the fees
and disbursements of the Company's counsel, accountants and other advisors, (v)
the qualification of the Securities under securities laws in accordance with the
provisions of Section 3(d) hereof, including filing fees and the fees and
disbursements of counsel for the Initial Purchasers in connection therewith and
in connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the fees and expenses of the Trustee, including the fees and
disbursements of counsel for the Trustee in connection with the Indenture and
the Securities, (vii) any fees payable in connection with the rating of the
Securities and (viii) any fees payable to the review by the National Association
of Securities Dealers, Inc. (the "NASD") in connection with the initial and
continued designation of the Securities as PORTAL securities under the PORTAL
Market Rules pursuant to NASD Rule 5322.
(b) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
10(a)(i) hereof, the Company shall reimburse the Initial Purchasers for all of
their documented out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Initial Purchasers.
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<PAGE>
SECTION 5. Conditions of Initial Purchasers' Obligations. The
---------------------------------------------
obligations of the several Initial Purchasers hereunder are subject to the
accuracy of the representations and warranties of the Company contained in
Section 1 hereof or in certificates of any officer of the Company or its
subsidiary delivered pursuant to the provisions hereof, to the performance by
the Company of its covenants and other obligations hereunder, and to the
following further conditions:
(a) Opinion of Counsel for Company. At the Closing Time, the
Representatives shall have received the favorable opinion, dated as of the
Closing Time, of Gibson, Dunn & Crutcher LLP, counsel for the Company, in form
and substance satisfactory to counsel for the Initial Purchasers, together with
signed or reproduced copies of such letter for each of the other Initial
Purchasers to the effect set forth in Exhibit B hereto and to such further
effect as counsel to the Initial Purchasers may reasonably request. Such
counsel may also state that, insofar as such opinion involves factual matters,
they have relied, to the extent they deem proper, upon certificates of officers
of the Company and its subsidiary and certificates of public officials.
(b) Opinion of Counsel for Initial Purchasers. At the Closing Time,
the Representatives shall have received the favorable opinion, dated as of the
Closing Time, of Cahill Gordon & Reindel, counsel for the Initial Purchasers,
with respect to matters in form and substance satisfactory to the
Representatives. In giving such opinion such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the law of the State of
New York, the federal law of the United States and the General Corporation Law
of the State of Delaware, upon the opinions of counsel satisfactory to the
Representatives. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiary and certificates of
public officials.
(c) Officers' Certificate. At the Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Offering Memorandum, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or,
to such officer's knowledge, business prospects, of the Company and its
subsidiary considered as one enterprise, whether or not arising in the ordinary
course of business, and the Representatives shall have received a certificate of
the
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<PAGE>
President or an Executive Vice President of the Company and of the chief
financial or chief accounting officer of the Company, dated as of the Closing
Time, to the effect that (i) there has been no such material adverse change,
(ii) the representations and warranties in Section 1 hereof are true and
correct, in all material respects, with the same force and effect as though
expressly made at and as of the Closing Time (except the representations and
warranties in Section 1 qualified as to materiality shall be true and correct
with the same force and effect as though expressly made at and as of the Closing
Time) and (iii) the Company has complied, in all material respects, with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Time.
(d) Accountant's Comfort Letter. At the time of the execution of
this Agreement, the Representatives shall have received from KPMG Peat Marwick
LLP, a letter dated such date, in form and substance satisfactory to the
Representatives, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to Initial Purchasers with respect to
the financial statements and certain financial information contained in the
Offering Memorandum.
(e) Bring-down Comfort Letter. At the Closing Time, the
Representatives shall have received from KPMG Peat Marwick LLP a letter, dated
as of the Closing Time, to the effect that they reaffirm the statements made in
the letter furnished pursuant to subsection (d) of this Section, except that the
specified date referred to shall be a date not more than three business days
prior to the Closing Time.
(f) Maintenance of Rating. At the Closing Time, the Securities shall
be rated at least Ba3 by Moody's Investors Service Inc. and BB by Standard &
Poor's Corporation, and the Company shall have delivered to the Representatives
a letter dated the Closing Time, from each such rating agency, or other evidence
satisfactory to the Representatives, confirming that the Securities have such
ratings; and since the date of this Agreement, there shall not have occurred a
downgrading in the rating assigned to the Securities or any of the Company's
other debt securities by any nationally recognized securities rating agency, and
no such securities rating agency shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of the
Securities or any of the Company's other debt securities.
(g) PORTAL. At the Closing Time, the Securities shall have been
designated for trading on PORTAL.
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<PAGE>
(h) Additional Documents. At the Closing Time, counsel for the
Initial Purchasers shall have been furnished with such documents and opinions as
they may require for the purpose of enabling them to pass upon the issuance and
sale of the Securities as herein contemplated, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of any
of the conditions, herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Securities as herein contemplated
shall be reasonably satisfactory in form and substance to the Representatives
and counsel for the Initial Purchasers.
(i) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled in all material respects when and as
required to be fulfilled, this Agreement may be terminated by the
Representatives by notice to the Company at any time at or prior to the Closing
Time, and such termination shall be without liability of any party to any other
party except as provided in Section 4 and except that Sections 1, 7, 8 and 14
shall survive any such termination and remain in full force and effect. Notice
of such termination shall be given in writing to the Company.
SECTION 6. Subsequent Offers and Resales of the Securities.
-----------------------------------------------
(a) Offer and Sale Procedures. Each of the Initial Purchasers and
the Company hereby establish and agree to observe the following procedures in
connection with the offer and sale of the Securities:
(i) Offers and Sales Only to Institutional Accredited Investors or
--------------------------------------------------------------
Non-U.S. Persons. Offers and sales of the Securities will be made only
----------------
by the Initial Purchasers or Affiliates thereof qualified to do so in the
jurisdictions in which such offers or sales are made. Each such offer or
sale shall only be made (A) to persons whom the offeror or seller
reasonably believes to be qualified institutional buyers, as defined in
Rule 144A under the 1933 Act, and (B) non-U.S. persons outside the United
States, as defined in Regulation S under the 1933 Act, to whom the offeror
or seller reasonably believes offers and sales of the Securities may be
made in reliance upon Regulation S under the 1933 Act.
(ii) No General Solicitation. The Securities will be offered by
-----------------------
approaching prospective Subsequent Purchasers on an individual basis. No
general solicitation or gen-
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<PAGE>
eral advertising (within the meaning of Rule
502(c) under the 1933 Act) will be used in the United States in connection
with the offering of the Securities.
(iii) Purchases by Non-Bank Fiduciaries . In the case of a non-
---------------------------------
bank Subsequent Purchaser of a Security acting as a fiduciary for one or
more third parties, in connection with an offer and sale to such purchaser
pursuant to clause (i) above, each third party shall, in the judgment of
the applicable Initial Purchaser, be a Qualified Institutional Buyer or a
non-U.S. person outside the United States.
(iv) Subsequent Purchaser Notification . Each Initial Purchaser
---------------------------------
will take reasonable steps to inform, and cause each of its U.S. Affiliates
to take reasonable steps to inform, persons acquiring Securities from such
Initial Purchaser or affiliate, as the case may be, in the United States
that the Securities (A) have not been and will not be registered under the
1933 Act, (B) are being sold to them without registration under the 1933
Act in reliance on Rule 144A or in accordance with another exemption from
registration under the 1933 Act, as the case may be, and (C) may not be
offered, sold or otherwise transferred except (1) to the Company, (2)
outside the United States in accordance with Rule 904 of Regulation S, or
(3) inside the United States in accordance with (x) Rule 144A to a person
whom the seller reasonably believes is a Qualified Institutional Buyer that
is purchasing such Securities for its own account or for the account of a
Qualified Institutional Buyer to whom notice is given that the offer, sale
or transfer is being made in reliance on Rule 144A or (y) another available
exemption from registration under the 1933 Act.
(v) Minimum Principal Amount . No sale of the Securities to any
------------------------
one Subsequent Purchaser will be for less than U.S. $1,000 principal amount
and no Security will be issued in a smaller principal amount. If the
Subsequent Purchaser is a non-bank fiduciary acting on behalf of others,
each person for whom it is acting must purchase at least U.S. $1,000
principal amount of the Securities.
(vi) Restrictions on Transfer . The transfer restrictions and
------------------------
the other provisions set forth in Section Two of the Indenture, including
the legend required thereby, shall apply to the Securities except as
otherwise agreed by the Company and the Initial Purchasers. Following the
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<PAGE>
sale of the Securities by the Initial Purchasers to Subsequent Purchasers
pursuant to the terms hereof, the Initial Purchasers shall not be liable or
responsible to the Company for any losses, damages or liabilities suffered
or incurred by the Company, including any losses, damages or liabilities
under the 1933 Act, arising from or relating to any resale or transfer of
any Security.
(vii) Delivery of Offering Memorandum. Each Initial Purchaser
-------------------------------
will deliver to each purchaser of the Securities from such Initial
Purchaser, in connection with its original distribution of the Securities,
a copy of the Offering Memorandum, as amended and supplemented at the date
of such delivery.
(b) Covenants of the Company. The Company covenants with each
Initial Purchaser as follows:
(i) Due Diligence. In connection with the original distribution
-------------
of the Securities, the Company agrees that, prior to any offer or resale of
the Securities by the Initial Purchasers, the Initial Purchasers and
counsel for the Initial Purchasers shall have the right to make reasonable
inquiries into the business of the Company and its subsidiaries. The
Company also agrees to provide answers to each prospective Subsequent
Purchaser of Securities who so requests concerning the Company and its
subsidiaries (to the extent that such information is available or can be
acquired and made available to prospective Subsequent Purchasers without
unreasonable effort or expense and to the extent the provision thereof is
not prohibited by applicable law) and the terms and conditions of the
offering of the Securities, as provided in the Offering Memorandum.
(ii) Integration. The Company agrees that it will not and will
-----------
cause its Affiliates not to make any offer or sale of securities of the
Company of any class if, as a result of the doctrine of "integration"
referred to in Rule 502 under the 1933 Act, such offer or sale would render
invalid (for the purpose of (i) the sale of the Securities by the Company
to the Initial Purchasers, (ii) the resale of the Securities by the Initial
Purchasers to Subsequent Purchasers or (iii) the resale of the Securities
by such Subsequent Purchasers to others) the exemption from the
registration requirements of the 1933 Act provided by Section 4(2) thereof
or by Rule 144A or by Regulation S thereunder or otherwise.
-23-
<PAGE>
(iii) Rule 144A Information. The Company agrees that, in order
---------------------
to render the Securities eligible for resale pursuant to Rule 144A under
the 1933 Act, while any of the Securities remain outstanding, it will make
available, upon request, to any holder of Securities or prospective
purchasers of Securities the information specified in Rule 144A(d)(4),
unless the Company furnishes information to the Commission pursuant to
Section 13 or 15(d) of the 1934 Act (such information, whether made
available to holders or prospective purchasers or furnished to the
Commission, is herein referred to as "Additional Information").
(iv) Restriction on Repurchases. Until the expiration of two
--------------------------
years after the original issuance of the Securities, the Company will not,
and will cause its Affiliates not to, purchase or agree to purchase or
otherwise acquire any Securities which are "restricted securities" (as such
term is defined under Rule 144(a)(3) under the 1933 Act), whether as
beneficial owner or otherwise (except as agent acting as a securities
broker on behalf of and for the account of customers in the ordinary course
of business in unsolicited broker's transactions) unless, immediately upon
any such purchase, the Company or any Affiliate shall submit such
Securities to the Trustee for cancellation.
SECTION 7. Indemnification.
---------------
(a) Indemnification of Initial Purchasers. The Company agrees to
indemnify and hold harmless each Initial Purchaser and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Offering
Memorandum or the Final Offering Memorandum (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental
-24-
<PAGE>
agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
7(d) below) any such settlement is effected with the written consent of the
Company; and
(iii) against any and all expenses, as incurred (including the
reasonable and documented fees and disbursements of outside counsel chosen
by Merrill Lynch), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of or based on any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Company by any Initial Purchaser through the Representatives expressly for use
in the Offering Memorandum (or any amendment thereto); and provided, further,
-------- -------
that the Company will not be liable to any Initial Purchaser hereunder with
respect to any such loss, liability, claim, damage or expense that resulted from
the fact that such Initial Purchaser sold Securities to a person to whom such
Initial Purchaser failed to send or give, at or prior to the Closing Time, a
copy of the Final Offering Memorandum, as then amended or supplemented, if the
Company has previously furnished copies thereof (sufficiently in advance of the
Closing Time to allow for distribution by the Closing Time) to the Initial
Purchasers and the loss, liability, claim, damage or expense of such Initial
Purchaser resulted from an untrue statement or omission or alleged untrue
statement or omission of a material fact contained in or omitted from the
Preliminary Offering Memorandum as amended by the Supplement that was corrected
in the Final Offering Memorandum or, if applicable, amended or supplemented
prior to the Closing Time and such Final Offering Memorandum was required by law
to be delivered at or prior to the written confirmation of sale to such person.
(b) Indemnification of Company, Directors and Officers. Each
Initial Purchaser severally agrees to indemnify and hold harmless the Company,
its directors, its officers and each
-25-
<PAGE>
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Offering
Memorandum in reliance upon and in conformity with written information furnished
to the Company by such Initial Purchaser through the Representatives expressly
for use in the Offering Memorandum.
(c) Actions Against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section
7(a) above, counsel to the indemnified parties shall be selected by Merrill
Lynch, and, in the case of parties indemnified pursuant to Section 7(b) above,
counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
-------- -------
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 7 or Section 8 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admis-
-26-
<PAGE>
sion of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) Settlement Without Consent if Failure to Reimburse. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 7(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement. Notwithstanding the immediately preceding
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, an indemnifying party shall not be liable for an settlement of the
nature contemplated by Section (a)(ii) effected without its consent if such
indemnifying party (i) reimburses such indemnified party in accordance with such
request to the extent it considers such request to be reasonable and (ii)
provides written notice to the indemnified party substantiating the unpaid
balance as unreasonable, in each case prior to the date of such settlement.
SECTION 8. Contribution. If the indemnification provided for in
------------
Section 7 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Initial Purchasers on the other hand from the
offering of the Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of the
Initial Purchasers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
-27-
<PAGE>
The relative benefits received by the Company on the one hand and the
Initial Purchasers on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Initial
Purchasers, bear to the aggregate initial offering price of the Securities.
The relative fault of the Company on the one hand and the Initial
Purchasers on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Initial Purchasers agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation (even if the Initial Purchasers were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 8. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 8 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 8, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Initial Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
-28-
<PAGE>
For purposes of this Section 8, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such Initial
Purchaser, and each director of the Company, each officer of the Company, and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Company. The Initial Purchasers' respective obligations to
contribute pursuant to this Section 8 are several in proportion to the principal
amount of Securities set forth opposite their respective names in Schedule A
hereto and not joint.
SECTION 9. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
- --------
Agreement or in certificates of officers of the Company submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Initial Purchaser or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities to the Initial Purchasers.
SECTION 10. Termination of Agreement.
------------------------
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to the Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Offering
Memorandum, any material adverse change in the condition, financial or otherwise
or in the earnings, business affairs or business prospects of the Company and
its subsidiary considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the
Representatives, impracticable to market the Securities or to enforce contracts
for the sale of the Securities, or (iii) if trading in any securities of the
Company has been suspended or limited by the Commission or, if trading generally
on the American Stock Exchange or the New York Stock Exchange or in the NASDAQ
National Market System has been suspended or limited, or minimum or maximum
prices for trading
-29-
<PAGE>
have been fixed, or maximum ranges for prices have been required, by any of said
exchanges or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental authority or
(iv) if a banking moratorium has been declared by either Federal or New York
authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 7, 8 and 14 shall survive such termination and remain in full force and
effect.
SECTION 11. Default by One or More of the Initial Purchasers. If one
------------------------------------------------
or more of the Initial Purchasers shall fail at the Closing Time to purchase the
Securities which it or they are obligated to purchase under this Agreement (the
"Defaulted Securities"), the Representatives shall have the right, but not the
obligation, within 24 hours thereafter, to make arrangements for one or more of
the non-defaulting Initial Purchasers, or any other Initial Purchasers, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms herein set forth; if, however, the
Representatives shall not have completed such arrangements within such 24-hour
period, then this Agreement shall terminate without liability on the part of any
non-defaulting Initial Purchaser.
No action pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default that does not result in a termination
of this Agreement, either the Representatives or the Company shall have the
right to postpone the Closing Time for a period not exceeding seven days in
order to effect any required changes in the Offering Memorandum or in any other
documents or arrangement.
SECTION 12. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchasers shall be directed to the Representatives at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Edward Crook;
notices to the Company shall be directed to it at
-30-
<PAGE>
14000 San Bernardino Avenue, Fontana, California 92335, attention of Executive
Vice President, Finance.
SECTION 13. Parties. This Agreement shall each inure to the benefit
-------
of and be binding upon the Initial Purchasers and the Company and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Initial Purchasers and the Company and their respective successors and
the controlling persons and officers and directors referred to in Sections 7 and
8 and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Initial Purchasers and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities
from any Initial Purchaser shall be deemed to be a successor by reason merely of
such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED
----------------------
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Section headings herein and the
------------------
Table of Contents are for convenience only, and shall not affect the
construction hereof.
-31-
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
CALIFORNIA STEEL INDUSTRIES, INC.
By:/s/ CELO LOURENCO GONCALVES
_____________________________
Name:CELO LOURENCO GONCALVES
Title:PRESIDENT AND CHIEF
EXECUTIVE OFFICER
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BANCBOSTON ROBERTSON STEPHENS INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:/s/ MICHAEL F. SENFT
__________________________
Name:MICHAEL F. SENFT
Title:MANAGING DIRECTOR
-32-
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Principal
Amount of
Name of Initial Purchaser Securities
- -------------------------- -----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................. $ 90,000,000
BancBoston Robertson Stephens Inc............................. 30,000,000
NationsBanc Montgomery Securities LLC......................... 30,000,000
------------
Total......................................................... $150,000,000
============
</TABLE>
Sch A-1
<PAGE>
SCHEDULE B
CALIFORNIA STEEL INDUSTRIES, INC.
$150,000,000 of 8 1/2% Senior Notes due 2009
1. The initial public offering price of the Securities shall be 100%
of the principal amount thereof, plus accrued interest, if any, from the date of
issuance.
2. The purchase price to be paid by the Initial Purchasers for the
Securities shall be 97.75% of the principal amount thereof.
3. The interest rate on the Securities shall be 8 1/2% per annum.
A-1
<PAGE>
Exhibit A
REGISTRATION RIGHTS AGREEMENT
A-1
<PAGE>
Exhibit B
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(a)
(i) The Company is a corporation validly existing and in good
standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Offering
Memorandum and to enter into and perform its obligations under the Purchase
Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in the State of California.
(iv) Based solely on such counsel's review of the stock certificates
available to such counsel, all of the outstanding shares of the Company are
owned of record by Rio Doce Limited and Kawasaki Steel Holdings (USA), Inc.
(v) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(vi) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and (assuming the due authorization,
execution and delivery thereof by the Initial Purchasers) constitutes a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement thereof is
subject to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) and except as rights to
indemnity and contribution thereunder may be limited by Federal or state
securities laws or principles of public policy.
(vii) The Indenture has been duly authorized, executed and delivered
by the Company and (assuming the due authorization, execution and delivery
thereof by the Trustee) constitutes a valid and binding agreement of the
Company, enforceable
B-1
<PAGE>
against the Company in accordance with its terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws relating to or affecting enforcement of
creditors' rights generally, or by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law).
(viii) The Securities are in the form contemplated by the Indenture,
have been duly authorized by the Company and, when executed by the Company and
authenticated by the Trustee in the manner provided in the Indenture (assuming
the due authorization, execution and delivery of the Indenture by the Trustee)
and delivered against payment of the purchase price therefor, and the Exchange
Notes and the Private Exchange Notes (other than with respect to the delivery in
book-entry form), if any, when executed, authenticated and delivered in exchange
for the Securities in accordance with the terms of the Registration Rights
Agreement, will be entitled to the benefits of the Indenture and will be
enforceable against the Company in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium (including, without limitation, all laws relating to fraudulent
transfers), or other similar laws relating to or affecting enforcement of
creditor's rights generally, or by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), and will
be entitled to the benefits of the Indenture.
(ix) The Securities, the Exchange Notes, the Private Exchange
Notes, the Registration Rights Agreement and the Indenture conform in all
material respects to the descriptions thereof contained in the Offering
Memorandum.
(x) To such counsel's knowledge except as set forth in the
Offering Memorandum, there is not pending or threatened any material action,
suit, proceeding, inquiry or investigation, to which the Company or its
subsidiary is a party, or to which the property of the Company is subject,
before or brought by any court or governmental agency or body.
(xi) The statements set forth in the Offering Memorandum under
"Summary -- The Offering", "Business--Legal Proceedings", "Description of the
Notes", and "Certain U.S. Federal Income Tax Considerations", to the extent that
they constitute matters of law, summaries of legal matters, or legal
B-2
<PAGE>
proceedings, or legal conclusions, have been reviewed by them fairly summarize
the matters referred to therein.
(xii) All descriptions in the Offering Memorandum of contracts and
other documents to which the Company or its subsidiary are a party are accurate
in all material respects; and to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments that would be required to be described in the Offering
Memorandum that are not described or referred to in the Offering Memorandum
other than those described or referred to therein.
(xiii) Neither the Company nor its subsidiary is in violation of its
charter or by-laws in any material respects and, to the best of our knowledge,
no default by the Company or its subsidiary exists in the due performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument that is listed on the certificate such counsel
receives from the officers of the Company (the "CSI Officers' Certificate").
(xiv) To such counsel's knowledge, no material authorization,
approval, consent or order of any court or governmental authority or agency,
other than such as may be required under the applicable securities laws of the
various jurisdictions in which the Securities will be offered or sold, as to
which we need express no opinion, is required in connection with the due
authorization, execution and delivery of the Purchase Agreement or the due
execution, delivery or performance of the Indenture by the Company, or for the
offering, issuance, sale or delivery of the Securities to the Initial Purchasers
or the resale by the Initial Purchasers in accordance with the Purchase
Agreement.
(xv) Assuming the accuracy of the representations and warranties of
the Initial Purchasers and compliance by them with their agreements contained
herein, it is not necessary in connection with the offer, sale and delivery of
the Securities to the Initial Purchasers and to each Subsequent Purchaser in the
manner contemplated by the Purchase Agreement and the Offering Memorandum to
register the Securities under the 1933 Act or to qualify the Indenture under the
Trust Indenture Act.
(xvi) The execution, delivery and performance of the Purchase
Agreement, the DTC Agreement, the Indenture and the Securities and the
consummation of the transactions contem-
B-3
<PAGE>
plated in the Purchase Agreement and in the Offering Memorandum (including the
use of the proceeds from the sale of the Securities as described in the Offering
Memorandum under the caption "Use Of Proceeds") and compliance by the Company
with its obligations under the Purchase Agreement, the Indenture and the
Securities will not, whether with or without the giving of notice or lapse of
time or both, conflict with or constitute a breach of, or default or Repayment
Event (as defined in Section l(a)(xv) of the Purchase Agreement) under or result
in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or its subsidiary pursuant to any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any
other agreement or instrument, including agreements governing the rights of
stockholders of the Company (in each case, as listed on the CSI Officers'
Certificate) to which the Company or its subsidiary is a party or by which it or
its subsidiary may be bound, or to which any of the property or assets of the
Company or its subsidiary is subject (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect), nor will such action result in any violation of the provisions
of the charter or by-laws of the Company or its subsidiary, or any applicable
law, statute, rule, regulation, judgment, order, writ or decree, known to us, of
any government, government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or its subsidiary or any of their respective
properties, assets or operations.
(xvii) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
(xviii) Assuming the application of the proceeds of the Securities as
set forth in the Offering Memorandum, neither the consummation of the
transactions contemplated by the Purchase Agreement nor the sale, issuance,
execution or delivery of the Securities will violate Regulation T, U or X of the
Board of Governors of the Federal Reserve System.
In addition such counsel shall state that such counsel has
participated in conferences with representatives of the Initial Purchasers,
officers and other representatives of the Company and representatives of the
independent certified accountants of the Company, at which conferences the
contents of the Offering Memorandum and the business and affairs of the Company
and its subsidiaries were discussed, and although such counsel has not verified
and does not pass upon or assume any
B-4
<PAGE>
responsibility for the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum (except and only to the extent set forth in
subclause (xi) above), on the basis of the foregoing participation, no facts
have come to the attention of such counsel that lead such counsel to believe
that the Offering Memorandum at the date thereof or as of the Closing Time,
contained or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading (it being
understood that such counsel need not express any comment with respect to the
financial statements, including the notes thereto and supporting schedules, or
any other financial or statistical data found in or derived from the internal
accounting or other records of the Company set forth or referred to in the
Offering Memorandum).
In rendering such opinions, such counsel (A) need not express any
opinion with regard to the application of laws of any jurisdiction other than
the Federal law of the United States, the General Corporation Law of the State
of Delaware and the laws of the State of New York and (B) may rely, as to
matters of fact, to the extent they deem proper on representations or
certificates of responsible officers of the Company and certificates of public
officials.
References to the Offering Memorandum in this subsection include any
supplements thereto at or prior to the Closing Time.
B-5
<PAGE>
EXHIBIT 10.14
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of April 6, 1999
by and among
CALIFORNIA STEEL INDUSTRIES, INC.
and
MERRILL LYNCH & CO.,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
BANCBOSTON ROBERTSON STEPHENS INC.
and
NATIONSBANC MONTGOMERY SECURITIES LLC,
as Initial Purchasers
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
---------
entered into as of April 6, 1999 by and among CALIFORNIA STEEL INDUSTRIES, INC.,
a Delaware corporation (the "Company"), and MERRILL LYNCH & CO., MERRILL LYNCH,
-------
PIERCE, FENNER & SMITH INCORPORATED ("Merrill Lynch"), BANCBOSTON ROBERTSON
-------------
STEPHENS INC. ("BancBoston") and NATIONSBANC MONTGOMERY SECURITIES LLC
----------
("NationsBanc" and, together with Merrill Lynch and BancBoston, the "Initial
----------- -------
Purchasers").
- ----------
This Agreement is made pursuant to the Purchase Agreement dated March
30, 1999 by and among the Company and the Initial Purchasers (the "Purchase
--------
Agreement") that provides for, among other things, the sale by the Company to
- ---------
the Initial Purchasers of an aggregate of $150,000,000 principal amount of the
Company's 8 1/2% Senior Notes due 2009 (the "Notes"). In order to induce the
-----
Initial Purchasers to enter into the Purchase Agreement, the Company has agreed
to provide to the Initial Purchasers and their direct and indirect transferees
the registration rights set forth in this Agreement. The execution and delivery
of this Agreement is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following
-----------
capitalized defined terms shall have the following meanings:
"Additional Interest" see Section 2(e) hereof.
-------------------
"Advice" see the last paragraph Section 3 hereof.
------
"Applicable Period" see Section 3(s) hereof.
-----------------
"Business Day" shall mean a day that is not a Saturday, a Sunday, or a
------------
day on which banking institutions in New York, New York are required to be
closed.
"Closing Time" shall mean the Closing Time as defined in the Purchase
------------
Agreement.
"Company" shall have the meaning set forth in the preamble to this
-------
Agreement and also includes the Company's successors and permitted assigns.
<PAGE>
-2-
"Depositary" shall mean The Depository Trust Company, or any other
----------
depositary appointed by the Company; provided, however, that such
-------- -------
depositary must have an address in the Borough of Manhattan, in The City of
New York.
"Effectiveness Period" see Section 2(b) hereof.
--------------------
"Effectiveness Target Date" see Section 2(e) hereof.
-------------------------
"Event Date" see Section 2(e) hereof.
----------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Exchange Offer" shall mean the exchange offer by the Company of
--------------
Exchange Notes for Notes pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the
---------------------------
Securities Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
-------------------------------------
registration statement on Form S-1, S-3 or S-4 (or, if applicable, on
another appropriate form), and all amendments and supplements to such
registration statement, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Exchange Period" see Section 2(a) hereof.
---------------
"Exchange Notes" shall mean the 8 1/2% Senior Notes due 2009, issued
--------------
by the Company under the Indenture containing terms identical to the Notes
(except that (i) interest thereon shall accrue from the last date on which
interest was paid on the Notes or, if no such interest has been paid, from
the Issue Date, (ii) the transfer restrictions with respect to the Notes
and all registration rights in respect thereof shall be eliminated and
(iii) the provisions relating to Additional Interest shall be eliminated)
to be offered to Holders of Notes in exchange for Notes pursuant to the
Exchange Offer.
"Holders" shall mean the Initial Purchasers, for so long as they own
-------
any Transfer Restricted Notes, each of their direct and indirect
successors, assigns and transferees who become registered owners of
Transfer Restricted
<PAGE>
-3-
Notes under the Indenture and each Participating Broker-Dealer that holds
Exchange Notes for so long as such Participating Broker-Dealer is required
to deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes.
"Indenture" shall mean the Indenture relating to the Notes dated as of
---------
April 6, 1999 between the Company and State Street Bank and Trust Company
of California, N.A., as trustee, as the same may be amended from time to
time in accordance with the terms thereof.
"Initial Purchasers" shall have the meaning set forth in the preamble
------------------
to this Agreement.
"Inspectors" see Section 3(m) hereof.
----------
"Issue Date" shall mean the date on which the Notes are originally
----------
issued.
"Majority Holders" shall mean the Holders of a majority of the
----------------
aggregate principal amount of outstanding Transfer Restricted Notes.
"Merrill Lynch" shall have the meaning set forth in the preamble to
-------------
this agreement.
"Notes" shall have the meaning set forth in the preamble of this
-----
Agreement.
"Participating Broker-Dealer" shall have the meaning set forth in
---------------------------
Section 3(s) hereof.
"Person" shall mean an individual, partnership, corporation, trust or
------
unincorporated organization, or a government or agency or political
subdivision thereof.
"Private Exchange" see Section 2(a) hereof.
----------------
"Private Exchange Notes" see Section 2(a) hereof.
----------------------
"Prospectus" shall mean the prospectus included in a Registration
----------
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any
portion of the Transfer Restricted Notes covered by a Shelf Registration
Statement, and by all other amendments and
<PAGE>
-4-
supplements to a prospectus, including post-effective amendments, and in
each case including all material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the preamble
------------------
to this Agreement.
"Records" see Section 3(m) hereof.
-------
"Registration Expenses" shall mean any and all expenses incident to
---------------------
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all applicable SEC, stock exchange or National
Association of Securities Dealers, Inc. (the "NASD") registration and
----
filing fees, (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws (including reasonable
fees and disbursements of one counsel for Holders that are Initial
Purchasers in connection with blue sky qualification of any of the Exchange
Notes or Transfer Restricted Notes) and compliance with the rules of the
NASD, (iii) all applicable expenses incurred by the Company in preparing or
assisting in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus and any amendments or supplements
thereto, and in preparing or assisting in preparing any other documents
relating to the performance of and compliance with this Agreement, (iv) all
rating agency fees, if any, (v) the fees and disbursements of counsel for
the Company, (vii) all fees and expenses incurred in connection with the
listing, if any, of any of the Transfer Restricted Notes on any securities
exchange or exchanges, if the Company, in its discretion, elects to make
any such listing; but excluding fees of counsel to the Holders and
underwriting discounts and commissions and transfer taxes, if any, relating
to the sale or disposition of Transfer Restricted Notes by a Holder.
"Registration Statement" shall mean any registration statement
----------------------
(including, without limitation, the Exchange Offer Registration Statement
and the Shelf Registration Statement) of the Company which covers any of
the Exchange Notes or Transfer Restricted Notes pursuant to the provisions
of this Agreement, and all amendments and supplements to any such
Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
<PAGE>
-5-
"SEC" shall mean the Securities and Exchange Commission.
---
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Shelf Registration" shall mean a registration effected pursuant to
------------------
Section 2(b) hereof.
"Shelf Registration Event Date" see Section 2(b).
-----------------------------
"Shelf Registration Statement" shall mean a "shelf" registration
----------------------------
statement of the Company pursuant to the provisions of Section 2(b) hereof
which covers all of the Transfer Restricted Notes or all of the Private
Exchange Notes, as the case may be, on an appropriate form under Rule 415
under the Securities Act, or any similar rule that may be adopted by the
SEC, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Target Consummation Date" see Section 2(a).
------------------------
"Target Effectiveness Date" see Section 2(a).
-------------------------
"TIA" shall have the meaning set forth in Section 3(k) hereof.
---
"Transfer Restricted Notes" means each Note until (i) the date on
-------------------------
which such has been exchanged by a person other than a broker-dealer for an
Exchange Note in the Exchange Offer, (ii) following the exchange by a
broker-dealer in the Exchange Offer of a Note for an Exchange Note, the
date on which such Exchange Note is sold to a purchaser who receives from
such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii)
the date on which such Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement, (iv) the date on which such Note is distributed to the public
pursuant to Rule 144(k) under the Securities Act (or any similar provision
then in force, but not Rule 144A under the Securities Act), (v) such Note
shall have been otherwise transferred by the holder thereof and a new Note
not bearing a legend restricting further transfer shall have
<PAGE>
-6-
been delivered by the Company and subsequent disposition of such Note shall
not require registration or qualification under the Securities Act or any
similar state law then in force or (vi) such Note ceases to be outstanding.
"Trustee" shall mean the trustee with respect to the Notes under the
-------
Indenture.
2. Registration Under the Securities Act.
-------------------------------------
(a) Exchange Offer. The Company shall, for the benefit of the
--------------
Holders, at the Company's cost, (i) unless the Exchange Offer would not be
permitted by applicable law or SEC policy, file with the SEC within 90 days
after the Closing Time an Exchange Offer Registration Statement on an
appropriate form under the Securities Act covering the offer by the Company to
the Holders to exchange all of the Transfer Restricted Notes (other than Private
Exchange Notes (as defined below)) for a like principal amount of Exchange
Notes, (ii) unless the Exchange Offer would not be permitted by applicable law
or SEC policy, use its best efforts to have such Exchange Offer Registration
Statement declared effective under the Securities Act by the SEC not later than
180 days after the Closing Time (the "Target Effectiveness Date"), (iii) have
-------------------------
such Registration Statement remain effective until the closing of the Exchange
Offer and (iv) unless the Exchange Offer would not be permitted by applicable
law or SEC policy, commence the Exchange Offer and use its best efforts to
issue, on or prior to the 30th Business Day after the date on which the Exchange
Offer Registration Statement was declared effective by the SEC (the "Target
------
Consummation Date"), Exchange Notes in exchange for all Notes tendered prior
- -----------------
thereto in the Exchange Offer. Upon the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Exchange Offer,
it being the objective of such Exchange Offer to enable each Holder eligible and
electing to exchange Transfer Restricted Notes for Exchange Notes (assuming that
such Holder is not an affiliate of the Company within the meaning of Rule 405
under the Securities Act and is not a broker-dealer tendering Transfer
Restricted Notes acquired directly from the Company for its own account,
acquires the Exchange Notes in the ordinary course of such Holder's business and
has no arrangements or understandings with any Person to participate in the
Exchange Offer for the purpose of distributing (within the meaning of the
Securities Act) the Exchange Notes) and to transfer such Exchange Notes from and
after their receipt without any limitations or restrictions under the Securities
Act and under state securities or blue sky laws.
<PAGE>
-7-
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(ii) keep the Exchange Offer open for acceptance for a period of not
less than 20 Business Days after the date notice thereof is mailed to the
Holders (or longer if required by applicable law) (such period referred to
herein as the "Exchange Period");
---------------
(iii) utilize the services of the Depositary for the Exchange Offer;
(iv) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last Business Day of the
Exchange Period, by sending to the institution specified in the notice, a
telegram, telex, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Notes delivered for exchange, and a
statement that such Holder is withdrawing his election to have such Notes
exchanged; and
(v) otherwise comply in all material respects with all applicable
laws relating to the Exchange Offer.
If, prior to consummation of the Exchange Offer the Initial Purchasers
hold any Notes acquired by them and having the status of an unsold allotment in
the initial distribution, the Company upon the request of any Initial Purchaser
shall, simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to such Initial Purchaser in exchange (the "Private
-------
Exchange") for the Notes held by such Initial Purchaser, a like principal amount
- --------
of debt securities of the Company that are identical (except that such
securities shall bear appropriate transfer restrictions) to the Exchange Notes
(the "Private Exchange Notes").
----------------------
The Exchange Notes and the Private Exchange Notes shall be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture and that, in either case, has been qualified under the TIA or
is exempt from such qualification and shall provide that the Exchange Notes
shall not be subject to the transfer restrictions set forth in the Indenture.
The Indenture or such indenture shall
<PAGE>
-8-
provide that the Exchange Notes, the Private Exchange Notes and the Notes shall
vote and consent together on all matters as one class and that none of the
Exchange Notes, the Private Exchange Notes or the Notes will have the right to
vote or consent as a separate class on any matter. The Private Exchange Notes
shall be of the same series as and the Company shall use all commercially
reasonable efforts to have the Private Exchange Notes bear the same CUSIP number
as the Exchange Notes. The Company shall not have any liability under this
Agreement solely as a result of such Private Exchange Notes not bearing the same
CUSIP number as the Exchange Notes.
The Exchange Offer and the Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or Private Exchange, as
the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding shall have
been instituted or threatened in any court or by any governmental agency that
might materially impair the ability of the Company to proceed with the Exchange
Offer or the Private Exchange, and no material adverse development shall have
occurred in any existing action or proceeding with respect to the Company and
(iii) all governmental approvals shall have been obtained, which approvals the
Company deems necessary for the consummation of the Exchange Offer or Private
Exchange. As soon as practicable after the close of the Exchange Offer and/or
the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all Transfer Restricted Notes or portions
thereof properly tendered and not validly withdrawn pursuant to the
Exchange Offer in accordance with the terms of the Exchange Offer
Registration Statement and the letter of transmittal that is an exhibit
thereto;
(ii) accept for exchange all Notes properly tendered pursuant to the
Private Exchange; and
(iii) deliver, or cause to be delivered, to the Trustee for
cancellation all Transfer Restricted Notes or portions thereof so accepted
for exchange by the Company, and issue, and cause the Trustee under the
Indenture to promptly authenticate and deliver to each Holder, a new
Exchange Note or Private Exchange Note, as the case may be, equal in
principal amount to the principal amount of the Transfer Restricted Notes
surrendered by such Holder and accepted for exchange.
<PAGE>
-9-
To the extent not prohibited by any law or applicable interpretation
of the staff of the SEC, the Company shall use its best efforts to complete the
Exchange Offer as provided above and shall comply with the applicable
requirements of the Securities Act, the Exchange Act and other applicable laws
in connection with the Exchange Offer. Each Holder of Transfer Restricted Notes
who wishes to exchange such Transfer Restricted Notes for Exchange Notes in the
Exchange Offer will be required to make certain customary representations in
connection therewith, including representations that such Holder is not an
affiliate of the Company within the meaning of Rule 405 under the Securities
Act, that any Exchange Notes to be received by it will be acquired in the
ordinary course of business and that at the time of the commencement of the
Exchange Offer it has no arrangement with any Person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes.
The Company shall inform the Initial Purchasers of the names and addresses of
the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall
have the right to contact such Holders and otherwise facilitate the tender of
Transfer Restricted Notes in the Exchange Offer.
Upon consummation of the Exchange Offer in accordance with this
Section 2(a), the provisions of this Agreement shall continue to apply, mutatis
-------
mutandis, solely with respect to Transfer Restricted Notes that are Private
- --------
Exchange Notes and Exchange Notes held by Participating Broker-Dealers, and the
Company shall have no further obligation to register Transfer Restricted Notes
(other than Private Exchange Notes) pursuant to Section 2(b) hereof.
(b) Shelf Registration. If (i) the Company is not permitted to file
------------------
the Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or SEC policy,
(ii) the Exchange Offer is not for any other reason consummated by the Target
Consummation Date, (iii) any holder of Notes notifies the Company within a
specified time period that (a) due to a change in law or policy, in the opinion
of counsel, it is not entitled to participate in the Exchange Offer, (b) due to
a change in law or policy, in the opinion of counsel, it may not resell the
Exchange Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and (x) the prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
holder and (y) such prospectus is not promptly amended or modified in order to
be suitable for use in connection with such resales for such holder and all
similarly situated holders, or (c) it
<PAGE>
-10-
is a broker-dealer and owns Notes acquired directly from the Company or an
affiliate of the Company, (iv) the holders of a majority of the Notes may not
resell the Exchange Notes acquired by them in the Exchange Offer to the public
without restriction under the Securities Act and without restriction under
applicable blue sky or state securities laws or (v) the Exchange Offer shall not
have been consummated within 210 days after the Issue Date (the date of any of
(i)-(v), the "Shelf Registration Event Date"), then the Company shall, at its
-----------------------------
cost, use its best efforts to cause to be filed a Shelf Registration Statement
prior to the later of (A) 60 days after the Shelf Registration Event Date and
(B) 270 days after the Issue Date and use its best efforts to cause the Shelf
Registration Statement to be declared effective by the SEC on or prior to 150
days after such obligation arises. Each Holder as to which any Shelf
Registration is being effected agrees to furnish to the Company all information
with respect to such Holder necessary to make any information previously
furnished to the Company by such Holder not materially misleading.
The Company agrees to use its best efforts to keep the Shelf
Registration Statement continuously effective for a period of two years from
the Issue Date (subject to extension pursuant to the last paragraph of Section 3
hereof) (or such shorter period that will terminate when all of the Transfer
Restricted Notes covered by such Shelf Registration Statement have been sold
pursuant thereto, cease to be outstanding or are eligible for resale pursuant to
the provisions of Rule 144(k) under the Securities Act) (the "Effectiveness
-------------
Period"); provided, however, that the Effectiveness Period in respect of the
- ------ -------- -------
Shelf Registration Statement shall be extended to the extent required to permit
dealers to comply with the applicable prospectus delivery requirements of Rule
174 under the Securities Act and as otherwise provided herein. The Company
shall not permit any securities other than Transfer Restricted Notes to be
included in the Shelf Registration. The Company further agrees, if necessary,
to supplement or amend the Shelf Registration Statement, if required by the
rules, regulations or instructions applicable to the registration form used by
the Company for such Shelf Registration Statement or by the Securities Act or by
any other rules and regulations thereunder for shelf registrations, and the
Company agrees to furnish to the Holders of Transfer Restricted Notes copies of
any such supplement or amendment promptly after its being used or filed with the
SEC.
(c) Expenses. The Company shall pay all Registration Expenses in
--------
connection with the registration pursuant to Section 2(a) or 2(b) hereof and the
reasonable fees and ex-
<PAGE>
-11-
penses of one counsel, if any, designated in writing by the Majority Holders to
act as counsel for the Holders of the Transfer Restricted Notes in connection
with a Shelf Registration Statement. Except as provided in the preceding
sentence, each Holder shall pay all expenses of its own counsel, underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Transfer Restricted Notes pursuant to the Shelf
Registration Statement.
(d) Effective Registration Statement. An Exchange Offer Registration
--------------------------------
Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement
pursuant to Section 2(b) hereof will not be deemed to have become effective
unless it has been declared effective by the SEC; provided, however, that if,
-------- -------
after it has been declared effective, the offering of Transfer Restricted Notes
pursuant to a Shelf Registration Statement is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, such Registration Statement will be deemed not to have been
effective during the period of such interference, until the offering of Transfer
Restricted Notes may legally resume. The Company will be deemed not to have
used its best efforts to cause the Exchange Offer Registration Statement or the
Shelf Registration Statement, as the case may be, to become, or to remain,
effective during the requisite period if it voluntarily takes any action that
would result in any such Registration Statement not being declared effective or
in the Holders of Transfer Restricted Notes covered thereby not being able to
exchange or offer and sell such Transfer Restricted Notes during that period,
unless such action is required by applicable law and except as otherwise
provided in the second paragraph of Section 2(e) below.
(e) Additional Interest. In the event that (i) the applicable
-------------------
Registration Statement is not filed with the SEC on or prior to the date
specified herein for such filing, (ii) the applicable Registration Statement is
not declared effective on or prior to the date specified herein for such
effectiveness after such obligation arises (the "Effectiveness Target Date"),
-------------------------
(iii) if the Exchange Offer is required to be consummated hereunder, the Company
fails to consummate the Exchange Offer within 30 Business Days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) the applicable Registration Statement is filed and declared
effective during the period effectiveness is required by Section 2(e) and 3(a)
but shall thereafter cease to be effective or usable without being succeeded
immediately by an additional Registration Statement covering the Transfer
Restricted
<PAGE>
-12-
Notes that has been filed and declared effective (each such event referred to in
clauses (i) through (iv), a "Registration Default"), then the interest rate on
--------------------
the Transfer Restricted Notes as to which such Registration Default relates will
increase ("Additional Interest"), with respect to the first 90-day period (or
-------------------
portion thereof) while a Registration Default is continuing immediately
following the occurrence of such Registration Default in an amount equal to
0.25% per annum of the principal amount of the Notes. The rate of additional
Interest will increase by an additional 0.25% per annum of the principal amount
of the Notes for each subsequent 90-day period (or portion thereof) while a
Registration Default is continuing until all Registration Defaults have been
cured, up to a maximum amount of 1.0% of the principal amount of the Notes.
Additional Interest shall be computed based on the actual number of days elapsed
during which any such Registration Defaults exists. Following the cure of a
Registration Default, the accrual of Additional Interest with respect to such
Registration Default will cease.
If the Company issues a notice that the Shelf Registration Statement
is unusable due to the pendency of an announcement of a material corporate
transaction, or such notice is required under applicable securities laws to be
issued by the Company, and the aggregate number of days in any consecutive
twelve-month period for which the Shelf Registration Statement shall not be
usable due to all such notices issued or required to be issued exceeds 60 days
in the aggregate, then the interest rate borne by the Notes will be increased by
0.25% per annum of the principal amount of the Notes for the first 90-day period
(or portion thereof) beginning on the 31st such date that such Shelf
Registration Statement ceases to be usable, which rate shall be increased by an
additional 0.25% per annum of the principal amount of the Notes at the beginning
of each subsequent 90-day period, up to a maximum amount of 1.00% of the
principal amount of the Notes. Upon the Shelf Registration Statement once again
becoming usable, the interest rate borne by the Notes will be reduced to the
original interest rate if the Company is otherwise in compliance with this
Agreement at such time. Additional Interest shall be computed based on the
actual number of days elapsed in each 90-day period in which the Shelf
Registration Statement is unusable.
The Company shall notify the Trustee within five Business Days after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). Additional Interest shall be
----------
paid by depositing with the Trustee, in trust, for the benefit of the
<PAGE>
-13-
Holders of Transfer Restricted Notes, on or before the applicable semiannual
interest payment date, immediately available funds in sums sufficient to pay the
Additional Interest then due. The Additional Interest due shall be payable on
each interest payment date to the record Holder of Notes entitled to receive the
interest payment to be paid on such date as set forth in the Indenture. Each
obligation to pay Additional Interest shall be deemed to accrue from and
including the day following the applicable Event Date.
3. Registration Procedures. In connection with the obligations of
-----------------------
the Company with respect to the Registration Statements pursuant to Sections
2(a) and 2(b) hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement or
Registration Statements as prescribed by Sections 2(a) and 2(b) hereof
within the relevant time period specified in Section 2 hereof on the
appropriate form under the Securities Act, which form (i) shall be selected
by the Company, (ii) shall, in the case of a Shelf Registration, be
available for the sale of the Transfer Restricted Notes by the selling
Holders thereof and (iii) shall comply as to form in all material respects
with the requirements of the applicable form and include all financial
statements required by the SEC to be filed therewith; and use their best
efforts to cause such Registration Statement to become effective and remain
effective in accordance with Section 2 hereof. The Company shall not file
any Registration Statement or Prospectus or any amendments or supplements
thereto in respect of which the Holders must provide information for
inclusion therein without the Holders being afforded an opportunity to
review such documentation a reasonable time prior to the filing of such
document if the Majority Holders or such Participating Broker-Dealer, as
the case may be, their counsel or the managing underwriters, if any, shall
reasonably object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the Effectiveness Period or the
Applicable Period, as the case may be; and cause each Prospectus to be
supplemented by any required prospectus supplement and as so supplemented
to be filed pursuant to Rule 424 (or any similar provision then in force)
under the Securities Act, and comply with the provisions of the Secu-
<PAGE>
-14-
rities Act, the Exchange Act and the rules and regulations promulgated
thereunder applicable to it with respect to the disposition of all
securities covered by each Registration Statement during the Effectiveness
Period or the Applicable Period, as the case may be, in accordance with the
intended method or methods of distribution by the selling Holders thereof
described in this Agreement (including sales by any Participating Broker-
Dealer);
(c) in the case of a Shelf Registration, (i) notify each Holder of
Transfer Restricted Notes, at least three Business Days prior to filing,
that a Shelf Registration Statement with respect to the Transfer Restricted
Notes is being filed and advising such Holder that the distribution of
Transfer Restricted Notes will be made in accordance with the method
selected by the Majority Holders; and (ii) furnish to each Holder of
Transfer Restricted Notes, without charge, as many copies of each
Prospectus, and any amendment or supplement thereto and such other
documents as such Holder may reasonably request, in order to facilitate the
disposition of the Transfer Restricted Notes; and (iii) subject to the last
paragraph of Section 3 hereof, hereby consent to the use of the Prospectus
or any amendment or supplement thereto by each of the selling Holders of
Transfer Restricted Notes in connection with the offering and sale of the
Transfer Restricted Notes covered by such Prospectus or any amendment or
supplement thereto subject to the limitations on the use thereof provided
in Sections 2(b) and 2(c);
(d) in the case of a Shelf Registration, use its best efforts to
register or qualify, as may be required by applicable law, the Transfer
Restricted Notes under all applicable state securities or "blue sky" laws
of such jurisdictions by the time the applicable Registration Statement is
declared effective by the SEC as any Holder of Transfer Restricted Notes
covered by a Registration Statement shall reasonably request in advance of
such date of effectiveness, and do any and all other acts and things that
may be reasonably necessary or advisable to enable such Holder to
consummate the disposition in each such jurisdiction of such Transfer
Restricted Notes owned by such Holder; provided, however, that the Company
-------- -------
shall not be required to (i) qualify as a foreign corporation or as a
broker or dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (ii) file any
general consent to service of
<PAGE>
-15-
process or (iii) subject itself to taxation in any such jurisdiction if it
is not so subject;
(e) in the case of (1) a Shelf Registration or (2) Participating
Broker-Dealers who have notified the Company that they will be utilizing
the Prospectus contained in the Exchange Offer Registration Statement as
provided in Section 3(s) hereof, notify each Holder of Transfer Restricted
Notes, or such Participating Broker-Dealers, as the case may be, their
counsel, if any, promptly and confirm such notice in writing (i) when a
Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of any request by
the SEC or any state securities authority for amendments and supplements to
a Registration Statement or Prospectus or for additional information after
the Registration Statement has become effective, (iii) of the issuance by
the SEC or any state securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) if the Company receives any notification
with respect to the suspension of the qualification of the Transfer
Restricted Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction or the initiation of
any proceeding for such purpose, (v) of the happening of any event or the
failure of any event to occur or the discovery of any facts or otherwise,
during the period a Shelf Registration Statement is effective that makes
any statement made in such Registration Statement or the related Prospectus
untrue in any material respect or that causes such Registration Statement
or Prospectus to omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading and (vi) the Company's reasonable determination that a
post-effective amendment to the Registration Statement would be
appropriate;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement as soon as
practicable;
(g) in the case of a Shelf Registration, furnish to each Holder of
Transfer Restricted Notes, without charge, at least one conformed copy of
each Registration Statement relating to such Shelf Registration and any
post-effective
<PAGE>
-16-
amendment thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the
selling Holders of Transfer Restricted Notes to facilitate the timely
preparation and delivery of certificates not bearing any restrictive
legends representing Notes covered by such Shelf Registration to be sold
and relating to the subsequent transfer of such Notes; and cause such
Transfer Restricted Notes to be in such denominations (consistent with the
provisions of the Indenture) and registered in such names as the selling
Holders may reasonably request at least two Business Days prior to the
closing of any sale of Transfer Restricted Notes;
(i) in the case of a Shelf Registration or an Exchange Offer
Registration, upon the occurrence of any circumstance contemplated by
Section 3(e)(ii), 3(e)(iii), 3(e)(iv), 3(e)(v) or 3(e)(vi) hereof, use its
best efforts to prepare a supplement or post-effective amendment to a
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of the Transfer Restricted
Notes, such Prospectus will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and to notify each Holder to suspend use of the Prospectus as
promptly as practicable after the occurrence of such an event, and each
Holder hereby agrees to suspend use of the Prospectus until the Company has
amended or supplemented the Prospectus to correct such misstatement or
omission;
(j) obtain a CUSIP number for all Exchange Notes or Private
Exchange Notes, as the case may be, not later than the effective date of a
Registration Statement, and provide the Trustee with certificates for the
Exchange Notes or the Private Exchange Notes, as the case may be, in a form
eligible for deposit with the Depositary;
(k) cause the Indenture to be qualified under the Trust Indenture
Act of 1939, as amended (the "TIA"), in connection with the registration of
---
the Exchange Notes or Transfer Restricted Notes, as the case may be,
cooperate with the Trustee and the Holders to effect such changes to the
Indenture as may be required for the Indenture to be so qualified in
accordance with the terms of the TIA and
<PAGE>
-17-
execute, and use its best efforts to cause the Trustee to execute, all
documents as may be required to effect such changes, and all other forms
and documents required to be filed with the SEC to enable the Indenture to
be so qualified in a timely manner;
(l) in the case of a Shelf Registration, enter into such
agreements (including underwriting agreements) and take all such other
appropriate actions as are reasonably requested in order to expedite or
facilitate the registration or the disposition of such Transfer Restricted
Notes, and in such connection, (i) make such representations and warranties
to Holders of such Transfer Restricted Notes with respect to the business
of the Company and its subsidiaries as then conducted and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made by
issuers to underwriters in underwritten offerings, and confirm the same if
and when requested; (ii) obtain opinions of counsel to the Company and
updates thereof in form and substance reasonably satisfactory to the
Holders of a majority in principal amount of the Transfer Restricted Notes
being sold, addressed to each selling Holder covering the matters
customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by such Holders; (iii)
obtain "cold comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements
and financial data are, or are required to be, included in the Registration
Statement), addressed to the selling Holders of Transfer Restricted Notes
that satisfy the applicable requirements of Statement of Accounting
Standards No. 72, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings and such other matters as reasonably requested
by such selling Holders; and (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures no
less favorable than those set forth in Section 4 hereof (or such other
provisions and procedures acceptable to the Company and the Holders of a
majority in aggregate principal amount of Transfer Restricted Notes covered
by such Registration with respect to all parties to be indemnified pursuant
to said Section including, without limitation,
<PAGE>
-18-
such selling Holders). The above shall be done at each closing in respect
of the sale of Transfer Restricted Notes, or as and to the extent required
thereunder;
(m) if (1) a Shelf Registration is filed pursuant to Section 2(b)
or (2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2(a) is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, make available for inspection
by each such person who would be an "underwriter" as a result of either (i)
the sale by such person of Notes covered by such Shelf Registration
Statement or (ii) the sale during the Applicable Period by a Participating
Broker-Dealer of Exchange Notes (provided that a Participating Broker-
Dealer shall not be deemed to be an underwriter solely as a result of it
being required to deliver a prospectus in connection with any resale of
Exchange Notes) and any attorney, accountant or other agent retained by any
such person (collectively, the "Inspectors"), at the offices where normally
----------
kept, during reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries (collectively, the "Records") as shall be reasonably necessary
-------
to enable them to exercise any applicable due diligence responsibilities,
and cause the officers, directors and employees of the Company and its
subsidiaries to supply all information in each case reasonably requested by
any such Inspector in connection with such Registration Statement. Records
that the Company determines, in good faith, to be confidential and any
Records that it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a material misstatement or omission in such
Registration Statement, (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction or (iii) the information in such Records has been made
generally available to the public (other than by breach of this
confidentiality obligation). Each selling Holder of such Transfer
Restricted Notes and each such Participating
<PAGE>
-19-
Broker-Dealer will be required to agree that information obtained by it as
a result of such inspections shall be deemed confidential and shall not be
used by it as the basis for any market transactions in the securities of
the Company unless and until such is made generally available to the
public. Each selling Holder of such Transfer Restricted Notes and each such
Participating Broker-Dealer will be required to further agree that it will,
upon learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company at
its expense to undertake appropriate action to prevent disclosure of the
Records deemed confidential;
(n) comply with all applicable rules and regulations of the SEC
and make generally available to its securityholders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 60 days after the end of any 12-month period (or 135 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Transfer Restricted
Notes are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which
statements shall cover said 12-month periods;
(o) upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company addressed to the Trustee for
the benefit of all Holders of Transfer Restricted Notes participating in
the Exchange Offer or the Private Exchange, as the case may be, and which
includes an opinion that (i) the Company has duly authorized, executed and
delivered the Exchange Notes and Private Exchange Notes, as the case may
be, and (ii) each of the Exchange Notes or the Private Exchange Notes, as
the case may be, constitute a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its respective
terms (in each case, with customary exceptions);
(p) if an Exchange Offer or a Private Exchange is to be
consummated, upon proper delivery of the Transfer Restricted Notes by
Holders to the Company (or to such other Person as directed by the Company)
in exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be, the Company shall mark, or cause to be marked, on such
Transfer Restricted Notes and on the books of the Trustee, the Transfer
Agent, the Registrar and the Depositary delivered by such Holders that such
Transfer Restricted Notes are being canceled in exchange for the Exchange
Notes or the Private Exchange Notes, as the case
<PAGE>
-20-
may be; but in no event shall such Transfer Restricted Notes be marked as
paid or otherwise satisfied solely as a result of being exchanged for
Exchange Notes or Private Exchange Notes in the Exchange Offer or the
Private Exchange, as the case may be;
(q) cooperate with each seller of Transfer Restricted Notes
covered by any Registration Statement participating in the disposition of
such Transfer Restricted Notes and one counsel acting on behalf of all such
sellers in connection with the filings, if any, required to be made with
the NASD;
(r) use its best efforts to take all other steps necessary to
effect the registration of the Transfer Restricted Notes covered by a
Registration Statement contemplated hereby; and
(s) (A) in the case of the Exchange Offer Registration Statement
(i) include in the Exchange Offer Registration Statement a section entitled
"Plan of Distribution," which section shall be reasonably acceptable to
Merrill Lynch, as representative of the Initial Purchasers, and which shall
contain a summary statement of the positions taken or policies made by the
staff of the SEC with respect to the potential "underwriter" status of any
broker-dealer (a "Participating Broker-Dealer") that holds Transfer
---------------------------
Restricted Notes acquired for its own account as a result of market-making
activities or other trading activities and that will be the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes
to be received by such broker-dealer in the Exchange Offer, whether such
positions or policies have been publicly disseminated by the staff of the
SEC or such positions or policies, in the reasonable judgment of Merrill
Lynch, as representative of the Initial Purchasers or such other
representative, represent the prevailing views of the staff of the SEC,
including a statement that any such broker-dealer who receives Exchange
Notes for Transfer Restricted Notes pursuant to the Exchange Offer may be
deemed a statutory underwriter and must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes, (ii) furnish to each Participating Broker-Dealer who has
delivered to the Company the notice referred to in Section 3(e), without
charge, as many copies of each Prospectus included in the Exchange Offer
Registration Statement, and any amendment or supplement thereto, as such
Participating
<PAGE>
-21-
Broker-Dealer may reasonably request; (iii) hereby consent to the use of
the Prospectus forming part of the Exchange Offer Registration Statement or
any amendment or supplement thereto, by any Person subject to the
prospectus delivery requirements of the SEC, including all Participating
Broker-Dealers, in connection with the sale or transfer of the Exchange
Notes covered by the Prospectus or any amendment or supplement thereto,
(iv) use its best efforts to keep the Exchange Offer Registration Statement
effective and to amend and supplement the Prospectus contained therein in
order to permit such Prospectus to be lawfully delivered by all Persons
subject to the prospectus delivery requirements of the Securities Act for
such period of time as such Persons must comply with such requirements in
order to resell the Exchange Notes; provided, however, that such period
-------- -------
shall not be required to exceed 90 days (or such longer period if extended
pursuant to the last sentence of Section 3 hereof) (the "Applicable
----------
Period"), and (iv) include in the transmittal letter or similar
------
documentation to be executed by an exchange offeree in order to participate
in the Exchange Offer (x) the following provision:
"If the exchange offeree is a broker-dealer holding Transfer
Restricted Notes acquired for its own account as a result of market-
making activities or other trading activities, it will deliver a
prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Notes received in respect of
such Transfer Restricted Notes pursuant to the Exchange Offer;"
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in clause (x) and by delivering a Prospectus in
connection with the exchange of Transfer Restricted Notes, such broker-
dealer will not be deemed to admit that it is an underwriter within the
meaning of the Securities Act; and
(B) in the case of any Exchange Offer Registration Statement, the
Company agrees to deliver, upon request, to the Trustee or to Participating
Broker-Dealers upon consummation of the Exchange Offer (i) an opinion of
counsel substantially in the form attached hereto as Exhibit A, and (ii) an
officers' certificate containing certifications substantially similar to
those set forth in Section 5(c) of the Purchase Agreement.
<PAGE>
-22-
The Company may require each seller of Transfer Restricted Notes as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the proposed distribution of such Transfer
Restricted Notes, as the Company may from time to time reasonably request in
writing. The Company may exclude from such registration the Transfer Restricted
Notes of any seller who fails to furnish such information within a reasonable
time (not to exceed 10 Business Days) after receiving such request and shall be
under no obligation to compensate any such seller for any lost income, interest
or other opportunity forgone, or any liability incurred, as a result of the
Company's decision to exclude such seller.
In the case of (1) a Shelf Registration Statement or (2) Participating
Broker-Dealers who have notified the Company that they will be utilizing the
Prospectus contained in the Exchange Offer Registration Statement as provided in
Section 3(s) hereof, that are seeking to sell Exchange Notes and are required to
deliver Prospectuses, each Holder agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
3(e)(ii), 3(e)(iii), 3(e)(iv), 3(e)(v) or 3(e)(vi) hereof, such Holder will
forthwith discontinue disposition of Transfer Restricted Notes pursuant to a
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof or until
it is advised in writing (the "Advice") by the Company that the use of the
------
applicable Prospectus may be resumed, and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense) all copies in such
Holder's possession, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Transfer Restricted Notes or
Exchange Notes, as the case may be, current at the time of receipt of such
notice. If the Company shall give any such notice to suspend the disposition of
Transfer Restricted Notes or Exchange Notes, as the case may be, pursuant to a
Registration Statement, the Company shall use its best efforts to file and have
declared effective (if an amendment) as soon as practicable an amendment or
supplement to the Registration Statement and, in the case of an amendment, have
such amendment declared effective as soon as practicable and shall extend the
period during which such Registration Statement shall be maintained effective
pursuant to this Agreement by the number of days in the period from and
including the date of the giving of such notice to and including the date when
the Company shall have made available to the Holders (x) copies of the
supplemented or amended Pro-
<PAGE>
-23-
spectus necessary to resume such dispositions or (y) the Advice.
4. Indemnification and Contribution. (a) In connection with the
--------------------------------
Registration Statement, the Company shall indemnify and hold harmless each
Initial Purchaser, each Holder, each Participating Broker-Dealer, each
underwriter who participates in an offering of Transfer Restricted Notes, their
respective affiliates, each Person, if any, who controls any of such parties
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment or supplement thereto), covering
Transfer Restricted Notes or Exchange Notes, including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any court or governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission; provided
--------
that (subject to Sections 4(c) and 4(d) below) any such settlement is
effected with the prior written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including reasonable fees and disbursements of one counsel (in addition to
any local counsel) chosen by Merrill Lynch, such Holder, such Participating
Broker-Dealer or any underwriter (except to the extent otherwise expressly
provided in Section 4(c) hereof)), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any
<PAGE>
-24-
court or governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (i) or (ii) of this Section 4(a);
provided, however, that this indemnity does not apply to any loss, liability,
- -------- -------
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission (i) made in reliance upon and
in conformity with written information furnished in writing to the Company by or
on behalf of such Initial Purchaser, such Holder, such Participating Broker-
Dealer or any underwriter with respect to such Initial Purchaser, Holder,
Participating Broker-Dealer or underwriter, as the case may be, expressly for
use in the Registration Statement (or any amendment or supplement thereto) or
any Prospectus (or any amendment or supplement thereto) or (ii) contained in any
preliminary prospectus if such Initial Purchaser, such Holder, such
Participating Broker-Dealer or such underwriter failed to send or deliver a copy
of the Prospectus (in the form it was first provided to such parties for
confirmation of sales) to the Person asserting such losses, claims, damages or
liabilities on or prior to the delivery of written confirmation of any sale of
securities covered thereby to such Person in any case where the Company shall
have previously furnished copies thereof to such Initial Purchaser, such Holder,
such Participating Broker-Dealer or such underwriter, as the case may be, in
accordance with this Agreement, at or prior to the written confirmation of the
sale of such Notes to such Person and the untrue statement contained in or the
omission from the preliminary prospectus was corrected in the final prospectus
(or any amendment or supplement thereto). Any amounts advanced by the Company
to an indemnified party pursuant to this Section 4 as a result of such losses
shall be returned to the Company if it shall be finally determined by a court of
competent jurisdiction in a judgment not subject to appeal or final review that
such indemnified party was not entitled to indemnification by the Company.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company, each Initial Purchaser, each underwriter who
participates in an offering of Transfer Restricted Notes and the other selling
Holders and each of their respective directors and each Person, if any, who
controls any of the Company, any Initial Purchaser, any underwriter or any other
selling Holder within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, against
<PAGE>
-25-
any and all loss, liability, claim, damage and expense whatsoever described in
the indemnity contained in Section 4(a) hereof, as incurred, but only with
respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment or supplement
thereto) or any Prospectus (or any amendment or supplement thereto) in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such selling Holder with respect to such Holder expressly for use
in the Registration Statement (or any supplement thereto), or any such
Prospectus (or any amendment thereto); provided, however, that, in the case of
-------- -------
the Shelf Registration Statement, no such Holder shall be liable for any claims
hereunder in excess of the amount of net proceeds received by such Holder from
the sale of Transfer Restricted Notes pursuant to the Shelf Registration
Statement. This indemnity agreement shall be in addition to any liability that
any such Holders shall have.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability that it
may have otherwise than on account of this indemnity agreement. In the case of
parties indemnified pursuant to Section 4(a) above, one counsel to all the
indemnified parties shall be selected by Merrill Lynch, and, in the case of
parties indemnified pursuant to Section 4(b) above, counsel to all the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
--------
however, that counsel to the indemnifying party shall not (except with the
- -------
consent of the indemnified party) also be counsel to the indemnified party.
Notwithstanding the foregoing, if it so elects within a reasonable time after
receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume the defense of such
action with counsel chosen by it (including local counsel) and approved by the
indemnified parties defendant in such action (which approval shall not be
unreasonably withheld), unless such indemnified parties reasonably object to
such assumption on the ground that there may be legal defenses available to them
which are different from or in addition to those available to such indemnifying
party. If an indemnifying party assumes the defense of such action, the
indemnifying parties shall not be liable for any fees and expenses of counsel
<PAGE>
-26-
for the indemnified parties incurred thereafter in connection with such action.
In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 4 (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes a full and unconditional release of each indemnified party
from all liability arising out of such litigation, investigation, proceeding or
claim and the offer and sale of any Notes and (ii) does not include a statement
as to or an admission of fault, culpability or a failure to act by or on behalf
of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for reasonable fees and
expenses of counsel pursuant to Section 4(a)(iii) above, then such indemnifying
party agrees that it shall be liable for any settlement of the nature
contemplated by Section 4(a)(ii) effected without its written consent if (i)
such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement. Notwithstanding the immediately preceding
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, an indemnifying party shall not be liable for a settlement of the
nature contemplated by Section 4(a)(ii) effected without its consent if such
indemnifying party (i) reimburses such indemnified party in accordance with such
request to the extent it considers such request to be reasonable and (ii)
provides written notice to the indemnified party substantiating the unpaid
balance as unreasonable, in each case prior to the date of such settlement.
<PAGE>
-27-
(e) In order to provide for just and equitable contribution in
circumstances under which any of the indemnity provisions set forth in this
Section 4 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Company, the Initial
Purchasers and the Holders, as applicable, shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature contemplated by
such indemnity agreement incurred by the Company, the Initial Purchasers and the
Holders; provided, however, that no Person guilty of fraudulent
-------- -------
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person that was not guilty of such
fraudulent misrepresentation. As between the Company and the Initial Purchasers
and the Holders, such parties shall contribute to such aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement in such proportion as shall be appropriate to reflect the
relative fault of the Company on the one hand and of the Holder of Transfer
Restricted Notes, the Participating Broker-Dealer or Initial Purchaser, as the
case may be, on the other hand in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations.
The relative fault of the Company on the one hand and the Holder of
Transfer Restricted Notes, the Participating Broker-Dealer or the Initial
Purchasers, as the case may be, on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, or by the Holder of Transfer
Restricted Notes, the Participating Broker-Dealer or the Initial Purchasers, as
the case may be, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Holders of the Transfer Restricted Notes and the
Initial Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 4 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 4.
For purposes of this Section 4, each affiliate of any Person, if any,
who controls a Holder of Transfer Restricted Notes, an Initial Purchaser or a
Participating Broker-Dealer
<PAGE>
-28-
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act shall have the same rights to contribution as such other Person,
and each director of the Company, each affiliate of the Company, each executive
officer of the Company who signed the Registration Statement, and each Person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Company. Notwithstanding the foregoing, none of such
persons, other than the Company or the Holders, shall be deemed to have
indemnification obligations under this Section 4.
5. Miscellaneous.
-------------
(a) Rule 144 and Rule 144A. The Company shall provide to each
----------------------
Holder such reports as are required under Section 4.08 of the Indenture and,
upon the request of any Holder of Transfer Restricted Notes (a) make publicly
available such information as is necessary to permit sales pursuant to Rule 144
under the Securities Act, (b) deliver such information to a prospective
purchaser as is necessary to permit sales pursuant to Rule 144A under the
Securities Act and take such further action as any Holder of Transfer Restricted
Notes may reasonably request, and (c) take such further action, if any, that is
reasonable in the circumstances, in each case, to the extent required from time
to time to enable such Holder to sell its Transfer Restricted Notes without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such rule may be amended
from time to time, (ii) Rule 144A under the Securities Act, as such rule may be
amended from time to time, or (iii) any similar rules or regulations hereafter
adopted by the SEC. Upon the reasonable request of any Holder of Transfer
Restricted Notes, the Company will deliver to such Holder a written statement as
to whether they have complied with such requirements.
(b) No Inconsistent Agreements. The rights granted to the Holders
--------------------------
hereunder do not, and will not for the term of this Agreement in any way
conflict with and are not, and will not during the term of this Agreement be
inconsistent with the rights granted to the holders of the Company's other
issued and outstanding securities under any other agreements entered into by the
Company.
(c) Amendments and Waivers. The provisions of this Agreement,
----------------------
including provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to
<PAGE>
-29-
departures from the provisions hereof may not be given, otherwise than with the
prior written consent of the Company and the Majority Holders; provided,
--------
however, that no amendment, modification, or supplement or waiver or consent to
- -------
the departure with respect to the provisions of Section 4 hereof shall be
effective as against any Holder of Transfer Restricted Notes or the Company
unless consented to in writing by such Holder of Transfer Restricted Notes or
the Company, as the case may be.
(d) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, telex, telecopier, or any courier guaranteeing overnight delivery
(i) if to a Holder, at the most current address given by such Holder to the
Company by means of a notice given in accordance with the provisions of this
Section 5(d), which address initially is, with respect to the Initial
Purchasers, the address set forth in the Purchase Agreement; and (ii) if to the
Company, initially at the Company's address set forth in the Purchase Agreement
and thereafter at such other address, notice of which is given in accordance
with the provisions of this Section 5(d).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors, assigns and transferees of the
Initial Purchasers, including, without limitation and without the need for an
express assignment, subsequent Holders; provided, however, that nothing herein
-------- -------
shall be deemed to permit any assignment, transfer or other disposition of
Transfer Restricted Notes in violation of the terms of the Purchase Agreement or
the Indenture. If any transferee of any Holder shall acquire Transfer
Restricted Notes, in any manner, whether by operation of law or otherwise, such
Transfer Restricted Notes shall be held subject to all of the terms of this
Agreement, and by taking and holding such Transfer Restricted Notes, such Person
shall be conclusively
<PAGE>
-30-
deemed to have agreed to be bound by and to perform all of the terms and
provisions of this Agreement and such Person shall be entitled to receive the
benefits hereof.
(f) Third Party Beneficiary. Each of the Initial Purchasers and each
-----------------------
Holder shall be a third party beneficiary of the agreements made hereunder
between the Company, on the one hand, and the Initial Purchasers, on the other
hand, and shall have the right to enforce such agreements directly to the extent
it deems such enforcement necessary or advisable to protect its rights or the
rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. Specified times of day refer to
New York City time.
(j) Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Notes Held by the Company or Any of Its Affiliates. Whenever the
--------------------------------------------------
consent or approval of Holders of a specified percentage of Transfer Restricted
Notes is required hereunder, Transfer Restricted Notes held by the Company or
any of their affiliates (as such term is defined in Rule 405 under the
Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
CALIFORNIA STEEL INDUSTRIES, INC.
By: /s/ Celo Lourenco Goncalves
----------------------------
Name: Celo Lourenco Goncalves
Title: President and Chief
Executive Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BANCBOSTON ROBERTSON STEPHENS INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: /s/ Michael F. Senft
------------------------
Name: Michael F. Senft
Title: Managing Director
<PAGE>
Exhibit A
---------
Form of Opinion of Counsel
--------------------------
1. Each of the Exchange Offer Registration Statement and the
Prospectus (other than the financial statements, notes or schedules thereto and
other financial and statistical information and supplemental schedules included
or referred to therein or omitted therefrom and the Form T-1, as to which such
counsel need express no opinion), complies as to form in all material respects
with the applicable requirements of the Securities Act and the applicable rules
and regulations promulgated under the Securities Act.
2. In the course of such counsel's review and discussion of the
contents of the Exchange Offer Registration Statement and the Prospectus with
certain officers and other representatives of the Company and representatives of
the independent certified public accountants of the Company, although such
counsel has not verified and does not pass upon or assume any responsibility for
the accuracy, completeness or fairness of the statements contained therein, on
the basis of the foregoing participation (relying as to materiality to a large
extent upon representations and opinions of officers and other representatives
of the Company), no facts have come to such counsel's attention that lead such
counsel to believe that the Exchange Offer Registration Statement (other than
the financial statements, notes and schedules thereto and other financial and
statistical information contained or referred to therein and the Form T-1, as to
which such counsel need express no belief), at the time the Exchange Offer
Registration Statement became effective and at the time of the consummation of
the Exchange Offer, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements contained therein not misleading, or that the Prospectus (other than
the financial statements, notes and schedules thereto and other financial and
statistical information contained or referred to therein, as to which such
counsel need express no belief) contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 8,040
<SECURITIES> 0
<RECEIVABLES> 60,972
<ALLOWANCES> 900
<INVENTORY> 162,436
<CURRENT-ASSETS> 242,143
<PP&E> 446,918
<DEPRECIATION> 192,047
<TOTAL-ASSETS> 533,191
<CURRENT-LIABILITIES> 85,680
<BONDS> 0
0
30,000
<COMMON> 10,000
<OTHER-SE> 160,447
<TOTAL-LIABILITY-AND-EQUITY> 533,191
<SALES> 160,994
<TOTAL-REVENUES> 160,994
<CGS> 134,443
<TOTAL-COSTS> 134,443
<OTHER-EXPENSES> 7,321
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,774)
<INCOME-PRETAX> 15,517
<INCOME-TAX> 6,369
<INCOME-CONTINUING> 19,230
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,148
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
