UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File
No. 1-9820
BIRMINGHAM STEEL CORPORATION
DELAWARE 13-3213634
- -------------------------- -------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
1000 Urban Center Parkway, Suite 300
Birmingham, Alabama 35242
(205) 970-1200
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 and 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 ( ).
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date: 29,668,298 Shares of Common Stock, Par Value $.01 Outstanding
at February 10, 1997.
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Birmingham Steel Corporation
Consolidated Balance Sheets
(in thousands, except number of shares)
December 31, June 30,
1996 1996
(Unaudited) (Audited)
------------ -----------
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ASSETS
Current assets:
Cash and cash equivalents $ 2,747 $ 6,663
Accounts receivable, net of allowance
for doubtful accounts of $1,546 at
December 31, 1996; $1,554 at June 30, 1996 107,179 111,565
Inventories 219,519 196,752
Prepaid expenses 1,924 1,390
Other 10,603 11,623
----------- -----------
Total current assets 341,972 327,993
Property, plant and equipment
(including property and equipment,
net, held for disposition of $19,252 and
$18,210 at December 31, 1996 and June 30,
1996, respectively):
Land and buildings 169,284 123,465
Machinery and equipment 529,819 376,744
Construction in progress 143,734 178,011
----------- -----------
842,837 678,220
Less accumulated depreciation (151,832) (134,196)
----------- -----------
Net property, plant and equipment 691,005 544,024
Excess of cost over net assets acquired 51,945 46,077
Other assets 29,878 9,893
----------- -----------
Total assets $ 1,114,800 $ 927,987
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 121,999 $ -
Accounts payable 79,963 83,226
Accrued operating expenses 4,236 5,936
Accrued payroll expenses 5,434 6,888
Income taxes payable - 369
Other current liabilities 42,102 19,979
----------- -----------
Total current liabilities 253,734 116,398
Deferred income taxes 49,512 50,292
Deferred compensation 4,941 5,606
Long-term debt less current portion 333,500 307,500
Minority interest in subsidiary 17,345 -
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, par value $.01;
authorized 5,000,000 shares - -
Common stock, par value $.01; authorized:
75,000,000 shares; issued and outstanding:
29,718,050 at December 31, 1996 and
29,679,761 at June 30, 1996 297 297
Additional paid-in capital 331,502 331,430
Treasury stock, 1,060,940 and 1,070,727
shares at December 31,1996 and June 30,
1996, respectively, at cost (20,939) (21,148)
Unearned compensation (1,391) (2,165)
Retained earnings 146,299 139,777
----------- -----------
Total stockholders' equity
455,768 448,191
----------- -----------
Total liabilities and stockholders' equity $ 1,114,800 $ 927,987
=========== ===========
See accompanying notes.
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Birmingham Steel Corporation
Consolidated Statements of Operations
(in thousands, except per share data; unaudited)
Three months ended Six months ended
December 31, December 31,
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
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Net sales $210,140 $197,398 $443,562 $404,650
Cost of sales:
Other than depreciation and
amortization 178,920 172,936 377,620 345,735
Depreciation and amortization 10,872 8,272 21,588 16,302
-------- -------- -------- --------
Gross profit 20,348 16,190 44,354 42,613
Provision for loss on mill
modernization program and
unusual items 1,112 3,810 2,534 5,116
Selling, general and administrative 7,912 9,284 16,362 19,666
Interest 4,645 3,093 8,633 5,364
-------- -------- -------- --------
6,679 3 16,825 12,467
Other income (expense), net 3,233 1,271 3,847 2,634
Minority interest in loss of
subsidiary 121 - 121 -
-------- -------- -------- --------
Income before income taxes 10,033 1,274 20,793 15,101
Provision for income taxes 4,113 618 8,525 6,267
-------- -------- -------- --------
Net income $ 5,920 $ 656 $ 12,268 $ 8,834
======== ======== ======== ========
Weighted average shares outstanding 28,653 28,538 28,639 28,529
======== ======== ======== ========
Earnings per share $ 0.21 $ 0.02 $ 0.43 $ 0.31
Dividends declared per share $ 0.10 $ 0.10 $ 0.20 $ 0.20
======== ======== ======== ========
See accompanying notes.
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Birmingham Steel Corporation
Consolidated Statements of Cash Flows
(in thousands)
Six months ended
December 31,
-----------------------------
1996 1995
(unaudited) (unaudited)
------------ ------------
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 12,268 $ 8,834
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 21,588 16,302
Provision for doubtful accounts
receivable 15 383
Deferred income taxes (780) 1,641
Provision for loss on mill
modernization program and
unusual items - 2,055
Gain on sale of 50% equity
in scrap subsidiary (1,746) -
Minority interest in subsidiary (121) -
Other 1,083 1,458
Changes in operating assets and liabilities,
net of effects from business acquisition:
Accounts receivable 4,370 11,622
Inventories 1,233 (42,062)
Prepaid expenses (535) (763)
Other current assets (417) 3,299
Accounts payable (19,684) (2,163)
Income taxes payable (369) 213
Other accrued liabilities (2,184) 2,708
Deferred compensation (665) 203
--------- ---------
Net cash provided by operating activities 14,056 3,730
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (101,666) (76,879)
Payments for business acquisitions (43,309) (11,250)
Proceeds from disposal of property,
plant and equipment 108 86
Proceeds from sale of 50% equity in
scrap subsidiary 5,372 -
Investment in scrap subsidiary (7,500) (7,499)
Additions to other non-current assets (15,664) (14,649)
Reductions in other non-current assets 2,110 3,921
--------- ---------
Net cash used in investing activities (160,549) (106,270)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings and repayments 121,999 (8,020)
Proceeds from issuance of long-term debt 26,000 165,000
Proceeds from issuance of common stock 305 59
Purchase of treasury stock - (540)
Cash dividends paid (5,727) (5,704)
--------- ---------
Net cash provided by financing activities 142,577 150,795
--------- ---------
Net increase (decrease) in cash and
cash equivalents (3,916) 48,255
Cash and cash equivalents at:
Beginning of period 6,663 4,311
--------- ---------
End of period $ 2,747 $ 52,566
========= =========
Supplemental cash flow disclosures:
Cash paid during the period for:
Interest (net of amounts capitalized) $ 11,912 $ 4,404
Income taxes $ 7,136 $ 4,069
See accompanying notes.
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BIRMINGHAM STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
1. Description of the Business and Significant Accounting Policies
Description of the Business
Birmingham Steel Corporation (the Company) operates steel mini-mills in
the United States producing steel reinforcing bar, merchant products
and high quality bar, rod and wire. The Company operates in one
industry segment and sells to third parties primarily in the
construction, manufacturing and automotive industries throughout the
United States and Canada.
Principles of consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. In the opinion of management, all
adjustments considered necessary for a fair presentation have been
included. All significant intercompany accounts and transactions have
been eliminated.
Inventories
Inventories are stated at the lower of cost or market value. The cost
of inventories is determined using the first-in, first-out method.
Earnings per share
Earnings per share are computed using the weighted average number of
outstanding common shares and dilutive equivalents (if any).
Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121 that requires impairment losses to be recorded on
long-lived assets used in operations, including goodwill, when
impairment indicators are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets'
carrying amount. Statement No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of in future
periods. The Company adopted Statement No. 121 in the first quarter
of fiscal 1997 with no material effect on earnings or asset values.
The Company issues stock based awards in several forms which are
accounted for in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees". In October 1995,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", which provides an alternative to Opinion No. 25, in
accounting for stock-based compensation issued to employees. The
Statement allows for a fair value based method of accounting for
employee stock options and similar equity instruments. For companies
that continue to account for stock-based compensation arrangements
under Opinion No. 25, Statement No. 123 requires disclosure of the pro
forma effect on net income and earnings per share of its fair value
based accounting for those arrangements. The Company has elected to
continue accounting for stock-based compensation arrangements in
accordance with Opinion No. 25. However, the Company will adopt the
disclosure requirements of Statement No. 123 in its annual report for
fiscal 1997.
2. Business Acquisitions and Joint Ventures
On November 15, 1996, the Company entered into a Contribution Agreement
with Atlantic Steel Industries, Inc. (Atlantic) and IVACO, Inc., the
parent of Atlantic, pursuant to which the Company and Atlantic formed
Birmingham Southeast, LLC (Birmingham Southeast), a limited liability
company owned 85 percent by Birmingham East Coast Holdings, a wholly
owned subsidiary of the Company, and 15 percent by a subsidiary of
IVACO, Inc. On December 2, 1996, pursuant to the Contribution Agreement
the Company contributed the assets of its Jackson, MS facility to
Birmingham Southeast which had no impact on the accompanying
consolidated financial statements. Birmingham Southeast then purchased
the operating assets of Atlantic located in Cartersville, GA for
$43,309,000 in cash and assumed liabilities approximating $40,206,000.
The purchase price has been allocated to the assets and liabilities of
the Company as follows (in thousands):
Current assets $ 28,051
Property, plant & equipment 63,400
Other non-current assets,
primarily goodwill 9,529
--------
Total assets acquired $100,980
Fair value of liabilities
assumed (40,206)
Minority interest (17,465)
---------
Total purchase price $ 43,309
=========
The non-cash financing and investing activities related to the purchase
of the Cartersville, Georgia assets have been excluded from the
statement of cash flows.
On September 18, 1996, the Company entered into an agreement with Raw
Materials Development Co., Ltd., an affiliate of Mitsui & Co., Ltd.
forming Pacific Coast Recycling, LLC (Pacific Coast), a 50/50 joint
venture established to operate in southern California as a collector,
processor and seller of scrap. The Company made equity investments in
Pacific Coast of approximately $7,500,000 on December 27, 1996 and
$1,750,000 on January 23, 1997. On December 27, 1996, Pacific Coast
purchased certain assets from the estate of Hiuka America Corporation
and its affiliates with annual scrap processing capacity of
approximately 1 million tons. Pacific Coast plans to utilize the
facility at the Port of Long Beach to export scrap.
On August 30, 1996, the Company entered into an Equity Contribution
Agreement with American Iron Reduction, L.L.C. (AIR), a 50 percent
owned subsidiary of the Company, for the purpose of constructing a
direct reduced iron (DRI) facility in Louisiana. Under the Equity
Contribution Agreement, the Company is required to make an equity
contribution to AIR of not less than $20,000,000 and not more than
$27,500,000 upon completion of the DRI facility, which is expected to
be completed by the end of calendar year 1997. The Company also entered
into a DRI Purchase Agreement with AIR on August 30, 1996, whereby the
Company will purchase a minimum of 600,000 metric tons of DRI annually.
The DRI purchased will be utilized primarily at the Memphis melt shop
as a substitute for premium, low-residual scrap.
On August 8, 1995, the Company purchased certain assets of Western
Steel Limited, a subsidiary of IPSCO Inc., located in Calgary, Alberta,
Canada for a purchase price of approximately $11,206,000. On December
13, 1995, Birmingham Recycling Investment Company (BRIC), a wholly
owned subsidiary of the Company, completed a related transaction when
it purchased the stock of Richmond Steel Recycling Limited (RSR), a
scrap processing facility and subsidiary of Western Steel Limited,
located in Richmond, British Columbia, Canada. On December 20, 1996,
BRIC sold 50 percent of the stock of RSR to SIMSMETAL Canada, Ltd. and
recognized a pre-tax gain, included in other income, of approximately
$1,746,000.
3. Inventories
Inventories were valued as summarized in the following table (in
thousands):
December 31, June 30,
1996 1996
------------ ----------
At lower of cost (first-in, first-out)
or market:
Raw materials and mill supplies $ 46,385 $ 37,871
Work-in-progress 82,639 95,423
Finished goods 90,495 63,458
-------- --------
$219,519 $196,752
======== ========
4. Borrowing Arrangements
Under line of credit arrangements for short-term borrowings with four
banks, the Company may borrow up to $185,000,000 with interest at
market rates mutually agreed upon by the Company and the banks. One of
these lines of credit supports a bankers' acceptance and commercial
paper program. Approximately $63,001,000 was available under these
facilities at December 31, 1996.
On October 8, 1996, the Company issued a $26,000,000, 30 year variable
rate industrial revenue bond under the authority of the City of Memphis
and County of Shelby, Tennessee. The Company will use the proceeds of
the tax-free bond to finance certain portions of its new melt shop in
Memphis, Tennessee.
On September 29, 1995, the Company completed a $150,000,000 private
placement of senior notes. The notes are unsecured and primarily
consist of maturities ranging from seven to ten years and a weighted
average interest rate of 7.05 percent. The proceeds of the debt issue,
which were drawn down on December 15, 1995, were utilized primarily to
fund the current requirements of the Company's multi-year capital
expenditure program.
On September 1, 1995, American Steel & Wire Corporation (ASW), a
wholly-owned subsidiary of the Company, issued $15,000,000 in Solid
Waste Disposal Revenue Bonds under the authority of the Ohio Water
Development Authority. The bonds have a term of thirty years at a
variable market interest rate. The proceeds of the bonds have been used
to construct a waste water treatment facility at the Company's new bar
mill located in Cleveland, Ohio.
5. Contingencies
Environmental
The Company is subject to federal, state and local environmental laws
and regulations concerning, among other matters, waste water effluents,
air emissions and furnace dust management and disposal.
The Company has been advised by the Virginia Department of Waste
Management of certain conditions involving the disposal of hazardous
materials at the Company's Norfolk, Virginia property which existed
prior to the Company's acquisition of the facility. The site has been
accepted into Virginia's Voluntary Remediation Program. This program
confers statutory immunity from certain environmental claims upon
certification by the Virginia Department of Environmental Quality of the
site remediation. The Company has also been notified by the Department
of Toxic Substances Control (DTSC) of the Environmental Protection
Agency of the State of California of certain environmental conditions
regarding its property in Emeryville, California. The Company has
performed environmental assessments of these sites and developed work
plans for remediation of the properties for approval by the applicable
regulatory agencies. The remediation plan for the Emeryville site was
approved by DTSC and is substantially complete.
As part of its ongoing environmental compliance and monitoring programs,
the Company is voluntarily developing work plans for environmental
conditions involving certain of its operating facilities and properties
which are held for sale. Based upon the Company's study of the known
conditions and its prior experience in investigating and correcting
environmental conditions, the Company estimates that the potential costs
of these site restoration and remediation efforts may range from
$3,050,000 to $5,250,000. Approximately $2,107,000 of these costs is
recorded in accrued liabilities at December 31, 1996. The remaining
costs principally consist of site restoration and environmental exit
costs to ready the idle facilities for sale, and have been considered in
determining whether the carrying amounts of the properties exceed their
net realizable values. These expenditures are expected to be made in the
next one to two years, if the necessary regulatory agency approvals of
the Company's work plans are obtained. Though the Company believes it
has adequately provided for the cost of all known environmental
conditions, the applicable regulatory agencies could insist upon
different and more costly remediative measures than those the Company
believes are adequate or required by existing law. Additionally, if
other environmental conditions requiring remediation are discovered,
site restoration costs could exceed the Company's estimates. Except as
stated above, the Company believes that it is currently in compliance
with all known material and applicable environmental regulations.
Legal Proceedings
The Company is involved in litigation relating to claims arising out of
its operations in the normal course of business. Such claims are
generally covered by various forms of insurance. In the opinion of
management, any uninsured or unindemnified liability resulting from
existing litigation would not have a material effect on the Company's
business, financial position, liquidity or results of operations.
6. Disposition of Idle Facilities
In Fiscal 1995, the Company entered into an agreement to sell the real
property at its idle facility in Ballard, Washington. In December, 1995,
the Company incurred a write-off of $2,055,000, which is included in the
provision for loss on mill modernization program, primarily related to
the equipment at the Ballard facility after termination of the sales
contract on the equipment. In August, 1995, the Company completed the
exchange of the idle Kent, Washington facility and other property at the
Seattle, Washington steel-making facility with the Port of Seattle for
property owned by the Port which is being used in the Company's Seattle
operations. No gain or loss was recognized as a result of the
transaction.
7. Provision for Loss on Mill Modernization and Other Unusual Items
The provision for loss on mill modernization program in the accompanying
financial statements consists of pre-operating/start-up expenses related
to the Company's on-going capital improvement plans.
8. Subsequent Events
On January 15, 1997, the Company issued 1,000,000 additional shares of
common stock from treasury in a public offering. The proceeds from the
offering were used to offset certain payments made by the Company
pursuant to the acquisition of the assets of Atlantic Steel Industries,
Inc. located in Cartersville, Georgia (see Note 2).
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Statements contained in this report which are not purely historical or which
might be considered an opinion or projection concerning the Company or its
business, whether express or implied, are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements include, without limitation, statements expressing the Company's
expectations, hopes, anticipations, intentions, plans or strategies regarding
the future. Forward-looking statements involve risks and uncertainties described
below under the heading "Risk Factors That May Affect Operating Results" which
could cause actual results to differ materially from those projected.
For the second quarter of fiscal 1997, the Company reported earnings of
$5,920,000, compared with $656,000 in the second period of fiscal 1996. Earnings
per share for the quarter were $.21, up from $.02 reported for the second
quarter of last year. Second quarter steel shipments were 609,000 tons, compared
with 557,000 tons shipped in the same period a year ago. Net sales for the
second quarter were $210,140,000, an increase of 6 percent from $197,398,000 for
the same period last year.
For the six months ended December 31, 1996, the Company reported earnings of
$12,268,000, compared with $8,834,000 for the same period last year. Earnings
per share for the period were $.43, up from $.31 reported last year. Steel
shipments for the six month period were 1,278,000 tons, a 13 percent increase
from 1,131,000 tons for the same period of 1996. Net sales were $443,562,000 for
the first six months compared with $404,650,000 in the same period a year ago.
Net Sales
Second quarter rebar/merchant shipments increased 3 percent to 444,000 tons from
429,000 tons in the same period last year. Shipment of lower margin
semi-finished steel billets account for 4 percent of total rebar/merchant
shipments in the second quarter and 6 percent for the same period a year ago.
Second quarter rebar/merchant average selling prices were $311 per ton,
essentially flat compared with the immediately preceding quarter and up 3
percent compared to the second quarter of fiscal 1996.
Second quarter shipments of the Company's bar, rod & wire products rose 29
percent to 165,000 tons compared with 128,000 tons in the prior year period.
Average bar and rod selling prices for the second quarter were $469 per ton,
compared with $453 per ton in the first quarter and $460 per ton in the prior
year period. The increase in net sales is primarily attributable to increased
bar shipments coupled with an increase in average selling price over the prior
year period.
Cost of Sales
As a percentage of net sales, cost of sales (other than depreciation and
amortization) fell to 85.1% compared with 87.6% in the second quarter last year.
The decline resulted from increased selling prices coupled with lower scrap cost
partially offset by increased billet and conversion costs at the Company's bar
and rod facility.
For the six months ended December 31, 1996, cost of sales as a percentage of net
sales was essentially unchanged at 85.1% compared with 85.4% in the second
quarter last year.
Rebar/merchant conversion costs rose to $125 per ton for the second quarter
compared with record conversion costs of $114 in the first quarter but was
essentially flat compared with $126 per ton in the second quarter of the prior
fiscal year.
Conversion costs at the Company's rod and bar facility increased to $67 per ton
in the second quarter compared with $58 per ton in the prior year period but was
down $10 per ton from the immediately preceding quarter. The improvement in
conversion costs from the first quarter resulted from increased operating
efficiencies of the new bar mill.
The Company's second quarter scrap raw material cost of $132 per ton was down
from $137 per ton in the prior year period. Raw material billet cost at the
Company's rod and bar facility was $362 per ton in the second quarter, up $15
per ton from $347 in the second quarter last year. The Company is currently
constructing a high quality steel melting facility in Memphis, Tennessee to
supply approximately 1 million tons annually of the bar and rod billet
requirements. The facility is scheduled for start-up in the fourth quarter of
fiscal 1997 at an expected capital cost of approximately $200 million.
Depreciation and amortization was $10,872,000 in the second quarter compared
with $8,272,000 in the prior year period. For the six month period, depreciation
and amortization totaled $21,588,000, up from $16,302,000 reported for the same
period last year. The increase is primarily attributable to the recognition of
depreciation expense on assets placed into service during fiscal 1996 and the
first two quarters of fiscal 1997.
Provision for Loss on Mill Modernization Program and Unusual Items
Provision for loss on mill modernization program amounted to $1,112,000 for the
second quarter compared with $3,810,000 in the same period a year ago. The
current quarter charges relate primarily to pre-operating costs at the recently
acquired Cartersville, Georgia facility and the Memphis, Tennessee melt shop
currently under construction. The prior period charges resulted primarily from a
write-off of equipment at the Company's idled Ballard, Washington facility and
charges related to reorganization at both the corporate and plant levels.
For the six months ended December 31, 1996, the provision for loss on mill
modernization program amounted to $2,534,000 compared with $5,116,000 for the
prior year six month period. In addition to the pre-operating charges discussed
above, the current year charges include the start-up expenses incurred at the
new bar mill in Cleveland, Ohio which began operations in July. The prior year
charges are attributable to first quarter start-up expenses related to the
Seattle melt shop and the second quarter charges discussed above.
Selling, General and Administrative Expenses ("SG&A")
SG&A declined 15 percent in the second quarter to $7,912,000 from $9,284,000
reported in the second quarter last year. The favorable decline is primarily
attributable to decreased costs associated with salaries and benefits and costs
savings resulting from the renegotiation of the Company's contract with
Electronic Data Systems (EDS) in the fourth quarter of fiscal 1996. As a
percentage of net sales, second quarter SG&A were 3.8 percent, compared with 4.7
percent last year.
For the six months ended December 31, 1996, SG&A declined 17 percent to
$16,362,000 from $19,666,000 reported in the same period last year due to
decreased costs as discussed above. As a percentage of net sales, year-to-date
SG&A were 3.7 percent, compared with 4.9 percent last year.
Interest Expense
Interest expense increased to $4,645,000 in the second quarter compared with
$3,093,000 reported last year, primarily due the inclusion, in the current year
quarter, of interest on the $150 million private placement, the proceeds of
which were drawn on December 15, 1995. In the second quarter, the Company
capitalized approximately $1,695,000 in interest related to construction
projects, compared with approximately $1,349,000 in the same period last year.
For the six months ended December 31, 1995, interest expense increased to
$8,633,000, compared with $5,364,000 in the prior year essentially due to the
reasons stated above. For the six month period, the Company capitalized
approximately $3,535,000 in interest related to construction projects, compared
with approximately $2,272,000 in the same period last year.
Income Taxes
Effective income tax rates for the six months ended December 31, 1996 and 1995
were 41.0% and 41.5%, respectively.
Liquidity and Capital Resources
Operating Activities:
For the first six months of fiscal 1997, cash provided by operating activities
rose to $14.1 million, compared with $3.7 million reported in the second quarter
of last year. The increase in operating cash flow was essentially due to an
increase in net income and changes in accounts receivable, inventories and
accounts payable.
Investing Activities:
Net cash used in investing activities was $160.5 million, compared with $106.2
million last year. Capital spending increased over the prior year period due
primarily to the construction of the new melt shop in Memphis.
On November 15, 1996, the Company entered into a Contribution Agreement with
Atlantic Steel Industries, Inc. (Atlantic) and IVACO, Inc., the parent of
Atlantic, pursuant to which the Company and Atlantic formed Birmingham
Southeast, LLC (Birmingham Southeast), a limited liability company owned 85
percent by Birmingham East Coast Holdings, a wholly owned subsidiary of the
Company, and 15 percent by a subsidiary of IVACO, Inc. On December 2, 1996,
pursuant to the Contribution Agreement, the Company contributed the assets of
its Jackson, Mississippi facility to Birmingham Southeast and Birmingham
Southeast purchased the assets of Atlantic located in Cartersville, Georgia for
$43.3 million in cash and assumed approximately $40.2 million in liabilities
(See Note 2 to Consolidated Financial Statements).
During the second quarter, the Company made a $7.5 million investment in Pacific
Coast Recycling, LLC (Pacific Coast), a joint venture established to operate in
southern California as a collector, processor and seller of scrap owned 50
percent by the Company and 50 percent by Raw Materials Development Co., Ltd., an
affiliate of Mitsui & Co., Ltd. In January, the Company made an additional $1.8
million investment in Pacific Coast. On December 27, 1996, Pacific Coast
completed the purchase of certain assets from the estate of Hiuka America
Corporation and its affiliates with annual scrap processing capacity of
approximately 1 million tons. Pacific Coast plans to utilize the facility at the
Port of Long Beach to export scrap (See Note 2 to Consolidated Financial
Statements).
On December 20, 1996, Birmingham Recycling Investment Co., a wholly owned
subsidiary of the Company, sold 50 percent of the stock of Richmond Steel
Recycling Limited to SIMSMETAL Canada, Ltd. and recognized a pre-tax gain of
approximately $1.7 million.
Financing Activities:
Net cash provided by financing activities was $142.6 million in the first six
months, compared with $150.8 million last year. During the period the Company
completed a $26 million, 30 year tax-free bond financing at Memphis, the
proceeds of which will be used to finance certain portions of the Memphis melt
shop currently under construction. Net short-term borrowings for the first six
months of fiscal 1997 were $122.0 million compared with net short-term
repayments in the prior year period of $8.0 million. The change in net
short-term borrowings primarily relates to the investing activities
discussed above. During the prior year period, the Company completed a $15
million, 30 year tax-free bond financing at its Cleveland, Ohio facility and
issued $150 million senior debt notes, using a portion of the proceeds to
pay down the short-term lines of credit.
On January 15, 1997, the Company issued 1,000,000 additional shares of common
stock from treasury in a public offering. The proceeds from the offering were
used to offset certain payments made by the Company pursuant to the acquisition
of the assets of Atlantic Steel Industries, Inc. located in Cartersville,
Georgia (See Note 2 to Consolidated Financial Statements).
Working Capital:
Working capital at the end of the second quarter declined to $88.2 million,
compared with $211.6 million at the end of fiscal 1996. The decrease in working
capital was essentially due to increased borrowings on the Company's short-term
lines of credit during the first six months of fiscal 1997.
Other Comments
On January 14, 1997, the Company declared a regular quarterly cash dividend of
$.10 (ten cents) per share which will be paid February 4, 1997 to shareholders
of record on January 24, 1997.
Risk Factors That May Affect Operating Results
The statements contained in this report that are not purely historical or which
might be considered an opinion or projection concerning the Company or its
business, whether express or implied, are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements include statements regarding the Company's expectations, hopes,
anticipations, intentions, plans and strategies regarding the future.
Forward-looking statements include, but are not limited to: expectations about
environmental remediation costs, assessments of expected impact of litigation
and adequacy of insurance coverage for litigation, expectations regarding the
costs of new projects, expectations regarding future earnings, and expectations
regarding the date when facilities under construction will be operational and
the future performance and capabilities of those facilities.
All forward-looking statements included in this document are based upon
information available to the Company on the date hereof, and the Company assumes
no obligation to update any such forward-looking statements. It is important to
note that the Company's actual results could differ materially from those
described or implied in such forward-looking statements. Among the factors
that could cause actual results to differ materially are the factors
detailed below. In addition, you should consider the risk factors described
from time to time in the Company's reports on Forms 10-Q, 8-K, 10-K and Annual
Report to Shareholders.
The Company is in the steel industry. The steel industry tends to be vulnerable
to economic cycles which cannot be predicted. A downturn in the economy or in
the Company's markets could have a negative impact on the Company's performance.
The Company has tried to spread its sales across the reinforcing bar, merchant
product and special bar quality markets to reduce the Company's vulnerability to
an economic downturn in any one product market. The Company's performance,
however, can still be materially affected by changes in demand for any one of
its product lines and by changes in the economic condition of the construction
industry, manufacturing industry or automobile industry.
The cost of scrap is the largest element in the cost of the Company's finished
rebar and merchant products. The Company purchases most of its scrap on a
short-term basis. Changes in the price of scrap, therefore, can significantly
affect the Company's profitability. Changes in other raw material prices can
also influence the Company's profitability.
Energy costs are also a significant cost affecting the Company's results.
Current reforms in the electrical industry at the state and federal level are
expected to lower energy costs in the long run. However, numerous utilities and
political groups are fighting these reforms and states are approaching the
reforms in different fashions. The possibility exists, therefore, that the
Company could be exposed to energy costs which are less favorable than those
available to its competitors. Such a situation could materially affect the
Company's performance.
Until completion of the Memphis Melt Shop, currently under construction, the
Company's Special Bar Quality ("SBQ") division will purchase substantially all
of its steel billets from third parties. The cost of these steel billets is the
largest element in the cost of the SBQ division's finished products. Thus, the
performance of this division, and in turn, the performance of the Company, can
be materially affected by changes in the price of the steel billets it buys from
third parties.
The Company currently is constructing a new Memphis Melt Shop to supply billets
to the Company's SBQ division and is participating in a joint venture to
construct a DRI facility in Louisiana. Delays or cost overruns in either of
these projects could materially affect the Company's future results. While both
projects are currently on schedule, these projects, like other construction
projects, can be affected or delayed by factors such as unusual weather, late
equipment deliveries, unforeseen conditions and untimely performance by
contractors. A late start-up of one or both of these projects could materially
affect the Company's results.
The Company believes its labor relations are generally good. Almost the entire
work force is non-union and the Company has never suffered a strike or other
labor related work stoppage. If this situation changes, however, the Company's
performance could suffer material adverse effects.
The Company operates in an industry subject to numerous environmental
regulations. Changes in environmental regulations or in the interpretation or
manner of enforcement of environmental regulations could materially affect the
Company's performance. Further, the Company is planning and performing certain
environmental remediations. Unforeseen costs or undiscovered conditions
requiring unplanned expenditures in connection with such remediations could
materially affect the Company's results.
The Company's economic performance, like most manufacturing companies, is
vulnerable to a catastrophe that disables one or more of its manufacturing
facilities and to major equipment failure. Depending upon the nature of the
catastrophe or equipment failure, available insurance may or may not cover a
loss resulting from such a catastrophe or equipment failure and the loss
resulting from such a catastrophe or equipment failure could materially affect
the Company's earnings.
The Company anticipates that it will continue to borrow funds in the future.
Major increases in interest rates, depending upon the extent of the increase, or
changes in the Company's ability to borrow funds, could materially affect the
Company's performance.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in litigation relating to claims arising out of its
operations in the normal course of business. Some of these claims against the
Company are covered by insurance, although the insurance policies do include
deductible amounts. It is the opinion of management that any uninsured or
unindemnified liability resulting from existing litigation would not have a
material adverse effect on the Company's business or financial position. There
can be no assurance that insurance, including product liability insurance, will
be available in the future at reasonable rates.
By letter dated October 20, 1992, the Department of Toxic Substances Control of
the Environmental Protection Agency of the State of California ("DTSC")
submitted to Barbary Coast Steel Corporation ("BCSC"), a wholly owned subsidiary
of the Company, for its review and comment a proposed Consent Order relating to
BCSC's closed steel facility at Emeryville, California. BCSC and DTSC executed
the terms of a Consent Order on March 22, 1993. Pursuant to that Consent Order,
BCSC has completed an environmental assessment of the site and, on June 10,
1996, received DTSC approval of its proposal for the remediation of the
property. Remediation of the site in accordance with the approved plan is now
substantially complete. The Company believes that the fair value of the property
is in excess of $13.0 million, based upon offers received by the Company for the
purchase of the property, which is in excess of the Company's carrying cost of
the property plus incurred and anticipated future costs of remediation.
On December 20, 1996, the U. S. District Court for the Northern District of
California approved the terms of the Settlement and Release Agreement (the
"Settlement Agreement") between BCSC and various other parties to the action
styled IMACC Corporation v. Warburton, et al., in which BCSC was both a
defendant and counter-claimant. The claims in this case were brought under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
with respect to property which is adjacent to BCSC's closed steel facility in
Emeryville, California on which an industrial drum and barrel reconditioning
facility operated from the 1940's until 1991. The Settlement Agreement provides,
among other things, that IMACC will pay to BCSC $250,000 in respect of BCSC's
counter-claims and that BCSC will then contribute $380,000 to an escrow account
to be established for the payment and reimbursement of costs incurred to
remediate the contaminated property immediately adjacent to the BCSC property.
As a result, the parties to the Settlement Agreement have dismissed their
respective claims and counter-claims against each other. BCSC has also entered
into a settlement and release agreement involving mutual releases and dismissal
of claims with other parties to the litigation. All other claims and prospective
claims in the litigation against BCSC are barred by the Court's order approving
the settlement with IMACC.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Company was held on October 15, 1996,
at which the following matters were brought before and voted upon by the
shareholders:
1. The election of the following to the Board of Directors, each
to serve until the next Annual Meeting of Stockholders:
Voted Voted
Director For Against
Robert A. Garvey 19,972,577 92,572
E. Mandell de Windt 19,991,260 73,889
C. Stephen Clegg 19,919,826 145,323
George A. Stinson 19,945,386 119,763
E. Bradley Jones 19,991,390 73,759
Harry Holiday, Jr. 19,978,045 87,104
Reginald H. Jones 19,988,340 76,808
William J. Cabaniss, Jr. 19,975,982 89,166
T. Evans Wyckoff 19,978,608 86,541
2. Proposal to approve the 1996 Director Stock Option Plan.
Voted for: 19,024,573
Voted against: 946,883
Abstained: 93,693
3. Proposal to approve the 1997 Chief Executive Officer Incentive
Compensation Plan.
Voted for: 19,225,510
Voted against: 639,980
Abstain: 110,858
4. Proposal to approve and ratify the selection of Ernst & Young LLP as
the independent auditors for the Company and its subsidiaries for the
fiscal year ending June 30, 1997.
Voted for: 19,965,076
Voted against: 64,008
Abstained: 36,063
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are required to be filed with this report:
4.1 Reimbursement Agreement, dated as of October 1, 1996, between
Birmingham Steel Corporation and PNC Bank, Kentucky, Inc.
10.1 Asset Purchase Agreement, dated as of October 31, 1996, among
Mitsui & Co., Ltd., R. Todd Neilson, as Chapter 11 Trustee for
the bankruptcy estate of Hiuka America Corporation, All-Ways
Recycling Company, B&D Auto & Truck Salvage, and Weiner Steel
Corporation.
10.2 Contribution Agreement, dated as of November 15, 1996, among
IVACO Inc., Atlantic Steel Industries, Inc., Birmingham Steel
Corporation and Birmingham Southeast, LLC (incorporated by
reference from Current Report on Form 8-K filed December 12,
1996)
The Company filed a current report on Form 8-K on December 12, 1996 to report
the completion of its acquisition of certain assets of Atlantic Steel
Industries, Inc. An amendment to Form 8-K was filed on January 15, 1997.
<PAGE>
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.
Birmingham Steel Corporation
February 12, 1997 \s\ John M. Casey
-------------------------------------
John M. Casey
Vice President,
Chief Financial Officer
February 12, 1997 \s\ Robert E. Powell
-------------------------------------
Robert E. Powell
Vice President & Controller
<PAGE>
Exhibit 4.1
REIMBURSEMENT AGREEMENT
dated as of October 1, 1996
between
BIRMINGHAM STEEL CORPORATION
and
PNC BANK, KENTUCKY, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 Definitions and Rules of Construction............ 2
SECTION 1.1 Definitions........................................... 2
SECTION 1.2 Rules of Construction................................. 18
ARTICLE 2 Letter of Credit................................. 18
SECTION 2.1 Issuance of Letter of Credit.......................... 18
SECTION 2.2 Reimbursement of Drawings Under Letter
of Credit............................... 19
SECTION 2.3 Letter of Credit Fees................................. 19
SECTION 2.4 Reduction of Letter of Credit......................... 19
SECTION 2.5 Pledge of Tendered Bonds.............................. 20
SECTION 2.6 Extension of the Termination Date..................... 20
SECTION 2.7 Bank's Undertaking in Event of Rating
Downgrade............................... 21
ARTICLE 3 Conditions Precedent............................. 21
SECTION 3.1 The Act............................................... 21
SECTION 3.2 Proceedings and Certifications........................ 21
SECTION 3.3 Certificate........................................... 21
SECTION 3.4 Corporate Documents................................... 22
SECTION 3.5 Opinions of Company Counsel........................... 23
SECTION 3.6 Opinion of Bond Counsel............................... 23
SECTION 3.7 Executed Documents.................................... 23
SECTION 3.8 Related Documents..................................... 23
SECTION 3.9 Bonds................................................. 23
SECTION 3.10 Other Documents, Etc.................................. 23
ARTICLE 4 Representations and Warranties................... 24
SECTION 4.1 Organization; Power; Qualification;
Subsidiaries............................ 24
SECTION 4.2 Authorization......................................... 24
SECTION 4.3 Litigation............................................ 25
SECTION 4.4 No Adverse Change..................................... 25
SECTION 4.5 No Adverse Fact....................................... 25
SECTION 4.6 Taxes................................................. 26
SECTION 4.7 Environmental Matters................................. 26
SECTION 4.8 Investment Company Act................................ 26
SECTION 4.9 Historical Information................................ 27
SECTION 4.10 ERISA................................................. 27
ARTICLE 5 Covenants........................................ 27
A. Affirmative Covenants..................................... 27
SECTION 5.1 Compliance with Applicable Law........................ 27
SECTION 5.2 Preservation of Corporate Existence and
Similar Matters......................... 28
SECTION 5.3 Maintenance of Properties............................. 28
SECTION 5.4 Payment of Taxes and Claims........................... 28
SECTION 5.5 Accounting Methods and Financial Records.............. 28
SECTION 5.6 Insurance............................................. 28
SECTION 5.7 Visits and Inspections................................ 29
SECTION 5.8 Compliance With Environmental Laws.................... 29
SECTION 5.9 Affirmative Covenants and Information to
Be Furnished............................ 30
B. Negative Covenants........................................ 32
SECTION 5.10 Liens................................................ 32
SECTION 5.11 Debt................................................. 33
SECTION 5.12 Loans, Advances, Investments and
Contingent Liabilities.................. 34
SECTION 5.13 Merger and Sale of Assets............................ 35
SECTION 5.14 ERISA................................................ 36
SECTION 5.15 Transactions with Affiliates......................... 36
SECTION 5.16 Amendment of Related Documents....................... 36
SECTION 5.17 Optional Redemption of Bonds......................... 36
ARTICLE 6 Further Assurances............................... 37
SECTION 6.1 Further Assurances..................................... 37
ARTICLE 7 Events of Default................................ 37
SECTION 7.1 Events of Default..................................... 37
SECTION 7.2 Remedies on Default................................... 40
ARTICLE 8 Miscellaneous.................................... 40
SECTION 8.1 Payments to the Bank.................................. 40
SECTION 8.2 Increased Costs....................................... 41
SECTION 8.3 Set-off; Limitation on Set-off........................ 42
SECTION 8.4 Obligations Absolute.................................. 44
SECTION 8.5 Liability of the Bank................................. 45
SECTION 8.6 Costs, Expenses and Stamp Taxes;
Indemnity............................... 46
SECTION 8.7 Participants.......................................... 47
SECTION 8.8 Calculations.......................................... 47
SECTION 8.9 Extension of Maturity................................. 47
SECTION 8.10 Successors and Assigns................................ 48
SECTION 8.11 Modification or Waiver of this Agreement.............. 48
SECTION 8.12 No Waiver of Rights by the Bank;
Cumulative Rights....................... 48
SECTION 8.13 Severability.......................................... 49
SECTION 8.14 Governing Law......................................... 49
SECTION 8.15 Consent to Jurisdiction............................... 49
SECTION 8.16 Notices............................................... 49
SECTION 8.17 Counterparts.......................................... 50
SECTION 8.18 More Restrictive Agreements........................... 50
SECTION 8.19 Waiver of Jury Trial.................................. 51
ANNEXES
I Letter of Credit
II Opinion of Counsel to the Company
<PAGE>
REIMBURSEMENT AGREEMENT
THIS REIMBURSEMENT AGREEMENT, dated as of October 1, 1996, between
BIRMINGHAM STEEL CORPORATION, a Delaware corporation (the "Company") and PNC
BANK, KENTUCKY, INC. (the "Bank").
W I T N E S S E T H:
WHEREAS, The Industrial Development Board of The City of Memphis County
of Shelby, Tennessee (the "Issuer") has caused to be issued and sold, pursuant
to its resolution adopted September 18, 1996 (the "Resolution"), $26,000,000 in
aggregate principal amount of its Pollution Control Revenue Bonds (Birmingham
Steel Corporation Project), Series 1996 (collectively, the "Bonds"), pursuant to
a Trust Indenture, dated as of October 1, 1996 (as amended or supplemented from
time to time, the "Indenture"), between the Issuer and PNC Bank, Kentucky, Inc.
(the "Trustee"), as authorized pursuant to the Act (as hereinafter defined); and
WHEREAS, the Issuer and the Company have entered into a Loan Agreement
(as hereinafter defined) for purposes set forth therein; and
WHEREAS, the Company has requested the Bank to issue its irrevocable
letter of credit, substantially in the form of Annex I hereto (such letter of
credit, as amended from time to time, and any substitute or replacement therefor
issued by the Bank, shall be referred to herein as the "Letter of Credit") in
support of the Company's obligations with respect to the principal of, or the
portion of the Purchase Price (as hereinafter defined) corresponding to
principal of, and interest on, or the portion of the Purchase Price
corresponding to interest on, the Bonds; and
WHEREAS, the Bank is willing to issue the Letter of Credit
on the terms and conditions herein contained;
NOW, THEREFORE, in consideration of the premises herein contained, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
Definitions and Rules of Construction
SECTION 1.1 Definitions. For purposes of this Agreement, the terms set
forth in this Article shall have the following meanings:
"A Drawing" shall mean a drawing under the Letter of Credit resulting
from the presentation of a certificate in the form of Exhibit A to the Letter of
Credit.
"Accumulated Funding Deficiency" shall have the meaning ascribed to
that term in Section 302 of ERISA.
"Act" shall mean Tennessee Code Annotated Section 7-53-101 et seq., as
amended.
"Affiliate" shall mean, with respect to any Person, any other Person
that, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with, such first Person.
"Agreement" shall mean this Reimbursement Agreement.
"Authorized Officer" shall mean (i) with respect to the Company, the
Chairman, any Vice Chairman, the President, any Vice President, or the Treasurer
or any Assistant Treasurer of the Company, or (ii) with respect to the Trustee,
any Vice President, Assistant Vice President, Trust Officer or Assistant Trust
Officer or any equivalent officer.
"Bank" shall have the meaning ascribed to that term in the introductory
paragraph of this Agreement.
"B Drawing" shall mean a drawing under the Letter of Credit resulting
from the presentation of a certificate in the form of Exhibit B to the Letter of
Credit.
"Bonds" shall have the meaning ascribed to that term in the
recitals hereto.
"Business Day" shall mean any day except Saturday, Sunday or any day
which will be, in the Commonwealth of Kentucky or in the jurisdiction in which
the principal corporate trust office of the Trustee is located, a legal holiday
or a day on which banking corporations are authorized or obligated by law or
executive order to close.
2
<PAGE>
"C Drawing" shall mean a drawing under the Letter of Credit resulting
from the presentation of a certificate in the form of Exhibit C to the Letter of
Credit.
"Capitalized Lease Obligations" shall mean all rental obligations that,
under GAAP, are required to be capitalized on the books of the Company or any of
its Subsidiaries.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
corresponding provision of any future laws of the United States of America
relating to federal income taxation, and, except as otherwise provided herein or
required by the context hereby, shall include interpretations thereof contained
or set forth in the applicable regulations of the Department of the Treasury
(including final regulations and temporary regulations), the applicable rulings
of the Internal Revenue Service and applicable court decisions.
"Company Obligations" shall mean all Debt, obligations and liabilities
of the Company to the Bank incurred under or arising out of or in connection
with this Agreement or any of the Related Documents to which the Company is a
party.
"Consolidated Current Debt" shall mean, at any time, all Current Debt
of the Company and the Restricted Subsidiaries outstanding at such time
(determined after elimination of intercompany items among such Persons).
"Consolidated Current Maturities" shall mean, at any time, all Current
Debt of the Company and the Restricted Subsidiaries outstanding at such time
(determined after elimination of intercompany items among such Person), in each
case where such Current Debt constitutes a liability payable within one (1) year
with respect to the principal amount of indebtedness expressed to mature more
than one (1) year from the time such indebtedness shall have been incurred and
which, but for the provisions of the parenthetical phrase in clause (a) of the
definition of Funded Debt, would constitute Funded Debt.
"Consolidated Funded Debt" shall mean, at any time, all Funded Debt of
the Company and the Restricted Subsidiaries outstanding at such time (determined
after elimination of intercompany items among such Persons).
"Consolidated Interest Expense" shall mean, for any period, all
interest charges for such period accrued on or with respect to Consolidated
Funded Debt and Consolidated Current Maturities
3
<PAGE>
(including, without limitation, amortization of debt discount and expense and
imputed interest on Capitalized Lease Obligations).
"Consolidated Net Earnings" shall mean, for any period, net earnings
(or loss) after income taxes of the Company and the Restricted Subsidiaries,
determined on a consolidated basis for such Persons, but excluding:
(a) any gain or loss (net of tax effects applicable thereto)
resulting from the sale, conversion, write-down or other disposition of
capital assets other than in the ordinary course of business;
(b) any extraordinary, unusual or nonrecurring gains
or losses;
(c) any gains resulting from any write-up of assets;
(d) any portion of the earnings of the Company or any
Restricted Subsidiary attributable to the unremitted
earnings of any Person that is not a Restricted Subsidiary;
(e) any earnings of any Person acquired by the Company
or any Restricted Subsidiary through purchase, merger or
consolidation or otherwise for any year prior to the year of
acquisition;
(f) any earnings attributable to the amortization of
negative goodwill; and
(g) that portion of net earnings of any Restricted Subsidiary
that is unavailable for payment as dividends to the Company or another
Restricted Subsidiary as a result of a legal or contractual
prohibition, unless such portion of such net earnings is legally
available for either:
(i) reimbursement to the Company or another
Restricted Subsidiary for advances, loans or allocated
expenses, or
(ii) advances or loans to the Company or another
Restricted Subsidiary.
"Consolidated Net Earnings Before Interest and Taxes" shall
mean, for any period, the sum of:
(a) Consolidated Net Earnings for such period, plus
4
<PAGE>
(b) the aggregate amount of
(i) taxes imposed on, or measured by, income or
excess profits, and
(ii) Consolidated Interest Expense
(to the extent, and only to the extent, that any such amount
was deducted in the computation of Consolidated Net Earnings
for such period),
in each case accrued for such period by the Company and the Restricted
Subsidiaries, determined on the consolidated basis for such Persons.
"Consolidated Net Tangible Assets" shall mean, at any time,
the result of
(a) the gross book value of the assets of the Company and the
Restricted Subsidiaries (exclusive of goodwill, patents, trademarks,
trade names, organization expense, treasury stock [to the extent
reflected in said gross book value], unamortized debt discount and
expense and other like tangibles and investments in and loans to
Unrestricted Subsidiaries), minus
(b) all reserves (including, without limitation, accumulated
depreciation) applicable to such assets and all liabilities (including
deferred income taxes) other than Funded Debt, capital stock and
surplus,
all as would be shown on a consolidated balance sheet of such
Persons at such time.
"Consolidated Senior Funded Debt" shall mean, at any time, all Senior
Funded Debt of the Company and the Restricted Subsidiaries outstanding at such
time (determined after elimination of intercompany items among such Persons).
"Consolidated Subsidiary" means at any time, with respect to any
Person, any Subsidiary or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements
as of such time.
"Consolidated Tangible Net Worth" shall mean, at any time, Consolidated
Net Tangible Assets at such time minus Consolidated Funded Debt at such time.
5
<PAGE>
"Contaminant" shall mean any waste, pollutant, hazardous substance,
toxic substance, hazardous waste, special waste, industrial substance or waste,
petroleum or petroleum-derived substance or waste, or any constituent of any
such substance or waste, including any such substance regulated under any
Environmental Law.
"Contract" shall mean any contract, indenture, agreement,
lease or debt instrument.
"Current Assets" shall mean, as at any date of determination, the
consolidated current assets of the Company and its Subsidiaries as determined in
accordance with GAAP consistently applied.
"Current Debt" shall mean, at any time, with respect to any
Person:
(a) all liabilities for borrowed money and all liabilities
secured by any Lien existing on Property owned by such Person whether
or not such liabilities have been assumed, that, in either case are
payable on demand or within one (1) year from such time, except any
such liabilities that are renewable or extendible at the option of such
Person to a date more than one (1) year from such time, and
(b) its liabilities under Guarantees of obligations
described in clause (a) above;
provided that any such liability shall be treated as Funded Debt of such Person,
regardless of its terms, if such liability is renewable by such Person pursuant
to the terms of a revolving credit or similar agreement effective for more than
one year after the date of the creation of such liability, or may be payable out
of the proceeds of a similar liability pursuant to the terms of such liability
or of any such agreement.
"Current Liabilities" shall mean, as at any date of determination, the
total liabilities of the Company and its Subsidiaries which may properly be
classified as current liabilities in accordance with GAAP consistently applied
on a consolidated basis, after eliminating all intercompany transactions, but in
any event including as current liabilities, without limitation, any portion of
Funded Debt outstanding on such date of determination which by its terms or the
terms of any instrument or agreement relating thereto matures on demand or
within one year from such date (whether by way of any sinking
6
<PAGE>
fund, other required prepayment or final payment at maturity) and is not
directly or indirectly renewable, extendible or refundable, at the option of the
debtor or obligor under an agreement or firm commitment in effect on such date,
to a date more than one year from such date.
"D Drawing" shall mean a drawing under the Letter of Credit resulting
from the presentation of a certificate in the form of Exhibit D to the Letter of
Credit.
"Date of Issuance" shall mean the date of issuance and
delivery of the Letter of Credit.
"Drawing" shall mean any A Drawing, B Drawing, C Drawing or D Drawing.
"Debt" shall mean, with respect to any Person, at any time, without
duplication, all Funded Debt and Current Debt of such Person at such time.
"Default" shall mean an Event of Default or an event which, with notice
or lapse of time or both, would become an Event of Default.
"Default Rate" shall mean a fluctuating interest rate equal to 2% per
annum above the Prime Rate in effect from time to time.
"Effective Date" shall mean October 8, 1996.
"Environmental Laws" shall mean any and all Federal,
national, state, provincial, local or municipal laws, rules,
orders, regulations, statutes, ordinances, codes, decrees or
requirements of any Governmental Authority relating to pollution
or protection of the environment, including without limitation,
laws relating to the Release or threatened Release of
Contaminants, into the environment (including, without limita-
tion, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the presence,
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Contaminants, which such laws
include, without limitation, the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C.
ss. 9601 et seq. ("CERCLA"); the Superfund Amendment and
Reauthorization Act of 1986, as amended, Public Law 99-499, 100
Stat. 1613 ("SARA"); the Emergency Planning and Community Right
to Know Act, as amended, 42 U.S.C. ss. 1101 et seq. ("EPCRKA"); the
Resource Conservation and Recovery Act, as amended, 42 U.S.C.
ss. 6901 et seq. ("RCRA"); the Toxic Substances Control Act, as
7
<PAGE>
amended, 15 U.S.C. ss. 2601 et seq. ("TSCA"); the Surface Mining
Control and Reclamation Act, as amended, 30 U.S.C. ss. 1201 et seq.
("SMCRA"); the Clean Water Act, as amended, (including the
Federal Water Pollution Control Act, as amended), 33 U.S.C.
ss. 1251 et seq. ("CWA"); the Clean Air Act, as amended, 42, U.S.C.
ss. 7401 et seq. ("CAA"); the Safe Drinking Water Act, as amended,
42 U.S.C. ss. 300 et seq. ("SDWA"); the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. ss. 1802 et seq.
("HMTA"); the Federal Insecticide, Fungicide and Rodenticide Act,
as amended, 7 U.S.C. ss. 136 et seq. ("FIFRA"); any regulation
promulgated under the foregoing; and any similar state or local
statute, regulation or ordinance; and all substitutions therefor.
"Environmental Liabilities and Costs" shall mean all liabilities,
obligations, responsibilities, obligations to conduct Remedial Actions, losses,
damages, punitive damages, consequential damages, treble damages, costs and
expenses (including, without limitation, all reasonable fees, disbursements and
expenses of counsel, expert and consulting fees and costs of investigations and
feasibility studies), fines, penalties, and monetary sanctions, interest, direct
or indirect, known or unknown, absolute or contingent, past, present or future,
resulting from any claim or demand, by any Person, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute,
including any Environmental Law, arising from on-site environmental, health or
safety conditions, or the Release or threatened Release of a Contaminant into
the environment, as a result of past, present or future operations of the
Company or its Subsidiaries or any previous owners or lessees of any properties.
"Environmental Lien" shall mean any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" shall mean a Person that is under common control with
another Person within the meaning of Section 414(b) or (c) of the Code,
including but not limited to a Person who is an Affiliate or a Subsidiary of
such other Person.
"Event of Default" shall have the meaning ascribed to that term in
Section 7.1.
"Existing Debt" shall mean Debt issued and outstanding (or committed to
be issued and outstanding) on the date of this Agreement to the extent referred
to on Schedule 1.1 hereto and,
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if but only if, immediately after giving effect thereto no Default would exist,
any renewals, extensions or refundings thereof, but not any increases in
principal amounts thereof or interest rates thereon, except for increases in
interest rates upon the occasion of any such renewal, extension or refunding
that are commercially reasonable at such time.
"Fair Market Value" shall mean, at any time, with respect to any
Property, the sale value of such Property that would be realized in an
arm's-length sale at such time between an informed and willing buyer, and an
informed and willing seller, under no compulsion to buy or sell, respectively.
"Fund" shall mean any of the funds created under and
pursuant to the Indenture.
"Funded Debt" shall mean, at any time, with respect to any Person,
without duplication:
(a) any obligation, payable more than one year from the date
of creation thereof, that is shown on the balance sheet of such Person
as a liability (including Capitalized Lease Obligations but excluding
current maturities of such obligations, reserves for deferred income
taxes and other reserves to the extent that such reserves do not
constitute an obligation);
(b) indebtedness payable more than one year from the date of
creation thereof that is secured by any Lien on Property owned by such
Person, whether or not the indebtedness secured thereby shall have been
assumed by such Person;
(c) guarantees, endorsements (other than endorsements of
negotiable instruments for collection in the ordinary course of
business) and other contingent liabilities (whether direct or indirect)
in connection with the obligations, stock or dividends of another
Person;
(d) the obligations of such Person under any executory
contract providing for the making of loans, advances or capital
contributions to any Person other than a Restricted Subsidiary or for
the purchase of any Property from any Person, in each case in order to
enable such Person to maintain working capital, net worth or any other
balance sheet condition or to pay debts, dividends or expenses;
provided that upon the making of such loan, advance or
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capital contribution pursuant to any such obligation, such
obligation shall no longer constitute part of Funded Debt;
(e) obligations of such Person under any contract for the
purchase of materials, supplies or other Property or services if such
contract (or any related document) requires that payment for such
materials, supplies or other Property or services shall be made
regardless of whether or not delivery of such materials, supplies or
other Property or services is ever made or tendered;
(f) obligations of such Person under any contract to rent or
lease (as lessee) any real or personal Property if such contract (or
any related document) provides that the obligation to make payments
thereunder is absolute and unconditional under conditions not
customarily found in commercial leases then in general use or requires
that the lessee purchase or otherwise acquire securities or obligations
of the lessor;
(g) obligations of such Person under any contract for the sale
or use of materials, supplies or other Property, or the rendering of
services, if such contract (or any related document) requires that
payment for such materials, supplies, Property or services, shall be
subordinated to any indebtedness of such Person;
(h) the obligations of such Person under any other
contract that, in economic effect, is substantially
equivalent to a Guarantee; and
(i) obligations treated as Funded Debt pursuant to the
proviso of the definition of the term "Current Debt" herein.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time.
"Governmental Approval" shall mean an authorization, consent, approval,
license or exemption of, registration or filing with, or report or notice to,
any Governmental Authority.
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
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"Hazardous Substance" shall mean any toxic, caustic or otherwise
hazardous substance, including, without limitation, petroleum, its derivatives,
by-products and other hydrocarbons, whether or not regulated under Federal,
State or local environmental statutes, ordinances, rules, regulations, or
orders.
"Indenture" shall have the meaning ascribed to that term in
the recitals hereto.
"Interest Charge Coverage" shall mean, at any time, the ratio of
Consolidated Net Earnings Before Interest and Taxes of the Company and its
Subsidiaries for the most recently completed four fiscal quarters of the Company
to Interest Expense for such period.
"Interest Component" shall mean that portion of the Stated Amount of
the Letter of Credit to be used to pay accrued interest on the Bonds.
"Interest Expense" for any period shall mean all interest charges
(including all imputed and capitalized interest) on all Debt, including
amortization of debt discount and expense and imputed interest on Capitalized
Lease Obligations.
"Interest Payment Date" shall have the meaning ascribed to that term in
the Indenture.
"Investments", as applied to any Person, shall mean any direct or
indirect purchase or other acquisition by such Person of stock or other
securities of any other Person, or any guarantee, endorsement (other than
endorsements of negotiable instruments for collection in the ordinary course)
and other contingent liabilities (whether direct or indirect) in connection with
the stock, dividends or obligations of any Person or any direct or indirect
loan, advance (other than advances to employees for moving and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business) or
capital contribution by such Person to any other Person, including all Debt and
accounts receivable from such other Person which are not current assets or did
not arise from sales to such other Person in the ordinary course of business,
and any direct or indirect purchase or other acquisition by such Person of any
assets other than assets used in the ordinary course of business, all as
determined in accordance with generally accepted accounting principles.
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"Issuer" shall have the meaning ascribed to that term in the
recitals hereto.
"Lien" shall mean any mortgage, pledge, priority, security interest,
encumbrance, deposit arrangement, lien (statutory or otherwise) or charge of any
kind (including any agreement to give any of the foregoing, any conditional sale
or other title retention agreement, any lease in the nature thereof, and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction or any other type of preferential
arrangement for the purpose of, or having the effect of, protecting a creditor
against loss or securing the payment or preference of any obligation.
"Loan Agreement" shall mean that certain Loan Agreement, dated as of
October 1, 1996, as amended or supplemented from time to time, between the
Company and the Issuer.
"Materially Adverse Effect" means, (a) with respect to any Person, a
materially adverse effect upon such Person's business, assets, liabilities,
financial condition, results of operations or business prospects, (b) with
respect to a group of Persons "taken as a whole" on, where appropriate, a
consolidated basis in accordance with GAAP and (c) with respect to any Contract
or any other obligation, a materially adverse effect, as to any party thereto,
upon the binding nature, validity or enforceability thereof.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Notice of Extension" shall have the meaning ascribed to that term in
Section 2.6.
"Outstanding" shall have the meaning ascribed to that term
in the Indenture.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Investments"shall mean the following investments:
(a) direct obligation of the United States of America or
obligations guaranteed by the United States of America maturing no
later than 365 days from the date of acquisition;
(b) repurchase agreements or eurodollar deposits with
or certificates of deposit maturing no later than 365 days
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from the date of acquisition and issued by banks having a combined
capital and surplus of over $250,000,000 and rated at least A- by S&P
and at least A3 by Moody's Investor Service, Inc.;
(c) Investments in Restricted Subsidiaries or Persons
that contemporaneously with such Investment become
Restricted Subsidiaries;
(d) Investments in commercial paper issued by corporations
incorporated in the United States of America or any state thereof and
maturing in 270 days or less and rated at least A-1 by S&P or P-1 by
Moody's Investor Service, Inc.;
(e) Investments in Property used in the ordinary
course of business of the Company and the Restricted
Subsidiaries; and
(f) other Investments so long as after giving effect to such
other Investments the aggregate book value of all such other
Investments of the Company and the Restricted Subsidiaries at such time
does not exceed 30% of Consolidated Net Tangible Assets at such time.
"Person" shall mean any natural person, corporation, firm, association,
government, governmental agency or other entity, whether acting in an individual
or fiduciary capacity.
"Plan" shall mean any pension plan that is covered by Title IV of ERISA
and in respect of which a Person or an ERISA Affiliate of such Person is an
"employer" as defined in Section 3(5) of ERISA.
"Preferred Stock" shall mean any class of capital stock of a
corporation that is preferred over any other class of capital of such
corporation as to the payment of dividends or the payment of any amount upon
liquidation or dissolution of such corporation.
"Prime Rate" the rate publicly announced by the Bank from time to time
as its prime rate. The Prime Rate is not tied to any external rate or index and
does not necessarily reflect the lowest rate of interest actually charged by the
Bank to any particular class or category of customers. If and when the Prime
Rate changes, the rate of interest on this Agreement will change automatically
without notice to the Company, effective on the date of any such change.
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"Principal Component" shall mean that portion of the Stated Amount of
the Letter of Credit to be used to pay the principal amount of the Bonds.
"Prohibited Transaction" shall mean a transaction which is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not exempt under
Section 4975 of the Code or Section 408 of ERISA.
"Project" shall have the meaning ascribed to that term in
the Indenture.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
"Purchase Money Debt" shall mean Debt representing all or any part of
(but not more than) the purchase price of any property, and any Debt incurred at
the time of or within 30 days prior to or after the acquisition of any property
for the purpose of financing all or any part of the purchase price thereof, and,
but only if, immediately after giving effect thereto, no Default would exist,
any renewals, extensions or refundings thereof, but not any increases in the
principal amounts thereof or interest rates thereon, except for increases in
interest rates upon the occasion of any such renewal, extension or refunding
that are commercially reasonable at such time.
"Purchase Price" shall have the meaning ascribed to that
term in the Indenture.
"Related Documents" shall mean the Indenture, the Loan Agreement, the
Remarketing Agreement, the Placement Agreement dated as of October 1, 1996 by
and among the Company, the Issuer and NationsBank, N.A., as placement agent, the
Resolution and any other agreement or instrument relating thereto and to the
transactions contemplated thereby.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, disbursal, leeching or migration into
the indoor or outdoor environment or into or out of any property owned by the
Company or any of its Subsidiaries including the movement of Contaminants
through or in the air, soil, surface water, ground water or property.
"Remaining Years" shall mean, at any time with respect to any
Indebtedness, the result obtained by:
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(a) multiplying the amount of each required payment of
principal (including payment at maturity) of such Indebtedness payable
after such time by the number of years (calculated to the nearest 1/12)
that will elapse between such time and the date such required principal
payment is due and
(b) calculating the sum with respect to each of such
required payments of principal of each of the products
obtained in the preceding subsection (a).
"Remarketing Agent" shall have the meaning ascribed to that
term in the Indenture.
"Remarketing Agreement" shall mean, at any time, the agreement between
the Company and the Remarketing Agent with respect to the Bonds, as in effect at
such time.
"Remedial Action" shall mean all actions required to (1) clean up,
remove, treat or in any other way adjust Contaminants in the indoor or outdoor
environment; (2) prevent the Release or threat of Release or minimize the
further Release of Contaminants so that they do not migrate or endanger or
threaten to endanger public health or welfare or the indoor or outdoor
environment; or (3) perform pre-remedial studies and investigations or
post-remedial monitoring and care.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, except any such event as to
which the provision for 30 days' notice to the PBGC is waived under applicable
regulations.
"Resolution" shall have the meaning ascribed to that term in
the recitals hereof.
"Restricted Payment" by any Person shall mean (a) any dividend or other
distribution on any shares of such Person's capital stock (other than dividends
payable solely in shares of its capital stock), (b) any acquisition of (i) any
shares of such Person's capital stock (except shares acquired solely upon the
conversion thereof into, other shares of its capital stock), (ii) any security
convertible into, or any option, warrant or other right to acquire, shares of
such Person's capital stock or (iii) any subordinated Debt of the Company and
(c) any payment on account of the principal of, or interest or premium, if any,
on, or any fee or other amount payable with respect to, any subordinated Debt of
the Company.
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"Restricted Subsidiary" shall mean, at any time, a
corporation,
(a) organized under the laws of the United States,
Puerto Rico or Canada or a jurisdiction thereof at such
time,
(b) that conducts substantially all of its business
and has substantially all of its Property within the United
States, Puerto Rico and Canada at such time and
(c) at least 80% (by number of votes) of each class of Voting
Stock and of which 100% of all Preferred Stock and other equity
Securities of which are legally and beneficially owned by the Company
and its Wholly-Owned Restricted Subsidiaries at such time.
"S&P" shall mean Standard & Poor's Corporation, a corporation organized
and existing under the laws of the State of New York, and its successors and
assigns.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Security" shall mean "security" as defined by section 2(1)
of the Securities Act.
"Single Employer Plan" shall mean any Plan which is not a
Multiemployer Plan.
"Stated Amount" shall have the meaning ascribed to that term in the
Letter of Credit.
"Stated Expiration Date" shall have the meaning ascribed to that term
in Section 2.6.
"Subsidiary" when used to determine the relationship of a Person to
another Person, shall mean at any time, a corporation of which the Company owns
directly or indirectly, more than fifty percent (50%) (by number of votes) of
each class of Voting Stock at such time.
"Taxes" shall have the meaning ascribed to that term in
Section 8.1.
"Termination Date" shall mean the earlier to occur of (i) October 15,
2000, or (ii) the actual date on which the Letter of Credit is terminated,
unless extended pursuant to Section 2.6
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hereof; provided, however, if such Termination Date is not a Business Day, the
Termination Date shall be the next succeeding Business Day.
"Termination Event" shall mean (i) a Reportable Event, (ii) the
termination of a Single Employer Plan, or the treatment of a Single Employer
Plan amendment as a termination of such Plan under Section 4041 of ERISA, or the
filing of a notice of intent to terminate a Single Employer Plan, (iii) the
institution of proceedings to terminate a Single Employer Plan by the PBGC under
Section 4042 of ERISA, or (iv) the appointment of a trustee to administer any
Single Employer Plan.
"Trustee" shall mean PNC Bank, Kentucky, Inc., as trustee under the
Indenture, or any successor trustee appointed pursuant to the Indenture.
"Unrestricted Subsidiaries" shall mean, at any time, any Subsidiary
that has been designated by the Company's Board of Directors as an Unrestricted
Subsidiary; provided that at the time of such designation:
(a) the Subsidiary so designated neither owns,
directly or indirectly, any Funded Debt of the Company or
any Restricted Subsidiary or any capital Stock of any
Restricted Subsidiary,
(b) no Indebtedness of such Subsidiary is guaranteed
by the Company or a Restricted Subsidiary,
(c) no Default or Event of Default would occur as a
result of such designation.
"Voting Stock" shall mean capital stock of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect corporate directors (or Persons performing
similar functions).
"Weighted Life to Maturity" shall mean, at any time with respect to any
Indebtedness, the number of years obtained by dividing the Remaining Years at
such time of such Indebtedness by the principal amount of such Indebtedness.
"Wholly-Owned Restricted Subsidiary" shall mean, at any time, any
Restricted Subsidiary 100% of all of the Indebtedness and equity Securities
(except directors' qualifying shares), which are owned by the Company or one of
its Wholly-Owned Restricted Subsidiaries.
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SECTION 1.2 Rules of Construction. In this Agreement, the following
rules of construction and interpretation shall apply:
(a) The terms "herein", "hereof", "hereto", "here-inabove",
"hereinbelow", "hereunder", and words of similar import, refer to this
Agreement as a whole and not to any particular section, subsection,
paragraph, clause or other subdivision hereof, unless otherwise
specifically stated.
(b) Any headings preceding the text of any article or section
of this Agreement, and any table of contents and marginal notes
appended hereto, shall be solely for convenience of reference and shall
neither constitute a part of this Agreement nor affect its meaning,
construction or effect.
(c) All accounting terms not specifically defined herein shall
be construed in accordance with GAAP, consistently applied, except as
otherwise stated herein.
(d) In this Agreement, in the computation of a period of time
from a specified date to a later specified date, the word "from" shall
mean "from and including" and the words "to" and "until" each shall
mean "to but excluding".
(e) Unless otherwise indicated, all references herein
to particular articles or sections are references to
articles or sections of this Agreement.
(f) All capitalized terms used herein and not otherwise
defined shall have the meanings ascribed thereto in the Indenture.
ARTICLE 2
Letter of Credit
SECTION 2.1 Issuance of Letter of Credit. Upon the terms and subject to
the conditions herein set forth, the Bank agrees to issue and deliver the Letter
of Credit to the Trustee. The Letter of Credit shall expire on or before the
Termination Date and shall be in the initial Stated Amount of $26,299,179, of
which $26,000,000, the amount specified as the Principal Component, may be drawn
thereunder with respect to payment of the unpaid principal amount of the Bonds
or the portion of the Purchase Price corresponding to principal thereof, and
$299,179, the amount specified as the Interest Component, representing 35 days'
interest on the Bonds at the rate of twelve percent (12%)
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per annum, calculated on the basis of a year of 365 days, may be drawn
thereunder with respect to interest accrued on the Bonds or the portion of the
Purchase Price corresponding to interest.
SECTION 2.2 Reimbursement of Drawings Under Letter of Credit. The
Company will pay or cause to be paid to the Bank by 3:00 p.m. (Louisville,
Kentucky time) on the date of each Drawing a sum equal to the amount of such
Drawing. Any such sum not so paid shall bear interest, payable on demand, at a
rate per annum equal at all times to the Default Rate.
SECTION 2.3 Letter of Credit Fees.
(a) The Company shall pay to the Bank a fee with respect to
the Letter of Credit at a rate equal at all times to .45% per annum of the
Stated Amount thereof, based on a 365-day year and the actual number of days
elapsed, payable quarterly in advance, on January 1, April 1, July 1, and
October 1 of each year, commencing with the first such date to occur after the
Date of Issuance (with the first such payment pro rated to the Date of
Issuance), and on the Termination Date.
(b) The Company will pay to the Bank (i) One Hundred
Twenty-Five Dollars ($125) for each Drawing (or such other amount as shall at
the time of such Drawing be the charge which the Bank is making for drawings on
similar letters of credit), on the date of such Drawing, (ii) Two Hundred
Dollars ($200) for each amendment to the Letter of Credit other than extensions
of the expiration date or changes requested by the Bank (or such other amount as
shall at the time of such amendment be the charge which the Bank is making for
amendments to similar letters of credit), on the date of such amendment, and
(iii) Five Hundred Dollars ($500) for every transfer of the Letter of Credit
whereby the Letter of Credit is transferred to a successor trustee under the
Indenture (or, upon delivery of notice to the Company, such other amount as
shall at the time of such transfer be the charge which the Bank is making for
transfers of similar letters of credit), on the date of such transfer. For
purposes of this paragraph (b) all Drawings, amendments to or transfers of the
Letter of Credit occurring on the same day shall be considered as one Drawing,
amendment or transfer, as the case may be.
SECTION 2.4 Reduction of Letter of Credit. The Company shall have the
right, at any time, to direct the Trustee to reduce permanently, without premium
or penalty, the amount available to be drawn under the Letter of Credit by the
amount by which the Stated Amount thereof exceeds the sum of the principal
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amount of the Bonds Outstanding and interest coverage required by the
Remarketing Agreement with the Remarketing Agent.
SECTION 2.5 Pledge of Tendered Bonds. The Company hereby pledges,
assigns, hypothecates and transfers to the Bank all of the Company's right,
title and interest in and to all Bonds as delivered from time to time to the
Remarketing Agent by the holders thereof with respect to which a B Drawing
occurs under the Letter of Credit; and the Company hereby grants to the Bank a
first lien on, and security interest in its right, title and interest in and to
such Bonds, the interest thereon and all proceeds thereof, as collateral
security for the prompt and complete payment when payable from time to time by
the Company (by acceleration, at stated maturity or otherwise) of all Company
Obligations. The Company has authorized the Remarketing Agent to deliver or
cause to be delivered to the Bank or its designated agent, and registered in the
name of the Bank, as pledgee, all Bonds with respect to which any B Drawing
occurs under the Letter of Credit. Upon the reimbursement of the Bank for the
amount of such B Drawing, the Bank shall, or shall cause its agent to release
from the pledge and security interest pledged Bonds having an aggregate
principal amount equal to the principal portion of such payment and shall
promptly deliver such Bonds to the Remarketing Agent if the Bank is reimbursed
out of remarketing proceeds or to the Company, or as the Company shall otherwise
direct, if the Bank is reimbursed by payment from the Company.
SECTION 2.6 Extension of the Termination Date. The initial term of the
Letter of Credit is stated to expire, subject to earlier termination, on October
15, 2000 (the "Stated Expiration Date"). At any time prior to five (5) months
before the Stated Expiration Date, the Company may request the Bank in writing
to extend the Stated Expiration Date for a period of time to be negotiated at
the time of extension. If the Bank, in its sole discretion, elects to extend the
Stated Expiration Date then in effect, it shall deliver to the Trustee not later
than 60 days prior to the Stated Expiration Date a Notice of Extension in the
form of Exhibit G to the Letter of Credit (herein referred to as a "Notice of
Extension") designating the date to which the Stated Expiration Date is being
extended. Such extension of the Stated Expiration Date shall be effective on the
Business Day following delivery of the Notice of Extension to the Trustee, and
thereafter all references in this Agreement to the Stated Expiration Date shall
be deemed to be references to the date designated as such in the most recent
Notice of Extension delivered to the Trustee. Any date to which the Stated
Expiration Date has been extended in accordance with this Section
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2.6 may be extended in like manner. Failure of the Bank to deliver a Notice of
Extension as herein provided within 60 days after receipt of the Company's
request shall constitute an election by the Bank not to extend the Stated
Expiration Date. The Bank may determine to extend the Stated Expiration Date of
the Letter of Credit in its sole discretion and no course of dealing or other
circumstances shall require the Bank to extend the Stated Expiration Date of the
Letter of Credit.
SECTION 2.7 Bank's Undertaking in Event of Rating Downgrade. In the
event that, subsequent to the Effective Date, the Bank's credit rating is
downgraded by S&P, which results in an increase in the interest rate borne by
the Bonds, the Bank shall negotiate in good faith with the Company in an attempt
to arrive at a mutually agreeable adjustment in the amount of the fees charged
by the Bank pursuant to Section 2.3(a) hereof. In the event the Bank's credit
rating from S&P falls to or below BBB+/A-2, the Bank shall cooperate with the
Company to facilitate the assignment of the Bank's obligations on the letter of
Credit and the assumption thereof by a higher rated bank. Such cooperation shall
include the Bank's review of the assignment and assumption document(s) at no
charge to the Company by the Bank.
ARTICLE 3
Conditions Precedent
The Bank's obligation hereunder to issue the Letter of Credit is
subject to the fulfillment, to the satisfaction of the Bank and its counsel, of
each of the following conditions:
SECTION 3.1 The Act. The Act shall not have been revoked, rescinded, or
modified or amended in any material respect adverse to the interests of the Bank
or the holders of the Bonds.
SECTION 3.2 Proceedings and Certifications. The Bank shall have
received a copy, certified by an Authorized Officer, of all proceedings taken by
the Company authorizing the transactions hereunder and contemplated hereby,
including, without limitation, the execution and delivery of this Agreement and
all other documents and agreements contemplated hereby, together with such other
certifications as to matters of fact as shall reasonably be requested by the
Bank or its counsel.
SECTION 3.3 Certificate. The Bank shall have received a certificate
from the Company, dated the Date of Issuance and duly executed by an Authorized
Officer, stating that on and as of the
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date thereof, except as otherwise disclosed to the Bank as of the
Date of Issuance:
(a) the Company has obtained all Governmental Approvals
required under law to authorize the issuance and sale of the Bonds, and
the execution, delivery and performance of this Agreement and the
Related Documents to which the Company is a party and the consummation
of the transactions contemplated thereby, and all of the foregoing
remain in full force and effect, and attaching true and correct copies
of all such Governmental Approvals;
(b) to the best knowledge of the Authorized Officer
executing the certificate, no Default, has occurred or would
occur after giving effect to the issuance of the Letter of
Credit;
(c) all representations and warranties of the Company
set forth in this Agreement and the Related Documents to
which the Company is a party are true and correct;
(d) the Company is not in default of its obligations
under any of the Related Documents; and
(e) except as disclosed to the Bank in writing prior to the
date hereof, there is no action, suit, investigation or proceeding
pending or, to the best knowledge of the Authorized Officer executing
the certificate, threatened (i) in connection with the Bonds or the
issuance of the Letter of Credit or any of the other transactions
contemplated by this Agreement or the Related Documents, or (ii)
against or affecting the Company, the result of which could have a
Materially Adverse Effect on the business, financial condition or
operations of the Company or the ability of the Company to perform or
observe any of its duties, liabilities or obligations hereunder or
under any of the Related Documents.
SECTION 3.4 Corporate Documents. The Bank shall have received the
following documents, each dated the Date of Issuance:
(a) the Certificate of Incorporation of the Company,
as amended and the By-laws of the Company, certified by the
Secretary or Assistant Secretary of the Company;
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(b) a Certificate of the Secretary of State of the
jurisdiction of incorporation of the Company as to the good
standing of the Company in such jurisdiction;
(c) a certificate of the Secretary or Assistant Secretary of
the Company certifying the names and true signatures of the officers of
the Company authorized to sign this Agreement and the other documents
to be delivered by the Company hereunder;
SECTION 3.5 Opinions of Company Counsel. The Bank shall have received
an opinion addressed to it of Smith Gambrell & Russell, counsel to the Company,
dated the Date of Issuance, in substantially the form of Annex II hereto.
SECTION 3.6 Opinion of Bond Counsel. The Bank and Trustee shall have
received an opinion of King & Spalding, as Bond Counsel in form and substance
satisfactory to the Bank.
SECTION 3.7 Executed Documents. The Bank shall have received executed
copies of each of the following documents:
(a) this Agreement;
(b) a certificate of an Authorized Officer of the
Company designating the Authorized Company Representatives;
(c) such other documents, instruments and certificates
as the Bank shall reasonably request.
SECTION 3.8 Related Documents. The Bank shall have received a
certificate of an Authorized Officer of the Company stating that no Related
Document: (i) has been, and is proposed to be, modified, amended, supplemented,
waived or rescinded, except as otherwise disclosed to the Bank; (ii) is not in
full force and effect on and as of the date hereof; and (iii) is in default nor
has such default occurred.
SECTION 3.9 Bonds. The Bank shall have received satisfactory evidence
that the Bonds have been duly and validly executed, issued and delivered in
accordance with the Indenture, and continue to be validly outstanding tax-exempt
obligations of the Company, which evidence may be in the form of written
certification by an Authorized Officer.
SECTION 3.10 Other Documents, Etc. The Bank shall have
received such other documents, certificates and opinions as the
Bank or its counsel may reasonably request and all matters
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relating to this Agreement and the Bonds shall be satisfactory to
the Bank.
ARTICLE 4
Representations and Warranties
In order to induce the Bank to enter into and perform this Agreement,
including, without limitation, to issue the Letter of Credit, the Company hereby
represents and warrants to the Bank, which representations and warranties shall
be deemed to be repeated on and as of the date of each Drawing (except that the
representations and warranties set forth in (i) Section 4.4 shall be deemed to
refer to the date of the then most recent audited financial statements of the
Company delivered to the Bank and (ii) Section 4.3 shall be deemed to include an
exception for any litigation described in written disclosure by the Company to
the Bank) as follows:
SECTION 4.1 Organization; Power; Qualification; Subsidiaries. The
Company and each of its Subsidiaries are corporations duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of incorporation, have the corporate power and authority to own their respective
properties and to carry on their respective businesses as now being and
hereafter proposed to be conducted and are duly qualified and are in good
standing as foreign corporations, and authorized to do business, in each
jurisdiction in which the character of their respective properties or the nature
of their respective businesses requires such qualification or authorization,
except for qualifications and authorizations the lack of which, singly or in the
aggregate, has not had and will not, have a Materially Adverse Effect upon the
Company and its Subsidiaries taken as a whole.
SECTION 4.2 Authorization. The Company has the corporate power, and has
taken all necessary corporate (including stockholder, if necessary) action to
authorize it, to execute, deliver and perform this Agreement and each Related
Document to which it is a party in accordance with their respective terms. This
Agreement and each Related Document to which the Company is a party have been
duly executed and delivered by the Company and constitute legal, valid and
binding obligations of the Company enforceable in accordance with their
respective terms. The execution, delivery and performance by the Company of the
Agreement and each Related Document to which the Company is a party do not and
will not (a) require any Governmental Approval, or any consent or approval of
the stockholders of the Company or
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of any of its Subsidiaries, that has not been obtained and is not listed on, and
a copy of which (certified in the case of Governmental Approvals) is not
attached to, Schedule 4.2, (b) violate or conflict with, result in a breach of,
or constitute a default under, (i) any Contract to which the Company or any of
its Subsidiaries is a party or by which any of them or any of their respective
properties may be bound or (ii) any applicable law or (c) result in or require
the creation of any Lien upon any assets of the Company or any of its
Subsidiaries.
SECTION 4.3 Litigation. Except as set forth on Schedule 4.3, there are
not, in any court or before any arbitrator of any kind or before or by any
governmental or non-governmental body, any actions, suits or proceedings,
pending or threatened (nor, to the knowledge of the Company, is there any basis
therefor) against or in any other way relating to or affecting (a) the Company
or any of its Subsidiaries or the business or any property of the Company or any
such Subsidiary, except actions, suits or proceedings that would not, if
adversely determined, singly or in the aggregate with all other such actions,
suits or proceedings involving the same facts or subject matter, if similarly
determined, have a Materially Adverse Effect on the Company and its Subsidiaries
taken as a whole, or (b) this Agreement or any Related Document.
SECTION 4.4 No Adverse Change. Since June 30, 1996, no material adverse
change in the business, assets, liabilities, financial condition, results of
operations or business prospects of the Company or any of its Subsidiaries has
occurred, and no event has occurred or failed to occur, which adverse change,
event or failure has had or may have, either alone or in conjunction with all
other such adverse changes, events and failures, a Materially Adverse Effect on
the Company and its Subsidiaries taken as a whole or on this Agreement or any
Related Document.
SECTION 4.5 No Adverse Fact. No fact or circumstance is known to the
Company, as of the date of this Agreement, which, either alone or in conjunction
with all other such related facts and circumstances, has had or may have (so far
as the Company can reasonably foresee) a Materially Adverse Effect upon the
Company and its Subsidiaries taken as a whole or on this Agreement which has not
been reflected or provided for in the financial statements referred to in
Section 5.9 or disclosed in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1996. If a fact or circumstance reflected or provided
for in such financial statements or if an action, suit or proceeding disclosed
in Schedule 4.3, should in the future have a
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Materially Adverse Effect upon the Company and its Subsidiaries taken as a
whole, or upon this Agreement, such Materially Adverse Effect shall be a change
or event subject to Section 4.4 notwithstanding such disclosure.
SECTION 4.6 Taxes. To the best of Company's knowledge, all tax returns
of the Company and its Subsidiaries required by applicable law to be filed have
been duly filed, and all taxes upon the Company or its Subsidiaries or any of
its or their assets, revenues, income or profits which are due and payable have
been paid, except any such tax (a) payment of which the Company or such
Subsidiary is contesting in good faith by appropriate proceedings and for which
adequate reserves have been provided on the appropriate books or (b) the
non-payment of which will not have a Materially Adverse Effect on the Company
and its Subsidiaries taken as a whole.
SECTION 4.7 Environmental Matters. Except as disclosed on Schedule 4.7,
the Company and its Subsidiaries, and the plants and sites of each, have
complied with all Environmental Laws, except in any such case, where such
failure to comply would not result in a Materially Adverse Effect on the
business, financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole. Without limiting the generality of the preceding
sentence, neither the Company nor any of its Subsidiaries has received notice of
or has actual knowledge of any actual, claimed or asserted failure so to comply
that alone or together with any other such failure is material and would result
in a Materially Adverse Effect on the business, financial condition or results
of operations of the Company and its Subsidiaries, taken as a whole. Neither the
Company nor any of its Subsidiaries, nor their plants or other sites manage,
generate or Release, or, during their respective periods of use, ownership,
occupancy or operation by the Company or its Subsidiaries, have managed,
generated or Released, any Hazardous Substances in material violation of or in a
manner that would result in liability under any Environmental Laws, except where
such noncompliance or liability would not result in a Materially Adverse Effect
on the business, financial condition or results of operations of the Company and
its Subsidiaries, taken as a whole.
SECTION 4.8 Investment Company Act. The Company is not an "investment
company", or a company "controlled by an investment company" within the meaning
of the Investment Company Act of 1940, as amended.
SECTION 4.9 Historical Information. The financial
statements listed on Schedule 4.9 are complete and correct in all
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material respects and present fairly, in accordance with GAAP consistently
applied throughout the periods involved (except as noted therein), the
consolidated financial position of the Company and its Consolidated Subsidiaries
as at their respective dates and the consolidated results of operations,
retained earnings and the changes in financial position of the Company and its
Consolidated Subsidiaries for the respective periods to which such statements
relate. Except as disclosed or reflected in such financial statements, as of
June 30, 1996, to the knowledge of the Company, neither the Company nor any of
its Subsidiaries had any liabilities, contingent or otherwise, and there were no
unrealized or anticipated losses of the Company or any of its Subsidiaries,
which, singly or in the aggregate, have had or will have a Materially Adverse
Effect on the Company and its Subsidiaries taken as a whole.
SECTION 4.10 ERISA. No Accumulated Funding Deficiency, whether or not
waived, exists with respect to any Plan (other than a Multiemployer Plan). No
liability to the PBGC has been or is expected by the Company to be incurred with
respect to any Plan (other than a Multiemployer Plan) by the Company or any of
its Subsidiaries which has or may have a Materially Adverse Effect on the
Company and its Subsidiaries taken as a whole. Neither the Company nor any of
its Subsidiaries has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan which
has or may have a Materially Adverse Effect on the Company and its Subsidiaries
as a whole. The execution and delivery of this Agreement will not involve any
transaction which is subject to the prohibitions of section 406 of ERISA or in
connection with which a tax could be imposed pursuant to Section 4975 of the
Code.
ARTICLE 5
Covenants
A. Affirmative Covenants. As long as this Agreement is in
effect, the Letter of Credit is outstanding, and until all
amounts payable hereunder or thereunder are indefeasibly paid in
full, the Company will perform and observe the covenants set
forth below:
SECTION 5.1 Compliance with Applicable Law. Comply with the
requirements of all applicable laws, noncompliance with which would have a
Materially Adverse Effect on the Company and its Subsidiaries taken as a whole,
except insofar and so long as
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compliance with or the applicability of such requirements is being contested in
good faith by appropriate proceedings.
SECTION 5.2 Preservation of Corporate Existence and Similar Matters.
Preserve and maintain its corporate existence and qualify and remain qualified
as a foreign corporation authorized to do business in each jurisdiction in which
the character of its principal properties requires such qualification or
authorization and in which the failure to qualify, together with all other
failures to qualify, would have a Materially Adverse Effect on the Company and
its Subsidiaries taken as a whole; and preserve and maintain those of its
rights, franchises and privileges, the loss of which would have a Materially
Adverse Effect on the Company and its Subsidiaries taken as a whole.
SECTION 5.3 Maintenance of Properties. Maintain or cause to be
maintained in good repair, working order and condition all material properties
used or useful in its business (whether owned or held under lease), and from
time to time make or cause to be made all needed and appropriate repairs,
renewals, replacements, additions, betterments and improvements thereto, so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times.
SECTION 5.4 Payment of Taxes and Claims. Pay and discharge all taxes
imposed upon it or upon its income or profits or upon any properties belonging
to it, prior to the date on which penalties attach thereto, and all lawful
claims for labor, materials and supplies which, if unpaid, might become a lien
or charge upon any properties of the Company or any of its Subsidiaries; except
that nothing in this Section 5.4 shall require any such tax or claim to be paid
which is being contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on the appropriate books.
SECTION 5.5 Accounting Methods and Financial Records. Maintain a system
of accounting, providing for true and complete entries of all transactions and
true and complete books, records and accounts, as may be required or necessary
to permit the preparation of financial statements in accordance GAAP.
SECTION 5.6 Insurance. Will and will cause each of its Subsidiaries to,
maintain, with responsible insurers, insurance with respect to their respective
properties and business against such casualties and contingencies (including,
but not limited to, public liability, larceny, embezzlement or other criminal
misappropriation) and in such amounts as is customary in the case of similarly
situated corporations engaged in the same or similar
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businesses, in conjunction with the delivery of the financial statements under
Section 5.9(b), the Company will deliver a certificate of an Authorized Officer
specifying the details of such insurance in effect. Notwithstanding the
foregoing, the Company and its Subsidiaries may, to the extent permitted by law,
establish and responsibly maintain a sound system of self-insurance against
liabilities for employee health benefits and personal injuries and property
damage, provided that the Company will maintain adequate reserves with respect
thereto and, at all times, the Company will maintain an amount of excess
insurance to cover casualties and contingencies greater than such reserves.
SECTION 5.7 Visits and Inspections. Permit representatives (whether or
not officers or employees) of the Bank, from time to time, as often as may be
reasonably requested, but only during normal business hours, to (a) visit and
inspect any properties of the Company and its Subsidiaries, (b) inspect and make
extracts from their books and records, including but not limited to management
letters prepared by the Company's independent accountants, and (c) discuss with
their principal officers, their respective businesses, assets, liabilities,
financial conditions, results of operations and business prospects.
SECTION 5.8 Compliance With Environmental Laws. Will, and will cause
each of its Subsidiaries to, comply in a timely fashion with, or operate
pursuant to valid waivers of, the provisions of all Environmental Laws together
with any other applicable requirements for conducting, on a timely basis,
periodic tests and monitoring for contamination of ground water, surface water,
air and land and for biological toxicity of the aforesaid, and diligently comply
with all Environmental Laws (except to the extent any regulations are waived by
appropriate Governmental Authorities), except where the failure to do so would
not have a Materially Adverse Effect on the business, operations or financial
condition of the Company and its Subsidiaries taken as a whole. The Company
agrees to indemnify and hold the Bank and each of its officers, directors,
agents and employees harmless from and against any loss, liability, claim,
damage or expense that any of them may incur or suffer: (a) as a result of a
breach by the Company or any of its Subsidiaries, as the case may be, of this
covenant, or (b) by reason of or in connection with any violation or alleged
violation by the Company of any Environmental Law. The Company shall not be
deemed to have breached or violated this Section 5.8 if the Company or any
Subsidiary of the Company is challenging in good faith by appropriate
proceedings diligently pursued the application or enforcement of such
Environmental Laws for which adequate reserves have been established in
accordance with GAAP.
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SECTION 5.9 Affirmative Covenants and Information to Be Furnished. As
long as this Agreement is in effect, the Letter of Credit is outstanding, and
until all amounts payable hereunder or thereunder are indefeasibly paid in full,
the Company shall, unless the Bank shall otherwise consent in writing, deliver
to the Bank:
(a) Quarterly Financial Statements. Within 50 days after the
close of each of the first three quarterly accounting periods in each
fiscal year of the Company, a consolidated balance sheet of the Company
and its Consolidated Subsidiaries as at the end of such quarterly
period and the related consolidated statements of income, retained
earnings and changes in financial position of the Company and its
Consolidated Subsidiaries for the elapsed portion of the fiscal year
ended with the last day of such quarterly period, each of which shall
be accompanied by a certificate of the chief financial officer or
controller of the Company in the form of Schedule 4.9.
(b) Year-End Financial Statements; No Default Certificate.
Within 95 days after the end of each fiscal year of the Company, a
consolidated balance sheet of the Company and its Consolidated
Subsidiaries as at the end of such fiscal year and the related
consolidated statements of income, retained earnings and changes in
financial position of the Company and the Consolidated Subsidiaries for
such fiscal year, setting forth in comparative form the figures as at
the end of and for the previous fiscal year, in each case certified by
independent certified public accountants of recognized national
standing selected by the Company and approved by the Bank. Together
with such financial statements, the Company shall deliver a certificate
of such accountant addressed to the Bank (A) stating that (1) the
Company is authorized to deliver such financial statements and their
certifications thereof to the Bank pursuant to this Agreement and (2)
they have caused this Agreement to be reviewed and that, in making the
examination necessary for the certification of such financial
statements, nothing has come to their attention to lead them to believe
that any Default exists and, in particular, they have no knowledge of
any Default under the provisions of Article 5 or, if such is not the
case, specifying such Default and its nature, when it occurred and
whether it is continuing and (B) having attached the calculations
required to establish whether or not the Company and its Consolidated
Subsidiaries were in compliance with the financial covenants contained
herein.
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(c) Additional Materials.
(i) Reports and Filings. As soon as practicable,
copies of all such financial statements and reports as the
Company shall send to its stockholders and of all registration
statements and all regular or periodic reports which the
Company shall file, or may be required to file, with the
Securities and Exchange Commission or any successor
commission.
(ii) Requested Materials. From time to time and
promptly upon request of the Bank, such data, certificates,
reports, statements, opinions of counsel, documents or further
information regarding this Agreement, or the business, assets,
liabilities, financial condition, results of operations or
business prospects of the Company and its Subsidiaries as the
Bank may reasonably request.
(d) Notice of Defaults, Litigation and Other Matters. Promptly
after the Company becomes aware thereof: (i) any Default; (ii) the
commencement of any actions, suits or proceedings or investigations in
any court or before any arbitrator of any kind or by or before any
governmental or non-governmental body against or in any other way
relating adversely to, or affecting, the Company or any of its
Subsidiaries or any of their respective businesses or properties, that
might, if adversely determined, singly or in the aggregate with all
other such actions, suits or proceedings involving the same facts or
subject matter, if similarly determined, have a Materially Adverse
Effect on the Company and its Subsidiaries taken as a whole or on this
Agreement or any Related Document; (iii) any amendment of the
certificate of incorporation or by-laws of the Company; and (iv) notice
of any violation or alleged violation of any Environmental Laws which
could have a Materially Adverse Effect on the Company and its
Subsidiaries taken as a whole or on this Agreement or any Related
Document.
(e) Future Information. All data, certificates, reports,
statements, opinions of counsel, documents and other information
furnished to the Bank pursuant to any provision of this Agreement or in
connection with or pursuant to any amendment or modification of, or
waiver under, this Agreement, shall, at the time the same are so
furnished, but in the case of information dated as of a prior date, as
of such date, (x) be complete and correct in all material respects, (y)
not contain any untrue statement
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of a material fact, and (z) not omit to state a fact necessary in order
to make the statements contained therein not misleading in any material
respect, and the furnishing of the same to the Bank shall constitute a
representation and warranty by the Company made on the date the same
are furnished to the Bank to the effect specified in clauses (x), (y)
and (z).
B. Negative Covenants. As long as this Agreement is in
effect, the Letter of Credit is outstanding, and until all
amounts payable hereunder or thereunder are indefeasibly paid in
full, unless the Bank shall otherwise consent in writing:
(a) Minimum Consolidated Tangible Net Worth: Minimum
Consolidated Tangible Net Worth at the end of each fiscal
quarter of the Company, shall be at least the sum of:
(i) $315,000,000 plus
(ii) the sum of the "Quarterly Net Worth Increase
Amounts" for all fiscal quarters ended after September 30,
1995. Quarterly Net Worth Increase Amount means, for any
fiscal quarter of the Company, the greater of:
a. 50% of Consolidated Net Earnings before
interest and taxes for such fiscal
quarter, and
b. $-0-.
(b) Consolidated Net Earnings. Consolidated Net Earnings
Before Interest and Taxes for the Company and its Restricted
Subsidiaries to Consolidated Interest Expense (both determined on a
trailing four quarter basis) shall be at least 1.75 to 1.00.
SECTION 5.10 Liens. The Company shall not, and shall not permit any
Subsidiary to, create, assume or suffer to exist any Lien upon any of its
property or assets, whether now owned or hereafter acquired, except:
(a) Liens for taxes (including ad valorem and property
taxes) not yet due or which are being actively contested in
good faith by appropriate proceedings;
(b) Liens in existence on the date of this Agreement
to the extent set forth on Schedule 5.10 hereto, but only,
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in the case of each Lien, to the extent it secures Existing
Debt;
(c) other Liens incidental to the conduct of its business or
the ownership of its property and assets including pledges or deposits
in connection with workers' compensation and social security taxes,
assessments and charges, provided that such Liens were not incurred in
connection with the borrowing of money or the obtaining of advances or
credit or do not otherwise materially detract from the value of its
property or assets or materially impair the use thereof in the
operation of its business;
(d) Liens on property or assets of a Subsidiary of the
Company to secure obligations of such Subsidiary to the
Company or another Subsidiary of the Company;
(e) Liens securing Secured Debt permitted under
Section 5.11 hereof;
(f) Any common law right of setoff or banker's lien arising in
connection with ordinary course of business deposit arrangements
maintained by the Company or its Subsidiaries with its banks and
banking institutions and with any lender of indebtedness to the Company
that is defined hereunder as Funded Debt if the Company Obligations are
equally and ratably secured thereby; and
(g) the aggregate amount of all Debt and other obligations
secured by liens may be in the maximum amount of 15% of Consolidated
Net Tangible Assets.
SECTION 5.11 Debt. The Company shall not, and shall not permit any
Subsidiary to, create, incur, assume or suffer to exist any Funded Debt or
Current Debt or guarantee or otherwise becomes contingently liable in connection
with the obligations, stock or dividends of any Person, except:
(a) the Debt incurred under this Agreement;
(b) Debt represented by endorsement of negotiable
instruments for collection in the ordinary course of
business;
(c) other Funded Debt of the Company other than Funded
Debt owing by the Company to any Subsidiary of the Company;
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(d) Debt of any Subsidiary of the Company owing to the
Company or any other Subsidiary of the Company;
(e) Secured Funded Debt of a Subsidiary; provided, however,
that the principal amount of such Secured Funded Debt shall at no time
exceed 100% of the fair market value of the property securing such Debt
and the Lien created to secure such Debt shall be confined to the item
or items of property leased or acquired in connection with such
financing;
(f) Existing Debt;
(g) Funded Debt in connection with the issuance of letters of
credit in favor of a surety or insurance company in connection with the
workmen's compensation self-insurance program of such entity; and
(h) Secured Current Debt representing the current
maturity of secured Funded Debt permitted to be outstanding
hereunder.
(i) Consolidated Funded Debt to Consolidated Net
Tangible Assets for the Company and its Restricted
Subsidiaries shall not exceed .6 to 1.0.
SECTION 5.12 Loans, Advances, Investments and Contingent Liabilities.
The Company shall not, and shall not permit any Subsidiary to, make or permit to
remain outstanding any loan or advance to, or guarantee, endorse or otherwise be
or become contingently liable, directly or indirectly, in connection with the
obligations, stock or dividends of, or own, purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any Person, except that the Company or any Subsidiary may:
(a) make or permit to remain outstanding loans or
advances to any Subsidiary of the Company;
(b) own, purchase or acquire stock, obligations or securities
of a Subsidiary of the Company or of a corporation which immediately
after such purchase or acquisition will be a Subsidiary of the Company;
(c) acquire and own stock, obligations or securities
received in settlement of debts (created in the ordinary
course of business) owing to the Company or any Subsidiary
of the Company;
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(d) own, purchase or acquire (a) prime commercial paper (rated
A2 or better by S&P or P2 or better by Moody's Investors Service, Inc.)
and certificates of deposit in United States commercial banks (having
capital reserves in excess of $100,000,000) having a term of one year
or less, (b) direct obligations of the United States Government or any
agency thereof, and obligations guaranteed by the United States
Government, each having a term of one year or less, (c) readily
marketable shares in mutual funds managed by managers of recognized
standing and investing solely in the foregoing investments or in
readily marketable corporate debt securities rated A or better by S&P
and (d) repurchase agreements of United States commercial banks having
capital reserves in excess of $100,000,000 having terms of one year or
less; and
(e) create or permit to remain outstanding contingent
liabilities arising out of a letter of credit in favor of a surety or
insurance company in connection with the workmen's compensation
self-insurance program of such entity; provided, however, that the
aggregate amount of all such contingent liabilities is permitted under
Section 5.11(g).
SECTION 5.13 Merger and Sale of Assets. The Company shall not, and
shall not permit any of its Subsidiaries to, merge, consolidate or exchange
shares with any other Person, sell, lease, transfer or otherwise dispose of any
of its assets (in the ordinary course of business or otherwise) to any Person
for a consideration which is materially less than the fair value (as valued in
good faith by the Company) of such assets at the time of the disposition, or
sell, lease, transfer or otherwise dispose of (whether for fair value or
otherwise) assets of the Company and/or any of its Subsidiaries except that:
(a) any Subsidiary of the Company may merge or consolidate
with the Company (provided that the Company shall be the continuing or
surviving corporation) or with any one or more other Subsidiaries of
the Company;
(b) any Subsidiary may sell, lease, transfer or
otherwise dispose of any of its assets to the Company or
another Subsidiary of the Company;
(c) the Company may merge with any other corporation so long
as the Company shall be the continuing or surviving corporation and the
Company, as the continuing or surviving corporation, shall not,
immediately after such merger, be in Default under this Agreement;
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(d) the Company may merge into any solvent corporation
organized under the laws of the United States or any state thereof that
expressly assumes in writing the obligations of the Company hereunder
pursuant to an instrument in form and substance satisfactory to the
Bank and the surviving corporation shall not, immediately after such
merger, be in Default under this Agreement.
SECTION 5.14 ERISA. The Company shall not, nor permit any
of its Subsidiaries to:
(i) terminate or withdraw from any Plan (other than a
Multiemployer Plan) so as to result in any material
liability to the PBGC;
(ii) engage in or permit any Person to engage in any
Prohibited Transaction involving any Plan (other than a Multiemployer
Plan) which would subject the Company or any Subsidiary of the Company
to any material tax, penalty or other liability;
(iii) incur or suffer to exist any material accumulated
funding deficiency (as defined in Section 302 of ERISA and Section 412
of the Code), whether or not waived, involving any Plan; or
(iv) allow or suffer to exist any risk or condition, which
presents a material risk of incurring a material liability to the PBGC.
SECTION 5.15 Transactions with Affiliates. The Company shall not effect
any transaction with any Affiliate on a basis less favorable to the Company or
such Subsidiary than would be the case if such transaction had been effected
with a Person not an Affiliate, except that this Section 5.15 shall not apply to
transactions that are not material in nature or amount.
SECTION 5.16 Amendment of Related Documents. The Company shall not
enter into or consent to any amendment of, or accept the benefit of any waiver
of any provision of, any Related Document.
SECTION 5.17 Optional Redemption of Bonds. The Company shall not direct
the Issuer or the Trustee to call Bonds for optional redemption pursuant to
Section 4.1(a) or (c) of the Indenture unless, prior to such direction, the Bank
shall either: (a) have received written evidence from the Company satisfactory
to the Bank that the Company has sufficient funds to reimburse
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the Bank for all Drawings on the Letter of Credit which may be made in
connection with such optional redemption, or (b) the Bank has otherwise
consented in writing to such optional redemption.
ARTICLE 6
Further Assurances
SECTION 6.1 Further Assurances. The Company agrees that it shall take
all such further actions and execute all such further instruments, certificates
and other documents, as the Bank shall reasonably request, in order to effect
the intents and purposes of the transactions contemplated by this Agreement.
ARTICLE 7
Events of Default
SECTION 7.1 Events of Default. The occurrence of any of the following
events shall constitute an "Event of Default":
(a) the Company shall not make any payment of any
amount under this Agreement when due;
(b) any representation or warranty made, or deemed to have
been made as expressly provided in this Agreement, by the Company in
this Agreement, or any of the Related Documents to which it is a party,
or by any of its officers in any certificate, agreement, instrument or
statement contemplated by or made or delivered pursuant to or in
connection herewith or therewith shall prove to have been incorrect in
any material respect when made or when deemed made;
(c) (i) any "Event of Default" under the Indenture
shall have occurred, or (ii) any event of default has
occurred and is continuing under the Loan Agreement;
(d) the Company shall fail to perform or observe any
term, covenant or agreement set forth in sections 5.10,
5.11, 5.12, 5.13, 5.16 or 5.17;
(e) the Company shall fail to perform or observe any other
term, covenant or agreement (other than one described in any other
paragraph of this Section 7.1) contained in this Agreement, the Bonds
or the Related Documents on its part to be performed or observed, and
any such failure shall remain unremedied for thirty (30) days after
written notice
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thereof shall have been given to the Company by the Bank; Provided,
however, if the Company shall commence to cure such failure in a manner
satisfactory to the Bank, and such failure cannot be fully effected
within the 30-day period established above, such event shall not be
considered an Event of Default so long as the Company continues to take
reasonable steps toward rectifying such failure;
(f) the Company or any of its Subsidiaries shall fail to pay,
in accordance with its terms and when due and payable, an amount that,
when aggregated with all other such amounts, is equal to or greater
than $25,000,000, or the maturity of any Debt equal to or greater than
$25,000,000, shall have been accelerated in accordance with the
provisions thereof, or any Debt equal to or greater than $25,000,000,
shall have been required to be prepaid prior to the stated maturity
thereof, or any event shall have occurred and be continuing which, with
the passage of time or the giving of notice or both, would permit any
holder or holders of such Debt, any trustee or agent acting on behalf
of such holder or holders or any other Person to so accelerate such
maturity;
(g) the Company or any of its Subsidiaries shall make an
assignment for the benefit of creditors, file a petition in bankruptcy,
be unable generally to pay its debts as they become due, or be
adjudicated insolvent or bankrupt or there shall be entered any order
or decree granting relief in any voluntary or involuntary case
commenced by or against the Company or any of its Subsidiaries under
any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or the Company or any of its Subsidiaries shall
petition or apply to any court or administrative body for the
appointment of any receiver, trustee, liquidator, assignee, custodian,
sequestrator (or other similar official) of the Company or any
Subsidiary or of any substantial part of the properties of the Company
or its Subsidiaries, or shall commence any proceeding in a court of law
for a reorganization, readjustment of debt, dissolution, liquidation,
assignment or other similar procedure under the laws or statutes of any
jurisdiction, whether now or, hereafter in effect, or there shall be
commenced against the Company or any of its Subsidiaries any such
proceeding in a court of law which remains undismissed or not
discharged, vacated or stayed within sixty (60) days after
commencement, or the Company or any of its Subsidiaries by any act
shall indicate its consent to, approval of or acquiescence in any
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of the foregoing or take any action for the purpose of
effecting any of the foregoing;
(h) a ruling, assessment, notice of deficiency or technical
advice by the Internal Revenue Service shall be rendered to the effect
that interest on the Bonds is includable in the gross income of the
holder(s) or owner(s) of the Bonds and either (A) the Company, after it
has been notified by the Internal Revenue Service, shall not challenge
such ruling, assessment, notice or advice in a court of law during the
period within which such challenge is permitted or (B) the Company
shall challenge such ruling, assessment, notice or advice and a court
of law shall make a determination, not subject to appeal or review by
another court of law, that such ruling, assessment, notice or advice is
correctly rendered;
(i) (i) a Termination Event with respect to a Plan shall
occur, (ii) any Person shall engage in any Prohibited Transaction
involving any Plan, (iii) an Accumulated Funding Deficiency, whether or
not waived, shall exist with respect to any Plan, (iv) the Company or
any ERISA Affiliate shall be in "default" (as defined in Section
4219(c)(5) of ERISA) with respect to payments due to a Multiemployer
Plan resulting from the Company's or such Affiliate's complete or
partial withdrawal (as described in Section 4203 or 4205 of ERISA) from
such Plan, or (v) any other event or condition shall occur or exist
with respect to a Single Employer Plan, which event or condition
referred to in any of the clauses (i) through (v), together with all
such other events or conditions at the time existing, would subject the
Company or any of its Subsidiaries to any Tax, penalty, Debt or
Liability which has not been adequately provided or reserved for by the
Company or such Subsidiary and which, alone or in the aggregate, would
have a Materially Adverse Effect on the Company and its Subsidiaries
taken as a whole; or
(j) Any material provision of this Agreement, or of any of the
Related Documents, shall at any time for any reason cease to be valid
and binding in accordance with its terms on the Company or shall be
declared to be null and void, or the validity or enforceability thereof
shall be contested by or on behalf of the Company or a proceeding shall
be commenced by or on behalf of the Company seeking to establish the
invalidity or unenforceability thereof, or the Company shall deny that
it has any or further liability or obligation under this Agreement or
under any of the Related Documents.
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Notwithstanding the provisions of Section 7.2 to the contrary, upon the
occurrence of any Event of Default described in paragraph (g) of this Section
7.1, the Bank shall automatically be deemed to have given the notice and made
the declaration set forth in paragraph (a) and to have given the direction set
forth in paragraph (b) of Section 7.2.
SECTION 7.2 Remedies on Default. Upon the occurrence of an Event of
Default, the Bank may:
(a) upon notice to the Company declare all sums payable to it
by the Company hereunder to be immediately due and payable, whereupon
the same shall become immediately due and payable without demand,
presentment, protest or further notice of any kind, all of which are
hereby expressly waived;
(b) by notice to the Trustee inform the Trustee of an Event of
Default under this Agreement and inform the Trustee of its obligation
to accelerate the Bonds in accordance with Section 7.03 of the
Indenture; and/or
(c) pursue any other remedy available to the Bank
under this Agreement, at law or in equity.
ARTICLE 8
Miscellaneous
SECTION 8.1 Payments to the Bank.
(a) All payments to the Bank hereunder shall be made without
set-off or counterclaim in lawful currency of the United States and in
immediately available funds at the Bank's office and in accordance with
the instructions specified opposite the Bank's name on the signature
page of this Agreement, or by such other method as the Bank may specify
in writing, not later than 4:00 p.m., Louisville, Kentucky time, on the
due date thereof.
(b) All payments to the Bank hereunder shall be made free and
clear of any and all present and future taxes, levies, imports, duties,
deductions, withholdings, fees, liabilities and similar charges
("Taxes"), unless any Taxes are required by law to be withheld or
deducted. If, as a result of any change in applicable law or
regulations or in the interpretation thereof by any governmental
authority charged with the administration thereof, or the introduction
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of any law or regulation, any Taxes are required to be withheld or
deducted from any amount payable to the Bank hereunder, the amount
payable will be increased to the amount which, after deduction from
such increased amount of all Taxes required to be withheld or deducted
therefrom, will yield to the Bank the amount stated to be payable
hereunder. Notwithstanding the foregoing, the Company shall not be
required to pay any increased amounts pursuant to this paragraph (b) on
account of Taxes measured by or based upon the overall net income of
the Bank. The Bank shall give notice to the Company of the imposition
of any Taxes, provided any failure to give such notice shall not
relieve the Company of its obligations under this Section 8.1. The
Company will execute and deliver to the Bank at its request such
further instruments as may be necessary or desirable to give full force
and effect to any such increase. The Company will, upon the request of
the Bank, provide the Bank with evidence satisfactory to it of the
payment of any Taxes. If any of the Taxes required to be borne by the
Company pursuant to this paragraph (b) are paid by the Bank, the
Company will, upon demand of the Bank, reimburse the Bank for such
payments, together with any interest, penalties and expenses in
connection therewith.
SECTION 8.2 Increased Costs. If any change, announced after the date
hereof, in applicable law, regulation, rule or directive, or any interpretation
thereof (including any request, guideline or policy, and including, without
limitation, Regulation D promulgated by the Board of Governors of the Federal
Reserve System as from time to time in effect) by any authority charged with the
administration or interpretation thereof:
(i) subjects the Bank to any tax with respect to the Letter of
Credit on any amount paid or to be paid under the Letter of Credit
(other than any tax measured by or based upon the overall net income of
the Bank);
(ii) changes the basis of taxation of payments to the Bank of
any amounts payable hereunder (other than tax measured by or based upon
the overall net income of the Bank);
(iii) imposes, modifies or deems applicable any reserve,
capital adequacy or deposit requirements against any assets held by,
deposits with or for the account of, or loans made or letters of credit
issued by, the Bank; or
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(iv) imposes on the Bank any other condition affecting
the Letter of Credit or this Agreement;
and the result of any of the foregoing is to increase the cost to the Bank of
maintaining this Agreement or issuing or maintaining the Letter of Credit, or to
reduce the amount of any payment (whether of principal, interest or otherwise)
receivable by the Bank under this Agreement, including, without limitation, a
reduction of the return to the Bank in respect of these transactions calculated
as a percentage of its assets or equity, or any increase in cost resulting
therefrom, or to require the Bank to make any payment on or calculated by
reference to the gross amount of any sum received by it, in each case by an
amount which the Bank in its sole judgment reasonably deems material, then and
in any such case:
(i) the Bank shall promptly notify the Company in
writing of such event;
(ii) the Bank shall promptly deliver to the Company a
certificate describing such event in reasonable detail together with
the date thereof, the amount of such increased cost or reduction or
payment and the way in which such amount has been calculated; and
(iii) the Company shall pay to the Bank, within thirty (30)
days after delivery of the certificate referred to in subsection (ii)
hereinabove, such an amount or amounts as will compensate the Bank for
such additional cost, reduction or payment for so long as the same
shall remain in effect.
The certificate of the Bank, signed by an officer of the Bank, as to
additional amounts payable pursuant to this Section 8.2 delivered to the Company
shall be conclusive evidence of such amounts absent manifest error. The benefit
of this Section 8.2 shall be available to the Bank regardless of any possible
contention of invalidity or inapplicability of any law, regulation, condition,
directive or interpretation.
SECTION 8.3 Set-off; Limitation on Set-off.
(a) In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, during
the continuance of any Event of Default the Bank is hereby authorized
at any time and from time to time, without notice to the Company or to
any other person or entity, any such notice being hereby expressly
waived, to set-off and to appropriate and apply any and all deposits
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(general or special) and any other indebtedness at any time held or
owing by the Bank to or for the credit or the account of the Company
against and on account of the obligations and liabilities of the
Company to the Bank under this Agreement, irrespective of whether or
not the Bank shall have made any demand hereunder and although said
obligations, liabilities or claims, or any of them, shall be contingent
or unmatured.
(b) Anything in paragraph (a) above to the contrary
notwithstanding but without modifying any other provision of this
Agreement, the Bank waives any right referred to in paragraph (a)
above, and any other right which it may have at law or otherwise to
set-off and apply such deposits or indebtedness referred to in
paragraph (a) above, if there shall be a drawing under the Letter of
Credit during the pendency of any proceeding by or against the Company
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee, or other similar official for it or for any
substantial part of its property; that such waiver shall terminate and
be of no force and effect when and to the extent that both (i) the
exercise of any such right would not result in the Bank's being
released, prevented or restrained from or delayed in fulfilling the
Bank's obligations under the Letter of Credit and (ii) the absence of
such waiver would not result in the lowering or withdrawal by Moody's,
if the Bonds are rated by Moody's, or by S&P, if the Bonds are rated by
S&P, of its respective rating of the Bonds.
(c) The Bank agrees promptly to notify the Company after the
exercise of any set-off and application referred to in paragraph (a),
provided that the failure to give such notice shall not affect the
validity of such set-off and application.
(d) If at any time the Bank shall have or be entitled to the
benefits of any security interest or other lien securing the
obligations of the Company hereunder, such security interest or lien
and any proceeds thereof shall be pledged to the Trustee equally and
ratably to secure the Bank and the Trustee on behalf of the owners of
the Bonds, provided the agreement of the Bank set forth in this
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paragraph (d) shall terminate and be of no further force or effect when
and to the extent that both (i) the termination of such agreement would
not result in the Bank's being released, prevented or restrained from
or delayed in fulfilling the Bank's obligation under the Letter of
Credit and (ii) the termination of such agreement would not result in
the lowering or withdrawal by S&P, if the Bonds are rated by S&P, of
its respective rating of the Bonds.
SECTION 8.4 Obligations Absolute. The obligations of the Company under
this Agreement shall be absolute, unconditional and irrevocable, and shall be
paid strictly in accordance with the terms of this Agreement under all
circumstances whatsoever, including, without limitation, the following
circumstances:
(a) any lack of validity or enforceability of the
Letter of Credit, the Bonds, the Related Documents or any
other agreement or instrument relating thereto;
(b) any amendment or waiver of or any consent to
departure from the Letter of Credit, this Agreement, the
Related Documents or any other agreement or instrument
relating thereto;
(c) the existence of any claim, set-off, defense or other
right which the Company may have at any time against the Trustee, any
beneficiary or any transferee of the Letter of Credit (or any persons
or entities for whom the Trustee, any such beneficiary or any such
transferee may be acting), the Paying Agent, the Bank (other than the
defense of payment to the Bank in accordance with the terms of this
Agreement), or any other person or entity, whether in connection with
this Agreement, any related agreement or instrument or any unrelated
transaction, agreement or instrument;
(d) any statement or any other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever;
(e) payment by the Bank under the Letter of Credit against
presentation of a demand, draft or certificate which does not comply
with the terms of the Letter of Credit, provided that such payment
shall not have constituted gross negligence or willful misconduct of
the Bank;
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(f) the exercise or non-exercise by the Bank of any
rights or remedies it may have under or pursuant to any of
the Related Documents; and
(g) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, provided that such other
circumstance or happening shall not constitute willful misconduct or
gross negligence of the Bank.
SECTION 8.5 Liability of the Bank.
(a) As between the Company and the Bank, the Company assumes
all risks of the acts or omissions of the Trustee and any transferee
beneficiary of the Letter of Credit with respect to their use of the
Letter of Credit. Neither the Bank nor any of its officers, directors,
employees or agents shall be liable or responsible for (i) the use
which may be made of the Letter of Credit or for any acts or omissions
of the Trustee, or any transferee in connection therewith, (ii) the
validity, sufficiency 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, insufficient, fraudulent or forged,
(iii) payment by the Bank against presentation of documents which do
not comply with the terms of the Letter of Credit, including failure of
any documents to bear any reference or adequate reference to the Letter
of Credit, or (iv) any other circumstances whatsoever in making or
failing to make payment under the Letter of Credit, except only that
the Company shall have a claim against the Bank, and the Bank shall be
liable to the Company, to the extent, but only to the extent, of any
direct, as opposed to consequential, damages suffered by the Company
which the Company proves were caused by the Bank's willful misconduct
or gross negligence in determining whether documents presented under
the Letter of Credit comply with the terms of the Letter of Credit. In
furtherance and not in limitation of the foregoing, the Bank may accept
documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
(b) The Bank may, under the Letter of Credit, receive, accept
and pay any demands or other documents and instruments (otherwise in
order) signed by or issued to the receiver, trustee in bankruptcy or
custodian of anyone named in the Letter of Credit as the person by whom
drafts, demands and other documents and instruments are to be made
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or issued. The Bank shall be protected in relying upon an instrument of
transfer in the form attached to the Letter of Credit in connection
with its transfer.
(c) The Bank shall not have any liability to the Company for,
and the Company, hereby waives any right to object to, payment made
under the Letter of Credit against a demand containing non-substantive
variations in punctuation, capitalization, spelling or similar matters.
The determination whether a demand has been made before the expiration
of the Letter of Credit and whether a demand is in proper and
sufficient form for compliance with the Letter of Credit shall be made
by the Bank in its sole discretion, which determination shall be
conclusive and binding upon the Company provided that such
determination shall not have constituted gross negligence or willful
misconduct of the Bank.
SECTION 8.6 Costs, Expenses and Stamp Taxes; Indemnity.
(a) All costs and expenses paid or incurred by the Bank
(including, without limitation, the reasonable fees and disbursements
of the Bank's counsel) in connection with the preparation, review,
execution and delivery of this Agreement and the Related Documents
shall be paid by the Company. The Company agrees to pay on demand all
costs and expenses, if any, in connection with the amendment or
enforcement of this Agreement and the Related Documents, and the
protection of the rights of the Bank thereunder, including reasonable
counsel fees and out-of-pocket expenses.
(b) The Company shall pay all stamp and other taxes and fees
payable in connection with the preparation, execution, delivery, filing
and recording of this Agreement and any other documents contemplated
hereby and agrees to save the Bank harmless from and against all
liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.
(c) The Company will indemnify, defend and hold harmless the
Bank, its officers, directors, employees and agents, from and against
all claims, damages, losses, liabilities or reasonable costs or
expenses which may be incurred (or which may be claimed by any person
or entity) by reason of or in connection with the negotiation,
execution, delivery, performance or transfer of, or payment or failure
to pay under, this Agreement and/or the Letter of
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Credit, or in connection with the issuance and sale of the Bonds,
arising out of or based upon a suit or proceeding or governmental
action brought or taken in connection with the Bonds or the use of the
proceeds of any drawing under the Letter of Credit.
SECTION 8.7 Participants. Subject to the consent of the Company, which
consent shall not be unreasonably withheld, the Bank shall have the right to
grant participations from time to time (to be evidenced by one or more
participation agreements or certificates of participation) in the Letter of
Credit to one or more other banking institutions; provided, however, that (a)
the Bank's obligations to the Company under this Agreement shall remain
unchanged, (b) the Bank shall remain solely responsible to the Company for the
performance of such obligations, (c) the Company shall continue to deal solely
and directly with the Bank in connection with the Bank's rights and obligations
under this Agreement and (d) any participation in the Letter of Credit by
another banking institution shall be in a minimum amount of $2,500,000.
Notwithstanding anything contained herein, the consent of the Company shall not
be required to grant participations in the Letter of Credit if an Event of
Default shall exist. Each banking institution purchasing such a participation
shall in the discretion of the Bank have all rights of the Bank hereunder to the
extent of the participation purchased; provided that (i) no participant shall be
entitled to receive payment hereunder of any amount greater than the amount
which would have been payable to the Bank if the Bank had not sold a
participation to such participant, (ii) if and when the consent of the Bank
shall be required hereunder, the consent of such participants shall not be
required, (iii) the Company shall not be required to provide notice or furnish
information hereunder to any such participant, and (iv) no participant shall be
entitled to the rights of the Bank to exercise remedies under Article 7 hereof.
Notwithstanding the foregoing, the Bank shall not be entitled to receive payment
of any amount under Section 8.2 hereof greater than the amount which would have
been payable to the Bank if the Bank had not sold a participation to any
participant.
SECTION 8.8 Calculations. Interest and fees payable hereunder shall be
computed on the basis of a 365- or 366-day year, as the case may be, and shall
be paid for the actual number of days elapsed, from and including the first day
to but not including the last day of the period of accrual thereof.
SECTION 8.9 Extension of Maturity. If any payment to the
Bank would become due and payable other than on a Business Day,
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such payment shall instead become due on the next succeeding Business Day and,
in the case of the principal amount of the reimbursement of any Drawing,
interest shall be payable thereon up to the date payment is actually made at the
rate specified herein.
SECTION 8.10 Successors and Assigns.
(a) This Agreement shall (i) be binding upon the Company and
its successors and assigns and (ii) inure to the benefit of and be
enforceable by the Bank and its successors and assigns.
(b) At any time, the Bank may assign to one or more banks or
financial institutions all or a portion of its rights and obligations
under this Agreement; provided, however, that the Bank shall continue
to be the issuing bank of the Letter of Credit until such time as the
conditions for delivery of an alternate letter of credit under the
Indenture have been satisfied; and provided further, that after giving
effect to all such assignments, the Bank shall retain at least 51% of
all rights and obligations originally belonging to the Bank under this
Agreement.
(c) Notwithstanding anything contained herein to the contrary,
the rights and duties of the Company hereunder may not be assigned or
transferred, except with the prior written consent of the Bank.
SECTION 8.11 Modification or Waiver of this Agreement. This Agreement
is intended by the parties hereto as a final expression of their agreement with
respect to the subject matter hereof, and is intended as a complete and
exclusive statement of the terms and conditions of that agreement. No
modification or waiver of any provision of this Agreement (including this
Section 8.11) shall be effective unless the same shall be in writing and signed
by the Bank and the Company. Any modification or waiver referred to in this
Section 8.11 shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Company in any
case shall entitle the Company to any other or further notice or demand in the
same, similar or other circumstances.
SECTION 8.12 No Waiver of Rights by the Bank; Cumulative Rights. No
course of dealing or failure or delay on the part of the Bank in exercising any
rights, power or privilege hereunder shall preclude any other or further
exercise or the exercise of any right, power or privilege. The rights of the
Bank under the
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Letter of Credit and under this Agreement are cumulative and not exclusive of
any rights or remedies which the Bank would otherwise have.
SECTION 8.13 Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby. The
parties shall negotiate in good faith to replace any invalid, illegal or
unenforceable provision with a valid provision, which, to the extent possible,
will preserve the economic effect of the invalid, illegal or unenforceable
provisions.
SECTION 8.14 Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the Commonwealth of Kentucky.
SECTION 8.15 Consent to Jurisdiction. In any legal action or proceeding
relating to the Letter of Credit or this Agreement, and the enforcement thereof,
the Company hereby irrevocably and unconditionally: (a) consents to the
non-exclusive jurisdiction of the Courts of the Commonwealth of Kentucky, the
courts of the United States of America for the Western District of Kentucky and
appellate courts from any thereof; (b) waives, to the extent it may legally and
effectively do so, any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court; (c) agrees that service of
process in any such action or proceeding may be effected by mailing a copy
thereof by registered or certified mail to the Company in accordance with
Section 8.16; and (d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction.
SECTION 8.16 Notices. All notices and communications hereunder shall be
given by hand delivery, with a receipt being obtained therefor, by United States
certified or registered mail, or by telegram, telex, telecopier or by other
telecommunication device capable of creating written record of such notice and
its receipt. To the extent that any telecommunication notice is permitted
hereunder, the parties hereto shall provide appropriate telex and, to the extent
available, facsimile numbers. Notices and communications hereunder shall be
effective when received and shall be sent to the following addresses or numbers
(or to such other addresses or numbers of which either party hereto shall notify
the other party in accordance herewith):
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If to the Bank, to: PNC Bank, Kentucky, Inc.
500 West Jefferson Street
Louisville, Kentucky 40202
Attention: Benjamin A. Willingham
Telecopier No.: (502) 581-2302
With a copy to: PNC Bank, Kentucky, Inc.
500 West Jefferson Street
Louisville, Kentucky 40202
Attention: International Department
Telecopier No.: (502) 581-2302
with a copy to: Stites & Harbison
Suite 1800
400 West Market Street
Louisville, Kentucky 40202
Attention William H. Haden, Jr.
Telecopier No.: (502) 587-6391
If to the Company, to: Birmingham Steel Corporation
P.O. Box 1208
Birmingham, Alabama 35201
Attention: Treasurer
Telecopier No.: (205) 444-3352
with a copy to: Smith, Gambrell & Russell
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: A. Jay Schwartz
Telecopier No.: (404) 264-2652
SECTION 8.17 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but both or all of
which, when taken together, shall constitute but one document, and shall become
effective when copies hereof which, when taken together, bear the signatures of
each of the parties hereto shall be delivered to the Company and the Bank.
SECTION 8.18 More Restrictive Agreements. Should the Company, while
this Agreement is in effect or any obligation hereunder remains unpaid, issue
any Debt for money borrowed in an amount exceeding $500,000 in aggregate amount
to any lender or group of lenders acting in concert with one another, pursuant
to a loan agreement, credit agreement, note purchase agreement,
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indenture or other similar instrument, which instrument includes covenants,
warranties, representations, or defaults or events of default (or any other type
of restriction which would have the practical effect of any of the foregoing,
including, without limitation, any "put" or mandatory prepayment of such debt)
other than those set forth herein or in any of the other Related Documents, the
Company shall promptly so notify the Bank and, if the Bank shall so request by
written notice to the Company delivered not later than 30 days after the Bank
shall have received notice from the Company as to the contents of any such
instrument (which notice shall be accompanied by a certified copy of any such
instrument) (after reasonable determination has been made by the Bank that any
of the above-referenced documents or instruments contain any provisions, which
either individually or in the aggregate, are more favorable than any of the
provisions set forth herein), the Company and the Bank shall promptly amend this
Agreement to incorporate some or all of such provisions, in the discretion of
the Bank, into this Agreement and, to the extent necessary and reasonably
desirable to the Bank, into any of the other Related Documents, all at the
election of the Bank.
SECTION 8.19 Waiver of Jury Trial. THE COMPANY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT TO ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT, THE LETTER OF CREDIT OR ANY OTHER AGREEMENT CONTEMPLATED TO
BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY, WHETHER
HAVING OCCURRED PRIOR TO THE DATE HEREOF OR OCCURRING DURING THE TERM OF THE
LETTER OF CREDIT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK'S ISSUANCE OF
THE LETTER OF CREDIT. THIS WAIVER HAS BEEN GRANTED BY THE COMPANY AFTER THE
COMPANY HAS CONSULTED WITH ITS LEGAL ADVISOR; AND THE COMPANY UNDERSTANDS THE
MEANING OF THIS WAIVER.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto authorized as
of the date first written above.
BIRMINGHAM STEEL CORPORATION
By: \s\ Jim F. Tierney
Title: Treasurer
PNC BANK, KENTUCKY, INC.
By: \s\ Ralph Phillips
Title: Vice President
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Exhibit 10.1
--------------------------------
ASSET PURCHASE AGREEMENT
dated as of October 31, 1996
by and among
Mitsui & Co., Ltd.,
R. Todd Neilson, in his capacity as Chapter 11
Trustee for the estate of Hiuka America Corporation,
All-Ways Recycling Company,
B&D Auto & Truck Salvage
and Weiner Steel Corporation
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TABLE OF CONTENTS
Page
1. RECITALS........................................................... 1
2. DEFINITIONS........................................................ 1
3. TRANSFER OF ASSETS................................................. 7
4. CLOSING / PURCHASE PRICE........................................... 10
4.1 Closing................................................... 10
4.2 Purchase Price............................................ 10
4.3 Payment to Seller at Closing.............................. 11
4.4 Deposit................................................... 11
4.5 Instruments of Conveyance and Transfer.................... 12
4.6 Assumption of Liabilities................................. 13
4.7 Prorations................................................ 15
4.8 Allocation of Purchase Price.............................. 15
4.9 Severance of the B&D Site................................. 16
4.10 Exclusion of Affiliates................................... 19
5. REPRESENTATIONS OF SELLER.......................................... 20
5.1 No Broker................................................. 20
5.2 Due Execution and Enforceability.......................... 20
6. REPRESENTATIONS AND WARRANTIES OF BUYER............................ 21
6.1 Organization.............................................. 21
6.2 Corporate Power and Authority of Buyer.................... 21
6.3 No Defaults............................................... 21
6.4 Financing................................................. 21
6.5 No Broker................................................. 21
7. COVENANTS.......................................................... 21
7.1 Permits and Consents: Modification of Leases............. 21
7.2 Confidentiality; Publicity................................ 22
7.3 Access to Books and Records............................... 22
7.4 Arrangements with Others.................................. 24
7.5 Removal of Property....................................... 24
7.6 Employment................................................ 25
7.7 Conduct of Business; Preservation of Organization......... 26
7.8 Exclusive Negotiations; No Solicitation................... 27
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7.9 Hart-Scott-Rodino Cooperation............................. 27
7.10 Environmental Agreements.................................. 27
7.11 Guarantee................................................. 27
7.12 Sales and Use Tax......................................... 28
7.13 Further Assurances........................................ 28
7.14 Due Execution, Etc........................................ 28
8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS TO
CLOSE...............................................................28
8.1 Conduct of Business....................................... 28
8.2 Access; Confidentiality................................... 29
8.3 No Material Adverse Change................................ 29
8.4 Bankruptcy Order.......................................... 30
8.5 Purchase of Assets........................................ 31
8.6 Title; Title Policies..................................... 31
8.7 Permits and Approvals..................................... 32
8.8 Affiliate Matters......................................... 32
8.9 Weiner Matters............................................ 33
8.10 Intercompany Agreements....................................34
8.11 Executory Contracts and Leases.............................35
8.12 No Material Misrepresentation by Seller................... 35
8.13 Other Transaction Documents............................... 35
8.14 Representations........................................... 35
8.15 Employees................................................. 35
8.16 Governmental Approvals.................................... 35
8.17 Other..................................................... 36
8.18 Information............................................... 36
8.19 Port Lease Stipulation.................................... 36
8.20 Estoppel Certificate...................................... 37
8.21 Notification.............................................. 37
9. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER
AND AFFILIATES TO CLOSE............................................ 37
9.1 Representations........................................... 37
9.2 Purchase Price............................................ 37
9.3 Bankruptcy Orders......................................... 37
9.4 Other Transaction Documents............................... 37
9.5 Legal Proceedings......................................... 37
9.6 Approvals................................................. 38
10. TERMINATION........................................................ 38
10.1 Injunction................................................ 38
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10.2 Mutual Agreement.......................................... 38
10.3 Termination Date.......................................... 38
10.4 Material Breach........................................... 38
10.5 Stay of Bankruptcy Order.................................. 38
10.6 Hart-Scott-Rodino Matters................................. 38
10.7 Failure of Conditions..................................... 38
10.8 Effects of Termination; Liquidated Damages................ 38
11. MISCELLANEOUS...................................................... 39
11.1 Expenses.................................................. 39
11.2 Limitation on Seller's Liability.......................... 39
11.3 Disclaimer of Representations and Warranties.............. 39
11.4 Notices................................................... 40
11.5 Entire Agreement.......................................... 43
11.6 Waivers and Amendments.................................... 43
11.7 Binding Effect............................................ 43
11.8 Governing Law Jurisdiction................................ 43
11.9 Resolution of Disputes.................................... 43
11.10 Severability.............................................. 44
11.11 Counterparts.............................................. 44
11.12 Headings.................................................. 44
SCHEDULES AND EXHIBITS
Schedule 3(A)(1) -- Tangible Assets
Schedule 3(A)(2) -- Excluded Tangible Assets
Schedule 3(B) -- Executory Contracts and Leases
Schedule 3(C) -- Real Estate
Schedule 8.6 -- Approved Liens, Encumbrances, Interests and Other
Exceptions
Schedule 8.11 -- Amendments, Waivers, Extensions, or Other
Modifications to the Executory Contracts and Leases
Exhibit A(1) -- Indemnities
Exhibit A(2) -- Declarations
Exhibit B -- Excluded Site Boundaries
Exhibit C -- Stipulation Regarding Lease
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of October 31, 1996, by and among Mitsui & Co., Ltd., a corporation
organized under the laws of Japan, R. Todd Neilson, in his capacity as Chapter
11 Trustee for the bankruptcy estate of Hiuka America Corporation, All-Ways
Recycling Company, a California corporation, B&D Auto & Truck Salvage, a
California corporation, and Weiner Steel Corporation, a California corporation.
1. RECITALS.
A. Seller is the duly appointed and acting Chapter 11 Trustee
for the bankruptcy estate of Hiuka America Corporation, a California
corporation.
B. Hiuka America Corporation filed a voluntary petition under
Chapter 11, Title 11, United States Code, in the United States Bankruptcy Court
for the Central District of California on December 20, 1995
(Case No. SB95-27964-RWA).
C. On July 19, 1996, the Bankruptcy Court (as defined herein)
determined that Buyer was the winning bidder for certain assets of the Company
and Affiliates (as defined herein).
D. Buyer wishes to purchase certain of the assets of the
Company and Affiliates (as defined herein), and is willing to assume certain
associated obligations and liabilities (and no others), and Seller and
Affiliates are willing to sell or assign, as the case may be, those assets, on
the terms and conditions set forth herein (the "Transaction").
2. DEFINITIONS.
"Acquired Sites" means the Real Estate (with any technical
modifications to the descriptions that may be required to correct typographical
and similar errors and to correctly describe the Excluded Site in accordance
with this Agreement), premises covered by Executory Contracts and Leases, and
premises leased by Weiner.
"Acquiring Entity" means one or more newly-formed entities,
which may be corporations or limited liability companies, the equity of which
will be owned, directly or indirectly at least 50% by Mitsui and 50% or less by
Joint Venture Party.
"Affiliates" means Allways, B&D and Weiner.
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"Agreement" means this Asset Purchase Agreement, including any
amendments or supplements hereto.
"Allways" means All-Ways Recycling Company, a California
corporation, and with respect to all periods following commencement of a
bankruptcy case with respect to All-Ways Recycling Company, the bankruptcy
estate of All-Ways Recycling Company.
"Allways Assets" means (i) all tangible personal property
covered in Section 3(A) hereof, owned by the Company or any Affiliate, located
at the Allways Site on the Closing Date, (ii) all tangible personal property
covered in Section 3(A) hereof located at the Allways Site at any time on or
after May 10, 1996, that, on the Closing Date, is not located at the Allways
Site because of off-site repair or because such property is located at the
premises of another person (including an affiliate of the Company), a customer
or supplier, (iii) all tangible personal property covered in Section 3(A) hereof
generally used at the Allways Site on or before the Closing Date but which, on
the Closing Date is not located at the Allways Site because of off-site repair
or because such property was located at the premises of a customer or supplier,
(iv) all of Allways' interests in respect of any Executory Contracts and Leases
(other than interests, rights and obligations in real property) relating to the
assets described in clauses (i), (ii) and (iii) of this definition, and (v)
Purchased Assets of Allways set forth in Sections 3(D), 3(E), 3(F) and 3(G)
relating to the assets described in clauses (i), (ii), (iii) and (iv) of this
definition.
"Allways Site" means interests in real property (i) described
in Schedule 3(C) as the approximately 1.38 acre parcel at 3055 Commercial
Street, San Diego, California and all improvements and structures, including
office buildings located thereon; and (ii) subject of that certain Lease dated
July 1, 1993, by and between Virginia C. Riedy, Trustee of the Riedy Trust, as
lessor and Hiuka America Corporation, a California corporation, as lessee,
relating to premises located at 110-12 31st Street, San Diego, California.
"Assignment and Assumption Agreement" has the meaning set
forth in Section 4.5.
"Auction Hearing" means the auction hearing held by the
Bankruptcy Court on July 19, 1996 relating to the Transaction at which it was
determined that Buyer was the winning bidder for the Purchased Assets for a
purchase price of $36,930,000, subject to adjustment as set forth herein.
"B&D" means B&D Auto & Truck Salvage, a California
corporation, and with respect to all periods following commencement of a
bankruptcy case with respect to B&D Auto & Truck Salvage, the bankruptcy estate
of B&D Auto & Truck Salvage.
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"B&D Assets" means (i) all tangible personal property covered
in Section 3(A) hereof, owned by the Company or any Affiliate, located at the
B&D Site on the Closing Date, (ii) all tangible personal property covered in
Section 3(A) hereof located at the B&D Site at any time on or after May 10,
1996, that, on the Closing Date, is not located at the B&D Site because of
off-site repair or because such property was located at the premises of another
person (including an affiliate of the Company), a customer or supplier, (iii)
all tangible personal property covered in Section 3(A) hereof generally used at
the B&D Site on or before the Closing Date but which, on the Closing Date is not
located at the B&D Site because of off-site repair or because such property is
located at the premises of a customer or supplier, (iv) all of B&D's interests
in respect of any Executory Contracts and Leases (other than interests, rights
and obligations in real property) relating to the assets described in clauses
(i), (ii) and (iii) of this definition, and (v) Purchased Assets of B&D set
forth in Sections 3(D), 3(E), 3(F) and 3(G) relating to the assets described in
clauses (i), (ii), (iii) and (iv) of this definition.
"B&D Site" means the Real Estate described in Schedule 3(C) as
the approximately 4.98 acre parcel at 12301, 12319, 12327, 12329, 12335, 12339
and 12351 Valley Boulevard, El Monte, California, and all structures and
improvements located thereon.
"Bankruptcy Code" means Chapter 11, Title 11, United States
Code, as amended from time to time.
"Bankruptcy Court" means the United States Bankruptcy Court
for the Central District of California hearing Case No. SB95-27964-RWA.
"Bankruptcy Orders" has the meaning set forth in Section 8.4
hereof.
"Berth 118 Site" means those certain premises located at Pier
T, Berth 118 in the City of Long Beach and that are the subject of the Lease.
"Bid" means that certain Offer to Purchase Certain Assets of
Hiuka America Corporation and Its Affiliated Corporations, submitted by Buyer to
Seller on May 10, 1996, as clarified at the request of Seller on May 20, 1996
and as modified as to price at the Auction Hearing, as further amended by that
certain Amendment Number 1 to the Offer dated August 29, 1996 and Amendment
Number 2 to the Offer dated August 30, 1996, between Mitsui and Seller, and as
further amended by mutual agreement of Mitsui and Seller.
"Buyer" means Mitsui & Co., Ltd., a corporation organized
under the laws of Japan, or Acquiring Entity following the assignment of Buyer's
interests hereunder to Acquiring Entity under Section 11.7 hereof.
"Case" means Case No. SB95-27964-RWA filed in the Bankruptcy
Court on December 20, 1995.
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"Closing" means the closing of the sale and purchase of the
Purchased Assets.
"Closing Date" has the meaning set forth in Section 4.1 hereof.
"Company" means Hiuka America Corporation and, with reference
to all periods following commencement of the Case, the bankruptcy estate of
Hiuka America Corporation.
"Confidentiality Agreements" means that certain
Confidentiality Agreement dated April 17, 1996 between Mitsui & Co., Ltd. and
Seller, that certain Confidentiality Agreement dated July 26, 1996 between
Mitsui & Co., Ltd. and Allways, that certain Confidentiality Agreement dated
July 26, 1996 between Mitsui & Co., Ltd. and B&D, that certain Confidentiality
Agreement dated August 14, 1996 between Mitsui & Co., Ltd. and Weiner, that
certain Confidentiality Agreement between Joint Venture Party and Seller
executed by Joint Venture Party on July 8, 1996, that certain Confidentiality
Agreement dated August 27, 1996 between Joint Venture Party and Allways, that
certain Confidentiality Agreement dated August 27, 1996 between Joint Venture
Party and B&D, and that certain Confidentiality Agreement dated August 27, 1996
between Joint Venture Party and Weiner.
"Declarations" means one or more declarations of covenants,
conditions and environmental restrictions, waivers and releases, relating to any
Acquired Site, substantially in the form attached as Exhibit A(2) hereto, as
modified in accordance with Section 4.5 hereof.
"Deposit" has the meaning set forth in Section 4.4 hereof.
"Environmental Agreements" means, collectively, the
Indemnities and the Declarations.
"Escrow Account" means an interest bearing account established
by the Escrow Trustee to be held in trust, separate and apart from other funds
and accounts held by the Escrow Trustee, to be administered consistent with
industry practices with respect to such accounts. In connection with the
establishment of any Escrow Account, Buyer, Seller and Affiliates, as
applicable, shall execute an escrow agreement or instructions (not inconsistent
with the applicable terms and provisions of this Agreement), which shall be
reasonably satisfactory in form and substance to Buyer, Seller and Affiliates,
as applicable. All fees, costs and expenses of the Escrow Trustee relating to
the establishment and maintenance of the Escrow Account and related matters
shall be borne in equal amounts by Buyer, on the one hand, and Seller and the
applicable Affiliates, on the other hand. Amounts in the Escrow Account shall be
applied solely for the purposes set forth in this Agreement with respect to such
Escrow Account. The Escrow Account shall be maintained by the Escrow Trustee
until all
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purposes set forth in this Agreement with respect to such Escrow Account have
been satisfied.
"Escrow Trustee" means the escrow trustee designated in
writing by Buyer and Seller to carry out such functions in accordance with this
Agreement, together with its successors and assigns.
"Excluded Site" has the meaning set forth in Section 4.9(a)
hereof.
"Executory Contracts and Leases" has the meaning set forth in
Section 3(B) hereof.
"Hydrocarbon Contamination" means the petroleum hydrocarbons
and other chemicals associated with the gasoline station formerly existing on
the B&D Site.
"Indemnities" means one or more environmental indemnity
agreements relating to any Acquired Site, substantially in the form attached as
Exhibit A(1) hereto, as modified in accordance with Section 4.5 hereof.
"Indemnity Obligation" means all (i) indemnity obligations
under paragraph 2.3.2 of the Lease in respect of the Company's relocation from
Berth 205, Pier F in the City of Long Beach, to the Berth 118 Site; and (ii)
"Indemnity Obligations" as defined in the Stipulation.
"Joint Venture Party" means Birmingham Steel Corporation, a
Delaware corporation and any wholly-owned direct or indirect affiliate thereof.
"Lease" means that certain Lease between Hiuka America
Corporation and the City of Long Beach dated November 5, 1992.
"Mitsui" means Mitsui & Co., Ltd., a Japanese corporation.
"Monetary Obligations to Port" means the obligations to pay
money under the Lease, including by example and without limitation any
obligations under the Lease to pay: rent, "Base Rent" and "Tariff Charges" (as
such terms are defined or described in the Lease), taxes, assessments, and
governmental or district charges, dockage charges, wharf and other storage
charges, demurrage charges, wharf demurrage charges, wharfage charges on bunker
fuel, payments owing for utilities, attorneys' fees, costs of suit, charges and
other sums payable directly or indirectly under applicable tariffs, laws,
ordinances or regulations, or which are or may become a lien against or somehow
attach to the Berth 118 Site or to any improvement thereon, but excludes without
limitation the Indemnity Obligation, Post-Closing Paragraph 16 Obligations,
Pre-Closing Paragraph 16 Obligations and obligations under paragraph 15 of the
Lease relating to liens arising on or prior to the Closing (including without
limitation Mechanic's Liens as defined in the Stipulation).
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"Motion" means the "Motion of Trustee and Committee for Order:
(1) Approving Bidding Procedures, etc.," filed with the Bankruptcy Court on or
about April 26, 1996.
"Non-Monetary Obligations to Port" means the obligations under
the Lease to do things other than pay money, including by example and without
limitation any obligations under the Lease to maintain the Berth 118 Site in any
particular condition, to construct improvements thereon or to create plans
therefor, but excludes without limitation the Indemnity Obligation, Post-Closing
Paragraph 16 Obligations, Pre-Closing Paragraph 16 Obligations and obligations
under paragraph 15 of the Lease relating to liens arising on or prior to the
Closing (including without limitation Mechanic's Liens as defined in the
Stipulation).
"Orix Lease" means that certain Lease by Hiuka America
Corporation with Orix USA Corporation for a Lindemann Shearing Machine, model LU
1000/10 (also known as "PA75 Automatic Shear"), serial no. 636003M00, and
related accessories and attachments, dated March 28, 1995.
"Post-Closing Paragraph 16 Obligations" means obligations of
the tenant under paragraph 16 of the Lease arising out of events occurring or
performance by the tenant to be made after the Closing Date.
"Pre-Closing Paragraph 16 Obligations" means obligations of
the tenant under paragraph 16 of the Lease arising out of events occurring or
performance by the tenant to be made up to and including the Closing Date,
excluding indemnifiable claims under the Indemnities and the Site Access
Agreements.
"Purchase Price" has the meaning set forth in Section 4.2
hereof.
"Purchased Assets" has the meaning set forth in Section 3
hereof.
"Real Estate" has the meaning set forth in Section 3(C)hereof.
"RMD Agreement" has the meaning set forth in Section 8.9(c)
hereof.
"Schnitzer" means Schnitzer Steel Industries, Inc., a
California corporation.
"Seller" means R. Todd Neilson, in his capacity as Chapter 11
Trustee for Hiuka America Corporation.
"Site Access Agreements" means one or more site access
agreements executed by Mitsui or Buyer in connection with the Transaction.
"Stipulation" means that certain stipulation between Seller
and the City of Long Beach, as set forth in Exhibit C hereto.
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"Tonnage Drop-Off" means, with respect to either B&D or
Allways, a decrease in the average monthly tonnage of ferrous scrap purchased
during the pendency of a bankruptcy proceeding with respect to B&D or Allways,
as appropriate, measured against the average monthly tonnage of ferrous scrap
purchased during (with respect to B&D) calendar year 1996 prior to the
commencement of B&D's bankruptcy proceeding and (with respect to Allways) during
the period from April 1, 1996 to the commencement of Allways' bankruptcy
proceeding.
"Transaction" has the meaning set forth in Recital 1(D) hereof.
"Transaction Documents" has the meaning set forth in Section
4.5 hereof.
"Weiner" means Weiner Steel Corporation, a California
corporation.
"Weiner Assets" means (i) all tangible personal property
covered in Section 3(A) hereof, owned by the Company or any Affiliate, located
at the Weiner Site on the Closing Date, (ii) all tangible personal property
covered in Section 3(A) hereof located at the Weiner Site at any time on or
after May 10, 1996, that, on the Closing Date, is not located at the Weiner Site
because of off-site repair or because such property was located at the premises
of another person (including an affiliate of the Company), a customer or
supplier, (iii) all tangible personal property covered in Section 3(A) hereof
generally used at the Weiner Site on or before the Closing Date but which, on
the Closing Date is not located at the Weiner Site because of off-site repair or
because such property is located at the premises of a customer or supplier, (iv)
all of Weiner's interests in respect of any Executory Contracts and Leases
(other than interests, rights and obligations in real property) relating to the
assets described in clauses (i), (ii) and (iii) of this definition, and (v)
Purchased Assets of Weiner set forth in Sections 3(D), 3(E), 3(F) and 3(G)
relating to the assets described in clauses (i), (ii), (iii) and (iv) of this
definition.
"Weiner Site" means the interests in real property that are
the subject of (i) that certain Rental Agreement dated as of May 22, 1993, by
and between H & L Tooth Company, as landlord and Weiner Steel Corp., as tenant,
relating to premises located at 1540 South Greenwood Avenue, Montebello,
California; (ii) that certain Lease executed on November 2, 1994 by H & L Tooth
Company, as lessor, and on November 17, 1994 by Weiner Steel Corp., as lessee,
relating to premises located at 1540 South Greenwood Avenue, Montebello,
California; (iii) that certain Rental Agreement dated as of November 15, 1991,
by H&L Tooth Company, as landlord, and Weiner Steel Corp., as tenant, relating
to premises located at 1535 Gage Avenue, Montebello, California; and (iv) that
certain Rental Agreement dated as of February 1, 1996, by H&L Tooth Company, as
landlord, and Weiner Steel Corp., as tenant, relating to premises located at
1545 Gage Avenue, Montebello, California.
3. TRANSFER OF ASSETS. Subject to the terms and conditions of
this Agreement, on the Closing Date, Seller and Affiliates will sell, convey,
transfer, assign
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and deliver to Buyer, and Buyer will purchase from Seller and Affiliates all of
Seller's and Affiliates' right, title and interest in and to the following
assets and properties, free and clear of all liens, encumbrances and interests
(except for any permissible liens, encumbrances or interests relating to the
Real Estate in accordance with Section 8.6 of this Agreement) (the "Purchased
Assets"):
A. All tangible personal property in the categories
described in clauses (i) through (iv) of this Paragraph 3(A) (or any of
them): (i) located at any Acquired Site on the Closing Date, (ii)
located at any Acquired Site at any time on or after May 10, 1996,
that, on the Closing Date, is not located at any Acquired Site because
of off-site repair or because such property is located at the premises
of another person (including an affiliate of the Company, a customer or
supplier), (iii) generally used at any Acquired Site on or before the
Closing Date but which, on the Closing Date, is not located at any
Acquired Site because of off-site repair or because such property is
located at the premises of a customer or supplier, and (iv) listed
under the heading "Tangible Assets" in Schedule 3(A)(1). Those assets
listed on Schedule 3(A)(2) and any assets excluded from the Purchased
Assets at the Closing pursuant to Section 4.2 hereof are excluded from
this paragraph 3(A). The following is excluded from paragraph 3(A) and
the items enumerated on Schedule 3(A)(1): tangible personal property
which is held by Seller, the Company or any Affiliate under documents
entitled (or which otherwise prominently identify themselves as)
"leases" or "rental agreements," except that the following items are
included in this paragraph 3(A): (a) items listed as "Enumerated
Assets" in Schedule 3(A)(1) (designated by paragraph 1 of that
Schedule), (b) interests in tangible personal property held under
leases or executory contracts listed in Schedule 3(B), and (c) tangible
personal property held (x) under leases or executory contracts between
the Company and any Affiliate or between any Affiliate and any other
Affiliate, and (y) (other than items listed in Schedule 3(A)(2)), under
leases or executory contracts between the Company or any Affiliate, on
the one hand, and another affiliate of the Company, on the other.
B. All real and personal property leases and
executory contracts of the Company and Affiliates, if and only if
described or identified under the heading "Executory Contracts and
Leases" in Schedule 3(B), excluding any assets excluded from the
Purchased Assets at the Closing pursuant to Section 4.2 hereof (the
"Executory Contracts and Leases").
C. The real estate described under "Real
Estate" in Schedule 3(C), and any improvements thereon (the "Real
Estate").
D. Any insurance proceeds received by Seller or
the Company or Affiliates as a result of any loss, damage or
disappearance relating to any of the foregoing assets to be purchased
or assumed by Buyer which occurs after
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May 10, 1996 and prior to the Closing and not applied by Seller or the
Company or Affiliates to remedy such loss, damage or disappearance.
E. Intellectual or other intangible rights or
property of the Company or Affiliates owned on May 10, 1996 or acquired
on or prior to the date of the Closing relating to the ferrous and
nonferrous scrap and related businesses of the Company or Affiliates,
including without limitation, supplier and customer lists, software,
data stored on computer disks and tapes, books, records and other
information relating thereto (other than those subject to
attorney-client privilege or third party privacy rights, which are
disclosed to Buyer on or prior to Closing). However, (i) claims or
causes of action of the Company or Affiliates (other than rights to
insurance proceeds, discussed above in Section 3(D)) relating to events
occurring prior to the Closing shall not be included, except that a
particular claim or cause of action shall be included to the extent,
and only to the extent, that the exclusion of such claim or cause of
action would materially reduce the value of any assets purchased by
Buyer as of the Closing Date; and (ii) claims under any policy with
respect to actions of the Company's or Affiliates' management, officers
and directors and the following assets of the Company designated in
Section B of the Motion as "additional property of the estate for which
bids are not being solicited" shall not be included: (a) cash or cash
equivalents; (b) deposit accounts, security deposits and other
deposits; (c) interests in insurance policies (except interests in two
insurance policies on the life of Stephen Weiner set forth on Schedule
3(B) hereto and rights to insurance proceeds discussed above in Section
3(D)); (d) interests in other entities (e.g., the stock of KIC
Acquisition Co. (which in turn owns the stock of Kaiser International
Corporation) and the 50% stock interest in Hi-Way Industrials, Inc.);
(e) interests in a condominium unit located at 600 West 9th Street,
Unit 813, Los Angeles, CA 90015; (f) existing accounts receivable,
related party receivables and intercompany receivables; (g) refund or
insurance claims including worker's compensation refunds, legal
retainers, supplier advances, and other advances; (h) contract rights
for worker's compensation profit-sharing; (i) memberships in country
clubs and other organizations; (j) bankruptcy avoidance or strongarm
actions or claims; (k) any choses in action, claims, counterclaims, or
rights of setoff or recoupment, whether arising in tort or contract;
and (l) claims to the sale proceeds of any asset sold or assigned
through the Transaction (other than interests in Escrow Accounts
established hereunder).
F. All books and records (other than personnel
records of the Company's or any Affiliate's employees not hired by
Buyer within ten (10) business days of the Closing Date or which
otherwise cannot be disclosed in accordance with applicable law) and
all files, documents, papers and agreements pertaining to the Purchased
Assets or otherwise to the business of the Company and Affiliates that
are material to recommencing the operations of the Company and
continuing the operations of Affiliates as going concerns (other than
those books, records, files, documents, papers and agreements
pertaining to the Purchased Assets or the business of the Company or
the Affiliates that are subject
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to attorney-client privilege or subject to any third party rights and
disclosed to Buyer on or prior to Closing and then only to the extent
inconsistent with such rights) and which are in the possession of
Seller or any of the Affiliates, or with respect to records in the
possession of governmental agencies that could with Seller's reasonable
effort be made available to Buyer at their then locations, subject to
Seller and any Affiliate retaining copies of the same, if and as he or
it so chooses and subject to any rights of any third party. Seller and
any Affiliate, as the case may be, shall preserve the confidentiality
of all proprietary information contained in such copies, except where
the disclosure of such proprietary information is required by law and
except where necessary or appropriate in connection with the
administration of the bankruptcy estate of the Company or bankruptcy
cases of Affiliates.
G. All transferable business licenses, permits and
equivalent documents relating to the ferrous and non-ferrous scrap and
related businesses of the Company and Affiliates, subject to Buyer
paying all fees required by the applicable governmental entities in
connection with such transfer.
4. CLOSING / PURCHASE PRICE.
4.1 Closing. The Closing shall take place at the offices of
O'Melveny & Myers LLP, 400 South Hope Street, Los Angeles, California, at 9:00
a.m., local time, on the latest to occur of (i) November 15, 1996; (ii) upon the
satisfaction of the conditions set forth in Sections 8 and 9 hereof; or (iii)
such other date as may be mutually agreed upon in writing by Seller and the
Affiliates, on the one hand, and Buyer, on the other hand (the "Closing Date").
4.2 Purchase Price. The aggregate purchase price for the
Purchased Assets (the "Purchase Price") shall be in the amount of $36,930,000
less only (i) $3,000,000, representing all price adjustments agreed to between
Buyer, on the one hand, and Seller and Affiliates, on the other hand, as of the
date of execution hereof; (ii) adjustments to reflect the exclusion of assets
from the Purchased Assets, which adjustments are permitted only based upon the
inability or failure of Seller or any of Affiliates on the Closing Date to
deliver good and marketable title to any such excluded assets, free and clear of
all liens, encumbrances and interests (except for any permissible liens,
encumbrances or interests relating to the Real Estate approved by Buyer in
accordance with Section 8.6 of this Agreement), provided that Buyer shall not be
entitled to any adjustment to the Purchase Price solely because Seller or
Affiliates are unable to produce documents or other evidence of ownership of
individual items of tangible personal property comprising Purchased Assets,
except in the case of motor vehicles that are both (i) designated Enumerated
Assets in paragraph 1 of Schedule 3(A)(1) hereto, and (ii) ownership of which is
registered with the California Department of Motor Vehicles or any other
appropriate governmental agency; (iii) adjustments to reflect all liabilities
assumed by Buyer related to employees' accrued vacation time in accordance with
Section 7.6 hereof, (iv) adjustments to reflect uninsured damage (whether
uninsured
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by reason of the amount of any deductible, limitations on coverage or otherwise)
to Purchased Assets between May 10, 1996 and the Closing, (v) adjustments to
reflect the exclusion of certain Purchased Assets in accordance with Section 4.9
hereof; and (vi) adjustments to reflect the exclusion of certain Purchased
Assets in accordance with Section 4.10 hereof. In the event of a dispute as to
the amount or existence of any such adjustment set forth in clauses (ii), (iii),
(iv), (v) or (vi) above, the dispute shall be determined by arbitration in
accordance with Section 11.9 hereof. If such arbitration proceedings have not
been concluded by the Closing, at the Closing any amount under arbitration shall
be paid by Buyer into an Escrow Account to be held pending final determination
of the arbitration award and thereafter remitted (together with interest
thereon) to Buyer, Seller and Affiliates, as applicable, in accordance with such
arbitration award. So long as Seller and Affiliates transfer good and marketable
title to materially all of the Purchased Assets to be transferred at the Closing
pursuant to the terms and provisions hereof, Buyer's exclusive remedy by reason
of Seller's or the Affiliates' failure or inability to transfer good and
marketable title shall be to exclude such assets from the Purchased Assets at
the Closing and receive an adjustment to the Purchase Price as provided in
clause (ii) of this Section 4.2.
4.3 Payment to Seller at Closing. At the Closing, Buyer shall
pay the Purchase Price (with the amount paid to Seller and Affiliates to be
adjusted pursuant to Section 4.2 and reduced to reflect the placement of funds
in one or more Escrow Accounts in accordance with this Agreement) by a bank
cashier's check or a wire transfer in immediately available funds based on wire
transfer instructions to be provided to Buyer by Seller and Affiliates, as
applicable, (i) as determined by Seller as follows: $900,000 to Allways,
$3,200,000 to B&D, $3,000,000 to Weiner, and $26,830,000 (less the amount of the
Deposit) to Seller; provided, however, that, if the Purchase Price (as adjusted)
is reduced below $33,930,000 in accordance with the terms and conditions of this
Agreement, the amount to be paid to Seller and each Affiliate shall be reduced
pro rata; or (ii) as the Seller may otherwise instruct the Buyer in writing.
However, in all events, Seller shall (x) use diligent efforts to re-allocate to
Affiliates up to $2,500,000 of the Purchase Price allocated in clause (i) above
to Seller to result in an aggregate allocation of up to $9,600,000 (inclusive of
the portion of the Purchase Price allocated to Affiliates pursuant to clause (i)
above) designated for all Affiliates, but only to the extent necessary to enable
Affiliates to pay, satisfy or set aside adequate funds with respect to all of
each Affiliate's then-known claims, debts and obligations not otherwise
satisfied or released at the Closing; and (y) not reduce the allocation to any
Affiliate below the amount set forth in clause (i) above, without the prior
written consent of the Affiliate receiving the reduced allocation.
4.4 Deposit. Prior to the date hereof, Buyer has deposited
$1,500,000 in cash with Seller, which Seller has held in trust in an
unencumbered interest bearing account subject to refunds and draw-downs, as
referred to in Section I.C(1)(u) of the Motion (but not subject to Section
I.C(1)(u)(iii) of the Motion) or otherwise herein (the "Deposit"). Seller has
drawn-down from the Deposit in order to pay expenditures related to business
operations and management of the Company and Affiliates $1,000,000 of the
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Deposit (Seller having made the first two such drawdowns following the Auction
Hearing). Seller may, following but only following the satisfaction of the
conditions set forth in either clause (i) or (ii) of Section 8.19 hereof) draw
down from the Deposit the remaining $500,000 of the Deposit in order to pay
expenditures related to business operations and management of the Company and
Affiliates. Drawn down amounts shall be held in trust in an unencumbered account
or accounts (which account or accounts must be interest bearing until at most 10
days prior to expenditure) until such amounts are actually expended by Seller in
connection with the business operations and management of the Company and
Affiliates. Refunds of the Deposit, including portions thereof drawn down, shall
be accomplished as set forth in Section I.C(1)(u) of the Motion (excluding
Section I.C(1)(u)(iii) of the Motion), except that if this Agreement terminates
in accordance with its terms, other than as a result of Buyer's default
hereunder (including, without limitation, a termination pursuant to Sections
10.1, 10.5, 10.6 or 10.7 hereof, whether such termination occurs by passage of
time or an election by Buyer to terminate), or upon the failure of any condition
to Buyer's obligation to purchase the Purchased Assets set forth herein, (i) all
of the Deposit and interest thereon, net of any amounts previously drawn down
from such Deposit and actually expended on the business operations and
management of the Company or its affiliates, shall be returned in cash to Buyer
immediately without deduction for claims in the bankruptcy or otherwise, and
(ii) Buyer's right to a refund of such drawn down and expended portion of the
Deposit shall have the priority of a priority claim pursuant to Bankruptcy Code
Section 507(a)(2).
The Deposit (together with interest earned thereon) will be
credited to the Purchase Price payable to Seller as set forth in Sections 4.2
and 4.3, notwithstanding Section I.C(1)(u)(iii) of the Motion or any delays in
consummating the Transaction, whether or not such delays are attributable to
Buyer.
4.5 Instruments of Conveyance and Transfer. On the Closing
Date, Seller and Affiliates, as applicable, shall execute and deliver to Buyer
(a) bills of sale quitclaiming title to all personal property included in
Purchased Assets, (b) an assignment and assumption agreement (the "Assignment
and Assumption Agreement") relating to all Executory Contracts and Leases, and
(c) quitclaim deeds in recordable form for the Real Estate, each in form and
substance reasonably satisfactory to Buyer and Seller, together with such other
documents as may be reasonably requested by Buyer in order to carry out the
Transaction (collectively, together with the Confidentiality Agreements, each
guaranty agreement executed in connection with Section 7.11 hereof, the
Environmental Agreements and all other documents executed in connection with the
consummation of the Transaction, the "Transaction Documents").
Buyer and Seller shall, immediately following the execution
and delivery hereof, meet and negotiate in good faith the form and content of
the Transaction Documents which shall be completed by 11:59 p.m., November 10,
1996. As to the Environmental Agreements, subject to Sections 4.9(f) and 4.10
hereof, the documents comprising the Environmental Agreements are to be
substantially in the form attached as
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Exhibits A(1) and A(2) hereto, except that (i) a provision shall be incorporated
into the Indemnities pursuant to which the parties consent and agree that
jurisdiction and venue for all disputes arising thereunder shall be in an
appropriate court in Los Angeles County, California (other than any bankruptcy
court); (ii) the parties to be released under the Declarations shall be modified
to coincide with the parties indemnified under the Indemnities; (iii) Section 16
of the Indemnities shall be modified to include the "Limited Indemnified
Parties" as third party beneficiaries of the Indemnities; (iv) Section 1.2 of
the Indemnities shall be modified to clarify that the term "Governmental Agency"
includes not only governmental agencies or instrumentalities of the United
States and states and political subdivisions thereof with jurisdiction over the
parties covered by the Indemnities, but also those with jurisdiction over the
environmental condition thereof or environmental matters relating thereto; (v)
the recitals in the Environmental Agreements shall be modified to properly
describe this Agreement, the fee and leasehold interests being transferred and
assigned pursuant to this Agreement, and the persons and entities transferring
and assigning such interests, as the case may be; (vi) the Environmental
Agreements shall include in their coverage each Acquired Site other than any and
all Acquired Sites (including, without limitation, the Excluded Site) which may
be excluded from the Purchased Assets in accordance with the provisions of
Section 4.9 or 4.10 hereof; and (vii) the Declaration shall be modified to
include a provision to the effect that the releases provided for therein shall
be binding on Buyer, upon execution and delivery on the Closing Date, whether or
not such Declaration is ultimately recorded in the real estate records. In no
event shall the Environmental Agreements cover any Acquired Site unless and
until such Acquired Site is acquired by Buyer.
4.6 Assumption of Liabilities.
(a) Responsibilities of Buyer. On the Closing Date, Buyer
shall execute and deliver to Seller and Affiliates the Assignment and Assumption
Agreement, which shall provide that (i) Buyer shall assume and agree to pay,
perform and discharge when due, (aa) all liabilities arising out of events
occurring or performance to be made after the Closing Date under Executory
Contracts and Leases (including without limitation Post-Closing Paragraph 16
Obligations and Monetary Obligations to Port arising out of events occurring or
performance by the tenant to be made after the Closing Date) and (bb)
Non-Monetary Obligations to Port, but (ii) Buyer shall not assume or be
responsible for Monetary Obligations to Port arising out of events occurring or
performance by the tenant to be made up to and including the Closing Date, the
Indemnity Obligation, Pre-Closing Paragraph 16 Obligations, or obligations under
paragraph 15 of the Lease relating to liens arising on or prior to the Closing
(including without limitation Mechanic's Liens as defined in the Stipulation).
Except as expressly provided herein, Buyer shall not assume any liabilities of
any kind or nature of Seller, the Company or any Affiliate, whether or not
matured, and whether contingent or otherwise.
(b) Responsibilities of Seller and Affiliates. Seller
and Affiliates shall be responsible for any and all arrearages and cure amounts
owing up to and including the Closing Date, and all liabilities arising out of
events occurring or performance to be
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made up to and including the Closing Date, under Executory Contracts and Leases
(other than Non-Monetary Obligations to Port), including without limitation
Monetary Obligations to Port arising out of events occurring or performance by
the tenant to be made up to and including the Closing Date, Pre-Closing
Paragraph 16 Obligations and obligations under paragraph 15 of the Lease
relating to liens arising on or prior to the Closing (including without
limitation Mechanic's Liens as defined in the Stipulation, but specifically
excluding those obligations under paragraph 15 of the Lease relating to liens
arising out of "work", as defined in the Site Access Agreements). Seller agrees
that, as required by Section 3 of the Stipulation, he will reserve from the
proceeds of the Transaction the sum of $565,000 which will be set aside for the
payment of such Mechanic's Liens if and when and only to the extent that the
Bankruptcy Court determines that such Mechanic's Liens are due and payable, with
payment or reduction of such reserve to be in accordance with any applicable
Bankruptcy Order. Without creating any implication with respect to the
interpretation of any other provision of this Agreement, this Section 4.6(b)
shall not create any rights in favor of third parties.
(c) Segregated Account. On the Closing Date, for the purpose
of paying arrearages and cure amounts owing, Seller and Affiliates (as
appropriate) shall set aside out of the Purchase Price in a segregated account
or accounts an amount equal to the aggregate of all arrearages and cure amounts
asserted by counterparties to the Executory Contracts and Leases (except as
otherwise permitted or required by any court order). Seller and Affiliates (as
appropriate) may withdraw amounts from the segregated account or accounts to pay
arrearages and cure amounts upon the approval of the Bankruptcy Court or as
otherwise permitted by court order.
(d) Orix Lease. Notwithstanding anything to the contrary in
this Agreement, in the event that Buyer fails to obtain prior to the Closing the
consent of the lessor under the Orix Lease to the assignment of the Orix Lease
to Buyer, the Orix Lease shall conclusively be deemed excluded from Executory
Contracts and Leases and Seller's assignment thereof to Buyer shall not be a
condition to Buyer's obligation to consummate the Transaction.
(e) Underwater Survey and Cleanup. In respect of the
obligations under paragraph 11.4 of the Lease to complete by February 28, 1997 a
survey of submerged land, Seller may in his discretion fulfill such obligation
prior to Closing and, if he does not, Buyer shall fulfill such obligation after
Closing and on or prior to February 28, 1997. In respect of the obligation to
clean up items found by the aforementioned survey (based on the provision in
paragraph 11.4 of the Lease requiring the tenant to keep the submerged land free
and clear of debris), Seller may in his discretion cause such cleanup prior to
Closing and, if he does not, Buyer shall cause such cleanup prior to May 31,
1997. Buyer and Seller shall each reimburse the other for one half of the
reasonable costs incurred in obtaining the underwater survey and the cleanup
described in this Section 4.6(e), provided that an invoice for such costs
incurred is presented to the reimbursing party within 45 days of the rendering
of services for which reimbursement is sought.
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(f) Interpretation. (i) As between Buyer and Seller, this
Section 4.6 governs as to obligations under the Lease, notwithstanding any
apparently inconsistent provision of the Further Stipulation Between the Trustee
and City of Long Beach Regarding Port Lease dated October 30, 1996, and (ii) the
Site Access Agreements and the Environmental Agreements have full force and
effect as to their subject matters, and the terms and provisions thereof shall
control in the event of any inconsistency with the terms of this Section 4.6.
4.7 Prorations. All of the types of obligations for which
Buyer, on the one hand, and Seller or Affiliates, on the other hand, both would
be liable under Executory Contracts and Leases in accordance with Section 4.6
hereof and all utility charges, real or personal property taxes and assessments,
both general and special, and rental payments and charges and the like which are
attributable to any of the Purchased Assets (including Executory Contracts and
Leases) shall be apportioned between Buyer, on the one hand, and Seller and
Affiliates, on the other hand, as of the Closing Date. Any item which relates to
the period up to and including the Closing Date shall be apportioned to Seller
and Affiliates and any item which relates to the period after the Closing Date
shall be apportioned to Buyer; provided, however, that this Section 4.7 shall
not require Seller or B&D or Allways to pay any amounts in respect of any
pre-petition claim not "secured" (as defined in 506(a) of the Bankruptcy Code)
by a Purchased Asset. The net amount of any unpaid obligations apportioned to
Seller or Buyer pursuant to this Section 4.7 shall be paid in cash by Seller or
Buyer (as applicable) upon final determination of the amount of each such unpaid
obligation.
4.8 Allocation of Purchase Price. Buyer shall have the right
to allocate the purchase price of the Purchased Assets, including, without
limitation, separate allocations for each parcel of Real Estate, and allocations
attributable to liabilities assumed by Buyer. Buyer shall indemnify, defend and
hold Seller and Affiliates harmless from any and all claims, demands, fines,
penalties, damages, liabilities, losses, costs, expenses, assessments,
settlement payments and judgments of any nature whatsoever (including attorneys'
fees and other costs and expenses incident to any claim, suit, action or
proceeding) resulting from any action of, or actual or asserted obligation to,
any taxing authority relating to Seller's or any Affiliate's acquiescence to
Buyer's allocation. Buyer and Seller agree (i) to jointly complete and
separately file Form 8594 with their respective federal income tax returns for
the tax year in which the Closing Date occurs, and (ii) that neither Buyer nor
Seller will take a position on any income or gains tax return before any
governmental agency charged with the collection of any such tax or in any
judicial proceedings that is in any manner inconsistent with the terms of such
allocation, without the written consent of Buyer. Nothing contained in this
Section 4.8 shall (i) require Seller or any Affiliate to participate in any
fraud on any taxing authority or governmental entity, or (ii) prohibit the
payment of the Purchase Price in accordance with Section 4.3 hereof.
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4.9 Severance of the B&D Site.
(a) Mitsui elected, by written notice to Seller on September
18, 1996, to exclude from Purchased Assets that portion of the B&D Site set
forth on Exhibit B hereto (subject to adjustment in accordance with Section
4.9(c), the "Excluded Site"). In the event that substantive legal impediments
under subdivision or other laws or regulations lead to the inability to
accomplish the requested subdivision of the Excluded Site, or in the event that
Buyer determines that proceeding with such subdivision would be impracticable
(because of costs and expenses relating to such subdivision or other burdens
other than potential environmental liability), Buyer, within ten days following
a final determination of such inability or impracticability, shall notify Seller
of (i) the inclusion or exclusion of the entire B&D Site or such portion as may
be necessary to accomplish such subdivision, and (ii) any B&D Assets that Buyer
elects to exclude from Purchased Assets and reconvey to Seller or B&D, as
appropriate, with a downward adjustment to the Purchase Price calculated in
accordance with Section 4.9(b) hereof (provided that in no event shall any
Executory Contract or Lease, once conveyed to Buyer, be reconveyed to Seller).
In the event that Buyer elects to exclude and reconvey to Seller or B&D, as
appropriate, all or a portion of the B&D Assets in accordance with the
foregoing, Seller or B&D, as appropriate, shall within 45 days of the notice of
such election remove or cause to be removed B&D Assets owned by it from any
portion of the B&D Site not owned by it. Upon the earlier of such removal or the
expiration of such 45 day period, Buyer shall bear no risk or liability in
connection with any loss or destruction of or damage to any such asset during
the period which such asset remains on the B&D Site.
(b) The amount of any downward adjustment to the Purchase
Price contemplated by Section 4.9(a) above shall be (i) in the event the entire
B&D Site (and any or all or none of the B&D Assets are excluded from the
Purchased Assets), $2,400,000 in respect of the B&D Site and the B&D Assets; and
(ii) in the event that less than the entire B&D Site is excluded from the
Purchased Assets, such amount (in no event more than $2,400,000) as shall be
determined by mutual agreement between Buyer and Seller and, if mutual agreement
cannot be timely reached, by an arbitration proceeding held in accordance with
Section 11.9 hereof, provided, however, that in no event shall a further
reduction to the Purchase Price be made with respect to the Excluded Site.
(c) The boundary lines of the Excluded Site, as set forth on
Exhibit B hereto, are subject to adjustment to ensure complete containment of
the Hydrocarbon Contamination if, following an examination of the B&D Site,
GeoMatrix Consulting, Inc. (or another nationally-recognized environmental
consulting firm selected by Buyer to conduct such examination) reasonably
determines (which determination must be made, if at all, within 30 days
following execution and delivery of this Agreement) that the boundary lines set
forth on Exhibit B hereto fail to completely contain the Hydrocarbon
Contamination within the Excluded Site. Such adjustments to the boundary lines
of the Excluded Site shall not result in an adjustment to the Purchase Price.
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(d) If it is not possible to accomplish the subdivision or
severance of the Excluded Site prior to the Closing, the portion of the B&D Site
to be conveyed to Buyer shall not be conveyed at the Closing, but shall be
conveyed immediately upon completion of such subdivision or severance and (i)
Buyer shall be entitled to use, lease or license such portion of the B&D Site
(other than the Excluded Site) as Buyer elects, pursuant to a written lease or
license agreement in form reasonably acceptable to Buyer and Seller (to be
executed by Buyer and Seller) until subdivision, severance or exclusion of the
Excluded Site, for such purposes consistent with the current and past use of the
B&D Site (and only for such purposes), as it is legally permissible to do,
provided that no rent or fees shall be payable by Buyer other than payment of
the Purchase Price and the payment of amounts pursuant to Section 4.9(e) below
and the other provisions of this Section 4.9; and (ii) Buyer shall be entitled
to remove any or all B&D Assets acquired by Buyer from any portion of the B&D
Site not so used, leased or licensed by Buyer. Following the Closing, Buyer
shall, except as provided in Section 4.9(a) above, bear all risk and liability
in connection with any loss or destruction of or damage to or caused by any B&D
Asset acquired by Buyer.
(e) In the event that the requested subdivision or severance
of the Excluded Site is not accomplished on or prior to the Closing Date, as
additional consideration for the use and enjoyment of the portion of the B&D
Site (other than the Excluded Site) used, leased or licensed by it, Buyer shall
be responsible for the payment of (which shall be reflected in a written lease
or license agreement) the following with respect to such portion of the B&D Site
(other than the Excluded Site) from the date of its first possession of such
premises to and including the date that Buyer acquires such portion of the B&D
Site or the date that the B&D Site has both been vacated by Buyer and excluded
from the Purchased Assets in accordance with Section 4.9(a) above:
(i) All taxes and assessments of any nature whatsoever,
including but not limited to excise taxes, ad valorem taxes, ad valorem
and specific lien special assessments and gross receipts taxes, if any,
levied upon or applicable to such portion of the B&D Site (other than
the Excluded Site);
(ii) Insurance premiums on all property and liability
insurance in respect of such portion of the B&D Site and the B&D
Assets, which Buyer shall arrange with substantially the same coverage
as maintained by Seller on the Closing Date; and
(iii) Any other fees, costs, charges and expenses (including,
without limitation, utility charges and maintenance and repair costs)
arising in connection with or relating to Buyer's use and occupancy of
the B&D Site (excluding Seller's legal fees and expenses).
In no event shall Mitsui or Buyer be responsible for any costs, fees, expenses
or liabilities of any kind relating to the transactions contemplated by Section
4.9(d)(i) other than
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those expressly provided for in this Section 4.9(e), Section 4.9(g) below, or in
the written lease or license agreement executed by Buyer under Section 4.9(d)
above.
(f) Without limiting Buyer's obligations under Section 4.9(g)
below, the Environmental Agreements shall be modified to exclude therefrom
coverage of any and all indemnities and other obligations and liabilities of or
relating to Mitsui or Buyer with respect to any portion of the B&D Site until
such time, if any, as Seller conveys to Buyer good and marketable title thereto,
free and clear of all liens, encumbrances and interests (except for any
permissible liens, encumbrances or interests relating to the Real Estate as set
forth in Section 8.6 of this Agreement). If Buyer does not acquire the Excluded
Site, the Environmental Agreements shall exclude coverage of the Excluded Site.
Mitsui shall in all events remain liable under each Site Access Agreement to
which it is a party.
(g) Buyer shall indemnify, defend and hold Seller harmless
from any and all claims, demands, damages, liabilities, losses, costs, expenses,
assessments, settlement payments, fines, penalties, actions, causes of action,
obligations and judgments of any nature whatsoever (including attorneys' fees
and other costs and expenses incident to any claim, suit, action or proceeding)
suffered or incurred by Seller to any person or entity as a result of the use or
occupancy of the B&D Site by Buyer, including, without limitation, any of the
foregoing incurred by Seller relating to environmental contamination caused by
Buyer's use or occupancy.
(h) In the event that the requested subdivision or severance
of the Excluded Site is not accomplished on or prior to the Closing Date, Buyer
shall remit $2,400,000 of the Purchase Price into a separate Escrow Account to
be held, for a period (the "escrow period") not exceeding 180 days following the
Closing, pending the requested subdivision or severance of the Excluded Site
from the B&D Site. In all events, interest earned on such escrowed funds shall
belong to Seller to the extent such interest earnings are paid as "adequate
assurance" payments to lenders whose obligations are secured by the B&D Site.
Any remaining interest earned on such escrowed funds shall be apportioned in
accordance with the payment to Buyer or Seller of such escrowed funds. Within
ten (10) days prior to the expiration of the escrow period, Buyer and Seller
shall meet to discuss in good faith an extension thereof (provided that among
the bases on which Seller may refuse to agree to such an extension would be the
absence of reasonable prospects to effect a subdivision or severance within a
reasonable time or the lack of consent by lenders whose loans are secured by the
B&D Site). If at any time prior to the expiration of the escrow period, as the
same may be extended, Buyer makes a final determination in accordance with
Section 4.9(a) hereof to: (i) exclude the entire B&D Site, the $2,400,000
deposit in such Escrow Account shall be immediately returned to Buyer, or (ii)
acquire the entire B&D Site, the $2,400,000 on deposit in such Escrow Account
shall be immediately paid to Seller, or (iii) exclude a portion of the B&D Site
less than the entire B&D Site, upon the conveyance of the included portion of
the B&D Site, a portion of the $2,400,000 deposit in such Escrow Account equal
to the Purchase Price downward adjustment determined in accordance with Section
4.9(a) shall be immediately returned to Buyer and the balance of the $2,400,000
shall be immediately
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paid to Seller. Upon the expiration of the escrow period, as the same may be
extended, if Buyer has not made a final determination to include or exclude all
or a portion of the B&D Site in accordance with Section 4.9(a), then the entire
B&D Site shall be conclusively deemed excluded from the Purchased Assets and the
$2,400,000 on deposit in such Escrow Account shall be immediately returned to
Buyer.
(i) Buyer shall pay all costs in connection with the
subdivision or severance process (including, without limitation, application
fees, costs of preparing any plans or maps and any revisions thereto, costs of
any environmental impact reports and fees in connection therewith, costs of
complying with all conditions imposed in obtaining the required approvals,
including, without limitation, the costs of constructing any on-site or off-site
improvements which may be required, and the cost of posting any necessary bonds
(which may only be posted in Buyer's name) other than the cost of bonds to the
extent that they relate to the payment of property taxes with respect to the
Excluded Site, and shall be entitled to process any such subdivision or
severance of the B&D Site using its own agents and attorneys. Buyer shall
process such subdivision or severance in accordance with all applicable laws and
Seller shall have no liability in connection therewith. Each of Buyer and Seller
shall execute, or cause to be executed, such applications, documents and other
papers and use its diligent efforts to perform such further acts as may be
reasonably required or desirable to carry out the subdivision or severance of
the Excluded Site; provided that (x) Seller shall in no event be required to
join in or take any action or to sign any application, document or paper which
would have the effect of binding the B&D Site prior to the date the subdivision
or severance actually becomes effective, nor shall Buyer execute any
application, document or paper or take any action which would have such effect;
and (y) Seller shall in no event be required to initiate or join in any court
action or proceeding against any third party in connection with the proposed
subdivision or severance. Concurrently with its submission to the applicable
governmental authorities, Buyer or Seller, as the case may be, shall provide the
other with true and complete copies of all documents, applications and other
materials filed or submitted in connection with the subdivision or severance
process contemplated herein. Without limiting the generality of the foregoing,
if required by such subdivision or severance process and if permitted under
applicable law and this Agreement, Seller shall cooperate with the filing of a
lot-line adjustment application with the City of El Monte, California, including
executing, and returning to Buyer for filing, any necessary forms and
application within two days (exclusive of weekends and holidays) of Seller's
receipt thereof from Buyer.
4.10 Exclusion of Affiliates. In the event of Seller's
inability to allocate to any Affiliate sufficient cash to pay and satisfy or set
aside cash for all of such Affiliate's then-known claims, debts and obligations
that are not otherwise satisfied or released at the Closing, or in the event
that a Bankruptcy Order is not obtained by December 15, 1996 with respect to
either or both of B&D and Allways, Mitsui or Buyer, by written notice to Seller
on or prior to the Closing Date, may elect in its sole and absolute discretion
to waive Buyer's condition to consummate the transaction set forth in Sections
8.4, 8.5 and 8.8 in relation to such failure. If such election is made, the
Allways
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Site and the Allways Assets (if the failure relates to Allways), the B&D Site
and some or all of the B&D Assets (if the failure relates to B&D) and the Weiner
Site and the Weiner Assets (if the failure relates to Weiner) shall at the
option of the Buyer be excluded from the Purchased Assets at the Closing, with
pre-determined downward adjustments to the Purchase Price calculated in
accordance with the following three sentences. In the event that the Allways
Site and the Allways Assets are so excluded, the Purchase Price shall be reduced
by $1,150,000 in respect of the exclusion of both the Allways Site and the
Allways Assets. In the event that the B&D Site and the B&D Assets are so
excluded, the Purchase Price shall be reduced by $3,200,000, representing
$2,400,000 in respect of the exclusion of the B&D Site and $800,000 in respect
of the exclusion of the B&D Assets, and if the B&D Site but not the B&D Assets
are so excluded the Purchase Price shall be reduced by $2,400,000. In the event
that the Weiner Site and the Weiner Assets are so excluded, the Purchase Price
shall be reduced by $3,000,000 in respect of the exclusion of both the Weiner
Site and the Weiner Assets. In the event that any portion of the Acquired Sites
is excluded from the Purchased Assets, the Environmental Agreements shall be
modified as provided in Section 4.5 hereof to exclude such Acquired Site from
coverage thereunder. In the event that the conditions set forth in Section 9.6
would otherwise fail, Buyer at its option may elect to exclude the Weiner Site
and the Weiner Assets with an adjustment to the Purchase Price of $3,000,000, or
to exclude a particular Executory Contract or Lease that would otherwise cause
such failure (without any adjustment to the Purchase Price).
5. REPRESENTATIONS OF SELLER.
Except for the following, Seller makes no representations
whatsoever to Buyer:
5.1 No Broker. No broker, finder, agent or similar
intermediary has acted for or on behalf of Seller in connection with this
Agreement or the Transaction, and, no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with Seller or any action taken by Seller. Seller agrees to
indemnify, defend and hold Mitsui and Buyer harmless from and against damages or
costs incurred by reason of any assertions of such employment or incurrence.
Notwithstanding the foregoing, the parties acknowledge that Seller has engaged
Robert Lewon to assist in the efforts to dispose of the Purchased Assets and
agree that the Seller or Affiliates shall be responsible for the payment of all
compensation to Mr. Lewon in connection therewith.
5.2 Due Execution and Enforceability. On the date hereof,
subject to obtaining the Bankruptcy Orders, and at the Closing, the execution,
delivery and performance by Seller of this Agreement and all Transaction
Documents to which it is party have been duly and validly authorized by all
necessary action on the part of Seller and this Agreement and all Transaction
Documents to which it is a party (assuming the due execution and delivery by
Buyer) constitute the legally valid and binding obligation
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of Seller enforceable against Seller in accordance with their respective terms.
On the date which is seven days immediately following the date of execution and
delivery of this Agreement by Buyer and Seller, subject to obtaining the
Bankruptcy Orders, and at the Closing, the execution, delivery and performance
by each Affiliate of this Agreement and all Transaction Documents to which it is
party will have been duly and validly authorized by all necessary action on the
part of each Affiliate, and this Agreement and all Transaction Documents to
which it is a party shall (assuming the due execution and delivery by Buyer)
constitute the legally valid and binding obligation of each such Affiliate
enforceable against each such Affiliate in accordance with their respective
terms.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer
represents and warrants to Seller and each Affiliate as follows:
6.1 Organization. Buyer is duly organized, existing and
in good standing under the laws of its jurisdiction of organization.
6.2 Corporate Power and Authority of Buyer. Buyer has the
power and authority under its constituent documents to execute and deliver this
Agreement and to perform fully its obligations hereunder. Buyer has taken all
necessary action to authorize the execution, delivery and performance of this
Agreement and the consummation of the Transaction. This Agreement has been duly
executed and delivered by Buyer and, assuming the due execution and delivery by
Seller, constitutes the valid and binding agreement of Buyer, enforceable
against Buyer in accordance with its terms.
6.3 No Defaults. The execution and delivery of this Agreement
and the consummation of the Transaction will not conflict with or result in any
violation of Buyer's operating agreement or any statute, regulation, order,
judgment or decree applicable to Buyer or any contract or agreement to which
Buyer is a party or to which it or its assets are otherwise bound.
6.4 Financing. At the Closing, Buyer will have funds
sufficient to enable Buyer to carry out its obligations under this Agreement.
6.5 No Broker. Neither Buyer nor any of its members, agents or
employees have employed or incurred any liability to any broker, finder or agent
for any brokerage fees, finder's fees, commissions or other amounts with respect
to the transactions contemplated by this Agreement. Buyer agrees to indemnify,
defend and hold Seller and each Affiliate harmless from and against damages or
costs incurred by reason of any assertions of such employment or incurrence.
7. COVENANTS.
7.1 Permits and Consents: Modification of Leases. Each
of Seller, the Company, Affiliates and Buyer shall furnish promptly to the other
all information
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(excepting information subject to attorney-client privilege or subject to any
rights of any third party) that is in its possession and not otherwise available
to the other that the other may reasonably request in connection with any filing
with a governmental body or regulatory authority to be made by it. Seller shall
permit Buyer, if Buyer so elects, to negotiate modifications to the Executory
Contracts and Leases listed on Schedule 1(B), on terms acceptable to Buyer, such
modifications to be effective only upon consummation of the Transaction;
provided, however, that Buyer's inability to obtain such desired modifications
shall not give rise to a condition to Buyer's obligation to consummate the
Transaction.
7.2 Confidentiality; Publicity. All information disclosed in
writing and designated in writing as confidential by Buyer (or its
representatives) and Joint Venture Party (or its representatives) after the date
hereof, in connection with the transactions contemplated by, or the discussions
and negotiations preceding, this Agreement to counsel to Seller shall be kept
confidential by such counsel, Seller, Affiliates and the Company and shall not
be used other than as contemplated by this Agreement, except to the extent that
such information (i) was known by the recipient when received, (ii) is or
hereafter becomes lawfully obtainable from other sources, (iii) is necessary or
appropriate to disclose under applicable laws, including bankruptcy laws, or
(iv) to the extent such duty as to confidentiality is waived in writing by
Buyer. If this Agreement is terminated, Seller (or their respective
representatives) shall use all reasonable efforts to return upon written request
from Buyer or Joint Venture Party, respectively, all documents (and
reproductions thereof) received by them or their representatives from Buyer or
Joint Venture Party, respectively (and, in the case of reproductions, all such
reproductions made by the receiving party) that include information not within
the exceptions contained in the first sentence of this Section 7.2, unless the
recipients provide assurances reasonably satisfactory to Buyer or Joint Venture
Party, as the case may be, that such documents have been destroyed.
Buyer and Seller shall endeavor to coordinate any publicity
relating to the Transaction and this Agreement. Prior to Closing, neither party
shall issue any press release, publicity statement or other public notice
relating to the Transaction or this Agreement without active consultation with
the other party hereto, unless required or appropriate under applicable laws,
including bankruptcy laws.
7.3 Access to Books and Records.
(a) From the date hereof up to and including the Closing Date,
Buyer and its agents and Joint Venture Party and its agents shall have
reasonable access (subject to attorney-client privilege and subject to any
rights of any third party to the extent thereof) during normal business hours
and on reasonable notice to inspect or review the Purchased Assets and any
properties, books and records (whether in printed, electronic or other form)
maintained by or otherwise available to Seller, the Company or Affiliates, or
with respect to records in the possession of governmental agencies which could
with Seller's reasonable effort be made available to Buyer, relating to the
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Purchased Assets, the Company or its Affiliates. All tests and inspections
conducted by any party pursuant to this Section 7.3(a) shall be deemed to be
"Work" under the Site Access Agreements to which Mitsui's indemnification and
other obligations thereunder apply.
(b) After the Closing and prior to January 1, 1998, Seller,
each Affiliate, counsel for the Committee of Creditors Holding Unsecured Claims
in connection with the Case (the "Committee") and their respective agents
(including, without limitation, accountants) shall have reasonable access during
normal business hours and on reasonable notice to inspect (subject to
attorney-client privilege or subject to any rights of any third party) the
Purchased Assets consisting of books, records and similar tangible property
existing at or prior to the Closing Date solely with respect to administration
of the Case; provided, however, that, prior to such access any such person
requesting access shall execute in favor of Buyer a confidentiality agreement,
on terms satisfactory to Buyer and such person seeking access (which such terms
shall be consistent with Buyer seeking to prohibit dissemination of all
information contained in such books, records and similar tangible property to
competitors or potential competitors, suppliers and customers and with Seller,
the Committee and Affiliates, as applicable, seeking to gain access to such
books, records and similar tangible property solely to further the
administration of the Case and the bankruptcy cases of Allways and B&D and any
other affiliate of the Company), with respect to all information provided to
such person during such access; and provided further that in no event shall
information provided to such person during such access be provided to any member
of the Committee. Buyer shall provide such person requesting access with
reasonable space within which to conduct such inspection. To the extent
reasonably necessary in connection with the administration of the Case or any
bankruptcy case of any affiliate of the Company, including any Affiliate, or any
litigation, resolution of claims or windup of the Company, Affiliates or any
other affiliate of the Company, Seller, or the debtor or the trustee of any such
bankruptcy shall have the right to use the books and records contained in the
Purchased Assets, including, without limitation, the originals thereof, but such
originals shall be returned as soon as possible.
(c) Buyer also agrees that, for a period of nine months
following the Closing Date, it will reasonably cooperate with purchasers or
prospective purchasers of the capital stock of affiliates of the Company or of
any assets of such affiliates or of the Affiliates or the Company other than
Purchased Assets in providing access to Purchased Assets consisting of books,
records and similar tangible property existing at or prior to the Closing and
access to Buyer's employees (provided that such access does not interfere with
the conduct of the business of Buyer) who are former employees of the Company or
any Affiliate and who are knowledgeable about such assets or the business and
affairs of such other affiliates, all on reasonable terms mutually agreed by
Buyer and Seller; provided that any such purchaser or prospective purchaser
shall execute and deliver to Buyer a confidentiality agreement as described in
Section 7.3(b) above (with such terms as shall be consistent with Buyer seeking
to prohibit dissemination of all information contained in such books, records
and similar tangible property to
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competitors or potential competitors, suppliers and customers and with such
purchaser or prospective purchaser seeking to gain access to such books, records
and similar tangible property solely to assess its interest in purchasing the
capital stock of affiliates of the Company or of any assets of such affiliates
or of the Affiliates or the Company other than Purchased Assets).
(d) For a reasonable period of time following the Closing,
which shall not be less than 60 days and shall, in any event, extend for so long
as Seller, Affiliates and their respective employees, agents, attorneys and
consultants have possession of the same, Buyer and its agents shall have
reasonable access during normal business hours and on reasonable notice to
inspect any properties, books and records (whether in printed, electronic or
other form) maintained by or otherwise available to Seller relating to the
Purchased Assets, the Company or Affiliates. Seller, Affiliates and their
respective employees, agents, attorneys, consultants shall make available to
Buyer at their then locations all such books and records (whether in printed,
electronic or other form) that are not subject to attorney-client privilege or
third party privacy rights at such time as Seller or the Affiliates desire to
cease maintaining, or otherwise discard or destroy, such books and records.
(e) Buyer agrees, for a period of two years following the
Closing Date, not to destroy any Purchased Assets, consisting of books, records
and similar tangible property existing at or prior to the Closing Date unless
Seller and Affiliates shall have certified in writing that access is no longer
required with respect thereto; provided however, that prior to the expiration of
such two-year period, upon written request of Buyer, Seller and Affiliates shall
at their election either remove any such books and records from the Acquired
Sites or certify in writing that access is no longer required with respect
thereto and permit Buyer to destroy such books and records.
(f) Nothing contained in this Section 7.3 shall govern the
rights of Buyer, Mitsui, Seller or any Affiliate in the event of the issuance of
any subpoena with respect to any information or documents. In such case, Buyer,
Mitsui, Seller and Affiliates reserve all rights to contest such subpoena
without regard to any provision contained in this Section 7.3.
7.4 Arrangements with Others. Prior to May 22, 1998, neither
Buyer nor any of its affiliates will form a joint venture relating to or
otherwise share ownership of the Purchased Assets with Schnitzer. Buyer may
negotiate with and enter into agreements with an operator for and investors in
up to 50% of the Purchased Assets other than Schnitzer, if such operator and
investors agree to be bound by a confidentiality agreement substantially in the
form of the Confidentiality Agreement (as modified by this Agreement) prior to
the Closing.
7.5 Removal of Property. Within 45 days following the Closing
with respect to assets listed as "Excluded Tangible Assets" on Schedule 3(A)(2)
hereto, and within 45 days following notice by Mitsui or Buyer to Seller (which
such notice shall in
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no event be delivered by Buyer or Mitsui later than 45 days following the
Closing) with respect to any other asset which is not a Purchased Asset, Seller
or an Affiliate, as appropriate, shall cause to be removed from the Acquired
Sites, at Seller's or Affiliate's, as appropriate, expense, all tangible
personal property located thereon other than Purchased Assets. If Mitsui or
Buyer determines prior to the Closing Date that an asset to be removed will
interfere with the commencement or continuation of business operations at any
Acquired Site, Buyer may provide reasonable notice to Seller or an Affiliate, as
appropriate, of such interference and Seller or such Affiliate, as appropriate,
shall take reasonable steps at its election, either to remove such asset from
the Acquired Sites or to relocate such asset to another location on the Acquired
Site in a manner that eliminates such interference. Buyer shall make available
to Seller or such Affiliate, as appropriate, employees of Buyer (if and to the
extent such availability would not interfere with the conduct of the business of
Buyer) to assist Seller or such Affiliate in connection with such removal, all
on reasonable terms mutually agreed by Buyer, on the one hand, and Seller or
such Affiliate, on the other hand. Seller and each Affiliate expressly
acknowledge that Buyer shall bear no risk or liability in connection with any
loss or destruction of or damage to any such asset that is not a Purchased Asset
during the period that such asset remains on any Acquired Site. In the event
Buyer incurs any reasonable expense in removing any such tangible personal
property (other than Purchased Assets) after the Closing and the failure of
Seller or such Affiliate to remove within the applicable period set forth above
in this Section 7.5, Seller or such Affiliate, as appropriate, shall forthwith
reimburse Buyer for the full amount of such reasonable expense. At or prior to
the Closing, Seller shall, at its own expense, cause to be removed and disposed
of in compliance with applicable law waste comprised of a dirt pile located at
or near the Lindemann Shearing Machine from the Berth 118 Site.
7.6 Employment.
(a) In light of the fact that the Company and Affiliates are
selling substantially all of their assets, and have decided to terminate (or
continue the employment in other aspects of the Company's or its affiliates'
affairs) all of their employees at the Acquired Sites, the Seller, the Company
and Affiliates will cause each of their employees who are not hired by Buyer to
vacate the Acquired Sites at or prior to the Closing. Buyer shall have no
obligation to hire any of the employees of the Company or Affiliates or any of
their affiliates, or to assume any collective bargaining agreement of the
Company or any of its affiliates, including the Affiliates. As between Seller,
the Company and Affiliates, on the one hand, and Buyer, on the other hand,
Seller, the Company and Affiliates shall retain sole and full responsibility for
any and all obligations arising out of the employment or the termination of
employment by Seller, the Company and Affiliates or any of their affiliates of
employees prior to the Closing, including without limitation accrued salaries,
sick leave, severance pay, medical insurance or benefits, vacation benefits,
employee benefit or retirement plans, or any other liabilities, and Buyer shall
have no responsibility for any of the foregoing obligations; provided, however,
that to the extent any employee of the Company or the Affiliates is offered (and
accepts) employment with Buyer, Buyer shall recognize and be fully
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responsible for such employee's full accrued vacation time and Buyer shall be
credited at Closing with an adjustment to the Purchase Price to reflect the
economic value, determined at the time of the Closing, of the liability assumed
in connection therewith.
(b) In the event that, at Closing, Seller or the applicable
Affiliate notifies Buyer in writing of uncertainty concerning whether Buyer will
be required to assume responsibility for designated employees' full accrued
vacation time, Buyer shall remit the amount of the adjustment to the Purchase
Price which corresponds to such accrued vacation time into an Escrow Account for
a period not in excess of 30 days from the Closing Date pending resolution of
whether Buyer shall assume such responsibility. In the event Seller or the
applicable Affiliate notifies Buyer that such liability is not to be assumed by
Buyer, the corresponding amount shall be released from such Escrow Account and
remitted to Seller or the applicable Affiliate. Otherwise, at the end of such 30
day period, all amounts on deposit in such Escrow Account (including accrued
interest thereon) shall be remitted to Buyer and Buyer shall assume such
responsibility with respect to the corresponding accrued vacation time.
(c) Notwithstanding the Confidentiality Agreements, Buyer may
contact employees of the Company and Affiliates and may offer employment to any
of the employees of the Company or any of its Affiliates to commence after the
Closing.
7.7 Conduct of Business; Preservation of Organization. From
and after the date of this Agreement and until the Closing Date, except with
Buyer's prior written consent, and subject to the provisions of the Bankruptcy
Code and the customary responsibilities of Chapter 11 trustees, Seller and
Affiliates shall:
(a) use their diligent efforts (which shall not include the
expenditure by Seller or any Affiliate of amounts in excess of amounts it
ordinarily and customarily expended with respect to such matters) to (i)
preserve the Company's and Affiliates' business organization and goodwill
intact; (ii) retain the services of their key employees; and (iii) maintain
their existing relationships with suppliers, customers and others so that they
will be preserved for Buyer on the Closing Date (provided, that a bankruptcy
filing and any Tonnage Drop-Off that would not give rise to a failure of the
condition set forth in Section 8.1(ii) hereof, with respect to B&D or Allways,
by themselves, shall not constitute a failure to satisfy Section 7.7(a)(i), (ii)
or (iii));
(b) not, without the prior written consent of Mitsui or Buyer,
which shall not be unreasonably withheld, amend, waive, extend, otherwise modify
or terminate any of the Executory Contracts or Leases, other than such
amendments, waivers, extensions, or other modifications provided for in
stipulations filed with the Bankruptcy Court prior to the date hereof as set
forth on Schedule 8.11 hereto;
(c) not, without the prior written consent of Mitsui or Buyer,
which shall not be unreasonably withheld, materially increase the level of
compensation to any officer, director or employee of the Company or any
Affiliate; provided, however, that
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Seller or the applicable Affiliate, as the case may be, may at its election pay
a one-time bonus to each of Keiko Nakano, Craig Samples, Takashi Sato, Toshiro
Tsunenari and Stephen Weiner for services rendered prior to the Closing Date;
and
(d) use diligent efforts not to encumber or dispose of, in any
fashion, any of the Purchased Assets or any interest therein, except that the
Company and its Affiliates may grant security interests in Purchased Assets
securing not more than an aggregate of $5,000,000 between May 10, 1996 and the
Closing Date, with prompt written notice to Buyer of each such encumbrance.
7.8 Exclusive Negotiations; No Solicitation. Without Buyer's
prior written consent, between the date of this Agreement and the Closing Date,
Seller, the Company and Affiliates shall not sell, agree to sell, or solicit any
offer or engage in any negotiations (other than with or to Buyer) for the sale
of any of the Purchased Assets. Notwithstanding the foregoing, Seller may
continue discussions with Schnitzer in accordance with the Motion, whose rights,
if any, are subject to Buyer's rights hereunder, if and to the extent consistent
with or in furtherance of Sellers efforts to sell the Purchased Assets to Buyer.
7.9 Hart-Scott-Rodino Cooperation. Buyer and Seller will
cooperate with each other and move quickly to comply with, and provide
information required by, the premerger notification and waiting period rules of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 codified in Section 18a
of Title 15, U.S. Code), in any Federal Trade Commission regulations, and in any
provisions or regulations of or relating to the Clayton Act.
7.10 Environmental Agreements. At the Closing, Buyer will
execute and deliver to Seller (in recordable form, where applicable) the
Environmental Agreements with respect to each Acquired Site.
7.11 Guarantee. At the Closing, Mitsui will execute and
deliver guarantees, in form and content reasonably, (i) satisfactory to Mitsui
and Seller, to the Seller in favor of each "Indemnified Party" and "Limited
Indemnified Party" under the Environmental Agreements (as both such terms are
defined therein) of the obligations of Buyer thereunder, and (ii) satisfactory
to Mitsui and the City of Long Beach, in respect of Buyer's obligations under
the Lease. In the event that Buyer assigns its interest hereunder to Acquiring
Entity in accordance with Section 11.7 hereof, the guarantee required under
Section 7.11(ii) shall, with the prior written consent of the City of Long
Beach, be satisfied by the execution and delivery by each of Buyer and Joint
Venture Party of a guarantee of the obligations set forth in this Section
7.11(ii), pro rata according to their respective percentage equity ownership of
Acquiring Entity. Buyer's success in obtaining such consent shall not constitute
a condition to Buyer's obligation to consummate the Transaction.
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7.12 Sales and Use Tax. Buyer shall timely pay to the
appropriate taxing authority all sales, use and transfer taxes (including,
without limitation, documentary transfer taxes) payable in connection with the
Transaction.
7.13 Further Assurances. Each of Buyer, Seller and the
Affiliates shall execute, or cause to be executed, such documents and other
papers and perform such further acts as may be reasonably required or desirable
to fulfill its obligations under this Agreement and to give effect to the
Transaction. Each of Buyer, Seller and the Affiliates shall use its diligent
efforts to fulfill or obtain the fulfillment of the conditions to the Closing.
7.14 Due Execution, Etc. Subject to obtaining any required
bankruptcy court orders, Seller covenants that as soon as practicable, but in no
event later than the date which is seven days immediately following the date of
execution and delivery of this Agreement by both Buyer and Seller, (i) the
execution, delivery and performance of this Agreement and all Transaction
Documents to which they are signatories by Affiliates will have been duly and
validly authorized by all necessary action on the part of Affiliates; and (ii)
this Agreement and all Transaction Documents to which they are signatories will
constitute the legally valid and binding obligations of Affiliates enforceable
against Affiliates in accordance with their respective terms. In the event such
authorization has not been obtained, and this Agreement and the Transaction
Documents do not constitute the legally valid and binding obligations of
Affiliates enforceable against the Affiliates in accordance with their
respective terms by the date which is seven days immediately following the date
of execution and delivery of this Agreement by both Buyer and Seller, Buyer may
at its sole election terminate this Agreement in accordance with Section 10.4
hereof.
8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS TO CLOSE. The
obligations of Buyer to consummate the Transaction is subject, at its option, to
the fulfillment on or prior to the Closing Date of each of the following
conditions, each of which Buyer and Seller shall use diligent efforts to cause
to be fully and timely satisfied, and any of which may be waived by Buyer:
8.1 Conduct of Business. From May 10, 1996 through the
Closing, the Company and Affiliates shall have (1) conducted their respective
businesses in a manner which is consistent with their practices since the
appointment of Seller as trustee of the Company's bankruptcy estate, except for
(i) increases in the business level of the Company and Affiliates from time to
time to facilitate shipment of ferrous and nonferrous scrap) and (ii) any
bankruptcy filing with respect to B&D or Allways and any reduction in business
thereafter which does not result in a Tonnage Drop-Off of 20% or more with
respect to either or both of B&D and Allways, (2) maintained their books and
records either in accordance with past practices since the commencement of the
Company's bankruptcy proceeding or in a reasonable manner, (3) maintained the
Purchased Assets in the same condition and repair as they were in on May 10,
1996, except for ordinary wear and tear and casualty (it being understood and
agreed by the
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parties hereto that casualty related to the Purchased Assets shall be treated in
accordance with Sections 4.2, 8.3, 8.5 and 8.6), and (4) maintained or caused to
be maintained, with financially sound and reputable insurers, insurance with
respect to the Purchased Assets and the businesses of the Company and Affiliates
against loss, damage or theft in amounts and of types not materially less than
maintained by the Company and Affiliates as of the date hereof and disclosed to
Mitsui and Buyer.
From May 10, 1996 and from the date hereof through the
Closing, the Company and Affiliates shall not have (i) materially increased the
level of compensation to any officer, director or employee (excepting one-time
bonuses to employees as set forth in Section 7.7(c) hereof); or (ii) encumbered
or disposed of, in any fashion, any of the Purchased Assets or any interest
therein, except that the Company and Affiliates may grant security interests in
Purchased Assets securing not more than an aggregate of $5,000,000 between May
10, 1996 and the Closing, with prompt written notice to Buyer of each such
encumbrance, which such encumbrances shall be unconditionally terminated on the
Closing Date.
8.2 Access; Confidentiality. Buyer and its representatives
shall between the date hereof and the Closing have had unlimited access at
reasonable times (subject to any attorney-client privilege or subject to any
rights of any third party) to the properties, books, records (whether in
printed, electronic or other form) and employees of the Company and Affiliates,
to the extent the same are in the possession of Seller, the Company or
Affiliates, or to the extent access can be provided to Buyer upon reasonable
efforts of Seller, the Company or Affiliates. Buyer may engage one or more
independent contractors, which will be instructed by Buyer to comply with the
terms of the Confidentiality Agreements in favor of Seller and the Affiliates to
which Mitsui & Co., Ltd. is a party.
8.3 No Material Adverse Change. No material adverse change
shall have occurred from May 10, 1996, and from the date hereof, through the
Closing in the ownership, condition, existence or location of the Purchased
Assets, or to the Company or the operations of the Affiliates, taken as a whole;
provided, however, that a bankruptcy filing with respect to any Affiliate, by
itself, shall not constitute a material adverse change for purposes of this
Section 8.3; and provided further that a reduction in business following a
bankruptcy filing with respect to any Affiliate which results in a Tonnage
Drop-Off of 20% or more with respect to either or both of B&D and Allways shall
be deemed a "material adverse change" for purposes of this Section 8.3 and a
reduction in business following a bankruptcy filing with respect to any
Affiliate which results in a Tonnage Drop-Off of less than 20% with respect to
either or both of B&D and Allways shall not be deemed a "material adverse
change" for purposes of this Section 8.3. Mitsui and Buyer further acknowledge
that Weiner has obtained a one million dollar line of credit loan (the "Credit
Line") and agree that Weiner's having obtained the Credit Line shall not by
itself be deemed a "material adverse change" for purposes of this Section 8.3 or
otherwise be deemed a failure of any condition set forth in Section 8.1 or to
violate any covenant set forth in this Agreement so long as any security
interest in any
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Purchased Assets related thereto is unconditionally terminated on or prior to
the Closing Date and any amounts outstanding with respect thereto shall have
been fully paid or released on or before the Closing.
8.4 Bankruptcy Order. An order or orders of the bankruptcy
court or courts having jurisdiction over cases of the Company, Allways and B&D
(cases having been commenced with respect to B&D and Allways, and any case not,
without the prior written consent of Mitsui or Buyer, having been commenced with
respect to Weiner) which relate to the Transaction (the "Bankruptcy Orders")
shall have been entered for a period no less than eleven days prior to the
Closing, and on the date of the Closing shall be fully effective and unstayed.
Among other requirements, the Bankruptcy Orders shall conform in all material
aspects to the provisions of Section I.C(1)(s) of the Motion, and shall, as to
Seller, the Company and each Affiliate:
(i) be acceptable in form and substance to Buyer;
(ii) have been entered upon notice acceptable to Buyer, including
without limitation (a) individual notice served upon all known
parties in interest; and (b) publication notice acceptable to the
bankruptcy court to bind all persons not receiving service of notice;
it being agreed that Buyer shall deliver written notice to Seller no
later than five (5) business days following notice to Buyer of entry of
an order by the bankruptcy court intended to satisfy the condition
set forth in this Section 8.4, and receipt by Buyer of such order and
proofs of service, advising Seller whether Buyer approves the
matters described in this clause (ii) and clause (i) immediately
above. If Buyer timely delivers written notice disapproving any such
matters, this Agreement shall (unless Seller or the Affiliate
undertakes to cure such deficiency, in which case the parties may
agree to an extension of time to resolve such matters) terminate
with the same consequences as a termination pursuant to
Section 10.1 hereto;
(iii) provide that, pursuant to Bankruptcy Codess.363(f), the assets to be
purchased by Buyer from the estate of the Company and each of
B&D and Allways, as applicable, shall be sold to Buyer free and
clear of all liens, claims, encumbrances and interests (except for any
permissible liens, encumbrances or interests relating to the Real
Estate as set forth in Section 8.6 of this Agreement), and that the
assets to be purchased by Buyer from the estate of the Company
and each of B&D and Allways, as applicable, shall be free of any
executory contract or lease not assumed hereunder;
(iv) provide for assumption and assignment of the Executory Contracts
and Leases of or relating to Seller and each of B&D and Allways, as
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applicable, by and to Buyer and that Seller (or each of B&D and
Allways, as applicable) shall make all cure payments required under
such Executory Contracts and Leases in accordance with Section 4.6
hereof and that Buyer shall be liable for the performance of each such
Executory Contract and Lease after such assumption and assignment;
(v) provide that (except as provided in clause (iv) above) Buyer shall
have no liability for any civil or criminal claim that arose against
the Company, Allways and B&D prior to Closing, including without
limitation for environmental liability or liability for antitrust
violations; provided that nothing herein or in any such order shall
be deemed to in any manner waive, limit, discharge or otherwise
affect any obligation of Buyer under the Confidentiality Agreements,
the Environmental Agreements, a declaration of covenants,
conditions, environmental restrictions, waivers and releases, any Site
Access Agreement, or any other document, instrument or agreement
executed pursuant to or in connection with this Agreement; and
(vi) provide that Buyer is a good faith purchaser for fair value entitled
upon the closing of the purchase of the assets of the Company and each
of B&D and Allways to the protections provided by Bankruptcy Code ss.
363(m).
8.5 Purchase of Assets. Buyer shall concurrently consummate
one or more transactions resulting in the sale, conveyance, transfer, assignment
and delivery to Buyer of materially all of the Purchased Assets of the Company,
Allways, B&D and Weiner (other than the B&D Site, if and to the extent the same
is either excluded from Purchased Assets or the transfer thereof is deferred in
accordance with Section 4.9 hereof, or the B&D Site, the B&D Assets, the Allways
Site, Allways Assets, the Weiner Site and the Weiner Assets, if and to the
extent excluded from Purchased Assets, in accordance with Section 4.10).
8.6 Title; Title Policies. At the Closing, Buyer shall have
received (i) good and marketable title to materially all of the Purchased Assets
(other than the B&D Site, if and to the extent the same is either excluded from
Purchased Assets or the transfer thereof is deferred in accordance with Section
4.9 hereof, or the B&D Site, the Allways Site, or the Weiner Site, if and to the
extent excluded under Section 4.10), free and clear of all liens, encumbrances
and interests except for liens and encumbrances on and interests in Real Estate
approved as provided in clause (ii) below; and (ii) an ALTA Owner's Policy of
Title Insurance relating to the parcels described in items (a) and (b) of
Schedule 3(C), in the amount of the purchase price for the Real Estate (as
reasonably allocated by Buyer), issued by any title insurance company acceptable
to Buyer (which shall include Chicago Title Company), insuring title to the Real
Estate duly vested in Buyer subject only to those liens, encumbrances, interests
and other exceptions approved
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by Buyer as set forth on Schedule 8.6 hereto. The premium for such title
insurance, and the costs and expenses of any survey or surveys required for the
issuance of such title policies, shall be paid by Buyer. To the extent that any
Real Estate is not transferred at the Closing by virtue of the application of
the provisions of Section 4.9 or 4.10 hereof, the transfer thereof and delivery
of a title policy with respect to any such Real Estate as provided in this
Section 8.6 shall not be a condition to the Closing, but if such Real Estate is
transferred thereafter, Buyer's receipt of such title policy shall be a
condition to such transfer and the payment or release from escrow of any payment
therefor.
8.7 Permits and Approvals. Buyer shall have received or
obtained on or prior to the Closing all material permits, licenses, approvals
and the like held or required to be held by Buyer in order to own and operate
ferrous and nonferrous scrap and related businesses similar to those theretofore
conducted by the Company and Affiliates on premises comprising Purchased Assets
or covered by Executory Contracts and Leases, without the imposition of any
burdens or conditions materially adverse (not including applicable permit fees
and expenses) to Buyer or any of its affiliates. Buyer shall use diligent
efforts to promptly cause to be received or obtained such material permits,
licenses, approvals and the like, and Seller, the Company and Affiliates shall
assist Buyer in that regard. The permits and approvals required to be obtained
shall include without limitation (i) the issuance of required permits and
approvals from environmental authorities or relating to the environment, and
(ii) the expiration or termination of any applicable waiting periods relating to
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or the satisfactory
conclusion of any proceedings that may have been instituted thereunder.
8.8 Affiliate Matters.
(a) Prior to any bankruptcy of any Affiliate, the Seller shall
have made available to such Affiliate cash sufficient to satisfy substantially
all such Affiliate's trade debt to sellers of scrap prior to such bankruptcy;
(b) Prior to the Closing, the Seller shall have made available
to each Affiliate sufficient cash to permit it to continue operations
substantially the same as those during the period since Seller was appointed as
Trustee, including without limitation operation substantially on a "cash on
delivery" basis in any bankruptcy;
(c) At the Closing, the Seller shall have allocated to each
Affiliate sufficient cash to pay and satisfy or set aside or reserve full
amounts for all of such Affiliate's then-known claims, debts and obligations
that are not otherwise satisfied or released at the Closing; and
(d) All then-known claims, debts and obligations of each
Affiliate that are not otherwise satisfied or released shall be satisfied or
adequately provided for at the Closing.
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8.9 Weiner Matters.
(a) On or before the date which is seven days immediately
following the date of execution and delivery of this Agreement by both Buyer and
Seller, Weiner shall have all necessary corporate power and authority to
execute, deliver and perform this Agreement, and the execution, delivery and
performance of this Agreement by Weiner shall have been duly and validly
authorized by the board of directors of Weiner and approved by the requisite
number of shareholders of Weiner and by all other necessary corporate action on
the part of Weiner;
(b) On or before the date which is seven days immediately
following the date of execution and delivery of this Agreement by both Buyer and
Seller, this Agreement shall constitute the legally valid and binding obligation
of Weiner, enforceable against Weiner in accordance with its terms except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles relating to or
limiting creditors rights generally with evidence thereof reasonably
satisfactory to Mitsui or Buyer. As of that date, the execution, delivery and
performance of this Agreement by Weiner and the execution, delivery and
performance of any related agreements or contemplated transactions by Weiner
will have been approved by the directors and the requisite number of
shareholders of Weiner and will not violate, or constitute a breach or default
(whether upon lapse of time or the occurrence of any act or event or otherwise)
under, the charter documents or by-laws of Weiner or any material contract of
Weiner, result in the imposition of any material lien, encumbrance or charge
against any assets or properties of Weiner or any of the Purchased Assets or
violate any applicable law, with evidence thereof reasonably satisfactory to
Mitsui or Buyer;
(c) At or prior to the Closing, the agreement between Mr.
Stephen Weiner and Raw Materials Development Co., Ltd. dated September 25, 1996
(the "RMD Agreement"), shall not have been directly or indirectly terminated or
modified unilaterally by Mr. Weiner;
(d) At the Closing, all oral and written employment
agreements, consulting agreements and understandings related to employment or
consulting services between Stephen Weiner, on the one hand, and the Company,
any Affiliate, or any other affiliate of the Company, on the other hand, shall
have been and shall remain expressly terminated, in writing, effective on or
before the Closing Date (Mitsui having advised Seller that the RMD Agreement
provides that Stephen Weiner shall be under the exclusive employ of RMD and its
affiliates). In the event that an agreement providing for employment or
consulting services is executed between Mr. Herman Weiner and Mitsui or any
affiliate of Mitsui, all oral and written employment agreements, consulting
agreements and understandings related to employment or consulting services
between Herman Weiner, on the one hand, and the Company, any Affiliate, or any
other affiliate of the Company, on the other hand, shall have been and shall
remain expressly terminated, in writing, effective on or before the Closing
Date;
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(e) At the Closing, the Solid Treatment Systems, Inc. v.
Hi-Top Steel Corporation, Weiner Steel Corporation, Hiuka America Corporation et
al. litigation and the South Pacific Steel & Metal Corporation v. Hi-Top Steel
Corporation and Weiner Steel Corporation litigation shall (i) have been
completely settled and dismissed with prejudice as to Weiner, on terms that do
not and will not cause risk of material adverse effect on Buyer or any Purchased
Asset; (ii) be the subject of a final and nonappealable judgment of the court in
which each such action was brought which judgment either (x) is fully paid and
satisfied, or (y) is in favor of Weiner with terms that do not and will not
cause risk of any material adverse effect on Buyer or any Purchased Asset; or
(iii) have been finally resolved and settled through the provision by Seller for
payment of all or any part of the disputed sums, all on terms that do not and
will not cause risk of material adverse effect on Buyer or any Purchased Asset,
as determined by Buyer in its sole and absolute discretion. For purposes of this
paragraph (e) any material adverse effect shall include without limitation a
possibility that Buyer could be held responsible for any debt or obligation not
provided to be assumed by this Agreement;
(f) At the Closing, all bulk sales laws applicable to the sale
and transfer of the Purchased Assets of or relating to Weiner shall have been
complied with; and
(g) At the Closing, all necessary filings with and consents
and approvals (including without limitation, all consents to and approvals of
assignment to Buyer of Executory Contracts and Leases of or relating to Weiner)
of third parties or any governmental entity relating to the Transaction of or
relating to Weiner shall have been made and received.
8.10 Intercompany Agreements.
(a) As to any of the Purchased Assets which are real property
or tangible personal property and which are the subject of a lease between or
among any of the Company and any one or more of the Affiliates, each such lease
shall have been cancelled, at or prior to the Closing;
(b) Any other oral or written agreement or arrangement between
or among any of the Company, any one or more of the Affiliates, and any one or
more entities or persons that are affiliates of the Company or any Affiliate
that relates to the ownership, possession, use or enjoyment after the Closing
Date, or any interest whatsoever in, any of the Purchased Assets which would
remain in force after the Closing Date shall have been cancelled at or prior to
the Closing; and
(c) Any indebtedness or monetary or other obligation of any
kind whatsoever owed by any Affiliate to the Company or any other Affiliate, or
any entity or person affiliated in any way with the Company or any Affiliate,
shall have been either satisfied in full, or cancelled and fully released at the
Closing, or cash necessary to satisfy in full such indebtedness or obligation
shall have been set aside for it.
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8.11 Executory Contracts and Leases. Prior to and at the
Closing, there shall have been no amendments, waivers, extensions, or other
modifications made to any Executory Contracts and Leases, other than (i) such
amendments, waivers, extensions, or other modifications provided for in
stipulations filed with the Bankruptcy Court to the date hereof as set forth on
Schedule 8.11 hereto; or (ii) as approved in writing by Buyer, such approval not
to be unreasonably withheld.
8.12 No Material Misrepresentation by Seller. Seller or his
agents shall have made no material misrepresentation regarding the Company and
its business or operations or the Purchased Assets, which was not disclosed by
Seller to Buyer prior to the date hereof.
8.13 Other Transaction Documents. Seller and each Affiliate
shall have executed and delivered to Buyer original counterparts of each
Transaction Document to which it is a signatory.
8.14 Representations. The representations and warranties of
Seller contained in this Agreement shall be true in all material respects on and
as of the Closing Date as though made at and as of that date. Seller shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by Seller
on or prior to the Closing Date. Seller shall have delivered to Buyer a
certificate, dated the Closing Date and signed by Seller, to the foregoing
effect.
8.15 Employees. On the date which is seven days immediately
following the date of execution and delivery of this Agreement by both Buyer and
Seller, and on a date ten days prior to the Closing Date, Seller and Affiliates
shall have furnished to Mitsui and Buyer a true and correct schedule listing (a)
the name, title and current base salary rate of each present employee of Seller,
the Company and Affiliates (other than part-time or temporary employees), and
current annual bonus amount and commission formulas, accrued sick leave, accrued
severance pay, and accrued vacation benefits of each present employee of Seller,
the Company and Affiliates, (b) each collective bargaining, union or other
employee association agreement to which Seller, the Company or any Affiliate is
a party, (c) each employment or managerial agreement to which Seller, the
Company or any Affiliate is a party, and (d) any employee handbook(s) currently
in effect and any reports and/or plans currently in effect prepared or adopted
by Seller, the Company or Affiliates pursuant to the Equal Employment
Opportunity Act of 1972, as amended.
8.16 Governmental Approvals. At or prior to the Closing, any
material consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental or regulatory body required in connection with the execution
and delivery of this Agreement or the consummation of the Transaction shall have
been received by Buyer.
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8.17 Other. No legal proceedings shall be pending on the date
of the Closing seeking to prohibit consummation of the Transaction, and all
defaults in Executory Contracts and Leases shall have been cured (or agreements
acceptable to Buyer shall have been made by Seller for such cure at or promptly
following the Closing), including payment of any monetary amounts (including any
property taxes payable by the Company or Affiliates thereunder); provided,
however, that this condition shall not be deemed to fail by reason of any appeal
of the order or orders of the bankruptcy court or courts having jurisdiction
over cases of the Company not resulting in a stay of such order or orders.
8.18 Information. Seller shall have provided to Buyer no
earlier than ten (10) and no later than five (5) business days before the
Closing Date the following information, including such supporting documentation
as Buyer may reasonably request: (i) figures which allow for the calculation of
the Tonnage Drop-Off pursuant to section 8.3 hereof, (ii) a list of each
Affiliates' then-known claims, debts and obligations that shall not be satisfied
or released at the Closing (or for which an amount is not reserved or set aside
for such satisfaction or release), and (iii) any then-known uninsured damage
(whether uninsured by reason of the amount of any deductible, limitations on
coverage or otherwise) to the Purchased Assets.
8.19 Port Lease Stipulation. On or prior to November 15,
1996, either:
(i) the City of Long Beach shall have waived its rights under the
Indemnity Obligation and the Pre-Closing Paragraph 16
Obligations and shall have affirmed that the "Rent Credit" (as
defined in the Stipulation) shall remain in effect; or
(ii) Seller shall have notified the City of Long Beach (and
provided Buyer with a copy of such notice) that Seller, in
accordance with paragraph 6 of the Stipulation, is assuming
the Indemnity Obligation and that such "Rent Credit" shall
remain in effect, and Seller shall have obtained from the City
of Long Beach a written agreement (by stipulation or
otherwise) that neither Buyer nor Mitsui shall have any
liability for the Indemnity Obligation or the Pre-Closing
Paragraph 16 Obligations.
In the event that either clause (i) or (ii) above has not been
satisfied by November 15, 1996, Buyer may at its sole election terminate this
Agreement in accordance with Section 10.4 hereof. In the event that Seller
notifies the City of Long Beach that Seller will assume the Indemnity Obligation
and that such "Rent Credit" shall remain in effect, in accordance with clause
(ii) above, it shall be a further condition to the obligations of Buyer to
consummate the Transaction that (aa) on the Closing Date the agreement by the
City of Long Beach referred to in clause (ii) above shall be in full force and
effect, (bb) Seller shall on or as of the Closing Date assume the Indemnity
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Obligation, and (cc) Buyer shall be entitled to such "Rent Credit" with respect
to relevant periods from and after the Closing Date.
8.20 Estoppel Certificate. The City of Long Beach shall have
furnished to Mitsui and Buyer an estoppel certificate in form and substance
reasonably satisfactory to Buyer which confirms that there are no defaults in
Non-Monetary Obligations to Port in existence as of the date of such certificate
other than those related to the construction of improvements and plans therefor
on the Berth 118 Site and which confirms rent, additional rent and other
Monetary Obligations in amounts consistent with those known to Mitsui on the
date hereof.
8.21 Notification. Buyer shall notify Seller within ten
business days following the date that it determines that any of the foregoing
conditions will not be met and will not be waived and in the event Buyer
determines that such conditions shall not be waived, Buyer may terminate this
Agreement and the Transaction.
9. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER AND AFFILIATES TO
CLOSE. The obligations of Seller and Affiliates to consummate the Transaction
are subject, at their option, to the fulfillment on or prior to the Closing Date
of each of the following conditions, each of which Buyer and Seller and
Affiliates shall use diligent efforts to cause to be fully and timely satisfied,
and any of which may be waived by Seller and Affiliates:
9.1 Representations. The representations and warranties of
Buyer contained in this Agreement shall be true in all material respects on and
as of the Closing Date as though made at and as of that date. Buyer shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by Buyer
on or prior to the Closing Date. Buyer shall have delivered to Seller a
certificate, dated the Closing Date and signed by an officer of Buyer, to the
foregoing effect.
9.2 Purchase Price. Buyer shall have paid the Purchase
Price in accordance with Section 4.3.
9.3 Bankruptcy Orders. The Bankruptcy Orders shall have
been entered and not stayed pending appeal.
9.4 Other Transaction Documents. Buyer and Mitsui, as
appropriate, shall have executed and delivered to Seller and Affiliates, as
appropriate, original counterparts of each Transaction Document to which it is
a party.
9.5 Legal Proceedings. No legal proceeding shall be
pending on the Closing Date seeking to prohibit consummation of the Transaction.
The consummation of the Transaction shall not violate or cause any violation of
any order of any court of competent jurisdiction.
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9.6 Approvals. At or prior to the Closing, all material
consents or approvals required in connection with the assumption of any
Executory Contract or Lease as part of the transfer of the Weiner Assets or the
Weiner Site shall have been received.
10. TERMINATION. This Agreement may be terminated at any time on or
prior to the Closing Date:
10.1 Injunction. by Buyer or Seller if any court of competent
jurisdiction in the United States shall have issued an order (other than a
temporary restraining order), decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Transaction and such order,
decree, ruling or other action shall have become final and nonappealable.
10.2 Mutual Agreement. by mutual written agreement of the
parties.
10.3 Termination Date. by Buyer or Seller if the Closing shall
not have occurred on or before December 31, 1996.
10.4 Material Breach. by either Buyer or Seller, if there has
been a material breach of this Agreement on the part of the other party,
including, without limitation, its representations, warranties or covenants set
forth herein; provided, however, that if such breach is susceptible to cure the
breaching party shall have seven (7) business days after receipt of written
notice from the other party of its intention to terminate this Agreement
pursuant to this Section 10.4 in which to cure such breach.
10.5 Stay of Bankruptcy Order. by Buyer or Seller if a stay
of any of the Bankruptcy Orders is entered within ten (10) days of the entry of
such Bankruptcy Order and such stay is not lifted within thirty (30) days
thereafter.
10.6 Hart-Scott-Rodino Matters. by Seller if on or prior to
the date which is seven days immediately following the date of execution of this
Agreement by each of the parties hereto, Mitsui, Buyer and Tamco shall not have
taken all actions required as of the date hereof by the Department of Justice
with respect to the termination of any applicable waiting periods relating to
Mitsui's filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
whether or not expiration or termination of any applicable waiting periods has
occurred.
10.7 Failure of Conditions. by Buyer in accordance with
Section 8.21 hereunder.
10.8 Effects of Termination; Liquidated Damages. If this
Agreement is terminated pursuant to Section 10.1, 10.2, 10.3, 10.5, 10.6 or 10.7
all obligations of the parties hereunder (except for obligations in this Section
and Sections 5.1, 6.5, and 7.2) shall terminate without liability of any party
to any other party. In light of the difficulty
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in determining damages to Seller and Affiliates, in the event of a final
non-appealable court determination that Buyer has breached this Agreement, Buyer
shall in that event relinquish all rights to the return of the Deposit (and the
interest earned thereon) as liquidated damages. The forfeiture of the Deposit as
liquidated damages shall be the sole and exclusive remedy of Seller or any
Affiliates for Buyer's breach of this Agreement, including its failure, in
violation of this Agreement, to consummate the Transaction except that Seller
and Affiliates shall retain any rights they may have under the Site Access
Agreements and the Confidentiality Agreements and under Section 6.5 hereof. If
the Transaction is terminated by Buyer or Seller pursuant to Section 10.1, 10.3
or 10.5 hereof, or by Buyer pursuant to Section 10.4 or 10.7, or by Seller
pursuant to Section 10.6, or by mutual consent pursuant to Section 10.2, the
Deposit shall be refunded to Buyer as set forth in Section 4.4 of this
Agreement, together with all interest earned thereon.
11. MISCELLANEOUS
11.1 Expenses. Each party shall pay its own expenses. Buyer
shall be responsible, at Buyer's sole cost and expense, for any and all title
insurance procured by Buyer with respect to the Purchased Assets or any part
thereof.
11.2 Limitation on Seller's Liability. Seller is entering into
this Agreement and the Transaction Documents solely in his capacity as trustee
(and not in his individual capacity or any other capacity) and in the event of
any default in the performance of any of Seller's or the Company's obligations
hereunder or under any Transaction Document or in the event that any claim is
asserted against Seller in connection with the Transaction, Seller shall in no
event have any personal liability whatsoever (whether as trustee, in his
individual capacity or otherwise), it being expressly understood and agreed that
Buyer's sole recourse, if any, in such event shall be to any assets of the
Company and its affiliates.
11.3 Disclaimer of Representations and Warranties. SELLER AND
AFFILIATES MAKE NO REPRESENTATIONS OR WARRANTIES AND GIVE NO OTHER ASSURANCES
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY MATTER RELATING TO THE
PURCHASED ASSETS, OR ANY PORTION THEREOF (INCLUDING, WITHOUT LIMITATION, ANY
REPRESENTATIONS, WARRANTIES OR ASSURANCES CONCERNING THE VALUE OF THE PURCHASED
ASSETS, THE PHYSICAL CONDITION OF THE PURCHASED ASSETS OR ANY PORTION THEREOF
(INCLUDING, WITHOUT LIMITATION, THE ENVIRONMENTAL CONDITION OF THE REAL ESTATE
COMPRISING A PORTION OF THE PURCHASED ASSETS OR COVERED BY ANY LEASE COMPRISING
A PORTION OF THE PURCHASED ASSETS); THE TITLE TO OR OWNERSHIP OF THE PURCHASED
ASSETS; THE TRANSFERABILITY OR ASSIGNABILITY OF ANY RIGHTS, PERMITS, APPROVALS,
LICENSES OR AGREEMENTS COMPRISING A PORTION OF THE PURCHASED ASSETS; THE
ACCURACY, COMPLETENESS, OWNERSHIP OR
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TRANSFERABILITY OF ANY DOCUMENTS, INFORMATION OR OTHER MATERIALS RELATING TO THE
PURCHASED ASSETS DELIVERED TO BUYER; OR ANY OTHER MATTER OR THING RELATING TO
THE PURCHASED ASSETS OR ANY PORTION THEREOF). BUYER WILL ACCEPT THE PURCHASED
ASSETS AT THE CLOSING "AS IS," "WHERE IS" (I.E., WHEREVER LOCATED AT THE
CLOSING) AND "WITH ALL FAULTS." IN ADDITION, BUYER UNDERSTANDS AND AGREES THAT
IT IS ACQUIRING THE PURCHASED ASSETS WITHOUT ANY WARRANTY EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
11.4 Notices. Any notice or other communication required or
which may be given hereunder shall be in writing and shall be delivered
personally, telegraphed or telexed, or sent by certified, registered or express
mail, postage pre-paid, and shall be deemed given when so delivered personally,
telegraphed or telexed, or if mailed, two days after the date of mailing, as
follows:
(i) If to Buyer, to:
Mitsui & Co., Ltd.
2-1 Ohtemachi 1-chome
Chiyoda-ku, Tokyo, Japan
Attn: Mr. Shun Hirashima
Telecopier: (03) 3285-9963
with a copy to:
Mitsui & Co. (U.S.A.), Inc.
601 South Figueroa Street, Suite 1800
Los Angeles, California 90017
Attn: Mr. Mamoru Ishida
Telecopier: (213) 688-7935
and
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Attn: John B. Power, Esq.
Telecopier: (213) 669-6407
and
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Balch & Bingham
1901 Sixth Avenue North, Suite 2600
Birmingham, Alabama 35203
Attn: Timothy J. Tracy, Esq.
Telecopier: (205) 226-8799
(ii) If to Seller or any Affiliate, to:
R. Todd Neilson
Neilson, Elggren, Durkin & Co.
77 West 200 S., 3rd Floor
Salt Lake City, Utah 84101
Telecopier: (801) 531-8113
with a copy to:
Pachulski, Stang, Ziehl & Young, P.C.
10100 Santa Monica Boulevard, Suite 1100
Los Angeles, California 90067
Attn: Robert B. Orgel, Esq.
Telecopier: (310) 201-0760
and
Committee of Creditors Holding Unsecured Claims
c/o Michael Warner, Esq.
Simon Anisman Doby & Wilson
303 West Tenth Street, Suite 400
Fort Worth, Texas 76102
Telecopier: (817) 335-2274
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(iii) If to Affiliates, also to:
All-Ways Recycling Company
3055 Commercial Street
San Diego, California 92113
Attn: Mr. Takashi Sato, President
with a copy to:
Robbin L. Itkin, Esq.
Wynne Spiegel Itkin
1901 Avenue of the Stars, Suite 1600
Los Angeles, California 90067-6080
Telecopier: (310) 551-3059
and
Weiner Steel Corporation
1540 S. Greenwood Avenue
Montebello, California 90640
Attn: Mr. Stephen Weiner
Telecopier: (213) 726-1988
with a copy to:
Todd Sloan, Esq.
22601 Pacific Coast Highway, Suite 240
Malibu, California 90265
Telecopier: (310) 317-6266
and
B&D Auto & Truck Salvage
Pier T Avenue, Berth 118
Long Beach, California 90802
Attn: Ms. Keiko Nakano, President
with a copy to:
Daren Brinkman, Esq.
Blakeley & Brinkman
333 S. Grand Avenue, 37th Floor
Los Angeles, California 90071
Telecopier: (213) 625-1832
42
<PAGE>
11.5 Entire Agreement. This Agreement, the Schedules and
Exhibits hereto and the Transaction Documents contain the entire agreement among
the parties with respect to the sale and purchase of the Purchased Assets and
supersedes all prior agreements, written or oral, except for the Confidentiality
Agreement and Site Access Agreements, with respect thereto, including, without
limitation, the Bid and the Notice. There are no other understandings or
arrangements, whether written or oral, or binding or nonbinding, relating to or
purporting to relate to the Purchased Assets or any purchase or other
disposition or transfer with respect thereto or with respect to any interest
therein, whether effective or applicable before or after the Closing, between
Buyer or any of its affiliates and Seller or Affiliates.
11.6 Waivers and Amendments. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived only by a written instrument signed by the
parties hereto.
11.7 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors, assigns and
legal representatives. Buyer may assign its rights and obligations hereunder to
Acquiring Entity or any other affiliate of Buyer with or without the prior
consent of Seller, in which case such affiliate shall assume in writing all
obligations of the Buyer hereunder and shall thereafter constitute "Buyer"
hereunder for all purposes; provided, however, that no such assignment shall
relieve Mitsui & Co., Ltd. of its obligation (i) to pay the Purchase Price, (ii)
under Section 7.11 hereof, or (iii) under the Confidentiality Agreements or Site
Access Agreements. If Buyer's rights under this Agreement are assigned to more
than one entity comprising the Acquiring Entity, then each such entity
comprising the Acquiring Entity shall be liable for all of the obligations of
Buyer under this Agreement, unless Mitsui guaranties such obligations or Seller
and Affiliates, as appropriate (in their sole discretion), agree to other
assurances of performance of such obligations. Except as provided in this
Section 11.7, Buyer shall not assign its rights and obligations hereunder.
11.8 Governing Law Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of California
without giving affect to the conflict of laws provisions thereof.
11.9 Resolution of Disputes.
(a) Any controversy or claim between or among the parties
hereto relating to Section 4.2 hereof, shall be determined by arbitration to be
held in the County of Los Angeles, California. The arbitration shall be
conducted in accordance with the United States Arbitration Act (Title 9, U.S.
Code), notwithstanding any choice of law provision in this Agreement, and under
the Commercial Rules of the American Arbitration Association. The arbitrator(s)
shall give effect to statutes of limitation in determining any claim. Any final
ruling by the arbitrators shall be binding on all parties and shall not be
appealable.
43
<PAGE>
(b) Any controversy or claim between or among the parties
hereto, other than a controversy or claim relating to Section 4.2 hereof, shall,
(i) if initiated during the period commencing on the date hereof and ending on
the date nine months following the Closing Date, be determined by the Bankruptcy
Court, and (ii) if initiated following the date nine months following the
Closing Date, be determined by a judicial proceeding conducted before any court
of competent jurisdiction located in the County of Los Angeles, California
(which shall not include a bankruptcy court). The parties hereto agree that the
Bankruptcy Court shall have exclusive jurisdiction over any action or proceeding
(other than a controversy or claim relating to Section 4.2 hereof) arising out
of or relating to this Agreement which is initiated during the period described
in clause (i) above and hereby consent to such exclusive jurisdiction. By doing
so, the parties make no agreement, and reserve all rights, as to whether such
dispute would be a core matter or whether the Bankruptcy Court could enter final
judgments in such matter. The parties hereto further agree that the courts of
competent jurisdiction located in Los Angeles County, California (other than any
bankruptcy court) shall have exclusive jurisdiction over any action or
proceeding (other than a claim or controversy relating to Section 4.2) arising
out of or relating to this Agreement which is initiated during the period
described in clause (ii) above and hereby consent to such exclusive
jurisdiction.
(c) No provision of this Section 11.9 shall limit the right of
any party hereto to exercise self-help remedies such as set-off, or to obtain
provisional or ancillary remedies from any court of competent jurisdiction
before, after, or during the pendency of any arbitration proceeding. The
exercise of any such remedy does not waive the right of any party to resort to
arbitration.
(d) All costs, fees and expenses relating to any such
arbitration proceedings, including fees and costs of the arbitrators, shall be
apportioned pro rata between the parties. Each party shall bear its own costs,
fees and expenses, including attorneys' fees, relating to any such arbitration.
11.10 Severability. The validity, legality or enforceability
of the remainder of this Agreement will not be affected even if one or more of
the provisions of this Agreement will be held to be invalid, illegal or
unenforceable in any respect.
11.11 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
11.12 Headings. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
interpretation of this Agreement.
11.13 Separate Liability. Without in any way limiting the
provisions of Section 11.2 hereof, to the extent that Seller and/or Affiliates
have obligations of
44
<PAGE>
confidentiality under this Agreement, each shall be liable only for its own
breach of such obligations.
45
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
MITSUI & CO., LTD.
By:\s\ Shun Hirashima
Name: Mr. Shun Hirashima
Title: General Manager, Ferrous Raw
Materials Division
R. TODD NEILSON, in his capacity as
Chapter 11 Trustee for the estate of Hiuka
America Corporation
---------------------------------
ALL-WAYS RECYCLING COMPANY
By:\s\ Takashi Sato
Name: Takashi Sato
Title: President
B&D AUTO & TRUCK SALVAGE
By:\s\ Keiko Nakano
Name: Keiko Nakano
Title: President
1
<PAGE>
WEINER STEEL CORPORATION
By:\s\ Stephen Weiner
Name: Stephen Weiner
Title: President
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
December 31, 1996 Consolidated Balance Sheets and Cosolidated Statements
of Operations of Birmingham Steel Corporation and is qualified in its
entirety by reference to such.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> Jun-30-1997
<PERIOD-END> Dec-31-1996
<CASH> 2,747
<SECURITIES> 0
<RECEIVABLES> 107,179
<ALLOWANCES> 1,546
<INVENTORY> 219,519
<CURRENT-ASSETS> 341,972
<PP&E> 842,837
<DEPRECIATION> 151,832
<TOTAL-ASSETS> 1,114,800
<CURRENT-LIABILITIES> 253,734
<BONDS> 333,500
0
0
<COMMON> 297
<OTHER-SE> 455,471
<TOTAL-LIABILITY-AND-EQUITY> 1,114,800
<SALES> 443,562
<TOTAL-REVENUES> 443,562
<CGS> 399,208
<TOTAL-COSTS> 399,208
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,534
<INTEREST-EXPENSE> 8,633
<INCOME-PRETAX> 20,793
<INCOME-TAX> 8,525
<INCOME-CONTINUING> 12,268
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,268
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
</TABLE>
